well thank you everyone for being here is one of our largest sources of exports the earl space industry plays a vital role in securing our military strength and bolstering the economic competitiveness of the united states  today's hearing is to examine the strategic and economic impact of our current policy see on this industry this is part of an ongoing effort by this subcommittee we have held hearings on this issue in july of zero seven may of zero eight and earlier this year both in april and in july these hearings have led to changes in policy and procedure in the  executive branch and to the passage through at least the house of important legislation that has yet to make it through the senate this includes the defense trade controls improvement performance act which is pass the house twice the second time as part of the foreign relations authorization act which is pending in the senate that act pending before the senate has the the work of this subcommittee and time protecting our technology from china we have are also in the process of including a larger bill the export control improvement act the aerospace forward ongoing clarification in this arena from the departments of state and commerce would be beneficial as will a timely review of control items also as a result of this subcommittee previous work  with the directorate of defense trade controls the d d t c please to see that the state department has decreased the average license application processing time to one third of the two thousand  average so you're to be commended i want to commend both agencies represented here for responsiveness to congressional concern not only does the aerospace industry contribute to the economic output of the us and provide high paying jobs it also is critical to the defense strategic capacity of the united states to that of our allies  and the fact that we're building the planes means that some other country isn't and that we are preventing the development of technology in hands that we might not control in fact organizations such as  the international association of machinists nurse based workers warned at our last hearing on this subject that failure to consider the employment impact in export control policy m aster bait the existing job crisis in the united states and want to submit for the record a letter sent to us by the machinists union which states in part mindful that policies that encourage or facilitate further outsourcing of technology and production can and do have a detrick mental impact on u s workers and will impede this nation's recovery clearly in deciding what our policy in this area ought to be we should be weighing on the one hand any possible even remotely possible then you should in our national security by shipping abroad sensitive technologies versus the jobs impact where we have a circumstance where something has a negative jobs impact then we should not accept even the tiniest and most theoretical definition in our national security that currently there is no legal requirement for the export control process to take into account the employment impact when assessing the licensing decisions or the consequences that certain transfers  will have to the stability of the defense industrial base while companies need licenses through the d t t c to manufacture certain nations overseas it's time to start thinking about making a similar requirement for dual use items and whether it is commerce or state no license should be issued that doesn't take into consideration the effect on jobs and as i've said before there's no reason to issue a license if it's going to have a detrimental impact on jobs we need to ensure that we are not outsourcing our critical national security infrastructure or facilitating the outsourcing of u s jobs and perpetuating our trade deficit  particular issue arises over the defense needs of japan their prior interest in the f twenty two their possible future interest in the f thirty five i know  that we have refused in the past japanese governments requests to purchase for them to purchase for us to sell the f twenty two every year since one thousand nine hundred eighty eight congress has imposed a year long ban on foreign sales of the f twenty two this is not been done by the foreign affairs committee but rather through the appropriations process and i can't blame the appropriations committee for for taking this action when our committee has as not stepped forward with a clear policy answer to the question of whether and what should should be the limitations on the export of the f twenty two when we don't act they  do congress works best when the different roles of the appropriations and authorizing committees are followed and i look forward to a return to regular order on on that issue the two thousand and ten national defense authorization bill includes reporting language a rather reporting requirement to detail the feasibility cost and impact of selling the f twenty two is a broad showing that the other relevant authorising committee is in fact taking a look at whether we should sell these f twenty two thousand certain circumstances and as i said there may be interest in the f thirty five i would say that it is in the u s national security interest for japan to have a major qualit advantage over china and other potential japanese adversaries and to enhance japanese security is the most part to enhance american security notably due to a recent change in the ruling party the japanese government  which had expressed continuing interest in purchasing the f twenty two may or may not be interested the present time they had been interested in purchasing forty to sixty aircrafts taiwan has also expressed an interest in purchasing f sixteen aircraft given the violence done to the american economy by the legal actions of china in so many economic fears for us to exceed chinese concerns in not providing the f sixteen to taiwan seems to add not insult to injury but injury to injury u s aerospace companies have had significant financial interest in the export of their commercial products our industry today faces foreign competition for the sales the europeans and for verily subsidize their industry i believe the united states has a vested interest in supporting our domestic producers for example markets in china and russia potentially high demand for u s commercial aircraft in particular the chinese may have a demand for as many as thirty seven hundred new civilian aircraft in the next twenty years that represents a forty billion potential sales additionally new russian airline rosalba i'm sure i mispronounce that name has solicited beds for up to sixty five aircraft i've long advocated a better relationship between the united states and russia and the integration of u s commercial planes into the russian civil aviation carriers would be a real signal of an improvement in increased u various facilities to to china perhaps to take advantage of the chinese market we have a strategic decision to make one is do we try to compete against the europeans to see who can hand more technology to china on the most silver on the thickest silver platter or do we want cooperate with europe to say that this that as long as china running such a huge trade surplus with the world that perhaps this is one area of economics that they should not be expanding into and none of the arguments in favor of cooperating with china should assume that cooperation with europe on this is impossible until we at least try i look forward to hearing from today's witnesses in a special look forward to hearing the opening remarks of our ranking member mr royce thank you very much this is the latest hearing on export controls the subcommittee is i think very well positioned should the committee move ahead with broad export control legislation let me just make a couple of observations and one is that aerospace is one of our nation's key industries both economically but certainly national security wise as well of course american dominance and leadership can't be assumed here russia and china are focused on developing  india has a vibrant space program our export control system was crafted during our economic and technological dominance that has changed unfortunately the question today is whether the system has evolved appropriately in a way that doesn't choke innovation in competitiveness yet protects critical technology there have been some helpful rip forms made mainly by the past administration and there are many encouraging words by the current administration but more is needed to manage rapidly evolving technology and crafty fellows a witness at our satellite hearing called the system broken very bureaucratic and unable to distinguish what's commercially available and what's not the g a o has observed any heroically complex system i'm worth what they call significant wellner abilities meanwhile the g a o keeps rattling the system they put out a june report that explained how it's investigators beat export controls by buying sense of to sensitive technology and illegally shipping fake versions abroad it was very easy for them to pull that off and that's a big problem the first house has approved in of authorization bill giving the president authority to remove satellites from the state department manage munitions list except for technologies that could be transferred to or launched into space by china this change reflects the view of the pentagon and others that satellite export controls have hurt u s innovation excluding china is smart though for one china is working with iran on space and satellite programs i've expressed concerns about china before particularly the validated end user program which expedites text exports to china yet lacks strong monitoring capacity there is too much trust but it's not just an export controls that china is naive leave you to a recent time magazine story analyzed what a lousy decade we were finishing at nine eleven to market collapses the financial crisis katrina and so forth on the plus side of its ledger one of the few amazingly great things was the quote stunning rise of china amazingly great as if china is not a to totally tearing country aggressively stealing our technology we need moral realism about china across the board in this society i want us companies to be world class that means killing the bureaucratic excess i want to deny terrorists a and iran critical technology and that means being efficient these aren't contradictory goals but we won't get near them in less export control betterment is a key administration goal i hope to be proved wrong in my skepticism let's start today thank you very much m thank you with that let's see who else says an opening statement assumes god thank you mr chairman i appreciate this hearing the commercial and military aerospace industries are very significant terms of our exports but also in terms of vital employment for our aerospace industries employ hundreds of thousands of workers in the united states and the recent economic downturn has affected a great number of americans with unemployment exceeding well over ten percent so it is timely and it's a pleasure to be with you here and like to join you in welcoming our distinguished witnesses as we tackle the subject the strategic and economic review of aerospace x ports the topic of today's hearing is one that we have broadly been considering for quite a while but the specific aspects of today's hearing particularly the economic impact of aerospace exports is one that i am keenly interested in and so i thank you once again mr chairman for providing this forum to discuss these important issues as i said the bone and bust of aerospace exports has played out on the stage particularly of my congressional district where lockheed martin and the people of georgia built some of the finest planes in the world as a matter of fact lockheed has long been the structural backbone of the reason why the united states has the air superiority that we have today which means we terminate a program that employed thousands of workers not just in georgia but all across this country impacting over eighty five thousand employees and that isn't the building of the f twenty two the f twenty two that platform that is gives us and has given us that competitive edge that has helped us to maintain our military superiority myself and hundreds of other members of congress both in the house and the senate employer would the president i visit the white house on three different occasions to plead with the president and secretary gates to consider the economic consequences of closing this production line entreaties were roundly ignored by this administration though and during a time when our economy is him merging jobs left and right they decided to kill thousands of more jobs and so celeste for these workers is there any hope that their jobs might be saved well we do have the f thirty five coming on line but when and it is my understanding that the japanese for example wanted to purchase f twenty two has told them no of course that makes little sense on any front the japanese are a close friend and they are a close ally who wish to help out the united states economy by purchasing high value products from us but we tell them no and mr chairman i do want to add one other point this time that i think it is very important for us in the foreign affairs committee and us particularly on our subcommittee for it is our subcommittee that deals with international trade and while i have great respect for the appropriations committee they are appropriators it is the foreign affairs committee that provides the end a little go information the thoughtful embrace of these decisions dealing with our military and our defense moods and relative relations to our foreign policy and to well one with the very important issue of international trade and i think it is very important that if there is a final size so and terms of the f twenty two and others that will come online regarding international trade as i said the japanese are close friends and their allies and by purchasing these high value products from us it helps us moreover this administration has stated a commitment to helping our partners build their capacity for defense and security and has been pointed out it is important that our partners in the world maintain the  one hand or perhaps israel in the middle east on another hand so it is even more quiz otic that this administration would tell the japanese that they can't buy what they want and especially with the japanese being friends admittedly the united states government does not have a responsibility to promote exports from one particular company or another and economic concerns should not always trump national security so concerns and fact they must not but when our economy is struggling and a friend offers us a win win solution in the help that creates and preserves jobs and helps ensure our national security at the same time why not jump at the chance instead of telling them thanks but no thanks and driving them into the hands of others so well again mr chairman i've had say on this and i hope that my points have been made clear and i thank you for giving us the chance to explore and i look forward to the testimony of our witnesses and i agree with the  gentleman from georgia that when we don't sell to one of our friends we drive them into the hands of others so not only do we not help the development of our industry we help the development of industry elsewhere which creates a new competitor economically and depending upon that competitor is a new competitor strategically as well mr rupert berger the chair of the techno technical and tactical subcommittee of the intelligence committee who helped to bring to our attention the potential impact of i talk on the domestic satellite industry and the potential ramifications of that for u s intelligence would like to submit a statement for the record on that issue and so without objection i would like to have that statement added to the record at the appropriate place hearing no objection it will be done in addition i'd like you know animas consent to add to the record the congressional research service  study of november twenty fifth done at the request of this subcommittee it is some thirty two pages long and it is comprehensive and helpful and without objection will be added to the record of this hearing and i guess the gentleman from illinois does not have an opening statement i'm going to waive mine i'm very anxious to hear the testimony of the witnesses when i don't consent to make it part of the record i thank you and i know the gentleman from california is no less anxious to hear the witnesses but we are anxious to hear his opening statement thank you very much mr chairman i want to thank you for your leadership in this very significant issue in terms of exporting american technology and these economic decisions that are also national security decisions and thank you for letting me be part of this subcommittee hearing today so many american companies are now american in name only having sent their manufacturing facilities along with millions of american jobs overseas this has been both an economic and a national security disaster for the people of the united states the latest move by g e to join forces with a chinese government run company to compete with boeing and airbus in the sale of avionics technology is so much for our prosperity and our national security it is unforgivable mr chairman it was a disastrous economic mistake for this congress to grant communist china most favored nation trading status to begin with ever since then tens of millions of good jobs have been lost to china which has resulted in the present disastrous situation where communist dictators control our economy by holding trillions of dollars of u s debt they also have technology available to them to outcompete us and to defeat us militarily which is again a disaster for the people who need states of america the foreign affairs committee should ensure that the greed of a few american business people who have already done so much damage to the american economy and again so much damage to the well being of american american engineers and skilled laborers that we have to what we can to make sure that they are not permitted to render our nation security in permanent vulnerability and if we end up sending over to communist china which is involved with political rationing and involved with sending military equipment to  regimes and we let them have their art the technology that was developed by hundreds of millions even billions of dollars worth of us research team on us for not stepping in and getting in the way of these our we have with us to acting deputy assistant secretaries acting does does not comment adversely on on their the authoritativeness of their pronouncements but it does reflect on the fact that it's taken a very long time for this administration to to gear up and get its people into positions throughout government we're at the close of two thousand and nine you could blame the administration for the fact that they've been slow to gear up you could blame the senate this is one of the few things going wrong in washington for which you cannot blame the house of representatives i welcome mr matthew s borman acting deputy assistant secretary of commerce for export administration in this capacity mr mormon is responsible for implementing the bureau of industry and securities also known as b i s controls on dual use items of defense trade controls also known as d d t c at the state department first mr brown thank you mr chairman it's a pleasure to be here before the u n the committee again and i commend you for your continued interest in this subject chairman chairman ranking member rice and distinguished members of the subcommittee thank you for the opportunity to testify on the department's role in controlling the exports of aerospace items department's bureau of industry and security in conjunction with other federal agencies administers controls on a range of dual use items including aerospace commodities software and technology to further u s national security foreign policy and economic objectives minister enforce the controls through the export administration regulations promotion of the competitiveness of the aerospace industry is the responsibility of the department's international trade administration has a different part of the part of the commerce the international trade administration commerce before several critical functions to help ensure the u s aerospace industry remains globally competitive the aerospace market is the united states most significant advanced technology export sector in the last fiscal year fiscal year two thousand and nine eighty billion dollars worth of aerospace exports were made from the united states and the aerospace industry sector of course there are many dual use items items that have both civilian and military applications in the last fiscal year of industry and security approved one thousand two hundred thirty applications for licenses to export aerospace products worth about one point three billion dollars that constituted more than seven percent by volume of all of the roughly twenty thousand export license applications we processed our control seek to allow us companies to supply secure markets and to benefit from international technology collaboration while minimizing potential threats to national security and foreign policy under the export administration regulations most civil aircraft and related parts including virtually all commercial aircraft and engines can be exported to most of the world without individual export licenses individual licenses are required to export these items however to cuba iran north korea syria and sudan as well as a range of prescribed persons in two thousand and eight the departments of commerce and state clarified our respective regulations on the export jurisdiction of certain aerospace components it appears that the clarification has served its purpose as the number of requests for commodity jurisdiction determinations for aerospace items which had been significant increasing has dropped substantially after the publication of that clarification we also seek to regularly update our list of controlled items that congress control is to ensure that reflects global realities including the availability of controlled items from foreign sources in this regard our technical advisory committees in particular our transportation technique advisory committee has formulated modifications to make sure that aerospace controls are up to date partnership between the aerospace industry and the bureau of industry and securities and been an effective tool in our continuing efforts to more precisely target our controls our enforcement efforts help to ensure compliance with our dual use aerospace export control policy this includes warning potential violations of the regulations by a variety of means including and use checks abroad and temporary denial orders we also vigorously pursue violations of the regulations and several examples of enforcement actions involving aerospace items are included in my written testimony which i request mr chairman be included in the hearing record a significant challenge for the bureau especially with respect to its enforcement activities is a longstanding lapse of the export of ministration act this lapse injures the ability of the bureau to employ up to date authorities to enforce the dual use export control system in control system the aim of the review is to ensure the system best addresses the threats and changing economic and technological landscape we face today this review is well underway thank you for the opportunity to testify in the department of commerce its controls on the export of aerospace items and i'm chairman chairman and members of the committee for the opportunity to testify on the export control process and policies of the department of state directed to direct defense tray controls in the department of state ministers the us defense trade system its mission is to advance national security and foreign policy through the licensing of direct commercial sales of defense articles and services and the development of the forstmann of defense trade control laws policies and regulations like any regulatory agency our goal is to ensure that this mission is performed in a manner that is transparent efficient and predictable as possible while preventing exports koori transfers of defense articles and technologies that are counter to or could undercut u s national security and foreign policy interests several years ago without justification the directorate had a less than stellar reputation for the processing of licensing applications during calendar year zero six the record process seventy thousand licensed applications with an average processing time forty three days  this is not tell the whole story however one point two thousand and six the directorate had over ten thousand license applications open awaiting final action and i'm proud to say that the situation has changed radically and for the better in two thousand a department processed over eighty four thousand licensed applications while decreasing the average processing time to just over sixteen calendar days the number of applications open at any one time averaged thirty four hundred and the number of cases that took over sixty days were reduced to just eleven hundred that year i'm also extremely proud to note that this was not an isolated event or the result of extraordinary exertions that cannot be sustained so far in two thousand and nine the department processed over seventy thousand license applications an average processing time of just fifteen days number of open cases one time was also dropped and proven of this magnitude requires changes to process policy and practices as well as sustained effort on the part of all those involved in the export process the problem geisha event s p d fifty six provided the impetus for many changes in policy in the processing of licenses including the establishing of the sixty day limit of processing unless national security foreign policy concerns apply and the requirement for applicants to utilize electronic licensing department of defense support in the policy and process improvements has also been critical to the department's defense technology security administration has been a steadfast partner in all the regulatory policy changes and most importantly in its own process improvements which included the use and continued refinement of the do not staff list identify identifying technologies and circumstances that do not require d o t review finally and most importantly these improvements have been the result of actions within the directorate itself we've done a detailed review of the process policies and practices used in licensing develop internal standard operating procedures publish guidelines and policy notices to the exploiting community and maintain a sustained effort on all fronts to improve the process on a daily basis kevin maloney and esteem in the office of defense trade controls licensing deserve much of the credit for these improvements regulatory changes have and will play a part in these improvements as i already mentioned section seventeen sea changes last year have significantly reduced the number of aircraft related commodity jurisdiction requests expansion of the exemption the permits re transfers without prior approval to include nato agencies as lightly likewise had a positive impact departments recently published a draft rule to clarify the exemption for exports in for foreign military sales cases and workers just completed the draft rule to clarify exports exempt from licensing one buyer for the u s united states government other improvements are all the drawing board in summary the improvements that take place to have been impressive and will continue the apartment is committed to making the system efficient transparent and predictable our goal is threefold first to establish a regulatory regime that requires licenses only when required by law or when us national security and foreign policy concerns are a factor that the applicant cannot address second to make the process expedition expeditious as possible a license is required and finally to design a process to support design the process to support enforcement any specific future improvement be implemented it will depend on a number of factors including the impact of any legislation that might be forthcoming however any improvement as undersecretary tauscher assistant secretary shapiro has made clear will be executed within the u s national security being the primary consideration i would be happy to respond to i thank you both for your testimony our export control system is based on the idea of controlling that which is export it and therefore an awful lot of the items important dual use items can be purchased by any american for any reason or for no reason no matter who they are and then we're going to hope that that person doesn't then ship it abroad permission mr gorman does given the fact that many of these dual use items could be put in a pickup truck and trucked to the iranian ambassador in any day of the week are we just fooling ourselves with the idea that we can allow these items to be purchased by anybody who can go on the internet in the united states and then that somehow we're going to prevent their export mr chairman i can tell you how we currently try to deal with that situation there's two aspects as it relates to release of control technology to foreign nationals in the united states there is a how far back when they get it was where you were what your software that it was illegal to ship abroad so the u s the iranian ambassador united nations was free to buy it at a kid but somehow we're going to prevent him from sending it or the electrons on the disk back to terrorism are you saying that we make sure or at least have a system to make sure that any american buying something has a good use for it and a legitimate reason to buy it if that's something that we would not allow the export of you know what i'm saying is the current system requires a  to do this so you can't you got to go on the internet you can't say ship it to the u n ambassador of iran you would have to say send it to this one individual given the recent terrorist arrests are we assuming that every legal citizen and resident of the united it's that not a single one of them would cooperate is is our hold the export control program based on the assumption that a single one of them would cooperate with serin you know ing where we think we're accomplishing something by saying you you know if you're sitting in malaysia or in denmark you can't buy this  widget but if you were the iranian ambassador the un's best friend you can't well that would still be a violation of the existing law because if there's a domestic transfer and then there's an attempt to make lawyer and trust me whoever is his best friend is willing to violate the the law of the great satan basically any american citizen or resident can buy any one of these things put it in the back of a pickup truck and drive to canada or mexico and the only person violating the law would be the guy in the pickup truck right well whoever's facilitating that illegal acts well you go on the internet you buy it it's delivered to your house by u p s you talk about the u p s driver in jail he does you know he's what he's doing is entirely legitimate he puts in his pickup truck and drive to mexico city we've got one person violating law we've got terrorist organizations where people are willing to blow themselves up here the chance of being caught is when you say zero words we have had cases we haven't for it's been cases where we have apprehended  prosecuted individuals who have pictured things in the united states and try to do exactly what you that we have a system that would do that if we just get all lucky no i mean we have a law enforcement agents both in our department and other departments who are on the lookout for that try and that's what they do i would say you've got thousands of things on your list you're trying to control any one of my staff by any of them as long as they can afford to just by going on the internet they don't have a use for any of them and thank god none of them is a good friend of the iranian ambassador to the united nations and with that chairman i'm going to ask mr boreman a couple of questions here and i'll start with in january the bureau of industry and security announced the full implementation of the validated end user program with china there have been concerns that one of those entities of these a technology china shared an address with a state owned firm that was sanctioned by the state department in december of two thousand and six and they were  sanctioned expressly for the illicit sales to iran and to syria as well so i would ask are you confident that this program is defensible on national security grounds yes i am in that particular case that that end user underwent a thorough intelligence law enforcement interagency review and the the location is actually a bonded warehouse  so we have a long record of being able to check and see what they're doing there and the intel information as i said intelligence and law enforcement of ration indicated that there was that that was a the bonded warehouse that the bonded ware out which means the items come in and they're secure and then there is sent to their customers and of course the company is responsible for informing us items authorized to go there don't end up at the customer that they're supposed to go which is a strong business incentive for them but here's here's part of the catch you've got to give sixty danes notice understand right you've got to you've got to give that notice to the chinese government before you subsequently have that opportunity to do that inspection and that first night ask is that still sixty days because that seems like an awful long time to get your ducks in a row if you're notified that the u s has tripped the question here as to the end use let me ask you about that it is sixty days that's right  must an inspector be calm accompanied when he goes in there by an official representative of the chinese government is that also still part of the that someone else in the customer i mean that's that's a significant business impact for the company so they have a strong incentive to make sure that the individual item comes in that that's for a specific customer in order that goes there it's not it's not it's not on the other hand the return on investment can be very very high well let me ask you one of the question in june the g a o concluded as a result of its covert testing of that sensitive dual use in military technology can be easily and legally purchased from manufacturers and distributors within the united states and illegally exported without detection the items in its test included gyro chips night vision equipment parts used for smart bombs  explosives what are your thoughts on that and then all for other members as i mentioned to chairman sherman right now under the legal authority we don't have to regulate domestic transfers of control to use items what are illegal of course is if there's a domestic transfer in the parties know that they're going to take it out of the country and we've had any number of enforcement cases where you've identified those transactions apprehended individuals and prosecuted them we will need to go vote we will reconvene after the votes thank you mr chairman and let me just ask the question first whenever i want to deal with the security environment in the pacific luda to my opening remarks  with north korea moving with their nuclear program and missile program china now having really in the pro in the midst of developing a counterpart to the f twenty two it seems to me that  these events on the front pages of our newspapers what effect would the u s sales of military aircraft like the f twenty two to japan or the f sixteen to taiwan have on the security environment in the pacific region given what i've said about north korea and china any any export there's going to be a positive a negative impact increase your friends decrease the enemy in each of those cases when we receive the requests we look at it very seriously to balance both the national security and foreign policy of the united states of that country and the potential regional impacts  so i mean do you do you see an imbalance occurring as a result of this do you see a need to move more aggressively  do you see some some need for us to look more more more carefully at this situation are you all concerned about the the balance in the pacific  d what role we are not playing to to get a better balance there yes sir and we we work very close coordination with the department of defense and from you know from the department of defense to pay com commander and what he has regional security plan and how that interplays with any specific requests that we receive is taken very seriously so if you had your druthers about this you would in the trade advocacy right business we only evaluate the requests that we do receive and we evaluate them at the time for japan for example we've got an extremely loyal upstanding country they've got a tremendous record on export controls there are relatively dangerous part of the world and we wholeheartedly support it exports there are the fast and would in the future if that was available ok good  i know we've got a vote mr chairman let me just ask a question about the employment impact that i brought up given the impact from an employment standpoint in our country how might including economic impact studies and rendering expert control decisions mitigate the harmful effects of outsourcing on the u s economy at least on the  the statements of the president that america does not torture apply only to the executive branch we're going to ask our two witnesses to remain and we're going to continue to ask them questions after the votes thank you in our science and technology area and in the area in which we are moving forward on is how do we more more progressively bring russia a more stronger partnership with the alliance could you tell me how might the sale of american made commercial aircraft to technology transfer and but generally speaking the sale of commercial full of commercial aircraft to russia would not even require a license and export license said it doesn't it would not ok these are civilian aircraft going for civilian  in russia it would not require a license and so that it's really a business transaction to the parties involved the u s seller and the russian buyer think that it makes business sense and so that's that's the perspective that we would bring to that additional such a sale but from our point of view the issue is really do the items need a license to go to russia or not and if they do you do a national security analysis what would be the unique challenges to those and the unique opportunities well the challenge aside i suppose if there is an issue of transfer of control technology to make sure that it's used for those civilian aircraft the opportunities i think i guess are obvious that is you have potentially significant sales from u s company and then with that there might be attendant other impact on the bilateral relationship and so how would you categorize the status quo right now well it's i said before if it's a full up civilian aircraft those those can be exported to  a bit of an idea of the extent of our canadian export relationship it is so large is it's about nine point seven billion dollars how would you explain and our canadian export well canada is our largest export market and in the aerospace area last year calendar year zero eight i guess there were over six billion dollars worth of aerospace exports alone to canada and there's a very strong connection integration between the industrial base particularly the aerospace area canada the u s a lot of u s companies have facilities in canada canadian companies that have saudis in the united states may i wanted to while moving around to end two thousand and seven the united states signed treaties with the united kingdom and with australia that would eliminate the need for the export licenses for certain defense and counterterrorism technologies and one motivation for these treaties was to facilitate a collaboration a military aircraft such as the joint strike fighter more than two years after their signed the treaties have not been ratified by the senate so what impact would modify the ratification of these treaties have on the domestic aerospace industry basically the determining what the impacts are going to be of the treaties if ratified is a little tough to determine far out for downrange the treaties have certain specific requirements k approved a community in addition to the u s community who are exporters but and then it has an exclusion less of certain technologies that are excluded from being treated as exports under the treaty because of all of those variables it would be extraordinarily difficult to predict the pack of the treaties on a specific sector or a specific area we're just going to time with that have to tell all right thank chairman we're in a hybrid situation in that one member has done his second round but we've had members who haven't done their first round starting with mr menzel thank you chairman for having this meeting and got it the area that i represent used to be known as the machine tool center of the world and that's rockford illinois and we have probably two thousand factories in the congressional district no one really knows because it's kind of hard to to quantify them on unemployment is officially sixteen point nine percent add seven points  it twenty two twenty three percent i guess what has really bothered me for years is now the restriction on exports of the five axis machine tools  when i was elected the u s share of the worldwide machine to sales around thirteen to seventeen percent now it's down to seven percent and we have a situation in rockford wholly owned chinese industry bought a machine tool shop saved ninety jobs directly indirectly another hundred and eighty effect that company wanted to make a five axis machines they couldn't export a back to china even though china owns all the technology it is meant actually manufacturing it here in the united states i mean that's that's lunacy and it's continued over the years as we try to rework the export of ministration act and year after year we sell fewer and fewer machine  tools and it's not that it's just part sun united states becoming an unreliable supplier you can never we can never quantify how many sales are lost because the united states is simply an unreliable supplier i've seen the brochures come in from european countries and canadian countries canadian companies i'm sorry canadian and european companies saying we are i tire free i just don't know how long or what it's going to take of for this congress or for the agencies to realize that there's nothing immoral about a five axis machine and a constituent about an eight access cutting tool from a german company and we have one of the most sophisticated laser manufacturers and in the world of the whitney they can cut through the laser so powerful can cut through one and a quarter inch of bullet proof stock and whitney could have been manufactured here because unless you could have a overseas sale why limit it just to domestic manufacturers i mean you know i guess my question is why don't we just grow up and realize that the world is more than four a and people can come and take a look at these machine tools have a at the mall in milan every two years or in or in chicago and simply copy them by taking a picture of them they would want to tackle that one i guess that's in my bailiwick their ear i think you're right i mean this is this is this is a very vivid example of the challenge of export controls because as you well pointed out folks in the machine to industry i think would say export controls as significant responsible for the decrease in market share and the development of foreign competitors course the challenge is i think it's most would agree that we would not want a five access right in today's technology you've got to have more than four axis and i even even the i s considers the movable platform to be an axis and i just you know those regulations really i mean the of developing i would call the short term revision to the regulation to address this at least in part based on a foreign availability we study we did and of course that's exactly the kind of thing the long term more fundamental reform the president has directed us to do has to look at exactly those kinds of issues that's exactly right ok the the other question is you had published a notice of inquiry on the effects of export controls on decisions by companies abroad to use or not use  our preference would be to avoid u s products or u s components if we can because we don't want to take the risk that somehow the export control system and the policies will impede their ability to do business and so again that that's exactly the kind of d tell you that the charge to us is don't necessarily just look at the existing system and decide how to make it better but really look at what would be the best system in light of all these factors including foreign availability including design out desires of foreign buyers to construct a system that that really best addresses the security and technology and economic realities of the twenty first century so and one of the pieces of the charges to very take a very hard look at the control and see should the controllers be pared down to something less than they are now do recommendations to the agency principals early next year and then they'll have to decide based on those recommendations you know how to implement that or what they want to implement but i think the goal is to really do something next year thank you and thank you know the gentleman from virginia thank you mr chairman and welcome this subcommittee had a hearing a number of months ago where we looked at the satellite industry and how export controls affected the satellite industry and it's not too much of a stretch to say that with the best of intentions and trying to control sensitive technology and the export of it we ended up damaging the domestic satellite industry and intentionally helping foreign competitors who then had no controls of the technology transfer and so in an effort to do a noble thing where actions were self defeating obviously not intentional but we heard both the industry and frankly ultimately had trouble achieving the goal behind our actions what you think we've learned from that what do you take away from that experience take that first because i've got a i think  that any as matt was saying the control this is the key you know narrowing them down making them specific making them clearly where there is an edge required to go ahead and maintain that but not take it down so far that you end up hurting everybody in the process even those that do not cause a problem in the greater scheme of things the where the technology is simple well known for  only available we take a look at that problem we have thor to lists right now is that we look at them very myopically they're structured to be very myopic i control defense articles defense articles anything specifically designed and developed for specifically designed to develop for military and use or add and use more and use that's determined to be military vast majority of firearms for example our military foreign spy control firearms so therefore our control of the parts of the whole and so those far when the action was taken in ninety nine move the satellites it had the identical effect and it controlled things that we did not care about in satellites and things that we cared a lot about in satellites so with the legislation that's currently in twenty four ten if that's able to be realized and right now the department of defense has a study ongoing under section two hundred forty eight of their india so go ahead and look at the industry and separate that we from the ch look at those that may receive or require higher controls and those which should be controlled another matter if those two things come to fruition i think we have a better way to do it but i guess i'd add mr correct and i certainly concur with what you just said but i guess i'd add one other thing you ought to consider and that is unintended consequences i mean after you could you could still do what you did and come to the same conclusion and you'd be wrong correct in retrospect i don't think you can argue that our policy these are the satellites worked it hard to mess again history and the technology got transferred anyhow just by other people who are then able to exploit commercial sales and so forth so that can't be the intended consequence and i think we have to look at even if the the goal is desirable if it's if we realize that by adopting a policy another that's the operations a success but the patient dies i think we've got to look at that saying that that's not something you know we want to achieve that's not a desirable objective absolutely it's a little bit in the fundamental review that we're undergoing right now correct that's exactly one of the tenants were applying is we really don't want have a policy that drives foreign customers to foreign suppliers even at the risk then of technology transfer yeah you work to work to mitigate that as much as you can but ultimately if a foreign customer buys us products we have some control visibility over that in addition to the economic benefits and let me ask a building that a little bit a devil's advocate question perhaps the nature of technology today that's very different than what we originally when we envisioned the original export control regime in the middle of the cold war you can't control i mean it just it's sort of a hopeless manager and so there may be some limited things of highly sensitive nature we still control but devil's advocate question maybe you have to basically yield to the the you know the the the  imperative of technology and just say there's just things we can't control and so we're going to recognise that a move on the very notion of an export control list is questioned in that devil's advocate question obviously and i'm i'm just trying to how far as i thinking along those lines well one of the ways we've been evolving the system in my sense is we'll continue to do this is you're right there are certain strata of technologies that are just not controllable but they still can do us harm and so another way to get at that is to deal with the foreign parties involved and one of the ways we've dealt with that is we've we've identified a a chairman ring of foreign parties that we're buying and trafficking in low level electronic components that was the same type showing up in i d s in iraq and afghanistan you can't really control them based on a technology level but we published a list of these parties and made them preschool and that has had some effect so there may be other ways to get at this because there are technologies lowlevel that can do that to us and our allies harm  and we want to deal with them in some way but you're right some point you can't win based on technology and if i may mr chairman just a final point i hope and in your deliberations i'm very glad we're having this review keep in mind the burden of private sector to you know you know i worked in the industry for the last twenty years and i can over every year the last six seven years i had that i had to take a refresher on export controls and i'll be honest with you i am a high school graduate but they were tough to fully get it right make sure you weren't violating the law which which category and when you multiply that in terms a liability of large companies that may or may you know are in various businesses it is a real burden it's an economic burden they bear and so if we can and streamlining our own requirements had a chance mr boreman do now and then it seems like we're allowing exports to a particular country with the promise that the goods will only be used for civilian use within that country do we put any stock at all and if that promise comes from a chinese company well yes i mean if they double promise and cherry on top that they're not going to use it for military purposes does that ever convince you we don't rely solely on even when it comes to china is here any time when you're going to allow the sport because you're told that the end user is not going to be military not sole because of what the end user says there's any number of other sort i mean you know if it's not been used military today it will be at any time it's useful for the military so there are occasions when if you had two applications one said we're shipping to the people's republic army and the other says we're shipping this to a private company that's owned by chinese interests and located in china you might treat those two applications differently sure because there are plenty years in china who have legitimate civilian businesses and there and it was very single one of them which defy the people's liberation army if that army wanted that those goods to be used temporarily or permanently for military purposes after remember most of things that we license are of course on the dual use side so they're machine tools or they're not saying that they couldn't be used for civilian purposes from nine to five but can you imagine that they wouldn't be used for military purposes from five toni well again in the in the inner age where you process with state defense and energy we look at all the available information including classified information to make an assessment as well i would hope that you would be less trusting and would simply recognize that once something is physically located in china it is available to the people's liberation army at their request at any time eroei regardless of any promises that have been made to you and if you start with that as a starting point we'll have a more that the goal here isn't to paint a pretty picture the goal is to actually control this technology which is while shift back to the idea of goods being that are widely available in the united states  if something is easily portable and easily purchasable by anybody in the united date's does that factor into whether you think you can actually control the technology by prohibiting its export well maybe i take a step back and this battle about how we put things out of control is our control as roughly three quarters of the items are subject to a multilateral export control regime and the process every year that that goes that that happens is in the united states we defense and state department look at the list and decide are there items that should come off the list because they're widely available or technology now or they're items that should be added to the list then we have to get all of the other members of the regime decide so the items that are on the list are items that really are supposed to have so there are plenty of things on the list there anybody could but in the united states could buy on the internet and put in that pickup truck i talked about i would say that there are plenty of things on the list i mean hundreds on the list there's there clearly are things that could be bought over the internet but again you know cable by we need to shift to a system where we have a no your customer regime just as we've imposed to know your customers  on the bank well we don't identify a few hundred items or a few thousand items and say look if you want to sell these in the united states it's got to be to a licensed consumer yes hospitals have a reason to buy those isotopes but you can't just ship them do jack jones in toledo who doesn't own a hospital and that that is the case in some cases i mean select a biological agent for example some hazard goes but just to give you the isotopes is the wrong example whether the order of magnitude last year we processed about twenty thousand export license applications for exports if we were to look at imposing a similar government vetting before sale review for domestic sales you're talking or you would license the purchaser and once a somebody is a certified purchaser you wouldn't to look at it again and you might very well take thousands hundreds of items off your international control list i mean this stuff works bureaucratically but the fact is anything that a guy named jack jones can you know with a p o box in toledo can buy and truck to to mexico or canada is not controlled you can believe it's controlled you can say it's illegal to do this or that you can say i got certificates in files in a review process but the other guy's got a pickup truck and that and that trumps you let me move on to i mean but if ultimately the system comes down to anything that somebody couldn't take out of the country and that magnitude you're talking about an extremely small as well i'm talking about those things for which we do cannot identify those customers that have a legitimate use it's one thing to say it's going to be sold to jack jones it's another thing to be to say it's going to be sold to a company that has it is known to the seller and has a legitimate and use for it it is extremely easy to for a foreign state or a terrorist organization to get appeal box in the name of a guy named jack jones it  is much more difficult to stablish a an aircraft manufacturing operation that would have a legitimate use for this or that we're not going to make it impossible but so far o enemies have not created a whole large scale dummy companies in the united states p o boxes are a lot easier mr kovac and i just want to put my colleagues indulge me for one last question illicit cargo and well i doubt that that's not an exaggeration i know that the u a e has and adopted regulations to enforce its two thousand and seven export statute malaysia  another key transport hub and has even taken those actions can we trust malaysia with u s technology should we oppose technology transfer especially  facilitates offshore production to malaysia at this time we're going to have a little out of my field on the u a e you're right the u a e now has an export control law there in the process of  standing up their export control authority what they have told us when we have discussed this with them is right now because they don't effectively have regulations in place any controlled item is prohibited from being continue to try to press them to to take progress make progress they have they made progress well they're working on an export control law they tell us and you need to press them to we're going is the first time they told us they were working on it they've been working on it for a while did i have here at that time i'm not sure you very well may have let me old to the gentleman from illinois i want to follow up you then the same dumb truck has a military application as a truck and in the in the chinese army and i just you know export control of the united states unfortunately it means that we're losing all our technology because of of being unreliable supplier soon they are trying to dance and on the head of a needle as to whether that truck that will have parts that are machined or cut from five axis machines or use for civilian or defense and then they just  you recreate a whole new frame for example on a military truck what is going to be the same tonnage of caring for a civilian truck i just i'm sorry magnesium and were made here in the united states but now it's plastic unfortunately but i know that's why you know we sit back in the arguments we're going on for i've been here for seventeen years and how much more of our machine tool industry do we have to lose i mean it you know you can buy a profiling machine offer for twenty five thousand dollars you just you just send in your coordinates on your design and with the layering they can create a product like this for various small amount of money so when somebody buys it they know exactly what it is in fact i've got it in my in my bag it's how much more of our machine to industry would are we going to lose because we're losing all the technology and i know you're with me on the issue but i guess what cspan here maybe get the message out more we've got to move faster to this  military aircraft that's one of the challenges and i'm not saying i disagree with the challenges the other course is that these are multilateral controlled we know that other partners apply a different china policy than we do but if they're not multiple out of control that and you open up the possibility for these captive machines to go from other countries to a place like iran so that's how we've got to try to figure out how do we not and i don't know the very legitimate i don't know i don't know if you can stand out that either me at one time at one time knowledge was discovered today had some senate you know and it's not it's not that difficult and you know you don't want to give the people the bad guys in iran anything but goodness gracious with what the incredible march of technology  the ability to make these machines almost anywhere and here we are in the united states to keep on losing more and more and more i mean i've i've talked to people that you know a bit of these machine shows this is you know we'd like to buy more from the united of of our own business here because some that footbridge collapsed in kansas city and it wasn't a problem with the tensile strength of the bolt it was just the wrong one was put in by the architect on it but that's the whole problem that we have we're going to factor in here is that is that some of my colleagues in dana's good friend of mine think that because we've got a real jam here that we can prohibit somebody else from using it when the same thing is made in a country like canada that doesn't have the extent of those controls on it but i just i just want to hear that the i had one further question and deemed exports just a follow up and go ahead but no i think that that's exactly the point though of this the review or entertaining is exactly to try to grapple with those issues in in a way that reflects the twenty first century reality absolutely but the other issue is that we have a university back home that has many foreign students  and i helped link up that university to a very sophisticated company that in the school is now doing research for the company the problem is was deemed exports some of these kids coming from the countries on the on the list i mean companies are really getting in trouble in the school figures out what are we going to do here are you take a look at the deemed export issue also absolutely ok in fact we have a new advisory committee we caught the merging technologies and read that research guys a committee that is specifically looking at the issue of what methodology should we decide to apply to technologies that should be subject to deemed exports  you fact i'll sing their praises as they take their seats will first hear hear from is marian blakely presidency of the aerospace industries association prior to her work with that association ms blakely served as administrator of the f a a and chair of the national transportation safety board next we'll welcome david bure tow senior adviser and director of the defense industrial initiatives group at the center for strategic and international studies mr bure tow was principal deputy assistant secretary of defense for production and congressional commission on the prevention of weapons of mass destruction proliferation and terrorism previously he served as deputy for nonproliferation policy in the department of defen apted testified today and i'd like to ask that my written statement be submitted for the record if i might say i represent more than two hundred seventy three member companies with total high technology of two hundred and sixty seven thousand six hundred people we operate is the largest trade to says organization in the united states across three lines of business space systems national defense civil aviation  consistently generates america's largest manufacturing trade surplus this the seven point four billion dollars in two thousand and eight but continuing this track record of success can't be taken for granted so why do aerospace exports matter last year nearly half of the over two hundred five billion dollars in u s aerospace sales went to overseas customers it's critical to recognize that these exports a necessary to both sustain and increase the capacity for cutting edge innovation in the united states industrial base we must continue to compete effectively in the international marketplace and i want to speed up our economic recovery increase our jobs and set a trajectory for even greater economic growth aerospace exports also serve as a foundation for building key relationships and a shared pluto with important international allies and partners additionally our companies rely on exports to provide americans defending our county our country and guarding our homeland with the very best technology at the best price for the u s taxpayer the value of aerospace exports is certainly not lost on members of this subcommittee nor on other leaders here or capitol hill and in the administration the consistent and sustained efforts of senior leadership in congress and the administration is crucial to ensuring a level playing field opening up markets for u s products winning sales opportunities particularly in the face of strong and determined advocacy from foreign governments on behalf of our international competition presuming our industry is able with the help of the u s government to compete successfully for contract in the end a national marketplace one of the last hurdles to cross is the u s expo control system this subcommittee has heard from ai in the past about our ultimate goal for obama zation of all predictable efficient and transparent system we've heard that before today but permit me the opportunity to clarify again what we mean by efficient the government must make decisions on export authorizations in a timely manner eliminating unnecessary administrative delays by predictable we mean that the license process must be consistent with applicable laws and policies and that similar export licenses should be considered in similar timeframes transparent means that the rules governing the license process must be interpreted and used consistently and industry and foreign partners have quick easy access to the information on the status of their applications in two thousand and seven our cold war era export control system had reached a point where it was paradoxically hurting our massive national security it was also hurting our economic strength and our technological competitiveness had a good chance of worsening this  committee recognizes that it is of our national security interest both to prevent our adversaries from accessing our technology and to facilitate technology trade with our closest allies and trading partners so i'm pleased to report that your efforts have resulted in a great deal of improvement and how the export control system operates however i think it's clear to everyone that additional steps will make the system more predictable efficient and transparent i continues to be a staunch supporter of senate ratification of the u k and australia defense trade cooperation treaties our industry has also welcomed president obama's call in august for comprehensive review of the us x control system we believe that there are several potential reform initiatives that this can be committee can actually lead i encourage the committee to review by submitted  descriptions in conclusion the u s aerospace industry has the strength to left america and these challenging times our nation reaps the benefits of aerospace exports in the form of enhanced national security an economic growth the government industry partnership supporting aerospace exports is crucial and it can't be taken for granted as you're aware previous modernization efforts have met with varying degrees of success experience suggests that critical factors and enabling meaningful reform include sustained oversight by senior administration officials as well as effective consultation with congress and the private sector we stand ready to work with you and the obama administration to ensure that we continue to make meaningful progress toward a twenty first century technology control machine thank you very much export controls for quite a number of years we have a long record of studies i cite those and in my statement we've learned a number of lessons for those that are in there as well i think all i want to say or earlier two things one is there are some national security issues here that the current regime tends to work in the opposite direction of what we would intend them to do so and i would note three things one is in fact there is a lack of prioritization in the system today that leads us to spend an awful lot of time on things that we should well spend less time on and perhaps ignore the things that are more and secondly is the effective lobel ization a number of the committee members brought this up in earlier with the first panel and the degree to which at some point we may get to the point where we can't get access to what we need because somebody else doesn't want to be subject to our controls we have a reset point yet we've come close to it a number of times there's no smoking gun but the elements of the gun are there and third is the degree to which we have the unintended consequences of promoting a capability elsewhere that actually works against our national interests rather than favor of it these are all tough questions are hard to wrestle with i think it's also instructive in my statement goes into some detail on this to look at what the europeans are doing with the new e u directives on both and transfer and the potential to create a situation that would i think substantiate some of the comments i made about the national security impacts with that mr chairman i yield back the rest of my time and and proceed to your questions thank you very much mr chairman for holding this hearing i note the presence of my congressman at least indirectly my mother lives a palace verdi's you've been there a long time we actually are contemporaries and went to p v not quite the same school but close mr chairman i want to thank you again and the ranking member for inviting me to speak today on this issue of controlling us aerospace controls and asked that the full statement that i have written be placed in the record my general recommendation which is based on my experience over the last twenty years initially working in the defense department licensing a lot of aerospace items particularly missile tech is that it would generally be a mistake to encourage more us aerospace exports to go license free or to reduce their ability at least attracted to track them  after nine eleven and at least three post cold war rounds of export control decontrol we now are at a point where ninety nine point five percent of the good subject the commerce department regulations are already being exported license free as for mean ition items the us last year sold at least ten times more than any other country capturing sixty eight percent of the world's arms market this suggests that we are holding our own against our competition even under current export controls more important i think such controls are still warranted this is my role i believe on this panel to make that case at the high end there is plenty of aerospace technology in the us should only export with the greatest care and only in support of the most critical security alliance in cooperative undertakings these technologies explicated in much greater length than that in the testimony include things like software codes aerospace black art skills or systems integration insights satellite technology language design integration and satellite subsystems of satellites that we use in our military unmanned air vehicles and related ground equipment and technology stealth technology and air and missile defense penetration aids and advanced missile and air defense systems and should be noted that most of these military related technologies and their subsystems are controlled by the missile technology control regime and that when you do decontrol you have to attend to that we talk generally about reducing nuclear arms this will inevitably lead to some kinds of limits i suspect on missile technology and missiles the instrument for doing that will be very heavily dependent on the m t c are could be that we get rid of the  but then we're in a bit of a bind with regard to our general goals on doing strategic arm reductions there are still difficult adversaries out there and they try to acquire our goods and they cannot get them anywhere else in fact there have been fifty to seventy five federal prosecutions last year of individuals attempting to export these items illicitly out of the us despite all of the reasonable points the chairman points out i sympathize with what he's commenting on it's still a lot does get exercised also after nine eleven the transshipment of dual use military technology directly from the us has become a much greater security concern at the at the very low when we have this example of bin laden buying a surplus military transport which is to my knowledge i'm not sure if it's a control technology even now i think it's still possible he used it for transport purposes the general accounting office study was cited i will go into that meanwhile i think neither state nor commerce has yet to reassess what a complete list of items might be that terrorists might be seeking slightly different  point i think they've got their eye on the commercial ball and that's important but i'm not sure they have their eye on the other ball which i have to balance why then is there a push for the control i think one reason has to do with the integration of us with european aerospace firms the e u based consortiums that operate throughout the e u and the us no longer have a very high interest after the cold war and investing heavily to develop defense capabilities as a result they are falling further and further behind the us in key leading military related technologies polluting the list i just gave you and they have a clear interest in getting access to this technology without having to pay for the research and development sells the same to you base vendors are among those most interested in decontrolling military exports to places like china they tried to do so several years ago let me get to the recommendations i think by the way doing a totally license free approach even with regard to australia my wife's australian so i say this with hesitation would probably be a mistake you still want to keep track of things i don't think you want to hold things up but you want to keep track of things and you don't want to send things without a trace even to good good neighbors like australia and say that hasn't and only my wife will talk to me later recommendations i think you need to clarify what's being controlled before authorizing any further decontrol what specifically might be shipped out under the controls needs to be specified by industry before government pushes to change broad categories to reform the export control system second i think we need to consider ways we might share the benefits of control technology without transferring the technology itself in the case of space launch vehicle services the services relating to you a visa and the intelligence they might gather there is in fact something of a industry already i think we need to investigate how much more can be done finally i think we need to strengthen rather than undermine certain critical multilateral aerospace control efforts such as the m p c are in particular if we're going to have missile defenses it would be nice if the technology to defeat them wasn't going around license free or uncontrolled the m p c doesn't cover all of that yet  that i conclude i should make one last comment i certainly sympathize with the previous panels need to make things transparent and expedite i am i was a little astonished after many years looking at the system  how many inefficiencies still have they're doing better th want to thank you i'm going to have to step out in a few minutes for a few minutes in our vice chair will take over chairing the hearing in that interim this politically reading the detailed testimony that you referred us to  looking for things we can do here in congress and you basically have said pass h r twenty four ted been there done that is there anything else for the house of representatives to do well we think at this point of course we would like to ask you of course to be as persuasive as possible with your senate colleagues because i do think a lot of the action as you doubted l you know but i do think we do think dadaab of things that might be very helpful in all of this we'd like to see more flexibility in the way d d t city can use the fees that the big elected because we want to see the system modernized and we do want to see the kind of updated computer system that the state department needs we think that the threshold where there's a short twenty four ten provide that flexibility on the fees it's my understanding you do so you know i would check that all right let me go to one it's a tiny bit harder and again this is something that's a multilateral issue but it's one that i think you know as we're discussing things here the pal when we're talking about the missile technology control regime white now we are catching all language is constructed the definitions are not as precise and they certainly are not up to date with regard to these kinds of technologies now again advocacy on that point and helping to instruct that we take that on it are deleted from the definition of missile anything that traveled in under two hundred miles an hour would pretty much solve this problem you know i don't want to try to pin down that definition i'm certainly not the one who can conjecture all the potential issues there but we do see that this is not up to date it is not clear and it is certainly something that is not to our bad edge as it's currently constructed so you know among things that i'd point out those are some of the things that i think we would very much appreciate congressional action on across the board i've been concerned with iran being able to get its hands on various technologies including aircraft parts we made a mistake in jones print up some letterhead on a computer jack jones aircraft repair corporate it should one of your how much of a burden it would be if there were certain items produced by your members where they were just allowed to ship it to anybody who claimed to have a company and a use for it they'd actually have to know something about about the customer the circumstances i'm familiar with are going of course to commercial aircraft and they're going to the issue of safety of flight this is a situation where i think we all understand that we have enormous issues with the air radio regime but we certainly don't want to undermine the safety of passengers following alone i think interrupt all that's outside the scope of this hearing what we should have done is said iran should ground its fleet as long as developing nuclear weapons and that anybody who dies a lot of those planes dies at the hands of the ayatollah not at the hands of the united states we made a clear mistake in instead telling iran that they can have commercial aircraft functioning and a nuclear program that's a mistake we made it's outside the scope of these hearings  let's return to the scope of the hearing how much of a burden would it be if you were members had to know the difference between a real user of their product on the one hand and some guy with a p o box and and some letterhead he printed up on his own the zone the printer i think at this point in the defense or a no there's no question about the fact that our companies do now use i mean i think again the things that are at real issue that have defense and military sensitivities of howrah i don't think we're running into an issue there but when you get down to what i think is at the heart of this it's an enforcement issue and you know how do you track those issues when someone violates u s law we we will never be able to enforce against a guy named jack jones who drove his pickup truck to mexico city so the question th is do we have a list of individual companies that you're allowed to ship to do we just say that it's your obligation to know your customer we have to put the burden none fortunately on legitimate actors saying that jack jones the guy in his pickup truck is subject to criminal prosecution it's not going to deter jack jones so we've got to control things at the factory gate of your statements about grounding the iranian airline fleet which should have been if we were going to actually be serious about putting pressure on them not to develop nuclear weapons that would have been a very good way to do it a safe way to do it but it sounds like we didn't have courage enough at that time to move forward with that policy let me just ask there's a debate going on about whether or not we should have a two tiered system of controls governments versus the other tier which would be democratic governments clearly democratic governments and would be have somewhat unlimited restrictions china has been the one element that has prevented us from having that system because there are so many companies a large american companies that are making huge short term profits by dealing with that gangster regime what it was the panel think about two tiered system and whether or not idea of the two tier system that are very hard to solve it's pretty easy to put most countries in the world into one category or the other as you know it's there it's the ones at the boundary plus china which is a different question that come into play the two issues are at the boundary number one is where exactly do you draw that line the second is in fact as you know sometimes countries move from one of those categories into another without a whole lot of warning and so the system would have to be able to accommodate both of those things neither of those would solve your china issue everwhere where the question of short term versus long term clearly needs to be addressed well our refusal to define china as a potential enemy even as it's still lower worlds where human rights abuser and has an expanding their own military capabilities i think has had dramatic negative impact on the security united states in the long run but go right there question still on the table  i would warn you though having administered export controls it and use controls and destination controls are something that you have and use but in the end for the really important stuff there's an expression it's like kissing your sister it's not serious and the reason why is if something's worthwhile and important it will move and it will move from the destination you've okayed to destinations you don't want it to move and if you don't have a way of tracking that that usually means an end to individual validate your goose is cooked a lot of these schemes where you send things to the e u or great britain or i say again australia license free means it's over to them and if they don't have a tracking system and we don't as to what was received it's over well i agree with that so we're talking about this really a for everybody that we have to know who the end users are going to be unable to have a system to determine that i agree with that and what about you want to tutored system you know and i don't think any of us advocating license free per se i mean even the u k and australia treaty is that we are very much in favor of still stipulate appropriate technologies and of course trusted in uses they are so and that is the highest echelons here let's just take a look at this what we've gotten out general electric announces they're going to go into the and as a partnership with producing aerospace parts in china is this not against the national security interest of the united states considering that china is still a vicious dictatorship and in considering that china's relationship with the regimes like iran and north korea except for that were traced very irresponsible if not hostile actions burma except for a is a is this not in all pose against the interests of the united states american national security as well as economic mind a state of the new joint venture that general electric has entered into is that it's entirely on the commercial side commercial avionics is what we're talking about we're talking about again technologies that are appropriate and widely available worldwide and in speaking about the economic interest the issue in the long run is that you are going to have a healthier industry you're going to have also both jobs in the united state a modern jet airliner and avionics that will go into a bomber that will deliver a a weapon on taiwan or or somebody else or the united states or japan i don't think that there is this distinction and i i think that number one anybody and our cabin corporations have been doing this anybody who builds up the avionics and the aviation aerospace capabilities of china at this time is number one be trained their employees have been loyal to them all this time rather than having to buy parts from us they're going to now my new factory in china and number two it's not only bad for us economically but our national security will suffer greatly in the long run unless of course there's  as my perception that they are high level decision makers in the aerospace industry are not considering the national security interests of the united states and not see even considering the long term interest of their employees much less their own stockholders who in the end or that we're ending up building into a an industry that will compete with ours in china can we logically say th that it is not a good thing to leave these decisions up to people in the industry but instead we should be trying to establish a policy to make sure our country and our countrymen are not betrayed well i would take complete and enormous yes action of course to the characterization of the aerospace interest in terms of our national security i think we are the ball lock on that and i do believe in fact that we with the kind of innovation and the kind of ability to compete which we have great confidence in that with appropriate technologies not all technologies the united states can increase our national security because in fact we will be able to continue to innovate we will have the kind of economic engine that allows us to could train you to be have the technological edge that's inherent in the system that we are currently using and i would refer you back again to fifty seven point six billion dollars of trade surplus which is what is driven by our ability to also appropriate technology when the chair without chinese can manufacture this and they can pay their people unlike our own very well paid aerospace engineers who deserve the pay they get if we ship those jobs over there we are not going to have that trade surplus anymore because people will be able to buy chinese made airplanes i think this is a catastrophe in the making and  every patriotic american should stand up to the aerospace industry imus look i am someone who stands in all of the accomplishments of the aerospace industry in the past let's just hope they're not doing things that are put my children in jeopardy and make sure that we don't have good paying jobs for our own people any other comment i make one other comment about this though but we're talking about a situation in which we actually cannot control the world dynamic on this the fact i'm out is that the chinese are entering the aviation aerospace market where the we are there or not that will happen it is not a situation we control well i have tremendous confidence and in that i think that shared among the leadership of ai industry is o to innovate and to compete is something that will keep us in the leadership as long as we are not trying to pull back into a shell and hold on tight to only what we have now we will evolve and exports will help us  with the last word on that go right ahead and then i'll make one comment yes i'm old enough to have been here before during a little while he's controversy if i think you were here that was not a pretty time for the american aerospace industry we made mistakes and they were very very significant players still pains else note fifteen years ago when that happened and r and we had a more open policy of trade and i supported it originally because i bought into the argument when i launched the satellites is not going to be any tech transfer in the end now there was so much technology transfer that chinese rockets today can outcompete american rockets because they've got technologies which you know they've stolen from us or were transferred back in those days that give them tremendous capabilities based on what research and development paid for by the united states taxpayer and we just hand it over to them or they come in and steal it and now they're using it to put us out of work and outcompete us and glad you brought that up thank you very much mr chairman i appreciate th but thank you i am i'm always continuing impressed with my good friend from california and his intellect and depth of these issues i enjoy our travels to gather and  and you continue to make some excellent points i might add that it might be perhaps not a lot is a fair attitude with kind of my something to do with the fact that they control over a trillion dollars of our debt right now doesn't necessarily put us in the best position it's something we both are working hard to address let me ask go back to the economic issue here a little bit do you agree that it makes sense to support u s jobs and the manufacture of u s goods as a part of our national security policy scott i think that that's clearly a very significant issue associated with that one of the real challenges this entire question of the export control system faces is that we don't have a good definition from a national security point of view of what defense industrial base we really do need to protect and at what level it's not just a technology questions question a skills question supplier base question access to materials and technology as well  as a government to look at these kinds of questions on a program by program basis rather than in a comprehensive manner across the board and until unless we tackle this from a more comprehensive is build up your comparative advantage sometimes that means letting go i think that was industry's point but how shall i put it they might like go a lot earlier than i would different but well let's take a specific situation your situation in terms of strengthening the u s industrial base doesn't it make sense for united states company the united states company to build the next tanker for the united states air force as opposed to building it by the europeans through airbus even knowing that some of the production will be in the united states well they're nervous i'm not i have lots of cars i have actually five  big carbon footprint potentially but i don't drive and i collect two of them are american the other three are japanese japanese cars a lot better i think on this we have to be fair if the japanese are willing to build plants here and get us to build these wonderful cars even though they're of their design only on the other hand american material science and other things is a kind of collaborative thing that should we care if they're trusted allies i don't think so i think when you get to the chinese and some of these other things you have to worry so i'm gnostic on that one by the way i still have the two old cars what about you mr blakeley how do you feel about the well we certainly because as you know we represent the industry now front and we're not in a position to comment on the tanker competition but i do think it's important going to this issue of what i and us trail base should be capable of doing and preserving those capabilities is a very important consideration as d o d s making choices that we do need to be certain that we continue to be able to preserve the technological age of this country is always saying and i would simply say that it's something that is tough choices and tough budget choices that being made i hope that will be very much a part of the strategy and the consideration it needs to be in examining the rationale of the united states policy for doing something like this like awarding the u s air force tanker contract to a foreign company the question to the man on the street is why would we do that particularly if it's for our own armed forces that that is a major issue it is a concern we hear from our union members how do we how do we grapple with that we've spent a lot of time looking at questions like that not just only for the tanker but for in fact most defense systems and i think you've got to start from the very strong starting point that this is not about who wins the contract but about what the military requirements are and whether or not those military requirements will be satisfied now we could have a whole different conversation about whether the draft request for proposals that was put out by the defense department for the tanker actually does the right job of defining those requirements and whether or not the source election criteria and source evaluation criteria will align with satisfy those requirements that's a different issue but i think the primacy of the military requirements has got to be where we start from here not the question of who wins the war do we have been the empirical data or information to do any comparative analysis on the number of jobs in the aerospace industry twenty years ago the percentage of those jobs that were here in the united states as opposed to jobs we've lost outside of the united states due to our export policies there's a lot of data that you could use to analyze that unfortunately a lot of that data is provided not necessarily by the government but by those who are participating in the process back during the one nine hundred ninety s in part as a  saver we no longer required companies to provide that level of information particularly for sub contractors when they had a government contract because the government had to pay for the companies to collect and provide that information so we save the money by no longer getting that data we can create estimates we can look at estimates i'm not aware of any of anything that looks particularly at the answer to your question but we'll check and see what's what is available on the record and provide that for you we currently have very searing unemployment in this country loss of jobs do you see anything that needs to be changed in our export policy dealing with the  attention of the subcommittee to a front page article on the wall street journal today and i want to consider including it in the record at this point on the value of the export import bank in promoting aerospace exports from the and and i think that's very positive indication of how you can have a counter cyclical from an economic point of view benefit from export promotions and i would note that the article itself doesn't cite this but that the  level of default on those is essentially zero it's almost a win win situation i think the degree to which we could look for other opportunities to do that would be something that would that would behoove us and i certainly think you know when you look at the drop in market share in the commercial satellite arena the steps this committee and this house has taken very constructive as well as the significant improvements that d t c has made in terms of license processing there are a lot of levels to this but in the long run our jobs are depending upon a very significant export ability i would suggest one change and recognition of a trend there is another article i would hardware and not enough about what probably is easily very significant maybe even more significant which are things that are not hardware much of the concern we're going to be facing regarding iran is going to be dealing with all kinds of missiles that technology goes there because folks are selling a lot of hardware i'm not sure you should be doing that i think there's a lot more interest he had a lot more high paying jobs and if we build on the comparative advantage of the services that we can provide with the hardware but not leaving it or shipping it overseas ok mr chairman just one one more  point i know you just came in this time but those moments were shared with the other question there i wanted to go back for a moment and get a good clear in the standing of your thoughts on the deemed exports if i may and i want to get your opinions on what type of security threat in your opinion is posed by foreign nationals inside the united states who are working on or purchasing control technology well in the area of working on technologies have been there is a very tiny percentage of foreign nationals who are involved in defense of production and therefore in the area of control technologies and there is a very definite distinction and facilities across the board not companies but tween what foreign nationals may do on the commercial side where there is certainly a significant workforce but it also again contributes to the expertise the pool if you will of talent but strictly on the commercial side when you look at the numbers do you feel that our security is tight enough  and kind of are half way related way we had an incident for example at fort hood who would have thought that even within our own military we would have that kind of terrorist mentality at work this individual engaged in communications with a known terrorists and getting this so it begs the question if if if if we have this happening right within our we're sure we don't have this kind of situation happening let's say and this area where we have sensitive technology do you do you believe that our security is strong enough in place to prevent any sensitive material from getting into the hands of individuals like iran or others it's worth bearing down on because that is at least as important as some of the physical things that you know i'm glad that you mention that because in my district if you all recall i was in the news we had georgia tech students who were arrested on terrorism charges because of similar incident and in dealing with sensitive materials and trying to get it back out so i think it's good that we brought that up as a part of the record and that's good to hear that you all feel that we're not as secure it is an area we certainly need to tighten up on but that  talk about it and our other two witnesses i'm frankly disagree with their position and since i introduced them i'm aware of their qualifications but i hate to say it also lack of qualifications in the sense that we here in congress are responsible for jobs in the economy you spend your lives a step away from those constituent concerns and we're concerned especially in the subcommittee on the unfair trade practices that are used to create the enormous national debt and if we don't fight back we're going to see a hollowing out of the u s economy even more than what we face now and finally i don't think either of you have been involved in trying to explain to a town hall why it's a good thing that we spend so much on military hardware one of those arguments is that we build it here we build our companies here we build jobs here and so being an agnostic as to whether the tankers are built here in the united states or  not or whether they're built by us companies or foreign companies makes it hard for you to be an envoy evangelic evangelist for the idea of us he having the tankers at all and  would hope that i mean looking at everything involved you cannot be an egg gnostic on the economic impact of where we get our tankers  key i couldn't agree with you more it's not all about hardware software you don't even need that that pickup truck to take the stuff to mexico so there's an even greater concern to making sure that those who are legally in the united states who get their hands on stuff should get their hands on things for the right purposes with the right restrictions and the idea that but they will will well let people buy anybody who walks in with cash to egghead to buy it but we're going to prevent its export may have heard this this is called the internet you can just see any any program you've got so now i'd like to shift to coproduction and talk about things this basically may be allowed to talk about  we import from china five times what they're willing to buy from us or they buy from us only one fifth of what they sell that if anything overstates the i'm out there willing to buy from us because we when they are willing to buy from us is subject to these coproduction agreements and inspect us companies reported some ninety two hundred offset transactions worth forty five billion dollars one hundred ninety three to two thousand and seven not all of those are with china but now we see them saying well of course with you have free access to us market whenever we want but americans will sell aerospace products to us only subject to co production agreements this break is that you're interested in the isn't entirely legal for china to be demanding these co production agreements in order to purchase u s products i think we see attendance at around the world with a lot developing countries and developing markets to want to share in the development of technologies and of these capabilities and their proposition of course is one it's a open market and those who choose to enter will do so if u s firms do not others will so what we could do is say if you insist on co production agreements as to aerospace we're mediately close our markets to all chinese exports that would be an effective response if our government was capable of wrecking of fighting for america rather than kowtow into those few americans who make a lot of money importing things into the united states since we don't do that the very few exports that we do have to china are only could be counted as exports  short term the really exports in the oil imports in the long term were either we don't sell the china at all or we're allowed to slit our own throats in particular we have this e announcement is that is it in the interests of the total employment in your industry that we a clip china with this good paper capability i think more robust capability on the part of our companies u s companies uncertainty is one in the long run will allow for a much greater share of the chinese market it is an enormous market from an aviation standpoint and they already have sophisticated avionics it is not as though avionics are not present on chinese aircraft and in a multiplicity of ways very competitive ones this is all in the commercial arena and i would simply say that i think an argument certainly is a very strong one that in the long run this benefits us economic terms and benefits our common benefits us work so right now our companies face competition from europe  little bit from brazil you're we're conjuring up in a world twenty years from now where the chinese can take a good half three quarters of the world commercial airplane business is that in the america interest of the chinese market itself which they have a great deal of control over is an enormous market well i have a great day if i can interrupt there if they have control of it is long as we're total wimps once we say you can't import anything into the united states in list you buy american aircraft then we have control of course that would require us to assert some fortitude and it's unlikely that will do so so we things that would quake the terrorists have traded icon of itself so but do you expect that your industry is going to face a loss of half of the world market due to chinese exports twenty years from now no we don't because we believe that again u s technology and u s abilities are incredibly strong and we will continue to compete as long as we have give all those capabilities to china so that they have a low labor cost the ridiculously low currency and government subsidies why do you think that you can give them the technology and you're still not going to the international competitors i certainly can't speak to the specific technologies they may be and volves in the terms of general electric and set up but again we're talking about commercial technologies that all widely available there and well evolve on a global basis i do believe the united states and our capabilities when it comes to everything from you know the avionics itself which is at issue here all the way through composites all the way through advanced designs we will continue to maintain a pet a logical edge and therefore an advantage in exports which we have now as long as we have the resources to do so and that again is fueled by this aviation industry corp of china and providing them with avionics keep abilities fully at the level that g e is able to provide well representing the end astray as a whole i can't speak specifically for the terms of this deal a j but what i'd like to do is certainly ask that your question got of them directly and we'll see about facilitating some further assuming u s companies fall over each other in an effort to get the short term and vanish for a little while  china and provide to the chinese all the technology that they're legally allowed to do do so in person when we get the licenses that are in vision by this g e agreement why do you assume that we're not going to lose pass the market or more to china twenty years from now i think because again it comes back to do we have capabilities that have proven over time to be those that will china and give it to them and to lose the market we've done we had great technology in a lot of other fields the one thing american companies have proven the ability to do is to offshore it's a matter of fact almost all the profits that are made are made from offshore why do you think that your industry is incapable of immediately transferring in a very profitable way to china all the great technology that you and i are confident that they can develop why are you guys so bad at offshoring well i can't i can't sit suggests that i think it really comes down to that i think you know when you're talking about a sophisticated set of technologies which is what aerospace is all about it's not making widgets it's not going and giving them a singular technology that suddenly gives a tremendous advantage i also think our companies are very intelligent about what makes sense in terms of strategic advantage and what does not and again i'd be happy to get more specific it's a bastion on this from general electric standpoint but as a broad matter we're projecting that we can hold our market share very well using the kind of strategies that we're taking these days to the market well you've lost a good shere to the air bus and they are the euro is one and a half to the dollar and is allowed to float assume that the chinese currency is not only under price by forty percent but let's say they decide to underprice their currency by sixty or seventy percent next decade how confident are you that planes can be manufactured in the united states  profitably to continue our level of the world market share you know some of these are the dynamics of world trade that i honestly will tell you are not within the control of a singular and history or even the kind of projections that any this very little aerospace technology that is control technology that is going to china at this point again we've been talking in the commercial arena almost exclusively today as regards china our companies a very serious about not only maintaining but enhancing controls on sensitive technologies it is something we are advocating as a part of export control reform we believe that needs to be greatest scrutiny and in fact something that may be somewhat counterintuitive even when it comes to the commerce controlled items we'd like to see a gradation with some controls there that may be higher controls so that it is not simply a one size announced and i'm not aware that there are licenses that issue we can try to find out more and be more specific for you could get back to us and either say grease the skids or use every tactic provide two hundred american jobs that's a very few jobs to take in return for losing a big chunk of our technological advantage oh i think that you mr chairman you have raised over the course of the last few minutes broad array of very significant issues and i know that both mr sokolski and myself have been busily jotting down notes of what we would like to say in response to these issues i think that in light of the time and the pressure of that that i would request that we be allowed to provide for the record a number of comments all these three witnesses and our two earlier witnesses are all invited in urged to provide written comments for the record for the five business days in addition mr scott if you either of you recently nord witnesses can have keep whatever it is that you're worried about from happening would be export controls so if the review is done properly you might get the result you want if it's not you get rid of the controls katie bar the door not only do we need to maintain our export control system and make it better we've got to put into that review an explicit jobs component and the both  state as well as congress does mr chairman there is one area where we have stayed ahead of the global curve in terms of competitive advantage flowing to places other than the u s and that's a national security and i think that's the core issue why we have export controls in the first place we've done it by investing in the research necessary to keep us ahead of the technology curve that others have developed you asked earlier on what the congress can do and i will expand a little bit on that in my in my written remarks because i think that's that's the key question there are other industries where we've done the same there not a lot of them and and i think the larger questions of how we maintain a competitive advantage not only against china but against the rest of the world is a very significant challenge facing america i think national security and the national defense arena plays an important role in that both american and a technology perspective as well as from a defending american perspective and i'll be glad that i look forward to getting your comments just and as concluding comments we have devoted hundreds of billions of dollars to national security research chiefly in aerospace this has given  companies the edge that edgy is important you know order to maintain our national security needs to be preserved but that edge is also been important to maintaining one of the last few industries where the united states a major exporter and we have to make sure that our national security research dollars not only keep us a head in  national security technology but also preserve for the united states the lion's share of the jobs that are made available by the explicit billion exploitation of that technology  to thank you all for being here and these hearings are concluded