May 26, 2016

Controlling Outer Space



The growth of the commercial space industry in the United States has been one of the major industry stories of the last decade. For the first time, American companies have started providing cargo launch services to the International Space Station for NASA and have won contracts to work with the Air Force:

The dawn of true commercial space operations may finally be upon us. Unless the U.S. government changes its approach to the global business of space, however, the dawn could quickly turn to twilight.

One of the challenges facing the U.S. space industry is the export control regulations placed on space products. The explosive nature of rocket technologies and the dual-use military/civilian nature of much of these implements have landed much of the industry on one of two lists: the State Department’s International Traffic in Arms Regulations (ITAR) or the Commerce Department’s Export Administration Regulations (EAR). While EAR is more flexible and less of a regulatory burden than ITAR, both systems can make the expansion of international trade complicated. In a field where even major world powers work together to handle costs and share expertise, access to international markets may be vital to the future competitiveness of American space companies.

At the moment, American industry is grabbing headlines, but it still has stiff competition abroad. Arianespace, a French-based launch company, grabbed fourteen contracts for geosynchronous launches in 2015 compared to SpaceX’s nine. And while the United States and Europe may be on the cutting edge, other countries are stepping up their game. India, for example, has made some strides in launch capabilities. As these competitors ramp up operations, they may have an easier time accessing global markets, eroding U.S. competitiveness.

The U.S. government has acknowledged and has been working on changes to the export regulations system since 2010 under the export control reform initiative. While there have been many improvements, with certain systems transitioned from tougher ITAR oversight to the more flexible EAR process, there are still improvements that could be made. Manned vehicles, for example, are all still under ITAR. The industry panel advising the government on reform agrees that some manned civilian vehicles should be shifted to EAR, but there is disagreement over how to best determine standards for differentiation. Some industry advisors suggest using specific technical capabilities to separate manned craft that are purely civilian from those that could be used for military missions, while others suggest some type of Federal Aviation Agency licensing.  

Alternatively, some of the reforms that have been implemented have actually made the situation more complex and difficult to understand. While some companies may now have more flexibility in exporting, there is also less certainty over how exactly the regulations work. Smaller companies might still shy away from exporting equipment and services because of a lack of time and ability to understand the regulations. The language in each of the regulation regimes differs as well,  adding to unnecessary complexity and future uncertainty.

There is also the political side of the problem. There have been concerns that regulation reform might allow sensitive technology to proliferate. There has also been uncertainty over whether moving certain classes of satellites under DOC jurisdiction would allow some systems to legally use Chinese components. That could be problematic if the user is a government agency and would go against other government policies restricting the use of Chinese components.

Some industry observers have noted that the Department of Commerce appears to be getting stricter about its own regulations and enforcement in response to these political concerns. This would offset the whole point of shifting items under their jurisdiction.

When it comes to easing export controls, there are no easy answers. The dual-use nature of many parts of space technology makes it problematic from a national security viewpoint. The effort to reform and reconcile the two regulatory regimes is a good start. Both DOC and the State Department recently testified that the eventual goal is to merge the two oversight departments into one internally consistent regime. This new approach will still have to work hard to balance the national security and business sides of the problem, but could be very good for creating certainty in the industry. Even during this transitionary election year, the two departments should stay focused on smoothing definitional problems, undertaking outreach to teach industry about the new rules, and working to release as much technology for export as possible.

The domestic space industry is in a good place. It attracted more venture capitalism funding in 2015 than the previous fifteen years combined. But the competition abroad is also poised to expand. Without better export controls, the nascent commercial space industry might end up failing to launch.