The Costs of Export Controls

If there is a key word in the United States in the late 1980s, it is "competitiveness."

By | March 23, 1987

If there is a key word in the United States in the late 1980s, it is "competitiveness." It's a word that's used in many contexts to mean many things. In his new book The Technical Enterprise (Ballinger, 1986) Herbert Fusfeld discusses how social, economic and political pressures like the drive for competitiveness are at work in shaping the technical system today. In this adaptation from the book, he describes the practice of using export controls to keep technological advances from potential adversaries and cautions against overuse of controls.

Export controls on technology from the United States are intended to prevent a potential adversary's access to any U.S. technology with military applications. Both the definition and implementation of such controls pose enormous difficulties, and they have a significant impact on the technical enterprise worldwide.

There is little quarrel with the intent of export controls. Common sense indicates that no great social or intellectual purpose is served by shipping a device for undersea detection of submarines or a laser-guidance system for missiles to the Soviet Union. Those are the easy decisions. The issues quickly become more complex when the question is one of selling landing systems for Soviet airports that embody advanced memory chips available in Europe, exchanging technical data between American and Soviet metallurgists, or (as recently happened) refusing permission for technical personnel from NATO countries to attend a professional meeting on advanced optical systems.

Any restriction on linkages within the technical enterprise weakens the effectiveness of the overall system. Thus, a deliberately restrictive policy should be based on careful analysis of the local gain or loss from the restrictions.

First, the objective of export controls should not be to keep important technology from potential adversaries, but to keep ahead of them. In some areas, this leadership may be maintained by restricting exports. In others, it may be improved by free trade and technical exchanges. Restriction of exports is only one tool.

Restricting the flow of important technology to a potential adversary requires a control over the worldwide technical enterprise that simply does not exist. The vast number of linkages and of independent technical activities in all countries create a global sea of science and technology, not just a few easily controlled channels. Thus, the export of U.S. technology would have to be restricted everywhere to keep it from the Soviet bloc.

It is impossible to identify an area of science or technology as having only commercial or only military applications. Every technology or scientific advance has what is known as "dual-use" capability.

Restricting a particular technology does not affect only that device or that area of know-how. It can affect our future capacity for generating new advances in that or related areas. Thus, before imposing export controls, nations must decide whether, by preventing short-term help to a potential adversary, they are limiting their own long-term capabilities. There is no question in time of war, since the short term is the only term that counts. There is a very serious question, however, in peace time.

It is important to note that export controls are not simply on finished products or processes but on technology itself. The system by which the United States attempts to control exports was established during World War II and has been in use since then. Much of the present concern comes from the reauthorization of the Export Administration Act of 1979. The implementation of the Act, administered by the Department of Commerce, traditionally has focused on the shipment of something physical—a product, a device, a report, a blueprint—that embodied a technology or that described it specifically. A license must be issued by the Commerce Department for such shipments.

The definition of technical data used in the Export Administration Regulations refers to "information of any kind that can be used or adapted to use in the design, production, manufacture … of articles or materials." Technical data are not limited to physical devices but can be knowledge conveyed in discussion, in a lecture or during a visit. Indeed, after 1979, individuals and companies were reminded that a license is necessary to export technology in any form outside the country, and that this definition could include discussion with foreign nationals in this country or overseas.

The extent of the enforcement problem is obvious. Most companies today are often in unintentional violation of the literal application of export regulations with regard to communication and visits with colleagues from friendly countries. Even though attempts are sometimes made to limit the refusal of a license to the most advanced and critical technologies, a great many companies must still undergo the application process in a great number of situations. Apart from the time and cost, there are other serious negative consequences.

First is the potential slowing down and weakening of the U.S. technical base. The sources of technical change in each company are varied. While the largest activity is very likely that of the domestic R&D organization, a substantial amount of input can come from various foreign ventures. These linkages can all be affected by export controls. Furthermore, the extent of company R&D depends on the sales of its products. If substantial markets are cut off by export controls, it would result in less money flowing back to support R&D in those areas, and would stimulate and strengthen competitive R&D overseas.

Second, controls affect our relations with friendly countries. Senior personnel from several of the major British companies assert that one of the top priorities of their R&D programs is to achieve independence from the United States with respect to advanced components and systems in electronics. They have expressed deep concern that items from the United States on which they depend for telecommunications and data processing might be cut off by U.S. export controls. Similar comments have been made by French executives and those involved in the Esprit program of the European Community.

Such reactions can shift the relative balance of technical strengths internationally on specific components and systems. They will almost certainly affect the overseas markets of U.S. companies. In the long run, the results may be exactly the opposite of what was intended.

Does this mean that export controls should be abandoned? No, but they must be realistic. Controls can be more effective if they are limited to a specific device or product. Even then, the effect is to slow, not to prevent. Any broadening of controls reduces their effectiveness. Most important, there is a cost to every action, and that cost must be evaluated with full knowledge of how the technical enterprise operates.

The United States has developed a strong and productive system for generating and converting technical change. In most cases, I really do not know how to prevent those results from being known and used by unfriendly countries. But I am certain that if a potential adversary has to obtain those advances from the United States, then we are more advanced and will very likely stay that way. Any change in a system which produces that result must be subject to the most serious and thoughtful analysis.

Fusfeld is director of the Center for Science and Technology Policy,
Rensselaer Polytechnic Institute, Troy, NY 12181.

Copyright © 1986 Ballinger Publishing Co. Reprinted by permission.

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