Technology Transfer And National Security Issues

Congressional Research Service n 0 -. 2. Washington, The Library of Congress D.C. 20540 TECHNOLOGY TRANSFER AND NATIONAL SECURITY ISSUES IP0209T The transfer of technology from the West to the East has been an issue of serious debate since the introduction of detente in the 1970s. Recent disclosures by the Central Intelligence Agency (CIA) indicate that the Soviet and East European intelligence services have,been so successful in acquiring U.S. technology that there now exists a significant threat to the national security of the United States. The CIA speculates that the Soviets and East Europeans will increase their efforts for legal and illegal acquisition of U.S. technology in several areas : o Computers -- systems designs, concepts, hardware and software o Microelectronics -- complete industrial processes and equipment for Soviet military requirementa o Lasers -- optical, pulsed power and other laser-related components for laser weapons o Radars -- air defense radars for missile systems The Reagan Administration has proposed a package of countermeasures to curtail the flow of military-related technology. This includes: strengthening U.S. export controls, increasing efforts against foreign industrial espionage, expanding the list of "military critical technologies" which should not be exported, and influencing the academic community to reduce Soviet access to U.S. research through the free exchange of information. This Info Pack provides unclassified, background information and analysis of the politico-military impact of technology transfers on the United States and the NATO allies. It contains proposals by the Reagan Administration to redress the problems posed to the national security by the loss of U.S. technology to the Soviet Union. Congressional Reference Division Soviet Acquisition of Western ~ e c h n o l o ~ ~ United S t a t e s Central I n t e l l i g e n c e Agency Contents Introduction Soviet Acquisition of Western Technology: - - A National-Level Program Soviet Mechanisms for Acquiring Western Technology Soviet Acquisitions and Benefits Outlmk for the 1989s Page 1 1 2 5 11 Appeadix Projected Soviet Technological Needs and Aquisition Targets Through the 1980s Reprinted by the Library of Congress, Congressional Research Service, May 1982. 13 Soviet Acquisition of Western Technology Introduction The United States and its Allies traditionally have relied on the technological superiority of their weag ons to preserve a credible counterforce to the quantitative superiority of the Wanaw Pact. But that technical superiority is eroding as the Soviet Union and its Allies introduce more and more sophisticated weaponry-weapons that all too often are manufactured with the direct help of Western technology.' Stopping the Soviets' extensive aquisition of military-related Western technology-in ways that,are both effective and appropriate in our open society-is one of the most complex and urgent issues facing the Free World today. This program accords top priority to the military and military-related industry, and major attention is also given to the civilian sectors of Soviet industry that support military production. The Soviets and their Wanaw P a a allies have o b tained vast amounts of militarily significant Western technology and quipment through legaI and illegal means. They have succeeded in aquiring the most advanced Western technology by using, in part, their scientific and technological agreements with the West to facilitate access to the new technologies that are emerging from the Free World's applied scientific research efforts; by spending their scarce hard currency to illegally purchase controlled equipment, as well as to legally purchase uncontrolled advanctd Western This report describes the Soviet program to aquire technologies having military-industrial applications; US and Western technology, the aquisition mechanisms used, the spectrum of Wcstern aquisitions that and by tasking their intelligence services to aquire have contributed to Soviet military might, the project- illegally those US and Western technologies that are ed Soviet priority needs for Western technology, and classified and export controlled. the problems of effectively stemming the transfer of Western technology that could someday find applica- The Soviets have b u n very successful in aquiring Western technology by blending acquisitions legally tion in weapons used to threaten the West. and illegally acquired by different government organizations. The Soviet intelligence services-the Soviet Soviet Acquisition of Western Technology: Committee for State Security (KGB) and the Chief A National-Level Program ~ Soviet Union has devoted Intelligence Directorate of the Soviet Gcncral Staff Since at least the 1 9 3 0 ~the the primary responsibility for collecting vast amounts of its financial and manpower resources (GRU)-have Western classified, export-controlled, and proprietary to the aquisition of Western technology that would enhance its military power and improve the efficiency technology, using both clandtstine and oven collecof its military manufacturing technology. Today this tion methods. They in turn make extensive use of Soviet effort is massive, well planned, and well man- many of the East European Intelligence Services (see aged-a national-level program approved at the high- inset, p. 2); for their efforts in aquiring Western technology, these countries are paid in part with est party and governmental levels. Soviet military quipment and weapons. ' While there are numerous intcrpreklions of "technology" lor weapons. it is defintd in this rcport as the application olrcientDc knowledge, technical information. know-how, critical rnateriars, keystone manufacturing and 1 s t equipment, and end produrn . which'are arcntial to the restarch and development as well as the wries manufaaurc of modem highqualily weapons and military cquipmcnl. Western technology is defined as that t&nobgy 'dmlopcd by the Free World. Clandestine acquisition of the West's most advanctd military-related quiprnent and know-how by the KGB and GRU is a major and growing problem. . They have major responsibilities for both legal and illegal acquisitions and purchases; they work closely with the KGB and GRU in arranging trade aiverIn the late 1970s aformer East European intelligence sions. East European trade companies assist them in oflcer revealed organizational and iargeting details clandestine and illegal acquisition operations. related to Soviet-directed arquisirions 4/ Western Official Sovid and East European science and ttchtechnology by East European intelligence sentices, nology (S&T) organizations also play a major role in parricularly military-indunrial many/acturingboth open and clandestine acquisition of Western related ~echnologiesihar were given the highest priortechnology. Tbe Soviet State Committee for Scicna ity for collection by ar least one East European (GKNI) is the key player in amngand Tahnology intelligence service. Many technologies were acquired ing government-to-government s c i t n a and *echnolrhrough dummy firms established in Western Europe ogy apttcments to facilitate a-s to and the acquisithat were succesdul in securing some d r h e most as well as new technologies, tion of established advanced iechnologies in the West, including comincluding those just emerging from W s t m univeniputer, microelectronic, nuclear, and chemical ties, laboratories, and high-technology firms. It is the rechnologies. G m that oversets tbe aUocation of scarce Soviet hard currency for the legal purchase by various Soviet In microelectronics,for example, many LISfirms of selected Western ~ o l o g for y !b organizations were targeted through their ut7iliates in Western viet m i l i t a r y panposts. If the GKNT is unable to Europe; scientists, technicians, and commercial r e p acquirr tbe r y kchnolopy by open or legal resentorives also were succesdully recruited ro promeans, it tasks Soviet intelligence to clandestinely vide irJotmation during their trips to Europe. Alaquire the technology. though most d r h e milirary and defense-industrial East European Intelligence Services Arquire Technologiesfor rhe Soviet Union idormation acquired by East European ituelligence services wen1 to the Soviets, much d i l was used by r he East Europeans themselves to bc&t their military and civilian indunries. The computer, micre electronic, and photographic areas were priority targets. The East European countries bendfiled considerably from microelectronic acquisitions, and could nor have achieved the present level of develop men1 in their computer indusrry withour illegal acquisitions of Western technology. It is the well-organized and w&coordinated use of all these organizations that has made the Soviet program to acquire Western technology so succssful. As a result, the Soviets have acquired militarily significant technologies and m'ticaIly important industrial Western technologies that have benefited every major Soviet industry engaged in the research, dcveiopment, and production of weapon systems. Soviet MechPnisms for Acquiring Western Technology Soviet aquisition mechanisms include: legal means through open literature, through legal trade channtis, These intelligence organizations have b u n so success- and .through student scientific and ttthnoiogical exful at acquiring Western technology that the manchanges and conferences; illegal means through trade power levels they allocate to this effort have increased channels that evade US and Western (is. CoCom)' significantly since the 1970s to the point where there export controls, including aquisitions by their intelliare now several.thousand technology c~llectionoffigence services through recruited a p t s and industrial cers at work. These personnel, under various covers '~ho-~oordinati'ngCommittee ( C o h ) was established in 1949 to ranging from diplomats to journalists to trade offiserve as the forum for Watcrn efforts to dmlop a system of cials, are assigned throughout the world. strategic txpon amtrois. It is compostd af the Unitcd S u ~ athe , United Kingdom, Turkey, Portugal, Norway. the Nclherhndr, Luxcmbou~g.Japan. luly. G=, France, the Federal Republic of Soviet foreign tjade organizations, or enterprises, although quasi-independent entities, are partially sub- Gcnruny, Denmark Canada. and Belgium. ordinated to the Ministry of Foreign Trade, and their activities are closely coordinated by this Ministry. , espionage. While a large volume of technology is acquired by nonintelligence personnel, the overwhelming majority of what the United States considers to be militarily significant technology acquired by and for the Soviets was obtained by the Soviet intelligence services and their surrogates among the East European intelligence services. However, legal aquisitions by other Soviet organizations are important since it is often the combination of legally and illegally aquired technologies that gives the Soviets the complete military or industrial capability they need. microelectronics is the critical basis for the present wide-ranging enhancements of Soviet military systems and for their continuing sop;histication. Acquisitions through illegal trade channels often have both industrial and military applications, and tbus are important in the near term. Illegal aquisitions of technology fall into two general categories, botb of which are extremely difficult to detect and monitor. One is the diversion of controlled technology from legitimate trade channels to proscribed destinations. This is done through US and foreign firms that are Because of the priority accorded to the military over willing to engage in profitable impropriety; through the civilian sectors of the Soviet economy, Western agents-in-place in US or foreign firms or foreign dual-use technology-ix., technology with both mili- subsidiaries of US firms; through Soviet- and East tary and civilian applications-almost always finds its Europcan-owned firms locally chartered in tbe way first into military industries, and subsequently West; and through foreign purchasing agents (including arms dealers). For instance, to evade the US into the civilian sectors of industries that support embargo on microelectronic technology exports to the military production. Thus, Soviet assurances that Soviet Union, the Soviets and their surrogates have legally purchased dual-use technology will k used solely for civilian applications can seldom be accepted set up dummy corporations in the West that purchase sophisticated microclcctronics manufacturing cqdp at face value. ment. This quipment is then shipped and reshipped, sometimes with the knowledge of individuals in the Legal aquisitions generally have their greatest imcompanies, to disguise its ultimate destination-tbe pact on the Soviets' broad industrial base, and thus Soviet Union or Eastern Europe. Botb the Soviet and affect military technology on a relatively long-term Warsaw Pact intelligence services are in the mainbasis. The Soviet Kama Truck Plant, for example, was built over some seven yeais with massive imports stream of this illegal technology trade flow. The other type of diversion is an in-place diversion, in which of more than f 1.5 billion worth of US and West European automotive production quipment and tech- legally acquired technology and equipment-in the computer area, for example--are put to military end nology. Large numbers of military-specification trucks produced there in 198 1 are now being used by uses not authorized in export license applications, Soviet forces in Afghanistan and by Soviet military units in Eastern.Europc opposite NATO forces. Simi- The aquisitions that most directly a f f m Soviet military development have come from intelligence larly, large Soviet purchases of printed circuit board technology and numerically controlled machine tools collection and related illegal trade diversions. Soviet from the West already have benefited military manu- Bloc inte!ligence services have concentrated their effort in the United States, Western Europe, and facturing sectors. Japan. These scrvices target defense contractors and The Soviets give priority to those purchases that meet high-technology firms working on advanced technology (both classified and unclassified), foreign firms the direct needs of the Soviet military-industrial complex by paying for them in hard c~rrency.~Over and subsidiaries of US firms abroad, and international organizations with access to advanced and/or the past 10 years, the Soviets legally and illegally proprietary technology, including access to computer purchased large quantities of Western high-technoldata base networks throughout the world. ogy microelectronics quipment that has enabled thtrri to build their own military microeltctronics industry in a short time. This acquired capability in Table 1 Major Fields of Technology of Interest to Soviet and East European Visitors to the United States Computers Materas Stmiconductors Communiatiom, Navigatiw, and Gmtroi Vcbicular/Transportatmn Lrvr and Optics N u d a r Pbysics Microbioh Architecture Automatic Control CAD (Computer-Aidcd Design) Cybernetia/Artificial lntcll~gencc Data Basts Image Processing Design Image Processing/Retrieval Amorphous CAD Composites Cryogenics Deformation CAD Circuits .. Defects Devim Antennas Microwav+/Millimeter Waves Radio Wave Propagation Marine System Fikr Optics Gas h e n Cryogenics Fusion Materials MHD (Magnetohydrodynamics) Gencuc Enginur~ng Both legal and illegal acquisitions of US and Western technology and quipment are coordinated with information obtained through the complex network of international governmental scientific and technical agreements and exchanges that the USSR maintains with the advanced industrial nations. These include know-how, equipment, and computer data base collection activities of Soviet scientists and engineers who participate in academic, commercial, and official S&T exchanges. Visiting Soviet and East European technical and student delegations to the United States generally consist of expert scientists, many of whom are connected with classified work in their home countries. Such was the case with the Soviet scientist who managed-to get assigned to fuel-air explosives work. When he finished his US study programs, he almost ccr&nly returned to the USSR to work on related weapons. Other Soviet and East European scientists have come to the United States to work in Memories N/C (Numcricaliy Controlled)Units Networks Pattern Recognition Programming Robots Software Metallurgy N / C Machine Tools Powder Metals Superconducton TatinglNDT won-Destructive) Design Ion lmplanution Production Technology SAW (Surface Acoustic Wave) Devim Salcllitc Co~rnun~aticns Signal Proce+rinp felccommunicaticrrs Shipbuilding Optics Tunable Lawn-* Rcanws Structural Designs Superconductan the aerohydrodynarnic, cryogenic, optic, laser, cornputtr, magnetic bubble computer memory, nuclear, microelectronic, and structural and electronic rnateria1 areas. Given the military importancc of these fields to the Soviet Unian, it appears likely that a high percentage of these scientists will work on militaryrelated programs in these areas after they return home. From the beginning, Soviet candidates in various academic and scientific exchange programs have nearly always proposed research activities involving techpblogies in areas that have direct military applications and ill which the Soviets are technologicaliy deficient. Table 1 provides a list of the key hightechnology fields that Soviet and East European Over the past few years there has been an increased use of Soviet- and East European.+wned firms locally chartered in the United States and abroad to exploit Western-controlled and military-related technology. There are more than twenty Soviet- and East European+wned firms in the United States, and near, the end of the 1970s there were more than 300 similar' firms in Western Europe. In addition to the United States, heavy concentrations are in the United Kingdom, Sweden, the Netherlands, Italy, the Federal Republic of Germany, France, Canada, Belgium, and Austria. These firms are avenues for Soviet aquisition of advanced Western technologies, as was shown Thc Soviets correctly view the United States and when the US engineer arrested in late 1981 was several other Western countries as a continuing charged with selling US secret documents to an East source of important and openly available scientific European intelligence officer employed by a Polishand technical information, which they take every opportunity to obtain access to. Some of the unclassi- owned firm chartered in Illinois (see inset, p. 6). Furthermore, firms chartered in the United States fied documents so acquired are previously classified materials which had been downgraded to unclassified can legally purchase controlled US technology and through US procedures providing for automatic de- . study it without actually violating US export controls classification after a stipulated period. When w l l a - unkss they attempt to export the equipment or related technical data from the United States without a ed on a massive scale and centrally processed by the Soviets, this information becomes significant because license. it is collectively used by Soviet weapons designers and Soviet Acquisitions and Benefits weapons countermcasure experts. Today's recognition of the crucial role of Wtstern technology in the development and production of The Soviets also regularly attend high-technology trade shows, and attempt to visit commercial firms in Soviet wcapon systems and related military quip the West, particularly small and medium-sized firms ment is not unique. Soviet dependence on Western that are active in developing new technologies. These technology was visible and clear-cut in the yean immediately after World War 11, when tbe Soviets apparent trade promotion efforts often mask Soviet stole Western nuclear secrets leading to tbcir develop attempts to acquire emerging Western technological ment of a nuclear weapon capability, and copied a US know-how before its military uses have been identified bomber in its entirety leading to production of their and government security controls have been applied. TU-4. To achieve major improvements in tbeir miliEmerging technologits are particukrly vulnerable to tary capability quickly, they exploited captured scjenforeign collection efforts of this type. tists and industrial plants and resorted to a combination of espionage, stealing, and copying Western Soviet intelligence continues to place a high priority systems. on the collection of S&T information on genetic engineering and futuristic weapons such as lasers and Since that early period of near-complete reliance in particle beam weapons. The Soviets have been s t e p the 1 9 5 0 ~the Soviets' dependence on Western techping up their efforts to acquire new and emerging, nology to devtlop their weapons has decreased. Nevtechnologies such as very-high-speed integrated-c6ertheless, despite several decades of Soviet priorities cuit (VHSIC) and very-large-scale integration (VLST) focused on science, technology, and weapon systems, technology from Western universities and commercial the Soviets, because of their inability to be innovative laboraiories for both military and commercial applications. visitors come to the United States to study, research, or discuss, many of which are on the US Militarily Critical Technology Lisl today. In cach of the past two years, more than a third of the 50 program proposals offered under the Graduate Student/Young Faculty Program of the International Research and Exchanges Board (IREX) has been completely unacceptable in terms of prospective technology loss, and many other programs needed to be modified or have access constrained before the exchanges could be allowcd. US Radar Expert Passes Over 20 Significant Clussified Reports on Future US Weapon ~yiremsto Intelligence Agent William H. Bell, a radar project engineer for a hightechnology US ddensefirm was recruited by an intelligence officer who operated under cover as a vice president d t h e Polish firm caNed Polamco. This firm is a subsidiary of the Polish Government Corporation and is incorporated in Illinois and Delaware. It began as an importer/exporter d machinery, parts and tools and as a consultant tofirms exporting these products to Poland. The recruitmenr began as a simpleJriendship between neighbors with mutual sporting interests, grew quickly to include theirfamilies, rhen to proving Bell's credentials by showing a classified document to the agent, and then to passing microfilm copies of classified reports at meeting places in rhe US, Switzerland, and Ausrria. Mr. Bell was in financial srraits and was easily iduenced by the cash pr0flered-a total dSll0,OOO over a threeyear period. In all, over 20 highly classified reporls on advanredfuture US weapon systems or their components were passed to rhe Polish Intelligence Service and probably evenrually ro the Soviet Intelligence Service. Among rhe classified reports, those of prime importance to the West included: the F-I5 look-downshoor-down radar system, the quiet radar system for the BI and Stealth bombers, an all-weather radar system for tanks, an experimental radar system for the US Navy, the Phoenix air-to-air missile, a ship borne surveillance radar, the Patriot surjace-to-air missile, a rowed-array submarine sonar system, a new air-to-air missile, the improved HAWK surjaceto-air missile, and a NATO air-ddense system. The idormation in rhese documents put in jeopardy existing weapons and advanced future weapon systems q f the United ~ t a t e and s its Allies. The acquisition d mhis idormation will save rhe Polish and Soviet Governments hundreds dmillions d dollars in R&D d o r t s by permitting them to implement proven designs developed by the Unired States and by fielding operarional counterpart systems in a much shorter time period. Sp'ecifications on current and future US weapon systems will emble rhem to develop ddensive countermeasure systems. and effectively apply new technology to weapons developments, still depend on Western technology and quipment to develop and manufacture some of their advanced weapon systems more quickly. Today, Soviet military designers carefully choose the Western designs, engineering approaches, and q u i p ment most appropriate to their deficiencies and needs. These needs are still substantial and pervade almost every area of weapons technology and related manufacturing quipment. Table 2 lisu classes of Western technology acquired by the Soviets and East Ebopcans and illustrates the wide range of Swiet military technology needs. In the following paragraphs of this section, Soviet Bloc acquisitions have been grouped according to their likely applications: stratepic systems, aircraft systems, naval systems, and ~ c t i c a l systems. Also cited are acquisitions in the microelectronic and computer areas that have broad application to military and industrial programs. In certain of these areas, notably the development of microeltctronics, the Soviets would have '=n incapable of achieving their present technicai level without the aquisition of Western technology. In other areas, aquisitions have allowed the Soviets to reduce the indigenous effort they would otherwise have had to expend. The Soviets' strategic weapons program has benefited substantially from the aquisition of Western technology. The striking similarities between the US Minuteman silo and.the Soviet SS-13 silo very likely resulted from aquisition of US documents and expedited deployment of this, the first Soviet solid-propellant ICBM.The Soviets' ballistic missile systems in particular have, over the riast decade, demonstrated qualitative improvements that probably would not have been achieved without Western acquisitions of ballistic missile guidance and control technology. The most striking example of this is the marked improvement in accuracy of the latest generation of Soviet ICBMs-an improvement which, given the level of rele~intSoviet technologies a d h d e ago, appears almost .ceflahly to have been speeded by the acquisition of Western technology. Their improved accuracy has been achieved through the exploitation and development of good-quality guidanct components-uch Selected Soviet and East European Legal and Illegal Acquisitions From the West Affecting Key Areas of Soviet Military Technology Key Technology A m Notable Success Computm Purchases and aquuitions of complete syslem designs. concepts, hardware and software, including a wide variety of Western general purpose computers and minicomputm. for military applicatiom. Complete industrial proccsra and semiconductor manufacturing equipment capabk of d n g all Soviet military requirements, if aquisitions were combined. Aquisitions of prowsing quipment and know-how. Acquisitions of automated and precision manufacturing quipment for elcnronicr,matamls. a d oplial and future laser weapons technology; aquisition of information on manufacturing technology r e h t d to weapons. ammunition. and aircraft pans including turbine blades, cornputen. and electronic components; aquisition of machine tools for cutting large g u n for ship propulsion systems. Aquisitions of low-power, low-noise, high-~mitiYityreceivers. Acquisitions of optical, pulsed p o w source, and other laser-related annponenrs, including s p c i r l optical mirrors and mirror technology suitable for future laser -porn. Acquisitions of marine and other navigation ruriven, advanced intrrirl-guidmcccomponents,including miniature and hser gyros: acquisitions of missile guidancc s u b s t e m s ; acquisitions of precision machinery for ball b r i n g production for missile and other applicatioar; acquisition of missile la n n g e inunrmcatnlion s y s t e m and docvmmtation and precirm eimtfnodolina for collecting data critical to portflight ballisti; missile analysis. Purchases and acuuisitions of Western titanium alloys. welding quipment, and,funvca for producing titanium plate of large size applicable to submarine construction. Missile technology; some ground propulsion !ahnology (diesels, turbim. and muria): purchases and squisitions of advanced jet engine fabrication technology and jet engine daipn informalion. Acquisitions of underwater navigation and diration-finding equipment. Acquisition of information on satellite technology, laser m n g c h d m , and u n d m r t a low-light-Id television a m e m s and systems for remote operation. Acquisitions and exploitations of air defense radars and antenna designs for m k i l c systems. Microclcctronia Signal Pracssing Manufacturing Communications Lten Guidance and Navigation Structural Materials Propulsion Acousticll Senson Eleclrosptical Sensors Rahn as gyroscopes and accelerometers. The quality of these instruments, in turn, depends to a considerable degree on the quality of the small, precision, highspeed bearings used. er than would have be.; likely through indigenous devciopment. The Soviets probably could have used indigenous grinding machines and produced the required quaIity of bearings over a long period by having an abnormally high rejection rate. Through the 1950s and into the l96Os, the Soviet precision bearing industry lagged significantly behind While some of the Soviet acquisition in the aircraft area appears directed toward the development of that of the West. However, through legal trade puiciiases in the 1970s. tbe Soviet Union acquired US countermeasures against Western systems, the Soviets appear to target data on Western aircraft primarily to precision grinding machines for the produdion of aquire the technology. Furthermore, while the Sovismall, high-precision bearings. Similar grinding maets have acquired a large amount of hardware and chines, having lower production-rate capabilities, were available from several foreign countries. Only a data from planes downed or captured in Vietnam and elsewhere, they continue to attempt to aquire the few of these machines, either US or foreign, would have been sufficient to supply Soviet missile designers most advanced technologies through both legal and 'illegal transactions with the West. Assimilation of with all the quality bearings they neded. Thtse p u r c h a s ~provided the Soviets with the capability to manufacture precision bearings in large volume soon- - 8 Western technology has been of great benefit to both their military and commercial aircraft development programs-to the extent that aircraft from certain Soviet military design bureaus are to a significant degree copies of aircraft of Western design. Soviet military aircraft designers have "ordered" documents on Western aircraft and gotten them within a few months, including plans and drawings for the US C-5A giant transport aircraft early in its development cycle; these plans, although dated now, have contrib uted to current Soviet development of a new strategic military cargo plane. Designers were in particular n d of data on US technological advances, but more importantly, they needed information on aerospace manufacturing techniques. Soviet aircraft designers have been interested in US military transports and wide-body jets and probably have managed to accelerate the development programs for their IL-76 Candid and IL-86 transports. The IL-86 looks much like the Boeing 747 and the IL-76 resembles the C-141. Neither system is an identical copy. The IL-76 also is used by the Soviets as the platform for their new AWACS (Airborne Warning And Control System), which is expected to be operational in the mid-1980s. This system will provide the Soviets with a major improvement in attacking low-flying missiles and bombers. The Soviet AWACS is strikingly similar in many ways to the US AWACS, and is a major improvement over their old AWACS. The Soviets' acquisition effort in the naval systems area reflects well the two major factors that motivate their requirements: the aquisition of technology not readily available to them-yet critical to their programs-and the acquisition of quipment which, while producible in the Soviet Union, allows them to divert resources'to more pressing naval programs. The Soviets appear to have concentrated their acquisitions in areas related to aircraft carriers, deep sea diving capabilities, sensor systems for antisubmarine warfare and navigation, and ship maintenance facilities. In the maintenance a k a , two huge floating drydocks purchased from the West for civilian use by the Soviets have beendiverted to military use. Drydocks are critical for both routine and fast repair of ships damaged in warfare. In 1978, when the Soviets took possession of one of the drydocks, they diverted it to the Pacific Naval Fieet. The other was sent to the Northern Fleet in 1981. These drydocks are so large that they can carry several naval ships. More importantly, they are the only drydock facilities in either of the two major Soviet fleet artas--Northern or Pacific--capable of servicing the new Kiev-class V/STOL aircraft sarriers. Soviet advanced submarines carrying balistic missiles, Soviet Kiev aircraft camers, and Soviet destroyers were among the first ships repair& In these drydocks. It is important to note that the drydocks themselves are so large that no Soviet shipyard would have been capable of accommodating their construction without major facility modifications, associated capital expenditures, and interruptions in present weapons programs. n c i r importance will be even more pronounced when the Soviets construct the stilllarger &rriers (for high-performance aircraft) projectcd for the 1990s. The Soviets even have acquired Western aircraft carrier ca@pult equipment and documentation for this larger carrier; catapult technology, though relatively common in the West, is outside the Soviet experience. Within the past few years, the USSR also has sontracted for or purchased foreign-built oceanographic survey ships quipped with some of the most modern Western-manufactured quipment. In place of US quipment that was embargoed, other Western equip ment has been installed on the ships. This modernization of what is the world's largest oceanographic fleet with Western technology will help support the development of Soviet weapon system programs and antisubmarine systems against the West. Although the Soviets have a strong indigenous technology base that could suppsrt the development of much of their tactical weapons systems, this does not pregint them from maintaining an ambitious program for acquiring and benefiting from Western technology in this area. In some cases, their acquisitions satisfy deficiencies in Soviet technology; smart weapons technology and electro-optical technology are examples of Table 3 Microelectronic Equipment and Technology Legally and Illegally Acquired by tbe Soviet Bloc Equipment or Technology Procas Technology for Mirroclcnronic Wafer Preparation Comments . R o w Technoiogy for Producing Circuit Marks Equipment for Device Fabrimtion Assembly and T a t Equipment The Soviets haw acquired hundreds of specific picas of quipment related to wafer preparation, including expitaxial growth furnaces. crystal pullen, r i m / d r y m slicers. and iapping and polishing units. Many acquisitions in this area include computer-aided design toftware, pttcrn generators and compitcrr, digital plotters, photorrpcaim, contact printers, mask comparators, elcclron-beam gener- , atom. and ion millinn muiament. Many hundreds ofacquisitions in this area have provided the W c t r with mask alignm, diffusion furnacu, ion implanters, toam,etchm, m d photocbmical pmccs lines. Hundreds of items of Western equipment, including scriben, bonden, ptok t m , md final t a t equipment have b a n aequircd by the Soviets. this. Signal and information-processing technology, particularly for Soviet air defense systems, is another. More often, however, technology is exploited to speed up a developmental program or to improve upon original Western designs in an expeditious manner. The Soviets appear to have concentrated their tactical systems aquisitions on Western tank, antitank, and air defense-related technology and equipment in order to derive concepts and know-how to benefit their weapons programs and to design countermeasures to the Western systems. The Soviet SA-7 heat-seeking, shoulder-fired antiaircraft missile contains many features of the US Redeye missile. Such aquisitions have enabled the Soviets to obtain advanced tactical weapon capabilities sooner than otherwise would have been possible. systems for decades. The acquired quipment and know-how, if combined, could meet 100 percent of the Soviets' high-quality microelectronic needs for military purposes, or 50 percent of all their microelectronic netds. Table 3 identifies the microelectronic productionrelated equipment that has been aquired by the Soviet Bloc. These aquisitions have been grouped into areas related to the four steps required to produce a microchip: wafer preparation, circuit-mask making, device fabrication, and assembly and testing, Soviet computer technology has long been limited by fabrication and production technology problems and by difficulties in software development. Since 1969 the USSR and East European countries have been developing a family of general purpose computers Western equipment and technology have played a known as the Ryad series. These computen; which very important, if not crucial, role in the advancement make up virtually the total Soviet and East European of Soviet microelectronic production capabilities. This effort in large general purpose computen, have been advancement comes as a result of over 10 years of and will continue to be used in a wide variety of civil successful acquisitions-through illegal, including clandestine, means--4 hugdreds of pieces of We.tern and military applications. Western technology has rnicroekctronic qujpment worth hundreds of millions been important tp development of the Ryad series by of pollars to equip their military-related manufactur- providing proven design directions both at the system and component levels. The architectural designs of the ing facilities. These aquisitions have permitted the SoSiets to systematically build a modern microelectronics industry which will be the critical basis for enhancing the sophistication of future Soviet military Ryad computers, for example. are patterned after Ofleer Rmals those of the highly suCCCSsfu1 mass ~ r d u IBM d 360 ~ ~y ~ ~ ~ ~saved i soviet ~h i ~~ ~ ij ~l ~i ~ ~ and 370 series, computers that are used in a wide Hundreds of Millions of Rubles tange of applications and are highly serviceable in the field. A .former Soviet inrelligence oflcer revealed that idormarion on Wcclern military-relared rechnology With lhis the and EurO~eans by fhe Sodel inldljgence serVjces sOYCdthe eliminatd many of the risks involved in undertaking military indusrry hundreds dmillions the development and production of a new series of rubles. The aquisition d Western technology opergeneral purpose computers, and saved considerable ationally was assigned she highest priorityfor collecamounts of manpower and lime. Since the early 1970s lion by local rerideIICiesin luy WenEuromn the Sovieu and Eu-ns have legally purcountries because d r h e relarively easy a c m to lhan390W minimmputen' 'Ome much US and Wesrern rechnology in Europe and ihe which art now being used in military-related organipraise being received by the servicesfor their aquisizations. Furthermore, they a n also developing minition d o n s . mmputen that are direct copies of Western models. and bn E u r ~ n mmPuter These acquisiiions were directed by the jlirary sfltcmshas kn aided mennr--fegal ma&acluringj,,duslrjes the Council dMj,,jsand illegal, including clandestine-for acquiring the rers, and there was intense competirio~herwcrn rhe needed ttchnical know-bow. intelligence services to q u i r e Warern lerhnolopy needed for wapotu dcvelopmcnt programs. OjparThus, the Soviets and their Warsaw Pact allia have ricvlar Ned by weawm been lhe derived significant military gains from their aquisiacquisition knowledge on special mlotions of Western technology, particularly in the strably the weaving dcarbonfilamenrs in a three tegic, aircraft, naval. t a c t i d , mi==l=mni=, and dimeNionol CortligrrrariOn the sewices were computer areas. This multifaceted Soviet aquisitions lasled to The endproducrJJrom 3-D program has allowed the Soviets to: carbon-carbon weaving technology are ustful for abSave hundreds of millions of dollars in RBD costs, blive hear shields for high rlociry reentry rhiclrr and years in R&D development lead time (set inset). (rhe warhead part d ICBMs and S U M S )and for Mdcrnize critical sectors of their military industry poniom drockel moror5~or large missilUU and reduce enginefine Or copyThe Soviet aqujsirjon dsome drhjs is jng mn thereby limiting the likely ro enable them to ewntually gain a capability rise in their military production cotu. /or increased military options against the West-+ Achieve greater weapons performance than if they capability that orherwise would haw taken them had to rely solely on their own'technology. several addirional years to develop themselves. The wcams lncomrrate counarmeasures inrelligence services also worked closely wirh sciem early in the development.of their own weapon ris~sfromthe Soviet military mandacturing indusprograms. tries and even planned joint operarions against WestThese gains are evident in all areas of military ern Trade and Equipment Fairs in order to acquire weapons system. While difficult to quantify, it is rechnoloD, clear that the ~ e s t e r nmilitary expenditures netded to overcome or defend against the military capabilities derived by the acquisition of Western technology far outweigh the West's earnings from the legal sales to the Soviets of its quipment and technology. ~ l~ ~ Outlook for the 1980s The Soviets' military R&D and weapon test-andevaluation efforts are continuing at a rapid pace. Several hundred development projects for weapons systems and major system elements are now under way, and it is expected that through the 1980s the number of new or modified advanced Soviet weapon systems emerging from these projects into production and deployment will remain at the high levels of the last two d w d e s - s o r n e 200 weapon systems per dwde. Despite these economic difficulties, there are no s:3h5 that the Soviets are shifting resources away from t ne military sector or slowing down development of w w p on systems that will be entering the production ste e by middecade. New generations of Warsaw Pact 4 weapons will require selected critical component a114 modern manufacturing technologies. It k in these artas that Soviet illegal acquisitions of Western tecnnology, complemented by legal acquisitions, are more likely to be concentrated over the next five to 10 Soviet military manufacturing capacity increased by a significant 80 percent during the 19605 and 1970s, and new plant expansion now under way at one-fourth of their key weapons manufacturing facilities will add considerably to their capabilities. These new facilities will be ready to produce weapons in the next four to 10 years. Plant expansion is in the following areas: ground warfare vehicles, including new tanks; avi- . ation, including facilities for a ncw B-1-type bomber and a new long-range military transport aircraft having strategic airlift capabilities; naval shipbuilding, including submarines for ballistic missiles and cruise missiles, as well as full-size aircraft carriers for high-performance aircraft capable of competing with the United Stata in global operations; and electronic and microelectronic manufacturing facilities throughout the USSR.The development and production of new Soviet weapons at these facilities is sure to be more complex and costly than during the 1970s. Among the more important tcchnologies arc micra electronics, computers, and signal processing. Micro electronics will play a vtry significant role in advanc in computers and signal promsing, and all of thew technologies will be important in developing advanc c Soviet missile, aircrafr, naval, and tactical weapon systems, and associated detection systems. Additiond projected Soviet technological netds related to sucf systems art presented in the append= As the m l t of both tactical and strategic force modernizations, Soviet and Warsaw Pact military manufacturen are inmasingly pressed by large-scab production requirements and the d a t e d n a d to control manufacturing and materials costs. Thus, particularly critical for the 1980s are Soviet .needs t o improve their manufacturing capability. To a large cxtcnt, the level of manufacturing technology in Sovi et plants determines the Soviets' capability to move new technology from R&D into military app1icatio:r. All of this military development and plant expansion Manufacturing technologies play a significant role n only in tbe development of advanced component tech activity, however, is taking place at a time when the Soviet economy has reached its lowest level of growth nologies, such as microel~ctronicsand computers, b 3 since World War 11. Soviet arinual GNP growth may also in tbt actual production of modern military well be limited to an average of 1 to 2 percent by the systems. mid-1980s. Stagnation in industrial sectors that are Futurc Soviet and Warsaw Pact acquisition effortskey to both the civilian and the military sectors wiIl including acquisitions by their intelligence servicesmake it increasingly difficult for tbe Soviets to satisfy are likely to concentrate on the sources of such theeneeds of.both. Thus, Soviet leaders will have to component and manufacturing technologies, make tough choices among defeqse, jnvestment, and including consumption; the competition among rival claimants for rtsourccs will become intense. Under these condiDefense contractors in the United States, Western tions, it may be impossible for the Soviets to maintain Europe, and Japan wbo are the repositories of curknt growth in military production without hurting military development and manufacturing the civilian economy. technologies. General producers of military-related auxiliary manufacturing equipment in the United States, Western Europe, and Japan. Small and medium-size firms and research ceniers that develop advanced component technology and designs, including advanced civil technologies with future military applications. inttlligence services. But the most alarming aspect of this commercial focus by Soviet Bloc intelligence services is that as a result of these operations. the Soviets have gained, and continue to gain. access to those advanced technologies that are likely to k u s 4 by the West in its own future weapons systems. The Soviet intelligence effort against Western defense contractor firms poses a serious problem in itself. With more than 11,000 such firms in the United The combination of pan Soviet acquisition practices and projected Soviet military needs indicates that the Slates and hundreds of subsidiaries abroad, US munterintelligena efforts are stretched thin. Pro:mion of United States and its Allies are likely to experience US firms abroad from hostile intelligence threats is serious counterintelligence and related industrial security and export control problems over the next five the responsibility of host governments, but they too are feeling the burden of well-orchestrated Soviet to 10 y e n . Bloc efforts. The Soviet intelligence threat and the illegal trade problem appear to be severe in Japan. It The task of stopping Soviet Bloc intelligence operations aimed a t Western military and industrial tech- appears that Western industrial security-both defense and commercial-will bt severely tested by the nologies already poses a formidable counterintelligence problem, both in the United States and abroad. Soviet intelligence smicts and their surrogates But that task is likely to become even more difficult in among the East European intelligence services during the 1980s. the future as several trends identified in the 1970s continue into the 1980s: Western industrial nations also can expect increased Soviet Bloc intelligence activities directed ax the First, since the early 1970s. the Soviets and their aquisition of their key industrial technologies. Wcstsurrogates among the East Europeans have been ern export controls arc presently Being updated and increasingly using their national intelligence serbroadened; the CoCom allies have recently agreed to vices to a q u i r e Western civilian technologies-for strengthen controls and to enhance their enforcement. example, automobile, energy, chemicals, and even Moreover, serious hard currency shortages, along with consumer electronics. generally increased restrictions on Soviet S&T visitors Second, since the mid-1970s. Soviet and East Euro- to the United States, will make the Soviets men more dependent on intelligence and other illegal efforts to pean intelligence services have been emphasizing the collection of manufacturing-related technology, aquire the goods and equipment they will need. in addition to wsapons technology. The massive, well-planhed, and well-coordinated SoThird, since the late 1 9 7 0 there ~ ~ has been increased viet program to aquire Western technology through emphasis by these intelligcnce services on the acqui- combined legal and illegal m a n s poses a serious and growing threat to the mutual security interests of the sition of new Western technologies emerging from United States and its Allies. In response, the West universities and research centers. will need to organize more effectively than it has in Tbe combined effect of these trends is a heavy focus the past to protect its military, industrial, commercial, by Soviet Bloc intelligence on the commercial sectors and scientific.cornnunities. in the West--sectors that are not normally protected from hostile intelligence services. In addition, the security provided-by commercial firms is no match for the human penetration operations of such foreign Appendix Projected Soviet Technological Needs and Acquisition Targets Through the 1980s Given the dynamic nature of their collection program, it is expected that the Soviets will continue their attempts to acquire a broad range of Western technologies. Certain areas, however, represent priority collection targets for them; these areas are critical to the Soviets' enhancement of their weapons capability. Western solid rocket propulsion technology also will be a high-priority Soviet acquisition target in the 1980s. While the Soviets have vast expcrienc. with the liquid-propellant systems which represent the bulk of their ballistic missile force, they are shifting their emphasis to solid propulsion systerns, which have practical advantages over liquid systems in a variety Over the past decade, the Soviets' most pronounced of applications. At the zame time, the Soviets have improvements in strategic weaponry have been in the had only limited success with the progress of their solid-propulsion program. They probably will pursue development of a MIRV ballistic missile capability and a significant improvement in the accuracy of.their the aquisition of information on solid-propellant production procedures, and propellant grain design, moICBMs. The former capability was made possible tor case, and rocket nozzle technolog~s. . largely through the introduction of onboard digital computers and the latter through tbe improvement in, The Soviets' ABM R&D effort has axhued apace the quality of the missile guidance systtms and the procedures used to calibrate them. Technology a q u i - since the 1960s. As a result, they have gained considerable expertise in the development of large fixed-site sitions from the West contributed significantly to radars for early warning, tracking, and engagement, these improved capabilities. and their interceptor technology has also improved substantially over the years. Areas m a i n , however, The Soviets probably will continue to make their highest priority the aquisition of Western microelec- in which the Soviets will still seek and would benefit from sophisticated Western ABM technology. These tronics and computer technology for in-flight guidinclude signal processing for detection, discriminaance computers. This aquisition effort will be motivated by a desire to overcome reliability problems and tion, target assignment, and sensor technology, particularly in the long-wave infrared portion of the also to provide the on-board processing capability required for the development of new guidance options electromagnetic spectrum applicable toward improving their launch detection capability. with the potential for extremely high accuracies. ' The Soviets will also give top priority to acquiring information on the latest generation of US-inertial components upon which the MX ICBM and the Trident SLBM guidance systems are based. Despite the past accuracy improvements of Soviet ICBMs, these two US systems incorporate technologies beyond -present Soviet technological capabilities. Moreover, their SLBM accuracies are significantiy behind those of US systems. In addition to information 06 hardware, the Soviets are expected to seek calibration sofiware algorithms which, as the guidance instrument.4 themselves reach their practical performance limit, would allow for continued improvement in weapon system accuracy. Priority Soviet targets in the aircraft area will include Western materials technology, particularly composite materials to allow weight-efficient designs. The Soviets would also benefit from the acquisition of certain engine technologies, in particular those critical to the development of nigh-bypass turbofans for large strategic airlift type of aircraft. While, in general, Soviet avionics technology appear adequate, the Soviets have yet to demonstrate a capability to deploy reliable, accurate airborne inertial navigation systems for longrange navigation and weapons delivery. Thus,while long used in the West, these systems are still prime candidates for aquisition. Very high priority probably will bc given to the aquisition of computer-aided aircraft design technol, ogy, an area in which the Soviets are clearly im. pressed by US progress. In general, they also will continue to benefit from the aquisition of efficient aircraft production technology from the West to r c d u a costs. Much of the Soviet aquisition effort in the area of tactical weapons is likely to bt targeted against s u k n and sensor technology for tactical missiles and prccision-guided munitions. Tbe Soviets will apply considerable effort in particular to aquiring advanced Western electro-optical technology including that related to antitank weapons. As in other weapons areas, the signal proctssing and microclectronia technolWhile the Soviets have a strong indigenous air defense ogies supporting tactical weapon systems will also be radar and missile technology, their general lag in priority aquisition targets. Technical documentation microelectronics and microprocessing will direct them on entire weapon systtms, if obtained, will k used to to attempt whmver possible in the West the aquisi- develop countermeasures. tion of advanced signal-processing hardware and In the micraelectronics area the USSR is now at the software. stage of implementing its LSI (large-scale integration) The Soviets will continue to emphasize the aquisition technology to high-volume production. Despite the of naval-related technologies applicable to improving large acquisitions of Western ttchnology and productioh"tquipment over the past 10 yean which have their antisubmarine warfare capabilities, an area in wbich much Western technology is superior to theirs. brought them to the LSI level, additional acquisitions Thus, a significant effort to acquire acoustic sensor from the West are needed for the m m sophisticated weaponsprojtcts of the future. Ever-intnasing medt technology can be expected, in particular that techfor higher precision Western equipment wiIl uctend at nology applicable to the development of large towed least through the 1980s. acoustic arrays that would assist the localization of Western submarines in open waters. They probably In addition, the Soviets will require considerable will also target the aquisition of Western signalexpansion of their microelectronic material base to processing hardware and software rquired to fully support continutd expansion of integrated-circuit proexploit the detection capabilities of these sensors. duction. In this regard, the USSR is seeking Western help to build two or three poly-silicon plants that will Another critical problem area to which the Soviets more than double current Soviet capacity for military will direct aquisition is that of submarine quieting. Here also the Soviets lag the West significantly. As a applications. Also, with increasing advances in the result, not only arc their submarines more vulnerable technology, the USSR already will be seeking addito detection, but the self-generated noise reduces the tional Western assistance in key complementary technologies such as packaging and printed circuit h a r d efftctiveniss of their own acoustic sensors. production. An area in which the Soviets have historically lagged The USSR is expected to focus its future acquisitions behind the West is precision submarine navigationin particular, in the development of submarine inertial efforts on the emerging techno1ol;iu related to verynavigation systems. The need for improvements here high-speed integrated circuits (VHSIC)and verywill bccome more pressing as the Soviets develop long- large-scale integration (VLSI). It is important to note that, while VHSIC is thought of as a military develrange cruise missiles for land attack which require opment program, and VLSI as a civilian technology, precise knowledge of launch location. therds little difference between the two as far as SO& produ'ction needs are concerned. The same Tbe Soviets also will continue to target technologies related to the design and construction of large aircraft materials, production, and test quipment will be used carriers (for high+crformancc aircraft) to reduce the to produce both. in both of these ttchnological arcas, the USSR has dcveloptd effe~tivemeans for illegally likelihood& poor design choices that would arise in what is for them an entirely new type of construction aquiring Western advanced products. program. , Prime Soviet collection efforts in computer technology through the 1980s are likely to include large-scale scientific computers such as the US-built CRAY-1 Computer. Computers of this class offer significant improvements ovq Soviet models in weapons-systems design and simulation and in tbe processing of numerical data for many military applications. Other hardware targets will include: very dense randomaccess memory chips; high-capacity disk drives and packs; the so-called"superminicomputer" class of machines; and the latest in general purpose computer . technology. All of the above targets offer opportuni&s for significant performance improvements and ' represent technologies of substantial Sovia lag. In computer software, the Soviets will continue to attempt to collect IBM programs and programs of other vendors written for these machines because of past Soviet decisions related to copying IBM computers. The large and growing number of IBM-compatible computers in the USSR means tbat collection activity in this area can be expected to increase. The compelling attraction of computer networks also should spur great Soviet interest in acquiring network-control software and other programs related to networking. 8' s&ehg. Soviet sub- marines are zmtrxhsly noisier than US. subs-so noisy that this sigHow far htis the Soviet lhion gone m challenging America's %?rq&pxsttA,deaset*)4.r4.4 Saviet surface -,*-kootlcentrat- kadinmilitarytEchbbByT Whatevergeinsthe&rrpi.nnlPlwe madg-wd ' "--*.opy there have bben Cbftad fnte~ceAgency*EOaitical areas where Moscow still hgs behind and is making an all-out e&nt to catch up. Smmnarizing a topserret kt&gencestudyina-to- t h e c I A s a y s s e v e r a i ~ ~ o g y ~ o n ~ s a r e ~ i u a "massive,well p k w d d d oaordinated Soviet program to q u i r e Western technology throagh cornh i n e d ~ a n d ~ ~ ~ TheSeazetfaeo3leps*CU33aiiclsla M o ~ r x r w b a s ~ i a i t s ~ ~ gian~havemane their way and that sdmndne- hnmched*~-because sub slclppers cannot be sore exacdy where they are under the water. The CIA expects the Soviet Union to give t o p p r i o r i t y t o ~ d e t a i l s o f w e s t e r n f&xtmmk and computer devices ad forin-ftightguidance ofmissilessndof-* 44 Reproduced by Congressional Research Service, Library of Congress with Permission of Copyright Claimant %*pest aadc.rs rhe s l y measure, br qpddraroe of getting ~b~ it seeks. Prethat, wams the %&, 'Yr ume ofthe most CI.S.UEWS 6 WORLD REPORT. May 3. 1982 Reproduced by Conzressional Research S e ~ i c e , Library of Congress with PemisSiwt of Copyright Claimant -... 1 - Pg. 1 31 January 1982 BALTIMORE SUN Soviet espionage siphons U,S. know-how B 1 Following the military crackdown in Poland, five other influential Democrats, including such liberal spokesmen as Senaton Gary Xart of Colorado ~8geaciesoperatmginthis Washington-As a target for g- amdry, to ever-greater efforts to Pad Carl Levin of Michigan, both members of the pionage, William Holden Bell was obtain secretly and illegally what Senate Armed Services Committee, urged Mr. Reatextbook perfect. gan to halt all technology transfers to the Kremlin, LIoreow ance might have Pcqnired Then 59 years old md trying to particularly those that would aid the Kremlin's enkeer, pace with a w w wife 25 years WY. =w programs. S a w e r p a t s , b o t b y m m e a n s his jvnior, he was bitter about a rela- all, ke the .cquisition of oattide If there are differing views about the consequentively warewarding cmwx d dcs- technology as vitnl to Moscow's c e of technology transfers to the Soviets, there is penbely in need of a h to a haps of coatianag its military comgeoeral agreement on one thng: It continues, deliitstyle gf travel and leisme. spite publicly expressed concern at both ends of petitha with the United States and at Pennsylvania avenue. By and large, the Kremlin is In short, Bell, a xyhr thenmctimc.d~~itsowninable to acquire mPch of what it wants, from the laexpert for H y h c s Anarft tulaalarmanic problem. ny, a major U.S. defame -or, I f t b e y w e r e n o t a M e t o u ~ I a t a n ~test - in computer chips to radar technology to the was ripe for the picking. And w e d lror as a aort of "quick fir,"some of these experts latest advancements m space-age rc~paruy. he was. m,the ,%vie& would mnfrout a Santiaaing se- "Soviet leadas have learned they have access to Before the FBI m t op with ties of d i f f i i trade-offs, paltlcularly in allocat- Western techwlogy both t)armgh legal and illegal him last summer,Bell, in ffing prccioPs rtscarcb a d development nsancg, channels," Richard N. Ferle, aspistant secretary of for about $119,000, haied to intryingtomeetbothttnirdd~.oddrmcstic ddcllse for international security policy, says of the ariomacas of the problem. P of b~ hl w m l ~. t1 iCmQ g c t . r.ane s i f i eofd ttRe , l t d s . "Under the guise of pmchases for benign, civilIbe West "is oirtually wrbsidtnng M e t mili, have obtained a wide West's most closely @laded mqt- tary power," ups Dr. Miles CoJticlr, who rmrs the ian o b ~the ~Soviets of quipment critical to their military proom Systelns, ilxhdhg the skdth -W Mitute for Strateg~cTrade and rtsge Where they have failed to get what they aasioPPlly acmes as a m o l r P l c o n d t u l t gram. want openly, they have resorted to a well-coordito offset the W a m w W s m-onE8st-westtrade. cal superiority in EmPp. ?bse .re some, including a few members of mfe&illegal acquisition program. " The Bell case is tbe rbdf of spy aPlgas, who believe the extent to which the Speaking on the threat of Soviet espionage last drama in an era in rhich y Kremlir~dies on Western technology is greatly ex- maath, Attorney General Smith told a Los Angeles interestsbavecometooutwughtbe aggerated by a Reagan administration that tends to group that because the United States relies so highview most foreign policy questions in East-West Iy on superior military technology, the current First of t h ~ e ea ? t d e a This w d d seem to be a minority view, how- casts to national acPrity through such losses are - tams. "iucalcnable." ever. political mothawb of earlier The Bell case,which led last fall to his convicRqmsmtative Jonathan B. Bingham (D, N.Y.), -. Today. spb..e.~~p~~ll,* c b i m u n of t8e House Foreign Affairs sobconrmit- Uan and.that of his Polish confederate, Marian W. s!ored m =wQt= bce tbpt uwxxm US. trade poky, .asatS flatly ZIChMti. 01) arpioeage charges, illustrates the technology that goes into a child's t h t t k R r P m , ~ t i l m b a s ~ t e d t hkind e of sensitive tnilhy information that stimuelectronic bprhlt game, .ad smhlmem of the problem to the United states, lates such contacts as the Polish link to Bell: The FBI still will not discuss certain details of dummy corporatiinm p h y 88 great a p a r t m k l y the amtributim the west has made to role as do secnt Mta drops Pad tbe Soriets t&rough over-thecormter sllcs of ~ D O W - the case, or describe in detail the extent of the narnidmght rendezvous. tionnlrecmitybrtpch. how. More ai9nifirint. tk coc ilhrsot)las,indadmgmmtoppollcy-mplrcrsmthe Evidace and tatirhoay at Mr. Zachanki's trial, t r a z what law a d M i - uealtiw m, question Washin%on's ahility to however, indicated that auxmg the secrets obtained cials in the United ~-~ cWreofftilchaports,emnifmcha@iswar- by Polish intellrgeace (and, US. officials assume. by the KGB) was information about the Stealth Attorney CmerPl William Frcach rurtcd. project, a new; rapid-firing. radar-conSmith and FBI I)nator William H. ~ i s n o c b u b t t h a t ~ c s t e r n t e c h d o l o g y h abomber s Webster-see as a change in tPetia W some impact," says William A. Root, director trolled antiaircraft and antitank gun; a sophisticatby the Soviets in a cancerted effort of the Office of East-West R a d e a t the a t e De- cd antitank missile, and the socalled "look-down. to obtain data about Amuican ad- pPrtmcat, but "if you take the line that any trade shootdown" radar of America's most sophsticated vances in military and indmrtrial free nrmrcg for military production, that h i - fighter plane. The Stealth bomber is the super-secret aircraft technology. a l l y is a fommla for a totaleuhqp, arid this s While espionage in the United an idea no& being pmsued under present cbmn- being dcsigaed to replace the B-52 and the planned 5 1 bombers as the airborne component of this States certainly is mWng new for camtry's nuclear triad. The plane is so named bethe Soviets, the law enfolrcmeot ofcause of its hoped-for invulnerability to Soviet raficials see the Kremlin turning more dar detection. than ever to claadestiDe means of The other weapons systems are e:emen& of gaining scientific hardware d &ed liberal credentials. know-how, since bans on wa-theSenator Joseph R. Biden, Jr. (D,Del.) for exam- NAlWs conventional deterrent forces in Europe. counter traasfers rere adaed by ple, says Western technology, princip~llyfrom the aad provide tbe West with technology to counter Residents Carter and Rugon. United Stam, has beem of "slgnificaat benefit" to the massive numerical superiority in tanks,planes mldien of the Warsaw Pact nations. President Carter orrkred a par- tbe Sovie& and their Eastern Bloc allies,aad . .he is andThe "lookdown, sbwtdown" radar, for examtial ban on techoology sales to Mos- & t j d of rh.t he sees as a r a v a i n g dmKUStraple, is destgned to permit US. F-15 fighters to cow dter the Ikcember, 1979, Soviet tiancfforttoebbrbeflow. iuvasion of AfghanMan. Last month, "It seems to me the administrption loves can- counter cwmy airuaft that fly low to the ground President Reagan s e t to torrghcn merce more than it hates colmnonm." be says, to avoid detection by ground-based surveillance the embargo following the military citing a Mmller of large, govermaentopproved systems. Soviet radar technology is believed to be much crackdown in Poland, which he bas mles to the Soviets since Mr. Loot office version of "looksaid was inspired by the Rremlin. marc than a year ago, and a lack of law enforce- Aess advanced than the -can The Reagan a ' ' tion's ac- imzmt in b a l m illegal acquisiof industion, federal l a w s offi- trial aod technical know-how. 5 v Walter Taylor ~ a s h ~ n ~ ~t o u rne a u of The Sun ckts believe, is likely to spur the KGB and the GRU, the two Soviet in- m- - 1 I 1 - - : ; y o d w e d by C o y r e s s i o n 3 1 Research Ser4cc, Library of' C o n : w s with ~crvi-:;on of Ccpyri:bt Cl~irnznt BALTIMORE SUN 1 February 1982 PG. 1 US.technology enhances Soviet weaponry -t&unitul(#rte#iadoSLcrwrtan cocmtrkr-thc moakr SS-18 mhik, t h e ~ h t b c a o v w I ~ u r t MI. Y u c h o f t L L , ~ w u o b t.tnsd DL% by Y a c m ' s a b l e o@omgedfat but over tk counter. Tk SgpietU~LU~~MCtOo#.in - wotantnm-bor,uNlia*mKcrrs military krdmm, o p n l y Second of thm artidca Uldtdwmd-.Rc BALTIMORE - SUN 2 F e b r u a r y 1982 PE. 1 U S . acts to stem technologyflow to Soviet - Ry Walter Taylor Washington Bureau of The Sun Washington-In the snmmer of. 1979, Lawrence J. Brady. then acting director of the Carter adminiiration's Office of Export Administration, became an overnight cause celebre for critics of &mornic detente with the %viet Union. Mr. Brady, appearing as an administration witness, told a coagressiollpl oversight committee what skeptics had bem maintaining all along: The Nixan-Fordpolicy of relatively open trade with the Russians w t only had accomplished little toward its goal of moderating tee Knmlia's internatiavl daugm, Last of a series -- but in fact was abtting efforts to achieve them. U.S.safewards against the diversion Of sophist~cated technology of potential military use to the Russians had only "marginal utility," aserted Mr. Brady. Intemationa1 efforts by thc West. hr said, were even worse. His cathartic testimony m y have won him a rrpot in the hearts of conservatives, bat it alsn m u n t political purgatory at the bands of thc Carter White House.Mr. Brady lost his positi00 ia tbe cammem Dcportmmt, and in January, 1980, a month after Soviet troops began rolling into Afghanistan on trucks manufactrncd at a Ural Mcmntain foundry outfit* by an American company, be ratgnd from the govenmwnt . Today Mr. Brady is b c k . &nt s t q + % r y + r for &de admmstrd Ion e 1s in charge of efforts by the R a g a n White H ~ U K to refashion American rad Western export policy in a way thnt would deprive the Soviets of the rterdy diet of Western technology thcy have enjoyed for most of the l a d -&. Unlike rerent govetmmnts, Reagan administration vkrs the, control of trade, p a r t i d & in the area of high technology. as a Strat* ' gir weapon that ran deprive the RW 1 sians of assistanc.0 vitally mcdcd to modernize their military-industriel - .baTechno\oc)., ~ r Rrady . said in a intervie=, "is i h r one t d . the hook ae'se had siWwld War 11 , . . that wuld c a m real stra\m in the Sovivt Svstem. to weave a Along with its effV ~ C Yumt'would emrather than mon' -mercc Soviet BIW. the Reagan a d m l s t r a - * - , , rithththe ti0n has stepped up law cnfomment and counterintelligence efforts to red~ the logs of American b - b o w through ilkgal traIISfers and espiomee. The US. M o m s Seroice, traalLioarlly @!and to prevent material from Coming into the country rather than leaving it, rcrrntly began a progun dubbed "Operation Exodus" deskoed to s c r u ~ morc claeeiy cugo boaad far the East. T%e FBI and tbe Justice Departmmt, for their parts, have embarked on a m p p r campaign to make the public more aware of the espionage peril. Actor Efmn Zimbalist, Jr., star of the old FBI television series, h a been doing looselips-sink-ships spots on radio and TV in California, where more than 1,000 companies doing sensitive work for the U.S. gwernment are headquartered. Concern for the problem is by no muas limited to the administration. Servitor SPm N u n (D,Ca.), tbe senior Democrat on the Permaaeat Subcommittee on Investigations, has assigned his entire subcommittee staff to an invcstigatioa of possible kgislPtive s t e ~ zto cut off the flow of information to the Soviets, with an eJic towar6 public hearings in April. -tor Nunn, in an interview, tenncd the transfer of technology "a very srriops problem," and openly qaestiaacd the ability of the government, as currently organized, to addnss it effectively. Without providmg specifics, be said a number of legislative remedies were possible at the conclusion of his panel's probe. So far, autboritles acknowledge, the new federal effort on this front has fallen far short of stopping the flow of illegal diversions to the Soviet Union and its Iron Curtain allies, despite a few spectacular successes. Officials of some enforcement agencies complain of a lack of funds, manpower and, perhaps even more crucial to their efforts, the expertise necessary w e n to recognize tbe sophiktication or potential value of material finding its way to tbe Russians. "How does the average customs inspector recognize the difference between a microchip you can buy at Radio Shack and one that tbe Soviets can plug into a military computer?'' asks om! beleaguered federal official involved in efforts to stop the flow. Moreover, amid the competition of commercial, political and bureaucratic interests both inside and outside the government, there is still less than total unanimity about the need and deslrabilitv of a policy of pre- venting trade with the Russians. Representative Jonathan B. Bing(D,N.Y.),chairman of the House F m i g n Affairs subcommittee that U.S. trade policy, contends. for e m m P k that the administration kas vastly 'exaggerated the deg'pe to which the Russians m n d on the West. He described as "utter wrrsense" tbe as6ertion that transfers from the United States bave played a significant role in Soviet technological advancement, and charges that adrninistration statemeats about tbe seriousness of the problem "verge on tbe hysterical." On the academic f m t , a number of scientists and university administrators, citing the cause of intellectual freedom, have baked a t Reagan administration efforts to restrict access to technology during visits to. American campuses. Some academicians also have bristled at suggestions last 'month by Adm. Bobby Inrnan, deputy d i m t o r of the CIA, that American scientists should voluntarily submit their work for possible government cepsorship in cases where it is to be published. Some American businessmen also complain, though I g s openly than they owe might have. One who has w t tempered IS outspokenness is Robert D. Schmidt, vice c h a i n of Control Data Corporation and an 4vocate of continued economic dett ,te with tbe Russians. He complains that Reagan poiicy merely serves to spur the Kremlin to develop its own technical capability, accomplishing little of strategic value to the West but costing US. companies valuable werseas markets. In general, there is one major area of agreement among experts on the subject within and outside the government. Given recent history, however, this also bodes ominously for U.g efforts .@-cut the eastward trafflc in know-how. q t is worth bearing in mind that in the total volume of Western hightechnology exports to the Soviet Union, the United States is a small player," notes a recent Rand Corporation study, underscoring the point b a d e by others that there is little Washington can do unilaterally. ~.S..experts,notes Thzne Custafson, author of the Rand report and an expert in the field, amount to only about a tenth the level of advanced machinery and equipment sent annu- ... ContinueL -;~~lWTDiest Germanv. France and Jamn aione. "The chart& of g a k R such s u p port from other countries for an expanded system of export controls are small and growing smaller, for among the nations conducting hightechnology trade with the Soviet Union one fiads not only NATO a h s (whose relucllnce to apply stiffer expott controls is of long standing), but a h countries like AasLnlia and Switzerland, which are onlikely to operate at all." A similar wpm? by the cargr& si-I Office of Technology A s e ~ ment, which focused specifically on the role of Western nations in development nf S-rint Energy mfies, reached hke conclusions. The lack of support for Resident Reagan's trade sanctions against tbe Soviets in the ongoing Polish crisb, and two years nRn in the wake of the Afghanistan Invasion, would seem to support such pessimism. in its first mapr initiative in this area, the Reagan advmistration, following up on dwussions bekun amcwp, allled badem last s o m w at the Clttasa r v ~ n o m i csummlt. Sought allied support tor pnriwly these kinds of restr~rlionsin early ~anuary. Representatives of COCOM, an Organization of NATO e m t r i e s created to control exports to the Communist blw. agreed, at Washington's urging. to tighten the list of embargoed technology, particularlv in the field of TECHNOLOGY computer know-how, to the Russians. Since tbe deliberations of tlre group nre'secret, it remains difficult to ktermiw bow this a g c a a e a t will play out ia terms of streagtbcaing d e r ; rcstriaions.Tbe North Atlantic Treaty Organization members made clear, for example, that tbey plumed to go ahead witb sales to 1Yaclcon to .idiatbe-~nofaMberiannaturalgaspipeltmto~. The S,soo--mile pjpcliw, rhicb moM supply Soviet gas to W c S t a n Some experts question whether M is any longer a useful vehicle for creating barriers to technology &s. Ow arch specialist, a bank rep-ti= who asked not to be identifii, noted that most of the participating Western nations do not even include military experts in their c o c o M dekgations. "How tbe bell can tbey decide rkther amwthg will cantribute to the Soviet military if they don't know .nytbiag .bout tbe military?" he O E m a p e ~ ~ r t r o a g ~ ~ a p p a s e d b g ~ asks. Rcog~n.dnrinistrptionomtofaffan comrtries such 8s WcstGamuryardFr~acedepemknt aa tbe Kremlin, and thus PsEcptible to political bloduruil. Mr. Rug.n, as that it rill make partofBispmgramofPnctioos against lrQBcor after tlK military crackdown m PolPad, ordered a total US.banoa~tedmo10gytbltdd aid the Soviets to dewlop t k i r cmr- w-. The pipeline issue highlights the differing perspectives in tbe West on the tcetmology question even after tk events in Poland. The director of East-West tmle at &&t tbe State Department, William A. Root, .clmaorkdgcd in an interview that there continues to be no consensus .mong the allies on preci9ely w h t they obould seek to deny tbe .aviets. 'The concept is not at issue." he nid. "It is the questmn of nhat constitutes aid that remains under de- - *mninatration officials, citing an immwe in government rejections of proposed U.S. sales to the Soviets even W o r e tbe Polish crackdown. try the United Slates is prepared to p it .low if the allies don't cooper- ate. One smior Pcntrgon official, Under Secretary of Weme Fred Ikle, bas said that if it comes to this. the United Strtes might have no choice but to try to restrict U.S. tecbnology ttlffle!rSeven toallied nations. "We h v e to establish a boundary beyond which we will not permit sensitive technology to trayel." Mr. Ikle told the Reutrrs news, agency "We would like to have this boundary include not just our allies 'but our friends and other coantries that we cooperate with." But. he warned. Washington would stop selling its technology to friend]! nations if they let it &p Into Soviet hands. I - (excerpt from) Technology and East-West Trade cwmrn or WE u*mo STATES -0fhdndoglr.rrrrrmu.t WASHINGTON. D. C. 20510 hrernbmber, Reprinted by the Library of Congress, Congressional Research Service, June, 1982. 1qV CHAPTER VI Technology Transfer: Definition and Measurement Discnssions of tbe economic consequences of trade in technology for both the United States and the Communist world have been hampered by conceptual and pmctial difficulties in gathering and interpreting data. There is no universally accepted defiition of "technology," and in many critical instances, useful data ie eimply unavailable. Any attempt to assess the economic importance of this trade must therefore inch& a discussion of the nature of technology and technology transfer and the ways in which they can be measured. DEFINITIONS Technology must be differentiated from science on one hand and from products on the other. Science is the pursuit of knowledge, whereas technology is the specific application of knowledge to the production of goods and services. Science flows freely across international boundaries, and even if it were possible to effectively control this flow, the prospect of doing so raises a t the very least grave Constitutional questions. Some control of technology, however, is both desirable and necessary in the interests of national security because of the military or strategic capabilities it may provide. The distinction between technology and products is more troublesome. If technology is broadly defined to mean the knowledge necessary to design, create, or implement a process; the process itself; or any services related to the process, the problem of how to treat the resulting product remains. Often this will be a "technology intensive" product, one that might be said to "embody" technology or from which the technology may be extracted through a process known as "reverse engineeringw--the deduction of the techniques of manufacture from exarnination of the product itself. Often too tech- nology-intensive products have military applications that cause them to pose as severe a problem to national security as the design and manufacturing know-how that went into them. For commercial purposes, "technology" usually refers either to equipment and processes that transform raw materials into goods and services, to the training that accompany these, or to final products like computers that embody high technology. But there is little agreement, in the United States or abroad, as to exactly which products and process should be included in these categories. There are, furthermore, problems of measurement within each category. The cost of equipment or of the licenses for rights to processes, for instance, may not necessarily reflect the value to the buyer in terms of the quality, output, innovativeness, and profitability of the final product. The value of a purchase, which includes the skills of the workplace-the training required to operate machines, to achieve practical familiarity with the theoretical aspects of equipment, and to become able to adapt and extend the operation of the equipment-is difficult to quantify. Finally, there is disagreement over 100 Technology and East- West Trade which products qualify as "high technology items. To these empirical problems must be added the difficulties engendered by the fact that a number of both commercial and noncommercial vehicles exist through which technology of potential economic value is exported to the East. Commercial vehicles of technology transfer include turnkey factories (i.e., a factory built in the recipient country by a foreign firm, which is turned over to the recipient only when it is ready to "turn the key" and start production); licensing (with and without training programs): joint ventures; technical exchanges; training in high-technology areas; sale of processing equipment; provision of engineering docu- mentation and technical data; consulting; proposals (documented and undocumented); and sale of products that embody technology. Noncommercial vehicles include visits in both directions of students, scientists, and businessmen or managers; the use of unclassified published technical data and patents; the reverse engineering of single machines or components; and clandestine activities. All of the latter modes of technology transfer cost negligible amounts of hard currency and, for the most part, have been beyond Government control. Communist states have made the most of these techniques, although they are by no means unique in this regard. These channels of technology transfer have historically been and will continue to be of great importance to market and nonmarket nations alike. PROBLEMS OF MEASUREMENT COMMERCIAL TRADE IN TECHNOLOGY The most common forms of commercial technology transfer are the direct sale of products embodying high technology and various forms of industrial cooperation agreements. High-TechnologyProducts The U.S. Department of Commerce re. cently attempted to isolate trade in high technology through the examination of err. ports in selected categories of the Standard. International Trade Classification (SITC). This classification scheme summarizes trade information for approximatelv 10.000 different items by or&nizing it into commodity groupings. The Commerce study selected 2F categories of products which, -it contends, contain all those goods that reflect best practice in critical technology sectors-machinery and transport equipment and professional, scientific, and controlling instruments (see table 14).This effort is by far the most precise and comprehensive attempt to use trade statistics to measure techn01ogy transfers. There are problems with the Commerce list, however. Aside from quarrels over what constitutes a "high technology" good, no list based on trade data can be sufficiently detailed to precisely distinguish between levels of technology. This could be accomplished only through a caseby-case examination of individual exports in light of an accepted set of criteria defining "high technology." The Commerce Department classifications are therefore overly inclusive; they "catch" items which do not in fact embody "high" technology, if by that is meant state-of-theart or items unobtainable in the East. This means that calculations of high-technology trade based on these categories are inflated. Second, techniques used to value and d e scribe exports a t point of origin in the United States cannot reflect the contribution of third nations. U.S. technology embodied in products originating froin American subsidiaries in Europe or Japan appears in the trade statistics of these countries and Ch VI- Technology Transfer: D e t ~ n i t i o nand Measurement Photo credlt 8ureau ot East West Traae U S Department U.S.4J.S.S.R. technology transfer through the mechanism of trade fairs 01 Commerce 107 102 Technology and East-West Trade Table 14.-High-Technology Items Jet and gas turbines for aircraft Nuclear reactors Calculating machines (including electronic computers) Statistical machines (punch card or tape) Parts of office machinery (including computer parts) Machine tools for metal Glassworking machinery Pumps and centrifuges Machine tools for wood, plastic, etc. Parts and accessories for machine tools Cocks, valves, etc. Telecommunicationsequipment (except TC a radio receivers) Primary batteries and cells Tubes, transistors, photocells, etc. Electrical measuring and control instruments Electron and proton accelerators Electrical machinery, n.e.s. (including electromagnets,traffic control equipment, signaling apparatus, etc.) Aircraft, havier than air Aircraft parts Warships Special purpose vessels (including submersible vessels) Optical elements Optical instruments Image projectors (might include holograph projectors) Measuringand control instruments, n.e.s. SOURCE: 0uentific.rion of Western Expons of High Technology ~roductsto Communisl Countries. prepared by John Young. Industry and Trade Administrat~on. Offlce of East.West Pollcv and Plannlna. US. DeDart. ment of Commerce, Prolect No. 0.41 not in those of the United States. Finally, customs valuations are determined by the price of the sale. Price does not necessarily reflect the full market value of the commodity, however; some firms deliberately underprice an initial sale in order to break into Eastern markets. With these reservations, and in the absence of alternative superior measures, the Commerce system has been used in chapter I11 to analyze U.S.and industrialized world exports of high-technology products to the Communist nations. Industrial Cooperation Agreements Industrial cooperation agreements have become increasingly common in East-West trade. In its most general sense, the term refers to a broad charter extending wer a number of years to conduct commercial relations between a Western firm and a centrally planned economy. Industrial cooperation includes a wide variety of possible relationships, ranging from the sale of licenses and patents to coproduction agreements and turnkey plant sales. The comprehensive list incorporated into table 15 summarizes the basic mechanisms and techniques utilized in these ventures. These frequently involve relationships between trading partners which extend beyond simple sales of goods and services, to continuous and close contacts between trading partners, training, and technical assistance programs. I t can be expected that these agreements lead to considerable communication of technicalknow-how congruent with sales of plant and capital equipment. Activities in this area are extremely difficult to measure. Cooperation agreements are often complex and their values particularly difficult to establish because many East-West transactions involve countertrade rather than cash (see chapter 111). Chantertrade is particularly attractive to Eastern nations with scarce hard-currency resources and a need to foster exports to the West. But while its importance in Communist countries is becoming increasingly apparent, little data on such agreements exist. The US. Department of Commerce estimates that in Poland, 40 to 50 percent of electrical products and machinery exports to the West in the 1980's will be part of countertrade agreements; and 38 percent of Soviet trade turnover between 1976 and 1980 will be generated through countertrade.' There are no comprehensive studies of the full range of countertrade transactions, although the Organization for Economic Cooperation and Development (OECD)has studied individual categories of contract^.^ 'See U.S. bpartment o f Commerce, East-West Counter tmdP Pmchces. An Intmductory Gurde for Busrness, Indust r y and Tmde Administration. August 1978. 'Organization for Economic Cooperation and Develop ment. Countemode Pmctices in East-West Economic RehZions. Paris.Mar. 23,1978. Ch. VI- Technology Transfer: Definition and Measurement Tabh 15.-Types of Contnctwl Amngemonts Included in Different Definitionsof East-West IndustrialCoopemtion 1. Sale of equipment for complete production systems, or tumkey plant sales (usually including technical assistance). 2. Licensing of patents, copyrights, and production knowhow. 3. ~ i a n c h i s i n of~trademarks and marketing know-how. 4. Licensing or franchising with provision for market sharing and quality control. 5. Cooperative sourcing: long-term agreement for pur. chases and sales between partners, especially in the form of exchanges of industrial raw materials and intermediate products. 6. Subcontracting: contractual agreement for provision of production services, for a short term and on the basis of existing capabilities. 7. Sale of plant, equipment, andlor technology (1-3 above) with provision for complete or partial payment in resultinp or related products. 8. production contractings: contractual agreement for production on a continuing basis, to partner specifications, of intermediate or final goods to be incorporated into the partner's product or to be marketed by him. In contrast to subcontracting, production-contracting usually is on the basis of a partially transferred production capability, in the form of capital equipment andlor technology (on basis of a license or technical assistance contract). 9. Coproduction: mutual agreement to narrow specializb tion and exchange components so that each partner may produce and market the same end product in his r e spective market area. Usually on the basis of some shared technology. 10. Product specialization: mutual agreement to narrow the range of end products produced by each partner and then to exchange them so that each commands a full line in his respective market area. In contrast to coop erative sourcing, product specialization involves adiustment in existing product lines. 11. Comarketing: agreement to divide market areas for some product(s) andlor to assume responsibilities for marketing and servicing each other's product(s) in r e spective areas. Joint marketing in third markets may be included. 12. Project cooperation: joint tendering for development projects in third countries. 13. Joint research and development: joint planning, and the coordinated implementation of RBD programs, with provision for joint commercial rights to all product or process technology developed under the agreement. 14. Any of the above in the framework of a specially formed mixed company or joint venture between the partner firms (on the basis of joint equity participation, profit and risk-sharing,joint management). SOURCE: Offlce of Technology Assessment. Table 16 summarizes one of the most r e cent attempts to classify types of cooperation agreements by frequency. I t shows that in 1976 coproduction based on the principle 103 of specialization accounted for more than 38 percent of East-West agreements. This kind of transaction involves the transfer of an entire production activity to a new location, usually in Eastern Europe. After coproduction, the next most common agreements were turnkey plant sales and the sale of licenses. Coproduction.-Under this kind of agree ment, each partner specializes either in the production of certain parts of a finished product, which is then assembled by one or both partners; or in the manufacture of a limited number of articles in the production range, which are exchanged so that each partner can offer a full range of products. The technology is usually provided by one of the partners, but in some cases may be the culmination of joint R&D effort, Generally, coproduction and speualization agreements also include cooperative marketing arrange ments. Usually the product bears the trademark of both partners, each of which has exclusivity for the market in its own area but shares the market in other countries. In c e operative agreements with the Soviet Union, the Western partner usually has priority for selling in the industrialized West, and the Soviet Union confines its sales to Warsaw Pact nations and possibly certain developing countries. The attraction of such agreements for both the Western and Eastern partners is obvious. The Western firm may acquire raw materials and/or labor in the East. The Eastern country expands its repertoire of manufacture, its markets, and often its potential for earning hard currency. Turnkey Plants.-Of all cooperation agreements, turnkey transactions are perhaps the most effective means of technology transfer. Although technology may in m y cases be purchased or Ieased through straightforward transactions in the marketplace, turnkey projects afford the possibility of acquiring whole production systemsfrom feasibility studies, construction, and training through technical assistance during the initial run-in period. Further, most trans- 104 Technology and East- West Trade Table 16.-Classification of East-WestIndustrial CooperationAgremnents by Percent Total S u m y of June 1,7976 Bulgaria . . . . . . . . . . . . . . . . . . . Czechoslovakia . . . . . . . . . . . . . East Germany .............. Hungary . . . . . . . . . . . . . . . . . . . Poland .................... Romania ................... U.S.S.R.. ................... Tobl CYEA countries 1972....................... 1975. . . . . . . . . . . . . . . . . . . . . . . June 1,1976. . . . . . . . . . . . . . . . Supply of ticensea Delivery of plant 17.1 27.3 25.7 100.0 100.0 100.0 100.0 100.0 100.0 100.0 29.5 21.7 19.4 3.2 23.5 16.3 24.2 25.5 20.4 100.0 100.0 100.0 28.2 26.1 17.1 11.9 21.7 20.5 - Specialization Joint venturing coproduction Subcontracting and other - CMEA = Cwncil for Mutuai E m i c Assistance or Comecorn. %wly of license in ac(in part at least) for productsor components SOURCE: Ecommic Commission for Europe. United Nations. actions guarantee an ongoing relationship with the supplier, opening the possibility of access to developing technology. The continuity of these relationships is universally regarded as the most important single ele ment affecting the success of a technology transfer. Turnkey projects in their pure form, involving purchase of an entire installation from one firm or one country, are relatively rare-at least in the case of the Soviet Union. Most often, a Communist nation contracts with many Western firms for particular components of a complex, including marketing and subsidiary services. The Soviet Kama River truck plant is a good example. Here, the U.S.S.R. dealt with Western firms in several countries, assembling its own sophisticated mixture of goods and services to fit its own specifications.a Licenses and Patents.-The acquisition of technology through licenses accelerates indigenous technological progress and enhances potential export capabilities in the East. According to one estimate, the purchase of a license may cause technological progress in the affected field to leap by 7 to 8 .See Marian S. Finer, Howard Gobstein, and George D. Holliday, "KamAZ: U.S.Technology Ransfer to the Soviet Union," in Hemy R. Nau, ed.. Technology ltansfer and U.S. Foreign Policy (NewYork: Praeger Publishers, 1976). years, compared to only 3 to 5 years with the purchase of know-how and 1 to 2 years for coproduction.' Often the acquisition of a license creates requirements for other improvements, more imports, further licenses, and the promotion of exports. Licenses may be miid for in either currency or in products thr-ougfi cuuntertrade z&&tm&ts. In Eastern Europe,the latter predaminate.6 Licensing arrangements are varied, ranging from a straightforward authorization to exploit an individual patent to complex agreements on industrial cooperation. These may provide for the grant of licenses for using patents linked with the importation of certain capital goods; of licenses to use know-how and technical assistance in build-. ing turnkey plants or other industrial installations; and of licenses to use trademarks. I t is apparent that the diversity of modes through which technology is transferred and the complex interdependence of activities,which are directly or indirectly involved in the process, make it extremely difficult to accurately measure the value of technology that flows to the East in commercial transac4See Jozef Wilczynski, "License in the West-East-West Transfer of Technology." Journal of World Trade Law, March-April1977. 'The US. Perspective on Enst-West Zndus trial Coopem 60%International Development Centre of Indiana Universi. ty (Blwmington, Ind., 1975). Ch. Vl-Technology Transfer Definition and Measurement tions. No extensive statistical analysis of the transfer function in this respect has been made, and available data can support only crude analyses of overall volumes and trends. Any comprehensive assessment of the economic importance of these transactions would require data of a sophistication presently unavailable. NONCOMMERCIAL TECHNOLOGY TRANSFER Open and regular contacts between the scientific and engineering communities of the United States and the Soviet Union have received official encouragement through a number of bilateral agreements. In July 1959, a formal agreement was concluded b e tween the U.S. National Academy of Sciences (NAS)and the Academy of Sciences in the U.S.S.R.; in the same year the International Research and Exchanges Board (IREX) began a program that sent American graduate students and young instructors to the U.S.S.R. In 1972, the U.S.1U.S.S.R. Agreement on Cooperation in the Fields of Science and Technology (S&T) was completed, instituting bilateral cooperative programs in a number of scientific fields. The S&T agreement is predicated on the idea of building and maintaining a world scientific community through open channels of communication. More recently, exchanges with the People's Republic of China (PRC)have begunThe role that such contacts have in transferring American technology with potential commercial value is the subject of considerable disagreement. Two recent studies of the S&Tagreements and the exchanges program by NAS have attempted to assess the value to both sides of the information exchanged in these prog r a m ~Both . ~ concluded that exchanges with BNational Academy o f Sciences, Review o f the U.S./U.S.S.R.Agreement on Coopemtion in the Fields o f Science and Technology, National Research Council, May 1977, and Review of U.S./U.S.S.R. Zntemcademy Exchanges and Relations, National Research Council, September 1977. 105 the Soviet Union were worthwhile, although their value to U.S. participants may be limited by American scientists' lack of familiarity with the Soviet Union's unique style of science and engineering and by the lack of Soviet candor regarding weaknesses in many areas of its research. Both programs were plagued by the rigidity of the Soviet bureaucracy (although problems with the US. bureaucracy seemed to rank a close second) and by erratic attendance on the Soviet side. In 1978, for example, NAS extended invitations to 44 Soviet scientists; only 4 participated. A review of the two studies indicates that while the initial contacts provided some useful information about Soviet research (especiallyin the fields of medicine, weather forecasting, accelerated drug testing, nucle ar fusion, magnetohydrodynamics, superconducting magnets, and earthquake prediction), the primary value of the U.S.1U.S.S.R. exchanges to America has been one of educating the scientific and engineering community about the nature of the Soviet scientific system: Not only do U.S. scientists and engineers have the opportunity of acquiring at first hand new ideas and new perspectives from their Soviet colleagues, they also become more familiar with the relevant Soviet scientific literature and are alerted to particular Soviet scientists and engineers whose future publications likely merit special attention. . . . m e Soviets] have probably r e ceived more technical value in computer topics, in econometrics, and in management science than has the U.S., largely because the U.S. is more advanced in these areas. But the most significant value to the U.S. . . . lies in better U.S. understanding of the Soviet planning and management process, and of Soviet status and approaches in economics, management science and computer science.' It is nevertheless true that the United States has, on the whole, taught the Soviets more than it has learned from them. The NAS expects the future balance to shift toward greater equal it^.^ 'Ibid., Agreement on Coopemtion, pp. 7,43. 'Ibid.. Zntemcademy Exchanges andRelntions, p. 3. 106 Technology and East-West Trade According to NAS. the risk of inadvertently communicatingimportant technology through scientific exchange is minimrrl. The Commerce Department's Office of Export Administration regularly briefs U.S. scientists on topics they should not discuss in the exchange programs. and "except in certain narrow and welldelimated fields, problems of technology do not loom large. . . The Soviets have not managed to translate into practice the wealth of American technical data already available to them t h . u g h the open literature [and as a result] their technology is unlikely to benefit greatly from any further technical data we might disclose except certain specific data which are proprietary or classified. A different mstibenefit balance may exist in the student exchanges between the United States and the U.S.S.R. These can result in the transfer of technology that is difficult to quantify or even identify. Since about 1972. Soviet "students." who are usually exprienced engineers. scientists, and managers of R&D establishments, have concentrated on study programs in the United States in semiconductor technology. 'Ibid, inkmcademy Exchanges, p. 4; Agreement on Coop amtion, p. 43. Photo credit: U.S. &p.rtmenr of Energy -RI.gnaohydroclrurnictu~~)t~ mtvea in th.6 n * t union p.rt of th.U . S N S S . R . Coop.Rtk" R q p . m Ch. VI-Technology Transfec Definition and Measurement computers, and other fields related to problems of applied research. Large numbers of Chinese "scholars" are similarly beginning to appear in the West. Data reflecting the number of such students and the institutions they attend tell little of the nature and amount of the technology they carry back with them. I t has been alleged that this in- 107 formation carries potential military significance. As far as can be determined, however, no systematic attempt has ever been made to quantify its value in either military or commercial terms. Any complete assessment of such exchanges must weigh both strategic and potential commercial losses against their political and cultural value.