International Traffic in Arms Regulations (ITAR) is one of the
key components of the United States' export regime regulating
the defense related items and the items that have dual use
features. The main purpose of ITAR is to implement the provisions
of the Arms Export Control Act which was specifically designed to
prevent the transfer of key military technology to the hands of the
groups of countries that might jeopardize the American national
security. ITAR, by enumerating a list of items inside the U.S
munitions list that should be subject to such controls serves as
the pinnacle of this export regime. It ensures that any information
pertaining such material not to be shared by a non U.S citizen.
The Recent State of the Industry
After a surge by two substantial wars in Iraq and Afghanistan
the growth of the US Defense Industry has now started to slow down
as a natural consequence of the subsiding of these two wars. USD$
37 billion reduction by the Senate for the year 2013 and the
expected further reduction of USD$ 52 billion for the year 2014 are
clear indicators for the political decision for defense budget
cuts. Even though the defense spending in some other parts of the
world like China, Russia and Japan is on the rise, the sheer weight
of the U.S defense budget makes it the single most important player
in the global defense industry. The United States alone accounts
39% of global defense spending. Hence a slowdown in U.S spending
would have negative implications for the industry as a whole.
ITAR and the Industry
The implications of ITAR and its stringent regulations for the
American defense industry have recently come to the fore following
India's decision to exclude two major U.S companies from the
bid for its new fighter jets in 2011. Even though no information
had been disclosed about why these two American companies were
excluded from the bid by the Indian officials, the pundits who are
well acquainted with the dynamics of the industry points out the
negative effect that the ITAR had played on the decision.
Following the Indian decision to exclude these two American
firms, there is a growing unrest in the American defense companies
that considerations related with U.S export policies might be
behind the decision. Usually the American technology is considered
the best in the field and given the American companies'
expertise and reputation developing such cutting edge technologies,
ITAR remains as the only plausible alternative to explain the
Indian decision. For this business sector, technology transfer is
one of the most critical things that the buyers are seeking for.
Stringent regulations for the export of defense items such as
unmanned aerial vehicles (UAV) had provided an advantage for other
UAV producing countries such as Israel, which positioned itself as
the number one UAV supplier in the world.
The main purpose of the ITAR is clear. It is designed to ensure
that key technologies that the American defense industry has been
producing are not to be transferred to the players that do not
necessarily have good relations with the United States. However in
a world where global defense spending is mainly accounted by the
United States and where the American national defense spending is
increasingly being subject to Congressional cuts, the American
defense industry is naturally expected to shift its focus on
overseas for new markets which are increasingly to be found in
emerging countries. However as the Indian case demonstrates the
American export regime of the defense related items of which ITAR
is one of the main components might have some negative effects for
such a shift of focus. In order to provide the American companies
which are seeking to operate in defense industry and to penetrate
in to the new markets around the world, the U.S regulations,
especially the U.S export regime that is regulating the defense
industry items should be restructured along more flexible lines
that can respond to the needs of the defense industry.
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guide to the subject matter. Specialist advice should be sought
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