Where Industry and Security Intersect
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Working in the arcane area of export controls, I sometimes feel as if I operate in two parallel universes. On any given day, visitors to my office will complain that export controls are too harsh and restrictive. But others will then write me letters complaining that our system is too loose and accommodating. Are our controls relatively efficient and transparent? Or outmoded and opaque? In some quarters, U.S. export controls are seen as outdated. In others, there is concern that too much high technology is being freely traded around the world, too easily.
In reality, neither perspective is fully accurate. Export controls do not exist in a policy vacuum, isolated from broader issues of national or international concern. America’s export controls on sensitive goods and technology are guided by and reflect larger U.S. foreign policy and national security imperatives. We do not make “trade-offs” between security and prosperity – our policy recognizes that security and prosperity are inseparable. That’s why our export controls are designed to protect national security interests in a way that also facilitates civilian high-technology trade.
There are three important principles guiding the Bush Administration’s export control policy, and I’d like to discuss those with you today.
First, it is important that export controls reflect current security threats and foreign policy interests. This means adjusting our export controls to deal with the new nature of the threats America faces, and also making sure that policies for particular countries like China and India accurately reflect our evolving relationships with those important nations.
Second, it is vital that export controls keep pace with rapid changes in technology, and with the needs of the U.S. economy. All of you know that technology changes much more quickly than government regulations. And you know also that America’s economic and technological competitiveness depend on our ability to attract the best science and engineering talent to our high-tech companies.
Finally, if government is going to impose a regulatory system, such a system should be operated in the most transparent and efficient manner possible. At the Bureau of Industry and Security, we are proud that we process licenses efficiently, electronically, and expeditiously, and are working to do even better.
Reflecting Current Threats and Evolving Relationships
During the Cold War, it was sufficient for export controls to focus almost exclusively on countries: exports to the Soviet Union and Warsaw Pact were broadly restricted, regardless of the customer. Today the threat is different and more diffuse. Terrorists and proliferators do not wear uniforms, do not advertise their intentions, and do not restrict their quest for deadly weapons conveniently within the borders of a single state. They operate across borders, and even within the open societies of friendly nations. So export controls must now look beyond state-based threats, toward individual customers and entities of concern.
That’s why we are trying to tell exporters more about who the “good guys” and the “bad guys” are. We are implementing new programs to facilitate exports to Trusted Customers in China and India, while also expanding the criteria for putting firms with bad records on our Entity List for stricter license reviews. We are also considering dealing with countries of diversion concern through a new country group in our regulations, called “Destinations of Diversion Concern.” This new category, if adopted, would address the threats to national security posed by the illicit transshipment and diversion of sensitive dual-use technologies to countries supporting terrorism or proliferation. All of these initiatives – Trusted Customer, an expanded Entity List, and possibly Countries of Diversion Concern – are designed to give exporters more information about existing and potential customers.
Export controls must also take account of our complex relationships with emerging powers. Perhaps more than in any other case, there is a cacophony of views on what to do about China. Some of our Chinese friends, joined by some in the business community, argue that export controls hold back billions in trade and should be eliminated. Many others believe that controls on trade with China should be tightened in light of China’s rapid military modernization and Chinese efforts to obtain controlled U.S. technology. At the Commerce Department, we are guided by a clear and unwavering principle: U.S. export controls must reflect and support America’s larger foreign policy toward China.
That policy has remained generally consistent for more than thirty years. Across seven presidential administrations of both parties, the United States has worked to encourage China’s political and economic integration with the world. We urge China to act as a responsible stakeholder in the international system, and welcome China’s market reforms and peaceful economic development. U.S. export controls support that by helping to facilitate hundreds of millions of dollars of civilian high-technology trade annually.
Yet there are other aspects of China’s growth that cause concerns, both in the United States and other countries. China is modernizing its nuclear forces, rapidly expanding its navy, deploying precision-strike weapons, developing sophisticated command and control networks, and recently tested an anti-satellite capability in space. It has reported double-digit real increases in defense spending for more than a decade, and its actual level of defense spending may be much higher. The United States sees more organized efforts to obtain and illegally export controlled U.S. technology to China than to any other country. The lack of transparency about this buildup heightens international anxieties about China’s military intentions and capabilities. Consequently, America’s export controls must support our longstanding arms embargo and not allow exports that would make a direct and significant contribution to China’s military.
This must be a targeted and calibrated response, and not a futile attempt to hold back the forces of economic globalization. Indeed, the total amount of export licenses issues in 2005 for China was about $2.4 billion, or only 4.7% of total U.S. exports to China. And in terms of actual exports of “advanced technology products” (ATP), only 0.6% of such U.S. exports to China required an individual validated license.
Another area where export controls must keep pace with change is India. President Bush has worked to transform America’s relationship with the world’s most populous democracy, creating a strategic partnership covering both political and economic exchanges. As we build ever-closer ties with India, our export controls will continue to be adjusted to reflect new, post-Cold War realities. In 1999, after India tested a nuclear device, almost 25% of all U.S. exports to that country required some sort of license from the Commerce Department. Today, as a result of the new strategic partnership, less than 1% of U.S. exports are subject to individual license requirements.
Keeping Pace with Changing Technologies, and a Global Workforce
All of you are perhaps more aware than anyone that technology can change seemingly overnight. One of our top priorities is making sure our export controls keep up with that change. The Bush Administration made a significant revision in computer controls, and implemented a major change in controls on general purpose semiconductors for civilian uses. We are currently working on changes to controls on thermal imaging technology, and will take a look at encryption controls later this year to make sure that we are administering those controls efficiently and effectively. We’ve asked our technical advisory committees for ideas on list review in all categories of the Commerce Control List. And we’ve established a new Office of Technology Evaluation to help us understand not only what is coming over the horizon, but also what is already widely available on world markets.
As this industry knows well, America’s competitiveness depends on America’s ability to attract and retain the top talent from around the world. Ensuring that we remain the world’s leading destination for foreign talent, while ensuring that foreign nationals don’t repatriate sensitive technology that could be used against us, is one of the great challenges we face. To address this challenge, Secretary of Commerce Gutierrez announced last fall the appointment of 12 business and academic leaders to the newly formed Deemed Export Advisory Committee. This Committee has been tasked with examining the complex issues surrounding sensitive technology transfers which involved the release of dual-use technology to foreign nationals in the United States, and we look forward to their report this fall.
Efficiency and Transparency in a Complex Environment
That brings me to the third area of focus, which is efficient and transparent regulation. I’m proud of the work that the Commerce Department does to educate exporters, answer questions, provide information, and reach out to those having difficulty coping with U.S. export controls. We run more than 40 seminars a year, all around the country and overseas, reaching more than 4,000 people. Our annual conference for exporters sold out last year in just 45 minutes, and we just did a version on the West Coast. We’re working hard in BIS to recruit and retain the best scientists, engineers, and export specialists available in the federal government. We have successfully implemented a brand-new electronic system to file export licenses and supporting documents online, and will continue our work to update the internal BIS licensing systems.
Those efforts show real results. For the first half of this fiscal year, our average licensing processing time was down to 29 days, far below the 90 days we are allowed under a 1996 executive order governing export licensing. All of these improvements are coming even as we deal with a steady increase of about 15% more export license applications a year. But efficiency is not achieved at the expense of national security. Virtually every license we issue undergoes a strict interagency review by the Departments of Defense, State, and many are also reviewed by the Department of Energy. The intelligence community also sees most export license applications, with a special focus on end-users of concern.
Conclusion
Both the nature of the security threat and the nature of the global economy have changed dramatically in recent years, and export controls must change also to keep pace. The Bush Administration is committed to maintaining controls that reflect new security challenges, evolving key relationships, rapidly-changing technologies, and the emerging competition for global talent, all while administering our system efficiently and fairly.
The task is complex. But we will continue to develop technology controls that will meet the security needs and economic imperatives of the 21 st Century. Globalization will not wait.