A Saner Export-Control Scheme

Saddled with a system no one likes and doesn't work, even the Pentagon is advocating reform. Here are the outlines

By Stan Crock

Maybe, just maybe, the newly convened 107th Congress will be the one that finally adopts a long-overdue overhaul of the nation's increasingly obsolete export-control laws. The laws governing overseas sales of "dual-use" items -- that is, those with both commercial and military applications -- have been on the books for decades. They're supposed to make sure that critical items don't get into the hands of criminals, terrorists, and rogue nations. But high-tech companies continue to scream bloody murder. And they have a point: The current system is choking on itself and hamstringing industry, with little gain for America's security.

Leading the charge for change, as usual, is the computer industry. It argues that Washington can't rewrite the rules fast enough to keep up with innovation. Apple Computer, for example, had to delay foreign sales of its G4 laptop in 1999 because the machine's operating power exceeded export limits. That cost the company an estimated 30,000 in unit sales overseas. But here's something new: Both the General Accounting Office -- the watchdog arm of Congress -- and even the Pentagon have now taken Apple's side. And this good news for the computer industry could be very good for a broad spectrum of businesses that make dual-use items.

The campaign for an overhaul is certainly off to a fast start. Even before the new Congress took office, the GAO issued a report concluding that the current approach tor controlling computer exports focuses on an outdated measure -- each unit's computing power. It's easy these days for a foreign buyer to purchase legally exportable computers and link them together to obtain computing power far exceeding the U.S. export ceilings. Companies also can outsource their computing needs, using the Internet.


  The Pentagon has reached a similar conclusion. Just before he left office, former Defense Secretary William Cohen sent a letter to Senator Carl Levin (D-Mich.) saying the ability of buyers to buy uncontrolled computers and make clusters of them made the current process "largely irrelevant." What's more, a Defense Dept. study found that there was no good alternative approach to controlling hardware. The Pentagon looked at several possibilities, but all were found wanting.

Cohen favored a new tack: focusing restrictions on software used to develop advanced weapons systems. An adversary can have powerful computers, but if it doesn't have the software to build a nuclear bomb or design a command-and-control system, the hardware will have very limited military use. "It's not the computer hardware, stupid," is the way Unisys Corp.'s Dan Hoydysh puts it. And unlike servers, militarily critical software is limited and easier to contain.

The solution for computers sheds light on better standards for limiting exports of other dual-use items. It might be wise in other areas to target restrictions just to the warfare-related software and other items that the Pentagon and the intelligence community buy -- products with essentially no commercial use. That might include such things as fissile material for nuclear bombs, stealth technology, space sensors to detect incoming missiles, and naval warfare systems. Then national-security policymakers should zero in on the things they really care about, and Congress could consider junking the entire export-licensing scheme.

"The transfers that are damaging are not the legal transfers," notes Richard N. Perle, a national-security expert at the American Enterprise Institute. "If you were North Korea or Saddam Hussein and you wanted to get something you knew American policy did not permit, you wouldn't apply for a license."


  Perle advocates gutting the entire licensing process and spending the money on intelligence activities to make sure dangerous buyers don't get the relatively small number of critical items on a new export-control list. During the Presidential campaign, George W. Bush took a similar approach. He called for a policy that "significantly narrows the scope of restrictions on commercial products" and improves intelligence capabilities aimed at discovering violations of export controls. In a bid to court the high-tech constituency, he may try to make good on his campaign pledge.

So the stage is set for change. Truth is, Bush may have more credibility with Congress on this issue than Clinton, who was viewed on Capitol Hill as willing to open the store for campaign contributions. There's already a legislative vehicle: The Senate Banking Committee has drafted a new Export Administration Act, which among other things would exempt widely available commercial products from the licensing process. And in April, a high-level, bipartisan panel of experts put together by the Center for Strategic & International Studies, a Washington think tank, is scheduled to come out with recommendations for a new regulatory scheme.

If there's no new scandal about, say, China obtaining some critical technology, the stars may be sufficiently aligned for Congress to adopt a new regulatory regime for high-tech exports -- finally. Instead of wasting time and resources approving licenses for inconsequential exports, the government could then focus on the stuff it should really care about. Business and the nation's security would both profit handsomely.

Crock covers national security and foreign affairs for BusinessWeek from Washington. Follow his views twice a month, only on BW Online

Edited by Douglas Harbrecht

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