Security at Issue : License Lag Stirs Debate on Exports

Times International Economics Correspondent

When helium, nature's endowment to lighter-than-air travel, was discovered after World War I in a lab near Amarillo, Tex., Congress wanted to save the precious, non-explosive gas for the U.S. Navy's airship program.

So the lawmakers passed the Helium Control Act banning exportation of the substance.

The 1925 law was America's first peacetime control over a technology export. "We didn't want a blimp gap with the Germans," explained Donald Weadon, an attorney who specializes in international trade problems.

Space Age Nightmare

The ban on helium sales has been eased, but in the years since that first step, U.S. export control has mushroomed into a Space Age nightmare for industry and government.

Congressional acts or amendments followed in 1940, 1949, 1969, 1979, 1981 and 1985. Each change added items to the list of restricted products and substances, and set new guidelines for the Commerce Department, which grants export licenses.

Then, six years ago, President Reagan, concerned over what he called a "hemorrhage" of U.S. technology to the Soviet Union, complicated the process by giving the Defense Department a virtual veto power--the right of review--over licensing decisions.

Commerce each year receives approximately 110,000 license requests, of which about 15% are relayed to the Defense Department for review. Some 3,000 applications are for sales to the Soviet Bloc or China, and about 14,000 cover prospective deals in non-Communist nations known to serve as transfer points for shipments to the East.

Process More Lengthy

Never fast, the licensing process grew more lengthy--and more contentious.

As a result:

--The Defense and Commerce departments, deadlocked over the question of national security, are at each other's throats over the authority to license exports.

--American companies are in a monumental rage over the Washington red tape, which they say is costing them billions of dollars in overseas sales and even risking loss of American technological superiority.

--Governments of U.S. allies and neutral nations are thoroughly frustrated over the extraterritorial impact of U.S. efforts to keep Western technology out of Moscow's hands.

"All the players have horror stories to tell," said a senior State Department official involved in the conflict.

Twice in the past six years, Reagan has had to settle disputes that even the Cabinet could not resolve.

In one case, Romania had contracted to buy an airborne, infra-red scanning system designed to find iron deposits but also able to detect underground military facilities. The President disapproved. In the other instance, the Soviet Union had signed to buy machinery to make combines that also could be used to make weapons. The President approved that sale, but it later fell through.

Commerce Department officials rail against the Pentagon for sitting on applications, and proudly point to a new regulation that allows them to license any applicant to whom the Defense Department does not respond within 10 days.

At the Pentagon, officials accuse the Commerce Department of ineptitude and say they feel threatened by lobbying pressures stemming from a National Academy of Sciences report that, basically, sides with the Commerce Department.

'Vultures Are Out'

"The vultures are out," Richard N. Perle, assistant defense secretary for international security policy, said in an interview.

At the State Department, the view is divided. "The Soviets already have breached so much of our security through espionage and purchases that perhaps we should concentrate only on the highest areas of technology," one diplomat said. "Yet Perle has a point: We have a leaky situation, and, as we proceed to (Strategic Defense Initiative defense program), computers and computer programming will play a crucial role and the Soviets will want everything they can get."

Only one dimension of the problem is clear: its enormity.

Sales of more than 200,000 American technology products--about one-third of the $213 billion in merchandise the United States exports each year--require licensing to be shipped abroad. Most of the items are spinoffs of the electronics revolution, and, once on the list, tend to stay on it.

List Growing by Year

"The list of restricted technology is so extensive and complex that only technical experts can understand it," said Rep. Don Bonker (D-Wash.), chairman of the House Foreign Affairs subcommittee on international trade policy and economics. "And the list grows longer every year."

To be deemed restricted, a commercial product needs only to be seen as having a potential military application--"dual use" in export-control parlance--under a definition so broad that it has included a talking teddy bear controlled by a microprocessor in its belly.

Everyone seems to agree that American technology of direct value to the Soviet war-making capacity should be withheld from Eastern Bloc countries and third countries that might re-export it to the Soviets. (Some 5,000 to 6,000 people are identified in government data banks as potential Soviet purchasing agents around the world.)

Just what should be held back, and at what cost? What about textile technology that would bring in millions of dollars but could be used to produce uniforms for chemical warfare? How about electronic pianos with innards that could be copied for use in naval sonar equipment?

Ball-Bearings Example

Pentagon officials cite the U.S.-built ball-bearing plant that the Commerce Department licensed for construction in the Soviet Union in the 1970s, before the Reagan Administration gave the Defense Department the right of review.

That plant was used in the building of the SS-18 nuclear missiles.

More recently, defense officials point out, the Commerce Department has argued for--but the Pentagon has vetoed--sales of $6-million worth of combat radios for a Libyan "fig farm" and of concrete testing equipment, ordered by Moscow, that could be used to measure the hardness of missile silos.

"At least 5,000 Soviet military projects already operate with Western technology," said Perle, the assistant defense secretary. "In technology flow our country has been a sieve."

(The 5,000 figure is a little out of date, Perle said. The spy inside the Soviet Union who supplied the documentation a few years ago was found out and shot.)

So what, Perle asks, if some of the restricted equipment falls below the latest and highest levels on the technology scale?

Theory of Restriction

Perle reasons that although the Soviet Union could develop almost any technology it chose to concentrate on, it would take time and resources that could be spent on new weapons.

"The Russians are much further ahead if they can get a Western country to supply them," he said.

In a study of 79 rejected applications for selling the Soviet Union computers, sensors, fiber optics, lasers or other high-tech equipment, Perle said, it was estimated that without the purchases, Moscow would have to spend between $6 billion and $10 billion to develop the technology on its own.

But the Defense Department goes too far, critics say.

"The Pentagon has a theory that anything we export that reaches the Soviet Union with the remotest military application frees up Soviet resources for more harmful purposes," said Howard Lewis III, assistant vice president of the National Assn. of Manufacturers.

"On that assumption, Defense can throw a monkey wrench into any trade with the Soviet Bloc."

Moreover, critics of the Pentagon say, the Defense Department sits on or rejects applications to export some products that are already available from West European or Japanese sources, and thus gives a boost to foreign competition.

Foreign Competitors Gain

"If our licensing is onerous, it gives an advantage to our overseas competitors--if you take three months and Japan takes three days, there is no question which country will get the sale," said Paul Freedenberg, the Commerce Department's assistant secretary for trade administration.

In fact, Commerce officials say that "foreign availability" makes the notion of export controls increasingly problematic.

They cited the case of a New Jersey businessman, George Kachajian, who could not get Defense Department officials to approve sale of silicon wafering saws to Eastern Europe even though comparable equipment was available from a Swiss company.

In another example, after Sperry Corp. was denied permission to export a computer for the official Soviet news agency Tass, the Soviets simply purchased another one from a French manufacturer.

In some cases, companies concede, the question is not at all clear. An ultrasound cardiovascular diagnostic system made by Honeywell, for instance, is restricted because it uses a signal processor that could also be useful in anti-submarine warfare.

Estimate of Cost

In all, however, the United States forfeits more than $9 billion a year in sales and nearly 200,000 jobs as a result of its export control laws, the National Academy of Sciences estimated in its recent report.

The figures are in some dispute ("They are rubbish, based on foolish extrapolation," said Perle), but it is generally agreed that export controls do impose a cost on the American economy.

"What people forget is that economic health is part of our national security, too," said Ralph J. Thomson, senior vice president of the American Electronics Assn., the largest trade group and lobby of the electronics industry.

"Our overweening export controls have amounted to severe self-inflicted wounds--they are a major and critical problem," he said.

"In West Germany, France and the Benelux countries, components we have supplied are being bought elsewhere because the United States is no longer considered, as a result of export control, to be a reliable supplier," Thomson added.

"That reduces our incentives for research and development and induces our foreign competitors to do more of it," he said. "In other words, it puts our technological edge at hazard."

Views of Other Nations

Advocates of strict export control also are concerned with third countries' attitudes toward U.S. regulations, although for different reasons.

For them, the world outside the Soviet Bloc falls into two camps: Allies grouped into COCOM (Coordinating Committee), which include the NATO nations and Japan, excluding non-industrial Iceland, and the rest of the non-Communist world, including European neutrals such as Austria and Switzerland and other countries, like India, that have special ties to the Soviet Bloc.

The COCOM countries enjoy trust because they at least have consented to the principle of export control--even though no European nation or Japan is as steadfast on the subject as the United States and they often seek exceptions for their own manufacturers.

"The Americans push for more enforcement; the Europeans and Japanese push for more relaxation," said a U.S. official who has participated in the meetings. "Sometimes it's gridlock."

Outside the COCOM camp, the United States deals with each country individually and the level of trust varies. A computer sale to India, for instance, gets far more scrutiny in the licensing process than a similar sale to Britain--and the application is more likely to be sat on or rejected.

India's Special Status

India, in fact, is one of 15 nations outside COCOM whose purchases of high technology merchandise receive special scrutiny.

For multinational companies based in the United States, subsidiary companies in foreign nations can present a problem when a customer seeks to buy sensitive technology that a U.S. parent company would be forbidden to sell from a U.S. plant.

Washington holds that a foreign subsidiary of a U.S. company is bound by American export control, but some COCOM governments deeply resent this view as an improper intrusion into their sovereignty.

Out of 110,697 applications for export licenses received by the Commerce Department in 1986, 88% were approved (covering shipments worth $60.3-billion) and 0.5% of them were rejected outright (shipments worth $500 million).

Slightly more than 11% of the applications--for exports valued at $10 billion--were "returned without action," a status covering a multitude of possibilities, ranging from deals gone sour to "insufficient data."

"The question is whether this figure--about 5% of total export trade--is an unreasonable cost for industry to bear," said Lee W. Mercer, deputy assistant secretary for trade administration in the Commerce Department.

What certainly is unreasonable, said Lewis of the manufacturers' group, is that controls on exports (and re-exporting from Western countries) have made American suppliers of components "the seller of last resort--the buzzword in Europe now is that products with American components are 'contaminated goods.' "

"With our trade deficit problem," Lewis said, "we certainly don't need that. We need to keep our economic position in the world."

Do export controls work? Even the strongest advocates concede that the Soviet Union can obtain, in general, any U.S. technology it wants, through espionage or leaks in the control system, which no one claims is perfect.

"A lot of stuff they simply can buy here and send through the (diplomatic) pouch," an American government official said, "but there's one thing they cannot get--access to our technicians for follow-up. You may find an IBM computer in Russia, but you won't find any IBM technical teams showing the Russians how it works and how to fix it.

"In that sense, controls work."

Times researcher Nina Green contributed to this story.

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