LETTER TO JOHN MCMAHON FROM PAUL WALLICH

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86B00885R000800990289-2
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 27
• Document Creation Date: December 21, 2016
• Document Release Date: August 19, 2008
• Sequence Number: 289
• Publication Date: July 2, 1982
• Content Type: LETTER

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MEMORANDUM FOR: C,` ~Q~~17
Not referred to OSD - On file release instructions
apply.
State Dept. review
comoleted
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IEEE ?xe:utive }legibtay
July 2, 1982
Mr. John McMahon
Executive Director
Central Intelligence Agency
Langley Headquarters -- 70 55
Washington, D.C. 20505
Dear Mr. McMahon:
Please take a look at this transcript of our technical information
controls roundtable and check whether statements attributed to you
are correct. If you really feel it necessary, you may chose to
have a portion of your statements not attributed to you. Jay Keyworth
will be reviewing the transcript to see whether any portion of it
should be excised for national security reasons; you may wish to con-
sult with him on this, although we do not expect excisions to take
place.
In view of the importance of this matter, we ask that you return any
comments by July 12, either by mail or by phone. You will receive
copies of the official meeting report, including an executive summary.
The report will be made available to government agency personnel and
other interested parties, and will form the basis of a Spectrum
article. Thanks for your help and participation.
Yours truly,
PW:vr
Enclosure
Paul Wal l ich
Associate Editor
[phone]
Not referred to OSD - On file release instructions
apply.
G
al
m
N
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ROUNDTABLE
George A. Keyworth, Science Advisor to the President.
Although there have been a number of these interactions between government officials
and members of the academic community, I think this is really the first broad
meeting with industrial representatives. We certainly want to establish good
channels of communication between those various sectors because in many ways it
is industry not academia that is most immediately effected by changes and policy
regarding the release or export of technical information and products of course.
Certainly, we're all aiming for a position that reasonably balances the needs of
the national security and the needs for scientific freedom to exchange ideas
and research results. I think we have to keep our goal firmly in mind: to
maintain and extend our technological edge over the Soviets. This is essential
to restoring the military balance with the Soviet Union we are unlikely to match
the Soviets in either quantity of men, or tanks, or aircraft at least any time
in the foreseeable future so we have to overmatch them in quality.
We're attempting both to slow the progress of their [military] establishment by
denying them our critical technology and to spur American and Western innova-
tion on militarily critical technology. The Soviet empire is our concern,
not with our allies whom we share much of our most advanced defense technology:
F-15s, F-16s, Sidewinders, etc. We do want our allies to take this problem as
seriously as we do because the Soviets will always find and exploit the weakest
link in the chain. We're now working with the allies to try to strengthen Co-
Com export controls as some of the other participants will explain.
John McMahon, Executive Director, CIA.
We've been trying to scope the question of technology transfer and what technology
is being transferred to the Soviet Union, and what the impact that has on the
United States. A little over a year and one-half or two years ago, we conducted
a study of some 700 militarily significant items in the Soviet arsenal and then
asked our question: how did the Soviets get their technology to produce that
kind of system and what we found was rather appalling. We were also able to de-
termine that the goofs that we had made in assessing missile accuracy on the
Soviet missiles were not because we misjudged the evolution of Soviet technology
but we misjudged the fact that the Soviets were acquiring U.S. technology and
what we should have been looking for was what do the Soviets do for their missile
accuracy by gaining access to U.S. technology.
And so we found rather an extensive program that the Soviets have oddly enough
using the KGB and the GRU. And it is a very aggressive program. We found that
75% of the military significant end items that the Soviets had were derived from
operations through their intelligence services where they acquired information
either overtly or through typical James Bond operations where they could operate
against the U.S. industry and businessmen both here and abroad and against U.S.
subsidiaries abroad to acquire not only plans/designs but even hardware. This
spanned the entire spectrum of technology.
We also find oddly enough that in addition to being able to acquire that technology
which gave them capabilities in aircraft and transports, they had the plans to
the C5A before it even flew. They had avionics, they had look down/shoot down
-1-
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radars, they had information on AWACs radars, and if you looked at all the mili-
tary industries in the Soviet Union, and you saw where they had technology to
aid them in their propulsion plants and their ships and their submarines, their
ASW, their laser range finders for tanks, all it had an eventual source here
in the United States. Then as we looked at the entire military/industrial complex
of the Soviet Union to find out where they're going, we saw all the plants
expanding and the Soviets do not have the wherewithal technologically to provide
the manufacturing capability in those plants, so they have to come to the West
to acquire that. What we want to do is put the West on notice that the Soviets
are coming after you not only for advanced technology but also for the simple
industrial computer-driven machines, for operational software, for computers,
everything to help them in building up this military complex in filling the vacant
floors that now exist in these many plants. That goes to every aspect of an
arsenal, whether it is tanks, trucks, submarines, shipbuilding, aircraft, air
transport. So it is rather an awesome program and they are using their intelli-
gence services to help them. We view this not as a trade problem, but as a counter-
intelligence problem and our focus with the Western nations, Europe and Japan,
has been to alert those nations that they have to look at this from a counterin-
telligence standpoint because it is the KGB and GRU that is driving it.
Steven Garfinkle, Director, Information Security Oversight Office
There's been a great deal of publicity that the Executive Order signed by
President Reagan on April 2, is (1) an effort to classify a great deal more in-
formation that may be classified under the existing Executive Order and (2)
that it represents a step backwards on the issue of the classification of
scientific and technological information. Both of these generalized statements
which have appeared often in the media are incorrect.
The impetus for the new Executive Order on classification actually began before
we had a Reagan Administration. There was a consensus within the most affected
Executive Branch agencies that some of the so-called reforms of the Executive
Order signed by President Carter in 1978 had resulted in administrative problems
-and litigative problems for the United States in protecting that information that
clearly merited national security protection in the form of classification.
And it was to the end of cleaning up some of these administrative problems and
perhaps, more importantly, these litigative problems that an effort was begun
to consider amending the Executive order even during the time of the Carter
Administration. With the onset of the Reagan Administration, I would think that
the most important change was that it went from an effort to amend the existing
order to a new order itself calling it a new system. There are a couple of
things about the new order and its effect on the information that will be under
discussion today that I think are most critical.
First of all, in signing the new order the President indicated that one of the
most important things about an information security system or classification
system is that the information to be classified, justifies that classification.
If not, if we go about classifying a great deal of information that is not
warranted, we end up jeopardizing that information which does. Four things
have to happen before we can classify information:
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First, only an individual with what is called original classification
authority may classify information. Now, throughout the Executive
Branch of government, worldwide, including the military, there are
only about 7,000 persons who have the authority to make the determina-
tion for them that has not previously been classified [should be
classified].
Of that 7,000 approximately 1,300 are authorized to classify information
as Top Secret, approximately 5,000 secret level and the remainder at
the confidential level.
Second, the government must own or control the information that is to
be classified and I think that test is critical, very critical, to
matters under discussion today. Own or control, ownership is easy, but
control is not quite so easy. It's a term that scares people but control
means alot more than possession. The government possesses a great
deal of information that industry possesses, academia possess. By
controlling I would suggest controlling its distribution and dissemina-
tion, controlling access generally.
Thirdly, the information must fall within one of ten classification
categories. I would suggest that of the four tests that I'm describing
this is the least important because the categories are intentionally
broad and just about any information would be fitted into one of the
categories.
And fourth, there must be a determination by this original classifier
that the information if disclosed without authorization would result
in damage to the national security. It has been stated over and over
again that the thought process involved in this decision has been removed
from the new Executive Order. That is contrary to our intent. There
is always an apparent weighing of the factors that bear on the interest
of protection and the interest of disclosure in any classification
decision and any declassification decision. That will not be altered
by the new order.
So what I leave you with is the idea that things really have not
changed from the way they are now. They won't change in any signifi-
cant way on the first of August and that is notwithstanding some of
the articles you may have been reading which will indicate otherwise.
Joseph Smaldone, Chief, Arms Licensing division, Office of Munitions Control,
State Dept.
The Office of Munitions Control, is the one in the State Department that administers
the International Traffic and Arms Regulations. Our job is to regulate
commercial exports of defense articles and services. Our caseload has been in-
creasing at about a 10% rate compounded per year. This year we expect to process
about 40,000 license applications and other requests for export approval. Trans-
lated into dollar value, last year there were about $2 billion worth of products
of commercial defense articles and services and about $8 billion worth of license
approval.
We're not partisans, we don't get into the fracas of trying to determine whether
a particular sale will or will not be made. If there are policy and security im-
plications we refer them to the appropriate offices of Defense, State and else-
where to try to reconcile any differences and make sure everyone gets to see the
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cases they need to see and make sure everyone gets a fair deal.
With regard to the ITAR itself, the rumor about a revision, I might put to rest
because I don't see any revision happening very soon. Back in December, 1980,
we put in the Federal Register a proposed revision. We got about one volume's
worth of comments from the public and ever since then we've been scratching
our heads wondering what to do with them. The truth is that it will take a
considerable amount of time of several people getting together and reviewing
that ITAR and all the comments and trying to come up with another proposed
revision and as it works out we haven't had the time. We depend very heavily
upon our legal counsel for this particular service and when the one person
who is available to us for that purpose, looks at or notices the ITAR at the
bottom of his stack, he sort of shakes his head and goes on to the next crisis.
So, I don't see anything happening very soon. I certainly like to get it out
but I just don't see it in the cards, unless someone is willing to take us
all and lock us in a closet and send us off to an island and say go to work
for a month.
Our basic problem, as I see it, is one of saturation: the caseload is getting
to the point where we are on the verge of getting overwhelmed. Now, frankly, I
have been there two years and I don't know what the hell people did five years
ago when we only had 20,000 cases; we are now doing 40,000 somehow with the
same staff. We have undertaken some new initiatives, though, which we hope
will knock out this compounded rate of increase.
We've emphasized in our various briefings with industry some of exemptions for
licensing. I really feel that industry oftentimes feels the need of a security
blanket and they apply for alot more licenses that. are in fact necessary,
especially for technical data. And so we have been eiiip;iasizing if you have
technical data licenses to market things don't bother coming back and
renewing it, because there is an exemption for that. If everyone does what
they are supposed to do, will cut down a couple of thousand licenses a year.
At the beginning of this year, we extended the validity period of our licenses
from one to two years. We hope that this also will revitalize result in a
reduction of a few thousand licenses for otherwise unshipped balances or
previously approved ones. Over the course of two years, we figure exports
would have taken place. It won't be necessary to renew a license to finish up
shipments.
ITAR, of course, is the so-called munitions list. These are the articles that
we control. Let me say a couple of words about how things get on and off the
munitions list, mostly, how they get off.
We have a long standing procedure under which a U.S. company can write to us
and ask that any particular product they make which has been on the munitions
list can be removed if they make a good argument for removal. Obsolescence
widespread commercial applications, things of that nature are among the kinds
of arguments that will be entertained. So if you can make a good argument
for getting something off the list, it might succeed.
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The Congress is also very interested in this issue of what's on and what's off.
I'm not quite sure where they stand. I think the Congress knows where it
stands but we get different winds blowing on different days. But, we were
required last year to do a study of the munitions list to identify what we
could remove and transfer to the Commerce Department and we did the study and
as a result of that we have taken off a number of items and one of these days
the Commerce Department should get out in the Federal Register a notice which
will effect that removal.
We are now faced under the new legislation with the continuing requirement to do
a review of the munitions list. The language of the legislations calls for a
periodic review. It didn't say how often. We'll probably do it about twice a
year and we need to report to the Congress any proposed removals 30 days before
we actually effect them. We just completed our first skull session on that
matter and very shortly we'll be sending it over other agencies the items
that we propose for their review and comment. I might add in this whole process
that neither State nor Defense unilaterally, has the authority to add or sub-
tract from the munitions list. We have to get the DOD's approval to put on or
take off. Likewise, they have to come to us for any proposed change. Neither
one of us can simply add to or subtract from the list.
A couple of issues that are worth including:
1. Back in 1978, we put out a piece of advice with the Defense
Logistics Agency with regard to licensing requTrements from
foreign nationals employed by U.S. companies and the advice
was one sentence which is ambiguous at best and misleading
at worst. In any event despite the fact that we wrote this
letter specifically to the Defense Logistics Agency at their
request, it was widely circulated throughout the Government
and industry and was interpreted, because the language is not
very clear, as an exemption essentially for licensing if you've
got foreign nationals working in your company on programs which
involve access to technical data. It was presumed to be a li-
censing exemption because they were employed here in the United
States.
Well, there was never any attempt to do that. The regulation
is clear and consistent in order to remove that ambiguity and
to confirm the requirement for a license, there will appear
in our next newsletter a reiteration of the requirement to
get a license if they are foreign nationals as opposed to immi-
grant aliens and those people who understand the state-of-the-
art and the language know there is a big difference. If those
folks have access to technical data, in other words, if you
would have to get a license to export the-data to them in
their homeland, it would certainly be inconsistent to exempt
them from licensing if they work in your backyard. So we con-
firmed the need to take care of that and we've had all kinds
of screams from people "what is this?" We've got 25,000 foreign
nationals working for us.
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Those that are truly foreign nationals and those that are in a
situation where they are getting access to classified or par-
ticularly unclassified technical data which would otherwise
need a license, ought to be regularized by means of licenses
and I have not prescribed any ways by which this ought to be
done except to invite those industries which find themselves
in this quandary to get in touch with me and I will be happy to
work out some kind of mutually agreeable way of doing that.
The other item has to do also with foreigners and that is
foreign ownership. The ITAR does not take into account foreign
ownership, therefore, if one of your companies or any U.S.
company is partially or even fully owned by some foreign
company, we couldn't care less. We do not regulate ownership,
we regulate exports. If there is going to be technical data
provided to your parents or your half-brothers or sisters what-
ever the relationship might be, get the standard license. But,
ownership itself does not equate to export as far as we're
concerned and we don't intend to regulate ownership.
One final point, we have begun a modest program to upgrade our enforcement activi-
ties. This doesn't relate directly so much to U.S. industry as it does to foreign
industry. We're beginning to scrutinize more carefully license applications and
use checks on those which appear to be questionable and we're finding much to
our chagrin that not only are foreign companies oftentimes ignorant of or
acting contrary to U.S. reexport provisions but certain foreign governments are
in the same situation. So piecemeal and gradually as we get to it, we're bringing
to their attention the fact that they wish to continue to benefit from having
access to U.S. defense articles then they need to abide by our reexport regulations.
Bohdan Denysyk, Deputy Undersecretary of Commerce for Export Administration.
During the past decade, a number of forces were acting which caused alot of tech-
nology to to to the Soviets that should not have gone. Alot of political climate
was such that it was conducive to remove things from the list that perhaps should
not have been removed. In addition, the list itself was product-oriented. I fo-
cused on the export of products in the free world as well as to bloc countries and
the PRC, with less emphasis on technology transfer.
How do we control technology more efficiently? The area of most concern to most
people in government is the process know-how, the recipes to make certain types
of things. Fred Bucy pointed this out very, very well in his '76 report. We
haven't done an adequate job on it. The Export Administration Act of '79 reflected
some of that by directing Defense to put together an MCTL focusing on technology
and starting to deemphasize some of our product controls.
The other element that was working to provide technology transfers to the Soviet
Union that are coming back to haunt us now again is a political climate. Even
things that were on the list were not controlled. Decisions were taken that
focused on the short-term economic benefits of those sales.
There is an unclassified report now available which lists with some fair detail
the types of things the Soviets are after. As you know it is a well organized
exercise, it's not stereotyped, bumbling KGB agents who are kind of groping around.
That probably was the case a number of years ago, that is not the case now. They
are highly sophisticated, they know what they want, they know who to go to get it
and that's a challenge that we need to rise to.
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As a general rule, we're trying to control more tightly our process technology.
We're also trying to decontrol products which are either significant or which we
have no resources to enforce. Embedded microprocessors in some consumer items
come to mind immediately. It's getting more and more difficult to control things
like that. So when we're constructing the new list that will be taken into
account. Of course, I'm not suggesting that we will decontrol items that con-
tain microprocessors simply because they contain microprocessors.
We are currently engaged in a two-tier approach on the regulations. The first is
general cleanup. That is to simplify the language to make them more readable.
I've drawn the analogy of the commodity control list to a walk frankly. You
start at one place, they refer you to another section and so on and after awhile
you are thoroughly confused. The first exercise is to make it more readable and as
one example, if there is a computer entry, we will attempt to have all the relevant
notes and advice and anything else you need on one or two pages that are relevant
to computers so you don't have to go walking around an inch thick of paper. The
second part is to look at revising the substance or size of other control systems
on technical items. That'll happen about a year after we start negotiations in
October with CoCom. As part of that, we will also look at ways of doing a better
job in controlling technology. By a better job I don't necessarily mean broadening
the controls; there are various ways that we can first look through more private
control. We could also look at ways to narrow the list of technologies to items
that we have substantial leads in.
Ellis Rubinstein.
[trouble with CoCom operation?]
Ernest Johnston, Senior Deputy Assistant Director, Economic and Business Affairs,
State Department.
The first thing to keep in mind in regards to CoCom is that is although it's an
organization that's existed since 1949, exists purely on an informal basis. There
is no formal commitment by any country to follow CoCom. So it is not anything
that we can force our way in too much.
Without CoCom we would stand exposed completely in regards to our export controls.
So it is pretty important that we have consolidated Western position on this,
otherwise we will have technology and commodity controls which don't have much
effect on the Soviet Union and which are essentially a penalty on our own exports.
It is true, I think that there are certain things which the United States has got
a monopoly but that is not nearly so important as a control which effects the
major Western industrial countries.
CoCom operates essentially three kinds of functions:
One is the establishment and the periodic updating of lists of
commodities that are added or subtracted in regard to the embargo
that we are trying to maintain.
Second, it acts as a clearinghouse for requests by member governments
to ship specific items which are on the list for given reasons.
And third, coordinates the Administration Enforcement Activities of
the countries who are involved in it.
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We think that the system can work moderately well. On the other hand there is no
denying the fact that the Soviet Union and the Warsaw Pact Countries have ob-
tained some equipment and technology of strategic importance from the West either
through violations of controls or because some items just aren't on the list.
As a result, of Afghanistan we got agreements from the Allies that they would cut
back considerably the exceptions that they would request on shipments to the
Soviet Union. And subsequently after the invasion of Poland, we approached them
the same way.
We have tried with our Allies to increase some of the items that we have put on
the CoCom recently in mid-1980. We got tighter controls on lasers, semiconductor
manufacturing equipment and silicon material. At the same time and this was
essentially a response to Afghanistan we went to them with a proposal for Keystone
Technology process know-how which involved plants that were being constructed in
the Soviet Union valued at more than $100,000,000, but we were not very successful
in that. We went to them with a list of defense priority industries that even
though there were quite a civil component in the production of these industries,
we felt further restraints should be put in effect but were not successful with
that Keystone Technology Proposal. They asked that we redefine it in terms of
commodities. We have begun to do this in the metallurgy area and we think that
we are very fairly close to committee agreement on several proposals.
We had a high-level meeting in January which was the first ministerial level
meeting CoCom has had in the past 20 years. There was a broad agreement to
work on expanding the embargo to control critical equipment and technology
not covered while at the same time exempting noncritical items. Agreement on
improving enforcement efforts, international multilateral level, and agree-
ment harmonizing national licensing practices. The licensing practices of the
different countries are sufficiently different that if there is not more harmony
we will not be seeing the effectiveness we would like.
We have submitted several precise proposals for embargo coverage in special areas
of concern and we are completing now the submission of several scores of other
proposals for consideration during the next major CoCom list review which begins
in October.
We've got twelve technical subcommittees working on precisely what ought to be in
those submissions and we have depended very heavily on the work that the Defense
Department has done-in the military/political technology area.
Last week we held a subcommittee meeting where we made some modest movement in
our efforts to encourage other members to place a high priority on enforcement
efforts. The committee endorsed the U.S. initiatives on the need to limit the
access of Soviet business control technology and on Eastern access to Western data
banks.
We also raised the issue of problems of diversion through third countries. The
United States is the only country that requires reexport licensing if a good
is sent to a second country and then it's going to be transferred to a third
country. There are other countries that rely essentially on end use certificates.
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We also have seen reluctance on the part of other governments to devote additional
resources to enforcement efforts.
Stephen Bryen, Deputy Assistant Secretary of Defense for International Trade and
Security Policy.
There are two ways to face this problem I suspect:
One is to uphold property rights and do so fiercely. You see in the
academic community a great deal of upheaval and ferment over what
types of controls the government may be thinking about if they
are thinking about any at all, and in the business community concern
about how to address the system which itself is in transition; that's
one kind of perspective.
The other perspective and one I can prefer-I think a lot of it has al-
ready come out today-is really that we have a management problem. We
have it for two reasons:
One reason Bo[hdan Denysyk], I think, touched on very well is
that in a sense we're all the prisoners of the past and what
happened in the past. We're trying to come to grips with
that, but it creates many areas where it is difficult to work.
Second reason, John McMahon touched on and I think very effective-
ly is that we face organized opposition and we're not to well-
organized.
Then from the other speakers, from Joseph Smaldone and from
Ernest Johnston, I think you had a sense that the system we
have in place now is overloaded with things to do if we really
would get at the problem. All of us are stretching very thin
and all of us are trying to do a great deal of work which should
have been done in the past.
CoCom effort is a tremendous undertaking. It involves seeking
high-level political agreement. We've got some of that for the
first time in two decades. It involves then translating that
down to the working level which is no simple matter even here at
home, let alone having it happen in all of the other participating
governments, and its a system that runs on a consensus basis.
In the past, CoCom as an organization worked largely on the rule
of exception and so the actual rules became blurred. In a sense
CoCom could be understood as an organization that ratified export
decisions that in themselves were not quite harmful.
We have the problem that Ernie mentioned with the Third World
unaligned countries many of which are becoming increasingly tech-
nologically capable. How we handle that and our posture toward
it has become a very important subject. It's an area where in the
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past we did virtually nothing at all and where we have recently seen
some very grievous examples of transfer of our own technology that
has brought considerable harm to our defense efforts and obliged
us to make expenditures in the hope of repairing some of these
problems but not with guarantee of repairing these problems.
Then we have the management problem internally in each department.
In Defense it's a question of interfacing system services with
technical experts and developing a system that is composed of real-
time and in one that is precise. It is no simple engineering
problem. Anyone that's ever looked at the wiring diagram at the
Pentagon, quickly comes to the conclusion that it is not a good micro-
processor. You also have a management problem which is the respon-
sibility of industry, which has a common interest with government
in succeeding in this undertaking.
The responsiiblity of industry to, in a sense, police itself, to
take action itself, that helps us carry out a common policy. That
is an agreeable thing and industry is going to have to think/find
committees, staff, personnel, education, all the things that it's
going to require to do this cooperatively with us. It's not in
your interest or ours to try and have one side do it and the other
side not. We really have to work this thing very much together.
I know that tends to sound like a platitude but I hope it doesn't
become that because the practice of working it out, making the
maximum use of our different institutions is probably the most
effective thing we could do within this Administration.
Michael Lorenzo, Deputy Undersecretary of Defense for Defense Research & Engineering
As you know the MCTL was called for by legislation in the Export Administration
Act of 1979. The first version was published in October 1980 for comment. We're
in the second edition now for revision which will be published in October of this
year. Unfortunately, it is still in classified version only.
Alot of facets of industry don't have facility clearance and everything. They're
really in the dark so to speak. For example, our instrumentation industry is
dependent on exports for livelihood and they do need guidance. However, we're
using industry to give them that guidance, we're using the Mapag [Multi -Association
Policy Advisory Group) to review the list.
It gets good technical input, it gets the practical bottom line input. I just
came from the industrial sector, and you do have to make a profit and be practical
as well as being bureaucratic in trying to control everything.
There is a bottom line and that's to make a profit and pay people.
First of all, a little bit of levity, I ran across Bill Perry recently a former
predecessor OUSDRE and he said, "Gee, I hear all about the technology transfer
links; to me that is good news. We must still have a technological lead over
the Soviets since they're still trying to steal our Western technology." So
that is one way of looking at it.
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[Outlining the large number of tech transfer agreements with our allies]
And, system technology parks where alot of graduate students go back and forth.
Technology is really an international language. The physical/scientific laws
of nature have no barriers with ethnic group or anything. It's been around
since day 1. People know the payoff.
I think there's two things though, a bottom line that you should keep in mind.
You ask if we can control certain critical technology. Well, I think we have to
realize these are short-lived at best. People are very bright and they're very
intelligent and they're going to reverse engineer it or copy it or steal it or
buy it.
But, I think nonetheless as a nation we've done a very poor job. We can be
smarter than other people, do different things to help protect our technology.
I will mention in a generic way a case where we can be smarter. Let's take the
CAT scanner in a hospital and say why were we concerned about it. Well, it was an
inventive computing system there with an ATP and GP and display and alot of soft-
ware that could've been used off-line for uses in which we didn't want it to be
used. Getting together with the chief designer and so forth after four or five
chats, there are ways that we can put engineering in there to prevent easy
accessability off-line or reverse engineering.
Grant Dove
The critical argument in the Bucy report was need to separate design and manufac-
turing know-how from in-products inside. We believe this critical technology
approach remains valid today as the only way to simultaneously achieve two goals:
protecting the national security content of the International Trade and minimizing
unnecessary restrictions of trade. Current efforts by the U.S. government to
tighten controls over technology come against a heightened awareness of Soviet
and other adversary nations access in acquiring Western technology for use in the
military efforts,.
Denying or delaying Soviet acquisition of critical technology is, we believe, an
accepted goal of the university community, industry and government. Differences
among government, industry and university today appear over issues of definition
and of the implementation.
The critical technology concepts should be distinguished from the military
critical technology lists MCTL. The critical technology approach was intended
to identify the most important technologies and most active transfer mechanisms
and focus control efforts on these. The military critical technology list is
so long and the categories so broad that it does not appear to have the focus
as was intended in 1976. The MCTL efforts should, therefore, not be regarded as
fulfilling the concepts of the 1976 DSB report. Clearing the technology
approaches should not be submerged in short-term political consideration, such
as economic warfare.
The critical technology should not change during periods of detente and cold war
but provide the baseline of control areas both in the U.S. and with our CoCom
allies.
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The issue of controlling university research which has created alot of heat in
recent months goes much deeper than changes in government regulations. Basic
research in universities is not an issue. It should remain uncontrolled. The
problem is that the old model of government funded basic research in universities
which progresses towards applied research and eventually to military and later
commercial applications simply does not apply today. Many universities are
trying to build application labs in significant dual use technology such as
microelectronics. Since commercial application for many of these technologies
are proceeding military use by several years, the results of these application
labs should be covered by U.S. Government regulations, just as they have been
for years in industry.
But we must not forget the economic vitality of our technology/industrial base
is of crucial importance to our nation's security. Since the Communist country
markets are very small in most sectors, the primary impact of export regulations
fall on free world trade. In designing a control structure, we must not throw out
the "baby with the bath water." The critical technology approach could, in fact,
facilitate less trade restriction by placing less emphasis on controlling end product.
And finally, we need to keep in mind the purpose of export control is to preserve
technological lead time. Export control can delay the acquisition of critical
technology by adversary nations but there's another side of the coin that is
the need for the U.S. to run faster in our own technology development and utili-
zation in military systems.
After about ten years of looking at it, we at TI are more convinced than ever
that the critical technology approach has to be intelligently implemented no
matter how difficult the test. It is essential that universities, industry and
government go beyond rhetoric ideology and seek pragmatic, workable solutions.
Robert Schmidt, Vice Chairman, CDC
I have assumed that we have been convened here today with two objectives. First,
to discuss the current and potential effects of the government's policies for
management of technical information on U.S. economic well-being. And, second,
to make recommendations regarding current and future policies intended to manage
the flow of technical operations.
Inregard to the first objective, I want to make only one point, but I want to
make it as strongly and as directly as I can. The point is that in my view the
U.S. Government is enmeshed in a myopic, self-deluding export control process
which has already cost the country billions of dollars in lost revenue and
threatens to cost even more in revenues as well as in prestige, leadership and
security.
I call the process myopic because by focusing on the restrictive access to existing
technology the government is losing sight of the need to develop new technology.
The 1979 version of the Export Administration Regulations seeks to control broad
technologies and management skills as well as specific products. Its influence
also extends to meetings, training agreements, technical exchanges, and workshops.
The dilemma was summed up very nicely by five university presidents who wrote last
year to the Secretaries of Commerce, State and Defense. In that letter they said
restricting the free flow of information among scientists and engineers would alter
fundamentally the system that produced the scientific and technological lead that the
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government is now trying to protect and leave us with nothing to protect in the
very near future.
The way to protect that lead is to make sure that the country's best talent is
encouraged to work in the relevant areas, not to try to build a wall around past
discoveries.
The other half of my opening assertion is that the export control process is self-
deluding. The reason for that statement is bound up with our arms export policies
and with the military critical list. As you know, the MCTL defines technology
whose export is restricted.
[Quotes Rand Report]: "But the most important question about technology transfer
in the long run is whether to receiving side is able to absorb the technology
it imports and to build upon it to generate further technological advances. In
certain high priority areas, notably military, where Soviet technological skills
are already high, the Soviets' ability to learn from foreign technology is also
high. But, in the industrial sector where most Soviet imports of foreign technol-
ogy are concentrated the Soviet's record in absorbing and learning from it is poor."
The Rand Report concluded the most effective barriers against technology transfer
are those directed by the Soviets against themselves. The Soviet difficulty in
absorbing technology was not newly disclosed in the Rand Report. It is a problem
that is generally known for years. Yet, in response to this knowledge, the U.S.
Government persists in efforts to expand the MCTL which already includes several
hundred technologies while aggressively maintaining its position as the world's
number one supplier of weapons to other nations.
President Reagan has eliminated nearly all the restraints on U.S. weapons exports.
According to the Defense Monitor over the past decade, the United States has
provided weapons and military services totalling more than $123B to about 130
of the world's 161 nations. This total includes 28 of the 41 military dominated
governments. With this much of our own sophisticated weaponry in circulation,
does the Government really believe that the embodied technology is safe from
Soviet hands?
Iran is a recent example of the danger of providing sophisticated weapons to an
unstable nation. With the fall of the Shah, the U.S. was in a position of having
armed an adversary and having compromised secret military technology in particular
the F-14 and the Phoenix missile
Not only have we made technology generally available but we have even been thought-
ful enough to provide them the form which it is most readily absorbed by the Soviets.
Under these circumstances, the MCTL is an exercise in futility. In an analysis
that my company has made of the list only 125 of its 700 technologies were found
to be possible candidates for restrictive exporting and in many cases the restric-
tion would have protected a proprietary process of particular companies rather than
a technology that had any military significance. But given the extent of our arms
traffic, the protection of any number of critical technologies is in question. The
prime result of the MCTL is a loss of business by U.S. companies seeking to engage
in free trade.
This brings me to the second objective for today which is make recommendations for
management of the flow of technical information. Ideally, the government should
bring its weapons export policy into line with its .position on other exports. Then
in an effort to protect our truly advanced technology the MCTL should be revised
and it should be shortened instead of broadened. The mistake being made is that
the level of included technology is too low and that we are constructing a fence
around past glories. An alternate approach would be to define as critical only
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technologies in which the United States has a clear lead. Those technologies would
then become a part of the restricted export list. Two years might be used as a
guideline for the list and in those two years while other countries catch up to
us we could realistically expect to advance further maintaining our lead. We would
thereby protect only that which deserves protection, restore focus on leadership
rather than on the status quo and unleash our businesses to reestablish themselves
in the world market. Achieving this will require hard work from all of us but
I hope you will all agree that it is far more rational and realistic approach
than the witchhunts that we are currently undertaking.
If we proceed in the fashion that we're now going and we don't take some advice
from Fred in Texas Instruments, then we are soon going to be in the position where
the only way to control what we need to control is to stop exporting. That's what
I hear when I listen to all this discussion. It means stop exporting if we're
going to get the kind of control that everybody thinks we ought to have.
William Howard, vice president, Motorola
I think there are a number of points which I feel require some emphasis.
The goal as originally stated for this technology control policy was
against clear and present danger from the Soviet threat.
And clearly we would agree that is a significant problem. There's another aspect
of this that I think we have to be cognizant of and that is that although the
Soviets represent a clear and present danger right now, there's also clear
and present danger which deals with the competitiveness of U.S. industry in worldwide
markets. Speaking from my own industry, which is that related to the semiconductor
industry, approximately 50% of the semiconductor market lies outside the United
States. In fact many of the higher technology areas, the United States does not
have the monopoly on this technology. That's the important tying to remember.
In the discussions that took place earlier this year with respect to some of the
items that were included earlier in CoCom discussions, one of the things that came
up was the possibility of the potential controls on hyperpure silicon. It seemed
to be new news to people who are proposing that silicon be contrlled that in fact,
the majority of the hyperpure silicion made in the world is not made in the United
States, and therefore, a unilateral United States embargo in thiscommodity would in
fact hurt only the United States and not cause damage substantial to the adversary.
The controls that have been put in place concentrate on means of transmission.
Controls of commodities are very heavily dependent on shipping paperwork and on
means of transmission. When we deal with information, we're dealing with something
which is not a commodity type item but something which once lost can be replicated
virtually indefinitely, and so controls on means of transmission are not the
effective way to control this technology (information).
We have to look at the sources of information not the means of transmission. There
must be a cooperative agreement between the controlling authorities that are govern-
mental, and those developing that information that are largely industrial. Many of
whom are not funded by the government. In fact, the cooperative relationship must
be symbiotic and must be equivalent for both sides not just for one side or the
other.
In the semiconductor industry there is a relatively limited number of sources
of this kind of information which if cooperative could effectively bottle up a
large part of this. But it has to be done in a way that the competitiveness of
this industry does not suffer.
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Classification as a means of controlling information is a major problem in that
alot of us in the civilian semiconductor industry don't have in place facilities nor
the people to handle large amounts of classified activity. In fact, putting
classifications as a control into this industry would be a major problem in the
ability of technology to go forward. Instead we would prefer to rely on items
like employment agreements and other voluntary agreements by people working in
this area as a means of controlling the flow of information.
The technology we develop is very definitely dual use. As was pointed out earlier,
applications of the civilian marketplace of critical technology frequently lead
the applications in the military area. As a result, these (technologies) have
to be viewed from the standpoint more of the Export Administration Regulation than
from the standpoint of I.T.A.R.
I believe that U.S. industry is willing to cooperate. Motorola has been involved
in a lot of the activity that's going on in regard to military critical technology
lists with regard to preparation of positions for CoCom and we believe that indus-
try is willing to cooperate in this activity because it's being recognized as a
clear and present danger.
Furthermore, industry as a whole would welcome a slowdown in the intercompany
as opposed to intracompany transfer of information as long as we are all provided
with the same guidance. If we run into situations where foreign competitors
show up with different sets of rules and conditions, then it represents a serious
competitive threat to United States industry.
And finally a word of exasperation: part 376 of the Export Administration Re-
gulations in a world of highly obfuscated governmental rules and regulations ranks
as one of the most impenetrable documents that we have encountered. That is
the section which deals with technical data transfer. Anything that can be done
within the Commerce Department to simplify those regulations, or to clarify them
would be a great benefit. Because we believe the majority of people in uni-
versities in the industry have no idea of what they mean '& how to apply them.
(Denysyk) A lot of people in government have the same feeling.
Erich Bloch, Vice President, IBM.
I would like to focus on internal relationships. We are a multinational company,
and most of the high-technology companies are multinational companies that depend
on the free relationship with their subsidiaries and with installations in foreign
countries. Any amount of interference with that free relationship I think would
be disastrous, not just for company, but for the economy of the United States
as a whole. I think we are not giving that kind of an aspect enough considerations.
That means employment of-foreign nationals, means information that has to flow
freely on a daily basis -- on an hourly basis, I would say -- information sen-
sitive to the company itself, that has to flow freely back and forth between these
installations and the United States.
And by the way, let me make one point: the government doesn't have a monopoly
on protecting information. I think the industry has learned the hard way and
it has learned a great deal that it must protect its own information. I would
urge that the government use that, as a part of its enforcement policy, that the
industry is mandated by itself to protect its information in a serious kind of
a way. That should be a guarantee to the government, that it's not
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just a free flow all the way from here to there, where it wants to go, but that
information free-flows in channels that are important channels. I want to really
focus on that aspect of it: not just the trade with foreign countries, but trade
within the company itself.
Bohdan Denysyk
From some of the comments that you made earlier on where the problem is and how to
solve the problem of technology transfer, it seems that we're looking at the pro-
blem as an either/or type of thing. We've focused simply on trying to control
technology and not putting enough emphasis on keeping our country ahead.
Frankly, I would agree with that. I don't think we have done enough to have an
environment that's fertile enough to solicit technology to go forward and very
quickly get into the different factories so we do increase productivity. But
it's not a one-sided issue. I think we need to look at both sides.
I think there is consensus in government and perhaps in most other places that
somebody has taken advantage of us. (The Soviets) have mechanisms to take tech-
nology that sometimes we view as purely civilian put it into weapons or into
logistical support very quickly. They have weapons coming on line every six or
seven years.
Our weapon systems, have large gaps in development, sometimes 10 or 15 years,
but the Soviets always have a new system in the pipeline.
Just one other point--I don't think anyone in government is trying to overcon-
trol the system. We took decisions in the past which were shortsighted in terms
of economic and perhaps political strategic objectives. We have had problems
in the past and the pendulum has swung too far in one direction.
But there is also a strong desire to construct a system which doesn't overcontrol
so that the pendulum doesn't swing in the opposite direction and enter the domain
where we start impeding legitimate technology transfers, abroad which would
create markets where we can bring~R&D $ back into the US to keep our technology
going.
There's a very real desire on the part of all officials in government to do that
and we need advice as to how most effectively and most rationally to construct
a system like that.
One way of doing this is to look at the way the Bucy report suggests that we con-
struct our control system. But even there it's not going to be a black and white
situation. It's not going to be controlling technology and keystone equipment
and decontrolling all products. There are certain products which have their
own intrinsic strategic value--large computers, , for example, ATP, spectrum
analyzers and so forth.
So it will be an amalgam of various things: products, technology & keystone
equipment. But I think we're working the right things. It'll take a little time, but
I think we are going in the right direction. We welcome any kind of input
that we can get from industry or from the scientific community to help us con-
struct a rational system.
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The product of our study on technology transfers was not only the evidence of the
technology going in the Soviet weapon systems causing us to put more into our
own defense, but the fact that U.S. industry was being robbed. Your companies
aren't getting a dime because the Soviets are stealing you blind, they're getting
it for nothing through their intelligence services and that's why I say its a
counterintelligence problem and industry is going to have to figure out how to
prevent it themselves.
So it isn't a question of just trade, it's a question of U.S. industry being
robbed.
---If you can't export, you can't get money for it. That's the problem. One side
is preventing the other side from getting money for that technology and I'll
give you a classic example my friend, Gus Weiss, (NSC staff), was involved in.
We tried to export some obsolete memory disc products. We tried to export the ability
for the Soviets to manufacture those discs absent the technology for the head and
we got turned down flat. My friend here said don't you do that, don't you even
think about making a proposal. And that'.s about six years ago, as I recall or longer.
But anyway next week at the National Computer Conference in Houston, Control Data
is going to announce seven new products that cover the entire range of discs and
not one bit of it has anything to do with the present technology. It's all plated
heads and plated discs. It's a whole new technology. We could have in the pro-
cess sold that other technology to the Soviets and got them started; they never
throw anything away--gotten some money from it and gone about our business and they
would be using that yet today.
McMahon
Well, I ask you to worry about the Soviets getting that plated technology today.
Schmidt
Sure, and they're going to try but we've got no more interest in letting them have
that plated technology than you do and that's the point of my discussion.
Let's-get down to what's important and stop all of this horsing around, with
(aspirin) acetylsalicylic acid which is one of the 700 things on the list. That's
ridiculous, that denies the credibility of that list.
I think to worry about trade and export is one thing, you also have to worry
about them picking your pockets---Schmidt--I agree with that; I don't question
that for one second.
Henry Bachman, V.P.
Someone made a comment that we had been taken advantage of and that's nothing
new in the United States to be taken advantage of. We got to be careful not
to shoot ourselves in the foot in trying to prevent that from happening. Our
present position justifies some jeopardy in that regard by maintaining a free and
open society and we just can't tie ourselves up in knots in trying to prevent
being taken advantage of.
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Some of the things that we hear today makes you even more concerned when you hear
the litany of things that we have to face in regard to doing our business, clearly
not in the best interests of the country.
Nobody here is arguing against the fact that the best thing for us to do is to
stay ahead in our technology and the worst thing we could do is put obstacles
in that path.
Some of the obstacles are very simple: If we don't sell our products and make
profits and have justification to invest money in R&D, we're not going to have.
that technology.
Industry recognizes very well the fact that it must maintain from its competitors
be they internal or external those things that are important for its economic
wellbeing. They should be relied upon more to do that, rather than trying to impose
regulations.
Ed David. President, Exxon Research & Engineering
I don't think the problems have been very carefully defined. I don't think we
really understand what we're trying to prevent. It's a very, very diffuse sit-
uation and I don't think the Federal agency people have done good service to the
whole community bringing the problem in this form. It would be much better if we
understood clearly what is the issue.
But let's assume for the moment we do understand what the issues are. If you look
at ITAR, CoCom, EAR and the other mechanisms which we have used to try to regulate
the flow of technology over the years, you have to say if there really is a
serious problem today, then these things gaven't worked very well and yet we hear
proposals to try to augment mechanisms which apparently don't work.
This is a rather strange way of going about things. No matter how the regulations
are changed, how the list is changed, whether we get new people in to operate
the system, whether we have a more rational system in some sense, I don't think
it's going to work a great deal better. I'm not being defeatist, what I'm saying
is that if you really want to control these matters, it's got to be done through
a voluntary system in which private sector plays an important role.
Because it's only by putting the responsibility where the authority is that we
will be able to get this problem worked out and indeed get the problems defined.
I don't think you can define them on the general level. You have to define industry
by industry and probably company by company, and the only way to do that is to do
it in the private sector.
Now, I think we ought to spend some time this morning talking about mechanisms
which would enable a communication between the private sector entities that have
to be involved and the federal entities that have to be involved and find some way
of bringing these people together. I think that some of the things that have
been said here this morning are very, very true. Industry is a responsible,
basically responsible sector of society. Certainly the government is basically
a responsible sector of this society. And if you want to define these problems
and get solutions to them I think uou've got to bring the responsible sectors
together.
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I just want to say that I don't think there's ever been any disagreement between
Fred Bucy and Bob Schmidt or even Lou Branscomb. We carried on a debate somewhat
like this for the National Security Council at the beginning of the Carter ad-
ministration. In fact, we've gone through this debate for about twelve years.
It started in the Nixon administration (Ed David -- It goes back further than that.)
One of the things that always happened was that each administration starts out like
the world just began on January 20th. In this kind of situation, we have to have
a policy that'll weather different administrations. And we're not getting it
because our government speaks with different tongues. Each department speaks
with a tongue different from the other departments, and the Defense Department
has two of them. The technical side, with Dick DeLauer's sort of position, and
the strategic side with Fred Ikle. I'd just like to see us get one position
in the government that we can deal with, and then deal in a cooperative fashion.
We've always said, "we've got to get on the same side of the table." We're not now.
Henry Bachman--Perhaps one could have something like the American standards asso-
ciation, something of that sort where one could set up standards and you could
adopt them...
I agree with Bob Schmidt and also with Ed David. We have four major things
underway: MAPAG getting on the MCTL, trying to get this down to a managable
size in terms of having it accepted; the, Dale Corson National Science Foundation
study; Dr. DeLauer and Dr. Kennedy of Stanford on the universities thing; and
a meeting going on with Dr. Curry. v.p., missiles div. at Hughes, heading up
a Defense Science Board task force on technology transfer. Their first session
is tomorrow, and they've been working quite a while. So -- I hear you. But it
ain't gonna happen overnight. What I've found in government -- I've already been
in several months -- is this adversarial relationship. It's damn deep and heavy.
I don't know how the hell you get rid of it. I've talked to a lot of old bureau-
crats; I don't think they know they have it; they've never been in the private
sector, they've never worked for a real profit, met a payroll and I think you need
more rotation of the bureaucrats in government and private sector and let them
get talent and make a payroll and make a deadline and make a design and cut a
piece of hardware and produce it.
Chief, Technology transfer assessment center, CIA
I want to pick up on something that Ed David said, and that was about whether the
old systems had worked. I think you've got to look at the environment in which
they were forged. You didn't have the economic competition you do today. Nor
do you have the intelligence threat that you do today, so I think you've got
to look hard in planning a new system that handles all of these problems. We
think that the old system has worked to some extent. It's forced the Soviets
and East European services to go to a very well-organized illegal program.
They've acquired hundreds of millions of dollars of microelectronics production
and design equipment illegally, and that doesn't go out of this country in a pouch.
But it has gone out. It's been carted out of here, it's been taken from your
subsidiaries abroad. If they need it, they will acquire it. You're not dealing
with amateurs. The programs that they mount against you both for illegal trade
and penetratration of your company are well-designed. Industrial security, the man
from IBM said, is probably one of the best approaches that can be taken at the
local level. And I think there's much to be said about that.
STAT
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But it's not the kind of industrial security we know today. It's not key-based
defenses, the doors-. Penetration of the Hughes Aircraft company is a good example
of that: it's the recruitment of the man behind the door. This complicates
your problem in trying to provide that kind of protection at the source. One other
thing: when you look at the stealing, or the picking of your pocket, oftentimes
the technology doesn't come back in the form of market competition. It doesn't
show up outside the Bloc. But it does show up in the military arena. It forms
a military threat to us and our allies. And that's very hard sometimes for people
outside the intelligence community to see because you don't have the classified
materials to see that.
There are three trends we have seen over the seventies that will impact very heavily
on the industrial security programs of the 1980s. First, the Soviet intelligence
and East European intelligence services have been using these national intelligence
means to acquire what we traditionally thought of as civilian technology:
automotive technology, chemicals, energy microelectronics and the consumer area.
The second trend has been the emphasis on the part of Soviet and East European
intelligence, to acquire what we would consider to be the industrial, the production
technologies as opposed to the weapons technology. That's not unexpected because
in many cases they're into the third and the fourth weapons generation. They
don't need our weapons designs, but they do need a better productive capability
to be able to manufacture the large volume needed by the Warsaw Pact. The third
trend that we've noted is the focusing of Soviet and East European intelligence
on the sources of our emerging technology: the universities, the laboratories,
at the point before it's protected. All three of those trends result in something
that rejects the experience of the fifties and sixties namely the heavy emphasis
of the Soviets and East Europeans on our commercial sector as opposed to our national
security sector as opposed to the military labs where they design this work. It's
oftentimes in that sector that the protection against soviet intelligence, the
counterintelligence, does not exist. Many of the western countries are not pro-
tected for the commercial sector; companies really don't have the ability to counter
this penetration effort on the part of-the soviets and East Europeans. And finally,
that technology is in fact the technology that we're hoping to use in our military
programs some years down stream.
Keyworth -- Having sat here and listened so far, what I would like to do is make
sure that I am extracting what I think is the general consensus.
Let me start with an extreme end on one side, which is the question of academic
freedom. There's no question within the administration that our academic free-
dom must be sustained, there's no questions that it's one of the things that we
have that serves us most effectively. However, the issue was raised that there is
something new in terms of academic research. We think of academic research as being
fundamental forefront of knowledge type research. But what we now are beginning
to have in some academic institutions is technology development, something very
different from fundamental research. I would contend that at the present moment
at least these are few and relatively far between and represent a very small part
of academic research. VHSIC research is one example as an area of very serious
potential leakage that is important but I think it is dangerous if we allow that
relatively local concern to in any global way strangle academic freedom. I think
that Bobby Inman did this entire country a service regardless of the flack that
he took for it by raising the warning at the AAAS 6 or 8 months ago, the question
and the concern. The discussion that has ensued has been a very productive and
a very profitable one. But let me lay on the side academic research as generally
a relatively small problem.
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That takes me to a most informative discussion with some months ago... STAT
the CIA has been able to put together and bring out very, very clearly. The fact
that most Soviet military development has come straight from the United States.
It is a very serious problem. But, inevitably there will be technology transfer.
The U.S./Western World will inevitably help the Soviet Union do their development.
And I think we have to accept that inevitability. The single most important issue
that has come up today is the question of protecting existing technology versus
tomorrow's technology. And it addresses the entire question of how we establish
priorities. We have this global list of things.we wish to protect--40,000 and more
items depending upon which list you are looking at. We are trying to protect those,
and granted the people who are actually doing the rule enforcement and regulation
making are trying to use judgment to the best of their ability. But there is no
built in priority per se.
I can define two military technologies today that are absolutely critical for the
future security of America. One is stealth technology and the other is antisub-
marine warfare. They're both very, very forefront technology where we have a sub-
stantial lead over the Soviet Union and that must be maintained. There are clearcut
technologies that underlie that leadership and they are not as broad as saying all
of microelectronics, either. Eut those should be examined by the government to
try to get industry involved in national security in detail so that very key
elements can be identified and we can try to more rigidly draw fences around
narrow things.
The Soviet Union's ability to penetrate has been very well testified to. Now,
how are we in our free society, how will we control that? True we can't draw a
fence around the country, but maybe we can draw a fence around very small local
areas and thereby maintain our leadership. The counter example I would offer
is a personal example that I have -run. into before--we have protected the transfer
of oscilloscopes, for example, to other nations for fear that they will use them
in underground nuclear testing programs and extracting information. That's about
a fourth-order payoff compared,to what I was just defining as a first order payoff.
At least we ought to be able to distinguish the first from the fourth order.
First of all, the lack of priorities is impeding industrial effectiveness. Secondly,
and probably making the job ten times more difficult for government, and of course
impeding the effectiveness of this overall control. The question has come up
of an industrial-government mechanism for starting with the problems of implemen-
tation and how fast it can be accomplished. It would seem to me that particularly
with the DOD hasn't a clearcut standing mechanism giving these priority assign-
ments in areas that must be protected today, and lots more too than classified.
The department of Defense should have a standing or "a" mechanism, I won't even
be as specific as that, a mechanism whereby you can have the kind of input getting
today getting down to brass tacks on specific issues and see how the implemen-
tation can best be perfected.
Your point, Jay, about that priority is critical to the whole damn discussion.
I was trying in a maybe somewhat different way to make that very point. If we ao
back and think about the suggestion that was made by Fred Bucy's defense science
board report, I was always negative about that for a different reason. Not that
I thought we shouldn't protect the technology but I was afraid that if the camel
got its nose under that tent that we'd not only restrict that technology but we
wouldn't release the product. And that's exactly what's happened. We have taken
a very fine report and one with a lot of credence and bastardized it. And we've
been at it since 1976. Now that shows you we weren't doing something properly.
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I think that last comment is one that I would've made ... we now have two sets
of regulations; we have key technology regulations and product regulations
and if we think of another mechanism we will have three sets of regulations unless
we can do something to cut through all of this. The problem is the regulations
are caused by legislative action followed by people just doing what they have
been told to do. The only way you can get to that issue is you've not to start
at the top.
Keyworth
There is no broad top-level administration policy that has fully evolved on this
subject. Cases keep coming up, in the very top levels of the White House and issues
are looked at. I recently attended a meeting where some key members of Congress
wanted to talk to Ed Meese about this fifth generation computer problem. for exan-
ple, and there is an increasing level of awareness and there are groups working
on it. But broad policy stance is not yet evolved at this point. At the beginning
I said that I thought that industrial competitiveness and what we are trying
to constrain from the Soviet Union are two very different things but...one parti-
cularly common overlap, is that the United States and most of the rest of the western
world are just plain very very different countries. The reason, of course, if that
whether if we like it or not, we still retain fundamental responsiblility for security
in the west. It is our military technology that really underlies that superiority.
That places a very different responsibliity on the United States.
So how we, come into the new era of competitiveness and still address this problem
of techn. transfer. Today does require new solutions. I think most people agree,
that we are not going to maintain either our fundamental scientific or even our
sorely challenged technological superiority unless we find new solutions to today's
problems and I think one of the best things we have come up with today really
are a number of comments that are not the same as have underlied this question
of transfer to the Soviet Union in the last 20 years.
In these discussions and some others I've been in frequently we intermix the question
of military security and strategy with the question of national security and strategy
and the two are not always the same. And they must be handled and treated in different
ways. If we had a good, sound military strategy. which I don't really think we
have, we could solve a lot of those arguments and questions about what's good
and what's bad to export. And if we also had a good sound national security
strategy we could then unmix the two and we wouldn't get all confused.
D. Langenberg
I want to solicit the views of you around the table on another aspect of this
question that we've discussed so far. By far the most effective means of technology
transfer is the head and the hands of the human being. And one of the biggest
import/export businesses this country has had in the last three decades is higher
education. We have processed, if you like, through our institutions of higher
education hundreds of thousands of foreign nationals. They tend to concentrate
in our schools of engineering and arts/sciences departments.
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They stay, some of them; they pass from being foreign nationals to immigrant aliens
to citizens and wind up playing key roles in American high technology. Some
of them return home and achieve positions of leadership, technical or political
leadership, in their own countries. And they do so for better or for worse as
alumni not only of our institutions of higher education but alumni of the United
States. I'd like to hear the views of any of you on the government or industrial
side about how we deal with that group of people.
G. Keyworth
I think that the export, as you call it, of students and of expertise, knowledge,
etc., is one of the proudest that this country has. I believe that the openness
of our academic institutions to foreign students should be maintained, even increased,
that we should be proud of the fact that 50 percent of our graduate students in
engineering are from other nations. I think that this is a testimony to our
society and it is one of the unattractive aspects of isolationism that many people
have questioned whether this is in America's best interest to have so many foreign
students.
E Block
I agree with you what you're saying. There are clearly lofty reasons for keeping
it open., and for selfish reasons. Where would U.S. industry high technology be
today if it were not for foreign immigrants, for people that are here for a long
period of time. Secondly, even if they go back, how many of these people are being
hired and are therefore supporting, directly or indirectly, by American companies
operating overseas?
Gordon Moore, Chairman, Intel.
I agree with a good portion of this. Aliens certainly have been a major source
of personnel for a company like ours. But don't underestimate the loss of in-
formation that can occur this way in a very new technology. By the time you get
the body of information that exists in microelectronics, today for example, pro-
bably no two people could transfer a portion of it.
But in one of our newer areas, in microelectronics 10 years ago, for example,
one.graduate student properly positioned can take back a tremendous amount of in-
formation. Seeing Polish graduate students at Stanford at that time really bothered
me. This is a potentially major leak of information and I think you do have
to be careful if you're really concerned about the loss of information in embryonic
technologies.
B. Denysyk
Back to what Jay said earlier, about the need to keep a fairly open scientific
environment in universities: I don't think anyone in government is trying to con-
trol that, even for bloc countries.
The concerns are not in open literature basic research and they're not directed
at foreign students in the aggregate. They're directed to a very narrow sector
of technology: technology in the sense of process know-how not the basic research,
not the systematic exploration of new frontiers, but rather the application of
that knowledge into processing, how to make things, how to make chips.
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The Cornell comes to mind immediately in terms of applications laboratory or
Stanford for robotics. Those types of things have fairly and direct significant
applications in the military infrastructure, to make weapons to increase pro-
duce. In terms of people, were interested in depriving them of easy access of this
technology, it's clear that we can't hold a wall high enough to prevent all leaks
of our technology.
Nor would we want to because (censorship) will spill over into other areas and we'd
lose creativity. The people we want to keep that technology from are the Communist
country nationals, eastern Europe, USSR as well as PRC. So if you extract those
sectors, out of the whole aggregate of academia, they are minimal. So I think
you can construct a reasonably rational system where you minimize this danger to
its creativity of the international control on technology. I think it is a fairly
small and reasonably well-defined problem and if we attach it as such I think
it's manageable.
Does it seem there ought to be some sort of an ongoing industry/government effort?
Certainly SPECTRUM doesn't want to be in business, but would it be in the interest
of this group for us just to try to offer our services to find the people that
might organize such a thing and just sort of start it going and step out of it?
G. Weiss
The world doesn't need another group. As Steve Brye pointed out earlier, we're
all tied up, being awfully low on staff. The people who work this problem are finite
in number and have got weighty responsibilities, so unless you can come up with
a clear definition of what that would do and how that-would help, I'd be skeptical
about tying up expensive people's time.
We haven't mentioned an opportunity coming up which you might want to think about
as an alternative, namely the rewriting of the Export Administration Act, which
comes up next year for renewal. Many of the things that had been mandated and
methods by which we're operating are in the present act. I'm sure that that
would be a weighty and very controversial and important effort for everybody
concerned in industry, government, and the Hill. To find out what provisions
need to be changed and whether the list needs to be continued etc., etc. and you,
can do some yoeman-like work by.putting together whatever, it is you're capable
of doing to comment on that. That's the thing we're looking forward to as sort
of the next thing. I would point out that those of us who struggle with this
and I think I'm the last person in the government who was on the Bucy panel --
are convinced that this is about the most elusive subject you could get at.
If you listen to the hades of color going around the room, we have a counterin-
telligence problem, a university problem, a basic problem, applied research problem,
different technologies, 27 different government agencies up against a very professional
collection service cutting off exports for some allegedly myopic reasons, a lack
of priorities.
In fact it's not that we don't have the priorities straight; it is that they con-
flict with each other and the only time that we ever really sat down and did
a methodical review of the conflicting priorities, namely economic strength versus
technological loss, was a study of computer sales of Soviet countries done in 1974.
There we quantified the whole thing as best we could in a crude way and that be-
came a CoCom position.
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Barring that one attempt, it's really a very hard thing to do as everybody knows.
And antitrust is a minefield and I don't know who's got the minesweepers to go
through and work that. Well, I'll just conclude by saying that I would hope we
could begin to focus on the Export Administration Act and what can be done through
that to help straighten this out. And if people want to come to see NSC, they
are welcome to come by, I'd be happy to talk.
Keywo rt h
I find that I will confess to a significant lack of personal confidence let's say
in how the bureaucratic mechanisms of the past are likely to be effective in the
future in preventing what has built up to be an overwhelming problem. Certainly,
it has worked in the past in the sense that it just forced the Soviet Union to
become better but, nevertheless the ability of the Soviet Union to target the flow
of technology is vastly superior to what it was in the past.
I do think new mechnaisms are needed here. Just another plain study group is not
what I thought anybody was discussing. We were talking about a mechanism which I
couched in terms of priorities to be established. Efforts should be made to develop
a close standing interaction between particular defense and 'he private sector.
and I for one still feel it would be a valuable thing and I would be delighted
to sit down and talk with Dick DeLauer about it and maybe John McMahon would
like to also participate too.
I would just like to make a plea for simplicity and not overregulation. I com-
pletely concur with what Mr. Weiss has said about not having too many study groups
but I'm not sure I agree with him on the Export Administration Act. In my view
there's too much in it already and the problem, if it exists, is one of more ef-
fective enforcement in some of these areas and perhaps a degree of better indus-
try self-policy. I have a feeling industrial security is very good in some areas
and perhaps not as good as it should be in other areas. I don't think that what
we need is a great new regulatory scheme. We especially don't need something
that's going to impose a mass of new rules to effect communications within companies
or within the western world. Although I agree with Dr. Keyworth that the United
States has a special position of leadership when it comes to Free World security,
we do not have a monopoly any more and we have to get cooperation from our friends
in western Europe. If we try to do it unilaterally through a large and extra-
territorial type of control scheme it will not work.
I was looking for a mechanism by which the time that you gentlemen spent coming
here would yield something that might be of some continuing benefit. Since I
had heard several people say that there ought to be more industry-government
at least industry DOD contact, I thought maybe since none of you are all very
busy, we could at least try to find a couple of people who would sit and think
about it for a little bit and make a proposal back to you.
We will offer our services to try to outline a narrowly scoped follow-up and if
anybody wants to suggest something to us, we would be happy to do it. And if it
turns out that it's not in harmony in what any individuals here would like,
we will find out very quickly I'm sure.
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