Testimony: Renewing the Export Administration Act

Testimony of Gary Milhollin

Professor, University of Wisconsin Law School and
Director, Wisconsin Project on Nuclear Arms Control

Before the House Committee on Armed Services

June 15, 1994

I thank the committee for giving me this opportunity to testify on the renewal of the Export Administration Act. First, I would like to describe the background against which this bill has come up. Then, I would like to suggest ways the bill could be improved. I would also like to submit for the record a report by the Wisconsin Project on Nuclear Arms Control, titled “25 Myths about Export Control,” as well as an article on export control that appeared in the Washington Post in February and a graphic published in the New York Times showing which countries supplied Saddam Hussein’s mass destruction war machine.

Export Controls Are Worth the Price

The most important thing to recognize about export controls is that they work. They buy the time needed to turn a country off the nuclear weapon path. Argentina and Brazil agreed to give up nuclear weapons mainly because of the costs that export controls imposed upon them. And in Iraq, secret documents showed that export controls on dual-use equipment seriously hampered the Iraqi nuclear weapon design team. The Iraqis spent time and money making crucial items that they could not import. The same controls also stopped Iraq’s drive to make a medium-range missile. In addition, these controls are now hampering India’s effort to build an ICBM.

But how much do export controls cost? Are they a drag on the U.S. economy? How many jobs are at stake? The total American economy was about six trillion dollars in 1992. Of that, only four tenths of one percent($23.7 billion) even went through Commerce Department licensing. And only $790 million in applications were denied–which is one hundredth of one percent of the U.S. economy and less than half the cost of one B-2 bomber. If the American economy were equivalent to a dollar, only four tenths of a penny’s worth would go through export control and only one hundredth of a penny’s worth would be denied a license. Export control is not a jobs issue. It has only a microscopic effect on employment. Gutting export controls will not stimulate the U.S. economy; it will only stimulate the proliferation of weapons of mass destruction.

And what about the end of the Cold War? Does that mean that export controls are less important? If anything, they are more important. With bipolar stability gone, regional tensions are growing. These tensions stimulate the appetite for weapons of mass destruction. The nuclear and missile arms race is still on between India and Pakistan, and still on in the Middle East. As CIA director Woolsey said during his confirmation hearings in 1993, “We have slain a large dragon, but we live now in a jungle filled with a bewildering variety of poisonous snakes.” It is illogical to say that because the Cold War is over, proliferation is the main international threat, and then to say that export controls, which are one of the best ways of containing that threat, should be reduced.

In fact, the lesson of Iraq was that export controls need to be stronger instead of weaker. But today’s export controls are only a shadow of what they were before the Gulf War, when Saddam Hussein was buying the means to make his mass destruction war machine. Since 1988 applications to the Commerce Department have dropped by 75%. Cases have fallen from nearly 100,000 in 1989 to about 25,000 in 1993. The value of goods individually licensed has dropped from over $100 billion a few years ago to just over $20 billion last year, and is expected to fall to only $10 billion in 1994. The reason is simple: fewer items are controlled, and so fewer applications are required.

Thus, the export control system today is only a shadow of its former self. The trouble with the House bill–the bill reported out of the Foreign Affairs Committee–is that it would get rid of the shadow.

Preserving Multilateral and Unilateral Controls

First, the bill makes it virtually impossible to continue multilateral controls–that is, controls that are the same as, or similar to, those of other countries. The bill virtually defines multilateral controls out of existence. Under the House bill, a control is multilateral only if it is adopted by an export control regime. The regime, in turn, must name the countries at which its controls are aimed. No current regime fits that definition. In effect, the bill would make all existing controls “unilateral.” These unilateral controls would expire after six months unless extended by the President under criteria that are almost impossible to satisfy. Thus, the bill’s definition of multilateral controls is only a thinly veiled attempt to abolish all export controls.

The House bill also erects prohibitively high barriers to the extension of unilateral controls. These barriers must be lowered in order to preserve U.S. leadership in export control. The United States must be able to adopt strong controls first, and then persuade other countries to follow its example. This is the method by which every export control agreement since World War II has been created. By denying the ability to sustain unilateral controls, the House bill makes it impossible for the United States to continue its leadership on export control, which will be a giant step backward for world peace.

At best, the bill would allow the United States to control exports about the same way that Germany controlled them in the 1980s. The graphic I submitted for the record shows that German firms were the main suppliers of Iraq’s chemical weapon, nuclear weapon and long-range missile programs. Germany supplied as much as all the other countries in the world combined. What most people don’t know is that German firms bought U.S. computers and combined them with German machine tools so that they could send the whole package to Iraq. Today, because we have decontrolled computers, we have lost the ability to track this kind of export behavior. This is bad enough, but the House bill would push all U.S. controls down to the level of Germany, or Switzerland, or other countries that prefer to make a profit at the expense of world security.

Strengthening Inter-Agency Review

The House bill also enables the Secretary of Commerce alone to decide which items to control and whether to consult other agencies on license applications. But to decide strategic questions, such as whether to export sensitive equipment, one must rely on strategic experts. They alone know what exports can do and what they will really be used for. In the United States, these experts are in the Pentagon, the Department of Energy, the Arms Control and Disarmament Agency, and the intelligence services. They are not at the Commerce Department. In order to bring the maximum amount of government expertise to bear upon decisions, the Departments of State, Energy, Defense and the Arms Control and Disarmament Agency should have the power to concur in the decision to add or subtract items from the control list. They should also have the power to concur in licensing decisions on individual exports.

The House bill does not now require the Secretary of Commerce to share licensing information with the national security agencies. In fact, these agencies do not have ready access to such information. These agencies should be given on-line computer access to all licensing information in the hands of the Commerce Department.

Preserving Adequate Time Limits

As written, the House bill now imposes a 30-day limit for processing licensing applications. This, says the Clinton Administration quite correctly, is so short as to preclude meaningful review. Moreover, there is no reason to shorten existing time periods. At present, the average time for granting a license application is only nine days, unless the application is referred to other agencies, and the Commerce Department is now meeting its licensing deadlines in 97% of its applications. The Department of Energy, to which Commerce refers nuclear cases, already turns them out so fast that Energy spends an average of less than 40 minutes on each. The House bill should be amended to restore the 90-day period requested in the Administration bill.

Transparency and Accountability

After the Gulf War, U.N. teams inspecting Iraq found factories full of Western equipment–machines that almost gave Saddam Hussein an atomic bomb. Saddam was able to buy this equipment without revealing his true intent because the licensing process for dual-use equipment is secret. Neither Congress nor the public is permitted to examine Commerce Department licensing in the open. This means that only the exporters know what is being sold, and only the exporters’ voices are heard by the licensing officers when decisions are made. The effect is to freeze the public and Congress out of the process and to open the door to the worst forms of private lobbying. This is true despite the fact that dual-use licenses are supposed to be for civilian items restricted to peaceful use.

The best American model of export licensing is the Nuclear Regulatory Commission. All of the Commission’s export licenses are granted on the public record and in the light of day. This is the main reason why there were no horror stories about U.S. nuclear exports to Iraq. Neither exporters nor regulators wanted to defend such transactions in public, so they did not happen.

To justify the present system, the Commerce Department argues that secrecy is necessary to protect proprietary interests. But the U.S. nuclear industry competes well on the international market, despite the openness of NRC licensing. That fact alone proves that secrecy is not necessary to be competitive. Indeed, there seems to be no evidence that any company would be disadvantaged if licensing data were made public. Companies know their markets well. They know who is selling to whom because their survival depends on it. Anything they might learn from licensing data would be only a small addition to what they already know. But even if there were a small disadvantage to a few companies from having licensing data published, this cost would be amply justified by the clear national security interest in having an effective, publicly-accountable licensing process.

To prevent another Iraq, the Export Administration Act should require the Commerce Department to publish semi-annual summaries of all dual-use licensing actions. The information would include the date of the application, the applicant, the date of the licensing decision, the name and country of the ultimate end-user, a description of the item sold, and a description of the end-use. This information already exists in a database. It could be printed by pushing a button. The summary would only cover licensing actions that have been completed. Pending sales would not be revealed in order to protect negotiations.

The summary would also include the name of the exporter. If a company is ashamed of having sold one of its products to a sensitive country, the company should not have made the sale in the first place. Reputable companies do not object to telling the truth about their business. If the sales are legitimate, and satisfy export laws, there is no reason to keep them hidden. The decision to license them is an official government act paid for with tax dollars. Pushing export licensing into the light of day would encourage the exporters to be honest, encourage the government to be careful, and allow the public to find out whether American exports are undermining U.S. national security.

Keeping U.S. Technology away from Rogue Nations

The bill as now written would allow sensitive U.S. exports to go without a license to any country that joins an export control regime, a step that is self-defeating. Spain and Italy, for example, adhere to the Missile Technology Control Regime and want to buy large space rockets. But Spain is reported to be developing a multi-stage missile that will reach North Africa and neither Spain nor Italy can adequately control its own exports. Thus, U.S. rocket technology sold to these countries could be reexported to Iran, Iraq or Libya, the very countries against which the control regimes are targeted. If an item that only the United States makes is freely sold to the other 25 members of the missile control regime, there would then be 25 potential suppliers instead of only one. The bill should be amended to delete the authority to create license-free zones and instead should allow the Secretary of Commerce to adjust U.S. export controls in favor of countries that have sound export controls.


The bill as reported also contains a provision entitled “indexing.” The idea behind this is that as soon as more sophisticated technology is developed, controls on less sophisticated technology should be dropped. But the bombs dropped on Hiroshima and Nagasaki are “obsolete” by modern standards. Should they be exported? Should the means to make them be exported? The first U.S. intercontinental ballistic missiles are also obsolete and after the Gulf War, U.N. inspectors discovered that Iraq nearly made an atomic bomb with the inefficient “calutrons” that the United States abandoned in the 1940s. It is no consolation to be killed by a bomb made with obsolete equipment.

To sum up, we are better off with the current Export Administration Act than with the House bill as proposed. Export controls are an essential tool in our effort to stop the spread of weapons of mass destruction. And it is much cheaper to prevent the spread of the bomb with export controls than it is to build giant systems to defend against the spread once it has happened.