House Committee on Foreign Affairs, Subcommittee on Terrorism,

Nonproliferation, and Trade

 

Prepared Statement

 

William J. Lowell

Managing Director, Lowell Defense Trade, LLC

 

July 26, 2007

 

 

 

 

Thank you, Mr. Chairman.  Please permit me to commend you, Ranking Member Royce and other Members of the Sub-Committee for convening this hearing today, which concerns matters of genuine importance and urgency.

 

I think the questions the Subcommittee is raising are exactly the right ones:  Are we doing what needs to be done to ensure our technology does not fall into the wrong hands; and are we taking appropriate steps to facilitate technology sharing where this furthers our interests.    

 

Before summarizing where I believe the main problems lie in this area, I think it is important to state what is not a problem.  I am referring to the comprehensive framework set forth in the Arms Export Control Act for controlling transfers of armaments and related technology.  This statutory framework ensures crucial oversight by Congress and has served our country’s security and foreign policy interests well over the years.  I think it is no exaggeration to say that, if other governments had similar frameworks in place, we might be dealing with significantly more favorable security situations in various trouble spots around the world.  A corollary of this, in my view, is that the United States should be providing leadership in the effort to strengthen international control of armaments –- not retreating from leadership through proposals to water down our own system, or undercutting our leadership by administering our system in such a difficult manner as to discourage even our closest allies. 

 

There are three, interrelated problems challenging our arms export control system today.  In my view, they all arise with the Executive Branch’s administration – or, in part, the lack of proper administration – of various authorities granted by Congress under the Arms Export Control Act.

 

(1)     Failure to Assess and Reorient Controls against Terrorist Threats

Despite repeated urgings from Congress -- and two detailed reports by the Government Accountability Office[1] -- there has been no review in the Executive Branch, even at this late date, of whether our export controls should be tightened in some areas (or loopholes closed in others) to deal with the heightened terrorist threat.

There is ample information about this threat, including an important study released by the National Intelligence Council in December 2004, forecasting that terrorists will continue to rely primarily on conventional weapons in the coming years -- but will also move up the technology ladder to include advanced explosives, unmanned aerial vehicles and other items of the type controlled on the U.S. Munitions List by State.  If we needed a more recent reminder, just last Sunday during his interview on “Meet the Press” Admiral McConnell pointed to concerns about terrorist sleeper cells in the United States and al Qaeda’s continued primary interest in explosives that generate mass casualties.

Mr. Chairman, to my knowledge, our export control programs are the only part of our overall national security structure that has not been subjected to a post-9/11 security review.  Why the agencies continue to assert – as an article of faith, rather than rigorous assessment – that our programs in this area are sound and immune from exploitation is mystifying and dangerous. 

 

(2)     Systemic Vulnerabilities and Risks to U.S. Technology

 

For the first time in history, Executive Branch programs related to export control and protection of critical military technology have been placed in GAO’s “high risk” list.  This is not just a dubious distinction; it is a flashing red light signaling that many things are wrong – and it comes at an inopportune time.     

 

GAO has spelled out in a series of reports since 9/11 all of the corrective actions needed to resolve problems related to those vulnerabilities.  The problems cover the waterfront, from clarifying export license requirements for missile technologies to providing reasonable assurance that anti-tamper systems in U.S. weapons are working as intended when sold to foreign countries.

 

Given Ms. Calvaresi-Barr’s presence at today’s hearing, there is no need for me to elaborate on the magnitude of the problems in this area -- except to note that the very fact of the high risk designation impeaches any assurance by the Executive Branch that the programs it administers pursuant to the Arms Export Control Act are functioning effectively to safeguard U.S. interests.

 

(3)     Declining Levels of Service for U.S. Industry

U.S. industry plays a decisive – perhaps, the decisive – role in safeguarding our military equipment and technology.  Executive Branch agencies establish the policies and parameters for exports and other technology transfers to foreign persons through federal regulations and the export license process.  But, hundreds of U.S. companies execute those policies on a daily basis through their corporate compliance programs.   These companies – particularly small and medium sized defense companies who cannot afford Washington law firms or lobbyists – are currently in very difficult straits due to excessive delays and uncertainty in the export license process.  This is not only harmful to U.S. industry; it also takes a toll on our national security interests in multiple ways.  For one thing, we will not be very successful in persuading other nations of the need for strict controls over their weapons technology if we cannot administer our own efficiently.

Flat resources at State[2] in the face of an increase in license applications represent only one part of the problem and one that is easily resolved for not a great deal of money.  The other, more intractable part is the Department of State’s strategy for solving this problem.[3]  It is a strategy that appears to imply an air of indifference to legitimate concerns of exporters and one that is committed to reducing the backlog of license applications chiefly by redefining the mission to eliminate export license requirements. 

 

There are problems with such a strategy on multiple levels.  For one thing, increases in license applications of the magnitude reported by State (i.e., six-to-eight percent per annum) generally correlate to a growing share of the international arms market by U.S. companies.  The message we inevitably send to other countries through such a strategy is that the more arms technology our country sells abroad, the less we will control.  This does not seem to be a sound basis for managing U.S. security interests internationally.  Nor is it one we would welcome if adopted by other governments. 

 

Importance of Congressional Oversight

 

Mr. Chairman, the Congress and the American people are entitled to a high degree of confidence that:

 

(1) Important United States interests related to transfers of military and dual use technology are being safeguarded in the war on terrorism;

 

(2)      This area of national security policy is being thoughtfully and fully integrated into U.S. counterterrorism and nonproliferation policy; and

 

(3)      Legitimate defense trade with our friends and allies is being furthered through timely and efficient adjudication of export license applications submitted by U.S. companies.

 

Unfortunately, there are serious reasons for concern in all of these matters.  The solutions are not expensive and are attainable in the near term.  They do not involve any massive re-engineering of the arms export control process at State, which has already become something of a reinvention lab in recent years.  But, the solutions do require a commitment by the Department of State to administer the system provided in the Arms Export Control Act responsibly and effectively.  They will also require expanded oversight by Congress, at least in the near term to ensure this is done.

 

That is why I think it would be very helpful for either the Subcommittee or the full Committee as the leadership deems most appropriate to designate several Members who will work intensively with senior management from State on a work plan to:

 

  • Clear away the backlog of license applications at State over the next 120 days through all appropriate means, including through the temporary detail of Department of Defense personnel, the temporary redeployment of State personnel and other extraordinary measures;
  • Identify a permanent funding sources (e.g., budgetary or license fees) necessary to prevent a recurrence of any backlog and assure predictable timelines for the U.S. business community in the range of 10 days for most cases (unstaffed) and 30 days for more complex cases (interagency staffed);
  • Establish a timetable and reporting channel to Congress for a post-9/11 inter-agency review (including law enforcement and intelligence agencies) of any gaps to be closed or enhancements needed in U.S. export control regulations and policies; and
  • Include in this discussion a plan and timetable for eliminating system vulnerabilities and weaknesses which have triggered GAO’s “high risk” designation, and also include GAO representatives in the discussion to ensure the approach is sound.

 

These are the priorities areas that need to be addressed, Mr. Chairman, in my opinion.  In focusing on these urgent matters, I do not mean to imply we should exclude eventual consideration by Congress of well-designed proposals that promote cooperation with allies while preserving credible means for the U.S. Government to safeguard our systems, and deter, detect and prosecute violations when they occur.

 

But, I am persuaded the primary focus at this juncture should be on getting the arms export control system back on some reasonable footing and dealing effectively with existing security threats and system vulnerabilities.  Accomplishing these tasks is well within the grasp of the U.S. Government and should not prove to be vexing or protracted provided there is a good faith effort to do so.

 

I thank you, Sir.

 



[1] GAO, Defense Trade: Arms Export Control System in the Post-9/11 Environment, GAO-05-234 (Washington, D.C.: Feb. 16, 2005); Defense Trade: Arms Export Control Vulnerabilities and Inefficiencies in the Post-9/11 Security Environment, GAO-05-468R  (Washington, D.C.: Apr. 7, 2005).   GAO, Export Controls:  Improvements to Commerce’s Dual-Use System Needed to Ensure Protection of U.S. Interests in the Post-9/11 Environment,  GAO-06-638  (Washington, D.C.: June 26, 2006).

 

 

[2] The U.S. Government spent $67 million in FY 2005 controlling slightly more than one billion dollars in dual use goods and technology licensed by the Commerce Department.   In contrast, only $11 million was spent in the same year controlling $54 billion in defense articles and services licensed by State. 

[3] GAO’s report (GAO-05-234) supra suggests that the Department did not execute a funding authorization to hire additional licensing officers beginning in FY 2003 in order to expedite munitions export licensing and, instead, planned a reduction in the number of licensing officers over the next two fiscal years.