ALLIED ATTITUDES TOWARD EXPORT CONTROLS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP08S01350R000401070002-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 30
• Document Creation Date: December 22, 2016
• Document Release Date: March 5, 2012
• Sequence Number: 2
• Publication Date: January 5, 1982
• Content Type: SNIE

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Director of
Central
Intelligence
IStIV 1\
e (1
led Attitudes Toward
rt Controls
Special National Intelligence Estimate
&VIE 3120141-82
5 January 1982
CoPY 355
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ALLIED ATTITUDES TOWARD
EXPORT CONTROLS
Information as of 8 January 1982 was
used in the preparation of this Estimate.
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THIS ESTIMATE IS ISSUED BY THE DIRECTOR OF CENTRAL
INTELLIGENCE.
THE NATIONAL FOREIGN INTELLIGENCE BOARD CONCURS.
The following intelligence organizations participated in the preparation of the
Estimate:
The Central Intelligence Agency, the Defense Intelligence Agency, the National Security
Agency, and the intelligence organizations of the Departments of State and the
Treasury.
Also Participating:
The Assistant Chief of Staff for Intelligence, Department of the Army
The Director of Naval Intelligence, Department of the Navy
The Assistant Chief of Staff, Intelligence, Department of the Air Force
The Director of Intelligence, Headquarters, Marine Corps
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PREFACE
This Estimate assesses the views of our COCOM allies concerning
East-West economic relations in general and controls on exports to the
Soviet Bloc in particular. It is designed to aid in the preparation for the
upcoming COCOM High Level Meeting.
The Estimate examines the political, strategic, and economic
factors affecting allied attitudes toward East-West trade and the
manner in which these attitudes color their approach to export controls.
Where feasible, it assesses the receptivity of our allies to particular US
export control initiatives. In the annexes, supporting material is present-
ed on (a) export control statutes and procedures of the major allies and
(b) statistical problems in evaluating export controls.
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CONTENTS
PREFACE
Page
iii
KEY JUDGMENTS
1
I. THE ISSUES IN PERSPECTIVE
3
II. PERCEPTIONS AND INTERESTS
3
Political Perceptions
3
Security Considerations
4
Economic Realities
4
Experiences With COCOM
7
III. COUNTRY ATTITUDES
7
West Germany
7
France
8
Italy
10
United Kingdom
11
Japan
12
IV. PROSPECTS FOR COCOM REFORM
13
Defining COCOM Strategic Criteria and Defense Priority Industries
15
Role of the Military
16
Harmonization
16
Improving Enforcement
16
ANNEX A: EXPORT CONTROL STATUTES AND PROCEDURES OF
THE MAJOR ALLIES A-1
ANNEX B: MEASUREMENT PROBLEM IN EXPORT CONTROLS B-1
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KEY JUDGMENTS
Western Europe and Japan approach the January High Level
Meeting?and the US proposals to reform COCOM (the Coordinating
Committee for East-West Trade Policy)?with attitudes toward East-
West relations that differ markedly from those of the United States.
The allies see their political and security interests best served by
maintaining and increasing contacts with Eastern Europe and the Soviet
Union to promote political and economic stability and establish a web of
interdependence between East and West.
The allies' East-West trade is small relative to total trade but is im-
portant for specific industries in each country. In the short term, with
the current economic slump, the Eastern Bloc markets are particularly
important in maintaining employment in key depressed industries.
Over the longer term, despite problems in Poland and a general slowing
of the Eastern Bloc economies which have tarnished the glitter of
potential sales to the East, the allies view the Eastern Bloc as one of the
few major export markets in which they can expand their sales.
Even though the United States and its allies approach COCOM
with different perspectives, there is a consensus that the COCOM
mechanism needs to be updated. The allies recognize that Soviet
military power is growing, and they worry about the implications for
their own security of what they perceive to be an increase in US-Soviet
tensions.
The allies are not persuaded, however, that significantly broader
COCOM controls could help curb Soviet military growth. The current
NATO study on strategic technology transfer to Moscow could play an
important role if it helps heighten allied sensitivities to the military
application of exports. Also helpful would be a greater involvement of
defense ministries in export control policymaking. The allies, however,
will insist on coordinating any interministerial differences within their
own governmental structure and will not agree to the creation of a
military subcommittee within COCOM.
Even if the allies can be convinced that COCOM controls need to
be broadened, they will not be receptive to sweeping proposals that
would seem to subject whole categories of products and technologies to
COCOM review. They believe that COCOM controls should
1
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be focused on products and technologies whose contribution to Soviet
military strength can be demonstrated. The burden of this demonstra-
tion will continue to fall on the United States.
The allies will be favorably disposed to the need for tighter
enforcement of COCOM restrictions. Although differences in domestic
political sensitivities would complicate enforcement efforts, the allies
can be expected to endorse some steps to increase national activities and
to increase multilateral communication and coordination of enforce-
ment activities.
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I. THE ISSUES IN PERSPECTIVE
1. At the Ottawa Summit, President Reagan ad-
dressed the need for tighter controls over trade in
strategic goods and technologies with the Soviet Union.
As a result of this initiative, COCOM members agreed
to hold the first COCOM High Level Meeting (HLM)
in nearly 25 years to discuss the direction of strategic
trade controls. The meeting is scheduled to convene on
19 January 1982.
2. Over the two decades before the Soviet interven-
tion in Afghanistan, the dominant trend was toward
reduced COCOM restrictions?updating the COCOM
lists by adding a few new technologies, dropping ones
that had become obsolete, loosening administrative
procedures, and granting exceptions on a routine basis.
Following the intervention a number of economic
denial measures were accepted by COCOM members,
including a de facto "no exceptions" policy on exports
to the USSR for items requiring COCOM review. In
the intervening 24 months, however, support for these
tighter restrictions among the COCOM partners has
eroded, although the "no exceptions" policy has not
formally been abandoned.
II. PERCEPTIONS AND INTERESTS
3. The West European COCOM members and
Japan view export controls as a necessary but delimit-
ed element in their overall relations with the Soviet
Union and Eastern Europe. All COCOM members
remain firmly committed to coordinating and control-
ling the export of specific equipment and technology
that would clearly augment Soviet military power,
when such controls would be effective. However, they
prefer to interpret this policy to permit exports when
in doubt. Where they can find ambiguities in the
guidelines, an absence of clear linkages to military
applications, or uncertainty as to effectiveness, the
European countries and Japan tend to subordinate
export controls to other objectives of East-West policy
and commercial interests. In these instances, West
European COCOM members and Japan seldom inter-
pret export controls to be in their best interests.
4. In general, West European COCOM members
and Japan pursue what they perceive to be a balanced
policy toward the USSR?one that accepts the adver-
sary relationship and recognizes the vast military
power of the Soviet Union but seeks to maintain and
build contacts with Moscow to reduce tensions. Broad
political, security, and economic considerations shape
this desire for East-West detente and narrowly limit
the willingness to further restrict exports to the USSR
and its Warsaw Pact allies. Moreover, unique condi-
tions within COCOM countries and specific expe-
riences with COCOM procedures contribute to a
pluralism on COCOM's role and direction.
Political Perceptions
5. The governments of Western Europe and Japan
believe that detente allows them to offer the Soviet
Union incentives and disincentives that will reduce
Soviet adventurism and enhance global political stabil-
ity. They believe that efforts to isolate or contain the
USSR, especially through a program of economic
sanctions, cannot restrain Soviet policy. Instead they
contend that to integrate the Soviets more fully?
politically, economically, and culturally?into the glo-
bal system might curb Moscow's adventurism. In this
view, all relations except those that directly increase
Soviet military power should be expanded and
COCOM controls should be limited to specific equip-
ment and technology with reasonably clear and sig-
nificant military applications. Broader controls would
be perceived as counterproductive.
6. For example, the West European governments
have been willing to aid the USSR in developing its
natural gas and energy reserves, not only because the
pipeline will supply Western Europe with needed
energy and West European companies with contracts,
but also because they hope that development of Soviet
energy resources may turn Soviet attention away from
the oilfields of the Middle East, which provide the
bulk of energy to West European economies.
7. Detente with the Soviet Union also furthers
specific foreign policy goals of the European COCOM
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members and Japan. West Germany, for domestic as
well as foreign policy reasons, wants to maintain or
improve stable relations with East Germany and with
Eastern Europe as a whole. France, in the past two
decades, sought to establish a special relationship with
the USSR. Although the current French Government
has taken a firm stand on East-West issues and has
reaffirmed French commitments to the Atlantic Alli-
ance, there remain aspirations for an independent
French foreign policy including a continuation of
Franco-Soviet cooperation. Japan, too, sees detente as
a way to further its goal of beginning negotiations on
the status of the Northern Territories, which it hopes
to recover eventually from the Soviet Union.
8. The West European COCOM partners differen-
tiate between Eastern Europe and the Soviet Union in
their export policies. Promoting through trade politi-
cal, economic, and social conditions in Eastern Europe
that could lead to a gradual reduction of Soviet
influence and military presence is regarded as contrib-
uting to Western security. Thus European COCOM
members are even less prepared to further restrict
trade with the East European countries than with the
Soviet Union. They make an even greater differenti-
ation with regard to China, which they view as a
potentially growing export market.
Security Considerations
9. The political importance of detente as a principle
of foreign policy strongly colors European and Japa-
nese views of the security implications of trade with
the Soviet Bloc. The Europeans and Japanese generally
take a narrow view of the impact of exports to the
Soviet Bloc on Soviet military power. Although they
do not want to make it easier for the Soviets to develop
their military strength, they downplay the role that
East-West trade broadly speaking can play in this
respect and look only for specific linkages between
exports of goods and technology and the enhancement
of Soviet weapons systems. They argue that the denial
of large amounts of exports to the Soviet Bloc would
not result in a reallocation of resources from military
to civilian uses, because of the top priority Moscow
gives to the development of military power.
10. Even for narrowly defined products and tech-
nologies, the allies almost always put the burden of
establishing links to military uses on the United States
and are apt to grasp any evidence that the items in
question have civilian uses or can be found in non-
COCOM countries. Moreover, they sometimes argue
for a short control list on the grounds that difficulties
in administering and enforcing a long list of proscribed
items weakens the effectiveness of controls.
Economic Realities
11. In general, East-West trade plays a small role in
the West European and Japanese economies, although
it is important to certain industries. Even for West
Germany, which accounts for one-fourth of OECD
exports to the Soviet Bloc, sales to the East amount to
only about 6 percent of total exports and directly
provide jobs for about 1 percent of the labor force.
Problems in Poland and a slowdown in Eastern Bloc
economies have tarnished somewhat the earlier hopes
for an expanding Eastern Bloc market for Western
goods. Moreover, the Soviet Union has experienced a
sharp erosion in its hard currency position which is
expected to continue. This has already led the Soviets
to trim import plans and to cut back on imports of
chemicals and industrial materials. Hard currency
trade accounts for a significant amount of total Soviet
trade in certain sectors (see table 1). A hard currency
bind probably will affect sectors important to the
allied COCOM members?especially machinery, met-
als, and chemicals.
12. Nevertheless, the West Europeans and Japanese
believe that they cannot ignore any foreign market
because they rely heavily on exports to promote
growth?exports of goods and services total nearly
one-fourth of their GNP compared to only 10 percent
in the United States. The allies still view the Eastern
Bloc as one of the few major markets in which they
have an opportunity to expand their sales. Moreover,
the structure of trade with the East is much different
for Western Europe and Japan than for the United
States. Unlike the US exports, which are primarily
agricultural, West European and Japanese exports are
concentrated in industrial goods, particularly steel and
machine tools. Exports to the Soviet Union and East-
ern Europe account for a significant share of these
industries' total sales.
13. The West German steel industry is especially
reliant on sales to the Soviet Bloc?about 15 percent of
total steel exports go to that region. Steel pipe, primar-
4
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Figure 1
Trade With USSR and the Warsaw Pact
Percent of Totala
1980
United States
Japan
West Germany
France
United Kingdom
Italy
Total
1.2
2.1
USSR Eastern Europe
0.4 0.8
1.7 ?0.4
6.3 2.2 4.1
4.0 2.4
2.4 11.2 1.2
4.5 2.6 1.9
aAs a percent of each country's total trade.
585920 1-82
Table 1
USSR: Share of Hard Currency Trade in Total Trade
(Percent)
Soviet Exports
Soviet Imports
1970
1975
1980
1970
1975
1980
Total hard currency trade
of which:
17
23
31
23
38
38
Fuels
24
36
42
4
34
NA
Crude oil and petroleum products
26
40
43
10
72
NA
Natural gas
2
34
48
0
0
NA
Machinery and equipment
5
9
3
22
37
26
Ferrous metals
10
6
7
47
77
75
Chemicals
18
25
36
34
42
42
Wood and wood products
44
37
48
34
27
15
Agricultural products
14
24
25
27
42
66
Grain
5
1
0
73
87
90
Consumer goods
23
26
13
12
9
9
Source: Soviet foreign trade data.
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Figure 2
Exports to the USSR and the Warsaw Pact
Billion US $
West Germany, France, U.K., Italy, and Japan
25
20
15
10
5
1970
75
80
Other
Manufactures
Machinery
Steel
Raw Materials
and Fuels
Foodstuffs
United States
25
20
15
10
5
Other
Manufactures
- Machinery
Steel
Raw Materials
and Fuels
Foodstuffs
1970
75
80
585921 1-82
ily for natural gas transmission lines, constitutes a large
portion of these exports; Mannesmann, AG, which has
been delivering large-diameter pipe to the USSR for at
least 20 years, has one plant in Mulheim producing
large-diameter pipe almost exclusively for export to
the Soviet Union. The recently signed West German-
Soviet gas deal guarantees that the Mulheim plant will
be operating at near capacity through at least the late
1980s. Italy's state-owned steel producer, Finsider, is
also heavily dependent on sales to the Soviet Union
and recently signed a contract to supply 250,000 tons
of large-diameter pipe for the Siberian gas line. Sales
to the Bloc account for about 12 percent of Italian
steel exports. While the French and Japanese also have
received sizable pipe contracts associated with the
Siberian gas line, steel sales to the East account for a
smaller share of their total steel exports.
14. Soviet and East European purchases of machin-
ery?primarily capital goods destined for resource
development projects or for upgrading manufacturing
facilities?are also relatively important for West Euro-
pean industry. The Eastern Bloc traditionally has
relied heavily on West Germany for metalworking
machinery, particularly machine tools. About 14 per-
cent of West German metalworking machinery ex-
ports go to the region. Most of these machinery sales
are part of larger contracts to build industrial plants.
The Soviet Union and Eastern Europe are also a major
market for Italian machinery exports, although sales
recently have slipped because Italian firms have been
unable to match the high-technology equipment of-
fered by West Germany, Japan, and the United States.
15. West Europeans and Japanese have viewed the
Eastern Bloc as a stable, if not growing, market for
their industrial exports and indeed have competed
actively for sales to the East. The use of subsidized
export credits and export guarantees illustrates the
degree of this competition. Such credits, particularly
for France, Italy, and Japan provide an additional
edge. In addition, Western Europe and Japan feel
increasingly threatened by the possible loss of the
Soviet Bloc market to newly industrializing countries,
such as Mexico, Brazil, and Korea, which are rapidly
developing competitive steel and machinery indus-
tries.
16. Over the last two years, the economic slump in
Western Europe has increased the perceived impor-
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tance of trade with Moscow and Eastern Europe. West
European governments probably especially value ex-
ports to the East because they buoy employment in
industries which have been particularly hard hit by
the slump. With the highest unemployment levels in
30 years, the more than one-half million jobs created
by sales to the Eastern Bloc take on even greater
significance.
Experiences With COCOM
17. The West European COCOM members and
Japan are generally not dissatisfied with the scope of
existing COCOM controls, which was narrowed con-
siderably in the 1950s. There is little question that
export controls have had a greater impact on US
exports of technology to the Soviet Bloc than those of
Western Europe and Japan because they apply mainly
to advanced products, such as computers and micro-
electronic items, in which the United States has long
been a world leader (see annex B on statistics). These
countries are extremely sensitive, however, to any
suggestion for comprehensive controls covering indus-
trial sectors because of the broad range and volume of
their exports of machinery and other manufactures to
the Soviet Bloc. Although they have supported the -no
exceptions" policy in COCOM applied in the after-
math of Soviet military intervention in Afghanistan,
they have criticized the United States for suggesting
broad industrial controls while lifting its grain embar-
go against Moscow.
18. Procedures within COCOM have also become a
source of concern and frustration for the COCOM
partners. The West Europeans and Japanese are dissat-
isfied with the extraordinarily long delays experienced
in waiting for completion of review of COCOM cases
by the United States. These frustrations have some-
times spawned unofficial speculation in the press,
including imputations of ulterior motives to the US
Government.
19. West European attitudes toward COCOM have
been shaped further by their perception that the
United States has attempted to deprive them of na-
tional discretion, as agreed in COCOM, for lower
performance equipment through the extraterritorial
application of US export controls on reexports. This
issue of extraterritoriality is politically sensitive and
legally and technically complex. Both the United
States and the allies have avoided a clear definition of
the issue.
III. COUNTRY ATTITUDES
20. Although it is possible to generalize about the
factors shaping West European and Japanese attitudes
toward COCOM, these factors resonate differently in
particular national contexts. Each of the major West
European COCOM members and Japan has its own
foreign policy goals, domestic political dynamics, and
economic concerns. In each governmental structure,
the policy toward export controls is brewed in a
unique national cauldron containing divergent views
of political parties, contending positions among minis-
tries, and pressure from industrial and labor lobbies.
West Germany
21. West Germany is particularly sensitive to signs
of increased tensions in Europe and promotion of
friendly and stable relations with the USSR and
Eastern Europe is a major German foreign policy goal.
Moreover, ties with the East are important in keeping
alive the ideal of German reunification, a hope that
may be unrealistic but cannot be denied by any West
German government.
22. West Germany continues to be the Eastern
Bloc's largest Western trading partner, with about 6
percent of its total exports flowing to the East. Over 14
percent of total exports in both steel and metalworking
machinery go to the East. Although less than 300,000
of some 27 million West German workers are directly
employed in producing goods for export to the Soviet
Bloc, indirect employment dependence is much
higher.
23. West Germany favors denying the Soviets any
product that it perceives would directly enhance
Soviet military power. Following the Soviet moves in
Afghanistan, Bonn expressed a willingness to consider
additional restrictions on trade with the USSR. It
joined the -no exceptions" policy of other COCOM
members and supported US proposals to strengthen
?specific items on the COCOM lists, notably including
the computer item. The West Germans concede that a
massive Soviet intervention in Poland, especially one
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Table 2
West Germany: Trade With USSR and Warsaw Pact Allies
1980
(Million US $)
Exports
Value
Sector
Share a
Imports
Value
Sector
Share b
Total
$12,357
6.4
Total
$11,574
6.1
Foodstuffs
991
9.5
Foodstuffs
964
4.5
Raw materials
537
12.5
Raw materials
948
6.4
Fuels
611
8.0
Fuels
4,892
10.9
Chemicals
2,167
8.6
Natural gas
1,144
20.5
Machinery and transport equipment
3,545
4.2
Chemicals
800
5.8
Metalworking machinery
2,333
16.1
Machinery and transport equipment
533
1.5
Other semi- and finished
Other semi- and finished
manufactured goods
4,506
7.2
manufactured goods
3,446
5.6
Steel
1,913
16.8
a Exports of each sector to the Bloc as a percent of total exports of that sector to the world.
b Imports of each sector from the Bloc as a percent of total imports of that sector from all sources.
involving resistance and bloodshed, would provoke
Bonn to apply economic sanctions against the Soviet
Union.
24. West Germany believes that COCOM is useful
but could be made more effective and efficient. Bonn
prefers multilateral discussions aimed at streamlining
the decisionmaking and improving the clarity of con-
trols to increase uniformity and predictability of
COCOM decisions. Bonn believes, however, that the
COCOM mechanism must be reformed carefully: an
overly ambitious program might weaken the consensus
needed for the effective functioning of COCOM.
25. Broad agreement exists between the West Ger-
man Foreign and Economic Ministries on the desir-
ability for continued East-West trade and on
COCOM's overall functions. The control procedures
are largely run by the Economics Ministry; the De-
fense Ministry has little influence on COCOM-related
issues. Moreover, the governing coalition and the
opposition Christian Democrats also are in general
agreement on the political importance of trade with
the East and the limited circumstances under which it
should be curtailed.
26. West German business interests see no defensi-
ble alternative to East-West trade and the business
community forms a major lobby for expanded trade
with the East. Pressure for continued and expanded
trade could be especially effective directed at the
more conservative Christian Democrats, who receive
support from the business community. The Christian
Democrats also are seeking to make inroads into the
Social Democrats' strong labor support in North
Rhine-Westphalia?the state that would be hardest
hit by a restriction in West German trade with the
Soviet Union and Eastern Europe.
France
27. Since his election last May, President Mitter-
rand has placed less emphasis than his predecessors on
fostering the Franco-Soviet "special relationship" initi-
ated in 1966 by de Gaulle and has expressed a
willingness to take a harder line with the Soviets. This
view, however, does not appear to be widely held at
the administrative level of the government. It also has
little popular political support and could easily be
altered. Like other West European members, France
believes that long-term Western interests are served by
increased East-West trade that reduces tensions in
Europe, generates a favorable political evolution with-
in the Soviet Bloc, and curbs the Soviet Union's
interest in expanding its sphere of influence. Further-
more, Mitterrand's domestic economic policy of in-
creasing employment would profit from increased
trade with the East.
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Table 3
France: Trade With USSR and Warsaw Pact Allies
1980
(Million US $)
Exports
Value
Sector
Share a
Imports
Value
Sector
Share b
Total
$4,643
4.2
Total
$5,253
3.9
Foodstuffs
1,062
6.0
Foodstuffs
219
1.6
Raw materials
96
2.2
Raw materials
389
4.9
Fuels
24
0.5
Fuels
3,120
8.7
Chemicals
943
7.0
Natural gas
467
16.1
Machinery and transport equipment
352
3.6
Chemicals
511
4.1
Metalworking machinery
538
6.4
Machinery and transport equipment
304
1.1
Other semi- and finished
Other semi- and finished
manufactured goods
1,166
3.5
manufactured goods
710
2.0
Steel
513
7.5
a Exports of each sector to the Bloc as a percent of total exports of that sector to the world.
b Imports of each sector from the Bloc as a percent of total imports of that sector from all sources.
28. French trade with the East is not as large as
West Germany's. East-West trade accounts for rough-
ly 4 percent of both total French exports and total
imports. Sales of industrial goods accounted for 70
percent of exports to the East, primarily in chemicals,
steel, and metalworking machinery. Thousands of jobs
in these recession-hit sectors were maintained by this
trade?a factor of critical importance to the Paris
government.
29. Paris's view of trade as a bilateral issue probably
will encourage the French to keep up sales efforts.
Bilateral trade with the Soviet Union fell into deficit
for the first time in 1980, and future French energy
imports threaten to make this deficit permanent. Paris
is likely to try to persuade the Soviet Union to increase
imports from France to offset this deficit.
30. The Mitterrand government advocates the es-
tablishment of a shortened "hardcore" COCOM list
that would restrict genuinely sensitive technology ex-
ports to the Soviet Union and its allies.
France has not divulged its contents to the United
States nor to COCOM. It presumably excludes items,
such as communications equipment, which are pro-
duced by French firms and which France hopes to
export. France claims that current COCOM controls
are too hit-and-miss, allowing the sale of some technol-
ogy that has already contributed to the Soviet military
buildup while restricting the sale of certain other
technology that the USSR has already acquired or has
no interest in acquiring. Paris contends that an effec-
tive COCOM list needs to be narrowly focused to
unambiguously spell out the "rules of the game- on
export controls so that they can be strictly enforced.
However, France sees no contradiction between its
announced desire for effective restrictions and its
overall interest in increasing sales of advanced technol-
ogy to the East.
31. In early October, Prime Minister Mauroy ap-
proved new administrative guidelines to provide for
review by more government agencies of French ex-
ports to the Soviet Union and Eastern Europe. The
Ministry of Industry now will handle the preliminary
processing of export licenses and will notify other
concerned agencies, including the Ministries of Exter-
nal Relations, Defense, Foreign Trade, and the Secre-
tary General for National Defense?an oversight body
within the Prime Minister's office. The Prime Minister
will rule on a particular case if disagreement over
licensing develops. The new guidelines appear to give
added weight to the Ministries of Defense and Exter-
nal Relations and to the Prime Minister's office, which
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are believed to advocate more stringent controls than
those favored by the Industry Ministry.
32. The current case of the Thomson-CSF tele-
phone switching units and production technology illus-
trates the pressure now shaping French policy on East-
West trade and COCOM controls. Paris's preoccupa-
tion with reducing unemployment makes it sympa-
thetic to the argument of industrial lobbies that a
cutback in French high-technology exports to the East
would only benefit West German, Japanese, and US
competitors. A continued delay of the sale by the
government, moreover, further exposes Paris to
charges that its export policy is overly influenced by
US pressure.
33. The Mitterrand government may turn out to be
a somewhat stronger advocate than its predecessor for
increasing the effectiveness of export controls on at
least the most sensitive items.
Italy
34. Italy was a pioneer in the expansion of East-
West economic ties long before the heyday of detente.
Relaxed international tensions in the 1970s gave Rome
a further opportunity to broaden these links and
parlay them into improved political relations, thus
providing further underpinning for the political rap-
prochement already under way. Detente remains po-
litically popular in Italy because it is perceived as a
constraint on Soviet adventurism. Moreover, many
Italians believe that closer political and economic ties
with the East are dictated by Europe's proximity to
the USSR, while at the same time Italy's distance from
the Soviet border diminishes its sense of a direct threat
from Moscow.
35. Trade with the East constitutes a relatively
small portion of Italy's overall trade: in 1980 Italy sold
3.5 percent of its exports to and obtained 5.3 percent
of its imports from the USSR and its allies. Although
the relative importance of the Eastern market for Italy
has declined steadily over the past five years, sales to
Moscow still provide direct employment for about
100,000 Italians. In addition, these exports are ex-
tremely important to some of Italy's largest firms,
which have been experiencing severe financial
difficulties.
36. Rome still prefers to think of Eastern Europe as
a potentially rich market for its products, and believes
trade with the Eastern Bloc to be a stabilizing factor
on the Italian economy, especially during periods of
slow economic growth. For these reasons, Italy has
tried?sometimes unsuccessfully?to protect its mar-
ket share in the East from encroachment by other
Table 4
Italy: Trade With USSR and Warsaw Pact Allies
1980
(Million US $)
Exports
Value
Sector
Share a
Imports
Value
Sector
Share b
Total
$2,729
3.5
Total
$5,238
5.3
Foodstuffs
138
2.5
Foodstuffs
429
3.5
Raw materials
65
5.4
Raw materials
497
4.7
Fuels
112
2.6
Fuels
3,018
11.0
Chemicals
379
6.8
Natural gas
628
41.6
Machinery and transport equipment
980
3.9
Chemicals
309
3.8
Metalworking machinery
460
10.7
Machinery and transport equipment
333
1.6
Other semi- and finished
Other semi- and finished
manufactured goods
1,055
3.0
manufactured goods
652
3.3
Steel
440
11.8
a Exports of each sector to the Bloc as a percent of total exports of that sector to the world.
b Imports of each sector from the Bloc as a percent of total imports of that sector from all sources.
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West European and Japanese firms through trade
subsidies and generous export credits and guarantees.
37. Rome is committed in principle to the underly-
ing goal of COCOM's export controls to deny specified
technology to the Soviet Union. When compared with
many other COCOM countries, however, Italy has
little to offer Moscow in terms of sensitive technologies
that can have direct military application. Rome there-
fore can claim strict adherence to COCOM principles,
although the Italians occasionally complained that the
restricted list is too long. Rome has applied for a small
share of COCOM exceptions and has chided the
United States for delays in ruling on their requests,
even threatening "independent action" to speed up
Washington's deliberations.
38. An interministerial committee chaired by the
Foreign Affairs Ministry and including the Ministries
of Foreign Trade, Finance, Industry, and Defense
determines the specifics of Italian COCOM policy.
The committee considers all requests for exceptions
from other COCOM members and processes and
evaluates Italian requests for exceptions.
39. The Italian Communist Party (PCI) no longer
plays the role in facilitating East-West trade that it did
several years ago, before domestic legislation forced all
political parties to divest themselves of specially estab-
lished trading companies. PCI leaders still favor closer
links between Moscow and Rome to deflect frequent
disagreements in policy between the Soviet and Italian
Communist parties. Nevertheless, even in this area, the
PCI wishes to appear as independent of Moscow as
possible.
40. As the major partners in Italy's center-left
coalition, the Christian Democrats and the Socialists
are extremely sensitive to the impact that trade with
the Soviet Bloc has on Italian-US relations. Each party
cautiously balances the importance of East-West trade
against its desires to demonstrate suitability to lead a
government that is closely aligned with the United
States.
United Kingdom
41. On the whole, the British Government has been
supportive of US positions on COCOM matters. A
number of factors have contributed to their sympa-
thetic view. The UK has a smaller economic stake in
high-technology trade with the Soviet Bloc than most
major European economies. The UK also has had a
Table 5
United Kingdom: Trade With USSR and Warsaw Pact Allies
1980
(Million US $)
Exports
Value
Sector
Share a
Imports
Value
Sector
Share b
Total
$2,629
2.3
Total
$2,971
2.5
Foodstuffs
270
3.5
Foodstuffs
89
0.6
Raw materials
182
5.6
Raw materials
547
6.7
Fuels
32
0.2
Fuels
503
3.2
Chemicals
455
3.7
Natural gas
1
0.1
Machinery and transport equipment
901
2.3
Chemicals
151
2.0
Metalworking machinery
139
4.2
Machinery and transport equipment
226
0.7
Other semi- and finished
Other semi- and finished
manufactured goods
789
2.2
manufactured goods
1,455
3.6
Steel
126
5.8
a Exports of each sector to the Bloc as a percent of total exports of that sector to the world.
b Imports of each sector from the Bloc as a percent of total imports of that sector from all sources.
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smaller political stake in detente than have countries
on the continent. The UK also shares a more common
appreciation of the impact that East-West trade has
had on Soviet military power because of Washington's
special effort to share data and analysis. Finally, there
do not exist the large differences in views between the
government ministries that are found in other
COCOM member governments.
42. The USSR and Eastern Europe account for little
more than 2 percent of Britain's overall trade. British
exports to the East have grown steadily during the past
decade, but London's share of the Soviet Bloc market
has declined as France, West Germany, and Japan
have boosted sales more rapidly. Sales of manufac-
tured goods have been particularly weak, and Britain
now faces an overall deficit in trade with the East.
43. The Thatcher government, prompted by nag-
ging recession and a strong dose of traditional Conserv-
ative profit motive, is seeking to expand trade in Soviet
Bloc markets. Despite several years of strained trade
relations, London and Moscow have held a series of
high-level talks that are likely to lead to new commer-
cial agreements. British officials have also expressed
strong interest in winning contracts related to con-
struction of the Soviet?West European gas pipeline,
even though the UK would not receive any of the gas.
44. Few British jobs, probably less than 100,000
directly and 25,000 indirectly, are dependent on So-
viet trade. Exports are concentrated in a few commod-
ity groups and only a few firms are especially depend-
ent on Soviet trade. Even so London is leery of US
efforts to reorder and expand COCOM controls, par-
ticularly in the strong export categories, such as chemi-
cals. Of major concern is Imperial Chemical Industries
which has been in a financial predicament in recent
months. Over one-fifth of ICI employees owe their
jobs, directly or indirectly, to exports to the Soviet
Union. The present COCOM list has little impact on
ICI but US proposals to strengthen controls in the
defense priority chemical industry are of potential
concern.
45. Furthermore, the UK is concerned that it may
be hurt by restrictions in exports of high-technology
products, such as computers, which Britain is trying to
develop. Most industrial organizations would lobby the
government to resist a further tightening of COCOM
controls.
46. Among British political parties, too, there has
been little controversy over the application of
COCOM regulations. Like the Conservatives, the
Labor Party has favored a narrow application of
COCOM regulations to expand employment. A Social
Democrat?Liberal government also would probably
seek to define controls narrowly to promote business
and employment. However, a future leftist-dominated
Labor government might propose a radical reduction
or even elimination of COCOM activities.
Japan
47. Trade with the Soviet Bloc remains relatively
unimportant to the Japanese economy despite a rapid
expansion in economic relations over the past 10 years.
In 1980 trade with Moscow and Eastern Europe
accounted for less than 3 percent of Japanese exports
(but over 7 percent of total Japanese steel exports) and
1.5 percent of Japanese imports. The Japanese have
enjoyed substantial annual trade surpluses with the
USSR; in 1980 the surplus topped $1 billion.
48. Although trade with the Soviet Bloc has devel-
oped less than the Japanese had hoped, the Japanese
steel and machinery industries still view the USSR as
an important alternative market offsetting slower eco-
nomic growth and rising protectionism in the West.
49. Until recently, Tokyo and Moscow each appar-
ently believed that they might be able to turn this
potential for trade to political advantage. The Japa-
nese hoped that increased economic relations between
the two nations would enhance the Soviet stake in
harmonious relations and eventually induce Moscow to
negotiate on the contentious Northern Territories is-
sue. Moscow, at the same time, assumed that Japanese
businessmen would find the lure of Soviet markets
irresistible and pressure Tokyo to set aside the territo-
rial issue.
50. In fact, the pace of Japanese involvement in
Siberia has slowed sharply since the late 1970s, mainly
because of Soviet heavyhandedness and international
developments. By increasing its military presence in
the Kuriles, Moscow flaunted its possession of the
islands in a way the Japanese found particularly
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Table 6
Japan: Trade With USSR and Warsaw Pact Allies
1980
(Million US $)
Exports
Value
Sector
Share a
Imports
Value
Sector
Share b
Total
$3,585
2.8
Total
$2,068
1.5
Foodstuffs
9
0.5
Foodstuffs
132
0.9
Raw materials
78
5.6
Raw materials
886
3.8
Fuels
73
14.4
Fuels
324
0.5
Chemicals
425
6.3
Natural gas
0
0.0
Machinery and transport equipment
1,174
1.7
Chemicals
90
1.4
Metalworking machinery
1,148
6.9
Machinery and transport equipment
81
0.9
Other semi- and finished
Other semi- and finished
manufactured goods
1,826
3.8
manufactured goods
555
3.4
Steel
1,095
7.1
a Exports of each sector to the Bloc as a percent of total exports of that sector to the world.
b Imports of each sector from the Bloc as a percent of total imports of that sector from all sources.
irksome. Furthermore Japan's interest in expanding
trade with China has led Moscow to view Japan as a
potential partner with the United States and China in
a hostile Pacific triad. Finally, Japan strongly disap-
proved of the Soviet invasion of Afghanistan and
Soviet support for Vietnam's aggression against Kam-
puchea and consequently is tightening its security ties
with the United States.
51. Tokyo has adhered to the current COCOM
export controls but is skeptical about their effective-
ness in impeding the development of Soviet military
technology. Japan would be apprehensive about ex-
panding the present denial lists unless Western com-
petitors were clearly under similar restrictions.
52. Japan looks to the United States to take the lead
in COCOM in formulating new guidelines, applying
them to US firms, and assuring West European com-
pliance. The Japanese feel that their conscientious
observance of the Afghanistan sanctions was undercut
by continued European dealings with the Soviet Union
and the lifting of the US grain embargo.
53. The Ministries of Foreign Affairs, International
Trade and Industries (MITI), Finance, and to a lesser
extent the Japanese Defense Agency, all help formu-
late Japanese export policy toward the Soviet Bloc.
MITI, which tends to reflect the business lobby,
especially can be expected to react coolly to any new
COCOM controls that threaten to restrict foreign
trade. To overcome disagreements on such issues
between individual ministries, a personal commitment
from the Prime Minister probably would be required.
IV. PROSPECTS FOR COCOM REFORM
54. The United States has formally proposed to
COCOM a revision in the strategic criteria and
mechanisms to improve procedures. It has advised
COCOM that the objective of the partners should be
to broaden controls to restrict exports in nine defense
priority industrial sectors that support the military
potential of the Soviet Union. Five of these indus-
tries?computers, communications, high-technology
microelectronics, aerospace, and machine building?
are already subject to a significant degree of control,
but existing controls on shipbuilding, metallurgy,
chemicals, and heavy vehicles are not extensive. The
West European COCOM members and Japan are
reacting negatively to this US effort. They view it as
another in a series of broad, sweeping, and therefore
unacceptable proposals since the Soviet invasion of
Afghanistan.
55. All COCOM members prize the principle of
consensus, which has operated in the organization for
30 years. They oppose US initiatives for a formalized,
permanent -no exceptions- policy mainly because it
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would reduce COCOM's future flexibility and aggra-
vate relations with the USSR. There is no agreement
yet on modifications required in COCOM procedures,
except to expedite cases.
56. The European partners and Japan view the
January HLM as a political meeting offering an
opportunity to exchange views. They want to avoid an
open confrontation with the United States. They there-
fore prefer to put off hard decisions for subsequent
meetings. Nevertheless, they are increasingly con-
cerned over what they perceive as increased East-
West tensions which have contributed to divergences
within the Alliance. They agree that in this context
there is a need to ensure that the COCOM mechanism
works properly.
57. The United States has three main handles in its
attempt to achieve tighter and broader controls on
Western exports to the Soviet Bloc. At the political
level, the allies are willing to engage in a broad.
ranging discussion of East-West economic relations
and its implications for Western security. At the
technical level, they are willing to learn more about
the impact of Western goods and technology on Soviet
weapons systems. At the administrative level, they are
willing to try harder to stem illegal exports. But
effective use of these handles is difficult because
European and Japanese political objectives and secu-
rity considerations in East-West trade differ greatly
from those of the United States.
58. There are strong counterarguments to the Euro-
pean contention that trade with the Soviet Bloc has a
positive effect on Western security. It can be argued,
for example: that imports and credits from the West
are of increasing importance to the Soviet economy;
that this helps Moscow carry its heavy defense burden
and burden of empire; and that to compete the West
must then increase its military expenditures. Although
neither the direct impact of East-West trade on Soviet
military power nor the indirect impact on Western
military expenditures can be quantified in the aggre-
gate, defense spending by our allies is several times
larger than their total exports to the Soviet Bloc, and is
orders of magnitude larger than any fraction of ex-
ports that might be placed under COCOM controls.
(See table 7.) It is also evident that the economic and
security burden of overcoming or defending against
Table 7
Comparison of Defense Spending With
Exports and Credits to Soviet Bloc
1980
COCOM
Member
Country
Defense Expenditures
Exports to USSR
and Warsaw Pact Allies
Official Credits
Outstanding a
Billion US $
Percent of
GNP
Billion US $
Percent of
GNP
Billion US $
Percent of
GNP
West Germany
26.7
3.2
12.4
1.5
9.3
1.1
France
26.1
4.0
4.6
0.7
11.1
1.7
Italy
9.6
2.4
2.7
0.7
5.6
1.4
United Kingdom
27.0
5.2
2.6
0.5
5.7
1.1
Belgium
Luxembourg
3.9
0.1
3.2
1.2
1.3
1.0
0.8
NA
0.7
NA
Netherlands
5.3
3.3
1.4
0.9
0.3
0.2
Denmark
1.6
2.1
0.3
0.4
0.2
0.3
Greece
2.4
5.7
0.5
1.2
NA
NA
Norway
1.7
2.9
0.3
0.5
0.2
0.3
Portugal
0.9
3.7
0.1
0.4
NA
NA
Turkey
2.2
3.8
NA
NA
NA
NA
Canada
4.4
1.8
1.8
0.7
1.4
0.5
Japan
9.6
0.9
3.6
0.3
5.4
0.5
United States
144.0
5.6
3.8
0.1
2.7
0.1
a Represents the outstanding balance of principal and interest for guaranteed credits actually drawn as well as credits committed to orders
that have not yet been completed.
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improved military capabilities derived by the Soviets
from Western research and development far out-
weighs the West's earnings from sales to the Soviets of
the products and technologies on which those im-
provements in military capability are based. The
dependence of the Soviet military buildup on Western
technology and trade is detailed and evaluated in
SNIE 3/11-4-81: Dependence of Soviet Military
Power on Economic Relations With the West.
59. The modernization of Soviet tactical and strate-
gic forces has benefited substantially from the acquisi-
tion of Western products and technology. This can
mean significant savings in cost and/or development
time. It can also mean enhanced weapons capabilities.
Moscow uses a combination of legal and illegal chan-
nels to acquire certain products and technologies as
part of a highly organized and focused program. For
example, Moscow has relied heavily on imports of
Western equipment and technology to systematically
build a modern microelectronics industry. This newly
acquired capability in microelectronics is a critical
basis for large and wide-ranging enhancements in the
sophistication of Soviet military systems, including
ASW sensors and weapons systems and air defense and
ballistic missiles. These Soviet acquisitions also have
caused the United States to undertake the develop-
ment of a new generation of microelectronic devices
to maintain a technological lead in future weapons
systems. This development program, called VHSIC
(Very-High-Speed Integrated Circuits), will require an
initial US investment outlay for R&D alone of over
$200 million.
60. Trucks produced at the Kama River truck
plant, built with massive imports of some $3 billion
worth of Western automotive production equipment
and technology, are currently the mainstay of Soviet
military units above division level opposite NATO.
Kama trucks also are in use by Soviet forces in
Afghanistan. An imported US turnkey facility for
licensed production of high-quality rock drill bits will
in the long run accelerate Soviet efforts to improve the
performance of tungsten-based kinetic energy armor-
piercing ammunition for Soviet main battle tanks.
61. A major weakness in the Soviets' ability to
incorporate advanced component technology in mili-
tary systems lies in their outdated manufacturing
equipment and production technology. Defense hard-
ware production continues to benefit from key techno-
logical acquisitions from the West. Large purchases of
numerically-controlled machine tools from Japan and
Western Europe may already have benefited some
military manufacturing sectors, particularly the Soviet
aircraft industry.
62. The COCOM allies have always been receptive
to well-supported technical analysis which establishes
links between Western exports and Soviet military
power. They will welcome any stepped up US collec-
tion and analytic efforts in this area but their own
technical capabilities are weak. For the most part
these capabilities are found in areas of the govern-
ments?notably the defense departments?which play
little part in the COCOM process and have a limited
role in national decisions on COCOM policy.
63. There appear to be fewer barriers to an in-
creased enforcement effort, but here again the key
actors are normally not involved in the COCOM
process itself.
Defining COCOM Strategic Criteria
and Defense Priority Industries
64. The West European and Japanese Governments
are genuinely concerned about the growing military
might of the Soviet Union and share the desire to
control tightly exports to the USSR and Eastern Eu-
rope that could directly augment Soviet military capa-
bilities. However, West European COCOM members
and Japan insist that export controls must be defined
in detail to be practical, effective, and uniformly
accepted. They are highly skeptical of proposals that
seek to broaden the strategic criteria and expand the
list of controlled items.
65. The identification of high-priority defense in-
dustries to be included under COCOM jurisdiction is
extremely troublesome to the allies. They are con-
cerned, because of the loosely worded nature of the US
proposal, that they will be asked to accept a shopping
list of industries to be placed under COCOM review,
including shipbuilding, metallurgy, chemicals, and
heavy machines, which are major exports to the Soviet
Bloc from Western Europe and Japan. An expansion
of the restrictions to include broad controls in such
industries would be perceived as an attempt to enforce
broader economic sanctions against the USSR, going
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beyond COCOM's function of restricting exports in
limited but highly sensitive technologies. Making all
trade in these industries subject to veto by any one
member would be clearly unacceptable to West Euro-
pean and Japanese Governments. Furthermore, an
attempt to extend COCOM controls to such broadly
defined categories would heighten objections from
Western Europe and Japan that the burdens of eco-
nomic sanctions were being distributed unfairly, be-
cause they are the major exporters of goods that would
fall into the expanded lists. Finally, the European
members and Japan, already disturbed by the lengthy
review process for exceptions, fear that an expansion
of the lists of controlled items would result in even
more delays in review, because the number of excep-
tions requested by Japan and Western Europe would
significantly increase. The COCOM partners argue
that what is really needed is a continuation of the
COCOM practice of precisely defined controls with
some clarifications and reductions in coverage and a
shortening of the review process to improve uniform-
ity, efficiency, and predictability in the COCOM
system.
Role of the Military
66. The allies are only willing to consider a broader
role for their military in export control policies and
procedures in a limited context and consider even this
to be an internal matter. They contend that NATO is
the proper multilateral forum for discussing the mili-
tary implications of export controls. They have resisted
proposals for giving the military a formalized role in
COCOM through the subcommittee mechanism for
fear of having more than one national view being
voiced at COCOM, and thereby weakening their
country positions. Moreover, the foreign affairs and
trade ministries are reluctant to give other ministries a
greater role in decisions on export controls.
Harmonization
67. The United States has suggested that COCOM's
effectiveness could be improved through the harmoni-
zation of export licensing procedures within the mem-
ber states. This entails the removal of inequities among
the members in the establishment of licensing require-
ments and in the processing of license applications.
The anticipated results of this coordinated effort
would be: reducing leakage of strategic goods, decreas-
ing competitive disadvantages, and facilitating the
licensing process (that is, quicker and more accurate
review and disposition of cases).
68. In general, the West European allies and Japan
can be expected to have mixed reactions to such
suggestions. They would be extremely receptive to any
proposals that would speed up review procedures in
the United States. Because our allies already deal with
most COCOM exceptions within three weeks of the
requests, they claim that this is really a US problem.
69. At the same time, they claim that the current
discrepancies among licensing procedures are primar-
ily attributable to the broad and ambiguous guidelines
under which COCOM operates. In their view harmo-
nization of procedures requires commonly agreed to
interpretations of what should and should not be
controlled.
Improving Enforcement
70. Proposals for improving multilateral and bi-
lateral enforcement of export controls will receive
broad support from the COCOM partners. They are
highly concerned about the leakage of sensitive tech-
nology to the Soviet Union and will endorse coopera-
tive efforts to stem these losses. Most of the COCOM
members have been less enthusiastic in prosecuting
exporting firms for evasions.
71. The implementation of enforcement guidelines
is complicated, however, by political sensitivity to
stronger administrative actions. The subject of strate-
gic export controls is so politically charged that many
governments try to keep the whole process as confi-
dential as possible. This greatly influences government
attitudes on publicly prosecuting violators and on
increasing public awareness of the leakage problem.
72. This primarily political problem is manifested
in part by differences in domestic legislation. West
Germany has enacted laws with stiff penalties for
illegal export of products and production technologies
having direct military application and probably would
support initiatives in this area. Rome enforces export
controls only through the Foreign Trade Ministry's
issuance of export licenses and the Finance Ministry's
merchandise checks at the border. In Japan there is no
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legislative basis for the enforcement of COCOM con-
trols, but MITI has tried to ensure Japanese compli-
ance with COCOM restrictions. Although all COCOM
members recognize that the divergence in enforce-
ment procedures probably weakens export controls,
domestic political and legal constraints limit the possi-
bilities for further harmonization.
73. Nevertheless, there are aspects of enforcement
that may attract support from some COCOM partners,
including: exchanging information on suspected
COCOM violations, publicizing export control en-
forcement activities, and strengthening procedures for
rapid communication between member countries' en-
forcement services.
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ANNEX A
EXPORT CONTROL STATUTES AND
PROCEDURES OF THE MAJOR ALLIES
West Germany
1. The Foreign Commerce Law of 1961 authorizes
the federal government to control exports of commod-
ities and technical data for reasons of national security.
The appropriate implementing regulations are con-
tained in the Foreign Commerce Ordinance and
Foreign Commerce Licensing Jurisdiction Ordinance
of 1961. These regulations stipulate that an export
license is required for any item appearing on the
export control list. Licenses are granted automatically
except when the government can demonstrate that the
export of an item would threaten national security. A
separate arms export control law forbids sales of
military hardware when the export could exacerbate
international tensions.
2. West Germany has four export control lists. The
first three lists cover munitions, atomic energy, and
"other strategic goods" as well as know-how and
documentary data associated with the production of
these goods?essentially all items on the COCOM lists.
The fourth list largely covers nonindustrial goods like
botanical plants, alcohol, and raw materials, controlled
either because of Common Market regulations or
because they are in short supply in Germany. The list
of commodities placed under export control is deter-
mined by the executive branch, but the Bundestag
may remove an item from the list within four months
of its promulgation.
3. Companies wishing to export a controlled item
apply to the Federal Office for Industrial Economics,
which is an agency of the Economics Ministry. This
office grants licenses that do not need COCOM per-
mission, and 30 to 40 percent of all applications are
decided at this level. The Federal Office refers the
remainder to the Ministry of Economics for further
consideration. This ministry cooperates with the Min-
istries of Foreign Affairs and Defense in deciding
whether the application should be brought up in
COCOM. Firms may sue the government if they are
not satisfied that export license denial was based on a
threat to national security.
4. While the' Foreign Commerce Law does not
apply to trade with the GDR, the special legislation
governing inner-German trade effectively applies
COCOM regulations.
France
5. French trade control statutes give the govern-
ment rather broad powers to restrict exports. Various
decrees permit additions to or deletions from the list of
controlled commodities merely by publication in the
Journal Officiel. While these notices appear in the
name of the Ministry of Economics and Finance, an
interministerial committee reportedly establishes the
criteria for items to be included on the list. Any item
listed requires an export license regardless of the
destination. The list is essentially the three COCOM
lists; France has few, if any, unilaterally controlled
items. Only about 8 percent of French exports to
Communist countries require licenses.
6. On 15 December France was to begin applying
new guidelines for exports to the USSR and Eastern
Europe. The new procedures move the French export
licensing process closer to the US, British, and Italian
systems by establishing formal interministerial review.
The Ministry of Industry will continue to handle
preliminary processing of export licenses for controlled
exports to Communist countries. Whereas this ministry
previously had some discretion in choosing to consult
with the Ministry of External Relations and Ministry
of Defense before granting a license, it must now
obtain formal licensing approval for all cases from
these ministries as well as other concerned agencies for
cases involving an item on the "hardcore" list of
sensitive technologies. The other concerned agencies
include the Ministry of Foreign Trade, the Armed
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Forces Chief of Staff, the Ministry of Finance, and the
Secretary General of National Defense. Under pre
vious guidelines an unofficial intergovernmental com-
mittee was convened only if the COCOM representa-
tive in the Ministry of External Relations requested
further consultation. As before, interministerial dis-
putes over licensing are settled by the prime minister.
Italy
7. Italy's basic trade control document is the
Tabella Es port. All items included in the Tabella
Es port require export licenses regardless of the desti-
nation. All goods and technology in the COCOM lists
are included in the Tabella Es port.
8. The Ministry of Foreign Trade bears primary
responsibility for the formulation of Italian export
control policy and the administration of export licens-
ing. An interministerial committee made up of the
Ministries of Defense, Foreign Affairs, Finance, and
Industry and Commerce and Crafts plays an advisory
role by screening all export license applications for
goods subject to strategic control. Although the Minis-
try of Foreign Trade is not obligated to accept the
committee's view on a license application, it reported-
ly has never disregarded the committee's position.
United Kingdom
9. UK trade controls are implemented by a statu-
tory export control order which details those items and
destinations requiring export licenses. This order is
supplemented by the Consolidated List of Goods
Subject to Security Export Control which specifies all
items requiring licenses when sold to Communist
nations. This control document, which consists of the
munitions list, atomic energy list, and industrial list,
incorporates all items included under COCOM. The
British prohibit the export of certain additional items
for domestic reasons.
10. British law presumes that the export of an item
on the control list is forbidden unless an exception is
granted. License applications are submitted to the
Department of Trade which reviews requests, where
appropriate, with the Ministry of Defense, the Foreign
Office, and/or the Department of Industry. An objec-
tion from one of the ministries is sufficient to deny a
license.
In general, the interministerial review attempts
to balance national security concerns and the possibil-
ity of third-country diversions to Communist countries
against effects on domestic employment.
11. The British Government encourages industry to
consult with the Department of Trade before submit-
ting license requests so that by the time the applica-
tions are made, the probable outcome is known. The
British Government, however, has turned down li-
censes for which COCOM approval has been granted.
There is an appeals procedure for denied licenses.
Japan
12. The basis for Japanese export controls is the
Foreign Exchange and Foreign Trade Control Law of
1949. The law specifies that trade should proceed
without controls except when the balance of payments
or national economy is threatened. On the basis of this
provision, the Ministry of International Trade and
Industry (MITI) has sole authority to determine which
goods require export license and the administrative
authority to issue such licenses. Although the law
makes no mention of controlling exports for military
or security reasons, MITI adheres to COCOM stand-
ards. MITI requires licenses for commodities appear-
ing on the Japanese export control list for nearly all
destinations. This list consists of all items on the
COCOM lists plus a few additional goods included for
reasons of domestic short supply, to prevent dumping,
or to improve quality control. End-use checks are
made on suspicious exports of strategic items.
13. The licensing process in Japan operates through
consensus between business and government and in-
volves a system of thorough preliminary clearance.
MITI and the exporter conduct extensive informal
consultations before negotiations with a Communist
buyer commence. Companies brief MITI on the provi-
sions of prospective deals, returning for further consul-
tations at successive stages if the package alters.
14. By law and practice export licensing remains
largely Mill's prerogative. No interagency boards or
committees are involved. The Ministry of Finance,
and less frequently the Ministry of Foreign Affairs,
plays an occasional consultative role. In the rare
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instances when differences of opinion arise within
MITI or one of the other ministries voices a strong
objection, MITI will convene an informal committee
made up of representatives from the Ministry of
Finance, the Export-Import Bank, the Ministry of
Economic Planning, and the Ministry of Foreign Af-
fairs. The cabinet and prime minister are only rarely
involved in licensing disputes.
15. There are no provisions for public accounting in
the licensing process. The government is not required
to publish its decisions on export licenses nor report
them to the Japanese parliament.
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ANNEX B
MEASUREMENT PROBLEM IN EXPORT CONTROLS
1. The measurement of "strategic trade" founders
against two basic barriers: the intractable problem of
measuring the impact of export restrictions and the
lack of correspondence between proposals for en-
hanced restrictions and the classification of trade
statistics.
2. There is no general view of the meaning of
"strategic" trade. Among the possible definitions are:
? Exports subject to controls (that is, that cannot
legally take place).
? Actual legal exports that contribute in identifi-
able ways to Soviet military power, but have not
been controlled.
Obviously, the only measure of prohibited exports is
the volume of illegal exports of these products. Esti-
mates of illegal trade are necessarily extremely rough.
Known cases add up only to the tens of millions of
dollars, but total illegal exports could be in the hun-
dreds of millions of dollars. Legal exports that should
be, but have not been, prohibited could be defined
and their past value extracted from trade statistics.
Unfortunately, the US proposals for expanding CO-
COM controls cannot be translated into existing ele-
ments of the classification of foreign trade statistics.
The basic problems are that trade classifications:
? Reflect the degree of processing and use of
products rather than technological character-
istics.
? Are too broad, even at the most detailed level, to
correspond to export control lists.
? Are especially inadequate in describing modern
industries, like computers.
3. Moreover, international comparisons of trade
flows are complicated by differences at the most
detailed level of classification.
4. Given these basic problems there is no good way
to measure the impact of either actual or potential
export controls. The nearest substitutes for such meas-
ures are, calculations of the value of exports of "high-
technology products." Presumably, such products are
the most likely to contribute directly to the production
or development of weapons systems. Unfortunately,
for reasons already mentioned, "high-technology prod-
ucts" can only be described from trade statistics in
categories that include many low-technology products
while specific high-technology products contained in
other categories are missed.
5. Work in the OECD and in the United Nations in
the early 1970s attempted to measure the flow of
goods of a "technologically advanced" nature to sup-
plement the more traditional breakdown among cap-
ital-intensive and labor-intensive products.
6. In 1977, the US Department of Commerce pro-
posed a list of "High Technology" items based on four-
and five-digit SITC codes?a much narrower and
more precise definition than that of the OECD and
UN. It covers such items as machinery and instru-
ments?probably in a too general fashion?and ex-
cludes products such as chemicals and specialty steels.
7. Although the Department of Commerce list of
high-technology goods cannot be used to measure the
flow of goods critical to the Soviet Bloc military, it is
useful in comparing certain high-technology trade
patterns with the East between COCOM member
countries. This classification scheme dates from work
done in 1977 by the Department of Commerce. A
more recent refined scheme has been used by the
Department of Commerce but the results do not vary
substantially. The 1977 definition includes the follow-
ing trade categories:
Nuclear reactors
Calculating machines and computers
Statistical machines
Machine tools for metal
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Telecommunications equipment
Tubes, transistors, and photo cells
Electron and proton accelerators
Electrical machinery (not elsewhere stated)
Aircraft heavier than air
Optical elements
Optical instruments
Measuring control instruments (not elsewhere stated)
8. Trade with the USSR and Eastern Europe in
these -High-Technology- categories for 1980 is shown
in table B-1.
9. The United States is the largest exporter of these
goods to the world but ranks sixth in exports of these
goods to the East Bloc. Conversely, West Germany,
which exports less of these products than the United
States to the world, exports nearly 10 times as much to
the East. This is not to say that West Germany supplies
10 times as much in goods critical for the Soviet
military or even that West German export controls are
more lax. It does point out, however, that even though
the United States is a major producer and exporter of
high-technology goods, it is not taking as much advan-
tage of potential markets in the East as European
COCOM members would like to suggest when they
point to the large number of COCOM exception
requests tabled by the United States each year.
10. Table B-2 shows the proportion of high-technol-
ogy goods exported to the East as a percentage of the
total exports to each respective region. Although the
percentage of high-technology goods in total exports is
about the same for the United States as for other major
industrialized countries, thepercentage of high-tech-
nology goods in US exports to the USSR and Eastern
Europe is well below that of all other countries except
Canada.
11. Table B-3 presents high-technology exports to
the USSR and Eastern Europe as a percentage of each
Western country's high-technology exports to the
world. It shows that US high-technology exports to the
Bloc constitute a much smaller proportion of total
high-technology exports to the world than for any of
the other countries.
Table B-1
Exports of High-Technology Goods
1980
(Million US $)
World
USSR and
Eastern
Europe a
USSR
Eastern
Europe a
United States
16,792
109
57
52
West Germany
15,852
998
566
432
Japan
12,614
300
189
112
United Kingdom
10,106
207
86
121
France
7,707
467
241
226
Italy
5,138
267
115
152
Sweden
2,687
104
53
51
Canada
1,488
24
23
1
Austria
574
77
21
56
a Eastern Europe includes Bulgaria, Czechoslovakia, East Germany, Hungary, Romania, Poland, and
Albania.
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Table B-2
Exports of High-Technology Goods
1980
(As percent of total
exports to each region)
USSR and
Eastern
Eastern
World Europe
USSR
Europe
United States
7.7 2.8
3.8
2.2
West Germany
8.3 10.6
12.9
8.5
Japan
9.7 8.4
6.8
13.8
,United Kingdom
8.8 7.9
8.1
7.7
France
7.0 10.0
9.8
10.3
Italy
6.6 9.7
9.0
10.3
Sweden
8.7 8.7
12.7
6.5
Canada
2.4 1.4
1.8
0.3
Austria
3.3 3.6
4.4
3.4
Table B-3
Exports of High-Technology Goods
1980
(As percent of total high-
technology exports)
World
USSR and
Eastern
Europe
USSR
Eastern
Europe
United States
100.0
0.7
0.3
0.3
West Germany
100.0
6.3
3.6
2.7
Japan
100.0
2.4
1.5
0.9
United Kingdom
100.0
2.1
0.9
1.2
France
100.0
6.1
3.1
3.0
Italy
100.0
5.2
2.2
3.0
Sweden
100.0
3.9
2.0
1.9
Canada
100.0
1.6
1.5
0.1
Austria
100.0
13.43
3.7
9.7
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