He has encouraged many of the allies to spend more on defense. With my government, Lord Robertson has urged substantial efforts to assure that allied militaries are able to field comparable, and interoperable, advanced defense technologies, many of these residing in the U.S. defense industrial base.

So, from the outset of the Bush Administration, the Secretary General has identified the U.S. defense export licensing regime as a key factor in the equation of NATO's future effectiveness as a fighting force.

Who Benefits from Interoperable Militaries

There are many in Washington, and elsewhere, who would regard more privileged access to advanced U.S. defense technology by our transatlantic allies as a benefit being conferred by the United States on the European defense industry - and in one sense this is undeniable.

Yet, when one considers the scope and breadth of security obligations, deployments, and ongoing missions presently assigned to American military forces - and when we add up the burden this imposes on the American soldier and taxpayer alike - it is clear that the goal of increasing allied defense spending to ensure greater alliance interoperability, deployability and combat effectiveness, confers a major, lasting and very strategic benefit on the security interests of the United States.

I might add that NATO's decision to assume important new security roles, such as in Afghanistan, gives credibility and impetus to achieving this longer-term vision of a NATO that is relevant to the 21^st century security environment.

The recent establishment of Allied Command Transformation will, I predict, further sharpen our collective focus on highly effective concepts of operation enabled by technology.

NSPD-19

With that, let me turn to President Bush's ongoing review of Defense Trade Export Policy and National Security - what is known inside the Washington Beltway as "NSPD-19."

The main impetus to undertaking this review was, really, three-fold:

• A strong belief that the 21^st century threats are different from those that shaped our defense posture in the 20^th century; 
  
  
• A concern that grew quite pronounced throughout the 1990s that the U.S. licensing process was overly complex and slow, and not compatible with the growing trend of multinational collaboration in the defense industry. I would add that the benefit to U.S. interests of exercising controls on U.S. defense technology in the manner we have been doing, was being achieved at a high cost in terms of damaged political influence and goodwill among the very countries on whose security partnership we depend. 
  
  
• The third impetus to this policy review was, and is, the need to ensure that the U.S. and its allies are able to make optimal use of advanced defense technology for our shared security purposes.

What I find noteworthy, looking back on the past two years in the Bush Administration, is how cooperative the key agencies in Washington have all been on defense trade policy issues. By that I refer to the Defense Department - Acquisition as well as Policy offices, and the Commerce Department, in addition to my own State Department.

Senior officials in all of these offices share President Bush's very serious commitment to national security and the imperative of keeping dangerous defense technologies out of irresponsible hands.

At the same time, reflecting the President's management philosophy, all of these agencies equally recognize that important foreign policy and national security goals can better be achieved by elevating the focus and quality of our efforts.

We are highly conscious of the strategic purpose of NSPD-19 and its connection to NATO transformation, namely: to better prepare the alliance to cope effectively with new threats and dangers emanating from outside Europe that could endanger the safety, interests, and values of both the United States and Europe

That is the theme of the report that Ms. Bronson and I offer to you today.

Major Improvements in the Licensing Process

At the start of the Bush Administration, the State Department was faced with a large agenda of unfinished business in the defense export policy arena inherited from the previous administration.

• We had a series of actions known as the Defense Trade Security Initiative (DTSI), including streamlined program and project licenses, a promised review of the U.S. Munitions List, and an offer to negotiate ITAR exemption arrangements with Australia and the United Kingdom, adding to the longstanding (but recently revised) U.S.-Canada exemption arrangement. 
  
  
• Within the State Department, the licensing office was adjusting to sharply increased manpower levels and the newly-assigned legal responsibility for licensing commercial communications satellites, as well as a strong push in both the State and Defense Departments to move to electronic licensing, including paperless processing among these government departments and offices.

Two years later, there is very substantial progress to report:

• We have processed the first-ever Global Project Authorization, in support of the Joint Strike Fighter multinational development project.
  
  
• The National Security Council staff has led an intensive inter-agency effort to review the U.S. Munitions List, and about half of the categories of this list have completed or will soon complete review. This process is helping us to identify items that either may not belong on the Munitions List or do not merit intensive controls. That, in turn, will help our bureaucracy focus more time on proposed exports of more sensitive defense goods and technology, including some items representing new threats that we are recommending adding to the U.S. Munitions List. 
  
  
• Our ITAR exemption negotiations with Australia and the United Kingdom, after an extraordinary effort by all concerned, have both successfully reached agreement. Legislative action is needed in Washington and other capitals to allow these arrangements to come into force. 
  
  
• In the State Department's Directorate of Defense Trade Controls (DDTC), along with very significant increases in manpower the last 2 years, we have realigned the organization, expanded the management ranks, and brought in senior executive leadership to run the whole function. 
  
  
• Deputy Assistant Secretary Gregory Suchan will assume his duties at the end of the month as the so-called "DAS" for Defense Trade Controls. The Managing Director, who has also been Deputy Assistant Secretary during a six-month transition period, is Robert "Turk" Maggi, and he is with us today. 
  
  
• We have a new Policy Directorate and a new Management Directorate, to go along with Licensing and Compliance Directorates, and we are building a public outreach team to make the whole export licensing activity more conveniently accessible to defense industry and allied governments alike.

Our electronic licensing initiative is a major evolution. Working with 18 U.S. defense exporters, large and small, during this pilot project phase, we are processing actual cases and working through a range of technical issues.

The State Department, working closely with Ms. Bronson and her DoD colleagues, has overcome enormous challenges and is ready to open the flow of fully electronic licensing cases between our two Departments. The State Department is also very close to achieving an electronic connection with the U.S. Customs Service in the Department of Homeland Security, which will greatly enhance our knowledge of what defense goods are actually being exported, and our ability to assure compliance with U.S. laws and regulations.

Under the new management structure in 2003, the State Department has been systematically reviewing every segment of its process, and designing systems and tools to assure timely action by competent and properly-informed offices.

Under NSPD-19, we are looking closely at a number of additional procedural factors that affect the timing and predictability of obtaining export authorization for U.S. defense articles and technology, including: 

• How to adjudicate Commodity Jurisdiction cases without incurring long delays;
  
  
• How to ensure that non-sensitive cases are not referred unnecessarily from the Directorate of Defense Trade Controls to other offices and departments; 
  
  
• How to work with our Congress to ensure that no part of the executive-legislative approval and oversight process for arms transfers unduly harms the ability of our defense companies to compete in legitimate overseas project opportunities; and 
  
  
• How to maintain continuous process management so that our work is done efficiently and our staff is better able to pay comparatively more attention to sensitive export cases.

These steps, taken together, represent a wholesale re-tooling of the State Department's licensing process, one that we hope will make the job of the Pentagon and other departments easier and more effective as we go forward.

The chorus of voices a few years ago, from other U.S. agencies, industry, Congress, and allies alike - including NATO agencies - advocating a major effort to improve the licensing process, as been answered. These changes are now well underway and visible to the naked eye, and will be manifestly evident over the next year.

Policy Review

That brings us to the area of policy. Indeed, for the first time, we will no longer have a chronically under-resourced and non-responsive U.S. licensing process as an excuse for not meeting alliance interoperability goals.

Now, the relevant export control issue will be the terms of release for export by the U.S. of certain advanced defense technologies to other countries.

I will defer to Ms. Bronson to discuss the Defense Department's thinking on technology release policy as it relates to our national security objectives, notably with the NATO allies.

Before turning the floor to her, I would like to lay before this audience the proposition that there are, in fact, three fundamental policy questions before us, and they are linked.

The first, as I just noted, is whether the U.S. and its NATO allies, respectively, will see fit to move toward a more advanced defense technology relationship in their export and procurement policies;

A second is whether concerted U.S. steps to advance NATO interoperability will be reciprocated by the allies' fulfillment of their PCC commitments, and substantial improvements in the readiness, deployability and sustainment of European forces that would be assigned to the NATO Response Force.

We have solicited and received a lot of suggestions from industry and government. Lord Robertson has brought many concerns to our attention from the perspective of NATO agencies.

I hope all those here who support the ambitious agenda for NATO reform will embrace these U.S. initiatives, put the past behind you, and work with us to achieve new levels of both international technology collaboration and technology security. We stand ready to be your partner in that effort.