Administration Knowledge of Economic Costs of Foreign Policy Export Controls

Pursuant to a congressional request, GAO examined the extent to which the administration complied with the criteria requiring it to: (1) consult with businesses affected by proposed foreign policy export controls; and (2) consider the economic impact of such controls during the process of imposing them. GAO also provided information on the issue of compensation for adverse economic effects and examined foreign policy controls imposed on: (1) oil and gas-related exports to the Soviet Union effective December 30, 1981, and June 22, 1982; and (2) exports to Libya effective October 28, 1981, and March 12, 1982, and the revision of existing controls on South Africa during 1981 through 1982.

Although the Export Administration Act of 1979 requires consultation with businesses affected by proposed controls and consideration of the controls' economic impact, little or no formal business consultation took place before foreign policy controls were imposed. Decisionmakers were reluctant to consult earlier and more actively with business because of the possibility that leaks to the news media would reduce the controls' foreign policy effectiveness. However, discussions between business and Government before controls were imposed did inform the administration of business' basic objections to controls. In addition, businesses conveyed their main concerns about foreign policy controls through Government-sponsored policy advisory groups and individual contacts with administration officials. Public comment periods after the imposition of controls did not prove useful to business for providing information to decisionmakers. When controls for the Soviet Union were being considered, Department of Commerce analysts did give decisionmakers estimates of direct export sales to be lost but not estimates of the indirect effects of controls. GAO determined that revising the act to require more economic analysis would not alter the decisions made and that the choice for Congress is between relying on presidential judgment for appropriate use of foreign policy controls and limiting or removing from the act the authority to impose such controls.