[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
EXPORT CONTROLS, ARMS SALES, AND REFORM: BALANCING U.S. INTERESTS, PART 
                                   1

=======================================================================

                                HEARING

                               BEFORE THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 12, 2011

                               __________

                           Serial No. 112-37

                               __________

        Printed for the use of the Committee on Foreign Affairs


 Available via the World Wide Web: http://www.foreignaffairs.house.gov/

                                 ______


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                      COMMITTEE ON FOREIGN AFFAIRS

                 ILEANA ROS-LEHTINEN, Florida, Chairman
CHRISTOPHER H. SMITH, New Jersey     HOWARD L. BERMAN, California
DAN BURTON, Indiana                  GARY L. ACKERMAN, New York
ELTON GALLEGLY, California           ENI F.H. FALEOMAVAEGA, American 
DANA ROHRABACHER, California             Samoa
DONALD A. MANZULLO, Illinois         DONALD M. PAYNE, New Jersey
EDWARD R. ROYCE, California          BRAD SHERMAN, California
STEVE CHABOT, Ohio                   ELIOT L. ENGEL, New York
RON PAUL, Texas                      GREGORY W. MEEKS, New York
MIKE PENCE, Indiana                  RUSS CARNAHAN, Missouri
JOE WILSON, South Carolina           ALBIO SIRES, New Jersey
CONNIE MACK, Florida                 GERALD E. CONNOLLY, Virginia
JEFF FORTENBERRY, Nebraska           THEODORE E. DEUTCH, Florida
MICHAEL T. McCAUL, Texas             DENNIS CARDOZA, California
TED POE, Texas                       BEN CHANDLER, Kentucky
GUS M. BILIRAKIS, Florida            BRIAN HIGGINS, New York
JEAN SCHMIDT, Ohio                   ALLYSON SCHWARTZ, Pennsylvania
BILL JOHNSON, Ohio                   CHRISTOPHER S. MURPHY, Connecticut
DAVID RIVERA, Florida                FREDERICA WILSON, Florida
MIKE KELLY, Pennsylvania             KAREN BASS, California
TIM GRIFFIN, Arkansas                WILLIAM KEATING, Massachusetts
TOM MARINO, Pennsylvania             DAVID CICILLINE, Rhode Island
JEFF DUNCAN, South Carolina
ANN MARIE BUERKLE, New York
RENEE ELLMERS, North Carolina
VACANT
                   Yleem D.S. Poblete, Staff Director
             Richard J. Kessler, Democratic Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

The Honorable Ellen Tauscher, Under Secretary, Arms Control and 
  International Security, U.S. Department of State...............    10
The Honorable Eric L. Hirschhorn, Under Secretary, Bureau of 
  Industry and Security, U.S. Department of Commerce.............    18
The Honorable James N. Miller, Jr., Principal Deputy Under 
  Secretary of Defense for Policy, U.S. Department of Defense....    29

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

The Honorable Ileana Ros-Lehtinen, a Representative in Congress 
  from the State of Florida, and chairman, Committee on Foreign 
  Affairs: Prepared statement....................................     4
The Honorable Ellen Tauscher: Prepared statement.................    12
The Honorable Eric L. Hirschhorn: Prepared statement.............    20
The Honorable James N. Miller, Jr.: Prepared statement...........    31

                                APPENDIX

Hearing notice...................................................    60
Hearing minutes..................................................    61
The Honorable Gerald E. Connolly, a Representative in Congress 
  from the Commonwealth of Virginia: Prepared statement..........    63
The Honorable Eric L. Hirschhorn: Material submitted for the 
  record.........................................................    64
Questions submitted for the record to all witnesses by the 
  Honorable Ileana Ros-Lehtinen..................................    83
Written responses received from the Honorable Eric L. Hirschhorn 
  to questions submitted for the record by the Honorable Ileana 
  Ros-Lehtinen and the Honorable Jeff Duncan, a Representative in 
  Congress from the State of South Carolina......................    86
Questions submitted for the record to the Honorable Ellen 
  Tauscher by the Honorable Jeff Duncan..........................   100
Questions submitted for the record to the Honorable James N. 
  Miller, Jr., by the Honorable Jeff Duncan......................   101


EXPORT CONTROLS, ARMS SALES, AND REFORM: BALANCING U.S. INTERESTS, PART 
                                   1

                              ----------                              


                         THURSDAY, MAY 12, 2011

                  House of Representatives,
                              Committee on Foreign Affairs,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 o'clock a.m., 
in room 2172 Rayburn House Office Building, Hon. Ileana Ros-
Lehtinen (chairman of the committee) presiding.
    Chairman Ros-Lehtinen. The committee will come to order.
    After recognizing myself and the ranking member, my good 
friend Mr. Berman of California after 7 minutes each for our 
opening statements, I recognize the chairman and the ranking 
member of our Terrorism, Nonproliferation, and Trade 
Subcommittees deg. for 3 minutes each for their 
statements. We will then hear from our witnesses. I would ask 
that you summarize your prepared statements in 5 minutes each 
before we move to the question and answer period with members 
under the 5 minutes rule as well.
    Without objection, the witnesses' prepared statements will 
be made a part of the record. Members may have 5 legislative 
days to insert statements and questions for the record subject 
to the length limitations in the rules.
    The chair now recognizes herself for 7 minutes.
    This morning the committee is holding the first in a series 
of hearings examining United States strategic export controls, 
what I would prefer to call trade security, and sweeping 
changes proposed by the Executive Branch.
    As members are aware, the main goal of export controls is 
to keep certain states or non-state actors from developing or 
acquiring military capabilities that could threaten important 
U.S. security interests. United States policy, with respect to 
the export of sensitive technology, has long been to seek a 
balance between the U.S. economic interest in promoting 
exports, and our national security interest in maintaining a 
military advantage over potential adversaries, and denying the 
spread of technologies that could be used in developing weapons 
of mass destruction.
    Clearly, the U.S. has a compelling interest in protecting 
its critical technologies from theft, espionage, reverse 
engineering, illegal export, and diversion to unintended 
recipients.
    In this regard, we understand from press reports that a 
U.S. helicopter with certain advanced radar-evading designs 
crashed during the otherwise flawless raid to capture or kill 
Osama bin Laden in Pakistan. While the U.S. team took steps to 
destroy the helicopter to protect the know-how relating to the 
design, engineering, and manufacture of this sensitive defense 
item, there are reports that sufficient parts of the helicopter 
remained intact to afford foreign entities significant insight 
into our technology. Pakistani officials must offer full 
cooperation to the U.S. to safeguard and ensure the immediate 
return of any parts, and prevent the sharing of any information 
about them with third parties.
    This example clearly illustrates the need and value of 
strategic export controls. Over the years, numerous 
Congressional hearings and GAO reports have called attention to 
the need to reexamine our export control system. Responding to 
these concerns, the President announced in August 2009 that he 
had directed the National Security Council to carry out such a 
study. Last year the administration proposed a complete 
reorganization of the current system, proposing a single export 
control list, a single licensing agency, a single primary 
enforcement coordination agency, and a single information 
technology system.
    Ultimately, the new legislative authorities would be 
required to implement the administration's plan, a plan 
substantially at variance with the current statutory scheme for 
controlling defense articles under the Arms Export Control Act 
and dual-use items under the Export Administration Act, and 
requiring committee review. To date, a compelling case has not 
been made for the wholesale restructuring of our current 
system, especially one that would include the creation of a 
costly and perhaps unaccountable new Federal bureaucracy.
    Although there are several aspects of the ongoing reforms 
that many of us do support, I want to focus on challenging 
issues associated with proposed reforms of the current 
munitions and dual-use control lists. We are particularly 
concerned that the pace and scope of the ongoing ``list 
review,'' which simultaneously includes: Establishing a new 
``tiering'' structure for controlled exports; a comprehensive 
review of the Munitions List; and a complete re-write of that 
list's 21 categories of defense items, is straining the system 
and its personnel to its breaking point.
    The Executive Branch interagency review is only one part of 
the process. As required by section 38(f) of the Arms Export 
Control Act, any item which the Executive Branch proposes to 
remove from the Munitions List must first be reviewed by the 
Committees on Foreign Affairs and Foreign Relations of the 
House and Senate, respectively.
    Although the committee intends to work with the 
administration to expeditiously review hundreds or thousands of 
38(f) cases in the months ahead, we will and must vigorously 
perform our due diligence on these important security matters 
in accordance with existing protocols. The committee cannot 
fulfill its oversight responsibilities in this regard, however, 
until it understands fully how such articles would be regulated 
under Commerce jurisdiction, as well as assess enforceability 
of the new controls.
    However, largely due to the complexity of the ongoing 
reforms, clarity with respect to future licensing policy has 
not been forthcoming. The administration should reconsider this 
time-consuming exercise and focus on common sense reforms upon 
which we can all agree.
    One example may be the treatment of generic parts and 
components treatment; rivets, wire, bolts and the like 
currently controlled on the Munitions List because they were 
designed for military use but which have little in the way of 
inherent military utility. Toward this end, I intend to 
introduce legislation to clarify that generic parts and 
components need not be regulated in the same manner as the more 
sensitive defense articles. This modest, but important, step 
would address a key concern of small- and medium-sized 
enterprises, larger defense firms, and our allies.
    Unlike the breathtaking scope of the proposed 
administration reforms, this initiative can be implemented in a 
timely manner without precipitating institutional gridlock or 
sparking significant friction within the Legislative Branch. In 
so doing, the committee will seek to ensure that this effort is 
fully consistent with our broader national security interests, 
including by: Preventing transfers or retransfers of such 
articles to Iran; ensuring consistency with current 
prohibitions on the transfer of defense and dual-use items to 
China, for example; and requiring that any subsequent lessening 
of controls for these items meet with the concurrence of the 
Department of State and the Department of Defense, as well as 
can be reviewed by Congress.
    These, and other legislative changes, together with our 
intent to authorize a short-term extension of the lapsed Export 
Administration Act, will help enable Congress and the 
administration to tackle together the critical changes 
necessary to strengthen our national security, while advancing 
commercial interests.
    I now recognize Mr. Berman, the ranking member, for his 
opening remarks.
    [The prepared statement of Chairman Ros-Lehtinen follows:]

    
    
    
    
    Mr. Berman. Thank you, Madam Chairman. And thank you, 
witnesses. And Ellen, particularly good to see you again.
    In July 2009 Defense Secretary Gates and National Security 
Advisor Jones urged President Obama to launch the Export 
Control Reform Initiative that we are reviewing today. Their 
concern, which I share, is that our export controls are out of 
date, more unilateral and therefore less effective than they 
were in the past and are fast becoming a burden on our defense 
industrial base, our scientific leadership and our national 
security.
    My concern is widely shared among our national security and 
scientific leaders. Two years ago the National Research Council 
published a report which concluded that America's national 
security is highly dependent on maintaining our scientific and 
technological leadership. The committee was co-chaired by 
former National Security Advisor Brent Scowcroft and Stanford 
University President John Hennessy. They were joined by former 
four star generals, admirals and senior intelligence officers, 
university presidents and Nobel Laureates.
    In stark terms these leaders reported that our outmoded 
export controls were designed for the Cold War when the United 
States had a global dominance in most areas of science and 
technology. The current system of export controls now harms our 
national and homeland security as well as our ability to 
compete economically. It goes on to state that,

        ``In the name of maintaining superiority, the United 
        States now runs the risk of becoming less competitive 
        and less prosperous. We run of the risk of actually 
        weakening our national security. The Cold War mentality 
        of Fortress America cripples our ability to confront 
        the very real dangers of altered world conditions.''

    The Obama administration's Export Control Reform Initiative 
has taken on the mammoth task of reforming our export control 
system, and I commend them for doing so.
    The administration formed an interagency task form of all 
agencies responsible for administering export controls, and 
there are a lot, to assess what needed to be done and how to 
implement changes. This task force has accomplished an 
astonishing amount of work in the last 18 months, proving that 
if focused, an efficient interagency review and planning is 
indeed possible under the right leadership.
    Last week, the NSC-led interagency team doing the work on 
this project was selected as a finalist for one of the most 
prestigious awards for public service, the Samuel Heyman 
Service to America award. They deserve our congratulations and 
thanks.
    I welcome and generally support the administration's Export 
Control Reform Initiative, although I have some questions about 
some aspects, especially the idea of a single-licensing agency. 
There are also measures that the Congress should take, such as 
giving the President the flexibility to determine how controls 
should be applied to exports of commercial satellites and 
related components. The House passed my provision to accomplish 
this in the last Congress with bipartisan support. I hope the 
House will approve again in this Congress.
    But more broadly, we need to update and revise the Export 
Administration Act which lapsed from 1994 to 2000 and again in 
2001. Shortly I will introduce legislation to accomplish that 
objective.
    Reform has generally been interpreted in terms of making 
the military export control system more responsive to 
exporters, more efficient and more predictable. But reform is 
also a call for reassessment for questioning old assumptions 
and patterns of thinking.
    For example, the Arab Spring has shattered old assumptions 
about the Middle East. It is a time of hope, but it is also 
fraught with peril. The region is in turmoil. We all hope that 
governments throughout the region will become more democratic 
and stable, but it is a real possibility that we will see new 
governments that are less sympathetic to our concerns; more 
hostile to Israel then the current regimes. It is time for a 
new level of caution on what we sell to the Middle East and 
Persian Gulf. Arms will not produce more democratic regimes.
    I would be interested in hearing from the witnesses about 
the additional levels of review that arms sales to this region 
are now undergoing to lower the risk to the security of the 
United States and our friends and allies, especially Israel.
    A second area of caution is that our controls on munitions 
largely ignore the domestic environment. Persons and companies 
in the United States are able to purchase military items that 
are controlled for export without a license and without so much 
as a background check so long as the item is not to be 
exported. This is a God-send to smugglers for Iran and other 
countries of concern, and a nightmare for Customs agents. Our 
export control system is literally fighting with one arm tied 
behind its back if we continue to ignore this loophole.
    Investigators from the GAO using fake identities and front 
companies were able to purchase several defense items, 
including a flight computer for an F-16 aircraft and ship them 
out of the United States with no difficulty as commercial mail. 
I would be interested in the witnesses' thoughts about whether 
it makes sense to set up a system whereby all domestic 
purchasers of components for significant military equipment, 
excluding the firearms, should be licensed and vetted by the 
U.S. Government in order to purchase those components with an 
easily accessible database that defense manufacturers and 
distributors should check before selling to them.
    In sum, our national security requires a wholesale revision 
of export control policy, a re-evaluation of our arms transfer 
policy in the Middle East and a critical review of domestic 
access to military technology.
    Thank you very much, Madam Chairman. And I yield back my 
time.
    Chairman Ros-Lehtinen. Thank you very much, Mr. Berman.
    We will hear now from Mr. Royce, the chairman of the 
Subcommittee on Terrorism, Nonproliferation, and Trade from 3 
minutes, and then Mr. Sherman the ranking member.
    Mr. Royce. Madam Chairman, thank you very much for holding 
this hearing and for recognizing me here.
    And let me just make one overarching point that I have to 
keep our eye on, and that is that a country of particular 
concern as we engage in this whole effort has got to be China. 
As a matter of fact, that is where our focus needs to be. And 
the reason for it is because Beijing is targeting our 
technology by hook or by crook, and the Commerce Department and 
State Department have been naive regarding China. I would argue 
all of us in the United States have been woefully naive.
    And I think that at the end of the day export control 
reform must be very clear-eyed about Chinese intentions. We 
should not kid ourselves anymore about what is going on.
    So, as you know, Mr. Sherman and I have had several 
hearings in the TNT Subcommittee on export control reform. We 
heard about the broken U.S. export system, which is a relic of 
the Cold War that is poorly suited for today's global economy; 
we know that. The GAO has said export controls needs 
substantial reform and we do know bureaucracies fall behind the 
times. Conflicts between agencies further burden the system.
    As one witness testifies: ``Interagency commodity 
jurisdictions over the years have bordered on epic.''
    The losers here are America's national security and 
economic competitiveness. So this has to be fixed.
    And in moving forward we must realize that it takes only 
one key piece of cutting edge technology slipping through the 
cracks to seriously compromise our security. Our technological 
capabilities will only become more important, too, as the costs 
of maintaining armed forces hits fiscal reality. So national 
security here is paramount.
    So is our economic competitiveness, which is a core 
component of national security. And simply put: We will not 
remain a military super power without a world class 
technological base. Exports are essential to that base. So to 
balance these issues, the administration is proposing a 
single=licensing agency and putting fewer items behind higher 
walls. Higher walls should be a greater scrutiny and a law 
enforcement focus on key technologies.
    So, we await the details.
    Thank you again, Madam Chairman.
    Chairman Ros-Lehtinen. Mr. Sherman?
    Mr. Sherman. Thank you, Madam Chairman, for holding these 
hearings. They would be justified even if it was just a chance 
to see our old friend Ellen Tauscher. But they are also 
justified by the substance that we are dealing with today. This 
is an issue critical not only to our national security but also 
our economy.
    Before addressing the administration's export control 
efforts, I want to mention one little noticed State Department 
decision that is, I believe, still in process. And that is 
granting a waiver allowing for the inspection and repair of jet 
engines on the airplanes owned by Air Iran and the Iranian 
Mahan Air. Under Secretary Tauscher and I have discussed this. 
I have not been sufficiently persuasive up until now, but now I 
have another chance.
    These are so-called civilian aircraft, but they have been 
used to ship weapons to Hezbollah, Hamas and other terrorist 
organizations. They have been used for terrorist/intelligent 
operations in Europe. And Mahan Air, in particular, is known as 
a Revolutionary Guard affiliate.
    It is natural for us to want all planes to be safe, but we 
do not have to fix these planes. We can tell the world loudly 
that they are unsafe and that no one should fly them, and that 
Iranians wishing to fly should fly anyone of the many dozens of 
Asian and European airlines that fly into and around Iran.
    If instead, we fix the planes that are the very implements 
of Iranian terrorism, then we demonstrate that our sanctions 
against Iran go right up until the point where we might 
inconvenience any Iranian citizen or any American corporation 
which makes a mockery of those sanctions.
    In early 2007, our Subcommittee on Terrorism, 
Nonproliferation, and Trade held hearings that highlighted the 
inefficiencies in the licensing process at the State 
Department's Directorate of Defense Trade Controls. I joined 
with Mr. Manzullo in introducing the Defense Trade Controls 
Improvement Act of 2007. I should point out our subcommittee 
has also had, as I think Ed Royce points out, over half a dozen 
hearings on this issue. The bill was substantively folded in 
the State Department Authorization Bill authored by Howard 
Berman. That bill did not become law because the Senate lacked 
adequate wisdom, but many of the provisions were acted upon and 
implemented by the State Department, showing considerable 
wisdom in that body.
    Subsequently, the Obama administration has focused on 
export controls. It even garnered a couple of sentences in the 
State of the Union Address. This is in importance, though often 
thankless task.
    The main focus of the effort seems to be the category-by-
category review of the U.S. ML and Commerce list to loosen 
unnecessary controls and eventually produce a single unified 
list with different tiers.
    I agree that we ought to have a higher fence around a 
smaller yard. And I agree with Mr. Berman that that higher 
fence has got to include licenses sometimes for domestic 
purchasers who otherwise could easily be front companies.
    I see that my time has expired, and I look forward to 
questioning the witnesses.
    Chairman Ros-Lehtinen. Thank you so much.
    Our first witness will be the always lovely, ever engaging 
and talented and smart and witty Ellen Tauscher, Under 
Secretary of State for Arms Controls and International 
Security.
    Under Secretary Tauscher is well known to members of this 
committee, having previously served with distinction for 13 
years in this body representing California's 10th Congressional 
District and a founding member of the Fun Gals' Caucus. We will 
not talk about that.
    And Eric Hirschhorn serves as the Under Secretary of the 
U.S. Commerce Department's Bureau of Industry and Security. I 
am sure that he is a fun guy in his own right.
    Prior to serving in this capacity, Mr. Hirschhorn worked as 
a partner in the Washington, DC, office of Winston and Straun. 
Thank you.
    And then we will finish with Dr. James Miller, the 
principal Deputy Under Secretary of Defense for Policy. Prior 
to his confirmation Dr. Miller served as Senior Vice President 
for Director Studies at the Center for a New American Security.
    We welcome all of you. All of your statements will be made 
a part of the record. Please feel free to summarize it within 
the 5 minutes.
    Honorable Tauscher is recognized.

  STATEMENT OF THE HONORABLE ELLEN TAUSCHER, UNDER SECRETARY, 
  ARMS CONTROL AND INTERNATIONAL SECURITY, U.S. DEPARTMENT OF 
                             STATE

    Ms. Tauscher. Thank you, Madam Chairwoman and Ranking 
Member Berman, and members of the committee.
    It is an honor to be here today. I have submitted my full 
statement for the record, and I will give an abbreviated 
statement because I appreciate the opportunity to be here today 
with you to speak on the Obama administration's effort to 
reform the United States export control system.
    The Obama administration has two priorities in our efforts 
to reform the export control system. We want to improve the 
current system that it enhances United States national security 
and we want an efficient system to help American companies 
compete in the global marketplace.
    I want to use my time to outline the administration's 
reform strategy and the actions that the State Department is 
taking to support that strategy.
    For decades the United States export control system worked 
adequately to keep sophisticated United States technologies out 
of the hands of our Cold War adversaries. But today we face a 
different challenge. We no longer face a monolithic adversary 
like the Soviet Union. Instead, we face terrorists seeking to 
build a weapon of mass destruction, states striving to improve 
their missile capabilities with back door acquisitions of 
technology and elicit front companies seeking items to support 
such activities.
    We also face far more rapid developments in technology 
beyond our borders. The United States is no longer the sole 
source of key items in technologies. In many cases, United 
States companies must collaborate with companies in allied 
countries to develop, product and sustain leading edge military 
hardware and technology.
    In November 2009, the White House stood up a task force to 
create a new approach to export controls that would address 
today's threats and the changing technological and economic 
landscape. The task force included the Departments of State, 
Defense, Commerce, Energy, Treasury, Justice, Homeland Security 
and the Office of the Director of National Intelligence. The 
sheer number agencies involved in export controls alone is a 
key indicator for the need of reform.
    The review found numerous deficiencies in our current 
systems. Agencies have no unified computer system that will 
permit them to communicate with each other, let alone with U.S. 
exporters. Exporters must deal with numerous paperwork 
requirements which in the case of my Department alone can be 13 
different forms. And licensing requirements are confusing which 
causes delays for U.S. exporters and helps those who would 
evade our controls.
    There is no regular process to review all of what we 
control, and so controls lists have not been comprehensibly 
updated since the early 1990s.
    Our enforcement agencies do not always communicate well, so 
we have seen instances of enforcement actions that are 
ineffective and waste resources.
    The task force recommended steps to address these problems 
by creating standardized policies and processes, and 
consolidating resources in four key areas which we refer to, 
and Madam Chairman talked about, we call them the four 
singularities. These include drafting a single control list, 
designing a single information technology system, implementing 
a single enforcement coordination capability and creating a 
single licensing agency.
    We are implementing these recommendations in three phases.
    In phase 1, we made core decisions on how to rebuilt our 
lists, recalibrate and harmonize our definitions, regulations 
and licensing policies and create an export enforcement 
coordination center, and to build a consolidated licensing 
database.
    We have started to implement phase 2 by revising the U.S. 
Munitions List and a Commerce Control List. Dr. Miller will 
discuss this topic in more detail
    The Departments of State, Commerce and Treasury are 
adopting the Department of Defense's export licensing computer 
system as an initial step to creating a government-wide 
computer system dedicated to supporting the export control 
process.
    We will create a single form for applications to State, 
Commerce and Treasury, and exporters will submit these 
applications through a single electronic portal.
    And we hope to work with Congress to pass legislation to 
create a primary U.S. export enforcement agency.
    American businesses have complained for decades about the 
lack of clarity and predictability as to just what a munition 
is or what a dual-use item is. So we are creating a bright line 
between munitions and dual-use items to provide clear guidance 
on commodity jurisdiction issues.
    The administration also wants to improve how Congress is 
notified about arms sales and a transfer of items from the 
United States Munitions List because the current process is 
lengthy and unpredictable. This reform is of special interest 
to me as a former Member of Congress. I know that by working 
together we can better.
    In phase 3 we plan to create the four singularities that I 
mentioned, which will bring the initiative to its logical 
conclusion.
    Unless we complete this agenda and create a single list and 
single licensing agency, we will miss the opportunity to better 
focus our export control efforts and face higher national 
security risks as a result. We have more to do to refocus our 
export control system, but we are committed to this initiative 
because it will enhance our national security and the 
competitiveness of American companies.
    I am happy to answer any questions, Madam Chairman. But 
first, I would like to turn to my colleagues from the Commerce 
Department and the Defense Department to give their 
Department's perspectives on the reform effort.
    [The prepared statement of Under Secretary Tauscher 
follows:]













    Chairman Ros-Lehtinen. Thank you very much.
    Mr. Hirschhorn?

STATEMENT OF THE HONORABLE ERIC L. HIRSCHHORN, UNDER SECRETARY, 
  BUREAU OF INDUSTRY AND SECURITY, U.S. DEPARTMENT OF COMMERCE

    Mr. Hirschhorn. Thank you very much, Madam Chairman, and 
Ranking Member Berman, members of the committee.
    Chairman Ros-Lehtinen. If you could turn on your 
microphone.
    Mr. Hirschhorn. It is a pleasure to be here this morning. I 
appreciate the chance to discuss with you export control reform 
and the effort to bring that about.
    The Export Control Reform Initiative recognizes that first 
and foremost, our export control policy must keep sensitive 
items out of the hands of end users who would harm our national 
security. It also must facilitate interoperability with our 
allies and, at the same time, should not undermine our defense 
industrial base.
    As you know, BIS, the Bureau of Industry and Security 
controls exports and reexports of dual-use items. Working with 
our colleagues at the Departments of State, Defense and Energy, 
our policy and technical personnel evaluate more than 20,000 
license applications a year to ensure that items sold abroad 
are destined for appropriate end-users and appropriate end 
uses.
    In addition, we work on educating the regulated community 
about our regulations and enforcing those regulations, 
including a dedicated corps of special agents located here and 
aboard.
    Under Secretary Tauscher has noted the four ultimate goals 
of export control reform. An interim but essential step is to 
harmonize the U.S. Munitions List and the Commerce Control List 
because the items we control and the means by which we control 
them are the cornerstone of an effective export control system. 
As part of this process, less critical items can be moved to 
the more flexible licensing system under the Export 
Administration Regulations. These items are primarily parts and 
components for military end items.
    Many of the items to be moved are inherently similar and 
functionally identical to comparable items that are subject to 
the EAR. All items especially designed for military application 
will remain subject to control even after transfer unless there 
is a contrary consensus among the agencies, including the 
Departments of State and Defense.
    We are also recrafting the Commerce Control List into a 
three tiered structure that allows controls on items to cascade 
over their life cycles based on their sensitivity and foreign 
availability. This will facilitate more quickly adding controls 
on new items and technologies while enabling the transition off 
the list of items that no longer warrant control.
    We anticipate that items in the highest tier, for example, 
will require licenses worldwide.
    For the second tier, a new license exception STA--for 
strategic trade authorization--would permit exports of certain 
dual-use items to our most trusted allies and friends, subject 
to certain safeguards and requiring consignees within that 
group of countries to obtain authorization from the United 
States to re-export such items to any country not in the group.
    Consignees, and their consignees, must agree not to 
reexport or transfer the items without authorization. This one 
piece of export reform will eliminate about 3,000 low risk 
licenses a year.
    At the same time, we will continue to maintain controls on 
items for foreign policy reasons, such as specially designed 
implements of torture, and maintain comprehensive controls and 
sanctions on terrorist supporting countries.
    Once the lists have been made positive and more specific, 
we will have two aligned lists that can be combined into a 
single control list. We believe that this single list can best 
be administered by a single licensing agency.
    We are also harmonizing definitions of key terms such as 
``technology'' and ``specially designed'' across the various 
sets of export control and sanctions regulations.
    We owe a level playing field to those who seek to comply, 
and therefore we are going to continue to enhance our education 
outreach to the exporting and re-exporting community. And 
domestically on the compliance side we are expanding our 
enforcement operations and taking advantage of the permanent 
law enforcement authorities that this committee played a major 
role in providing last year as part of the Comprehensive Iran 
Sanctions Act. We appreciate that very much, and it is helping 
us do our job.
    In November 2010, the President signed an Order creating 
the Export Enforcement Coordination Center. This will better 
enable us to share information with other enforcement agencies 
and prevent us from getting under foot between one another.
    This brings me to my final point and a central issue before 
us today. The administration has recognized from the outset 
that it needs to work closely with the Congress to ensure that 
the goals of this reform initiative are met. This includes 
continuing to brief members and staff regularly, providing 
updates on our efforts and seeking your input on regulations, 
and of course and most importantly, the enactment of 
legislation. Success in this joint effort will strengthen our 
national security and in doing so, strengthen our economy as 
well.
    Thank you very much, and I look forward to your questions.
    [The prepared statement of Mr. Hirschhorn follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chairman Ros-Lehtinen. Thank you, sir.
    Dr. Miller?

  STATEMENT OF THE HONORABLE JAMES N. MILLER, JR., PRINCIPAL 
 DEPUTY UNDER SECRETARY OF DEFENSE FOR POLICY, U.S. DEPARTMENT 
                           OF DEFENSE

    Mr. Miller. Thank you, Madam Chairwoman, and Ranking Member 
Berman and members of the committee for the opportunity to 
testify today on export control reform. I am very pleased to 
join my colleagues Under Secretary of State Ellen Tauscher and 
Under Secretary of Commerce Eric Hirschhorn.
    I wanted to start by emphasizing what the chairwoman said 
the outset: ``U.S. armed forces should always have the 
technology advantage, and we should take all reasonable steps 
to prevent potential adversaries from using our own technology 
against us.'' It is in fact because export controls are so 
important to our national security that reform is so essential.
    As I think we all now recognize, over the years the 
bureaucracy that surrounds our current systems has grown into a 
byzantine set of processes with diffuse authority scattered 
throughout the government. This structure results in time 
wasted on process and jurisdiction issues, and it creates 
opportunities for mistakes, enforcement lapses and openings for 
problematic exporters to probe the system for the best results.
    We have made incremental changes in progress in our export 
system over time squeezing our processes for efficiencies, but 
this is clearly not enough. We need to focus our efforts on the 
most critical technologies that underpin U.S. military 
advantages where they could be dangerous in the hands in 
others. We need to focus on what Secretary Gates has called 
``U.S. crown jewels.''
    In over 95 percent of U.S. export control cases we say yes, 
go off and only after a lengthy and cumbersome review mandated 
by our current processes. By focusing our efforts better, we 
will be better to protect the technologies and capabilities 
that really matter.
    As you know, the administration has proposed what we have 
called the four singularities and that Ellen Tauscher outlined. 
I want to say just a few words about each of them.
    We are already making very good progress on the first two. 
Last November, President Obama signed an Executive Order to 
establish an Export Enforcement Coordination Center which will 
bring together representatives from Commerce, FBI, ICE, the 
intelligence community, military law enforcement and components 
in other agencies. Agencies are now in the process of standing 
up the center and establishing procedures for its operation. So 
a single law enforcement coordination center is well underway.
    We are also making good progress toward a single IT system. 
The DoD is the executive agent for the new U.S. Government-wide 
export licensing system which will be based on DoD's USXPORTS 
system. We signed a Memorandum of Agreement with the Department 
of State in February 2010, and expect initial operational 
capability by August 2011. We signed an MOU with the Department 
of Commerce in October 2010, and expect initial operational 
capability in October 2011.
    So, good progress on the first two. And in addition, work 
is progressing toward the establishment of a single export 
control list. We obviously need congressional support to 
complete this task.
    Establishing a single list is essential because the line 
between purely commercial and purely military technologies has 
blurred, and it will continue to blur. For example, high 
accuracy gyroscopes that were once used only by the U.S. 
military are now being used in commercial aircraft, conversely 
our military uses commercial computers and processors in 
military systems. From a national security perspective we 
should treat items with similar capabilities the same way, 
irrespective of whether an item was designed for a specific 
civil or military purpose.
    A single list based on positive control language that 
capture key performance characteristics will allow us to focus 
our efforts on key items that provide the U.S. with an 
important military advantage or that pose risk to our security.
    As you know, DoD has taken the lead in rewriting the U.S. 
Munitions List. This is a major undertaking that is an 
essential precursor to a single control list. We have involved 
experts from the military departments and are working closely 
also with the Departments of State, Commerce, Energy and other 
Departments and Agencies.
    Under a single list items that we consider to be U.S. 
``crown jewels,'' those items and technologies that are the 
basis for maintaining our military technology advantage, 
especially those items that no foreign government or company 
can duplicate such as hot section engine technology, will be 
placed in that top tier, Tier 1 and guarded with extreme 
vigilance. This is the highest of our higher walls of expert 
control reform.
    Items that provide substantial military and intelligence 
capabilities will be placed in tier 2 and would be available 
export on a case-by-case basis, including certain items that 
would be eligible for license exemptions to specified U.S. 
allies and partners as appropriate.
    For tier 3, a license would be required for some but not 
all destinations.
    As Under Secretary Hirschhorn noted, the administration has 
also begun revising and tiering dual-use controls on the 
Commerce Control List so that when coupled with revised USML, 
the two lists can be merged.
    If we are able to move forward successfully to a single 
list, it makes perfect sense and would make no sense otherwise, 
to move forward with a single licensing agency. Our vision is 
that the expertises that we currently have in government from 
various agencies, including State, Commerce, Department of 
Defense, Treasury and others would be involved and that these 
individuals would work together to strengthen our approach. A 
Board of Governors consisting of the Secretaries of key 
department, including State, Commerce and DoD would oversee the 
work of the single agency.
    In conclusion, our national security will be far better 
served by a more agile, transparent, predictable and efficient 
export control regime. We have made good progress, but we need 
help and we need support from Congress to complete this 
critical effort.
    Thank you very much for the opportunity to speak today, and 
we look forward to your questions.
    [The prepared statement of Mr. Miller follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chairman Ros-Lehtinen. Thank you very much for excellent 
testimony.
    I will begin the round of questioning.
    Under Secretary Tauscher, I wanted to ask about the Middle 
East. Can you assure this committee that arms sales proposals 
are based on well formulated, focused and realistic capability 
requirements or ``wish lists'' from our friends for the latest 
technology? Are you also confident that all sales comply with 
U.S. conventional arms transfer policy? And I ask because, as 
you know, the GAO recently found that State and DoD did not 
consistently document ``how arms transfer to Persian Gulf 
countries advanced U.S. foreign policy and national security 
goals.'' And as Mr. Berman said, the Arab Spring is remaking 
the political map of the Middle East, go or for bad, creating 
new opportunities but new challenges.
    So, what plans, if any, does the administration have to 
review arms sales to that ever changing region?
    Ms. Tauscher. Thank you for that very comprehensive and 
timely question, Madam Chairwoman.
    Yes, I can assure you that the United States State 
Department goes through significant processes and consultations 
both with the region, our allies and with the Congress, and 
with the other Departments before we agree to front military 
sales and agree to arm sales.
    I know that everyone is sensitive about the Middle East. We 
have been consistently working on consultations both with House 
and Senate committees, but also inside the government and with 
the region before we go forward with any kinds of arms sales.
    So, I think that the answer is yes, Madam Chairwoman, we 
are confident that we are consulting in a vigorous way. And, 
yes, we are confident that when we do make these announcements 
of a sale that they are going where they are supposed to be 
going and that are not transferred. But as you said in your 
testimony, it is very important that we make sure that there 
are no questions about this system, and that is why reform is 
so important.
    It is important that we have common sense and we have a 
comprehensive nature to this reform. As you know, attempts have 
been made in the past through various administrations, both 
Democratic and Republican, to make these reforms. Both the 
bureaucracy fights it at times, and certainly just doing things 
the way we have done them before is a way for people to 
rationalize that we cannot make reforms. But the truth of the 
matter is, and Secretary Gates has said this very elegantly, 
``We cannot have a 20th century export reform regime for 21st 
century threats and for 21st century global competitiveness of 
American businesses.''
    So I think that, once again, I reassure you that we are 
confident that we are doing as best we can and that we are 
protecting what we need to protect.
    Chairman Ros-Lehtinen. Thank you.
    And turning to Taiwan, it has been nearly 14 months since 
the last major arms sales was notified for Taiwan. Over a year 
ago, Assistant Secretary of State for Political Military 
Affairs Andrew Shapiro assured the Committee on Foreign Affairs 
that the State Department would undertake an extensive but 
honest discussion with our committee regarding Taiwan. No such 
discussions have been held for nearly 9 months, and you have 
also violated requirements related to the Javits Report. So 
consistent with the Taiwan Relations Act, when will the 
administration be prepared to discuss Taiwan's defensive needs 
with our committee?
    Ms. Tauscher. Madam Chairwoman, we will appear before the 
committee whenever you ask. And I will make sure that that is 
as timely and as soon as possible, depending on your schedule.
    Chairman Ros-Lehtinen. Thank you very much.
    And a good place to start that discussion would be with 
Taiwan's increasingly urgent requirements for a new practical 
fighter aircraft. If Taiwan presents the administration with a 
letter of request for the transfer of the new F-16 CD Fighter 
Aircraft, will the administration accept that request? If not, 
why not? And does Communist China have a veto on U.S. arms 
sales to Taiwan?
    Ms. Tauscher. No foreign country has a veto on any sales of 
military requirements to our allies and friends; that is for 
sure, and certainly not China.
    But let me turn to Dr. Miller who can talk some more about 
the Taiwan requirements. But let me say this. This 
administration, like all previous administrations, values its 
relationships with its allies, whether they be NATO allies or 
near-NATO allies or members of different organizations that we 
belong to. These are prized relationships. And part of the 
projection of American power and American prestige is by 
selling armaments to our friends. And so we will do everything 
we can to have these consultations both open with you and at 
the same time respectful of the relationship of our allies and 
friends.
    Chairman Ros-Lehtinen. Very good.
    Dr. Miller, just for 1 minute.
    Mr. Miller. Yes, of course.
    Madam Chairwoman, let me first reiterate what the Under 
Secretary had to say, and that is that no nation including 
China has any veto over our export of arms, of course.
    The Department of Defense in working with the Department of 
State and others owes a report to Congress, as you know, on 
Taiwan and arm sales. We are very close to concluding that. We 
have done the detailed analysis that has been requested and 
required in order to do that. And we will be prepared to come 
forward and brief very soon on the topic.
    And just to reiterate what Ellen Tauscher, also pleased to 
come forward in whatever format you would like when you ask.
    Chairman Ros-Lehtinen. Look forward to it. Thank you so 
much.
    My good friend Mr. Berman of California is recognized.
    Mr. Berman. Thank you very much Madam Chairman. And thank 
all of you for your testimony.
    In line with the chairman's question regarding the Middle 
East, for me the underlying question is there are huge changes 
going on, changes that none of us anticipated. With respect to 
future arms sales to that region, is there some process going 
on within the administration to reassess and re-evaluate those 
decisions in the context of what's happening and what the 
implications are? Has that kind of reassessment either formally 
or informally been undertaken? Are people thinking about 
undertaking it?
    Mr. Miller. Mr. Berman, let me answer in two time frames. 
First, in the near term the administration has put on pause, 
put on hold some transactions that were otherwise planned, as I 
think you know and I expect that you have been briefed on. It 
would probably be better to talk about those in a closed 
session. Be happy to provide more information.
    For the longer, for the question of where we go next and 
does it imply a different set of guidelines. The administration 
is looking at the implications and looking both on the broad 
basis of Middle East and North Africa, looking on a country-by-
country basis. And I can assure you that the question of what 
is the appropriate role of export and export control broadly 
for the region and on a country-by-country basis has got to be 
a part of that assessment.
    Mr. Berman. Okay. In this vein, I do want to particularly 
congratulate the administration for its outreach and 
consultation with Israel on U.S. security policies in the 
Middle East, including possible arm sales. My own sense is the 
level of consultation that has gone directly with them by this 
administration far exceeds what I have seen in the past. And 
one way I know it is because I do not hear people complaining 
about the lack of consultation. So, I appreciate that.
    Mr. Miller, I would like to just take sort of the devil's 
advocate's point of view for a second regarding the four 
singularities: A single IT system, a single licensing list, a 
single licensing agency and a single enforcement agency. As you 
may know, and I sure did not before my staff wrote this, in 
cosmological terms a singularity is a black hole, so dense that 
nothing useful, not even information can come out of it. And 
what goes on inside is a complete mystery beyond the law of 
physics.
    There are redundancies in the current system, and that is 
what motivates a lot of us trying to get this reform. But let 
us take the other side of the coin for a second. That 
redundancy and that inefficiency and those different agencies 
and bureaucracies, in effect create a system of checks and 
balances with multiple agencies, with different missions review 
of sales from their own perspectives. One wants those different 
perspectives in this process. We want a Commerce Department 
that is thinking about America's technological edge. We want a 
State Department understand, evaluating the foreign policy 
implications of export decisions, we want a Defense Department 
that is thinking about what this is going to mean for our 
national security and our forces. How in a system of four 
singularities will those different perspectives still be 
brought to bear?
    Mr. Miller. Mr. Berman, let me very briefly comment on the 
term. I thought that we should use the four singles instead 
because, as you probably also know, singularities is referred 
to a situation in which artificial intelligence reaches the 
point at which it equals or surpasses human intelligence. So--
--
    Mr. Berman. Is that on a case-by-case basis or----
    Mr. Miller. I will take under advisement to change our 
terminology. And I think the idea that four singles could equal 
a homerun would be, perhaps, more appropriate.
    I agree, and the administration agrees with your suggestion 
that different perspectives need to brought to bear. Let me 
talk about that at two different levels.
    The first is that different perspectives, different 
expertises on various technologies, on the expertise associated 
with military operations and no intelligence assessments of 
what other countries have and may have in the future have to be 
brought together. That is a key purpose of having a single 
licensing agency and a staff that is able to look across these 
various types of technologies and items. We expect that this 
staff of the SLA, the single licensing agency, would be able to 
deal with the straightforward issues to be able to implement 
guidance associated with it. But at the same time we expect 
that for cases that are particularly challenging because they 
represent a new technology or they represent an item of 
technology going to a country that we think is essentially 
marginal for the tier of the technology we are talking about, 
we fully expect that the Departments will contribute their 
views.
    So while we would expect that some of our experts for the 
Defense Technology Security Agency for the Department of 
Defense would join the SLN, we also expect that we will 
continue to have experts on these issues that will provide a 
Department of Defense input, and that on the whole the number 
personnel involved will be about the same, perhaps slightly 
less. But in ballpark, about the same as they are today. But 
those people will be able to work directly together on what we 
think will be smaller number of difficult cases and be able to 
then bring in departmental expertise overseen by a board of 
governors that involves the Secretaries of these three 
Departments and others that will bring in that outside 
expertise and, where necessary escalate, take to higher levels 
those new choices where new policy has to be made.
    Chairman Ros-Lehtinen. Thank you very much.
    Mr. Rohrabacher is recognized.
    Mr. Rohrabacher. Thank you very much, Madam Chairwoman for 
having us look at his very serious issue today. And special 
welcome to Ellen Tauscher. We are very, very pleased you are 
with us today.
    And I would just like to start off by pointing out that I 
have a newspaper, this is put out by the Communist Chinese 
Government. And their headline is, ``Dialogue Produces Positive 
Results.'' And I am sure that there were all sorts of 
newspapers like this before World War II were positive results 
with dialogues with the fascists and the Nazis that we had to 
deal with in World II, people thought that they were going to 
make war less likely and make friendship more likely by dealing 
with those folks. And the fact is that the Hitler regime 
benefitted greatly by its relationship to England, trade 
relationship with England just prior to the Second World War.
    On the issue today, clearly what it sounds like at the end 
of this strategic and economic dialogue with China, which this 
headline is referring to, Chinese Vice President Wang 
stated, the deg. ``The United States committed to 
accord China fair treatment in a reform of its export control 
regime and relaxed high tech export controls toward China.''
    It sounds like to me that the United States Government 
still cannot differentiate between a dictatorship that murders 
religious believers every day, has no opposition, political 
opposition, no opposition parties, no freedom of speech and 
press; that we cannot differentiate that country from Belgium 
or France, or even Brazil. There should be a differentiation 
between these countries, should there not in terms of the 
technology that they are allowed to import from the United 
States?
    Ms. Tauscher. As my friend from California knows, 
engagement is not endorsement, as Secretary Albright said many 
years ago. And Secretary Clinton, if you read the American 
papers, gave a very, very tough and consistent message to the 
Chinese on a number of areas where we are not happy and we do 
not believe our relationship is as transparent or as 
forthcoming as it needs to be. Certainly on human rights, the 
Secretary gave a very, very tough message.
    Mr. Rohrabacher. Excuse me for interrupting. But are you 
trying to suggest that the Clinton administration should be 
looked at as making a tough statement with China? It was during 
the Clinton administration that the technology from our space 
program was transferred to China, which is now being used and 
has been used to perfect the Chinese rocket systems, for Pete's 
sakes.
    Ms. Tauscher. I was speaking about Secretary Clinton just 2 
days ago.
    Mr. Rohrabacher. Oh, pardon me.
    Ms. Tauscher. Just 2 days ago.
    Mr. Rohrabacher. Pardon me.
    Ms. Tauscher. And if you read the----
    Mr. Rohrabacher. Sometimes I get my Clintons mixed up here.
    Ms. Tauscher. Yes, well it can happen.
    But Secretary Clinton made very clear to the Chinese just 2 
days ago, I was there, about many different issues, especially 
human rights. And that was a very tough message to give in an 
engagement.
    Mr. Rohrabacher. Yes.
    Ms. Tauscher. But as I said, engagement is not endorsement. 
And we do have a complicated relationship with the Chinese. But 
nothing about that relationship includes special preferences. 
And I think that as often happens in newspapers around the 
world, the hometown paper sometimes engrandizes what exactly 
happened.
    Mr. Rohrabacher. Well, how about the statement of the Vice 
President? You know, it is one thing to make a tough statement 
on human rights and then the next day to leave people with the 
impression that the United States is committed to relax high 
tech export controls. I mean, this is a statement from the Vice 
President right out of meetings with the administration. And I 
can see why it might confuse them to think that we are actually 
serious about protecting specific transfers.
    Let me just get right to the heart of the matter, because I 
got just a couple of seconds left. Should we have tougher 
export controls toward dictatorships that are potentially 
enemies, as China is potential, is an adversary but not an 
enemy, but it is a rotten dictatorship? Should we have more 
serious export controls and why is that not mentioned in the 
interim report? Should it be a dual track?
    Mr. Hirschhorn. If I may, Congressman.
    The whole point of export control reform is to make exports 
to our friends and allies easier and to build higher walls to 
ensure that they do not go to improper places.
    Mr. Rohrabacher. Yes.
    Mr. Hirschhorn. And with the chair's indulgence, I would 
like to read from the Joint Statement rather than from the----
    Mr. Rohrabacher. Okay. That list that you said, it does not 
include China, is that right?
    Mr. Hirschhorn. That is correct.
    Mr. Rohrabacher. Okay.
    Mr. Hirschhorn. I would like to ask that the record include 
the actual text from the Joint Statement.
    Chairman Ros-Lehtinen. Without objection, subject to size 
limitations.
    Mr. Hirschhorn. Thank you.
    Chairman Ros-Lehtinen. Congressman Cicilline is recognized.
    Mr. Cicilline. Thank you, Madam Chairwoman.
    And I thank the witnesses for their thoughtful testimony 
this morning.
    Under Secretary Tauscher, I want to particularly thank you 
for your leadership on export control reform. We live in very 
challenging economic times and international arm sales I think 
are really critical to sustaining a strong industrial base here 
in our country, and certainly our national security as well as 
our interests in promoting robust job growth.
    This is especially important in my District where several 
of my constituent companies are affected by the long process of 
arms sales. We received the letter in this committee from 
Secretary Clinton raising the issue of the long process of arm 
sales notification and congressional review. And I think like 
many members of this committee, I am interested in finding a 
solution that speeds up the process but also allows our 
committee to exercise appropriate oversight in order to protect 
our national security.
    One suggestion has been made to add a time limit on the 
prenotification process, similar to what is in place in formal 
notifications. But, of course, some have criticized that idea 
as saying that a time limit could impede congressional 
oversight on sensitive arms transfers. And since you have the 
unique perspective of having been on both sides having served 
here in Congress and now at the State Department as Under 
Secretary, could you share with us your thoughts on that? And 
also comment on the State Department's concerns, if there are 
any, about this informal review process and whether or not the 
Department will propose a time limit for a period of review 
similar to what is in place in formal notifications?
    Ms. Tauscher. Thank you very much, Congressman.
    You know, I think that we all agree that we want to get 
this right, and this is not about a clock that would interfere 
with our ability to protect American technology, especially our 
most sensitive technology. But it is also important that we 
deal with the real world and the global marketplace where we no 
longer dominant in so many areas and where it is very, very 
important for our economic recovery for American exports to 
move out into those marketplaces and to create jobs.
    So what we have here is over the years the average time for 
the pre-consultation period for foreign military sales went 
from an average of 29 days to an average of 57 days. The 
different Departments have different time periods for the USML 
and for the CCL. It is about 15 days in the State Department, 
it is double that in the Commerce Department.
    So we do not want to have an artificial metric. We do not 
want time to be the metric. We want it to be done right, but at 
the same time we believe that there are efficiencies that you 
can get in the system by doing things where there is a common 
view for the many different people and a common agency to go; 
one place to go, one phone call that gives what we hope are 
both comprehensive but common sense answers to how to go 
forward, especially for the small and medium businesses that 
are very, very dependent on exports for their livelihood.
    So I think, Congressman, you have hit upon what is a 
difficult tension area: How do we do this efficiently, in a 
timely way so that we can trade with our allies, trade with our 
friends and keep growing businesses, but at the same time as 
Congressman Rohrabacher has made a very significant point, that 
we make sure that people that are trying to go around the 
system or trying to use the system, the inefficiencies in the 
system to beat us, do not get that victory.
    So as Congressman Berman said, redundancies are important, 
so we need to build a system that has redundancies so that we 
are making sure that we are checking and balancing each other 
and getting things done in the right way. But stovepipes are 
not redundancies. They are barriers to efficient processes. And 
so what we want to do is remove these, and that is why the 
singularities have been developed. We think that that is the 
best way for us to give both the enforcers and the people that 
are going to say yes and no a common view, having common 
applications, things that are going to provide the efficiencies 
of the system but also have redundancies to check and balance 
and to move the system more quickly but we do not have a number 
of days that we have to meet. We expect that it will shorten, 
but this is not about just that.
    Mr. Cicilline. Thank you.
    I yield back the balance of my time.
    Chairman Ros-Lehtinen. Thank you, sir.
    Mr. McCaul of Texas is recognized.
    Mr. McCaul. Thank you, Madam Chair.
    And it is nice to see a former colleague in such high 
places now.
    I want to talk about a couple of issues. I just got off the 
phone with Howard Schmidt, the Cyber Security Coordinator about 
the presence of proposed legislation on cyber. And I think that 
is important because while we can talk a lot about the physical 
espionage, we know that that is taking place every day in the 
virtual world. The Pentagon has been hacked into, NASA, and one 
of the most hacked into offices, as you know, is the Export 
Control Office in the Department of Commerce, and that is open 
source.
    I just say that. I think beyond that we probably cannot 
talk a whole lot about that in a public hearing, but it is a 
big concern to me. And I hope I can work with the 
administration on this important issue.
    Secondly, end use monitoring as it pertains to Pakistan. We 
have teams that are supposed to be allowed to go in and monitor 
end use, and yet Pakistan is denying these teams access. To me 
that is very disturbing, particularly in light of the latest 
revolution of the helicopter being shown off to China. Can you 
very quickly in the time I have comment on the end use 
monitoring issue?
    Ms. Tauscher. Well, any country that does not provide the 
access that we have in the agreement, immediately will come 
under suspicion. And all of the different processes to approve 
anything further will stop. So I think we have very good 
controls in the existing system.
    But as you know, and perhaps, Congressman, the best thing 
to do is to offer you and other colleagues on the committee a 
more classified briefing on some of these issues. Because I 
think that we could satisfy some of your questions and 
certainly get your input in that kind of forum.
    But the key here is that we already have processes and a 
system that stopped continuing business with people that do not 
live up to their agreements. If it is about end use monitoring 
or if it is about other kinds of controls that are part of the 
agreement, if they do not live up to those agreements, things 
begin to stop.
    Mr. McCaul. Thank you. And I look forward to that briefing.
    China has been on my radar screen for a long time. And when 
I worked in the Justice Department I worked on the Campaign 
Finance Investigation. I had the Johnny Chung case, which led 
us directly to the Director of Chinese Intelligence funneling 
money to him to be used in the campaign through China 
Aerospace. And it was very disturbing.
    And going back to Pakistan and China, we have $3 billion in 
foreign aid, $1.5 billion of that for counterterrorism. And 
when I look at what they are using the money for, it is defense 
priorities, which is okay. It is supposed to be for 
counterterrorism, but it is being used to pursue a joint 
venture with China to develop the JF-17 Fighter Aircraft, a 
surface-to-surface nuclear-capable missile with the help of 
China, and a $1.3 billion deal which allows Pakistan to receive 
J-10 fighters and six submarines from China; is that of any 
concern to the administration?
    Ms. Tauscher. Well, I think that it is fair to say that the 
relationship with Pakistan is a significant one because of its 
geography and because of the relationship and border with 
Afghanistan. But as you know, this is a very complicated 
relationship.
    I think that once again, Congressman, if we could come in a 
classified setting, I think we could assure you in many ways of 
what is going on and have your input as to what you think 
should be done.
    Mr. McCaul. Well, I would welcome that. Because I think it 
is very troubling and disturbing if this all is true because 
this is taxpayer money being used to further China's interest. 
You know, I think I speak for most Americans when I say we 
would prefer that money to be used to buy American.
    And so I see my time is just about expired. With that, I 
will yield back.
    And thank you so much for the testimony.
    Chairman Ros-Lehtinen. Thank you so much.
    Ms. Bass of California?
    Mr. Connolly of Virginia.
    Mr. Connolly. Thank you, Madam Chairwoman.
    And Ellen Tauscher, welcome back to Congress. We are so 
glad to you, and we miss you.
    I would like to ask the panel, I guess the longer I have 
looked at export controls of any kind, they strike me as 
something that with good intentions, that almost always go 
awry.
    Technology, you know at the height of the Cold War maybe we 
could control the transfer of technology, maybe we could 
control certain sensitive items. But given the universality of 
technology and access to information, I guess I would ask this 
question: Are we on a full zone here? And that is question 
number one, and I mean it quite sincerely. As somebody who, you 
know I worked for a defense contractor and every year I had to 
take a refresher course in compliance with Export 
Administration controls. And I have to tell you, you almost 
needed a Ph.D. to fully understand all the implications to make 
sure you were never technically in violation of anything. And 
if you have not taken those tests, I urge each and every one of 
you take it and look it from the point of view of people who 
have to comply.
    So, the first question is: Given the changes in technology, 
what are we doing here? And then secondly: What about 
unintended consequences?
    One looks at the commercial satellite industry as a case 
study in good intentions that actually lead to all the results 
that were undesirable. China got the technology anyhow, the 
French got the business and we hurt our own domestic industry 
capacity which seems to run counter to President Obama's 
laudable goal of tripling our exports.
    And let me before you answer, also applaud the 
administration for this thorough review. Long overdue. Thank 
you for doing it. But I wanted to add this other layer given 
the end of the Cold War and the universality of access to 
technology, how viable is an Export Administration in this part 
of the 21st century? And what about unintended consequences?
    Mr. Hirschhorn. Let me take a moment, Congressman, to 
respond to at least the more general portion of your question 
and then either Dr. Miller or Under Secretary Tauscher can 
address the satellite issue if there is anything to add on 
that.
    This is not a unilateral exercise on the part of the United 
States. We are members of four broad-based multilateral regimes 
that include just about all the Western industrialized 
countries and many other countries. There are between 35 and 45 
countries that are members of each of those regimes, and we 
have general agreement on what is to be controlled. That covers 
most, if not all in some cases, of the places where this kind 
of technology is available. No one can deny that there has been 
a spread of technology. We and our allies and the members of 
these regimes do what they can, which is a great deal as we see 
from intelligence reports, to prevent the untoward spread of 
this technology. Some of it does get out, but we are trying to 
retard it, we are trying to prevent it as best we can.
    Mr. Miller. Congressman, if I could add first a broad 
comment and then I will talk about a few key technologies of 
satellites in particular.
    The broad comment is that I do think it would be foolish to 
try to continue our system with its inefficiencies and, as you 
have suggested, a number of self-inflicted wounds to speak 
specifically to satellites.
    A couple of decades ago the United States had about 75 
percent market share globally of satellites. We are down in the 
ballpark of 25 percent today. And when you see companies 
advertising USML free satellite components and so forth, you 
know that we have got some thinking to do. On that subject, we 
recently provided a summary of what has been a very extensive 
effort looking at applying export control reform to satellites. 
We are in the middle of an in depth review, in fact past the 
middle of an in depth review of Category 15 of the USML which 
is on satellites. And while we think at this point that there 
are a substantial number of items associated with commercial 
satellites that could be moved from the USML to the Commerce 
Control List, we expect that as we continue this review we will 
find a number of other items that are so widely available 
globally that we will feel comfortable in exporting them and 
allowing our companies to compete better.
    And another category that, while not as widely available 
are available to our allies and partners, and we want to make 
sure that our companies are able to compete with that for those 
specific countries.
    There is a few other examples. And one of the key points I 
want to make is that what is critical, what is not available to 
others changes over time and that is one of the reasons why we 
think the integration of these lists and a single focal point 
makes a lot of sense.
    To date stealth technology remains a critical technology 
where we have a real advantage. Some propulsion technologies, 
including for space launch, I talked about hot section engine 
technology, that is actually applied now in commercial 
aircraft. We have a special variant basically that we use for 
the military aircraft that we really do not want to get out 
into----
    Mr. Connolly. Unfortunately, my time is up and the chairman 
is being very indulgent. And I know Ms. Tauscher knows how 
strict that time limit is. But I hope you will come and see me 
and talk about this. I have a deep abiding interest in the 
subject.
    Thank you.
    Chairman Ros-Lehtinen. Thank you so much.
    Mr. Royce is recognized.
    Mr. Royce. Yes. Thank you. I appreciate Mr. Connolly's line 
of inquiry there. And my colleague's from California as well. 
And maybe we could get a little further into this right at this 
juncture while you are here, Mr. Miller.
    And I guess it was a pretty meager report that came out the 
other day. I think it was a five pager. Is there a more 
detailed report behind that that you are going to be publishing 
subsequently? Is that my understanding?
    Mr. Miller. Excuse me, Congressman. Yes, there is.
    Mr. Royce. Okay. Well let me ask you this----
    Mr. Miller. We had a, frankly, a lengthy report that did 
not take account of the ongoing review of Category 15 of USML. 
We would like to take that into account. And so as we complete 
that in July, we will give a report that, frankly, is based on 
the type of detailed analysis that you expect. And on behalf of 
the administration, I know that we are late and I apologize. We 
want to get it right.
    Mr. Royce. Well I want to ask you this: Will that future 
report now that we have got a little time where it examined 
this question if the space industry-base continues to erode, 
what would that mean for U.S. national security? And 
specifically I think you should look, obviously, China. But I 
was going to ask what other countries you are most concerned 
with in this regard when it comes to satellites?
    Mr. Miller. Congressman, the focus of this report will be 
on the export control related issues.
    Mr. Royce. I understand.
    Mr. Miller. We----
    Mr. Royce. But how do we get to that question I just asked 
so that we are looking at this in sort of the totality of what 
it means to national security vis-a-vis satellites? How do we 
get you to do an addendum or a focused discussion of that 
especially as it relates to China?
    Mr. Miller. I was just about to say, one of the due outs 
from the National Security Space Strategy that was completed a 
few months ago is a hard look at our industry-base and our 
capabilities over time. If we look in the rearview mirror, we 
see a pretty daunting trend. And as we look forward, we see a 
lot of challenges. So the Defense Department is working on that 
and will be working with our interagency colleagues to provide 
an assessment. And as we move forward on that, we would be 
happy to come up and brief you and other members on that, sir.
    Mr. Royce. Yes, I think Mr. Connolly and I, and Mr. 
Rohrabacher and others here would certainly appreciate that.
    Let me ask a question of Under Secretary Hirschhorn, 
because in the testimony that I read Commerce you say is 
stepping up its presence in Asia adding an export control 
officer who will conduct end-use visits for dual-use items. So 
in reading this, and maybe I misread it. I might not understand 
this, but you say you have added a second ECO in China. And I 
was just going to ask you, does that mean that there are only 
two export control officers in all of China, or have I just 
misread that? Well, anyway, let me begin with that.
    Mr. Hirschhorn. You are correct that there are two in 
China. We also have export control officers in a number of 
countries where we think they are needed.
    Mr. Royce. Well, we have been holding a series of hearings, 
and of course I saw the agreement that we made with China the 
other day and just how focused they are on us loosening our 
expert control regime in certain ways. It just seems to me that 
given inordinate amount of attention on the other side of the 
Pacific, but especially given the amount of theft that 
routinely occurs of intellectual property and attempts to get 
at this technology, that that seems questionable that we would 
only have two there. And I was also going to ask you about the 
language skills; whether these individuals are really going to 
be able to have access to Chinese facilities? Do they always 
have that access? Let me ask you that very quickly.
    Mr. Hirschhorn. Well, we select which facilities we visit.
    Mr. Royce. Yes.
    Mr. Hirschhorn. And which licenses we think are important 
and ought to be followed up.
    Mr. Royce. Can they really make a dent? Maybe this is 
something we have missed. Maybe we are just too light on our 
supervision on this front. But two export control officers in 
all of China for all of the factories in China in order to try 
to monitor what is going on given what we are finding out in 
the hearings that we are doing here, and the Harvard Business 
Review article from December of last year which is the expose 
on a lot of what China's done here. It just seems kind of lax.
    Mr. Hirschhorn. Well, we are trying to do more, Congressman 
Royce. We have asked for an additional $10 million for 
enforcement----
    Mr. Royce. Yes.
    Mr. Hirschhorn [continuing]. In 2011 and now again in the 
2012 budget. We are hopeful that we will see some of that 
funding, which will help our intelligence capability as well as 
add to our enforcement staff.
    We also work with the other agencies and through the Export 
Enforcement Coordination Center which was established by the 
President's Executive Order, and ultimately through the primary 
enforcement coordination agency. We are trying to make sure we 
use these resources in the most efficient way we can and to be 
as aggressive as we can be.
    Mr. Royce. Thank you, Mr. Hirschhorn.
    And I am out of time, Madam Chairwoman.
    Chairman Ros-Lehtinen. Thank you very much.
    Mr. Deutch of Florida.
    Mr. Deutch. Thank you, Madam Chairwoman.
    Just a follow-up Secretary Hirschhorn. I had a meeting not 
too long ago with a former BIS official who suggested that we 
could better verify end user status and better control our 
exports if we had more export control officers, particularly in 
China given the seemingly bipartisan support for this. And I 
know you spoke of the additional $10 million. How many 
additional export control officers; what would make a 
difference? I know there is now one more. What would you like 
to see and what impact would that have?
    Mr. Hirschhorn. Well, what I would like to see and what we 
are able to see may be two different things. I would like to 
submit something to the committee on that, if I might.
    Certainly we do not have too many in China. I certainly 
will grant you that.
    Mr. Deutch. Right. We all agree.
    Mr. Hirschhorn. But there are finite resources. We are 
trying to put them where they will do the most good and be the 
most efficient in finding diversions and making sure our 
technology is protected.
    Mr. Deutch. I appreciate that. I would ask you to consider 
that further and, please, submit your thoughts.
    I wanted to talk a bit about the ability of foreign nations 
to take U.S. commercial technology and convert it to military 
technology. Secretary Miller spoke earlier about the hot 
section of aircraft engines. The U.S. does strictly control 
what are considered the truly critical components of aircraft 
engines, which is the hot section. It is my understanding and I 
would ask Secretary Miller this question and Secretary 
Hirschhorn as well, that this amounts to only about 10 to 20 
percent of the critical technology for aircraft engines, which 
allows other nations then to acquire 80 to 90 percent of the 
available technology for the aircraft engine through technology 
offset agreements and then focus their internal resources on 
the remaining 10 to 20 percent. The reason I am concerned about 
this is especially the fact that China has announced recently 
it is going to be investing a $1.5 to develop aircraft engines, 
could you speak to whether BIS is looking at increased controls 
of other parts of the engine? And Secretary Miller, if you 
could also address this issue that the notion quite simply that 
while we are protecting what is the truly critical component, 
the technology has advanced to the point that if 80 percent of 
the technology is available that sophisticated countries are 
able to then to adapt and figure out the remaining 10 to 20 
percent?
    Mr. Hirschhorn. Let me just briefly state that the hot 
section technology is, indeed, uniquely available to us. The 
other 80 percent of aircraft engine technology of which you 
speak is, as you rightly observe, pretty broadly available 
outside the United States. And that is a principal reason why 
we do not control it in the same way we control the technology 
that is critical for military purposes, and that we have close 
to a monopoly on.
    I think Dr. Miller will add something about hot section 
technology.
    Mr. Miller. I think Under Secretary Hirschhorn got it just 
right. When you think about, in a sense, categories and the 
line moves over time. There is a category of this technology 
that is widely available internationally. I do not know what 
the percentage is, but it is creeping upward over time and it 
is creeping upward because of the indigenous interest in it. 
And I think that we just have to take that into account.
    There has been some fairly sensitive technology that we can 
share with close allies, and then there is some that in our 
future system that we call tier 1, that the presumption would 
be against export that is really absolutely cutting edge and 
that we would expect that there would be very, very rare 
exceptions that they would be shared.
    Mr. Deutch. I had this concern. I would like to explore 
this further with you, perhaps after the hearing.
    I wanted to quickly change in my remaining minute to the 
technical advisory committees. And the suggestion that has been 
made to me that often the participants in these technical 
advisory committees are larger corporations. I would like to 
know whether there are alternative methods being considered by 
BIS to receive additional input to the technical advisory 
committee, particularly from smaller companies, perhaps retired 
industry experts, other ways to provide information where there 
will not be a specific economic interest involved?
    Mr. Hirschhorn. Well, we do look to the technical advisory 
committees to give us technical advice. And obviously in many 
cases the large companies have the most forward looking 
technology. That said, we are making a concerted effort to 
diversify those committees and to make sure that smaller and 
medium size businesses are represented. But it takes time. This 
is a long process because it involves not only a selection 
process, but an extended process of getting security 
clearances. We are trying to do that.
    Mr. Deutch. I appreciate it.
    And, Madam Chairwoman, if I just beg your indulgence for 15 
additional seconds?
    If you could provide my office some detailed information on 
what it is that the BIS is doing to include smaller companies, 
how you are reaching out to them, the standards that are being 
applied, that would be a great help to me and I believe, 
ultimately to these technical advisory committees as well.
    And thank you, Madam Chair. I appreciate that.
    Chairman Ros-Lehtinen. Thank you. We would love to have 
access to that information as well. So if you could send it to 
the committee, also.
    Thank you.
    Mr. Manzullo is recognized.
    Mr. Manzullo. Thank you.
    I appreciate you all being here, especially a former 
colleague.
    Let me give some of our colleagues a real life example of 
what we are talking about.
    This is a cable manufactured by one of our 2500 
manufacturers in Illinois. It is a cable made to a specified 
length. It is an ITAR. If it were a quarter inch shorter, it 
would not even be regulated. This is the type of stuff which 
you call the nuts and bolts of plates that have a strategic 
hole in them. It is constant. It goes over and over. One of the 
reasons why our machine tool world share has shrunk to 4 
percent is because of our insistence that anything involving 
access to more than four countries needs a license.
    The United States now has a reputation of being an 
unreliable supplier. We have completely lost in the machine 
tool industry. The satellite industry, as Dr. Miller said, has 
gone from 75 percent down to 25 percent. Manufacturing jobs in 
this country have shrunk. It took three of us 3 years ago, 2 
years to correct two sentences in Section 17(c) of the Export 
Administration Act to allow the additional billions of dollars 
in aircraft exports that were arbitrarily being held up by some 
bureaucratic problem because people just are not talking to 
each other.
    A police helmet is uncontrolled, but you put a shield on it 
and it is on ITAR.
    I have seen time after time again, my constituents involved 
in manufacturing having their European competition say that, 
``We are ITAR free.''
    You just reach a certain point where we end up binding 
ourselves. Fifteen years ago the United States led the world in 
neodymium iron boron and Samarium-cobalt permanent magnets. 
Ninety-seven percent of that is now in China and we are 
desperately trying to get that type of manufacturing to this 
country.
    I just want to commend the administration for spending a 
tremendous amount of time in my office with this new proposal. 
It is very transparent. To be able to combine the lists so that 
my constituents can access one portal and find out exactly what 
it is that they are doing wrong. We have been successful with 
the AES system so that now people are able to tell whether they 
are in compliance before they actually begin manufacturing the 
product.
    But my big concern, again, is what is the big picture on 
this thing? I think it is absolutely essential that this 
country maintain a manufacturing base. What I would like to 
know are thoughts from the three of you as to how you think the 
new system that you are proposing with the one list and the 
portal can help the United States increase its manufacturing 
base?
    Ms. Tauscher. Congressman, thank you for your support. And 
thank you for your consistent help in representing your 
District so well.
    I think that what you are talking about is a very narrow 
area that needs special attention. It is called specially 
designed. And for many decades these specially designed systems 
and apparatus were basically based on the assumption that 
technologies and items were developed for the military and only 
later some subset found themselves to be commercially viable. 
The truth is the exact opposite is true in the 21st century.
    And so we have many specially designed items that are under 
control that really do not need to be. They are commercially 
available all over the world and this really hurts American 
productivity, it hurts especially small businesses and medium 
sized businesses. It hurts job creation. And what we are 
proposing is a new definition for specially designed that will 
provide clear guidance consistent with how the phrase is used 
in international agreements for focus controls only on those 
items that we intend to control and not capturing big baskets 
of things that create all kinds of havoc for small and medium 
sized businesses.
    Mr. Manzullo. I appreciate that.
    Just one unrelated question. The Section 1248 report, when 
do you expect that to be finalized?
    Mr. Miller. Congressman, we expect to finish the review of 
Category 15 on the USML in July, and to be able to provide the 
report, I think I would have to give us about a couple of 
months after that. So, I would say this fall. And we are, as I 
said earlier, conscious that we are late and we will move it 
forward as quickly as possible. And be very pleased to brief in 
the meantime as we have the intermediate steps, sir.
    Mr. Manzullo. Thank you.
    Chairman Ros-Lehtinen. Thank you.
    Mr. Sherman is recognized.
    Mr. Sherman. Thank you.
    My first question is for the record because it deals with a 
detail that you will want to look at when you get back to your 
offices.
    Right now a satellite license is pending at State. It is a 
communication satellite for the Government of Azerbaijan. Now 
this is packaged as if it is just a satellite that would allow 
people in Baku to make cell phone cells or send emails. And, of 
course, that means a general in the Azeri army could make a 
call to his mother in Moscow or some general in Moscow, but 
that is, after all, just a telephone call or an email.
    I would hope that you would look carefully at this license 
to see whether the particular satellite will give Azerbaijan 
the ability to do surveillance or jamming. And so my question 
for the record is will you reject this license if the satellite 
in question gives the Azeri government the capacity to jam or 
Armenian communications or surveil Armenia or Nagorno-Karabakh? 
So, I look forward to reading your answer.
    I do want to pick up on the chairwoman's comments that you 
are moving forward with this. You are going to moving a lot of 
things from one list to another. Please give us enough time to 
review things. You have worked carefully with us in the past 
and you do not want us to protest 200 items just because you 
gave us 400 items and we only got time to look at 200.
    My question relates to the industrial base of this country. 
If we do not export a particular item, then we do not get the 
money which helps build our industrial base. And somebody else 
gets the order and that builds their industrial base. But 
sometimes when you take something off the Munitions List what 
is being exported, perhaps, is not the product but the tools 
and the dies that allow somebody else to make the product or 
the technology, the plans.
    Does a decision to take, say that wire that Don Manzullo 
hold up, if you took that off the Munitions List, does that 
mean that you would have to take off the list the tools, the 
dies, the plans on how to make that component or can you deal 
separately with the technology for manufacture and the product 
that is manufactured?
    Mr. Hirschhorn. We do today treat technology separately 
from end items and from capital goods that manufacture end 
items. So the existing Commerce List, for example, does allow 
us to treat them differently. But in many cases, technology 
that is widely available is not going to be preserved by our 
controlling it. If it is out there, it is out there. And we are 
trying to limit----
    Mr. Sherman. Yes. And the technology of making that 
particular wire may not be all that secretive.
    But what you are saying is if you take a particular item 
off the Munitions list, you could very well leave on the list 
the plans, specifications, tools and dies that would allow 
somebody else to make that product?
    Mr. Hirschhorn. It is certainly possible. And it is going 
to be an item-by-item review, but in many cases part of why 
these items are going to moved to Commerce control, and I 
stress that they still will be controlled but it is a more 
flexible set of controls, is because either the items do not 
have a particular military use or because the technology is----
    Mr. Sherman. Let me ask the Under Secretary of State, I 
mean is there a jobs analysis here where we would say, ``Well, 
exporting this particular product produces jobs in America and 
it is generally consistent with U.S. national security.'' And 
at the same time say, ``We are going to prohibit the export of 
the manufacturing technology, both because that could give 
another country a lot more than just the product.'' I mean, it 
is the technology to make this product and they could soup that 
up and make next year's product or next decade's product as 
well. It is a national security issue, but also it means 
exporting jobs. Is there going to be a separate analysis of the 
industrial-base input back fact of exporting a product versus 
exporting the tools and the dies and the techniques?
    Ms. Tauscher. Well, Congressman Sherman, no, there is no 
specific jobs analysis but it is intuitive, and I think 
everyone believes, first and foremost this review is about 
national security. But we believe that the importance of 
protecting national security and having bigger fences over 
smaller property will give us the transfer of----
    Mr. Sherman. I would point out that the statute says that 
our industrial-base is critical to our national security. And 
so it is not just the product, it is whether you are building 
the industrial-base of the United States or building an 
industrial base in a rival country. And so I hope that a job/
industrial-base is part of it, not just talking to generals 
about what this particular box can do on that particular 
airplane
    Chairman Ros-Lehtinen. Thank you, Mr. Sherman.
    Ms. Buerkle of New York is recognized.
    Ms. Buerkle. Thank you, Madam Chairman. And thank you for 
holding this very important hearing export control reform. And 
thank you to all of our witnesses this morning for being here.
    I think that we can all agree that the export system in its 
current form is a complex, bureaucratic maze that we need to 
correct. The question is: What are those corrections going to 
look at?
    If small or a medium sized firm looked at this reform, do 
you think it is going to be their assessment that this is going 
to be simpler, more streamlined approach to exporting?
    Ms. Tauscher. I was actually going to answer Congressman 
Sherman. But, thank you, Congresswoman, I think that is a great 
question and it is a metric that is very important to us.
    I think one of the reasons why the President's reforms are 
so supported by the Chamber of Commerce, the National 
Association of Manufactures and many technology business 
associations is for the very reason that the ancillary benefit 
is more American job creation and more streamlined system that 
protects national security.
    Mr. Sherman. Will the gentleman yield for 10 seconds?
    It is about jobs----
    Chairman Ros-Lehtinen. Hold on. Hold on. Hold on.
    Ms. Buerkle. Absolutely.
    Mr. Sherman. It is about jobs, not profits. And if the 
Chamber of Commerce says it is great and the machinist says it 
is wrong, who cares about jobs?
    I yield back.
    Chairman Ros-Lehtinen. Ms. Buerkle.
    Ms. Buerkle. Thank you.
    And going back to my colleague Mr. Cicilline's point, it is 
about the clock when it comes to these businesses. And when I 
hear redundancy is important, not for businesses it is not 
important. They need to get their product out to market as 
quickly and as efficiently as possible.
    Ms. Tauscher. But redundancy does not have to cost time. 
There has to be checks and balances that ensure that national 
security is the number one effort to make sure that we protect 
the most precious national security secrets. Redundancy does 
not mean that we have to have more time added to the clock. But 
we do have to ensure you and the American people that we have 
checks and balances in the system to make sure that we do not 
have a little slip between lip and cup and cause something to 
be transferred that is not meant to be transferred
    Ms. Buerkle. Thank you.
    Mr. Miller. Could I just briefly?
    Ms. Buerkle. Absolutely.
    Mr. Miller. The other thing from a business perspective I 
would think would be desirable is predictability. And as we 
shift USML to a positive Control List where we specify the 
elements that would be allowed and not allowed rather than say 
everything in a broad category is subject to review over some 
unspecified period of time, I think that predictability of 
outcome as well as timeliness would be valuable.
    Ms. Buerkle. Thank you.
    Mr. Hirschhorn, my next question is for you. It is 
regarding the Coordination Center. How would you counter the 
argument that this just represents another bureaucratic layer 
on top of an already complicated system?
    Mr. Hirschhorn. Well, it is not a bureaucratic layer. It is 
not going to involve, for example, additional personnel other 
than one or two people who will be permanently situated there. 
Everyone else will be participating from their existing 
agencies.
    It is essential that the various agencies that have 
enforcement responsibilities in this area not step on one 
another's toes. The last thing we want is a situation where 
Agency A goes after a suspect company that turns out to have 
been Agency B's front operation, another enforcement agency's 
front operation. And the point of this Coordination Center and 
this coordination effort is to make sure we do not run into a 
situation like that, and also to make sure we do not duplicate 
one another's work.
    I do not think it is creating another bureaucracy so much 
as making the enforcement system a lot more efficient. When we 
start a case, for example, we are going to submit the names of 
the people that are possibly involved to the Coordination 
Center. And we are going to get back from the other agencies 
whether they have any information on those kinds of 
individuals.
    It is really quite convenient to have a place where 
everybody goes and the people can sit in the same place rather 
than having to rely on long distance kinds of communication.
    Ms. Buerkle. Thank you.
    And my last question, and I will allude back to what my 
colleague Mr. Sherman mentioned in his opening remarks, and 
that is the coordination between Congress. I mean, I think we 
all agree that this export reform needs to be coordinated with 
Congress. And so I would like to just hear assurances of how 
you think that that will happen.
    Ms. Tauscher. Yes, Congresswoman. We are anxious to 
continue briefing both staff and members. And as Dr. Miller 
said, the 1248 Report will be ready and in the not too distant 
future we look to bring that report up and have briefings. And 
I know for myself and for my colleagues, anytime you choose to 
call, we will be sure to answer the call in the same day and 
get back to you. And come up on our horse as fast as we can to 
answer whatever questions you have.
    Mr. Miller. I agree fully with Under Secretary Tauscher.
    Ms. Buerkle. Thank you.
    Chairman Ros-Lehtinen. Thank you so much.
    Mr. Rivera?
    Mr. Rivera. Thank you, Madam Chair.
    With your permission and indulgence, my subcommittee chair, 
the gentlemen from California Mr. Rohrabacher has asked to 
follow-up on some questions. May I yield my time to him?
    Chairman Ros-Lehtinen. Mr. Rohrabacher is recognized.
    Mr. Rohrabacher. You know I have heard references to bolts 
earlier and to gyroscopes. Let us note that those were pivotal 
technologies in the development of the Chinese missile system. 
Before we gave them exploding bolts which permits stage 
separation, their long march rocket system was totally 
unreliable. And it was the United States that developed 
exploding bolts and this methodology of separating stages. Also 
at the same time we provided them the information they needed 
to have more than one payload. And, yes, that was for 
delivering satellites but guess what? It also makes sure their 
rockets now, their missiles now can deliver more than one 
nuclear warhead.
    The gyroscopes that we are talking about as well. These are 
things that cost us billions of dollars to perfect. The United 
States has spent billions of dollars of research that ends up 
in the hands of a country that is targeting us with their 
missiles. Is there any doubt in anybody's mind out there what 
group is targeted by these Chinese missiles? It certainly is 
not Belgium, and it probably is not Great Britain. But we can 
rest assured we are high on the target list.
    That is a travesty and we should make sure that never 
happens again, and yet we have another article by another 
Chinese Communist publication at the end of the meetings with 
the administration, ``U.S. To Ease High Tech Limits.'' They are 
not meaning high tech limits to Belgium, they are meaning it to 
Beijing.
    I hope that we are not on the way to another great transfer 
of technology in the name of some company getting a couple of 
years of higher profits.
    The interim report restricts launch failure investigations. 
And let me just note that that was the vehicle in which these 
other technologies that I just mentioned that were transferred 
15 years ago to the Chinese. But it also says that among the 
information that we can transfer to unspecified foreigners, is 
that technology which ``will ensure a safe ride to orbit.'' 
Does that mean we can help the Chinese perfect? Because it does 
not say who they are referring to. Are the Chinese excluded 
from that, helping ensure a safe ride to orbit? It does not say 
they are excluded in the report. Are they excluded from that?
    Mr. Miller. Congressman, the principles that are outlined 
in that very short report which will be, as you know, as I said 
will be elaborated, are applicable. And that is that the answer 
will depend on what technology is helping provide a safe ride 
to orbit. And that a country such as China will not be accorded 
the same treatment as a country such as the United Kingdom. And 
we----
    Mr. Rohrabacher. Okay. So there is something in the report 
that should suggests that creating a safe ride to orbit and the 
technology that does that will be permitted to a democratic 
country like Great Britain, but not to China? Where does it say 
that in the report?
    Mr. Miller. That report is a very short summary of----
    Mr. Rohrabacher. Then it will be in the full report? You 
are saying that that will be specifically delineated in the 
full report?
    Mr. Miller. Sir, no, what I am saying is that we will have 
a system and what we propose is to move toward a system where 
this is more transparent to Congress and to others----
    Mr. Rohrabacher. The answer is no, is that what you are 
telling me? You can answer that with a yes or no. Is that going 
to be in the report?
    Mr. Miller. Well, Congressman----
    Mr. Rohrabacher. It is not going to be, is it?
    Mr. Miller. Congressman, what I will tell you is that----
    Mr. Rohrabacher. Usually when people do not answer yes or 
no to questions like this, it is because they do not want to 
give a specific answer.
    Mr. Miller. Congressman, I will assure you that it is 
question that will be asked of the report by me as I review it.
    Mr. Rohrabacher. All right.
    Mr. Miller. As I said, I think the right answer----
    Mr. Rohrabacher. And who will it be answered by?
    Mr. Miller. I will review the report before it comes back 
up. And so I think the correct answer is to think that there 
categories of technology that can be broadly transferred, there 
are other categories that should not be broadly transferred. 
And other----
    Mr. Rohrabacher. There are some countries that should not 
be transferred----
    Mr. Miller. And there are some countries----
    Mr. Rohrabacher. And that should not be transferred to 
because they are violators of human rights and potential 
threats to our national security.
    Last year this committee endorsed the removal of some 
satellites and components from the Munitions List, but clearly 
stated the exception of barring any of these transfers to 
China. I would hope that remains our policy, Madam Chairwoman.
    Chairman Ros-Lehtinen. Thank you very much, Mr. 
Rohrabacher.
    And I thank the witnesses as well as the excellent 
questions from our members. We all look forward to working with 
you as this process moves forward either in an open setting or 
in a classified setting.
    Thank you.
    And with that, the committee is now adjourned.
    [Whereupon, at 11:50 a.m., the committee was adjourned.]
                                     

                                     

                            A P P E N D I X

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     Material Submitted for the Hearing RecordNotice deg.



                               Minutes deg.

                               
                               
                               
                               
                               Connolly statement deg.
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                                deg.
                               __________

Material Submitted for the Record by the Honorable Eric L. Hirschhorn, 
 Under Secretary, Bureau of Industry and Security, U.S. Department of 
                                Commerce







































                               Questions by Duncan--no response deg.
                               __________

 Questions Submitted for the Record to All Witnesses by the Honorable 
  Ileana Ros-Lehtinen, a Representative in Congress from the State of 
          Florida, and chairman, Committee on Foreign Affairs







[Note: Responses to these questions were not received by all witnesses 
prior to printing. Responses received follow this page.]

                               Responses--Hirschhorn from Ros- 
                               Lehtinen & Duncan deg.

                               __________

Written Responses Received from the Honorable Eric L. Hirschhorn, Under 
    Secretary, Bureau of Industry and Security, U.S. Department of 
Commerce, to Questions Submitted for the Record by the Honorable Ileana 
 Ros-Lehtinen, a Representative in Congress from the State of Florida, 
  and chairman, Committee on Foreign Affairs, and the Honorable Jeff 
 Duncan, a Representative in Congress from the State of South Carolina





























                               Questions by Duncan--no response deg.
                               __________

  Questions Submitted for the Record to the Honorable Ellen Tauscher, 
    Under Secretary, Arms Control and International Security, U.S. 
Department of State, by the Honorable Jeff Duncan, a Representative in 
               Congress from the State of South Carolina



[Note: Responses to these questions were not received prior to 
printing.]

                               Questions by Duncan--no response deg.

                               __________

 Questions Submitted for the Record to the Honorable James N. Miller, 
   Jr., Principal Deputy Under Secretary of Defense for Policy, U.S. 
 Department of Defense, by the Honorable Jeff Duncan, a Representative 
              in Congress from the State of South Carolina




[Note: Responses to these questions were not received prior to 
printing.]

                                 
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