Support Fades for East Bloc High-Tech Ban : Trade: America’s allies are less willing to embargo sales of sensitive products to Warsaw Pact countries. And tensions are rising.

Growing differences between the United States and its key allies, aggravated by the political changes in Eastern Europe, have generated potentially crippling tensions in a system that has kept sensitive Western technology from the communist world for 40 years.

Few observers predict the immediate breakup of the Coordinating Committee for Multilateral Export Controls (COCOM)--the 17-nation, Paris-based committee that administers the West’s high-tech embargo.

But unless tensions are diffused, they could eventually erode both the unity and the political will essential to enforce the restrictions. That would leave the committee little more than an empty shell, according to sources close to the group.

COCOM--is certainly no stranger to internal strain.

Americans have long considered West Europeans too ready to risk passing on technology to the East in pursuit of commercial deals. Europeans, on the other hand, have for years judged the United States as hard-line purists about the embargo.

But differing views about how to react to the breathtaking changes in Eastern Europe have raised these longstanding tensions to a new level of intensity.

While COCOM’s penchant for secrecy keeps those directly involved from speaking openly about the problems, participants on both sides of the Atlantic privately expressed concern about the committee’s future.

“Old questions are being posed with a new urgency,” said a veteran participant in the COCOM process.

COCOM’s problems contain elements of a larger challenge facing the West: that of reconciling diverging interests of the United States and its Atlantic Alliance partners in adapting from the Cold War to the realities of a new era.

“COCOM no longer serves the purpose it should,” said Kenneth Warren, a Conservative Party member of the British Parliament who chaired a 1988 House of Commons committee report on trade with Eastern Europe. “The embargo is too big, it is inefficient and needs to be overhauled.”

Warren’s comments echoed a main conclusion of his committee’s damning conclusion on COCOM: “The time has arrived for a major reform of the whole procedure.”

In West Germany, Eastern Europe’s largest Western trading partner and the country that would gain most both politically and commercially from any relaxation, the mood is stronger.

“It’s a problem that is going to get bigger,” predicted Claudia Woermann, a trade specialist at the West German Industry Assn. “It is not a minor irritant.”

An annual high-level COCOM meeting here last month, described by one participant as “pretty intense,” left Europeans dismayed at the absence of any apparent new U.S. flexibility.

The 17 countries--all 16 members of the North Atlantic Treaty Organization except Iceland, plus Japan and Australia--remain committed to the goal of keeping sensitive high technology with possible military use from the Warsaw Pact countries of Eastern Europe.

It is the method of achieving this goal that is so divisive.

Europeans argue that the complex, unwieldy lists of embargoed products have grown too large to enforce and are so laughably obsolete that they jeopardize the committee’s credibility.

Disputes within COCOM, for example, have prevented dropping major, now outdated items from the machine tool list for 17 years, while export bans remain on personal computers that an East European citizen can freely purchase and carry home from any major city in the Western world.

At one point in the early 1980s, even drugstore digital watches and pocket calculators were banned.

“We’re wasting too much time and resources on things that don’t matter,” Warren said.

A rolling review of the lists instituted in 1985 has helped reduce some categories and eliminate a few others completely, but the need for all 17 countries to agree before dropping any item has kept progress slow.

This slow pace, coupled with the rapid proliferation of new technology means that the size of the embargo continues to expand.

The so-called streamlining process remains so cumbersome that in fast-moving technologies, products have been developed, marketed, become obsolete and been dropped from production before COCOM has eventually decided, in a somewhat empty gesture, to lift its embargo on them.

A West German Economics Ministry official complained that without U.S. movement, his country’s huge machine tool industry will “sooner or later be unable to deliver anything at all to the East.”

Virtually alone among its allies, the United States resists major change. Although committed in principle to streamlining the embargo, and encouraged toward more decisive action by Commerce Department officials who see billions of dollars in lost trade, successive U.S. administrations have shown little enthusiasm to act.

The United States sees the committee’s job primarily as risk-cutting and has been guided mainly by the Pentagon’s view that the more sweeping the embargo, the lower the risk.

Pentagon officials claim that COCOM restrictions have slowed Soviet computer development by up to 15 years and point to intelligence reports that Moscow took longer to copy IBM’s System 300 computer than IBM did to develop the product.

It cannot be bad, these officials argue, when Soviet Foreign Minister Eduard A. Shevardnadze complains openly about “these damn lists.”

Only reluctantly has the United States consented to the easing of controls, as it did last March at the urging of the Commerce Department when it agreed to remove from the embargo an entire range of personal computers such as the Macintosh SE. Defense Secretary Dick Cheney quickly distanced himself from the decision.

These internal differences within the Bush Administration are expected to continue, but those who know Washington believe that the Pentagon will in most cases maintain the upper hand. In arguments usually far too technical for policy-makers to follow, the Defense Department remains the sole judge of military risk.

The United States also takes the toughest line on the thousands of requests annually that COCOM reviews for specific, one-time exceptions to the embargo.

“I think most of the objections are from the States--I would say 90% of the time,” Barry Caine, British computer company ICL’s general manager for Eastern Europe, testified before the British Parliament’s trade and industry committee.

European government and industrial sources claim that COCOM decisions frequently take so long that the delay itself effectively blocks the shipment.

As an entity, COCOM is unique.

It operates secretively from an annex of the U.S. Embassy here with little more than a small secretariat of some 30 clerical workers and no experts of its own.

It is the final arbiter of a multibillion-dollar East-West trade relationship, yet is based on no treaty, is directly responsible to no public authority, has no appeal process and no statutory powers of its own.

Instead, individual member nations monitor the embargo on their territory and initiate their own legal action against companies that violate it.

The United States maintains its powerful influence over COCOM with the implied threat of denying access both to U.S. technology and to the huge American market to those members who fail to comply. As a consequence, there is little enthusiasm among Europeans for direct confrontation.

The recent spectacle of Japan’s mighty Toshiba Corp. taking the full wrath of U.S. congressional and public opinion after one of its subsidiaries was found selling embargoed machine tools to the Soviet Union, was a sobering reminder for any nation considering renunciation of the embargo.

The Toshiba equipment at the time was alleged to have enabled Moscow to produce higher precision, quieter submarine propellers, making them more elusive to Western sonar.

For much of the post-World War II era, it was not the COCOM embargo that imposed the main constraints in East-West trade, but a chronic East Bloc shortage of hard currency and the communist countries’ inflexible five-year plans.

But with a new political climate, a flurry of joint ventures involving Western companies in Eastern Europe and the growing prospect of major business opportunities as a part of Western-aided economic restructuring, COCOM reform has suddenly taken on a new urgency for Europeans.

Last week, West German Chancellor Helmut Kohl offered substantial new economic assistance to East Germany on top of the $2.5 billion per year that West Germany already provides East Berlin, and he has pledged more than $1.5 billion in aid to Poland.

Other Western countries, including the United States, have also pledged large sums for assistance.

The embargo is unlikely to hinder immediate Western aid to rescue the Polish and Hungarian economies. But any continued Western help to provide them with the basics of a modern economy, such as pollution-control equipment and adequate telephone systems, would violate existing bans.

Commented a source close to the committee: “There are political issues that have to be faced and decided. Do we want the Hungarians to be able to talk to each other on the telephone? Yes or no?”

Few are optimistic that these issues can be easily resolved.

“When it comes to things like telephone systems--and it will--I don’t see any solutions,” said trade specialist Woermann.

Some, like the British legislator Warren, see the only answer as a radically smaller, tighter embargo.

“Decide on the half-dozen or so technologies that are vital to defend and control them tightly,” he said.

Others talk of using the new openness in Eastern Europe to verify that technology with a possible military application is employed only for civilian use.

In the present political climate, many Europeans who share the U.S. desire to protect key technology have become increasingly disillusioned by the embargo’s blanket nature.

“When you are stopped from selling an out-of-date machine to the East by some bureaucrats in Paris and then watch the Swedes or the Swiss get the business, it’s dispiriting,” commented a British industrial source who declined to be identified by name. Sweden and Switzerland, as neutral countries, do not belong to COCOM.

Those close to the committee fear that if frustration levels among governments and manufacturers in Europe continue to escalate, COCOM could be exposed to a subtle, yet damaging erosion of support.

For if industries began to avoid compliance on any sizable scale, governments would quickly find themselves incapable of policing the restrictions.

“If we lose credibility with industry, we’re in serious trouble,” a British government official admitted. “It’s terribly important we are able to keep the support of major exporters.”

Added a source close to the committee: “No one is going to say ‘We quit COCOM.’ They’ll just pull back and say, ‘We just can’t convince our people to do this anymore.’ It would be a lingering death, not a dramatic one.”

A GROWING MARKET

High-tech U.S. exports to the European Community, measured in billions of dollars and in percent change since 1985

Amount Percent Product in billions change Inorganic chemicals $0.8 -9 Pharmaceuticals 1.7 +71 Power-generating machinery 4.1 +73 Computers and office machinery 10.5 +67 Telecommunications equipment 1.3 +60 Electrical machinery and semiconductors 4.6 +72 Aircraft 6.1 +85 Professional and scientific instruments 3.0 +44

Source: National Assn. of Manufacturers