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For nearly a century, America’s defense industrial strength yielded a subtle benefit: influence as the world’s security guarantor of choice. But the system that once anchored partner access to U.S. weaponry is now an obstacle. Modern statecraft — the interplay of industry, diplomacy, and defense — requires a fresh approach to regulating defense trade.
While the American arsenal accounts for more than 40 percent of global arms transfers, that share largely comprises exquisite systems for which the United States is unable to meet its own demand, let alone the needs of other nations. Arab partners expended hundreds of high-end interceptors to combat low-cost drones during Operation Epic Fury. Japan and Taiwan await billions of dollars’ worth of backlogged conventional U.S. weapons. And even as European defense requirements multiply, they increasingly look inward.
Why hasn’t America risen to the challenge? Compounding an already diminished industrial base, U.S. regulations governing defense exports mute international demand and exacerbate the consequences of the Pentagon’s monopsony. American companies are disincentivized from entering the defense market or from manufacturing to meet global requirements, taxpayers pay higher costs, the industrial base stagnates, and warfighters are left with fewer choices.
Cold War-era regulations created to protect conventional American military superiority now hinder the timely delivery of capability to allies in need. International Traffic in Arms Regulations and Export Administration Regulations are a maze of rules originally developed when existential concern about Soviet exploitation of American military capability dictated national policy. That logic no longer applies.
The shape of technological progress has changed in the past half-century. Commercial technology now outpaces defense research. Software-centric weapons iterate in weeks-long cycles. By contrast, export licenses take months. Navigating current regulations to determine if an American technology is approved for export — and under what conditions — can take years.
These facts create a paradox: The arms export system designed to protect American military superiority now risks ceding it.
The justification for the existence of arms export regulations — to protect American technology — is sound. It’s not the motivation, but the approach that’s in need of modernization. The latest effort to augment arms sales, the Trump administration’s “America First Arms Transfer Strategy,” posits that the United States can bolster allied burden-sharing through a series of initiatives without painful regulatory revision. But reforms should go further.
I have navigated arms export processes for decades: as a Navy fighter pilot, congressional staffer, appointed State Department and Pentagon official, and now as a defense technology executive. In my current role at Anduril Industries, which involves export discussions with foreign government and federal officials, I have a commercial stake in reform. But I am also witness to the system’s friction and failures from several vantage points. This article does not advocate for a specific platform or vendor, but instead, a campaign to evolve an impediment to America’s global standing — arms export regulations.
When the current set of arms export regulations came into being, its guiding principle was straightforward: American military technology was the envy of the world, and it must never fall into the hands of the Soviets. Conventional export controls were designed to prevent adversaries from exploiting technological know-how from allied inventories of U.S.-origin weapons.
Crown jewels like stealth aircraft and precision targeting contributed to the second offset strategy, which helped win the Cold War. America was sufficiently zealous in guarding these advantages. CIA assessments concluded the Soviets were focused on getting access to U.S. technology through the 1980s. Yet, in part due to a strong export control regime, scandals in which companies in allied nations transferred technology to the Soviet Union were remarkably rare.
But what protected U.S. intellectual property against Moscow in the previous century won’t stop Beijing today. Instead of simply opening cracks in the allied facade through which to exploit U.S. technological secrets, China came in the front door of the American industrial base. It infiltrated weapons development and replicated high-end military capabilities. Experts note that the Chinese Y-20 transport plane and the U.S. Air Force’s C-17 look “uncannily similar.” China waged a 10-year campaign to steal F-35 technology — and to some extent succeeded. The Center for Strategic International Studies reported more than 200 confirmed cases of Chinese industrial espionage targeting U.S. government agencies and defense contractors. Even hypersonic technology — where some judge China to be ahead of the United States — benefited from the theft of U.S. missile data.
Meanwhile, China modernized its military forces at an unprecedented speed and scale. To match the capacity of the People’s Liberation Army, the United States can no longer fall back on its technological edge, but instead, should rely on a network of allies and partners. In the 2018 National Defense Strategy, the Trump administration committed to “…prioritize requests for U.S. military equipment sales, accelerating foreign partner modernization and ability to integrate with U.S. forces.” Yet, cumbersome technology transfer processes have failed to keep pace.
Unyielding technology controls are only effective when one nation is far ahead — uniquely willing to enforce global security standards. They don’t work under conditions of relative parity where allied burden-sharing is a stated national security objective.
It’s not just the machinations of our adversaries that diminish the relevance of the current export control regime. Changes in how dual-use technologies are developed require a new way of thinking.
20th-century American military superiority rested on massive government research subsidies through organizations like the Defense Advanced Research Projects Agency and federally funded research labs. In 1964, the federal government bankrolled two-thirds of U.S. research and development. Today, private sector dollars account for nearly 90 percent of that funding.
What does this mean in practice? The development of future battlefield capabilities — from artificial intelligence to autonomous hardware — often starts outside of the pathway prescribed by International Traffic in Arms Regulations, which were designed for technologies the government initiated and funded for military use. These days, many technological innovations derived from within the private sector have defense applications but often have inherent commercial utility as well. Nevertheless, defense technology firms are compelled to operate within siloed regulatory parameters.
The emergence of private sector research dominance has another alarming effect: the so-called “technological leveling” of international military competition. Companies outside of the United States don’t face the same restrictions on how they develop and sell their products. When faced with a simple choice: buy American but with perceived regulatory strings attached, or acquire from foreign competitors offering equivalent capabilities, customers are motivated to choose the latter.
Attempts at regulatory reform aren’t new. Secretary of Defense Robert Gates called International Traffic in Arms Regulations a “byzantine amalgam of authorities, roles, and missions scattered around different parts of the federal government.” Several previous administrations and congressional task forces took a hard look at fixing these regulations in the past. The fact of the matter is that we lacked the endurance and political will to see it through.
The current administration deserves credit for compelling allies to spend more on their defense and for promoting American arms transfers. But without modernizing the regulatory framework that undergirds such exports, the United States is missing an opportunity to reassert its predominance as the provider of choice.
Effectively regulating U.S. defense trade is a complex endeavor with far-reaching consequences. For too long, however, the gravity of the challenge has inhibited comprehensive reforms to keep pace with geopolitics and the state of technology. Drawing on previous efforts, below are five specific recommendations to transform defense trade.
First, consolidate regulations. While some criticisms of the International Traffic in Arms Regulations are misplaced, its brand is anticompetitive to U.S. trade interests. Allies chafe at the re-transfer restrictions and are wary of its “taint” (the compliance burdens of integrating American technology into foreign-made systems). The administration should consolidate the International Traffic in Arms Regulations within the Export Administration Regulations through executive order, while retaining the effective elements of both. The outcome would be a streamlined regulation that fulfills the statutory obligations of the Arms Export Control Act, while creating more consistency with the 2018 Export Control Reform Act (which accounts for more dual-use technology sales). The resulting enhanced Export Administration Regulations would preserve the statutorily mandated United States Munitions List and Commerce Control List, protect cutting-edge technology, and remove ambiguous language along with onerous compliance mandates for allies.
Second, merge oversight under one interagency task force. Even with a new export regulation in place, there’s still no single individual or agency in charge, resulting in bureaucratic silos and convoluted decision-making. To oversee license adjudication, the administration should create an international trade unit consisting of staff from the State and Commerce Departments, housed under the same roof, and connected to a single information technology network. This merger would eliminate duplicative functions, facilitate interagency collaboration, and reap cost savings.
Third, sharpen license applications. As it stands, the current system is a bureaucratic nightmare, with six distinct agencies (Directorate of Defense Trade Controls, Bureau of Industry and Security, Bureau of Alcohol, Tobacco, Firearms and Explosives, Nuclear Regulatory Commission, Department of Energy, and Office of Foreign Assets Control) each utilizing different forms and processes for export authorization requests. In its place, the administration should implement a single, harmonized Specific License Application accessible through a unified database. A new system would feature mandatory response times and eliminate customized license provisions, replacing them with standardized conditions for technology transfers, ensuring consistency and simplifying compliance.
Fourth, eliminate unnecessary obstacles to allied burden-sharing. Today, American-made aircraft and naval vessels cannot be repaired by citizens of many allied nations in their domiciles. The administration should mandate that allies take responsibility for their own industrial security and then capitalize on this momentum by consolidating license requests for high-trust allies into a general license authorization, knocking down artificial barriers between deeply aligned nations. In turn, regulatory agencies should shift enforcement efforts away from auditing close partners and towards diverting genuine national security threats.
Finally, modernize Pentagon directives to reflect advances in technology. Underpinning the licensing process is a disconnected web of actors responsible for overseeing technology security. While well-intentioned, these stakeholders govern a disjointed set of parallel processes and often rely on policies written years before the advent of AI and removed from several evolutions in microprocessors. The administration should consolidate oversight of these disparate processes, while mandating a rewrite of Pentagon instructions controlling technology security to refocus on protecting the highest-end capabilities.
Without a single change to the current regulatory framework, a breakthrough in trade regulation could happen overnight by adopting a less risk-averse mindset. At present, regulators conservatively interpret ambiguous terms found in the International Traffic in Arms Regulations (e.g., “specially designed,” or “peculiarly responsible”), erring on the side of over-classifying products. This condition is compounded by the ascendancy of a new class of software-defined, dual-use technologies, which have commercial applications at their core. Clear direction from State and Pentagon leadership will align agency interpretations to a longstanding regulatory principle that systems should not be controlled as defense articles if they have predominant or equivalent civil applications. In practice, that means regulators would ensure that baseline products — before they’ve been modified for military use — are available to trusted partners through commercial means.
As the new process takes shape and policymakers identify friction points, legislative changes may be necessary to further refine the system. But the five aforementioned recommendations don’t require a new statute to effectuate, preserve the oversight responsibilities of the relevant congressional committees, and empower technocrats to focus on guarding what matters.
A streamlined export framework would reap several intertwined benefits: a stronger ecosystem of companies capable of ultramodern production techniques, empowered allies prepared to burden-share, and more purposeful American exports. Defense cooperation would realize its potential as an instrument of national power instead of tarnishing the American brand.
As the United States seeks to revitalize defense production as the “Arsenal of Freedom,” opening the relationship between world-class American manufacturers and global markets is table stakes. The idea that policymakers ought to either protect the U.S. industrial base from foreign workshare mandates or accept sovereign control of supply at the cost of American jobs is a false choice. The influx of U.S.-designed defense technology into partner nations, enabled by a streamlined export regime, will bolster the case for expanded production capacity at home and create additional manufacturing opportunities abroad. Both contribute to allied industrial resilience. Moreover, the cross-border collaboration required to facilitate such deals will accelerate information sharing between trusted hardware, software, and production engineers and unlock innovation at scale.
Countries in Asia, Europe, and the Middle East are embarking on massive defense buildups. Few of these nations have the industrial capacity to meet their own demand. A new category of companies is growing, however, based on the principle that mass production can be achieved rapidly and at lower cost when using commercially derived technology. Products with readily available global supply chains open opportunities for international partnership. Facilitated by updated export regulations, systems with modular architecture would more efficiently incorporate foreign subcomponents and mission systems. Allied forces would then have the option to tailor U.S.-origin capabilities to their unique operational and industrial imperatives, while maintaining interoperability with American operators.
The more that American companies can engage with allies on commercially derived products, the faster they can hone a new class of defense capabilities — such as software-defined autonomy — to allies’ specific military requirements. Modular design will enable the United States to protect the technology that matters, and reduced regulatory burden will leverage American strengths of speed, ingenuity, and partnership.
The United States has a long and storied tradition of defense production — so much so that the Soviet Union once called America “the country of machines.” During this era of allied rearmament, confining those machines to the United States would be a grave mistake. America has a unique opportunity to replace the International Traffic in Arms Regulations with an optimized and secure system to provide military exports to its allies.
Gregory Kausner is the senior vice president of Global Defense at Anduril Industries. He served as a senior professional staff member on the Senate Foreign Relations Committee, the deputy assistant secretary of state for political-military affairs at the Department of State, the deputy director for the Defense Security Cooperation Agency, and executive director for international cooperation (acquisition and sustainment). He also performed the duties of the under secretary of defense for acquisition and sustainment.
Image: Pfc. Jaidyn Moore via DVIDS.
