NSC MEETING ON RENEWAL OF THE EXPORT ADMINISTRATION ACT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85M00363R000100060003-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 11
• Document Creation Date: December 22, 2016
• Document Release Date: September 2, 2009
• Sequence Number: 3
• Publication Date: March 21, 1983
• Content Type: MEMO

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SECRET
National Intelligence Council
NIC #2199-83
21 March 1983
MEMORANDUM FOR: Director of Central Intelligence
Deputy Director of Central Intelligence
THROUGH: Acting Chairman, National Intelligence Council
FROM: Maurice C. Ernst, NIO/Economics
SUBJECT: NSC Meeting on Renewal of the Export Administration Act
1. The purpose of the 2 March NSC meeting is to decide on three main
issues concerning revision of-the Export Administration Act before the
Administration's draft of the Act is presented to Congress. These issues
are: sanctity of contracts; new authority for imposing US import controls
on foreign nations which do not abide by US foreign. security export
controls; and new authority for import controls on companies which are in
violation of either national security controls alone or national security,
foreign policy, and short supply controls. These issues are the only ones
on which an interagency consensus could not be achieved from a much larger
number which were identified when the policy review process was
initiated. The three issues are summarized in Attachment A. An earlier
options paper which covered all the initial issues is Attachment B.
2. The process of developing the Administration's position on renewal
of the Export Administration Act has involved the balancing of the
following considerations:
o A desire to minimize the damage export controls do to the
competitive position of US business.
o A desire to minimize damage to our relations with our Allies.
o A concern for protection of Presidential and Executive Branch
powers.
3. There have been strong pressures on the Administration from
business groups and demarches from foreign governments and the European
Community to ease export controls, although in different ways. Several
bills to revise the Act, mostly reflecting US business interests, are
pending in Congress. Although there has been at least a near consensus
within the Administration that it is possible to live with the present Act,
NSC review completed.
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some have suggested that attempts to strengthen Executive authority might
be tactically useful in order to counteract the predominant pressures to
weaken it.
Issue One
4. The "contract sanctity" issue has been hotly debated in the SIG-
IEP and other groups. US business feels strongly that the power to
override existing contracts is a serious problem and that there is no reson
to treat industrial goods differently from agricultural products. The
contrary view, which is held by both State and Defense, holds that
excluding existing contracts from export controls would excessively limit
Presidential authority and flexibility. Secretary Shultz, although
favoring retention of existing Presidential authority, believes that the
Administration should make clear that it will use its powers only for very
serious reasons.
Issue Two
5. Commerce and Defense, as well as substantial business groups,
favor new authority to impose import controls on foreign countries which
were violating foreign policy export controls because it would strengthen
the President's hand and result in more equitable burden sharing among the
members of the Alliance. State and most other agencies are against it
because of the potential damage to our relations with our Allies and the
likely inconsistency with agreements under GATT.
Issue Three
6. Authority to impose import controls as a penalty against countries
that violate COCOM or US export controls--with options to apply this
provision only to national security controls, or also to foreign policy and
short supply controls.
The arguments are similar to those under Issue Two.
7. Comment: There is litt.le doubt that the addition of import
control authority on either national security or foreign policy grounds
would be very badly received by our Allies and would give public prominence
to contentious issues, such as extraterritoriality, at a time when we are
trying to build an Alliance consensus on East-West economic relations, INF,
and other key Alliance questions. Indeed, there is a possibility that
raising such issues would result in less cooperation from the Alliance, for
example on COCOM, than would otherwise be the case.
8. What would create the problem is probably not so much the added
authority the President would gain as the implication that the US is
insisting on the principle of extraterritoriality in the face of the strong
European reaction during the pipeline sanctions. The Allies almost
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certainly would consider such an initiative to cast serious doubt as to the
willingness of the US to approach East-West economic relations on a
cooperative basis.
aurice C. Ernst
Attachments:
As stated
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NIC #2199-83
21 March 1983
SUBJECT: NSC Meeting on Renewal of the Export Administration Act
DCI/NIC/NIC/Econ:M.Ernst:bha(21 March 83)
Dist:
Orig - DCI
1 - DDCI
1 - ExDir
1 - DCI/ SA/ I A
1 - ER
1 - C/NIC
1 - VC/NIC
2 - NI0/Econ
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UNHULMt1AL
NATIONAL SECURITY COUNCIL
WASHINGTON. D.C. 20506
CONFIDENTIAL
Mr. Donald P. Gregg
Assistant to the Vice President
for National Security Affairs
Mr. L. Paul Bremer, III
Executive Secretary
Department of State
Mr. David Pickford
Executive Secretary
Department of the Treasury
March 21, 1983
Lt. Col. W. Richard Higgins
Assistant for Interagency Matters
Office of the Secretary of Defense
Mr. Roger Clegg
Special Assistant to the Attorney
General
Department of Justice
Mr. Raymond Lett
Executive Assistant to the
Secretary
Department of Agriculture
SYSTEM
90338
^'- ~i Q rJ
Dr. Alton Keel
Associate Director for National
Security and International
Affairs
Office of Management and Budget
Executive Secretary
Central Intelligence Agency
Ms. Jackie Tillman
Executive Assistant to the
United States Representative
to the United Nations
Department of State
Mr. Dennis Whitfield
Executive Assistant to the
United States Trade
Represenative
Assistant to the President for
Policy Development
Mr. Eric Hemel
Special Assistant to the
Ms. Helen Robbins Chairman, Council of Economic
Executive Assistant to the Secretary Advisors
Department of Commerce
Col. George A. Joulwan
Executive Assistant to the
Chairman
Joint Chiefs of Staff
The Pentagon
SUBJECT: National Security Council Meeting on Export Administration
Act (C)
Attached are background papers for the National Security Council
Meeting on the Export Administration Act scheduled for Tuesday, March
22, at 11:00 in the Cabinet Room. (C)
CONFIDENTIAL
DECLASSIFY ON: OADR
i'mrincA lTi A l
Michael O. Wheeler
Staff Secretary
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March 21, 1983
OPTIONS PAPER
Issue 1: Should the Administration bill include a "contract
sanctity" provision that excludes pre-existing
contracts from foreign policy export controls? (This
prohibition would apply for 270 days, except where the
President determines that the absence of foreign
policy controls on these exports would prove
detrimental to the overrriding national interests of
the United States).
Analysis:-
Currently, the President may invoke export controls that affect
pre.-existing contracts at any time on all but agricultural
commodities. Under a recently enacted law, pre-existing
contracts for agricultural commodities are excluded from export
controls for a period of 270 days except in the case of a
declared national emergency or state of war.
Senator Heinz and Congressman Banker have both introduced bills
containing contract sanctity provisions. These proposals are
strongly supported by the business community.
Pro: The imposition of export controls on pre-existing
contracts makes U.S. exporters unreliable suppliers
and forces them to incur unexpected economic losses.
Equity would require that non-agricultural commodities
receive the same protection as agricultural
commodities.
Con: The President needs maximum flexibility to conduct
U.S. foreign policy short of military actions. In
addition, by proposing this limitation, the President
might be seen as acknowledging error with regard to
the Soviet pipeline sanctions.
Agencies supporting: Agriculture, Commerce, OPD-WH, Treasury, / ~~..~
Agencies opposed: Defense, Justice, State, OMB
Decision:
Approve Disapprove
r.n,NRnFNT1A1
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Issue 2: Should the Administration bill give the President new
discretionary authority to impose import controls on a
country whenever foreign policy export controls are
imposed on that country?
Analysis:
Currently there are no provisions authorizing the President to
impose import controls whenever export controls are imposed.
Senator Heinz has introduced a bill containing an import control
provision. This proposal is supported by some members of the
business community, although there is not a business consensus.
Pro: If U.S. exporters are required to incur economic loss,
the businesses in the affected countries should also
share the economic burden of U.S. foreign policy
controls. The proposal gives the President an
additional tool for implementing U.S. foreign policy.
Con: Political pressure may be brought to bear upon the
President to impose import controls or take stronger
measures than would otherwise be the case.
Retaliation and other foreign relations problems would
likely ensue from adoption of this proposal. Import
restrictions imposed against GATT members solely for
foreign policy reasons would be in violation of GATT
obligations.
Agencies supporting: Commerce, Defense
Agencies opposed: Agriculture, CEA, State, Treasury, USTR,
Justice
Decision:
Approve 'Disapprove
Issue 3: Should the Administration bill give the President new
discretionary authority to impose import controls as a
penalty against companies that violate COCOM or U.S.
export controls? If so, should this authority extend
to:
A. Only national security controls?
B. National security, foreign policy and short
supply controls?
CONFIDENTIAL
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11IL\L
Analysis:
Currently the President does not have this authority.. Moreover,
COCOM is a purely voluntary organization. None of its members
has authority to penalize violations of COCOM provisions by
companies of another COCOM member.
Senator Heinz has introduced a bill containing a similar
provision. This proposal is strongly supported by the business
community.
Pro: Current enforcement provisions are not working well.
The authority to impose such sanctions would make
multilateral controls through COCOM and enforcement of
our export control laws more effective. This proposal
would provide a powerful incentive for companies to
abide by COCOM provisions and U.S. export laws.
Con: This proposal would jeopardize continued participation
in COCOM by certain member states. Any provision for
sanctions should result from agreement among the COCOM
members rather than by unilateral U.S. statutory
mandate, the extraterritorial reach of which will be
challenged. As in Issue 2, retaliation and foreign
relations problems would likely ensue. Restrictions
against GATT members solely imposed for foreign policy
reasons would be in vo'il on of the GATT obligations
of the United States.
Agencies supporting: A. National security only: CEA, Treasure-,
USTR, Justice
B. All controls: Commerce, Defense
Agencies opposed: Agriculture, OMB, State
Decision:
Approve
A. For national security controls only
B. For all controls
Disapprove
CONFIDENTIAL
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hypothetical examples of the application of import controls merely
to assist interested agencies.
ILLUSTRATIVE EXAMPLES OF IMPORT CONTROLS
Issue 2: Should the Administration bill give the President new
discretionary authority to impose import controls on
a country whenever-foreign policy export controls are
imposed on that country?
Example: The United States has imposed foreign
policy export controls on Libya. The proposal would
allow the President, at his discretion, to prevent
the importation of some or all products from Libya to
the U.S.
Issue 3: Should the Administration bill give the President new
discretionary authority to impose import controls as
a penalty against companies that violate COCOM or
U.S. export controls? If so,.should this authority
extend to:
A. Only national security controls?
B.. National security, foreign policy and short
supply controls?
Examples of A:
1. A foreign subsidiary of a U.S. company (X), in
disregard of COCOM agreements and a U.S. national
security control, sells a sophisticated U.S.
computer to the Soviet Union without a license.
2. A purely French company (Y), in disregard of a.
COCOM agreement, sells a sophisticated, purely
French computer to the Soviet Union.
This proposal would allow the United States to
penalize both X and Y by preventing the importation
into the United States of any or all products of X
and Y for a given time period.
Comment: These two factual situations illustrate
opposite extremes in the possible implementation of
this provision. The factual situation with Y is the
most extreme' example. In the absence of this
provision, Y's transfer would not be a violation of
U.S. law because a foreign company shipping a foreign
computer would not otherwise be subject to the
jurisdictional reach of U.S. law.
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Examples of B:
1. The examples in "A" are also applicable here.
2. The United States imposed foreign policy controls
in the form of the Pipeline Sanctions against the
Soviet Union. This provision would have allowed
the President to prevent the importation into the
United States of products from companies that
shipped goods to the Soviet Union in disregard of
our sanctions.
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