Where Industry and Security Intersect
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Good morning. I am pleased to be back with PLI once again to discuss the direction of the Administration's export control program.
I discussed with you last year the extraordinary economic and political changes wrought by the end of the cold war and the breakup of 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, both here and elsewhere, as our economy continues to globalize, and technological progress advances rapidly. Technology has always been difficult to contain, and now the internet, the modem, and the availability of high performance computers make its diffusion even easier. It also makes the consequences of that diffusion more serious. That means it is time for some new thinking about export controls and the role they play.
Part of that is identifying other means of protecting our security. That was the impetus for the president's decision to create a Commission on Critical Infrastructure Protection to study the threat of cyber attacks on our critical infrastructures -- communication and information networks, transportation, energy, banking and finance, and so on. The Commission has completed its study, and now we are working on a plan to reduce our cyber vulnerabilities. We understand that the private owners and operators of these infrastructures are on the front lines of this effort, and we are working in partnership with them to deal with threats and to develop new protections to make such threats less credible. The President's plans for implementing the Commission's recommendations will be out early next year, and I anticipate a role for the Commerce Department in promoting a more effective partnership with the private sector, particularly in the information and communications sectors. This is not export controls -- obviously - but it is a reorganization of how broad a concept.
Efforts like this also demonstrate the inherent limitations of export controls in trying to prevent bad actors' acquisition of high tech tools. We fool ourselves if we think export controls alone can stop the spread of high technology, and we underestimate the resistance we will encounter from other nations who accuse us of trying to hold back their economic development and entry into the global information age.
Obviously, they continue to play an important part in our mix of security policies. But it is more important than ever that we do in reality what we have often said we want to do in theory -- focus controls on those choke-point technologies without which a weapon cannot be built and which can be controlled because of their special qualities, small number of producers, or limited alternative uses. That is why congressional action this year imposing new restraints on the export of high performance computers is so frustrating. By forcing us to devote time and scarce resources to controlling a ubiquitous technology, congress is missing the point of export controls and diverting our attention from enforcement areas that are more important and more productive. BXA, by law, is now supposed to perform a post-shipment check on every computer over 2,000 MTOPS sold to 50 countries. In a very short time this will be an unsustainable burden made all the worse by the fact that it serves no purpose. Computing technology is readily available worldwide, and our unnecessary efforts will only handicap our companies' competitiveness, as well as retard legitimate economic development elsewhere in the world.
We also face the 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 widespread availability of some of those ingredients and technologies -- which have common civilian uses -- makes the threat more dangerous and our export control task more difficult.
It will be even more difficult, if not impossible, to the extent it is unilateral. We have learned through painful 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 several years ago, 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 improvements and return us to a darker era. Even so, we are not standing still. More remains on our agenda, and I would like to take a few moments to comment on our successes and our plans.
As I indicated, we've made a great deal of progress reforming our process. Yet, more remains to be done. We need to ensure that Executive Order 12981, which expanded the scope of interagency review of licenses for dual-use items and brought discipline to the export licensing system, is functioning properly. I invite your comments -- positive or negative -- on that process as we undertake this review and continue our efforts to reduce licensing times. One of Roger Majak's goals, now that he has been confirmed as assistant secretary, is to make our procedures work better, and I know he would welcome your input on how to do that.
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 one of the most comprehensive arms control treaties of the post World War II era, and I look forward to working with industry to ensure an effective compliance program. Congress has not yet passed in final form the implementing legislation, but we are preparing for our role once it does so. BXA will have major responsibilities for obtaining company data declarations and for managing inspections of civilian facilities.
We are also deeply engaged in the ongoing negotiations to strengthen the Biological Weapons Convention by providing a similar inspection system. That will occupy an increasing portion of BXA's attention over the next two years.
The Wassenaar Arrangement on dual use technologies and conventional weapons has also entered into force. Its lack of strong central authority and its lack of explicit target countries, in contrast with COCOM, is a reflection of the times -- the absence of a single large threat and lack of agreement over the nature and seriousness of the smaller threats. That weakness has complicated its development and made consensus among the expanded membership more difficult to achieve. Nevertheless, its inclusion of conventional weaponry is a major step forward from COCOM, and I am confident that as its procedures and reporting requirements become routinized, discipline will grow.
In that regard, one of the things the CWC battle reminded 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, rewritten regulations, control liberalizations on computers, software, semiconductors, semiconductor manufacturing equipment, and, most recently, oscilloscopes to mention a few, a new commodity jurisdiction review process -- including resolution of the hot section technology and commercial communication satellite issues.
We are now processing some 10,000 licenses per year, and I do not expect that to decline significantly in the future because I see few high volume areas ready for major liberalization. Our challenge will not be to shrink it but to keep it from growing due to our failure to keep pace with technology advances.
One of the reasons why our licensing load is inching back up is the transfer of encryption licensing to Commerce earlier this year. No speech from me would be complete without a paragraph on encryption, so here it is. Our policy is intended to balance the competing interests of privacy, electronic commerce, law enforcement, and national security. We believe that use 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.
Our regulations allow recoverable encryption products of any strength and key length to be exported freely after a single review by the government. To encourage movement toward 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 43 plans, from companies large and small, and have one more pending.
We are also discussing with our trading partners a common approach to encryption policy. To head this effort, the President appointed Ambassador David Aaron, our new Under Secretary for International Trade at the Commerce Department. 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.
With respect to legislation, we believe the McCain-Kerrey Bill, S. 909, the Secure Public Networks Act, provides a sound basis for 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, there is 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 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, investigations are ongoing. This is an enforcement issue, not a policy issue. Reimposing specific licensing requirements on a broad range of widely available computers is a sledge hammer solution that will substantially restrict legitimate trade without solving the problem of diversion. Over time it will 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 proliferation end-users. That is why we have begun to publish the names of entities of concern, and we expect to continue that in the future. At the same time, business should redouble its efforts to know its customers and do its own due diligence using open source information about end-users.
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 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.
On the enforcement side we have continued the shift to a focus on bad end users or end uses. That places a greater burden on our enforcement and intelligence resources, and we have just concluded a major reevaluation of how our enforcement unit works. We have developed a 5 year strategic plan for enforcement strategies that will make EE a flagship for the next century. I hope you will attend the enforcement breakout session tomorrow 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. 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.
BXA not only works with our domestic industry, but also works closely with foreign nations to achieve our mutual interest of strong export control programs. Over the past several years we have helped them 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.
Despite our progress in reorienting our export control system, the major challenges I mentioned 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:
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.
Let me copnclude by mentioning BXA's two recently appointed Assistant Secretaries: Roger Majak for Export Administration, and Amanda Debusk for Export Enforcement. They are intelligent, talented and dedicated individuals, and I hope you will take time to get to know them.
In that regard, we are fortunate to have in our Secretary Bill Daley a leader who 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 its forefront, and which balances our national security and foreign policy interests with our economic interests, and one that will serve us well in meeting these objectives into the next century.
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.