Where Industry and Security Intersect
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Thank you, Mike, for that warm introduction. And thank you all, in the audience, for taking the time out of your busy schedules to spend this day with us.
Let me start by passing along the best wishes of Dave McCormick, our Under Secretary for Industry and Security. Dave was looking forward to being here, but he is just returning from a long trip to the Middle East, and so he couldn’t make it today. But he is frequently in California, so I hope he’ll have the chance to meet many of you in the months to come.
Thanks, too, to the many people from the Bureau of Industry and Security who are making the presentations, running the workshops, answering your questions, and listening to your concerns. From what I’ve seen and heard this morning, they are doing a very good job.
I’d especially like to compliment Mike Hoffman, the head of our Western Regional Office, Eileen Albanese, who is the Director of our Office Of Exporter Services, and their staffs for their hard work in pulling together this Export Control Forum for our friends on the left coast. I think all the people who worked so hard to organize this conference deserve a big round of applause.
It has been too long since we have held what we like to call “Update West.” Sure, it has only been four years, but in our world four years can seem like a lifetime. Recall how the world changed between, say, 1988 and 1992? In 1988, we were wondering where Mikhail Gorbachev would steer the Soviet Union. In 1992, there was no Soviet Union.
Or how about the changes between 1998 and 2002? In the former year, we were in the midst of the dot.com boom. I know; I had a start up company of my own. In the latter year, when we last held our conference in California, we were still coping with the immediate aftermath of 9/11.
Now, nearly five years after that tragic day, how does the world look? And what does that imply for our area, export controls and overall competitiveness?
Many speeches and articles on this topic start with something called “globalization.” But globalization is too broad for what we’re trying to do. It tends to hide more than it reveals. We need to look under the hood of globalization to find out what makes our world run and develop actionable responses.
The context for so much of what we call globalization is the stunning march of democracy. Fifteen years ago, Freedom House identified 76 democracies of varying shades of effectiveness. Today, there are 119 electoral democracies. This global expansion of democracy has enormous and positive implications for us. For as the circle of democracy expands, the sphere of chaos and conflict contracts. The sea within which terrorists can train and proliferators can plot dries up. The security challenges that we must address through export controls become more manageable.
Marching in tandem with democracy is the international expansion of free markets. Here, the pace can leave one breathless. In barely a quarter of a century, we have seen literally billions of new capitalists and consumers enter the global marketplace. China, India, Southeast Asia, Mexico, and other countries have embraced market economics. That’s billions of potential customers for our products – and billions of potential competitors for our market share. Clearly, our management of our security concerns through export controls must take this reality into account.
Perhaps most remarkable is the technological revolution that is changing our lives on a daily basis. From smart bombs to iPods, technology is changing the way we wage war and live peace. Every time it appears that we have reached a technological ceiling, the revolution kicks into a higher gear. As a result, today’s mantra is “cheaper, faster, smaller, better” – it’s Moore’s Law on steroids!
Like all revolutions, the technology revolution is a double-edged sword. Today we enjoy capabilities undreamed of a generation ago. We have witnessed the death of distance. With communication and transportation costs so cheap, it is possible to source globally in order to sell locally.
But, at the same time, we have also witnessed the death of people. Technological progress has led to new and newly deadly threats. The same Internet that allows us to make a long distance phone call for the same price as a local one also allows al-Qaida supporters to plot their crimes by email. The same jet airliner that whisks us overseas in comfort can return with a deadly flu virus. Or the same cell phone that lets us download the day’s breaking news can also be used by a terrorist in Baghdad to kill an American soldier fighting for Iraqi freedom.
Together, we face the real challenge of adapting our controls to ensure that the most sensitive of these new technologies are controlled in a way that does not hamstring our remarkable innovation economy.
Last, but certainly not least, are the geopolitical changes that are shaping our world. It has been over 16 years since the fall of the Berlin Wall, but the impact is still rippling through the international system. The states of the former Soviet Union are evolving – as is Russia, itself. New powers are rising – India, China, and others – and each of them has its own set of issues. America inhabits a very complex global environment, one in which the peril is not always evident. Our controls must continually adapt to these changes in our security environment.
Given this world, what can we do – those of us in the Administration, the Commerce Department, the Bureau of Industry and Security – to help you capture its opportunities while protecting our people from its perils?
I’m not going to bore you with a laundry list of BIS goals and accomplishments. Our 2005 Annual Report will soon be up on our Web site, and all the facts and figures will be available there.
Rather, I’d like to discuss how we view BIS’s role in meeting the challenges that arise from the changes we see in the world, starting with our efforts to m aintain and strengthen an adaptable and effective U.S. export control and treaty compliance system.
As we all know, for the most sensitive items with dual-use potential, the choice we face is not between trade in them with controls, and trade in them without controls. It is in fact a choice between trade in these items with effective controls and no trade in them at all. So, by running a fair, efficient, and effective system of dual-use export controls, we in BIS make such trade possible.
In adapting and updating our controls going forward, we will continue to take into account the security environment, market realities, and the impact of technological development. For example, we are in the final stages of updating our metric for high-performance computers to bring it into line with computing industry progress. We are confident that this new metric will capture the most sensitive products, while permitting the export of other, less sensitive levels of technology. To help us keep up with such advances, we are currently standing up an Office of Technology Evaluation.
Just as importantly, we are continuing to make the licensing system work more efficiently. Even though we now process some 20 percent more license applications than we did only two years ago, and even though these applications tend to be increasingly complex, we have brought our average processing time down to 31 days! Thanks to the licensing officers of Export Administration for their great work!
We have also made important strides in our efforts to harness technology to make it easier for you to submit license applications. Last fall, at our Update Conference in Washington, we demonstrated a prototype of our redesigned SNAP system for submitting license applications electronically. We also have a prototype here for you to test drive, and I’d encourage you to do so. While we still have a lot of work to do, we are on track to begin migrating exporters to the new system at the end of this year.
So we are making progress with the U.S. export control system. But even if we have the best system in the world, and operate it to perfection, that isn’t good enough. For, as September 11 taught us, what happens out there affects us here. In a globalizing world, we need to i ntegrate non-U.S. actors to create a more effective global export control and treaty compliance system. We need to extend our security boundaries beyond our national boundaries, to every place a controlled item is bought, sold, traded, or used.
That means working with our friends and allies to improve the consistency of our controls. We need to do a better job of implementing the same controls in the same ways – both to close security loopholes and to ensure a level playing field for American exporters.
But we need to go beyond the regimes to reach out to other major export markets and create conditions for increased trade in high technology and other controlled items. And we are doing so.
BIS has played an important role in the opening to India, which culminated in President Bush’s trip there earlier this month. In fact, U.S.-India cooperation has led to Indian steps to combat proliferation, and these in turn have allowed us to lift controls on tens of millions of dollars in annual exports to India, with every expectation that that figure will rise.
We are also continuing our intensive engagement with China. I know Bernie Kritzer discussed China policy earlier this morning, so I won’t go into detail, other than to reaffirm our commitment to doing everything we can to facilitate civilian high-technology and other controlled trade to China to the maximum extent we can, consistent with our security needs. I have every hope that the upcoming meeting of the U.S.-China Joint Commission on Commerce and Trade will bring tangible results for American exporters. In that vein, I am delighted to welcome a delgation from China’s Ministry of Commerce here at this conference.
It is critical to expand the reach of export controls, but without enforcement, controls lack teeth. So we are continuing to refine, focus, and improve our ability to keep one step ahead of the bad guys and eliminate illicit export activity. I heartily recommend to you this afternoon’s session on enforcement that Mike Turner, head of our Office of Export Enforcement, and Ned Weant, the new Director of our Office of Anti-Boycott Compliance, will lead. It promises to be a compelling program.
I’d also like to direct your attention to the “Major Cases List” on the BIS Web site. This document tells a remarkable story of success in breaking proliferation rings, stopping illicit exports to countries such as Iran, and leveraging the resources of our Federal Agents to enforce our dual-use export control laws.
Finally, the speed of the technology revolution means that none of our efforts will make sense if our policies do not support continued competitiveness through U.S. technology leadership in industries that are essential to national security.
Competitiveness, like security, has many homes in the U.S. government, including BIS. And the technology leadership that underpins competitiveness depends on many factors, none more important than our ability to attract and retain top talent from around the world. Past and present examples – giants such as Edward Teller, John von Neumann, and more recently, Andy Grove, who were all born in Hungary – tell the story of how foreign born innovators have brought benefits to the United States.
However, our place as the destination for the world’s best minds is not guaranteed. Just as we must compete in global markets for products and services, we must continue to compete and win in the global market for talent.
That’s where BIS comes in, through our approach to knowledge transfers to non-Americans, so called “deemed exports.” For the fact is that, without prudent restrictions, we are vulnerable to foreign nationals accessing and repatriating sensitive U.S. technology to potentially hostile militaries or terror groups.
We are working to make sure that our deemed export regulations protect only the technology that matters most and avoid imposing undue restrictions that could undermine our ability to attract the best and brightest to our laboratories.
At the same time, we must ensure that our stewardship of the dual-use export control system does not have perverse competitiveness effects. We understand that, if we are not careful, controls designed to “protect” our critical technologies from being exported to the wrong destinations could ultimately undermine the very security we are seeking to protect. Thus, we are taking active steps in a number of key industries such as night vision and semiconductors to make sure that export controls are carefully targeted to meet our overriding national security needs without denying our companies legitimate markets
That brings me to you, America’s exporters. It should be clear from any discussion of trade and security in our changing world that our responsibilities are too big for us to handle alone. That’s why we need you. That is why BIS performs hundreds of outreach activities every year, and that is why Mike Hoffman, Eileen Albanese, and their staffs work so hard to bring everyone together at conferences like this.
If the system is to work, if together we are to make these exports possible, America’s exporters must be the first line of our common defense. So I urge you to be aware of your potential customers for exports of your sensitive items; to work within the licensing system; to participate all year long in the various groups and forums BIS offers. Tell us what you think, and hear us out when we have something to say. Take responsibility for your actions. In short, be our active partners. And we will be yours.
Your presence here shows that you have chosen to rise to the challenge. So I hope you enjoy and benefit from the rest of the day. Thank you.