17 January 2002

Pentagon Official Discusses Export Policy Toward China

U.S. export policy toward China must strike a balance between protecting national security and ensuring the ability of U.S. companies to compete internationally, according to Lisa Bronson, deputy under secretary of defense for technology security policy and proliferation.

During a January 17 hearing of the U.S.-China Commission, Bronson said China's military modernization and "poor record" on proliferation are areas of concern for the United States in its relations with that country.

The Beijing regime remains "one of [the] world's key sources" for missile and weapons of mass destruction-related technology, "including to some terrorist sponsoring states," Bronson said, noting that Chinese firms "have provided some important missile related items and assistance to countries like Iran, Libya, and North Korea."

In addition, Bronson said, "Chinese entities have provided extensive support in the past to Pakistan's nuclear and ballistic missile programs and have supported some nuclear and chemical programs in rogue states."

Bronson called the communist state "both a problematic proliferator and the largest potential future market" for the United States.

"The challenge of China is striking the balance between the desire to successfully compete in a vast untapped commercial market and the need to protect national security, including through effective nonproliferation," the Defense Department official said.

"Our policies and practices must strive to minimize transfers of technologies that could contribute to potentially threatening modernization efforts," Bronson said. "Our focus is already on the areas Beijing has identified as its 'pockets of excellence,' but we need to continually be vigilant in the licensing process for new areas where our high technology might be exploited to our detriment."

At the same time, she continued, "our policies and practices must ensure that U.S. companies can compete for legitimate commercial sales on equal footing with their foreign competitors."

"We are ready and willing to hear an exporter's case that a commodity is already widely available in the international market," Bronson said. "If a commodity is widely available, and not amenable to multilateral controls, then export controls may not be the best tool for addressing a national security or proliferation concern."

Policy toward China must fit into the "the larger national security and foreign policy agenda set by the President, who has said that 'America's next priority to prevent mass terror is to protect against the proliferation of weapons of mass destruction and the means to deliver them,'" the Defense Department official said.

Bronson noted that the People's Republic of China has a "growing inventory of nuclear, biological and chemical weapons and associated delivery systems."

Using a year-old Department of Defense study, "Proliferation: Threat and Response," Bronson said the Beijing regime has more than 100 nuclear warheads and is increasing "the size, accuracy and survivability of its nuclear missile force."

With 20 CSS-4 ICBMs that have a range of more than 13,000 kilometers, Bronson emphasized, China is "one of the few countries that can threaten the continental United States."

The Pentagon official added that the United States expects that China "will continue to modernize its strategic missile force over the next generation, improving the survivability, reliability and accuracy of this force."

Technology security, Bronson said, is an important part of U.S. security both overseas and at home.

"The pursuit of a necessary balance between free markets and national security is affected by many factors," she noted. "Striking the right balance with respect to China is especially difficult, and questions of Chinese intentions, capabilities, and conduct weigh very heavily."

Following is the text of Bronson's remarks, as prepared for delivery:

United States - China Commission U.S. Export Control Policy Toward China
Prepared Statement January 17, 2002
Lisa Bronson, Deputy Under Secretary of Defense for Technology Security Policy and Counterproliferation

The Challenge of China

Mr. Chairman and Commissioners, I am honored to join you today with colleagues from the Departments of Commerce and State to discuss United States export controls and China.

The President has said that we seek a candid, constructive, and cooperative relationship with China. China is a partner on some issues and a competitor on others. American interests could be served by a China that is developing economically and politically. Still, we do not ignore the fact that China has embarked on an ambitious program of military modernization, including nuclear modernization. This modernization, combined with China's poor record on proliferation leaves us with many questions about the future direction of China's foreign and security policies.

One of the challenges China presents is its current and growing inventory of nuclear, biological and chemical weapons and associated delivery systems. A review of DoD's recent publication "Proliferation: Threat and Response" (January 2001) is instructive. China currently has over 100 nuclear warheads and is increasing the size, accuracy and survivability of its nuclear missile force. Given some 20 CSS-4 ICBMs of over a 13,000 km range, China is already one of the few countries that can threaten the continental United States. We expect China will continue to modernize its strategic missile force over the next generation, improving the survivability, reliability and accuracy of this force.

China continues to maintain elements of an offensive biological warfare program. Technology for production and weaponization of biological agents developed prior to Beijing's accession to the Biological Weapons Convention (BWC) in 1984 is believed to provide the basis for current capabilities. In addition, China is believed to have made incomplete and inaccurate declarations under BWC protocols.

Beijing is believed to have an advanced chemical warfare program, including research and development, production and weaponization capabilities. Chinese industry produces the necessary precursors for traditional agents, and its forces have a variety of delivery options. In the past, Beijing has not acknowledged the full extent of its chemical weapons program despite its ratification of the Chemical Weapons Convention.

A vital aspect of China's overall military modernization includes pursuit of a viable indigenous space force. China is paying particular attention to the development of small boosters able to launch satellites at a moment's notice in a contingency.

Recognized experts observe that China's modernization program appears to be focusing on "pockets of excellence," where advances in select technologies can be leveraged for disproportionate benefit in a potential conflict. Several such "pockets" include: preemptive long-range precision strike capabilities; information dominance; command and control; and integrated air defense. In support of these efforts, Beijing has identified the development of an indigenous microelectronics industry as one of its highest priorities. A cutting-edge domestic microelectronics sector will support both military and commercial modernization in China. China's increasing emphasis on development of very large-scale integrated circuits will have direct application in future military systems, for example, advanced phased-array radars.

China continues to be one of [the] world's key sources for missile and WMD-related technology, including to some terrorist sponsoring states. Chinese firms have provided some important missile related items and assistance to countries like Iran, Libya, and North Korea. Additionally, Chinese entities have provided extensive support in the past to Pakistan's nuclear and ballistic missile programs and have supported some nuclear and chemical programs in rogue states.

How Does Our Export Control System Deal With China?

The United States has a variety of tools to protect sensitive technologies from inappropriate Chinese exploitation, as well as multilateral means to encourage similar approaches among allies.

My colleagues from the Departments of Commerce and State address our dual-use and munitions regulatory systems in detail in their prepared statements. I want to reiterate that the number of Munitions List exports to China has been extremely small over the past several years. In the dual-use area, the export licensing system provides the U.S. government with a useful set of procedures for controlling dual-use commodities that could be used for military purposes.

The dual-use control system under the Export Administration Regulations addresses commodities falling within four areas of special military sensitivity: national security, nuclear nonproliferation, missile technology and chemical and biological weapons. The regulatory scheme assumes a policy of license denial for these commodities if they make a "direct and significant," or "material" contribution, depending on the area, to Chinese capabilities. Examples under the "national security" area of sensitivity include electronic and anti-submarine warfare, intelligence gathering, power projection and air superiority.

Another means of regulating the flow of technology to China is the Commerce Department "Entity List." This list identifies foreign entities that are believed to pose proliferation risks; there are currently 19 Chinese entities on the list. Other tools include the various multilateral nonproliferation regimes: the Missile Technology Control Regime, the Australia Group, and the Nuclear Suppliers Group. A particularly important element of these regimes is a "no undercut" policy, which remains to be adopted in a fourth multilateral regime, the Wassenaar Arrangement.

DOD's Role in the Licensing Process

The Department of Defense is a full partner in the interagency export license process, reviewing all sensitive munitions and dual-use license applications referred by the Departments of State and Commerce. Moreover, we are actively engaged in fashioning the conditions and provisos that address any national security concerns posed by export licensing applications. DoD's export licensing functions are executed by the nearly 200 military and career civilian personnel of the Defense Technology Security Administration. This cadre includes a tremendous depth of expertise in the "hard" sciences, engineering and manufacturing techniques. These technology specialists support licensing officers who review individual licenses referred to DoD under provisions of the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR), administered by the Departments of Commerce and State, respectively. We have a dedicated space launch monitoring division that is tasked specifically with reviewing licenses and then developing and implementing the technology safeguard programs for space launches of U.S.-made equipment on foreign launch vehicles. In addition, the space launch division implements technology safeguards for U.S. launches of U.S.-built satellites of certain foreign ownership. Members of our space launch division combine both scientific and licensing expertise to provide "cradle to grave" supervision of space launch technology safeguard programs. There have been no waivers of "Tiananmen sanctions" to permit any launch of U.S. equipment from China since 1998. However, DTSA's space launch division is ready to resume monitoring immediately, if a policy decision to issue such a waiver is made.

Whether in the space launch division, dual-use or munitions licensing, DTSA personnel review each license application individually with input as necessary from the military services, the Joint Staff, and, as necessary, any other DoD component. It is a process that is time-consuming, with some 24,000 licenses processed in calendar year 2001 (about 14,000 munitions licenses and 10,00 dual-use licenses). The DoD dual-use license review process also includes reviews of the end-user to minimize the risk of diversion. DTSA realigned its end-user reviews to create an assessment unit that provides more comprehensive checks on end-users identified in all dual-use license applications. This unit also assists reviews of munitions licenses. This unit is augmented by a cadre of reserve intelligence specialists who provide regular support for the end-user checks.

Despite the overall volume of licenses, I am pleased that there has been consistent improvement in processing times for munitions -- down from an average of 38 days in 1999 to approximately 20 days today. On the dual-use side of our operation, processing timelines have declined from an average of 12 to 11 days over the past two years, though the complexity of dual-use licenses has increased significantly. I believe we have struck an appropriate balance between taking the time to protect national security without unnecessarily delaying action on industry's license applications.

Where Do We Go From Here?

China is both a problematic proliferator and the largest potential future market for the U.S. It must be dealt with as part of the larger national security and foreign policy agenda set by the President, who has said that "America's next priority to prevent mass terror is to protect against the proliferation of weapons of mass destruction and the means to deliver them." This poses a significant policy challenge with respect to China.

The challenge of China is striking the balance between the desire to successfully compete in a vast untapped commercial market and the need to protect national security, including through effective nonproliferation. Our policies and practices must strive to minimize transfers of technologies that could contribute to potentially threatening modernization efforts. Our focus is already on the areas Beijing has identified as its "pockets of excellence," but we need to continually be vigilant in the licensing process for new areas where our high technology might be exploited to our detriment. Our policies and practices must ensure that U.S. companies can compete for legitimate commercial sales on equal footing with their foreign competitors. We are ready and willing to hear an exporter's case that a commodity is already widely available in the international market. For if a commodity is widely available, and not amenable to multilateral controls, then export controls may not be the best tool for addressing a national security or proliferation concern.

Specific Steps

In August 2001, the Deputy Secretary of Defense reestablished the Defense Technology Security Administration as an organization under the Under Secretary for Policy. This move reunited the technology security, counterproliferation and non-proliferation functions under a single under secretary. The Under Secretary for Policy has directed a more integrated approach than has been taken in the past. In this regard, my responsibilities include not merely export licensing and technology security policy, but counterproliferation policy as well. Counterproliferation refers to the range of military preparations and activities to reduce the threat posed by weapons of mass destruction and their delivery systems. It is distinguished from nonproliferation, which includes the range of political, economic and diplomatic tools to prevent, constrain or reverse the proliferation of weapons of mass destruction and their delivery systems. Thus, my office is now responsible for preventing potential adversaries from leveraging controllable, sensitive technologies, as well as policies for dealing with adversaries who may have already obtained such technologies.

By putting both our technology security and counterproliferation offices under one organic management structure, we hope to give DoD a more comprehensive approach to the interagency export control process, and to the development of a U.S. strategy for managing technology security and countering proliferation.

The realignment of technology security functions at DoD will pay dividends across the board. But we are paying special attention to China and its modernization and proliferation challenges in several areas:

We oversee the DoD contribution to the ongoing review and revision of the United States Munitions List. This review is informed by our knowledge of China's key modernization priorities.

In particular, our review of microelectronics dual-use licenses is colored by our evolving understanding of what China wants.

DoD licensing officers work with Commerce to fashion license conditions designed to deny critical dual-use manufacturing technology to Beijing but at the same time allow U.S. industry to compete where end items are widely available from foreign suppliers.

If and when a decision is made to resume space launch licensing for China, DTSA's license review, technology security planning and monitoring infrastructure is prepared to protect U.S. technology.

We are exploring ways to strengthen multilateral regimes such as the Wassenaar Arrangement.

Conclusion

September 11 was a grim reminder that government needs to better integrate all elements of national power - military, law enforcement, regulations, and intelligence - into a successful national security strategy. Technology security is one of those elements. It has implications for our troops deployed abroad as well as for "homeland defense" within our borders.

The pursuit of a necessary balance between free markets and national security is affected by many factors. Striking the right balance with respect to China is especially difficult, and questions of Chinese intentions, capabilities, and conduct weigh very heavily. In confronting the challenges posed by China, I expect that the work of this Commission will offer us very important insights.

Mr. Chairman, I appreciate the opportunity to appear before the Commission and look forward to our discussions.