Where Industry and Security Intersect
What's New | Sitemap | Search
Thank you for that warm introduction, Eileen.
Ladies and gentlemen, welcome to the 2006 Update Conference.
Every year we stand up here and thank Eileen and her staff for their hard work in putting together the Update conference. We mean what we say but, deep down, we know that Eileen and her people are such pros that, frankly, it’s not all that hard.
Well, let me tell you that, this year, they deserve every word of praise and more. As you learned when you tried to register for this year’s conference, Eileen and her staff faced huge new obstacles to pulling this event off. And they overcame them.
So, this year, let’s really give Eileen and her staff a thunderous round of applause for their hard work.
This is also the third year in a row that a different head of BIS has given the keynote address. Two years ago, it was Ken Juster. Then, following four successful years at the helm, he departed for the private sector. Last year, the keynote was presented by Dave McCormick. After a year of remarkable progress, Dave was promoted to the position of Deputy National Security Advisor for International Economic Affairs. This year, I have the privilege, as acting Under Secretary, to speak with you.
What I hope you’ll notice is that, although there have been three different faces, there has been one consistent approach to dual-use export controls within BIS.
Our approach has been to administer the system to meet America ’s security needs with maximum transparency and minimum disruption to exports.
Our approach has been to build the foundations for secure trade as the way to make controlled trade possible.
Our approach has been to engage in true consultation with you, the exporting community. What do I mean by “true” consultation? I mean that we are committed to explaining what we are thinking in a direct, unvarnished manner, and to listening to what you say in return.
Our approach is to be fact-based and analytical in our dialogue, to avoid policy by anecdote. And, it is to engage in dialogue with the understanding, on both sides, that listening does not always lead to agreement.
Finally, our approach has been to back regulatory work with targeted enforcement to ensure that crime is not a competitive advantage.
Our approach has yielded real benefits, for business and security.
It has yielded a continuing focus on the small percentage of exports that have significant security and foreign policy implications. In Fiscal Year 2006, for example, only some $36 billion worth of potential U.S. exports required a license from the Department of Commerce, a tiny fraction of overall U.S. exports.
Our approach has sustained a passion for improvement in processing applications for those exports. Last year, we evaluated 13 percent more license applications than the year before, and these applications tended to be more complex. Yet, we did so in only 33 days, on average. I think our license application processing team – licensing officers, enforcement analysts, and others – deserves a big round of applause for their hard work on your behalf.
Our approach has also led to more trade with more security in more essential markets. For example, BIS issued over $800 million in licenses for trade with China in Fiscal Year 2006 and, once again, did so in near record average times. Looking ahead, last month’s inaugural meeting of the U.S.-China High Technology and Strategic Trade Working Group laid the foundation for increased cooperation. The Validated End-User program proposed as part of our new China policy rule promises to free up even more trade.
BIS has also paved the way to greater high technology trade with India , through the efforts of the U.S.-India High Technology Cooperation Group. Since the HTCG was founded in 2002, U.S. exports to India have nearly doubled from barely $4 billion in 2002 to almost $8 billion in 2005.
Yet, thanks to reciprocal steps by India and the United States , the share of that trade which requires a license is declining. Now, only around one percent of U.S. exports to India require a license.
Our approach to “true” consultation has led to the establishment, by Secretary Gutierrez, of the Deemed Exports Advisory Committee, a group of 12 distinguished Americans who will take a year to study the issue of deemed exports and provide policy recommendations. After doing literally hundreds of deemed export outreach events and posting our Inspector General’s findings on deemed exports for public comment, it became clear that we needed more facts and more thinking. So public comment helped lead to this powerhouse committee. Your voice matters.
This outreach on deemed exports was in addition to hundreds of outreach events to the exporting community, including five meetings around the country to help answer questions on the proposed China policy rule.
In addition, our approach has led to more enforcement, in more targeted form. During the last fiscal year, BIS investigations led to 34 criminal convictions and the imposition of some $3 million in criminal fines. Our 104 administrative cases resulted in nearly $14 million in administrative penalties. This is good news for you. By making the world safer for legitimate exports, our enforcement team makes the world safer for your exports. Our enforcement people, and the attorneys and licensing officers that support them, deserve our thanks.
We also take our responsibilities under the anti-boycott laws very seriously. The statistics I just mentioned include cases brought by our anti-boycott team amounting to some $800,000 in administrative fines.
Our biggest disappointment over the past year is that the Export Administration Act has not been reauthorized. Don’t get me wrong. We do a first rate job of administering the dual-use export control system under the President’s emergency authorities. Nevertheless, an Export Administration Act would simplify our work and strengthen our national security.
Given the great year we had in BIS, I won’t dwell on our disappointment over the EAA. Nor will I read you more statistics or give you a complete inventory of all the great work that the BIS team has done over the past year, which also includes a huge increase in our CFIUS work, our Defense Priorities and Allocations System work, our treaty compliance program, our technical assistance to countries developing export control systems, and our industry studies. All of this information will be available in our FY2006 annual report, which will be posted to our Web site early in calendar year 2007.
For what is important is the story behind the statistics. With the steadfast leadership and firm support of Secretary Carlos Gutierrez and Deputy Secretary David Sampson, and with the hard work of BIS’s leadership and every member of the BIS team, we are placed and pledged to continue our progress in the year ahead.
In that regard, let me take a moment to welcome the newest member of the BIS leadership team, Christopher Padilla, our new Assistant Secretary for Export Administration. You will meet Chris shortly; let me just say here how pleased and excited we are to have someone of Chris’s talents and background on board.
Ladies and gentlemen, BIS has a good story to tell. But our story must evolve over time. For, even as we manage the current export control system, the world is changing, and our controls must change with it.
In the “good old days” of the Cold War, we liked to think in terms of “good countries” and “bad countries.” End-users in good countries were largely good; in bad countries inevitably bad.
Today, we face a more complex environment, in which the same country may host legitimate customers, proliferators, terrorists, and end-users we just don’t know about. The history of the past five years has clearly demonstrated that no economy is immune from “bad” actors. Similarly, only a very few economies fail to have “good” end-users within their borders.
At the same time, global market pressures and the “death of distance” have led to the location of more complex economic activity abroad. For example, to sell a product to a foreign purchaser, the manufacturer may co-produce parts of that product in the country of the purchaser, which may have a military program the United States does not wish to support. Or, to remain competitive, a manufacturer may outsource production or even design capability to a firm in a country that is of strategic concern.
Export controls are necessary to make sure that such activities do not compromise American security. At the same time, if export controls deter U.S. firms from responding to market demands, other companies in other countries may be ready to step in, costing the U.S. firms near-term sales and profits, and also raising the risk of ceding global leadership in industries critical to U.S. long-term security.
These are real issues of great importance to you, to us, and to all Americans. We need to begin now to adapt export controls to address them. Clearly, our work is cut out for us in the years ahead.
Just as clearly, we cannot work alone. We must adapt and evolve the export control system in partnership among the executive branch, the legislative branch, and you, the private sector. Each of us has an important and legitimate voice in export controls. All of us must unify around a common vision of the threat and the solution.
This conference is a good place to start. Eileen and her staff have laid out an excellent program. We are very fortunate to have Deputy Secretary of Defense Gordon England as our luncheon speaker. Deputy Secretary England brings a remarkable breadth of experience in private industry and government, and I know we will all enjoy hearing his insights.
The sessions, the breaks, and the gala all provide opportunities to network and learn from each other.
An enormous amount of work has gone into preparing the next two days. I congratulate you in advance for investing the time and effort to make the most of this opportunity.
Have a great conference. Thank you.