U.S. satellite firms want the federal government to lighten up on trade with China. For years, U.S. makers of satellite technology-everything from the orbiters themselves to the software that guides them through space-have been shut out of the controversial and potentially lucrative market Chinese market.
In 1998, Congress strictly curtailed the export of satellites and their components to China by putting them in the same category as military items such as tanks and missiles. The policy has never been seriously challenged.
But U.S. companies affected by the restrictions contend they give European rivals a major leg up in the commercial satellite communications market. As China's demand for satellite technology grows, European companies, particularly French ones, are rushing to meet it. Meanwhile, no U.S. satellite company has done business with the Chinese since the export policy was imposed, according to the State Department.
Lumping satellites into the military category has had an unintended ripple effect, the satellite industry contends. Even longstanding American allies, such as Canada, are taking their business to Europe, because U.S. companies whose products are on the list must get licenses to sell to all foreign nations, not just potentially hostile ones.
Getting those clearances can take several months, often longer than it takes to get export licenses for non-military items, which are granted by the Commerce Department. As the satellite industry's increasingly impatient customers cross the Atlantic, where regulatory hurdles are lower, the U.S. industry contends it's losing its dominant position in the market and its status as the leader in innovation.
The government and industry are at a standoff. Two amendments are pending before Congress to modify the 1998 law, but experts think they have no chance of passing this session, since they're buried under the appropriations process and higher-profile issues.
The policy spat also is playing out against a backdrop of sheer panic in the satellite business. According to the Satellite Industry Association, the commercial market has eroded from a high of $7.9 billion in revenues in 1998 to $5.5 billion in 2001. During the first half of 2002, the top two satellite manufacturers, Boeing and Lockheed Martin, received no commercial orders, the association said in a Jan. 2003 report. Today, the market is "characterized by overcapacity, shrinking margins, declining employment and a consolidating customer base," the report said.
For some companies, doing business in China would bring some relief.
"China was a very big customer" for Integral Systems, a Lanham, Md.-based company that makes software to run satellite communications and control systems, according to Steve Chamberlain, its chief executive officer. Integral has been trying to complete an order from a Chinese customer that is already using the first version of the company's software, sold before the product was put on the munitions list. The Chinese company wants to buy $10 million of the latest version of the software, but Integral can't get authorization to make the sale, Chamberlain said.
That authorization would have to come from the White House. Since 1989, following the killing of Chinese democracy advocates in Beijing's Tiananmen Square, only the president can authorize the sale of any items on the munitions list to China. Congress' action a decade later to move satellite technology onto the list was sweeping, and now covers a number of companies, such as Integral, that don't think their products have a military use.
The State Department disagrees, however, noting that a guidance system for a satellite can be transferred onto a missile. "This technology is directly applicable in missile systems," one State official said. "That was the big thing that motivated Congress" to take action. "It's not arbitrary," he added.
The official, who asked not to be identified, acknowledged that the munitions list controls had placed extra regulatory burdens on U.S. firms doing business with allied nations, and that this was a legitimate business concern. Their beef over China policy, however, is not, he said.
"Certainly [China is] a market that all these restrictions impede," he said. But the policies were put in place in response to China's record of human rights abuses and also because the country is known to sell equipment and technology to Iran and Pakistan for use in missile and chemical weapons programs, he argued. Until China changes its ways, the official predicted the export controls probably wouldn't be eased.
Weapons control advocates also say the satellite industry must show that any changes wouldn't jeopardize national security or foreign policy, and that State is failing to address industry's concerns.
Matt Schroeder, an arms control researcher with the Federation of American Scientists in Washington, said State is trying to speed up the process of granting export licenses. The department "has been working hard to reduce the processing time for routine requests," and is implementing an automated export system that should help, Schroeder said.
Those moves may not satisfy the satellite industry, which argues that while U.S. policies keep companies languishing at the gates, European rivals are joining forces to capture new markets.
Last year, European backers put $500 million behind Alphabus, a joint venture between satellite heavyweights Alcatel and Astruim. The money will pay for developing a large satellite to compete with those made by Boeing and Lockheed.
Also, China has announced that it is teaming up with the European Union, investing millions of dollars and offering scientific expertise on the Galileo space project, a rival to the U.S. satellite-dependent Global Positioning System, a bedrock technology for the American military and many U.S. corporations.
Euan Rellie, a satellite industry analyst and head of Business Development Asia in New York, said, "Overall, it is often a fine line as to whether to sell potential dual-use technologies to China." But, he added, "It may well be the case that the U.S., given its current cautious and unilateralist mood, will let the Europeans, who may be less nervous, take significant commercial advantage."