LEXIS-NEXIS® Congressional Universe-Document
LEXIS-NEXIS® Congressional
Copyright 1999
Federal News Service, Inc.
Federal News Service
APRIL 14, 1999, WEDNESDAY
SECTION: IN THE NEWS
LENGTH: 4163 words
HEADLINE: PREPARED TESTIMONY OF
GARY MILHOLLIN
PROFESSOR EMERITUS, UNIVERSITY OF WISCONSIN LAW SCHOOL
AND
DIRECTOR, WISCONSIN PROJECT ON NUCLEAR ARMS CONTROL
BEFORE THE
SENATE BANKING, HOUSING AND URBAN AFFAIRS COMMITTEE
INTERNATIONAL TRADE AND FINANCE SUBCOMMITTEE
SUBJECT - WISCONSIN PROJECT ON NUCLEAR ARMS CONTROL
BODY:
I am pleased to appear before this distinguished subcommittee to testify on
the reauthorization of the Export Administration Act. I will begin by making
some general remarks about the situation in which we now find ourselves with
respect to export controls. Then, I will make specific recommendations on
issues that now confront Congress. I would also like to submit two items for
the record. The first is a study that my office has just completed on U.S.
exports to China during the past ten years. The second is a study entitled
"25 Myths about Export Control" that my office prepared a few years ago but which is still relevant to the
issues we face today.
Export control is not a jobs issue
The most important single point for the Congress to appreciate is that export
control is not a jobs issue. Export controls do not have a significant--or
measurable--effect on employment. Of the total American economy, less than two
tenths of one percent ($10.7 billion) even went through Commerce Department
licensing in 1994, the last year for which I have been able to find licensing
data. And more than 95% of licensing applications were approved. Only $141
million in applications were denied in 1994--which is less than one hundredth
of one percent of the U.S. economy and roughly equal to six percent of the cost
of one B-2 bomber. The figures today are roughly the same. Reducing export
controls will not stimulate the U.S. economy; it will only stimulate the
proliferation of
weapons of mass destruction.
It is also important to realize that export controls are only a shadow of what
they were during the cold war. Since 1989, applications to the Commerce
Department have dropped by roughly 90%. Cases have fallen from nearly 100,000
in 1989 to 8,705 in 1996 and 11,472 in 1997. The reason is simple: fewer items
are controlled, so fewer applications are required. Nor does export licensing
take much time. The Commerce Department is meeting its licensing deadlines for
97% of its applications.
After cutting export controls to the bone to reflect the end of the cold war,
we now need to strengthen controls to combat proliferation, the main threat of
the post-cold war era.
Export control is a national security issue--now more than ever. The world for
which Congress must legislate today bears little resemblance to the cold war
world for which the existing
law was written. The spread of weapons of mass destruction, rather than
competition with the Soviet Union, is now the foremost strategic threat to the
United States. Because mass destruction weapons are built mainly with dual- use
equipment, the control of dual-use exports is of vital military and strategic
importance. Rather than being viewed as commercial transactions with a military
aspect, as they were during the cold war, dual-use exports must now be regarded
as deeply affecting U.S. national security. It is illogical to say that 1 .)
the cold war is over and therefore proliferation is the main international
threat, and 2.) that export controls, which are essential to contain that
threat, should be reduced.
In light of the situation we face today, Congress should reevaluate the ability
of the executive branch to respond to the proliferation threat. In particular,
Congress should consider transferring dual-use licensing from the Commerce
Department, which is concerned primarily with trade, to an agency, such as the
State Department, that is primarily concerned with protecting U.S. national
security. Or, if such a transfer is considered too big a step, Congress should
strengthen the role of the national security agencies in the existing
interagency process. In addition, Congress should find a way to increase public
accountability for export licensing decisions, and a way to provide effective
Congressional oversight of export licensing, which has been inadequate in the
past. Increasing the power of the national security agencies
The Defense, Energy and State Departments are the lead U.S. agencies on
nonproliferation issues. These agencies house the experts who understand how
dual-use equipment operates and what the risks are if such equipment is
diverted for military purposes. They also know which countries and companies in
the world are most likely to divert it. These experts are not at the Commerce
Department. In order to bring the maximum amount of government expertise to
bear upon export control decisions, the qualified personnel at the national
security agencies must be able to decide what is controlled and who is allowed
to gain access to it.
But that is not what is happening. The Commerce Department now has more
influence than any other agency when it comes to determining what is controlled
for export and who gets to buy it. Commerce now chairs the most important
export control committees and can use its administrative preeminence to
influence the outcome of licensing decisions.
I hope that this subcommittee will examine carefully the testimony given last
June by Dr. Peter Leitner before the Senate Committee on Governmental Affairs.
Dr. Leitner, who is a Senior Strategic Trade Advisor at the Department of
Defense, explained how the influence of technical experts from the national
security agencies has been diluted by making them subordinate to
a committee of non-specialists chaired by the Department of Commerce.
I would also like to point to the testimony of Representative Christopher Cox,
who testified in March before the Subcommittee on International Economic Policy
and Trade of the House Committee on International Relations. Congressman Cox
warned that mistakes are being made under the current process and that we can
do a much better job of export control. He also testified that the national
security agencies are not being given enough time to do a proper analysis of
applications, and he warned that the national security agencies should not be
outvoted on licensing cases. Because of the information Mr. Cox's committee has
recently gathered on export control, he is in a particularly good position to
judge the results of our current process.
Congress should, in my opinion, insure that no license application is approved
unless all the national security
agencies concur. It makes no sense to allow cases to be escalated to the
political level where the judgments of national security experts can be
reversed by political considerations. If a national security agency takes a
stand in opposition to an export application at the expert level, the case
should end there.
And instead of being like poor relatives invited to dinner, the national
security agencies should be put at the head of the table. Each interagency
committee should be chaired by a national security agency. There is no reason
to give this function to the Commerce Department, which has the least expertise
in the subject matter. And the power to decide what to put on the control list
should also be given to the national security agencies. Either the State or the
Defense Department should be given the lead in formulating the export control
list, with help from the Department of Energy for nuclear items. If export
control is
going to be a strategic question, instead of a trade question, then the
strategic experts should be put in charge of it. This is the only division of
labor that makes sense.
The Commerce Department is also burdened by a hopeless conflict of
interests--it must promote exports as well as regulate them. The promotion
function will always dominate, and will always cause the Commerce Department to
champion the exporters' point of view. As long as the Commerce Department is in
charge of administering the export control laws, national security will take a
back seat to trade interests.
Let me give an example to illustrate the problem. Last November, the State
Department slapped trade sanctions on approximately 300 companies in India and
Pakistan that are linked to nuclear, missile or military programs. The
objective was to register U.S. disapproval of the nuclear weapon tests in May
and to reduce the
risk that American products would contribute to the nuclear and missile arms
race in South Asia.
The Commerce Department, which opposed naming the companies in the interagency
process, but which now administers the sanctions, has virtually interpreted
them out of existence. Commerce has taken the absurd position that even though
a company has been placed on the sanctions list, it is still okay to supply its
subsidiaries or subdivisions. This is like saying that it is forbidden to sell
to General Motors, but it is okay to sell to the Chevrolet division, the Buick
division and the Cadillac division.
An example is Hindustan Aeronautics Limited (HAL). It makes the essential nose
cones, guidance equipment and engines for India's biggest rockets and missiles.
HAL's aerospace and engine divisions are specifically listed as
"involved in nuclear or missile activities." But the Commerce Department has taken the position that American exports are
permitted to
HAL's aircraft division, its foundry division, and its design and development
complex. How can anyone think that these entities are separate in any
meaningful sense from their parent?
A more flagrant example is Bharat Electronics Limited (BEL) in Bangalore,
India. It makes the electronic brains that guide India's long-range nuclear
missiles, the most powerful of which was tested just this week. Although BEL
too is listed as an entity
"involved in nuclear or missile activities," the Commerce Department wrote a letter in March to a U.S. exporter declaring
that sanctions did not apply to BEL's
"Components Division," which is also in Bangalore, because that division was not specifically
mentioned on the sanctions list.
According to an article in the Journal of Commerce, federal agents have
received information that the Components Division is simply diverting imports
to its parent. The Journal also reports that BEL has been
faxing the Commerce Department's letter to other U.S. exporters so that they
too can supply BEL through its subsidiary. The result is that American products
are continuing to fuel the missile and nuclear arms race in South Asia with the
help of the Commerce Department. Commerce seems to care little about missile
proliferation as long as the exports keep going out.
Congress should consider transferring jurisdiction over all dual-use licensing
to the State Department, for essentially the same reasons that it just
transferred jurisdiction over satellites. The Commerce Department is simply not
a trustworthy guardian of U.S. national security.
The State Department already handles munitions licenses with the help of the
Department of Defense. In the most recent fiscal year, State's Office of
Defense Trade Controls reviewed more than 44,000 licenses with a staff of about
55 persons. State could
easily expand its efforts to cover the missile and nuclear items now controlled
by the Commerce Department.
Congressional oversight
Another reason that export controls have not worked better is that Congress has
not exercised sufficient oversight. The cost of this lack of oversight is shown
by the example of Iraq. Congress essentially ignored export licensing to Iraq
until the invasion of Kuwait. If Congress had used its oversight powers, it
would have learned that the Commerce Department approved $1.5 billion worth of
sensitive, dual-use American exports to Iraq from 1985 to 1990, and that many
of these American products were sent directly to Iraqi mass destruction weapon
sites. The Commerce Department approved the following:
* special relays, capable of separating the stages of a ballistic missile,
after the exporter told a Commerce representative that Iraq wanted the relays
to be
"tested for shock and vibration" and to operate 66 miles
above the earth.
* $57 million worth of navigation, guidance and other equipment for the Iraqi
Air Force.
* $557 million worth of computers and guidance equipment for the Iraqi Ministry
of Defense.
* $3 million worth of computers and diagnostic equipment for the Iraqi Atomic
Energy Commission.
* $2.7 million worth of computers, and testing and tracking equipment for
Sa'ad 16, Iraq's leading missile development site.
The United States should have learned an important lesson from the export
debacle in Iraq. American pilots had to be sent to bomb what the American
government had approved for export. And some of the equipment that the Commerce
Department approved is probably part of what Saddam Hussein is still hiding
from U.N. inspectors.
Unfortunately, the Commerce Department has a similar record on exports to
China. My office has just completed a two-year study of what the Commerce
Department
approved for export from the United States to China from 1988 to 1998. The
study, based on official Commerce Department records, found that during the
past decade, Commerce approved more than $15 billion worth of strategically
sensitive U.S. exports to China. The exports included equipment that can be
used to design nuclear weapons, process nuclear material, machine nuclear
weapon components, improve missile designs, build missile components and
transmit data from missile tests.
The equipment, by definition, is of great strategic value. Only the highest
performing machine tools, instruments, computers and other such items require a
Commerce Department export license. This equipment has been placed on the U.S.
export control list by U.S. experts who have judged that special care-and
government review-is needed before releasing it to foreign countries.
Nevertheless, some of this
"dual-use" equipment went directly to leading nuclear, missile and military sites-the
main vertebrae of China's strategic backbone. And several of these Chinese
buyers later supplied nuclear, missile and military equipment to Iran and
Pakistan.
The study shows that the military and strategic value of these legal imports
exceeded by many times what China obtained by illegal means. What China got
from the Commerce Department dwarfed what it got from spies. Even after
purloining the design of a nuclear weapon, China still needed a large array of
high-precision equipment to manufacture and test it. Commerce Department
records show that it got that equipment from the United States.
More than half of the $15 billion was for computers. Until 1993, however, China
was effectively denied access to high-performance computers. In that year
President Clinton began to loosen export
controls, and in early 1996
computer export controls were slashed dramatically. Under the relaxed rules, China has imported or is
in the process of importing approximately 400 high-performance computers, the
great majority of which have been or are being sold without an export license.
Such machines can be used to encode and decode secret messages, to design and
test nuclear warheads and to simulate the performance of a missile from launch
to impact. China has refused to allow the United States to verify that these
computers are being used for civilian purposes, so it must be assumed that
China's weapon scientists have access to them. Some of the specific findings
of the study are as follows:
- The China National Nuclear Corporation was licensed to receive American
computer and imaging equipment for uranium prospecting. This company then
helped Iran prospect for uranium that U.S. intelligence believes will be used
to make nuclear weapons.
- The China
Precision Machinery Import-Export Corporation was licensed to receive American
equipment useful for building China's new C-801 and C-802 anti-ship cruise
missiles. This company then exported the missiles to Iran where, according to
the U.S. naval commander in the Persian Gulf, they threaten U.S. ships and
personnel.
- The China National Electronics Import-Export Corporation was licensed to
receive American equipment useful for developing radar. This company later sold
Iran a powerful military radar that could someday threaten American pilots.
- The Chinese Academy of Sciences was licensed to receive American computer
equipment to help develop a nuclear fusion reactor. The Academy then exported
the reactor to Iran, which U.S. intelligence believes is developing nuclear
weapons.
This record of dangerous exports to both China and Iraq contain an important
lesson. Congress must perform its
oversight duty if American security is to be protected.
Congress should carry out this oversight in two ways. First, it should require
each federal agency that participates in export licensing to file written,
periodic reports with each Congressional committee and subcommittee that has
jurisdiction over the agency's performance. These reports should be filed
automatically every six months. They should include a record of each licensing
application on which the agency acted and should include the agency's position
at all levels of review. The record should also include the case number, the
date received, the applicant, the consignee, the final date, the final action,
the value, the license type, the end use, the relevant commodity information,
and whether the application was approved, denied or returned without action.
Receiving these reports automatically and in writing would greatly aid
Congressional review of each agency's role in the licensing process.
Second, Congress should create
an independent Congressional office to review the government's performance on
export control. The office would have access to all licensing records, have
subpoena power, and the power to conduct investigations. The office would
function as an ombudsman. It would report to Congress and Congress would
appoint the office's director. The office could review the required periodic
reports referred to above, and provide to Congress an analysis of the licensing
performance of each relevant federal agency.
Transparency
In addition to Congressional oversight, the licensing process needs
transparency. Before the Gulf War, Iraq was able to buy sensitive equipment
that the Commerce Department must have known was going to be diverted to
weapons programs. The exports were approved primarily because the licensing
process for dual-use equipment is secret. Neither Congress nor the public is
permitted to examine Commerce Department licensing in the open. This means that
only the exporters know what is being sold, and only the
exporters' voices are heard by the licensing officers when decisions are made.
The effect is to freeze the public out of the process and to open the door to
the worst forms of private lobbying. This is true despite the fact that
dual-use licenses are supposed to be for civilian items restricted to peaceful
use.
The experience of the Nuclear Regulatory Commission shows the benefit of public
accountability. All of the Commission's export licenses are granted on the
public record and in the light of day. This is the main reason why there were
no horror stories about U.S. nuclear exports to Iraq. Neither exporters nor
regulators wanted to defend such transactions in public, so they did not happen.
To justify the present system, the Commerce Department argues that secrecy is
necessary to protect proprietary interests. But the U.S. nuclear industry
competes well on the international market, despite the openness of NRC
licensing. That fact alone proves that secrecy is
not necessary to be competitive. Indeed, there seems to be no evidence that any
company would be disadvantaged if licensing data were made public. Each company
would learn as much about its competitors as its competitors would learn about
it.
It is also true that companies know their markets well. They know who is
selling what to whom because their survival depends on it. Anything they might
learn from licensing data would be only a small addition to what they already
know through industrial intelligence gathering and marketing efforts. This is
true of foreign companies as well as American ones. But even if there were a
disadvantage to a company from having its past sales disclosed, this cost is
outweighed by the strong national security interest in having an effective,
publicly- accountable licensing process.
Congress should require the publication of all licensing decisions that are
more than one year old. It is difficult to see what harm could result from all
companies
knowing what other companies had sold a year ago. Because exporters consider
pricing information especially sensitive, Congress could decide not to release
such information until it were two years old.The licensing information would
include the date of the application, the date and nature of the licensing
decision, the applicant, the name and country of the ultimate end-user, a
description of the item sold, its value, and a description of the end- use.
This information already exists in a database. It could be primed by pushing a
button.
The summary would include the name of the exporter. If a company is ashamed of
having sold one of its products to a sensitive buyer, the company should not
have made the sale in the first place. Reputable companies do not object to
telling the truth about their business. If the sales are legitimate, and
satisfy export laws, there is no reason to keep them hidden. The decision to
license them is an official
government act paid for with tax dollars. Pushing export licensing into the
light of day would encourage exporters to be honest, encourage the government
to be careful, and allow the public to find out whether American exports are
undermining U.S. national security.
Multilateral vs. unilateral controls
One of the perennial issues in export licensing is the distinction between
unilateral and multilateral controls. In my judgment, it does not make sense to
pin national legislation on this distinction. A
"multilateral" control cannot be defined without referring to the laws and practices of other
nations. An attempt to do so leads one in a circle. To the laws of which
foreign countries should one refer? How much compliance by them with their
obligations is sufficient? Who decides whether the compliance really exists? If
foreign countries change their laws, does Congress have to change U.S. law too?
How does one avoid having the United
States sink to the level of the lowest common denominator?
The use of this distinction is the main weakness of HR 361, which allows the
United States to control only the things controlled by international regimes.
All other controls, which are labeled
"emergency" controls, lapse after twelve months. Under this approach, U.S. law would
depend entirely on the laws of other nations. No self- respecting country
should legislate in such a manner. It is the job of Congress to pass laws that
advance U.S. interests and reflect American values, not the interests and
values of other countries.
HR 361 would make it impossible for the United States to play its leadership
role in export control, and would reverse a foreign policy stance the United
States has maintained for over forty years. This would be an historic
abandonment of America's moral leadership. If the United States
simply aped what other countries did, American companies would now be selling
Iran sensitive machine tools because German firms are doing so. American
companies did not sell poison gas plants to Libya and Iraq because Germany did,
or sell large rockets to India because Russia did, or sell missiles to Pakistan
because China did. There were no American logos on the Russian-supplied and
German- enhanced Scud missiles that hit Tel Aviv during the Gulf War. U.S.
exporters have
"unilateral" controls to thank for that.It is essential for the United States to be able to
adopt strong controls first, and then persuade other countries to follow its
example--the method by which every export control agreement since World War II
has been created. U.S. diplomats are using this strategy today to help create
export controls in the former East Bloc. Leadership is inherently unilateral.
If the United
States had waited for Europe, Japan and the Arab countries to agree on what to
do when Iraq invaded Kuwait, Iraq might still occupy Kuwait today. Only by
acting
"unilaterally" was the United States able to forge a successful coalition.
Congress should give the President broad authority to control the export of any
dual-use item that is judged relevant to the national security of the United
States, the national security being taken to include combating the threat of
proliferation of weapons of mass destruction and maintaining the military
advantage that the United States now enjoys. The President should not be
limited by statute to controlling what other countries control. If, because of
the failure of other countries to control an item, the item becomes available
from foreign sources, the question of maintaining U.S. controls should be dealt
with through the foreign availability mechanism.
END
LOAD-DATE: April 15, 1999