West Tightens Technology-Export Rules But Shortens List of Controlled Products

By Eduardo Lachica and E.S. Browning
The Wall Street Journal

January 29, 1988

Officials from the U.S. and 15 allied nations reached general agreement on an American plan to strengthen and streamline controls on sensitive technology exports to Communist countries.

At a two-day meeting in Versailles, outside Paris, members of the Coordinating Committee for Multilateral Export Controls, or Cocom, agreed to reduce the number of items on export-control lists and to spend more money and time policing exports that remain.

For instance, sources said Western officials agreed to remove export controls on certain less-sophisticated computers. The U.S. had previously indicated it would allow the Soviets to acquire most 16-bit microcomputers, such as the International Business Machines Corp. PC XT and the Apple Computer Inc. II GS, but continue controls on more powerful computers. Sixteen-bit computers can handle 16 pieces of information at a time, considered to be medium power for a personal computer.

The meeting was part of an effort to rebuild confidence in Cocom, the body through which the U.S., 14 other North Atlantic Treaty Organization members and Japan set rules for restricting technology exports to the East bloc. Last year, disclosure that subsidiaries of Japan's Toshiba Corp. and Norway's Kongsberg Vaapenfabrik AS illegally sold the Soviet Union machines that helped its navy improve the stealth of its nuclear submarines provoked U.S. concerns about the reliability of U.S. allies. Some in Congress are demanding trade penalties against those companies.

U.S. and allied officials hope Cocom's effort to toughen export controls will dissuade Congress from enacting trade sanctions against Toshiba and Kongsberg. The allies argue that penalties could harm cooperation on export controls. The European Community recently complained to the State Department that U.S. penalties would be a "discriminatory" and "unacceptable" application of U.S. trade law.

After the Versailles meeting, a senior U.S. official said, "When we go home we will press our efforts to convince Congress that Cocom is a viable, effective instrument, and that the best way to control sensitive goods and technologies is to strengthen Cocom."

The U.S. plan would require each Cocom member to stiffen penalties for violations of export controls, to augment inspection staffs, share intelligence on suspicious traders, and make stronger efforts to persuade non-Cocom countries to cooperate. U.S. exporters argue that such changes would enable the U.S. to relax its technology-export rules.

Last year the National Academy of Sciences estimated that the complex nature of export controls may cost U.S. companies as much in $11 billion a year in lost sales; 52% of U.S. exporters polled reported they had lost sales for this reason. Global technology trade is being "deAmericanized" as buyers of U.S. products switch to other suppliers because of excessive U.S. controls, the study warned.

The Cocom changes, which members must enforce through their own laws, would also speed allied access to U.S. technology. For U.S. exporters, the changes could eventually eliminate 36,000 licenses a year for Cocom destinations and another 10,000 or so for non-allied but trustworthy countries, such as Sweden and Switzerland -- a huge reduction in the 104,000 export licenses the U.S. issued last year. Each license eliminated saves the average U.S. exporter up to three weeks in delivery time and, in some cases, legal fees.

In a curious way, the Toshiba case spurred the effort to revise Cocom rules. To atone for the damage, Japan lengthened prison terms for such violations to five years from one, and the statute of limitations to five years from three. Japan's Ministry of International Trade and Industry, or MITI, says it will double its export-screening staff to 103 people; the Foreign Affairs Ministry will post additional export-control specialists in Washington and at Cocom headquarters in Paris.

MITI says 2,187 Japanese companies, including NEC Corp., Mitsubishi Corp., and Komatsu Ltd., have begun educating employees on the tougher rules. "They are like reformed alcoholics, very much converted to their new faith," says Paul Freedenberg, U.S. acting undersecretary of commerce for export administration.

Japan's example has a strong influence on members of Cocom. Because the U.S. and Japan dominate world production of computers and semiconductors, two key products on the Cocom list, their combined vote can tip the balance of Cocom opinion. "The Europeans used to argue against controls by saying that Japan sells the stuff anyway. Now we've taken the Japanese card away from them," says David Houlihan, a lawyer for Toshiba.

In a broad sense, the U.S. has no choice but to seek more help from its allies. As its technology lead continues to slip, so does its ability to control these products. "We're seeing technology leadership go to Japan, the EC, and even to the newly industrializing countries," worries Michael Ciesinki, government affairs manager for the Semiconductor Equipment and Materials Institute, or SEMI.

The U.S. also wants to move toward stiffer allied enforcement because by the end of 1992 the European Community will dismantle its internal trade barriers, including intra-community export licensing. "We'd be in a tough position if we don't get better enforcement within that license-free zone," says the Commerce Department's Mr. Freedenberg.

In the U.S., impetus for change comes from the Commerce and State departments with the National Security Council providing critical support during interagency debate. The Pentagon has been less enthusiastic. "One of the problems about shifting the burden to the allies is we'd give up leadership in the program," says Stephen Bryen, deputy undersecretary of defense for trade-security policy. "The U.S. still has to provide the leadership, blow the whistle, put pressure on the allies."