I am pleased to appear before this distinguished subcommittee to testify on the reauthorization of
the Export Administration Act. I will begin by making some general remarks about the situation
in which we now find ourselves with respect to export controls. Then, I will make specific
recommendations on issues that now confront Congress. I would also like to submit two items
for the record. The first is a study that my office has just completed on U.S. exports to China
during the past ten years. The second is a study entitled "25 Myths about Export Control" that
my office prepared a few years ago but which is still relevant to the issues we face today.
Export control is not a jobs issue
The most important single point for the Congress to appreciate is that export control is not a jobs
issue. Export controls do not have a significant--or measurable--effect on employment. Of the
total American economy, less than two tenths of one percent ($10.7 billion) even went through
Commerce Department licensing in 1994, the last year for which I have been able to find
licensing data. And more than 95% of licensing applications were approved. Only $141 million
in applications were denied in 1994--which is less than one hundredth of one percent of the U.S.
economy and roughly equal to six percent of the cost of one B-2 bomber. The figures today are
roughly the same. Reducing export controls will not stimulate the U.S. economy; it will only
stimulate the proliferation of weapons of mass destruction.
It is also important to realize that export controls are only a shadow of what they were during the
cold war. Since 1989, applications to the Commerce Department have dropped by roughly 90%.
Cases have fallen from nearly 100,000 in 1989 to 8,705 in 1996 and 11,472 in 1997. The reason
is simple: fewer items are controlled, so fewer applications are required. Nor does export
licensing take much time. The Commerce Department is meeting its licensing deadlines for 97%
of its applications.
After cutting export controls to the bone to reflect the end of the cold war, we now need to
strengthen controls to combat proliferation, the main threat of the post-cold war era.
Export control is a national security issue--now more than ever. The world for which Congress
must legislate today bears little resemblance to the cold war world for which the existing law was
written. The spread of weapons of mass destruction, rather than competition with the Soviet
Union, is now the foremost strategic threat to the United States. Because mass destruction
weapons are built mainly with dual-use equipment, the control of dual-use exports is of vital
military and strategic importance. Rather than being viewed as commercial transactions with a
military aspect, as they were during the cold war, dual-use exports must now be regarded as
deeply affecting U.S. national security. It is illogical to say that 1.) the cold war is over and
therefore proliferation is the main international threat, and 2.) that export controls, which are
essential to contain that threat, should be reduced.
In light of the situation we face today, Congress should reevaluate the ability of the executive
branch to respond to the proliferation threat. In particular, Congress should consider transferring
dual-use licensing from the Commerce Department, which is concerned primarily with trade, to
an agency, such as the State Department, that is primarily concerned with protecting U.S.
national security. Or, if such a transfer is considered too big a step, Congress should strengthen
the role of the national security agencies in the existing interagency process. In addition,
Congress should find a way to increase public accountability for export licensing decisions, and a
way to provide effective Congressional oversight of export licensing, which has been inadequate
in the past.
Increasing the power of the national security agencies
The Defense, Energy and State Departments are the lead U.S. agencies on non-proliferation
issues. These agencies house the experts who understand how dual-use equipment operates and
what the risks are if such equipment is diverted for military purposes. They also know which
countries and companies in the world are most likely to divert it. These experts are not at the
Commerce Department. In order to bring the maximum amount of government expertise to bear
upon export control decisions, the qualified personnel at the national security agencies must be
able to decide what is controlled and who is allowed to gain access to it.
But that is not what is happening. The Commerce Department now has more influence than any
other agency when it comes to determining what is controlled for export and who gets to buy it.
Commerce now chairs the most important export control committees and can use its
administrative preeminence to influence the outcome of licensing decisions.
I hope that this subcommittee will examine carefully the testimony given last June by Dr. Peter
Leitner before the Senate Committee on Governmental Affairs. Dr. Leitner, who is a Senior
Strategic Trade Advisor at the Department of Defense, explained how the influence of technical
experts from the national security agencies has been diluted by making them subordinate to a
committee of non-specialists chaired by the Department of Commerce.
I would also like to point to the testimony of Representative Christopher Cox, who testified in
March before the Subcommittee on International Economic Policy and Trade of the House
Committee on International Relations. Congressman Cox warned that mistakes are being made
under the current process and that we can do a much better job of export control. He also
testified that the national security agencies are not being given enough time to do a proper
analysis of applications, and he warned that the national security agencies should not be outvoted
on licensing cases. Because of the information Mr. Cox's committee has recently gathered on
export control, he is in a particularly good position to judge the results of our current process.
Congress should, in my opinion, insure that no license application is approved unless all the
national security agencies concur. It makes no sense to allow cases to be escalated to the
political level where the judgments of national security experts can be reversed by political
considerations. If a national security agency takes a stand in opposition to an export application
at the expert level, the case should end there.
And instead of being like poor relatives invited to dinner, the national security agencies should
be put at the head of the table. Each interagency committee should be chaired by a national
security agency. There is no reason to give this function to the Commerce Department, which
has the least expertise in the subject matter. And the power to decide what to put on the control
list should also be given to the national security agencies. Either the State or the Defense
Department should be given the lead in formulating the export control list, with help from the
Department of Energy for nuclear items. If export control is going to be a strategic question,
instead of a trade question, then the strategic experts should be put in charge of it. This is the
only division of labor that makes sense.
The Commerce Department is also burdened by a hopeless conflict of interests--it must promote
exports as well as regulate them. The promotion function will always dominate, and will always
cause the Commerce Department to champion the exporters' point of view. As long as the
Commerce Department is in charge of administering the export control laws, national security
will take a back seat to trade interests.
Let me give an example to illustrate the problem. Last November, the State Department slapped
trade sanctions on approximately 300 companies in India and Pakistan that are linked to nuclear,
missile or military programs. The objective was to register U.S. disapproval of the nuclear
weapon tests in May and to reduce the risk that American products would contribute to the
nuclear and missile arms race in South Asia.
The Commerce Department, which opposed naming the companies in the interagency process,
but which now administers the sanctions, has virtually interpreted them out of existence.
Commerce has taken the absurd position that even though a company has been placed on the
sanctions list, it is still okay to supply its subsidiaries or subdivisions. This is like saying that it is
forbidden to sell to General Motors, but it is okay to sell to the Chevrolet division, the Buick
division and the Cadillac division.
An example is Hindustan Aeronautics Limited (HAL). It makes the essential nose cones,
guidance equipment and engines for India's biggest rockets and missiles. HAL's aerospace and
engine divisions are specifically listed as "involved in nuclear or missile activities." But the
Commerce Department has taken the position that American exports are permitted to HAL's
aircraft division, its foundry division, and its design and development complex. How can anyone
think that these entities are separate in any meaningful sense from their parent?
A more flagrant example is Bharat Electronics Limited (BEL) in Bangalore, India. It makes the
electronic brains that guide India's long-range nuclear missiles, the most powerful of which was
tested just this week. Although BEL too is listed as an entity "involved in nuclear or missile
activities," the Commerce Department wrote a letter in March to a U.S. exporter declaring that
sanctions did not apply to BEL's "Components Division," which is also in Bangalore, because
that division was not specifically mentioned on the sanctions list.
According to an article in the Journal of Commerce, federal agents have received information that the Components Division is simply diverting imports to its parent. The Journal also reports that BEL has been faxing the Commerce Department's letter to other U.S. exporters so that they too can supply BEL through its subsidiary. The result is that American products are continuing to fuel the missile and nuclear arms race in South Asia with the help of the Commerce Department. Commerce seems to care little about missile proliferation as long as the exports keep going out.
Congress should consider transferring jurisdiction over all dual-use licensing to the State
Department, for essentially the same reasons that it just transferred jurisdiction over satellites.
The Commerce Department is simply not a trustworthy guardian of U.S. national security.
The State Department already handles munitions licenses with the help of the Department of
Defense. In the most recent fiscal year, State's Office of Defense Trade Controls reviewed more
than 44,000 licenses with a staff of about 55 persons. State could easily expand its efforts to
cover the missile and nuclear items now controlled by the Commerce Department.
Congressional oversight
Another reason that export controls have not worked better is that Congress has not exercised
sufficient oversight. The cost of this lack of oversight is shown by the example of Iraq.
Congress essentially ignored export licensing to Iraq until the invasion of Kuwait. If Congress
had used its oversight powers, it would have learned that the Commerce Department approved
$1.5 billion worth of sensitive, dual-use American exports to Iraq from 1985 to 1990, and that
many of these American products were sent directly to Iraqi mass destruction weapon sites. The
Commerce Department approved the following:
* special relays, capable of separating the stages of a ballistic missile, after the exporter told a
Commerce representative that Iraq wanted the relays to be "tested for shock and vibration" and to
operate 66 miles above the earth.
* $57 million worth of navigation, guidance and other equipment for the Iraqi Air Force.
* $557 million worth of computers and guidance equipment for the Iraqi Ministry of Defense.
* $3 million worth of computers and diagnostic equipment for the Iraqi Atomic Energy
Commission.
* $2.7 million worth of computers, and testing and tracking equipment for Sa'ad 16, Iraq's
leading missile development site.
The United States should have learned an important lesson from the export debacle in Iraq.
American pilots had to be sent to bomb what the American government had approved for export.
And some of the equipment that the Commerce Department approved is probably part of what
Saddam Hussein is still hiding from U.N. inspectors.
Unfortunately, the Commerce Department has a similar record on exports to China. My office
has just completed a two-year study of what the Commerce Department approved for export from
the United States to China from 1988 to 1998. The study, based on official Commerce
Department records, found that during the past decade, Commerce approved more than $15
billion worth of strategically sensitive U.S. exports to China. The exports included equipment
that can be used to design nuclear weapons, process nuclear material, machine nuclear weapon
components, improve missile designs, build missile components and transmit data from missile
tests.
The equipment, by definition, is of great strategic value. Only the highest performing machine
tools, instruments, computers and other such items require a Commerce Department export
license. This equipment has been placed on the U.S. export control list by U.S. experts who have
judged that special careand government reviewis needed before releasing it to foreign
countries.
Nevertheless, some of this "dual-use" equipment went directly to leading nuclear, missile and
military sitesthe main vertebrae of China's strategic backbone. And several of these Chinese
buyers later supplied nuclear, missile and military equipment to Iran and Pakistan.
The study shows that the military and strategic value of these legal imports exceeded by many
times what China obtained by illegal means. What China got from the Commerce Department
dwarfed what it got from spies. Even after purloining the design of a nuclear weapon, China still
needed a large array of high-precision equipment to manufacture and test it. Commerce
Department records show that it got that equipment from the United States.
More than half of the $15 billion was for computers. Until 1993, however, China was effectively
denied access to high-performance computers. In that year President Clinton began to loosen
export controls, and in early 1996 computer export controls were slashed dramatically. Under
the relaxed rules, China has imported or is in the process of importing approximately 400 high-performance computers, the great majority of which have been or are being sold without an
export license. Such machines can be used to encode and decode secret messages, to design and
test nuclear warheads and to simulate the performance of a missile from launch to impact. China
has refused to allow the United States to verify that these computers are being used for civilian
purposes, so it must be assumed that China's weapon scientists have access to them.
Some of the specific findings of the study are as follows:
This record of dangerous exports to both China and Iraq contain an important lesson. Congress
must perform its oversight duty if American security is to be protected.
Congress should carry out this oversight in two ways. First, it should require each federal agency
that participates in export licensing to file written, periodic reports with each Congressional
committee and subcommittee that has jurisdiction over the agency's performance. These reports
should be filed automatically every six months. They should include a record of each licensing
application on which the agency acted and should include the agency's position at all levels of
review. The record should also include the case number, the date received, the applicant, the
consignee, the final date, the final action, the value, the license type, the end use, the relevant
commodity information, and whether the application was approved, denied or returned without
action. Receiving these reports automatically and in writing would greatly aid Congressional
review of each agency's role in the licensing process.
Second, Congress should create an independent Congressional office to review the government's
performance on export control. The office would have access to all licensing records, have
subpoena power, and the power to conduct investigations. The office would function as an
ombudsman. It would report to Congress and Congress would appoint the office's director. The
office could review the required periodic reports referred to above, and provide to Congress an
analysis of the licensing performance of each relevant federal agency.
Transparency
In addition to Congressional oversight, the licensing process needs transparency. Before the Gulf
War, Iraq was able to buy sensitive equipment that the Commerce Department must have known
was going to be diverted to weapons programs. The exports were approved primarily because
the licensing process for dual-use equipment is secret. Neither Congress nor the public is
permitted to examine Commerce Department licensing in the open. This means that only the
exporters know what is being sold, and only the exporters' voices are heard by the licensing
officers when decisions are made. The effect is to freeze the public out of the process and to
open the door to the worst forms of private lobbying. This is true despite the fact that dual-use
licenses are supposed to be for civilian items restricted to peaceful use.
The experience of the Nuclear Regulatory Commission shows the benefit of public
accountability. All of the Commission's export licenses are granted on the public record and in
the light of day. This is the main reason why there were no horror stories about U.S. nuclear
exports to Iraq. Neither exporters nor regulators wanted to defend such transactions in public, so
they did not happen.
To justify the present system, the Commerce Department argues that secrecy is necessary to
protect proprietary interests. But the U.S. nuclear industry competes well on the international
market, despite the openness of NRC licensing. That fact alone proves that secrecy is not
necessary to be competitive. Indeed, there seems to be no evidence that any company would be
disadvantaged if licensing data were made public. Each company would learn as much about its
competitors as its competitors would learn about it.
It is also true that companies know their markets well. They know who is selling what to whom
because their survival depends on it. Anything they might learn from licensing data would be
only a small addition to what they already know through industrial intelligence gathering and
marketing efforts. This is true of foreign companies as well as American ones. But even if there
were a disadvantage to a company from having its past sales disclosed, this cost is outweighed by
the strong national security interest in having an effective, publicly-accountable licensing
process.
Congress should require the publication of all licensing decisions that are more than one year old.
It is difficult to see what harm could result from all companies knowing what other companies
had sold a year ago. Because exporters consider pricing information especially sensitive,
Congress could decide not to release such information until it were two years old.
The licensing information would include the date of the application, the date and nature of the
licensing decision, the applicant, the name and country of the ultimate end-user, a description of
the item sold, its value, and a description of the end-use. This information already exists in a
database. It could be printed by pushing a button.
The summary would include the name of the exporter. If a company is ashamed of having sold
one of its products to a sensitive buyer, the company should not have made the sale in the first
place. Reputable companies do not object to telling the truth about their business. If the sales
are legitimate, and satisfy export laws, there is no reason to keep them hidden. The decision to
license them is an official government act paid for with tax dollars. Pushing export licensing into
the light of day would encourage exporters to be honest, encourage the government to be careful,
and allow the public to find out whether American exports are undermining U.S. national
security.
Multilateral vs. unilateral controls
One of the perennial issues in export licensing is the distinction between unilateral and
multilateral controls. In my judgment, it does not make sense to pin national legislation on this
distinction. A "multilateral" control cannot be defined without referring to the laws and practices
of other nations. An attempt to do so leads one in a circle. To the laws of which foreign
countries should one refer? How much compliance by them with their obligations is sufficient?
Who decides whether the compliance really exists? If foreign countries change their laws, does
Congress have to change U.S. law too? How does one avoid having the United States sink to the
level of the lowest common denominator?
The use of this distinction is the main weakness of HR 361, which allows the United States to
control only the things controlled by international regimes. All other controls, which are labeled
"emergency" controls, lapse after twelve months. Under this approach, U.S. law would depend
entirely on the laws of other nations. No self-respecting country should legislate in such a
manner. It is the job of Congress to pass laws that advance U.S. interests and reflect American
values, not the interests and values of other countries.
HR 361 would make it impossible for the United States to play its leadership role in export
control, and would reverse a foreign policy stance the United States has maintained for over forty
years. This would be an historic abandonment of America's moral leadership. If the United
States simply aped what other countries did, American companies would now be selling Iran
sensitive machine tools because German firms are doing so. American companies did not sell
poison gas plants to Libya and Iraq because Germany did, or sell large rockets to India because
Russia did, or sell missiles to Pakistan because China did. There were no American logos on the
Russian-supplied and German-enhanced Scud missiles that hit Tel Aviv during the Gulf War.
U.S. exporters have "unilateral" controls to thank for that.
It is essential for the United States to be able to adopt strong controls first, and then persuade other countries to follow its example--the method by which every export control agreement since World War II has been created. U.S. diplomats are using this strategy today to help create export controls in the former East Bloc. Leadership is inherently unilateral. If the United States had waited for Europe, Japan and the Arab countries to agree on what to do when
Iraq invaded Kuwait, Iraq might still occupy Kuwait today. Only by acting "unilaterally" was the
United States able to forge a successful coalition.
Congress should give the President broad authority to control the export of any dual-use item that
is judged relevant to the national security of the United States, the national security being taken
to include combating the threat of proliferation of weapons of mass destruction and maintaining
the military advantage that the United States now enjoys. The President should not be limited by
statute to controlling what other countries control. If, because of the failure of other countries to
control an item, the item becomes available from foreign sources, the question of maintaining
U.S. controls should be dealt with through the foreign availability mechanism.
Home | Menu | Links | Info | Chairman's Page