Export Control Reform Is Necessary

By Paul Freedenberg and Michael Czinkota

Export controls are a principal means of defending a nation's high technology advantage over its potential adversaries. It is incumbent upon each nation to keep up with constantly evolving technology and adapt its export control system.

As of late, the practices of many countries are ineffective and lacking efficiency. Without reform of their export control systems nations may not only lose competitiveness, but may also endanger their national security.

During the Cold War, export controls were successfully implemented in order to isolate the Soviet Union and deny or at least delay its acquisition of the high technology necessary to strengthen its military.

Soviet strategy had to depend on brute force, while the Western allies were able to rely on their superior technology to defend their interests.

The inability to develop technologically led General Secretary Gorbachev to open up his own country and to allow more freedom in Eastern Europe, thus making dissolution inevitable.

Since the end of the Cold War, times, the adversaries and conditions have changed. Nowadays, many argue that export controls are no longer relevant.

There is no unanimity among high technology countries about the nature of the threats they face. There is no longer a single nation in possession of a veto that can be wielded when there is disagreement.

The current export control forum, the Wassenaar Group, is mostly concerned with keeping dangerous technology out of the hands of terrorists and rogue states.

However, many potential adversaries do not fit the profile of the Wassenaar Group. For example, China and Russia are certainly not rogue states.

However, the U.S. government retains a restrictive licensing policy toward them. The U.S. government is consistently more limited than its European allies with regard to licenses for products and technologies destined for markets like China.

Delays combined with foreign availability of products have meant lost business for U.S. firms and trade friction with China.

To take but one example, China is the largest and fastest growing machine tool market in the world. The U.S. still tightly licenses five-axis machine tools, because they are considered to be the most sophisticated.

These licenses can take from six months to a year to gain government approval. The Swiss, Germans, and Italians license products with identical capabilities in weeks.

Over the past decade the U.S. has lost 50 percent of its share in this fast-growing market. At the same time, the domestic U.S. market has shrunk by 50 percent.

Similar problems occur for semiconductor manufacturing equipment and scientific instruments. Without the cooperation and enthusiastic support between allies, the current export control system does not work. Unilateralism is dead. It costs jobs and does not accomplish its objectives.

There are important reasons to limit the export of one's technology. There are nations capable of substantial minacity ― both economically and politically.

A strengthening of their power could adversely affect the strategic balance. So, the issue is then, how can a country develop an export control system that receives support from other nations.

Within the next month, the Obama administration is expected to issue a number of regulatory reforms regarding the way in which the U.S. administers export controls.

It is expected that these reforms will provide a better definition of which items belong on the military-oriented Munitions List and which items ought to be treated as dual use technologies.

There are likely to be other reforms dealing with the mechanics of license processing, with the objective of speeding up licensing time and, most importantly, shortening the list of controlled products that require an individual validated license.

These national reforms are a good first step in what needs to be a global movement. Export controls can be made more relevant and effective if they are targeted and administered more efficiently. But more needs to be done.

Nations need a defined reason and purpose for export controls.

Nations need to clarify why it is of interest to their allies to support controls, even if they'd prefer not to do so ― and help their allies to adjust their perceptions and rules accordingly.

Nations need to expand the list of countries to which they have few or no controls.

Nations need to take steps which increase the chance that bad actors will be caught if they violate the rules.

National security and economic interests demand that export control reform becomes a priority. No nation can afford to go forward without addressing this issue.

Paul Freedenberg served as under-secretary of commerce for export administration under President Reagan and is chairman of MK Technology in Washington, D.C. Michael Czinkota is a former senior advisor for export controls in the Commerce Department. He is a professor at Georgetown University's McDonough School of Business and the University of Birmingham in the U.K.