expanded East-West cooperation and defense spending reductions, while at the same time needing to guard against the remaining Soviet military threat.

Third, in contrast to the dramatic political changes in Europe and the improved East-West climate, significant and troubling challenges remain in other geopolitical areas, particularly a generally heightened potential for regional hostilities. Some of these regional problems—such as the recent crisis in the Persian Gulf—represent a direct threat to U.S. and international security; others threaten to spill over into broader international contexts. Many of these problems are driven or exacerbated by the proliferation of advanced munitions and dual use technologies related to nuclear, chemical, and biological weapons and to missile delivery systems.


The economic and technological challenges facing the United States have been widely analyzed for many years.2 As noted in Chapter 2, the following are among the most significant of these challenges.

  • The changing structure of the global economy. The revolution in information and telecommunications technologies has facilitated the development of integrated multinational corporations that operate in worldwide markets. Multinational firms now have a much broader range of choices regarding the siting of research and development (R&D) and manufacturing facilities. This broader field of opportunity has also led, in some cases, to a relative loss of capacity in the United States in key technology areas (e.g., D-RAM semiconductors) as manufacturers have moved their operations off shore, or in some cases have left the sector entirely. A second result has been a blurring of the specific national identity of technologies and multinational firms, thereby potentially raising additional complications from the standpoint of nationally based export controls.

  • The increasingly rapid global diffusion of technology. The search for new external markets, the siting of research and operating facilities abroad, and the growing strength and sophistication of technology development in other nations have accelerated the global diffusion of technology. Multinational companies constantly must transfer massive amounts of information to control and develop their international business. Moreover, technology transfer—frequently by license—to the host country also may be a condition of doing business. Such diffusion, however, also increases the difficulty of implementing effective export controls at the national level.

  • Declining U.S. technological and manufacturing preeminence. In recent years, as the unique postwar period of unchallenged U.S. economic dominance has further receded, there has been widespread concern about

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