Keeping U.S. export reform going; The little FTA that could.
Keeping U.S. export reform going
Through the final days of the Obama administration, officials at the Commerce Department’s Bureau of Industry and Security (BIS) say they plan to remain busy on the reform of the nation’s export control system.
President Obama mandated in August 2009 that the mostly Cold War-era U.S. export controls, which are administered by the Commerce, State and Defense departments, be updated to reflect current national security threats and economic realities.
A hallmark of this effort has been the in-depth review by the administration of the State Department’s U.S. Munitions List (USML), which is part of the International Traffic in Arms Regulations (ITAR), and the shift of less sensitive components and technologies, including commercial satellites, from that list to the Commerce Control List (CCL).
With the changes so far, the United States now has much better “interoperability” between federal agencies in charge of export oversight, as well as the country’s NATO and other allies, and has reduced the licensing burden for the U.S. export industry, Eric Hirschhorn, Commerce undersecretary for industry and security, told attendees at the BIS Update conference on Oct. 31.
This summer, Commerce and State published the so-called “definitions” rule, which harmonized definitions for key regulatory export terms found in both the Export Administration Regulations (EAR) and ITAR, such as “export” and “reexport,” among others.
“Revising the control lists and the attendant regulatory structure was a massive effort, not only for many dedicated government officials, but for industry as well,” Hirschhorn said. “In order to be transparent and to get the benefit of industry expertise regarding our reform ideas, the departments of Commerce and State, working closely with the Department of Defense and other agencies, published ideas for change as proposed rules over the course of the last five years. Commerce received more than 600 public comments on its rules, for which we are grateful. Many of the suggestions were adopted and made for better final rules.”
Hirschhorn said a key to the export control reform initiative going forward is that it continue to evolve, even after the Obama administration departs. The rules should be “regularly revisited in the future” by both the agencies and the export industry, he added.
For example, as a result of comments received from a March 2015 notice of inquiry, BIS and the State’s Directorate of Defense Trade Controls (DDTC) in February published proposed revisions to USML Categories VII (military aircraft) and XIX (military engines), Hirschhorn noted. He explained that revisiting those two categories was the result of continued changes in technology and the need to further clarify the original rulemaking’s language for transferring certain items from those USML categories to the CCL. Hirschhorn has previously stated that both BIS and DDTC plan to issue similar notices of inquiry for other revised USML categories after they have been in effect for 18 to 24 months.
“Some items and activities warrant strict controls, many warrant few controls, and others warrant a mix, depending on the circumstances of a particular transaction. Not all destinations, end uses, and end users are of equal concern. Foreign policy concerns and priorities change over time. Technologies evolve. Newly developed technologies can be extremely sensitive; others morph from predominant military use to something that is in normal commercial use,” explained Kevin Wolf, Commerce’s assistant secretary for export administration.
“The controls are an aggregation of decades of individual statutory and regulatory decisions, spread out over multiple government agencies, written and edited by hundreds of different individuals that have accreted into the complex system we have today, which has created additional complexities,” he added.
However, Hirschhorn warned the reform doesn’t mean an easing of enforcement against those who violate the export control regulations. “Without strong enforcement, those who expend energy and resources to comply with our rules are put at an economic disadvantage vis-à-vis those who flout, or are unaware of, the rules,” he said.
A significant goal for the U.S. export reform initiative is to establish a single agency that will use one information technology system to process all export license applications. This aspect of the reform is expected to carry over into the next administration. “When that is accomplished, the regulatory friction and burden caused by the need for export controls will be at their lowest possible levels,” Hirschhorn said.
Hirschhorn and Wolf are widely credited within the Obama administration, as well as by the export industry, for leading the charge on export control reform within the Commerce Department for the past seven years.
“All of us in this room will miss [Hirschhorn’s] leadership when he departs. But he will leave you in the capable hands of BIS’s experienced and talented career staff, including Deputy Undersecretary Dan Hill, Deputy Assistant Secretary Matt Borman, and Deputy Assistant Secretary Rich Majauskas. Now and into the next administration, I have great confidence in this team,” Commerce Secretary Penny Pritzker said in her keynote speech at the update conference.
Let’s hope the Trump administration continues the export control reform initiative with the same zeal and determination as its predecessor.
The little FTA that could
The United States doesn’t appear to be alone in its lack of interest and growing mistrust of free trade agreements. The European Union in late October nearly walked away from an FTA of its own with Canada.
The holdup came from opposition located in the French-speaking southern region of Belgium known as Wallonia. But there were also ample numbers of interest groups across Europe loudly protesting the trade deal.
Fortunately, the European Union and Canada were able to muster the political strength to break the impasse and sign the Comprehensive Economic and Trade Agreement (CETA) on Oct. 29. The FTA, which took seven years to negotiate, promises sweeping tariff relief for goods and services, and facilitates increased investment and regulatory cooperation between the European Union and Canada. Some estimates say the free trade agreement will boost Canada’s economy by $12 billion Canadian (U.S. $8.96 billion).
“The signing of the Comprehensive Economic and Trade Agreement (CETA) is a historic occasion. This modern and progressive agreement will reinforce the strong links between Canada and the EU, and create vast new opportunities for Canadians and Europeans alike—opening new markets for our exporters, offering more choices and better prices to consumers, and forging stronger ties between our economies,” Canadian Prime Minister Justin Trudeau said in a statement. “CETA will offer significant benefits for most sectors of the Canadian economy, from fishermen in Newfoundland and Labrador, to aerospace workers in Quebec, and from people assembling automobiles in Ontario, to forest industry workers in British Columbia to miners in the Northwest Territories.”
The Port of Halifax issued a statement saying CETA offers export growth opportunities for containerized and non-containerized project cargo from Nova Scotia and Atlantic Coast Canada to Europe. European cargo accounts for 38 percent of total containerized throughput at Halifax.
In addition to Halifax, container traffic moving in and out of Eastern Canada is handled by the ports of Montreal and Saint John, New Brunswick. And CETA could offer further impetus to advance new container terminals proposed in Melford and Sydney, Nova Scotia.
Likewise, Europe’s maritime industry stands to benefit from CETA. Patrick Verhoeven, secretary general of the European Community Shipowners’ Association, said the deal will “bring the EU and Canada closer to similar and fairer market conditions—given the EU market is almost completely free, with some very few conditions.”
Implementation of the agreement remains uncertain, however, because it requires the approval of nearly 40 national and regional parliaments in Europe. FTA foes, unfortunately, still have a chance to stop it.
