EXTENSION AND REVISION OF THE EXPORT ADMINISTRATION ACT OF 1979 Executive Branch Views TUESDAY, APRIL 5, 1983 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON INTERNATIONAL The subcommittee met at 2 p.m., in room 2154, Rayburn House Office Building, Hon. Don Bonker (chairman of the subcommittee) presiding. Mr. BONKER. The Subcommittee on International Economic Policy and Trade will come to order. Today the subcommittee convenes for the purpose of hearing testimony from the administration on the reauthorization of the Export Administration Act of 1979. This is the fifth in the series of hearings regarding reauthorization of the Export Administration Act. Previously we have heard testimony from representatives of the private sector, as well as Government agencies involved in implementation of the act. This particular session comes at a time of high drama for those who have been following the reauthorization of the act, for the administration's position is one of significance to the congressional consideration of amendment of the act. This afternoon is the first opportunity for Congress to hear from an official spokesperson regarding this administration's position with respect to foreign policy and national security export controls, and controls on materials in short supply. Before I invite Mr. Olmer to testify, I would like to turn to the ranking member of the subcommittee, Mr. Toby Roth. Mr. ROTH. Thank you, Mr. Chairman. And I want to join you in welcoming our distinguished Under Secretary of Commerce, Lionel Olmer, before our subcommittee today. Mr. Chairman, I believe that we share many of the same concerns regarding the international trade policy of the United States. This subcommittee has the opportunity to develop a new version of the Export Administration Act to further encourage our exports and, at the same time, prevent the flow of products and technologies which would enhance the strategic capabilities of our adversaries. I think other members of this committee would have been proud to hear Mr. Olmer at a recent trade conference in Berlin. Just in the past week I had the opportunity, and the good fortune, to hear the Under Secretary address many of the leading trade exports in Europe on international economic policy. I was most impressed, Mr. Olmer, with your presentation and with your views. I want to tell you, not only as a Member of this Congress but as an American, I was proud to hear your words be cause I thought for did a terrific job, and I want to compliment you for it. It is a difficult task to keep our export control law and the list of items we control up to date. I have been studying the many sec tions of the export control law and would like to quote from a study about the difficulty of halting illegal exports. It said that there are so many loopholes and the ingenuity of the smugglers and industrial spies was such that the efforts were in the long run, to control the flow of technology, unavailing. Mr. Chairman, this quote is not from a recent GAO study or a Department of Defense study, but it is from a book entitled, "The Unbound Prometheus", by the noted historian David Landis. It traces technological change from 1825 to the present. Certain sec tions describe how governments from the 18th century on tried to stem the flow of technology. They were unsuccessful. This work of a noted economist and historian, David Landis shows just how difficult it is to control technology. I think we see again this morning illustrated by the news reports that the French have asked 47 Soviets to leave France because of their attempts to steal high technology. I think it all points to what a difficult job we have in reauthorizing the Export Administration Act and making it a more effective law. But I am confident, Mr. Chairman, that with you at the helm and with the other members of our subcommittee that we are going to be able to hopefully overcome the hurdles that are placed in our path. Thank you, Mr. Chairman. Mr. BONKER. Mr. Olmer, we are most anxious to hear from you on the administration's proposal to reauthorize the Export Admin istration Act. STATEMENT OF HON. LIONEL OLMER, UNDER SECRETARY FOR INTERNATIONAL TRADE, DEPARTMENT OF COMMERCE BALANCING COMPETING INTERESTS Mr. OLMER. Mr. Chairman, I truly do appreciate the opportunity to present to the subcommittee the administration's proposal on re authorization of the Export Administration Act.1 This bill undeni ably has been an especially difficult one for the administration to develop. On the one hand, we are deeply committed to restoring America's competitiveness in international trade. Simultaneously we have pledged to remove and we have removed many unneces sary Government regulations from the backs of U.S. businessmen. 1 The text of the administration bill, H.R. 2500, appears in appendix 1. rade & have be Clearly, any law which establishes procedures for restraining exBeports, as does the Export Administration Act, conflicts with these for objectives. Yet there is an even more important objective, more fundamental to our national interest, which in my judgment must remain primary; that is, to prevent, insofar as it is possible, the acquisition by our adversaries of products and technologies that have Me military significance. There is no element of responsibility for leadership with a higher calling than to provide for our defense, even at great costs, assessed sometimes in tax dollars and at other times in the lives and personal liberty of our citizens. The Export Administration Act makes a contribution to the fulfillment of this responsibility. It has been the subject of extensive review within the executive branch and the subject of considerable discussion among the executive branch, the business community and the general public. In cooperation with the President's Export Council, we have held six public hearings around the country. I have personally met with business leaders in this country and abroad, with foreign government officials, and with representatives of the leading trade associations in order to discuss these issues with them. Export controls usually present competing policy interests. On the one hand, there is a vital need to improve our competitiveness in world trade. This requires aggressive marketing and access to worldwide sales opportunities. We must be internationally competitive in order to expand our employment base and to pay for the goods we want and need to import. It hardly needs repeating before this subcommittee, especially before you, Chairman Bonker, whose efforts over the last several years to improve our Nation's export posture have been stellar, that our national security is inextricably linked to the health of our economy. Economic strength does provide the foundation for our leadership throughout the world. On the other hand, the importance of exports cannot obscure, much less overshadow, the need to protect our national security. The transfer of sensitive Western technology and equipment to the Soviet Union has had a direct impact on the growth of Soviet military capabilities, especially over the past 10 years. It has accelerated the introduction of new and more sophisticated weapons to the Soviet arsenal, thus requiring the West to spend more on defense. Perhaps even more important, it can create vulnerabilities on our side that could have tragic results. The United States and its allies simply must curtail the flow of strategic technology the Soviet Union, and this administration views this area as of top priority. Clearly, export controls may impose economic costs to business firms. But these are sometimes necessary cost. While there may be disagreement regarding which items are of strategic importance, I do not believe there is any significant disagreement regarding the need for national security export controls. The public discussions I mentioned earlier demonstrated this beyond any doubt. Nevertheless, we must ensure that national security export controls are confined to those items necessary to protect the national interest without unduly interfering in the the free flow of commerce. عام However, there is often diversity of opinion as to the appropriat instances in which to impose import controls and as to whether w are administering them effectively and efficiently. The closer a con trol gets to a company's own particular interests, the more likely i is that these differences will emerge and that the Government's judgment will be challenged by those corporate interests. The administration's bill, I believe, strikes the appropriate bal ance for determining when export controls should be imposed. Le me explain how we attempt to achieve this balance. NATIONAL SECURITY CONTROLS This administration maintains that export controls for nationa security reasons are necessary to the safety of our Nation. This bil reflects this belief, but at the same time, it reflects an intention to minimize the economic costs imposed on our business firms. Whereas the present act emphasizes the importance of expor promotion, the administration's bill proposes to change the section on findings and policy declarations to clarify that exports should be considered within the context of overall U.S. interests. The presen act appears to place greater emphasis on exports, the administra tion bill highlights the consequences of failing to prevent or to delay the transfer of militarily sensitive technology. These changes better describe the economic and security objectives of the act. We are concurrently committed to improving the effectiveness o export controls on strategically important technology. Our aim is to tighten the controls at the top end of the technology spectrum and to reduce the controls at the lower end. At the same time, we intend to reduce controls of the products of those technologies. Effective and fair enforcement of the export of critical commod ities and technology requires multilateral cooperation. Accordingly the administration has been working very hard to strengthen and improve the effectiveness of Cocom. For example, one of the posi tions in the policy section of the administration's bill mandates bilateral and multilateral negotiations to eliminate wherever possible the foreign availability of comparable goods and technology. We recognize that the United States is not a unique source of supply for many commodities and technologies, and that the target country may often obtain comparable products elsewhere. The bill also stresses the importance of negotiations with other Cocom nations to improve the international control list, to strenthen enforcement and cooperation, to upgrade the Cocom secretariat, and to provide sufficient funding for its activities. The commitment reflected in this bill to strengthen Cocom will minimize the possibilities of diversion. Moreover, only controls that are multilateral avoid placing an unnecessary burden of U.S. business. Our bill also contains provisions requiring negotiations, not only with Cocom but also with other governments to remove foreign availability. In addition we intend to place greater emphasis than has been placed in the past on the very serious problem of diver sion of items from third countries that are not parties to control agreements. We will conduct bilateral negotiations with the intent of concluding agreements with such countries. As another means of reducing the flow of sensitive goods and technology to the Soviet Union, our bill also authorizes the President to control the transfer of goods or technology within the United States to embassies and affiliates of countries to which exports of such items are controlled. With regard to the chairman's efforts to decrease the burden of export licensing for West/West trade activities, we share the same goals. Unless we can better differentiate between exports that raise national security concerns from those that do not, the export control licensing system will become truly unmanageable. We must find ways to ease restrictions on certain West/West transfers, so that we may focus our attention on those exports that pose the greatest risk to our national security. At the same time, we must tighten our multilateral enforcement to prevent the diversion of those sensitive items to the Soviet Union. For this reason, we oppose the provision contained in H.R. 1566 which would require the Secretary of Commerce to automatically remove the export controls on any unilaterally controlled items for which all export license applications have been approved during any 1-year period. This mandatory decontrol would hinder our efforts to prevent diversion and interrupt the paper trail which now exists. We are examining carefully the concept of a comprehensive operaitons license, as proposed in H.R. 1566. However, we have not yet decided on the specific licensing mechanism to reduce the burden of transfers between U.S. companies and their subsidiaries. While we believe your idea has much merit, we do not believe that additional licensing mechanisms should be statutorily mandated. We must carefully evaulate alternatives so that the licensing system we fashion does not have unforeseen ramifications. We need the flexibility to modify and revise any licensing system once in operation. In any case, existing statutory authority enables the Secretary of Commerce to establish such a licensing procedure. As a point of interest, Mr. Chairman, in connection with our implementation of the militarily critical technologies list, we are now preparing proposals to implement a licensing system to facilitate transfers between U.S. companies and their overseas subsidiaries. With respect to your legislative proposal concerning microprocessors, the Commerce Department proposed to the Department of Defense last December the types of equipment incorporating microprocessors which we believe should be decontrolled. Currently scientific and analytic instruments which contain microprocessors require a validated license, irrespective of their strategic significance. We agree with you that this control is unnecessarily broad and needs to be streamlined. The Department of Defense has promised a response shortly. FOREIGN POLICY CONTROLS Foreign policy controls are imposed against nations which violate internationally accepted norms of conduct. These controls have not only been imposed in the East-West context, but in many other situations as well. Each of these controls has been tailored to the specific situation and has been designed to achieve important foreign policy objectives. |