WASHINGTON – The U.S. launch industry needs "more innovation" to increase competition in the world market, the chairman of the House Space and Aeronautics Subcommittee said Wednesday.

"Don't look to the government as your savior," he said at a hearing on Capitol Hill.

In biting comments to aerospace officials, Rohrabacher defended the terms of space-trade agreements signed by the U.S. with Russia, China and Ukraine that will expire at the end of this year.

The agreement was meant to spur Russia's entry into the commercial space-launch market while protecting U.S. rocket builders from "predatory" pricing tactics in other countries.

But some officials in the aerospace industry say such quotas will hurt joint ventures between Russia, Ukraine and U.S. aerospace firms like Boeing and Lockheed Martin.

Quotas may ultimately cause those partners to turn to more reliable European companies, said Clayton Mowry of the Satellite Industry Association. The group represents some of the industry’s top commercial satellite firms, including Lockheed and Boeing.

"Our membership is united in belief that the era of launch quotas must come to an end," Mowry said at the hearing. "The quotas now constitute a constraint on U.S. access to commercial launch services which seriously undermines the satellite industry’s competitiveness."

Wall Street analysts agreed with that, predicting that over the next two to four years the problem will begin to border on crisis.

"The financial markets despise ambiguity and uncertainty," said Pierre Chao, managing director of Credit Suisse First Boston.

"Questions about the economic viability of various [launch] markets and U.S.-government policy toward the sector have cast a pall" on the industry, he said.

But small space companies urged Rohrabacher to keep the quotas intact, saying they could be squeezed out of business without them.

The quota policy "eliminates the winner-take-all environment from the competition," said Oren Phillips, vice president of business development at Thiokol Propulsion in Salt Lake City, Utah.

If quotas were to be lifted on China, Russia and Ukraine, those countries could significantly undercut the pricing of launches and dump "cheap" rockets in the market, said Jeff Foote, president of Alliant Aerospace Propulsion in Hopkins, Minnesota.

Mowry defended the industry's position of removing quotas saying they have "outlived their purpose" and block healthy market competition.

"Competition is the tonic in this business," he said.

But Rohrabacher said removing quotas could compromise national security by allowing the transfer of sensitive technology into the wrong hands.

"Communist rockets were improved from the technology from members of your association," he said, referring to a special House report that blamed the presence of U.S.-built satellites atop Chinese rockets for helping boost China's technological prowess.

Just last month, the State Department accused Lockheed Martin of illegally giving a Chinese firm, owned partly by the Chinese government, advice on how to improve a flawed Chinese-made satellite motor. Lockheed denied it had violated any export laws.

"I am not saying that quotas have to stay," Rohrabacher said. "There can be some other kind of approach."

If U.S. industry can't deliver, he said, then perhaps Congress could funnel more money to NASA to come up with "some bold new alternatives."