[Senate Hearing 105-841]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 105-841


 
                     CHINESE MISSILE PROLIFERATION

=======================================================================

                                HEARING

                               BEFORE THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                       ONE HUNDRED FIFTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 11, 1998

                               __________

       Printed for the use of the Committee on Foreign Relations


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 senate



                    U.S. GOVERNMENT PRINTING OFFICE                    
49-527 CC                     WASHINGTON : 1998



                     COMMITTEE ON FOREIGN RELATIONS

                 JESSE HELMS, North Carolina, Chairman
RICHARD G. LUGAR, Indiana            JOSEPH R. BIDEN, Jr., Delaware
PAUL COVERDELL, Georgia              PAUL S. SARBANES, Maryland
CHUCK HAGEL, Nebraska                CHRISTOPHER J. DODD, Connecticut
GORDON H. SMITH, Oregon              JOHN F. KERRY, Massachusetts
CRAIG THOMAS, Wyoming                CHARLES S. ROBB, Virginia
ROD GRAMS, Minnesota                 RUSSELL D. FEINGOLD, Wisconsin
JOHN ASHCROFT, Missouri              DIANNE FEINSTEIN, California
BILL FRIST, Tennessee                PAUL D. WELLSTONE, Minnesota
SAM BROWNBACK, Kansas
                     James W. Nance, Staff Director
                 Edwin K. Hall, Minority Staff Director

                                  (ii)




                            C O N T E N T S

                              ----------                              
                                                                   Page

Milhollin, Dr. Gary, Director of the Wisconsin Project on Nuclear 
  Arms Control, Washington, DC...................................     5
    Prepared statement...........................................     8
Oehler, Dr. Gordon, former Special Assistant to the Director of 
  Central Intelligence for Nonproliferation, Arlington, Virginia.     4

                                 (iii)




                     CHINESE MISSILE PROLIFERATION

                              ----------                              


                        THURSDAY, JUNE 11, 1998

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:37 a.m. in 
room SD-419, Dirksen Senate Office Building, Hon. Jesse A. 
Helms, (chairman of the committee), presiding.
    Present: Senators Helms, Coverdell, Hagel, Grams, Frist, 
Brownback, Biden, Feingold, and Feinstein.
    The Chairman. The committee will come to order. The short 
delay is because I have a policy of not opening a committee 
meeting unless both sides are represented. Senator Biden was 
held up getting here and he suggested that we proceed. We 
appreciate your being here.
    Ladies and gentlemen, both in this hearing room and on 
television the Foreign Relations Committee today undertakes the 
first in a series of hearings to examine the Clinton 
administration's policy of promoting commercial satellite 
launches from China.
    This morning's hearing will focus on an examination of 
Chinese ballistic and cruise missile proliferation. We also 
will examine in some detail the extent to which the Clinton 
administration may have deliberately refused to fulfill its 
legal obligations to impose sanctions on China for this 
behavior.
    There is no more expert a panel of witnesses possible for 
this purpose than the two distinguished citizens who have come 
this morning. Dr. Oehler recently retired as the most senior 
intelligence officer for nonproliferation affairs, having 
served as Director of the Central Intelligence Agency's 
Nonproliferation Center, and Dr. Gary Milhollin is the Director 
of the Wisconsin Project on Nonproliferation, and someone to 
whom the committee often turns to for advice and counsel in 
such matters.
    Now, I must say at the outset that I regret the appalling--
how to put it? I guess legal hijinks would be the best way to 
describe it--the legal hijinks of the administration in trying 
to avoid sanctioning communist China for its missile 
proliferation. Some may recall that a few weeks ago, the date 
was April 28, the New York Times quoted President Clinton as 
having declared that, U.S. sanctions, laws have put ``enormous 
pressure on whoever is in the executive branch to fudge an 
evaluation of the facts of what is going on.'' Now, that is a 
curious statement for the President to make.
    But in any event, the fact that the President is on record 
as saying this, that his administration feels pressured to 
fudge the facts as a result of U.S. sanction laws, comes as no 
surprise to a lot of us. The U.S. Congress and the Senate 
Foreign Relations Committee in particular, and the latter I 
speak for, has been on the receiving end of this business of 
fudging the facts for the past 5 years. While no administration 
has ever voluntarily imposed sanctions that it believed would 
be counterproductive, the present administration's rather 
callous disregard of U.S. law is bouncing around at a new low.
    In any event, nowhere has this fudging of the facts been 
more clearly manifested than with respect to China's missile 
proliferation and, specifically, in the instance of China's 
transfer to Pakistan dozens of nuclear-capable M-11 missiles.
    Senators may recall that in July 1995 this committee, the 
Senate Foreign Relations Committee, obtained an advance copy of 
the Arms Control and Disarmament Agency's annual arms control 
report which addressed the M-11 transfer. The document, as the 
Washington Post later reported, had been approved for release 
to Congress by everybody. It had been approved--the Department 
of Defense had been approved to receive it, the chairman and 
members of the Joint Chiefs of Staff, the State Department, the 
Intelligence Committee, everybody except the White House. Now, 
this committee obtained it just before it was sent to the White 
House for any final changes that the White House may want to 
make. The effects of the NSC review are crystal clear, and 
there is a chart that I asked to be drawn, and I am going to 
have to ask which one it is because I cannot see it from this 
side. It is the one to the right of the audience. You are sure? 
All right. They can vouch for that. I cannot.
    The report before the White House changes read, ``we remain 
concerned about possible past transfer of M-11 missiles to 
Pakistan and are urgently seeking clarification and resolution 
of this matter.''
    After the White House changes, look at what happened to the 
report. ``We remain concerned about possible past M-11 related 
transfers to Pakistan and are continuing to monitor the 
situation closely.'' Dear me.
    Now, every one of the agencies had signed off on this 
report--bear that in mind--except the President's political 
appointees at the National Security Council. Everybody except 
those. The changes made by those National Security Council 
representatives of the President were done in spite of a 
consensus within the U.S. Government regarding the facts of the 
M-11 transfer, no question about it. It may be that this 
morning's witnesses will agree that the effects of the 
administration fudging are, indeed, significant.
    China had already been sanctioned for M-11-related 
transfers to Pakistan, don't you see. They cannot be sanctioned 
for the same violation twice. But what China has not yet been 
sanctioned for is the transfer of a complete M-11 missile. Now, 
bear in mind the distinction. The National Security Council 
understood full well that it could not let the original text of 
the ACDA report go to Congress unchanged.
    Sanctioning China for such a violation would mean among 
other things the immediate termination of important licenses 
held by whom? Guess who? Hughes and Loral, which allowed for 
the launching of commercial U.S. satellites from China. These 
sanctions also would affect a large number of Chinese 
companies, including the Chinese Aerospace Corporation.
    I have no doubt that concern over the impact of missile 
sanctions in this case has fueled the administration's efforts 
to contradict clear and totally unambiguous evidence that 
operational M-11 missiles are, in fact, in Pakistan. As we will 
doubtless hear today, the efforts to dumb down the U.S. 
intelligence process are ongoing and, of course, the M-11 
missile violation is not the only answer to Chinese 
proliferation that has threatened to derail U.S. satellite 
launches from China. I submit for the record an internal 
National Security Council memorandum which was recently 
declassified and provided to this committee in connection with 
its ongoing investigation. According to the memo--now, which 
chart is this one? OK. The outside one.
    ``It has been''--I am quoting, and you are reading, I 
hope--``administration practice to permit launches of U.S. 
satellites to proceed unless missile sanctions are enforced 
that prohibit the export of a satellite to be launched. No such 
sanctions are now in force. However, there is the potential for 
sanctions against the Chinese Government due to China's 
transfer to Iran of C-802 anti ship cruise missiles which might 
prohibit the export of technical data related to China sat 8.''
    But, the C-802 transfer will not be a problem, you see, for 
the Chinese or for Hughes or Loral. The administration has 
already taken care of that possibility, despite the fact that 
the administration admitted in testimony that the C-802's ``put 
commercial shipping in the Gulf at risk,'' and ``pose new 
direct threats to deployed U.S. forces.'' The administration, 
don't you see, nevertheless declared that the transfers thus 
far ``are not of a destabilizing number and type.''
    I must editorialize just a little bit. That depends on who 
is evaluating it.
    In any event, because of the relevant sanction law the 
Iran-Iraq Nonproliferation Act is triggered only by 
destabilization transfers. This fudging of the facts is 
equivalent to a decision not, not to impose sanctions, purely 
and simply.
    There are numerous other cases for which the administration 
is refusing to make sanctions determinations, and the chart 
clearly identifies five categories, count them, five categories 
of Chinese missile transfers to Iran and Pakistan which are 
sanctionable, mind you, under various missile proliferation 
laws, and I will be interested in what our witnesses say today 
about the specifics of each of these cases.
    I know I have run long, but I feel very strongly about 
this, and I felt the need of saying at the outset how careful 
we are going to be to assemble all the facts.
    In closing I must say that I am deeply concerned that the 
administration has sought to shield China, and no other face 
can be put on it, and the U.S. satellite vendors from the 
effects of U.S. sanctions. The imposition of missile sanctions 
could potentially derail commercial U.S. satellite exports for 
launch from China, and I say ``could'' because with the removal 
of all satellites from the United States munitions list of 1996 
the Clinton administration may have been attempting to sever 
all remaining links between these laws and U.S. commercial 
satellite licenses.
    But in any event, this is merely the first in a series of 
our hearings, and I look forward to the recommendations made 
here today as to how the committee should focus its 
investigation into this complicated and, to me, disturbing 
matter.
    Now, I will not proceed with the testimony of the 
witnesses. Senator Biden is still on his way. But I will say 
that the moment he gets here, I will offer him the opportunity 
to make his statement, possibly in rebuttal to some of the 
things I have said. Dr. Oehler, if you will proceed I will 
appreciate it.

STATEMENT OF DR. GORDON OEHLER, FORMER SPECIAL ASSISTANT TO THE 
    DIRECTOR OF CENTRAL INTELLIGENCE FOR NONPROLIFERATION, 
                      ARLINGTON, VIRGINIA

    Dr. Oehler. Thank you, Mr. Chairman.
    The Chairman. Please pronounce your name. Let me tell the 
folks, it is spelled O-e-h-l-e-r. How would you pronounce that?
    Dr. Oehler. It is pronounced Oehler, just like Taylor 
without the T in the front.
    The Chairman. I see.
    Dr. Oehler. It is a German name.
    The Chairman. Well, Dr. Oehler, thank you very much.
    Dr. Oehler. Thank you, Mr. Chairman. In July 1997 the 
Director of Central Intelligence submitted a report to Congress 
entitled, ``The Acquisition of Technology Relating to Weapons 
of Mass Destruction in Advanced Conventional Munitions.''
    In this report, China was singled out as ``the most 
significant supplier of weapons of mass destruction related 
goods and technology to foreign countries'' during the last 
half of 1996, the duration of this report.
    Because I was involved in the production of this report, I 
have been asked to comment on the reasons for this strong 
statement. First, let me say that the Chinese have made some 
progress in their proliferation behavior since the early 
1990's, but exports of materials and technologies of concern to 
Pakistan and Iran have not abated, and some exports to other 
countries have continued as well.
    With regard to Pakistan, China has had a long-term 
strategic relationship with Pakistan and has regarded Pakistan 
as a counterbalance to India in the region. China has held back 
few weapons and technologies from Pakistan in support of this 
relationship.
    For example, Mr. Chairman, it is my view and, I believe, 
the view of most intelligence officers, that Pakistan could not 
have tested a nuclear device a few weeks ago without the 
nuclear materials and technologies supplied by China.
    Most of those nuclear transfers took place in the 1980's 
and the early 1990's. As the recent tests show, the Pakistanis 
are now self-sufficient in nuclear weapons technologies, but in 
the early 1990's, the Chinese began an effort to provide 
Pakistan with nuclear-capable ballistic missile technologies 
and even complete missiles.
    In 1990, the intelligence community detected the transfer 
to Pakistan of a training M-11 ballistic missile and associated 
transporter-erector-launcher, indicating that operational 
missiles were not far behind.
    The intelligence community had evidence that the M-11 was 
covered by the so-called guidelines and parameters of the 
missile technology control regime, the MTCR. With this 
information, the U.S. imposed Category Two sanctions against 
China and Pakistan in 1991.
    In December 1991, China provided written assurances to 
Secretary of State James Baker that it would abide by the 
``guidelines and parameters'' of the MTCR if sanctions were 
lifted. Sanctions were, in fact, lifted effective 23 March, 
1992.
    However, in November 1992, less than 8 months later, the 
Chinese delivered 34 M-11 to Pakistan despite their earlier 
pledge. This led to a second sanctions action, not for Category 
One sanctions that would be required for complete missile 
transfers, but for Category Two M-11-related transfers, a 
lesser offense.
    This, too, was waived after China once again promised to 
abide by the guidelines and parameters of the missile 
technology control regime.
    Since late 1992, China has not transferred complete MTCR-
covered missiles to any country. Instead, it has concentrated 
on transferring production technologies and components. 
Production technologies and components are also covered under 
the MTCR, but they are easier to hide, or can be claimed to be 
for non-MTCR-related systems.
    One can argue, though, that the transfer of missile-related 
production technologies is a more serious infraction of the 
intent of the missile technology control regime.
    With regard to missile-related transfers to Iran, the 
primary transfers of concern relate to guidance and control 
components, their production technologies, and testing jigs.
    The 1997 report, in concluding that China was the worst 
offender during the last half of 1996, also considered Chinese 
transfers of chemical weapons-related materials and 
technologies, but that is another story.
    In sum, China has been for a long time a major proliferator 
of weapons of mass destruction materials and technologies. 
Moreover, the Chinese leaders have shown a very poor record of 
living up to their commitments to the U.S., and in the name of 
national sovereignty they resisted U.S. efforts to put in place 
any means to verify their compliance with bilateral or 
international agreements.
    In my opinion, based on this past record, we need to base 
any future agreements with China on something more than the 
word of its leaders and make provisions for an easy out for the 
United States if they resist verification procedures in the 
agreement or simply if they choose to disregard their 
commitments to us. Thank you very much, sir.

  STATEMENT OF DR. GARY MILHOLLIN, DIRECTOR OF THE WISCONSIN 
       PROJECT ON NUCLEAR ARMS CONTROL, WASHINGTON, D.C.

    Dr. Milhollin. Thank you, Mr. Chairman. I am pleased to be 
here today.
    The Chairman. We are pleased to have you here.
    Dr. Milhollin. I have testified before this committee 
before, and I have always felt that it was an honor to do so.
    Today, I am going to talk about a series of decisions by 
the administration which, in my view, have in effect given 
Chinese companies the green light to sell missile technology to 
countries like Iran and Pakistan.
    There have been three decisions that I think are 
particularly important.
    First, the decision that you mentioned already, which was 
to transfer control over satellite exports from the State 
Department to the Commerce Department. In my view, after 
looking at the various laws, I think that this decision, this 
transfer, effectively pulls the teeth from any future U.S. 
sanctions against Chinese companies that might be found guilty 
of missile proliferation. I should say, Chinese aerospace 
companies.
    The second decision by the administration that is important 
is its suspension of the implementation of our sanctions laws. 
These laws in my view require the United States to sanction 
Chinese companies for proliferating missile technology to Iran 
and Pakistan, but these sanctions actions have not been 
completed. They have been suspended without any basis in law.
    Third, the administration has decided to invite China to 
join the missile technology control regime. If the Chinese were 
to accept that invitation, in my view that would give them a 
future total immunity--I am sorry, would give total immunity in 
the future to Chinese firms that might be found guilty of 
missile proliferation, and my testimony will be an elaboration 
of my reasons for concern about these decisions.
    The Chairman. By the way, all of that will be in the 
printed record and it is going to be distributed rather widely. 
Proceed.
    Dr. Milhollin. 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 to dangerous countries with the other. I 
think that simple idea has now been abandoned by the practice 
of the current administration, and let me explain why I believe 
this.
    If a Chinese company sells missile-related components to a 
country like Iran or Pakistan in a program to make nuclear-
capable missiles, sanctions apply under the MTCR, but the 
sanctions are limited in the case of--this gets a little 
complicated, but in the case where the transfer is, as Mr. 
Oehler has said, of only components and technology rather than 
complete missiles, the U.S. export sanctions are limited to 
what are called missile-related items.
    Now, what is a missile-related item? The State Department 
defines a missile-related item as an item that has been defined 
by the MTCR as such, regardless of whether it has been embedded 
in a commercial satellite. According to the State Department, 
even if an item is embedded in a satellite, it is still 
missile-related.
    The Commerce Department, however, defines missile-related 
differently. The Commerce Department views a missile-related 
item as losing its identity once it is incorporated into a 
satellite. The practical effect is that once you transfer the 
satellite and all of the items associated with it to the 
Commerce Department for licensing, U.S. sanctions laws no 
longer prevent it from being exported.
    That is a change, I think, in the way we do things that is 
very important, but has not been generally recognized by the 
public or by those who are studying this subject.
    The transfer of this authority occurred first in 1996 and 
then was completed in 1998 when licensing authority over the 
last of the items associated with satellite launches were 
transferred to the Commerce Department. The result is that now 
satellites are insulated from missile sanctions because control 
over everything associated with launching them has been 
transferred to the Commerce Department, where sanctions will 
not be applied.
    The next point I would like to make is that the same 
Chinese companies that launch U.S. satellites also sell 
missiles to places like Iran and Pakistan. There is an 
excellent chart here which lays out which companies these are.
    We sanctioned, for example, the China Aerospace Corporation 
for missile technology exports to Pakistan. The Chinese 
Aerospace Corporation also launches our satellites, satellites 
made in America.
    It is important to realize that a satellite launch is one 
of the most lucrative things a Chinese aerospace company can 
get from the United States. Once you remove that from the scope 
of U.S. export sanctions, you have taken away the major threat 
that might deter those companies from committing missile export 
violations. The result of taking satellites out of U.S. 
sanctions is that the Chinese aerospace companies are free to 
sell missile technology to Iran and Pakistan without risking 
their most lucrative source of revenue.
    Also in my testimony I cover our failure to apply sanctions 
laws and the history of applying those sanctions and then 
waiving them. Mr. Oehler has done an admirable job of summing 
that up, but I would like to make one additional point, and 
that is that there have been complete findings of fact by the 
U.S. Government showing the transfers. These findings have been 
languishing in the State Department since 1996.
    The State Department has simply not completed the 
administrative process necessary to reach the point where a 
sanction might be imposed. Also, our government has completed a 
legal analysis that demonstrates that you do not need to show a 
missile with, ``Made in China'' written on the side. A 
conspiracy to export or an attempt to export missile-related 
items is sufficient for the imposition of U.S. export 
sanctions. That legal analysis is also completed and it too has 
been languishing for even longer than the findings of fact.
    The last point I will make here is that if China did join 
the MTCR, U.S. law is written so that no sanctions would apply 
to its aerospace companies in the future even if they were to 
sell whole missiles to Pakistan and Iran. It seems to me that, 
given China's record of breaking its promises, it is imprudent 
to make that kind of an offer at this time.
    Before we offer China membership in such a--before we 
invite China into the missile technology control regime, I 
think we should insist on a fairly long period of good 
behavior. There has been no such period, and so I think it is 
premature to make this offer.
    These conclusions lead to me to wonder whether we may be 
asking the right question about the link between satellite 
exports and missile proliferation. Whether or not our satellite 
policy has caused U.S. missile technology to go to China, it 
has certainly made it easier for Chinese missile technology to 
go to Pakistan, and India has watched this happen.
    India watched China help Pakistan not only make missiles, 
but nuclear warheads, and it also watched the United States do 
nothing about it. It seems to me the Indians might have 
concluded that America was against proliferation as long as it 
did not cost us anything, and that may have been a factor in 
India's decision to test.
    I think that our failure to do anything about the obvious 
proliferation by China to Pakistan has seriously undermined our 
credibility concerning nonproliferation.
    [The prepared statement of Dr. Milhollin follows:]

                  Prepared Statement of Gary Milhollin

    I am pleased to appear today before this distinguished Committee. I 
will direct my remarks to U.S. foreign policy toward China, 
particularly as it concerns transfers of missile technology by China to 
countries that are trying to make weapons of mass destruction. I will 
discuss the failure of the United States to sanction China under U.S. 
law for these exports, and the link between this failure and the 
current U.S. policy on satellite exports.
    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 the 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 very surprising and very 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 
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 American technology. 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. Under Section 73 of the Arms Export 
Control Act, sanctions apply to a Chinese company that sells components 
to country like Iran or Pakistan for use in a program to make nuclear-
capable missiles. The sanctions prevent the guilty company from 
importing U.S. missile-related items for a period of two years if the 
company's sale was of something less than a complete rocket system or 
subsystem. Most sales fall into this category. An example would be a 
rocket motor casing or a piece of guidance equipment. These are known 
as ``Category II'' items on the Annex of the Missile Technology Control 
Regime, an agreement among countries that are trying to curb missile 
proliferation by controlling their exports.
    So sanctions bar the guilty company from buying missile-related 
items from the United States. But what is a ``missile-related item''? 
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 moved 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 everything associated with launching 
them has been transferred to the 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
    In October of last year, I testified before this Committee on 
China's export behavior. I will not repeat that testimony here, except 
to summarize some points that are especially important to keep in mind.
    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 the sales continued and in August 1993, the Clinton 
administration applied sanctions again 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 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.
    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.
    In the autumn of 1996, the intelligence community had completed an 
airtight 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 ever happened. 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. 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-11's 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.
                           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.
    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 satellite 
launches can continue.
                               conclusion
    Our government's export policy on satellites has enabled Chinese 
companies to sell missile components to 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 policy has caused U.S. missile 
technology to go to China, it has certainly 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. Uncle Sam asked the Indians to show restraint 
in nuclear testing, but Uncle Sam was unwilling to put restraints on 
his own satellite companies by sanctioning China for missile 
proliferation. 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.

                                 ______
                                 

                            The Risk Report

                       China's Dangerous Exports

                                algeria
1980-1984
           Secretly agrees to supply a nuclear research reactor
1985-1989
           Trains Algerian scientists and technicians; starts 
        building reactor
1990-1997
           Completes reactor and supplies heavy water and 
        uranium fuel
                               argentina
1980-1984
           Sells over 60 tons of heavy water
           Sells Uranium concentrate and low-enriched uranium 
        hexafluoride
1985-1989
           Sells enriched uranium
                                 brazil
1985-1989
           Sells enriched uranium
           Agrees to provide liquid-fuel and guidance 
        technology for missiles in exchange for solid-fuel technology
                                 india
1980-1984
           Sells at least 130-150 tons of heavy water
1990-1997
           Agrees to supply Tarapur reactors with enriched 
        uranium
                                  iran
1980-1984
           Sold production capability for the Oghab short range 
        rocket
1985-1989
           Trains Iranian nuclear technicians in China
           Sells Silkworm anti-ship missiles
           Supplies a miniature reactor, a subcritical 
        facility, and tributyl-
        phosphate useful in plutonium extraction
1990-1998
           Supplies a calutron and a copper-vapor laser that 
        could be used for uranium enrichment research Contracts to sell 
        25.30 MW research reactor
           Helps prospect for uranium in Iran
           Contracts to sell nuclear reactor and isotope 
        separator
           Supplies a nuclear fusion research facility and 
        scientists and engineers to help install it
           Delivers poison gas ingredients
           Delivers missile guidance systems and computerized 
        machine tools
           Sells virtually complete chemical weapon factories 
        including precursor chemicals and glass-lined vessels
           Hosts Iranian nuclear specialists to study a uranium 
        hexafluoride plant for export to Iran
           Delivers components for missile guidance and 
        ingredients for rocket propellant
           Supplies 400 tons of poison gas ingredients
           Agrees to sell gyroscopes, accelerometers and 
        equipment to build and test missile guidance components
           Supplies two tons of calcium hypochlorate, used in 
        chemical decontamination
           Continues to supply chemical precursors
           Supplies C-801 and C-802 ship-based anti-ship cruise 
        missiles
           Supplies through Hong Kong high-grade seamless steel 
        pipes used to make chemical weapons or explosives
           Contracts to supply hundreds of tons of a key 
        ingredient needed to process natural uranium to nuclear weapon 
        grade
                                  iraq
1980-1984
           Nuclear bomb design supplied to Pakistan
1985-1989
           Helps make magnets for centrifuges to enrich uranium
           Sells ``Silkworm'' anti-ship missiles
1990-1997
           Agrees to sell lithium hydride useful for nerve gas, 
        missiles and nuclear weapons
                                 israel
1990-1997
           Agrees to fund development of a cruise missile with 
        a range of 400 kilometers
                                pakistan
1980-1984
           Supplies nuclear bomb design and its fuel
           Helps build Hatf missiles
           Helps with gas centrifuges to enrich uranium
1985-1989
           Agrees to sell tritium gas to boost the yield of 
        fission bombs
           Ships equipment for M-11 nuclear-capable missiles
           Starts building a 300 MW nuclear reactor at Chashma 
        in spite of de facto international supply embargo
1990-1997
           Secretly delivers more M-11 missile components
           Trains Pakistani nuclear technicians in China
           Continues to deliver components for M-11 missiles
           Supplies more than 30 M-11 missiles now in crates at 
        Sargodha Air Force Base near Lahore
           Helps build a secret 50-70 MW plutonium production 
        reactor at Khusab, and a nearby fuel fabrication or 
        reprocessing plant
           Supplies blueprints and equipment for a missile 
        factory near Rawalpindi, now under construction
           Supplies ring magnets used in gas centrifuges to 
        enrich uranium
           Supplies heavy water to Kanupp nuclear reactor
           Sells a high-tech furnace and diagnostic equipment 
        with military applications
           Ships rocket fuel seized en route in Hong Kong
           Agrees to build Chashma-2, a second 300 MW nuclear 
        reactor
                                 syria
           Contracts to sell M-9 nuclear-capable missiles
1990-1997
           Agrees to supply Syria's first nuclear reactor and 
        train nuclear technicians
                              saudi arabia
1985-1989
           Sells CSS-2 medium-range, nuclear-capable missiles
                              south africa
1980-1984
           Supplies 60 tons of enriched uranium, undercutting 
        U.S. pressure on South Africa

    The Chairman. I thank you, sir. Senator Biden has arrived, 
and as I mentioned to you, we would proceed with his statement 
at this point.
    Senator Biden. Mr. Chairman and my colleagues, I will not 
take the time to deliver my whole statement. I ask that it be 
placed in the record, but just let me say that unfortunately, 
although China has shown some responsiveness to U.S. concerns 
on exports of finished missiles, which is part of what we just 
heard, China has been reluctant to restrict the export of dual 
use items and missile technology.
    One of their explanations is, they do not think it is right 
for us to expect them to be bound by an agreement they did not 
have an opportunity to shape at its inception. This seems 
particularly strange to me. If China were to join the MTCR they 
would have the same right as all members to participate in the 
formulation of the export control list governed by the 
agreement.
    Perhaps China is simply not yet convinced that such exports 
might endanger their own national security.
    Mr. Chairman, I am not sure how to get beyond this log jam, 
but I am willing to entertain any creative suggestions from our 
panel and I am sure I have missed some already.
    Mr. Chairman, I am sure that nonproliferation will be high 
on the President's agenda when he visits Beijing later this 
month, and I hope that the administration will obtain some 
significant movement along the lines that I have outlined in 
the part of my statement I have not spoken to in the context of 
the upcoming summit.
    The world remains a very dangerous place, as we all know, 
and it will grow more dangerous if great powers do not work 
together to halt the spread of weapons of mass destruction, so 
Mr. Chairman, I look forward to our testimony today, and I hope 
that they will address--and maybe they already have, and again 
I apologize if you have--the mechanisms available to the United 
States to advance our nonproliferation interests.
    Two questions seem to me to be at the heart of our dilemma. 
How can we best make China realize that stopping weapons 
proliferation is as much in their interest as it is in ours, 
and what bludgeoning--oh, I should not say that. I should 
rephrase it. What encouragement, or what assistance will it 
take to make China keep its promise to join in preventing the 
spread of destabilizing weapons?
    I am not sure we yet have the answers to these questions, 
and I welcome the testimony of our experts today and thank you 
for your courtesy in allowing me to interrupt them to make a 
part of my statement.
    [The prepared statement of Senator Biden follows:]

           Prepared Statement of Senator Joseph R. Biden, Jr.

    Mr. Chairman, I want to thank you for holding this important 
hearing on Chinese ballistic missile proliferation. This is not the 
first hearing this committee has held on this issue, and it probably 
won't be the last.
    Halting the spread of weapons of mass destruction and the means to 
deliver them is vital to our national security. As we have witnessed 
recently with nuclear tests in India and Pakistan, failure to address 
this threat successfully could have the gravest consequences for 
American interests and the security of our people.
                        great power obligations
    Two nations, Russia and China, will be critical to the success or 
failure of global nonproliferation regimes. China is the subject of 
today's hearing, but we could just as easily be discussing Russia's 
nonproliferation record.
    Indeed, I see that Dr. Gary Milhollin is here to testify today, as 
he was last October when the committee last looked into this issue. I 
look forward to his testimony.
                    chinese proliferation activities
    China wants to be accepted as a great power. I welcome that desire, 
for while obedience to global nonproliferation norms is mandatory for 
all nations, as far as I'm concerned, great power obligations go beyond 
this minimum.
    China's interest, as well as ours, demands that they take the lead 
in stemming destabilizing arms proliferation. A great power bears an 
obligation not to sell dual-use equipment to a country that is known to 
have a program to develop long-range missiles. A great power bears an 
obligation not to sell chemical weapons precursors to firms that are 
fronts for military programs.
    Past Chinese Assistance to Pakistan contributed to that nation's 
ability to detonate a nuclear weapon and, potentially, to deliver it on 
a ballistic missile. Some people might argue that this was in China's 
self-interest because of their difficult relations with India. But I 
would say that recent events prove that no one benefits from the 
provision of weapons of mass destruction to nations on the 
subcontinent, or anywhere else.
    All of us on this committee are well acquainted with China's 
troubling nonproliferation record. The real question, it seems to me, 
is what do we do about it?
    We must strive to transform nonproliferation from an issue that has 
become emblematic of the difficulties in Sino-U.S. relations to an 
example of cooperation and trust.
    China deserves some credit for improving its official policy on 
nonproliferation. Since 1992, Beijing has joined the Nuclear 
Nonproliferation Treaty, ratified the Chemical Weapons Convention, and 
developed regulations governing chemical exports. In 1996, China began 
a moratorium on nuclear testing and signed the comprehensive test ban 
treaty. Last August, China promulgated a list of nuclear technologies 
prohibited from export.
    China has also agreed to be bound by some, but not all, of the 
terms of the Missile Technology Control Regime.
    Furthermore, last October, Chinese President Jiang Zemin reportedly 
provided assurances to President Clinton that China would stop selling 
C-801 and C-802 cruise missiles to Iran. Mr. Chairman, as you know, 
these cruise missile exports have been of particular concern to us.
    These steps by China are encouraging, but there is much more that 
needs to be done.
                           china's next steps
    I'd like for China to join with the United States to halt the 
spread of ballistic missile technology.
    There are some modest steps China could take which would 
demonstrate the sincerity of their commitment to nonproliferation. 
Specifically, China could:

   establish a comprehensive export controls enforcement 
        mechanism, and demonstrate its effectiveness through the arrest 
        and prosecution of violators; and
   agree to join multilateral bodies committed to comprehensive 
        nonproliferation, including the missile technology control 
        regime and the nuclear suppliers group.

    If China took these steps, we would be well on our way to 
transforming the issue of Chinese ballistic missile proliferation from 
a sore point in Sino-U.S. relations to a genuine success story.
    Unfortunately, although China has shown some responsiveness to U.S. 
concerns on the export of finished missiles, China has been reluctant 
to restrict the export of dual-use items and missile technology.
    One of their explanations--that they do not think it is right for 
us to expect them to be bound by an agreement they did not have an 
opportunity to shape at its inception--seems particularly strange to 
me. If China were to join the MTCR, they would have the same right of 
all members to participate in the formulation of the export control 
lists governed by the agreement.
    Perhaps China is simply not yet convinced that such exports might 
endanger their own national security.
    Mr. Chairman, I'm not sure how to get beyond this logjam, but I am 
willing to entertain creative suggestions from our panel.
                              summit hopes
    Mr. Chairman, I am sure that nonproliferation will be high on the 
President's agenda when he visits Beijing later this month. I hope that 
the administration will obtain significant movement along the lines I 
have outlined in the context of the upcoming summit. The world remains 
a dangerous place, and it will grow more dangerous if great powers 
don't work together to halt the spread of weapons of mass destruction.
                               conclusion
    I look forward to the testimony of our witnesses today.
    I hope they will address the mechanisms available to the United 
States to advance our nonproliferation interests.
    Two questions seem to me to be at the heart of our dilemma:

   How can we best make China realize that stopping weapons 
        proliferation is as much in their interest as it is in ours? 
        and
   What bludgeoning, what encouragement, or what assistance 
        will it take to make China keep its promises to join in 
        preventing the spread of destabilizing weapons?

    I'm not sure we yet have the answers to those questions, and I 
would welcome the expert advice of today's witnesses.

    The Chairman. Thank you, Senator.
    Dr. Milhollin, I do not want to be too long-winded, but I 
need to make a point here.
    The administration has adopted what appears to me to be, 
well, President Bush did it, too. As a matter of fact, today, I 
think, or yesterday--I believe it was this morning. It has been 
a long time since I read this morning's Washington Post--quoted 
an NSC official as saying, I see a lot of continuity between 
the Bush and Clinton approaches toward satellites.
    Well, when I was coming along, my mama and daddy did not 
accept everybody's doing it as an excuse, and I do not accept 
it, either, and in this case, for starters it ain't even so. 
George Bush never did what the current President of the United 
States has done, never. I was here, and I watched it fairly 
carefully.
    Now, President Bush agreed with what I considered to be my 
own strict interpretation, which I gave. Incidentally, as the 
author of the Arms Export Control Act missile sanctions, George 
Bush agreed that all satellites were covered by U.S. missile 
sanctions laws regardless of how they were licensed.
    Accordingly, when Category Two sanctions were imposed on 
China back in 1992, President Bush refused to allow the export 
of any satellites to China. It was only after sanctions were 
terminated that he issued the waiver.
    But I tried to make this point to folks at the 
administration, including my good friends at the State 
Department, but President Clinton refused to agree on this 
point and reversed the Bush policy. Bush did not do it the way 
Clinton is doing it. Clinton reversed the Bush policy, and I 
want to be placed in the record two exchanges of letters that I 
have dated 1993 and 1994, in which President Clinton declares, 
``after extensive legal analysis we determined that licenses 
for satellites controlled by the Commerce Department are not 
covered by the sanctions, and may be processed.''
    Thus, when President Clinton reimposed Category Two 
sanctions on China for an M-11 missile violation, he proceeded 
immediately and deliberately to undercut the effectiveness of 
his own sanctions, don't you see, by issuing a waiver for the 
ECHO STAR satellite.
    All right. I have here for the record a July 13, 1994 
memorandum to the President from Todd Stern--do you know him?--
which states with respect to the ECHO STAR satellite, ``the 
waiver would implement your November 1993 decision to the 
effect that Commerce-controlled satellites are not covered by 
the missile sanctions law and thus can be exported to China.''
    [The information referred to follows:]

                                   The White House,
                                          Washington, D.C.,
                                                     July 13, 1994.
Mr. President:
    The attached is a decision memo from Tony Lake and Susan Brophy 
recommending that you grant a national interest waiver necessary to 
allow the export to China of an Echo Star satellite system for launch 
by a Chinese-owned launch vehicle.
    The waiver would implement your November 1993 decision to the 
effect that Commerce-controlled satellites are not covered by the 
missile sanctions law and can thus be exported to China.
    We have sent copies of this memo to the Vice President and Leon.
    If you approve, please sign the two waiver messages to Congress.
                                         Todd Stern

    The Chairman. Now, I had to lay a predicate for my 
question. Now, do you agree that these documents clearly 
indicate that the President obviously gutted the effect of the 
MTCR sanctions law with this waiver?
    Dr. Milhollin. It seems to me that when we sanction a 
country for missile proliferation violations we are sending the 
message that we are prepared to impose punishment, we are 
prepared to make it cost something to engage in proliferation, 
and as I said in my testimony, the most valuable thing that 
Chinese aerospace companies want from us is satellite launch 
contracts, so if you sanction these Chinese companies but if 
you remove from the sanctions the thing they want most, then 
what you do is, you pull the teeth out of the sanctions.
    I guess we could use one or more metaphors. You could talk 
about pulling out teeth or gutting, but obviously it reduces 
the sanction to virtually nothing. Because of the Tiananmen 
sanctions the Chinese cannot get much else from us except 
satellite launches, so although we impose the sanction they do 
not have much teeth because nothing is being bought.
    The Chairman. We have the 5-minute rule. I am going to 
enforce it strictly on myself, and I hope other Senators will 
abide by it.
    Senator Biden. I will have a follow up on my question.
    Senator Biden. If you would like my time, Mr. Chairman, you 
go ahead.
    Gentlemen, we are going to be spending a lot of time here 
unrelated to your testimony--not here in this committee, but in 
the Congress--talking about what was done before, should it 
have been done now, and who started it, and was it different, 
what this administration did. I am not in any way denigrating 
the questions that relate to that series of concerns.
    But what I would like to do is, instead of looking back, I 
would like you to look ahead for me. Let us assume that no one 
is at fault, everyone is at fault, whatever. What do we do from 
this moment on?
    You are President of the United States. I am your National 
Security Advisor, or vice versa. I do not want to say I am 
President. That will start a rumor.
    Senator Feinstein is President of the United States. You 
are her National Security Advisor. I am being serious now. What 
do you tell her? What do you tell her you should do from this 
moment on relative to using missiles in China to drop 
satellites made in America on top of to get them into orbit? 
What do you tell her? Don't do it, stop it, end it?
    Because as you know, we made a very basic decision in a 
previous administration and in this administration that we were 
not going to spend the money to have the capacity available to 
launch--and it is not a critical judgment, but we made a 
concrete judgment that we would not in this Nation have 
sufficient capacity in terms of, for the listening audience, 
for missiles to go up in the air and to put payloads, i.e., 
satellites, commercial satellites up there in space.
    We made that conscious decision not to correct what we 
could have. If we decided to spend the money, we would not have 
to worry about Loral or Hughes or any other corporation wanting 
to put their satellites in space. We could do it all on the 
back of American-made missiles. We made a judgment not to do 
that.
    Now--is that correct? Do you both agree on that?
    The second thing we agree on, I think, is there ain't 
enough missiles in America to put satellites up in space that 
have commercial application, right? Anybody disagree with that? 
OK. They both shook their heads that they agreed.
    Now, my question is, what do we do now? Do we step back 
from the commercial competition of American companies putting 
satellites in space by saying, no more use of missiles that are 
made in China?
    I am being redundant. What the hell do we do?
    Dr. Milhollin. I will go first.
    I am advising President Feinstein, right?
    Senator Biden. Right. I am going to be her Vice President. 
She does not know that yet, but I am going to be her Vice 
President. East-West thing, you know, big-little, smart, not-
so-smart----
    Dr. Milhollin. Well, I would say some things are more 
important than others, and I would say that the spread of 
nuclear weapons and the missiles to deliver them is real 
important, and especially now that we seem to have a situation 
in South Asia that is getting out of hand, and that we have--
the United States has a certain amount of credibility when it 
comes to trying to stop this spread.
    That is a very important national resource. I would tell 
the President that we should not squander it so that we, some 
of our companies, can make a short-term profit. Obviously, this 
is a tradeoff.
    Senator Biden. I am not being critical. I think that is a 
legitimate end. Would you then say, though, that Madam 
President, you had better get underway--you had better get up 
to the Congress, because I think we Congressman and Senators 
have to face up to reality, OK. There has been no two stauncher 
critics of the transfer of technology by China to Pakistan than 
this Senator and this Senator. I actually called for a secret 
session of the Senate, which rarely occurs, so I share your 
view.
    But what is the second step? I do not think anyone can say 
we are just going to say America is out of the business, multi-
trillion-dollar business of dealing with satellites.
    Dr. Milhollin. Senator, if I can add something, I would say 
that there must be a way to launch a satellite without putting 
money into the pockets of people who are proliferating 
missiles. That is what I would say.
    Senator Biden. There is a way. We can do it.
    Dr. Milhollin. I think if we try real hard we can find one.
    Senator Biden. My time is almost up. I am going to cut you 
off. Doctor, what do you think? What are you going to tell her?
    Dr. Oehler. As you know, I have spent the last 25 years as 
an intelligence officer. We are supposed to look at the facts 
and not the policy.
    Senator Biden. I am going to ask you to do policy too now.
    Dr. Oehler. If she were President I would do this. You 
mentioned earlier that great powers ought to get together and 
work things out. You of course were referring to the United 
States and China. I think the same statement can be used for 
the administration and Congress. Those are two great powers.
    So one of the things I would say to my National Security 
Advisor would be let us work with the Congress on this to come 
up with legislation that meets the best interests of the U.S. 
Government and most importantly gives a consistent view, a 
consistent approach to what we are going to do in the future on 
this.
    The problem is not so much to me whether you have a 
satellite launch here or there, the problem is that policy 
seems to change from time to time, depending upon the status of 
the sanctions legislation or whatever, and what our allies 
really need to see is some consistent position on the part of 
the United States, and I think they will go along with whatever 
is reasonable.
    The Chairman. We will follow up on that. That is a good 
point.
    Senator Coverdell.
    Senator Coverdell. Dr. Milhollin, I have several written 
questions. Bear with me. Virtually all major enterprises are 
State-controlled in China. Can you explain, with reference to 
the charts supplied to the committee by the Defense 
Intelligence Agency, the relationship between the entities 
which (1) supplied the M-11 missiles to Pakistan, (2) are 
launching U.S. commercial satellites the Senator from Delaware 
talked about, and (3) were alleged to funnel funds to the 
Democratic National Committee? Is there a flow, a connection 
among these three entities in your mind?
    Dr. Milhollin. I must say, with respect to the third 
question that I am not normally asked about that, but--yes. But 
I think I can answer all three questions.
    First, the companies that launch U.S. satellites are the 
same companies that sell missiles to Pakistan and Iran, if that 
is your question.
    Senator Coverdell. They are one and the same?
    Dr. Milhollin. They are largely one and the same. The China 
Great Wall Industries, China Aerospace International Holdings 
Limited, and their parent, the China Aerospace Industry 
Corporation, these are companies that launch satellites on 
China Long March rockets.
    The United States has sanctioned both China Great Wall and 
China Aerospace in the past for supplying missile technology to 
Pakistan. My impression is that the supplies that are now going 
on are basically by the same complex of companies. Perhaps Dr. 
Oehler can comment on that.
    Your second question--I guess that answers your first two 
questions. The third question is whether the--I guess you are 
referring to press reports about campaign contributions coming 
into the United States from China, whether they came from these 
companies, and the reports I have read indicate that they did, 
that the money came from an officer of China Aerospace, which 
is the parent of China Great Wall, and which is a key company 
in launching satellites, U.S. satellites and also, as I said, 
engaged in missile proliferation.
    Senator Coverdell. May I continue, Mr. Chairman? I still 
have my green light.
    How would sanctions under the Arms Export Control Act and 
the Export Administration Act affect these companies if a 
Category One violation for the M-11 transfer were imposed on 
China?
    Dr. Milhollin. The sanction would, as I read the law, 
cutoff U.S. exports of satellites to those companies if it is a 
Category One violation. A Category One violation basically cuts 
off everything and so if the United States were to find that 
China Aerospace supplied complete missiles to Pakistan, then 
China Aerospace could not launch U.S. satellites.
    Senator Coverdell. How would sanctions under the Iran-Iraq 
Nonproliferation Act affect these companies if imposed for the 
C-802 transfer?
    Dr. Milhollin. I feel a little bit like I did when I was a 
law professor and being asked a question by a brilliant 
student. I think that in that case the person making the 
transfer to Pakistan would be sanctioned, including the parent 
of the person and the subsidiaries of the person doing the 
transfer.
    As I recall the C-802's were transferred by the--I have it 
here, the China Precision Machinery Import-Export Corporation, 
I believe. The parent of that company is China Aerospace, so if 
sanctions had been applied for the C-802's, then China 
Aerospace would have been denied the right to launch U.S. 
satellites.
    Senator Coverdell. I appreciate the response. If the 
Clinton administration had not removed satellites from the U.S. 
munitions list, how would the AECA and the EAA, which I 
previously referred to, and the Iran-Iraq Nonproliferation Act 
sanctions have affected U.S. commercial satellite companies 
doing business with the China missile launchers?
    Dr. Milhollin. Now I do feel like I am back in law school. 
That is a difficult question. First of all, you asked me with 
respect to the Arms Export Control Act--moving the satellites, 
as I said in my testimony, has the result of insulating them 
from sanctions of the Arms Export Control Act because the 
missile-related items would not hold them up, as interpreted by 
the Commerce Department.
    Senator Coverdell. As you explained in your earlier 
testimony.
    Dr. Milhollin. Yes. I think they would be free to go under 
the Arms Export Control Act because they had been moved. If 
they had not been moved, they would be blocked under the Arms 
Export Control Act.
    Then you asked me about the Export Administration Act. It 
would not catch satellites unless it was a Category One 
violation.
    Senator Coverdell. Back to the previous question.
    Dr. Milhollin. Yes. Then the Iran-Iraq Act you asked me 
about, if they had not been moved. If they had not been moved 
they would still be munitions under that act, and so if a 
foreign government made the transfer, as I recall now--if a 
foreign government made the transfer, the government would be 
sanctioned, I believe. I think that is right.
    The Chairman. Think about it in the next round.
    Senator Coverdell. I appreciate the response very much.
    The Chairman. Senator Feingold--I would like to have the 
answer to that, too.
    Senator Feingold. Thank you, Mr. Chairman. I want to thank 
both of the witnesses, and especially express our pride in 
Wisconsin that Dr. Milhollin is from Wisconsin, and one of the 
great experts on this subject in the world, and let me also 
express my strong agreement with his answer to Senator Biden's 
question. I thought it was a very important statement.
    Mr. Chairman, I am going to use my brief time to make a 
brief statement. Today's hearing is the Foreign Relations 
Committee's first look at the administration's China commercial 
satellite licensing decisions, an investigation that is being 
jointly conducted by several congressional committees.
    The issues currently under review by the various committees 
of the Senate, which cover broad areas of missile 
proliferation, trade, technology transfer, and the decision-
making process of the executive branch, are, indeed, quite 
serious, and do justify close congressional scrutiny, but this 
all comes in the context of a debate on the administration's 
overall China policy. That is troubling, because it tends to 
complicate each of these issues and causes them not to be 
considered as distinct items, which I think they deserve.
    One part of this mess that If find very disturbing is the 
allegation that campaign contributions may have influenced the 
President's judgment on issues of grave national security. As I 
have mentioned, and as this committee well knows, I have strong 
and longstanding disagreements with the current U.S. policy 
toward China. In particular, I have objected to the President's 
1993 decision to delink the issue of human rights from our 
trading policy. The administration argues that trade issues and 
human rights are and ought to be separate. They maintain that 
China's abysmal human rights record should have no impact on 
other aspects of this bilateral relationship. At the same time, 
the theory goes, only through constructive engagement in 
economic matters and dialog on other issues, including human 
rights, can the United States more effectively influence 
China's behavior.
    Well, Mr. Chairman, we have had several years now to 
observe the plain fact that this policy has been a failure in 
effecting real change in China. It is a policy that 
subordinates principle to practical considerations and, even by 
that less than lofty standard, the policy has been a flop.
    That said, I think it is important to note that for all 
waivers President Clinton and President Bush before him have 
granted for the relevant export licenses, and there have been a 
total of 13 granted, each was supported by a Presidential 
determination that the action was in the national interest.
    Now, national interest is a subjective phrase. It invites 
varied interpretations. Whatever sales they generate for 
American businesses, I personally do not think I would find 
such licenses to be in the national interest. They cost us too 
much in moral capital. But for an administration that so 
greatly values our trading relationship with China, perhaps 
this policy makes sense.
    According to a June 5, 1998 White House document, 
``licensing commercial satellite launches serves our policy of 
engagement with China.'' This statement is absolutely correct 
as far as it goes. My problem is not with the determination 
but, rather, with the underlying policy of engagement at this 
time.
    This, however, is not the primary subject of today's 
hearing, so let me move on to my second and more important 
point. It is no secret that the reason the commercial satellite 
licensing policies of the administration have attracted such a 
high level of congressional attention is the allegation that 
the administration's decisions to grant waivers to Loral was 
improperly influenced by campaign contributions.
    Although this committee will not delve deeply into this 
part of the inquiry, I must comment on it, Mr. Chairman, 
because it is so deadly serious. It is truly sad and shocking 
that we have reached a point where allegations that our foreign 
policy and, indeed, our national security are for sale to 
political contributors could be seen as plausible to many 
Americans.
    Why is it plausible? Not because of any evidence of a quid 
pro quo, but because the tools to do it are all provided by our 
current campaign finance law. It is very important that these 
allegations be thoroughly investigated and dealt with, and I 
hope that the investigation will show that these waiver 
decisions, as unwise as they may have been, were not influenced 
by the contributions made to the DNC by the chairman of Loral, 
Bernard Schwartz.
    But I must point out, Mr. Chairman, we have a campaign 
system that allowed and actually encouraged Mr. Schwartz to 
contribute over $1 million in soft money to the Democratic 
Party since the beginning of 1995. The contributions he made 
were perfectly legal. They would be perfectly legal if they 
were made today. In fact, they are being made today. Mr. 
Schwartz has given $55,000 in soft money contributions already 
this year.
    If we still had an adherence only to the hard money limits, 
this kind of activity at this level would be impossible, so 
until we enact campaign finance reform and get rid of soft 
money, we are asking for trouble.
    We are playing with fire here. We cannot continue to let 
corporations and their wealthy executives, or anyone else for 
that matter, make unlimited contributions to our political 
parties and expect that those contributions will have no impact 
on tobacco policy, or foreign policy, or anything else.
    We cannot do this hearing and turn a blind eye to this 
broken campaign finance system and then act surprised and 
shocked when big contributors seem to benefit from their 
generosity. Campaign contributors have a great interest in our 
Government's decisions in every area of policy, and not just 
foreign policy.
    When allegations are raised that our national security may 
have been compromised by fund raising concerns, it is time for 
us to sit up and take notice and act. Our citizens will simply 
not stand for much more of this.
    Whether or not the allegations raised regarding these 
particular contributions have any merit, the integrity of our 
foreign policy has been questioned and more to the point, Mr. 
Chairman, even if there is nothing to these charges, the 
integrity and credibility of our foreign policy has been 
endangered. I think that is a shame, Mr. Chairman. It is 
harmful to our reputation and our standing in the world. We all 
know this, and I think we had better do something about it 
soon.
    Thank you, Mr. Chairman.
    The Chairman. The Senator from Nebraska.
    Senator Hagel. Mr. Chairman, thank you. I will get back to 
the more mundane issues, like China.
    I want to thank our witnesses for your time this morning. 
Dr. Milhollin, I want to return to a point that you made that 
is referenced in your statement as well as a comment that you 
made concerning the missile technology control regime and, if I 
understood you correctly, I believe you said that we should not 
allow China to be part of the regime until they have over an 
extended period of time shown better behavior, I think, in your 
words.
    Dr. Milhollin. That is right, yes.
    Senator Hagel. If that is correct, then what should we do 
with China?
    Dr. Milhollin. I think our policy on China has to be to 
improve its behavior rather than try to pretend as if it was 
already behaving satisfactorily.
    I get the impression that our Government believes that you 
can change a country's behavior by letting it into a regime or 
selling it sensitive commodities, but I believe that you only 
should let a country into a regime or sell it a sensitive 
commodity after its behavior has changed already. That is, you 
should restrict sensitive exchanges to countries that are 
proved to be reliable.
    Senator Hagel. But is it not a fact that China does have 
nuclear technology today? Obviously, it has delivery capability 
for that technology, so are you saying we should try to roll 
back what they now have? I am not sure how we deal with this, 
and I did not really hear a good answer from you, one of you to 
Senator Biden's question, how do we go forward, but China is a 
nuclear power.
    As a matter of fact, what I found interesting is that it 
chaired the hearings of the National Security Council last week 
in Geneva on the Pakistan-India issue. Do you find that a 
little schizophrenic too, doctor? I do, too, but I want to 
further develop what we do here. We cannot just hold China, in 
my opinion, out there and isolate them and say, well, you 
behave yourselves, and then maybe we will talk to you, or act 
like they do not have nuclear capability. This is now.
    Dr. Milhollin. I would say we should aim for two objectives 
in China. First, our objective should be that its effort to 
modernize its military to increase the capability of its long-
range missiles, and to miniaturize its nuclear warheads, should 
not be assisted by U.S. equipment. I think that ought to be a 
clear policy. My impression is that is not our policy now. We 
are taking risks with our exports with respect to China.
    Second, I think our policy ought to be to discourage China 
from contributing to the spread of nuclear weapons and 
ballistic missiles around the world, and poison gas around the 
world, and our policy ought to be to increase the cost to the 
Chinese firms that are guilty of this behavior to the point 
where it does not make sense for them.
    Senator Hagel. How do you do that?
    Dr. Milhollin. Well, may will be accused of being a 
dinosaur, but I think you do it through sanctions, because 
after all, this is a question of money. The Chinese are making 
money from these sales. They are not making very much, but they 
are making a little.
    Senator Hagel. But if the Chinese already have nuclear 
capability and the delivery systems and other nations who are 
trading with them and selling to them, for the United States to 
unilaterally impose sanctions--I am not sure I follow the 
linkage here as to how that is going to affect not only their 
behavior, to your point, but stop anything.
    Dr. Milhollin. Well, if a Chinese company does the 
arithmetic and sees that it is going to lose many millions of 
dollars from a U.S. satellite launch contract if it sells a few 
million dollars, or even a few hundred thousand dollars worth 
of equipment to Pakistan, then it does not make sense for the 
company to make the sale to Pakistan.
    Senator Hagel. And then we essentially remove ourselves 
from, as Senator Biden said, a multi trillion-dollar market and 
again, I am not sure the analysis here is realistic, because we 
already have a current situation with China, and we cannot roll 
that back, and I know this is difficult. It is complicated. 
Nobody has the answer, but I am trying to get forward here to 
see what we do in a realistic practical, achievable way.
    Dr. Milhollin. I think it is realistic to expect China to 
decide that it is more valuable to have good trade relations 
with us and to receive the benefits of American high technology 
than it is to make a few dollars here and there proliferating 
poison gas and missile and nuclear technology.
    Senator Hagel. Poison gas is a little different. That is 
another element here.
    Dr. Milhollin. That is true, but I think we could hope for 
a rational decision by the Chinese that would be a drastic 
improvement in their behavior.
    Senator Biden. Mr. Chairman, may I ask for a clarification 
about a phrase? The sensitive technology that you are referring 
to, that is computers you are referring to, right? You are not 
talking about any of the launch, this thing about----
    Dr. Milhollin. No. I am talking about dual use equipment 
that China is getting that we would consider sensitive, and 
certainly super computers would be considered sensitive. That 
is why they are controlled for export.
    Senator Biden. But what else? Name some for the record.
    Dr. Milhollin. Dimensional measuring machines. Special 
equipment to handle molten fissile material. The only reason I 
know of that anybody wants to handle molten fissile material is 
to make nuclear weapons.
    That is, if you look at the list of things that China has 
been getting--faster oscilloscopes. I think it is very likely 
that China is doing----
    Senator Biden. Because the press is all going to look at 
this, and everybody listening, none of that is related in the 
Loral-Hughes piece of this equipment.
    Dr. Milhollin. No, but you asked me a question. I am trying 
to answer it.
    Senator Biden. No, I know. I just want to--because I 
guarantee you everybody would have thought that is who you are 
talking about.
    Dr. Milhollin. No. I was asked, you know, what should our 
general policy be. I think we should have a very strong policy 
of not contributing directly to China's militarization or to 
its weapons of mass destruction programs, and I think our 
policy has been a little too loose, and that we have 
contributed.
    Senator Hagel. I might just add, with the time I have left, 
that I think this is one of the clear cases, clear examples of 
how sanctions do not work. We have had sanctions on and off of 
China, as you presented in your testimony, and Dr. Oehler did, 
and in fact we are where we are today with sanctions on and off 
of China. In the unilateral world that we apply these, I think 
we have got to rethink what sanctions do, Mr. Chairman.
    Thank you.
    The Chairman. Thank you, sir. Senator Feinstein.
    Senator Feinstein. Thank you very much, Mr. Chairman.
    I want to follow up where Senator Hagel left off, but I 
want to say something first. I believe that China has been a 
proliferator. I believe that China did send 34 M-11's to 
Pakistan. I also believe that the second shipment did not go. I 
believe that the C-802's went. I also look at the commercial 
satellites somewhat differently, and this is what I wanted to 
ask you about.
    One of these commercial satellites, for example, was to 
carry CNN, and could not be launched from the United States.
    Senator Biden. I wish we had known that.
    Senator Feinstein. As I understand it, the materials are 
encrypted within the satellite. The satellite is kept under 24-
hour guard, and a Chinese rocket launches the satellite.
    The problem, I understand, came from a company that may 
have or may not have, I do not know, provided some classified 
material to the Chinese when the rocket exploded in one of 
these satellites.
    Your answer, doctor, is, ``Well, we should not send these 
satellites to China,'' and let us say I am President of the 
United States and you say that to me, and I say, ``I think that 
is highly principled, we should not, we will not,'' and we find 
a month later that Deutsche Aerospace has, in fact, provided an 
identical satellite to the Chinese, which I believe most 
probably would have been the case. What would you have then 
advised me to do, because the market then has been taken over 
by the Germans in these commercial satellites?
    Senator Biden. And do not say, dump Biden.
    Dr. Milhollin. I would say that that simply is a cost you 
have to be willing to absorb to have an effective 
nonproliferation policy. There are lots of things that other 
countries sell that we do not sell, and we do not sell them 
because it is really a moral question. It is not simply an 
economic issue.
    For example, the United States regulates the export of 
torture instruments. Most other countries, I am not sure any 
other country does that. We make better missiles than the North 
Koreans or the Russians or the Chinese, but we do not sell them 
to the countries that those countries sell missiles to.
    Senator Feinstein. So if I understand you, if there is 
sensitive data encrypted in anything we sell, the commercial 
satellite that carries Voice of America, CNN News to Asia, or a 
computer that has encryption capability on a high level, we 
should not then sell it. Is this essentially what you would 
advise me?
    Dr. Milhollin. What I am saying is--no, I am not advising 
you because of what is embedded in the satellite. I guess my 
advice would be based on the principle that, if you want to 
have a credible policy against the spread of the bomb and the 
spread of the means to deliver it, you have to pay costs from 
time to time, and one of those costs is giving up a sale that 
will show that you really do not care.
    If you are willing to put money in the pockets of somebody 
who is guilty of proliferation, then where is your policy, even 
if somebody else is willing to do it?
    Senator Feinstein. Now, if we can, let us continue our 
conversation. I thank you for that.
    My interest is also to have the Chinese change their 
behavior. I am aware that the Chinese have been proliferators. 
I am aware that they are a nuclear power. I am aware that they 
have been outside of these agreements. I am aware that China 
has a history of isolation from the West for well over 100 
years. I am also aware that China is now opening to the West, 
is receptive to the West.
    My policy would be to engage China in a way that it would 
accept the norms of internationally acceptable behavior when it 
comes to fissile material transfers, other technological 
transfers, poison gas, all of the rest of it. This is my goal.
    So these sanctions, which again are unilateral, not 
multilateral, go on and come off, and you are now advising me 
today, and I say, ``Is there any evidence that since May 11, 
1996 that China has violated its commitment to no longer 
provide materials to unsafeguarded Pakistani nuclear 
facilities, or to provide Pakistan with any missile technology 
in violation of the MCTR?'' and I ask you this question, how 
would you respond to me?
    Dr. Milhollin. The answer is, there is evidence.
    There have been attempts to supply nuclear ingredients, and 
I am told that China's missile and poison gas exports are still 
going on.
    Senator Feinstein. And I would say, could you be precise 
and tell me, since China made this commitment, exactly what has 
been going on?
    The Chairman. You are going to have to answer that question 
in writing, because we have two more Senators, and I would like 
for you to address it, too, in writing.
    Senator Frist.
    Let me say one thing first. We have a vote at 12.
    Senator Frist. Really, two things have emerged. One is the 
transfer of technology from the United States to China, the 
other is the proliferation from China to other countries. We 
focused a lot on how we can address Chinese transfers to other 
countries.
    I want at the end of our series of hearings to be able to 
answer two or three questions. A fundamental question that I 
want to be able to answer is, why did President Clinton 
transfer most of the authority over exporting militarily 
significant satellite technology from the State Department to 
the Commerce Department? It is going to require focusing on the 
licensing process, and the waiver authority, in determining 
whether or not today's policy has compromised our security vis-
a-vis China, and whether or not they exacerbate the 
proliferation of technology to third countries.
    It comes down to other questions, where are the holes, 
where are the leaks today, and effectively safeguarding, 
according to the discussions and the questions that have been 
on, but let me go to several questions to help me understand 
the process, and let me ask both of you--and I ask you to keep 
your answers fairly brief--other than the 1996 waiver issued to 
Loral, are either of you personally aware of any instance where 
a waiver was granted for the transfer of technology to China 
when the Department of Justice advised that there was an 
ongoing criminal investigation of the company seeking the 
waiver? Let me ask both of you to comment on that.
    Dr. Oehler. I am not aware of any other.
    I must say that I am not always aware of where the Justice 
Department has criminal investigations ongoing.
    Dr. Milhollin. Other than the Loral case, I know of none.
    Senator Frist. During the Bush administration, we talked 
about this to some extent, I understand that two-thirds of the 
commercial satellites were listed on the U.S. State 
Department's munitions list while about one-third were on the 
Commerce list. Under the Bush administration policy, no 
satellite could be on the Commerce list if it contained any of 
the nine identifiable militarily significant technologies. Any 
satellite containing militarily significant technology was kept 
on the State Department's munitions list.
    The Clinton administration changed that and moved all 
commercial satellites over to the Commerce list, and that 
brings me to my questions.
    First, how do you compare the two lists in terms of ease of 
export? Dr. Milhollin.
    Dr. Milhollin. Well, the Commerce Department, of course, 
has an obligation to promote trade, and to take economics into 
account when making license decisions, and the history of the 
Commerce Department has been to be considerably more lax in 
approving exports than the State Department has been.
    Senator Frist. That is sufficient for me. Dr. Oehler, ease 
of export, the Commerce Department list or State Department 
list.
    Dr. Oehler. Let me say something from the intelligence 
community's standpoint.
    Obviously, the intelligence community does not have a vote 
on which list this is on, but interestingly, the intelligence 
community gets a lot more review of items from the Commerce 
Department list than they do from the State munitions list.
    We have memorandums of understanding with Commerce where 
they supply quite a number, on the order of 1,000 licenses a 
month, that the Central Intelligence Agency looks at for end 
user checks, basically, and provides information back to 
Commerce.
    The State Department with the munitions list has never felt 
that it needed to go through a formal mechanism, or at least a 
regular mechanism for checking with the intelligence community. 
They would do that every once in a while, but not on a regular 
basis, so in one sense we were a little happy to see some of 
these things moved to the Commerce Department, where we would 
at least have a chance of review of them.
    Senator Frist. The intelligence community commented on 
that.
    Second, why would the Clinton administration move all 
export control authority to the Commerce Department?
    Dr. Oehler. My guess is--and I do not know the answer to 
it. My guess is that they are viewing these satellites as much 
more commercial commodities than military items, and certainly 
in the past satellites were primarily for military purposes, 
but with the imaging systems that are being built by Space 
Imaging and other companies now, things that were sensitive at 
one time may not be viewed as sensitive.
    Senator Frist. Are you saying the definition of militarily 
significant technology has changed?
    Dr. Oehler. I would imagine that would be the reason that 
would be given.
    Senator Frist. Dr. Milhollin, why would they move them from 
the State Department to the Commerce Department?
    Dr. Milhollin. I think it is always hard to assign motives, 
but certainly the effect of moving them is to insulate them 
from sanctions, so if that were an objective it would have been 
achieved by the transfer.
    Senator Frist. It is my understanding that Secretary 
Christopher wanted to keep the satellites on the munitions 
list. Can you imagine why the President would overrule his 
Secretary of State and give export control over satellites 
already found to contain militarily significant technology to 
the Commerce Department?
    Dr. Milhollin.
    Dr. Milhollin. Well, again I was not present at the 
meeting, but I would imagine that the arguments of the 
Secretary of Commerce were more persuasive than the arguments 
of the Secretary of State.
    Senator Frist. Dr. Oehler, comment on that.
    Dr. Oehler. I agree with that. I do not have any first-hand 
information.
    Senator Frist. The fourth question. As I understand it, 
Loral has been accused of sharing missile guidance technology 
with the Chinese. Is there a risk that, in turn, China could 
share this technology with its client States, Pakistan or Iran?
    Dr. Oehler. I, for one, do not know what was transferred, 
so it is very hard to say whether it is significant, and it is 
also harder to say what that would mean if it were 
retransferred.
    But I do want to say that the Chinese have significant 
technologies of their own, way ahead of what the Pakistanis 
have, and if they wanted to transfer, as they do occasionally, 
some of these technologies, they would not need U.S. technology 
to greatly improve Pakistani programs.
    Senator Frist. Dr. Milhollin, that last question. Loral has 
been accused of sharing missile guidance technology with the 
Chinese. Is there a risk that in turn China could share this 
technology with Pakistan and Iran?
    Dr. Milhollin. I think that Mr. Oehler has given an 
excellent answer, and I agree with it.
    Senator Frist. Can I ask one quick--I know I have used my 
15 seconds I lost before. Are there sufficient nonproliferation 
checks by allowing Commerce and not State to oversee the 
licensing process in your mind? Dr. Milhollin.
    Dr. Milhollin. When you say nonproliferation checks, if you 
mean sanctions, then I do not think there are sufficient 
checks.
    Senator Frist. I mean an effective set of safeguards.
    Dr. Milhollin. You mean licensing criteria and so forth?
    Senator Frist. Yes.
    Dr. Milhollin. I have not looked at that thoroughly enough 
to be able to answer the question.
    Senator Frist. Thank you.
    The Chairman. Senator Brownback.
    Senator Brownback. Thank you, Mr. Chairman, and I thank the 
witnesses.
    Just one quick question along that line. Do either of you 
know Secretary Christopher's opinion of the transfers that took 
place then under the Department of Commerce when they 
transferred these technologies, what he thought about these 
transfers?
    Dr. Oehler. I do not know.
    Dr. Milhollin. I do not know.
    Senator Brownback. Mr. Chairman, I would submit that at 
some time we ought to have then-Secretary Christopher up to 
testify what he thought about the transfer of this technology. 
I think that would be very valuable information to know.
    The Chairman. Good suggestion.
    Senator Brownback. I want to ask particularly Dr. Oehler 
along the line of questioning about the standard of proof that 
the Clinton administration was requiring before they would 
implement sanctions on these M-11 technology transfer and what 
their burden of proof was.
    Dr. Oehler, or Mr. Oehler, when the intelligence community 
gathered evidence which suggested the transfer of complete M-11 
missiles to Pakistan, what was the judgment of the intelligence 
community? What did they reach?
    Dr. Oehler. The intelligence community knew that M-11's 
were going to be transferred sometime. At least they had 
evidence to that.
    When the transfers took place, the evidence was quite 
strong at the time, and most agencies in the intelligence 
community agreed right away that actual transfer of missiles 
had taken place, but it was not until accumulating evidence 
came in over the next year or two that finally got the 
unanimous view of the intelligence community, including the 
State Department's Bureau of Intelligence and Research that, in 
fact, there was a high likelihood that the missiles themselves 
were transferred.
    Senator Brownback. Did the intelligence community brief the 
policy community immediately upon receiving this information?
    Dr. Oehler. The policy community was informed every step of 
the way, from the very beginning.
    Senator Brownback. What was the reaction from the National 
Security Council staff when they were briefed of this 
information?
    Dr. Oehler. All along, they were very concerned about this 
reporting.
    Senator Brownback. When the policy decision was reached 
that the evidence was not sufficient to reach a judgment that 
M-11 missiles were transferred, what was the reaction of the 
professional analysts in the intelligence community to that 
judgment?
    Dr. Oehler. Let me describe it in two ways. First, the 
senior intelligence officials knew why the administration took 
the position that they did, that the imposition of sanctions, 
Category One sanctions would have a very great impact on its 
relationship with China and any measure, almost any measure 
needed to be found to continue their negotiating flexibility 
rather than automatically impose sanctions, and one of the 
easier outs on this is to say that the intelligence information 
does not quite meet their high standards.
    I must say that the intelligence analysts in the community 
were very concerned about this. These are the people who 
struggle day-to-day to put together the intelligence judgments, 
the collection of profiles and everything, and they were very 
discouraged to see that fairly regularly their work was in 
their view summarily dismissed by the policy community with the 
statement that it is not good enough. It is not good enough.
    Senator Brownback. In your expert opinion, did a 
preponderance of evidence indicate that M-11 missiles had been 
transferred by China?
    Dr. Oehler. There is no question in my mind whatsoever 
about this.
    Senator Brownback. That there was clear, convincing, 
absolute evidence?
    Dr. Oehler. That the missiles were transferred. The 
evidence comes from many sources, very good sources.
    Senator Brownback. Did you believe at the time, and were 
others aware of your belief that the evidence available to the 
intelligence community proved the M-11 transfers had occurred, 
beyond even a reasonable doubt?
    Dr. Oehler. Well, proved beyond a reasonable doubt, I do 
not know that we ever use those words. I think that all of the 
intelligence agencies felt, as I mentioned, very quickly that 
in fact the transfers had taken place. As I mentioned, the 
State Department Bureau of Intelligence and Research took a 
little longer to come to the judgment that there was a high 
likelihood, or whatever the exact phrase was.
    Senator Brownback. I guess the question that it leads me to 
is, if the intelligence community is saying that this occurred, 
by every standard of your professional opinion this transfer 
occurred, and yet the policy community is saying no it did not, 
or send us more information, did the policy community put the 
standard of proof, or the burden of proof so high that 
sanctions could never be issued in this case?
    Dr. Oehler. In my view, watching this process, no 
administration likes automatic sanctions legislation, because 
it limits their flexibility in negotiating the settlement to 
try to get what they believe is a satisfactory solution out of 
this.
    Senator Helms talked about the statement that the President 
made regarding fudging the data, and the reason that the 
President gave was to allow them additional opportunities to 
work this. Certainly this administration is not any different 
in that.
    With that in mind, then, they are going to try to find 
whatever way they can to carry out the policy that they think 
is best, and one of the loopholes in this is that the President 
must certify that this transfer has taken place. This 
certification has been passed down to an Under Secretary of 
State, but then it is up to that person to decide whether the 
level of evidence is sufficient to impose these, in their view, 
drastic or draconian sanctions.
    Because of their interest in wanting to preserve their 
negotiating flexibility, in my view there was going to be 
little likelihood that the evidence would ever be high enough 
to do that.
    Now, when I say that, you could ask, well, what would it 
take? Obviously, if the Pakistanis were foolish enough to 
parade these missiles in Karachi, or fire some of these 
missiles, or test them, or do something like that, then that 
would force their hand, but short of that I think that they are 
going to want to continue to maintain their negotiating 
flexibility.
    Senator Brownback. So really, if I am hearing what you are 
saying correctly, you do not believe the intelligence community 
could ever provide the level of proof that the policy community 
would require before they would put these sanctions in place.
    Dr. Oehler. Well, ever is a strong word.
    Senator Brownback. Hardly ever?
    Dr. Oehler. I think that it is going to be a long while 
before--in the first place, the evidence that has been acquired 
is very, very strong.
    Senator Brownback. And the policy community would not put 
the sanctions----
    Dr. Oehler. The policy community has not put the sanctions 
in place, Category One sanctions, so it is a question of 
whether some little more information might go over some 
mythical bar, or whether an administration changes its level of 
the bar, but it is already up there very high.
    Senator Brownback. So if I am clear with what you are 
saying, in your professional opinion, absolutely this transfer 
took place. This was presented to the policy community. The 
policy community rejected the evidence so that they would have 
maximum flexibility in making what they deemed to be the right 
policy decision.
    Dr. Oehler. Well, the intelligence community view did not 
say absolutely. It said virtually certain that this transfer 
had taken place.
    Senator Brownback. And that that was presented to the 
policy community.
    Dr. Oehler. Sure.
    Senator Brownback. And the policy community said, we are 
not going to certify this because we want to keep what policy 
options we think would be best to do.
    Dr. Oehler. Because of the impact of the sanctions, they 
needed to set the level of evidence very high.
    Senator Brownback. That you could hardly ever reach that 
level of evidence.
    Dr. Oehler. That we were not able to reach.
    Senator Brownback. You might, but in a very difficult case.
    Dr. Oehler. Again, I do not believe so, unless the missiles 
themselves are taken out, and keep in mind, it has to be more 
than one, because as I mentioned in my prepared remarks, they 
received a dummy training missile in 1990, which the original 
sanctions were for, so you have to see at least two before one 
could really claim--before one might argue that a violation had 
occurred.
    Senator Brownback. Thank you very much, Mr. Chairman.
    The Chairman. Gentlemen, thank you very much.
    Senator Biden. Mr. Chairman, could we have part of a second 
round here to ask or qualify two points that have been raised?
    The Chairman. We have a roll call vote on the floor, but 
you proceed, sir.
    Senator Biden. All right. On two points, one is on the 
policy question, because you have expressed my frustration and 
the frustration of the Chairman--I do not speak for him, but 
others--because for three administrations there has been great 
difficulty in convincing folks that we should take the 
sanctions route relative to China which some of us thought 
should be taken, and that bar is inordinately high, but let me 
make sure I have this in context.
    Every--well, I will not say every. Let us just talk about 
this White House. The NASA security staff considered the 
Chinese launches of U.S. missiles to be one incentive the 
United States could offer in return for Chinese cooperation on 
other issues.
    The administration does not view this, and the last one did 
not, in the context of just this technology. They view it in 
terms of peace in Korea, China's involvement there, they view 
it in terms of the civil war in Cambodia, they view it in terms 
of now India and Pakistan, they view it in terms of a whole 
range of other larger issues, so it is not merely they are 
making a purely commercial decision on this, either, in terms 
of sanctions. At least, that is the argument the 
administrations have made to us.
    And the satellite launches were viewed by this outfit, at 
least, to be the only incentive available to the United States, 
but is it not fair to consider the potential benefit the United 
States may have gotten in other areas, even though some of us 
might say the national security concern outweighed the 
proliferation concern, outweighs the benefits.
    China has cooperated in Korea. China has cooperated in the 
civil war in Cambodia. China has cooperated in other areas we 
have tried to get them to cooperate. Is that not correct?
    Dr. Oehler. Certainly, even in the proliferation area, they 
have modified their previous practices in the last 7 or 8 
years.
    Senator Biden. Since my time is going to be up real 
quickly, the second point is about Warren Christopher, because 
it bothered me a great deal why Christopher would be overruled, 
and why would this go to Commerce, even though the previous 
administration wanted to go to Commerce, too, although they 
never did it.
    And in Warren Christopher's own words, he gives an 
explanation. He wrote a piece for the Los Angeles Times dated 
June 8, 1998 I would ask to be submitted for the record, Mr. 
Chairman. I will ready from an appropriate--from one section, 
and according to him, in 1995 the President said, let us move 
this to Commerce.
    Christopher says, no, no, I want to keep control in the 
State Department.
    [The information referred to follows:]

                Los Angeles Times, Monday, June 8, 1998

                         by warren christopher
    In March 1996, President Clinton announced a decision to transfer 
responsibility from the State Department to the Commerce Department for 
licensing the export of commercial satellites. My role in that decision 
has become the subject of extensive media discussion, much of it 
confusing and misleading. hence, I think it is important to look at the 
facts.
    In October 1995, I was presented with the question of whether to 
agree to eliminate a completely State Department licensing authority 
over commercial satellites by transferring it to the Commerce 
Department or, as had been recommended by an interagency committee, to 
retain State's licensing role over a category of commercial satellites 
employing more advanced technologies. I chose the latter option.
    Whether State or Commerce should have licensing jurisdiction over 
commercial satellites is an issue that goes back to the Reagan and Bush 
administrations. Competing views on the matter rest on the differences 
between the missions and export regulatory regimes of each department.
    Under the authority provided in the Arms Export Control Act, State 
has export licensing authority for items that are designed, developed 
or modified for military applications. Under the Export Administration 
Act, Commerce licenses most dual-use items--items with both commercial 
and military uses.
    The objectives of the two systems differ. The Arms Export Control 
Act gives State the authority to use regulatory export controls 
primarily to protect U.S. national security. Under the Export 
Administration Act, on the other hand, Commerce weighs economic and 
trade interests along with national security and foreign policy 
concerns.
    The Commerce Department objected by my conclusion that certain 
satellites should remain under State Department licensing jurisdiction 
and sought presidential review. The National Security Council then 
began--as it should have--a comprehensive interagency review aimed at 
developing a resolution. At the end of the process, I was satisfied 
that State would continue to play a significant role in commercial 
satellite licensing decisions and would have an opportunity to raise 
national security concerns to the highest level, notwithstanding that 
it would not be the licensing authority. My conclusion was based upon 
the recommendation of Lynn Davis, the highly regarded undersecretary of 
State for arms control and international security affairs, and senior 
Defense officials.
    As the situation now stands, the Commerce Department cannot act 
unilaterally on an application to export a commercial communications 
satellite. Instead, every such export application requires evaluation 
for national security concerns by the State and Defense departments and 
by the Arms Control and Disarmament Agency. If any of these reviewing 
authorities objects to a commercial satellite export proposed by 
Commerce, it can initiate a process that ultimately will bring 
conflicting views to the president.
    When President Clinton decided to move the licensing authority to 
the Commerce Department, he did so with agreement by the interested 
parties, including the State Department. No one was overruled. The 
president's decision represented a melding of national security and 
business interests, a result advocated by the Bush administration as 
well as by American manufacturers involved in the satellite business.

    Warren Christopher was Secretary of State from 1993-97.

    Senator Biden. In 1995, the President changes his original 
request to move it all to Commerce by strengthening the review 
process that Commerce has to undergo to make this decision, 
because is it not true that even under the new satellite export 
procedure--that is not 5 minutes.
    Even under the new satellite export procedure, with most 
licensing by Commerce, State still keeps some of satellite 
technology transfer totally to itself, but even with the new 
policy, State Department licenses all technology assistance 
agreements and defense approves the technology control plan?
    It cannot go--Commerce just cannot sign off, flat out. 
Defense has to sign off--now, right now while it is in 
Commerce, Defense has to sign off, and State has to sign off 
now. It does not make it a veto, but it guarantees it then 
goes, if they do not sign off--Commerce cannot do it unless it 
takes it to the President.
    Is that not correct?
    Dr. Milhollin. That is my understanding, but it is 
important to keep in mind the distinction between licensing and 
sanctions.
    Senator Biden. I got that. I am just focusing now on 
licensing, because one of the issues here is, why would 
licensing be transferred to Commerce? That was the question you 
were asked.
    Dr. Milhollin. I can comment on that, if you would like.
    Senator Biden. I think you already have. I just want to 
make sure if you can comment on, since my time is up, comment 
on whether or not licensing cannot go forward, even now, just 
by Commerce's signature. It has to have Defense and State sign 
off, and if they do not, or if they object, then it goes to the 
next level, it goes to the President. Is that correct?
    Dr. Milhollin. In practice--I may get in trouble for saying 
this, but in practice I think there is an understanding that at 
the higher levels the Pentagon is unlikely to object.
    The Chairman. In any case, this is almost irrelevant, 
Senator. This was not a hearing on the wisdom of unilateral 
sanctions legislation. These two gentlemen were here because 
they are experts in nonproliferation issues, and you are 
asking--we invited Warren Christopher to come.
    Senator Biden. Mr. Chairman, I am just trying to clarify 
the point that was made by the Senator from Tennessee. That is 
all.
    The Chairman. Well, excuse me. I love you, but you are 
confusing the point.
    Senator Biden. I probably am. I have just lost my vice 
presidency and my friendship with the Chairman all in one day.
    The Chairman. No, you have not. We cannot assess this 
matter. We have got in a deep hole right at the last minute, 
and we have got to keep our eyes focused on what we intended 
this hearing to be about, and it has been largely--we had two 
or three exercises in futility about reform and that sort of 
thing, and that was the Senator's prerogative, and I do not 
regret his doing it.
    But you came here to help this committee assess the extent 
to which the Clinton administration may have been shielding 
China from U.S. sanctions for fear of the impact that those 
sanctions would have on the satellite trade, is that not 
correct? OK.
    Senator Biden. Mr. Chairman, I withdraw the question.
    The Chairman. All right. Now, we are going to keep the 
record open. Senators who were at other committee meetings will 
want to file some written questions, and perhaps other 
Senators.
    I appreciate your coming. Your testimony has been 
excellent, and there being no further business to come before 
the committee, we stand in recess.
    [Whereupon, at 12:11 p.m., the committee adjourned, subject 
to the call of the Chair.]

                                  

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