Export controls and the art of modern defense

Longing for the simplicity of the longbow

Export controls are not a new idea. They date back to at least the 14th century when the English tried to keep longbow technology out of the hands of the French during the Hundred Years War. (The French got even by cutting off the first two fingers of each English archer they captured.) The modern history of export controls began with the Cold War as the United States and its NATO allies worked together to keep critical military technology out of the Soviet Union.

The first U.S. Export Administration Act (EAA) was enacted in 1949. It was three pages long. At that time export control policy was simple. We knew who the enemy was and where he was, and there was an allied consensus on what to do about him. Any technology exported to the USSR was assumed to end up in the Soviet Army, so very little time was spent worrying about specific end users or end uses. It was simply a matter of deciding whether we wanted the Red Army to have it or not. The allies set up a multilateral organization, COCOM (short for Coordinating Committee) that allowed countries to veto each other’s exports. There were disputes of course, but the system operated with reasonable efficiency.

Today, we face a very different world with multiple adversaries, including non-state actors, and no strong consensus on how or when to act. A universe of technologies exists that is orders of magnitude more sophisticated than in 1949, widely diffused, and much easier to export via the Internet. Virtually everything is made everywhere.

Modern day “dual-use” technologies

Despite rapid technological advancements, the basic framework for export controls in the United States has remained the same. Even though the statutory authority – the EAA – expired in 2001, the system has been legally maintained under the broad authority granted to the president in the International Emergency Economic Powers Act (IEEPA).

The law gives the president the authority to control so-called “dual-use” exports for three purposes: national security, foreign policy, and short supply. (“Dual-use” means an item that has both a military and civilian application. Examples would be night vision goggles and jet engine technology.) Exports of a good or technology might be restricted to prevent an adversary from using the material to enhance its military capabilities. Foreign policy-based controls might be used to keep the material from governments or groups that violate human rights. “Short supply” controls have been used very infrequently, but could be imposed to ensure sufficient quantities and availability for domestic needs.

Who in the government decides?

The government has developed a matrix to help exporters match the category their products and the technology embedded in them with the country of destination and proposed end user to help determine what licensing rules apply – if any. If a license is required, the exporter must submit an application for review by the government.

Goods and technologies predominantly for military applications, like weapons, are controlled separately by the State Department with advice from the Defense Department. Dual-use items are controlled through an interagency process led by the Commerce Department. An exporter applies for a license at Commerce, which then circulates the application to the Defense and State Departments, and occasionally other agencies, for their review.

More than 90 percent of the time, the agencies agree on whether or not a license should be issued. If they do not agree, there is an internal escalation process that moves from the senior career level to a committee of assistant secretaries to a committee of deputies and ultimately to the president for a decision, if necessary, although that has happened only a few times. Normal cases generally take less than 30 days to decide, while those going through the escalation process take longer.

How does the government decide?

In making a decision, there are a host of issues the government needs to consider. First it must determine whether a license is required. That depends both on the item and its destination. Over the past twenty years the government has generally followed the policy of “higher fences around fewer items,” focusing controls on the goods and technologies that really matter and not on older items that are widely available from multiple countries. In doing so, it often maintains tighter controls on design and production equipment than on end products. For example, we strictly control high-end semiconductor manufacturing equipment because we don’t want our adversaries to develop their own capabilities in that area, but we are somewhat less concerned about controlling the chips that the equipment manufactures if they cannot be reverse-engineered.

The location and nature of the customer also matter. For example, exports to Canada and NATO allies are not controlled nearly as strictly as exports to China or Russia. Since our law is also extraterritorial in its application, when an item is exported to an ally, that government is supposed to help ensure it is not further transferred somewhere else, which would violate US law. Similarly, we might permit an export to a clearly civilian destination like a bank or national railroad system but not to a destination linked to a country’s military forces.

In some cases, for example, the government might conclude that the capabilities of the item being exported far exceed the needs of the end user, which suggests the latter might have some other, illicit, use in mind. The government is also supposed to take into account foreign availability – the idea that if an export is available in sufficient quantity and comparable quality from a foreign source then we should approve the application because denying it would achieve nothing. The customer would get the item from someone else; our efforts to keep it out of his hands would fail; and our manufacturer would lose the market.

In defense of exports

Our approach to export controls has evolved as technologies evolved over the past 25 years, but there’s another significant change in how the Defense Department thinks about export controls.

In a world of fast-moving innovation, particularly in information and communications technology where products have short shelf-lives and are constantly being replaced with upgraded devices or systems, the Defense Department has realized that it needs to rely on commercial companies to meet many of its technology needs if it is to remain current. At the same time, for commercial companies, military sales are only a small part of their total sales. For the Defense Department that has meant accepting that exports to fast-growing foreign markets enables their suppliers to remain healthy and profitable, which in turn supports their ability to help meet our own defense needs.

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