The Israeli defense industry is a major employer in Israel, with around 50,000 employed directly and 150,000 indirectly. It is a major growth driver for the economy, with exports passing $7 billion in 2012. Israeli legislators are about to discuss an amendment crucial to defense exports: The Export Control Security Order (Military Equipment-2008) - but certain changes the industry badly needs are not on the agenda.
This secondary piece of legislation directly effects two key issues facing defense exporters: (a) whether a given product is "controlled" – meaning, is subject to export control licenses, and if it is - (b) which ministry is authorized to license it – the Defense Ministry, or the Economy Ministry.
The problem is neither semantic nor trivial. Procedures concerning defense exporters are longer, more complicated and therefore much more expensive at the Defense Ministry compared with the Economy Ministry.
Here are some examples.
The Defense Ministry requires any exporter seeking a license for a product to first register with its Defense Exporters' Registrar. That process alone usually takes around two months and filters, at this early stage, some of the exporters. The Economy Ministry has no such requirement.
The Defense Ministry requires not only a license to export a product, but also one to market it – this means additional forms, complications and costs. Not so at the Economy Ministry, which requires that the exporter have only an export license per product.
The Defense Ministry handles only requests submitted by hand or by "snail mail" – regular posted letters. The Economy Ministry has a computerized process, allowing digital applications.
That digital format enables immediate detection and correction of errors by the exporter – a major time-saver. This is not possible in the Defense Ministry's process.
Describing the situation in his 2013 report, the state comptroller wrote on the conduct of the Defense Export Controls Agency that "... the process of approving marketing licenses, in its current form, is cumbersome, is a burden on the exporters, and impairs their ability to compete in the international market."
Yet almost all of controlled defense products - 96% of the licenses granted - remain subject to the Defense Ministry, and only 4% are the Economy Ministry's fief. Here's where Israel could take a page from America's book.
In fact, the Israeli export control system is based on the American one. In both countries, the system distinguishes between two types of defense items: "sensitive" items (i.e., those that present a material threat to Israel or its allies) and "less sensitive" items.
In the U.S., the more sensitive items are controlled, relatively strictly, by the State Department and the Department of Defense. The less sensitive items are more loosely supervised by the Department of Commerce.
For years the U.S. Export Control system has been criticized as lacking in transparency and coherence, and thereby undermining defense exporters' ability to compete, say critics. In 2010 President Obama responded to the calls for change and announced reform of the U.S. export control laws.
The essence of the reform so far has been to transfer hundreds of items (including satellites) from the relatively strict supervision of the State Department, to the more flexible supervision of the Department of Commerce. "We need a system that dispenses with the 95 percent of 'easy' cases and lets us concentrate our resources on the remaining 5 percent," explained Secretary of Defense Robert Gates.
That doesn't mean security is becoming lax. The reform enables resources to be redirected from less sensitive items to very sensitive ones, thus contributing also to national security.
Back in Israel, its explanatory notes to the draft amendment, the Israeli Department of Defense clearly states: "the intention is to maintain the current level of supervision rather than reduce it", and accordingly, the draft order adds items (aerial photographs and radio systems for locating mobile phones, for example) to the supervision of the Ministry of Defense.
The Foreign Affairs and Defense Committee should reject the current draft and, instead, request action towards urgent reform of the Israeli export control system, emulating the American example. As many less-sensitive items as is possible should be transferred from the supervision of the Defense Ministry to that of the Economy Ministry, for the greater good of the companies and of national security itself.
The writer is an attorney specializing in Israeli export controls.
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