Where Industry and Security Intersect
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Good morning, I'm pleased to be here and to have the opportunity to talk with you about technology and export controls.
This is one of several areas where the Clinton Administration has worked very hard to create a partnership between industry and government. The result has been a streamlined export control system that enhances American competitiveness while protecting our national security.
Our efforts are already paying off. In the last few years under the Clinton Administration, the liberalization we have undertaken reduced incoming license applications for computers and telecommunications equipment by over 80 percent and freed up more than $42 billion in exports from the requirement of advance government approval.
These reform efforts have grown out of two parallel themes. The first is reinventing government -- whether a license is or is not ultimately approved, decisions should be reached quickly and transparently, at minimal cost in time and resources to the applicant.
The second is a clear understanding of the interrelationship between economic power, technology proliferation and national security in a post-cold war world.
The world is clearly changing rapidly. Economic goals have become much more important to industrialized nations, turning allies into competitors. That is one reason why this Administration has emphasized economic strength and global competitiveness as a critical element of national security and world leadership. If we are not prepared to compete and win globally in advanced technologies, we cannot maintain our position.
As we all know, the end of the Cold War has had significant implications for our own economy, particularly the defense sector. Through our Defense Diversification Program, the Bureau of Export Administration--working in coordination with the Economic Development Administration---has responded to the concerns of U.S. defense companies. Our program consists of three parts: the Needs Assessment Survey Program, the Resource Matching Program, and the Defense Trade Information Network.
We designed our Needs Assessment Survey Program to determine and match federal and state defense diversification and competitive enhancement programs with the specific needs of individual firms. This program provides detailed information regarding more than 70 federal and state assistance programs;
The Resource Matching Program began in 1994 with programs in California and was quickly expanded to include seminars in Connecticut and Pennsylvania, Alabama, Florida, and Texas. Last year we coordinated a nation-wide series of conferences on "Commercialization of Defense Technology." These included over 25 representatives of local, state and federal organizations which helped various small and medium-sized U.S. firms identify pertinent technologies.
Through our international defense market assessment guides, we provide current market information on defense business opportunities abroad to assist U.S. firms in their market diversification efforts.
These programs essentially operate to create "marriages" between companies facing competitive problems and people interested in helping them -- as customers, as investors, as research partners.
Our studies are also an examination of those sectors critical to the defense base and economic security of the country. Examples include semiconductor materials infrastructure in conjunction with SEMATECH, small explosives study in conjunction with the U.S. Navy, and emergency ejection seat study with the U.S. Air Force. Past studies have included advanced ceramics, advanced composites, artificial intelligence, optoelectronics, and superconductivity. In the course of these studies, BXA has analyzed factors like competitiveness, foreign ownership, dependence on foreign sources of supply, impact of defense cuts on production and on research and development, and market trends, just to name a few. And we are not done yet, as additional studies are planned for the near future.
BXA helps defense firms diversify their activities into civilian areas by developing and providing detailed economic and statistical information that helps the government develop policies that ensure our industry and technology base are able to support changing security requirements, as well as develop next generation weapon systems. For industry, we provide information that 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.
In addition, we have worked with our embassy defense and commercial officers to provide significant new market information for defense and dual-use companies. Information on these market guides covering Europe, the Pacific-Rim, Western Hemisphere and Middle East, as well as much more information on BXA and its mission and activities is on our home page. You can access our home page by using WWW.BXA.DOC.GOV. These guides explain the procurement process and points of contact in approximately 50 of the major defense and high technology markets around the world.
As you know, cuts in defense spending have also resulted in base closures, and we have teamed up with the Oak Ridge National Laboratory to develop a pilot program to utilize excess manufacturing equipment at closed military bases. This "manufacturing empowerment zone" project would entail setting up portion of the closed facilities for use by the local community. BXA would identify local firms's manufacturing equipment needs through a targeted survey. Oak Ridge is responsible for setting up the equipment and designing training leasing programs for the identified firms, The Long Beach Navy Yard has expressed interest in being the test bed for this pilot program.
These activities, while tied directly to the defense industrial base, are only part of BXA's mission. Our core activity is controlling high tech exports for national security purposes.
The changes in the world I have mentioned apply to export controls as well as our defense industrial base, and the Bureau of Export Administration is adapting to these changes. The Administration realized early on that rapid technological change and economic globalization compelled comprehensive reform of our export control system, reform which balances the need to keep sensitive goods and technologies out of the hands of countries and projects of concern without imposing unnecessary or ineffective constraints on U.S. business. We no longer have a clearly defined single adversary. Instead, we aim to restrict a narrow range of transactions that could assist in the development of weapons of mass destruction in irresponsible countries like Iran and Iraq.
In attempting to do that, we have refocused our control system on a smaller group of truly critical goods and technologies and on specific problem end uses and end users in addition to the so-called "pariah" countries. At the same time we are trying to persuade our allies to pursue parallel policies.
That is precisely why we reformed outdated controls, streamlined our existing export control system, enhanced our enforcement programs, and helped to strengthen multilateral regimes.
In the last three years, we have
In 1994, we heeded the advice of exporters to produce a quicker, clearer license review process. And through the President's 1995 Executive Order, we have improved the license process by broadening agency review opportunities while limiting the time for those reviews, providing an orderly procedure to resolve interagency disputes, and establishing more accountability throughout the interagency process. We also streamlined the dispute resolution process at the political level, plugging up the black hole where licenses had seemed to languish, and so far, so good: average processing time for referred cases went from 40 days in 1995 to 31 days in 1996, and nonreferred cases went from 12 days in 1995 to 10 days in 1996.
I am also proud to say that we completed the transfer of jurisdiction of commercial communication satellites and commercial jet engine hot section technology from the State Department's Munitions List to the Commerce Control List, reflecting the fact that these items are, indeed, dual use.
Third, we cannot have a truly effective export control policy without broad-based support from our allies. Gone are the days when the U.S. had a monopoly on high technology trade or had the ability to impose our policy objectives on other nations. We have entered a period where cooperation among countries with shared interests is the rule rather than the exception. To that end, the U.S. has taken a lead role in developing the Wassenaar Arrangement, which established multilateral controls on exports of conventional arms and sensitive dual use equipment.
We will also continue to work with the non-proliferation regimes - the Australia Group (for chemical and biological weapons), the Nuclear Suppliers Group, and the Missile Technology Control Regime to encourage consistent implementation of export controls in all member countries and to broaden membership to include responsible supplier countries.
We are also working with several successor states of the former Soviet Union to help them develop effective export control systems of their own and facilitate their membership into the international export control regimes.
BXA's enforcement programs continue to play a critical role in protecting our national security and foreign policy interests, particularly as we focus more on specific end-users and end-uses. We have conducted hundreds of investigations over the last four years that have led to the criminal prosecution of persons who illegally exported zirconium for Iraqi munitions, unlicensed equipment for India's missile program, brokerage services for Iraqi rocket fuel, and gas masks to suspected Aum Shinrikyo terrorists in Japan, just to name a few. These investigations also included the first civil charges and penalties for alleged unlicensed exports of biotoxins which are controlled to prevent proliferation.
Enforcement is a critical partner for exporters. I cannot stress to you enough the importance of companies to "know their customers," and as always to exercise due diligence in transactions to destinations of proliferation concern. I urge you to work with our enforcement people when you uncover a suspect transaction.
An important problem for the future is the growing tendency of our trading partners to insist on technology transfer as a condition of doing business abroad. We use export controls to limit the availability of items with national security implications, but we do not use them to maintain our competitiveness. Our dilemma is that the private sector -- and the U.S. economy as a whole -- need to operate in foreign markets in order to thrive, grow and maintain leadership in the global marketplace. In doing so, however, companies regularly run the risk of creating their own competition by transferring production technology and ultimately endangering our economic leadership while seeking short term commercial advantage.
We know that other governments pursue their technological and industrial national interests aggressively, often through intervention that we do not believe is consistent with free market principles -- subsidies, obstacles to market access, organizing domestic competition, etc. As a result, we need to identify and develop our own alternative strategies for maintaining the U.S. technology base -- both external strategies such as insisting on market access through the WTO, and our own internal strategies to help us keep our competitive advantage and maintain a level playing field. Government procurement is important, and we at the Department of Commerce have other vital programs -- like the Advanced Technology Program -- designed to help develop cutting edge technologies for the commercial marketplace.
At the same time, in both government-to-government collaborations and commercial transactions, it will remain important for both the government and private industry to balance the immediate gains that result from international joint ventures with the long term economic competitiveness and national security effects of these transactions.
In private sector cases, government can play a useful role by providing its conclusions about these effects to the participants. Doing that, however, requires a deeper exchange of information than has occurred thus far. I believe it is in industry's interest to help us do just that, but it will take some further work to know what our industries are technologically giving away and getting back. We are moving forward, however. Back in December, the National Science and Technology Council's Committee on National Security agreed that it is in our interest to focus on these issues and established an interagency group to review the issue. Part of what we plan to do is to consult with industry to identify the technology transfer problems that are out there. I hope that some of you will be contacted in that regard in the near future.
In closing, I want to say how fortunate we were in the past Administration to have been led by Ron Brown, who knew so well the complexities of our export control and trade policy and how important it is to the business community that we respond to their concerns. Between his tragic death and Congressional efforts to dismantle the Department, we had a long and difficult year. But we are fortunate in the choices the President has made to succeed the him -- first Mickey Kantor and now Bill Daley. I have spent some time with Secretary Daley, and I am confident he is a man who understands the same complexities and will provide the same leadership.
While we are welcoming a new Secretary, our policy will remain the same. You should be confident that we will continue to push for an export control agenda and policy which addresses the needs of the U.S. defense industrial base, and which balances national security and foreign policy interests with our economic interests. The entire Clinton Administration will continue to provide the best quality service into this next Century and to do it in close consultation with the private sector. Thank you.
In April of 2002 the Bureau of Export Administration (BXA) changed its name to the Bureau of Industry and Security(BIS). For historical purposes we have not changed the references to BXA in the legacy documents found in the Archived Press and Public Information.