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JUNE 25, 1998





[*] SENSENBRENNER: The committee will be in order. Without objection the chair has given authority to recess during votes during today's hearing.

Good morning. For the past few weeks, various House and Senate committees have held hearings to review reports that missile technology was transferred to China and that this transfer harmed American national security. Over the course of those hearings, we've heard spirited debates about export control, satellite waivers, the administration's China policy and campaign contributions.

Last Thursday, the House approved the creation of a special committee to investigate these issues. This committee held two days of hearings in 1988 on the Reagan administration's decision to allow the Chinese Long March vehicle into the commercial space launch market.

This morning, we're continuing the Science Committee's oversight function as a part of our responsibility to oversee legislation, regulation and policies that affect the U.S. launch industry. We intend to focus on the dual-use nature of space technology and the implications of improved Chinese rocket capabilities on the American launch industry. That is the purpose of this hearing.

We are not here to review the merits of the Clinton administration's export control policies or engage in a debate about differences between those policies and those of the president's predecessors. Other committees are doing that.

We are here to try to shed a little more light on the space technologies involved and what kind of space cooperation benefit China's rocket capabilities.

We also need to understand the implication of those technologies. Much attention has been paid to how they can be used to improve the accuracy of ballistic missiles pointed at the United States. But the same technologies can be used to improve the capabilities of foreign space launch vehicles. That is of concern to this committee, which has jurisdiction over the policies and laws affecting the health of the American space launch industry.

We've invited one technical witness with a background in rocket design to help us understand the technologies involved and how the technology can be transferred without a piece of hardware changing hands.

It does not take a rocket scientist to realize that the United States needs a healthy domestic launch industry. Our national security depends upon being able to launch satellites into space. Our strategic missile forces benefit from an industry that has a diversified customer base and broad experience in rocket technologies.

Our economic health is now intertwined with a host of space technologies, such as communication satellites, weather satellites, remote sensing satellites and space-based navigation systems. They all depend upon reliable access to space. It is not in our national interest to adopt policies that make us more dependent on foreign entities for that access. Our economy also depends upon the high- paying jobs in aerospace that designing, building and launching rockets creates. Those jobs are no less important than jobs in the satellite industry.

This point gets lost in debates about export controls and satellite waivers. Yet, it is just as important, if not more so. There are national security and economic competitive benefits that flow to the United States from a healthy launch industry that can exploit the synergy between commercial and national security uses of rockets.

A policy that causes America to lose the commercial market share will reduce those benefits to the United States and give them to some other country. We've invited two witnesses from the U.S. launch industry who can help explain the close relationship between the commercial and military rocket technologies and how the United States benefits from a healthy launch industry.

We also need to consider the U.S.-Chinese relationship in space in general. The press reported that the Clinton administration has been negotiating several space agreements that were to be concluded at the summit in Beijing.

One such agreement involves cooperation in earth science and applications. While there can be scientific benefits from such cooperation, there are national security implications. For example, knowledge of the planet's gravity map and the behavior of upper atmospheric winds helps improve the guidance of space launch vehicles and ballistic missiles.

Cooperation in earth science may also lead to technology transfer that would improve the capability of Chinese spy satellites. The administration reportedly proposed asking China to join the Missile Technology Control Regime under which it pledges not to proliferate missile technology. However, joining the MTCR would also entitle China to receive space launch technology from the United States.

Since missile and space launch technology are nearly identical, this could be a double-edged sword. We've invited one witness who will help us understand how civil space technology can be used for military applications and the degree to which cooperation and ostensibly civil space activities may complicate the proliferation problem.

This morning, we're here to learn something and not to pass judgment. And we're doing our part to fill in some parts of the picture.

And at this time, I will yield to the gentleman from Texas, Mr. Hall for the Democratic opening statement.

HALL: Mr. Chairman, I thank you. You have very adequately set the stage, and we have very important men who will give their testimony and their time is important. And recognizing that, and recognizing that you very fully covered the subject and the importance of space technology, national security, foreign policy and all, everybody knows how important it is.

I think George Brown is with another committee this morning. Sometimes we have three, four, five committees. But Mr. Chairman, his opening statement is available. And I hope it will be part of the record.

SENSENBRENNER: Without objection, Mr. Brown's opening statement will be put in the record at this point. And without objection, all members' opening statements will be put into the record at this point.

Today, the five witnesses we have before our committee are Mr. Gary Milhollin, director of the Wisconsin Project on Nuclear Arms Control. Mr. Oren Phillips, vice president of business development for Thiokol Propulsion. Mr. John Pike, director of space policy for the Federation of American Scientists. Mr. Leon McKinney, president of McKinney Associates. And Mr. Paul Ross, group vice president of space and strategic systems of Alliant Techsystems.

Would each of you please stand and raise your right hand to take the oath. Do each of you solemnly swear that the testimony you are about to give before this committee to be the truth, the whole truth and nothing but the truth, so help you God?

(ALL): I do.

SENSENBRENNER: Let the record show that each of the five witnesses answered in the affirmatively.

And Mr. Milhollin, why don't you go first.

We'd like to ask each of the witnesses to summarize their statement in five minutes or so. Without objection, each of the witnesses' opening statements will be printed in full in the record together with their verbal testimony.

MILHOLLIN: Thank you, Mr. Chairman.

My name is Gary Milhollin. I'm a professor at the University of Wisconsin Law School. And I direct a project in Washington called the Wisconsin Project on Nuclear Arms Control.

I'd like to begin with a bit of history. I think now that India has tested nuclear weapons and the world now believes that India's next step will be to put these weapons on missiles, we should look at the history of India's largest missile, the Agni missile.

And to do that, we have to look at the history of India's launch program. NASA started India's space launcher program in 1963, by launching an American rocket from Indian soil. The United States helped design India's first launch range and trained India's first rocket scientists. Among them was Mr. A.P.J. Abdul Kalam. He spent four months in the United States learning about rocketry. He went to NASA's Langley Research Center in Virginia. He went to Wallops Island, which is not far from Washington. And he learned about the Scout rocket.

The Scout is a four-stage, solid-fueled, space launcher. He also saw blueprints of the Scout while he was in the United States. When he got back to India, the United States got a request from the head of the Indian Atomic Energy Commission for information about the Scout, which the United States provided.

Mr. Kalam proceeded to design for India an exact copy of the Scout launcher, which became India's first space launcher, known as the SLV-3. The first stage of that launcher then became the first stage of the Agni missile. Mr. Kalam was also hailed after the Indian test as the father of the Indian atomic bomb.

So, if we look at the Agni missile, the first stage was -- had its origin in the United States. The second stage is liquid-fueled.

For that, India had to turn to France to learn about liquid fuel technology. Also, India managed to import from Russia a surface-to- air missile that served as the basis for the second stage of the Agni.

All of this assistance was supposed to be for peaceful space cooperation -- the French and the Russian assistance. But the result was, the first -- the two stages of India's biggest nuclear missile. The Agni also needed a guidance system, and for that India turned to Germany. Germany provided a tutorial in rocket guidance for India during the 1970s and 1980s.

If you look at the reports India's space researchers make about that period, they invent a new term. It's called indigenize. The Indians say one component after another, that they have managed to indigenize it. We used to import gyroscopes, we've indigenized gyroscopes, now we make our own.

I've given -- in my testimony, I've attached a graphic and a table that show the relationship between India's space launcher and its biggest ballistic missile. There is also a table in my testimony that lists help India received from various countries around the world. Almost all of that help was given under the guise of peaceful space cooperation. But in fact, each piece of assistance aided India in making it's Agni missile.

So, the Agni is an international product. It was produced with aid from the West for the first stage, the second stage and the guidance system. It is really a very clear lesson in the risks of providing peaceful space cooperation to a country that does not belong to the nonproliferation treaty, and that obviously has designs on strategic dominance in its region.

The story in Pakistan is similar. NASA launched Pakistan's first rocket also. And that project also was headed by a person from the Pakistani Atomic Energy Commission. It's remarkable that the atomic energy commissions of both countries were involved in the rocket program from the beginning.

So, the result has been in both cases that programs launched by the United States wound up being long-range missile programs that include the risks of nuclear warheads.

China. As I have said in my testimony, one of the main effects of our current policy concerning China is that we are providing assistance, by way of launch contracts, to the very companies that are proliferating ballistic missile technology to Iran and Pakistan. They are the same companies. These companies are named in my testimony.

So, the effect of letting these companies launch our satellites is to make them richer, increase their capabilities to export things that undermine our national security.

If China joins the MTCR, then I think it will be virtually impossible to stop this activity, because China will be effectively insulated from missile sanctions under our laws.

I think the overall lesson we see, if we consider the history of India's space launch program, and we consider how much help we've given to countries around the world, the lesson I think we need to learn is a simple one. And that is that we should confine our space cooperation to countries that already share our values and our world objectives.

We should not cooperate with countries that are themselves proliferating ballistic missile technology. And we should not cooperate with countries that do not belong to the nonproliferation treaty.

If we look back on our space cooperation with India and Pakistan, we see it was a mistake. What we thought was going to be peaceful space cooperation has produced rockets that are likely to carry nuclear warheads. Those rockets were produced from programs that the United States has nurtured.

That concludes my statement.

SENSENBRENNER: Thank you very much, Mr. Milhollin.

I would like to have Mr. Phillips and Mr. Ross kind of appear in tandem.

Which of you would like to testify first?


An executive decision, please.

PHILLIPS: Executive decision, I'll go forward.

SENSENBRENNER: Mr. Phillips, you're recognized. If you can summarize in about five minutes or so. And then, Mr. Ross will have a chance.

PHILLIPS: I can do that, sir. Mr. Chairman, members of the committee, good morning. Thank you very much.

SENSENBRENNER: Could you put the microphone closer to you? It will help the court reporter get your every word.

PHILLIPS: Thank you, sir. I tend to have a strong voice, so I tend to push it away.

Mr. Chairman, members of the committee, good morning and thank you for the opportunity to be here with you today. I'm vice president of business development for Thiokol Propulsion. Let me talk just a second...

SENSENBRENNER: Please, pull your mike a little closer.

PHILLIPS: There it is -- it's on and the light isn't, OK.

Sir, if I may start again.

SENSENBRENNER: We'll reset the clock.

PHILLIPS: Thank you.

Mr. Chairman, members of the committee, good morning. Thank you for the chance to appear before you today. I'm Oren Phillips, vice president of business development for Thiokol Propulsion.

Thiokol is in the business of designing, developing and producing solid propulsion rocket systems for the Department of Defense, NASA and numerous commercial applications. In the way of background, our products range from the booster for the space shuttle all the way down to very small propulsion use for divert and kill weapons for theater missile and ballistic missile defense.

Thiokol has produced stages on every single strategic missile system in the United States arsenal. We are currently involved in the Trident program. As well, we will soon be manufacturing again the Minuteman III for the U.S.

In addition to our military applications, we provide boosters and upper stage motors for the placement of satellites for the commercial industry throughout the world. To remain a leader, we continue to invest heavily in the development of new materials, new propellants, and hardware.

As I mentioned, we not only sell products and services to the U. S. government and U.S. commercial entities, we are also actively seeking foreign customers for our products in compliance with U.S. licensing procedures. An example of that is we are currently providing propulsion units and support to the Japanese H-2-A (ph) program as they attempt to commercialize that unit in support of U.S. industry.

We are also working in other countries, including Spain and France, and are attempting to bring some of those national programs here to the United States to launch from U.S. space ports.

PHILLIPS: In each of our activities off shore, we are particularly mindful of the potential transfer of sensitive technology. And we attempt to abide by all of the rules and regulations of the Department of State, Department of Defense, Commerce and other agencies involved.

Mr. Chairman, as you are well aware, with the opening of the U.S. commercial satellite market to foreign launch vehicles, and I think the reason we're here today, the U.S. launch industry is facing unprecedented price competition from non-market launch companies. Those companies reside in Russia, China and Ukraine.

I've spent a lot of time off shore. One of the things we are doing is demilitarizing a number of assets in the former Soviet Union. So, I think I'm quite aware of their capabilities.

I'm also aware, basically, of their circumstance. Let me be realistically blunt in my assessment. With the non-market economies' labor costs at one-tenth of those of the United States, and substantial infrastructure in place, I cannot find a way, in my mind, to clearly find a path that U.S. industry can directly compete with them. No matter how good our technology is, how efficient our production processes, or how low cost perhaps some of our new paper vehicles could be. I believe the math is simple.

Further, with increased business, the non-market economy vehicles will continue to mature and even become more reliable and their support systems more robust. And their average costs will continue to decrease. They will and are having enormous impact on the commercial satellite launch vehicle market. Not only affecting the United States, but also investments made by Europe and Japan.

The United States service satellite, or satellite service business, has a great desire to find cheaper launches and penetrate new markets. And I think that's the area of pressure at the moment. Both less expensive launches are available in the non-market economies, and certainly new markets for those satellites services are opening as well.

For the satellite service companies, the potential business awards are too great for entering these foreign countries to be ignored by the U.S. satellite manufacturers and service providers.

What is ignored, however, is the potential and I believe real impact of this mad rush for market share. That impact is on the U.S. defense capability and specifically, the industrial base. The global space and strategic defense business and the commercial space business

are inseparably linked. The same technologies, the same facilities, people and products support both markets.

Today, three-quarters of Thiokol's propulsion business is in the commercial and civil space market. Only one-quarter of our business is defense related. Thiokol is the largest solid propulsion company in the United States. Ten years ago, these ratios were reversed. Many U.S. companies are in the similar circumstance.

If the U.S. launch industry continues to lose significant market share to foreign competitors, the U.S. defense infrastructure will be greatly affected. And to be specific, our commercial space business subsidizes significantly our defense business, and those costs will need to be borne, not only by the Department of Defense, by the taxpayers of the United States.

A healthy, robust, U.S. commercial launch industry is critical, not only to our civil needs and our economic needs, but it is critical to maintaining the sufficient infrastructure and intellectual capabilities to support our strategic defense systems and to develop and deploy missile defense. It's important to our future.

At the same time as our defense capability deteriorates, launches of U.S. satellites on our vehicles of our former adversaries greatly subsidizes their military. Since their launch vehicle business is government controlled, every dollar profit -- perhaps they use a different currency -- is one less dollar to spend on their defense program. Therefore, they are able to invest more money in technologies and infrastructure.

The current policies of the U.S. government and the global pursuits of the U.S. satellite industry help to preserve and expand the Russian and Chinese strategic missile design, manufacturing capability and launch infrastructure at the expense of our own similar declining capability.

SENSENBRENNER: Mr. Phillips, do you think you could wrap it up so we could move on?

PHILLIPS: I certainly can.

As an important issue, there are a lot of facets to the decisions that are being made by the U.S. government. I would suggest that the U.S. government consider a balanced approach, so that we can marry both the economic value to be gained by the sales of these services, while recognizing that the defense infrastructure sorely needs a strong U.S. space launch capability.

Thank you, sir.

SENSENBRENNER: Thank you very much.

Mr. Ross from Alliant Techsystems.

ROSS: Good morning.

Mr. Chairman, I've submitted a copy of the material that addresses in detail the subject of today's hearings.

SENSENBRENNER: Under the previous unanimous consent, that will be printed in the record.


My name is Paul Ross. I currently am the group vice president for space systems, strategic systems and composite structures for Alliant Techsystems. We're about a $1.1 billion company that's headquartered in Hopkins, Minnesota. And I run the -- again, the operations for all of the space and missile business.

What I plan to do today is summarize some of the key points that I put into my write-up that I submitted. But I will spend most of my time talking about the chart that is on your left. Because I think it best and accurately displays what has happened in this business in the last 10 to 12 years and where I think we're going in this business.

Again, I want to thank you for the opportunity. I think you're addressing some things that are also very crucial in our viewpoint as to what we're doing in this country. The technology involved is special because it plays a very key role in our strategic deterrence. And that's primarily what I want to address as I go through my comments.

What I'd like to point out and give a foundation on solid propulsion. Solid propulsion is critical to both our land-based and sea-based missiles because it allows us to have what we call launch on demand. You don't have to wait hours or days to get ready. In an instant, you can push a button and launch these vehicles. And solid propulsion provides us that capability.

I'd like to draw your attention to the chart that is on your left. It is on the easel in front of you. We've used three color codes for this chart. The first one is a blue. If you'll take a look at the date, in 1986, we had six programs that we were involved in, either in development or in production. Every one of those programs were in the strategic field, government strategic business.

If you look across that chart, you'll notice that that started to wane. And the strategic business, that is, in the solid propulsion business, much like what Oren Phillips described, it has changed. And today, in 1998, we have one program in our facility that supports the strategic deterrent leg for this country. It's the D-5 program. It is the only missile that is in production today. And between ourselves and Thiokol in a joint venture, we built all three stages of that for the government.

That program will end its production phase in the early part of the next decade. So in the 2003, 2004 time period, that production program comes to an end.

The next program down, you see on that chart, in 1998 is the Titan program. That program will also come to an end in about 2001. So the only programs that are left in the solid propulsion industry are shown in green. And all of those programs support the commercial space launch business. And without that business, there is no production support for our strategic leg in this country.

Now, I mentioned that those other programs will stop. We want the commercial business to continue. That's what it's all about. We want to be able to have the ability to respond to the demands of this country if we needed to start production again or develop a new missile. And without that commercial business leg, that ability evaporates. So, that's why we're here.

I would like to just summarize my comments by stating the following. I believe that the U.S. space launch and strategic industrial base are one and the same. You cannot separate them. In fact, if you want to separate them and not rely upon the commercial leg in the next decade, you will not have a strategic capability. A loss of satellite launch business to foreign competition diminishes companies -- and by the way, all the infrastructure that exists in support of that -- and those businesses and infrastructures support the U.S. strategic deterrent. And we want to do that -- the proposal by some folks is to do that while at the same time subsidize the development of a foreign capability. And that's what absolutely astonishes us is that why would we want to go do that?

We -- to do that, we would experience a loss of our strategic capability. In other words, our strategic capability is solid propulsioned. It's based upon that. And at the same time, we'd be helping their business and allowing it to grow. In fact, forcing it to grow.

So that is the essence of our concern. I think the chart you have best describes that. Thank you.

SENSENBRENNER: Thank you, Mr. Ross.

SENSENBRENNER:Mr. Pike, why don't you be next? And your statement in full will be placed in the record. And if you could summarize it in five minutes or so, we can get to questions. Mr. Pike.

PIKE: Thank you very much. I appreciate it. I welcome the opportunity to be here this morning to address this important and timely set of questions.

Over the past decade, American policy with respect to China has been informed by the need to balance both traditional national security interests as well as the economic security interest represented by the American launch vehicle and satellite industries.

Up until recently, our strategy for addressing these equities is enjoyed by partisan congressional support. Policy is the art of choosing, and any industrial policy that picks winners must also pick losers, or at least decide who comes in first place and who is the runner up.

American companies dominate the commercial communications satellite industry globally. And in no small measure, this dominance goes hand in hand with American dominance in the rapidly growing international telecommunications sector.

The global explosion of the information economy has been good for American companies, good for American workers, and good for the American way of life. With strong congressional support, the Clinton administration has balanced these equities through giving preference to initiatives intended to sustain our global dominance, the satellite and telecommunications, while restoring the vigor of the American launch vehicle industry, primarily through the innovative Evolved Expendable Launch Vehicle Program.

The House has also recently taken steps under the Commercial Space Act that would shift more licensing responsibility for commercial remote-sensing satellite systems to the Commerce Department and away from traditional national security managers at State and Defense.

On Tuesday, we saw the beginnings, admittedly buggy, but nonetheless extremely impressive, of this information revolution with the debut of the Microsoft Terra server Web site, and the impending launches of the fist one-meter commercial imagery systems are eagerly awaited all across the country.

Now concerns have been raised as to whether the interactions with the American commercial satellite operators have led to the transfer of technical information that would be useful to the Chinese in improving the reliability or capability of their missiles.

Now, given the ongoing investigations of these matters, it's difficult to form a definitive view on the matter. But there is no indication in the public record of a national identifiable harm to American security interests. Irresponsible public claims to the contrary, China today has no capabilities to attack the United States that it did not have a year ago, or a decade ago.

Concerns have also been raised about the potential for American technical information to be used by the Chinese to improve the accuracy and the reliability of their ICBM force. But there is little reason to believe that it has happened and less reason to believe that it would be of concern if it had.

So, on balance, I believe the course taken over this decade with respect to Chinese launch vehicles has diverse benefits and manageable risks. It's given us leverage in discouraging the transfer of special weapons technology to other countries, notably Pakistan.

While these efforts clearly have not been as successful as we would have wished, our nonproliferation sticks would have been even less effective in the absence of the carrots of space cooperation.

We should not allow the present controversy to obscure the opportunities presented by closer cooperation between the Chinese and American space programs. China has stood up. And it is now up to the United States to suggest future directions for China's restored role in the world. We're at a very critical juncture in this process, and the steps we take in the next few years could be critical in determining whether China regards space ships or missiles as its chief talisman of its place in the world order.

If we succeed, China could become a valued partner in the international space station and a critical player in the effort to extend human presence to the moon, to Mars and beyond.

Thank you.

SENSENBRENNER: Thank you, Mr. Pike.

And finally, Mr. McKinney.

MCKINNEY: Good morning, Mr. Chairman and members of the committee. I welcome the opportunity today to share with the committee some of my knowledge concerning launch vehicle and missile technology. I hope my remarks and my accompanying written testimony provide illumination and insight to the members. I'm looking forward to answering your questions to the best of my ability.

I would like to provide the committee with a quick overview of my personal background. I received BS and Master's degrees in aerospace engineering from Purdue University in 1981 and 1982, respectively.

From June 1982 to June 1993, McDonnell Douglas employed me at the Space and Defense Systems Group in Huntington Beach, California. During that time, I worked primarily on advanced systems concepts, concentrating on new launch vehicles. I also worked on several military vehicle systems including Copper Canyon, Transatmospheric Vehicle and the National Aerospace plane.

Finally, I worked on systems analysis studies for SDI and several other projects, including studies examining the relative capabilities of current and projected U.S. and Soviet strategic offensive and defensive systems.

In 1993, I formed my own company, McKinney Associates, as a niche provider of services in aerospace and defense systems performance analyses.

Included in my material is a disclosure of the various government-sponsored studies I've participated in since I formed my company in 1993.

I think it's important for this committee to understand two primary points. First, there is essentially zero difference between what we call a launch vehicle and what we call a missile. All launch vehicles today, with only a couple of exceptions, such as the space shuttle, are actually derivatives of older IRBMs -- intermediate range ballistic missiles -- and/or intercontinental ballistic missiles.

The Atlas, Delta and Trident launch vehicles of today are just larger versions of the Atlas, Thor Delta and Trident strategic missiles which the U.S. has relied on.

Every launch vehicle carrying satellites to orbit moves through the atmosphere and turns towards the horizontal near the end of its two-, three- or four-stage flight to dispense its payloads.

A missile does precisely the same, except instead of dispensing satellites, a missile system dispenses warhead re-entry vehicles which will impact the earth.

A little joke among us rocket scientists is that while both missiles and launch vehicles put payloads into orbit, a missile payload's orbit intersects the earth. Nearly any technology that improves missile capabilities can be carried over, perhaps with some modifications, to improve launch vehicle capabilities. And as we're discussing today, vice versa.

The second point is that launch vehicle and missile trajectories are very, very sensitive to changes in characteristic attributes such as stage burnout time, altitude, velocity and orientation.

For example, a one percent error in burnout velocity result in missing a desired range of 5,000 miles by around 250 miles. A one degree burnout error, four miles of range error. A one mile burnout altitude error, five miles of range error. These values are only approximate and are very dependent on the launch vehicle or missile involved. But it should be clear that very small errors have very big consequences.

When we recall that U.S. nuclear missiles were designed to miss their designated targets by very small distances, on the order of 100 feet or so, we can appreciate the high degree of accuracy required for successful missile trajectories.

Now I'd like to address some specific issues of technology transfer as requested by this committee. I believe I made clear my views on the first issue -- the dual-use nature of the launch vehicle guidance technology. If you improve launch vehicle guidance technology, you simultaneously improve missile guidance technology. You really can't do one without doing the other.

A second issue is the effect of missile technology enhancements on mission performance. As I remarked above, very small improvements in boost trajectory accuracy result in big gains in targeting accuracy. Thus, transfer to the Chinese of technology even one to two generations behind current use, state-of-the-art, can enable them to rapidly and vastly improve the accuracy of their missiles.

For example, ring laser gyros -- which published reports indicate have found their way to the Chinese -- improve the accuracy of their missiles' navigation and guidance systems, which enables them to implement the missile trajectory control systems more effectively to ensure better accuracy.

Another example is telemetry encryption and decryption technology, which allows the transmittal of more and better information to Chinese rocket and missile engineers during the launches to help track exactly how the vehicle is performing and compare that to their predictions of the vehicle performance.

The third issue I've been asked to discuss is the risk of technology transfer through technical discourse. Based on published media reports, I understand that the claims that Loral violated U.S. laws and policies governing dissemination of militarily critical technical data appear to center around a report transmitted to the Chinese by a senior Loral manager in which certain suggestions were made and certain questions were asked.

MCKINNEY: I believe it is very easy for highly trained engineers to learn where to direct their efforts in analyses and tests to correct vehicle performance shortcomings and/or failures with that sort of help.

One of the most difficult problems for a launch vehicle or missile engineer is failure resolution analysis. What we did, for example, when the shuttle blew up. In the case of the Chinese Long March launch vehicles failures, which left only debris, it would have been of immense value to Chinese engineers to have American engineers with knowledge about the similar launch vehicle failures to make suggestions or ask particular questions about this or that vehicle subsystem.

It's conceivable and perfectly understandable to me that American engineers could inadvertently, out of a sense of collegial friendliness towards Chinese engineers, make helpful suggestions and ask helpful questions in their conversations.

However, it is very difficult for me to conceive how a formal written report, presumably the product of detailed analyses, could be submitted to the Chinese without close review by individuals designated by their organization to ensure correct application of policies governing technology transfer.

The national security laws and policies controlling the technical data generated and used by aerospace and defense engineers and scientists are part of our culture. These laws and policies are as much a part of our daily work environment as the water coolers and the cafeterias.

A common shared experience among aerospace engineers is your first security violation. Typically, for forgetting to close and lock your file cabinet where classified information is stored. During my years with McDonnell Douglas, I think nearly everyone I knew got at least one violation. Forgetting is part of the human condition.

However, while you'd get a laugh and might have to buy a round of drinks at happy hour for accidentally leaving your cabinet unlocked, you'd get short shrift if you deliberately violated security policies.

The last issue I was asked to address concerns a potential scientific exchange agreement between the U.S. and China covering certain earth science data. While I approve of such agreements in principle, I hold the same skepticism I often had about agreements signed with the Soviets.

Should the earth science data packages contain, for example, the detailed models of atmospheric winds developed by the U.S. over the past decades, or the equally detailed models of the earth's geodetics, that is, the exact shape of the earth and its magnetic and gravitational fields as a function of latitude and longitude, then the Chinese would be receiving valuable scientific data which would definitely improve the accuracy of their launch vehicles and missiles.

This is because atmospheric winds and the earth's gravitational fields vary around the earth to a sufficient degree that a simple, uniform model of those forces' effects on a vehicle trajectory is inadequate for predicting launch vehicle and missile trajectories with the fidelity required to place payloads in precise orbit and warheads on their targets.

The same is true for the earth's magnetic fields, which can affect the navigation guidance control systems on board the vehicle.

I thank you for your attention. And I'll be glad to answer any questions at this time.

SENSENBRENNER: Thank you very much, Mr. McKinney.

As we did yesterday, the committee will be operating under the five-minute rule. The question that is being answered at the time the bell goes off will be the last. And we will go on to whoever is next in line.

So, I yield myself five minutes. I have two very quick questions both for Mr. Ross and Mr. Phillips.

First, has the level of competition your firms have faced from non-market economics such as China increased or decreased since 1992?

ROSS: This is Paul Ross.

I think the way that we see it is that we've seen an increase, because your customers have come to us realizing they are in a global market and have asked us to drastically reduce our prices. And I mean drastically.

We have had to do things like we have major initiatives called lean thinking, that we have really pushed off to reduce our prices. How much we can continue to reduce those so they can stay viable in the global market is unknown to me. So, we drastically keep reducing.

SENSENBRENNER: Has this resulted in an increase in prices that you have to charge to the Department of Defense in order to keep yourself afloat?

ROSS: I think just the opposite. We have seen our business grow in the last few years because of the commercial launch business. And I think the government has benefited from that immensely. But if this commercial launch business were to go away, the reverse would happen and there could be an order of magnitude price increase for government items.


PHILLIPS: There's really significant pressure. Over the last few years, it's the calls you don't get from several missions that are being entertained today, particularly the Leo (ph) missions. There is very little remaining examination of U.S. vehicles for those launches.

I happened to be in attendance at recent teledesic (ph) medium launch vehicle negotiation. There were no U.S. launch vehicles at that negotiation. It's indicative of the type of pressure that we're seeing. And that's what I meant we don't get the call. U.S. vehicles are now rarely in the final negotiations for the next generation of launch.

SENSENBRENNER: The second question I have is, what's been the impact of Clinton administration policy on commercial launches and non-market economies on the U.S. launch business? Has it improved or hurt your market share?

PHILLIPS: I think we all have to work within the framework of the U.S. policy that's available. The various agreements that were addressed over the last few years with Russia, Ukraine and China helped define, at least, the playing field for geosynchronist (ph) placement.

The only agreement that I'm aware of that addresses really the next market surge is Ukrainian agreement, which at least tends to control the placement of 50 percent of Leo (ph) missions by non- market.

We all have to work within the framework available, but the opening in general were no controls over the Leo market, essentially is swiftly moving the decisions to their launch vehicles.


ROSS: Yes, I think what I would add to that would be that we have learned to play within the existing quotas. And so, to our customers, it's the lifting of those quotas, or letting it go to anything that the foreign markets want to sell, is our concern. Because once we do that, then there is no level playing field for us.


I yield back the balance of my time.

The gentleman from Texas, Mr. Hall.

HALL: Thank you, Mr. Chairman.

Mr. Milhollin, I seem to detect a kind of a wail in your testimony. A warning and almost Paul Revere-ish. What are you really saying? What -- you describe how in the 60s, India developed a missile program with help from the U.S., Russia, France and Germany.

And is there any reason to believe that NASA would negotiate a space agreement with China in 1998 that would violate the national security? Are you saying that?

MILHOLLIN: What I'm saying is that it's a more hazardous enterprise to engage in space cooperation than we have hitherto realized. And what I'm saying is, that given the history of our cooperation with programs that wound up being missile programs, that we ought to -- we certainly should be more careful in the future than we've been in the past.

And I think...

HALL: What do we do with China? You know, our president is over there. If we want to trade with them, we want to be a partner to them. Do we want to get in a race with them?

MILHOLLIN: I think that before we launch, if I can use that word, before we launch any kind of detailed space cooperation with China, we ought to be certain that we know just exactly what our own interests are. And we ought to be sure that those interests will be protected.

Some of the witnesses this morning have talked about economic interest. I think our security interests ought to be more important than any economic consideration. And so far, I don't think they have been, that is the security interests, have been given sufficient weight when we've made these decisions.

HALL: I certainly don't disagree with that.

Mr. Pike, what would happen if we banned the launch of any U.S. payloads by any foreign launch vehicle? Would that solve a problem or would that create some more for us? What are the facts?

PIKE: Well, I think that one of the things that it would immediately do would give foreign competitors in the satellite industry a tremendous opportunity to challenge existing American global dom and...

HALL: That makes sneaky -- I said sneaky, I mean squeaky clean national security wouldn't it? If we just banned all those, it wouldn't be any chance for any leaks there.

PIKE: It would certainly make some aspects of our life easier. It would make other aspects of our life much more difficult.

Right now, the American satellite industry and our communications industry dominates the market globally in part because we have a large captive market from the Defense Department and NASA here in the United States.

Satellite companies in other countries such as France, lacking that large captive domestic market, have had a hard time challenging us. If the United States, as a matter of policy, decided that American satellites were not going to be launched on Chinese launch vehicles, we would in effect be ceding the Chinese market and much of the Asia-Pacific market to some other competitor, probably the French.

Because for the most part, the satellites that have been launched on Chinese launch vehicles were owned by operators who had a very strong preference for launching on a Chinese launch vehicle. If they didn't launch an American satellite on that launcher, they would simply go to the French and get a French satellite.

Personally, I'm pleased with the fact that American companies dominate the global satellite launch industry. And I would be very loathe to artificially or unnecessarily create an opportunity for the French to gain a foothold in that market.

HALL: Well, we have to protect our strategic industrial base. What are the options? What other options do any of you see for that?

PIKE: Well, I think that that's been the big difference between...

HALL: In 1959 and '60, we were the strongest nation in the world. We -- in '50, '52 and '55, we had most of the money and had the strongest geopolitical position of any nation I guess in the history of the world. And we see that atrophying away and we wonder why. But we can't just close our harbors and shut down our faxes. What other options are there?

PIKE: Well, the one option that the Clinton administration has embarked on that I think is clearly well thought out, is the Evolved Expendable Launch Vehicle program. That rather than simply allowing the American launch vehicle industry to atrophy through neglect, that they've encouraged the consolidation and encouraged the introduction of new technology.

SENSENBRENNER: The gentleman's time has expired.

The chair recognizes the gentleman from California, Mr. Rohrabacher, who has been one of the leaders in bringing this issue to the attention of the Congress and the country.

ROHRABACHER: Thank you very much.

This is about the last point. Mr. Pike, you would agree wouldn't you, that anything that was done to upgrade a Chinese rocket capability would totally undercut what you just said? There was a well-thought-out Clinton policy of developing a domestic launch system. Isn't that correct?

PIKE: I'm sorry. I don't follow the logic of that.

ROHRABACHER: You don't? You don't follow the logic of helping the Chinese improve their system undercuts the development of a new system in the United States?

PIKE: I think that the key point of the Clinton administration policy on this has been that we need to have a well-thought-out market structure for the American launch vehicle industry through consolidation, and that we need to be introducing new technology here. The satellites...

ROHRABACHER: But you don't see any logic behind improving their capability so that the Chinese rockets are now more efficient, more effective, undercuts -- especially after the testimony of the two people sitting to either side of you -- that we are in serious competition with the Chinese, just commercially. And that they, they're just hanging on now because it's a non-market economy there. That improving their capability of those rockets is going to undercut those two guys who are sitting right next to you?

PIKE: With respect to the situation of launching American satellites on Chinese launch vehicles, I think that if you look at the manifest...

ROHRABACHER: That's not what I asked. That's not what I asked.


ROHRABACHER: I asked about improving the capabilities of Chinese rockets. Just for the record, Mr. Chairman, this administration and the defenders of this administration, every time we talk about the improving of Chinese rocket capabilities, they always end up talking about satellites and such like.

PIKE: Right.

ROHRABACHER: Right, exactly. Which was not the question and which is not people are concerned about in the United States right now.

Mr. McKinney, you seem to be the only one really totally focused on this issue. Have you seen evidence that Chinese rocket capabilities are better today than they were 10 years ago? And is

there a relationship between the United States' technology and the improvement of those rockets?

MCKINNEY: Well, they're not blowing up as much any more. So, I guess that's a distinct improvement. I'm not -- I don't think I'm...

ROHRABACHER: Let's see now -- they were blowing up. They had heavy consultations with American companies, and now they don't blow up. Do you think there is a relationship between that?

MCKINNEY: I would say most probably. I mean, without seeing all the documentation and the reports, you know, some of which I'm not entitled to, a lot of which I'm not entitled to see, I can't say for sure. But it's hard to imagine that suddenly -- the Chinese rockets are blowing up at a very high frequency. American failures are on the order of, you know, two or three percent, or less.

The Chinese rockets are blowing up much more frequently than that. Most of them are blowing up at the beginning. And one of the incentives for American satellite companies to improve or any satellite company to improve the capability of Chinese rockets is that when you, if you have a satellite that you manufacture and you're trying to sell, and you want to launch it, you have two things, three things that you have to do. You have the costs of manufacturing the satellite itself. You have the costs of procuring launch services on whoever's launch vehicle. And a third component which is very important is the cost of insurance. If the rocket blows up, your satellite probably does, too.

ROHRABACHER: So, if we actually lowered the costs of the insurance as well as making it more reliable, but also that has national security implications. Just to tie this back to American companies, I happen to have a list of the questions that were -- I'm just showing it to my colleague here. A list of the questions that were posed by the Loral Corporation to their Chinese counterparts who were involved with the missile project in...

SENSENBRENNER: Without objection, the questions will be included in the record.

ROHRABACHER: I don't think we are permitted to do so.

WELDON: I object. I object.

ROHRABACHER: OK. Unfortunately, the agreement made with the company was that these would not be made public.

SENSENBRENNER: Well, then I would request the gentleman not to refer to the questions so that the record does not have a hole in it.


Let us put it this way. I have in my possession something that would indicate that there was some consultation going on between the Chinese and an American company. Could the possibility, could an American company simply by asking questions in the right way, upgrade the Chinese capability, ability to build their missiles and rockets more effectively?

For example, Mr. McKinney, if I was to say that this was a question that might have been posed somewhere, minus a blank, which we've left out because of technological transfer considerations, would this help someone in improving the capability of their rockets, which then might carry payloads or carry nuclear weapons?

Will there be ways to verify that the battery current was drawn by the blank piece of technology? And to which the Great Wall, and to which an answer might have been given from their Chinese counterparts, will examine the telemetry data and provide additional answers. With that type of depth of questioning, on the part of one party to another, would this not lead to an improvement of their missile capabilities?

MCKINNEY: Most probably. What you have to understand is that when a launch vehicle or missile takes off, the sole means that engineers and scientists have of determining what is going on board the launch vehicle is the telemetry coming back from it. As well as visual observation. But the telemetry is most important, because that gives you things like accelerations and the forces and moments and rates of those quantities on the vehicle, which you can't tell just by tracking it through a long distance camera.

So anything that would improve the telemetry would help tremendously. Also, as I said before, one of the most difficult jobs for an engineer -- a missile engineer or rocket engineer -- is failure resolution. And the failure isn't necessarily to something blowing up. You could have something go to orbit and deploy its payload completely successfully. But a component may have failed during the ascent to orbit, which this time didn't cause any problems but next time may.

So, it's very hard to track down all these things because they're in space or they're scattered off in spent stages along the ocean floor. And it's -- you just can't tell. You just can't go check it out. And so, to try and determine the causes of problems or errors or anomalies, as we call them, it's very difficult.

MCKINNEY: And any kind of directive help towards focusing your attention on a specific component or subsystem, well, it saves you time, money and energy. So, it would have to help. I can't see anyway around that.

ROHRABACHER: Thank you very much.

SENSENBRENNER: The gentleman's time has expired.

The gentle woman from Michigan, Ms. Rivers.

RIVERS: Thank you, Mr. Chairman. And thanks to the panel.

In an article in the Washington Times from the 5th of this month, Brent Scowcroft puts forward an argument that this whole issue, as the public perceives it, is about four separate issues, two of which are political and ethical in nature, and two of which are technical. And I want to speak to the technical issues and to your views on it.

First, one is about the use of waivers in general, starting in 1986, for satellite launches. And then, secondly, I want to talk about whether or not -- the implications of the improved Long March missiles.

First I want to know, and I want a yes-or-no answer on this, the question of whether or not technology has been transferred by Loral and Hughes. Do any of you, have any of you actually seen the documents that give facts on this? In other words, have any of you read the accident report that Loral transmitted to China? Have you read any Defense Department analysis of the transfer? Have you read the CIA analysis of the transfer? Any of you? So, do you have any information...

SENSENBRENNER: Let the record indicate that all of the witnesses are shaking their head in the negative.


So, none of you has any particular expertise on what was or was not transferred and the implications of that in fact? Is that true?

MCKINNEY: That's correct.

RIVERS: OK. And secondly, I want to ask the question about your concerns that you have raised here about the waivers to permit launching of American satellites. This began, according to Brent Scowcroft, in 1986 under the Reagan administration, and has not varied in terms of the waiving for this.

What I need to know is, any criticisms that have been raised here today, have you been public and continuous in your concerns about those issues, starting in 1986? Or have you only been raising concerns in the more recent period? Since the practice started in 1986, have you voiced your concerns from 1986 on?

Mr. Milhollin.


RIVERS: No. Mr. Phillips?

PHILLIPS: No, not really.

RIVERS: No. Mr. Ross?

ROSS: My concerns started surfacing in about '94, '95.

RIVERS: OK, what changed between the '86 decision that were -- I believe there were nine launches during that period, during the Reagan-Bush period and 11 during President Clinton's. So, there wasn't a significant change in numbers.

ROSS: Their vehicles becoming more reliable.

RIVERS: Their vehicles becoming...

ROSS: Absolutely.


Mr. McKinney, have you launched your concerns?

MCKINNEY: Yes, my concerns changed. In '86, and in the '80s, the Reagan administration simply granted waivers to allow the satellites to go on top of Chinese rockets. And those satellites were kept under close watch by American citizens during that time. No foreign nationals were allowed to view the -- the satellites are kept in basically sealed compartments and just unwrapped just when they meet with the vehicle.

RIVERS: I'm confused then. Because I have a letter here addressed to Warren Christopher in 1993 signed by a significant number of Congress members, including Mr. Rohrabacher, that attest that in fact you will find that Hughes satellite are guarded around the clock by U.S. government and Hughes personnel during their time in China.

ROHRABACHER: Would it be possible to put this document in the record?

RIVERS: Absolutely, I would be happy to do that.

SENSENBRENNER: Without objection.

RIVERS: And also saying, "we believe that national policy objectives can be met without placing sanctions on communications

satellites. And we ask you to direct that these satellites are excluded from any list of sanctionable items." So, if you were concerned about this in '93, what did you know that these -- well, the entire delegation from California didn't know?

MCKINNEY: Well, I wasn't allowed to finish, but my point was, is when we were just allowing the waivers to occur -- and I didn't have any problem with that personally. You know, it had concerns because, yes, it does impact the aerospace launch industry here in the U.S. But I didn't see any national security implications, which was my concern.

However, during those times, during the Regan and Bush administrations, the applications for the waivers were reviewed by the State Department and Defense Department. In '93, Mr. -- President Clinton transferred or sometime in '93-'94, I don't know exactly when, transferred responsibility of reviewing those waivers and granting whether -- in other words presenting their professional opinions as to whether or not they're good, to the Commerce Department.

And as we know, there's been a lot of controversy about that.

RIVERS: Let me ask you about that. According to Brent Scowcroft, who worked for the Bush administration, he says that the waivers that the Commerce Department had control over was whether or not to waive the Tiananmen Square sanctions. They were about political response, not about whether or not defense issues were being compromised. And in fact, the DOD and the Pentagon retained that ability. Is that your understanding as well?

MCKINNEY: I'm sorry, I didn't quite follow you there.

RIVERS: That the waivers that the Commerce Department were able to give had to do with economic sanctions put in place in the face of the Tiananmen Square massacre. They were not waivers about defense implications. And that the Defense Department still is allowed to weigh in on that?


RIVERS: So that the waivers, which is a very confusing term to people, when they're not explained, were not about waiving any sort of possible implications for national defense. They were about setting aside an administration-imposed sanction because of political activity within China.

MCKINNEY: Well then, I don't understand the use of waivers during the Bush and Reagan years, because there wasn't -- that was before Tiananmen Square.

SENSENBRENNER: The time of the gentle woman has expired.

RIVERS: Thank you.

SENSENBRENNER: The gentleman from Utah, Mr. Cook.

COOK: Thank you, Mr. Chairman. I want to thank the panel of witnesses.

Mr. Phillips, you indicated in your testimony that launches of U.S. commercial satellites on launch vehicles of our former adversaries greatly subsidize their military. Did I characterize that correctly?

PHILLIPS: Yes, you did, sir. And if...

COOK: Go ahead.

PHILLIPS: If I could just have a moment to expand...

COOK: Sure.

PHILLIPS: Application of technology is very dependent on a secure and sustainable infrastructure. By maintaining a long-term commitment by the commercial market to those assets, they're able to invest in applying new technologies that otherwise I don't believe they would be able to.

COOK: So, if we not only allowed the launches but actually if the United States were to offer actual technical assistance to those launch vehicles, would that result in even greater subsidy of their military?

PHILLIPS: Well, certainly that helps to facilitate the speed of which, in which technology can be applied.

COOK: Do you or any of the other witnesses on the panel have an opinion as to the result on U.S. national security?

PHILLIPS: I think my biggest concern is that essentially we are investing in the economy, the economic capability of the countries that we are sending the launches to. It takes a substantial technical base, a facility base, to maintain a capacity to build and fly systems like these. No matter what country.

PHILLIPS: If we sustain their business, and do not sustain our own, then we are going to have a continuation of divergence of capability and responsiveness. That's my primary concern.

COOK: On that, let me ask Mr. Ross. In your testimony, you said you had not heard or seen the scenario on which the U.S. space launching industry will not be able to meet the projected demand for launch services for U.S.-built satellites. But just last week, we heard several representatives from the administration testify before the National Security and International Relations Committees that it must approve the launch of U.S.-built satellites on Chinese rockets because the U.S. launch industry, simply cannot keep up with the demand.

Can you elaborate on that, or express your opinion?

ROSS: OK. First of all, my opinion, Congressman, is that I have not that report. Everything that I ever looked at from the standpoint of the launch capability of the U.S. companies and our providing them solid propulsion, is that for U.S.-built satellites, we do have that ability. I've not seen anything that I'm aware of that conflicts with that. There are some reports that talk about the world U.S. satellite market. And yes, the U.S. launch can't do all the world satellites. But I believe that we can do the U.S. satellites.

I think -- I would like to comment, Congressman, on your previous point. I think the issue in front of this committee is that there is an infrastructure for us for decades to buy aircraft and to buy submarines and to buy bullets. But that chart over there says that if this commercial business goes away, I'm not so sure where you're going to buy your U.S. missiles that need solid propulsion. It's not going to exist.

COOK: Well, I take it at least you don't share the administration view that we must launch U.S.-built satellites on Chinese rockets? There is no inherent reason in the supply or any other reason that we have to be doing that, in your opinion?

ROSS: You use the term must. I can't support the word must. If there are...

COOK: Well, the word must was used at the National Security and International Relations Committees.

ROSS: I cannot support that.


If I can just ask Mr. Pike a final question. I was kind of intrigued with your position. That I -- tell me if I got to the right conclusion. When you're saying that because of enhanced technical reasons, we should be stressing the satellite communications part of the industry, much more than the launch part of the industry. You kind of said that's a real low wage, kind of almost nontechnical, rather unimportant kind of thing that maybe is more appropriate for developing countries to be involved in or things like that.

Tell me when you -- you know, I think that's an interesting statement because of the witnesses here, you're the only one that doesn't seem to think there's any national security implications of this stress that satellites launched at all costs including -- if Chinese launchers can do it, a little less money, that there's absolutely no national security interest in that.

I guess that, I think that's a very profound conclusion. Maybe if you could just tell us a little bit about your background in satellite or rocket launch experience and maybe your technical degrees and so forth.

ROSS: I don't have any.

COOK: This is a very important question that you seemed to come to the most strong conclusion of any witness. I sense a little bit of hesitancy on others to draw conclusions even one way or the other. With you, you're very solid. There's no national security problem here.

ROSS: No, that was not the statement that I made. I don't have the technical background that some of the other witnesses here have. I have been following this policy matter for some time. And I think that the other witnesses have correctly pointed out that, given the disparity in wage scales between the United States and other countries, it's extremely difficult for us to compete on price.

If a Chinese company wants to launch a satellite on a Chinese rocket, they're going to do it. And we have the choice of it either being an American satellite to create American jobs or being a French satellite to lose those jobs. I think it is incredibly important that we retain the technical capabilities exemplified by these two companies.

It has been a unique American advantage for the last half century, that we have had over the Russians, over the Chinese and against all comers. This has been a unique national asset that we cannot afford to lose. But launching satellites on China's rockets I don't think is (OFF-MIKE).

COOK: Very quickly...

SENSENBRENNER: The gentleman's time has expired.

The gentle woman from California, Ms. Capps.

The gentleman from Indiana, Mr. Roemer.

ROEMER: Thank you, Mr. Chairman.

Mr. McKinney, you mentioned that you believe in fact that when you put any kind of U.S. satellite on top of a Chinese rocket, you made the assertion on China, atop a Chinese rocket, that this helps the Chinese improve their military capabilities, specifically ICBMs. Is that correct?

MCKINNEY: No, I did not say that. I did not say that putting the satellite on top of a Chinese rocket or anyone else's rocket would improve that rocket's capability. What I said was, helping their engineers that work on that rocket itself would improve that rocket's capability.

ROEMER: And you also went on, I think, to insinuate or assert in your statement that any cooperation between the U.S. -- U.S. firms and Chinese firms and that China now does not blow up their rockets as frequently as they used to. You attributed this to the United States cooperation or exchange?

MCKINNEY: Well, possibly. I mean, I'm not sure. I'm not sure, but...

ROEMER: Don't you think that there is a great deal of chance that the proclivity might be in fact that over a 10-year period that the Chinese have just simply learned some things and gotten a little bit better?

MCKINNEY: Yes, that's possible.

ROEMER: Isn't that probably more likely than you other assertion?

MCKINNEY: No, I wouldn't say that.

ROEMER: What would you base that upon?

MCKINNEY: Because I didn't seem to see any improvement in the performance of the launch vehicle. Because the frequency in which they were failing, blowing up and so on, putting satellites, not putting satellites in precise orbits, didn't seem to be getting better very fast. They were learning, apparently, but not very fast. And all of a sudden, in a very short period of time, they seemed to suddenly become very accurate and stop blowing up.

Now, with U.S. experience...

ROEMER: Well, the United States still has problems with missiles blowing up.

MCKINNEY: Of course we do. Nothing's perfect.

ROEMER: We still do that. So the Chinese still have this problem, they do it a little bit less frequently. And again, I come back to the fact that some of that may be attributable to the fact that the Chinese scientists and the Chinese manufacturers and the Chinese have simply gotten a little bit better.

MCKINNEY: Well, I think of course they have. I mean...

ROEMER: You admit that, you say that really could be one of the key factors?

MCKINNEY: Of course.

ROEMER: Yesterday, Mr. McKinney, we had a hearing on the space station and the Russian-U.S. cooperation with the space station. Would you assert that the U.S. cooperation with the Russians and NASA gives them access to a host of different technologies that may in fact, could in fact endanger our security interest and subsidizes their defense industry?

MCKINNEY: Well, possibly. But Russia is a different case. In the case of Russia, they already have the capability to attack us with nuclear weapons. So it's not like we're helping an emerging threat. Also in the case of Russia, we have a situation where many of the engineers in the aerospace and defense industry are no longer afforded the jobs they had under the Soviet military machine.

And there is a serious concern -- it was by Bush and Clinton administration -- I shared this concern. That we do not want Russian engineers and scientists who literally aren't getting paid at all to desert Russia and go work for Iran, Iraq, North Korea, or anyone else for that matter. And so, to some degree, with the appropriate safeguards in place, I don't see any problem with working on the space station with the Russians.

ROEMER: And have you been over there to view any of the safeguards or see how we perform those types of security assurances?

MCKINNEY: No, I have not. But while I was at McDonnell Douglas, though I never worked specifically on the space station program, they were just, you know, a couple of floors away. And so I heard quite a lot about the different activities that we were embarked on in this international space station. And I've read a lot, as most people have in my industry, through the various media sources devoted to those issues.

ROEMER: You commented on the differences in security between the Reagan and Clinton administrations with respect to overseeing and guarding technology and satellites that may in fact be over in China for a period of time before they go up. Have you been there to assess or evaluate that security and that change in the two administrations?

MCKINNEY: No, I have not. But one thing I have read in published reports is that that is a difference between the Reagan and Bush administrations and this administration is that it appears as though, again, I'm not privy to all the conversations. I'm only going on published reports. But it appears as though at least several times, the objections of the Pentagon were overruled by the Clinton administration.

SENSENBRENNER: The gentleman's time has expired.

The gentle woman from Maryland, Ms. Morella.

LOFGREN: "Legislation to prohibit launches of U.S. commercial communication satellites by Chinese launchers would, at a minimum, turn over the Chinese communications market to our French, Italian and German competitors with no gain for U.S. security interest. Such a restriction would also disrupt the plans of several American-led global communications programs." And it goes on to talk about worldwide communications capabilities.

I don't know if you are members of the Aerospace Industry Association, Mr. Phillips or Mr. Ross, but if you are, or even if you aren't, could you comment? Do you agree with the statement of the president of the association?

ROSS: First of all, we are a member of the AIA. And I think the AIA has some very strong members in it, predominantly which are the satellite builders. I do believe that the AIA has not adequately addressed the threat to the solid propulsion industry in this country if the entire launch market goes off shore. And that's what we're here to address. And we need to have a place, I'll keep repeating -- you folks need to address where you're going to buy your missiles.

LOFGREN: If I could interrupt, because I know I have limit...

SENSENBRENNER: The gentle woman's time has expired.

LOFGREN: All right, Mr. Chairman.

SENSENBRENNER: The gavel has fallen equally on all.

The gentleman from Florida, Dr. Weldon.

WELDON: Mr. McKinney, the documents provided to the committee by Loral indicate that nine senior western technical people met with four senior Chinese technical analysts for two long days for technical discussions in April 1996. Then, about a week later, those same western senior technical people flew to Beijing where they spent another two days in technical discussions with over 20 aerospace engineers, scientists and executives.

Mr. McKinney, could you please describe to me how useful such a series of meetings could be to the Chinese launch vehicle.

MCKINNEY: Well, without knowing the details of the conversations themselves, it's difficult to quantify. But I really believe that those sort of lengthy...

WELDON: Can I interrupt you for a second?


WELDON: Because I've looked at the details of those questions. And for security reasons, we can't really talk about them. But if those questions were to be things like, did you think to check that the widget isn't effected by the moving thingamajig? Or, look at why the whatchamacallit changed 30 seconds into flight? Would those kinds of questions provide a comprehensive checklist for improving a launch vehicle?

MCKINNEY: It may not be comprehensive. But again, engineers when they're trying to resolve failures, are looking for avenues to direct their attention. They can't -- it takes them too long to check every possible alternative. So any help which would be directive in saying, did you check this widget, did you check that widget, could only be of benefit.

Many of the questions may end up in dead ends. They say, well, we'll check this, and that's not the answer. In many cases when you're doing failure resolution analysis, it's a process of elimination. That's really what it is. You never latch on to the cause of the problem right away.

It's always a process of elimination.

WELDON: Mr. Ross, Mr. Pike, in his written testimony, he indicates that meaningful statistics cannot be derived on the reliability of launch vehicles because there aren't enough launches on which to base a conclusion. He therefore concludes that the increased reliability in the Long March missile after the Loral meetings is statistically uncertain. However, insurance companies are forced to rely on such statistics to set rates and stay in business.

Mr. Ross, do you agree with Mr. Pike's conclusion?

ROSS: I always have trouble with statisticians.


They probably didn't have the personality to become an accountant. I'm not sure.


But my concern is that we launched 176 motors last year. Every one of them flawless. That is statistically sound. And it didn't happen by accident. It happened by a well-funded engineering, scientific background where we've gone through great process control in this industry. And that, I can say, is truly remarkable and the other folks aren't there yet. And so, do we want to get them there?

WELDON: Mr. McKinney, Loral has asserted in the press that the meetings between U.S. and Chinese engineers would not give China an advantage technically. Yet, in a February 1998 license granted to Loral by the State Department, a provision clearly states that a DOD monitor must be present at all meetings with Chinese scientists unless specifically exempted.

Mr. McKinney, when would a DOD monitor be exempt? And even more importantly, why would one be required at all if these meetings involved no technology transfer?

MCKINNEY: Well, that's an interesting question. I would just go back to -- let me tell you a little story. Again, we have a culture in the aerospace and defense industry of always trying to safeguard our technology. It's omnipresent. You can't get away from it.

Next month, I'm going to a conference in Cleveland on propulsion. It's the joint Army-Navy-NASA-Air Force propulsion conference. It follows a conference held by the industry right before that. To attend that conference, like all conferences, you have to submit a registration package.

However, unlike most conferences, I have to submit with my registration package a defense logistics service center registration number. That registration number is something I had to acquire by submitting a form to the Department of Defense giving them my bonafides and who I was and saying that I would not transfer any technology at all. If I do, I'm going to be subject to fine or imprisonment or both under different U.S. codes.

In fact, just putting false information on this form leads to fine or imprisonment or both under U.S. codes. It's part of our culture. So, the fact that a DOD representative would be at these meetings is not of itself an indicator that tech transfer could occur. But it's an indicator that, again, it's part of the safeguards we have in our culture.

SENSENBRENNER: The gentleman's time has expired.

The gentle woman from Michigan, Ms. Stabenow.

STABENOW: Thank you, Mr. Chairman.

First, I would ask that two letters be submitted into the record. One, that would respond to what Mr. Lofgren was talking about, the Aerospace Industry Association letter in its entirety.

SENSENBRENNER: Without objection.

STABENOW: And a letter from NASA as well.

SENSENBRENNER: Without objection.

STABENOW: Thank you.

I wonder if Mr. Pike, first of all, would like to respond to any of the comments, the exchange in questions that just occurred with the other gentlemen?

PIKE: Well, I think that the thing that's important to keep in mind here is the context in which the exchanges -- based on the public record -- were taking place between Loral and Great Wall Industry Corporation.

It was precisely because the insurance companies were having concerns about whether Chinese Aerospace Corporation and its subsidiaries had succeeded in repairing the Long March launch vehicle, a vehicle which had had only very limited flight experience, and as with any launch vehicle, experienced a high infant mortality rate.

We recall after all, that the Arian-5 (ph) built by the Europeans, blew up on the very first launch. So, it's normal practice that when you have new launch vehicles that you are going to have a lot of accidents. The Chinese today operate for reasons that I think are, continue to be something of a puzzle, operate the most diverse launch vehicle fleet of any country on the earth. They have introduced a lot of new launch vehicles recently. And not surprisingly, they've had a lot of failures.

International insurers wanted to have some assurance that the Chinese had understood what the problems were and they had been correctly fixed. So it was entirely appropriate that western technical experts were asking their Chinese counterparts, have you gone through A, B, C, and D so that they could then report to international insurance companies that it looks like the Chinese have in fact fixed it.

The proof of the pudding is the question of whether in fact the Chinese had correctly identified the problems for that launch and whether they had correctly implemented the fixes. And we're given to understand on the basis of the public record, that Loral concluded that the Chinese did understand the problem and had fixed it.

So, it's not as though the Chinese were going into these meetings being utterly bewildered and clueless at what had gone wrong and throwing themselves on the mercy of the kindly, yet naive Americans to please fix their rockets. But rather, it was a situation where the Chinese had identified the problem, had fixed it, and succeeded in demonstrating to Loral, the insurance companies, that they had fixed it, and subsequently launched successfully.

So, I think that that's the important point to keep in mind.

STABENOW: You could respond also, Mr. Pike. Again, going on with talking about sharing detailed information. Mr. McKinney was speaking to the Chinese -- NASA providing the Chinese with detailed atmospheric winds, miles and geodetic models. And that this would improve their missile accuracy. NASA has indicated that this is not the case. But I'm wondering if you share Mr. McKinney's hypothetical scenario coming to pass?

PIKE: In the absence of having a detailed understanding of precisely what is being proposed in these exchanges of information that to my knowledge has not been made public, or at least readily available, I wouldn't be able to give you a definitive opinion on it.

Based on what I have seen, however, the proposed program of collaboration with NASA seems to be perfectly consistent with that that we've seen with other government agencies. For instance, for the last six or eight years, the Office of Naval Research has had an extensive pattern of collaboration with the Chinese on shallow water acoustics. This is an area that is of tremendous interest to the United States Navy, because with our new naval doctrine of operating our submarines in shallow waters, understanding acoustic propagation in that environment is of vital interest to us.

There are continually meetings between American and Chinese acoustic specialists asking all kinds of questions and getting all kinds of answers.

There may be areas where scientific cooperation is leading to questions about our national security interests. But it seems to me that if we've been able to share data on shallow water acoustic propagation with the Chinese for many years now, something of immediate, direct, military interest, the sort of second or third order high, largely hypothetical applications that we're talking about in the NASA agreement, it's very difficult for me to understand why there should be significant concern there.

No concern whatsoever? Obviously, not. The significant concern -- I think it's very difficult to establish significant concern.

STABENOW: Thank you.

Thank you, Mr. Chairman.

SENSENBRENNER: The gentle woman's time has expired.

The gentleman from Maryland, Mr. Bartlett.

BARTLETT: Thank you very much, Mr. Chairman.

I have one brief question, and then I must leave. And I would like to give the balance of my time, yield the balance of my time to Mr. Rohrabacher.

China's intelligence activity support its policy interest by acquiring foreign high technology. One aspect of China's internal collection network is the aggressive use of technical surveillance measures.

It's our understanding that most of the prominent hotels that cater to foreigners are equipped with the technical surveillance of guests, equipped for the technical surveillance of guests and visitors.

During the 1996 launch failure investigation, members of the independent review committee caucus -- these included people from the Loral and Hughes, caucused in their Beijing hotel to discuss the fish bone (ph) analysis. This analysis was prepared by China Great Wall and consisted of the Chinese conclusions about the possible causes of the failure.

The independent review committee in these hotel rooms developed its own list of potential failure mechanisms and compared them with the Chinese fish bone (ph) analysis.

Mr. Milhollin and Mr. McKinney, although these discussions might not necessarily have broken any laws, should we be concerned about a discussion concerning the possible launch failure causes by western engineers in a Beijing hotel?

MCKINNEY: After eavesdropping on you, sure.

BARTLETT: Let the record show that the members of the, of our, visitors were nodding that this was indeed a problem. We should have known this. Those men should not have been there without competent monitors from the national security part of our country.

Let me yield the balance of my time to Mr. Rohrabacher. And thank you.

SENSENBRENNER: Without objection...

ROHRABACHER: Thank you very much.

SENSENBRENNER: ... Mr. Rohrabacher is recognized for three minutes and seven seconds.


First of all, let me note that my name was used earlier by one of our colleagues about my support of a memo. Was my name on a memo that was supporting the policy of actually launching Chinese satellites -- or American satellites -- on Chinese launchers? I plead guilty to that. I have never had a complaint that the Chinese satellite launching -- launching American satellites on Chinese rockets have improved Chinese satellites.

What I'm concerned here with...

SENSENBRENNER: The guilty plea is accepted, and sentencing will take place at a later date.



And again, what concerns me and what concerns most Americans who are focused on this issue, is the fact that it appears that Chinese rockets may have been improved with the use of American technology. Especially technology that was charged to the American taxpayers by billions of dollars we paid to have technology developed that would improve our security, and then to have it go to a hostile government that could well be an enemy of the United States someday, and is the biggest human rights abuser on the planet today.

Just one note on consultation. Mr. McKinney, consultation is not just saving time, is it? When you have American scientists meeting in the room that we just heard about, those people have been trained and quite often costing hundreds of thousands, or millions, or even billions of dollars worth of training and expertise are going into their capabilities.

So, it not only it just cuts down the time of consultation, but if there was consultation with the Chinese to improve their rockets, it actually was something that was qualitative, as well, is that not true?

MCKINNEY: When you say -- what you're saying is that it also saves money? Is that your question?

ROHRABACHER: No. What I'm saying is that if you have an individual who is an expert, who has been made an expert through training, through as I say, millions of dollars worth of training and has involvement in developing billions of dollars of technology, that gives a potential adversary not just his saving time, but he may have insights that they wouldn't have at all.

MCKINNEY: I think what you're saying -- he may have -- the potential adversary may have an insight into the training and capabilities of U.S. technical people. Is that your question?

ROHRABACHER: Well, let me just put it straight.

A U.S. expert may have different insights into problems of Chinese missiles that a Chinese expert might not have.

MCKINNEY: I think that's completely correct. And we have different insights than the French do. Everyone is different.

ROHRABACHER: And let us note that the change in whether someone was upset or not, that happened around 1994, was not just a change in political administration. It also reflected that when this administration came to power, as we've heard under testimony in other

hearings, there was a total collapse of controls that then permitted technologies to be transferred to the Communist Chinese rocket system.

SENSENBRENNER: The gentleman's time has expired.

The gentle woman from Texas, Ms. Jackson Lee.

JACKSON LEE: Thank you very much.

And good morning to the panel.

Mr. Chairman, I would appreciate the opportunity to submit my statement for the record.

SENSENBRENNER: Without objection.

JACKSON LEE: I think all of us have come to this hearing this morning with a keen sense of great responsibility and concern about ensuring that we get the facts in a balanced and informed perspective so that whatever role that this committee might play as other more designated committees perceive that we can be helpful rather than a hindrance.

One of my primary concerns, as I've listened to the various testimonies and questions, is just how easy it is to convert the technology used to launch satellites into the technology which carries warheads. And I believe as the American public listens to this debate, and accusations and allegations, I think that the key attractive element has been the whole issue of national security.

With that in mind, I would be interested, Mr. McKinney, in whether or not your company has a private intelligence gathering arm? Do you have access to any kind of intelligence that we may have? And, of course, when I use that word, not your native intelligence, which I know you have, but gathering opportunities. Do you have that? And are you relying upon that to give your testimony today?

MCKINNEY: No, I have no intelligence gathering capability. Nor, do I have, currently have access to any intelligence. My determination on whether improving a Chinese rocket would improve a Chinese missile is strictly a matter of flight mechanics and also physics.

JACKSON LEE: Thank you.

And I'd raise the same question with Mr. Milhollin. What about your company, do you have a particular arm of your company that relates only to intelligence gathering?

MILHOLLIN: No. We have no access to intelligence. And we have no satellites or other means of gathering intelligence. My comments today are simply based on my own assessment of the matters the committee asked me to discuss.

JACKSON LEE: Thank you.

Mr. Pike, I'm not sure -- when a question was asked and it was alleged that everybody was nodding about being in a hotel room. Would you just like to sort of speak more to that issue, that people gathered in hotel rooms and bugs going on? You nodded as to it, but I'd like to give you an opportunity to sort of clarify any points you might have wanted to make on that issue.

PIKE: Yes. I would not want to underestimate the eagerness with which the Chinese intelligence and security community is attempting to collect against American firms. The Chinese respect the expertise that American firms have. They recognize that the sort of expertise that I'm sitting between here is rocket science. That is not trivial. It's not a trivial matter to go from a space launch vehicle to a ballistic missile. They have gone through that sort of hard experience that you see represented here in doing that.

They're obviously interested in picking up on whatever little odds and ends that they can. Whenever I have gone to a country that has that sort of active collection program, I've been very aware of the activities of those agencies. And certainly, we have a very active industrial security program here in the United States that would have certainly briefed Americans before they went to that country.

Because everyone knows that the Chinese definitely have large apparatus for doing this. It is one thing to say that the Chinese have a large apparatus for doing this. It's quite another to say that they successfully collected useful information which they were then

able to turn to good purpose in their ballistic missile program. And I don't think there is any evidence of that.

JACKSON LEE: And let me follow up on that point. Because as you have listened to the testimony and the questions, would it be appropriate for us to leap from what has been already stated. I've asked two gentlemen, I haven't asked everyone whether they had some particular intelligence gathering apparatus in their companies. It appears that they are relying on basic knowledge. I understand testimony has been given that they might be relying upon newspaper articles. Should we leap now from that perspective to any judgments on conspiracies or the release of enormous amounts of technology that we don't know, we don't have the data before us at this point?

Mr. Pike.

PIKE: Well, there is certainly nothing that has been established in the public record thus far that I think would lead to that conclusion.

There has been a special committee established by the House that is going to be taking testimony from classified sources. But I think that we're going to have to wait until that committee concludes its investigation before there is any basis whatsoever for concluding that Chinese missile programs have benefited from space cooperation with the United States.

SENSENBRENER: The gentle woman's time has expired.

The gentleman from Mississippi, Mr. Pickering.

PICKERING: Thank you, Mr. Chairman.

The purpose of today's hearing is to look at our national security and whether the technology transfers had any implications.

As we live in an era where in the past, the one who could control the seas could control their nation's destiny and national security, today space, he who controls space, controls national security. And much of what we will see both positive and the threats that we will face, in the future.

To that end, let me ask a couple of questions.

Mr. Milhollin, in your view, or your judgment, has any of the technology transfer contributed to some of the nuclear proliferation and escalation that we've seen in India, Pakistan and other parts of the world through China? Would you, in your judgment, say that this cooperation, partnership, technology transfer from American companies to the Chinese -- could it have contributed to that escalation and proliferation?

MILHOLLIN: I think that we don't know enough about the -- we don't know enough specifically to make the kind of judgment I would make. But we do know specific cases. I know that the United States has supplied important components and infrastructure to a Chinese radar company that then sold combat radar to Iran. That our pilots may some day have to deal with.

And there are other cases where U.S. equipment went to China, went to Chinese companies, that we know have been turned around and sold products to Pakistan, Iran that have undermined our policies on proliferation and that have undermined world security. So, based on what I know, I can provide specific examples.

But I think we should do a lot more work in order to come up with the kind of comprehensive picture that we need to make an overall judgment.

PICKERING: Mr. Pike, and this goes to the heart of national security, as well. And as you're testifying, defending, minimizing the potential risks on what has happened, I'd like to understand a little bit more about where you're coming from, what your perspective is on national security, the importance you place on it.

And I want to put it in context. As I look at something that was taken from your Web page October 28th, 1995, titled International Point, Check It Out, where you describe potentially sensitive security, intelligence, military facilities, with the purpose of publicly disseminating this information that could expose individuals as we've seen, with the CIA facility at Langley, from terrorists acts, the murder that happened several years ago. What is your purpose in exposing sensitive intelligence, military and security facilities?

PIKE: The Joint Security Commission, about four years ago, recommended that non-sensitive intelligence and security facilities that did not have a clandestine function, that the fact of the existence of those locations should be publicly declassified.

We looked around town. Most of these facilities were readily identifiable. And as part of our profile of the American intelligence community, which also includes a profile of the Chinese intelligence community, which walks through their facilities as well, we went down and prepared a list of the major intelligence facilities in the Washington area.

PICKERING: And publicly disseminated that? Even though that it could put those facilities and individuals who work there possibly at risk?

PIKE: Well, we're particularly concerned about the Area 58 facility at Fort Belvoir which represents a critical node in American imagery intelligence facility -- capabilities. And I'm afraid that the U.S. intelligence community position on the security of this facility is simply to pretend that the facility doesn't exist and that nobody is going to notice it. They have not implemented adequate security measures at that facility. And that's been a matter of concern for us for quite some time.

PICKERING: So, you take it upon yourself to publicly expose?

PIKE: Well, the Area 58 facility was first disclosed by Jeff Ritchelson (ph) in the book The U.S. Intelligence Community that was published over 15 years ago. So, I'm not telling anything that isn't already...

PICKERING: Mr. Pike...

SENSENBRENNER: The gentleman's time has expired.

The gentleman from California, Mr. Brown.

BROWN: Mr. Chairman, I apologize for being rather late. And I suspect that any questions that I might ask would probably already have been asked. But just to make sure that my opening statement is in the record, I'll ask for permission...

SENSENBRENNER: That already was done by your friend from Texas, Mr. Hall.

BROWN: We appreciate that very much.

I had in that opening statement, made some comments about the beginnings of our problems being -- with regard to the Chinese capability in missiles was largely our own fault when we expelled Professor Tien (ph) from the United States in 1955. Because he taught the Chinese missile industry everything that it knows.

I had the opportunity to meet with two high-ranking members of the National People's Congress a month or so ago. I found out that they were both students of Professor Tien (ph) as well as members of the National People's Congress. And they had been for some part, between 10 and 20 years, which indicates that in China, at least, to be an important politician, you have to be a rocket scientist.

And as long as we assisted in training those rocket scientists, I don't think we should be too much concerned about the situation that we have over there.

BROWN: It's my view -- and I will ask this in the form of a question, that our primary problem stems from the fact that the Chinese have a cheaper launch system than we do. And that the solution to that problem is to improve our own launch system so that it's competitive in every way, both in costs and certainly in reliability with the Chinese launch system.

And that when that happens, our concern with any incidental matter that the Chinese may learn from launching our satellites on their launch system will probably disappear, because we won't be using their launch system any more.

May I ask, Mr. Pike, if he -- this is a leading question, I know -- if he sees this situation in the same light that I have stated here?

PIKE: Well, I think that certainly many of the concerns that I had about the competitive status of the Chinese launch vehicle industry in the late '80s and early '90s were alleviated by the Clinton administration's initiatives on the Evolved Expendable Launch Vehicle program, which I think has the potential to significantly restore the competitive status of the American launch vehicle industry.

Having said that, I think that it's important to keep in mind just exactly which satellites it is that are being launched on these Chinese launch vehicles. For the most part, these are satellites that are owned by and operated by either Chinese companies or companies with substantial Chinese equity participation. In many cases, which are owned by the same China Aerospace Corporation that builds the Long March launch vehicle.

So I think that under any circumstances, many of the satellites built by the United States that have been in the past launched on Chinese launch vehicles, are going to be launched on Chinese launch vehicles. And it is simply a question of whether those satellites are American satellites creating American jobs or whether they're French satellites, creating jobs in France and making the French satellite industry more competitive.

For the most part, the problem is that we did not have a good program in place to restore the competitiveness of the American launch vehicle industry. And I think that we have done that with EELV.

BROWN: We do have them. I have a very fine start up company operating in my district at the Norton Air Force Base which was closed down a few years ago. And that company has contracts for the launch

of quite a large number of the communications satellites. And if it proves to be successful, their market share will improve considerably. And it's only one of a number of different low cost, efficient launch systems that are being developed in this country.

I think we should not forget that our primary purpose is to continue to demonstrate world leadership, not to quibble over whether we have lost the longitude to a lower cost, foreign launch system such as in China.

And that theme of trying to continually improve on our technology is the only one that is going to keep us ahead of the rest of the world. And I hope that this hearing will contribute to some understanding of that.

I yield back the balance of my time.

SENSENBRENNER: The gentleman's time has expired.

The gentleman from Minnesota, Mr. Gutknecht.

GUTKNECHT: Thank you, Mr. Chairman.

I got in a little late, so I haven't heard all of the testimony. But if I could just summarize for my own perspective what I've heard so far. Is that the four panelists who are technical experts believe that our national security interests have been affected. And the one panelist who is not, is not so sure. And I think that's basically what I've heard so far.

Mr. Cannon, our colleague from Utah, couldn't be here. He stayed as long as he could. He's got a very important mark-up. And he left me with some questions he would like to have asked. And I thought they were pretty good questions, so I will ask them on his behalf.

First of all, for Mr. Phillips, in your opinion, are the current licensing procedures to sell space launch boosters and related hardware to foreign markets, are they too lax?

PHILLIPS: In my opinion, I don't believe they are. We have exercised successfully several export licenses. The requirements that are imposed by us, by the State Department, the reviews by MTEC (ph), DTSA and other agencies, I think is very thorough. And the licenses contain very descriptive provisos to contain any unwanted transfer.

GUTKNECHT: So, as long as you play by the rules, they're OK.

Are there differences in attempting to obtain an export license to sell boosters and related hardware to, say, Great Britain or other traditional allies, as opposed to China and Russia?

PHILLIPS: Yes, there are differences, particularly, there are differences in regard to Missile Technology Control Regime requirements. Most of the materials that my company would be trying to export would be classified as Category I or Category II under that guidance, an ITAR, an International Trafficking in Arms guidance, and there are different levels of express concern, depending upon which

country and how they are categorized as members, non-members, of the MTCR. And whether they are -- and they have different security requirements imposed on them.

GUTKNECHT: Could you talk -- now, I understand that Russia uses principally liquid fuel boosters. What kind of boosters do the Chinese use? And can you talk a little bit about the difference between solid fuel boosters and liquid? Which is more cost effective? Which is more reliable?

PHILLIPS: Today, as far as space launch vehicles, the Chinese are using liquid systems for the lower stages and their boosters' somewhat solid upper stages.

You're correct, the Russians do utilize liquid propulsion for much of their space effort. On the strategic side, however, the most modern systems are based on solid propulsion. Solid propulsion has kind of unique attributes as far as strategic missile applications are concerned. It's storable, very quick response time because there is no fueling, since the fuel is in place and you can go now.

That responsiveness, I think, is probably the key discriminator in placing solids in the forefront of modern delivery systems for weapons.

GUTKNECHT: Finally, Mr. Ross, you spoke about how the loss of satellite launch business has impacted solid rocket motor manufacturers, such as yours. Could you please explain how this loss of business affects other areas of the industry, particularly suppliers and subcontractors?

ROSS: We have an infrastructure of folks that we not only rely upon them, but they rely upon us. In the solids business, let me just point out one corporation called WECO (ph). WECO (ph) is the only builder now of what we use in our propellant called ammonium perchlorate (ph). There used to be two industries in the country that made that ingredient, now there's only one.

And between ourselves and Thiokol, we account for the vast majority of that company's business. So, if our commercial launch business wanes, that business would also have a very difficult time of staying in business.

GUTKNECHT: So, it ultimately could also drive up the costs of our launch vehicles as well?

ROSS: That is true. If we -- we were at the point where we only were building these, let's say the strategic missiles like a D-5, or a re-graining (ph) a Minuteman, and we lost our commercial business base, that would drive up exorbitantly the cost of our strategic missiles.

GUTKNECHT: Mr. Chairman, I would yield the balance of my time to Mr. Weldon of Pennsylvania, if he'd like it.

WELDON: I thank my colleague.

Mr. Pike, what's your current level of security clearance?

SENSENBRENNER: The gentleman from Pennsylvania is recognized for five minutes.

WELDON: Thank you. Thank you, Mr. Chairman.

What's your current level of security clearance?

PIKE: Unclassified.

WELDON: What level of security clearance have you had in your career?

PIKE: I'm not permitted to say.

WELDON: Why not?

PIKE: Because of the security agreement I signed at the time.

WELDON: With who?

PIKE: I'm not permitted to say.

WELDON: So, you have a security clearance...

PIKE: I had briefly.

WELDON: And you can't tell us who it was with? Well, that's an amazing statement. What, are you ashamed to have had a security clearance?

PIKE: Uh...

WELDON: I'm not asking you to reveal any facts. All we want to know is what level of security clearance you've had.

PIKE: My recollection is that at the time I signed that clearance, that the security agreement precluded me from publicly revealing that clearance.

WELDON: Now, that security clearance was with the U.S.. It wasn't with China was it?

PIKE: It was with the U.S.

WELDON: Thank you.

Let me just say, we're all entitled to our own opinions. And I certainly have my opinions as do our other witnesses here. But I would feel more comfortable if Mr. Pike were appearing with a panel that included H. G. Wells. And unfortunately, that's not the case today. Because I don't think he's technically qualified to sit with the scientists that we have at this hearing.

But let me put some facts on the table.

Mr. Chairman, I would ask unanimous consent...

(UNIDENTIFIED CONGRESSMAN): Would the gentleman yield?

WELDON: No, I will not yield. You had your time.

Mr. Chairman, I would ask unanimous consent to put into the record, first of all, a summary that I asked to be prepared by the Congressional Research Service. I think our colleagues would agree this is a bipartisan agency.

SENSENBRENNER: Without objection.

WELDON: This summary includes over the past six years, the Clinton administration's record on arms control compliance. There's been a lot of bantering back and forth about MTCR and arms control export licensing. Well, let's put the facts down.

There have been 38 cases of possible violations of arms control agreements during this administration's tenure. Twenty-one of those were by China, 17 of them were by Russia. In the case-by-case analysis prepared by the Congressional Research Service, of the 38 times, and these transfers of technology were to India, Pakistan, Iran and Iraq -- in each of these cases, there were only sanctions imposed three times. And in each of those three times, those sanctions were eventually waived.

My point is that this issue is about the control of technology by an administration that believes arms control is the cornerstone of our bilateral relationship and our way of controlling proliferation.

Now, my colleague from the other side who has since the hearing room, talked about an article that appeared in the Times today. And unfortunately, she left the room, so I can't counter her, and Mr. Pike commented on it. So, let me give you the fact of what occurred versus the hearsay, since neither of these two people were in any of the hearings that were held that involved this article.

Last week, we had a Joint International Affairs and National Security hearing, where we were going to ask administration witnesses from State, from ACDA and from the Department of Defense to respond on the record to us, about instances around the Loral situation.

Staff on the National Security and International Affairs Committee told them in advance, we'd be asking them about what appears to be the launch of an encryption capability within the satellite and the '96 launch failure.

They were told in advance they'd be prepared to answer the question. When the hearing was held on Thursday, all of the witnesses said, I don't know. I don't know whether we lost any technology or not. The only one who answered was Mr. Reinsch for Commerce. And from Commerce he said, well, even if it was a part of that, it would have absolutely no impact on our national security.

On Tuesday, we had the same witnesses back in our hearing again with both committees. Except for Mr. Lodal, who chose not to show up for some reason at that follow-on hearing. Over the weekend, we had gotten specific information from DOD. And let me share with my colleagues what happened. DOD finally acknowledged for the first time publicly that when the launch failed, the '96 launch in China, the satellite in that launch contained the command processor boxes and circuit cards which contained very sophisticated encryption.

Now, Mr. Pike has chosen to trivialize the encryption. I have talked to NSA officials today and yesterday, and they have told me that if you're a career officer in the military and you lose an encryption device, you're court martialed. Yet, Mr. Pike has told us, oh, don't worry. It's no big deal. So what if they stole an encrypted circuit chip or two of them from a satellite that failed, that was a very sophisticated -- it doesn't matter. It's already available.

And my colleague made the trivial comment, it's already available, everyone has it. Well then, why would we court martial a member of the armed forces who in fact would allow one of these chips or one of these devices to simply be lost? That boggles my mind.

But then the DOD went on to say, yes, it would cause minimal impact on national security. Then the NSA went on to say as a result of that crash, Congressman, don't worry. We've changed all of our algorithms involving our encrypted satellite control systems.

Well, if it wasn't a big deal, why then would we change all of the encryption algorithms? Did that just happen to take place following the '96 launch failure? I think not.

I think it was because -- not because we gave the Chinese -- and don't try to distort the story, as my colleague on the other side tries to. Not that we are saying that the Chinese would then be able to activate our satellites around the world.

The point that we're looking at, and it will be a subject of ongoing hearings in this Congress, is whether or not by reverse engineering, that encrypted capability, the process that we use to protect the security of our command systems and our satellite systems may give the Chinese additional advantages. That's the issue at hand.

SENSENBRENNER: The gentleman's time has expired.

The gentleman from Washington, Mr. Nethercutt.

NETHERCUTT: Thank you, Mr. Chairman.

Welcome gentlemen, I'm sorry I wasn't here for your prepared testimony due to a scheduling conflict.

Mr. Pike, I want to follow up on what Mr. Weldon was presenting to you. I looked at your testimony, and you state that concerns have been raised about the potential for American technical information to be used by the Chinese to improve the accuracy and reliability of their ICBM force.

There is no indication that this has in fact happened. There is little reason to anticipate that it will happen, and even less reason for American concern should it happen.

Sir, what is your educational background?

PIKE: I studied as an undergraduate, technology and public policy at Vanderbilt. I didn't complete that degree.

NETHERCUTT: Do you have a college degree?


NETHERCUTT: So, you have no aerospace science degree -- you have no...

PIKE: Not now, never have.

NETHERCUTT: And no engineering background or degree or certification?

PIKE: Not a degree, no.

NETHERCUTT: Yet, you sort of cavalierly, sir, with all due respect to you, come to this broad conclusion. And I'm wondering on what scientific or technical or any, you know, logical basis you make these conclusions?

PIKE: Well, I've been working on these issues for the last 15 years at the Federation of American Scientists. I've been called on to testify before this committee, a number of other committees. I've

done consulting work for a variety of government agencies where my technical judgment has been accepted as making a useful contribution.

I think that if one reviews the evidence that is publicly available today, there's simply nothing that suggests that Chinese repairs to their launch vehicles have contributed to the reliability or the accuracy of their ballistic missiles.

NETHERCUTT: But you make that judgment, sir, based only on some sort of political experience and some consulting experience, not on any technical or educational...

PIKE: Certification...

NETHERCUTT: May I finish? May I finish?

But not on any, you know, background, technical...

PIKE: Right.


PIKE: Right.

NETHERCUTT: So, it's -- I suggest to you that it's speculative at best. And you must have seemed to have a crystal ball, because you say there is even less reason for American concern should it -- meaning the potential for American technical information to be used by the Chinese to improve the accuracy and reliability of their ICBM force -- should it happen.

In other words, you're saying no matter what technical information they get to improve the accuracy and reliability of their ICBM force, we shouldn't be concerned about that.

PIKE: Right.

NETHERCUTT: I find that hard to imagine, sir. With all due respect to your opinion, in a world that's a dangerous one, that nuclear proliferation I think is generally accepted as dangerous. The development of capabilities and, you know, military capabilities especially, in terms of the accuracy of weapons and the ability to launch them, seems to me to be pretty much on the minds of everybody in this country.

But yet, you seem to feel as though there is no great concern about that.

PIKE: In that particular case, right. I think that we face a lot of national security dangers in this world. That just doesn't happen to be one of them.

NETHERCUTT: Well, all right.

I respectfully disagree with you, sir. And I think the weight of all evidence based on the testimony I've seen that's come out on this subject matter is far against your position.

Have I any time, Chairman?

SENSENBRENNER: A minute and ten seconds.

NETHERCUTT: All right, I'll go quickly.

Mr. Milhollin and Mr. McKinney, quickly if you can in the minute that I'll try not to use here, that encroaches on your answer, I'd be interested in your perspective on advancements that we witnessed in the Dong Fang development over the eight years that the Tiananmen Square sanctions have been in place.

I understand it's difficult to link any particular scientific advance to the surreptitious acquisition of American technology. But I wonder if we've seen any unexpected or sudden improvements in Chinese capabilities?

MILHOLLIN: I'll defer to Mr. McKinney on that one.

MCKINNEY: I think so. Again, until this whole issue emerged just recently, I just followed the progress or the capabilities of the Chinese Long March vehicle sort of in passing. It was just part of the -- you know, I'd read Aviation Week that the launch had already blew up, whatever. But it does appear to me they've had a fairly rapid improvement of their capability.

NETHERCUTT: Mr. Milhollin, do you want to answer that, too?

MILHOLLIN: No, I said I would defer to the other witness.

NETHERCUTT: Thank you, Chairman.

SENSENBRENNER: The gentleman's time is expired.

That concludes the number of members of the committee that wish to ask questions. I'd like to thank all the members of the committee for appearing. I think this has been our best attendance and our most lively questioning session that we've had this year.

So, I'd like to thank each of the five of you as witnesses and who have been on the grill for the last two hours and 15 minutes for your thoughtful and insightful comments. These are all on the record. I think that they have added a lot to the debate on this subject. So, my thanks and the thanks of all of the members of the committee.

There being no further business coming before the committee, the committee is adjourned.


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