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Weapons of Mass Destruction (WMD)

Remarks of
William M. Daley, Secretary of Commerce
At the BXA Update Conference
Tuesday, July 7, 1998

Thank you Bill [Reinsch]. Good afternoon everyone. It's good to see so many American exporters in one room. I'd like to recognize our special guests today -- a visiting delegation from the Newly Independent States and Eastern Europe. We also have with us one of BXA's longest serving employees, Frank Deliberti. Frank, could you please stand up. Frank is retiring after 31 years. He has served under 16 Secretaries and 7 Presidents and lasted longer than any of us. Would you please join me in congratulating him?

These are good times in America. Since President Clinton took office, 16 million new jobs have been created. We have the lowest unemployment rate in 28 years; the smallest federal government in 35 years. Home ownership and small business starts are at record highs. There is a budget surplus for the first time since Frank joined the government.

The point that I have tried over and over to make with the American people is this: over one- third of this economic growth is export related. The more than 250 trade agreements signed in this Administration have helped. But the real heavy lifting has been done by you. You committed to quality. You developed cutting-edge technologies. You found new overseas customers, new markets.

Because of your efforts, the United States is once again the world's leading exporter. In the last five years, exports of manufactured goods, high technology products and agricultural goods are up more than 40 percent. Exports now support some 12 million American jobs, and they have been responsible for nearly 2 million new jobs in the past four years alone.

Clearly, the national export strategy President Clinton put in place has worked. A key aspect of that strategy was the overhaul of the cumbersome export control structure. Many outdated controls were revised or eliminated. The licensing process was simplified. Export Administration Regulations were eased or clarified. We had the first entire rewrite of BXA's regulations in more than 40 years.

At the height of the Cold War, the United States reviewed over 120,000 individual export licenses. Over 60 percent of U.S. manufactured exports required government approval. In early 1993, when the President took office, the licensing load was still as high as 50,000. Today, that number has been cut to about 11,000 export license applications, covering only 2-3 percent of manufactured exports.

This has greatly improved U.S. export competitiveness. Essential sectors of the U.S. economy like computers, telecommunications and electronic equipment were freed of significant licensing burdens.

Exports are bringing in billions of dollars. They account for millions of high-paying American jobs. But not everyone is embracing this success.

At the very time our economy is prospering because of our global competitiveness, many in Washington -- and even in state legislatures -- are committed to expanding the range of unilateral sanctions.

Sanctions being proposed by state and local governments are becoming a real concern for all the reasons they are worrisome at the federal level. But also because in this age of global markets, they run a real risk of creating a patchwork quilt of differing restraints. This is costly and confusing, especially to small and medium-sized businesses that want to sell their goods around the world.

The President's Export Council last year issued a report identifying more than 75 countries subject to, or under the threat of sanction. Today that number has grown to over 90, and the trend is toward broader unilateral sanctions. This is happening even though the Council concluded that unilateral U.S. economic sanctions have a very poor record of success.

Sanctions that are ineffective -- that impose substantially more costs on U.S. interests than on the sanctioned country -- do not send a message of U.S. resolve or commitment. History has shown that what makes sanctions effective is multilateral cooperation. This is what worked in South Africa.

But that is not what we are seeing today. Sanctions have become a preferred policy option, not a measure of last resort. It has become too easy to call for new sanctions -- without any real consideration of the likely impact or consequences.

Unfortunately, our high tech industry is usually the biggest loser. We must seek much closer consultations between the Congress and the Executive Branch on sanctions issues. And we must ensure that any future sanctions are in fact effective and do not undermine our foreign and commercial policy interests without any benefit.

Our mission at the Commerce Department, as carried out by BXA, is to promote both national security and U.S. exports. National security is the highest priority. It is one I know you all recognize and share, whatever the impact on the bottom line.

Nonetheless, questions have been raised about certain licensing decisions on satellites. They involve whether export control laws were violated when American satellites were launched by Chinese rockets. This is being investigated by the Congress. If there was wrongdoing, it should be punished.

But let's be clear about one thing: the Commerce Department's licensing process is as thorough and careful as any in government. And the critics are simply wrong to suggest that the transfer of jurisdiction over communications satellites to the Commerce Department in 1996 in any way jeopardized our national security. The truth is the transfer completed a process begun by President Bush in 1990 and encouraged on more than one occasion by the U.S. Congress.

Let me make two fundamental points in this regard: One: Every satellite license the Commerce Department approved since the transfer in 1996 has had the approval of the State and Defense Departments. Two: The only way to have zero risk is not to export at all. And, as all of you know, that is not an option any of us can afford in today's global economy.

Imposing the tightest possible restrictions on high-tech exports is not necessarily the best way to protect our security. Currently our policy recognizes the realities of this global economy by ensuring that a number of factors are considered in controlling high tech exports.

For example, our policy takes account of the fact that the United States has a monopoly over very few technologies. After World War II we were the only economy whose industrial base had not been ravaged by war. We did have a virtual monopoly. We also had a clear list of target countries where this technology shouldn't go.

The situation today, however, is far more complex. The United States leads in many high tech applications, but we no longer have a monopoly in most product lines. We live in a world of globalization and joint ventures.

There is no international consensus for a program of technology containment that rigid controls would produce. Instead of protecting national security, unintended consequences would apply. The victims would be American exporters and workers. Our high-tech companies would become less globally competitive, less able to produce cutting edge products that our military and private businesses depend on. And some companies would no doubt move their research and manufacturing outside our borders. None of that would be good for our national security.

Take high-performance computers, for example. These machines are essential to a modern military. But the domestic market isn't enough to support this essential sector. Without exports, our world-class computer industry would be crippled. The profits would not be there to develop next generation computers. Foreign producers, who can't compete now, would leap to fill the vacuum. And our military would lose the domestic producers it needs.

Of course, it's much easier to have known enemies, a clear list of technologies that will not be exported to them, and an international consensus regarding the list. But that is not the world in which we live. What is still true is this: national security is at the forefront of our decision making. We take this responsibility very seriously.

Before closing, let me share some thoughts on President Clinton's very successful trip to China. I had the privilege of spending nine days with the President, and meeting with the U.S. business community in China. Those business leaders made clear to me that the President's trip was incredibly important for them and the opportunities they see in China.

China is the world's most populous nation. It is our fifth largest trading partner. Its transition to market economics is unleashing billions of dollars in consumer demand. If China grows only at an average of 7 percent in the coming years -- and this is a modest estimate -- it will be the largest economy in the world by 2030.

As President Clinton said, "Our relationship with China...will in large measure help to determine whether the new century is one of security, peace and prosperity for the American people." That's why he made his historic visit to China over the past two weeks.

As a result of China's engagement with the United States and the rest of the world, we are beginning to see signs of progress. For example, as of June 28, we have a framework that opens the door to conducting end-use visits in China in cooperation with MOFTEC. This is an important first step that we have been seeking from China for 15 years. We will be working with the Chinese to conduct visits that will increase our confidence in the proper use of controlled items.

Let me end with a few words on encryption. Bill told you earlier about BXA's introduction of an electronic filing option for export licenses. This system uses strong encryption. In April, I called on all parties to come together on the encryption issue. President Clinton wants to balance law enforcement, national security, privacy and commercial interests. Over the last three months, we have been working constructively with industry, privacy groups, and law enforcement leaders to try to find a balanced solution.

I am pleased to report some progress. I am today announcing final guidelines for the export of encryption products used by U.S. financial institutions. The guidelines cover products of any bit- length used to secure private electronic transactions. U.S. firms will be able to export strong encryption products -- with or without recovery features -- to eligible institutions in 45 countries without a license, after a one-time review.

These new guidelines will affect encryption exports for almost 70 percent of the world's financial institutions, including all of the 100 largest banks.

This action gives our nation's financial institutions the flexibility they need to remain globally competitive. Importantly, it balances those needs with law enforcement, national security, and foreign policy concerns. Through steps like this we can continue to encourage the development of an electronic commerce system users can trust. We expect to see the implementing regulation published soon.

In short, the Administration is doing what we said we would: creating a better environment for electronic commerce here and around the world.

The question for the private sector is this: "Are you doing your part?" If not, it's time to step up to the plate.

Policy decisions being made dramatically affect your industry and our national security. So we need for you to stay informed -- and involved -- and to make your voices heard.

I look forward to working with you to keep our nation secure and our industries competitive -- and to seeing you again next year.

Thank you.

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