Proposed high-tech export controls could pinch US companies
Massachusetts Gov. Michael S. Dukakis is working to ensure that his state's high-technology industry does not go the way of New England's blighted textile and shoe industries, which were eventually lost to foreign competition.
The governor's efforts have included taking a leading role in opposing a series of Commerce Department proposals to tighten United States regulations on American high-technology sales overseas. Governor Dukakis says the proposed measures would put US high-tech companies at a competitive disadvantage to the Japanese and Europeans in foreign markets.
The tighter controls are aimed at protecting US national security by preventing sensitive Western high technology from being smuggled or diverted into the East bloc for eventual use in sophisticated Soviet weapon systems.
Massachusetts officials have estimated that if enacted, the tighter restrictions may cost Massachusetts-based companies up to 20,000 jobs and $2 billion in sales. The governor traveled to Washington Monday to make this point to Commerce Secretary Malcolm Baldrige.
In return, Dukakis received assurances that public hearings will be held this summer in several major US cities (including Boston) to permit high-tech industry executives to voice their concerns about the proposed export regulations.
The goal is to develop a series of regulations that would guard against high-tech diversion, yet not hurt US companies. Commerce officials are expected to complete work by the end of June on a draft of the revised regulations.
The regulations cover ''distribution licenses,'' which permit large-volume high-tech companies such as Digital Equipment Corporation and Honeywell Corporation to make multiple shipments of similar goods and equipment under one license, thus eliminating duplicative paper work for the company and the government licensing officers in the Commerce Department.
The problem has been that once the licensed goods leave the US, there has been almost no means of ensuring that the shipment would not be subsequently diverted to the Soviet Union.
''Between $25 and $40 billion in technology is exported each year on distribution licenses, and we have no idea where it goes beyond the first-tier company,'' acting Assistant Commerce Secretary William T. Archey told a Boston business conference last month.
''Seventy percent of all shipments on a distribution license are in three areas: computers, semiconductors, and scientific instruments - almost all of them at the higher range of technology.''
Although the US has stepped up efforts in recent years to counter what has been called the ''massive'' assault on Western high technology by the Soviet bloc, technology smugglers have adopted increasingly sophisticated methods of circumventing US export controls.
Rather than being shipped directly to the East bloc from the United States, a growing amount of restricted US goods are being shipped to one or more ''dummy'' companies in countries friendly to the US, law-enforcement personnel say. The goods are subsequently shipped to the Soviet bloc.
As a result of such schemes, US export enforcement has broadened its scope under the Reagan administration to include not only trade with the East bloc but also trade between the US and its major Western trading partners. This broadening is what has brought distribution licenses under tougher scrutiny.
Earlier this year the Commerce Department shocked the high technology industry by publishing a very tough revision of the regulations governing distribution licenses. Among the proposed changes was a requirement that American companies submit a list of all the customers of its overseas distributors.
Company officials complained that such lists would be difficult to assemble and that many foreign distributors would be reluctant to provide such customer information.
They noted that some distributors are concerned that if their US suppliers knew who the distributor's customers were, they would simply bypass the distributor (the middleman) and deal directly with the end user.
Industry observers also question how the Commerce Department could handle the expected increase in individual export-license applications if the distribution license program were cut back. They say Commerce officials handled 95,000 license applications in 1983, at an average processing time of two months per license.
Industry representatives complain that such delays make it difficult for American companies to compete with Japanese and West European high-tech companies, which don't have to operate under such constraints.
Commerce officials expect to receive 140,000 individual license applications in 1984. To handle the increase, they are working to streamline and automate the licensing procedure.
''Hopefully, by the late summer we will produce 75 percent of license applications within 22 days,'' Archey says.
By early July, he adds, a new Commerce Department team of 25 people will be established to make objective technical assessments on whether certain goods considered to be strategic by the US are already freely available to the Soviets on international markets from non-US sources. If such a finding of ''foreign availability'' is made by the group, the item would be considered for deregulation.