Emergency Committee For American Trade - Publications

Export Controls

U.S. export control policy must continue to shift away from a Cold War-driven system that emphasizes broad controls to a system that promotes U.S. national security while maintaining U.S. technological leadership. The free flow of technology, capital, ideas, and goods in the global economy has made unilateral export controls increasingly ineffective and out of step with technological and commercial reality. For example, in the information technology sector alone, 54 percent of the industry’s total revenues are from exports. By the end of this year, 72 percent of all computers will be located outside the United States. To maintain its high level of exports, the information technology sector must be able to meet foreign competition for all types of computers and technological know-how.

The Administration’s February announcement of the further relaxation of export controls on high performance computers only provides a reprieve. The anticipated introduction of more powerful computer chips later this year, such as Intel’s new Itanium chip, will ultimately render the newly announced controls obsolete. As a result, current U.S. export controls continue to put U.S. computer companies at a serious international competitive disadvantage.

Harm to the international competitiveness of the high technology sector has serious implications for U.S. national security. With the level of technological innovation growing exponentially in the private sector, along with diminished federal spending for research and development, the United States military relies increasingly on the high tech sector for development of advanced technologies for weapons systems and other defense needs. If export revenues in the high tech sector decline, it will mean that the sector will not have sufficient resources to support the research and development necessary to develop the next generation of advanced technologies.

Maintaining the international competitiveness of the U.S. high technology sector is also critical to sustaining the growth of the national economy. The high technology sector has been responsible for nearly 35 percent of real economic growth in the United States. The industry employs over 4.3 million Americans, with over 500,000 of these jobs in the computer sector. Computer industry jobs pay nearly twice the average U.S. wage.

To achieve the twin goals of protecting national security interests and promoting the international competitiveness of U.S. high technology industries, U.S. export control policy should focus on those technologies that are critical to protecting U.S. national security. It should target those areas of technology that are not readily available in global markets and on which there is consensus within multilateral export control regimes on the need for controls. In the short term, these goals can be achieved by ensuring that the export control thresholds for high performance computers and microprocessors keep in step with the rapid advances in computer technology. In the long term, efforts must continue to build a bipartisan consensus among the Congress, the Administration, and business community in support of meaningful reform of the U.S. export control system. Any effort to renew the Export Administration Act (EAA) should codify the significant liberalization in export controls that has been implemented administratively since the expiration of the EAA. It should not become a vehicle for turning back the clock to a Cold War system of stringent unilateral controls which lacks the support of U.S. trading partners, undermines U.S. international competitiveness, and ultimately harms U.S. national security.

High Performance Computer Export Restrictions

The 1998 National Defense Authorization Act imposed pre-shipment notification and post-shipment verification requirements on exports and re-exports of high performance computers over a certain performance threshold, measured in millions of theoretical operations per second (MTOPS), to 52 countries regarded as proliferation risks that are classified under U.S. export regulations as Tier III countries. Tier III countries include China, Russia, India, and Pakistan. Adjustments to high performance computer control levels can be proposed by the Administration following a determination that the adjustment will not harm national security. Any decision to adjust high performance computer controls for Tier III countries is subject to a 180-day congressional review period.

Last July, President Clinton announced that he would raise the notification and licensing threshold for high performance computers to 6,500 MTOPS. The new control level became effective at the end of January. Recognizing that the 6,500 MTOP level will soon be bypassed by technology, the President announced in early February that he would increase the licensing and notification threshold to 12,500 MTOPS. This increase will not become effective until July of this year. The Administration plans another review of control levels for supercomputers in April.

The Administration plans to ask Congress to shorten the congressional review period from 180 days to 30 days in order to respond effectively to rapid advances in computer chip technology. Congressional support for a shortened review process is building. The EAA renewal legislation reported out of the Senate Banking Committee last September proposes reducing the congressional review period for adjusting supercomputer export controls to 60 days. In addition, Senators Bennett (R-UT) and Reid (D-NV) and Representatives Dreier (R-28CA) and Lofgren (D-16CA) are sponsoring legislation that would reduce the congressional review period to 30 days.

The 180-day notification period is impractical in the U.S. computer industry, given that new products are introduced nearly every three months. The 180-day waiting period also impedes U.S. companies from bringing their newest technology to the global marketplace before their foreign competition. Moreover, there is no precedent for a six-month review period under U.S. export control laws. For example, sales to foreign countries of munitions list articles such as tanks and rockets require only a 30-day review period. Finally, a 30-day notification period will give Congress ample time to consider any national security implications of a decision to adjust high performance computer controls.

Microprocessor Export Restrictions

U.S. export control regulations restrict the export of microprocessors above a performance threshold level of 3,500 MTOPS to Tier III countries (defined above). The MTOPS limit for microprocessors has been increased four times since 1995 to keep pace with improvements in technology and the large volume of devices entering world markets. The current process for increasing the MTOPS limit for microprocessors is subject to delay and not predictable. It is important that that this process be expedited and made more certain in order for the U.S. semiconductor industry to remain competitive in world markets. Enactment of a mass market product exception similar to the one included in S.1712, the Senate EAA reauthorization legislation, would also help ensure that U.S. export controls do not undermine the competitiveness of U.S. industry.

Export Administration Act Reauthorization

U.S. export control programs have been administered under the authority of the International Economic Emergency Powers Act (IEEPA) since 1994, when the Export Administration Act (EAA) expired. Since that time, the Administration has sought reauthorization of the EAA because of the legal vulnerabilities of administering export controls under IEEPA. EAA reauthorization legislation has failed to pass in the last several Congresses due to strong disagreements among the Congress, the Administration, and the business community about security issues and the treatment of high technology exports.

Last September, the Senate Banking Committee unanimously approved S. 1712, the "Export Administration Act of 1999," which would reauthorize the EAA. The bill was developed by Senator Gramm (R-TX), Chairman of the Senate Banking Committee, and Senator Enzi (R-WY), Chairman of the Senate Banking Subcommittee on International Trade and Finance. The bill would: 1) expedite the export-licensing review process, 2) establish an interagency dispute resolution process, 3) reduce the congressional notification period for adjustments to supercomputer export control levels from 180 days to 60 days, 4) encourage elimination of controls on low-risk technology products through a new mass-market product provision and revised foreign availability standard, 5) tighten criteria for imposing foreign policy controls and exempt agricultural commodities and medicine from such controls, and 6) increase criminal and civil penalties for EAA violations.

Among the most important provisions in the bill are those relating to the mass market and foreign availability determinations and the shortening of the congressional notification period for supercomputer controls. These provisions are intended to respond to U.S. industry concerns about the adverse impact of U.S. export controls on the international competitiveness of U.S. products, particularly in the computer sector. Under the bill, an item has mass-market status if it is: 1) produced and available for sale in large volumes, 2) widely distributed through marketing channels, 3) conducive to shipping by generally accepted commercial means, and 4) used for its intended purpose without substantial or specialized service. Once an item has been determined to have mass-market status, it is removed from the export control list unless the President finds that decontrolling the item constitutes a serious threat to national security and controlling the export of the item would diminish the threat. If the President makes such a determination, it must be reviewed every six months.

The bill provides that an item has foreign availability status if it is available from sources outside the United States at a price that is not excessive compared with the controlled item and in a sufficient quantity that renders control ineffective. The President can set aside a foreign availability determination if he finds that not controlling an item would prove detrimental to national security and there is a high probability that foreign availability will be eliminated through multilateral negotiations. The bill also provides that the foreign availability "set-aside" terminates when the President fails to initiate negotiations, negotiations fail, or agreement to eliminate the foreign source is not reached within 18 months. The bill also includes a "set-aside" provision for mass- market product determinations, but it is not time limited.

In drafting S.1712, Senators Gramm and Enzi responded to national security concerns raised in the Cox-Dicks report from the House Select Committee on U.S. National Security and Military/Commercial Concerns with the People’s Republic of China by incorporating 17 of the committee’s recommendations. The Cox-Dicks Committee recommendations reflected in the bill include: 1) emphasizing the importance of strengthening multilateral export control regimes, 2) incorporating a multilateral export control violation provision, 3) requiring immediate reporting of significant threats to national security, 4) enhancing enforcement resources, and 5) significantly increasing criminal fines and civil penalties for export control violations.

Senate Majority Leader Trent Lott (R-MS) has said that EAA reauthorization legislation is a legislative priority and S. 1712 was brought up on the Senate floor in early March of this year. Consideration of the bill, however, has been deferred due to Banking Committee concerns raised by the Senate Armed Services, Foreign Relations, Government Operations, and Intelligence Committees on a number of issues including the role of the Defense Department in the export licensing process, the breadth of the mass-market product provision, export controls on China, and anti-terrorism controls. Informal staff-level discussions have been held concerning a possible national security exception that would protect militarily sensitive items from the mass-market provision.

The Administration has said that it "broadly supports" S. 1712 as reported. In light of the variety of concerns that have been raised about the bill and the prospect that it could attract a wide variety of floor amendments, it is unclear whether there will be sufficient support to bring the bill up for a vote early this year in the Senate. Reform of export licensing procedures, significant liberalization of controls, and other improvements in U.S. export control policy have been achieved administratively over the past several years. These reforms could be jeopardized if EAA reauthorization legislation becomes the platform to impose stricter controls and tighten requirements for end-use, on-site visits for supercomputers.

The House has indicated that it will wait for the Senate to act before considering any legislation to reauthorize the EAA.

Encryption

Last September, the Administration announced that it would remove some restrictions on the export of U.S. encryption technology. In January of this year, the Administration published revised encryption regulations for public comment. The major sections of the regulations provide that:

Any encryption commodity or software of any key length can be exported license-free to individuals, commercial firms, and other non-government users in any non-terrorist country, following a one-time technical review;
Retail encryption commodities and software can be exported to any end users in non-terrorist countries. The Bureau of Export Administration will determine which encryption products qualify as "retail;" and
Export controls on source code, tool kits, and chips are relaxed.

The revised regulations include a broad definition of retail goods, which encompasses web-based products and any functionally equivalent product, and clarify that the definition of government entities does not include telecommunications firms, Internet Service Providers or educational facilities. The regulations contain many of the provisions in the Security and Freedom through Encryption Act, H.R. 850, sponsored by Congressman Goodlatte (R-6VA). While the revised regulations are an improvement over earlier Administration proposals, U.S. industry remains concerned that they remain too complex and believes that the U.S. government needs to address the competitive disadvantage U.S. industry faces in competing with European, Australian, and Japanese suppliers of encryption technology. U.S. industry would like to have another review of the encryption regulations in 6 months.

The Goodlatte encryption bill would:

Establish a national Electronic Technologies Center within the Justice Department to allow federal and local law enforcement officials to examine encryption techniques and obtain information on current technology;
Permit any person to use any encryption method and sell it in interstate commerce;
Prohibit federal and state law enforcement officials from requiring private encryption keys;
Prohibit any person who possesses an encryption key from being required to transfer control of the key to another person other than for law enforcement purposes; and
Penalize the encrypting of communications relating to a federal felony.

The Goodlatte bill was approved by the House International Relations, Armed Services, Commerce, and Intelligence Committees last year and has 258 co-sponsors. The bill has not been brought up on the House floor because of the Administration’s decision to implement most of its provisions by administrative action.

The FBI and the Justice Department remain opposed to further liberalization of export policy for encryption, based on concerns that terrorist groups could use encryption products.

Wassenaar Arrangement

In 1996, the United States and 32 other countries approved the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Technologies. The agreement replaced the Coordinating Committee for Multilateral Export Controls (CoCom). Unlike CoCom, the Wassenaar Arrangement does not impose mandatory multilateral export controls and instead operates on the basis of national discretion.

The Wassenaar member countries agreed to control certain dual-use items (items with a commercial and military use) that are listed in the appendix to the arrangement. Each member country has discretion to decide what export controls are appropriate for the dual-use items on the list. Wassenaar members continue to review the list of dual-use items and to attempt to coordinate their export control policies. In the area of encryption, Wassenaar members agreed to eliminate controls on encryption products below 56 bits and to extend controls to mass-market encryption products above 64 bits. Revisions were also made in the level of control for telecommunications products and machine tools. Wassenaar members are reviewing controls on computers and microprocessors to bring controls more into line with technological advances.

In July of last year, the United States issued regulations implementing an agreement among Wassenaar members to control exports of weapons-related goods and technology to pariah states and regions of instability. The new regulations include a minor relaxation of controls on some telecommunications and computer equipment, as well as on digital video magnetic tape recorders. The United States has launched an initiative within the Wassenaar Arrangement to strengthen rules preventing members from undercutting the export license denials of other countries. The United States is concerned that countries with lax export control laws will circumvent the Wassenaar Arrangement and ship sensitive technology to China and other countries of concern. The U.S. proposal was deferred for further study due to objections raised by Russia and Ukraine.

ECAT POSITION: ECAT supports efforts to liberalize controls on encryption products and to build a strong bipartisan consensus for meaningful export control reform. ECAT believes that upward adjustments in the control threshold for high performance computers should be expedited and urges the Congress to reduce the congressional notification period under the National Defense Authorization Act of 1998 to 30 days. Similarly, the Administration should establish an expedited, predictable process for raising the control threshold for microprocessors.

Any legislation re-authorizing the EAA needs to be bipartisan and reflect a consensus among the Congress, the Administration and the business community. A new EAA bill should provide an export control system that promotes U.S. national security and maintains U.S. technological leadership. An EAA bill should codify recent export control liberalization, provide for a higher threshold for the imposition of foreign policy controls, ease the ability to obtain foreign availability determinations, and reduce export-licensing processing time. Such legislation must not become the vehicle for further unilateral restrictions on U.S. exports that lack the support of our trading partners, are out of step with technological advances, and undermine the development of new technology that is critical to advancing U.S. national security interests.


	Export Controls U.S. export control policy must continue to shift away from a Cold War-driven system that emphasizes broad controls to a system that promotes U.S. national security while maintaining U.S. technological leadership. The free flow of technology, capital, ideas, and goods in the global economy has made unilateral export controls increasingly ineffective and out of step with technological and commercial reality. For example, in the information technology sector alone, 54 percent of the industry’s total revenues are from exports. By the end of this year, 72 percent of all computers will be located outside the United States. To maintain its high level of exports, the information technology sector must be able to meet foreign competition for all types of computers and technological know-how. The Administration’s February announcement of the further relaxation of export controls on high performance computers only provides a reprieve. The anticipated introduction of more powerful computer chips later this year, such as Intel’s new Itanium chip, will ultimately render the newly announced controls obsolete. As a result, current U.S. export controls continue to put U.S. computer companies at a serious international competitive disadvantage. Harm to the international competitiveness of the high technology sector has serious implications for U.S. national security. With the level of technological innovation growing exponentially in the private sector, along with diminished federal spending for research and development, the United States military relies increasingly on the high tech sector for development of advanced technologies for weapons systems and other defense needs. If export revenues in the high tech sector decline, it will mean that the sector will not have sufficient resources to support the research and development necessary to develop the next generation of advanced technologies. Maintaining the international competitiveness of the U.S. high technology sector is also critical to sustaining the growth of the national economy. The high technology sector has been responsible for nearly 35 percent of real economic growth in the United States. The industry employs over 4.3 million Americans, with over 500,000 of these jobs in the computer sector. Computer industry jobs pay nearly twice the average U.S. wage. To achieve the twin goals of protecting national security interests and promoting the international competitiveness of U.S. high technology industries, U.S. export control policy should focus on those technologies that are critical to protecting U.S. national security. It should target those areas of technology that are not readily available in global markets and on which there is consensus within multilateral export control regimes on the need for controls. In the short term, these goals can be achieved by ensuring that the export control thresholds for high performance computers and microprocessors keep in step with the rapid advances in computer technology. In the long term, efforts must continue to build a bipartisan consensus among the Congress, the Administration, and business community in support of meaningful reform of the U.S. export control system. Any effort to renew the Export Administration Act (EAA) should codify the significant liberalization in export controls that has been implemented administratively since the expiration of the EAA. It should not become a vehicle for turning back the clock to a Cold War system of stringent unilateral controls which lacks the support of U.S. trading partners, undermines U.S. international competitiveness, and ultimately harms U.S. national security. High Performance Computer Export Restrictions The 1998 National Defense Authorization Act imposed pre-shipment notification and post-shipment verification requirements on exports and re-exports of high performance computers over a certain performance threshold, measured in millions of theoretical operations per second (MTOPS), to 52 countries regarded as proliferation risks that are classified under U.S. export regulations as Tier III countries. Tier III countries include China, Russia, India, and Pakistan. Adjustments to high performance computer control levels can be proposed by the Administration following a determination that the adjustment will not harm national security. Any decision to adjust high performance computer controls for Tier III countries is subject to a 180-day congressional review period. Last July, President Clinton announced that he would raise the notification and licensing threshold for high performance computers to 6,500 MTOPS. The new control level became effective at the end of January. Recognizing that the 6,500 MTOP level will soon be bypassed by technology, the President announced in early February that he would increase the licensing and notification threshold to 12,500 MTOPS. This increase will not become effective until July of this year. The Administration plans another review of control levels for supercomputers in April. The Administration plans to ask Congress to shorten the congressional review period from 180 days to 30 days in order to respond effectively to rapid advances in computer chip technology. Congressional support for a shortened review process is building. The EAA renewal legislation reported out of the Senate Banking Committee last September proposes reducing the congressional review period for adjusting supercomputer export controls to 60 days. In addition, Senators Bennett (R-UT) and Reid (D-NV) and Representatives Dreier (R-28CA) and Lofgren (D-16CA) are sponsoring legislation that would reduce the congressional review period to 30 days. The 180-day notification period is impractical in the U.S. computer industry, given that new products are introduced nearly every three months. The 180-day waiting period also impedes U.S. companies from bringing their newest technology to the global marketplace before their foreign competition. Moreover, there is no precedent for a six-month review period under U.S. export control laws. For example, sales to foreign countries of munitions list articles such as tanks and rockets require only a 30-day review period. Finally, a 30-day notification period will give Congress ample time to consider any national security implications of a decision to adjust high performance computer controls. Microprocessor Export Restrictions U.S. export control regulations restrict the export of microprocessors above a performance threshold level of 3,500 MTOPS to Tier III countries (defined above). The MTOPS limit for microprocessors has been increased four times since 1995 to keep pace with improvements in technology and the large volume of devices entering world markets. The current process for increasing the MTOPS limit for microprocessors is subject to delay and not predictable. It is important that that this process be expedited and made more certain in order for the U.S. semiconductor industry to remain competitive in world markets. Enactment of a mass market product exception similar to the one included in S.1712, the Senate EAA reauthorization legislation, would also help ensure that U.S. export controls do not undermine the competitiveness of U.S. industry. Export Administration Act Reauthorization U.S. export control programs have been administered under the authority of the International Economic Emergency Powers Act (IEEPA) since 1994, when the Export Administration Act (EAA) expired. Since that time, the Administration has sought reauthorization of the EAA because of the legal vulnerabilities of administering export controls under IEEPA. EAA reauthorization legislation has failed to pass in the last several Congresses due to strong disagreements among the Congress, the Administration, and the business community about security issues and the treatment of high technology exports. Last September, the Senate Banking Committee unanimously approved S. 1712, the "Export Administration Act of 1999," which would reauthorize the EAA. The bill was developed by Senator Gramm (R-TX), Chairman of the Senate Banking Committee, and Senator Enzi (R-WY), Chairman of the Senate Banking Subcommittee on International Trade and Finance. The bill would: 1) expedite the export-licensing review process, 2) establish an interagency dispute resolution process, 3) reduce the congressional notification period for adjustments to supercomputer export control levels from 180 days to 60 days, 4) encourage elimination of controls on low-risk technology products through a new mass-market product provision and revised foreign availability standard, 5) tighten criteria for imposing foreign policy controls and exempt agricultural commodities and medicine from such controls, and 6) increase criminal and civil penalties for EAA violations. Among the most important provisions in the bill are those relating to the mass market and foreign availability determinations and the shortening of the congressional notification period for supercomputer controls. These provisions are intended to respond to U.S. industry concerns about the adverse impact of U.S. export controls on the international competitiveness of U.S. products, particularly in the computer sector. Under the bill, an item has mass-market status if it is: 1) produced and available for sale in large volumes, 2) widely distributed through marketing channels, 3) conducive to shipping by generally accepted commercial means, and 4) used for its intended purpose without substantial or specialized service. Once an item has been determined to have mass-market status, it is removed from the export control list unless the President finds that decontrolling the item constitutes a serious threat to national security and controlling the export of the item would diminish the threat. If the President makes such a determination, it must be reviewed every six months. The bill provides that an item has foreign availability status if it is available from sources outside the United States at a price that is not excessive compared with the controlled item and in a sufficient quantity that renders control ineffective. The President can set aside a foreign availability determination if he finds that not controlling an item would prove detrimental to national security and there is a high probability that foreign availability will be eliminated through multilateral negotiations. The bill also provides that the foreign availability "set-aside" terminates when the President fails to initiate negotiations, negotiations fail, or agreement to eliminate the foreign source is not reached within 18 months. The bill also includes a "set-aside" provision for mass- market product determinations, but it is not time limited. In drafting S.1712, Senators Gramm and Enzi responded to national security concerns raised in the Cox-Dicks report from the House Select Committee on U.S. National Security and Military/Commercial Concerns with the People’s Republic of China by incorporating 17 of the committee’s recommendations. The Cox-Dicks Committee recommendations reflected in the bill include: 1) emphasizing the importance of strengthening multilateral export control regimes, 2) incorporating a multilateral export control violation provision, 3) requiring immediate reporting of significant threats to national security, 4) enhancing enforcement resources, and 5) significantly increasing criminal fines and civil penalties for export control violations. Senate Majority Leader Trent Lott (R-MS) has said that EAA reauthorization legislation is a legislative priority and S. 1712 was brought up on the Senate floor in early March of this year. Consideration of the bill, however, has been deferred due to Banking Committee concerns raised by the Senate Armed Services, Foreign Relations, Government Operations, and Intelligence Committees on a number of issues including the role of the Defense Department in the export licensing process, the breadth of the mass-market product provision, export controls on China, and anti-terrorism controls. Informal staff-level discussions have been held concerning a possible national security exception that would protect militarily sensitive items from the mass-market provision. The Administration has said that it "broadly supports" S. 1712 as reported. In light of the variety of concerns that have been raised about the bill and the prospect that it could attract a wide variety of floor amendments, it is unclear whether there will be sufficient support to bring the bill up for a vote early this year in the Senate. Reform of export licensing procedures, significant liberalization of controls, and other improvements in U.S. export control policy have been achieved administratively over the past several years. These reforms could be jeopardized if EAA reauthorization legislation becomes the platform to impose stricter controls and tighten requirements for end-use, on-site visits for supercomputers. The House has indicated that it will wait for the Senate to act before considering any legislation to reauthorize the EAA. Encryption Last September, the Administration announced that it would remove some restrictions on the export of U.S. encryption technology. In January of this year, the Administration published revised encryption regulations for public comment. The major sections of the regulations provide that: Any encryption commodity or software of any key length can be exported license-free to individuals, commercial firms, and other non-government users in any non-terrorist country, following a one-time technical review; Retail encryption commodities and software can be exported to any end users in non-terrorist countries. The Bureau of Export Administration will determine which encryption products qualify as "retail;" and Export controls on source code, tool kits, and chips are relaxed. The revised regulations include a broad definition of retail goods, which encompasses web-based products and any functionally equivalent product, and clarify that the definition of government entities does not include telecommunications firms, Internet Service Providers or educational facilities. The regulations contain many of the provisions in the Security and Freedom through Encryption Act, H.R. 850, sponsored by Congressman Goodlatte (R-6VA). While the revised regulations are an improvement over earlier Administration proposals, U.S. industry remains concerned that they remain too complex and believes that the U.S. government needs to address the competitive disadvantage U.S. industry faces in competing with European, Australian, and Japanese suppliers of encryption technology. U.S. industry would like to have another review of the encryption regulations in 6 months. The Goodlatte encryption bill would: Establish a national Electronic Technologies Center within the Justice Department to allow federal and local law enforcement officials to examine encryption techniques and obtain information on current technology; Permit any person to use any encryption method and sell it in interstate commerce; Prohibit federal and state law enforcement officials from requiring private encryption keys; Prohibit any person who possesses an encryption key from being required to transfer control of the key to another person other than for law enforcement purposes; and Penalize the encrypting of communications relating to a federal felony. The Goodlatte bill was approved by the House International Relations, Armed Services, Commerce, and Intelligence Committees last year and has 258 co-sponsors. The bill has not been brought up on the House floor because of the Administration’s decision to implement most of its provisions by administrative action. The FBI and the Justice Department remain opposed to further liberalization of export policy for encryption, based on concerns that terrorist groups could use encryption products. Wassenaar Arrangement In 1996, the United States and 32 other countries approved the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Technologies. The agreement replaced the Coordinating Committee for Multilateral Export Controls (CoCom). Unlike CoCom, the Wassenaar Arrangement does not impose mandatory multilateral export controls and instead operates on the basis of national discretion. The Wassenaar member countries agreed to control certain dual-use items (items with a commercial and military use) that are listed in the appendix to the arrangement. Each member country has discretion to decide what export controls are appropriate for the dual-use items on the list. Wassenaar members continue to review the list of dual-use items and to attempt to coordinate their export control policies. In the area of encryption, Wassenaar members agreed to eliminate controls on encryption products below 56 bits and to extend controls to mass-market encryption products above 64 bits. Revisions were also made in the level of control for telecommunications products and machine tools. Wassenaar members are reviewing controls on computers and microprocessors to bring controls more into line with technological advances. In July of last year, the United States issued regulations implementing an agreement among Wassenaar members to control exports of weapons-related goods and technology to pariah states and regions of instability. The new regulations include a minor relaxation of controls on some telecommunications and computer equipment, as well as on digital video magnetic tape recorders. The United States has launched an initiative within the Wassenaar Arrangement to strengthen rules preventing members from undercutting the export license denials of other countries. The United States is concerned that countries with lax export control laws will circumvent the Wassenaar Arrangement and ship sensitive technology to China and other countries of concern. The U.S. proposal was deferred for further study due to objections raised by Russia and Ukraine. ECAT POSITION: ECAT supports efforts to liberalize controls on encryption products and to build a strong bipartisan consensus for meaningful export control reform. ECAT believes that upward adjustments in the control threshold for high performance computers should be expedited and urges the Congress to reduce the congressional notification period under the National Defense Authorization Act of 1998 to 30 days. Similarly, the Administration should establish an expedited, predictable process for raising the control threshold for microprocessors. Any legislation re-authorizing the EAA needs to be bipartisan and reflect a consensus among the Congress, the Administration and the business community. A new EAA bill should provide an export control system that promotes U.S. national security and maintains U.S. technological leadership. An EAA bill should codify recent export control liberalization, provide for a higher threshold for the imposition of foreign policy controls, ease the ability to obtain foreign availability determinations, and reduce export-licensing processing time. Such legislation must not become the vehicle for further unilateral restrictions on U.S. exports that lack the support of our trading partners, are out of step with technological advances, and undermine the development of new technology that is critical to advancing U.S. national security interests. 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