U.S. Dept. of State - IIP: The United States and China

TEXT: WHITE HOUSE RESPONSE TO COX REPORT ON CHINA ESPIONAGE
(Agrees with substance of nearly all recommendations)
Washington -- The Clinton Administration agrees with the substance of nearly all the recommendations made in the report of the Select Committee on U.S. National Security and Military/Commercial Concerns with The People's Republic of China -- also called the Cox Report.
In a statement released May 25, the White House points out that the Administration has been implementing many of the recommendations for months, and in some cases, years.
Although the Administration shares the Committee's objective of strengthening export controls and counterintelligence, while encouraging legitimate commerce for peaceful purposes, the statement said, the White House and the Committee differ on some specific issues.
Following is the text of the White House response to the report:
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THE WHITE HOUSE
Office of the Press Secretary ________________________________________________________________________
For Immediate Release May 25, 1999
RESPONSE TO THE REPORT OF THE
SELECT COMMITTEE ON U.S. NATIONAL SECURITY AND
MILITARY/COMMERCIAL CONCERNS WITH
THE PEOPLE'S REPUBLIC OF CHINA

The Select Committee submitted its classified report to President Clinton on January 4, 1999, including 38 recommendations to address issues related to export controls and counterintelligence. On February 1, 1999, the President provided a written response to the Select Committee's recommendations, a portion of which was declassified and released to the public. In its response, the Administration agreed with the Committee on the need to maintain effective measures to prevent the diversion of U.S. technology and prevent unauthorized disclosure of sensitive military information. This applies to our exports worldwide. We also agree with the Committee's recommendation to support U.S. high tech competitiveness consistent with national security. This has been a longstanding premise of the Clinton Administration's technology transfer policies.
In this regard, the Administration agrees with the substance of nearly all the Committee's recommendations, many of which we have been implementing for months, and in some cases, years. We have worked cooperatively with the Committee to declassify as much of the report as possible so that the American public can be informed on these important issues, consistent with the need to protect sensitive national security and law enforcement information. The declassified report, released today, provides the Committee's detailed assessments and investigations underlying its recommendations. Although the Administration does not agree with all of the Committee's analysis, we share the Committee's objective of strengthening export controls and counterintelligence, while encouraging legitimate commerce for peaceful purposes. With regard to the specific issues raised in the report:
Security at U.S. National Laboratories
The Administration is deeply concerned about the threat that China and other countries are seeking to acquire sensitive nuclear information from the U.S. National Laboratories. Security at the labs has been a long-term concern, stretching back more than two decades. In 1997, the Administration recognized the need to respond to this threat with a systematic effort to strengthen counterintelligence and security at the U.S. National Laboratories. In response, President Clinton issued a Presidential Decision Directive (PDD-61) in February 1998. This directive is the most comprehensive and vigorous attempt ever taken to strengthen security and counterintelligence procedures at the Labs. The FBI, in cooperation with DOE, is continuing its investigation into the possible source and extent of sensitive information that China may have acquired.
We welcome the Select Committee's support for PDD-61. As the President indicated in February, the Administration agrees with all of the Committee's recommendations concerning lab security, and we are carrying out these recommendations:

The President asked the Director of Central Intelligence to conduct a formal Intelligence Community damage assessment on China, which was reviewed by an independent panel headed by Admiral David Jeremiah. This review was completed and briefed to Congress on April 21, 1999.
The DCI will, at the President's direction, also consider the recommendations made by Admiral Jeremiah's group on intelligence collection and resources.
President Clinton asked the DOE to lead an interagency assessment of lab-to-lab programs with China, Russia, and other sensitive countries, which is scheduled for completion on June 1, 1999. The Administration believes that these programs serve the national security interest, but we are committed to ensuring that appropriate protections are in place to prevent compromise of classified information.
Energy Secretary Bill Richardson is aggressively implementing PDD-61 on an expedited basis, and has been following the implementation plan that was submitted to Congress on January 5, 1999. By the end of 1999, the DOE CI program will be as good as the best in the U.S. Government.
In addition, Secretary Richardson has instituted a number of additional actions to improve counterintelligence security and safeguards at the National Laboratories, including in the critical area of cyber security. Secretary Richardson ordered a 14-day "stand-down" of all classified computers at the weapons labs, has initiated a massive reorganization of department security functions, and has greatly increased the cyber security posture at DOE.
On March 29,1999, the Department of Energy submitted to Congress its annual Report on Safeguards and Security at the Department of Energy Nuclear Weapons Facilities. The report found that no nuclear material at DOE was at risk, but rated some areas "marginal". DOE initiated a thorough upgrade of all physical security and has committed to making all necessary upgrades so that all sites receive the highest rating by January 2000.
The Director of Central Intelligence, in coordination with appropriate agencies, is preparing a semi-annual report to Congress on the measures that are being taken to protect against espionage efforts by China to obtain nuclear weapons and other national security information of strategic concern.

In addition to the above steps recommended by the Select Committee, the President has requested Senator Warren Rudman, as Chairman of the bipartisan President's Foreign Intelligence Advisory Board, to evaluate security at the labs. Senator Rudman has assembled an excellent team of Board members to examine the issue.
Finally, the President asked the National Counterintelligence Policy Board to recommend measures to strengthen controls over nuclear information at facilities aside from the National Laboratories that handle nuclear weapons issues.
Missile & Space Technology
The Administration agrees with the Select Committee on the need to ensure that the launch of U.S.-manufactured civilian satellites by China or any other foreign country does not inadvertently transfer missile technology. The Department of Justice is continuing to investigate the allegations of improper transfers cited by the report, and it is inappropriate to comment on the specifics of these cases. The Administration also agrees with the Committee on the need to establish procedures to ensure timely processing of licenses, consistent with national security.
In this regard, the Administration agrees with and is carrying out all of the Committee's recommendations concerning satellite launches:

The Administration has implemented the provisions of the FY99 Defense Authorization Act, by, among other things, transferring licensing for communications satellite exports from the Department of Commerce to the Department of State.
As recommended by the Select Committee, the Department of State has developed new procedures for timely review of licenses, and is increasing its licensing staff to ensure the procedures are implemented properly.
The Department of State has taken steps to ensure that the affected U.S. companies understand and comply with the requirements of law and regulation for data that may be provided to the space insurance industry. The Department of Defense is implementing several measures proposed by the Committee to strengthen monitoring of foreign launches. Specifically:
DoD has established a new organization called the Space Launch Monitoring Division within the Technology Security Directorate of the Defense Threat Reduction Agency, and is hiring 39 additional staff for this function. The new division fulfills the congressional requirement in the FY 1999 National Defense Authorization Act to recruit, train, and maintain a staff dedicated to all aspects of monitoring the export of space launch and satellite technology from the U.S.
The new dedicated, professional staff in DoD will provide end-to-end monitoring of controlled space launch and satellite technologies from the first export license application through to launch -- and failure analyses if necessary. The monitors will review and approve all technology transfer controls plans, and all controlled technical data proposed for export. Monitors will participate in all technical interchange meetings and other discussions involving controlled technical data. Monitors will also deploy to launch sites as a cohesive group with expertise in space launch security operations, and satellite and launch vehicle technologies.
Plans are also in place to ensure that there are also resources available within DoD to augment the full-time monitoring staff should that be necessary to meet temporary surges in requirements for monitoring of meetings and other activities. As well, State and DoD are requiring industry to establish electronic archiving of technical data to ensure a complete and readily accessible data base of all controlled data exported as part of a satellite launch campaign.
Training for the monitor staff is being enhanced through a program of initial and recurring training and evaluation. The training will be managed as a formal program through the Defense Threat Reduction Agency's training facilities at Kirtland Air Force Base in New Mexico. The program will encompass the complete monitoring activities outlined in the FY 1999 National Defense Authorization Act.
Finally, DoD is examining the recommendation regarding contracting for security personnel to provide physical security at foreign launch sites. DoD looks forward to a dialogue with the appropriate congressional oversight committees on this matter.

The Administration is encouraging development of the U.S. domestic launch industry, to reduce our dependence on foreign launch services. Since 1994, the Administration has fostered the international competitiveness of the U.S. commercial space launch industry by pursuing policies and programs aimed at developing new, lower cost U.S. capabilities to meet both government and commercial needs. For instance, DoD is investing $3 billion in partnership with U.S. commercial space companies to develop and begin flying two competing families of Evolved Expendable Launch Vehicles (EELV) with a goal of significantly reducing launch costs for government and commercial payloads.
For the longer term, NASA has committed nearly $1 billion toward work with industry in developing and demonstrating technology for next generation reusable launch vehicles (RLVs). NASA's goal is to reduce launch costs by a factor of 10 within 10 years. To address the shifting balance from mostly government to predominantly commercial space launches in the U.S., the Administration recently initiated an interagency review to assess the appropriate division of roles and responsibilities between government agencies and the U.S. commercial space sector in managing the operation, maintenance, improvement, and modernization of the U.S. space launch bases and ranges. Together, these measures comprise an effective strategy aimed at strengthening domestic U.S. space launch capabilities and our industry's international competitiveness.
Domestic and International Export Policies
The Administration agrees with the Committee that the end of the Cold War and dissolution of COCOM in 1994 has complicated efforts to control transfers of militarily important dual-use goods and technology. In this regard, the Administration agrees with the Committee on the desirability of strengthening the Wassenaar Arrangement to improve international coordination and reporting on the export of militarily useful goods and technology, and to prevent transfers of arms and sensitive dual-use items for military end-uses if the situation in a region, or the behavior of a state is or becomes a cause of serious concern to the participating states. All Wassenaar members currently maintain national policies to prevent such transfers to Iran, Iraq, Libya, and North Korea. We are making a concerted effort this year to strengthen and enhance existing transparency mechanisms and to expand restraint measures. We do not believe that other countries are prepared to accept a legally binding international regime like COCOM directed against China and we are not seeking such a regime. We note that a COCOM-style veto could act against U.S. interests by letting other countries block U.S. sales to our own security partners.
The Administration agrees with the Committee on the need to enact a new Export Administration Act with new penalties. We have operated for too long without updated legislation in this very important area. The Administration will work with the appropriate Committees in Congress and U.S. industry to obtain a new Export Administration Act. The Administration believes that the existing dual-use export licensing system allows adequate time for careful review of license applications and provides effective procedures to take account of national security considerations in licensing decisions.
High Performance Computers
The Administration agrees with the Committee that we should encourage the sale of computers to China for commercial, but not military, purposes. The Administration has not licensed high performance computers (HPC) to China for military purposes.

As recommended by the Committee, we are reviewing the potential national security uses of various configurations of computers, the extent to which such computers are controllable, and the various consequences to the U.S. industrial base of imposing export controls on such computers. Our target date for completing this review is May 1999.
We also agree with the Committee that we need the capability to visit U.S. HPCs licensed for export to China to observe how they are being used. During President Clinton's visit to China in June 1998, we secured a long sought Chinese agreement to arrangements to conduct on-site visits in China to help verify the civilian use of HPCs and other dual-use technology. We have been working to expand and strengthen this arrangement. We believe that it is not possible to obtain agreement by China or any other country to a no-notice verification regime for U.S. goods.

Chinese Technology Acquisition and Proliferation Activities
The Administration is well aware that China, like other countries, seeks to obtain sensitive U.S. technology for military uses. We maintain strict policies prohibiting the export to China of munitions and dual-use items for military use. As recommended by the Select Committee, the FBI and CIA plan to complete their annual comprehensive threat assessment of PRC espionage by the end of May, 1999, and the Inspector Generals of State, Defense, Commerce, Energy, Treasury, and CIA expect to complete their review of export controls by June 1999.
The Administration agrees with the Select Committee on the need to obtain more responsible export behavior by China. Through our policy of engagement, we believe that significant gains have been realized on this front. For example, at our initiative China has committed not to provide assistance to unsafeguarded nuclear facilities in Pakistan or elsewhere -- a commitment we believe is being observed by Beijing, terminated assistance to Iran on a project of nuclear proliferation concern and refrained from new civil and military nuclear cooperation with Iran, stopped exports of C-802 cruise missiles to Iran, and strengthened export controls over nuclear and chemical weapons related materials. China has also, with our urging, ratified the Nuclear Nonproliferation Treaty and the Chemical Weapons Convention, and has signed the Comprehensive Test Ban Treaty, which are the key pillars of the international nonproliferation regime. On regional security, China has provided concrete assistance in dealing with proliferation threats in North Korea and South Asia.
The Administration agrees with the Committee that we should seek Chinese adherence to the MTCR. In June 1998, President Jiang announced that China will actively study MTCR membership. The Administration intends to continue actively pressing the Chinese on this issue and other proliferation issues of concern.
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