Arms sales: U.S.-U.K. defense technology pact likely to draw fire.

A defense export treaty signed in late June by the United States and the United Kingdom has sparked debate about the merits and the risks of sharing military technology with close allies.

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President George W. Bush and then-British Prime Minister Tony Blair signed the U.S.-U.K. Defense Trade Cooperation Treaty days before Blair left office in an attempt to simplify U.S. export control policies that have frustrated the defense industry and close U.S. allies in recent years.

Supporters of reforming the current policies believe that the new agreement--if ratified by the Senate and the British Parliament--could break down some of the barriers that have kept the United Kingdom from acquiring U.S. military technology.

"The president wanted to make a bold statement about the close relationship" between the two nations, said Pierre Chao, director of defense industrial initiatives at the Center for Strategic and International Studies.

Bush was so bold as to bypass the authority of the House Armed Services Committee, which has historically balked at defense export control reform. According to the Constitution, the president only needs Senate approval for treaty ratification. Plans call for the agreement to be submitted to the Senate in September, Chao said at an Atlantic Council conference.

The document strikes at the heart of a long political debate over the transfer of military technology to foreign allies. Although countries such as the United Kingdom and Australia are considered to be "safe" partners because of their support of U.S. military operations and their long-standing relationships with the United States, any move to ease export controls will nevertheless be highly controversial, experts note.

Maintaining technological superiority over all potential adversaries always will be a central national priority, Chao said. Several lawmakers and other critics of export reforms have argued that even if technology is only shared with allies, it still could end up in enemy hands through third-party transfers. The recent U.S.-U.K. treaty, officials said, addresses this concern by allowing the United States to vet any re-exports of U.S. technology by the United Kingdom.

Tension between the allies over information sharing bubbled to the surface in 2005 when the United Kingdom threatened to drop out of the international Joint Strike Fighter program because the Defense Department would not share computer codes and other critical information used in the design of the fighter airplane.

Although the two countries eventually came to an agreement over the technology transfer, "it was a painful process," said Al Volkman, director of international cooperation at the office of the undersecretary of defense on acquisition, technology and logistics.

The treaty is a "recognition that we've got problems in the current export licensing process in the United States," Volkman said at the Atlantic Council.

Under current rules, the United Kingdom must apply for export licenses each time it wants to make a purchase of U.S. military technology or services. These licenses often can take weeks or months to be approved.

Processing times have increased to 26 days in 2006 from 13 days in 2002, said Ann Calvaresi-Barr, director of acquisition and sourcing management at the Government Accountability Office.

The Defense Authorization Act of 2005 mandated that the State Department expedite authorizations with the United Kingdom and Australia. But the agency has failed to implement the faster approval process, she said in testimony before the House subcommittee on terrorism, nonproliferation, and trade.

Adding to the long delays is a growing number of backlogged applications. At the end of fiscal year 2006, the State Department had accumulated 10,000 cases, Calvaresi-Barr said.

The treaty would allow the United Kingdom to bypass most export license requests, which would put approvals on the "fast-track," Volkman said. It would also create a "secure circle" consisting of U.S. and U.K. governments and defense companies.

Creating a trusted circle would allow the two countries to more easily collaborate on critical anti-terrorism technologies, such as bomb detection systems, Volkman said. "If you're talking about developing technologies and equipment to counter improvised explosive devices, you're talking about, in my mind, a moral prerogative to do these things as quickly as you can," he asserted.

Calvaresi-Barr said that completely exempting the United Kingdom from defense export controls will create weaknesses and vulnerabilities in the export licensing process, particularly for law enforcement.

"Homeland Security officials explained that they generally oppose licensing exemptions because items can be more easily diverted without detection, which complicates potential investigations," she said.

Justice officials find that prosecuting export violations under an exemption is difficult because of the limited amount of documents generated during the process, she added. This also leads to a lack of government accountability, she argued. When exports don't require a license, "it becomes the exporter's responsibility--not the government's--to ensure the legitimacy of the export."

Canada, for example, was granted some licensing exemptions by the State Department in 2001. But State has at times given conflicting information to exporters about the process, Calvaresi-Barr said.

Companies need more guidance to minimize mistakes and to ensure they adhere to the law, she said. The risks associated with the current export processes are a threat to national security, she said.

Experts anticipate a contentious debate on Capitol Hill about the risks of exempting close allies from having to obtain export licenses.

Supporters of the treaty such as Jacques Gansler, former undersecretary of defense for acquisition and professor of public policy at the University of Maryland, believe that current policies are based on the outdated notion that the United States is the only country that is capable of developing advanced technology. The Defense Department is "no longer the leader in all military technology," Gansler suggested, but has laws in place that perpetuate that assumption.

Restrictions in the procurement of foreign equipment, as proposed in the "Buy America" law, hurt the military, he asserted. That legislation, which was approved by the House of Representatives, but not by the Senate, mandated that every piece of military equipment would be made in this country on U.S. machinery.

"The result of that law that was passed by the House would be that we have inferior weapons systems at twice the cost," Gansler said at the Atlantic Council. "The reason we are buying foreign parts is because they're better, not because they're cheaper. There's not a single weapon system today that you can take apart and not find foreign parts in it," he added.

Current export controls such as ITAR [international traffic in arms regulations] may be stifling new technology development, Chao said. "Am I inadvertently causing technologies to be withheld from the United States or the war fighter that I really want to get my hands on?" he asked.

Gansler cited the Defense Department's recent problems obtaining enough tires for the mine resistant ambush protected [MRAP] vehicle. Although the tires are manufactured by a U.S. company, they are made overseas and face strict guidelines for importation.

Some U.S. companies don't stand a chance in international defense competitions because of tight export controls, he said.

But advocates of maintaining current restrictions contend that laws such as ITAR are necessary to prevent critical technology from ending up in enemy hands. They point to the recent case involving ITT Night Vision, a contractor based in Roanoke, Va., which was charged by the Department of Justice for illegally transferring classified night vision technology to China, Singapore and the United Kingdom, and of making misleading statements to the government. ITT reached a plea agreement in March 2007 after a six-year investigation, a company document said.

As part of the settlement, the firm agreed to pay a $50 million fine and invest $50 million in U.S. night vision technology, the document said. Additionally, the company is subject to export compliance audits, monitoring and training.

Investigators said that an ITT employee was reportedly told to break the law back in 1998, but when the employee informed higher-level management, nothing was done to stop it. Attorneys from Steptoe and Johnson LLP, an international law firm, said that night vision equipment was also lent to foreign clients, but was subsequently lost or misplaced because it was not properly tracked. The Department of Justice also found that, among several other violations, the company improperly hired a foreign national from Singapore to work in its facility.

In January 2005, the State Department fined General Motors and General Dynamics for 248 ITAR violations. General Motors was hit with a $10 million fine for releasing defense data to foreign workers in countries such as Australia, Canada and Switzerland. It was also required to pay $5 million to fix its internal export compliance program.

General Dynamics was also ordered to spend $5 million to overhaul its export office because it had acquired part of GM'S defense business in years past.

Back in 2004, seven employees of United Technologies Inc. and Manten Electronics Inc., both of Mount Laurel, N.J., were arrested and later indicted for illegally transferring information to China, the Department of Justice said.

The employees were accused of exporting weapons systems, including radar, smart weapons, electronic warfare and communications. They were also accused of filing false written and verbal statements that said the items were being sent to a U.S. company.

Despite cases of export violations, Gander still believes that protectionist policies are not the answer. He also criticized current restrictions that keep science and engineering scholars from working in the United States. Their technical expertise could help create a competitive advantage for the nation, especially given the decreasing numbers of U.S. science and engineering college graduates.

A 2007 Army War College report written by Terrence Guay concurred with this assessment. Guay contended that "workers are a U.S.-based defense company's most important asset, and policies should be designed to have the best educated and trained workers designing and building U.S. weapons systems" regardless of origin.

Opposition to globalization within the Defense Department and Congress has been to the detriment of the nation's security, Gansler said. Everything in the world has become "globalized," he argued. Industry and technology firms generally accept that, but the Defense Department doesn't seem to.

"It's time for us to take advantage of globalization rather than to continue to hurt ourselves as a nation economically and militarily," Gansler asserted.

Although past experience has shown that the United States is slow to share important information with allies of any kind, Chao believes this agreement will be more successful than previous attempts at export control reform because of the close relationship between the two nations. The United States and the United Kingdom have "fought conflicts together now for almost 100 years," he said.

The treaty's success or failure may determine the fate of future export agreements with other nations, Chao said. "If we can't make it work with the United Kingdom, who can we make it work with?"