Control freaks: export licensing hurts American companies and doesn't improve national security

Reason, June, 1999 by John J. Miller

Last October "administration officials" boasted to The New York I Times that history would recognize technology transfers to China "as one of Clinton's most lasting legacies." They suggested that these exports improved national security by aiding the economy, ensuring the United States would keep its place as the planet's single superpower.

Republicans howled. Allowing China to purchase equipment that upgraded its military prowess, they complained, had precisely the opposite effect. Technology transfers indeed may be one of Clinton's "most lasting legacies," but they sure aren't anything to brag about. And now the top-secret report compiled by Rep. Christopher Cox (R-Calif.) and the Select House Committee on Technology Transfers to China is almost ready for declassification. When it becomes public, the White House is expected to take a few hard punches.

The effect has been to cow Clinton. Today, he is reluctant to do the one thing that ought to be a prerequisite for his aides' proud legacy claims. American computer manufacturers and their technological advances are on a collision course with Department of Commerce export controls. Industry officials say that without a fix, they will lose the opportunity to sell tens of thousands of mass-market machines by the end of this year. Even Cox has signaled that his forthcoming report shouldn't stymie free trade. "The committee found that the current export-licensing process is riddled with errors and plagued by delays [and hurts] America's competitiveness in world markets," he wrote in the San Jose Mercury-News on March 28. Yet the Clinton administration has made no attempt to modernize the rules governing American participation in the international computer trade.

Current regulations make it a hassle to sell a personal computer with just two Pentium III chips to a buyer in Beijing. Although this is basic Web-enabling equipment, the Department of Commerce prevents easy shipment of these machines to countries considered proliferation risks.

Even strong supporters of free trade can support the logic of restrictions. Nobody wants rogue states or bomb-building terrorists to get their hands on high-tech devices. If security crimps sales, so be it. Powerful computers built by IBM and Silicon Graphics already have found their way into two of Russia's top nuclear weapons labs. China returned a Sun Microsystems machine last year after U.S. officials discovered that it had been moved from the research facility that supposedly bought it to a military outpost far away.

Yet export control rules written just three years ago are rapidly becoming obsolete. In the 1980s, it took a multi-million-dollar supercomputer to do the complex calculations needed to operate a ballistic missile system. Today, a desktop computer running at 450 megahertz is as powerful as the machines used to design America's nuclear weapons. Within a year, Pentium III chips are expected to blaze at speeds of up to 800 megahertz. Under current rules, manufacturers will have to obtain a special export permit from the Commerce Department for every computer containing just one of them before it can be sold to a user in one of the countries deemed a national security hazard.

This red tape does little to make the United States safer. Virtually anybody can purchase computers powerful enough to run a nuclear arsenal. What's more, new developments in hardware and software have made it possible to create clusters of relatively weak machines whose combined energies approach the might of a supercomputer. If legitimate Chinese businesses cannot buy ordinary machines made in America because of licensing delays or outright bans, they will quickly turn to foreign competitors. The biggest beneficiaries of strict import controls in the United States are companies such as Acer (based in Taiwan), Fujitsu (Japan), Legend (Hong Kong), NEC (Japan), Samsung (Korea), and Siemens Nixdorf (Germany) to name just a few.

With foreign sales blocked, American companies will be denied an important source of revenue. According to industry figures, two-thirds of all computers with more than one processor were sold outside the United States last year. Worldwide sales are projected to double by 2002 to nearly 6 million units. Again, about two-thirds of those are expected to be sold abroad.

So harsh import controls would set back American companies without improving national security. They could also hurt international pro-democracy movements. During the 1980s, resistance movements behind the Iron Curtain kept in touch with each other and the outside world by using fax machines, copiers, and primitive computers.

Today, China is trying to squash similar trends within its own borders. Police departments are assigning agents to wander the Internet in search of troublemakers among China's Web users, estimated to number more than 2 million at the end of last year. In December, President Jiang Zemin threatened computer programmers (plus artists and writers) with stiff penalties if they dared to "endanger social order."