May 2, 1997

THE HONORABLE JOHN D. HOLUM, DIRECTOR
U.S. ARMS CONTROL AND DISARMAMENT AGENCY
REMARKS TO THE AMERICAN BAR ASSOCIATION
CAPITAL HILTON HOTEL, WASHINGTON, D.C.

I'm pleased to address this "Breakfast at the Bar" in the aftermath of the Senate's approval of the Chemical Weapons Convention, or CWC. The treaty's implementation starts this very week in the Hague. The Senate's decision places America on the ground floor of that process, where we belong.

The CWC also marks a significant deepening of a trend I'd like to discuss and invite you to think about this morning. Arms control, nonproliferation and disarmament traditionally have been governmental endeavors, with limited implications for your private-sector clients. Of course many of you have encountered, and doubtless chafed under, munitions and dual-use export controls designed to frustrate the wrong countries seeking the worst weapons. Having wrestled with those controls myself in private practice, I'd be the last to dismiss them lightly.

Still, traditional arms control negotiations have focused mainly on weapons and facilities only governments will likely have. Negotiating and verifying limits on missiles, strategic bombers or anti-ballistic missile systems has meant some lost contracts for aerospace firms, but has not generally impinged on the wider business community. There are no provisions, for example, under which international inspectors could turn up on your client's doorstep demanding to look for hidden atom bombs.

But that, as we shall see, is changing -- with arms control implications reaching more and more onto the factory floor and into the executive suite.

* * * *

The backdrop for this change is a growing danger: proliferation of nuclear, chemical, and biological weapons to rogue regimes and terrorists around the world.

These trends pose direct threats to our security. Aggressor and rogue states see weapons of mass destruction as equalizers, perhaps even nullifiers, of conventional military power. In the Gulf War, Iraq's military was decimated by the superior conventional forces of the United States and our coalition partners. But how might the calculus have changed if Saddam had succeeded in acquiring a nuclear arsenal before attacking Kuwait? For us, unquestionably the world's preeminent conventional military power, the lesson is that our security is enhanced whenever we can keep weapons of mass destruction out of the picture.

So arms control is not an exercise in altruism or morality, but a hard-headed national security mission. It works as "preventive defense," by taking weapons away from potential adversaries.

Accordingly, the President has made arms control a vital pillar of his national security strategy -- with "the most ambitious agenda to dismantle and fight the spread of weapons of mass destruction since the atom was split."

But to do much good, arms control has to be effectively verifiable. Generally I view agreements that are not the same way Samuel Goldwyn viewed another variety, when he said, "An oral agreement's not worth the paper it's written on." We need ways to be sure our treaty partners are keeping their bargain. And since it is impossible to negotiate agreements that inspect only those we distrust, we have to be prepared for even-handed coverage -- which means inspections here, too.

The result is that as arms control takes on emerging threats, it brings new implications for business. Several agreements and negotiations demonstrate this trend.

* * *

The Chemical Weapons Convention outlaws not only the use of chemical weapons, but for the first time their production, acquisition, even possession. The treaty has the strongest verification regime of any arms control agreement yet, including both routine and challenge on-site inspections.

That includes private sites. For the treaty's verification regime must have access to all the places deadly chemical agents could be made -- including the manufacturers of precursor chemicals and discrete organic chemicals.

This not only allows, but ensures, that international inspectors will soon appear at U.S. business establishments. And that raises a number of concerns. Will they disrupt business? How do we protect proprietary information? What happens if the inspectors uncover violations of environmental, occupational health and safety, or other laws that are none of their business? On constitutional or other grounds, can access be denied?

I'll dwell on CWC procedures in some detail, to give you a flavor of both its burdens and its protections -- as they explain this treaty and also suggest possible precedents for other regimes.

Roughly 2,000 private business facilities nationwide will be affected by the CWC. Up to 200 of those are the chemical manufacturers who will bear real burdens of detailed declarations and routine inspections. The other 1,800 produce more than certain threshold amounts of discrete organic chemicals, not included on the treaty's three lists of specified chemicals.

Producers of listed chemicals will have to fill out detailed reports and submit to routine inspections. Baseline declarations are due May 30; the baseline inspections will begin in November.

Routine inspections of private sites will occur primarily at the 20 or 25 U.S. sites where the two most dangerous categories of listed chemicals are produced, processed, or consumed. They will start within the next three years, first at sites whose declarations indicate the greatest potential danger of diversion.

If the company desires, all such routine inspections will be conducted according to a facility agreement negotiated between the United States and the treaty's governing body.

The same option is available for producers of the third, least dangerous category of listed chemicals, who will also be subject to routine inspections, but only on a random basis and only if their production is above 200 metric tons in the year. Of some 140 eligible sites in the United States, no more than 20 a year can be inspected.

More exceptional will be challenge inspections, which can be launched against any facility, declared or undeclared, to investigate potential treaty violations. Note that these are not limited to chemical producers. In theory they could be directed at any site whatsoever.

But the likelihood of inspection of a particular site is another question entirely. And the treaty incorporates a number of features to prevent abusive inspections and to protect intellectual property and constitutional rights.

First: The request must be initiated by a member country -- not a foreign company or person who might want to ferret out commercial secrets.

Second: Inspections will be carried out by long-term, full-time employees of the OPCW's technical secretariat, each of whom will have signed a nondisclosure affidavit committing to protect any information gleaned from inspections.

Third: The United States has the right -- which we will exercise -- to screen lists of potential inspectors in advance and peremptorily challenge any we have doubts about. The inspected site also has the right to refuse access to any observer from the challenging nation. So even if a country abuses the system and launches a challenge inspection for industrial espionage, its chosen observer will not gain access.

Fourth: The challenge inspection cannot even happen without a credible allegation of a treaty violation at the site. The first hurdle is the treaty's Executive Council, which can turn down an inspection unless at least 11 of 41 member countries agree it should proceed. And the Council will have every incentive to prevent frivolous or ulterior inspections, to avoid both the cost and the self-defeating precedent.

The next and higher hurdle is our own Constitution which, according to the treaty itself, is controlling. Whereas routine inspections are likely to go forward by consent or under administrative warrants, challenge inspections, absent consent, will require criminal warrants -- which means satisfying a federal judge of probable cause to believe a violation has occurred. The chances that this test can be met by, say, Iran, seeking trade secrets at Mary Kay Cosmetics, are slim indeed.

Fifth: The inspection team's mandate will clearly limit its activities to investigation of the specific compliance concern alleged. That means, first, no evidence of unrelated violations can be collected or reported. Then, all activities undertaken by the inspection team remain subject to negotiation under managed access -- so, if the team says it wants to look at production lab bench X to make sure that substance Y is not produced there, the company retains the ability to refuse that access and resolve the concern in other ways.

The net result is that anyone bent on industrial espionage will quickly learn that using the CWC for that purpose is like trying to pick a pocket at a Broadway show -- but onstage, while the intended victim is performing her climactic solo, under an insistent spotlight. Indeed, for all the concerns I listed, the CWC's protections satisfy those most affected -- the chemical manufacturers -- who strongly supported the treaty.

* * * *

Now we're looking at how to address similar concerns in another regime where the challenges are even greater -- biological weapons.

They pose an even more ominous threat. Chemical weapons, for all their horrors, become less lethal as they are dispersed and diluted. But in the right environment, deadly disease organisms can multiply and so self-perpetuate. They can also naturally mutate, frustrating protective measures. And even the tiniest quantities can be lethal. By one measure Botulinum toxin has been described as 3 million times more potent than the chemical nerve agent sarin, whose crude cocktail killed a dozen and injured over 5,000 more in Tokyo's subway in 1995.

Biotechnology is booming -- a boon for health, agriculture, the environment and a host of other fields. But it also means BW relevant knowledge, equipment, and materials are more accessible, often at declining costs, and are available in ever more facilities worldwide. The result is a burgeoning global BW potential.

Meanwhile, we know that the same fanatical cult that unleashed the sarin in Tokyo was also working on biological weapons. We have had more than one close call in the United States, including in 1995, when a hate group member in Ohio acquired a sample of Yersinia pestis -- the bubonic plague bacterium -- but was caught before he could use it.

And of course, just last week, someone sent B'nai B'rith here in Washington a package labeled "Anthrax." It turned out to be harmless, but could easily have contained the real thing.

The Biological Weapons Convention banned deadly uses of such organisms in 1972. But it has no binding compliance regime. We are now negotiating in Geneva to design one.

The private sector implications are huge. Those of you with biotech and pharmaceutical clients know that only about one new firm in twenty succeeds in these fields. Many start-ups pin their entire futures on winning regulatory approval, then market share, for a single new idea, substance or process. That means even a single breach of security can be a company-killer. So we have an even greater requirement than with the CWC to protect intellectual property and other private sector rights. Our negotiators have much heavy -- but also delicate -- lifting ahead.

* * * *

There are also new implications for the private sector in the nuclear realm, under the Enhanced Safeguards Initiative of the International Atomic Energy Agency, or IAEA, which I am confident will be adopted later this month. This initiative applies the lessons from the Iraqi nuclear program -- whose dimensions were revealed after the Gulf War -- by strengthening the Agency's ability to detect undeclared nuclear activities or materials. It will allow the IAEA to inspect sites on as little as two hours notice, and also to inspect undeclared activities.

As a nuclear weapon state under the Nuclear Non-Proliferation Treaty, U.S. facilities of "direct national security significance" will be exempt. But the new protocol will expand the envelope. We will have to declare all U.S. facilities that manufacture key components for civil nuclear facilities or do advanced R&D in such areas as uranium enrichment or plutonium separation. The IAEA will be able to inspect these declared sites in what amount to challenge inspections, virtually anytime and anywhere -- subject, of course, to relevant constitutional protections.

Extensive inspections here are unlikely, given the IAEA's resource constraints. But broadened potential access here was the unavoidable price of enhanced safeguards worldwide, to help ensure that we will not face another Iraq, or North Korea, diverting from peaceful nuclear programs to build weapons.

Notwithstanding the relatively modest size of the U.S. civilian nuclear industry, the private sector has an important role. We look forward to continued cooperative consultations with the nuclear industry as to the best design and implementation of the United States protocol, to minimize problems and costs.

Conclusion

It would be nice to say that all the protections in or intended for these agreements are the product of solomonic governmental wisdom. But as you may suspect, that would not be entirely true. In fact, our officials and negotiators do deserve great credit, but mainly for being sensible enough on these subjects to ask and heed industry's advice.

On the CWC, enormous credit goes to the chemical industry, and particularly its trade associations, such as the Chemical Manufacturers Association. They were involved in the negotiations from the start. They helped shape U.S. negotiating positions. They "test drove" proposed inspection regimes, and then helped further refine our positions to account for lessons learned.

As a result, the treaty we crafted together reflects a careful, workable balance between intrusiveness for verification on the one hand, and respect for private property and constitutional rights on the other.

That, in turn, made it a treaty that could be ratified, and can be effectively implemented in this country -- in part because it was upheld by the manifest expertise and standing of the industry with the most at stake.

That should be our model for other, future efforts. For it is axiomatic that arms control must be enforced to be effective. After all, these agreements are not paper tigers. They are security instruments... blueprints for action. If the blueprint does not fit the American context -- if we cannot bring it into force, if our private sector simply cannot live with it -- it will not work for America. Which is to say, it will never have the chance to make Americans safer, because it simply will not happen.

So going forward, the stakes couldn't be higher. The threats have never been closer or more real.

With your interest and help, the mission of keeping the deadliest arms out of the most unscrupulous hands need not reap the sorrow and recriminations other countries have had to endure. With industry's growing, constructive involvement in the arms control process, America will be at once more prosperous and more secure.