Speaker Identification:
EH: Eric Hirschhorn  
MF: Michael Froman

EH:   Ladies and gentlemen, I hate to interrupt your dessert, but I’m going to anyway.  Thank you.  I often say, and I think many of you heard me say that export control reform would not have been possible without the right and indeed the perfect combination of leadership within the Departments of State, Defense and Commerce, and most importantly, the White House.  Although it took a team effort, and a massive one, to make reform a reality, without the wholehearted engagement of our next speaker, we would not be where we are today or anywhere near where we are today.  I have been involved in export controls for more than three decades, and I’ve been a part, before I returned to the government in 2010, of the exporting community’s repeated calls for systemic reform during that time, and we in the export control community implored the staffs of numerous presidents of both parties to take on, within the White House, a coordination role for an export control reform effort.  Other than Bob Gates, who took a stab at it more than 20 years ago when he was the Deputy National Security Advisor, our calls went unanswered, until Mike Froman took on the task of export control reform.  Ambassador Froman was sworn in as the seventeenth U.S. Trade Representative more than three years ago, but before that, he served as Assistant to the President and Deputy National Security Advisor for National Economic Affairs.  That role saw him active in such international issues as trade and finance, energy security, climate change, development, and democracy issues.  He was the U.S. Sherpa for G8 and G20 summits, and staffed the president for Asia-Pacific Economic Cooperation leadership meetings.  He chaired the Major Economies Forum on Energy and Climate, the Transatlantic Economic Council, the U.S.-India CEO Forum, and the U.S.-Brazil CEO Forum.  Despite all these other responsibilities and activities all across the globe, he agreed to the president’s request to oversee and coordinate the export control reform project.  
Export control reform required input from industry, interagency cooperation, and dedicated leadership from many different parts of the government, but it also required Ambassador Froman doing everything needed to keep this worthy project moving and headed in the right direction.  There’s no way we could have succeeded without him.  Please welcome Ambassador Michael Froman.
MF:  Well, thanks very much, Eric.  It’s a very, very kind introduction.  As you all know, nobody has spent more time and energy in the public sector and the private sector, working on our export control system, than Eric, and we owe you a huge debt of gratitude.  I’ve personally thought I managed to escape the world of export controls when I became a U.S. Trade Representative, and I was delighted when Eric asked me to come back to this conference.  You know, the only thing I would correct in his introduction, he said I agreed to the president’s request that I take on this assignment.  That’s not exactly how I remember the conversation going.  Anybody who has worked at the White House understands presidents’ requests are otherwise known as “orders” and so I was delighted to be involved in this, and I guess I’m here because I was present at the creation of this round of export control reform, as Eric suggested.  As many of you know, this really started back in 2009, at a cabinet retreat, when President Obama asked the cabinet to each identify one particular initiative that each one thought we should be focused on, and Secretary of Defense Gates brought up export control reform, which the president had not been aware of before, I think many of the other cabinet members had not been aware of, but following that, he directed the Secretary of Defense and State and Commerce and the National Security Advisor to launch this effort of fundamental reform of the system, and he wanted us to make sure we made it responsive to the needs and realities of the 21st century economy and national security situation, that we worked both to enhance our national security and our economic security, and he very much wanted to make sure we made the new rules easier for industry to understand and comply with than the old ones, and that we could make enforcement even more effective.  In fact, I think it was… it may have been Ellen Tauscher, or it may have been Bob Gates who coined this phrase, that when it came to the enforcement of export control reform, it’s like looking for a needle in a haystack, and that the first thing you need to do is shrink the haystack, and that’s what the export control reform effort was all about.  Little did I know then how involved it would actually be.  
This is not an issue that comes up in political campaign debates.  It doesn’t get a lot of press attention.  There are probably hundreds of Americans who are not familiar with the issue of export control reform, but it is as important to our national security and our economic security as it is obscure, and there have been previous efforts to reform it.  Dan Poneman, former Deputy Secretary of Energy, reminds me that he and I were involved in an earlier effort to reform the system in the 1990s, but those efforts produced only partial results, and this time the team stayed on to get the whole job done, and we succeeded, I think, for a couple of reasons.  One, because the president gave us a very clear picture of what he wanted us to achieve, and that gave the mandate to do a lot of very hard if unheralded work in the detailed writing, rewriting of regulations and procedures, and it succeeded very importantly because we got input from a broad range of stakeholders, including the industries most affected by the export control regulations.  It was a very complex task.  It took seven years to complete.  It involved hundreds of thousands of military and satellite-related items, hundreds of pages of regulations, and billions of dollars in export sales, and the end result was a top-to-bottom revision of the controls on military and satellite-related items on the munitions list.
Before we took this on, no two export licensing agencies were on the same IT system.  They were oblivious to one another’s licensing decisions.  Now, there’s one online system, U.S. Exports, maintained by the Department of Defense and used by the State and Commerce Departments, and it allows all the bureaus within those departments that have a hand in export licensing to communicate and coordinate their work, and this was a badly needed improvement that will measurably speed up licensing decisions.  We determined from the beginning of this process that the process should be fully transparent, and we published every regulation in its proposed form and actively sought input from the public and from stakeholders, and the comments we received were incredibly useful to the rules that were ultimately finalized and were much better because of them.  
One crucial aspect of the reform is that we embedded in the export control system itself a process for the regular revision and renewal of the regulations.  Under the old system, the control lists rarely changed.  Most remained static for decades and couldn’t easily be updated for changes in technology or for different national security threats, and that made interoperability with our allies unnecessarily cumbersome.  We saw the consequences of that in Afghanistan a few years ago, when a U.S. ally’s F-16 was grounded for the lack of a spare part, and two other allies had the part right there but couldn’t give it to our ally because they needed a license from Washington.  The new rules are designed to prevent that from recurring by prioritizing our controls to focus on the significant, on sensitive items, and letting less significant items go to our allies without a license, and under the revised system, U.S. companies should be less concerned about non-U.S. companies deliberately designing out U.S. content, avoiding U.S. origin services, with respect to less sensitive items, or marketing their products as ITAR free.  This translates, of course, into more well-paying jobs back here in the United States.  
The roughly $200 billion in annual shipments of listed items subject to the Export Administration Regulations involve more than 300,000 exporters and support thousands of American jobs, and in that spirit, since I have a captive audience of exporters, let me talk for a few moments, and I know you won’t be surprised, about the Obama Administration’s trade policies writ large and specifically about the Trans-Pacific Partnership.  We pursue these policies to promote growth, create jobs here at home, and strengthen our middle class, and to do all that, we need to open markets around the world so we can increase our export of goods and services, level the playing field with our trading partners so that our workers can compete and win, and we also work to ensure that the rights and trade rules we fought so hard to negotiate are fully implemented and enforced.  
TPP will connect 12 Asia-Pacific economies representing 40% of the global economy.  It represents the highest standard of trade agreement in history, and those standards are fully enforceable, whether they’re intellectual property rights or labor and environmental standards or other commercial issues, and it reinforces the leadership role that the U.S. plays not only in this region but in the global economic system more generally.  It eliminates 18,000 taxes on American exports to some of the world’s fastest and largest growing economies in the world, and it’s the first trade agreement to require state-owned companies abroad to play by the same rules as private firms.  It’s the first trade agreement to take on the issues of the digital economy, make sure that there’s the free flow of data across borders, that companies are not required to build their servers in each market in order to serve that market, and to make sure that the internet stays open and free, which is so important, not just to internet companies but to any manufacturing or service company that relies on the free flow of information across borders.  As you know, the president very much wants Congress to act on TPP this year, and we’re doing everything we can across the administration, whole of government, whole of White House, to maximize the likelihood of that happening.  
I can’t overemphasize what’s at stake.  If Congress fails to act, the United States will be effectively frozen out of the Asia-Pacific region economically and strategically, and while our allies there wait to see whether TPP is going to move forward and how quickly, China is moving ahead aggressively with its own agreement, the Regional Comprehensive Economic Partnership, or RCEP, which covers 16 countries, ranging from India to Japan, and unlike TPP, it doesn’t have binding and enforceable labor and environmental provisions.  It doesn’t provide for the free flow of data across borders.  It doesn’t put disciplines on state-owned companies so that they have to play on the same playing field fairly with private firms.  That’s what’s at stake.  If we don’t move and others move ahead without us, as they are already indicating they are going to do, we’re going to find ourselves not only missing the opportunity of growth in these markets, but we’re going to find our current market share in these markets going down, and that hurts our jobs and firms back here at home.  If the U.S. walks away from TPP, it will leave a void that China is all too happy to fill, so it can pursue its values and interests throughout the region, and these are values and interests that are markedly different from our own.  If we walk away from TPP, our credibility will be damaged, not only in the Asia-Pacific, but more generally around the world.  Our allies will wonder if we can be counted on to follow through on our commitments, and not just our trade commitments, but on the whole range of bilateral and multilevel initiatives we’re working on around the world.  As Singapore’s Prime Minister Lee put it, “if you’re not prepared to deal when it comes to cars and services and agriculture, can we depend on you when it comes to security and military arrangements?”  So the stakes are high, the choice is clear, and as exporters, it’s important that your voices be heard in this debate as well.  
Thanks again for letting me come.  Congratulations to Eric, to Kevin Wolf, to Brian Nilsson, to the whole interagency team that have invested so much over the last seven years in getting this project done.  Congratulations to the exporters who have a reformed system to deal with, and again, thank you for all your support throughout this process.

© BIS 2020