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8 Recommendations of the Pane! PREAMBLE National security export controls should seek to preserve and enhance the technology lead and military capabilities of the West while minimizing the constraints on the economic vitality of the United States, its allies, and other nations friendly to Western interests. In today's global trade environment, U.S. economic vitality can be maintained only by ensuring that the nation's products remain competitive-in terms of quality, price, and availability with the best that other nations can offer. Trade promotes economic and technological strength, which is vital to Western military strength. Thus, maintaining the vigor and productivity of the U.S. technological base is fundamental not only to the continued economic vitality of the West but also to its military security. National security export controls also represent an important, albeit secondary, means of maintaining military security by impeding the flow of those goods and technologies deemed militarily important to the Soviet Union and its Warsaw Pact allies. The panel's recommendations therefore are directed toward enabling the United States and its allies to maintain a balanced and effective export control regime. The recommendations are offered within the context of what the panel considers appropriate national policy objectives. It should be the policy of the United States: 1. to promote the economic vitality of Free World countries, 2. to maintain and invigorate the domestic technological base, and 167
68 BA LANCING THE NA TI ONAL INTERES T 3. to cooperate with its allies to impede the Soviet Union and other Warsaw Pact countries in their efforts to acquire Western technology that can be used directly or indirectly to enhance their military capabil- ity. RECOMMENDATIONS Within the context of the declaratory policy set forth above, the panel makes two basic recommendations, together with a series of corollary prescriptions. I. STRENGTHEN THE COCOM MECHANISM The panel recommends that the United States take the lead in further strengthening the CoCom mechanism so that it can function as the linchpin for a fully multilateral national security export control regime for dual use technologies. Under current and prospective global circumstances, such a multinational system is essential to achieve maximum export control effec- tiveness without impairing Western economic vitality. To strengthen the current system of multilateral controls will require greater harmonization of the current U.S. approach and that of our technologically advanced allies through closer consultation and through the adoption of policies that promote cooperation. The two most immediate objectives are: (1) to limit the coverage of the U.S. Control List and the CoCom International List to those items whose acquisition would significantly enhance Soviet bloc military capabilities and that are feasible to control, and (2) to obtain agreement on a common approach to reexports of CoCom-origin items. The United States should strive to create a community of common controls on dual use technology that is, a set of trade relationships unimpeded by national security restrictions among those Free World nations that share an expressed willingness to adhere to common or equivalent export control restraints on the transfer of strategic and controllable goods and technologies to the Soviet Union and its Warsaw Pact allies. While recognizing that there are certain systemic deficiencies in the existing national security export control regime that will require sustained effort to overcome, there remain a number of initiatives that can be undertaken to advance this objective. Accordingly, the panel recommends the following changes in U.S. policy: 1. Control Only CoCom-Proscribed Items As a general policy the United States should seek to control only the export of CoCom-proscribed items, and then only when they are destined for a proscribed country or for a non-CoCom country that
RECOMMENDATIONS OF THE PANEr 169 has not entered into an agreement* to protect items controlled by CoCom. . 2. Within CoCom, Seek Controls on Exports to Third Countries With respect to CoCom, the United States should: Negotiate agreements with member countries" regarding control of their exports and reexports from their territory to third (i.e., Free World non-Cocom) countries, thereby obviating the need for U.S. reexport authorization. These control agreements might involve a variety of mechanisms appropriate to national policies and legal practices, including the use of import certifica- tion/delivery verification procedures, end-user checks, export denial lists, and so on. Such agreements should stipulate that participating countries share and act on information regarding potential diverters. · For almost all goods, eliminate the requirement to obtain validated licenses and reexport authorizations for exports to those trading partners with which the United States has reached agreement on the control of exports to third countries. Validated licenses should be required only for exports of extremely sensitive high-level technology (e.g., supercomputers). Reliance should be placed on cooperating foreign governments to prevent diversions from their own territory. There also should be a provision for reinstituting validated licensing requirements for CoCom countries that subse- quently fail to implement and enforce national security export controls on trade with non-CoCom Free World countries. For those CoCom countries unwilling to agree to or unable to implement controls on exports to third countries, retain the present system of validated licenses and reexport authorization while continuing to pursue adequate control arrangements. 3. Negotiate Comprehensive Understandings with Third Countries With respect to non-CoCom Free World countries, the United States should: · In coordination with other key members of CoCom, negotiate comprehensive understandings or equally effective informal ar- rangements deemed acceptable by the U. S. Department of State- that specify controls on the export of all CoCom-proscribed goods and technology (including those produced indigenously) to the *Such an agreement might be implemented either through a formal memorandum of understanding or an informal arrangement that achieves the same result. fit may be most feasible to begin this process initially with such key members of CoCom as Japan, France, the Federal Republic of Germany, and the United Kingdom.
i70 BALANCING THE NATIONAL INTEREST Warsaw Pact countries and to other noncooperating third coun- tries. A graduated scheme of incentives should be developed for third countries that agree to less than comprehensive controls. · Accord full "CoCom-like" treatment (meaning that exporters to those countries should not be required to seek validated licenses or reexport authorization) for exports to those third countries that have agreed to comprehensive arrangements, or that have been judged by the State Department to maintain equivalent standards, as soon as these countries can demonstrate their ability and willingness to enforce export controls. Such a commitment to enforcement should include formal or informal sharing of infor- mation on possible diverters. · Continue existing licensing requirements, as appropriate to their Commerce Department country group classification, for exports to third countries that are unwilling or unable to enter into comprehensive understandings or informal arrangements. 4. Remove Items Whose Control Is No Longer Feasible Regardless of the rate of progress on CoCom and third country negotiations, the United States should actively seek to remove from both the U.S. Control List and the CoCom International List items whose control is no longer feasible or necessary. This would include goods and technologies: · for which there is demonstrated foreign availability from any country that has not agreed to adhere to export controls and for which this availability has not been eliminated within a reasonable period of time through negotiated agreements (see Item II.4 on pp. 175-176~; or · for which control at the source is not practicable, that enter into world trade channels through multiple entrepot points, and that are manufactured and shipped in volumes so large they have in effect become "technological commodities" (e.g., certain com- puter memory chips and some personal computers). 5. Maintain Unilateral Controls Only on a Temporary Basis or for Limited, Unique National Security Circumstances Regardless of the rate of progress on CoCom and third country negotiations, the United States should eliminate the use of unilateral national security export controls except in those circumstances in which active efforts are under way to negotiate multilateral controls within and outside of CoCom- in which case unilateral controls could be maintained on a temporary basis or in those situations in which unique national security circumstances warrant the imposi tion of such controls for limited periods of time. Where a decision
RECOMMENDATIONS OF THE PANEL 171 has been taken to impose or maintain unilateral national security export controls, such restrictions should be subject to a 3-year "sunset provision" requiring their periodic rejustification. The panel wishes to emphasize that the phrase "unique national security circumstances" does not justify retaining present U.S. unilateral controls. Rather, it recommends that controls be estab- lished on a multilateral basis and that, in cases in which the United States or another CoCom member country cannot achieve unanim- ity on the need to control a particular item, no unilateral controls should be imposed. In rare cases the United States or another CoCom country may believe that critical national security concerns are at stake and may wish to reserve the right to establish a unilateral restriction on their domestic industry. This exception should be used sparing Y. For these few exceptions, it would be useful for CoCom countries to report their exports of new, uncontrolled items going to the Soviet bloc. Such reporting would over time better inform CoCom on the advisability of establishing controls on the proposed item and better inform U.S. and other CoCom policymakers on the effectiveness of the unilateral control. The panel recommends that the United States explore within CoCom the feasibility of developing a practical reporting system for this category of items. 6. Eliminate Reexport Authorization Requirements in Countries Partic- ipating in a Community of Common Export Controls on Dual Use Technology To further the objective of developing a community of common controls on dual use technology among cooperating countries of the Free World and to encourage international cooperation and trust, the United States should eliminate any requirement that a buyer seek authorization for a reexport that is subject to CoCom or "CoCom-like" controls by the country of initial export. Reliance should be placed instead on foreign governments that participate in CoCom or that have agreed (formally or informally) to impose "CoCom-like" controls on exports to prevent diversions from their territory. 7. Maintain Current Control Procedures on the Transfer Within CoCom of Sensitive Information, Technical Data, and Know-How The United States should continue to rely on current security classification procedures and the protection afforded by general license GTDR and individual proprietary interests to control the transfer within CoCom of information, technical data, and know- how that are considered to be militarily sensitive. This approach is
172 BALANCING THE NATIONAL INTEREST based on the recognition that the benefits of additional controls on technical data are outweighed by the potential damage of such restrictions to international business operations and R&D activities in the West. The attempt to exercise broader control of technical data is likely to prove unnecessarily restrictive to all such interna- tional cooperative ventures. 8. Reduce the Scope of the CoCom List and Modify CoCom Decision- Making Policies and Procedures There are a number of steps the United States together with its CoCom allies should take to improve the efficiency and effective- ness of the multilateral process. The most important step is to reduce the overall scope of the CoCom International List to improve its credibility and enforcement. List credibility also would be improved by the imposition of a 4-year "sunset provision" that would cause lower-level CoCom items to be removed automatically from the list- unless their inclusion can be rejustified when they come up for periodic review. The panel further recommends that the general procedure for decontrolling International List items be modified decontrol should no longer require unanimity to im- prove the effectiveness of multilateral enforcement. To ensure balanced consideration of economic and military fac- tors, the panel also supports greater participation by defense officials of the allied countries, as initiated through the establishment of the CoCom military experts group, in the multilateral decision-making process. Finally, the panel recommends that the uncertainties indus- try often associates with CoCom decision making be reduced through greater transparency. This could be accomplished by en- couraging member governments to provide industry with appropri- ately sanitized and delayed information regarding approval and denial precedents. 9. Maintain a Clear Separation Between National Security and Foreign Policy Export Controls Existing statutory authority describes separate systems and pro- cedures for the control of exports for foreign policy versus national security reasons. Therefore, the U.S. government should maintain the clearest possible separation between the unilateral control of exports for political that is, foreign policy purposes and the system of multilateral controls that are maintained for national security purposes. Although examination of the system of foreign policy export controls was beyond the scope of this study, the panel notes that many of our CoCom allies continue to disagree pro- foundly with some U. S. foreign policy export controls. If not
RECOMMENDATIONS OF THE PANEL -173 effectively isolated, such controls can have a corrosive effect on the resolve of the CoCom allies to cooperate in the implementation of national security export controls. II. ACCORD GREATER IMPORTANCE IN U.S. NATIONAL SE CURITY EXPORT CONTROL DECISIONS TO MAINTAINING U.S. TECHNOLOGICAL STRENGTH, ECONOMIC VITALITY, AND ALLIED UNITY The panel recommends that executive branch decisions concerning national security export controls accord greater importance than they currently do to maintaining U.S. technological strength, economic vigor, and allied unity. Ultimately, an elective multilateral national security export control regime can be established only through the commitment and support of the President and Congress. Nevertheless, the decision-making and advisory mechanisms of the executive branch also must be constituted and tasked appropriately to facilitate the effective implementation of the policy approach proposed above. As a general policy the United States should strive to achieve clarity, simplicity, and consistency in its national security export control proce- dures, as well as in the multilateral CoCom structure, and to obtain broader consensus on the need for national security export controls among the Free World nations that use and/or produce dual use technol- ogy. To achieve this goal, the United States should design policies and procedures that emphasize efficiency and effectiveness over comprehen- siveness. Over the long term, U.S. national security export control policies also should remain flexible to political and economic changes in the world situation. Toward these ends, the panel recommends the following specific changes in U.S. policy and procedures. 1. Balance the Protection of Military Security with the Promotion of National Economic Vitality Through Affirmative Policy Direction The President should require that the National Security Council (NSC) implement the existing policy mandate as set forth in the Export Administration Act of 1979, as amended- which calls both for the protection of military security and for the promotion of national economic interests. Currently, because of insufficient atten- tion and leadership from above, the existing policy mechanisms either are not being used or are producing results that fail to take adequate account of important national interests. This problem can be ameliorated by providing regular, affirmative policy direction to the responsible line agencies.
174 BALANCING THE NATIONAL INTEREST Accordingly, NSC should take steps to fulfill its responsibility on national security export control matters by providing the necessary balanced policy guidance. The secretaries of commerce and treasury should participate in NSC meetings at which export control matters are to be addressed. Moreover, as a matter of urgency, NSC should be staffed properly to deal with these matters and a senior NSC staff member should be given responsibility for bringing representatives of conflicting agencies together to resolve policy differences. A1- though NSC can assume such responsibility without legislation, the panel further recommends that Congress consider whether the National Security Act of 1947 (as amended) ought to be modified to reflect the growing importance of international trade as a fundamen- tal element of U.S. national security. 2. Provide Sufficient Resources and Authority to the Departments of Commerce and State to Allow Them to Fulfill Their Roles in the Export Control Process To establish a more balanced policymaking process within the federal government, the Departments of Commerce and State should be allocated sufficient resources dedicated to the implemen- tation of national security controls. In particular, the Department of Commerce should upgrade significantly the capacity and sophistica- tion of its automated systems and the quality of its in-house technical and analytical expertise. The Export Administration Act specifies that the Department of Commerce has primary responsi- bility for export licensing policy and procedures. In the case of national security export controls, Commerce has lost much of that leadership role because of its ineffective performance in the past and must now establish the organization, competence, and drive to merit regaining that role. It is also essential that the Department of State vigorously fulfill its traditional role of ensuring that the U.S. government speaks with a single, coherent voice when dealing with foreign governments and foreign firms on national security export control matters. Another State Department responsibility should be to work to reduce con- flicts within the ranks of CoCom, conflicts that stem in part from differences among the respective national delegations over how to prioritize conflicting economic and military objectives. Although the United States has had some modest success in encouraging allied defense officials to participate in the CoCom process, it is essential that State Department officials now play a more assertive leadership role in the U.S. CoCom delegation so as to create a balanced representation of U.S. economic and defense interests.
RECOMMENDATIONS OF THE PANEL 175 3. Restore Technical Judgment and Overall Balance to the National Security Export Licensing Process The locus of responsibility and decision making within the De- partment of Defense has shifted from the office responsible for research and engineering to the office responsible for policy. This shift has resulted in greater attention to extant deficiencies of the CoCom process and increased efforts to stem the leakage of tech- nology to the Soviet bloc. Although the pursuit of these policy objectives has led to the resolution or improvement of a number of long-standing problems, there has been at the same time a significant reduction in the weight accorded to technical factors and a resultant imbalance in the policy process. It should now be the goal (1) to establish greater balance within DoD between its technical and policy elements and (2) to reduce the DoD role in detailed license review as parallel steps are taken within the Department of Com- merce to strengthen its capability to implement national security export control licensing Procedures. The role of the policy side of DoD on export control issues should focus on the broader goal of maintaining the strategic balance and the contribution of technology to military systems. 4. Implement the Decontrol Procedures Required by Law When Foreign Availability Is Found to Exist The lack of action by the federal government on foreign avail- ability determinations is contrary to the statutory language ex- pressed in the Export Administration Act of 1979, as amended. This is due in part to the fact that no specific time lines for the completion of foreign availability determinations are specified in the legislation. Moreover, apart from the broad statutory criteria, there is still no generally accepted definition of foreign availability. Serious effort should be devoted to developing an interagency such a definition and reasonable deadlines for consensus on . . c .eclslons. The Department of Defense has overstepped its legitimate stat . ~ _ utory role of providing technical input In foreign availability determinations and has exercised de facto veto authority by delaying the review of such determinations. The result of this situation has been that, in 4 years, the Departments of Commerce and Defense have been able to reach preliminary agreement on the decontrol of only 3 items (out of more than 20 foreign availability assessments). At the very least the Export Administration Act should impose specific and equal time constraints on all responsi- ble agencies. Because the process for determining foreign avail
176 BALANCING THE NATIONAL INTEREST ability is not now functioning effectively, there is a need for effective remedial action by both the executive and legislative branches. 5. Withdraw the Statutory Requirement to Integrate the MCTL into the Commerce Department's Control List Congress should withdraw the statutory requirement to integrate the Militarily Critical Technologies List (MCTL) into the U.S. Control List. The fundamentally different nature and functions of the two lists the former an exhaustive list of all technologies with military utility and the latter a specific list of items requiring an export license make this goal unattainable. The Department of Defense should develop guidance for use of the MCTL as a reference document within DoD and as a basis for developing proposals to CoCom. 6. Provide Effective, Two-Way Communication at the Highest Levels Between Government and the Private Sector A mechanism should be established (or upgraded) to provide effective, two-way communication between the highest levels of government and of the private sector on the formulation and implementation of coordinated national policies that balance mili- tary security and national economic vitality. One such group already exists: the President's Export Council (PEC) and its Subcommittee on Export Controls. However, its advice currently is not receiving appropriate attention at senior policy levels within the government. The panel recommends, therefore, that senior policy stab of the Executive Office of the President meet periodically with the PEC (or with other respected representatives of the private sector) and inform the President of their concerns regarding national security export controls. It may be necessary, however, for Congress to establish a mechanism to ensure appropriate consideration of indus- trial concerns in the formulation of national security export control policy. 7. Develop Reliable Data Regarding the Operation and Impact of U.S. National Security Export Controls This study has revealed serious shortcomings in both the quality and quantity of information maintained and analyzed by the U.S. government on the operation of national security export controls and their domestic and international impacts. The panel recom- mends, therefore, that the Department of Commerce be instructed by Congress to develop and analyze such data and that the depart- ment be given sufficient resources to carry out these tasks.
RECOMMENDATIONS OF THE PANEL 177 8. Make More Systematic Use of Intelligence Evidence on Current and Anticipated Soviet Acquisition Efforts The Intelligence Community should structure its efforts with regard to West-East technology transfer so as to anticipate future Soviet technology acquisition efforts. The line agencies of the U.S. government, for their part, should strive to make more systematic use of existing intelligence resources for modifying the composition of the U.S. Control List, proposing changes to the CoCom Interna- tional List, and reviewing sensitive individual export licensing cases. In addition, the Intelligence Community should increase its efforts to sanitize and declassify "finished" intelligence products to provide a more informed public understanding of the technology transfer problem. CODA The panel notes in conclusion that there is a need for national security export controls and that current statutory authority recognizes the necessity to accommodate both military security and economic vitality. But the recent performance of the U.S. government on this matter has not been satisfactory-and will be increasingly less so because of prevailing trends in international trade and technology diffusion- because it has tended to focus on tightening controls while giving little attention to their effectiveness and costs. Although most of the necessary mechanisms appear to be in place, the U.S. policy process for national security export controls continues to lack proper direction and affirmative leadership at the highest level. As a result, the executive branch has failed to imple- ment the existing provisions of law in a coherent and effective manner, which has in turn created uncertainty, confusion, and criticism both at home and abroad. In the absence of appropriate corrective measures, these continuing problems will exact ever-higher tolls- on both Western economic vitality and innovative capacity and on the military security of the United States and its allies.
