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PRESS BRIEFING BY CHIEF
OF STAFF JOHN PODESTA, COMMERCE SECRETARY WILLIAM DALEY, AND DEPUTY
SECRETARY OF DEFENSE JOHN HAMRE
July 1, 1999
The White House Briefing
Room
Secretary
Daley | Under
Secretary Reinsch
11:55 A.M.
EDT
MR. SIEWERT: Here today to brief
and announce changes in our export control policy are Chief of Staff John
Podesta, Commerce Secretary William Daley, and --
Q No
sound.
MR. SIEWERT: No sound?
WHCA? And Deputy Secretary of Defense John Hamre. Mr.
Podesta.
MR. PODESTA: Now we have
sound? Yes.
Thank you for coming,
and I believe that a statement from the President has been passed
out. We'll have a fact sheet on this announcement available to
you, I think, during or immediately following the
briefing.
We'd like to discuss, today,
President Clinton's decision to revise U.S. export controls on
computers in order to maintain realistic controls for national
security, and to support a vital U.S. industry. Since computer
export controls were last revised in 1995, we've seen tremendous
increases in computer technology and in computer power.
Perhaps the most vivid example is that by this fall, a laptop
computer that can perform over current control levels of 2,000 millions of
theoretical operations per second, or MTOPS, which I will refer to
from now on in the briefing, and will cost a few thousand dollars,
will be available by mail order or through Internet
sales.
The force driving behind these improvements is
the ever-growing power of individual microprocessors. Single
chips in commercial release today are over 1,200 MTOPS, the current
control level. By next year, commercial chips will raise from
2,500 to over 5,000 MTOPS. Commercial chips are shipped in
millions throughout worldwide distribution networks. They're
essential components of over 21 million personal computers, laptops and
basic servers sold in Europe and Asia in 1997 alone. That
number is growing now. We've also seen a steady rise in the
number of non-U.S. computer makers, not just the personal computers,
but of the highly competitive business server market as well.
Companies in Europe, Japan, Taiwan and South Korea are expected to
capture 22 percent of the global business computer market by the
year 2000.
As we try to manage controls over dual-use items,
we need to focus our resources on items that are not widely
available. We believe that it is almost impossible to
effectively control widely available, what I would call
commodity-like commercial items. We recognized in 1995 that
computer controls would need to be kept up to date. Defense,
Commerce, State and Energy have been reviewing the controls under an
NSC process to see what adjustments could be made to address the
technology advancements consistent with our national security
concerns.
I would note that with no changes to current
controls, we estimate that the U.S. could lose nearly $4 billion in
sales over the next four years due to increased export license
applications. That would weaken our computer industry, it would
weaken our economy, and it would do so without any benefit to
our national security since these products would be widely
available through other sources.
With regard to the
specifics, we're making several announcements today at the tier one
control level. We're moving several countries from tier two to
tier one, Poland, Hungary, the Czech Republic and Brazil. We
are raising the control level for chips or individual
microprocessors from 1,200 to 1,900 MTOPS. On tier two, we've
decided to raise the licensing levels for the tier two countries
which present low proliferation risk from 10,000 MTOPS to 20,000
MTOPS immediately. We'll continue to review the technology and
likely will raise the tier two level to 32,000 to 36,000 MTOP levels
in six months.
On tier three countries, those that present
proliferation risks, we've decided to maintain the current structure
-- one licensing level for military end users and one level for
civilian end users. We'll raise the level at which an
individual license is required for civilian end users from 7,000
MTOPS to 12,300 MTOPS. We will raise the current individual
license level for military end users from 2,000 MTOPS to 6,500
MTOPS.
The National Security Agencies have judged,
and the President and Vice President agree that it is simply
not practical to try to control computers below 6,500 MTOPS, such as
the IBM Netfinity, the Hewlett-Packard NetServer and the Compaq
ProLiant. Likewise, we'll raise the level at which the 10-day
pre-export notification requirement is triggered for exports to tier
three countries from 2,000 MTOPS to 6,500 MTOPS. The change to
the civilian licensing level will take place immediately and the
other tier three changes will take place once we have completed the
legally required six-month congressional notification period.
I think -- let me mention that we also intend to encourage
Congress, and we intend to work with them, to reduce the six-month
congressional notification period to one month, and we intend to --
with regard to the specific announcements we're making today --
we'd like to be able to work with Congress to see those numbers be
able to move into effect sometime this fall, when the products that
we're talking about will begin to hit the market.
Finally, let me say that on a longer-term basis we intend to work with
Congress to adopt an approach that does not rely on ad hoc judgments
about appropriate levels of control, but rather keys our export
controls to recognize the practical impossibility of controlling
items so widely available that they amount to, as I said, commodity
items, like microprocessors, which are sold in the hundreds of
thousands of units per month.
With that,
let me turn it over to Secretary Daley, and then Secretary Hamre
for their comments.
SECRETARY DALEY: Thank you,
John. The focus of our export control policy has been, is, and
always will be the protection of our national security. And that is
the basis for this decision.
Let me say a few words --
as John has stated, this was made after a very careful interagency
review that considered a range of options, and took a very in-depth
look at the technologies. As you all know, technology in this
area has been evolving very rapidly, and is available quite
freely.
What was controlled in 1993 as a supercomputer is
now less powerful than the most used laptops. If the President
had not taken this step, let me show you something. This
Play Station, which will be available at the holiday season this
year, would be controlled if these changes were not made.
So our focus has been what
we can realistically control. We think it is better to focus
our energy and our resources on those critical items which we can
control rather than those that are out of the box. The issue
with computers is that the high end is moving very rapidly.
These changes may not go as far as some in industry wish, but we
have committed, as John has stated, to review the levels again in
six months to see if they need to be adjusted. We believe
that computers operating at above-the-tier-three level for civil
exports, 12,300 MTOPS, can be controlled to selected
countries.
The President's decision also is intended to
strengthen by making sure that our high-performance computer
companies continue to be competitive in this global
marketplace. More than half their sales, as has been
mentioned, are exports, and if they cannot compete in this rapidly
growing market overseas, they will be outpaced by their very
aggressive competitors. If they begin to lose market shares,
earnings will decline, so their ability to sustain their current
levels of R&D next generation products would be affected.
These would be the very products that our defense and intelligence
establishments need to maintain their lead over others. At the same
time, we want to control products where we have top-edge technology.
Finally, let me say that these new export controls for
high-performance computers are also good for electronic commerce,
for faster computers mean faster and better applications. That
way, we also help our computer industry maintain their
technological preeminence as well as their market share. Thank
you. [next]
DEPUTY SECRETARY HAMRE: Good morning. First, let me
thank my colleagues in the interagency process, especially the
President, for taking very seriously our national security concerns
that we had when we addressed this issue. I know we irritated
people a good deal. But every one of our concerns was
accommodated, and we're satisfied that we can continue to protect
the country with these relaxations. May I say,
first, that there is a great deal of confusion that powerful
computers mean bad weapons in the hands of opponents. We
designed and developed the Stealth fighter. Very very
advanced, and it's the biggest machines we had, on what was the
equivalent of a 100 MTOP machine. And we're now talking about
laptops that can produce at 2,000 MTOPS. So it isn't possible
to say a very powerful machine represents a national security risk
because it means smaller machines just work longer. So it's
finding a practical way that we can control the technology, that --
not let it become a dangerous thing for us. And we're very
satisfied that these new guidelines will do that.
There is
no way in which we can control supercomputers which now are
available in the tens of thousands per month, or hundreds of
thousands per month. We are in this new world, and we can
live in this world. We also need to do it in a way where it
doesn't hurt American companies. Because, frankly, we benefit
in the Department of Defense by having the strongest computer
industry in the world. We've got to protect that. And that
was a very important step in this as well.
So let me
reassure people, it is -- this is a decision, our security concerns
were heard at every corner. We're very satisfied with
it.
We do know that we're going to have to continue to
look at this technology on an ongoing basis, and we're committed
to doing that. And we're very grateful that so much attention
was given to the national security concerns during this
review.
Q A couple of questions.
What, if anything --
MR. PODESTA: Do you want to play
with the Play Station?
Q -- well, never
mind. (Laughter.) What, if anything, makes you believe
that setting these limits will protect American industry from sales
from overseas computer-makers, when anybody can put together, from
these widely available components, machines which will perform above
the levels which you've set? And secondly, what makes you
think that the rest of the world will observe your distinction
between military use and civilian use?
DEPUTY SECRETARY
HAMRE: First of all, this was, again, striking a balance on
where you see practical applications and machines. And we looked out
and saw every one of the American companies, and what they were
going to be producing over the next six months, twelve months, 18
months.
Our goal was to design a system where we weren't
trying to control what became basically a consumer product.
And that's what this regulation does. So there isn't a company
that's going to be kept back.
Now, if its product
isn't as good as a foreign product, it's not going to be because of
our regulations that affects -- it's because they may have lost the
edge competitively. I don't think that's going to
happen. I think they'll do very well.
We still are
putting restrictions on very strong machines. There are some
applications where power makes a big difference -- nuclear
simulations and things of this nature -- and for that, we have to
continue to have a regulatory environment that controls very strong
products. But that's not a consumer product like a laptop or
a desktop.
Q What about the
civilian-military distinction? You're making a distinction in these
regs.
DEPUTY SECRETARY HAMRE: To us -- yes, the
distinction and the regs exist for the tier three countries, and here
it is -- we still think it's very important to try to have
some observability into how end use of machines is going to proceed.
For us, the test is very much: is it possible for bad guys
to hide inside benign commercial activity, and we wouldn't be
able to see it?
I think we're going to have to look,
over the next six months, whether this distinction of military and
commercial is sustainable. We don't know, but --
SECRETARY DALEY: For commodity, for commodity --
[next]
DEPUTY SECRETARY HAMRE: For commodity -- process. But
for right now, we've asked that we continue to be able to take a
look at and observe sales where we think it's going to be going to
commercial users -- to military users. We think we have to continue
to do that for the time being.
Q It seems,
sir, that -- John, that the problems would be precisely there in
dual-use technology in tier three companies. What did you to toward
strengthening the separation between military and civilian uses of
this high-tech stuff?
MR. PODESTA: Again, I think
maybe John wants to answer that.
DEPUTY SECRETARY
HAMRE: In each instance, we're talking about machines -- and there
is a logic to the separation between 6,500 and 12,300, and it's the
way in which machines can be configured and the way their
maintainable after their sold. And we think that is the --
right now, it's really more over the long-term maintenance of the
product that still gives us a window into how it's going to be used.
That's why we drew the criteria at those thresholds and why we think
we can maintain it. But I've got to tell you, it's
increasingly hard to be able to distinguish in what's basically a
commodity, a commercial commodity, the difference between a
military user and just a regular commercial user. We're going
to still try. But my pledge and the promise I had to make to
the President and the White House is that we're going to review this
on an ongoing basis.
If it isn't a useful distinction,
I think we in fairness have to come back and say that it's the best way to
look at it in the future. Right now, we asked to do it that way
and we accommodated it -- the President accommodated
it.
Q This is the third time --
MR. PODESTA: I would just add one point to
that. As you know, there is considerable interest on Capitol
Hill on this and I think we wanted to engage them in that dialogue
as well in terms of trying to understand the commodity nature of
these products and to fashion a regime that will work, both in the
interests of the economic security and the national security
of the United States.
Q Are you
suggesting lawmakers do this, John? Are you suggesting that
you would welcome input from Congress on --
MR.
PODESTA: They have -- as you know, they have created a system in
which the tier three changes that we're making will sit over for six
months in Congress, at least the rise of the military end users will
sit over for six months in Congress, and I assume that they're
going to take that opportunity to try to understand the industry,
understand the national security implications, understand the
questions of whether those kinds of products can be
controlled. And I think we will have to work together to kind
of fashion the right kind of solution.
As I said in my
opening statement, we think that having a six month delay in a
product area that is so fast moving is probably unwarranted and we
would like to see that moved to a shorter time period.
Q John, this is the third time this
administration has raised the levels after hue and cry from the
computer industry. The industry is very interested in having
some more certainty and in some fashion indexing what our decontrol
limits should be to something -- the fastest computer in America,
what's widely available. Does this proposal today have
anything of that sort in it or are you building something of that
sort?
SECRETARY DALEY: I think first of all, as
John mentioned, the one month instead of a six month will help do
that. We are also, as you could imagine, in constant
communication with the industry. That's why we feel very
comfortable that the numbers that have been put out today very much
meet the needs of the industry through this end-of-year
period. But -- and if we could get a more regular basis, as
you say, that is our goal; that is what we're working
toward.
DEPUTY SECRETARY HAMRE: We in the national
security establishment spoke against having an automatic indexing
mechanism. We feel that there needs to be some form of human
assessment and judgment that's brought to this. We also feel it
needs to be done on a fairly regular, more frequent basis
than the law freely anticipates. We feel that there needs to
be a regular, every six month, we sit down and take a look at
it. I think it's the only fair way to balance the genuine
progress that's occurring in this industry, but still having a
chance to -- for people to judge, what does this mean and is
the national security affected by it.
So it was our
request that we not go to some automaticity, some mechanism at this
stage.
Q A couple of questions about Cox
Committee recommendations. One is that the military civilian
distinction would work only if you have decent end user
verification processes. My first question is, do you think
they're adequate now, or do you think you need to go the way of Cox
Committee --
MR. PODESTA: Let me just remind
you. We negotiated for 15 years to get some sort of end use
agreement. We got that last July. We've had a few before
the tragedy in Belgrade with the Chinese Embassy end use
visits. We are hopeful and optimistic that we will be able to
reinstitute those procedures soon. But it took 15 years to
get an agreement, we finally got one and we're trying to develop it
even into a better one.
DEPUTY SECRETARY HAMRE: I
think this gets to the core of the dilemma that all of us face -- not just
us, but also the Hill -- which is the notion of an end use is one
thing if you're talking about a product that's produced 10 a
month. But how in the world do you have end use certification
when you're talking about 100,000 a month, or 1 million a
month? That's the tension that we feel in the national
security world.
Here, we have to -- if a system is going to
work, you have to be able to monitor potential diversion up front and
you have to audit potential diversion after the fact. That
gets very hard when it's a commodity. And so when you get to a
broad commodity -- this is where we came down on the Department
of Defense -- is once it becomes a commodity, this kind of power
in the machine, it is not a realistic national security exercise
to think you can control it at that level.
Now, very
strong machines, where we're still only producing one a year, or five a
year, that, we definitely want to continue to monitor --
manage.
Q John --
Q That brings the next question, which is that the Cox
Committee reports asked for empirical testing of national
security-oriented software to see if it can be run through massively
parallel processing, or whether you need one big
supercomputer. Are you doing anything like that, which suggests
focusing on the software, and not the hardware?
DEPUTY SECRETARY
HAMRE: You're right, it's applications that are really the
difference, here. It's not really how powerful the underlying
machine is.
As to the specific recommendations of Cox on
tests and so forth, I am not familiar with it; I'll find out and I'll
get back to you.
Q Mr. Podesta, do
you -- the Wall Street Journal today says that you anticipate rough
sledding on the Hill, in light of the letter that you got from Mr.
DeLay and others. What do you think the prospects are for
this? And how much input did they have into this
proposal?
MR. PODESTA: I should have read my Wall
Street Journal this morning. So I'm actually not -- I don't know
what you're referencing.
I think that our judgment was
made on what we thought was in the best interest of the country, and
the best interest of the system. We have done -- we've made
some calls this morning, I think, to let people know what we're
doing. And I've done some of those myself. But I don't
think we had a wide discussion with members of the Hill about what
the actual proposal ought to be, although we heard from them in the
form of a number of letters that were organized by leadership on the
Hill, to send to us, to encourage us to make a move on this question
-- that the current rules just wouldn't last beyond this year, and that we
had to do something. And we met together, as I said, in an
NSC/NEC process. And all the agencies, I think, gave a
joint recommendation to the President that we move forward in this,
in this regard.
Q But are you
optimistic or not, and is there some education, maybe, that has to be done
on the Hill on this issue?
MR. PODESTA: Well, I think,
you know, we'll obviously be briefing the Hill on it, and we hope that
they both accept the recommendations -- accept the rules.
Obviously, they have some ability to act on this, given the
six-month layover provision that they've written into law, but we
think this is a very sensible approach, and we think it will be
accepted.
And we also hope that they'll consider shortening
that six-month time. As I said, we think that it's somewhat
unrealistic in this context. But we're really just beginning
our consultations on that matter.
Q
John, while we've got you here, I wanted to get your reaction to the CBO
projections, that are apparently more conservative than the OMB
projections for revenue and spending. And are any of the
Republican tax proposals at all palatable to the White
House?
MR. PODESTA: Well, I think that the President
laid out his budget framework at the beginning of the week. I
actually have not seen -- Jake, I don't know, have we gotten the
CBO? We heard the rumors of what they were going to be this
morning, which is a little bit higher in the early years and a
little bit less over ten. But I really -- it's hard for me to
react, because I haven't seen them yet.
Q Would you be surprised that they were lower?
They're usually higher.
MR. PODESTA: Well, you know, I
think they're fairly -- it was my understanding that they were fairly
consistent with OMB, and so -- I'm up here just
speculating.
MR. SIEWERT: Their original estimate was
much higher, and not too --
Q A lot of the
sections of the Cox Report that dealt with the computer power issues
pointed to the concerns about nuclear simulation, which you raised
earlier. The level that you've raised the civilian tier three
to, of 12,300, is -- I think, if memory's right -- roughly where
supercomputers were a decade ago, when you were designing nuclear
weapons. Would it be fair to say that you could use a computer
that would not require an export license, now, to a tier three
country, to do the kind of nuclear simulation that we were doing ten
years ago?
DEPUTY SECRETARY HAMRE: I don't know that I
would say that. I'd need to get somebody who's an expert in
weapons design to give you that sense. But, first of all, we've got
a lot of people out there that are designing nuclear weapons that
haven't had supercomputers, okay? So I don't think that's
stopping the world from getting nuclear weapons.
There
is, I think, a very important issue, which is, if we want people to be
able to calculate reliability issues if they do have nuclear
weapons, and that does require stronger computers, this would go
into a world when we don't have testing. So it isn't
automatically a thing where you don't want people to be able to
undertake simulation, either.
So it's a very complicated
issue. But I'd like to get somebody from the Department of
Energy to actually answer that technical question.
Q Secretary Hamre, I understand that in addition to this
every-six-month review, you -- I don't know if this was in the final
proposal, but the idea was to offer industry even a little more
certainty by trying to project where you'll be a year hence.
You've done that, just here today, on tier two countries.
Would you like to hazard a guess at where we'll be on tier three
countries a year from now?
DEPUTY SECRETARY HAMRE:
Well, no. (Laughter.) I mean, I can tell you where we see some
of the machines going, and they offer very, very startling
images. I mean, we're not talking about some processors of
5,000 MTOPS in a single processor. Now, you bolt them together
and now you've got really a powerful machine and we have got to --
we haven't sorted that out yet. I can forecast at least what
industry is telling us they're going to produce. This is why
we have to have human judgment into this and not just have an index
and say we're automatically going to do this or we're automatically
going to do "y". You're going to need us taking and studying
this very carefully, and that's what we pledged we would
do.
Q John,
legislation is moving through the Senate Banking Committee as you probably
know that would do some of the things that you talked about in terms
of reviewing things at a commodity level. It would also
tighten in some ways end user review and the approval
processing. Has the administration looked at that proposal and
do you have any feelings on that?
MR. PODESTA: I
will have to get back to you on that one. Bill did you testify on
this legislation?
DEPUTY SECRETARY HAMRE: Bill
testified and I did too.
UNDER SECRETARY REINSCH: I'm
Bill Reinsch the Under Secretary of Commerce for Export
Administration. Mr. Hamre and I testified on this I guess a
week ago Tuesday and indicated that we wanted to work with the
Committee to try to produce a bill that addressed all of their
concerns as well as some of ours. The administration has
supported renewal of this act ever since it expired, which was five
years ago. And we, on several occasions, have asked the
Congress to renew it so we're very happy that they have decided to move
forward.
We indicated that we had some problems with the
draft bill that they presented. They've taken those problems
on board. We had a lengthy staff meeting with them earlier
this week, all agencies represented. The Committee staff
agreed that they had made a significant number of technical errors,
is the best way to put it, in the draft. I think they're
working on a second version for us to review. We've given
them some of our problems. I'm hopeful that we can come to a
meeting of the minds, but it's too early to say for
certain.
Q Can I ask one
more. I'm having a little trouble understanding the meaningfulness
of this if what was considered too dangerous a level six months ago
or a year ago all of a sudden is superseded and it seems like that
is going to be happening on an ongoing basis. Why isn't there
more of an effort maybe to foster some sort of international
controls on these exports if what animates part of this is that
we're going to get swamped by the competition?
UNDER
SECRETARY REINSCH: Well, there are -- we consult with our
allies regularly on this. There are some international controls on
this of us an our regime, which is the multilateral regime that
relates to both conventional weapons and dual use items. It
maintains controls here. So, we have an ongoing dialogue with
people on this. Frankly, some of our allies in this area that
are -- our numbers have been pressing us to raise the multilateral
levels.
MR. PODESTA: Thank
you.
END 12:22
P.M. EDT |