will bring this subcommittee hearing to order i'd like to thank the witnesses for being here at least two of them and i know the governor englander's on his way i'm sure his staff was here will tell him that this opening statement by the chairman was concise truly truly an inspiration the purpose of this hearing is to examine how the u s government can implement necessary safeguards to protect national security and simultaneously preserve american jobs and industries that are subject to export control or you must make the current system more effective to reflect economic realities national security is the paramount concern this hearing will hopefully provide the first step in a long overdue process to reauthorize the export administration act also known as the export administration act provides statutory authority for export controls on sensitive dual use technologies namely those technologies that have both a military and a civilian use it expired years ago demonstrating that it is by no means clear that the united states government needs a congress  since or eight years we haven't had the law and things have gone on pretty much as they were before despite several attempts earlier this decade congress has not been able to reauthorize the export administration one problem that arises from this whatever is that the commerce department responsible for enforcing our dual use export control regulations and particularly the bureau of industry and security the b i s lost its status as a law enforcement agency and therefore lost powers that it needs to carry out its job most effectively representative manzullo and i introduced export to the export control improvement act we did this last year will be really introducing it this year we look for additional co sponsors the bill dressed a handful of issues related to the looting the integration of export control data into the automated export system which is a system basically currently purposes it reinstated the b i s's law enforcement authorities and dealt with diversion and transshipment of goods now recently the g a o release a study on june fourth that demonstrated the obvious but did so poignantly it described how undercover investigators successfully purchased dual use sensitive items from distributors and manufacturers using a bogus front company fictitious identities and a domestic mailbox they were also able to ship without detection by u more specifically they obtained what are known as park plug not to be confused with spark plugs or spark plug gap or a spark gap plug is a device that can be used in a highly technical medical equipment or can be used nuclear device it has a limited number of legitimate domestic it is of great economic importance with this study demonstrated was what i think we already know and that is if any one of three hundred million people through the charade of ourselves the psychological joy of saying we're controlling sensitive technologies but if anyone who happens to be a tourist in the united states anyone who happens to be in the united states diplomat happens to  prevent that from being export maybe one tenth of one percent the export packages are looked at by u s government authorities maybe if you wanted to export a thousand spark  plugs you'd have to buy a thousand and one mail the ball and figure you're going to lose one to the inspection process there is no requirement when somebody is sending something abroad that they use a legitimate sender address on the package so there's no risk of available to just about anybody in the united states to categorize items on a number of different formats of the first is freely available in the united states or is it like some chemicals subject to a licensing procedure is second is size in a quantity of great significance to our adversaries obviously a bullet is small but if you want to drive us out of afghanistan you need a civilian use and one of the united states can buy it it's not surprising that the taliban can get their hands on it we have to look at whether allowing the export good for american jobs or is in fact a job killer we have actually be preventing the offshoring of jobs we should not think of sacrificing one iota of our national security in order to facilitate offshoring and job killing  and we ought to of course as we do now look at whether the item is widely available abroad without significant controls now to control these items effectively may involve the jurisdiction of other committees but i don't want to go back to my constituents and say we don't have an effective export control program we do have a program that's killing a lot of jobs for no good reason but don't worry about it at least we didn't involve any of the other committees in congress it seems to me that we're going to need to control some items and we're going to need to have control at the factory for other items there is no reason why anybody in this country can buy a spark gap plug so i look forward to look taking a fresh look at our export controls looking at national security looking at the effect on american jobs looking at what's really practical perhaps creating a circumstance where we control a lot less and we control it a lot better to our ranking member the gentleman from california thank you mr chairman i thank you also brad for holding this committee hearing today and i think it continues the committee's work on this critical and rather arcane issue of export controls our satellite export to hearing that we had in april i think produced some foreign language for the state department authorization bill and previous hearings that we've had some greater efficiencies in terms of export it's clear to me however that more fundamental changes are needed here and effective export khan's network at the same time affective control have got to facilitate technology exports to all of our national defense relies upon a technological edge having an edge in the face of increasing global competition requires a vibrant manufacturer who depend upon a robust cooperation with governments and companies overseas unfortunately our export control system is a bureaucracy while our enemy agile and determined and bold are not making decisions and focusing on the really important items and leaving the others alone two years ago the subcommittee heard  from the government accounting office and they reported poor coordination between the state and commerce department problem number one problematic over which export  through a patchwork of emergency authorities and executive orders complicating prosecutions there are other legal shortcomings that make it difficult to target commercial espionage and commercial espionage has become a growing problem in this area i'm concerned with the validated end user program run by the commerce department one of today's witnesses documented the problems of tracking sensitive exports to china last year the g a o recommended that this program with  china because the department had not been able to reach an agreement with on site there is an agreement today but knowing what i know about china where the industrial military line is blurred to say the least provides the subcommittee must keep pushing but without strong leadership and commitment from the highest levels of the current administration we're carrying an awfully heavy load unfortunately i don't see that type of commitment happening and not being part of the previous administration was no different our attention grabbers until i suppose there's a glaring failure and hopefully i'm wrong but let's congress and certainly no one wants to see dual use call into the wrong hands and be turned against the united states either by terrorists or rogue government and that includes the united states companies that make and market this technology however we must keep in mind the need for our companies to be able to stay competitive in an increasingly integrated global marketing marketplace globalization is no longer just an emerging phenomenon globalization is now our way of life we're no longer the sole supplier for a great many of the items that we control the export of and that list is growing quickly moreover there are many countries with less stringent and less complicated export controls systems that are for their companies greater opportunities to compete we saw that in our examination of satellite technology exports several months ago so we must find  proper balance between protecting sensitive materials and allowing our companies to contend and i think perhaps developing a broader more robust validated and user program can very well allow us to do just that so i'm interested in hearing our witnesses and their thoughts on expanding that program and as a german i'm also very concerned as i know that you are as well by an article that i recently read in the washington times and that's our because in the washington times regarding the  technology over the internet and sending that equipment to persons and places that would ordinarily require an export license with the blossoming of the internet and the person to person commerce it has facilitated in the modern world i think an examination into the possibility of controlling some of this diversion is absolutely warranted and with that mr colleagues who commend you convening this very important hearing clearly export controls serve an incredibly valuable purpose yet at the same time the economic future of our country depends on our ability to compete on the global market the world would be a far more frightening frightening place a country like iran acquired in developed nuclear biological or chemical technologies to be mainly innocent transfer ology a fortun example was illustrated in two thousand and six when the computer circuits exported to the us were diverted to iran where they were fashioned into bomb that nader's and used in iraq history has proven that hostile regimes have managed to penetrate s export controls network due to the fact that the international community has yet to follow suit with similar export controls of their own there is no doubt that the united states still has the most specific a to defend technologies in the world which is the reason why we must guard our designs to such extreme which seems sometimes extreme restrictions but these limitations are no doubt decreasing the prestige and need for technologies in the world there's a great need to balance nonproliferation standards with the us is competitiveness in the global market i'm particularly concerned with restrictions on commercial communications satellites and gray areas in the export administration act which deal with encryption technologies used in free global communication and messaging technology in regards to satellites i'm concerned that if other countries our allies even want to develop i talk free satellites and become as competitive as the united states in this market we would most certainly reach a whole new frontier in global terrorism and although i do not share the same concern for encryption technologies it is important to know that for enriching regimes cannot use messaging services for  nefarious purposes rather the civilians living under these regimes can access to relay more information to the outside world to the use of these technologies as we've seen in the recent iranian election protests therefore i would like to learn from our distinguished panel of witnesses today how the u s can successfully balance its business interests with the security interests of not only the united states but the whole world again thank you  am executive committee and it was interesting in our discussion which was wide ranging several times we came back to the topic controls it's that important export controls exist to protect our national security that must always be competitor given the current job the importance of export controls and suggestions concerning the reauthorization a discussion of how the current system can be improved to include consideration of its impact on high for the next several months industries like manufacturing electronics and many others that were once the bedrock of our nation's economy are barely shadows of what they once were our economic security  our physical security diminishes with the loss of these basic industries and the jobs they provide grapples with the current economic crisis congress and the administration must explore new to ensure that our overall strategy is that what if we went with a program in which we controlled fewer things but we had internal u s controls so that you couldn't just send in an order need to look at how portable is the item what is its military significance what does it have many civilian legitimate users and finally is it widely available around the world i believe i program what i said about that we are hearing about it in this room and that is the word is the fix is in the french are going to get the lion's share of the jobs in return for france doing a little thing that will help you a security namely building a french naval base in that area we provide massively for their security in fact they would have been overrun by saddam had we not organized not france but we organized the effort to liberate kuwait our state department has made excruciating lee clear to us that they're free to give us just the crumbs and they'll still get the massive security umbrella we provide and then they can get an additional security enhancements from france if they give them the lion's share of the jobs so it's not surprising that the us going to do this years ago they decided to buy a french phone system and i can when you dial nine one one on products rather sharply and dramatically so that we were able to put our regulatory and enforcement focus on those those particular items that represent the greatest threat where we have that product in this because free trade agreements are designed to be one sided in favor of american investors and i believe the governor is a little bit more in favor of free trade agreements than  most members of organized labor out i'll let him go do you see a circumstance where we have to put up with offsets and co production agreements but we're not able i mean that's a good thing well that's the example of co production agreement general motors gets the profits but the u a w doesn't get the job i am sure that a lot of countries will welcome our investment in our technology so long as none of the manufacturing jobs benefit american workers if that's a big win few more wins like that and we're going to be a third rate country  largest auto market in the world and lots and lots of big auto companies decided not to give us our fair share of the jobs and many of them sold cars in this country without having us a single manufacturing job hard to say well china is a big market so we got to give them a lot of jobs and we're a big market so we got to giving us any of the jobs as long as we get the profit be acted on so there are lots of ways to look at this and to narrow the focus of those those things that are most important but the verified end user program might apply to a company that  already dealing with the most sensitive technology that has a branch in a foreign country particularly if that foreign country was a place we trust i don't care how much googling yahoo but when they do business in china all of a sudden they're turning over all kinds of documents to the chinese government that we'd prefer they not mr i can see why the machinist would fear competition from a low wage country most of those countries  governors referring to are not low wage countries do you see a threat to jobs if we make it easier for a us company with a branch in australia or britain to move  and some high technology if we're going to have a balanced trade on the one or two things that we export and then we're going to have massive deficits in everything we import and our trade deficit is going to get