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Executive Summary The United States and other countries of the Coordinating Com- mittee for Multilateral Export Control (CoCom) are maintaining a substantial qualitative and quantitative lead in computer technology over the USSR and other countries of the Council for Mutual Eco- nomic Assistance (CMEA). In many areas the lead is on the order of five to ten years or more. Export controls have thus far contributed to this gap, but current technological progress will make controls harder to enforce, and technological and market developments com- bine to make a case for a more focused and flexible control process. This report, commissioned by the Department of State, presents recommendations for producing such a process. Technical trends make control more difficult, and computer tech- nology continues to develop rapidly. Steady reduction in computer and component size makes increasingly sophisticated hardware both more portable and easier to hide. Professional workstations and other small computers will soon be offering performance capabilities for some applications that were previously available only in large supercomputers. Small, high-power computers have already boosted the lead of CoCom countries in scientific computing, but the prolif- eration of ever more powerful small systems will undermine control efforts. This situation could be aggravated by the movement toward parallel processors, which can be built using small, less-advanced 1

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2 GLOBAL TRENDS IN COMPUTER TECHNOLOGY computers in large numbers. The value of parallel processors de- pends on the development of appropriate software, however, and CoCom countries wig continue to lead in that area. Software is taking on growing importance in computer systems, and it is inherently easy to acquire. Scientific software is particularly difficult to control because it is so widely available in the scien- tific community. Software development tools are, along with com- puter manufacturing systems, making possible technologies critical to CoCom's computing lead. Increasingly powerful hardware and software win become com- modities. Commodity products are available in high volume and at Tow cost, they may be available in multiple and substitutable forms, and they tend to be small and easy to transport. These attributes make commodities vital to the economic health of the computer industry, but also effectively uncontrollable. International computer networking is flourishing among busi- nesses and researchers and is an implicit conduit for technology ex- ports. Because computer networks are used to communicate techni- cal information about software and hardware, computer networking probably represents the fastest growing gap between development and decision in current export control strategy. Advanced systems for computer and component design and man- ufacturing are critical technologies that enable CoCom countries to replicate computer products reliably and in large volumes. Within CoCom, the U.S. position in many such systems is inferior. CoCom's computer strengths overall depend on its manufacturing capabilities. Know-how is fundamental to CoCom's computer technology ad- vantage. CMEA countries are weak in computer manufacturing be- cause they lack both adequate equipment and the know-how neces- sary for volume production of high-quaTity products. Similar deficien- cies plague CMEA scientific computing. Nevertheless, the know-how of the West may not be sufficiently protected by export controls. Commercial vitality is essential to technical vitality. The de- velopment of computer technologies and their commercial markets (both domestic and export) in CoCom countries are closely inter- twinecI, and this relationship is fundamental to the CoCom technical lead. Relative positions are ranked as follows: CoCom commercial computer technology is best overall, followed by CoCom military computer technology, then CMEA military computer technology, with CMEA commercial computer technology last overall. Unlike past (lecades, CoCom military establishments now have more to gain from than give to the commercial computing technology base. Consequently, U.S. policymakers must be concerned with the

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EXECUTIVE SUMMARY 3 impact of control options on the domestic computer sector as well as their impact on the CoCom lead overall. The United States cannot afford to be complacent about its com- puter technology strengths or base export control decisions on an assumption of an invincible lead. As the computer market becomes increasingly global, U.S. firms face increasing foreign competition, mostly from firms operating with fewer export barriers under the same CoCom guidelines. Tighter U.S. controls may reflect the ab- sence of a fully effective multilateral control effort, but there is a risk that in the computer area, the United States may lock the proverbial barn door after the horse has escaped. And if the U.S. competitive position in computer technologies erodes, tighter U.S. controls wiD only find the United States devoting too much effort to controlling technologies available in equal or better form elsewhere. Non-CoCom countries are also expanding the supply of computer technology. The growing production and use of computer technology among countries outside of both CoCom and CMEA is another reason why computer technology is becoming much more readily available and therefore harder for CoCom to control around the world. Newly industrializing countries, especially those in Asia, are a major source of technology that the traditional CoCom-CMEA dichotomy fails to capture. CMEA prospects in computer technology are improving but still constrained. CMEA weaknesses reflect three factors in particular: export controls, the perception of Western firms that market op- portunities are limited in CMEA, and self-imposed constraints in CMEA countries. Change in each factor wiD facilitate absorption of new computer technology in CMEA countries and each factor is changing in ways that will promote technology transfer. But while this prospect creates more pressure on export controls to hold the line, there are countervailing pressures to keep export controls in harmony with the technological and international facts of life. The two need not be inconsistent. Below is a condensed presentation of the committee's recom- mendations; greater explanation can be found in Chapter 7 of the report. RECOMMENDATIONS Recommendation 1: Definitions for computer technologies on the list of controlled products and their use in administering control

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4 GLOBAL TRENDS IN COMPUTER TECHNOLOGY programs should be made more flexible to account for technology change, market developments, and variations among technologies that might be colloquially labeled in the same way. Further, the De- partments of State, Defense, and Commerce should review definitions or categorizations of controlled technologies and their administration in a manner that is more timely, rapid, and expert. Recommendation 2: The U.S. government should publish a list of computer technologies that are commodities, and it should pro- mulgate a policy that exempts such commodities from controls for trade at least among CoCom nations. A computer technology should be identified and treated in export control programs as a commod- ity if the technology is readily available from foreign sources outside CoCom control or if other factors (e.g., high volume, Tow price, small size, ready availability of substitutes) make the technology effectively uncontrollable. Recommendation 5: The U.S. government should formulate a policy for preventing computer networks from becoming a channel for significant covert technology transfer and to protect the com- putational resources of CoCom countries. While in many cases the necessary security technology exists, putting it; to ,'~ m~.v Nit further study or change in existing policy. o ~ ~ WE ~ _ ~ ~^ ~ _ Recommendation 4: The Department of State should work with other agencies to focus export control effort on computer technologies of compelling military importance that could enable CMEA countries to make substantial gains in their technology base, or those that represent key leverage points in the increasingly interdependent world of computer technology. Chapter 7 lists priorities. Recommendation 5: Software should be divided into three prin- cipal classes for control purposes. Software with a compeDing and direct military importance should be tightly controlled; some degree of control should be provided for software tools that could build software in the first class; but other software should be traded freely among CoCom nations. Recommendation 6: The Department of State should promote the integration of key Asian newly industrializing countries (NICs) (including Singapore, Hong Kong, Taiwan, and South Korea) into the CoCom control program. Unless these countries are part of an effective multilateral control effort, their role as potential suppliers of computer technology to C MEA countries will grow. These NTCs not

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EXECUTIVE SUMMARY 5 only act as conduits for technology originating in CoCom nations, but they also generate indigenous computer technology of increasing sophistication. Recommendation 7: The U.S. government should greatly in- crease its investment in the monitoring of computer technology de- velopment and associated market trends around the world. Although the intelligence community monitors developments in CMEA coun- tries, the committee recommends that more comprehensive attention (i.e., ad(lressing commercial as well as military applications) be paid on an ongoing basis to developments around the world, especially in non-CMEA, non-CoCom nations (e.g., newly industrializing coun- tries in Asia and Latin America). Given the rapid rate of change of computer technology, the globalization of capabilities and mar- kets, and the need to protect technology of compelling military im- portance, the Department of State must have a greatly expanded resource to make sound technology export decisions. Further, the Department of State should undertake periodic reviews of technology trends along the lines of this report. The rapid change in computer technology makes trend presentations perishable, and thus this type of review should be conducted at least every three years.