Address to the 18th Annual Global Trade Controls Conference
John Hillen, Assistant Secretary for Political-Military Affairs
Remarks to the Conference
Washington, DC
November 3, 2005
Thank you, Mr. Murphy, for your introduction, and my thanks to you and the other organizers of this conference for
inviting me to address this gathering today. I know that Assistant Secretary Lichtenbaum spoke to the conference
yesterday, and I am delighted that he and I have the opportunity to provide the views of the United States Government on
the issues with which you are dealing.
As you know, today the United States and other high technology countries are targeted by proliferators and terrorists
seeking equipment and technology for weapons of mass destruction, missiles, and conventional weapons. It is clear that
combating the twin threats of terrorism and proliferation will be one of the central tasks of the new century. There
could hardly be a more dangerous security scenario for any country in the world than the combination of bad actors and
bad materials. All our energies must be bent to prevent this sort of situation.
Enemies of modernism and open societies are on the move. They are constantly changing their tactics, locales,
modalities, technologies, command structures, and methods of procurement. Their contemptible operations extend from the
Twin Towers in New York City to Madrid, Casablanca, Istanbul, and Bali. Every day on our TV screens we see the handwork
of this enemy, targeting innocent civilians in the hopes of disrupting those countries' progress toward a democratic and
peaceful future. And of course the fact that we are meeting here today in the great city of London reminds us of the
brutal attacks on the public transportation system that took place on July 7.
We know these adversaries want access to our defense technology so they can use it against us. We know this because of
intelligence information and enforcement efforts.
* This year, two Iranians (Mahoud Seif and Shahrazed Mir Gholikhan) were indicted in a U.S. court and convicted in an
Austrian court for attempting to smuggle Generation III night vision goggles to Iran. A third suspect is still at large.
This operation was an exceptional example of cooperation between U.S. and Austrian law enforcement authorities.
* This year, dual Lebanese-Canadian citizen Naji Antoine Khalil pled guilty in a U.S. court to attempting to export
night vision equipment and infrared aiming devices to Hizballah.
* This year, Colombian citizen Carlos Gamarra-Murillo pled guilty in a U.S. court to brokering and exporting defense
articles without a license. The weapons he was trying to export were destined for the FARC, in exchange for cash and
cocaine.
We are here today at this conference to talk about export controls, which are nonproliferation in action. They are our
first line of defense in denying our enemies the access to the weapons they would turn against us. And export controls
are a very cost-effective tool.
Let me give you but one pressing example: One of the responsibilities of the Bureau of Political-Military Affairs, of
which I became Assistant Secretary last month, is to conduct a program to destroy man-portable air defense systems
MANPADS to keep them out of terrorist hands. So far, this program has resulted in the destruction of 14,000 MANPADS
systems, and we have agreements in place with other countries to destroy 10,000 more. And as you know, the United States
and other countries are considering deploying counter-MANPADS systems on civil aircraft to protect them against the
proven terrorist threat.
How much more effective in terms not only of dollars, pounds sterling or euros, but also in terms of human lives would
it have been to have exercised responsible export controls in the first place and kept these weapons out of the hands of
our enemies?
The people in this room, like myself, probably spend more time on airplanes than do paperback novels. We should care.
Now, nobody is more aware than this audience of the many considerations that must guide our defense export control
decisions in the U.S. There are issues of defense cooperation and alliance interoperability. There are issues of
globalization and the defense industrial base. But, let me be absolutely clear: while all these factors and others are
part of our decision-making process, the polar star that should guide all our export control decisions in a world at war
must be national security. This is the leg of our export control stool that can never be compromised.
As many of you are aware, the U.S. Congress is particularly concerned with making sure that national security concerns
drive our thinking about defense trade. Indeed, the Congress has been very critical at times of administration efforts
to rethink the defense trade calculus in the past few years.
In response, some critics have said that the U.S. Congress does not fully appreciate the need for international defense
cooperation and especially for an alliance-leading, coalition-seeking America to share defense technologies with allies
in the war on terrorism.
I think this is a misreading of the political currents in America and an unfair assessment of how our legislature is
viewing these issues. Even the Congress' most critical assessment of administration defense trade control proposals
expressed support for deepening defense cooperation with ''two of our closest allies'' and explained that the
appropriate committees would consider other appropriate ways to facilitate bilateral cooperation. So I think it would be
a mistake to characterize the debate in the U.S. as between an administration bent on loosening defense trade controls
and a Congress not cognizant of the pressing operational need for defense cooperation. Either of these observations
would be a caricature of the truth. There will be no loosening of national security considerations on my watch and I
also feel confident that Congressional leaders will take up the cause of defense cooperation if presented to them in
that context.
Our legislative bodies are keenly aware that within the uncompromising context of national security there are ways to
promote defense cooperation and interoperability among allies and coalition partners. They know this because they know
that America is in the alliance and coalition building business. Today, more than 30 countries are contributing military
forces to the Coalition in Iraq. Over 40, many of them the same countries, are serving in Afghanistan. NATO is
undertaking robust out-of-area operations ranging from Afghanistan to Africa even earthquake relief in Pakistan. For all
the mistaken labeling that the U.S. gets from some quarters as a unilateralist country, nobody knows better than we how
much we need our allies and coalition partners. And those allies and partners need access to military technology so they
can operate effectively against our common enemies and do so in a way that makes joint Coalition operations viable. And
that means defense industry cooperation, across borders and across continents.
Some of those countries are the same long-standing allies that I soldiered with when I was patrolling the Inner-German
border when the Berlin Wall fell sixteen years ago. Here our UK hosts deserve pride of place. Some are the new NATO
members, like Poland, Romania, Estonia, Latvia and Lithuania. But some are also relative newcomers to the Coalition of
the Willing. El Salvador has 1100 soldiers in Iraq. And who would have predicted even a few years ago that U.S. soldiers
would be fighting in Iraq alongside contingents from Albania, Georgia, Azerbaijan, and Mongolia?
If defense cooperation is to be successful, it is imperative that shared technology does not fall into the hands of
those who would use it against us or our friends and allies. Defense export controls are an integral part of our broader
security agenda, whether it is the global war on terrorism, preventing the spread of weapons of mass destruction, or
bolstering regional stability around the globe.
Never has this mandate of defense trade controls, which has fallen to the State Department since 1935, been more
important to U.S. national security and that of our friends and Allies. All U.S. arms transfers under the Foreign
Military Sales program are subject to the approval of the bureau that I lead. In addition, the export of U.S. defense
articles and services under license is regulated by our bureau's Directorate of Defense Trade Controls.
And never has this mandate been more challenging to carry out. The strategic environment of the 21st Century has grown
more complicated and more sophisticated. Technology changes far more rapidly than the regulatory regime. Globalization
challenges borders and laws made in another time. There is a revolution in military affairs and a revolution in
strategic affairs with modern militaries focused less on defense of territory and more on power projection, networked
warfare, and counter-terrorism/counter-insurgency operations. We in the Political-Military Bureau have responded to this
environment and its challenges in several ways.
First and foremost, we're responded to these complexities in part through more aggressive compliance efforts. In fiscal
year 2005, we more than doubled the number of U.S. companies contacted in the Compliance Visit Program to review their
internal compliance procedures. I might point out that during this period, there were 70 arrests and 60 criminal
convictions (up from 45 the previous year) for violations of the Arms Export Control Act and the International Traffic
in Arms Regulations.
Where the export control sins aren't sufficiently serious to require criminal prosecution, we can resort to civil
enforcement actions. Last fiscal year we concluded four new consent agreements that imposed monetary penalties that
totaled $35 million. While these fines are highly visible, these consent agreements also impose remedial compliance
measures that help industry do a better job of complying with the regulations in the future.
In short, we are not just about large monetary penalties. We also encourage industry to self-report violations
uncovered by their internal compliance programs, and last year we received 396 of these "voluntary disclosures" more
than one a day, every day, including Christmas. In addition to fostering industry's commitment to self-compliance, this
program has also allowed us to learn of problems more quickly and address national security or foreign policy problems
created by these violations.
We also conducted more than 500 pre-license and post-shipment checks under our "Blue Lantern" program, and in 80 of
these checks we uncovered information that didn't quite square with the license application.
For example, we recently did a pre-license Blue Lantern investigation to establish the bona fides of a transaction for
satellite components that were supposedly going to be used in a scientific experiment by a professor at a university in
Asia. The Blue Lantern check established that there was no professor by that name at the university, and that the
university itself had no satellite-related program. (It was essentially a medical school.) Needless to say, the license
was denied.
Second, we've worked hard to ensure that our defense trade controls are timely and nimble enough to meet the urgent
needs of our battlefield allies. To do this, we have instituted an expedited licensing procedure for the urgent needs of
our Coalition partners in Afghanistan and Iraq. In fiscal year 2005, 768 licenses were handled under this expedited
program, and the median processing time for these cases was seven calendar days. The American participants in this
conference will confirm that there is not much more that you can expect from the U.S. Federal Government in a week.
Third, the nature of international defense trade has grown infinitely more complex. More and more we find it shifting
toward direct commercial sales as U.S. and foreign defense companies seek to form international partnerships. In the
last three fiscal years, applications to the PM Bureau for arms export licenses have grown at 8% per year, and during
the fiscal year that just ended, the Directorate received more than 65,000 export applications of all types. And every
party to each of these transactions not just the exporter and the recipient but everybody in between, such as freight
forwarders and shippers is checked against a watchlist with more than 100,000 names of suspect parties.
One step we have taken to meet this growth is our new system for fully electronic defense trade, which is making our
export licensing process faster, simpler, and more efficient. Today, D-Trade can be used for licenses for the permanent
export of unclassified hardware, and about 15% of all license applications are received through the new system. License
processing times for D-Trade cases are half those of paper licenses. Over the next year, D-Trade will be expanded to
include all other export license applications, including agreements, as well as commodity jurisdictions and several
compliance functions.
Not only has defense trade become more complex, but the nature of what is being exported has become more sophisticated
as well. For the most part, "defense articles" used to mean weapons themselves and their component parts. But today the
most sensitive defense exports don't necessarily go "bang." Exports of night vision equipment, for example, are treated
with particular care. As someone who spent a good portion of the 1990s in the special operations world, I know how
important it is for U.S. forces and our Coalition partners to "own the night." Staying abreast of the technology
environment is a challenge in itself. This is particularly true for the role that information technology plays in our
defense. I am very aware of this phenomenon, having lead three information technology companies and sat on the boards of
several others. For example, the Joint Strike Fighter combat effectiveness relies on integrated software far more than
any previous U.S. fighter aircraft, such as the F-16.
Another trend we face is in the nature of the export applications. Although the majority of applications are for
hardware, the most important and complex cases are for defense services, including the export of technical data instead
of hardware. The Joint Strike Fighter program is still in its Systems Development and Design phase, but we have already
approved hundreds of Technical Assistance Agreements worth several billions of dollars. In Fiscal Year 2005, we
authorized the export of $28 billion in defense services, compared with $29.5 billion in defense articles.
Related to this is the challenge of controlling the export of defense technology by "intangible" means -- including by
email, fax, or internet. In the 21st Century, no country can claim that it has a modern or effective export control
system if it does not control intangible transfers. For example, almost all the work being done on the Joint Strike
Fighter is being transferred electronically, through a Virtual Private Network. The security of such networks is
critical to the companies involved. But governments also have to have the legal and regulatory authority to control the
export and re-export of the technical data that travels over these electronic networks.
Casting its shadow over each of these trends is the impact of globalization in the world economy, including the defense
industry. Until recently I was President of the U.S. subsidiary of an international corporation in the information
technology field that was cleared to do classified work for the U.S. Government. We had to maintain an arms-length
relationship with our parent company under rules established by the Pentagon's Defense Security Service. We maintained a
separate board of directors with security clearances and had a government security committee of the board to ensure that
the firewalls between my subsidiary and the foreign-owned parent were robust and monitored. Under certain circumstances,
our company had to have a license to discuss technical data with officials of the parent company. This added some layers
of complexity to an already complex business, but it was necessary, and it is an example of how we have tried to
accommodate globalization trends to the over-arching requirements of national security.
Another example: in 1999 BAE Systems established a North American entity, which is now called BAE Systems Inc. and is
the 6th largest supplier to the Department of Defense. This year, BAE Systems Inc. acquired United Defense which itself
had acquired Bofors in Sweden in 2000. Thus, the North American subsidiary of a British defense company is now itself
the owner of a Swedish defense company. And Peter Lichtenbaum and I as regulators have to deal with the export control
issues that such relationships create.
Similarly, transnational development of new defense systems or capabilities within structures such as the European
Union pose challenges to our regulatory regime. Projects whose development spreads across the Continent may require
multiple licenses and agreements to govern the flow of U.S. defense articles and technical data. But we are committed to
making that flow as smooth as possible once again, within the context of national security.
Given the increasingly global nature of defense trade, a key element of our defense export policy is to strengthen
international export controls, which is also a major pillar of our broader nonproliferation policy. Our colleagues in
the Bureau of International Security and Nonproliferation work closely in the multinational export control regimes,
including the Wassenaar Arrangement, to develop effective international export controls. I mentioned our efforts to
address the MANPADS threat earlier in this speech, and Wassenaar has done some useful work on MANPADS controls. In
addition, we have invested heavily in helping other countries bring their export control systems in line with
international standards.
While much of our work is aimed at meeting the threats posed by emerging challenges in the area of terrorism and
nonproliferation, we also scrutinize potential defense exports for their effect on regional stability. And so we must
recognize that international defense trade controls is not simply dependent on complementary regulatory regimes, but on
common perspectives about security threats. Even if there was an extraordinary and unimpeachable commonality in national
defense trade control systems around the world, it could be irrelevant in the face of profoundly different approaches to
some security challenges. I certainly don't mean to imply that we should all feel the same way about every strategic
issue in the world, but there should at the very least be an appreciation and respect for each other's perspectives on
security issues that may be closer to home for some than for others. In that regard, I want to offer our perspective on
the European Union's embargo on arms sales to China.
President Bush and Secretary Rice have made clear to our EU friends at the highest possible level our strong opposition
to the possible lifting of the EU embargo. So have other regional states, including Japan.
The United States strongly welcomes the efforts of the European Union to improve its Code of Conduct on Arms Transfers,
whose normative criteria strongly resemble those of the U.S. Conventional Arms Transfer policy. However, we do not
believe that even a strengthened Code of Conduct is an adequate substitute for the EU's China arms embargo.
As we have pointed out in our discussions with our EU colleagues, the European Union's own public reports on arms
transfers show that some EU Member States currently approve arms transfers to China under both the embargo and the Code.
Indeed, EU data show that those Member States approve more licenses for China than they deny.
This does not provide us a strong feeling of confidence that the Code of Conduct alone without an embargo would be an
effective guarantee that lifting the embargo would not result in a qualitative or quantitative increase in EU arms
transfer to China, as the European Council said in December.
I want to leave our European friends in no doubt that if the EU lifts its embargo on China, this will raise a major
obstacle to future U.S. defense cooperation with Europe. In addition, there is no doubt as to the strength of
Congressional feeling on this issue. I think we can count on it: should the EU lift its embargo, the U.S. Congress will
legislate.
This is of course not where we want to go. We want our defense cooperation with our European friends and allies to
increase. I am encouraged by the U.S.-EU strategic dialogue on East Asia, including China, and I hope it leads to an
appreciation and respect for the various positions of the parties, especially those who have tens of thousands of
service members carrying out the day to day tasks of security in that part of the world.
In closing, I believe the context for the thoughts I have offered you this morning can be summarized in three
fundamental principles. First, because of the threats to America and her allies and partners, even in the globalized
world, national security can never be compromised and must take precedence over considerations in the defense trade
calculus. Second, because it is absolutely necessary today for nations to fight together to combat the threats to their
common security we must work harder to find politically digestible ways to spur defense cooperation among trusted
allies. And third, in order to do this, the military forces of partner nations must be interoperable and capable --
which places a premium on sharing of defense cooperation, and I cannot emphasize this enough .on the protection of
defense technology.
As I take up my duties in the Department of State, I will heavily invest my personal energy and leadership in
continuing to ensure that we have even more efficient systems and processes in place to safeguard U.S. defense
technology, while at the same time allowing the governments and defense industries of our respective nations to
cooperate on behalf of security, stability, and the spread of democracy throughout the world.
I will close my remarks with a quotation from Sir Winston Churchill, an honorary American citizen who also has some
connection with our British hosts. Churchill, a man who was visionary and pragmatic all at once, might have been talking
about export controls when he said:
"It is a mistake to try to look too far ahead. The chain of destiny can only be grasped one link at a time." Just so.
Let us go forward in all our various capacities and try to frame common solutions to today's great threats in ways that
are achievable and sustainable.
Thank you for your attention. I wish you success in your conference, and I look forward to working with you in the
future.
ENDS