Testimony of Under Secretary William
A. Reinsch Mr. Chairman, thank you for the
opportunity to testify before the Committee on export policy for high performance
computers (HPCs). My testimony will describe
recent changes the Administration has made to adjust our computer export controls to
ensure effective controls while reflecting the reality of rapid technological progress in
the computing sector. These adjustments were
motivated by that progress as well as our belief that national security benefits if U.S.
manufacturers remain the world's leaders in this technology. On July 1, President Clinton unveiled
new export controls on High Performance Computers and semiconductors to ensure that
control levels accurately reflect advances in microprocessor technology and that
regulations accurately reflect any risk posed by HPC exports. The revised controls maintain the four country
groups announced in 1995, but changes the countries and levels as follows: First, Brazil, the Czech Republic,
Hungary, and Poland were moved from Tier Two to Tier One.
This reflects both their strong nonproliferation records and their close
economic and security ties with the United States. Second, the control level for Tier
Two countries, countries that pose little or no security
or proliferation risk, was raised from 10,000 to 20,000 MTOPS. Third, the two-level system we
established in 1995 for civilian and military end-users was maintained for Tier Three
countries, with individual license levels raised from 7,000 to 12,300 MTOPS for civilian
end users and from 2,000 to 6,500 MTOPS for military end users. Finally, prior notice of exports to
Tier Three countries of systems above 2,000 MTOPS is required by law. The President's announcement would raise the
notification floor to 6,500 MTOPS. As you
know, the latter change, by law, cannot take effect until the conclusion of a six month
waiting period, which will occur on January 23rd. (The
President decide to delay the implementation of the change for military end users to
coincide with the adjustment to the level for the notifications.) At the time of his announcement, however, the
President indicated that he was prepared to implement this change immediately and urged
Congress to reduce the six-month waiting period to thirty days. Unfortunately, Congress has not yet acted on that
request. The President has also directed the
relevant agencies to continue to review these levels every six months to determine if
further adjustments are warranted. We believe
this commitment is as important as the changes we have made, and we intend to meet the
schedule he has laid out. The role of the Commerce Department
in developing these recommendations was to collect and analyze information on computer
technology, the high performance computer market, and the capabilities of foreign
producers. Our work was done in partnership
with other agencies, particularly the Department of Defense and the Intelligence
community. In examining these issues, we
built on the work done in 1995 and in 1998. I
would like to briefly describe some of what we found.
TECHNOLOGICAL PROGRESS. Computers were once large, bulky
items, expensive and difficult to install and maintain.
Only a few suppliers in the U.S. and Japan existed, and many systems were
custom built. Today, the situation has
changed radically. The engine of change is
the microprocessor, which provides the basis of computing power. Improvements in
microprocessor design and manufacturing mean that manufacturers now sell single chips with
speeds over 2000 MTOPS, the current threshold for notification and post-shipment
inspection under the NDAA. These
microprocessors, sold in the tens of thousands, power ordinary PCs and laptops which under
current law must be treated as high performance computers. These chips and the related
motherboards are commodity items which are shipped to thousands of distributors around the
world. The computers which use these items
include servers and workstations, which require little support to install or operate. The affordability and widespread availability of
these computer products permit foreign end-users to modify commodity computers into high
performance systems. The result is that high
performance computers are smaller, cheaper, simpler to install and maintain and more
reliable than ever before. Although overshadowed by advances in
microprocessor capabilities, recent gains in network technology have also had a
significant effect on high performance computing. Advances
in software, interconnects and parallel processing mean that the performance levels once
associated with giant machines can now be obtained by smaller and less expensive
computers. While there is still an advantage in using one HPC instead of a group of
desktop computers, software and connection capability is opening the way to an increase in
both use and availability of very high performance computing based on PCs. Applications for this type of computing include
financial analysis, web servers, data warehousing and data mining and have greatly
increased demand for parallel processing systems. The
affordability and widespread availability of these computer products permit foreign
end-users to configure these mass market products into high performance computer systems. FOREIGN CAPABILITIES The number of firms capable of
producing computers able to perform above 7000 MTOPS has greatly expanded in the last few
years as global demand for computers has increased rapidly, in part driven by the growth
of the Internet. Previously, only the U.S.
and Japan had firms capable of producing HPCs for the commercial market. Other countries, primarily in Europe, had the
technological capability to produce HPCs but could not compete effectively. This is no longer the case. While the U.S. and Japan remain the two countries
with the ability to produce high-end HPCs (vector or massively parallel processor with
speeds over 20,000 MTOPS) in commercial quantities, the technology for producing HPCS
using four or eight chips is widely diffused around the world. We found 170 computer manufacturers
located around the world who account for three quarters of global computer production. More than 120 of these manufacturers are outside
of the United States. 28 are in countries
which are not members of the Wassenaar Arrangement, which provides the basis for
multilateral controls on HPCs - computers are not controlled by the nonproliferation regimes. The technologies and the production lines these
companies use to build PCs and servers can also be used to build computers with speeds
over 7,000 MTOPS. Many of these producers are
located in countries that do not observe U.S. or multilateral restrictions on computer
exports. Beyond that, the policies of most of
our major trading partners in Europe and elsewhere do not restrict exports of Wassenaar
controlled dual-use items to countries like China. If
the U.S. requires its firms to obtain licenses for computers which can be easily produced
by non-US suppliers, these foreign suppliers can -- and will -- fill the demand. They may not do so now because they cannot
compete with us economically, but if we remove our companies from a market, they will step
in promptly. NATIONAL SECURITY I will speak generally to the issue
of computer exports and national security, recognizing that the Department of Defense is
the U.S. Government agency best situated to provide the Committee with the
Administration’s perspective on this issue. I
urge the Committee to invite DoD to discuss this issue with them in depth at the
Committee’s earliest convenience. I will
note as a starting point, Deputy Secretary of Defense Hamre’s statements at the time
of the President’s announcement that DoD’s national security concerns were taken
very seriously during the interagency discussions on this issue, that every one of
Defense’s concerns were accommodated, and that DoD is satisfied that it can continue
to protect the U.S. with these changes. The President announced the new
control levels after a careful interagency review, involving the Departments of Defense,
State, Energy, and in consultation with the Intelligence Community. Agencies considered a range of options and took an
in-depth look at the technology available in the U.S. and overseas. The focus or our work has been to determine what
we can realistically control. Computers and
computer chips which are relatively inexpensive, manufactured in the millions and sold
through thousands of outlets around the world are readily available to any purchaser and
cannot effectively be controlled. We think it
is better for our national security to focus our energy and resources on critical items
that we can control. What we have concluded is that
computers at all levels, including PCs, have potential military applications. Our own military production illustrates this. The weapons found in the U.S. arsenal today were
built with computers whose performance was below 1000 MTOPS -- in many cases only 500
MTOPS. The level of computational power used
to develop all the bombs in the current U.S. nuclear arsenal, for example, is less than
that found today in many workstations. Our
conclusion is that the amount of computing power needed to design and manufacture modern
weapons, once you get over a few hundred MTOPS, is not a critical variable. Other factors -- software design, access to
sophisticated manufacturing techniques, experience and test data -- are more important. For this reason, our 1999 review
focused not only on the potential military applications but also on the issues of
controllability and technological leadership. Our
conclusion was that the national security interests of the United States are best served
by ensuring that the United States retains its technological advantage in the design,
development, and production of microprocessors and computers. As some 50 to 60 percent of revenues for these
sectors are generated through exports, the ability to compete internationally is an
essential ingredient to the continued viability of these industries. Today, no nation can remain at the leading edge of
technology unless it participates in the global market. The continued generation of
revenues from exports provides the needed capital for research and development which keeps
these industries at the cutting edge of technology. This,
in turn, ensures that the U.S. military and U.S. defense-related industries will continue
to have access to the computer technology they need to maintain our military advantage. NDAA Requirements To date, we have received a little
more than 2500 notifications under the NDAA process.
Of this amount, 205, or 8 percent were converted to licenses. Of those 205 licenses, nine, or less than one half
of one percent, have been denied. A number of
other cases were returned to exporters to allow them to assemble the documents needed for
the lengthy process of license review, and roughly one hundred and twenty notifications
are pending at this time. To be candid, there are problems with
the NDAA process. In particular, the 2000
MTOPS level for notification and
verification. Rapid advances in
microprocessor and computer performance make the 2000 MTOPS unworkable, and threaten to
clog the system with thousands of notifications to which no one is going to object. This problem will only grow as microprocessor
speeds continue to increase. The 2000 MTOPS level is forcing the
Department of Commerce to use scarce investigative resources to conduct a rapidly growing
number of post-shipment verifications in Tier Three countries which detract from more
important enforcement efforts. The fact that
we are required by law to visit all such computers, including PCs and laptops,
forces us to spend time on those that don't matter. If
our investigators were permitted to exercise their discretion, we could focus our efforts
directly on any problematic locations we might identify.
Adjusting the MTOPS level upwards for these required inspections will be
helpful, but it will only be temporary as chip speed increases and commodity level PCs and
laptops grow increasingly powerful. This matter will become much more
important in upcoming weeks, as several manufacturers place tens of thousands of chips
with speeds greater than 2000 MTOPS on the market. We
expect to see single chips with speeds greater than 3000 MTOPS enter mass production
before the end of the year. In particular, I
would call the attention of the Committee to the decision of at least one U.S. computer
company not to market laptops and PCs with performance above 2000 MTOPS in Tier Three at
this time, because of NDAA requirements. It
is not possible for PCs and laptops sold in the thousands in retail stores to wait ten
days for interagency review. If these
companies sell these commodity computers in Tier III, the NDAA review system would be
overwhelmed. I view this as only a temporary
grace period. More to the point, we must be
clear that the NDAA notification process does nothing to prevent militaries in Tier Three
countries from obtaining single chip PCs and laptops with performance above 2000 MTOPS if
they want them, since these are inexpensive, highly portable and widely available from
retail outlets around the world. CONCLUSION Computer export
policy has broad ramifications for the health of the entire American economy and for U.S.
national security. The U.S. is the world
leader in information technology and in computer manufacturing, and the industry's future
depends on exports. Ill-advised export
controls could put this vital sector at risk with little benefit to national security. In the short term, U.S. companies would lose sales
opportunities to foreign firms. In the long
term, U.S. companies would suffer a significant and perhaps irreversible loss of market
share in foreign markets. The loss of export
revenue would adversely affect the ability of U.S. computer companies to fund research and
development on next generation technologies, thereby harming their ability to maintain
product lines on the cutting edge of technology, including products with strategic
military applications. High performance
computers are only one example, although a salient one, of the eroding effect of economic
globalization on export controls. Our
approach to this sector is an example of our strategy for enhancing national security in
light of the globalization and commercialization of the industrial base which supports our
military. Experts at the Defense Department
argue that the US can achieve a net security gain if it properly exploits the
globalization and commercialization trends. Conversely,
a strategy dominated by risk-avoidance, or the absence of a clear strategy altogether,
will lead to a loss of security, due to gains made by potential adversaries as they take
advantage of the global availability of militarily-useful technology. |
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