While export controls will evolve along with technology and circumstances, they must remain a part of international trade as the United States and friendly countries grapple with persistent problems like proliferation of weapons of mass destruction, regional instability, and terrorism, says William Reinsch, U.S. under secretary of commerce for export administration.

Reinsch also explains U.S. use of unilateral controls and re-export controls.

Overview

With the advent of the Cold War, the United States established a comprehensive licensing system to control the export of goods and technologies that could contribute to foreign military capabilities. That system, revised many times, remains in force today with four agencies having primary responsibilities for licensing exports: The Department of State licenses arms and munitions exports. The Department of the Treasury licenses certain exports to countries under U.S. unilateral embargo. The Department of Energy licenses certain nuclear-related exports. And the Department of Commerce licenses exports of dual-use goods and technologies (i.e., those with both military and civil uses).

Since the end of the Cold War, there have been extraordinary economic and political changes, particularly among the nations of Eastern Europe and the former Soviet Union, which were the primary targets of Western export controls and now participate with Western countries in controlling exports. Another change is the accelerating pace of global technology diffusion. Technology has always been difficult to contain; now the Internet, the high-performance computer, and the modem make its diffusion even easier. We in the United States 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, the United States must do in reality what it has often said it wants to do in theory -- focus its 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 Coordinating Committee for Multilateral Export Controls (COCOM) experience that multilateralism is critical to our success even as it remains uneven in practice. Dealing with new threats has demanded changes in the U.S. export-control system and changes in the way the Commerce Department's Bureau of Export Administration (BXA) operates. The Clinton administration has worked hard to grapple with those changes.

One of the administration's most significant accomplishments in export controls in the past four years has been ratification of the Chemical Weapons Convention (CWC). 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. The BXA will have major responsibilities for obtaining company data declarations and for managing inspections of civilian facilities.

The Wassenaar Arrangement on export controls for dual-use technologies and conventional weapons has also entered into force. Unlike its predecessor regime COCOM, Wassenaar lacks strong central authority and specific target countries and has many more participants, all making consensus 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 and Wassenaar Arrangement 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, and the time spent getting there is not wasted. Even works in progress produce successes along the way.

In addition, we have made several significant changes in reforming the licensing process to help U.S. companies compete in the world marketplace: computer liberalization; software, semiconductor, semiconductor manufacturing equipment, and oscilloscope licensing reform; a new system for reviewing commodity jurisdiction between the State and Commerce departments.

Background

While the State Department issues a larger number of export licenses, the Commerce Department controls a broader range of commodities. The Commerce Department's Commerce Control List (CCL) comprises two types of items: those that the United States controls as part of its obligations to one of the multilateral control regimes (the Missile Technology Control Regime, the Australia Group for chemical and biological weapons, the Nuclear Suppliers Group, or the Wassenaar Arrangement) and those items it controls unilaterally, such as items controlled for human rights or anti-terrorism reasons.

Commerce's authority to regulate exports is based on an executive order in which the president, invoking the authorities given him by the International Economic Emergency Powers Act, directed Commerce to follow the provisions of the Export Administration Act of 1979 -- often referred to as the EAA. This act, which established the legal framework for dual-use export controls, expired in 1994. Since that time, no EAA reauthorizing legislation has been enacted, despite rigorous efforts to do so. The difficulties in adopting a new EAA reflect the uncertainties in U.S. foreign policy generated by the end of the Cold War, the rise of regional threats, the increased importance of nonproliferation, and, from a different perspective, economic competitiveness. While the debate on a new export control law continues, the president's executive order allows the United States to continue its regulation of dual-use exports to ensure that they are consistent with our national security and foreign policy.

The intent in placing an item on the CCL is to ensure that its export is not contrary to the national security, foreign policy, or nonproliferation goals of the United States. The mechanism for carrying this out is to require exporters to obtain a license from Commerce before they are allowed to ship. These license applications are reviewed by a number of agencies, which provide their recommendations as to whether the application should be approved or denied. The departments of Defense, State, and Energy and the Arms Control and Disarmament Agency are the principal agencies reviewing Commerce decisions. Licenses for exports of encryption products are also reviewed by the Department of Justice. Each agency brings its particular concerns and expertise to the process.

In many instances, for many items exported to certain countries, the United States has decided not to require a license. For example, many exports to U.S. allies like Japan, Australia, or the member countries of the North Atlantic Treaty Organization do not require prior approval. In other cases, less-advanced technologies may not require prior approval for export to responsible countries that are not close allies. Commerce reserves the right to remove these license exceptions when needed, and a special provision of the regulations (known as the Enhanced Proliferation Control Initiative) acts as a catch-all provision so that Commerce can require a license for the export of any item going to a proliferation project of concern. In addition, the United States has very stringent licensing requirements for seven countries that the secretary of state has identified as state sponsors of international terrorism -- Iran, Iraq, Libya, North Korea, Cuba, Syria, and Sudan. U.S. licensing restrictions on exports to these countries go far beyond what is required by the multilateral regimes and are perhaps the broadest in the world.

For certain technologies, such as high-performance computers, the United States has developed a series of thresholds. Computers whose performance falls below these thresholds can be exported without a license. These thresholds are very high for Western Europe and Japan and extremely low for the seven terrorist countries. This approach seeks to balance real security concerns with performance and to reduce the regulatory burden for exporters when they are shipping to safe end-users. While there has been considerable recent scrutiny of the United States' high-performance computer export policy, we believe that it continues to work very well.

In general, the Commerce licensing process follows the instructions found in another presidential executive order that laid out timelines and dispute resolution procedures for export licensing. This executive order created a new framework for export licensing in the United States. It established a hierarchy of committees, reaching from the working level, through assistant secretaries, and then to the Cabinet secretaries. Should a dispute continue beyond the last level, the president will ultimately determine whether a license is approved. In reality, almost no licenses are ever sent to Cabinet secretaries for decision, but agencies do disagree in their initial recommendations in perhaps 5 percent of all license applications sent to Commerce.

Policy decisions

In deciding whether or not to allow an export to proceed, Commerce considers a number of factors. For items controlled as part of the Wassenaar Arrangement, Commerce considers whether the export would make a significant contribution to the development of military capabilities detrimental to the national security of the United States. For items controlled for missile, nuclear, or chemical and biological weapons purposes, Commerce considers whether the export would make a "material contribution" to the proliferation of these weapons of mass destruction.

U.S. unilateral controls look at different issues and apply to additional items not controlled by the multilateral regimes. The United States looks at three sets of issues for these unilateral controls: regional stability, crime control, and anti-terrorism. In deciding whether to approve or deny exports of items controlled for regional stability purposes, the United States considers whether the export could contribute to a country's military capabilities in a way that would alter or destabilize the regional military balance contrary to U.S. national interests. Decisions on the export of items controlled for crime-control purposes are based on the U.S. interest in promoting human rights.

Anti-terrorism controls on exports or re-exports of U.S.-controlled goods are more complicated. In many instances, an exporter is required to obtain the approval of the Department of the Treasury's Office of Foreign Asset Control before being allowed to engage in a financial transaction (such as being paid for the export). Iraq and Libya are the subject of UN embargoes, and Iran is the subject of a comprehensive U.S. unilateral embargo. U.S. exports to these countries are very small, except for certain humanitarian donations of food, medicine, and other articles to Cuba and North Korea. While the economic effects of these sanctions vary, they serve a useful purpose in expressing a strong objection to the behavior of these states in supporting international terrorism.

In some cases, and in particular for items controlled for anti-terrorism reasons, the United States reaches out and imposes "re-export" requirements. This means that when an item produced in the United States or produced with U.S. technology or components is being resold to one of the seven terrorist states, the exporter in a third country must obtain prior U.S. approval for the sale. This re-export requirement is also applied to a number of other sensitive or advanced technologies being re-exported to any destination. While a number of U.S. close trade and security partners have objected to these re-export controls as extraterritorial, the United States continues to consider them a vital part of our export-control system and necessary to advance U.S. national security and foreign policy objectives.

One particular area of interest is U.S. controls on encryption exports. Until 1997, the United States treated encryption as a munition. The growing commercial use of encryption and the spread of the Internet led to a recognition that this is an increasingly commercial technology rather than a military good. Commerce issued regulations on December 30, 1996, to implement the new U.S. encryption policy. Key elements of the regulation include the transfer of commercial encryption items from the State Department's U.S. Munitions List to the Commerce Control List, liberalized treatment for recoverable products, and a two-year transition period during which non-key recovery 56-bit DES or equivalent-strength encryption products may be approved for export based on industry commitments to build and market key recovery products and to support a key management infrastructure for electronic commerce. Encryption export controls continue to be one of the major areas of debate in export-control policy and the focus of several legislative efforts.

The next steps

One special part of U.S. export controls has been working with the nations of the former Soviet Union and with newly industrializing nations to develop the legal and regulatory framework needed for effective controls. This effort has been helpful in integrating these states into the larger international order.

The United States continues to refine its export controls in light of the changing international security situation and to work closely with its partners in the multilateral regimes to ensure common practices that contribute to stability and peace without denying legitimate trade. Export controls continue to evolve as we reassess their value in contributing to nonproliferation and national security. Much will depend on the work in the multilateral regimes and on the development of new legislation. The element that is constant, however, is a common view in the United States and with our partners that export controls contribute to broad national and international interests and will continue to be a part of the practices of responsible states.