Like other big contractors, American space companies have long expected some friendly support from their government. And Uncle Sam has usually been more than happy to help. Sometimes, though, government help causes more harm than good.

Since 2005, US satellite manufacturers have been prohibited from hiring India’s space agency to launch their equipment. Private American launch companies, such as SpaceX, are quite happy with this arrangement, which was intended to protect them. But the ban is not only wrong in principle—it’s actually impeding an exciting new American industry.

Last month, under pressure from satellite operators and manufacturers, US trade officials began reviewing the decade-old policy. They should heed the pressure and overturn it.

Emerging India may seem like an unlikely competitor for Silicon Valley rocket companies. Yet since 1969, the Indian Space Research Organization has consistently punched above its modest weight class, racking up a series of cheap and practical achievements. One of its most important feats was the development of the Polar Satellite Launch Vehicle, which was designed to carry satellites for monitoring agriculture and water resources, among other things. What made the PLSV unique was that it was designed to launch small satellites. And that’s a good niche to occupy at the moment.

Over the past few years, the small-satellite market has boomed as advances in miniaturization made space accessible to governments and companies that might never have considered it. The uses for such gear seem almost limitless, from shoebox-sized climate-monitoring devices to Samsung’s plan to use thousands of micro-satellites to provide global internet access. Some $2.5 billion has been invested in the industry over the past decade.

But getting all those satellites into space is now proving to be a problem, and US policy is partly to blame.

In the 1980s, Ronald Reagan’s administration sought to protect nascent private launch companies from subsidized foreign competition by setting up Commercial Space Launch Agreements. The idea was simple: In exchange for the chance to put US satellites into space, foreign governments agreed to launch quotas and set fees. Both China and Russia signed such agreements. In 2005, India was asked to do the same. While the US waited for an answer (it was and continues to be “no"), it imposed an export moratorium on satellites for Indian launch.

The timing was no accident. In 2005, SpaceX was building its Falcon 1 rocket, which was designed to carry small satellites. The ban even came to be known as the “SpaceX Agreement." Problematically, though, the Falcon 1 had only one commercial launch before it was retired in 2009. At the time, the small satellite boom hadn’t yet taken off, and SpaceX didn’t believe there was a commercial justification for the rocket. (It’s now scrambling to correct that mistake.)

Since then, no other US company has offered a rocket for small satellite launches (though some are reportedly in the works), even as demand has surged. That leaves American satellite companies with few options. The US Trade Representative has handed out occasional waivers from the moratorium. And a European government consortium now offers its own small satellite launch vehicle, for a hefty fee. But a far cheaper and more reliable option—going to India—remains off the table.

That’s only hurting American companies, while sending the wrong message to India. Civilian space cooperation would benefit the economies of both countries, and restraining it to protect American companies—which have had 10 years to come up with a competitive product—can’t be justified from a business or diplomatic standpoint. If the US government wants to help its space companies shoot for the stars, it should stop shooting itself in the foot. Bloomberg

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