Index AIA Seeks Export Control Process Reform AIA Pinpoints Export Issues Industry Opposes Ex-Im Funding Cut The President's WASHINGTON PIPELINE: AIA Is Relentless in Its Advocacy for the Aerospace Commission Association Tells President Bush of Tax Relief Support Atlantic Research Joins Association SMC Reaches Out to SDBs and WOSBs AIA Adds Nikore Proposed Tax Incentives Could Stimulate Commercial Spaceports and Benefit U.S. AIA Offers FCC Technology Briefs U.S. Launch Range Initiative Underway A•E•R•O•I•N•D•I•C•A•T•O•R•S: Defense Spending Percentage at Record Low

AIA Seeks Export Control Process Reform

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AIA's proposal to improve the export control system used for defense items and services seeks specific changes in order to make the current system more efficient.

The proposed modifications, which range from raising congressional notification thresholds to relaxing deemed export rules, require administrative corrections and legislative changes.

Other organizations, such as the Center for Strategic and International Studies, the Stimson Center, and the Business Roundtable, are developing their own recommendations for change to the export controls process.

The association's proposals are not intended to compete with these studies, which will highlight the severe problems that U.S. industry and our industrial partners and allies encounter when navigating the current export control system.

AIA, along with the National Defense Industry Association and the Electronics Industry Alliance, are attempting to provide a catalogue of specific reforms that could be made in the next few months to assure that U.S. industry can continue to compete and cooperate in world markets.

The aerospace focus includes:

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The Bush Administration's 2002 budget proposal would slash funding for the Export-Import Bank by almost 25 percent under the FY 02 appropriation of $927 million.

AIA and its members are urging that funding levels be restored and that the administration and Congress increase funding for future years.

AIA Supplier Management Council members also have written to the president and Congress, reminding them that thousands of small companies indirectly depend on the Ex-Im Bank in provide parts and components for U.S. aerospace products under Ex-Im financing.

The Ex-Im Bank is a government financial institution used regularly by the aerospace industry and other U.S. exporters to help foreign customers obtain direct loans and U.S. government loan guarantees to purchase U.S. products.

For many middle and lower income countries, export finance or guarantees provided by governments are often necessary in order for them to purchase aerospace products.

Proponents argue that the benefits from exports stimulated by Ex-Im Bank, including increased corporate and individual income taxes, more than repay the U.S. treasury for the investment.

A significant decrease in Ex-Im Bank funding, such as the one proposed by the president's budget, will hurt the U.S. aerospace industry's competitiveness in world markets. Other industrial countries have comparable programs to which potential customers can turn if financing options are unavailable from the U.S.

Rather than a budget cut, Ex-Im estimates that it will need $1.4 billion more to keep up with the export demand it anticipates.

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Understandably, the Bush Administration has been occupied with the transition and reform policies in matters as important as taxes and education, issues that have required a great deal of attention.

And it’s also understandable that the Aerospace Industries Association is concerned about how some of its key issues have fared in the first 100 days of the new administration and new Congress.

Along with an initial attempt to cut FAA and Export-Import Bank funding and signs of scaling back certain defense programs, the administration missed the March 1 target to appoint six commissioners to the Presidential Commission on the Future of the U.S. Aerospace Industry. The date for the commission was set in section 1092 of Public Law 106-398.

The administration no doubt will set up the commission shortly. Association staff have met with representatives of the International Trade Administration in the Commerce Department, the National Science and Technology Council in the White House, and with administration transition officials in the Defense Department to develop the commission agenda. AIA and member company representatives continue working on detailed background papers to help the commission quickly focus on issues vital to the future of our industry.

The commission is charged with examining public policy in aerospace. The need to modernize air traffic control, build new runways, increase funding for aerospace research and development, reform our export control laws, and increase the defense procurement budget are serious issues that require comprehensive action.

The nation expects and needs the safe and efficient air transportation system and the technologically superior air defense that we enjoy today. To meet these expectations in the future, we must develop a plan to maintain a healthy aerospace industrial base for the next 10, 20, and even 30 years.

The commission could pull together diverse elements of aerospace — military and commercial space, civil aviation, defense acquisition and procurement, and international trade — to stimulate development of an even more efficient, productive industrial base that base that currently employs hundreds of thousands skilled workers.

The commission will have six members appointed by the president and six appointed evenly between the Senate and the House. Senate Majority Leader Trent Lott (R-La.,) recently filled his appointments with Dr. William Schneider, Jr., former under secretary of state for security assistance, science and technology, and Robert J. Stevens, president and chief operating officer of Lockheed Martin. Sen. Tom Daschle (D-S.D.) has appointed former Deputy Secretary of Defense John Hamre.

AIA is pleased with the appointments and feel they are proof of the seriousness with which Senate leadership views the commission. We recognize the administration must grapple with many weighty issues, and we also feel that aerospace must be in a prominent position on the administration’s radar screen. Aerospace is a major contributor to the economy, to transportation and trade, and to national security.

We are relentless in our advocacy for the commission and will enthusiastically support the commission's work.

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In a recent letter to President Bush, AIA President and CEO John Douglass stated AIA's support for the president's tax relief agenda. Noting that the tax burden on consumers and businesses is far too heavy, Douglass urged support for two specific changes in the tax law early in this Congress.

In addition to reducing corporate tax rates, Douglass supported the research and development tax credit, noting that it's been an important tool in keeping the United States in the forefront of technological development because it provides a significant incentive for industry to expand R&D programs.

Douglass pointed out that unfortunately few if any aerospace companies qualify for the regular 20 percent R&D tax credit, noting that most aerospace companies can take only a smaller "alternative credit" between 2.65 and 3.75 percent.

The disparity, he said, has the unintended consequence of providing a smaller incentive for development of new aerospace technology compared with other technologies.

Douglass applauded the president on the importance of a permanent R&D tax credit, currently set to expire in 2004.

The association executive said alternative credit rates should be increased and regular credit strengthened so that aerospace technology is not disadvantaged in the competition for research and experimentation resources in our economy.

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Atlantic Research Corporation (ARC), a unit of Sequa Corporation, is the newest AIA member. In business for more than 50 years, ARC has extensive experience in solid propellant rocket and gas generator development and production.

The company is the world's largest producer of tactical rocket motors and HTPB propellants. ARC also has warhead production capability and offers a complete spectrum of propellant types.

Located near Washington D.C., ARC's Gainesville, Va., center has facilities to design, fabricate, and test solid rocket motors, including a test chamber capable of firing rocket motors under simulated vacuum conditions. The facility includes composite motor filament winding equipment.

ARC's Camden, Ark., plant is its primary production facility with more than 1,500 acres and 896,000 square feet of floor space. ARC recently added a new facility in Orange County, Va., with propellant processing equipment and rocket test capabilities.

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AIA and its member companies since 1989 have provided leadership to substantially increasing subcontract awards to Small Disadvantaged Businesses (SDBs) and Women-owned Small Businesses (WOSBs).

One of the most significant tools used by industry to reach this goal for SDBs and WOSBs has been the DoD Mentor-Protégé Program, which allows large companies such as AIA members to support proteges in developing their business.

John Douglass, AIA president and CEO, and Jon Etherton, AIA assistant vice president for legislative affairs, were instrumental in creating the program before joining AIA. It is still an important way to expand business for SDBs and WOSBs.

With the formation of AIA's Supplier Management Council (SMC), opportunities abound to broaden support SDBs and WOSBs into the mainstream of the aerospace industry. As part of this effort, AIA is looking at the formation of a working group under the SMC to address the needs of SDBs and WOSBs.

The working group could be an advocate to make SDB and WOSB issues heard in government and industry and help expand their business in commercial and global markets.

SMC representatives were scheduled to participate in a Defense Department Mentor-Protégé Conference last month to seek feedback on this initiative from manufacturing protégé. Formation of a working group will strengthen the SMC and better meet the needs of AIA members.

Also, the SMC is collaborating with DoD and the National Women Business Council on including WOSBs in the Mentor-Protégé Program.

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Varun Nikore has been named director of supplier management for AIA.

He takes over the post from J.P. Stevens who has been promoted to vice president for special projects at the association.

"We are fortunate to have found a person with Varun's abilities to take on this critical supplier management function," noted John W. Douglass, AIA president and chief executive officer. "He brings with him a multitude of talents that will continue to bring growth and value to the Supplier Management Council."

Nikore's previous experience includes work in technical services at World Airways and airport and airline consulting. While at the U.S. Air Tour Association, Varun handled marketing and legislative affairs. Also, he served as a program analyst on the Integrated Terminal Weather System and the Safe Flight 21 programs at TRW.

Varun is a graduate of Embry Riddle Aeronautical University and George Mason University.

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Continuing growth of the commercial space launch vehicle industry has raised the question of where are the spaceports from which new space vehicles be launched.

Currently, U.S. launch facility resources are few and most are owned and operated by the federal government, putting commercial users in direct competition with the U.S. Air Force, NASA, and other government entities.

During the 106th Congress, Rep. Dave Weldon (R-Fla.), a champion of the U.S. aerospace industry, introduced a bill enabling municipalities to issue tax-free bonds to fund construction of future spaceports.

Congress did not act on the bill, which is likely to resurface this year. The Joint Tax Committee valued the tax impact of the bill at $130 million over 10 years, a small price tag for a huge investment in the emerging nonfederal spaceports.

AIA endorses the proposal, newly titled the Spaceport Equality Act, and urges congressional approval.

If space travel is to become more common, the infrastructure will be needed to support the growing transportation mode. Other modes - highways, airports, and seaports currently enjoy a tax incentive - so why not spaceports?

A number of states have formed spaceport authorities and are looking for ways to develop space transportation infrastructure. By using financing mechanisms such as tax-free bond issues, these authorities could allow site-specific and vehicle-specific tailoring to promote competition and innovation.

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VAIA staff in recent months briefed the Federal Communication Commission in a continuing program aimed at informing the agency of important emerging and advanced technologies that affect the satellite industry.

One briefing focused on advanced technology space adaptable antennas and the other on software defined radios.

AIA plans to conduct other briefings throughout the year, including one this month on micro, nano, and pico satellites.

Asked last year by the FCC to develop an Advanced Technologies Briefing Series, the association began the program in December.

Each briefing gives AIA member companies an opportunity to provide the FCC with information on emerging and advanced technologies before the agency writes regulations on them.

Also, the briefings reassure the agency that the satellite industry is continuing to invest in advanced technology research and development, helping validate future commission decisions on spectrum allocation and usage.

The briefings address issues such as current technologies and capabilities; state-of-the-art technologies; technology impact on satellite capability, adaptability, and performance; and a capability insertion timeline.

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A joint industry-government initiative to improve U.S. launch range infrastructure and resources got underway last month in the initial meeting of the Advanced Range Technology Working Group (ARTWG) at NASA's Kennedy Space Center in Florida.

The working group was formed in response to a recommendation government study last year on "The Future Management and Uses of the U.S. Space Launch Bases and Ranges."

The recommendation directed formation of a joint working group to "develop a plan to examine, explore, and proceed with next generation range technology development and demonstration with a focused charter to improve safety, increase flexibility and capacity, and lower costs for reusable and expendable launch vehicles."

While the government will be the technology development mechanism, it is putting plans in place to ensure that the new technologies will be applicable to various programs and distributed to ranges and spaceports around the country.

The ARTWG plan also includes integrating technology transfer strategies into their mission.

According to Bruce Mahone, AIA's Director of Space Policy and a participant in the working group, "ARTWG plans to solicit input from federal agencies, state agencies, spaceport authorities, industry, and academia to provide a synergistic approach for identifying, developing, and demonstrating range technologies.

"I was pleased to see substantial participation by so many range technology stakeholders. The ARTWG is an environment where we can share information as well as issues and concerns," he added.

The group's draft mission statement proposes that it facilitate opportunities for development of innovative technologies that provide range functions with increased safety and efficiency while providing greater flexibility and availability.

Mahone will continue to participate in this and other launch range working groups to represent the interests of AIA member companies.

In a related action, NASA designated the Kennedy Space Center for next-generation reusable launch vehicle range technology development and demonstration programs. The U.S. Air Force remains the authority for Eastern Range and Western Range architecture.

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Today's national defense spending represents only 15.9 percent of federal outlays and 2.9 percent of the U.S. gross domestic product.

Never in the post-World War II era has national defense share of government spending and economic output been this low.

President Bush's budget, which increases national defense spending to $319 billion, is considered a step in the right direction. However, AIA's analysis indicates $329 billion is necessary to adequately fund RDT&E and modernization.

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