Where Industry and Security Intersect
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Welcome to BXA's thirteenth Update conference. It is a pleasure to be here and to again have the opportunity to discuss our Nation's export control policies. But this year the opportunity is bittersweet, as this is the final Update of this Administration, and the last time I expect to appear before you.
It is with this in mind that I want to indulge in a bit of history of what we have done over the past seven and half years as well as some of the challenges we and our successors 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 and 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That is why we liberalized outdated controls, streamlined our existing export control system, enhanced our enforcement programs, and helped to strengthen multilateral regimes.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 the most fundamental change in philosophy this Administration has made, and a considerable part of my job has been to explain and defend it. You have heard me articulate our basic equation before:
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.
At our Update Conference in San Diego last February, I announced President Clinton's decision to substantially raise the performance levels allowed for HPC exports.
Coupled with the six month waiting period mandated by Congress, the Tier 3 military level of 12,500 MTOPS will go into effect on August 14th. We expect the President to make a new announcement shortly, which will be effective in January. The new announcement, like the previous ones, will no doubt be attacked by those in the Congress and the nonproliferation community who have not yet reconciled themselves to technological reality and wish for the good old days when security could be defined by export denials. Fortunately for you --and for our security --we are winning this debate and are increasingly dealing with ankle biters rather than frontal assaults.
Even so, this battle of philosophies has too often been one of two steps forward, one backward, or occasionally the other way around. I have testified before Congress fifty times during my tenure. Forty-one of these appearances were during the 105th and 106th Congresses alone, and usually involved defending the Administration's policy. Along with that testimony, we provided 320,000 pages of documents to the Congress while the Cox Committee was doing its work, and were subjected to 16 GAO and 9 Inspector General investigations.
Out of all that labor came one significant step backward --the transfer of commercial communications satellite jurisdiction back to the State Department. The jurisdictional change affected our foreign relations, our national security and 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 52% by the end of the first quarter of 2000. The changed controls on satellites bear much of the responsibility for this, and we can only conclude that a system that works well for arms exports is, even with the best intentions in the world, not appropriate for commercial exports. This is a fundamental point --treating exports of commercial items, like communications satellites, as arms sales does more harm than good to our national security and to the high tech industries upon which our military and intelligence agencies depend.
Ultimately, I am confident we will prevail on this matter as well, although the cost to the satellite industry and its world leadership in this critical sector will be enormous.
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. Roger will report on our results in that regard shortly.
We have also made things better by expanding efforts to assist exporters. Our Exporter Services Division, which is doing a wonderful job of putting on this conference, 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 to industry has not been confined to export controls alone. 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.
You will also see on our web site, under Defense Programs, that we provide a wide range of international market and competitiveness information of value to both defense and commercial high technology companies. We provide information that firms can use to develop new product lines and market existing products both here and abroad. Much of our work is one-on-one with individual companies, and we have a growing stack of success stories as testimony to our efforts.
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.
These are just SOME of the services I'm proud to say we provide.
One new element of BXA's activities relates to critical infrastructure protection. There is a growing awareness that America's information infrastructure - the basis of e-commerce - has become an attractive target for sabotage and so called cyber attack. One need only look to the recent spread of the Love Bug computer virus which corrupted systems worldwide or the work of hackers breaking into and disrupting service on a number of popular websites to see that this threat is indeed very real.
BXA's Critical Infrastructure Assurance Office has been coordinating efforts within both the federal government and private sector to protect critical infrastructures. The blueprint for this effort, the National Plan for Information Systems Protection, Version 1.0, was issued last January and stands as the first attempt by any national government to develop ways to protect important computer controlled infrastructures, like energy and water supply systems and communications, transportation, and financial networks, from sabotage or attack.
Another challenge for the CIAO is to encourage voluntary efforts among the broader business community to do the same. The Partnership for Critical Infrastructure Security has been vital to this. Comprised of industry leaders from companies who own and operate most of the nation's critical infrastructures, the Partnership is the centerpiece of the Administration's efforts in this area. The CIAO will continue to play an integral role in coordinating the Partnership's continued efforts to identify vulnerabilities and develop key solutions, but it remains the task of the private sector to see that the means of delivering our nation's important resources are fully protected.
I think that's a significant record of accomplishment, but I would not want anyone to think we are simply sitting out the last six 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 need to pass an Export Administration Act and find long term solutions to HPC and microprocessor controls, cryptographic technology, and 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. Industry figures I cited suggest that the changed controls on satellite exports hurt the U.S. more than they hurt any intended target. 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 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. And though Roger, Amanda, and I will continue 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.