EXTENSION AND REVISION OF THE EXPORT ADMINISTRATION ACT OF 1979 THURSDAY, MARCH 3, 1983 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON INTERNATIONAL The subcommittee met at 2:10 p.m. in room 2200, Rayburn House Office Building, Hon. Don Bonker (chairman of the subcommittee) presiding. Mr. BONKER. The subcommittee will come to order. This is the third in a series of hearings by the Subcommittee on International Economic Policy and Trade to reauthorize the Export Administration Act of 1979. We have previously heard from representatives of the umbrella trade associations of the business community and the administration. Today we have the opportunity to hear from a distinguished panel of witnesses representing the views of high technology companies. Through their trade associations, these companies have devoted a great deal of effort to formulating proposals for amending the act. The subcommittee appreciates the benefit of their views. I would now like to call upon the ranking member of the committee, Mr. Toby Roth, for any opening remarks. Mr. ROTH. Thank you, Mr. Chairman. Mr. Chairman, these series of hearings on the Export Administration Act are proving to be most beneficial. I know that I've learned a great deal and have been getting a much fuller grasp of the issue. Our witnesses today-representatives of the hi-tech industrycome from a critical and vital segment of our economy. Hi-tech is a field in which we lead the world, and our products are in demand. Hi-tech is revolutionizing the way we work and the way we live. At the same time, hi-tech carries with it serious implications. It is at the heart of our military technology and in the wrong hands. it can be utilized to develop weapons that could eliminate life as we know it from this planet. At the beginning of this century, Lenin reportedly wrote that: The capitalist nations will supply us with the materials and technology which we lack and will restore our military industry, which we need for our future victorious attack upon our suppliers. In other words, they will work hard in order to prepare their own suicide. This quotation has frequently been interpreted to mean that the West will be willing to sell the Communists the rope that they will use to hang us. Now, at the end of the century, we've moved beyond the "rope stage," but our necks are still in the noose. The American taxpayer is being asked to spend billions of dollars for procurement of new, modernized military hardware. At the core of these defensive tools is "hi-tech"-and we know that we will never use them unless attacked. But no matter how advanced our planned weapons may be, if we lose control of the technologyand it falls into the hands of the Soviet bloc-all that we have ac complished will become obsolete. The national security concerns posed by exports have thus far been dealt with rather lightly during our hearings, but the industry that appears before us today has developed a technology which can take us in two different directions. On the one hand, the products of hi-tech offer us a wonderful, unprecedented future prosperity; but in the wrong hands, it can bring down destruction on us all. I look forward to hearing our from our witnesses, for we must develop a solution to the problems posed by hi-tech exports. Mr. BONKER. Thank you Mr. Roth. Today's panel will consist of representatives from the Computer and Business Equipment Manufacturers Association [CBEMA], American Electronic Association [AEA], Scientific Apparatus Makers Association [SAMA], the Electronic Industries Association [EIA], and the Semiconductor Industries Association [SIA]. We are most anxious to hear from our distinguished witnesses. I notice that many of your statements are lengthy and in order to expedite the hearing and allow opportunity for questions, I hope that you are able to summarize your remarks. We shall move from the chair's right to the left and start with Mr. Henriques. STATEMENT OF VICO HENRIQUES, PRESIDENT, COMPUTER AND BUSINESS EQUIPMENT MANUFACTURERS ASSOCIATION Mr. HENRIQUES. Thank you, Mr. Chairman. In the interest of time we will abbreviate our statement and ask that the full written text be included in the hearing record. I am president of the Computer and Business Equipment Manufacturers Association. We represent 41 companies. During 1982 our members had revenues in excess of $75 billion, employed more than 1 million people worldwide, and had a positive trade surplus of $6.5 billion. Our companies are so involved in high technology trading and investment that we welcome the opportunity to comment on the bills now pending before the Congress relating to the renewal or amendment of the Export Administration Act. At the outset we would like to compliment you, Mr. Chairman, for holding this hearing. We also note that other related bills will be addressed in this hearing including H.R. 381 introduced by Representative Roe, and H.R. 483 introduced by Representative Byron. We believe these bills will promote useful discussion of the need to extend and to amend the Export Administration Act of 1979 which expires this year. I would like to provide an overview and summary of the full statement and hit some of the main points of what is contained in our statement and then let some of the details be explained by the other members of the panel who are sitting here with me. We recognize the need for and we support national security export controls on militarily critical products, and the technical data and knowhow for their production. We believe this goal can be accomplished by such measures as concentrating enforcement efforts on products and technical data that are truly militarily critical, improving multilateral controls, encouraging voluntary compliance and cooperation between the U.S. Government and U.S. exporters, and we believe that it is essential that there be effective implementation of the foreign availability provisions of the act. We stress that only effective multilateral export controls focused on East-West trade can promote our national security interests. We welcome your bill's recognition that the United States must develop an effective and workable regime to control transfers of militarily critical technologies and we would like to suggest an appropriate framework for such a regime and provide the details of new validated licenses under a premise that we have called the comprehensive operations license. We also recognize that cooperation and continuing dialog between the U.S. Government and private industry is esential to effective controls and to achieve national security objectives. HISTORICAL PERSPECTIVE OF EXPORT CONTROL POLICY I would like to turn now to a brief statement of history because I think this sets the stage for the hearings and for the consideration of the bills. In other words, for Congress to review the legislation for export controls in the 1980's, we believe it is essential to have historical perspective on modern export control policy and the issues that are raised by the pending legislation. The broad contours of the present public policy debate over competing security and economic interests were visible in the enactment of the Export Administration Act of 1969. The impetus for changing the then existing policies of an essentially strategic embargo on East-West trade were political and economic developments such as the emergence of Japan and Europe as economic rivals of the United States, increased interest in East-West trade, and a desire to move away from the application of confrontation. Indeed, by 1968 the United States was the only country still actively engaged in economic warfare against the Communists. It maintained unilateral export restrictions on approximately 1,000 items that were freely available to Communist countries from sources outside the United States. The 1969 act changed the focus of U.S. export control policy giving greater weight to the economic benefits of U.S. exports. However, the inherent tensions in the competing security and economic policies objectives articulated by the 1969 act have been a continuing source of practical difficulty and political controversy. The need to accommodate the competing security and economic objectives arise from major changes that have occurred since the height of the cold war. Controversy has surrounded U.S. export control policy throughout the 1970's. The Export Administration Act of 1979 addressed serious problems encountered under the 1969 act as amended. In the 1979 act, modifications were made to streamline the licensing of exports, to bring the controls under closer congressional scrutiny, to make administration of the controls more practicable, and to improve multilateral coordination and enforcement by the Coordi nating Committee for Multilateral Export Controls, or Cocom. Full implementation of changes intended by the 1979 act has not been achieved, and the U.S. export policy has continued to be criticized from a number of different directions. IMPORTANT PRINCIPLES OF NATIONAL SECURITY CONTROLS I would like to turn now to some of the principles that we feel are important to national security controls. Our companies believe that it is essential to establish effective export controls on goods, and more significantly on technologies, from all sources which can make a direct and significant contribu tion to the military capabilities of specific adversary countries. We believe this goal can be achieved through improved implementa tion of controls rather than expanding the scope of export control authority. It should be recognized that there are many ways other than through commercial exports that adversary countries can obtain U.S. technology. For example, military arms supplied to allied nations and illegal transactions could be better controlled to forestall leakage of militarily significant technology to adversaries. Second, militarily critical goods and technologies are available in most Western industrial countries and in many advanced develop ing countries such as Israel, Brazil, and Argentina. Therefore, effective national security controls must recognize the fact of foreign availability. The U.S. Government must seek multilateral agreements with our allies and bilateral agreements with nonadversary countries as the only effective means to deny access to such goods and technologies by adversary countries. Third, the goal of effective regulation, under national security export controls, is to deny adversary countries access to militarily critical goods and technologies through legitimate commercial channels, and to force such countries to employ illegal means where they attempt to acquire such goods or technologies. This goal can only be achieved through measures which promote voluntary compliance by responsible companies to the maximum extent possible. The objective must be to place export controls on free world trade into the framework of peremptory controls whose main purpose is not the regulation of U.S. business but the elimination of legal avenues for Soviet acquisition programs. Fourth, it may be necessary to improve national security export controls to deny access to truly militarily critical technologies, keystone equipment, and keystone materials. However, many technologies developed for commercial use are more advanced than technologies currently used for military purposes. DOD must rely increasingly on technologies developed for commercial purposes, and the quality of commercial technology available to DOD from U.S. companies depends to a significant degree on the ability of those companies to participate effectively in the free world market. Such ct as line the gress ractica nt by the 5, or Co act ba to be CONTEN participation is essential for our companies to learn from interaction with their most advanced foreign competitors, and to earn income to finance research and development in the United States. Therefore export control measures which put U.S. high technology companies at a competitive disadvantage with foreign companies in Western markets adversely affect our national security in the long run and must be avoided to the maximum extent possible. Fifth, to improve national security export controls on the technologies and keystone equipment, it is essential that the items on the MCTL, the militarily critical technologies list, be limited to those which can make a direct and significant contribution to the military capabilities of specific adversary countries. Effective enes the forcement is possible only if enforcement activities focus on limited groups of truly critical issues. blish RECOMMENDATIONS We recommend the following things: The Export Administration Act extension must direct the Administration to continue and intensify its efforts with Cocom and other governments to negotiate por effective multilateral controls, based on parallel national controls through whatever means are appropriate, including formal government-to-government agreements. We believe the act should prohibit the Department of Commerce from requiring a national security validated license for exports of goods or technologies other than militarily critical technologies subject to multilateral controls to Cocom countries. We believe the act also should prohibit the Department of Commerce from requiring U.S. national security reexport controls on goods and technologies exported to Cocom countries and subsequently proposed for reexport to adversary countries and to other Cocom countries when such goods and technologies are subject to multilateral security controls. We believe the act should require the Department of Commerce to impose less stringent national security licensing requirements on export of goods and technologies to nonadversary, non-Cocom countries which agree bilaterally with the U.S. Government to impose controls on exports and reexports which are similar to or identical with Cocom controls. We believe there should be a prohibition on the imposition of unilateral national security export controls on goods and technologies which are available from foreign sources except in extraordinary circumstances. Finally, we think the act should require national security export controls, which are imposed unilaterally by the U.S. Government on goods and technologies, to terminate 1 year after the date from which they are imposed, if such goods or technologies are available from foreign sources. Equally it should prohibit extension or renewal of national security controls on such goods and technologies unless Cocom countries agree to multilateral controls on those goods and technologies. That, Mr. Chairman, is the summary of what I would like to emphasize to you today. If you have any questions I would be more than happy to try to answer them. |