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SUMMARY 13 International Trade, Technology Transfer, National Security, and Diplomacy Trade, technology transfer as part of trade, and national security interests interact in complex ways that affect the U.S. economy and its position in the international marketplace. Control of the export of technology in the interest of national security is unquestionably a legitimate responsibility of the government. The task requires balancing national security or foreign policy objectives with those of strengthening the U.S. economy and preserving the U.S. position in advanced technology. The balancing process inevitably creates apparent inconsistencies and indecisiveness that are in themselves detrimental to trade because they tend to cast a shadow over the reliability of U.S. manufacturers as sources of supply. In policy deliberations it is important for realistic attention to be given to assessing the true effectiveness of any proposed restraints, the availability of alternatives, the potential near-and long-term damage to U.S. firms and to the economy, and the opportunities for retaliatory action by the countries being targeted. National security and foreign policy have powerful advocates within the government. Commercial interests are less easily represented because they are diffuse and not well articulated. Furthermore, in the sphere of international trade it is apparent that the U.S. government places a higher priority on national security versus commerce than do the governments of our trading competitors. Licensing and coproduction have been important elements of mutual security arrangements for many years. These agreements heighten the sense of partnership, broaden the defense industrial base, and reduce drain on local currencies. NATO allies have insisted on broadening the base of these agreements, and they have no doubt become a vehicle for transfer of both production and design technology. The Memoranda of Understanding (MOU) under which these exchanges occur seek a balancing quid pro quo, but the subject matter may be far afield from commerce. Industry spokesmen have felt that MOUs are negotiated with insufficient input from industry. The U.S. Department of Defense (DOD) is perceived as being very sensitive to possible loss of critical technology through commercial channels, but much less concerned over the possible adverse commercial implications of military agreements for coproduction. The panel believes it is important for policy deliberations in this area to reflect the changing circumstances of the United States in balancing security and trade, i.e., allies are much stronger economically and represent a growing competitive
