"Contaminated by American technology" makes for a curious but enlightening description. For most of the past century, the world has viewed American technology as unrivaled, and the notion that the U.S. space industry could be shunted to the margins would have seemed absurd. But the attitude of European space-industry executives toward U.S. components and software has changed in recent years. When building, launching or operating satellites and other spacecraft, many have come to believe, American know-how is now a liability.
The culprit is not American technology per se, but onerous restrictions the U.S. government has placed on the export of space components to all countries—enemies and allies alike. Ten years ago the U.S. Congress, fearful that U.S. technology would wind up in Chinese missiles and bombs, put commercial satellites under the jurisdiction of the International Traffic in Arms Regulations, a set of rules for purchasers of American military products. The rules say that each component of civilian spacecraft—even a rivet, if it was designed specifically for space—must be treated as a weapon.
Those rules have imposed huge bureaucratic burdens on European and Asian firms that want to use even the most modest technology made in America. The effect has been to hamper U.S. competitiveness in the space business and to give Europe a boost. The decade since ITAR took effect has seen a rapid rise in the demand for satellites and rockets to launch them, fueled by the markets for mobile phones, especially in Africa, Asia and the Middle East. Washington seems to have imposed stringent rules just as space services began to soar and alternatives to American technology took root.
The impact is most keenly felt in the $123 billion commercial-satellite business, which has been growing at more than 10 percent a year for more than a decade. In 1998, the year before ITAR took effect, U.S. firms accounted for 73 percent of the world market. Two years later U.S. market share had plunged to 27 percent. During the same period, Europe's share rose from about a quarter to more than half, according to the Satellite Industry Association in Washington, D.C.
The rules have also hamstrung U.S. suppliers in the growing space-launch business. U.S. launch firms earned $304 million in revenues from launch services in 2003, but by 2007 their take was down to $150 million. In the same period revenues from European launches increased from $178 million to $840 million, according to Forecast International, a consultancy in Newtown, Connecticut. France's reliable, heavy-payload Ariane V rocket is now the hands-down world leader, with six launches last year.
The entrepreneurial spunk and national pride of Europe and other space powers also have something to do with America's general decline. But "market distortions created by the government" due to applying ITAR to commercial satellites were the single biggest factor, says Loren Thompson, a space and defense expert at the Lexington Institute, a think tank in Arlington, Virginia. The procedures for obtaining an ITAR export license are "so unpredictable and inconsistent, and not transparent," that U.S. satellite-technology sales have suffered, says Kalpak Gude, vice president of regulatory affairs at Intelsat in Washington, D.C., the world's largest operator of commercial satellites. Consider the experience of Las Vegas, Nevada–based Bigelow Aerospace. In 2006, ITAR officials decided that the company's Genesis prelaunch satellite stand—similar in size, shape and technological sophistication to a coffee table—could only travel to Russia escorted by two armed guards. Bigelow was billed for the security detail.
Once cleared for export, even the smallest component comes with strings attached. If a satellite built by French giant Thales Alenia Space incorporates a line of computer code from a U.S. firm, it cannot be moved from France to a third country—not even a longstanding ally like Germany—without permission from Washington. Nor can it be launched from France's spaceport in Kourou, French Guiana, for a third country (a common practice) without U.S. approval. American officials can also block delivery of spare parts. Even conversations between U.S. researchers at universities and foreign experts are restricted.
Handicapped and spooked by what they see as Washington paranoia, space agencies and firms worldwide have responded by developing their own capabilities. The biggest beneficiaries, by far, are European firms, which have now mastered the gamut of satellite technology, from component manufacturing to assembly, launch and in-orbit management. The most advanced remote-sensing satellites (among those publicly acknowledged to exist) are now built by firms in Italy (Cosmo-SkyMed), Germany (SAR-Lupe) and Britain and Germany (TerraSAR-X).
The damage to U.S. commercial interests might be worthwhile if it truly protected military technologies. But it doesn't, many experts argue. Many of the technologies that militaries rely on—satellites for communications, munitions-guidance systems and unmanned aerial vehicles, to name a few—are now widely and legally available worldwide. A consensus is now emerging that export controls have actually hurt America's national security by chipping away at the ability of U.S. firms to innovate. A 2008 report from the Center for Strategic & International Studies, a Washington think tank, says that a lack of sales abroad is rendering U.S. firms overly dependent on U.S. government contracts; the reduced cash flow is undermining their ability to conduct research.
Arguably the most innovative companies—the small and medium-sized contractors—have been hurt the most by the export rules. They don't have enough resources or legal expertise to navigate the labyrinth of bureaucracy or weather production lulls while waiting out the often lengthy ITAR approval process.
The strictures of ITAR have strengthened the hand of European leaders seeking greater military independence from the United States. Space agencies in Europe—and, in particular, the EU's European Space Agency and France's Centre National d'Études Spatiales—encourage spacecraft makers to design indigenous technology by giving them technical assistance. For instance, Marotta, a Cheltenham, England– based maker of satellite and launch-vehicle systems, has received guidance from ESA officials on how to develop "ITAR-free" spacecraft components that have no American parts. In Europe's defense-policy circles, reducing technological dependence on politicians and bureaucrats in Washington is "becoming almost a must," says Siemon Wezeman, a defense expert at the Stockholm International Peace Research Institute.
Many European firms have few qualms about selling ITAR-free products to other nations—for the most part, emerging countries in Asia, Latin America and the Middle East—which can use them without approval from Washington. Large European companies that offer ITAR-free satellites or space components include EADS (a giant consortium headquartered in the Netherlands) and Thales Alenia Space, a joint venture between Thales of France and Finmeccanica of Italy. Dozens of smaller companies produce ITAR-free parts and software. Some buyers are willing to pay a 5 to 10 percent premium for an ITAR-free satellite because it can be launched on one of China's Long March rockets for 20 percent less than on U.S., French or Russian rockets, say analysts.
ITAR defenders in the U.S. State Department say the controls are necessary to protect military technology. One official, who wouldn't speak on the record, says overseers have found no evidence in the data that export controls are hurting U.S. space firms. The Obama administration is likely to look favorably on calls to focus ITAR narrowly on key technologies that truly confer a military advantage. Given the more pressing crises at hand, however, swift action is unlikely. U.S. space firms will just have to make the best of it.