Testimony of Gary Milhollin
Professor, University of Wisconsin Law School
and |
Director, Wisconsin Project on Nuclear Arms Control
Before the Committees on International Relations and National Security
United States House of Representatives
June 17, 1998
I am pleased to appear today before these distinguished Committees. I have been asked to
discuss U.S. policy on satellite exports to China. I will direct my remarks to the effect
of that policy on Chinese transfers of missile technology to countries that are trying to
make weapons of mass destruction.
We have heard a lot about satellites lately, especially American-made satellites going to
China. We have also heard about campaign contributions, about waivers of export
prohibitions, and about the transfer of control over satellites from one government agency
to another.
What we have not heard, and what I will talk about today, are decisions by our government
that have given Chinese companies a green light to sell missile technology to countries
like Iran and Pakistan. The Administration has made three crucial decisions in this
regard.
First, it has decided to transfer control over satellite exports from the State Department
to the Commerce Department, an action that effectively pulls the teeth from any future
U.S. sanctions against Chinese companies guilty of missile proliferation.
Second, it has decided to suspend, without any legal basis, the implementation of U.S.
statutes that require sanctions to be imposed against Chinese companies for past sales of
missile technology to Iran and Pakistan.
Third, it has decided to invite China to join the Missile Technology Control Regime, an
invitation that, if accepted, would immunize Chinese firms from any future application of
U.S. sanctions laws for missile proliferation.
When we look at the cumulative effect of these decisions, we see something both surprising
and alarming. Our government has enabled Chinese companies to proliferate missile
technology with little fear of punishment. More specifically, Chinese companies have been
able to sell Iran and Pakistan components for nuclear capable missiles without worrying
about losing U.S. satellite launch contracts.
Satellites
Our sanctions laws, as written by Congress, are based on a simple idea. A foreign company
cannot import American missile technology with one hand and proliferate missile technology
with the other. If a Chinese company decides to sell Pakistan or Iran a nuclear-capable
missile or the means to make one, that company has to forget about importing any
missile-related technology from the United States. U.S.-made satellites were originally
part of this equation, because they contain missile-related American components.
That simple idea has now been abandoned by the executive branch. When, for example, the
Administration transferred licensing authority over satellites from the State Department
to the Commerce Department, satellites were effectively removed from the list of U.S.
exports subject to missile sanctions.
Let me explain why this is so. If a Chinese company sells whole missiles to a country like
Iran or Pakistan, the company would be guilty of what is known as a "Category
One" violation. This is because whole missiles are listed on Category One of the
Annex to the Missile Technology Control Regime, an agreement among countries that are
trying to curb missile proliferation by controlling their exports. For selling a Category
One item, the sanctions bar the guilty company for at least two years from importing any
item controlled by the Export Administration Act. Category One sanctions would thus bar
satellites even if controlled by the Commerce Department, which administers that Act.
China did export whole missiles to Pakistan in the fall of 1992. Since then, however,
China has changed its tactics. It now exports missiles piecemeal, as components. An
example would be a piece of guidance equipment. These items are on Category Two of the
MTCR Annex. A "Category Two" violation bars only the export of U.S.
"missile equipment or technology " under the Export Administration Act and under
Section 73 of the Arms Export Control Act.
But what is "missile equipment or technology"? According to the licensing
practice of the State Department, a missile-related item retains its identity as a
missile item even if it is embedded in a commercial satellite. Thus, if a Chinese company
were sanctioned, the export of satellites would be blocked by the State Department because
satellites have missile-related items embedded in them. In the view of the Commerce
Department, however, a missile-related item loses its identity as a missile item if
it is incorporated into a commercial satellite. Thus, the export of satellites would not
be blocked by the Commerce Department even though the satellites contained items that
would be considered missile-related if not embedded. These embedded items are such things
as radiation-hardened computer chips, gyroscopes, and accelerometers.
The Administration first transferred export controls on satellites from State to Commerce
in 1996, and in its implementing regulations, it also moved a number of missile-related
items associated with satellites. Then in 1998, the Administration moved the rest of the
missile-related items associated with satellite launches, even though the items are not
embedded in satellites. These items included ground support equipment, test equipment,
replacement parts, and non-embedded kick motors.
The result is that now, satellites are insulated from missile sanctions because control
over virtually everything associated with launching them has been transferred to the
pro-export Commerce Department, where sanctions will not be applied.
It is important to realize that the same Chinese companies that launch U.S. satellites
also sell missiles to places like Pakistan. Who are these companies? China Great Wall
Industries, China Aerospace International Holdings Ltd. (CASIL, of Hong Kong) and their
parent, China Aerospace Industry Corporation. These companies launch satellites on China's
Long March rockets. The United States has sanctioned both China Great Wall and China
Aerospace Corporation in the past for supplying missile technology to Pakistan.
It is also important to realize that a satellite launch contract is one of the most
lucrative things a Chinese aerospace company can get from the United States. Thus, by
removing satellites from the threat of sanctions, the Administration has surrendered one
of the most important levers America has to stop Chinese missile proliferation. Chinese
companies are free to sell missile technology to Iran or Pakistan without risking their
most lucrative source of revenue.
Failure to apply sanctions laws
China's exports remain the most serious proliferation threat in the world. Since 1980,
China has supplied billions of dollars worth of nuclear weapon, chemical weapon and
missile technology to South Asia, South Africa, South America and the Middle East. It has
done so despite U.S. protests, and despite repeated promises to stop. The exports are
still going on, and while they do, they make it impossible for the United States and its
allies to halt the spread of weapons of mass destruction.
I have attached tables to my testimony that list China's exports of nuclear, chemical and
missile technology since 1980. The tables reveal that China has consistently undermined
U.S. nonproliferation efforts for nearly two decades and is still doing so today.
In the early 1990s, Chinese companies were caught selling Pakistan M-11 missile
components. The M-11 is an accurate, solid-fuel missile that can carry a nuclear warhead
about 300 kilometers. In June 1991, the Bush administration sanctioned the two offending
Chinese sellers. The sanctions were supposed to last for at least two years, but they were
waived less than a year later, in March 1992, when China promised to abide by the
guidelines of the Missile Technology Control Regime.
But by December 1992, in violation of its promise, China had shipped 34 M-11 missiles to
Pakistan. Waiving the sanctions was a mistake.
In August 1993, the Clinton administration applied sanctions for two years, after
determining that China had violated the U.S. missile sanctions law a second time. Then in
October 1994, the United States lifted the sanctions early again, when China pledged once
more to stop its missile sales and comply with the MTCR.
Since late 1994, the stream of missile exports has continued. U.S. officials say that
China's missile exports have continued up until the present moment, unabated. These
exports include the sale of missile-related guidance and control equipment to Iran as well
as Pakistan.
In fact, our officials have learned that they were duped in 1992 and 1994. China was not
promising what we thought it was. Our officials now realize that China interprets its
promises in 1992 and 1994 so narrowly as to make them practically meaningless. It is clear
that China has not complied with the MTCR in the past, that it is not complying now, and
that it probably never will comply unless something happens to change China's attitude on
this question.
In its latest venture, China is helping to build a plant to produce M-11 missiles in
Pakistan. U.S. officials say that activity at the plant is "very high." If the
Chinese continue to help at their present rate, the plant could be ready for missile
production within a year.
By the autumn of 1996, the intelligence community had completed an air-tight finding of
fact on China's missile transfers to Pakistan. There was clear proof that the transfers
had happened. All the factual analysis necessary to apply sanctions had been finished. A
similar finding on China's missile exports to Iran had also been made.
And roughly one year earlier, an important legal analysis had been completed. The legal
analysis established that sanctions could be applied where a foreign person
"conspires to or attempts to engage in" the export of any MTCR equipment or
technology. Thus, sanctions could be applied without a finding that hardware or
technology had actually been exported. A conspiracy or even an attempt to transfer such
items would be enough. One did not need a photograph of a missile with "made in
China" written on the side.
The findings of fact and the legal analysis showed clearly that China should be
sanctioned. Both the findings and the analysis had been circulated to the relevant
agencies by the autumn of 1996. Both Pakistan and Iran were covered. The process, however,
was short-circuited at that point.
The next step would have been for the National Security Council to call a meeting at which
each agency could submit for the record its views on whether sanctions should be imposed.
The NSC would then forward these views to the Department of State, which would prepare a
decision memorandum for the Under Secretary, who has the legal authority to impose
sanctions.
But none of these steps were ever taken. The State Department simply chose not to complete
the administrative process. Thus, the sanctions law is not being implemented as Congress
intended and, in fact, is being circumvented. It is obvious that the law can never take
effect unless the administrative process is completed, so the failure to complete it is
manifestly illegal.
Last week, in testimony before the Senate Committee on Foreign Relations, Mr. Gordon
Oehler, who headed the CIA's non-proliferation center when the findings were made,
confirmed that the evidence of the missile transfers was clear. Mr. Oehler said that there
was no doubt in his mind that the transfers happened, and that the rest of the
intelligence agencies agreed.
The State Department has now admitted this fact by implication. The State Department is no
longer saying that there is "not enough evidence" to apply sanctions to China.
It is now saying that it has "not yet made a determination" to apply sanctions,
which is quite different. In effect, the State Department is saying that it has not
applied sanctions because it has not chosen to complete the administrative process. I
recommend that Congress take steps to see that the law is enforced.
Now that Pakistan has demonstrated its nuclear weapon capability, and announced that it
will mount nuclear warheads on missiles, this matter has become urgent. The
Chinese-supplied M-11s will actually carry nuclear weapons. President Clinton has said
that the world should try to prevent India and Pakistan from putting warheads on missiles,
but his Administration refuses to apply a U.S. law designed to prevent Pakistan from
acquiring missiles in the first place.
I would also like to mention the Iran-Iraq Nonproliferation Act of 1992. Under that Act, a
foreign company is sanctioned if it exports "destabilizing numbers and types of
advanced conventional weapons" to either Iran or Iraq. The sanctions bar any American
product that needs an export license, including satellites.
In 1995, the China Precision Machinery Import Export Corporation sold Iran advanced C-802
anti-ship cruise missiles. Estimates of the number sold range from 60 to 100. The State
Department admitted that the shipment occurred but concluded in 1997 that it was not of
"a destabilizing number and type." Thus, it declined to apply sanctions, despite
the fact that Admiral John Redd, our naval commander in the Gulf, took the unusual step of
complaining publicly about the sale. The missiles threaten our ships and sailors in Gulf
and also commercial shipping.
If sanctions had been applied, the export of U.S. satellites would have been cut off.
Under the Iran-Iraq Nonproliferation Act, the sanctions reach the parent organization of
the guilty party. The parent of China Precision Machinery is the China Aerospace
Corporation, which launches U.S.-origin satellites. This raises the question whether the
State Department, when ruling that the missiles were not destabilizing, was simply trying
to protect U.S. satellite makers.
China in the MTCR?
This past March, the Administration invited China to join the Missile Technology Control
Regime. In a memorandum dated March 12, White House staff member Gary Samore stated the
reasons for making the offer. Sanctions figured prominently among them. If China joined,
the memo stated, China could expect "substantial protection from future U.S. missile
sanctions."
Mr. Samore could have said "complete protection." Under Section 73 of the Arms
Export Control Act, sanctions would not apply to a Chinese company if China joined the
MTCR even if the company transferred complete missiles to Iran or Pakistan. Sanctions
would be avoided if the sale were legal under Chinese law, or if China took action against
the company, or if China found the company to be innocent. In effect, the Administration
offered China a complete shield against U.S. sanctions law.
The Administration was also offering China a second benefit. As things stand now, if a
U.S. exporter gets an order from a known missile maker in China, the exporter cannot make
the sale without notifying the government and getting an export license. This is required
by Section 6 of the Export Administration Act. If China were to join the MTCR, however, no
license would be required for such a sale. U.S. firms could deliberately outfit Chinese
missile manufacturing sites without telling anyone.
It is difficult to see how such an offer is prudent. China has repeatedly failed to comply
with MTCR guidelines since promising to do so in 1992 and 1994. There is no real evidence
that China has changed its ways. Thus, the offer seems to be yet another effort to
insulate Chinese aerospace companies from U.S. sanctions laws so that satellite launches
can continue.
Conclusion
When we look at the history of U.S. sanctions policy, we see a willingness to sanction
China for missile proliferation in both the Bush Administration, which applied sanctions
in 1991, and in the Clinton Administration, which applied sanctions in 1993. But in 1995,
the Clinton Administration policy changes. China supplied the C-802s to Iran in 1995;
China supplied other missile components to Iran and Pakistan in 1995 and has continued to
supply up to the present time. And in 1996, the Administration refused to act on explicit
findings by the intelligence community that the transfers occurred. Also in 1996, the
Administration started transferring control over satellites exports from the State to the
Commerce Department, insulating them from the application of missile sanction laws in the
future. For some reason, the Administration decided in either 1995 or 1996 that missile
sanctions would no longer be part of U.S. policy in dealing with China.
Why did U.S. policy change? I don't know the answer to that question, but I urge the
Committees to look into it.
We do know the result of the policy change. It gave China a green light to proliferate.
Our government's policy on sanctions has enabled Chinese satellite launch companies to
sell missiles and missile components to Iran and Pakistan without fear of punishment.
Thus, it may be that we are asking the wrong question about how our satellite export
policy affects missile proliferation.
Whether or not our satellite exports caused U.S. missile technology to go to China, they
have made it easier for Chinese missile technology to go to Pakistan.
India, of course, has watched this happen. India watched China help Pakistan make not only
missiles but the nuclear warheads to go on them. India also watched the United States
invent every excuse possible not to do anything about it. America asked the Indians to
show restraint in nuclear testing, but America was unwilling to put restraints on its own
satellite companies by sanctioning China. The Indians no doubt concluded that Uncle Sam
was against the spread of the bomb unless it might cost him something. It should not
surprise us if our non-proliferation policy lacks credibility.