- The Washington Times - Friday, April 20, 2001

During the presidential campaign, George W. Bush asserted that "our national security and commercial competitiveness have been compromised by a broken export control system." So why is the Defense Department telling him that the same system is good enough to safeguard U.S. interests in the proposed sale of a leading U.S.-owned high tech firm to a foreign rival with extensive business ties to worrisome countries like China and Russia?
The president must rule by April 23 on a bid by the Dutch semiconductor equipment giant ASM Lithography to buy out a smaller but technologically more advanced U.S. rival Silicon Valley Group Inc. SVGs lithography machines enable companies like Intel to produce state-of-the-art computer chips, and the decision will speak volumes about the administrations commitment to preserving our national securitys technological foundations.
SVG is the last remaining leading-edge American-owned player in the lithography business. Keeping its equipment and technology in the United States helps ensure that U.S. forces will continue getting the earliest and broadest possible access to the worlds most advanced chips, and can therefore maintain global superiority. Meanwhile, SVGs subsidiary, Tinsley Labs, provides the high-powered lenses and mirrors used in the cameras carried by American spy satellites.
Although SVGs Dutch suitor ASML is headquartered in an allied country, like many European firms, the company and its partners do even more business than U.S. companies with countries that regularly challenge U.S. national security. These operations, moreover, are much harder for Washington to track. For example, ASMLs parent company makes semiconductor assembly and packaging equipment in China. And Zeiss, ASMLs leading supplier of optical components, has its own business partners and sales offices in Iran, Russia, and India, as well as China.
ASML itself sells equipment in China, but perhaps more important is its enormous share of the Taiwanese market for advanced lithography machines. Taiwan has become one of the worlds leading semiconductor manufacturers, and even the most advanced U.S. chip firms know that Taiwanese foundries can meet their exacting specifications.
Lately, Taiwan has been easing controls on semiconductor investments in China, and in late March, President Chen Shui-ban called for Taiwan and China to establish full-scale, European-like economic integration. Clearly, any advanced products and technologies ASML transfers to Taiwan will soon wind up in the PRC.
Since ASML announced the deal, the interagency federal Committee on Foreign Investment in the United States (CFIUS) supposedly has been examining its military implications. But this bodys record should inspire no confidence. In its 13 years of existence, CFIUS has investigated seriously only 18 of the 1,300 proposed transactions brought to its attention. Only one has been turned down, and among the many approved have been foreign takeovers that have eliminated U.S. corporate presences in other key phases of semiconductor manufacturing.
Moreover, CFIUS has generally refused to carry out its full mandate and investigate transactions that could not only affect the production of specific military systems, but that more broadly could reduce "U.S. international technology leadership in areas affecting U.S. national security." One big reason: CFIUS is chaired by the Treasury Department, which dogmatically views any restrictions on foreign investment in the United States as "protectionism."
Most alarming about CFIUS work on the SVG case, however, is the insistence by the midlevel Defense Department careerists and Clinton holdovers carrying Treasurys water that the current export control system can keep SVGs main technologies in American hands. New revelations show that President Bushs campaign criticisms of export controls were, if anything, an understatement.
As reported by the General Accounting Office in March, just before Bill Clinton left office, the export control system he bequeathed to Mr. Bush eased restrictions on U.S. sales of high-performance computers to countries like Russia and China. In the process, numerous laws mandating reporting and analysis for such decisions were violated.
Senior GAO official Susan Westin testified to the Senate Government Affairs Committee that export control officials failed to identify all known military uses for those computers about to be decontrolled, such as three-dimensional modeling of armor and submarines. Instead, they provided a threadbare analysis based on previously published and outdated studies. Nor did these officials fulfill their legal obligation to discuss how the possession of the decontrolled computers by the Chinas and Russias of the world would affect U.S. national security.
The easing decision was based on the assumption that computer hardware exports could no longer be controlled. But Pentagon officials interviewed by GAO researchers "could not provide evidence to support their conclusions" about foreign expertise in high-performance computing or about the costs of alternative control measures. In addition, the policy proposes shifting to software controls even though no such controls exist or have even been identified. Finally, the new policy urged more reliance on self-policing by industry, even though, as the GAO observed, "In the past, computer vendors inability or unwillingness to do so has resulted in shipments or diversions of computers to Russia and China in violation of the law."
The Pentagon officials responsible for this negligence are the same officials claiming export controls can eliminate the dangers posed by the SVG deal. President Bush should recognize that their guarantees are worthless and that the system they are running is a sham. SVGs foreign takeover must be prevented. National security should not be entrusted to proven failures.


Alan Tonelson is a research fellow at the U.S. Business and Industry Council Educational Foundation. His book "The Race to the Bottom" was recently published by Westview Press.

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