THE WHITE HOUSE|
Office of the Press Secretary
For Immediate Release January 10, 2001
TELEPHONE BRIEFING BY
CHIEF OF STAFF JOHN PODESTA,
UNDER SECRETARY OF COMMERCE BILL REINSCH,
AND DEPUTY SECRETARY OF DEFENSE RUDY DELEON
ON U.S. EXPORT CONTROLS ON HIGH PERFORMANCE COMPUTERS
1:37 P.M. EST
MR. PODESTA: Why don't I start. And I think Secretary DeLeon
and Mr. Reinsch will be following onto what I am about to say. I will
try to be relatively brief and I think we all will be, so that we can
get to your questions. I believe you have paper in front of you, but as
you know, the President today is announcing the sixth revision to U.S.
export controls on high performance computers since 1993.
We have been controlling them, I think as most of you know,
controlling high performance computer exports, using a hardware
performance measure called MTOPS -- Millions of Theoretical Operations
Per Second. Our policy goal in doing that was to limit the acquisition
of high performance computing capabilities by potential adversaries and
countries of particular proliferation concern, and to ensure that U.S.
-- simultaneously ensure that the U.S. computer industry could compete
in most foreign markets.
Until recently, we kept pace with growth in high performance
computing hardware availability by periodically adjusting controls. As
I've said, we've revised them five times between 1993 and the year 2000.
At the President's direction, DOD has been reviewing alternatives to
this control mechanism as the ability of the hardware and the
availability of essentially commercial end technology was outpacing this
methodology for being able to control high end computing performance.
He asked the DOD to review alternatives to these control
measures since mid 1999. The review included relevant agencies and
brought in private sector experts. That review concluded that our
ability to control the acquisition of HPC capabilities by controlling
computer hardware is already ineffective and it will be increasingly so
within a very short time frame.
So we set about to focusing on enhancing the already strong
controls on critical software applications, such as nuclear, military,
radar cross section applications. Rudy can go into more. And based on
this review, the President has decided to adopt a number of consensus --
and I say consensus, I mean consensus amongst the agencies
recommendations -- from his national security agencies.
Again, if you have the fact sheet in front of you, you will
note that what we are doing is combining the old their one which were
essentially friends in our allied countries with Tier 2, the countries
that posed a proliferation risk, into a new Tier 1. And those exports
to the new Tier 1 countries won't require a license, although there will
be some continued post shipment reporting requirements. And that change
will be effective when Commerce publishes the rule, which we expect to
do before we vacate the premises on January 20th.
We are moving Lithuania from Tier 3 to the now combined new
Tier 1, based on improvements to its export control system, and
continued good cooperation on export controls. That will be effective
pursuant to legislation. That will be effective 120 days after notice
goes to Congress, which will be in the next several days, I guess. And
then we will raise Tier 3 licensing and defense authorization act
notification level to 85,000 MTOPS. This is the performance level of
uncontrolled computers the DOD has determined can be easily networked
together by relatively unskilled individuals. That new level will be
effective 60 days after notice goes to Congress.
Q Did you say 60 days?
MR. PODESTA: Yes, 60 days. Again, Congress changed that
provision. It used to be six months. They shortened that time period
to 60 days during the last year. And finally, we will maintain the
virtual embargo on exports to terrorist countries.
Let me see, before I turn it over to Rudy, I just wanted to
mention one more thing, which is that it is our recommendation that we
will be making to Congress that we repeal the 1998 Defense Authorization
Act provisions that require notification and licensing of certain
computer hardware exports and waiting periods for adjustments in control
levels, which eventually will permit the elimination of Tier 3 hardware
I think I want to turn it over to Rudy for his comments, and
maybe some comments on our ability to work towards strong controls on
critical software applications from a national security prospective.
DEPUTY SECRETARY DeLEON: This is Rudy DeLeon at the Department
of Defense. Let me just make some brief comments. High performance
computing capability is -- this capability is linked to a healthy U.S.
computer industry, and the ability of that industry to continue to
produce products with increased capabilities. Computer hardware
controls are no longer effective, and in fact, this intensifies American
Eighteen months ago we recognized that the MTOP metric was
becoming ineffective, and we undertook a study to see if alternative
measures could be developed. We found no effective hardware export
control measures. However, after extensive review, determined that we
could effectively control critical application software. So on software
controls, effectively exploit high performance computing capabilities,
one needs critical application software. Software cannot be produced
over night. Much of it requires very extensive coding and data obtained
from -- adjusting for validations.
We recently completed a study that recommends technical
control measures for application software. The Secretary of Defense has
allocated additional funding in the fiscal '02 budget that we're working
on to implement these initiatives and further develop these technologies
that will restrict adversaries from using and reverse engineering
critical application software.
We have in play policy measures for controlling the release of
our critical application software, which if adequately enforced,
prevents dissemination to adversaries. We intend to introduce
additional education and training to make measures even more effective.
So with this revised strategy, we will ensure the performance
computing capabilities that are critical to national security will
continue to be effectively protected. And I think on the basis of this
reasoning, able to strongly --
MR. PODESTA: You just faded out, Rudy. Could you go back
over that point again?
DEPUTY SECRETARY DeLEON: Which is the piece?
MR. PODESTA: Just the last sentence you were just about to
DEPUTY SECRETARY DeLEON: Just that with this revised
strategy, we will ensure that those high performance computing
capabilities that are critical to the national security of the United
States continue to be effectively protected. And on the basis of this
line of analysis, and after our studies, we strongly support the
direction that the President is announcing today.
MR. PODESTA: Bill?
UNDER SECRETARY REINSCH: If I can add a little bit, as Rudy
mentioned, this is first and foremost a national security decision. One
element of this, as we've made clear -- one element that's central to
our national security is maintaining the good health of the computer
industry, so they can continue to make cutting edge products, which are
useful for our military and intelligence establishments.
More than 50 percent of the sales of these companies come from
exports. And so capturing market share abroad and staying on the
cutting edge of the market is very important to them to. You would have
to talk to the industry to get specific statements about likely impact.
Our judgement is that this decision will have a favorable impact on
their marketplace in several ways.
At the high end of these machines, you're talking about large
servers. And these are servers whose primary applications are in
financial services, banking and the like, essentially account customer
maintenance, things like that. And also for inventory use for large
retail establishments or manufacturing establishments, taking care of
complex inventories where there might be multiple manufacturing
locations is also a use of these servers. They also have applicability
in automobile manufacturing and other kinds of manufacturing units,
where there's a lot of machines that have to be controlled.
One area of very rapid growth for all those activities is in
Asia and Southeast Asia, and these are primarily formerly two-tier
countries. So we envision that combining the tiers into one will give
our companies a substantial opportunity to market products at this
higher end in countries where there has been a rapid growth in all of
the sectors that I just described.
Q I was wondering if you could talk about the decision to
collapse one and two, given some -- it just seems like a significant
shift in attitude. Is that -- and also why this is coming out just now.
UNDER SECRETARY REINSCH: Well, I think the core of the
decision here, frankly, is that the Defense Department came to the
conclusion that we were not able to effectively control hardware. The
technology is simply ubiquitous and out there, and that, in fact, our
national security needs to be met through the other means that Rudy
Given that situation, the distinction between Tier 1 and Tier
2 is no longer particularly important. Now, we have a statutory
requirement via the National Defense Authorization Act which, as John
Podesta pointed out, the President is supposed to repeal, to maintain a
control parameter for Tier 3. But the essence of this decision is that
there is no longer utility to maintaining those parameters, and so the
best way to implement that is to collapse the two tiers into one.
Q I just wanted to follow up on that, and maybe this is a
question for Mr. Reinsch -- just to put this in sort of context for us
and help us understand the importance of what you've done, merging one
and two, that I would assume is more important for you than bumping up
the MTOPS in the Tier 3 to 85,000 -- is that a fair presumption?
UNDER SECRETARY REINSCH: In the short term, yes. In terms of
the Tier 2 market -- the Tier 3 market has consistently been in the 5-10
percent range of total sales. At the same time I should note that two
of the most rapidly growing and largest economies of the world, India
and China, are in Tier 3. So what we do in Tier 3 is not insignificant
in commercial terms. But that's a little bit down the road. The
immediate advantage I think will be in precisely where you said, in
combining the two tiers.
MR. PODESTA: There was a separate question of why now. We
have been on a track actually for some time, working with industry, to
review -- especially because of what was a six-month and now a 60-day
lag time in shipping to Tier 3 exports -- to review where we were to
make sure that we weren't effectively impeding our computer companies
from being able to compete in terms of shipping product to markets that
was essentially off-the-shelf kind of standard product. And I think
that we had gotten -- because the statute was on a kind of six-month
review cycle, we were kind of on a six-month review cycle. And although
we had proposed shortening that to 30 days, Congress ultimately settled
on 60 days.
We're in the throes of doing our regular review of progress
that was being made in the industry in terms of what they were shipping
as essential commodity-style, off-the-shelf product, and that led to the
timing taking place now, in January.
Q I want to ask about your stance that controlling of
hardware is not as easy or may not be as effective as controlling
software, when it seems that bits would probably flow through borders
surreptitiously much easier than maybe crates of computers.
DEPUTY SECRETARY DeLEON: This is Rudy DeLeon. I think we
spent much time looking at what a proper regulatory mechanism was. The
industry is moving production where the MTOPS measure became meaningful.
And as we looked at it further, application of the hardware that becomes
critical for national security purposes -- it's not the hardware, but
rather the software that allows you to do the applications that becomes
Some significance -- (breaking up) -- transitioned in a decade
from a era dominated by -- (breaking up) -- computers to a nation where
computers and networks together can give you just as much -- (breaking
up) -- ability. So what becomes critical in this environment are two
things -- is there knowledge on the software through the applications of
the software that allows hardware to do these computations. Then
second, you have skilled people who know how to maximize software --
(breaking up) -- after examining it in great detail -- (breaking up) --
are very much committed to the national --
Q Rudy, you're breaking up. Could you repeat that?
DEPUTY SECRETARY DeLEON: What part? People here are very
much dedicated -- (breaking up) -- national security interest came to
the conclusion that hardware -- (breaking up) --
Q Rudy, you're breaking up, like the past three sentences.
DEPUTY SECRETARY DeLEON: Okay, I'll repeat it again. The
dedicated people here that are really focused and concerned about
national security issues came to the conclusion that it is the
application software plus trained and skilled people who know how to
utilize the capabilities that is embodied in the hardware, that that is
the critical path.
Q Who makes this type of software? I mean, is there a
small core of specialized developers?
DEPUTY SECRETARY DeLEON: This is a highly specialized
software industry that is unique to the national security side.
MR. PODESTA: Yes, when Rudy is talking about controlling
software, we're not talking about either going on-line or walking into a
-- and buying something on a floppy disk. These are big, complicated,
sophisticated programs that are done largely for our national security
industry. And that, I think, goes back to Ted's original question,
which is how do you control this stuff. Well, there are controls in
place on that now and we're really after the most cutting-edge, I
suppose, if you will, kinds of big programs.
Q Someone there mentioned the Tier 3 distinction might have
been simply done away with. Could you elaborate on that a little more?
UNDER SECRETARY REINSCH: Yes, John mentioned it in the
President's proposed repeal of the statute that requires it. But to go
back to something that I said a couple minutes ago, once you come to the
conclusion that the Defense Department has come to -- namely, the
futility of hardware controls -- there is no longer a national security
rationale for maintaining those controls on any countries except the
embargoed states, the terrorist states.
We are required by law to maintain a control standard based on
MTOPS for Tier 3. But the President has recommended that provision be
repealed, and if the Congress were to do that, then the next
administration would be in a position to remove the MTOPS limit on Tier
3 as well if it wanted to do so.
Q So this move today includes recommendations that Tier 3
be repealed --
UNDER SECRETARY REINSCH: Well, you have to phrase it a little
bit differently than that. It contains a recommendation that the
provisions in the National Defense Authorization Act to require a Tier 3
and an MTOPS limit be repealed.
Q In the paper you handed out, you noted that the Clinton
administration recognizes that the incoming administration needs an
opportunity to examine such a proposal and intimated there that you
might be doing less than you might have done if you didn't have just two
weeks left to go. Is there anything more that you would have liked to
do or that you're recommending that the Bush administration do, aside
from the congressional repeal?
MR. PODESTA: Well, if I'm not mistaken, the President-elect's
over at the Pentagon as we speak, or has just left. (Laughter.) So I
think that we want to brief their team about the study that was
undertaken and coordinated interagency, but led by the Defense
Department, and where we see the ability to be able to control the
critical, from a national security perspective, technology going in the
future, and also I think share our views on the necessity of keeping our
own computer industry and our own software industry first in the world,
because that is really another element of not only our continued
economic performance, but our continued ability to provide the national
security community with the highest level of capability and capacity.
And I think we want to share that with them, and they will
have to kind of pick up this issue and pick up this ball and decide
whether the suggestions we're making, for example, on these legislative
proposals are wise and ought to go forward, and to -- hopefully, to
continue the dialogue that I think we've had, which has been
constructive with not only interagency, but with our high tech
Q Can I ask how broadly will the definition be of the
restricted software -- and the national security and proliferation
related software? That could theoretically be a pretty ambiguous
UNDER SECRETARY REINSCH: If I can interject there -- and I
think Rudy will comment, too -- I think we are talking about a universal
software that is already classified, already controlled, already clearly
DEPUTY SECRETARY DeLEON: It is already controlled from the --
regime, and that is because most of this application software is based
upon empirical data that is classified.
MR. PODESTA: And we're not talking about expanding that.
DEPUTY SECRETARY DeLEON: Correct.
Q But getting back to the next administration, in order to
get rid of Tier 3, that's something that Congress would have to do, that
hardware review. Or, is there something that, administratively, this
administration or the next administration could do that would eliminate
UNDER SECRETARY REINSCH: As a legal matter we have
interpreted the NBAA to require the creation of a Tier 3 and a control
of Tier 3 on the basis of a number of MTOPS. Now, Tier 3 was an
administrative creation of the Executive Branch, as were Tiers 1, 2, 3
and 4, and it might have some utility that goes above and beyond
computers. It's not the existence of a tier that is the important
question as much as it is in the statute the requirement that exports to
those locations be controlled on the basis of the number of MTOPS. And
that's what we would propose repealing.
Q Who is saying this?
UNDER SECRETARY REINSCH: This is Bill Reinsch saying that.
Q Bill, for analogy's sake, so our readers can understand
this, 85,000 MTOPS -- can you equate that to X-number of Pentium Xs
UNDER SECRETARY REINSCH: It's 32 Pentium IIIs.
Q This won't allow the export of --
UNDER SECRETARY REINSCH: Well, two things. The President's
decision doesn't include the export of individuals. It doesn't change
anything with respect to the export of individual chips, which are also
subject to their own MTOPS requirement, which is not the subject of this
conference, so we haven't changed anything there. There is a limit on
those, and I don't know the plural of itanium is -- itania or itaniums
that go over 6,500 MTOPS would be subject to license one by one.
Computers that contain them would not come under this
restriction as well, depending upon what their overall power was.
UNDER SECRETARY REINSCH: I'll be around if people have
follow-up questions and want to call me at my own office, which is:
482-1455. I can follow up there if anybody is interested.
DEPUTY SECRETARY DeLEON: And this is Rudy DeLeon, and I'm
reachable here at the Pentagon, and we have a team of people that can be
available as well. Let me just say that on the issue that hardware
controls are no longer effective, this is really a conclusion that DOD
has come to. We're really looking for an alternative mechanism and we
appreciate the support from the White House and the Commerce Department
to find an alternative mechanism.
Q Thank you. Good-bye.
END 2:07 P.M. EST