Legal Commentary

There was an article in the Times of India on Wednesday, reporting on assertions by Pakistani nuclear scientist A.Q. Khan that Pakistan had nuclear weapons capability as early as 1983. According to the article, Khan maintains that U.S. preoccupation with the Soviet invasion of Afghanistan gave him somewhat freer reign to pursue a nuclear program for Pakistan, which he was able to do in just six years. Of particular interest to me was Khan?s statement about the ineffectiveness of export controls: according to the article, Khan said, "They [presumably meaning the U.S. and other governments] could not outmanoeuvre us, as we remained a step ahead always" in obtaining equipment and materials. Khan explained that when supply sources in Europe dried up, purchases were made indirectly through intermediate countries such as the UAE and Singapore.

On the one hand, Khan's statements should not be surprising; he has been the target of export compliance investigations for years now.  On the other hand, Khan?s statements have a peculiar resonance, because they were made in the wake of President Obama?s call last month for a review and possible overhaul of U.S. export control laws. Current U.S. export control laws are indeed badly outdated, as most everyone who has considered the matter agrees. I have written about the need for reform of these laws elsewhere. Yet current indications suggest that any reform will not be terribly meaningful.

U.S. export control laws operate on the premise that preventing foreign access to U.S. goods, software and technology can be an effective way to prevent unwanted foreign activity (military activity, weapons proliferation, etc.). This premise in turn rests on the assumption that there is something critical to such projects that can only (or at least primarily) be provided by or through the United States (or its close trading partners that implement similar controls). In the years immediately following World War II this was an accurate assumption for many types of higher-end goods and technologies, but it is far less true now. In response, U.S. administrations since the 1970s have made three significant adjustments. First, U.S. export control laws have been interpreted and applied in a much more extraterritorial fashion, which at times has caused tensions with U.S. trading partners (e.g., the Soviet pipeline dispute of the 1980s).  Second, multilateral efforts at regulatory harmonization and compliance have continued, although in many respects these are extensions of the efforts of CoCom and are not necessarily terribly new or innovative.  These are both worthy subjects for discussion (and the subject of current research for me), but today I want to focus instead on the third change, which is adoption of a ?choke point? approach to U.S. export controls.

Bill Reinsch, former Under Secretary for Export Administration at Commerce and now President of the National Foreign Trade Council in Washington, D.C., explained it thusly about a decade ago:

Missile technology, for example, takes a lot of sophistication, and it takes a lot of specialized material, it takes a lot of design work, it takes a lot of knowledge, and it takes a lot of systems integration. The key is to look at the problem as you would a puzzle . . . where you have to put together 250 pieces to make a picture, we are not stopping all 250 pieces, maybe we are only stopping 10 or 15 pieces. . . . But the puzzle isn't done unless you have all of them, and so that is the idea of choke points, maybe you can stop only one piece, but if it's the critical piece then you have done your job.

(Quoted in Bowman, E-Mails, Servers and Software:  U.S. Export Controls for the Modern Era, 35 Geo. J. Int'l L.J. 320, 362 (2004)). That is all well and good if it works, and it has had the advantage of requiring no change to the underlying laws (and few to the implementing regulations). The problem is that it does not work well, if at all. Khan?s reported statements yesterday (and other, previously reported statements by him) suggest that the approach is far less effective than U.S. export control officials would like to believe. If the approach did not prevent Pakistan?s development of nuclear weapons in the late 1970s and 1980s, when the world was far less interconnected than it is now, then I have trouble seeing how it would work effectively today, with far more supply nodes and supply vectors worldwide. Note, too, that Khan?s example involves the very type of scenario that the choke point approach is intended to prevent?that of nuclear or chemical/biological weapons, which are of the same level of concern as the missile technology referenced in the Reinsch quote, above.

Yet the choke point approach continues to be central to the current dialogue on U.S. export control reform. A spokesperson for the National Association of Manufacturers (NAM) stated just last month that the United States ?need[s] an export control system that can keep genuinely sensitive technologies out of the hands of those who seek to harm the U.S.,? while at the same time not ?harming our ability to compete economically.? In other words, NAM leaders believe U.S. export controls need to focus on those few choke point items that are critical to the foreign activities the United States wants to prevent. Similarly, a spokesperson for the American Association of Exporters and Importers (AAEI) noted that the association is ?deeply concerned about the corrosive effect of complex and overly-broad export controls that hinder U.S. companies from competing in a dynamic global marketplace.? It should be noted for the record that NAM and AAEI are large trade association players; what they are saying is representative of general U.S. industry views.

So, what to do? I recommended a solution several years ago that is actually being implemented in limited form with respect to intra-company transfers and exports to (pre-)validated foreign end users in India and China--to shift the focus from regulating individual export transactions and instead consider certain activities by an exporter as comprising a multi-transactional ?account.? (See link to article, above.) But the even larger question, as I sit and think about it now, is whether the entire export control licensing system should be scrapped. It uses large amounts of federal government resources, imposes significant compliance costs on the private sector, and provides, I suspect--although I do not have data to verify--somewhat marginal returns in terms of improved national security and achievement of U.S. foreign policy goals (which are the express policy goals of U.S. export control laws). Government resources thus might be more effectively used to prevent such unwanted activity in other ways, such as through increased intelligence-gathering and transnational cooperation with other countries? law enforcement personnel. Might greater resources devoted to those activities have prevented or delayed Khan's activities? The approach would be similar in some respects to the ?open border? changes to U.S. immigration law advocated by Kevin Johnson.  See Johnson, Opening the Floodgates: Why America Needs to Rethink its Borders and Immigrations Laws (NYU Press, 2007) and Johnson, Open Borders?, 51 UCLA L. Rev. (2003). Such an approach to export control reform may not be politically feasible, but it is a question worth asking.

This is an idea in progress, and I do have to think about it further. What I find intriguing is that it runs counter to the accepted wisdom in the trade community (private sector, government and academic) that an ?informed compliance? approach to regulation--under which parties are required to self-regulate and maintain records, much as under U.S. tax law--is both more efficient and effective than other alternatives. Yet if the returns from informed compliance are minimal and the costs (both direct and indirect) are great, then perhaps the regulatory cost is not worth the compliance candle.