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OCR for page 150
7
Findings and Key Judgments
of the Pane!
Based on the research initiatives and deliberations undertaken in pursuit of
its charge, the panel reached unanimous agreement on a series of principal
findings and key judgments. These are grouped below under seven major
headings: (1) the practical basis for national security export controls; (2)
considerations influencing national policy; (3) Soviet technology acquisi-
tion efforts in the West; (4) diffusion and transfer of technical capability;
(5) foreign availability and foreign control of technology; (6) the effective-
ness of multilateral procedures for national security export controls; and
(7) administration of U.S. national security export control policies and
procedures. These findings and judgments are reflected in turn in the
recommendations that appear in the final chapter of this report.
THE PRACTICAL BASIS FOR NATIONAL SECURITY EXPORT
CONTROLS
The fundamental objective of the national security export control
regime maintained by CoCom is to deny-or at least to delay- the Soviet
Union and its Warsaw Pact allies access to state-of-the-art Western
technology that would permit them to narrow the existing gap in military
systems. Yet, there are no well-defined criteria that can be used to
determine whether a given technology will enhance significantly the
Soviet military capability. For example, many technologies for which the
military application is not self-evident can contribute to improving the
quantity and quality of military goods. But many of these technologies
150
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FINDINGS AND KEY JUDGMENTS OF THE PANEL 151
also can be used for enhancing production in civilian sectors of the
economy. Some observers see development of the civilian sector in the
Soviet Union as offering long-run hope for ameliorating the Soviet threat
to Western society. Others believe, however, that enhancing even civilian
production will indirectly enhance Soviet military capability by relieving
pressure on the general economy.
Such differing assumptions and viewpoints inevitably give rise to
divergent judgments, divergent even on the extent to which a given
technology can enhance directly the military capability of the Soviet
Union and its allies. Without well-defined, agreed-upon criteria, it is
conceptually impossible to draw a definitive line above which technology
is critical and below which it is not-either for military capability or for
industrial productivity. But for an export control system to be operation-
ally effective, such a line must be drawn always recognizing that its
location remains a matter of judgment. Determining the precise location
of the line should be governed by the underlying objective of making the
system effective in actually denying specific technology to the Soviet
bloc. That in turn requires at a minimum a system that has the cooper-
ation of all technologically advanced countries in the Free World and one
that is comprehensible to the technologically advanced firms whose
cooperation is essential to make the system work.
Thus, adopting, as a basis for national security export controls, the policy
objective of constraining exports of Western technology that could have a
significant impact on Soviet bloc military capabilities is problematic because
it offers no precise identifiable threshold or definition of military criticality.
Without more precision, policy implementation must depend on the world
view of the decisionmaker. One individual might try to restrict only items
destined directly for military systems; another might also want to restrict
such items as numerically controlled production lines-no matter how
benign the output-because manufacturing capability is important to
military production. Yet another might want to restrict sales of subsidized
grain because the Soviet resources freed in the process could be used to
further military objectives. This conceptual vagueness can be surmounted
in practice by establishing a definition that permits effective and practical
implementation with our allies. In a practical sense this means restricting
controls to technologies that are easily identified with military uses.
CONSIDERATIONS INFLUENCING NATIONAL POLICY
1. Technology Lead Is Vital to Western Security and Must Be Main-
tained
Western security depends on the maintenance of its technology
lead in military systems over potential adversaries. This lead can be
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152 BALANCING THE NATIONAL INTEREST
sustained only through a dual policy of promoting a vigorous
domestic technological base and impeding the outward flow to the
Warsaw Pact of technologies useful in military systems. Pursuit of
this strategy is based on a recognition that maintaining the technol-
ogy lead of the West depends on continued Western technological
progress. Such progress in turn can be ensured only through active
and full exchange of technical information, both among scientists
and engineers within the United States and among the Western
countries, and by maintaining healthy Western economies. The
panel recognizes that, while continuing to out innovate potential
adversaries, it is also necessary for the United States and its allies to
develop more rapid and efficient military R&D and procurement
processes-as recommended in the recent report of the President's
Blue Ribbon Commission on Defense Management (the Packard
commission), A Quest for Excellence: Final Report to the President.
2. Export Competitiveness Is Essential to the Health of the U.S. Domestic
Economy
Export markets have become increasingly vital to the U.S.
domestic economy. Exports now represent a significant and growing
percentage of total sales in a number of key industrial sectors (the
portion of U.S. manufactured goods that were exported rose from 9
percent in 1960 to 25 percent in 1980 before declining to 18 percent
in 19851; and they are especially critical to the success of high-
technology enterprises (the high-technology sector accounted for 42
percent of manufactured exports in 19851. In some industries,
remaining competitive in world markets is essential to maintaining
their share of the domestic market because foreign competitors that
dominate the international market may in some cases enjoy econo-
mies of scale not available to U.S. producers limited to domestic
sales. Larger volumes of production result in lower average unit
costs and also allow research and development expenditures to be
amortized over a higher sales volume. Ultimately, these scale
economies enable the transnational firm to develop superior prod-
ucts, reduce manufacturing costs, and gain worldwide market share.
These realities are not yet fully reflected in the policies underlying
current U.S. national security export controls.
3. The Scope of Current U.S. National Security Export Controls Under-
mines Their Electiveness
U.S. national security export controls are not generally perceived
as rational, credible, and predictable by many of the nations and
commercial interests whose active cooperation is required for an
effective system. The panel also concurs with this judgment. The
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FINDINGS AND KEY JUDGMENTS OF THE PANEL 153
scope of current U.S. national security export controls encompasses
too many products and technologies to be administered effectively. In
particular, the U.S. government has not provided a justification for the
continued control of low-level technologies (e.g., some classes of
memory chips) traded outside the Communist bloc, technologies that
may be of marginal military significance and that in some cases are
available worldwide with little or no restriction. The panel requested
but did not receive information from the Department of Defense on the
military significance of such technologies; it therefore was unable to
evaluate the rationale for control of low-level items. However, during
its two foreign fact-finding missions (see Appendix B), the panel did
determine that many low-level products restricted by the United States
are in fact available in other countries with little or no restriction.
4. U.S. National Security Export Controls Impede the Export Sales of
U.S. Companies
National security export controls impede the ability of U.S.
companies to compete in world markets. There is limited but specific
evidence that export controls have negatively affected U.S. export-
ers in the following ways:
· export sales are lost because of delays in the licensing process or
are foregone because of uncertainty as to whether a license will be
approved;
· U.S. producers, especially small- to medium-sized firms, are
deterred from exporting by the complexities and delays of the
control regime; and
· foreign customers are discouraged from relying on U.S. suppliers
due to uncertainties about future license approvals, follow-on
service, spare parts and components, and possible reexport con-
straints, choosing instead to seek more dependable non-U.S.
sources. Once changes in buying preferences occur, large invest-
ments of time and effort may be required to reverse them.
5. Pragmatic Control Lists Must Be Technically Sound, Narrowly Fo-
cused, and Coordinated Multilaterally
The control criteria developed in 1976 as part of the report of the
Defense Science Board task force (i.e., the Bucy report), although
theoretically sound, have not always proven useful to the implemen-
tation of national security export controls. After extensive deliber-
ation the panel abandoned its efforts to develop an alternative
approach. The considerations that must govern control decisions
make it difficult to achieve a comprehensive solution within a simple
set of criteria. In the panel's view, the preparation of the control lists
must be a dynamic process that takes into account advice provided by
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~54 BALANCING THE NATIONAL INTEREST
technical advisory groups and that is constrained by the need to be
clear, to focus control efforts more narrowly on fewer items, and to
coordinate U.S. action more closely with that of our CoCom allies.
6. The Extraterritorial Aspects of U.S. Controls Engender Mistrust and
Weaken Allied Unity
The cohesiveness of military alliances is important to Western
security and depends on a high level of cooperation and coordination
among the participating nations. Several elements of U.S. national
security export controls, especially the requirement for reexport
authorization, are having an increasingly corrosive effect on rela-
tions with the NATO allies and on the close bilateral relations that
exist with Japan and certain other friendly countries. These controls
are now viewed abroad as a signal of U.S. mistrust of the will and
capacity of allies and other friendly countries to control the flow of
sensitive technology to the Soviet bloc. This atmosphere of mistrust
provides the Soviets with opportunities to take advantage of differ-
ences among the allies over export control issues that is, to use this
divisive issue as a "wedge" between the United States and its allies.
SOVIET TECHNOLOGY ACQUISITION EFFORTS IN THE WEST
1. Available Evidence on Soviet Technology Acquisition Efforts Rein-
forces the Need for Effective Multilateral Export Controls
The panel reviewed a substantial body of evidence-both classi-
fied and unclassified-that reveals a large and aggressive Soviet
effort to target and acquire Western dual use technology through
espionage, diversions, and to a lesser degree legitimate trade. There
is limited but specific evidence on the means by which Soviet
acquisitions are accomplished; there is also evidence to support the
conclusion that such acquisitions have in some cases played an
important role in upgrading or modernizing Soviet military systems.
Effective, internationally coordinated export controls are necessary
to counter the use of diversions and legitimate trade for such
purposes. However, export controls are not a means for controlling
espionage, which accounts for a high proportion of the successful
and significant Soviet technology acquisition efforts. Thus, export
controls must be viewed as one component in a more comprehensive
program for controlling technology losses.
2. Despite Systemic Difficulties, Soviet Technical Capabilities Have Suc-
cessfully Supported the Military Objectives of the USSR
The Soviet system does not enjoy the benefits derived from the
robust commercial sector found in the West. This places the Soviets
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FINDINGS AND KEY JUDGMENTS OF THE PANEL 155
at a fundamental disadvantage vis-a-vis the West in the promotion of
technological innovation. Nevertheless, the Soviets have demon-
strated an effective technical capability to meet their military objec-
tives, which has been achieved by prioritizing the allocation of
resources and key people to military R&D projects and to programs
devoted to the acquisition of foreign technology and its incorpora-
tion into military systems.
DIFFUSION AND TRANSFER OF TECHNICAL CAPABILITY
1. Wide Global Diffusion of Advanced Technology Necessitates a Fully
Multilateral Approach to Controls
Advanced technology has diffused widely throughout the indus-
trialized countries and is becoming increasingly available in some of
the more developed newly industrializing countries (NICs). As a
result, U.S. control policies can no longer be based on the assump-
tion that the United States holds a monopoly on nearly all dual use
technologies essential to the most advanced weapons systems. The
United States now must have the cooperation of other technologi-
cally advanced countries to succeed in blocking Soviet acquisition
efforts. National security export control efforts cannot succeed
unless two conditions are met: (1) there is an effective CoCom
process in which the other major CoCom countries accept respon-
sibility for regulating their exports (including reexports from their
territory) of CoCom-controlled goods and technology to third coun-
tries; and (2) the more advanced NICs adopt CoCom-like standards
for their own indigenous exports.
2. Controls on the Employment of Foreign Nationals in the U.S. R&D
Infrastructure Must Be Used Selectively and Sparingly
The movement of technical personnel between countries is an-
other means of diffusing technology. Foreign nationals now play a
significant role in U.S. domestic R&D activities as well as in the
laboratories of U.S. foreign subsidiaries. Such individuals contrib-
ute significantly to U.S. technological innovation and hence promote
the national interest. Efforts to use existing legislative authority to
restrict technical exchanges and more specifically to limit the full
participation of foreign citizens in the U.S. R&D community should
therefore be used sparingly. It is particularly important that such
efforts distinguish, as appropriate, between citizens of nations to
whom exports are proscribed and those of all other nations. They
should also reflect the varying levels of sensitivity of the specific
facilities or activities in question. It would be especially damaging to
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156 BALANCING THE NATIONAL INTEREST
U.S. interests both at home and abroad if high-technology industries
were prohibited from employing, in unclassified dual use areas, tal-
ented people from other countries. Similarly, in the panel's view,
increased barriers based on citizenship to easy exchange among
employees of multinational firms would be a major source of concern
and could well slow the pace of U.S. technological innovation.
FOREIGN AVAILABILITY AND FOREIGN CONTROL OF
TECHNOLOGY
1. The Congressional Mandate for Decontrol Based on Foreign Avail-
ability Is Not Being Fulfilled
The panel finds that the foreign availability provisions of the law
are not being effectively implemented. The Export Administration
Amendments Act of 1985 requires the Commerce Department to
remove (i.e., decontrol) an item from the U.S. Control List once it
has been determined to be available abroad beyond the control of
CoCom and if it has been impossible, within a period of 18 months,
to eliminate or restrict its foreign availability. Industry had expected
that foreign availability determinations would open a number of
markets that are currently inaccessible because of concerns about
unwanted technology transfer. But in the 4 years that the Depart-
ment of Commerce's Office of Foreign Availability and its predeces-
sor have been in existence, there have been only 3 positive foreign
availability findings (out of 20 assessments by the office) leading to
preliminary decontrol decisions. Thus, as currently administered the
foreign availability program has had virtually no impact on the
objective of achieving decontrol.
The panel therefore finds that the lack of action on these foreign
availability determinations is inconsistent with the provisions of the
Export Administration Act of 1979, as amended. This may be
attributable in some measure to the fact that no time constraints are
specified in the legislation for the government processing of foreign
availability claims (see the discussion in Chapter 51. Substantive
disagreements between the Departments of Commerce and Defense,
both over the evidence of and detailed criteria for foreign availability
determinations and over the strategic importance of maintaining con-
trol over particular items, have thwarted decisive action. Although the
Department of Defense has a legitimate role to play in providing
technical input to the foreign availability process, it has acquired de
facto veto authority over Commerce Department foreign availability
determinations with which it does not agree-a role not prescribed
within the provisions of the Export Administration Act.
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FINDINGS AND KEY JUDGMENTS OF THE PANEL 157
In those cases in which foreign availability of U.S.-controlled items
exists, U.S. industry is unfairly placed at a competitive disadvantage
with respect to firms of other countries because U.S. sales are
constrained by export controls, whereas its competitors' sales are not.
During the often lengthy delays (as much as 2 years or longer in some
cases) that occur while the U.S. government considers foreign avail-
ability petitions by industry, foreign sales may be hampered. This can
lead to the erosion of competitive market advantages previously
enjoyed by U.S. industry and in some cases to the permanent loss of
markets.
2. Control of "Technological Commodities" Is Impractical
The control of goods for which the volume of manufacture is so
large and the scope of marketing and usage so wide that they have
become "technological commodities" (e.g., some classes of-per-
sonal computers and memory chips) is not practical. The capability
to develop and mass-produce products embodying advanced tech-
nologies is no longer unique to the CoCom countries and will
become even less so in the years to come so that control at the
source may not always be feasible. And even within CoCom the
sheer volume and geographic distribution of daily commercial trans-
actions and warehousing of such products make control efforts
impracticable. Thus, given the volume in which technological com-
modities are produced and the growing number of entrepot points
that are unrestrained by the CoCom rules, decontrol to all Free
World destinations is in some cases the only appropriate solution.
3. Bilateral Agreements with Free World Non-CoCom Countries Must
Protect All CoCom-Origin Technology and Control Similar Indige
nously Produced Goods
The United States, with the support of CoCom, has achieved
some success in pursuing bilateral agreements with friendly non-
CoCom countries as part of the CoCom "third country initiative,"
which is designed to obtain cooperation in protecting CoCom-
controlled items. Although awarding "CoCom-like status" to coop-
erating countries is in principle a desirable approach, agreements
that in practice restrict only the reexport of U.S.-origin goods and
technology and do not restrict similar items produced indigenously
or obtained from other CoCom sources unfairly disadvantage U.S.
companies in international trade without achieving the intended
export control objective. Unless these agreements with non-CoCom
countries restrict the export of technology from all CoCom sources,
as well as that produced indigenously by non-CoCom countries,
they will not promote the electiveness of the CoCom system.
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158 BALANCING THE NATIONAL INTEREST
4. Other CoCom Countries Must Be More Vigilant in Preventing Diver-
sions of Both CoCom and Indigenously Produced Technology
For the CoCom system to be effective, all CoCom countries must
control the export of their indigenous technology with equal vigor.
Currently, some members of CoCom could substantially improve
their efforts to prevent diversions of CoCom-origin products and
technology exported to third countries. Although compliance with
U.S. reexport controls is not likely to become politically acceptable
in most CoCom countries, some compromise solution must be
reached. At a minimum, CoCom countries should be encouraged to
undertake more rigorous enforcement of prelicense and postship-
ment checks and better screening of license applications against lists
of known or suspected diverters.
5. The Extraterritorial Reach of U.S. Controls Damages Allied Relations
and Disadvantages U.S. Exporters
As the panel learned directly in its European and Asian study
missions, the extraterritorial reach of U.S. reexport controls is
anathema to most U.S. trading partners. Most foreign countries do
not accept that the United States has jurisdiction over the actions of
non-U.S. citizens outside the territory of the United States, and they
view assertions of this jurisdiction as clear violations of their
national sovereignty and of accepted principles of international law.
Moreover, data from the Department of Commerce suggest that in
fact compliance with U.S. reexport control requirements by foreign
citizens is exceedingly poor. These controls are seen by our allies as
reflecting mistrust of their capacity to further the West's common
interest in preventing the diversion of sensitive products from their
territory to the Soviet bloc.
The panel finds that U.S. reexport controls work primarily to the
disadvantage of U.S. companies because they provide incentives for
foreign companies to seek non-U.S. sources of supply. Reexport
controls typically present thorny legal issues, are ineffective, and have
a corrosive effect on the Western alliance. In light of these facts,
substantial alteration of U.S. reexport control policy is warranted.
EFFECTIVENESS OF THE MULTILATERAL PROCESS
1. The United States Must Clearly Distinguish Foreign Policy Export
Controls from National Security Export Controls
There is a substantial consensus-both domestic and interna-
tional-on the need for more narrowly defined national security
export controls. There is much less agreement on the appropriate
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FINDINGS AND KEY JUDGMENTS OF THE PANEL 159
ness of trade restrictions for foreign policy reasons and even less on
the specific foreign policy objectives that would warrant restrictions.
To the extent that the United States fails to distinguish clearly
between national security and foreign policy export control objec-
tives, allied cooperation in the national security export control
regime is undermined.
2. The Impact of Controls on Advantageous Scientific Communication
and Technology Transfer Within Western Alliances Must Be Minimized
Although it is essential for the United States to limit militarily
significant transfers from allied countries to the Soviet bloc, continued
open scientific communication and trade within the West are equally
important to maintaining the Western lead over the Soviet Union in
science and technology. Therefore, U.S. policy should have a twofold
objective: to facilitate mutually advantageous scientific communication
and technology transfer within its alliances and to limit militarily
significant transfers from the allied countries to the Soviet bloc.
3. The CoCom Countries Should Take Specific Steps to Bolster the
Efficiency and Electiveness of Multilateral Controls
The persistent efforts of the United States over the past 5 years to
strengthen CoCom and improve its operational efficiency and effec-
tiveness have produced positive results. Further efforts, however,
will be required on the part of all participating countries to bring
about greater harmonization of national policies and to work toward
a more rational and fully multilateral-system of national security
export controls. Among the most important issues now facing
CoCom are: (1) reduction in the overall scope of the International
List to improve its credibility and facilitate its effective enforcement,
(2) modification of the procedures employed for decontrolling items
on the International List, and (3) greater transparency in CoCom
decision making to reduce private sector uncertainty in international
business decisions.
4. The CoCom Process Would Benefit If All Country Delegations Had
Balanced Economic and Defense Representation
The U.S. delegation to CoCom includes a significant contingent
from the Department of Defense, but most other CoCom members
are represented at CoCom meetings principally by their economic
and trade ministries. The panel finds that a balance of economic and
defense representation on all the CoCom delegations would enhance
CoCom unity and the usefulness of the CoCom process, in part by
helping to prioritize and resolve conflicts between competing eco-
nomic and military objectives. On the other hand, the panel also
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160 BALANCING THE NATIONAL INTEREST
finds that the Department of State has failed to exercise leadership
within the U.S. delegation to CoCom, sometimes permitting other
agencies to overstep the bounds of their advisory role.
5. Foreign Perceptions of U.S. Commercial Advantage Derived from
Controls Impede Multilateral Cooperation
There is a widely held view in Europe and the Far East that the
United States uses its national security controls to afford commer-
cial advantage to U.S. companies. Upon investigation, the panel
found no substantive evidence to support this view. On the contrary,
the evidence suggests that U.S. trade interests are harmed by these
constraints. Nevertheless, the existence of such perceptions abroad
makes it more difficult to gain effective multilateral cooperation on
national security export controls.
6. Unilateral Controls Are of Limited Efficacy and May Undermine
Allied Cooperation
The imposition by the United States of unilateral national security
export controls for items of dual use technology can be justified only
as a stopgap measure pending negotiations for the imposition of
multilateral controls or in rare cases in which the United States
determines that critical national security concerns are at stake and
unilateral restrictions are required. It must be recognized, however,
that except when used as a temporary measure until consensus can
be achieved within CoCom, the application of unilateral U.S. export
controls undermines the incentive of the allies to develop a sound
basis for multilateral control. And it is only through multilateral
regulation that an effective export control system can be achieved.
ADMINISTRATION OF U.S. NATIONAL SECURITY EXPORT
CONTROL POLICIES AND PROCEDURES
1. The Lack of High-Level Oversight and Direction Reduces the Effec-
tiveness of U.S. Controls
The management of national security export controls within the
U.S. government involves a fundamental overlap of jurisdiction
among the three principal line agencies: the Departments of Com-
merce, Defense, and State. The administrative structures estab-
lished by the executive branch have not proven effective in
resolving in a coherent and timely fashion the frequent policy
differences that occur among these agencies on matters relating to
national security export controls. The policy vacuum created by
the lack of higher-level oversight and direction results in unclear
and sometimes conflicting policies, long delays in reaching closure,
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FINDINGS AND KEY JUDGMENTS OF THE PANEL ~ 6 ~
uncertain lines of authority, and underutilization of information-
sharing capacity.
2. Unequal Effort by and Resources of the Three Principal Line
Agencies Have Led to Conflict, Confusion, and Unbalanced Policy
The Department of Defense's determined efforts to reinvigorate
the national security export control regime have been useful in
raising the general level of awareness of the need for national
security export controls among government agencies, high-technol-
ogy industry, the governments of friendly countries, and world
public opinion. But the aggressiveness with which these matters
have been pursued also has had its costs. The exclusive DoD focus
on tightening export controls without balanced input from other
agencies concerning the possible economic and long-term national
security consequences has resulted in a failure to bring the objec-
tives of military security and economic vitality into balance. As a
result, conflicts have arisen among the responsible agencies over
the control and direction of U.S. export control policy; industry
has been confused and alarmed by present and contemplated policy
changes; and allies have become annoyed and in some cases have
misunderstood the application and intent of U.S. policy.
The increasingly active role of the Department of Defense in this
area in recent years also has led to an imbalance in the distribution
of government effort and resources with regard to the implemen-
tation of national security export controls. The Department of
Defense has upgraded its capabilities by creating a new dedicated
agency that is able to devote considerable manpower and financial
resources to analytical activities and case review. Despite some
recent reorganization, neither of the other two major concerned
agencies the Department of Commerce and the Department of
State has been able to implement equally effective measures to
upgrade its human and technical capabilities and office automation.
The result is a lack of balance in the interagency policy formulation
process and an inefficient and unnecessarily slow licensing process.
3. Shifts in Responsibility Within the Line Agencies May Preclude
Broadly Informed and Balanced Policy Judgments
Reorganization initiatives in a number of the principal line
agencies also have resulted in a shift of responsibility for managing
export controls from organizations with expertise in technology
development and international trade toward those whose principal
and often only concern is technology control. A case in point is the
Department of Defense, where the responsibility for export control
decision making has been relocated from the Office of the Under
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162 BALANCING THE NATIONAL INTEREST
Secretary of Defense for Research and Engineering to the Office of
the Under Secretary of Defense for Policy. Although there have
been positive effects of this shift in responsibility, the loss of
sustained technical input has been significant. The most important
areas of technology (e.g., electronics) are changing rapidly, and
their international character is extremely dynamic. Thus, the
internal policy process within the line agencies responsible for
national security export control matters must be capable of striking
an adequate balance between the application of stricter controls
and the promotion of trade and open scientific communication, all
of which help foster the economic and technological strength upon
which our defense ultimately rests.
4. Current Licensing Requirements, Classification Procedures, and Pro-
prietary Controls for Technical Data Are Both Appropriate and
Adequate
Although technical data that are not publicly available require a
validated license for export to the Soviet bloc, data exports to other
destinations for the most part are eligible for a general license. Thus,
data that are not classified or otherwise subject to restrictions imposed
by contractual undertakings with the government can be exported to
Free World destinations. The need for the exchange of large volumes
of data in international commerce and the desirability of wide-scale
exchange of information among the international research community
indicate that a strict system of control is neither feasible nor desirable.
The costs of a comprehensive system of validated licenses would be
enormous, and even if such a system were supported, it would be
doubtful whether effective control could practically be achieved.
Although national security and corporate interests may not always
be coincident, substantial national security protection is afforded by
the fact that data proprietary to U. S. corporations, including militarily
significant data, are carefully controlled already for commercial rea-
sons. The fact remains, however, that much nonnuclear information is
developed entirely under private auspices and therefore cannot be
controlled by the government except through a secrecy order imposed
by the Commerce Department's Patent and Trademark Office. Other
government efforts to restrict the dissemination of privately devel-
oped information have been futile and at times counterproductive.
5. Controls on Unclassified DoD Technical Data Have a Chilling Effect
on the U.S. R&D Community and Should Be Imposed Sparingly
The Department of Defense Authorization Act (DAA) of 1984
permits DoD to impose restrictions on domestic dissemination or
export of DoD-funded or DoD-generated technical data whose
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FINDINGS AND KEY JUDGMENTS OF THE PANEL 163
export would otherwise require a validated license under EAR or
ITAR. Such restrictions have the erect of creating de facto a new
category of unclassified but restricted information;* this is a new,
more comprehensive restriction on technical data both within the
United States and abroad. As a result, these restrictions also have
had a "chilling effect" on some professional scientific and engineering
societies that have elected voluntarily to close certain sessions or in a
few cases entire meetings to foreign nationals-including those from
CoCom and other friendly countries (except by special prior a~range-
mentWin anticipation of possible conflict with DAA provisions. It is
the panel's judgment that broader controls on technical data are not
warranted by the demonstrable national security benefits and that the
system of security classification has been and remains the most
appropriate mechanism for restricting access to technical information
considered critical to the security of military equipment and systems.
In those circumstances, however, in which unclassified technical data
arising from DoD-funded research have particular military signifi-
cance, the selective use of restrictions on data dissemination may be
appropriate. In such cases the controls should be built upon contrac-
tual agreements.
6. The Congressional Mandate for Integrating the MCTL into the Com-
merce Department Control List Practically Cannot Be Accomplished
In the 6 years since its first release on a classified basis, the
Militarily Critical Technologies List has been used inappropriately
as a control list, and its annual revision has resulted in a volumi-
nous itemization of many important technologies without apparent
prioritization. Because the Departments of Defense and Commerce
maintain fundamentally different objectives in their list develop-
ment exercises the former to identify those technologies with
military significance and the latter to identify items subject to
licensing-the congressionally mandated task of integrating the
MCTL into the Commerce Department's Control List cannot
practically be accomplished.
7. The Complexity of U.S. Export Control Policies and Procedures, Such
as the Export Administration Regulations, Discourages Compliance
The complexity of U.S. national security export controls dis-
courages compliance, especially by foreign firms and small- to
*This mandate is further expanded by the recent directive of the President's national
security adviser authorizing all agencies of the federal government to create a new restricted
category of information known as '~sensitive."
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medium-sized U.S. companies. One obvious example are the
Export Administration Regulations, which currently amount to
nearly 600 pages of rules and procedures. This document could be
reduced and simplified substantially and made more "user
friendly." There also is no effective means whereby a small or new
exporter-or a foreign firm can get an advisory opinion quickly
from the government on any aspect of export controls for exam-
ple, which control category a given product falls under or even
whether an item is subject to export controls at all.
8. There Is a Need for High-Level Industry Input in the Formulation of
National Security Export Control Policy
There is a need for an effective mechanism within the govern-
ment to provide meaningful input from the private sector on the
formulation of a coordinated national security export control policy.
Such a group must be constituted at sufficiently high corporate levels
to reflect major industry concerns, and it must be able to have an
impact on the actual policy process. This might be accomplished
through a variety of mechanisms, including the President's Export
Council. Currently, however, the council does not have significant
influence at senior policy levels of the government.
9. Voluntary Cooperation from U.S. Industry Is Important to the
Enforcement of Export Controls
Voluntary cooperation by U.S. industry, particularly companies
with overseas subsidiaries, and other commercial entities is impor-
tant to the effective enforcement of export controls, especially in
the identification of violations. U.S. companies frequently have
knowledge otherwise unavailable to the government of possible
violations by other firms. Some degree of positive feedback from
government agencies on the usefulness of information provided by
industry would help to ensure continuing active cooperation.
10. Adequate Information to Evaluate the Impact of National Security
Export Controls Is Not Maintained by the U.S. Government
This study has revealed serious shortcomings in both the quality
and quantity of information maintained and analyzed by the U.S.
government on the coverage, operation, and domestic and global
impacts of national security export controls. The Department of
Commerce, for example, has not used its own data bases to
measure the effectiveness of its licensing activities or the impact of
national security export controls on firms of different sizes and on
different industrial sectors. There also appear to be serious statis-
tical discontinuities between the licensing application data main
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FINDINGS AND KEY JUDGMENTS OF THE PANEL 165
tained by the Department of Commerce and the trade data recorded
by the Bureau of the Census. As a result the government currently
has no accurate means of tabulating the value of shipments made
under export licenses or of sorting dollar values of exports accord-
ing to type of license. It will continue to be difficult for policymak-
ers to arrive at more informed and balanced judgments as to the
advisability of controls in the absence of this type of information.
The panel notes that the Department of Commerce already is
required under the terms of the Export Administration Amend-
ments Act of 1985 to report annually to the Congress on the impact
of national security export controls. Such reporting, however, has
so far failed to produce the data necessary to measure actual
impacts on the U.S. economy or on specific industrial sectors.
11. A Comprehensive Cost/Benefit Analysis of Controls Currently Is
Infeasible
Despite some initial attempts to assess the competitive effects of
national security export controls, a comprehensive empirical anal-
ysis of the costs and benefits of controls currently is precluded by
the lack of data, by the complexity of the system, and by a variety
of qualitative judgments that must enter into an evaluation. Most
affected industries have not maintained data on the economic costs
of controls, although some are now beginning to do so. Likewise,
comparable methodological and data problems are encountered in
attempts to assess the military significance of specific controlled
items or the potential savings to the defense budget of continuing to
control them.
The process of international technology transfer requires constant
monitoring and periodic modification as conditions warrant to maintain
the proper balance between promotion of national economic vitality and
protection of military security. Failure to do so can result in frequent and
unpredictable changes in policies and procedures (i.e., controls). In the
late 1970s the U.S. government reacted to mounting evidence of Soviet
bloc technology acquisition efforts and to the emergence of new sources
of militarily significant dual use technology by largely revamping and
revitalizing the U.S. and CoCom national security export control sys-
tems.
There is little doubt that, without the heightened attention to these
issues initiated in the early years of the current administration by DoD,
the problem of Western technology diversion to the Soviet Union would
by now be considerably worse. But the panel is concerned that this policy
"correction," as useful and needed as it was, should not now overshoot
the mark. Although the new, more stringent controls may restrain the
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flow of militarily significant technology to the Warsaw Pact countries, this
success is likely to be achieved at an unacceptably high price in terms of
economic vitality and allied cohesiveness.
The panel wishes, therefore, to reiterate its concern about the continu-
ing lack of balance within the policy process for national security export
controls regarding the representation of technical, national security,
economic, and domestic and international political interests. Equilibrium
among these interests, supported by adequate data, standards of mea-
surement, and reliable intelligence information, should be developed and
maintained within each agency, among agencies of the U.S. government,
and among countries participating in CoCom.
In the final chapter of this report, the panel sets forth a series of
recommendations for changes in the existing national security export
control regime. These changes are designed to bring better balance to the
development and management of our future course of action on this
important national and international matter.
Representative terms from entire chapter:
security export
