High-Tech Sale Curbs Found to Sap Jobs, Funds

A National Academy of Sciences study has found that attempts to keep high technology from Soviet Bloc countries have not significantly improved America’s national security, but have cost the United States 188,000 jobs and $9 billion a year and “are having an increasingly corrosive effect” on U.S. relations with America’s allies.

The academy panel recommended ending the Defense Department’s “de facto veto” over technology sales and easing U.S. controls on strategic exports to match those of the North Atlantic Treaty Organization allies.

Ex-Officials on Panel

The committee, headed by former Air Force Chief of Staff Gen. Lew Allen Jr., includes former Defense Secretary Melvin R. Laird and Bobby Ray Inman, former director of the National Security Agency and former deputy director of the CIA. It also includes a number of business executives and academics.

Veteran defense officials and others on the panel questioned Pentagon estimates that export controls saved the United States billions of dollars in defense costs.

The benefit to U.S. national security from stringent export controls “is feasible only in the shrinking number of cases in which the United States is the only country possessing the technology,” said the study, which was made available to the Washington Post in the form of a preliminary draft report.

Export restrictions “have greater potential to damage the U.S. economy than . . . reduce exports to the East Bloc,” the draft report said.

“Executive-branch decisions concerning national security export controls (should) accord greater importance than they currently do to maintaining U.S. technical strength, economic vigor and allied unity,” the study concluded.

The study sides with American business in a dispute that has split the Reagan Administration, with the Commerce Department and high-technology companies pressing for export controls to be relaxed and the Pentagon insisting that they be strengthened.

The finding echoed complaints by William Root, a longtime State Department official concerned with export control. Root resigned over the Pentagon’s domination of Reagan Administration policy in the field.

Compromise Measure

The study was started in 1984 after Congress, also split on the issue, failed to agree on how to renew the Export Administration Act, forcing the government to use its emergency powers to maintain controls until Congress acted on a compromise measure in 1985.

The defense and intelligence backgrounds of several members of the academy committee gives the findings more weight than if they had come from a group solely composed of academics and business executives.

Inman started the trend toward strict controls on high-technology exports in 1982, when he released a CIA report that found a “hemorrhage” of U.S. technology to the Soviet Union.

Coupled with another report investigating the increasing dependence of the military on foreign technology--especially semiconductors, which are vital for all defense systems--the study is expected to play a major role in the upcoming debate on U.S. competitiveness in the world economy.

Official Denounces Report

Despite the leadership of former defense and intelligence officials, Assistant Defense Secretary Richard N. Perle denounced the academy report because there are business representatives on the committee, including officers of Hewlett-Packard Co. and General Electric Co.

Perle described the report as “comments by a group of largely interested parties about public policy that affects their financial interests.” He said the membership is “predominantly representative of the outlook of the business community.” There is “a tremendous amount of unproven assertions in this report. . . . We had misgivings about the report from the very beginning,” Perle said.

The study was partially funded by the Defense Department, but Perle said the money came from a Pentagon branch headed by a former undersecretary for research and engineering, Richard D. DeLauer, who opposed Perle in internal debates on the value of export controls. DeLauer, now in private industry, “did not care for the policy of this Administration” on export controls, Perle said.

Mirrors Other Study

Nonetheless, the NAS panel findings mirror the results of a less-extensive study that the Center for Strategic and International Studies, a conservative think tank, completed more than a year ago.

The NAS emphasized in its study that the United States’ economic well-being depends on being able to sell overseas. U.S. dominance in high technology has been eroded by Japan, Western Europe and the newly industrialized nations of Asia and the Pacific. Until 1981, a booming U.S. high-technology trade surplus helped to offset deficits in other sectors, the study said. But that surplus decreased, and high-technology trade ran in the red for the first time last year, it noted.

“Export controls are not a leading cause of this recent decline,” the study said, “but they may tend to exacerbate the U.S. trade deficit by contributing to an environment that discourages export activities by U.S. firms.”

The study found that export controls provided “clear incentives” against buying American products if other countries can supply comparable products. “The trend toward non-U.S. sourcing is already evident in Europe,” it said.

Estimate of Costs

A special study included in the report found that “a reasonable estimate of direct short-run economic costs to the U.S. economy in 1985 was in the order of $9.3 billion.” That translated to 188,000 American jobs lost as a result of export controls and--when the multiplier effect of that spending on other business is included--an overall drag on the nation’s economic vitality of $17.1 billion, the study said.

William Finan, an economic consultant specializing in high-technology issues, conducted the special study for the NAS committee.

During the panel’s European trip, the report said, it “heard repeatedly . . . that companies are in the process of switching to non-U.S. sources for items controlled by the United States.

“These actions stem not only from concerns about the additional costs and delays imposed by U.S. export controls, but even more importantly from a view that the United States is not a reliable supplier--a view that was given credence by U.S. efforts to control gas and oil equipment in recent years in the face of strenuous opposition by our allies.”

Edge on Soviets

The NAS committee said the United States and its allies hold a five- to 10-year technological advantage over the Soviet Union.

The report cited Defense Department studies estimating the impact of export controls on the Soviet Union. These studies said the Soviet military would save between $500 million and $1 billion a year if it were able to obtain technology denied it by export controls. That would require additional U.S. defense spending of $7.3 billion to $14.6 billion to match the Soviet advances, the Pentagon studies indicated.

But the NAS panel questioned those estimates, along with higher ones contained in another Pentagon study, and said the Defense Department declined to supply backup data.

“Despite an intensive acquisition effort,” the report said, “the Soviets in general have not succeeded in matching the West’s technology edge. . . . It is unlikely that an influx of Western technology will enable the Soviet Union to substantially reduce the current gap--as long as the West continues its own pace of innovation.”