In Japan, farmers have been using drones for decades to inspect crops. In Canada, police use drones for search-and-rescue operations. In the U.K., drones are used for commercial photography.

In the U.S., these activities have always been illegal without special permission from the Federal Aviation Administration (FAA), which, until recently, was rarely granted.

That began to change this year when the FAA proposed regulations for commercial drones. Once the rules are finalized in a couple of years, the U.S. can finally start catching up with other countries in this growing industry. Meanwhile, the U.S. is leaving billions of dollars in economic growth on the table as drone developers and customers do business elsewhere.

It is not too late to catch up. With reasonable and globally competitive regulations, the U.S. could still become a leader in this growing industry. The rules proposed in February are a good first step because they are based on the FAA’s characterization of the risk that the small, unmanned aircraft pose to the public. It’s important for the FAA to create the right risk-based foundation for drone regulations, not just to unleash the U.S. market, but also to guide the next regulatory issue that will be more fraught: privacy.

By 2035, the number of unmanned aerial vehicle, or UAV, operations each year will surpass the number of manned aircraft operations, according to the U.S. Department of Transportation research arm, the Volpe Center.

Industry experts estimate the global drone market is worth between $6 billion and $12 billion, and commercial drones account for about 10 percent. The Volpe Center forecasts the U.S. commercial drone market will reach $5 billion annually by 2035.

By far, the largest projected application for UAVs is in precision agriculture. Drones can identify differences in crop conditions at a much lower cost than aerial mapping with small planes. Drones are also being used in various ways for public safety, for example, helping with search-and-rescue operations, photographing wildfires, and monitoring nuclear sites for danger. They’re just not being used this way in the U.S., outside of special exemptions the FAA has made in limited circumstances. In the U.S., recreational use of small drones is permitted without FAA approval. However, as the FAA worked to issue a comprehensive set of regulations, it barred nearly all commercial use of drones.

This is the nut of the problem with U.S. drone regulations. The rationale for the distinction between recreational and commercial drone activities mirrors the manned aircraft world, where commercial pilots are responsible for transporting large numbers of passengers safely in large aircraft, and therefore are held to the highest level of experience and training. Recreational pilots are held to a lower standard in terms of experience because of the lower potential for harm. However, small drones pose equal risk, whether used for recreational or commercial purposes.

By 2035, the number of drone operations each year will surpass the number of manned aircraft operations.

The proposed FAA regulations conclude that the smallest, lightest drones (those under 4.4 pounds) traveling beyond the line of sight of the operator entail greater risk than heavier drones within the line of sight. But what is the true safety risk profile of different alternative operations under consideration? This rule would leave some highly anticipated activities, like package delivery, out of bounds.

Numerous reports conclude that U.S. drone manufacturers and users are at a serious disadvantage because of their inability to test commercial drone applications in the U.S. and the regulatory-driven absence of a commercial U.S. market. U.S. drone manufacturers and users have moved portions of their research and development to other countries.

In the emerging delivery market, Amazon reports that it has shifted some of its air delivery research and development overseas instead of flying UAVs indoors in the U.S. The company reacted to the FAA’s February 2015 proposed rules by saying that the agency needs to expeditiously address the needs of its customers—a clear reference to the line-of-sight limitation. Google’s similar drone delivery research is being conducted in Australia.

Price Tag of Lost Opportunities 

Putting a price tag on the lost opportunities in the U.S. resulting from regulatory constraints is difficult. The Association for Unmanned Vehicle Systems International estimates that each year of delay has a $10 billion economic impact for the U.S. Even a small fraction of that is significant, particularly if foreign-based companies can sustain the advantage of lead-time. And that is the fear of U.S.-based drone manufacturers.

Our view is that non-U.S. drone manufacturers will not sustain their first-mover advantage in the long term. The rapid technology changes and market growth of the commercial drone sector will enable U.S. firms to catch up once (and assuming that) the FAA issues reasonable regulations. First movers in other countries will achieve important short-term gains, at a minimum, gaining time to develop their brands in the market.

The FAA rules should be finalized quickly to catch up with the global drone industry and U.S. regulators must stick to their plan of incremental rule updates that are risk-based and closely track industry developments.

This groundwork will be important as drone use becomes more widespread and the public begins to call for stricter parameters on the topic of privacy. The most sensitive concern is that people will use drones for surveillance or to fly over private property and transmit images.

Typically, activities with lower safety risks—such as precision agriculture, oil and gas exploration, and wildlife conservation—also have lower privacy risks because they are conducted in remote areas. However, aerial photography is an example of drone use with low safety risk and high privacy concerns. Privacy concerns will probably prove even more difficult to manage than safety. Creating a risk-based approach for regulations will be crucial as the industry faces this next challenge.