U.S. eyes new controls on China exports

U.S. eyes new controls on China exports

By Bill Gertz
THE WASHINGTON TIMES
July 14, 2006

The Bush administration is imposing new controls on high-technology exports to China, aimed at preventing illegal diversion of goods that are boosting Beijing's large-scale military buildup, a senior commerce official says.
David H. McCormick, commerce undersecretary for industry and security, said in an interview that the proposed restrictions, announced last week, are a "substantial" revision of export controls that would limit 47 areas of high-technology exports, ranging from aircraft to machine tools, to composite materials used in radar-evading stealth aircraft.
"On one hand we want to restrict the use of U.S. technologies and advanced technologies in general in China's military modernization," Mr. McCormick said.
The administration also wants to engage China with "legitimate exports for civilian use," he said.
U.S. intelligence officials say China's industry does not distinguish between civilian and military products. The same factories that produce refrigerators also produce missiles, and technology is shared.
The new rules, if implemented after several months of review, will require U.S. exporters to prevent goods sold to Chinese firms from being used by the Chinese military, and to press Chinese companies to reveal how U.S. high-technology goods are being used.
"What we're saying is we want to try to place responsibility on exporters [to prevent diversion] and responsibility on importers in China to be transparent in the fact that these technologies are going to be used for civilian purposes and not military use," Mr. McCormick said.
All military-related exports for China are prohibited, he said. Congress banned military sales after Chinese troops violently suppressed pro-democracy protests in 1989.
The pending export controls were developed by the Commerce, State and Defense departments and will require U.S. companies to perform checks in Chinese factories to see how high-technology goods are being used. If exported goods are not in place, "that will be a red flag in China that that importer is not playing by the rules," Mr. McCormick said.
Mr. McCormick declined to discuss past U.S. technology diversions by China but said the problem is a worry of the Bush administration. Many Chinese state-run companies are operated by current or former Chinese military officials and several Chinese companies are involved in illegal activities, he said.
According to the Commerce Department, a total of $41 billion in U.S. high-tech goods were exported to China in 2004, including $2.4 billion that required export licenses. Some $12.5 billion worth of exports were denied last year on national security grounds.
The new restrictions will limit exports to China of certain chemicals, microorganisms, and toxins; precision machine tools; electronics design goods; high-speed computers; advanced telecommunications; encryption systems; sensors and lasers; navigation and avionics gear; submarine goods; and aircraft and rocket engines.
Three past diversions of U.S. commercial goods sold to China include the illegal use of at least one Boeing 737 commercial jet that was photographed after being converted into a military airborne warning and control aircraft at a military base.
A second major technology compromise occurred in the 1990s when two U.S. companies, Loral and Hughes Electronics, illegally passed missile technology to China during space cooperation. Both were fined a total of $52 million.
In 1995, three Chinese companies were caught illegally using McDonnell Douglas machine tools to make military aircraft. The machine tools had been approved for export only for use in producing commercial aircraft parts.

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