12 July 1997
Source:
http://www.bxa.doc.gov/updat97.htm
UPDATE 1997
KEYNOTE ADDRESS BY UNDER SECRETARY WILLIAM A. REINSCH
BUREAU OF EXPORT ADMINISTRATION
U.S. DEPARTMENT OF COMMERCE
UPDATE 97
JULY 8, 1997
Go to:
Continuing Global Change |
Export Control Changes |
Enforcement
Foreign Export Controls | U.S. Defense
Conversion | The Future |
Conclusion
Introduction:
Good morning and welcome to Update 97. It is a pleasure to be with you again at BXA's annual reunion with American exporters. This conference is our most important outreach event. It provides an opportunity to brief you on what we have accomplished and what we are planning and to hear back from you on whether our direction is the right one.
I also am pleased to welcome once again senior export control representatives from Eastern and Central Europe and newly independent countries of the former Soviet Union. I would also like to welcome our Israeli delegation. They are with us because they face the same challenges we do and have the same interest in strong export control systems. There is much we can learn from each other, and I hope you will take a moment today or tomorrow to meet them.
To our special guests, I would say that part of our support for the development of democratic and free market institutions is assisting in the creation of strong export control regimes so that we can deal effectively with our common adversaries. I know you share our commitment to export controls to keep critical technologies out of the hands of irresponsible parties, and I hope you find this week's program interesting and helpful.
CONTINUING GLOBAL CHANGE: In past years I have discussed the extraordinary economic and political changes wrought by the end of the Cold War and the former Soviet Union. By now we are familiar with those changes and busy going about the business of adapting to them. Yet at the same time the roller coaster ride of further change continues, although now as many of them are beginning here as outside the country. Even as we speak, for example, there is an effort in Congress to significantly tighten our export controls on high performance computers by rolling back the President's 1995 decision. It grows out of, among other things, Congressional concerns about Chinese actions in a host of areas -- trade, intellectual property, human rights, proliferation -- and it threatens to unravel the President's policy of constructive engagement.
The Chinese do not make such engagement easy -- many of their policies are deeply troubling, and this Administration has spoken out against them. But trying to ratchet back export controls flies in the face of everything we know about the global diffusion of technology and threatens to start a new Cold War. And, as in the past, it reflects a climate of fear and mistrust rather than one of confidence about ourselves and our economic and military strength.
Another change is the accelerating pace of global technology diffusion. Technology has always been difficult to contain, and now the Internet, the high performance computer, and the modem make its diffusion even easier. We fool ourselves if we think traditional export controls can stop this spread, and we underestimate the resistance we will encounter from other nations who will accuse us of trying to hold back their economic development and entry into the global information age.
Instead, we must do in reality what we have often said we want to do in theory -- focus our controls on those choke-point technologies without which a weapon or missile cannot be built, and which can be controlled because of their special qualities, small number of producers, or limited alternative uses.
We also face the growing complexities of rogue states, like Iran, Iraq, Libya, and North Korea, still determined to acquire weapons of mass destruction and still destabilizing their regions through their support of terrorism. They have branched out from conventional military buildups and efforts to acquire a nuclear capability to chemical and biological weapons and the missile technology to deliver them. The ubiquity of some of those ingredients and technologies -- which have common civilian uses -- make the threat more dangerous and our export control task more difficult.
We have also learned through our COCOM experience that multilateralism is critical to our success, even as it remains uneven in practice.
Trying to deal with these challenges has demanded changes in our export control system and changes in the way BXA operates. When I first met with you in 1994, I laid out our goals for reform, streamlining and liberalization. The good news is that many of these goals have been met. The bad news is that there are attempts, like the one I just mentioned, to roll back those hard-fought changes and return us to a darker era. Even so, we are not standing still. More remains on our agenda, so let me take a few moments to comment on our successes, our future plans, and what we hope will be unsuccessful efforts to roll them back.
EXPORT CONTROL CHANGES: Multilaterally, our most significant accomplishment has been ratification of the Chemical Weapons Convention. The CWC, which prohibits the development, production, acquisition, retention, transfer and use of chemical weapons, is the most comprehensive arms control treaty of the post World War II era, and we look forward to working with industry to ensure an effective compliance program. BXA will have major responsibilities for obtaining company data declarations and for managing inspections of civilian facilities.
The Wassenaar Arrangement on dual use technologies and conventional weapons has also entered into force. Its lack of strong central authority, in contrast with COCOM, and its lack of specific targets has complicated its birth and made consensus among the expanded membership more difficult to achieve. Nevertheless, its inclusion of conventional weaponry is a major step forward, and I am confident that as its procedures and reporting requirements become routinized, discipline will grow.
One of the things the CWC taught us is that arms limitation agreements rarely arrive fully grown and complete. They are incremental. Establishing comprehensive adherence and compliance is an ongoing process that takes years of patience and confidence building. The result is worth waiting for, but the time spent getting there is also not wasted. Even works in progress produce successes along the way.
In past years you have listened to me tick off our domestic accomplishments: licensing process reform, computer liberalization, rewritten regulations, software, semiconductor, semiconductor manufacturing equipment, and oscilloscope licensing reform, a new commodity jurisdiction review process -- including resolution of the hot section technology and commercial communication satellite issues, just to name a few.
In addition, since we met last year, the President has announced an encryption policy, and I would like to say a word about this challenging issue. Our policy is intended to balance the competing interests of privacy, electronic commerce, law enforcement, and national security. We believe that promotion and adoption of key recovery technologies is the best way to achieve that balance. We do not focus narrowly on a single technology or approach. We expect the market to make those judgments, but we are taking steps to facilitate the development and dissemination of these products.
On December 30, 1996, we published new regulations that transferred export licensing of commercial encryption products from State to Commerce. This change emphasized the President's decision that strong encryption is not something to be used primarily by governments or military forces but is fast becoming an accepted part of normal commercial activity.
The new regulations allow recoverable encryption products of any strength and key length to be exported freely after a single review by the government. To encourage the movement toward the development of recoverable products, we have also created a special, two-year liberalization period during which companies may export 56 bit DES or equivalent products provided they submit plans to develop key recovery products. This provides an incentive for manufacturers to develop these products, which in turn will facilitate the development of key management infrastructures. So far, we have approved 23 plans, from companies large and small, and have nine more pending.
We are also discussing with our trading partners a common approach to encryption policy. To head this effort, the President appointed David Aaron, our Ambassador to the Organization for Economic Cooperation and Development. Ambassador Aaron has found that most major producing countries have public safety and national security concerns similar to ours. We are working together with these governments to ensure that our policies are compatible, and that they facilitate the emergence of a key management infrastructure.
There is action in the Congress on this issue, and we welcome the Senate Commerce Committee's favorable vote on Senators McCain and Kerrey's encryption bill, S. 909, the Secure Public Networks Act. We believe it provides a sound basis from which to develop legislation acceptable to both Congress and the Administration. In particular, we appreciate the bill's explicit recognition of the need to balance competing objectives and of the potential for key recovery to become a market-driven mechanism to facilitate maintaining that balance.
For those of you deeply involved in this subject, we have a specific session devoted to it later on.
Speaking of legislation, my speech would be incomplete if I failed to mention the Export Administration Act. I continue to predict its passage, and one of these years I'm going to be right. We made good progress in the House last year, and I hope the same bill will be considered there again soon. If so, perhaps this time the Senate will be able to take it up as well.
I know that there is some lack of excitement in the business community about this bill, but I hope you will support it nonetheless, and I will again remind you why you should. It does not do everything you want. Frankly, everything you want cannot pass the current Congress, just as it could not pass the two previous Congresses. The bill does take some important steps forward, however, in the areas of unilateral and multilateral controls, in broadening the coverage of unfair impact, and in codifying some of the procedural improvements I've described. I believe you may want that statutory protection of what this Administration has done in the future. Some of you may see the bill as a cap on your ability to make further progress in a more hospitable Congress. I'd urge you to see it not as a cap but as a floor that will build in protection against a less friendly Administration and Congress.
That such protection is needed is illustrated by the current Congressional attack on our computer policy. The President's decision was a realistic response to the technology available in the marketplace, and the procedures we put into place have, by and large, worked. Where they have not, BXA, along with the Justice Department, are jointly conducting investigations. Reimposing specific licensing requirements on a broad range of widely available computers to 50 countries is a sledge hammer solution that would substantially restrict legitimate trade without solving the problem of diversion. Over time it would cripple our competitiveness in those countries.
If there is any good in this episode, however, it is reinforcement of BXA's long standing belief that we need to provide more specific guidance to exporters on military and proliferation end-users. That is why we just recently published the names of some 13 entities of concern, and we plan in the future to publish more. At the same time, I encourage you to redouble your efforts to "know your customers" and to do your own "due diligence" using open source information about end-users. Reference to such sources may enable you to improve compliance procedures and thereby work in partnership with us to form an effective first line of defense in preventing exports and reexports which may be contrary to the national security and foreign policy interests of this country.
There are, of course, other issues we continue to face besides the need to provide more end user information -- for example, the rule on hiring foreign nationals, publication of the Wassenaar regulations, longer than desirable license processing times, and what I see is a disturbing trend toward using individual licensing decisions as a means of de facto policy making. There are also the periodic surprises Congress puts on the table. We will continue to work on all of those. We also will ensure that the work we have done and the reforms we have undertaken do not fall by the wayside. I hope this time next year I will be able to include all these outstanding issues in the finished column.
ENFORCEMENT: Other major changes in BXA have occurred in enforcement as we shift to a more targeted system of controls that focuses on preventing transfers to bad end users or end uses. That places a greater burden on our enforcement and intelligence resources, and we are in the midst of reevaluating the way our enforcement shop works. We are developing a 5 year strategic plan for future enforcement strategies that will make EE a flagship for the next century. I hope you will attend the enforcement breakout session today to hear more about this.
In the past we have had notable successes in pursuing and prosecuting violators like those who assisted Iraq's bomb-making efforts, Libya's attempts to evade UN sanctions, and India's strategic missile program. We also recently imposed $800,000 in criminal penalties for export control violations by a computer company. Recently we announced a significant penalty on a company for making false statements to BXA during the course of our enforcement proceeding to renew the temporary denial order imposed on the company for exporting U.S.-origin thermal imaging prototypes to Iraq.
These results are a tribute to our effective enforcement team, but they are also a reminder of the continuing need for such a team. There are bad guys out there; we all know that, and we all need to be alert to them.
FOREIGN EXPORT CONTROLS: Our foreign guests' presence here is testimony to our mutual interest in strong export control programs. One of BXA's programs is our effort to help these countries develop such programs. Over the past several years we have helped them to: draft their laws; obtain and install hardware and software to maintain a control program; train licensing officers, enforcement agents, and border control officials; and prepare to adhere to international regimes. The result will be better global controls which will benefit all of us. I wish I could say, as I did last year that, "Barry Carter will provide you with some additional details on this program," but he has returned to the faculty of Georgetown Law School. He did a tremendous job, not just with the foreign export control program, but for the entire bureau. He is missed.
U.S. DEFENSE CONVERSION: We are also faced with the complex tasks of simultaneously trimming unneeded defense spending, maintaining defense-critical technologies, facilitating the transition to defense procurement from the civilian sector, and helping defense firms diversify their activities into civilian areas. BXA compiles and provides detailed economic and statistical information that helps develop policies to ensure our industry and technology base are able to support changing security requirements as well as develop next generation weapon systems. For industry, BXA's defense diversification initiatives provide information firms can use to develop new product lines and market existing products both here and abroad. Much of our work is one-on-one with individual companies, and we have a growing stack of success stories as testimony to our efforts.
THE FUTURE: Despite our progress in reorienting our export control system, the major challenges I described earlier remain. As the pace of economic globalization quickens, technology becomes more diffuse, and maintaining effective controls in the face of widespread foreign availability becomes more difficult.
We do not have a monopoly on sophisticated technology, and countries intent on developing weapons of mass destruction can usually find a number of suppliers to choose from. We would be wasting our time if we maintained long lists of items to control unilaterally that are available from other sources.
Instead, as we continue to pare those lists down to what is truly critical, we must also concentrate on increasing multilateral discipline over those same items. Developing a consensus on that is a continuing challenge for us. Let me suggest three ways to help that process:
The first is to continue our own control review process, applying
a strict effectiveness test. Controls that do not advance our security or
policy objectives should be eliminated. Doing so will add to our credibility
with our trading partners, most of whom take a much more limited approach.
We have not done as good a job as we should have of reducing unilateral controls
and sanctions. This is not an easy task, as they all have some utility, but
it is one on which we should -- and will -- press harder.
The second is to provide more information to exporters and our trading
partners about problem end users. Many of our trading partners have followed
our lead and adopted a catch-all clause like our Enhanced Proliferation Control
Initiative. Making them work effectively means telling what we know -- about
end users, end uses, potential for diversion, and so on. As I mentioned before,
we have made some progress on this issue, and we will continue to provide
this much needed information to exporters. You will hear much more about
our new "entities list" in the break-out sessions.
The third is to make sure that your concerns are taken into account
in the development of sanctions policy. We are increasingly driven to sanctions
in cases like Cuba and Iran, often because of the Congress, but also by our
determination to condemn and modify, if we can, behavior we find unacceptable.
More than many other issues, however, the sanctions devil is in the details.
Badly implemented, these measures can cause enormous uncertainty and difficulty
for businesses -- even for those who do not trade with these countries and
have no intention of doing so. Careful implementation will minimize the
extraterritorial impact that so irritates our allies. Our luncheon speaker
today will, I expect, have some thoughts on this issue as well.
CONCLUSION: In closing, let me thank you for your understanding during these last few years. The changes I've described have not come easily, and we have tried very hard to consult with affected industries as we have gone forward. Your cooperation and support in that is much appreciated and continues to be needed.
You also know that when I addressed you last year I had by my side two of the best Assistant Secretaries anyone could hope for. Sue Eckert and John Despres have moved on, but the changes and successes I have mentioned are a testament to their vision and hard work. The Bureau could not have accomplished what it has without them. The only comfort I have in their departure is the hope that Roger Majak and Amanda DeBusk will, after nomination and confirmation of course, join BXA as the Assistant Secretaries for Export Administration and Export Enforcement respectively. They are intelligent, talented and dedicated individuals, and I hope you will take a moment to meet them.
Last year I also reminded you of continuing attacks on the Department's existence. Those assaults go on, and we appreciate your support in dealing with them. We hope we can continue to count on it if they recur.
In that regard, we are fortunate in the appointment of Secretary Bill Daley, who wanted to be here today but could not because he is representing the United States at the electronic commerce conference in Bonn. Secretary Daley understands the problems we face and provides the same caliber of leadership that we were so fortunate to have with Ron Brown and Mickey Kantor.
Remember though, that while the people have changed, our policies remain the same. We will continue an export control agenda which recognizes the global diffusion of technology and our economic interest in being at the forefront of that phenomenon, and which balances our national security and foreign policy interests with those economic interests. And one that will serve us well in meeting these objectives into the next century.