Export rules under fire for eroding U.S. space industry.

• Author: Erwin, Sandra I.
• Position: ANALYSIS - International Traffic in Arms Regulations

Restrictions on exports of U.S. space technology have spurred a global demand for products made outside the United States.

The market for so-called "ITAR-free" technologies is growing to the detriment of U.S. space suppliers, said industry experts and government officials.

The International Traffic in Arms Regulations (ITAR) control the export and import of defense-related products and services that are specified on the U.S. Munitions List. Information and materials associated with any items on the list may not be shared with foreign countries without authorization from the State Department.

ITAR for years has been an irritant for suppliers of high-tech products, including satellites. Companies have complained that the regulations hinder their competitiveness in global markets. After 9/11, however, security trumped all other concerns.

The economic crisis and expectations of downward government spending on space and defense technology, alas, have sparked new fears in the industry, particularly as non-U.S, suppliers threaten the nation's dominance in the global markets.

"Some foreign firms advertise systems as ITAR-free," says the Defense Department's annual industrial capabilities report, which was sent to Congress in March.

Some members of Congress, especially those from states with a high concentration of space-related jobs, are beginning to worry about the future of the industry. "The space industry has made credible arguments that ITAR has hurt business and the space industrial base," said Rep. Brad Sherman, D-Calif., who chairs the Committee on Foreign Affairs' terrorism, nonproliferation and trade subcommittee. "This claim is echoed, in private at least, by the intelligence community who sometimes finds it more and more difficult to source satellite and related equipment domestically," Sherman said during a recent subcommittee hearing.

A big source of frustration for U.S. firms is that if a satellite is on a munitions list, every component down to a simple screw becomes a munition.

"This has hurt second--and third-tier suppliers," said Sherman. "Europeans and other buyers would rather just avoid U.S. regulations."

An "ITAR-free movement" is taking hold in European markets, said Sherman. "European satellite maker Thales Alenia is now promoting satellites and satellite components that are, quote, 'ITAR-free.'"

Apprehensions about declining U.S. dominance in the space market are prompting lawmakers to question whether it's time to revamp...