Balancing the National Interest U.S. National Security Export Controls and Global Economic Competition (1987) / Chapter Skim
Currently Skimming:
5. An Assessment of U.S. National Security Export Controls
5. An Assessment of U.S. National Security Export Controls
Pages 103-134
The Chapter Skim interface presents what we've algorithmically identified as the most significant single chunk of text within every page in the chapter.
Select key terms on the right to highlight them within pages of the chapter.
From page 103... ...
policy on national security export controls should result from a process that weighs the benefits of controls to the United States in its relations with adversaries against the costs of controls in relations with allies and trading partners. The purpose of controls is to prevent or delay improvements in Warsaw Pact military capabilities that can be accomplished through the acquisition and use of Western technology and goods.
|
From page 104... ...
Not only are the effectiveness and costs of controls uncertain, but there is a dearth of reliable data even on such basic points of reference as the value, composition, and share of U.S. export trade affected by national security export controls.
|
From page 105... ...
of the Export Administration Act, permitting its consultants unprecedented access to Commerce Department license files and data bases subject to strict observance of the confidentiality of business information. The consultants' study included analyses
|
From page 106... ...
The conclusions and judgments reached by the panel following these fact-finding efforts are discussed below. EFFECTIVENESS OF NATIONAL SECURITY EXPORT CONTROLS Intelligence and Enforcement Evidence Direct evidence of the effectiveness of national security export controls is confined to the results of enforcement activities and fragmentary intelligence data (see Chapter 21.
|
From page 107... ...
The data strongly suggest that independent foreign companies are either ignorant of or casual in their compliance with U.S. reexport controls except in the few countries, such as Switzerland, that require their firms to follow the rules of the country of origin when exporting imported products.
|
From page 108... ...
Ninety percent of license applications are for exports to Free World countnes. One-third of these applications are for items that may be exported to CoCom countries under a general license and even to Soviet bloc destinations *
|
From page 109... ...
Second, President Reagan directed the Department of Defense, concurrently with the Commerce Department, to review license applications for selected products to 15 Western countries that are not parties to multilateral control agreements and that are regarded as potential points of diversion. This greater attention to so-called "third countries" is reflected in longer processing times and slightly higher denial rates than for exports to CoCom destinations although it entails an additional layer of review whose independent contribution to the quality of the review process has been questioned by the General Accounting Office.3 Although more-sensitive technology items are excluded from distribution license coverage, the panel found little evidence that in the individual licensing process more attention is devoted to products of greater strategic importance than to those of lesser importance.
|
From page 110... ...
The study's estimates that the Soviet Union could have saved $6.6 to $13.3 billion over a 13-year period by acquiring the items specified in the sample of license applications, and that additional allied expenditures of $7.3 to $14.6 billion would be required over the same period to compensate for such gains, are the judgments of a group of military experts, but their criteria and assumptions are only partially stated. The more widely quoted assertion that "the cumulative costs of the Soviet long-term acquisition program are much higher perhaps $20-50 billion per year"s is not supported in the text of the report.
|
From page 111... ...
Commerce Department notices of amendments to the regulationsranging from major changes in the rules governing particular types of licenses to revisions of Control List entries to minor technical corrections-appear in the Federal Register on an average of about once a week. · The exporter must review all of its "exports" of technical data including international telephone conversations, servicing and installation activities abroad, and employment of foreign nationals to ensure that any
|
From page 112... ...
Distribution license holders and their approved foreign consignees are required in addition to implement a series of internal control measures that are unique to that type of license. These measures include designating and training employees with export control responsibilities; screening customers against the denial list, nuclear end use restrictions, and a profile of potential diverters; screening transactions against product and country restrictions on the use of the license; and maintaining extensive records to enable the Commerce Department to conduct periodic audits.
|
From page 113... ...
There is a pressing need to rewrite, simplify, and condense the Export Administration Regulations and to upgrade the competence of Exporter Services and diplomatic personnel to provide timely, accurate assistance. Processing Times A perennial concern of Congress, the business community, and the responsible agencies has been the time it takes to process licenses, especially IVLs.
|
From page 114... ...
Reducing further the average time a license application is under Commerce Department or interagency review is a worthy objective, but it would not necessarily have a significant effect on total processing times, the predictability of the process, or the skewed distribution of processing times. For many types of transactions, primarily those involving sales of most types of products to allied countries, the licensing system does operate *
|
From page 115... ...
Export controls are not designed to discriminate against small firms, but their operation adds to other difficulties small companies commonly experience in marketing internationally-difficulties in identifying markets, obtaining financing, and negotiating other hurdles to foreign trade. There is no estimate of the amount of exports foregone because the perceived costs of export controls discourage firms from doing international business in controlled products.
|
From page 116... ...
export trade affected by national security export controls is itself an elaborate and uncertain exercise. Nevertheless, a reasonable estimate is that in 1985 the United States exported $62 billion of dual use manufactured goods under the two most frequently used types of validated licenses-IVLs and distribution licenses.!
|
From page 117... ...
controls. The national security export control regime covers not only products and technology as they how across U.S.
|
From page 118... ...
national security export controls.
|
From page 120... ...
Like efforts to quantify the benefits side of the equation, any analysis of costs is hampered by certain inherent analytical problems. First, the continuity of national security export controls precludes examination in most instances of before-and-after effects on trade performance.
|
From page 121... ...
It has chosen nevertheless to present the results of the consultant's analysis as a frame of reference for appreciating the magnitude of the direct economic costs that may be associated with national security export controls.
|
From page 122... ...
As described in Appendix D, a realistic estimate of U.S.-Soviet bloc trade loss attributable to export controls is not insignificant, but it is smaller than the range noted above. Of much greater concern are the potential costs of export controls on U.S.-headquartered industrial firms engaged in West-West trade.
|
From page 123... ...
· For national security reasons the United States unilaterally controls some 27 categories of dual use products and technologies that are not included on the CoCom International List.8 Among other CoCom members, only Canada and Germany maintain unilateral national security export controls, but these are limited to certain kinds of chemical products and nuclear items, respectively. · The United States often requires foreign resellers to obtain a U.S.
|
From page 124... ...
national security export control system weigh more heavily than the controls of other countries with increasingly competitive suppliers, but it also captures a great many lower-level items and treats them on a par with more advanced technology having greater military significance. Although the benefits of controls appear to be concentrated in a few technology areas, the costs are spread across a wide range of products of varying sophistication and strategic importance.
|
From page 125... ...
components. THE CASE OF FOREIGN CONSIGNEES UNDER D~sTR~suT~oN LICENSES In May 1985 the Commerce Department issued new regulations requiring distribution license holders and their foreign consignees to protect controlled items from diversion to the Soviet bloc by establishing internal control and recordkeeping systems subject to on-site inspection by agents of the license holder and the U.S.
|
From page 126... ...
In the meantime the regulations have already brought about some erosion of the distribution networks of U.S. exporters, a marginal loss of business, and an increase in the volume of individual license applications.
|
From page 127... ...
Nevertheless, extending controls to unclassified technical data that relate to the wide range of technologies on the MCTL and allowing access to that data only by U.S. and foreign firms previously certified by the U.S.
|
From page 128... ...
USE OF THE MILITARILY CRITICAL TECHNOLOGIES LIST Regardless of the regulatory mechanism the panel is concerned by the prospective use of the Militarily Critical Technologies List as a de facto and possibly unilateral control list for technical data. It also considers unwise and unworkable the long-standing congressional mandate, renewed in the 1985 Export Administration Amendments Act, to integrate the MCTL with the U.S.
|
From page 129... ...
Further, the MCTL's development has not been disciplined by considerations of clarity, foreign availability, or enforceability, considerations that should be reflected if it is to be used as an operational control list accessible to licensing officers and exporters. The MCTL serves a useful but limited purpose as a reference document for developing control proposals and making informed licensing decisions.
|
From page 130... ...
The General Accounting Office is directed to "second-guess" the President's judgments and to determine whether they meet the statutory criteria. None of these formal checks and balances, intended by Congress to contain the costs and ensure the effectiveness of the President's actions, applies to national security export controls.
|
From page 131... ...
On its foreign fact-finding missions, the panel was told repeatedly that the United States speaks with several voices on technology transfer policy to the consternation and frustration of foreign negotiators. By the same token, several recent DoD initiatives, notably on the review of foreign availability findings and of license applications to certain Free World countries, have had the effect of weakening the authority of the Commerce Department and the morale of its Export Administration personnel.
|
From page 132... ...
Many of these studies have contributed needed discipline to the process by which new controls are conceived and developed. Of the 44 investigations, 20 were assessments of whether or not foreign availability should lead to the removal of existing national security export controls.
|
From page 133... ...
The reorganization of Export Administration in the Department of Commerce and the appointment of a senior representative for strategic technology policy in the Office of the Under Secretary of State for Security Assistance, Science, and Technology are two recent positive efforts to upgrade the administrative capabilities of responsible agencies. But there is a danger in isolating export control functions from trade and technology development responsibilities.
|
From page 134... ...
Technology, An Analysis of Export Control of U.S. Technology-A DoD Perspective (February 4, 1976)
|
Key Terms
This material may be derived from roughly machine-read images, and so is provided only to facilitate research.
More
information on Chapter Skim is available.