American industries and multinational corporations are preparing a major assault on the authority of American presidents to curtail overseas sales as an instrument of foreign policy.
This authority was used by President Reagan to stop U.S. manufacturers and their foreign subsidiaries from supporting the Soviet natural gas pipeline. It has also been used to embargo grain sales to the Soviet Union and to deny American computers, aircraft and other high-technology products to countries including Cuba and Libya.
The White House acceded this week to a significant limitation on this authority when Reagan signed legislation protecting current grain export contracts for 270 days after imposition of any future presidential embargo. This was added by farm-state senators to legislation renewing the Commodity Futures Trading Commission.
But the White House will be confronted by a host of such challenges from business interests when a legislative drive begins next month to rewrite the Export Administration Act, which expires in September. If Reagan is determined to maintain strong authority to restrict exports as a presidential option in foreign policy crises, he may have to confront a forceful lobby from one of his most important constituencies: America's corporate leadership.
"The administration does not understand fully the anger in the private sector over this," said one U.S. trade official.
It is a struggle in which the name of Reagan's secretary of state, George P. Shultz, will be invoked by those seeking to reduce the president's authority to impose export controls. Shultz argued three years ago as the president of Bechtel Group Inc. that "major commercial relationships overseas cannot be turned on and off like a light switch."
The debate on export controls will be staged against a backdrop of depressed foreign sales by U.S. companies and increasing competition from the Europeans and Japanese for high-technology markets abroad.
Congress also will address the longstanding conflict of the Commerce Department's role as enforcer of export control policy with its role as chief booster and promoter of U.S. sales abroad.
"No one applauds a Commerce Department official when exports are controlled," said Sen. Jake Garn (R-Utah), chairman of the Senate Banking Committee, in an upcoming newspaper essay. "But that same official is likely to be praised for his wisdom when export licenses are granted."
Garn, whose committee will hold hearings next month in preparation for the rewrite of the Export Administration Act, is most concerned about a section of the law that controls commercial sales affecting national security.
The Commerce Department has been criticized by Garn and others for approving the export of a number of sensitive industrial technologies, including some that have reportedly enabled the Soviet Union to improve the accuracy of its nuclear missiles and upgrade the efficiency of its antitank weapons.
Garn has drafted legislation that would pull export administration out of Commerce and set up an independent Office of Strategic Trade, whose director would be a member of the National Security Council. "We need an agency that is captive of no special constituency," he said.
Included in the legislative debate will be proposals to limit mandatory reviews and congressional oversight of commercial sales by U.S. firms to countries identified as supporters of international terrorist activities.
Most pointedly, industry officials have cited the pipeline sanctions as an example of presidential excess. They hope to limit the president's ability to block sales by foreign subsidiaries of U.S. firms and interrupt existing contracts, as Reagan did last June when he broadened sanctions he had imposed against the Soviet Union in December, 1981, in response to the martial law crackdown in Poland.
One proposal would have the government compensate firms which suffer financial losses from presidential export control actions.
"Unfortunately, it seems clear that as presidents find their options to influence world events narrow, there is too often a tendency to reach for export controls as a way of making a political statement," said V. Rock Grundman, business counsel for the Dallas-based Dresser Industries Inc., the giant equipment firm. Dresser's French subsidiary was ordered by the Reagan administration last August to stop delivery of turbine compressors destined for the Soviet pipeline project because the turbines had been made with General Electric Co. parts and technology.
Grundman argued in one of several public hearings held around the country this winter that Congress should clarify the language of the current law authorizing the president to block foreign sales found to be against the "national interest."
"Certainly, the national interest is not whatever the president says it is," Grundman said.
"Obviously the administration is listening" [to industry's complaints], said a State Department official involved in export policy. "But by no means will it discard the . . . export [control] tool as a weapon of foreign policy."
Unlike military sales, where Congress may veto through concurrent resolution any arms deal in excess of $14 million, Congress does not have veto authority over the administration's commercial licensing process. Its influence over the process, however, stems from access to the Commerce Department's confidential licensing procedures, which are shielded from any other public scrutiny.
The threat of congressional hearings and spontaneous legislation to ban specific sales, according to one Capitol Hill staffer, has often been the chief moderating force against Commerce Department officials eager "to license any damned thing that comes through the door."
Last year, Congress criticized a number of controversial licenses, including Commerce Department approval in April for the sale of 2,500 electric-shock police batons to South Africa, whose apartheid policies have kept it on a list of countries prohibited from purchasing certain police equipment in the United States without an extensive review by the State Department.
The current law incorporates a "commodity control list" of equipment and technologies that have national security and "dual use" applications, meaning they could be used for military as well as commercial purposes. For instance, an industrial press that a South African firm sought to purchase last year ostensibly to manufacture drill bits was challenged because the same technology could be used in the making of nuclear weapons components.
While industry officials would like to limit congressional review of export sales further, Congress is likely to push for more control. "The efforts for tighter scrutiny are simply a response to abuses by someone trying to pull a fast one in the Commerce Department or industry and they have only themselves to blame," said Michael B. Kraft of the Senate Foreign Relations Committee staff.
Even before the debate begins, the administration later this month will be under pressure from some congressional leaders to return Iraq to the list of countries supporting terrorism, which are subjected to certain U.S. trade prohibitions.
The State Department dropped Iraq from the list last February, making it possible for companies like Lockheed Corp., Gates Learjet Corp. and Hughes Helicopters Inc. to quickly undertake multimillion-dollar sales initiatives for civilian transport planes, small jets and helicopters.
A month after the State Department removed Iraq from the terrorism-support list, it discovered that one of the world's foremost international terrorists, Abu Nidal, had been welcomed back to Baghdad by the Iraqi government.
Nidal's organization, a radical splinter group of the Palestine Liberation Organization, has claimed responsibility for terrorist attacks against Syrian, PLO and Israeli targets in the Middle East and Europe. It also was linked to the attempted assassination last June 3 of the Israeli ambassador in London, an attack that provided partial justification for the Israeli invasion of Lebanon three days later.
A State Department official acknowledged last week that after Iraq was dropped from the list, "there have been clear instances where Iraqi territory has been used as a base for terrorist activity. This, of course, was not what was anticipated when we took them off the list."
Several members of the Senate Foreign Relations Committee challenged a Commerce Department license last May to Lockheed to sell Iraq six or more L100 transport planes, civilian versions of the well-known C130 Hercules military transport. The L100 is fitted with a large rear cargo door and lacks only the side paratroop door and military avionics to match its military version.
The congressional critics felt that since the United States had taken a neutral position in the two-year-old Iraq-Iran war, the sale was ill advised and perhaps harmful to U.S. foreign policy interests. After the L100 episode, committees in both houses received assurances from State Department officials that Congress would be consulted on future license questions.
In a letter to Sen. Charles H. Percy (R-Ill.) on May 27, Powell A. Moore, assistant secrtary of state for congressional relations, said, "The department . . . would be pleased to discuss significant cases with interested committees of the Congress in advance of licensing. Under these circumstances, the Congress would have the opportunity to review Iraqi cases and aircraft cases for Syria and South Yemen . . . . "
But by September, the administration's pledge was called into question when a low-level Commerce employe leaked details of a license approval to Gates Learjet to sell to Iraq civilian jets equipped to tow gunnery targets and conduct photoreconnaissance missions. William Edgar, Lear's Washington vice president, complained in an intervew that "some GS2 1/2" scuttled the sale by publicizing the license approval and causing the Iraqis "to immediately curtail discussions with us."
In addition, after congressional review of the license, Commerce told the Learjet officials that they would have to reapply under separate "munitions control" licensing procedures through the State Department for the target-towing and photoreconnaissance modifications.
Edgar defended the proposed sale by saying some of the jets would be used for air ambulances, others for oil exploration and others to tow targets for military pilots. "We seem willing to send food to anyone, but when it comes to airplanes . . . . Pilots need to be trained," he said, "and that's not going to result in anyone's death by the use of that specific Lear aircraft."
Lear has now resumed "tentative conversations . . . that hopefully will lead to a consummation of the sale," Edgar said.
"The U.S. government more than any other government imposes these human rights evaluations and other matters of foreign policy into any business contract at a time when our foreign competition is increasing," he added, echoing the view of many of his peers in industry. "Somehow our government and the Congress has to realize that we can't let that happen. Our foreign customers have to depend on U.S. manufacturers."
Friction between the administration and some members of Congress increased last month when the Senate Foreign Relations Committee discovered that Commerce Department officials had allowed Hughes Helicopters Inc. to sell 60 civilian helicopters to Iraq without an export license. The sale went through under an exemption from licensing for aircraft weighing less than 10,000 pounds.
The senators accused the administration of breaching its pledge to continue to consult on sales to Iraq even though the country is no longer subject to the anti-terrorism controls. Hughes officials claimed Iraq wanted the helicopters for crop dusting, but critics pointed out that both models are advertised as military trainers and could be adapted for military use.
"This . . . sale of 60 helicopters appears to directly contradict the official U.S. position of neutrality toward the Iran-Iraq war," said Sen. Rudy Boschwitz (R-Minn.). On Dec. 23, four senators led by Percy wrote a letter to Reagan asking that he halt the sale.
William Schneider Jr., undersecretary of state in charge of arms sales, asked Hughes officials to hold up the delivery of the helicopters. But an aide to Schneider said that he met "with a singular lack of success."
A litmus test of how the administration resolves the growing dilemma over imposing foreign policy constraints on major U.S. industries will come in the licensing debate over the proposed sale of $600 million worth of commercial airliners to Libya by the Boeing Co. Its application has just begun circulating in State and Commerce licensing offices.
Libya is not only on the list of countries supporting terrorism but was also the object of special trade sanctions imposed by Reagan last March after intelligence agencies reported that "hit teams" of Libyan-trained assassins allegedly had been sent to the United States to kill U.S. leaders.
"That's a tough one," said one State Department official. "Boeing is a big industry and it's had a hard year. Lots of jobs depend on the construction of airplanes and those are real voters out there--and, yet, the customer is Col. Muammar Qaddafi, for God's sake.
"How do you deal with that?"