Where Industry and Security Intersect
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It is a pleasure to be here with you today here in San Francisco. This city, the surrounding Bay Area and the companies you represent, are the heart of U.S. strategic technology leadership around the world. So, it is fitting that we have come together here to discuss an issue that is at the heart of export control and also at the heart of maintaining our technological leadership: the protection of U.S. strategic technology.
Your focus during this conference is on complying with U.S. export controls as they relate to intangible technology transfers. And, given my position, you probably expect me to talk with you about intangible technology transfers from an enforcement perspective. Well, you won’t be disappointed.
But, I am aware that enforcement is usually seen as the part of the trade equation that says, “No.” By contrast, everyone else in the equation is going about wonderful, positive things, including globalization efforts and making trade work in various other ways that help drive the economy. And by “everyone else”, I mean not only those of you in companies, but even other parts of the Department of Commerce itself! So, I want to begin this discussion a bit differently than you might expect.
Rather than beginning today with the enforcement message, I want to do so by letting you know that those of us in enforcement value what those of you in private industry are doing. I think it’s important that you hear that directly from us – and from me. Second, I want to discuss why we have the technology transfer export controls that we do. And finally, I want to link first two points and reinforce why compliance with those controls is critical to our economy and our national security, which in today’s post-9/11 world, cannot be separated.
With that as a backdrop, let me begin by recognizing the importance of the efforts and accomplishments of those of you in private industry. Let me do so by quoting the President, who has said that, “The role of our government is to create an environment in which the entrepreneur can flourish, in which minds can expand, in which technologies can reach new frontiers.”
What the President said about the importance of creating an environment in which entrepreneurs can flourish is demonstrated by the companies here in the Bay Area. Many of them are comparatively young; some were started in garages, and others were founded upon ideas that were formulated in dormitory rooms on college campuses. Yet, within a short relatively period of time, those companies grew and became corporate giants that are on the cutting-edge of technological innovation.
What the President said is particularly true when it comes to doing business in the global economy, which involves exports. And what has happened in exports during the President’s time in office reflects what he said: Exports have grown at about a 6% annual rate since the President took office. In 2005, the U.S. was the largest exporter of goods and services in the world with $1.3 trillion dollars in exports. In 2006 alone, U.S. exports grew by 13%.
There can be little question that, in order to remain competitive in today’s global business environment, we have to continue to open more global business markets and maintain a business environment that encourages entrepreneurship and innovation. Those of us at the Bureau of Industry and Security who work in the export context have embodied the President’s vision in our mission statement. Indeed, during this past year we modified our mission statement in an important way in order to express more fully what we see our responsibilities to be.
The core of the BIS mission statement remains the same: “to advance U.S. national security, foreign policy and economic objectives.” What we recently have expanded upon is the means by which we advance those interests. We do so not only by “ensuring an effective export control and treaty compliance system,” but also – and here is the new and important modification – by “promoting continued U.S. strategic technology leadership.” That is more than a small modification.
What we are communicating is that a central part of BIS’s mission – a measure of our success, our reason for being – is to contribute to sustaining and growing industry’s global economic leadership in strategic technology markets. We are saying that a central part of what we do every day in BIS is to help you succeed in selling the very best that America has to offer in state-of-the-art technology around the world.
Your success directly advances U.S. national security, foreign policy and economic objectives. Indeed, U.S. strategic technology leadership is a means of advancing those objectives. In short, your leadership in global markets abroad makes us both safer and more prosperous at home.
When we look at BIS’s mission in that light, we see that our export control system is not an impediment to legitimate trade. Rather, it is an enabler of U.S. global strategic technology leadership. Indeed, our system of export controls enables legitimate trade in U.S. high technology goods and information, while also ensuring that the most sensitive goods do not fall into the most dangerous hands.
All of us are well aware that, despite the collapse of Soviet communism, there are a variety of forces at large in the 21st Century that are opposed to freedom, security and prosperity. Some of those forces are older; others have more recently emerged.
World events clearly demonstrate that those forces oppose freedom and security not only for our country and its citizens, but also for our friends and allies around the world. You can take your pick of events to illustrate that point. Among them are the tragedy of September 11, the nuclear ambitions of Iran and North Korea, insurgent attacks against our troops in Iraq, the recent conflict in Lebanon. Also of concern is the build-up of China’s military capabilities. Indeed, currently in the news is the fact that China has tested an anti-satellite weapons system by destroying one of its old weather satellites.
Some of these forces have very publicly stated, through word and deed, that their goal is to destroy America and all it stands for – and that they will use every means at their disposal to achieve that end.
As a senior law enforcement official, I can tell you that one of the chief means that those forces continually try to employ in pursuing their nefarious goals is your technology. There is a reason why both legitimate consumers and illicit actors want our products and know-how: because they are the very best in the world.
So, while we work to enable trade in U.S. technology with legitimate business partners, we must guard against enabling weapons of mass destruction proliferators, terrorists, and military extremists, who would use that technology against our national interests. This is not hyperbole. Let me be specific.
In her testimony before Congress not long ago, former National Counterintelligence Executive Michelle Van Cleve stated that there are over 140 nations and 35 known or suspected terrorist groups actively targeting the United States with intelligence collection activities. The list of what they are seeking reads like a list of top-shelf U.S. technology: it includes aeronautics, information systems and manufacturing production technology, high performance computers, sophisticated sensors and telecommunications know-how.
A very interesting variety of individuals are involved in these collection efforts, most of whom would not seem suspicious at first blush if encountered a commercial context. According to Van Cleve, they include foreign businessmen, scientists, academics and students.
The National Counterintelligence Executive’s Annual Report to Congress on Foreign Economic Collection and Industrial Espionage 2005, was issued this past August of 2006. It accurately reflects much of what we are seeing.
We increasingly see these collection efforts targeted not just at tangible items for “reverse engineering” or direct incorporation into foreign proliferation programs and military equipment. We also see efforts targeted to acquire the intangible technical know-how on how to produce, use and maintain those items, including classified information, business proprietary information and export-controlled technology.
The methods employed in these collection efforts span the spectrum. Some are straight-forward and simple; others are complex and sinister. On one end, they involve such things as unsolicited e-mails and telephone requests for information, conversations at business and technical conferences or touring U.S. production sites. At the other end, they include:
And of course, that list reads like a list of the very ways in which intangible technology is legitimately transferred in the normal course of business, including:
The now ubiquitous use of the Internet for global communications has greatly aided these illicit efforts and complicated our work to combat it. Illicit technology acquisition efforts to obtain blueprints 25 years ago may have involved the physical transportation of the papers themselves across national borders. But with today’s electronic communications, acquiring that information can occur virtually instantaneously, and in an environment where there are no “borders” in the traditional sense – much less border controls that would prevent such illicit transfers.
Clearly, in the realm of legitimate commercial trade, intangible technology transfer is a valuable and necessary component of global business partnerships. Consistent with the President’s view of the federal government’s role, those of us in BIS want to enable such transfers. But the very technology that companies want to transfer in the commercial context can prove adverse to our national interests if it finds its way into the wrong hands. For example, the composite technology that enables U.S. leadership in the aerospace industry can be used to produce fighters and missiles we might face in combat. The plasma technology that may enable deep space exploration may also be used to develop the next-generation of unmanned aerial vehicles that could be used against our troops on the battlefield. The encryption technology that safeguards proprietary information may be used to mask terrorist communications.
That is why protecting intangible technology is so important. It keeps U.S. technology in the right hands, thereby furthering our global technological leadership. At the same time, it keeps technology out of the hands of those who would use it to pursue their goals of denying freedom and prosperity to us and our global partners.
One might begin to fear that the challenge of protecting our technology is too daunting, given the convergence of several factors that we have discussed, including:
Indeed, given such circumstances, one might fear that we can never effectively prevent the most sensitive technology falling into the most dangerous hands.
These challenges may be great, but we have two important things in our favor. The first is the system of export controls we have in place to manage the transfer of intangible technology – a system designed to enable legitimate trade that promotes U.S. technology leadership, while also preventing the transfer of our most sensitive technology to those who would seek to use it against us. The second thing in our favor is you – or, more specifically, your involvement in the global export control system and your compliance with it.
No one here – indeed, no one in the legitimate U.S. business community – would knowingly and willfully supply nuclear proliferators, terrorists, or potential military adversaries with the fruits of American know-how. To do so would be extremely short-sighted. It would sacrifice our children’s future for a quick profit today. It would arm those who are seeking to destroy the very foundations upon which our economy rests.
By contrast, the technology transfers you engage in are in furtherance of our country’s economic well-being.
But we must be ever mindful that the illicit actors of the 21 st Century are trying to get your technology, and that they are doing so in ways designed to conceal from you the true nature of their acts. Their efforts are quite often disguised as innocent exchanges of information in technical discussions, proposed business partnerships, or commercial purchases.
Our system of export controls is designed to enable legitimate trade and prevent suspect transactions. But the system depends upon your compliance efforts to help distinguish between the two. Accordingly, you must exercise due diligence to confirm the bona-fides of legitimate transactions, to highlight the activities of questionable parties, and to report to the proper authorities those instances in which you encounter hostile attempts to acquire controlled technologies.
The challenges of protecting technology in today’s environment may require new approaches to compliance not addressed in “traditional” compliance programs that have focused on tangible items. For example:
These and similar questions are at the cutting edge of export compliance as we address technology protection in the 21 st Century.
I submit to you that the goals and means of BIS’s mission statement – advancing U.S. national security, foreign policy and economic objectives, administering our export control system, promoting U.S. strategic technology leadership around the globe – are not just BIS goals. Rather, they are goals that we all share.
Those of us in BIS view our relationship with U.S. business as a partnership – a partnership in achieving compliance, a partnership in maintaining national security, and a partnership in promoting prosperity.
I can think of no more important message to convey to you today than this: Your compliance with U.S. export controls, particularly controls on intangible technology, is a vital contribution to the national security and prosperity of our nation.
Equally important are your contributions to the continuing dialogue with us about improving and strengthening the global export control system.
As you know, BIS is currently focusing on export control policy on two key issues. One of the issues is the proposed rule that concerns commercial trade in strategic goods with China. The other issue is pertinent to the discussions you will be having here during the next two days – technology transfer policy in the context of deemed exports.
It is a very healthy sign of our dialogue that BIS received in excess of 1000 pages of public comments in response to our proposed China policy. Some of you who are here today may have contributed to that input. I can assure you that BIS is carefully considering these comments as we continue the development of a China policy.
Our goal is to advance the economic interests of U.S. industry competing in Chinese markets, while also advancing our national security and foreign policy interests. That involves ensuring that our commercial trade with China does not become a vehicle for the material advancement of Chinese military capabilities. Again, China’s recent test of its anti-satellite weapons system demonstrates the concerns related to China’s military buildup. So does the white paper that China issued in December. Indeed, technology transfer issues that you will be discussing here are implicated in that white paper, which, among other things, said that China’s goal is to develop a military “capable of winning informationized wars by the mid-21 st century.”
Our other key policy area at BIS is deemed exports. We seek to enhance our controls on the domestic transfer of controlled technology to foreign persons. We are working to accomplish this through controls that enable global technology partnerships, support fundamental research, continue the advancement of scientific understanding and advance U.S. business competitiveness, while also ensuring that our most sophisticated know-how does not fall into the wrong hands.
Toward that end, the Secretary of Commerce has established the Deemed Export Advisory Committee, comprised of some of the top leaders of industry, academia and the scientific community, to provide the vehicle for considered input regarding what our policy should be. The Deemed Export Advisory Committee held its initial meeting in Washington, D.C. last year. As you may know, the Committee is holding its first in a series of public meetings right here in the Bay Area this week. The purpose is to give stakeholders in this important area the opportunity to provide input that will help inform the Committee’s report to BIS. In the months to come, the Committee will hold additional public meetings in various other parts of the country. We look forward to receiving the Committee’s report later this year.
Your support will also be very valuable as we continue to move forward to seek renewal of the Export Administration Act. We seek renewal of the EAA in order to:
The Administration supported the EAA renewal bill (HR 4572), which was introduced in the last Congress. Although the prior Congress did not act on that bill, we hope to see new legislation introduced that will provide these and other important tools to further our export enforcement successes.
As you can see, your efforts, in partnership with ours, are at the heart of keeping our nation secure, and prosperous, and free. I hope that you will keep that message in mind during the remainder of this conference, and beyond. I strongly encourage you to join us in this partnership.
For those of you here in the Bay Area, our Office of Export Enforcement, located in San Jose. It covers the Pacific Northwest, and stands ready to work with you on various steps you can take in furtherance of our compliance partnership. If you are located elsewhere, we have eight other Office of Export Enforcement offices positioned across the country, all of which stand ready to work with you on these important issues.
In closing, let me say that managing technology transfers and complying with U.S. export controls might well be among the most important responsibilities we face in the 21 st Century. Both Government and industry have important roles in meeting these responsibilities, and neither can succeed without the other.
Your contributions to our partnership are absolutely essential to the freedom and prosperity of our nation, and to all who love freedom around the world. The prospects of our partnership are exciting; the rewards will be more than well worth the effort. We look forward to working together with you to achieve them.
Thank you, again, for the opportunity to speak with you today. I wish you an enjoyable and productive time together at this conference; and I look forward to the work that we will do, together, in the service of our great country and all that it stands for.