The Evolution of U.S. Export Control Policy: 1949–1989
Mitchel B. Wallerstein with William W. Snyder, Jr.
The policy of the United States with respect to the control of exports of strategic technology has reached a critical watershed. If the policy is to remain effective beyond the short term, it will have to adapt to dramatically changed political, economic, and technological circumstances. Indeed, this analysis takes the imperative for change as a given and examines the historical evolution of U.S. export control policy since the end of the Second World War in an effort to inform the conceptualization of a new policy framework.
For the purposes of this analysis, restrictions on the export of dual use technologies and munitions are treated together, except where noted. Moreover, the three major dimensions of the policy—national security, foreign policy, and (the much less important) short supply controls—are distinguished only in those cases in which their purposes or implementation has diverged, or in some cases conflicted. The interest here is not so much to establish a detailed chronology of the evolution of each type of control, but rather to identify major changes in the rationale for and objectives of overall U.S. export control policy.
THE EARLY HISTORY OF U.S. CONTROLS
The earliest use of export controls by the United States was an outgrowth of perceived wartime necessity. In 1917, the Congress passed the Trading
with the Enemy Act, which empowered the President to limit economic activities severely, including exports, imports, financial transactions, investment, and so on, with designated enemy countries or nationals of those countries.1 Although the act fell into virtual disuse between the world wars, further restrictions were added that empowered the President to impose restrictions on trade with all nations, not just designated enemies.*
The U.S. government did not establish an arms export control regime until 1935. In August 1935, the Congress, fearing that the nation could be dragged into war by other belligerent nations, passed the Neutrality Act of 1935, which gave the President a legal basis for controlling the export of arms. Specifically, it established the National Munitions Control Board under the chairmanship of the secretary of state. That board was the forerunner of today's export licensing system.
By 1940, the war had begun in Europe, and Congress moved to give the President authority to control the export of militarily significant goods and technology. Section 6 of Public Law 703, "An Act to Expedite the Strengthening of the National Defense," gave the President authority to prohibit or curtail the export of "military equipment or munitions or components thereof, or machinery, tools, or material, or supplies necessary for the manufacture, servicing, or operation thereof. . . ." The President was required only to determine that his actions were necessary and in the interest of national defense and to issue a proclamation describing the articles or materials included in the prohibition or curtailment.
Following the Second World War, U.S. export control policy began for the first time to assume significant peacetime dimensions. The war had created major worldwide shortages of many critical materials, including chemicals, raw materials, and food. Further, the United States was engaged in the Marshall Plan recovery in Western Europe, which increased the demands for these items. This resulted in the continuation of the wartime restrictions during the period from 1945–1947, albeit largely for reasons of "short supply." It is significant that, in contrast to the current policy rationale, national security during this period was being defined largely in terms of the sanctity of critical materials supplies, rather than in strategic, ideological, or other terms. This situation was soon to change.
THE COLD WAR AND THE POLICY OF CONTAINMENT
As late as June 1947, with the "Cold War" still only in its infancy, the United States continued to offer to include the Soviet Union in the Marshall Plan for the reconstruction of Europe.* In July 1947, George Kennan published his now-famous Foreign Affairs article, "The Sources of Soviet Conduct," under the "X" pseudonym, in which he argued for an active and coordinated policy of "containment" of Soviet imperialistic ambition. And, by late the following year, the United States had begun to impose export licensing requirements on the Soviet bloc countries.
The Congress formally recognized the need for continuing peacetime controls in the Export Control Act of 1949. Although controls were still seen as a "temporary" measure, the act's stated objectives were (1) to reduce continuing shortages in critical materials, (2) to aid the President in implementing foreign policy, and (3) to control items deemed critical to U.S. national security.2 The act did not specify the particular national security concerns it was intended to address, but the accompanying Senate report stated that:
Equally important is the close scrutiny which is thus made possible over shipments of industrial materials which may have direct or indirect military significance. In the light of growing concern of democratic nations over the policies of the Eastern European nations, it is quite clear that our national security requires the exercise of such controls to complement export controls over arms, ammunition, and implements of war.3
Two important principles were embodied in the 1949 legislation and have survived virtually intact through multiple revisions. First, the executive branch was to enjoy broad authority to determine what products or technical data should be subject to export licensing, to administer the licensing system, and to impose penalties for violations. Second, the rule-making process, including the composition of the control list, was (and continues to be) largely exempt from the usual process of public comment and virtually immune from judicial review.
Paralleling the U.S. recognition of a monolithic national security threat from the Soviet bloc was the establishment of the North Atlantic Treaty Organization (NATO) in August 1949. To ensure the effectiveness of NATO and the other regional alliances, the United States transferred military technology, mostly in the form of hardware, directly to its allies. And because the recovering West European countries (and later Japan) also were becoming potential sources of advanced militarily relevant technology, President Tru-
man sent Secretary of Commerce Averell Harriman to Europe to enlist allied cooperation in denying the Soviet Union and its allies access to such strategic technology. This led to the establishment of the Coordinating Committee for Multilateral Export Controls (CoCom) in Paris in 1949 to coordinate for the first time an explicit strategy of "technology denial" to the Soviet bloc countries. From the start, however, the items on which the United States imposed controls differed from those controlled by CoCom. That is, the United States controlled many items unilaterally, particularly those technologies in which it held a virtual monopoly.
Although Congress continued to hope that export restrictions could be removed eventually, increasing tensions within Europe—including, for example, the Berlin blockade—and the outbreak of the Korean War on June 25, 1950, left little doubt as to the need to renew the Export Control Act in 1951.4 At about the same time, the Congress enacted the Mutual Defense Assistance Control Act, also known as the Battle Act.5 The Battle Act allowed the United States to embargo shipments of arms, ammunition, implements of war, nuclear materials, and other strategic items to nations that posed a potential threat to U.S. national security, and it provided statutory authority for U.S. participation in CoCom.* The act also threatened to cut off U.S. economic assistance to any country that would not cooperate in controlling the export of strategic goods or technology to the Soviet Union.
By the early 1950s, U.S. and NATO strategy was firmly based on the need to contain Soviet (and Chinese) expansionist ambitions and to maintain the political and territorial integrity of the West (which, by this time, included Japan). And soon after, the NATO alliance became opposed formally by the Warsaw Pact,† which was signed on May 14, 1955.
Having financed the successful reconstruction of the European and Japanese economies through a combination of credit, intentional trade deficits, and direct aid and investment, the United States was determined to protect its political and economic investment. Moreover, because its economy and technological base were so much more robust than those of its allies, the United States was prepared and able to absorb the economic costs associated with functioning as the paragon of the Western technology denial effort. At the same time, the European countries were more focused on the need to
complete their economic recovery than on the potential for trade with the East European countries.
It also had become apparent by this time that, for political and economic reasons, it was neither possible nor even desirable for the West to attempt to maintain numerical equality with the mobilized troop strength or fielded conventional weaponry of the Warsaw Pact countries. This reality led the NATO countries in evolutionary fashion to the so-called "force multiplier" strategy, which sought to capitalize on Western technological superiority in order to maintain strategic parity through the development of more advanced and effective weapons than those possessed by the Warsaw Pact countries. The decision to rely on technology lead was confirmed indirectly by former NATO Secretary General, Lord Ismay, who recalled that
the following December (1952) the [NATO] Council directed that, while the build-up should continue, primary emphasis should be placed for the future on improving the quality rather than the quantity of the NATO forces.6
Two inevitable implications of a strategy that depends on the maintenance of technology lead are, however, (1) a continuing need to prevent the potential adversary from gaining access to the technology, which would neutralize the strategic advantage, and (2) a continuing need to produce new "generational" technological advances in order to maintain lead times. Thus, the NATO decision in the early 1950s to rely on a strategy emphasizing technology lead also inevitably locked the alliance into a parallel policy of technology denial, a situation that has continued to the present day.
The Export Control Act subsequently was extended several times, in most cases without amendment, through 1965.* The 1962 renewal, however, did contain an important amendment that restricted the export of materials that could "contribute to the military or economic potential of . . . nations which would prove detrimental to the national security" of the United States.7 This provision appeared to enable the President to engage in a more direct economic warfare strategy in the denial of trade to a particular country, if he deemed it to be in the U.S. national security interest.
PROMOTING TRADE AND NATIONAL SECURITY IN THE ERA OF DÉTENTE
With the advent of the era of détente and the emphasis on "linkage" between trade and other foreign policy issues, U.S. export control policy underwent its first serious congressional reexamination and revision in 20 years. In the Export Administration Act (EAA) of 1969, Congress sought
for the first time to establish a balance between the need to protect technology essential to U.S. national security and the desire to promote U.S. trade. This change was designed, in part, to engage the Soviets in an expanded set of trade relationships and, in part, to acknowledge the growing importance of U.S. export trade to overall national economic well-being. The change in emphasis was reflected in the very name of the act itself, in which the word, "administration," was substituted for the word, "control." The EAA of 1969 was the first of many subsequent legislative attempts to limit the number of items subject to control, and it also marked the first time that Congress recommended that foreign availability of controlled items be taken into account explicitly in the licensing process.
The Nixon administration, however, did not support unilateral liberalization of national security export controls. It preferred instead to use partial relaxation of controls as part of an explicit linkage strategy whereby non-strategic trade could be used as leverage to promote other positive changes in Soviet behavior. One of the principal concerns at this time was the growing international outcry over Soviet mistreatment of political dissidents and its refusal to permit expanded emigration of Jews and other minorities. The Congress subsequently formalized its commitment to human rights by passing the Jackson-Vanik amendment to the 1974 Trade Reform Act, which linked the granting of most favored nation (MFN) trade status to the Soviet Union and other countries to human rights improvements and liberalized emigration policies.* Passage of the act largely ended for the moment any possibility of further liberalization of the U.S.-Soviet trade relationship.
Congress also renewed and amended the EAA again in 1974, reiterating its interest in balancing the protection of national security and the promotion of trade and introducing a 90-day time limit in the review of license applications under some circumstances. The intent of Congress was further underscored in the EAA renewal of 1977, wherein it attempted (still without much success) to shorten the license processing time by setting stricter time limits for the Department of Commerce's review of license applications. Also during this period, in 1976, Congress revised the Arms Export Control Act, which regulates the import and export of defense articles (i.e., arms, ammunition, and implements of war), defense services, and directly related technical data.
THINGS FALL APART
By 1978, East-West relations had begun to deteriorate seriously, due in part to Soviet mistreatment of dissidents and foreign journalists. The United
States also had stated publicly its misgivings about the economic and security implications of Western participation in and dependence on the Soviet-European gas pipeline. These tensions were, in turn, reflected in the 1979 revision of the EAA, which authorized the control of exports of commercial goods and technologies that would make a significant contribution to U.S. military adversaries. The act also authorized the continuation of controls to achieve U.S. foreign policy objectives and reaffirmed continuing concerns about the short supply of certain strategic materials. In the act Congress also explicitly endorsed and incorporated the recommendations of the 1976 Bucy task force report to the Defense Science Board,8 which called for a shift in the focus of controls away from end products to arrays of know-how, keystone equipment, and turnkey manufacturing facilities. Also in 1979, the Battle Act was repealed and the authority for multilateral export controls was shifted to the EAA.
From the standpoint of export controls, the period of détente clearly ended in 1979 with the Soviet invasion of Afghanistan and the mounting evidence that the Soviets had used Western dual use technology, obtained both legally and illegally as a result of relaxed trade controls, to modernize its conventional and strategic forces.* As a result, President Carter acted under the provisions of the EAA to restrict the sale of U.S. grain and to deny all pending and future validated export licenses for technology exports to the Soviet Union. These unilateral U.S. actions subsequently were reinforced by the adoption of a ''no exceptions" policy within CoCom, wherein the allied nations agreed not to propose individual export case exceptions for the Soviet Union while it continued its occupation of Afghanistan.
A CHANGE IN POLICY APPROACH: THE REAGAN ADMINISTRATION
The Reagan administration entered office at a time of rising U.S.-Soviet tension and with a distinctly different view of the Soviet Union and its potential threat to U.S. and Western seurity interests. In congressional hearings and in other public statements, administration officials † and members of Congress made repeated assertions that the Soviets had moved systematically, through both legal and illegal means, during the period of détente to gain expanded access both to the results of basic research and to embodied
technology and end products. Among the more notable examples of such statements were the following:
"There is no longer doubt that our technology has materially aided Soviet expansion. It has improved Soviet weapons, intelligence devices, and economic leverage . . . The need for a clear and comprehensive technology transfer policy is compelling and urgent." (Statement by Sen. Henry M. Jackson before the Permanent Subcommittee on Investigations of the Committee on Governmental Affairs, U.S. Senate, May 4, 1982)
"The concentration by the Soviets has been on illegal trade diversions and collection directly against defense contractors and high technology firms working in advanced technology, both classified and unclassified, foreign firms and subsidiaries of U.S. firms abroad, and international organizations with access to advanced and or proprietary technology . . . They are also stepping up their efforts to acquire new and emerging technologies such as very high-speed integrated circuits and VLSI technology from Western universities and commercial laboratories for both military and commercial applications." (Statement by Rear Adm. B.R. R. Inman, deputy director, Central Intelligence Agency, before the Subcommittee on Science, Research, and Technology, and the Subcommittee on Investigations and Oversight of the Committee on Science and Technology, U.S. House of Representatives, March 29, 1982)
"We are now in a situation, Mr. Chairman, in which every new Soviet weapons system that we see is produced at least in part, and some cases in significant part, with the aid of modern technology, equipment, know-how, expertise, acquired in the West. Indeed, the Soviets have become almost arrogant in the ease with which they assert both their access to and the utility they make of Western technical solutions to their military problems . . . We in the West are facing a well-organized, orchestrated and dedicated effort by the Soviets to acquire our technology with the specific purpose of altering the balance of power in their favor." (Statement by Richard N. Perle, assistant secretary of defense for international security policy, before the Technology Transfer Panel of the Committee on Armed Services, U.S. House of Representatives, June 9, 1983)
Evidence supporting these claims was provided in April 1982 by the U.S. intelligence community in the form of an unclassified white paper, Soviet Acquisition of Western Technology, which was later updated in 1985.9 And the evidence was quite compelling at that time, particularly in terms of the leakage of dual use technologies controlled under CoCom. In fact, it was subsequently revealed that much of the information contained in the white papers was based on the so-called "Farewell affair," which was the code name for a Soviet double agent who provided the French intelligence service with the actual Soviet shopping list for Western technology from 1979–1981, including targets and ruble allocations for each targeted item. On this basis, the administration contended that the West had indeed been "selling the Russians the rope" and that, until such time as there were definite and
dramatic changes in Soviet military doctrine, force posture, and industrial policies (i.e., heavy emphasis on military over civilian manufacturing requirements), it would be necessary to undertake a major tightening of U.S. and multilateral technology denial policies and to maintain such controls in place.
Political pressure forced an early removal of the grain embargo that had been imposed by President Carter, but the new administration soon demonstrated that, in conjunction with its announced intention to promote a major buildup in U.S. defense forces, it was prepared to get serious about restricting Soviet access to anything, including especially advanced technology, that would help it achieve its allegedly imperial ambitions (i.e., the Reagan notion of an "evil empire"). Accordingly, a variety of actions were taken, mostly by executive order,10 to expand the range of technologies and end products subject to control, to bolster the role of the Department of Defense in export licensing decisions* and to restrict the flow of technical information and, in some cases, people. In addition to its tightening and increased use of foreign policy and national security controls, the administration also moved to shore up and reinvigorate CoCom, which had become semi-moribund during the détente era, by pouring substantial human and financial resources into modernizing CoCom headquarters in Paris and by using its political resources to pressure the other CoCom countries into abiding more closely by the Industrial List of controlled items.
The success achieved in the implementation of this policy was due to an unusual confluence of factors, including (a) the conservative shift in the country as evidenced by the outcome of the 1980 elections, (b) the extraordinary political adroitness of Richard N. Perle and others in pressing the responsible line agencies to adopt a unified—and more restrictive—policy direction, and (c) the unusually close ideological alignment of the key players within the Department of Defense and the National Security Council staff and, of course, the President himself. Rarely, if ever, in the postwar era had a policy direction been reversed so quickly and with such thoroughgoing and far-reaching effect.
The opportunity for additional action soon arose with the imposition of martial law in Poland. The administration responded by invoking the foreign policy control provisions of the EAA and restricting the export of oil and gas drilling and gas pipeline laying equipment to the Soviet Union. The restrictions were opposed both by domestic industry, because of its inability
to fulfill previous contractual arrangements, and by U.S foreign subsidiaries and foreign companies using U.S. parts and components.
The concept of "contract sanctity" for U.S. exporters subsequently became a major issue of debate in, and a new provision of, the Export Administration Amendments Act (EAAA) of 1985. But the extraterritorial extension of U.S. law and regulatory authority, as epitomized by the imposition of the oil and gas controls, had even more profound and far-reaching consequences. First, it led a number of CoCom countries, most notably the United Kingdom and France, to legislate "blocking statutes"11 that explicitly prevented companies operating within the territory and under the authority of their respective governments from complying with the extraterritorial reach of another country's law, particularly when the activity in question was not illegal under the laws of the host country. Second, it reinforced and amplified the long-standing opposition in most other CoCom countries to extraterritoriality in general, with the effect that no other country has subsequently agreed to undertake intrusive end-use checks on dual use technology exports or to impose reexport authorization requirements. Finally, it "poisoned the well" (so to speak) for many years to come with the leading non-U.S. members of CoCom, who became deeply suspicious of U.S. motives, often failing (or refusing) to distinguish between unilateral U.S. foreign policy objectives and legitimate multilateral CoCom objectives.
NEW CONCERNS ABOUT "BALANCING THE NATIONAL INTEREST"
By the start of the second Reagan term, there was a growing perception, manifest both in the Congress and private industry, that the administration had perhaps been too successful in reversing the policy course of the détente period. This emerging new mood was first reflected in the debate over and final language of the EAAA of 1985. For the first time, there was undeniable evidence that U.S. industry was losing market share to its rivals because U.S. controls were more rigorous and far reaching than those of the other CoCom countries.* When combined with other evidence that a substantial number of controlled items were becoming increasingly available through third countries (i.e., non-CoCom, non-Communist countries), and that the other CoCom countries were not enforcing controls on "low end" controlled items that they believed (but were unable to convince the United States) no longer were really strategic, the pressure for change began to mount. As a
result, the EAAA of 1985 attempted to micromanage the policy approach to be pursued by the executive branch by calling for the elimination of licensing requirements for the export of "low end" items to other CoCom countries and attempting to place specific limits on the ability of the executive branch to deny licenses in situations in which there was demonstrated foreign availability.*
Little more than a year later, the report of the National Academies' Panel on the Impact of National Security Controls on International Technology Transfer, otherwise known as the Allen report (after its chairman, Dr. Lew Allen, Jr.), was released. For the first time, the actual scope and extent of the impact of licensing on U.S.-manufactured exports was documented. According to the Allen report, the United States exported about $62 billion worth of dual use manufactured goods under validated licenses in 1985, which constituted approximately 40 percent of total U.S. exports of manufactures in that year.12 Moreover, a consultant working under the supervision of the panel estimated that the overall economic impact of export controls on the U.S. economy in 1985, as measured in terms of lost West-West export sales, lost East-West export sales, and other factors, was approximately $9.3 billion. These data, together with the report's blunt conclusions about the new global economic and technologic circumstances that confronted the country—and the growing importance of economic vitality to the overall security of the nation—appeared to provide the impetus for a thoroughgoing reappraisal of U.S. export control policy at both ends of Pennsylvania Avenue.
Then, not coincidentally, revelations about a major illegal sale of controlled technology made headlines just two months after the release of the Allen report. The Toshiba-Kongsberg affair, so named as a result of the illegal sale of a nine-axis, numerically controlled machine tool to the Soviet Union by the Toshiba Heavy Machine Corporation of Japan and the Kongsberg Vaapenfabrikk Corporation of Norway, neutralized the political pressure for meaningful change in the policy, while playing directly to the rising anti-Japanese sentiment in the Congress and among the general public. At its nadir, the drama was played out on the television nightly news, with members
of Congress wielding sledgehammers on the front lawn of the Capitol to smash Toshiba consumer products, a scene shown over and over again in subsequent months on Japanese television.
The Toshiba-Kongsberg affair marked the end of any serious consideration of liberalizing export control policy during the Reagan administration. This fact was recognized and lamented by the other leading CoCom countries, who continued to pressure the United States for fundamental changes in both the extraterritorial dimensions of its unilateral policy and for a more accommodating position within CoCom. For its part, the Congress also continued to press ahead with yet another attempt to micromanage change in the executive branch policy under the terms of the Omnibus Trade and Competitiveness Act (OTCA) of 1988.* But it had become increasingly apparent that Congress was poorly equipped to force fundamental changes in U.S. export control policy in the absence of political will by the executive branch. Indeed, as an element of U.S. foreign policy, such a change could come about only as the result of a shift in the calculus of domestic and international political interest on the part of the executive branch of government.
BACKING INTO THE FUTURE
Whether or not one accepts currently fashionable arguments of the United States as a declining hegemonic power,13 it is undeniable that, as the dawn of a new century approaches, the political, economic, and technologic "balance of power" in the world has changed. But the United States has continued to drive the vehicle of export control policy while "looking in the rearview mirror." That is to say, the U.S. approach—namely, agreeing to incremental change in national and multilateral export control policy only under severe pressure from its allies—is based on a set of assumptions about American economic, technological, and political influence that, while certainly true for the first two decades or so following the Second World War—and perhaps even as late as the mid-1970s—simply no longer reflects prevailing global circumstances. At the same time, the United States is "trapped" by its perceived continuing obligation to exercise political and moral leadership as the paragon of the industrialized democracies.
With the advent of the Bush administration and the dramatic political changes that occurred in 1989–1990 in both Eastern Europe and the Soviet Union itself, it now appears that U.S. policy has indeed reached a point of decision. The choice for the United States has become rather straightforward: either maintain a reactive strategy, giving ground only incrementally and only when forced to do so, or seize the opportunity to forge a more proactive approach that takes account of the new global political, economic, and technological realities and the actual sources of threat (both current and prospective) to U.S. national security. There is no turning back in any case, because the old circumstances and leverage simply cannot be recaptured.
To let this historic opportunity pass by—and with it perhaps the possibility of continued effective multilateral export control coordination—would likely be viewed in the future as a policy failure of monumental proportions and long-standing consequence.