Where Industry and Security Intersect
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I also want to join Under Secretary Juster in welcoming you to Update. I especially welcome those of you who have traveled to Washington during these anxious times. I am confident you will find the city, the government, and BXA "open for business."
Over the next two days, I hope you will join me in thanking my staff and all BXA employees for keeping the licensing process up and running during the aftermath of September 11. Public service has always required personal sacrifice. That's just part of the job. But our employees - and all civil servants - have exhibited a high degree of professionalism and courage in the past four weeks.
This morning I want to take the opportunity to introduce myself to those of you who don't already know me and to begin a dialogue on some of the policy initiatives on which I will focus the next several months. Prior to being appointed to this position, I split my time between government and the private sector. In the private sector, I have practiced law, served as an officer in a bank holding company, and worked as a lobbyist for a management consulting firm. Many of you know me from the six years I served as a staff member in the U.S. Senate. In the Senate I focused on international trade issues and ultimately served on the Senate Banking Committee where I was responsible for overseeing the operations of BXA and for re-authorizing the Export Administration Act. I hope that through my experiences, I bring to the Bureau an understanding of the needs of business and some ideas of how to make BXA more responsive to you, the exporting public.
There are seven policy initiatives that I will briefly highlight this morning. I do this in order to begin a discussion on these issues - among the business community, executive branch officials, and legislators. All of these initiatives must be addressed within the context of BXA's mission, which is to enhance national security while minimizing the impact on U.S. industry. We know that export controls impose a cost on your individual companies and influence many of your business decisions, such as whether to hire foreign nationals or enter a particular overseas market. However, I believe we have decided, as a society, that the benefit to national security of export controls outweighs the cost to the economy. One of the many painful lessons of September 11 is that a breach of security is not good for business. I am sure some of your companies have felt that firsthand. Nevertheless, every effort should be made to target export controls so that national security is enhanced with the least impact on legitimate, commercial activity. The following initiatives are offered in this spirit.
First - We need a new Export Administration Act. As counsel to the Senate Banking Committee, I was charged with developing the EAA of 1999, the basis for S. 149 that passed the Senate last month. As part of that process, I spoke with many experts in this area, including some of you in the audience today. I realized that although export control law is very complex, the goal of export controls can be stated simply: it is the desire to keep certain technologies out of the hands of those who threaten our national security. Yet those two elements of export controls - the technology we produce and the threats we face - have changed fundamentally since the EAA was significantly rewritten more than 20 years ago.
It is crucial that the Act be updated to reflect these changes and that those of us charged with administering the country's export control laws have tools that allow us to adapt to the reality of the global marketplace and the changing geopolitical situation. S. 149 provides such a framework, and gives the Administration the flexibility to respond to changes in both technology and threats.
The alternative to enacting S.149 is to retain the export control provisions of outdated Cold War legislation or continue to use emergency authorities. Nobody considers either to be a desirable scenario, especially given the challenges we currently face in combating terrorism and preventing weapons proliferation. Accordingly, I'm hopeful that we can continue to work with Members of Congress to give us the legislation we need to properly administer our dual-use export control program.
Second - We need to improve the interagency licensing process. When I was on Capitol Hill, the perception was that the interagency process was broken. As a result, commodity jurisdiction disputes continued for years without resolution, the processing of licenses was delayed due to indecision and infighting, and policy development was stifled. Now that I am on the job, I can report that things probably were not as bad as it seemed to me then but so much of what we do as a Bureau depends on good working relations between the various agencies. And when the system fails to operate efficiently, neither business nor national security is served.
I am confident that the new political management at the Departments of Defense, State, Energy and Commerce is committed to building the level of trust and cooperation necessary to restore integrity to the interagency process. We can begin by taking the simple step of adhering to the requirements of the Executive Order that governs the licensing process. Agencies should make decisions within the allotted 30 days. It's better to inform an exporter, after careful review, that their application is denied than to allow it to languish without action for months on end. Licenses should be held-without-action only for legitimate questions, not as a delaying tactic. Decisions should be based on the regulations and any policy that impacts on a license decision should be reflected in the regulations, whenever possible. In other words, let's get back to the basics of the Executive Order. That's the first step to improving the interagency process.
Third - We need to rethink how we implement our overall technology, or knowledge, controls, including the "deemed export" rule. In a world of technology globalization, new products are often co-developed by engineers and scientists in facilities around the world, even within the same company. As these ideas are shared and elaborated via the Internet, by telephone, and in face-to-face meetings, it has become increasingly difficult to delineate what is U.S.-origin technology and what exactly is subject to our export control laws. Our current technology controls were developed during the early Cold War era, a time when the United States had a monopoly on a wide range of dual-use technologies and when "made in the USA" was a far easier label to apply.
During the past four months I have met with many of you and others in the business community. Based on these discussions, it is clear that the issue of "knowledge controls" is the most perplexing aspect of our licensing system. You have told me that it is particularly difficult to develop internal compliance programs to cover the full range of potential intangible technology transfers. You have also explained that the scope and reach of our technology controls, including the deemed export rule, exceed that of our allies and regime partners.
On the other hand, those in the national security community argue that liberalizing technology controls would be tantamount to selling "the goose that lays the golden egg". Since technology represents the ability to replicate, it is essential to control it even more stringently than we do commodities. After carefully studying our knowledge controls, I believe there is truth in both sides of this debate. Clearly, a significant cost is being placed on industry in terms of either compliance with the law or structuring business processes so that the controls are avoided. Alternatively, there is a very strong national security interest in protecting cutting edge U.S. technology.
The challenge before us is to reform our technology controls to account for the realities of globalization while still protecting our critical national security interests. There are three scheduled breakout sessions during the conference on deemed exports and I invite you to share your ideas on how to accomplish this during these sessions.
Fourth - We need to strengthen the multilateral export control regimes in order to combat terrorism and prevent the proliferation of weapons of mass destruction. Under Secretary Juster has already articulated the reasons for strengthening the various multilateral control regimes. He also outlined several specific initiatives to accomplish this. It is also important to remember that all four of the current export control regimes are informal arrangements. Although they each have agreed lists of items subject to control, they are implemented by member countries with a substantial degree of national discretion and without many of the explicit disciplines of a treaty-based regime.
In order to strengthen the regimes, we may need to convince member countries to exercise their national discretion in comparable ways to a greater degree. For example, license requirements vary widely among members and little agreement exists on end-users of concern. This undermines the effectiveness of the regimes and often puts U.S. industry at a competitive disadvantage vis-a-vis their foreign competitors. Many exporters have told me that they consider themselves locked out of certain markets that are available to their overseas competitors because we evaluate security risks differently than our regime partners. Both of these initiatives - a more common approach to licensing requirements and end-user threat - will serve to enhance the effectiveness of the particular regime while leveling the playing field for U.S. exporters.
Fifth - We will continue to review Trade Sanctions Policy. As I met
with many in the business community over the past four months, I have heard
the arguments against unilateral trade sanctions. Mainly, that they are ineffective
in protecting national security and result in punishing the exporter, a U.S.
company, but not the importer, the country of concern. Indeed, at the beginning
of this year, the new Administration committed to reviewing existing unilateral
sanctions. This review has taken on a new focus in the aftermath of the terrorist
attacks. As you may know, on Monday BXA published a regulation lifting existing
sanctions on India and Pakistan. Although this review was in the works prior
to September 11, the lifting of these sanctions now takes on greater diplomatic
meaning. On the other hand, late last week President Bush designated certain
individuals and entities that are now subject to broad economic sanctions,
including trade sanctions. We will continue to review sanctions policy to
limit the burden on exporters whenever possible recognizing, however, that
sanctions remain a viable foreign policy tool under certain circumstances.
Sixth - We need to maximize the national security benefits of international treaties such as the Biological and Chemical Weapons Conventions while minimizing burdens on U.S. companies. The Bush Administration will continue to review existing international conventions to ensure that they are effective in achieving their stated goals. BXA will continue to manage the compliance efforts of U.S. industry. One example of this is BXA's involvement under the Chemical Weapons Convention, the first arms control treaty that has a major impact on U.S. companies. We will seek to minimize burdens on U.S. companies and maximize the protection of their sensitive business information. The U.S. government is committed to ensuring that the scope and intrusiveness of inspections does not exceed what is explicitly written in the treaty.
As we meet our compliance obligations, we will seek to focus more attention on compliance in countries of real concern. I'm confident that we can achieve these objectives and maintain a cooperative relationship with both U.S. industry and the international inspection organization.
Seventh - We need to maintain a strong defense industrial base. One of BXA's principal areas of focus, outside of export controls, is to ensure that U.S. defense related industries are able to meet U.S. national security requirements. Economic security and national security are two sides of the same coin. We must be careful that the export control policies we implement support, and never undermine, the industries we rely upon for our economic strength and military readiness. It is my strong belief that the nation that leads the world in developing new technology will also lead the world both economically and militarily.
BXA has been aggressive in pursuing its agenda to promote a healthy defense industrial base. One way we do this is through our defense advocacy program. Through this program, the Department of Commerce advocates on behalf of U.S. industry in foreign defense procurement contracts. In FY 2001, we received and acted on 55 defense advocacy requests and successfully placed more than $1.3 billion in contracts for U.S. firms. Another example is our recent joint project with the U.S. Coast Guard to promote the "Deepwater Project." Deepwater is a $15 billion, multi-year initiative to modernize Coast Guard systems that operate at least 50 miles offshore, including ships, helicopters, sensors and logistics systems. BXA is working with the Coast Guard to help promote sales of Deepwater equipment to navies around the world. By so doing, we reduce the unit costs for U.S. procurement, stimulate export markets for U.S. companies, strengthen international security through improved interoperability with allied nations and enhance the U.S. maritime industrial base.
I hope this gives you an idea of the issues we will be working on in the coming months and years. It is clear that, in a free society, export controls function effectively only through the cooperation and commitment of the private sector. This conference - Update - is the cornerstone in BXA's efforts to enhance this cooperation. All of us at BXA appreciate that you are here and look forward to working with you in the future.
In April of 2002 the Bureau of Export Administration (BXA)
changed its name to the Bureau of Industry and Security(BIS). For historical
purposes we have not changed the references to BXA in the legacy documents
found in the Archived Press and Public Information.