Space

Congressional Research Service · Library of Congress · Washington, D.C. 20540



A Joint Hearing of the Committees on
International Relations and National Security
U.S. House of Representatives

U.S. Policy Regarding Satellite Exports to China

Testimony by Shirley A. Kan
Analyst in Foreign Affairs
Foreign Affairs and National Defense Division

June 17, 1998, 9:30 am
Rayburn House Office Building, Room 2118

Good morning. I am Shirley Kan of the Foreign Affairs and National Defense Division of CRS. I am here to present a statement that will provide background on foreign policy and national security issues concerning Chinese launches of U.S. satellites and Chinese missiles. I request that a CRS Report on the background and chronology leading to the current controversy, a CRS Report on China's ballistic and cruise missiles, and a CRS Issue Brief on commercial space launches be included for the record.

China Great Wall Industry Corporation

Important for our understanding is the Chinese company at the heart of various concerns. China Great Wall Industry Corporation is the only Chinese state-owned corporation that offers launch services to foreign customers. It is also a subsidiary of China Aerospace Corporation, which heads the Chinese defense-industrial aerospace complex and oversees both space and missile research and development efforts. China Great Wall uses the Long March series of rockets to launch satellites. The Long March boosters are also produced as China's DF-4 and DF-5A intercontinental ballistic missiles (ICBMs). U.S. sanctions have been imposed twice on China Great Wall for missile proliferation in Pakistan.

China gains several benefits from launching satellites for foreign customers: foreign capital, technical expertise, and international prestige. Some satellites or parts exported to China for launch have been for Chinese use. However, China has also been embarrassed by a number of costly failed satellite launches. In 1992, the engine for a Chinese rocket failed to ignite while attempting to launch a satellite, and another rocket exploded and destroyed a second satellite. Both satellites were built by Hughes Electronics Corporation. In 1995, a Long March rocket exploded and destroyed another satellite built by Hughes. In 1996, yet another Chinese rocket exploded and destroyed the Intelsat satellite built by Loral. Aside from the dramatic explosions, other problems have prevented Chinese rockets from successfully launching satellites into the correct orbits. More recently, since 1997, China had success in all satellite launches. Initially, China's response to the failures was to blame foreign satellite companies. China later shifted to a willingness to work with U.S. companies to determine the causes of the explosions and other failures.

Multiple Issues

Loral's Case. There are several issues surrounding the recent controversy on the use of Chinese Long March rockets to launch U.S. satellites. The immediate legal issue which prompted the controversy concerns whether Loral Space and Communications Ltd. provided expertise to China that it can use to improve its ballistic missile force. The New York Times, in April 1998, cited a classified Pentagon report that reportedly concluded in May 1997 that American expertise was transferred to China that significantly enhanced the reliability of its ballistic missiles and that U.S. national security was harmed. Since last September, the Justice Department has been conducting a criminal investigation into whether Loral violated export control laws. Loral acknowledges that, after the explosion of a Chinese rocket that destroyed a Loral-built satellite in February 1996, it formed an independent committee to review the Chinese findings about the cause of that explosion. The company admits that the committee provided a report to the Chinese in May 1996 without first getting approval from the State Department. Loral says that it promptly informed the Departments of Defense and State of having provided the report and is cooperating with the Justice Department and Congress. Loral says that the report did not transfer sensitive information or technology.

Policies, Sanctions, and Export Controls. A second issue concerns how the Clinton Administration has shaped and implemented U.S. policies on China, on satellite exports to China, and on missile nonproliferation. Specifically, the Administration reviews satellite exports to China in making decisions on two sets of sanctions (one for the Tiananmen crackdown and one for missile proliferation) in conjunction with the export control process. The Administration transferred control over the licensing of satellites from the State Department to the Commerce Department in November 1996.

Some, including the President, have argued that engagement with China is a better policy than isolation of China. Others say that the issues are how the policy of engagement is carried out and whether satellite exports need to be included in that policy. In part to promote ties with China, the Reagan Administration, in September 1988, first notified Congress of its decision to approve licenses for exports of satellites for launch from China. That Administration acknowledged the need to protect legitimate U.S. national security interests and the U.S. commercial launch industry, while promoting relations and trade with China. Over the years, some in Congress have supported the use of Chinese space launch vehicles to launch U.S.-origin satellites. President Bush first issued waivers of post-Tiananmen sanctions. President Clinton continues the long-standing policy of engagement with China, including satellite launches to expand multifaceted relations. The Clinton White House argues that satellite exports to China have benefits for commercial competitiveness, nonproliferation goals, spread of democracy, and the policy of engagement.

Let me clarify that, for satellite exports to China, considerations of Presidential waivers for post-Tiananmen sanctions and missile proliferation activities have been added to the export control process. U.S. sanctions imposed in 1990 for the Tiananmen crackdown have meant that Presidential waivers allowed by the law were needed before licenses could be approved for export of satellites or parts to China. As shown in the chart on those waivers, Presidents Bush and Clinton have issued 13 waivers for 20 satellite projects, by reporting to Congress that it is in the national interest to do so.

Those waivers have been issued fairly routinely, except for the consideration of the Justice Department's concerns about the latest waiver or other sanctions for missile proliferation. After China transferred technology for the M-11 short-range ballistic missile to Pakistan, the Bush Administration, from June 1991 to March 1992, denied exports to China of high-speed computers, satellites for launch, and missile technology or equipment. The Clinton Administration determined that China again transferred M-11 technology to Pakistan and imposed sanctions from August 1993 to November 1994 denying exports of missile equipment and technology to China, affecting exports of satellites for launch by China Great Wall. During those two periods of sanctions, one Presidential waiver was issued (in July 1994) for the export of satellites for launch by China Great Wall. Some debate has arisen as to whether the Administration is required to impose sanctions again, since reports say that China has continued to transfer missile equipment and technology to Pakistan.

Commerce vs. National Security. A third and broader issue concerns the underlying debate over the national interest: weighing the benefits of trade and commercial competitiveness versus the risks to national security. Some are calling for a stop to the export of satellites to China. Others say that such exports benefit American companies, consumers, and the country.

The White House says that licenses or waivers for satellite exports to China do not authorize the transfer of sensitive missile technology. Administration officials state that export licensing procedures and strict security measures (including escorts of satellites by Pentagon officials) preclude any assistance to Chinese missile programs. The policy is intended to allow American exporters to compete while protecting U.S. security interests. Some also consider the benefits of the Pentagon having access to the secretive Chinese aerospace and missile complex. According to the March 23, 1998 Washington Times, a secret National Security Council memo discussed the use of satellite launches as a "carrot" for China to curb missile proliferation. Some supporters also argue that satellite broadcasts promote the spread of democratic values. The Chinese argue that commercial space launches are part of what they call defense conversion, defense industries doing civilian business.

Critics say that allowing China to launch U.S.-origin satellites indirectly subsidizes and assists China's missile research and development efforts. The technology and know-how used in launching satellites are similar to those used in ballistic missiles. Secondly, some say that although an individual piece of technology or technical assistance may not be significant, assistance given over time has a cumulative effect of conveying valuable expertise. Third, U.S.-China cooperation has been characterized by a tension between a certain unreliability of Chinese rockets and the interests of American companies to have successful launches. Working with American and European engineers, Chinese engineers may have learned important quality controls and other lessons. Some also say that allowing the Chinese to launch satellites rewards or ignores their missile proliferation and any U.S. expertise gleaned through satellite launches may then be transferred by China to other countries. Others say that while satellites may promote a more open Chinese society, they may also be used by the Chinese military. Some experts point out that China's defense industries have not converted, but diversified into both military and civilian research.

As for potential benefits to China's ballistic missile program, some observers point out that launching satellites has not provided breakthroughs and China has deployed ICBMs since 1980, before launching U.S. satellites. As seen in my second chart on Chinese ballistic missiles, the Chinese have a diversified nuclear-armed missile force in what they call the Second Artillery, consisting of intercontinental, medium-range, submarine-launched, and short-range ballistic missiles. Other experts say that China has experienced problems with its missile force and reportedly is improving the reliability and accuracy of its missiles. The Second Artillery is expected to deploy, after the turn of the century, new ICBMs, possibly with MIRV (multiple independently targeted reentry vehicle) capability, and a new submarine-launched ballistic missile. MIRV technology is similar to that used by China to launch multiple satellites. I will end my presentation of background here. Thank you.

Presidential Waivers of Post-Tiananmen Sanctions
for Exports of Satellites or Parts to China