An Interview with Paul Freedenberg

MultinationalMonitor: What do you think of ourexport control policy? Paul Freedenberg: I think our export control policy for East-West trade is highly successful. The Soviet Union has been deprived of a substantial part of technology that it needs to run its military machine, in terms of acquiring that technology from the West. There is obviously a lot of room for improvement. Over the last year, the U.S. has been spearheading an effort to increase COCOM cooperation so that it would have a more effective net of export controls around the Soviet Union. We have also had success in getting the neutral countries of Europe and the Pacific Rim to cooperate with the United States in that effort. So overall, during the two years that I have been involved there has been a substantial increase in overall national security from the point of view of technology transfer. Obviously, we could improve. The Toshiba transfer affair showed that Japan's system is not effective. The Japanese have taken a number of measures to improve it. There is still more to do but I think their response is very encouraging. It shows there is a genuine belief that the U.S. effort is a legitimate one, because otherwise they would tell us that it is none of our business to ask them for these changes. Instead of doing that, they've moved with almost lightening speed, enacting national legislation to satisfy a number of our requests. Monitor: Does the administration oppose sanctions on Toshiba? Freedenberg: Yes, we still do, very firmly. Monitor: Is that because of the great reliance of some large U.S. corporations on Toshiba parts and products? Freedenberg: No, absolutely not. It's a very bad way to do foreign policy. You don't punish a company in a foreign country for violating that country's laws. You let that country enact and prosecute under its own laws. We have never had a policy from the beginning of our nation of enforcing other country's laws on their citizens or on their corporations. It is not a good time to start now. That would be the height of extraterritoriality. Monitor: Isn't Congress intent on implementing some kind of sanction? Freedenberg: That is exactly why we have been lobbying so hard with them not to do it, because it is a bad precedent. In fact, what happens is that you have the opposite effect. If you are going to enforce their laws for them they might, in fact, either pull back from cooperation with COCOM or pull back on the penalties they have in their own legal system. In fact they are pursuing the wrong-doers and those wrong-doers are on trial right now, and the investigation is ongoing. Monitor: Do you support reducing controls to fewer items and increasing the penalty for individual abuses? Freedenberg: What you want to have is the most extensive net, meaning if you have 16 countries within COCOM and you add another 20 countries outside of COCOM, then the net is more extensive. So, a more effective net means that much less technology transfer. The simple point is there has been no effort either in Congress or in the administration to loosen controls on East-West trade in general. There has been an effort within the administration and COCOM to get items off the list that no longer belong there. We are about to take personal computers off the list because they're so widely available in the free market. There is also other lower level technology that will go off the list. It would be chasing things that are widely available and generally made not only in the West, but also in the East. Monitor: Officials at the Defense Department have called foreign availability an excuse to decontrol technology. How do you respond to this statement? Freedenberg: The Department of Defense can say what it likes, but it is the law, like it or not. This is a government of laws, not some cabal of industry executives. The foreign availability clause is being used, and should be more widely used. Only a few important items have been decontrolled, but there is a list of thousands of items that need to be reviewed on the grounds of foreign availability. I believe the Office of Foreign Availability (OFA) does work effectively. We've been trying to have a shorter list because technology just marches on, and some of the things that are on have been on for a decade and are being made all over the world, and there is simply no point in controlling them. Monitor: What sectors of the U.S. economy are hit hardest by export controls? Freedenberg: Obviously, the high technology sectors. Monitor: Has there been a strengthening of the lobbyon the part of those sectors to loosen controls? Freedenberg: Except for one amendment that would cut the list by 40 percent, there has been no great effort to cut the export control list itself. They've been trying more to cut the constraints on West-West trade. That's been the big emphasis. One amendment supported by Mr. Bonker deals with the whole list with the belief that the list is really too long. We think that it ought to be done in detail, go item by item and decide whether it is relevant or not relevant, rather than doing it in a meat-axe fashion. Monitor:. Won't loosening controls on West-West trade allow forgreater flow of U.S: origin products to the East as well? Freedenberg: That's if you don't get trade partners to increase their own enforcement and licensing. However, we have been doing that. We've just gotten agreements in a number of areas. The Japanese and the Norwegians, who did have weak systems, are strengthening them. The other thing to point out is that if you cut off U.S. products to Western Europe because they don't have a strong enough system, almost all of the things that you cut off are made by the Japanese, Germans, or French. So you don't cut off the flow of that product to the East. What you do is cut off that flow of the product to the West. The better way to do it is by getting them to increase their own national security [export control] systems. Whetheror not you sell it to them, it's still going to go to the East, because they are making the thing themselves or they are able to buy it freely from Japan. The whole idea is to make it multilateral not unilateral. Monitor: The laws governing export control policy specify that Commerce should have primary authority, but the department often seems to relinquish authority to the Defense Department. Which agency should have primary authority over export control policy? Freedenberg: We don't abdicate authority. There are laws that specify the Defense Department has a veto in areas of East-West trade. Where they have a veto we recognize that reality, but out of 110,000 cases last year, there were about 3,000 East-West COCOM type cases. That's where Defense really has an impact, or on China. That's an area where the law specifies they have to give approval or have to be overridden by the President. We think that the NAS report was a good report. It emphasized West-West trade, which is what we are doing. That's why we have put out all the regulations that deemphasize extra-territoriality and make it easier to trade within the West by cutting out some of the licensing at the low end of the list, and we are going to continue that policy. The interagency battle is unfortunate, but in terms of where the authority lies, you put it very clearly. We're a government of laws, not of men. The law says explicitly that Commerce has the lead and will continue to be the lead. Again, when you are talking about the universe of cases, it is a very small universe that DoD reviews. Congress wanted it that way. The House, if they have it their way, will make it an even smaller universe that they will be reviewing. We just think that with whatever law is passed, we will execute it. There are some spectacular cases where DoD gets involved, and in those cases it gets a lot of press, but it is really just a small part of the overall processing. Monitor: Have we reached a point where controls are limiting R&D, international competitiveness and exports without adding significantly to national security? Freedenberg: We have made that argument with regard to revising our regulations. For example, it's absurd to have extra regulations on U.S. micro-processors if the exact same ones are available from Japan with no controls. What we have tried to do is both get them to agree to the same rules of the game and also drop the extraterritorial concerns in our regulations. I think it has balanced it a little better than in the past. Unilateral controls are ineffective. We have been going down the list of our controls and trying to get rid of those that are unilateral. We agree with the premise of your statement, that the strength of America is in its industrial base. If you lose export sales, then you lose the industrial base and therefore lose the game. So, in the process of denying the Soviets in 1987, you might not have the capacity to stay ahead of them in 1995, if you are not doing the R&D. Monitor: Are non-COCOM members capable of providing items restricted by our export controls? Freedenberg: That's right, but we have had success with Switzerland, Sweden, Austria, Finland, Singapore and around the world in cutting off that source. We have a memorandum of understanding with a number of countries both in Europe and the Pacific Rim. Monitor: How recent are these developments? Freedenberg: Over the last two years, but we don't give it a lot of publicity because most of these countries don't like to give publicity to cooperation in that area, since they have a neutral status. They have done it in their own sovereign - interests. They believe that it is best to have good trade relations with us, and we say that to have good trade relations with us, you have to agree not to ship certain items to the Soviet Union or the Eastern bloc. They agree to that condition as a way of trading with the United States and the rest of the West. So it has been very successful. Monitor: What potential is there for expansion of hightech trade with the East? Freedenberg: Well, I said it from the beginning that there is a very high potential if you want to reduce COCOM controls. There is no great desire either in the United States or the rest of Western Europe to do so, so I don't know that there is a likelihood that it is going to occur. There is obviously a potential. The Soviets desperately need computers and all the rest of the things that would make a centralized economy work better. They don't have a good telecommunications system. They don't have a good computer system. They don't produce all the sorts of things that would make up a modern industrial state, so there is obviouslya market. On the other hand, all these things have dual use, or most of these things do, so it is difficult to remove them from the list of proscribed items. We depend on technological superiority for our security, and we are likely to continue to depend on this for our security. That's not something we are about to give away, so whatever anybody says, that's not the policy of this administration, and it's not likely to be the policy of the next administration, whoever is in charge. We can argue about the length of the list with the Japanese and the Germans, because they want a shorter list, but we are not arguing about the core. Nobody wants to sell the core technology to the Soviets, nor are they likely to in the foreseeable future. Monitor: Looking at the long run, if the next administration is a Dole administration or a Democratic administration, do you think it would be more likely in the long run for East-West trade, particularly U.S.-Soviet, trade to expand? Freedenberg: I don't know that Mr. Dole, except for selling more wheat which is understandable given his constituency, is pushing for any strategic trade. The Democratic administration is anybody's guess. They may see it as a part of detente. That's a difficult question to answer. Obviously, policy could change and obviously the Soviets have it as a high priority. They want more trade, particularly in the strategic areas, because they're doing so miserably in high technology. They make the world's largest semi-conductor, which is nothing to brag about. They aren't selling their VCRs at Radio Shack. They are not very competitive in almost anything. Obviously, if I were in Mr. Gorbachev's shoes I would be nervous about it. It is a very frightening thought to be so miserably behind, but I don't think it is in the U.S. strategic interest to help them get out of this problem. As I understand it, it is not our policy to do that. In fact, we emphasize not selling them any production equipment. That is what they really want, the capacity to produce semiconductors, the capacity to produce computers, not just buy them. Monitor: How do you think the U.S. should respond to the Soviet request for participation in GATT, the World Bank, and the IMF, and should we support their current efforts to integrate into the world economy? Freedenberg: Yes, we should support it, but no I don't give them much hope because they would have to be more capitalist. It is a good effort to become more market oriented, but basically it is almost impossible. They are not likely to open themselves up, particularly on the IMF side of things. They may open up on GATT because they want to get better trade conditions. But the IMF side of it, they just aren't going to open their economy to that kind of scrutiny or that kind of control. Monitor: Don't you think DoD might consider it is dangerous to call for greater efficiency in the Soviet economy? Freedenberg: I guess you found the core of our differences. We are not against efficiency. Eastern European/U.S. Trade Composition, 1986 Bulgaria Principal U.S. Exports: Grains, seeds, coal, heavy fuel oils, machinery, fertilizers, plant regulators, tobacco, insecticides and pesticides. Principal U.S. Imports: Tobacco, kerosene, liquid petroleum derivatives, cheese, wines, wool coats, chemicals, antibiotics, farm equipment and typewriters. Czechoslovakia Principal U.S. Exports: Cattle hides, fertilizers, coffee, pipe-laying equipment, pressure sensitive tape, drilling equipment, film finish equipment, leaf tobacco, track-laying tractors, nitrogen compounds, insecticides and radio navigation equipment. Principal U.S. Imports: Hops, diamonds, wire rods, riding tractors, leather footwear, ham, steel plates, woven fabrics, imitation gemstones and antibiotics. East Germany Principal U.S. Exports: Corn, soybeans, film finishing equipment, semiconductors, cotton linters, pork livers, almonds, lithographic ink, inorganic acids, knitting machinery, textile machinery, analog electronic computers, animal feed and nonmilitary airplane engines. Principal U.S. Imports: Urea, automobile tires, potassium chloride, ammonium nitrate, nitrogen sollutions, wire rods, X-ray equipment and printing press parts. Hungary Principal U.S. Exports: Soybeans, agricultural tractors, pressure sensitive tape, coffee, steroids, tractor parts, glass rods, cattle hides, corn, tobacco, oil and gas drilling equipment, fertilizers, bull semen and sheep. Principal U.S. Imports: Hams, autonomic drugs, lamps, motor vehicle parts, pear and apple juices, aluminum sheets, overcoats, footwear, bacon, tires, pistols and electrical parts. Poland Principal U.S. Exports: Fertilizers, excavating equipment, wheat, cattle hides, coffee, cigarettes, medicines, soybean oil, polyester fibers, semiconductors, perfume, tobacco, tractor parts and heavy fuel oil. Principal U.S. Imports: Hams, pollock, casein, lamps, nails, woven fibers, track-laying tractors, bent-wooden furniture, frozen strawberries, steel plates, motor vehicles, male breeding horses and footwear. Romania Principal U.S. Exports: Soybeans, machinery, coal, cattle hides, corn, barley, fertilizers, computer parts and sodium silicates. Principal U.S. Imports: Petroleum products, chemicals, aluminum sheets, steel plates, urea, fuel oil, rugs, nitrogen solution and ammonium nitrate. U.S.S.R. Principal U.S. Exports: Soybeans, corn, fertilizers, pressure sensitive tape, track-laying tractors, almonds, insulating oils, tallow, diesel fuel, marine oils and petroleum coke. Principal U.S. Imports: Gold bullion, ammonia, heavy fuel oils, urea, rhodium, palladium, aluminum bars, sable fur-skins and ortho-xylene. Yugoslavia Principal U.S. Exports: Commercial aircraft, coal and lignite, oil seed, wheat, animal feed, motor-vehicle parts, telecommunications equipment, hides and skins, measuring instrumentation and parts for office machines. Principal U.S. Imports: Furniture, motor vehicles, footwear, tobacco, meat, outer-wear, pig iron, ferro alloys, jewelry, aluminum, aluminum alloys and glassware. SOURCE: U.S. COMMERCE DEPARTMENT