Knowledge Regulation and National Security in Postwar America

Mario Daniels, John Krige

• Publisher: University of Chicago Press
• Year: 2022
• ISBN:
  9780226817521
• Topic: History
• Subtopic: World History
• Index: History

The first historical study of export control regulations as a tool for the sharing and withholding of knowledge. In this groundbreaking book, Mario Daniels and John Krige set out to show the enormous political relevance that export control regulations have had for American debates about national security, foreign policy, and trade policy since 1945. Indeed, they argue that from the 1940s to today the issue of how to control the transnational movement of information has been central to the thinking and actions of the guardians of the American national security state. The expansion of control over knowledge and know-how is apparent from the increasingly systematic inclusion of universities and research institutions into a system that in the 1950s and 1960s mainly targeted business activities. As this book vividly reveals, classification was not the only—and not even the most important—regulatory instrument that came into being in the postwar era.

CHAPTER ONE

Introduction

What Are Export Controls, and Why Do They Matter?

In December 1962, the New York–based company Hydrocarbon Research Incorporated (HRI) was the first American firm punished for exporting unclassified intangible scientific-technological knowledge. The case set a legal precedent that had far-reaching implications. It was the first official interpretation of the meaning of “technical data” in the US export control regulations specified in the Federal Register. The case also summed up some of the most important results of two decades of reflection within the US government on how to control knowledge and information in an age of intensifying global communication. A discussion of the issues and misunderstandings that it raised can help orient our readers in the intricacies of knowledge controls before we plunge into our detailed account of the history of export controls in the US national security state, whose roots stretch back to World War I.

In 1959 HRI signed a $17 million contract with the Rumanian government to build an oil-refining complex in Ploesti. In the following years, HRI built facilities “of the latest design” to turn low-grade petroleum into high-grade motor and aviation fuels, plastics, synthetic rubber, and synthetic fibers.1 For the work in Ploesti, HRI drew on the support of two European partners, Hydrocarbon Engineering SARL in Paris, wholly owned by HRI, and the German Hydrocarbon Mineralöl GmbH in Düsseldorf, an HRI affiliate. The three companies had cooperated before in the design, construction, and operation of a similar plant in France, and they reused and adapted the plans and technical data from this project in Rumania.2 According to the contract, HRI turned over to the Rumanians “all of the process designs, plans and specifications” of the plant, “thus enabling the Rumanians to duplicate it elsewhere.”3 Additionally, Western engineers were dispatched to make things work on the spot.

The president of Hydrocarbon Research Incorporated, Percival C. Keith, was perfectly aware that, in the context of the Cold War, Rumania and France were separated by the Iron Curtain, and he knew of his obligation to follow US export control regulations. He consulted early on with the Department of Commerce, which was in charge of controlling the exports of dual-use technologies. The DoC informed Keith “that HRI could engage in the transaction only if HRI, its associates and any HRI personnel who might go abroad in connection with it, were to use no unpublished United States technical data” as defined by the regulations.4 But even though Keith attempted to tread carefully in the bureaucratic minefield of export control rules, he did not grasp the far-reaching implications of their sophisticated understanding of knowledge flows. Keith relied on his own commonsense understanding of knowledge, with the result that serious penalties were imposed on him and on his company.

The Consent Denial and Probation Order that summarized the affair in order to clarify the official reading of export controls stated that Keith’s offense was that he “construed unpublished data in the engineering field to be limited to fundamental, secret know-how held by persons or company.” For him “published data,” that is, data that was exempt from export regulations, meant “any information or documents which a competent, experienced engineer thought he could furnish or prepare with his own mind using well-recognized engineering principles, texts, technical articles, and patents.”5 For Keith the concept of exempted published data also covered the export and disclosure of all the general knowledge acquired by the HRI engineers when they built the plant in France. This plant served as the blueprint for the subsequent Ploesti project that Keith thought could be shared with Rumania without seeking an export license.6

Keith’s defense revolved around the dichotomy of openness and secrecy. In his reading, export controls dovetailed with the concept of trade secrecy, focusing only on very few crown jewels of company knowledge, but leaving everything else unregulated. This wide sphere of public domain included for Keith not least the minds, skills, and experience of people. Apart from some closely-to-be-guarded secrets, the knowledge an individual had acquired in the course of professional practice and education had to be beyond the reach of government regulation.

Keith was mistaken. For the US government, the duality of “secret” and “open” was not as clear-cut as Keith obviously assumed. For US export regulators, there was an expansive “gray zone” in between, in which information was, without being classified, not openly accessible but under government control. In this zone, transmissions of knowledge were not tantamount to general publication. Even an export control license for a set of data did not free knowledge from its regulatory shackles; each license covered only specific, clearly delimited acts of communication. Moreover, the brains of engineers were as a matter of principle subject to export regulation wherever they carried knowledge that originated in the United States. Thus, people who traveled were conceived of as data exporters, and knowledge was ascribed a national identity just like an individual’s citizenship.

In practice, these principles had far-reaching consequences as the HRI case made clear. The Commerce Department subscribed to the “mosaic theory,” a basic concept rather than a full-fledged theory used in the realm of classification and intelligence analysis. It assumes that unrelated and innocuous pieces of information could in combination yield a bigger picture that could be useful to foreign intelligence services and that was so dangerous that it required classification. The Commerce Department argued in the HRI case that “whether the technical details contained herein could separately be found in published literature or worked out by simple engineering did not deprive them of their unpublished status when combined and incorporated in the overall plans and specifications.” The lines between “open” and “controlled” were thus decidedly blurred.7

For the government, US technicians traveling to Rumania were not free to share their knowledge even if they did not divulge clearly defined trade secrets. Without a Department of Commerce license even “the application by such persons of their United States–origin know-how and experience constituted an unauthorized use and export of unpublished data.” Nor did the theory of export controls target only US citizens. It was assumed that American knowledge kept a stable national identity that remained unchanged no matter where it had traveled and whoever handled it. As the Commerce Department stipulated, the use by HRI and its affiliates of “the unpublished US technical data in the French plant, the subsequent use of the redrawn French plant documents by United States and foreign technicians employed . . . to design the Rumanian plant, the commingling hereby of the unpublished US data with other published (or unpublished) technical data of whatever origin, did not serve to deprive the original data for the French plant of their status as unpublished technical data nor their United States origin.”8 In short, a German engineer, who had never set foot on US soil, working in Ploesti and using a blueprint drawn in New York but received from France, was still under the umbrella of US export controls, specifically of regulations that targeted reexports.9 Their reach transcended the US border and applied extraterritorially to any geographical area to which US knowledge traveled. Knowledge had a “US character,”10 or an imprint of “Americanness,” which it did not lose by moving abroad or when it was appropriated by a foreign national’s mind. Even products made using US data still carried this imprint.11

As esoteric as these considerations may have seemed, they set a legal precedent and had considerable economic impact on HRI. Even though the Department of Commerce conceded that the violation of the law was not willful but due to negligence, its sanctions were “inordinately severe.”12 HRI was barred for five years from any trade with the Sino-Soviet bloc and Cuba. Keith personally lost his export control privileges entirely for six months, that is, he was excluded from any foreign trade. The company and its president were placed under probation for three years, at risk of losing all their US export privileges if they made the mistake again. To enforce these penalties, Keith and his firm were placed under special surveillance for two years, forcing them to submit all relevant documents and even information on oral communication for any transaction subject to export controls to the Department of Commerce. The DoC had the right to stop any further transaction if it had merely the suspicion of an irregularity.13 In addition, HRI faced considerable reputational damage. Some negative press, but more importantly being blacklisted in the Federal Register and in the export control report of the Commerce Department to the president and the Congress, left the impression that Hydrocarbon had violated the rules of trading with the enemy beyond the Iron Curtain.14

In 1962, the technical data regulations were not at all new, and HRI was not the first company that had to deal with the complexities of data export control regulations. But apparently, the Department of Commerce deliberately used the Rumania deal to make an example of Hydrocarbon and to establish a legally strict, far-reaching reading of its export control regulations for technical data. The DoC’s investigations spanned more than one and a half years,15 and the closed-door hearings with HRI involved no fewer than thirty people, inflicting high costs on the company. In the eyes of J. Forrester Davison, who was one of HRI’s lawyers in the case, the DoC tried to overwhelm the company by amassing a huge amount of evidence in order to reach an out-of-court consent order.16 Such an order would provide the DoC with the “opportunity to give a unilateral interpretation of its own regulations,” without the intervention of the courts.17 But more importantly, it had the effect of a warning signal.18 Since US controls over goods and data cast such a wide net, they were in practice enforceable only if the business community cooperated and complied. Legal deterrence was supposed to impose a kind of self-censorship.19

Stimulated by the Hydrocarbon case, technical data export controls became widely discussed, especially in scholarly law journals.20 The contemporary literature clearly understood the incredibly far-reaching implications of the legal precedent especially for academic freedom and the freedom of travel. And yet the public and scholarly interest in data controls was short-lived and had effectively petered out by 1967.21 Data export controls, however, did not vanish in the late 1960s. They were continuously (and mostly quietly) administered behind the closed doors of the US federal bureaucracy.

More importantly, the literature we have on data export controls in the 1960s—and for that matter, the entire scholarly output up to the present day—has not understood that the data controls that defined the Hydrocarbon case were the outcome of a policy-making process and control practices that began in the late 1930s. The first two chapters of this book are the first historical account that we know of, of the origins of export controls over “technical data.” It will show how World War II changed the way bureaucrats in the federal government thought about the circulation of scientific-technological knowledge and why they decided that knowledge flows needed oversight. The subsequent chapters explore the expansion and implementation of instruments to control the global circulation of sensitive knowledge throughout the Cold War, and up to the present day.

The developing concepts and practices of export controls were shaped by the ideology of “national security,” an intellectual innovation of the 1940s. It fostered the perception that certain kinds of knowledge posed a danger to the very existence of the United States if shared too freely. The national security thinkers in the federal government developed a highly sophisticated idea of knowledge and a complex understanding of technology transfers, based on the experience of the mobilization of science and technology for World War II. A successful technology and knowledge transfer was conceived as the interplay of the movements of information, people, and things.

Export controls are usually described as regulating the mobility of goods. By contrast, this book will show that the idea of information and knowledge control was at the very core of the US export control regime. Scientific-technological information had to be regulated because it was the foundation of all military and economic artifacts. Conversely, trade with these artifacts had to be supervised because they embodied the knowledge used to produce them. Reverse engineering could make the embedded information accessible again. And finally, people were probably the most effective transmitters of information: indeed, not only their brains, but also their hands carried tacit knowledge. Hence they also had to be placed under surveillance.

The export control community within the US government understood all this in the 1940s. It was an enormous challenge to translate these concepts into policy within the framework of a liberal democracy. Moreover, the policy-making process was constantly propelled and catalyzed by the pull and push of the larger forces of total war, the Cold War, rapidly changing US foreign policy, and technological change. The overall trend and trajectory was an incremental expansion of export controls not only over goods, but also over information and people during the 1940s and 1950s. It is only against this backdrop that it is possible to make sense of the Hydrocarbon Research case of 1962 and of all the developments that came afterward.

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Every single day beginning in the 1940s, US export controls have intervened in the global sharing of scientific-technological knowledge. They subjected universities, research institutions, companies, and foreign national individuals to national security and foreign policy considerations, circumscribing their latitude in their international communication of knowledge, know-how, and technical information. Export regulations demarcate the borderline where the reach of “free-market” ideology and liberal democratic freedoms end and the realm of national security begins. Such regulations hem in First Amendment rights and academic freedom, infringe on the freedom of travel, and inhibit the flow of foreign direct investment. Their main goal is to target enemies and adversaries and to deny them access to scientific and technological knowledge and know-how. However, they also affect allies as well as US citizens and institutions. Export controls were instrumental to waging economic warfare in World War II. After 1945 their main target was the Eastern bloc, and export controls played a crucial role in constructing and cementing the Iron Curtain and in isolating Mao’s China. They played a prominent role in managing and policing détente in the 1970s and then in biting deeply into Soviet ambitions in the Reagan era (while simultaneously being relaxed to encourage China’s modernization, inaugurated by Deng Xiaoping in the late 1970s). They deeply affected not only East-West trade, but also inter-West relations, and time and again caused harsh conflicts and deep rifts in the Western alliance, most prominently during the so-called Second Cold War in the 1980s.22 Moreover, in the relations between the West and economic and strategic competitors in the global arena, export controls were and are being used to balance national and international trade interests with concerns of the military and national security. This is nowhere more visible today than in the US trade war with China, which is above all a war over access to advanced knowledge in which export controls play a crucial role to mediate what can cross borders and what cannot.23 This book charts these developments by focusing on sites that have had a major impact on the evolution of the American export control system over knowledge flows from the 1940s to...

Table of contents

• Cover
• Title Page
• Copyright Page
• Contents
• List of Abbreviations
• chapter 1.  Introduction: What Are Export Controls, and Why Do They Matter?
• part 1
• part 2
• part 3
• part 4
• Notes
• Index