Mr. PERLE. I am glad to hear you say that. I am confident that, working together with the subcommittee, we can fashion some proposals and some instruments that would enable us to strengthen the organization.

One proposal we have made in particular, that is a modest step that we have not yet succeeded in persuading our allies, and we continue to try, is that there ought to be a military subcommittee of Cocom, since, after all, it is the job of Cocom to come to a consensus as to what is militarily sensitive and what is not.

Yet virtually all of the Cocom representatives from the various countries are Foreign Service officers, usually, attached to the commercial section of their Foreign Service, and they may or may not have knowledge of high technology. It is pretty much hit or miss, and mostly, I must say, miss. So, we would urge the establishment of a military subcommittee.

Mr. Chairman, I would like to stop there, if I may. I realize time is short.

[Mr. Perle's prepared statement follows:]

PREPARED STATEMENT OF HON. RICHARD N. PERLE, ASSISTANT SECRETARY for INTERNATIONAL SECURITY POLICY, DEPARTment of DefeNSE

Mr. Chairman, members of the committee, I appreciate the opportunity to appear before the subcommittee today to discuss the role of the Department of Defense in implementing national security controls under the Export Administration Act.

As the subcommittee is aware, the problem of the transfer of significant military technology to the Soviet Union and Warsaw Pact is serious indeed.

Over the past 15 years, the Soviets have acquired from the West technology which has significantly contributed to their military build-up and improved the quality of their deployed hardware.

In certain applications, the Soviet bloc has narrowed its technology gap with the West from 10 years to within 2 years.

Western microelectronics and computer technology are two specific cases where the Soviets 10 years ago had no industry of their own. Yet, aware that NATO forces depend extensively on microelectronics and computers for everything from smart weapons to command and control, the Soviets sought and continue to seek to import the key technical and industrial elements to give them a similar capability.

Today, we are seeing the result of Soviet acquisition efforts. Soviet strategic and conventional weapons are using Western microelectronics and Western computer designs to enhance their performance.

To help counter this threat, the Department of Defense, in cooperation with other Federal agencies, over the past 2 years has undertaken major efforts at home and internationally to curb what until recently had been a virtual hemorrhage of strategic technology to the Soviet bloc countries.

As the subcommittee is aware, the problem of Soviet bloc use of strategic technology is complex and difficult. But, it is well within our reach to substantially limit Soviet penetration of our industrial system if we have the will to implement a comprehensive program, and we work hard to coordinate our own program with our allies and friends overseas.

The Export Control Program of this administration, therefore, has stressed three main elements:

First, we have sought to strengthen our domestic program by improving our efficiency, building up our analytical and information skills and tightening enforce

ment.

Second, we have sought to improve the International Technology Control Program which is centered in the International Coordinating Committee, or Cocom, which includes the NATO nations, less Iceland and Spain but including Japan, by strengthening controls over key technologies and recommending institutional changes to promote enforcement.

Third, we have acted to stem the hemorrhage of technology through conduits outside the Cocom system—namely through neutral and non-aligned nations, which are reexport points for moving western high technology equipment into the Soviet bloc.

At Cocom, we are seeking to create a new spirit and commitment from the organization's membership and provide policy direction and sensititvity to the threat.

In addition, we are working to strengthen the organization itself, and to make available to it the professional staff and infrastructure required to function effectively.

In the end, I believe we will be successful in strengthening the organization. Our partners more and more understand and share our commitment and our sentiment to improve Cocom overall.

One of our goals is to improve the efficiency, clarity, and predictability of our own domestic control program.

This should be particularly helful to business both here and abroad, as it will mean greater certainty as to what can and cannot be exported, faster turn-around on actual applications for export, and-most importantly of all-improved voluntary support for the control program because I believe a consensus will emerge on what is important, and why.

It should be clear to all that the export control program requires voluntarism by business and industry if it is going to be success in the end. A clear corollary is that government needs to streamline its activity and level with business and industry as much and possible. Our program certainly is moving in this direction. In stemming the hemorrhage of technology through conduits outside of the Cocom systemnamely neutral and non-aligned nations-we are seeking the cooperation of friendly countries in order to prevent the compromise of U.S. high technology. These undertakings are proving successful.

Each of the three component parts of our program involves substantial preparation and professional staff support. When we began the effort at the onset of this administration, the resources were insufficient given the immensity of the problem. For example, our enforcement effort was weak. Few inspectors were available to check outbound cargo from the harbors and air-fields of the United States.

Project Exodus of the U.S. Customs Service has begun to reverse the problem of outbound inspection. To give exodus a headstart this year. The defense department made available on a one-time basis $25 million. This action was approved by Congress. In its first years of operation, exodus has interdicted 1100 shipments valued at more than $71 million dollars. Some involve extremely sensitive equipment that would have gone to the Warsaw Pact.

I trust this brief statement will give the subcommittee an appreciation of the scope of our effort. Separately, I am providing replies to the specific questions you have asked.

In summary, let me say that I believe that we are now moving in an effective manner to stop the loss of advanced technology to the Soviet Union and Warsaw Pact. In the near term this will contribute to greater consistency and predictability in the administrative process and improvement of the underlying consensus required for the program to work well.

Over time, the impact of the program will be to limit the Soviet ability to match and countermeasure our defense effort. This will lead to the saving of billions of dollars in future defense costs.

Question: What office in the Department of Defense receives export license applications referred from the Department of Commerce? With which other offices is that office likely to consult in reaching a decision on an individual license application? What particular expertise do each of these consultative offices provide?

Answer: At present, an export license which comes from Commerce first goes to the office of Under Secretary of Defense for Research and Engineering and then is referred to the office of the Under Secretary of Defense for Policy, which provides a final defense reponse. In reaching a defense recommendation on an application, the case generally is referred to the respective services, the intelligence community and to DOD regional experts for evaluation.

Question: How many personnel positions in international security affairs and in policy involve full-time consideration of export license applications? How many involve part-time consideration? What is the amount of money authorized for these positions? Are any of these positions vacant at this time?

Answer: In giving the Under Secretary of Defense for policy the lead role in formulating, developing and issuing policy, DOD directive 2040.xx also gives policy the responsibility of handing the export license process. In that context, policy receives technical help from the office of the Under Secretary of Defense for Research and Engineering, which turns to the services and the intelligence community for additional assistance. The Office of the Secretary of Defense recently increased the number of positions in policy to handle export license applications and other responsibilities in strategic trade and munitions licesing consistent with the Export Ad

minstration Act and Arms Export Control Act. Hiring is now underway. $2 million was appropriated by Congress in fiscal year 1983 for research and staff. We are planning to add thirty-four full time staff positions.

Question: Please explain the roles of the Deputy Under Secretaries for international security affairs and for policy. What are the implications for their responsibilities under the Export Administration Act of the policy memorandum promulgated by former Deputy Secretary Carlucci (December 28, 1982)?

Answer: The office of the Assistant Secretary of Defense for International Security Policy makes all final defense recommendations on a particular export or policy, with the exception of China where the coordination of the office of the Assistant Secretary of Defense for International Affairs is required. Under the policy memorandum promulgated by former Deputy Secretary Carlucci (DOD directive 2040.xx), the Under Secretary of Defense for Policy (USD(P)) formulates, develops and issues policies relating to technology transfer control. In preparing policy guidance and coordinating overall DOD policy in this area, the USD(P) shall:

1. Represents DOD on an interagency basis:

2. Serve as the DOD point-of-contact for foreign governments, international agencies, other U.S. government departments, industry and other DOD components in policy matters.

Question: Please describe current activities with respect to the militarily criticial technologies list (MCTL), including a description and rationale for Under Secretary DeLauer's proposal for modification of the commodity control list (CCL) with respect to semiconductor goods and technology.

Answer: A significant effort was completed in 1982 to incorporate the MCTL in the U.S. proposals prepared for the current Cocom list review effort. The MTL program provided over 300 technical proposals in November 1981 to the interagency Technical Task Groups (TTG's) of the Cocom list review to attempt to capture on the multilateral Cocom list that keystone equipment, keystone materials, etc. on the MCTL that was identified in the MCTL program as not presently covered on the control list. There is still a need to include the MCTL "arrays of know how-how" into the U.S. export control regulations. DOD provided to the department of commerce and to industry on 10 September 1982 a first revision of the technical data regulation procedures (section 379 of the Export Administration regulations). We expect many changes before an agreed on policy is achieved.

The MCTL also is currently being used as supplementary information in the DOD license review process. OSD tasked DIA and asked the intelligence community to analyze and update foreign availability information for each critical technology on the MCTL. Although classified, this data will be put into the MCTL data base to help support timely, consistent and predictable license reviews.

Question: Please outline any defense department proposals for changes in multilateral controls which have been presented to Cocom. Have any of these proposals been adopted?

Answer: For the 1982 Cocom list review, the U.S. Government has submitted 18 new areas of control, 88 modifications for controls on existing items and 37 liberalizations of controls. Some of the criticial areas include: robotics, printed circuit boards, polysilicon, ceramics, space craft technology and computers. Although the first round of the list review ended February 23, 1983, a number of countries have not yet given their final position on the items. Cocom discussions are confidential. I can state that our Cocom allies recognize the need to tighten controls on certain items, and we are working closely with them to define the controls as specificially as possible.

Three items which were submitted prior to the list review have been adopted since the review began. The first is the broad control on technology for all the items on the Cocom list. The other two are the controls on superalloys and aluminum power used in rocket propellants.

Question: What progress have you made in identifying for decontrol some of the analytical instruments presently controlled under CCL 4529 B?

Answer: Defense has identified certain analytical equipment as candidates for decontrol under CCL 4529 B. These include chromatographs, spectrophotometers, ph meters, elemental analyzers and thermal analyzers. Commerce, of course, administers the export control program.

Question: How many U.S. export license applications were referred to Department of Defense in FY 82? How many Cocom applications? On what percentage of applications in each category did you reach a decision within 30 days? How many required longer than 60 days? At this moment, how many applications have been pending longer than 30 days? Longer than 60 days? What additional resources would you require to cut those processing times in half?

Answer: During FY 82 the Department of Defense received 1923 license applications from the Department of Commerce for national security review. The total number of Cocom applications received during this period was 1350. Cocom cases have different due dates depending upon the type, e.g., 18 days are allowed for "de minimus" cases, 30 to 45 days for certain computer cases, and "exception" cases do not have a fixed limit such as the statutory limit of 60 days for U.S. cases.

During the first half of FY 82, a defense decision was reached within 30 days on about 10 percent of the cases; during the last half of FY 82, this percentage averaged 42 percent. We are continuing to work to improved our responsiveness.

The status of commerce applications within defense awaiting review as of 18 February 1983 is as follows:

Recent changes in policy regarding the Soviet Union and Poland are creating an increase in the number of license applications submitted to defense. For example, defense received a total of 620 applications during December 1982 and January 1983. The defense technical transfer area and policy recently received authorization for an increase in permanent positions for case processors for export license applications. Once these personnel are on board and trained in case processing procedures, defense will be better prepared to reduce average case processing time, as well as quality of review.

In my opinion, there is no indisputable fixed number of personnel which can be specified to cut the processing time in half. This is due to a number of factors which affect the final decision on a given case. These include, but are not limited to:

(A) The completeness of the end-use statement, the technical documentation, and the foreign availability information.

(B) The amount of information available on the end-user.

(C) The availability within the proscribed destination of the technology or commodity, and

(D) The amount of time it takes to obtain DOD service and agency inputs, including those required from the field.

Question: How many delegations of authority to commerce for approval of certain exports without referral to the Defense Department has been made in the last 12 months? How many previous delegations of authority have been retracted?

Answer: During the last 12 months, defense granted the Department of Commerce one temporary two-month delegation of authority. This delegation was restricted to analytic instruments controlled under export commodity control number 4529B, which covers electronic test equipment under unilateral U.S. control. In 1978, there were 126 DOA's of which the Department of Commerce is actively implementing 13. A majority of the outstanding DOA's are general exceptions, or have been overcome by advances in technology and changes in the Cocom list. Defense is currently reviewing all the delegations of authority, many of which we feel are outdated because of change over time in export controls, technology and policy.

Mr. BONKER. Thank you, Mr. Perle, for your statement, and of course there will be questions from the panel as soon as we hear from Mr. Schneider, who is here today representing the Department of State.

STATEMENT OF HON. WILLIAM SCHNEIDER, JR., UNDER SECRETARY FOR SECURITY ASSISTANCE, SCIENCE AND TECHNOLOGY, DEPARTMENT OF STATE

Mr. SCHNEIDER. Thank you, Mr. Chairman.

It is a privilege to appear before this subcommittee today.

I, too, have a statement of encyclopedic length. With the subcommittee's permission, I would like to have it entered into the record, and I will provide a condensed statement for you now.

As part of your subcommittee's review of the Export Administration Act of 1979, you have asked me to outline State's responsibility under this act. I shall also describe some of our negotiations

with our allies to strengthen the multilateral system of national security export controls, known as Cocom. I am particularly pleased to have this opportunity, since the administration has undertaken a vigorous effort in working with our allies to reduce the transfer of militarily significant technology and equipment to the Soviet Union and the Warsaw Pact.

SOVIET TECHNOLOGY PIRACY

The U.S.S.R. has relied on Western high technology exports in its military buildup, and we know that Western technology has been a significant factor in the Soviet development of advanced missiles as well as the advancement of the industry that supports the Soviet war-making capability.

The Soviets obtain Western technology illegally through their intelligence services, using classical espionage, as illustrated by the recent spy cases in Germany and Italy. They also evade export controls through diversion retransfer, and dummy companies. One legal way technology is passed to the East is through a kind of buyback project in which Western companies contract with Eastern States to export factory equipment and the plans for building that plant on credit. It is estimated that these projects involved the exchange of some $10 billion between the East and the West in 1980. The West, in return for its exports, receives a substantial share of the products as part payment. An example of this is the Siberian gas pipeline in which pipeline equipment is being bought from the West, and fuel is sold to Eastern Europe upon completion of the pipeline. The Kama River Truck Plant was built with the help of U.S. companies using Western technology and U.S. export licenses. The plant has been used to supply trucks for the transport of Soviet troops and material in support of Soviet conventional military needs in Afghanistan.

Today, there continues to be a serious threat to our national security from Soviet technology piracy in which an increasing oneway stream of United States technology is moving to the Soviet Union. Nearly all new technology developments have direct or indirect military application. The critical importance of our technology loss may be emphasized by the example of the Soviet intercontinental-range missiles achieving improved accuracy through better gyroscope systems. The Soviet gyroscopes were developed using precision bearings produced with advanced grinding machines obtained from the West in the early 1970's. Other examples include: U.S.-developed laser optical mirrors with direct military application, which have been smuggled to the U.S.S.R. Advanced American computerized drafting equipment was diverted to the Soviets through a foreign corporation. The Soviets illegally acquired IBM 360 and 370 mainframe computers from the West in 1972. And we have noted, to our despair, that the Soviet RYAD computer series uses the same repair manuals as the IBM computers.

Soviet technological gains obtained through carefully crafted acquisition programs are providing them with: significant savings in time and money in their military research and development programs; rapid modernization of their defense industrial infrastructure; a closing of gaps between our weapons systems and theirs; the