Hearing on Export Control Issues in the Cox Report


Joint Testimony of
The Honorable Christopher Cox (R-CA)
and
The Honorable Norman Dicks (D-WA)


10:00 a.m., Thursday, June 10, 1999

Report Overview

  1. Commercial and Intelligence Operations: PRC Acquisition of U.S. Technology


  2. Statutory and Regulatory Controls: The Export of Our Militarily Sensitive Technology

  3. High Performance Computers

  4. Recommendations

1. Commercial and Intelligence Operations: PRC Acquisition of U.S. Technology



The Peoples Republic of China's 16-Character Policy

Combine the military and civil;
combine peace and war;
give priority to military products;
let the civil support the military



The PRC seeks advanced U.S. military technology to achieve its long-term goals. To acquire U.S. technology the PRC uses a variety of techniques, including espionage controlled commercial entities, and a network of individuals and organizations that engage in a vast array of contacts with scientists, business people, and academics.

The PRC has mounted a widespread effort to obtain U.S. military technologies by any means legal or illegal. These pervasive efforts pose a particularly significant threat to U.S. export control.

Efforts to deny the PRC access to U.S. military technology are complicated by the broad range of items in which the PRC is interested, and by transfers to the PRC of Russian military and dualuse technologies, which may make the consequences of the PRC's acquisition of U.S. technology more severe.

The PRC uses commercial and political contacts to advance its efforts to obtain U.S. military, as well as commercial, technology.


2. Statutory and Regulatory Controls: The Export of Our Militarily Sensitive Technology



United States and international export control policies and practices have facilitated the PRC's efforts to obtain militarily useful technology.

Recent changes in international and domestic export control regimes have reduced the ability to control transfers of militarily useful technology.

The dissolution of COCOM in 1994 left the United States without an effective Multilateral means to control exports of militarily useful goods and technology.

The expiration of the Export Administration Act in 1994 has left export controls under different legislative authority that, among other things, carry lesser penalties for export violations than those that can be imposed under the Act

U.S. policy changes announced in 1995 that reduced the time available for national security agencies to consider export licenses need to be reexamined in light of the volume and complexity of licensing activities.

U.S. policies relying on corporate self-policing to prevent technology loss have not sufficiently accounted for the risks posed by inherent conflicts of interest, and the lack of priority placed on dedicating resources to security in comparison to other corporate objectives.


3. High Performance Computers



The People's Republic of China (PRC) has stolen design information on the United States' most advanced thermonuclear weapons.

The Select Committee judges that the PRC's next generation of thermonuclear weapons, currently under development, will exploit elements of stolen U.S. design information.

The PRC requires high performance computers (HPCs) for the design, modeling, testing, and maintenance of advanced nuclear weapons based on the nuclear weapons design information stolen from the United States.

The Select Committee judges that the PRC has in fact used HPCs to perform nuclear weapons applications.

Over the past several years, U.S. export controls on the sale of HPCs to the PRC have been steadily relaxed.

HPCs from the United States have been obtained by PRC organizations involved in the research and development of:

The United States has no effective way to verify that U.S. HPCs reportedly purchased by the PRC for commercial purposes are not diverted to military uses.


4. Recommendations

U.S. Action to Improve Multilateral Export Controls

In light of the demise of the Coordinating Committee on Multilateral Export Controls (COCOM) and the insufficiency of the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies, the United States should work I including in the context of the scheduled 1999 review of the Wassenaar Arrangement, to establish new binding international controls on technology transfers that threaten international peace and U.S. national security.

In light of the PRC's aggressive military technology acquisition campaign and its record as a proliferator, the United States should work to reduce the transfers of weapons systems and other militarily significant technologies from Russia and other nations to the PRC.

These actions should include strengthening international measures including economic incentives, to encourage, Russia to become a full partner in stemming the proliferation of weapons.

To protect the national security, the Congressional judgment that the Department of State is the appropriate agency for licensing both exports of satellites and any satellite launch failure investigations must be faithfully and fully implemented.

The Select Committee recommends that relevant Executive departments and agencies ensure that the laws and regulations establishing and implementing export controls are applied in full to communications among satellite manufacturers, purchasers, and the insurance industry, including communications after launch failures.

The Select Committee supports the sale of computers to the PRC for commercial but not military purposes. The Select Committee recommends that the appropriate Congressional committees report legislation that requires the following:

The Select Committee recommends that the appropriate Congressional committees report legislation that requires:

Legislation requiring end use verification for PRC use of HPCs

- As a condition to U.S. HPC export licensing, the establishment by the PRC of an open and transparent system by September 30, 1999, which provides for effective end-use verification for HPCs sold or to be sold to the PRC and, at a minimum, provides for on-site inspection of the end-use and end-user of such HPCs, without notice, by U.S. nationals designated by the U.S. Government.

- Failure to establish such a system by that date should result in the U.S. Government's lowering the performance level of HPCs that may be exported to the PRC, the denial of export licenses for computers destined to the PRC, or other appropriate measures.

- An independent evaluation of the feasibility of improving end-use verification or HPCs in the PRC, and preventing the use of such HPCs for military purposes.

Legislation that requires efforts by the Executive branch to encourage other computer-manufacturing countries, especially those countries that manufacture HPCs, to adopt similar policies toward HPC exports to the PRC.

Export Legislation and Other Technology Controls

The Select Committee believes that it is in the national interest to encourage commercial exports to the PRC, and to protect against the export of militarily sensitive technologies. To this end:

With respect to those controlled technologies and items that are of greatest national security concern, current licensing procedures should be modified:

With respect to controlled technologies and items that are not of greatest national security concern, current licensing procedures should be modified to streamline the process and provide greater transparency, predictability, and certainty.

Effect of Maintaining Looser National Security Controls for Hong Kong
Since Its Absorption by PRC on July 1, 1997

The Select Committee recommends that appropriate Congressional committees report legislation requiring appropriate Executive departments and agencies to conduct an initial study, followed by periodic reviews, of the sufficiency of customs arrangements maintained y Hong Kong with respect to the PRC and of the appropriateness of continuing to treat the Hong Kong S.A.R. differently from the PRC for U.S. export control purposes. Such a study should consider, among other things, the implications of unmonitored border crossings by vehicles of the People's Liberation Army.

Mandatory Notice of PRC or Other Foreign Acquisition
of U.S. National Security Industries

The Select Committee recommends that appropriate Congressional committees report legislation amending the Defense Production Act of 1950 to require notice to the Committee on Foreign Investment in the United States (CF1US) by all U.S. companies that conduct national security-related business of any planned merger, acquisition, or takeover of the company by a foreign entity or by a U.S. entity controlled by a foreign entity. The amendment also should require Executive departments and agencies to notify CFIUS of their knowledge of any such merger, acquisition, or takeover.

The Select Committee recommends that appropriate Congressional committees require the Secretaries of State, Defense, Commerce, and the Treasury and the Director of Central Intelligence to direct their respective Inspectors General to investigate the adequacy of current export controls and counterintelligence measures to protect against the acquisition by the PRC of militarily-sensitive U.S. technology, and to report to Congress by July 1, 1999, regarding their findings and measures being undertaken to address deficiencies in these areas.



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