Executive Spotlight: Back and Forth with SIA President Patricia Cooper
by Lou Zacharilla
Washington, D.C., March 5, 2013-During the Christmas holidays, the Satellite industry received a “gift” from the United States Senate, which had voted to remove certain International Trade in Arms regulations (ITAR) enforced upon the USA’s satellite industry since 1998. The ITAR regulation (over-regulation, in the view of many), classified all forms of satellite hardware as “munitions.” The classification effectively put handcuffs on large swaths of the domestic industry. It is claimed that international partnerships evaporated, innovation slowed and the global industry was impacted.
What has become clear is the degree to which the two industry trade associations who helped steer the way, the Satellite Industry Association (SIA) and the Aerospace Industries Association (AIA), were vital to the emergence of a more nuanced view. SSPI along with other groups kept the dialogue going through their memberships and proved, yet again, the critical role of trade associations to defend and to articulate industry positions.
I had a chance to speak with Patricia Cooper, president of SIA, to get her take on what this means and how SIA, which took the lead, views the decision.
Lou Zacharilla (LAZ): For the sake of clarification, the SIA is not the Semiconductor Industry Association or the CIA, right?
Patricia Cooper: Correct. I hope people will not confuse us.
LAZ: For the sake of those who may not know SIA, what is the primary role of the Satellite Industry Association?
Patricia: We represent the satellite industry and seek to find issues of common interest among participants in the USA. Any area that has an impact on the satellite industry, including launch, manufacturing and services, is where we focus.
LAZ: In December a significant change that will have beneficial impact on the industry took place, as of course you know, having led the charge. Let’s talk briefly about the rationale that led to the Senate’s decision to establish (in 1998) and to now remove restrictions that we refer to as “ITAR?”
Patricia: Since the Clinton Administration era, the American Congress has had in place restrictions on the US domestic satellite industry, which classified all forms of satellite hardware as “munitions.” This meant that their export was under control and restricted as a single category. There were no distinctions.
LAZ: Meaning that potentially lucrative innovations and services from our industry were under the control of the Pentagon. Our members maintained that the drain on the industry was very real. Was it mainly because of the corrosive economic consequences that the Senate decided to make its 180-degree reversal?
Patricia: To be clear, this is not a 180-degree, or abrupt, change. It is evolutionary change. It did not happen overnight. I can tell you that. The primary reason the legislators revisited the issue was because national defense concerns have changed. In 1999 there was a sense that we needed to safeguard the industry, and regulations reflected this. By 2012, there was a different conclusion. By over-regulating we were doing potential harm to our industrial base and THIS was a pressing national security concern.
LAZ: So this was not exclusively political theatre designed to boost a lousy global economy?
Patricia: The national security concern was primary. Trying to sell into a regulated environment was seen to be working against the industry and USA national security.
LAZ: That still sounds like part of an economic chain reaction.
Patricia: The lack of incentive and prohibition of the market created weaknesses in the supply chain, which impacted – or could have had an impact – on military capability. There was also an “ITAR free” satellite which shifted the landscape.
LAZ: So as regulations took root, small companies and new companies felt a disincentive to enter the market. The military’s dependence on the commercial industry thus produced gaps that had national security implications?
Patricia: Unintended consequences resulted.
LAZ: We discussed a “positive perfect storm” that led to a rethinking of ITAR.
Patricia: Yes. Three issues converged. There was the fact that it was difficult for satellite companies to function in such a strictly-regulated market. Second, there was the disruption to the national security supply chain. Finally, there was within the national political dialogue concern about regulation. All pushed in the same direction.
LAZ: A Center for Strategic International Studies report showed a nearly 50% drop in domestic USA industry sales attributed to the ITAR restriction. What impact did this have?
Patricia: Reformers took notice. Military readiness and economic factors enabled the dialogue. While it is difficult to attribute ITAR to any lost sale, it was clearly a factor. But as I say, national security concerns here in Washington overrode economic considerations.
LAZ: What do we need to know next about ITAR? Is it on its way out?
Patricia: ITAR is not on its way out, but the blanket treatment is. Some items will move out of ITAR and some will not. The Obama administration needs to draft rules and put them out for public comment. The public, including organizations like ours (SSPI and SIA), will then comment. Congress is then notified of changes.
LAZ: What is the timing on this?
Patricia: We expect that it will be late in 2013 before any item is actually removed. The administrative process will take time.
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Lou Zacharilla is the Director of Development of the Society of Satellite Professionals International (SSPI). He can be reached at: LZacharilla@sspi.org
