Where Industry and Security Intersect
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It is a pleasure to be here and to have the opportunity to speak about export controls, I suspect an important issue to many people in Silicon Valley. This Administration has done much to liberalize these controls, lifting unnecessary burdens imposed on industry as globalization has expanded trade to all corners of the world and transformed the way our military thinks about technological advantage.
But, despite our efforts, which the President and Vice President recognized early on as a priority, export controls continue to be a contentious part of our national security debate. While the global economic and strategic framework to which export controls must adapt has changed, the policy making process has been slow to evolve. In other words, economic globalization is moving faster than politicians can comprehend and deal with.
Before I get into that, however, I would be remiss, being here in Santa Clara, if I did not mention Secretary of Commerce Norm Mineta. No one knows Secretary Mineta better than you, given his long and distinguished career in public service here, representing the fifteenth district for over 20 years in the Congress and as mayor of San Jose before that. But I can also tell you of the respect he has in Washington and the strong leadership we have been proud to see at the Commerce Department.
One of the Secretary's first priorities on his arrival was to help win passage of Permanent Normal Trade Relations with China, legislation President Clinton signed into law last week. Passage of PNTR is an historic event that has been in the making since the first international efforts to create an organized framework for world trade and finance were begun over fifty years ago. Not only will PNTR help to deepen market reforms in China, it will also open virtually every economic sector to U.S. exports, from agriculture, telecommunications and technology to a variety of products and services like cars, banking, and insurance.
Perhaps most notable is the fact that PNTR will do away with unseen barriers to American exporters, giving you the right, for the first time, to freely export to and distribute in China. At the same time, we hope that the improvements in our trade relationship with China will also pave the way for more economic and political freedom for the Chinese people and the further integration of China into the modern world economy.
Now, let me return to what I began to say at the outset about export controls -- what you might call the other side of the coin when it comes to trade policy. (We think of ourselves modestly as the speed bump on the information highway.) I want to indulge in a bit of history of our successes over the past seven and half years as well as some of the challenges we will face in the days ahead.
When this Administration began its work, we were at a crossroads in U.S. strategic trade policy. The design of our export control system was antiquated and its process creaky, having been designed for the Cold War, when political relationships were less ambiguous.
Our goal was to build a strong Western alliance as a bulwark against Communism. Our security was tied to keeping advanced capabilities out of our adversaries' hands. This meant keeping our best technology from reaching beyond our borders.
Then the world changed dramatically. The familiar framework we had followed for nearly a half-century required new flexibility to deal with more ambiguous, but equally real emerging threats. Instead of bipolar simplicity, we face a number of rogue states -- or should I say "states of concern?" -- bent on acquiring weapons of mass destruction and destabilizing their regions through acts of terrorism.
The Administration realized early on that rapid technological change and economic globalization compelled comprehensive reform of our export control system which balances the need to keep sensitive goods and technologies out of the hands of countries and projects of concern without imposing unnecessary or ineffective constraints on business. That is why we liberalized outdated controls, streamlined our existing export control system, enhanced our enforcement programs, and helped to strengthen multilateral regimes.
Among other things, we:
In liberalizing controls, we have focused on narrowing the range of these controls to cover only the most critical products and technology. Our rationale is clear. We do not protect national security by unnecessarily controlling widely available, older generation products.
This is perhaps our most fundamental change, and a considerable part of my job has been to explain and defend it. The equation is simple and basic: strong exports = strong high tech companies = a strong defense = improved national security.
This equation is based on our realization that the new era we live in is one where the military prime contractor is no longer king; the technology driver in the economy is the civilian sector; and success measured in terms of profits that can be put back into R&D on next-generation products depends on exports.
That means, particularly in microprocessor based sectors, accepting, if not encouraging expanded exports ultimately promotes our security rather than our vulnerability.
The goal of any government agency, especially those with regulatory responsibilities, is to be responsive and fair. I believe our achievements in liberalizing controls and streamlining the process show that we have done just that.
During the Clinton Administration, we have processed nearly 100,000 license applications for almost $100 billion in U.S. exports abroad. Although this is a big reduction from the days when the Reagan Administration did that many every year, it has been no easy task. The cases are more complex and the interagency review process rigorous. We believe nonetheless that the President's approach of allowing the relevant agencies to be fully represented in the process is an overall improvement that has produced more effective analyses and better policy development, albeit at some cost in time, which we continue to try to reduce.
We have also made things better by expanding efforts to assist exporters. Our Exporter Services Division has completed over 1.2 million phone consultations in the past seven years, an average of 175,000 per year. In addition, they have held nearly 10,000 one-on-one counseling sessions to assist small and large exporters alike.
We have also gone out into the field with over 1,700 conferences with nearly 115,000 business people. These include seminars to answer licensing questions and explain changes in export controls, and training sessions for business executives on enforcement and compliance programs.
Our outreach has not been confined to export controls. We have also worked to address the way changes in the world have impacted industry, particularly the defense sector. The Administration, through BXA's DPAS program, helps defense firms diversify their activities into civilian areas by developing and providing detailed economic and statistical information. This helps us develop policies that ensure our industry and technology base are able to support changing security requirements, as well as develop next generation weapon systems.
We also continue to work with the Newly Independent States to help them develop effective export control programs. We have an extensive effort to focus on export control licensing processes and procedures, preventive enforcement mechanisms, industry-to-government relations and electronic automation of the licensing system. Since 1993, we have delivered 140 bilateral and multilateral workshops in 25 countries.
BXA's enforcement programs play a critical role in protecting our national security and foreign policy interests, particularly as we focus more on specific end-users and end-uses. We have conducted hundreds of investigations over the last four years that have led to the criminal prosecution of persons who illegally exported zirconium for Iraqi munitions, unlicensed equipment for India's missile program, brokerage services for Iraqi rocket fuel, and gas masks to suspected Aum Shinrikyo terrorists in Japan, just to name a few. These investigations also included the first civil charges and penalties for alleged unlicensed exports of controlled biotoxins.
Enforcement is a critical partner for exporters. I cannot stress enough how important it is for companies to "know their customers," and to exercise due diligence in transactions to destinations of proliferation concern. I urge you to work with our enforcement people when you uncover a suspect transaction. Our enforcement organization has developed special programs to help with such "preventive enforcement" activities, which I urge you to take advantage of.
I think that's a significant record of accomplishment, but I would not want anyone to think we are simply wasting these last four months like sand leaking out of a bag. Substantively, more remains to be accomplished. We must finish our improvements to the licensing process and complete our own "electronic revolution." We have just published new regulations revising our high performance computer controls upwards and further liberalizing our encryption controls, but we still need to find a long term solution to HPC and microprocessor controls and do a better job on deemed exports. We must also settle the continuing conflict over licensing jurisdiction between the Commerce and State Departments.
This latter issue is particularly important, as we have seen the consequences for the satellite industry of asking State to license items that compete in a commercial environment. We have put ourselves in the paradoxical situation where denial or delay of exports under the rubric of national security has, in the end, done more harm than good to our nation's military and economic strength.
The transfer of commercial communications satellite jurisdiction back to the State Department has affected a broad range of U.S. industry, from small, high tech firms to industrial giants, even for sales to allies. Since the transfer, which this Administration opposed, satellite exports have declined forty percent, from $1.06 billion in 1998 to $637 million in 1999 according to Census Bureau export statistics, and the satellite industry has told us that the U.S. share of the world market has dropped from 73% in 1998 to 62% in 1999 and to 42% currently. The changed controls on satellites bear much of the responsibility for this. This problem now threatens to spill over into related "space qualified" items.
While the Department of State has taken action to alleviate some of the problems, the fundamental issue remains that it is not practical or desirable to treat commercial export sales as munitions transfers. The better solution is to recognize dual use items for what they are and control them through the Commerce procedures that are designed for that purpose. In fact, Congressmen Gejdenson and Goodlatte last May introduced legislation in the House to do precisely that.
Recently, the Defense Department has led an effort to reform State's munitions licensing practices. Its motivation has been the Pentagon's desire to prevent the development of "Fortress Europe" by promoting transatlantic defense cooperation through appropriate technology transfer and joint activities. I want to make it clear that the Department of Commerce supports that effort and has been working closely with DOD to facilitate it. Many of DOD's proposals, in fact, parallel reforms we have already undertaken at BXA. At the same time, we have also been clear that with respect to dual use items, process reform at State misses the point. You cannot successfully "tweak" a system that was designed for a fundamentally different purpose -- licensing munitions -- and our message to Congress has been not to force square pegs into round holes but instead to recognize and respect the differences in the systems.
Here once again we have become mired in a philosophical debate, as those who reject this Administration's new thinking about export controls seek to bring more items under State's control in the expectation that will produce the higher level of rejections they desire. This is a profoundly dangerous approach which will not only cost the U.S. market share and jobs; it will cost us our technological leadership and will compromise our security.
Thus, the stakes are not small and the challenges not minor. While I expect to make progress on some of the specific matters still pending in the time left, I have no doubt that the larger debate will continue beyond the election, just as it has for the last decade. Those still fighting the Cold War are not going to stop in November, and those who have invested their intellectual energy into trying to turn the clock back have no reason to suddenly set it right.
This Administration has stood firm on these issues, not because it is in your interest, though it is, but because it is in the interest of a stronger America. As I said earlier, we are winning -- because we have the facts and the better argument -- but you should not for a moment assume that the fight is over or that you can abandon your own efforts for rational export controls. While I will join with President Clinton in continuing our work until the last hour of the last day, you must remain ready to carry on the fight that will continue after us.
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.