Mr. Chairman and Distinguished Members of the Commission:
It is a pleasure to be here today to discuss the activities of the Department of Commerce's Bureau of Export Administration (BXA) related to the aerospace industry. We recognize the important contributions that the U.S. aerospace industry makes to our national security and economic well being. In particular, exports are very important to the aerospace industry and the industry routinely provides a large trade surplus for the U.S. economy. In 2001, aerospace exports were worth over $60 billion dollars, and contributed to the employment of nearly 800,000 highly skilled workers. We fully support the efforts of the Commission to ensure that this vital industry sector remains prosperous and at the technological forefront in the future.
BXA affects the aerospace industry in implementing export controls, reporting on offsets in defense trade, and contributing to the U.S. government's defense advocacy efforts. As we carry out these activities, we remain mindful of the importance of the aerospace industry to U.S. national and economic security.
Commerce, through BXA, administers and enforces, with several other departments and agencies, controls on the export of sensitive "dual-use" goods and technologies - items that have civilian uses, but also have potential military applications. These controls further U.S. national security and foreign policy interests. In this age of rapid technological advancement and a blurring of the line between military and commercial technology, it is an increasing challenge to administer a system designed to keep sensitive goods and technology out of the hands of potential adversaries, yet also facilitate international trade and economic growth. Export controls are government intervention in the marketplace, but we seek to implement efficient and effective export controls to facilitate responsible trade.
We know that our export control system must continually evolve to fit the world in which we live - a world of tremendous global economic integration and rapid cross-border flows of information, technology, and labor. Some aspects of our current system of export controls stem from the Cold War. Globalization has fundamentally affected the way companies - including aerospace companies - conduct business. And while the effects of globalization and economic interdependence have generally been positive, globalization has led to new challenges and even threats. As the tragic events of September 11th demonstrate, we can no longer assume that problems far away from our country will not effect us. One of the threats to national security
exacerbated by globalization is the threat of proliferation of weapons of mass destruction and the means to deliver them. In this regard, export controls have an important role to play in stemming the proliferation of weapons of mass destruction not only to rogue states, but also to terrorists.
As many of you know, the Export Administration Act - the statutory basis for the dual-use export control system - expired in August of last year. This is the sixth time in the past 23 years that this act - enacted in 1979 - has expired. To maintain a system of export controls in effect, the President was forced again to declare a national emergency and invoke safety net emergency powers.
Consequently, new export control legislation is fundamental to Commerce's ability to administer and enforce an effective and efficient export control system. In this regard, the Administration strongly supports the Export Administration Act of 2001 (S. 149) passed by the Senate last year. S. 149 provides a balanced framework for imposing effective export controls while at the same time facilitating responsible exports. S. 149 provides transparency, predictability, and time limits in the export licensing process. It also addresses the reality of mass market items and foreign availability, and allows for decontrol of such items when items are so widely available they cannot be effectively controlled. S. 149 also strengthens, in several significant ways, our authority to safeguard national security and combat terrorism.
The House of Representatives is also working on a new Export Administration Act - H.R. 2581. The Administration has not taken a position on this bill.
Turning to implementation of export controls on aerospace products, I believe the existing regulatory process works fairly well. Under Commerce's Export Administration Regulations, lower level aerospace items can generally be exported without a license while higher level items may require a license depending on the country of destination and/or end-use or end-user. The vast majority of commercial (or civil) aerospace trade occurs without significant government intervention. In 2001, for example, Commerce processed 412 licenses for civil aircraft-related hardware and technology worth over three billion dollars. These 412 licenses constitute less than four percent of the total number of export license applications processed by Commerce in 2001. The average processing time for these 412 licenses was 48 days. While this average processing time is slightly higher than our average processing time for all applications that must be referred to other departments for their review, it is important to remember that less sensitive aerospace parts and components can be exported without a license as long as exporters comply with the pertinent regulatory requirements.
One particular area I would like to highlight is the International Space Station. Although licensing jurisdiction over civil communications satellites was moved back to the Department of State by the Congress, Commerce retained licensing jurisdiction for the International Space Station. In 2001, we processed, with full interagency review, 51 licenses for exports of hardware to support that program with an average processing time of 30 days. This average processing time is less than the time limits set forth in the pertinent executive order - Executive Order 12981.
There is, of course, always room for improvement in processing times. One of our priorities has been to obtain sufficient appropriations to increase our technical staff. More technical experts, such as engineers, will help ensure that applications can be thoroughly but quickly reviewed. Another priority is enhancing our electronic licensing system to have the supporting documentation, such as technical specifications, on-line. In addition, we strongly support the efforts of the Department of Defense's USXPORTS program to establish full connectivity between the Departments of Defense, State, and Commerce for processing license applications and commodity jurisdiction requests. Electronic enhancements will enable the reviewing agencies to have access to the necessary technical data in real time, thus making their review more efficient and effective.
Commerce has also been participating in the interagency review of the United States Munitions List (USML). Category VIII - Aircraft and Propulsion Systems - of the USML is one of the categories currently under review. In this process, as in other reviews of agency jurisdiction over goods, software, and technology, Commerce believes that the export of items with significant commercial and civilian markets are most effectively administered under the Export Administration Regulations implemented by BXA. The Export Administration Regulations are designed to address the needs of commercial markets, while at the same time protecting national security and foreign policy interests.
In addition to export controls, Commerce has some responsibility for another issue that affects the international competitiveness of the aerospace industry - offsets in defense trade. Pursuant to the Defense Production Act, Commerce prepares an annual report to Congress on the impacts of offsets on the defense preparedness, industrial competitiveness, employment, and trade of the United States. We are about to submit our sixth such report to Congress. These reports provide a sound analytical basis for government and industry initiatives on offsets. Based on these reports, we continue to look for opportunities to work with industry and our allies to address the offset issue, and, in particular, to seek more efficient means of forming partnerships and gaining access to new markets and technologies.
Commerce also supports international trade on the defense side of the aerospace industry through its advocacy work. We work closely with the Departments of Defense and State to advocate for U.S. firms involved in foreign defense procurement competitions. We have supported approximately $21 billion in U.S. defense aerospace exports since 1994, including last year's $600 million dollar sale of tanker aircraft to Italy. These sales have helped to maintain the U.S. defense industrial base and create high technology, export-related jobs for U.S. workers.
A vibrant aerospace sector is of great importance to our country, both economically and for our security. Commerce is committed to helping maintain the vibrancy of the aerospace industry through its work in export controls, offsets in defense trade, and defense advocacy. We look forward to working with the Commission on these issues. We also look forward to your recommendations.
I would be happy to answer any questions you may have for me.