controls--namely, to restrict the export of goods or technology which would make a significant contribution to the military potential of our adversaries. We do feel, however, that improvements can and should be made in the provisions of our law governing national security controls. Specifically, we support the following policy positions: 1. U.S. national security controls should be limited to items and related technologies on the Cocom control list. 2. 3. 4. We should work toward arrangements with Cocom We must continue to build on recent efforts to improve the administration of U.S. control regulations. For example, the definitions of products and technology on the Commodity Control List should be clarified by adoption of the nomenclature of the Harmonized Commodity Description and Coding System. Policy decisions and licensing of controls should remain in the Commerce Department. Priority should be given to raising the technical expertise of the Commerce Department staff to ensure more effective policy development and enforcement of control regulations. The quality of U.S. technology available for U.S. defense purposes often depends on the ability of U.S. industry to develop and perfect advanced technology for commercial markets. Cutting our high technology industries off from these markets, therefore, should be done with the utmost caution. The strength of these industries cannot be sustained without access to commercial markets throughout the world. Turning to the subject of U.S. foreign policy controls, NAM members have discussed two different approaches for dealing with these controls (1) (2) Elimination of Presidential authority to apply Revision of the existing provisions of Section 6 to define more clearly the circumstances and conditions for using foreign policy controls. The first approach--elimination of Section 6 authority to impose foreign policy export controls--is perhaps the simplest way to deal with the problems caused by foreign policy controls. Under this approach, Presidential authority to limit U.S. exports would be removed from the Export Administration Act but still exist under the President's emergency and other powers. could continue to include export controls in U.S. responses when: fulfilling international treaty obligations; · responding to international emergencies; Thus he pursuing definite foreign policy objectives This would bring U.S. control policies into line with those of other major industrial nations. A recent report of the Subcommittee on Export Administration of the President's Export Council notes that: National security is the only statutory basis for control in the majority of Cocom countries covered by our study. While a nod is given to foreign policy as possible justification in two instances, it was reported that this reason is almost never used. The U.S., on the other hand, has used it quite frequently in the last two administrations. It is clear that other trading nations find that the costs of using foreign policy controls outweigh the benefits. It is time that the United States paid more attention to the costs of these controls to our competitive position in critical industrial sectors. In We must recognize the limitations inherent in the unilateral application of not only our national security controls but also our foreign policy controls. The extensive set of unilateral controls we maintain deprive our adversaries of very little. fact, our export control policies would be far more realistic if they were based upon the assumption that there exist few, if any, manufactured products which other industrial nations are not already producing or have the capability of producing if the appropriate market opportunity arises. It should not be forgotten that market positions are established by U.S. manufacturers often with great difficulty and expense. Foreign competitors are reluctant to take on U.S. companies with established market positions because of the initial startup costs and time involved with such a challenge. When the U.S. government unilaterally takes our companies out of any particular market, foreign competitors quickly fill the vacuum with their products while ours are denied. The fact that imposition of export controls is a serious step cannot be emphasized too strongly. Both American security and economic well being depend upon the strength of our industrial base, and industry depends upon markets. The United States, as the leader of the free world and champion of the open trading system, has encouraged both American producers and others to see the world as their market. We have opened our markets to highly competitive industries from the rest of the world. In doing so, we have created a situation in which our industrial strength depends to a significant extent upon our ability to export and that ability is threatened by unilateral export controls which contribute to the perception that U.S. business cannot be relied upon as a supplier or business partner. Under these circumstances we find that it makes little sense to continue to have sweeping powers under the Export Administration Act to impose unilateral foreign policy controls. Essentially, if an international development is not serious enough to warrant either our allies' cooperation, special action by Congress, or the declaration of an emergency under the International Emergency Economic Powers Act, it probably is not serious enough to justify unilateral control of U.S. exports for foreign policy reasons. We should rely instead on traditional diplomatic or political- military "tools" to register our protests and dissatisfaction. A second approach to U.S. foreign policy controls which has been discussed by NAM is the revision of Section 6. If Section 6 were to be revised, the following basic principles must be recognized: 1. 2. 3. Existing export licenses and controls must not U.S. control policies shall be applied in Close consultation with industry is necessary on any decision to implement controls. These principles should be applied not only to controls under the Export Administration Act, but also to controls imposed under emergency powers or under specific grants of authority by Congress. If Section 6 is retained, the process by which it is implemented and enforced also needs to be reviewed and refined require control regulations to be issued first in establish a technical advisory committee to assess establish a specified time beyond which Congress : On balance, we believe that the first approach--removal of authority to control exports for foreign policy reasons under the Export Administration Act except in the circumstances outlined on page three of this letter--offers the best means to express the determination of the U.S. government to re-establish the credibility of American business as a reliable exporter. clear-cut nature of such an action would remove a good deal of the existing ambiguity on this point. The I would be most interested in your views on possible approaches to dealing with the issue of U.S. control policies so that we can attain the twin objectives which I think all of us share--namely, control policies which have minimum interference with U.S. international commerce and which achieve definite I would, of objectives that further U.S. national interests. course, be glad to meet with you to discuss this matter in greater detail. refined in ess is. val of Mr. BONKER. Thank you for an excellent statement, Mr. Trowbridge. We shall now move to Mr. Jenkins who represents both Armco and the coordinating group on this act for the chamber of com merce. STATEMENT OF KEMPTON JENKINS, VICE PRESIDENT, GOVERN- Mr. JENKINS. I am pleased you have given me the opportunity to return to this hall and testify on behalf of the chamber on this most important subject. As you are aware, the chamber is the world's largest business asder sociation with a membership of over 237,000 small, medium, and e large businesses, trade and professional associations, and State and local chambers. st the The refinement of this act is a major priority of the U.S. Chamber of Commerce. I would like to emphasize in the beginning of my testimony, Mr. Chairman, that no responsible member of the business community would tolerate the diversion of critical technologies to the military use of our adversaries. In this regard, we applaud the efforts of both the administration and the Congress to strengthen the enforcement of export controls in order to put a halt to the illegal acquisition of controlled items by our adversaries. I would like to add special praise for those administration efforts as outlined by the Department of Commerce in testimony before the Senate Banking Committee on February 3, and, specifically, the personal efforts of Under Secretary Olmer, whose judgment has been a steadying factor during export administration problems of the past 2 years. We applaud the past and present efforts of this subcommittee. In particular, Chairman Bonker deserves recognition for his ongoing efforts, which include a thoughtfully drafted bill to modify the present Export Administration Act. This bill includes a number of extremely important provisions related to such principles as contract sanctity and extraterritorial application of controls. It is our hope that, following these hearings, provisions will be added to provide for other important principles and judicial review. PRINCIPLES FOR REAUTHORIZATION PROCESS The chamber favors a number of changes in the act. Through experience since the enactment of the 1979 act, five important principles have emerged which reflect the problems that have arisen in the export control process. These principles relate to: First, sanctity of contract, Second, multilateral controls, Third, extraterritorial application, Fourth, advanced consultations, and Fifth, cost/benefit analysis. |