Some of Our Chips Are Missing

By Ed Magnuson

Trying to keep U.S. high-tech exports from Moscow

When experts at the Pentagon recently examined a Soviet ocean buoy obtained by American intelligence agencies through unspecified means, they were not surprised at what they found. The printed circuit boards inside the buoy, which was designed to help track U.S. submarines, were pin-for-pin compatible with those produced by Texas Instruments Inc. of Dallas. T.I., needless to say, had not sold them to Moscow or indeed to any Communist bloc enterprises. Similarly, the Soviets feigned innocence a year ago, when they tried to buy sophisticated U.S. equipment that tests the strength of concrete, claiming that they needed it to check out their bridges and apartment buildings. The Pentagon blocked the sale on the ground that the more likely use would be to test the hardening of ICBM silos.

The Soviet Union can acquire such items of American high technology through industrial espionage, outright theft, or by purchasing them secondhand from companies in nations that are either allied with the U.S. or neutral and that got them from U.S. firms. The problem for the U.S., says Lionel Olmer, Under Secretary of Commerce for International Trade, is "finding a way of assuring our national security with minimal damage to the American business community."

As the matter now stands, American exporting companies are required by the Export Administration Act of 1979 to insist in contracts with the buyers of their defense-sensitive products that the items cannot be re-exported to any East bloc nations. That law, which will expire in September, has already prompted an intense backstage battle between the Commerce and Defense departments on future methods of tightening controls over such exports.

The battle lines could not be more sharply drawn. In general, the Commerce Department argues that U.S. business suffers when the rules are too stringent, when items with potential military application are readily available to the Soviet Union from other nations, or when the line between an innocent use of technology and a military use is so vague as to be indistinguishable in practice. The Pentagon, on the other hand, would like veto power over the export from the U.S. of any technology that some day could conceivably endanger U.S. security.

The current practice leaves the authority and responsibility almost wholly with Commerce. Officials there review all applications for export licenses and invite Pentagon recommendation only when they need a second opinion on whether the item might have military value to a Communist nation. Last year, out of 85,000 applications it reviewed, Commerce concluded that about 8,000 involved national-security considerations. Of those, Commerce asked the Pentagon to take a good long look at 2,000. In the end, Commerce denied only 5% of the sensitive applications. For another 10%, it asked the U.S. firms involved to reduce the sophistication of their high-tech exports, presumably so that the merchandise would be less useful if it did find its way to the Soviet Union.

Defense Secretary Caspar Weinberger believes the current system is simply too loose; he would like to see the creation of an Office of Strategic Trade that would report directly to the President but be tied closely to the Pentagon and to intelligence agencies. The Defense Secretary, says a Weinberger aide, is "an absolute tiger -- really very passionate -- on this issue."

The Commerce Department argues that if the U.S. gets too tough on the export of items of marginal military application, Japanese and West European companies will readily fill the void, selling their equivalent goods to the Communist bloc countries. The delay created by Pentagon review alone, according to Commerce, can add two months' time to the approval of an export application. In the meantime, the U.S. exporter of any product ultimately cleared for trade may have lost the sale to a foreign competitor.

Just as the argument seemed about to boil over into Congress, a tenuous agreement was reached last week between the two Executive Branch departments. Under it, Commerce will retain its current authority to screen all applications. They will not go automatically to the Pentagon for further review. However, a "memorandum of understanding" will be amplified over the next few weeks to specify what types of high-technology products must go to the Defense Department before Commerce can grant an export license. The memorandum, which will remain a classified document, will also cite specific nations requiring extra care and vigilance on the part of the U.S., since they have a poor record of blocking reexport to Communist nations.

The no-sale list will also be classified information. But there is no shortage of candidates for it: they include Sweden, Switzerland, Austria and India. From the U.S. point of view, the problem with the practices of such countries is typified by Austria's export policy. It claims that it has no right to try to determine whether high-tech products from the U.S. are directly re-exported to the East. Declares Austrian Secretary of State Ferdinand Lacina: "We have no export controls and no means of checking whether an Austrian company abides by its business agreement with a U.S. partner."

While the Administration seems to be in agreement on how to handle the problem of sensitive export controls, no one is certain whether Congress will accept it. Business interests are expected to oppose any shift of greater authority to the Pentagon. Explains Robert Hormats, former Assistant Secretary of State for Economic and Business Affairs: "Defense has shown a tendency to limit exports on products that represent a minimal risk. Defense has done this by delaying decisions, by applying criteria that go well beyond what the law intended, or simply by being rigid. This can impede exports."

Though sympathetic to the business viewpoint, the Commerce Department's Olmer contends that too many businessmen react to the issue with "hyperbole in the extreme." He contends that it should not be too difficult to "both control trade and protect trade." Indeed, he points out, the stakes could be high. "I can remember some people claiming that rock-bit drilling technology was of no conceivable military use to the Soviets," he says. "Yet we now know that technology has been used by the Russians to develop armor-piercing shells. I sure wouldn't want my son to be in a tank facing Soviet-supplied artillery that had benefited from access to American technology."

-- By Ed Magnuson.

Reported by Strobe Talbott/Washington

With reporting by Strobe Talbott This file is automatically generated by a robot program, so viewer discretion is required.