An Iron Curtain to Free Trade: An Evaluation of H.R. 4653, the Export Administration Act Amendments

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AN IRON CURTAIN TO FREE TRADE: AN

EVALUATION OF H.R. 4653, THE EXPORT

ADMINISTRATION ACT AMENDMENTS

INTRODUCTION

In the realm o international economic relations, 1990 has been a year of tremendous, unprecedented change. The collapse of communism in Eattern Europe has altered the balance of power forever. The potential for new avenues of trade with people who desire the bounty of Western consumer goods appears unlimited. In addition, with the emergence of more democratic governments, there is a strong need and desire to obtain the newest technologies in medicine, communications, electronics, and science in order to raise the relatively low standard of Eastern Europeans.

As Japanese and German companies continue to rival and even surpass U.S. companies in a host of once U.S. dominated industries, corporate America is looking to Eastern Europe for an opportunity to regain its competitive edge, increase profits, and strengthen the foundation of the U.S. economy. However, attempts to send high-tech commodities and technology, ranging from computer technology and telecommunications systems to navigation equipment, radar, and laser technology, to Eastern European countries has been greatly hampered by technical export control laws that require manufacturers to obtain licenses from the executive branch before exporting to a region which has been considered off-limits since the beginning of the cold war for reasons of national security.

U.S. export control laws hamper not only exportation to countries of strategic importance, but they also pose barriers to free trade with Western Europe and our more democratic allies. With the coming of 1992 and the unification of the European Economic Community, Western European companies will be able to freely export commodities across national boundaries, providing a tremendous competitive advantage over U.S. exporters. The U.S. export control laws now require exporters to obtain governmental approval in the form of licenses. This licensing process results in additional expense, long delays and the possibility of denial, all of which serve to make U.S. companies less desirable sellers.

In an attempt to loosen these restrictions in response to the democratization of Eastern Europe and to anticipate the liberalization of trade in Western Europe, businesses in the private sector have lobbied Congress to amend the Export Administration Acts of 1979 and 1985 (EAA). (1) Congress responded with H.R. 4653: The Export Administration Act Amendments of 1990 which, if enacted, would reduce the export restrictions and give American companies a competitive edge. (2) However, in November 1990 H.R. 4653 was pocket vetoed by President George Bush on the grounds that the legislation was too permissive and micro-managed the affairs of the executive branch, thereby jeopardizing foreign relations. (3) Recognizing the importance to U.S. industries of liberalizing access to European markets, the Chairman of the House on International Economic Policy and Trade Subcommittee and the sponsor of H.R. 4653, Congressman Sam Gejdenson, was prepared to reintroduce the bill. (4) The Senate followed the veto with the passage of bill S. 320 in February 1991, which is virtually identical to H.R. 4653. (5)

This Note analyzes provisions of the 1990 Reauthorization Act to determine how responsive the new amendments are to the recent developments in Eastern and Western Europe. Of particular importance is the effect that these changes will have upon U.S. industries. The paper concludes that the executive branch should forfeit some autonomy over the present licensing process and defer to the Congress in the interest of strengthening the U.S. economy. The Congress should adopt the proposals for reforming the export control system that have been urged by U.S. industry, such as a license-free zone in Western Europe, the abolition of re-export controls, greater trade liberalization in Eastern Europe, and a streamlined commodity control list. …