Where Industry and Security Intersect
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Thank you, Peter, for that warm introduction. And thanks to all of you in the audience for taking the time to spend two days with us. I am especially honored that Secretary of Commerce Carlos Gutierrez will be joining us for lunch later today. I am grateful to the Secretary and all the participants who are giving of their time and talents to make this Update conference a success.
I’d like to start by congratulating Peter Lichtenbaum on a remarkable year of service to the Bureau of Industry and Security and to the country. I think most of you know that Peter served as Acting Under Secretary for most of 2005, adding overall Bureau leadership responsibilities to his already substantial duties as Assistant Secretary for Export Administration. Peter performed both his jobs with grace, intelligence, and effectiveness. I sincerely appreciate inheriting such a strong Bureau, thanks in large part to Peter’s leadership. Please join me in a round of applause for Peter’s outstanding work on behalf of U.S. business and U.S. security.
I’d also like to welcome Darryl Jackson, the Bureau’s new Assistant Secretary for Export Enforcement. Darryl brings a wealth of public and private sector experience to his post, and I’m looking forward to working with him. I also wish to thank Eileen Albanese and her staff for their hard work in pulling together this 18 th annual Update Conference. Over the course of the next two days, you’ll be learning about the latest developments in U.S. dual-use export controls from the U.S. Government’s top experts in the field. It promises to be an outstanding event.
Being new to BIS, I have the advantage of a fresh perspective as I survey the landscape. And what I see is rapid change, especially when I think back to the world in which the first Update Conference took place in 1987. In that year, I was an Army officer stationed at Fort Bragg . As part of my military training, I learned that an organization called COCOM was the way we kept sensitive items out of the hands of the enemy, and the enemy of that generation was the Soviet Union . In those days, the gasoline for my aging Jeep Wagoneer cost 90 cents a gallon and my experience with computers was limited to intermittent interactions with a temperamental mainframe buried in the bowels of West Point ’s engineering department. The software industry was in its infancy, and so the idea of someday running a software company would never even have occurred to me.
Today’s world looks much different. The word globalization has been used by some to describe this new world – one that offers historic promise for Americans, but also one of unique and unprecedented peril. But this is a broad concept that obscures more than it explains. To understand how to best capture the unique opportunities offered by this new world, while minimizing the threats, we must look under the hood of globalization to find out what makes our world run.
When I do so, I see four underlying trends that are the driving force behind the world we live in today. First, and most important, democracy is on the rise. The latest Freedom House report identifies 119 electoral democracies, up from only 76 in 1991. The global expansion of democracy has enormous and positive implications for us. As the circle of democracy expands, the sphere of chaos and conflict contracts and the space within which terrorists and proliferators are able to operate dries up. Free people making their own decisions create prosperity for us all.
Marching in tandem with democracy is the international spread of free markets. In barely a quarter century, we have seen literally billions of new consumers enter the global marketplace as China , India , Southeast Asia , Mexico , and other countries have embraced property rights and economic freedom. That’s billions of potential buyers of U.S. goods and services – and millions of potential competitors for our market share.
The third fundamental force that is shaping our environment is the technological revolution. From smart bombs to iPods, technology is changing the way we wage war and live in peace. As a former technology industry executive, I find the most striking aspects of this revolution to be its pace and durability. Every time it appears that we have reached a technological ceiling, the revolution kicks into higher gear. As a result, today’s mantra is “cheaper, faster, smaller, better” – it’s Moore ’s Law on steroids.
Like all revolutions, the technology revolution brings both progress and pain. Today we enjoy capabilities undreamed of a generation ago. We have witnessed the death of distance, with the rapid decline in the costs of communication and transportation. At the same time, technological progress has led to new and deadly threats. The same Internet that allows us to make long distance phone calls for the same price as local ones also allows al-Qaida supporters to plot their crimes by email. The same cell phone from which we can download the day’s breaking news can also be used by terrorists to coordinate their next assault on Iraq ’s emerging democracy.
Last, but certainly not least, are the geopolitical changes that are shaping our world. It has been almost exactly 16 years since the fall of the Berlin Wall, but the impact is still rippling through the international system. The states of the former Soviet Union are evolving. New stakeholders in the system -- India , China , and others -- are rising. America inhabits a very complex global environment, one in which the peril is not always evident.
President Bush’s Administration has recognized these forces that are shaping our world and channeled them to the benefit of America . Under the President’s leadership, America has fostered economic development, including in the Middle East , where certain distorted economies coupled with political alienation have provided a ripe environment for terrorism. He has opened markets through free trade agreements with economies from Chile to Bahrain and the countries of Central America . Under the President’s leadership, the Doha Development Round of world trade talks was launched, even in the shadow of 9/11.
The President’s Technology Agenda is fostering a new generation of American innovation. The Administration is pursuing effective policies to encourage clean and reliable energy, assure better delivery of health care, and expand access to high-speed Internet in every part of America . The President’s goal, which I’m sure we all share, is to give our workers the best technology and the best training, and thereby make sure that the American economy remains the most flexible, advanced, and competitive in the world.
President Bush has played an active and effective role on the world stage, whether through encouraging China to act as a constructive and responsible partner in the international system or by pursuing an end to conflicts around the globe. At the same time, he keenly understands that the world remains a dangerous place as he explained in the 2002 National Security Strategy of the United States, which reminds us that “the gravest danger our nation faces lies at the crossroads of radicalism and technology,” even as we pursue “the hope of democracy, development, free markets, and free trade.”
I am proud to be the leader of the Bureau of Industry and Security at this moment in history, when it plays an important role in the Administration’s quest to channel these forces to America ’s advantage.
BIS plays several important roles in support of this objective. First, BIS oversees our U.S. system of dual-use export controls. In this rapidly changing and perilous world I have described, balanced and thoughtful controls on sensitive dual-use items are a national security imperative. Even more, a fair, efficient, and effective system for implementing these controls provides a foundation upon which secure trade can not only be conducted but dramatically grow. The mission of BIS, through its administration of U.S. dual-use export control system, is to fulfill both of these mutually reinforcing objectives.
BIShas worked hard over the past year to adapt this system to this evolving world. For example, BIS has:
The Bureau has also taken significant steps to make the export licensing system work better. Even though we now process almost 20 percent more license applications than we did two years ago – and despite the fact that many of these are increasingly complex – BIS has brought its averaging licensing time down to 31 days. To improve “the customer experience”, BIS is also working to make it easier for you to submit license applications electronically through our redesigned SNAP system. I urge you give the prototype a test drive. We have a lot of work to do before it’s ready for prime time, but we’re well on our way. BIS’s licensing officers and technology team have made excellent progress in this area over the past year.
Looking forward, we hope to complete our work on a new metric for controlling exports of strategically significant computers, one that will adapt our controls to the dramatic and frequent changes in computer and microprocessor technology. The Bureau will also continue to review its country polices and regulations in light of changes in technology and the international market to determine whether further adjustments are warranted. Of course, our regulatory and enforcement authority flows from the law. I hope that with the leadership of some of our colleagues in Congress, we will soon see renewal of the Export Administration Act, thereby giving our system a firm statutory foundation.
But running the best possible dual-use export control system in the world is not enough if we must act alone. Those in the proliferation trade look for the weakest link in the international chain. So our second priority is to broaden the international commitment to controlled trade in sensitive items. This is a security imperative. It is also a business imperative. If the United States plays by the rules thereby making trade in dual-use items secure, we must ensure that your competitors do as well. Proliferation must not become a perverse form of competitive advantage.
With this in mind, BIS is actively working to encourage other nations to create an effective global system of export controls. India ’s recent passage of a robust law to combat proliferation in the context of the Next Steps in Strategic Partnership Initiative is a move toward adding substance behind its partnership pledge. The United States is also looking forward to building on India ’s non-proliferation progress by increasing cooperation in high technology, civil space, and civil nuclear trade.
We are continuing our cooperation with the State Department on the Export Control and Border Security Program to help bring countries from Azerbaijan to the United Arab Emirates more fully into the global system of export controls. By helping these countries fulfill their obligations under United Nations Security Council Resolution 1540 to implement effective export controls, we are making the world safer. Last year, we implemented 76 programs in 23 countries and in the year ahead we will continue to expand and refine these efforts.
While BIS works to bring new members into the global export control system, we are also cooperating with our existing partners to strengthen it. For example, in 2005, the United States has expanded the reach of anti-terrorism controls in multilateral export control regimes. And over the past several years, members of the Australia Group agreed to implement a U.S. proposal to add certain biological agents and chemical weapons precursors to the control list. Separately, Missile Technology Control Regime members agreed to control Unmanned Air Vehicles capable of delivering chemical or biological weapons. The Bureau also continues its role in implementing the Chemical Weapons Convention through the accurate and timely collection of industry declarations, hosting international inspections of U.S. industrial sites, and working with other countries to implement fully their treaty commitments. An important aim of all of these efforts, of course, is to focus regime members on controls that deny terrorists the means to commit crimes.
Also critical to lessening the security threats created by globalization is eliminating illicit, high risk, export activity outside that system. In other words, we need sophisticated, specialized enforcement capabilities that allow us to beat the proliferators at their own game. In the past year, under the leadership of Wendy Wysong, our Deputy Assistant Secretary for Export Enforcement, our enforcement efforts gained new focus and effectiveness. BIS investigations led to 31 criminal convictions, criminal fines of $7.7 million, and 74 administrative settlements with civil penalties of $6.8 million. I look forward to seeing this record of success continue under Darryl Jackson’s leadership.
But the numbers don’t tell the full story. On the bureau’s website we have a “Major Cases List.” I urge all of you to take the time to look at this as it tells a remarkable story of success in breaking proliferation rings, stopping illicit exports to countries like Iran , and leveraging effectively the resources of some 100 Federal Agents.
Take the Asher Karni case, for example, in which agents from the BIS Boston Field Office turned an anonymous industry tip into a criminal conviction that brought down a proliferation ring that tried to ship triggered spark gaps – which can be used as nuclear detonators – to Pakistan . Or the Naji Abi Khalil case, in which agents from our New York Field Office, working as members of the New York Joint Terrorism Task Force, secured the criminal conviction of persons shipping night vision equipment to Hizballah.
We continue to look for “force multipliers” to extend the reach and effectiveness of our agents by strengthening cooperation with the intelligence community, as recommended by the Robb-Silberman WMD Commission. We also work very closely with the Department of Homeland Security and the Federal Bureau of Investigation and are using technology, wherever possible, to improve our targeting and analysis capabilities. And we will continue to improve the effectiveness of our investigations by, among other things, increasing outreach to freight forwarders – a vital component of the supply chain – to discuss their export control responsibilities.
But our many efforts might fail in their broader objective if the United States does not maintain its current lead in cutting edge technologies. Technology is the currency both of commerce and security, and BIS will work with you to maintain U.S. leadership in areas of technology essential to national security and economic vitality. On the top of our list is the effective implementation of a practical deemed export rule, one which gives U.S. business, universities, and research institutions – but not terrorists, proliferators, or other adversaries – access to the world’s best minds.
Technology leadership also requires a deep understanding of America ’s defense industrial base. We need to identify potential vulnerabilities before they become a danger. In support of this, BIS has conducted industry studies, prepared an annual report on offsets in defense trade, and advocated for defense contracts, where appropriate, for American firms. BIS also plays an important role through its contributions to the Committee on Foreign Investment in the United States – “CFIUS” – by helping to evaluate foreign investment to ensure that it does not threaten U.S. security. In the year ahead, you can expect to see BIS actively moving ahead with analysis, ideas, and actions aimed at supporting America ’s continued technological leadership.
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When friends and colleagues ask me what has been the biggest surprise for me in this job, I tell them that I had not realized the breadth of the BIS’s responsibilities. In fact, our responsibilities are too big for us to handle alone. That’s why we need you. That is why BIS performs hundreds of outreach activities and annually brings everyone together at Update each fall to set a common direction for the upcoming year.
I’d like to close this morning with a commitment and a challenge. My commitment is that we will focus on delivering on the priorities that I have discussed in a manner that protects national security interest while advancing the critical growth and success of U.S. businesses. We will seek your counsel. We will listen actively and communicate candidly. And we will work with you.
In turn, I challenge you to be the first line of our common defense by working within the licensing system, knowing your customers, and reporting suspicious transactions. We need your participation all year long in the various forums that BIS offers. Partnership means engagement, and two full days of engagement await. So let’s get started. Thank you, and enjoy the conference.