DOD AUTHORIZATION BILL CONFERENCE REPORT (Senate - October 30, 1997)

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Mr. GRAMS. Mr. President, I rise in opposition to the conference report to the DOD authorization bill. One of the issues which held up the resolution of the conference was the high performance computer issue. This matter certainly was not resolved to my satisfaction, and I understand that this is one of three issues that may cause the veto of this legislation.

On July 10 the Grams-Boxer amendment passed in the Senate by a vote of 72-27. It created a GAO study on the national security concerns related to computer sales between 2,000-7,000 MTOPS to tier 3 countries. Those countries include China, Russia, and Israel. The amendment was a second degree amendment to an amendment which sought to license exports of these mid-level computers, after they had been decontrolled 2 years ago. Rather than creating an unwise barrier to US-made exports, 72 of my colleagues believed we needed more study of this issue before passing this new regulation on the Senate floor circumventing the usual committee debate and consideration.

Mr. President, as Chairman of the Subcommittee on International Finance, of the Banking Committee, which has jurisdiction over export control matters, I strongly opposed this attempt to circumvent the normal committee process. Chairman D'Amato joined me in vigorously opposing the underlying amendment, paving the way for a strong Senate vote on the issue.

After the vote, Chairman D'Amato and the Subcommittee Ranking Member Carol Moseley-Braun joined me in sending a letter to the Conferees requesting we be consulted prior to any attempts to modify the Senate provision in conference. I regret that at no time in the months-long process did any consultation occur, even though the issue was clearly one of Banking Committee jurisdiction.

I was informed by the conferees that they had accommodated my request for a GAO study. What I determined from other sources was that language accompanying my study essentially accomplished the same thing as the underlying amendment my second-degree amendment defeated. And I was supposed to be satisfied because my study remained in the bill.

I applaud my colleagues who worked hard in the conference committee to complete the report. There were many difficult issues effectively handled. In total, the bill is a good one. However, because this bill may be vetoed, I would like to make a strong case for further resolution of this issue once it is returned to conference.

My specific concerns with the provisions of the conference report are the following:

First, rather than a mandate to obtain export licenses for computers between 2,000 and 7,000 MTOPS to tier 3 countries, the conference report would require a 10 day notice to Commerce of a proposed sale. If no government entity opposes, the shipment can be made. This not only creates a bureaucratic nightmare taking scarce resources away from review of truly sensitive export license applications, but the reality would be that there would be an objection to each one of them--if for no other reason that the Government needs more time to look at them. So the 10-day notice requirement essentially implements the intent of the original amendment the Senate defeated. This is not acceptable. The reason we decontrolled in the first place, requiring licenses between 2,000 and 7,000 MTOPS only to questionable end users in tier 3 countries, was to free up needed resources to analyze exports of higher performance computers, including those computers between 20,000 and well over 1 million MTOPS--which are the real supercomputers. Opponents of my amendment insisted on defining computers between 2,000 and 7,000 MTOPS as being supercomputers, but supercomputer technology has long ago passed this level of computers. They are now the kind of computer systems we have in our offices. They are not supercomputers used to design nuclear weapons.

There is a 180-day layover for future decontrol of computer level changes and a 120-day layover for any changes in which countries remain on the tier 3 list. I believe the President should have flexibility to continue to exercise current authority to make these changes. These layovers will give opponents plenty of time to prevent these changes--and will ensure that no changes will be made in the future even though rapid technology advancements challenge us to maintain a system for decontrols in the future.

Mr. President, there is also a requirement for end-user verification that could be unenforceable and also create a strain on limited resources. This language should be worked out with the Administration. Certainly post shipment checks should not be required over 2,000 MTOPS regardless of whether decontrol is made in the future. Even by next year that level of computer will be found in the local computer store, so it is unlikely that all of these verifications could be made. Also, there should be some discretion regarding whether verification in every case is even necessary if the exporter maintains service on the computer.

Mr. President, I am just as concerned about selling sensitive high-technology equipment to military end users, but I don't think this is the right way to stop the few diversions that brought about the original amendment. There is adequate enforcement authority now to address diversions. Those that have occurred are being addressed.

Mr. President, my floor amendment also asks Commerce to work more closely with companies to identify questionable end users than they are doing now. The GAO study will help us study national security interests involving sales of computers at this mid-level. There simply is no need for the provisions added in conference that will compromise our efforts to remain competitive with other nations which do not have these type of requirements. Anyone who will tell you that an export license takes only a short time is wrong. It takes months. And sales have been lost because of our lengthy, burdensome licensing process.

Mr. President, I urge my colleagues to oppose this conference report. I also ask unanimous consent that a copy of my statement at the time my second-degree amendment was offered be printed in the Record. That statement relates all of my reasons for opposing the underlying amendment reimposing export licenses of these midlevel computers.

There being no objection, the material was ordered to be printed in the Record, as follows:

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From the Congressional Record, July 10, 1997

[FROM THE CONGRESSIONAL RECORD, JULY 10, 1997]

Mr. Grams. Mr. President, I understand that there is a lot of concern in this body about United States computer sales being diverted for military use to either China or Russia. None of us wants that to occur. But we have to consider whether the Cochran amendment solves the problem. I believe that it does not.

The Cochran amendment would require export licenses for all midlevel computers. Now, these are not supercomputers, these are not high-end computers. You are going to hear that term, but they are not supercomputers. These are midlevel computers, and they are shipped to China, Russia, Israel, and 47 other countries. We talk about the Third Tier countries. They involve 51 nations, like Russia, China, India, Pakistan, Saudi Arabia, Israel, Romania, and the Baltic States. Some of our future NATO Allies could also be involved. Mr. President, export licenses do not solve end-user problems. These are diversions that would not have been caught during the export license procedure. Export licenses do require end-user certification, but if the end user chooses to ignore the agreement, or if the computer is stolen, that possibility will not be evident in the licensing process. In my judgment, the current system works.

Just yesterday, Secretary of Defense Bill Cohen sent us a letter opposing the Cochran amendment. He said the current law and system can deal with unauthorized exports and diversions. This is from the department that has been very conservative on all export decontrol matters. Secretary Cohen further states that we should focus our controls on technology that can make a national security difference, not that which is widely available around the world and is obsolete.

Yes, Mr. President, there have been three diversions, but that was out of 1,400 sales. But, no, this is not the right way to address those problems. The right way is to force the administration to publish as many military end users as possible and then to work with the industry to identify all military end users. We have been able to identify diversions through our capable intelligence sources. Mr. President, there is no evidence that there are dozens of computers out there used by military end users. It is just not there.

Further, I don't believe that the industry irresponsibly ignores available information about military end users. They have too much at stake. A company which violates export control laws takes a very big risk. The penalties are prohibition of all exports for 20 years or more, 10 years in prison, and up to a $5,000 fine for each violation. This doesn't include the blemish that would remain on the company's reputation or the great difficulty that company would have in the future seeking an export license. No company, Mr. President, can afford that risk.

What we would be doing here this morning is handing this midlevel computer business over to the Japanese and other allies. Now, again, I want to emphasize that these are midlevel computers, they are not supercomputers. Next year, they will be the kind of systems that we will be able to have in our offices here in the Senate, or what you could find in a small company or in a doctor's office. These are not the computers that are sought after for nuclear weapons production or design. Again, we are looking at midlevel computers, between 2,000 and 7,000 MTOPS, which are widely available around the world.

Supercomputers, which are sought after for weapons design, start at the 20,000 MTOPS level and go all the way up to 650,000 this year, and they will go beyond the 1 million MTOPS level next year. By the way, China already produces a computer at 13,000 MTOPS. No other country considers these computers to be anything but generally available and will step in to take over the business that the Cochran amendment will hand to them. The question is, is that what we want?

Also, anyone can purchase upgrades, by the way, to raise a PC, a current PC, above the 2,000 MTOPS level. We can't control the box. We can't control the chips around the world that can be put in it. We can't control the upgrades. There is no way to control these low-level PC's under the 2,000 MTOPS threshold, again, since they are available in nearly every country in the world.

Further, the chips that make up these computers are also available and produced around the world. They were decontrolled during the Bush administration. Our chip producers have markets throughout the world, and they need to maintain them to remain competitive. Chip producers cannot control who receives their end product.

Also, how do you prohibit a foreign national from using a computer even above the 7,000 level here in the United States and taking the results back, or faxing it back?

Our friend Jack Kemp has written to us also this week stating that the Cochran amendment would `establish a policy that is destined to fail and would hurt American computer manufacturers without protecting our national security. The American high-technology sector is critical to the future of this country and must be protected from overly intrusive Government restrictions.'

I wish there was something we could do to effectively control some of these exports, but it is just not possible at these lower levels. We cannot convince our allies to reverse 2 years of their own decontrol. In fact, Europe has tabled a decontrol proposal at 10,000 MTOPS, which proves that they have no intention of even respecting our 7,000 level. We cannot pull all the PC's and upgrades off the retail shelves, and we cannot close our borders to prevent all foreign nationals from entering this country and using our computers.

We must concentrate our resources on keeping computers above the 7,000 level from reaching military end users; that's for sure. But I fear that an increased license burden in the administration would steer resources away from efforts to locate diversions and investigate them.

Now, Mr. President, in an earlier statement, I also countered a claim that an export license requirement would not slow down these computer sales. I have heard that someone made the comment that an export license would take 10 days. Well, anyone who knows how the licensing process works knows that it can take many, many months to obtain one. This will only earn our industry a reputation as an unreliable supplier, and it will cost us sales and it will cost us many, many U.S. jobs. The administration admits that a computer license application averages 107 days to reach a decision. I have seen it take far longer. Even 107 days, by the way, is enough to convince the end user to go out and seek a buyer in another country.

Since so many of the Tier 3 countries are emerging markets, we need to be in there early to maintain a foothold for future sales. When we hear about the 6.3 percent of sales to Tier 3 countries, that is misleading. It is in an area where the market is expanding rapidly. If we leave our companies out of those markets, they will not be there to compete in the future. They will not be there to provide sales and jobs for the United States.

Another argument I have heard is that there is no foreign availability over 3,500 MTOPS. Well, last year, NEC of Japan tried to sell a supercomputer to the United States Government at a level between 30,000 and 50,000 MTOPS. They match our speeds all the way to the top.

Mr. President, I believe that all of us are proud of our computer industry, that our industry remains the state of the art in so many areas, particularly in the levels above 7,000. We have made progress to facilitate exports without compromising our national security, progress which began back in the Reagan and Bush administrations, but here is an effort today to reverse all of that progress.

Our industry has to survive on exports, and it has to pursue commercial business with these 50 countries to remain competitive. All computer sales over the 7,000 MTOPS level do require license now. We have not sold any computers above that level. And, again, the 7,000 MTOPS are not supercomputers--they are not--they are midlevel computers. We have not sold any computers above that level to Tier 3 countries; nor do our allies, to my knowledge. However, we should not restrict the sales of these midlevel and, again, generally available computers to commercial end users. We should simply maintain the current licensing requirement for the questionable end users. I firmly believe that there will be improved cooperation between the Government and industry on end-user information, particularly those for Russia and China.

Now, I also commend the Commerce Department for starting to publish information on end users and to examine all sales that are made to the Tier 3 countries within these computer speeds.

The Grams-Boxer amendment requests the GAO to determine whether these sales affect our national security. That is very important. It will look into the issue of foreign availability. It will also require the publication of a military end-user list, and it requires Commerce to improve its assistance to the industry on identifying those military end users.

There will be some that vote today solely to express their dissatisfaction with China's alleged military sales to our adversaries. Let me remind you once again that there is no evidence that U.S. computers were involved in any of those cases. I also urge you to look at the merits of this issue. Pure and simple, the Cochran amendment would hand the sales of midlevel computers over to the Japanese and the Europeans at the expense of an industry that we have sought to protect and to promote and an industry that we are proud of.

As chairman of the International Finance Subcommittee of Banking, the committee that has jurisdiction over this issue, I strongly, this morning, urge my colleagues to vote for my substitute and let us continue this debate in the normal manner, through committee consideration. At the same time, the administration should step up its efforts to express to the Chinese and the Russians our grave concerns regarding efforts to divert commercial sales to military end users without knowledge of the United States seller.

Mr. President, I appreciate the efforts of my colleague from Mississippi to address these diversions. I want to work with him in my role as chairman of the subcommittee of jurisdiction to ensure that the current system does work or on how we can improve it once we have better information regarding the extent of the problem.

I urge the support of my colleagues for the Grams-Boxer substitute as a compromise to this very, very controversial issue. Thank you very much.

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