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BALANCING
THE
NATIONAL
IN rEREsT
US. Naiior~ Security Export Controls
and Garbed Economy Compenhon
Panel on the Impact of National Security Controls
on International Technology Transfer
Committee on Science, Engineering, and Public Policy
National Academy of Sciences
National Academy of Engineering
Institute of Medicine
NATIONAL ACADEMY PRESS
Washington, D.C. 1987
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NATIONAL ACADEMY PRESS · 2101 Cons~dtudon Avenue, NVV · Washington, DC 20418
The National Academy of Sciences (NAS) is a private, self-perpetuating society of
distinguished scholars in scientific and engineering research, dedicated to the furtherance of
science and technology and their use for the general welfare. Under the authority of its
congressional charter of 1863, the Academy has a working mandate that calls upon it to
advise the federal government on scientific and technical matters. The Academy carries out
this mandate primarily through the National Research Council, which it jointly administers
with the National Academy of Engineering and the Institute of Medicine. Dr. Frank Press
is President of the NAS.
The National Academy of Engineering (NAE) was established in 1964, under the charter
of the NAS, as a parallel organization of distinguished engineers, autonomous in its
administration and in the selection of members, sharing with the NAS its responsibilities for
advising the federal government. Dr. Robert M. White is President of the NAE.
The Institute of Medicine (IOM) was chartered in 1970 by the National Academy of
Sciences to enlist distinguished members of appropriate professions in the examination of
policy matters pertaining to the health of the public. In this, the Institute acts under both the
Academy's 1863 congressional charter responsibility to be an adviser to the federal
government and its own initiative in identifying issues of medical care, research, and
education. Dr. Samuel O. Thier is President of the IOM.
The Committee on Science, Engineering, and Public Policy is a joint committee of the
National Academy of Sciences, the National Academy of Engineering, and the Institute of
Medicine. It includes members of the councils of all three bodies.
INTERNATIONAL STANDARD BOOK NUMBER 0-309-03738-7
LIBRARY OF CONGRESS CATALOG CARD NUMBER 87-60020
Copyright ~ 1987 by the National Academy of Sciences
No part of this book may be reproduced by any mechanical, photographic, or electronic
process, or in the form of a phonographic recording, nor may it be stored in a retrieval
system, transmitted, or otherwise copied for public or private use, without written
permission from the publisher, except for the purposes of official use by the United States
Government.
Printed in the United States of America
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Pane' on the Impact of National Security Controls on
International Technology Transfer
LEW ALLEN, JR. (Chairman), Vice President, California Institute of
Technology, and Director, Jet Propulsion Laboratory (former Chief
of Staff, U.S. Air Force, and member of the Joint Chiefs of Staff
[1978-19821; former Director, National Security Agency [1973-19771)
DANIEL BERG, President, Rensselaer Polytechnic Institute
THOMAS A. CHRISTIANSEN, Manager, International Trade Relations,
Hewlett-Packard Company; member of the Subcommittee on Export
Administration, President's Export Council
W. DALE COMPTON, Senior Fellow, National Academy of Engineering
(former Vice President of Research, Ford Motor Company)
RICHARD N. COOPER, Boas Professor of International Economics
Department of Economics, Harvard University (former Under
Secretary of State for Economic Affairs [1977-19811)
JOHN M. DEUTCH, Provost, Massachusetts Institute of Technology
(former Under Secretary, Department of Energy [1979-19801)
HERBERT M. DWIGHT, JR., Chairman and Chief Executive Officer,
Spectra-Physics, Inc.
ALEXANDER H. FLAX, President Emeritus, Institute for Defense
Analyses (former Assistant Secretary of the Air Force for Research
and Development [1963-19691; former Chief Scientist, U.S. Air Force
[1959-19611)
JOHN S. FOSTER, JR., Vice President, Science and Technology, TRW
Incorporated (former Director, Defense Research and Engineering,
Department of Defense [1965-19731; former Director, Lawrence
Livermore National Laboratory, and Associate Director, Lawrence
Berkeley National Laboratory [1961-19651)
FREDERICK W. CARRY, Vice President, Corporate Engineering and
Manufacturing, General Electric Company
MARY L. GOOD, President and Director of Research, UOP
Incorporated, Signal Research Incorporated; member, National
Science Board
RUTH L. GREENSTEIN, Vice President and Treasurer, Genex
Corporation (former Associate/Deputy General Counsel, National
Science Foundation [1981-19841)
B. R. INMAN, Chairman and Chief Executive Officer, Westmark
Systems, Inc. (former Director, National Security Agency
[1977-19811; former Deputy Director, Central Intelligence Agency
[1981-19831)
MELVIN R. LAIRD, Senior Counselor for National and International
. . .
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Affairs, Reader's Digest Association (former Counselor to the
President for Domestic Affairs [1973-19741; former Secretary of
Defense [1969-19731; former Member of Congress [1953-19691)
JOSHUA LEDERB ERG, President, Rockefeller University (Nobel
laureate [19581)
FRANKLIN A. LINDSAY, Chairman, Vectron, Inc.; Chairman, National
Bureau of Economic Research
JOHN L. McLUCAS, President and Chairman of the Board, Questech,
Inc. (former Executive Vice President and Chief Strategic Officer,
COMSAT; former Administrator, Federal Aviation Administration
[1975-19771; former Secretary of the Air Force [1972-19751)
RICHARD A. MESERVE, EsQ., Partner, Covington and Burling (former
legal counsel to the President's Science and Technology Adviser
[1977-19811)
G. WILLIAM MILLER, Chairman, G. William Miller and Company, Inc.
(former Chairman and Chief Executive Officer, Textron, Inc.; former
Chairman, Federal Reserve Board t1978-19791; former Secretary of
the Treasury [1979-19811)
LEIF H. OLSEN, Chairman, Leif H. Olsen Associates (former Chief
Economist, Citibank, Inc.)
RUDOLPH A. OSWALD, Director, Department of Economic Research,
AFL/CID; member, Advisory Committee on Trade Negotiations,
Office of the U.S. Special Trade Representative
Staff
MITCHEL B. WALLERSTEIN, Project Director and Associate
Executive Director, Office of International Affairs
SUSAN R. McCUTCHEN, Administrative Assistant
STEPHEN A. MERRILL, Senior Staff Consultant
STEPHEN B. GOULD, Staff Consultant
GEOFFREY M. HOLDRIDGE, Staff Consultant
LOUISA KOCH, Staff Consultant
DELIA E. STOEHR, Consultant
LEAH C. MAZADE, Editor
1V
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Committee on Science, Engineering, and Public Policy
GILBERT S. OMENN (Chairman), Dean, School of Public Health and
Community Medicine, University of Washington
H. NORMAN ABRAMSON, Executive Vice President, Southwest
Research Institute
FLOYD E. BLOOM, Director and Member, Division of Pre-Clinic
Neuroscience and Endocrinology, Scripps Clinic and Research
Foundation
W. DALE COMPTON, Senior Fellow, National Academy of Engineering
EMILIO Q. DADDARIO, Esq., Wilkes, Artis, Hendrick, and Lane
GERALD P. DINNEEN, Vice President, Science and Technology,
Honeywell, Inc.
RALPH E. GOMORY, Senior Vice President and Director of Research,
Thomas J. Watson Research Center
ZVI GRILICHES, Professor, Department of Economics, Harvard
University
ARTHUR KELMAN, Wisconsin Alumni Research Foundation, Senior
Research Professor of Plant Pathology and Bacteriology, Department
of Plant Pathology, University of Wisconsin
FRANCIS E. LOW, Institute Professor, Department of Physics,
Massachusetts Institute of Technology
EDWARD A. MASON, Vice President for Research, Amoco Corporation
JOHN D. ROBERTS, Gates and Crellin Laboratories of Chemistry,
California Institute of Technology
KENNETH J. RYAN, M.D., Kate Macy Ladd Professor of Obstetrics
and Gynecology, Harvard Medical School; Chairman, Department of
Obstetrics and Gynecology, Brigham and Women's Hospital
LEON T. SILVER, Professor of Geology, Division of Geological and
' Planetary Sciences, California Institute of Technology
HERBERT A. SIMON, Professor of Computer Science and Psychology,
Department of Psychology, Carnegie-Mellon University
Ex Officio
FRANK PRESS, President, National Academy of Sciences
ROBERT M. WHITE, President, National Academy of Engineering
SAMUEL O. THIER, President, Institute of Medicine
ALLAN R. HOFFMAN, Executive Director
BARBARA A. CANDLAND, Administrative Coordinator
JOANNA MASTANTUONO, Senior Secretary
v
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Sponsors
This project was undertaken with both public and private sector
support. The following agencies of the federal government provided
support for the study: the Department of Commerce, the Department of
Defense, the Department of Energy, the Department of State, the
National Aeronautics and Space Administration, and the National Sci-
ence Foundation. The following private organizations provided support
for the study: the American Association for the Advancement of Science,
the American Electronics Association, the American Geophysical Union,
the American Institute of Aeronautics and Astronautics, the American
Physical Society, the American Vacuum Society, the Armed Forces
Communications and Electronics Association, the Computer and Busi-
ness Equipment Manufacturers Association, the General Electric Com-
pany, the German Marshall Fund of the United States, the Institute of
Electrical and Electronics Engineers, the National Society of Professional
Engineers, the Optical Society of America, the Semiconductor Industry
Association, and the U.S.-Japan Friendship Commission.
The project also received support from the National Research Council
Fund, a pool of private, discretionary, nonfederal funds that is used to
support a program of Academy-initiated studies of national issues in
which science and technology figure significantly. The NRC Fund con-
sists of contributions from a consortium of private foundations including
the Carnegie Corporation of New York, the Charles E. Culpeper Foun-
dation, the William and Flora Hewlett Foundation, the John D. and
Catherine T. MacArthur Foundation, the Andrew W. Mellon Foundation,
the Rockefeller Foundation, and the Alfred P. Sloan Foundation; the
Academy Industry Program, which seeks annual contributions from
companies that are concerned with the health of U.S. science and
technology and with public policy issues with technological content; and
the National Academy of Sciences and the National Academy of Engi
neering endowments.
.
V1
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Preface
The United States in cooperation with its allies has imposed controls
since 1949 on exports to the Soviet bloc of commercial goods and
information that would be of significant value to Warsaw Pact military
systems. Since the late 1970s, there has been significantly increased
concern in the United States about Soviet success in acquiring and
applying this commercial Western technology, a concern that was trans-
lated into a vigorous effort to improve the effectiveness of national
security export controls. The Department of Defense spearheaded this
initiative, which has resulted in substantial strengthening of controls on
dual use technology (i.e., items with both commercial and military
application), primarily under the authority of the Export Administration
Act of 1979, as amended. These stricter controls, however, have caused
broad concern about unintended effects that may dampen the vigor of
U.S. research and technology development and unnecessarily impede
trade in high-technology goods.
In 1982 a panel of the National Academy complex (now known as the
Corson panel after its chairman Dale Corson) examined the effect of
national security export controls on the communication of basic scientific
research. The results of that study led to an executive branch policy
intended to minimize restraints on the vital free flow of scientific results
and research findings. During the ensuing period, representatives of
industry and research institutions in the United States expressed misgiv-
ings about the effect of export controls on the U.S. international compet-
itive position, and this national controversy also required an objective
· .
V11
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viii PREFACE
examination. As a result the leadership of the National Academy complex
decided in 1984 to organize a second panel to examine the effect of export
controls on commercial trade in high-technology goods and information
and on the vigor of U.S. high-technology industry.
The new panel recognized from the outset that Western military
security depends in part on the technology advantages of the West as
compared to the Soviet Union and that some restrictions on the flow of
technology of military importance are indeed necessary. Furthermore,
the panel was aware of the vital importance of maintaining the West's
technological advantage through continued technological progress. It also
took note of the fact that a 1976 study of the Defense Science Board
(known as the Bucy report) had provided much of the theoretical basis
from which to examine the current situation.
The panel found it appropriate to narrow and focus its efforts. Although
controls for foreign policy purposes, controls on transfer of nuclear
technology, and controls on arms transfer are all part of the total U.S.
export control policy, in accordance with our charge we have focused on
national security export controls (as specified by the Export Administra-
tion Act of 1979, as amended) imposed on dual use technology. More-
over, although certain countries other than the members of the Warsaw
Pact are affected by U.S. national security export controls, we have
focused primarily on issues relating to the Soviet Union and its Eastern
bloc allies due to their central importance to the problem. We also have
given particular attention to the role of friendly and neutral Free World
nations that are not members of CoCom (the Coordinating Committee on
Multilateral Export Controls), countries that may now or in the future be
sources of indigenous technology and potential channels of West-East
technology transfer.
The panel shares the concerns of many regarding the health of U.S.
high-technology industries and the effect on national security of declining
U.S. leadership in various sectors. We have, for example, taken note of
other recent studies that address the loss of manufacturing capability in
the semiconductor industry and the problems associated with defense
procurement. Our focus in this study and the overall effect of export
controls-does not minimize the importance of other measures needed to
retain and improve the vitality of high technology in the United States and
its contribution to U.S. military security.
Perhaps not surprisingly the panel found the central problem of this
study to be extraordinarily complex and initially difficult to grasp in its
totality. Moreover, we determined that reliable quantitative data regard-
ing the effectiveness of controls and the impact of controls on economic
development and trade continue to be very difficult to obtain. Never-
theless, at the conclusion of its efforts the panel was convinced that it had
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PREFACE iX
reviewed and considered sufficient information to justify its findings and
recommendations. It was unanimous in the adoption of these views.
It is clear that, for this complex problem, there are valid competing
interests to be weighed in considering the course of action that will be
most effective in enhancing U.S. national security. The panel hopes that
this report serves to identify and explain these important issues and that
our findings and recommendations will be useful to those who bear the
responsibility for formulating and implementing wise policy.
The panel is grateful for the assistance provided by the liaison repre-
sentatives of the various federal agencies and by the hundreds of
individuals and private organizations, both in the United States and
abroad, who cooperated in providing information for this study (see
Appendix G). We also wish to thank the professional staff, directed by
Mitchel Wallerstein, which so ably organized the panel's briefings and
foreign fact-finding missions and laboriously wrote and rewrote the many
preliminary drafts of this report. Finally, I personally wish to thank the
members of the panel for their dedicated service in this lengthy and
sometimes contentious effort.
LEW AEEEN, JR.
Chairman
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Contents
EXECUTIVE SUMMARY
Introduction, 2
The Technology Transfer Problem, 4
The Current National Security Export Control Regime, 7
Assessment of the Critical Issues, 8
Findings and Key Judgments of the Panel, 15
Recommendations of the Panel, 22
INTRODUCTION.............................
The Nature of the Problem, 28
Origins and Mandate of the Study, 34
Scope of the Panel's Work, 36
Focus of the Study, 37
Organization of the Report, 39
Notes, 39
2 EVIDENCE ON THE TECHNOLOGY TRANSFER
PROBLEM .............................
Introduction, 40
Intelligence Evidence on Soviet Technology Acquisition, 41
Espionage, 42
Diversions, 42
X1
. 28
.. 40
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Xl1 CONTENTS
Legal Sales, 44
The Significance of Various Channels of Loss, 45
Soviet Utilization of Acquired Western Technology, 45
The State of Soviet Science and Technology, 49
Implications of Intelligence Evidence, 51
Notes, 52
3 THE CHANGING GLOBAL ECONOMIC AND
TECHNOLOGICAL ENVIRONMENT .......
Changes in the International Marketplace, 54
Growing U.S. Interaction in the Global Economy, 56
The Challenge to U.S. High-Technology Leadership, 59
Notes, 68
4 THE DIMENSIONS OF NATIONAL SECURITY
EXPORT CONTROLS....................
Historical Background, 71
U.S. National Security Export Controls, 75
Administration of U.S. Controls, 93
Multilateral National Security Export Controls, 97
The Control Systems of Other Western Nations, 99
Notes, 101
AN ASSESSMENT OF U.S. NATIONAL SECURITY
EXPORT CONTROLS......................
Introduction, 103
Effectiveness of National Security Export Controls, 106
The Efficiency of Export Control Administration, 111
Competitive Effects of Controls, 116
Technical Data Controls, 126
Use of the Militarily Critical Technologies List, 128
The Policy Process and the Balancing of U.S. Interests, 129
Notes, 133
6 AN ASSESSMENT OF THE MULTILATERAL
EXPORT CONTROL SYSTEM ...........
Progress in CoCom, 136
CoCom Deficiencies, 137
U.S. Policy and International Cooperation, 144
Negotiations with Non-CoCom Free World Countries, 148
. 54
.. 70
· . .
. 103
. 135
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CONTENTS xiii
7 FINDINGS AND KEY JUDGMENTS OF THE PANEL . . 150
The Practical Basis for National Security Export Controls,
150
Considerations Influencing National Policy, 151
Soviet Technology Acquisition Efforts in the West, 154
Diffusion and Transfer of Technical Capability, 155
Foreign Availability and Foreign Control of Technology, 156
Effectiveness of the Multilateral Process, 158
Administration of U.S. National Security Export Control
Policies and Procedures, 160
RECOMMENDATIONS OF THE PANEL.
Preamble, 167
Recommendations, 168
Coda, 177
APPENDIXES
167
A. COSEPUP Charge to the Panel 181
B. Panel Foreign Fact-Finding Mission Reports 183
C. Operation and Effects of U.S. Export Licensing for
National Security Purposes 221
Stephen A. Merrill, Senior Staff Consultant
D. Estimate of Direct Economic Costs Associated with
U.S. National Security Controls
William F. Finan, Quick, Finan & Associates
254
E. Glossary 278
F. List of Acronyms 285
G. List of Briefers, Contributors, and Liaison Representatives . . . 288
H. Bibliography. ........................... 297
INDEX . . .
311
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