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CONTROL OF DUAL-USE TECHNOLOGIES: A BUSINESSMAN'S RECOMMENDATION FOR PRESERVING THE MILITARY AND ECONOMIC SECURITY OF THE UNITED STATES

J. D. Rittenhouse

Senior Vice President for Technology Programs

General Electric Company

INTRODUCTION

Perhaps what is most difficult to understand about the control of dual-use technologies is the relationship between U.S. government and the U.S. industrial base; yet it is this relationship (or the lack thereof) which will form much of our policy in this area. The following comments on the separateness of the U.S. government and industrial sectors are intended to describe what ''free market'' means in both the commercial and defense industrial base sectors. This separateness is different from other democratic free market countries and is certainly different from the background of our CIS colleagues.

This separateness can be brought into focus by characterizing the attitudes and environment of each business sector—commercial and defense.

Commercial Sector
  • Exists in a price-driven competitive environment.

  • Believes profit is a noble goal—the more the better. Profit is based on price competition, both domestically and internationally.

  • Hates regulation and interference by the government and feels regulation is directly impacting our international competitiveness.

  • Does not have a uniform or constant viewpoint. Competitiveness and antitrust laws block collective demands on government policy until impact has occurred (e.g., the semiconductor industry and automotive industries).

  • Feels constraints on export of dual-use technologies significantly impact our global competitiveness—puts economic security ahead of military security.



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Dual-Use Technologies and Export Administration in the Post-Cold War Era: Documents from a Joint Program of the National Academy of Sciences and the Russian Academy of Sciences CONTROL OF DUAL-USE TECHNOLOGIES: A BUSINESSMAN'S RECOMMENDATION FOR PRESERVING THE MILITARY AND ECONOMIC SECURITY OF THE UNITED STATES J. D. Rittenhouse Senior Vice President for Technology Programs General Electric Company INTRODUCTION Perhaps what is most difficult to understand about the control of dual-use technologies is the relationship between U.S. government and the U.S. industrial base; yet it is this relationship (or the lack thereof) which will form much of our policy in this area. The following comments on the separateness of the U.S. government and industrial sectors are intended to describe what ''free market'' means in both the commercial and defense industrial base sectors. This separateness is different from other democratic free market countries and is certainly different from the background of our CIS colleagues. This separateness can be brought into focus by characterizing the attitudes and environment of each business sector—commercial and defense. Commercial Sector Exists in a price-driven competitive environment. Believes profit is a noble goal—the more the better. Profit is based on price competition, both domestically and internationally. Hates regulation and interference by the government and feels regulation is directly impacting our international competitiveness. Does not have a uniform or constant viewpoint. Competitiveness and antitrust laws block collective demands on government policy until impact has occurred (e.g., the semiconductor industry and automotive industries). Feels constraints on export of dual-use technologies significantly impact our global competitiveness—puts economic security ahead of military security.

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Dual-Use Technologies and Export Administration in the Post-Cold War Era: Documents from a Joint Program of the National Academy of Sciences and the Russian Academy of Sciences Defense Sector Exists in a cost-driven competitive environment. Is constrained in profit by a large set of regulations. Profit is based on cost, not price, except in international sales. Reluctantly accepts regulation as a demand of the public, but feels the bureaucracy is out of control. Competitiveness dictated by law blocks collective demand for reform. Feels laws which restrict personnel movement from business to government sector have significantly impacted capability of DOD personnel. Has no consensus perspective on dual-use technology export policy. Finally, government participation in the economic condition of the U.S. has varied significantly. While regulation has grown, impacting detailed costs of business (1980-1990), at the same time deregulation (meaning more competition) of the communications industry has been a significant change, and our current executive branch has a hands off attitude (i.e, no industrial policy) which is at a peak right now. This is in contrast to the government participation during the pre World War II era. In the author's opinion, the CIS needs to understand that our current long term economic condition is fundamental to our attitude toward control (or non-control) of dual-use technologies, and on our attitude toward the role of government in our free market system. WHAT ARE DUAL-USE TECHNOLOGIES? As a first step toward recommendations concerning control of dual-use technologies, we need to understand which technologies will be most critical considering the most likely threats to the United States (the author believes these bear a strong resemblance to those facing the CIS); and which part of the industrial base (commercial or defense) is currently providing leadership in that technology area.

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Dual-Use Technologies and Export Administration in the Post-Cold War Era: Documents from a Joint Program of the National Academy of Sciences and the Russian Academy of Sciences To facilitate the discussion, technology areas are divided into three categories: First, those dual-use technology areas in which the commercial sector provides leadership. These include: Solid State Devices Electronic Components Chemical Biological Computers Software Second, those dual-use technology areas in which commercial and defense share leadership. These include: Jet Engines Satellites Nuclear Third. those technology areas which are not dual-use, but are peculiar to defense. These include: Stealth Submarines Reactive Armor Cannon Tubes The examples presented are not complete or exhaustive, nor are they intended to be. Exhaustive lists tend to generate the belief that we can control detailed areas intelligently on a case by case basis. What is needed, instead, is an easily understood policy that both protects what we need to protect while enabling global trade to flow freely to improve our economic situation and promotes global infrastructure to enhance long-term prospects for peace. Before discussing the technology examples given, we need to understand the threats we are most likely to face. Once again, we cannot be certain that we will address every possible threat, but we can relate these threats to two of the four foundations of the National Military Strategy of the United States, published in January, 1992.

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Dual-Use Technologies and Export Administration in the Post-Cold War Era: Documents from a Joint Program of the National Academy of Sciences and the Russian Academy of Sciences THE FOUNDATION OF U.S. DEFENSE STRATEGY Strategic Deterrence and Defense The receding threat of an all-out nuclear exchange between superpowers is being replaced by the threat of proliferation of weapons of mass destruction of property and/or life. These threats center on non-manned delivery vehicles (such as IRBM, ICBM, and cruise missiles) and their warheads (nuclear, biological, chemical, and conventional). Thus, the technologies of central concern are those enabling and enhancing vehicles and warheads, and technologies which enable defense against such threats. These include, for example, Solid State Electronics, Software, Exotic Materials, Chemical, Biological, Nuclear. Crisis Response This is our second defense foundation and could take two forms. MEDIUM-SCALE COOPERATIVE ENGAGEMENTS Here, medium-scale means something less than a Persian Gulf engagement, as it is unlikely the United States will be able to commit such resources in the future. Such an engagement would feature existing air, ground, and sea weapon systems and their upgraded and modernized derivatives. The technologies most important to this threat scenario are: Solid State Electronics Software Computers Exotic Materials These technologies are the ones most likely to upgrade existing weapon systems.

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Dual-Use Technologies and Export Administration in the Post-Cold War Era: Documents from a Joint Program of the National Academy of Sciences and the Russian Academy of Sciences UNILATERAL SMALL SCALE ACTION Here the weapons scenario would shift more toward unmanned strike vehicles—the objective being surgical strikes without the risk of American lives—in an attempt to bring swirl resolution to the problem. Such an action would be technology dominated. Those most important would be: Solid State Devices Software Computers Exotic Materials Forward presence and reconstitution are the remaining two foundations of our defense policy. Reconstitution, in a technological sense, has more to do with how to preserve and improve manufacturing and engineering processes central to threat profiles larger than those anticipated in this paper. Forward presence is covered in the medium scale and small scale actions considered above. We can now start to make some overall observation about which dual-use technologies are critical to defense. Included in our list are: Solid State Devices Computers Software Electronic Components Chemical Biological Exotic Materials Jet Engines Nuclear. It is the author's contention that technological leadership is dominated by the commercial sector for 1-6; shared between defense and commercial sectors for 7-9. As the author has more experience with the first four technologies, these will be used to explain the fundamentals which cause commercial leadership in them. First, all four are dominated by use in global scale products or processes, such as television, appliances, games, and automobiles. It is necessary to amortize technology expense on a broad base to remain competitive. The defense industry, even in the United States, simply does not have the demand to support independent defense technologies in these areas.

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Dual-Use Technologies and Export Administration in the Post-Cold War Era: Documents from a Joint Program of the National Academy of Sciences and the Russian Academy of Sciences Second, leadership is clearly commercial: Software operating systems are now commercially dominated. Solid state material and manufacturing processes must enjoy commercial scale to provide cost/yield effectiveness. The U.S. government dictates defense solid state processes must be founded on a commercial process. Computer chip sets must be commercially based to match operating systems and manufacturing (solid state) processes. Other than specialty items, there is little defense electronic component capability in the United States The areas where technology leadership is produced by both the commercial and defense sectors present unique difficulties. In jet engines, for example, those areas impacted by threat and speed have historically come from the defense sector. Those areas impacted by efficiency and life have historically been impacted by the commercial sector. With fewer engine requirements in the military, the drift is toward the commercial sector, although this technology, unlike computers and electronics, is relatively long-lived. THE U.S. DEFENSE INDUSTRIAL BASE As additional background, the nature of the U.S. defense industry must be discussed. Understanding its organization, attitudes, and how it does research and development helps to understand how technology improvement occurs, and the impact of dual-use control schemes on various companies. There are three forms of suppliers to the U.S. Department of Defense. Pure Defense Companies These companies, in the main, do only defense business. Examples are Lockheed, General Dynamics and E-Systems. They reflect their customer (the Department of Defense) in organizational structure, and their research and development is funded solely by IRAD funds which are negotiated with the government (usually on an annual basis). These funds are partly profit and partly allowable costs of doing business. For any given company, their range is relatively limited (vs. that of a commercial counterpart) and speaks to the unlikeliness of defense technology breakthroughs driven by IRAD funds alone.

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Dual-Use Technologies and Export Administration in the Post-Cold War Era: Documents from a Joint Program of the National Academy of Sciences and the Russian Academy of Sciences Nevertheless, these firms provide significant advantages over government arsenals because they are subject to a competitive environment and operate free from direct control of the government bureaucracy. Companies Engaged in Both Commercial and Defense Work Examples here are General Electric (GE), Westinghouse and Pratt and Whitney. Using GE as an example serves to illustrate various forms which exist here (GE regularly ranks in the top five defense contractors). The first thing to notice is that, by and large, the defense business is physically isolated from the commercial business. This is stimulated by bureaucratic regulation, perceived inefficiencies, and just plain differences in product. Notable exceptions are satellites and jet engines, where commercial and defense are physically collocated in the same buildings (while being organizationally and project isolated). Nevertheless, in these few instances there will be person-to-person transfer of technology unless a scheme is in place to guard against it (GE has one). Finally, GE's central research lab is organized to split defense work separately, primarily to ensure compliance with federal financial reporting regulation. Companies Which Supply Commercial Off the Shelf Products to DOD In general, these companies accept no DOD research money and supply products on an off-the-shelf basis. Nevertheless, there are federal regulations which require that all prices to the government be no more than that given to the best commercial customer. The CIS should not be misled by general media insinuation of a military industrial complex. The current relationship between defense industry suppliers and the government is at a peak of contentiousness, and can best be described as a "love-hate" situation. Overlaying this structure of companies is an environment of competition which was formalized in the Competition in Contracting Act of 1985. Our government has not yet decided upon the implications of a much lower defense budget, which undoubtedly will create a less competitive environment. Now having discussed the most likely threats, the critical technologies needed to defend against those threats, and the fundamental structure of the U.S. defense industry, we can turn to some ideas on control of dual-use technologies. Before making specific recommendations, the author wishes to express some deep-seated convictions in this matter. There can be no control over these matters without some form of anti-proliferation treaty which includes retaliation against offenders.

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Dual-Use Technologies and Export Administration in the Post-Cold War Era: Documents from a Joint Program of the National Academy of Sciences and the Russian Academy of Sciences Proliferation of the enabling technologies will happen—or they will be replaced with technologies which ripen in the commercial sector. A fundamental choice for the United States is to weigh strict technology controls vs. the debilitating impact this will have on our commercial global trade position. Choosing is a difficult judgment call. But, if we recognize both global peace as our long-term objective—and the inevitability of technology transfer, then the strongest position we can take is to: enable a dominant U.S. position in world trade; be the leader in an anti-proliferation treaty (that has retaliatory measures); and slow the transfer of the technology as applied to defense systems, enabling U.S. technological long-term leadership in these areas. My recommendations and supporting discussion are as follows: Control the technology application as reduced to practice in defense. Use security classification systems as the means of information and export control. This results in controlling the export of the application of the technology. The time cycle of application of technology in defense is longer than the cycle time of new technology. Security systems are in place and, by and large, work. Without the Department of Defense as the leading provider of technology—it is the application of commercial technology which matters. allow an "out" for those few cases of export of defense technology in a commercial product (e.g., satellites) by specific application to an oversight board (not just DOD). Dismantle COCOM and Replace it with a Treaty with Retaliatory Measures Specified. We must accept that we cannot control proliferation by bureaucratic means, nor slow the pace of commercial technology around the world. Continue Strict Controls on the Resale of Previously Developed Weapons and Systems to Third Party Countries. No sale should be made without agreement on accountability of those systems supplied, including spares. In some cases this may cause the loss of a sale by U.S. companies. We should be prepared to stand by the basic principle of accountability.