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MAY 21, 1998





COCHRAN: This morning we will examine the question of how a foreign country's satellite and intercontinental ballistic missile programs could benefit from launching commercial satellites that are built in the United States and whether the administration's export control policy for satellites is adequate to prevent technology transfers that could endanger our country.

We will hear from witnesses who will explain the evolution of our commercial satellite export policies and discuss specifically whether military benefits are derived by China when it launches U.S.-built satellites.

In 1996, President Clinton export licensing jurisdiction for all commercial satellites on the U.S. munitions list moved from the State Department to the Department of Commerce. This policy change was accompanied by an announcement that the Commerce Department would conduct enhanced reviews of satellite export license requests in order to safeguard American technology and national security.

That export licensing decision for commercial satellites would still be based primarily on the national security implications of the transfer and that an individual validated license would continue to be required through the export process.

The end of the Cold War, of course, did not signal the end of threats to America's security. In numerous hearings last year, this subcommittee took testimony from experts who provided many facts on one the most substantial post-Cold War threats to the United States -- the proliferation of weapons of mass destruction and missile delivery systems.

And while Russian and China were identified as the world's major proliferators, we learned last year that the United States itself is implicated in proliferation through increasingly lax controls over the export of so-called dual-use products, such as supercomputers, that have both civilian and military uses.

This morning we will explore the effect on American national security of the relaxation of U.S. export controls on missile and satellite technology.

Although there's a lot of interest in the reasons for the administration's commercial satellite export policy changes, and particularly in the questions that have been raised about the license issued to Loral Space & Communications, those issues will be examined later after a thorough review of the facts.

A senior official of one of America's major aerospace firms recently told my staff that whenever you connect a launch vehicle to a satellite there has to be some technology transferred. The question is whether the United States faces enhanced national security risks as result of this kind of technology transfer, and if so, what should be done about it?

The witnesses who will testify this morning are Dr. William Graham, former deputy administrator of NASA and science adviser to Presidents Reagan and Bush and currently president of National Security Research, Inc.; Mr. John Pike, director of the space policy project at the Federation of American Scientists; and Dr. William Schneider, undersecretary of state for security assistance, science and technology from 1982 through 1986 and now a fellow at the Hudson Institute.

It is the intention of the chair to ask each witness to make a statement. We have written statements that have been supplied to the committee which will all be printed in the record. And then we will have an opportunity after all the statements have been made to question the witnesses.

Senator Levin.

LEVIN: Thank you, Mr. Chairman. That question that we're asking today is whether using other country's rockets to launch U.S. commercial satellites could jeopardize our national security. And specifically, the focus will no doubt be on whether the United States should permit U.S.- built civilian satellites to China or other similarly situated countries for launching.

Apparently, our country does not have enough capacity to accommodate the needs of our own commercial companies and launches in the United States are considerably more expensive than launches in China.

These factors drove U.S. businesses to seek approval for their satellites to be launched in China starting in the late 1980s when President Reagan first approved the use of Chinese rockets in China to launch U.S.-made commercial satellites.

In order to send a sensitive item like a satellite to a foreign country like China, the owner must obtain an export license. As of March 1996, the owner is required to submit an application to the Commerce Department which convenes and inter-agency process to review it.

The Departments of Defense, State, Energy Department and Arms Control and Disarmament Agency all participate in reviewing the license application. For countries other than China, that's the end

of the process. Commerce can either approve or reject the application.

Prior to March 1996, and depending upon the type of satellite or satellite equipment, the licensing agency was the Department of State, which maintains the so-called munitions list, which included many commercial satellites and satellite equipment.

The Department of State limits licensing considerations to those of national security and foreign policy without consideration of economic or trade concerns. When the licensing authority was transferred to the Commerce Department, consideration of national security and foreign policy concerns continue, but consideration of U.S. economic interests was added and Commerce was made the licensing agency.

Relative to China, however, the licensing process doesn't reach a conclusion until the president agrees to a waiver. Unless, of course, there's a decision not to proceed.

Since the 1989 Tiananmen Square incident, the law prohibits any commercial satellite shipment to China unless the president, on a case-by-case basis determines that the shipment would be in the national interest.

This waiver, like the export license, involves an inter-agency process determining whether a waiver would be appropriate. The State Department is a major player in this decision. If the agencies agree, they send a recommendation to the National Security Council, which then conducts its own review and makes a recommendation to the president.

No license to ship a satellite to China may be issued by the Commerce, or could have been issued by the State Department when it had the jurisdiction, without that presidential waiver.

So in the case of China, the licensing process is really determined by the requirement of a presidential waiver, since no license can be issued without it and, obviously, once a waiver is granted, a license will follow.

Recent news stories have focused on the procedures that our government follows in granting licenses to send the satellites to China -- namely, the issue of which department should be in charge of approving the licenses and whether the grant of waivers of President Clinton has been appropriate.

But in looking at the last nine years in which American-made satellites have been sent to China for launching, we can see that both the choice of which department will be doing the licensing and the identity of the president granting the waivers has been immaterial to the outcome.

As you can see from the list which has been prepared by my subcommittee staff using data provided by the Congressional Research Service, of the 20 waivers granted for satellites sent to China for launching in the last nine years, nine were approved by President Bush

over three years and 11 were approved by President Clinton over four and half years. And in all but the last three waivers -- so in 17 of the 20 waivers -- the licensing agency was the State Department, which is the licensing agency if the exported item is on munitions list.

LEVIN: These facts strongly suggest that it has made no difference relative to China whether satellites were on the munitions list, and therefore licensed by the State Department, or whether the license is not on the munitions list -- the item is not on the munitions list, and therefore licensed by the Commerce Department.

Either way, the use of Chinese-launched rockets required a presidential waiver. And it made no difference whether the president was named Bush or Clinton. Those waivers have been approved.

In answering the question of whether we should simply eliminate the opportunity for a waiver and bar the shipment of civilian satellites or their parts to China, period, we need to look at the risks involved in continuing the current practice initiated by President Reagan.

First, does the act of using China's rockets to launch U.S. satellites involve the transfer of technology that will enhance China's ability to launch missiles? One witness today at least thinks there is such a possibility.

Second, there is the possibility that the failure of a launch -- the explosion of a rocket -- will allow pieces of U.S.-made satellites to fall into the hands of the Chinese. And I'd like to explore that question and the question of other possible risks with today's witnesses, as I know each of us will.

And Mr. Chairman, the United States is a technological giant in a world of commerce. And this hearing raises important questions about how we carry out that role. And I'm glad we're holding this hearing and I thank you for bringing us together.

COCHRAN: Thank you, Senator Levin.

Senator Thompson.

THOMPSON: Thank you very much, Mr. Chairman.

I appreciate the fact that you're holding these hearings to examine our process of export approval with regard to communications -- commercial communications -- satellites and whether or not we're risking the transfer of technology that might assist the Chinese with their ICBM missiles.

I think that we will have to conclude at the outset that no one -- no one here anyway -- can possibly know whether or not technology has been transferred in any particular instance that might compromise our interests.

I think it's clear that, with regard to the way these things work, the extensive communications between our commercial vendors and the Chinese concerning the operations of the missiles, no one knows exactly what conversations take place or what information might be passed on.

We do know that it's very much in the interests of our commercial enterprises for these missiles carrying these satellites to work. It's very much in the commercial interests of our domestic companies to have the Chinese, for example, carry these satellites. It's the difference between hundreds of millions of dollars per launch and somewhere between $25 and $85 million.

So going in, we know that our commercial interests, while totally patriotic, have a commercial interest in not only having the Chinese do this but -- and others -- but that they work, and that they not explode as happens on occasion, and that if there are problems that they perceive with regard to the missiles carrying these satellites, there is a tendency I'm sure to want to transfer enough information -- to the Chinese in this instance -- to make sure those missiles don't explode again, that they don't shake so much that they mess up sensitive technology, and that they have the capability of getting the job done.

THOMPSON: We can't know about all of what transpires. We can guess. We think in terms of probabilities or we can think in terms of possibilities.

We can think in terms of the risks that are there and we certainly need to think in terms of safeguards and what kind of process and procedure we need to have to minimize the risks that are there.

Of course, the underlying problem is that these commercial communications satellites contain militarily sensitive characteristics, cross-link capabilities where satellites talk to one another without having to go through the ground, the integration technology that can improve ballistic missile capabilities to make sure that the missiles are stable.

Many people think the intangible knowhow, not the hardware, not a black box, but the intangible knowhow that might be derived from learning more and more about how to make their missiles operable and accurate is more important to the Chinese than anything else.

Satellite dispenser technology -- the same technology that allows these multiple satellites to be launched on one launcher -- is the same kind of technology that's needed for multiple warhead missiles.

There's no question that the standards have been relaxed with regard to the transfer of this technology and the export licensing. State and commerce simply approach things differently, as they're supposed to do.

Commerce has more than one interest. Commerce has the commercial interest in addition to the national security interest. I think it should be pointed out I'm not sure how much we can determine by the fact that there have been waivers in various administrations and some are state and some are commerce.

I'm not sure, without examining each one, how much we can determine about that and how -- or what the result might have been had they been with another agency.

But we do know that the shift that this administration made in 1996 of the responsibility in this area from commerce -- or from the State Department to commerce -- was contrary to the determinations that have previously been made by interagency groups, both in the Bush and the Clinton administrations.

I think it's important to point out that, in the Bush administration, the interagency group established criteria with regard to militarily sensitive characteristics pertaining to these satellites.

And they determined that, with regard to satellites that did not contain these militarily sensitive characteristics, that they could be transferred to the jurisdiction of commerce.

And about two dozen items were so transferred and about half of the satellites, of which had no such characterizations. That was following the recommendation of the two-year study by this interagency group. And what happened in 1996 was that the interagency group, at that time, determined that that situation should stay the way it was -- that is if these satellites did not contain militarily sensitive information, it was OK to be under the commerce jurisdiction. But if they did, they should remain at state.

Secretary of State Christopher agreed with that. The president overruled his own interagency group and the secretary of state, his own secretary of the state at the time.

THOMPSON: So the difference is, with regard to the nature of the technology or the nature of the satellites that were being transferred -- number one -- and the fact that, in one instance, the president was following the recommendations of his interagency group, and in another instance, the president overruled it.

It was overruled when Secretary of Commerce Ron Brown appealed the decision of Secretary of State Warren Christopher. And that's the way that that came about.

The GAO looked at all of this, and they say that the implications of this transfer of these militarily sensitive characteristics with regard to these satellites to commerce -- they say that the implications of this are uncertain.

I do not think that we can consider this matter without the underlying consideration of who we're dealing with. We know the Chinese have sent missiles to Pakistan. They've sent technology to Iran. They've sent nuclear equipment to both. They've conducted missile tests off the coast of Taiwan. And apparently, according to reports, the CIA has determined that 13 of their 18 long-range ballistic missiles have nuclear warheads aimed at American cities.

They have been caught in violation of their solemn agreements with regard to these matters. They're apparently aggressively trying to improve their missile program as a part of a military build-up. This is what we're dealing with here.

So I appreciate the fact that you're having this hearing, Mr. Chairman, and look forward to this and saving other matters for other times -- several what have been called coincidences that we will look into later on, such as the fact that the Chinese arms dealer Wang Jun visited Mr. Brown at commerce and attended a White House coffee on the very day that President Clinton approved the launch of four satellites by the Chinese on February 6th, 1996. And of course, Mr. Wang Jun had millions of dollars at stake in a Hong Kong satellite company.

Another coincidence that we will into later is the fact that, between November of '95 and June of '96, Loral folks contributed $275,000 to the Clinton re-election. And the last coincidence we will look into later on is one concerning Mrs. Liu who, apparently, after the president announced this shift to commerce, facilitated the transfer of a little under $100,000 to the Democratic National Committee. Ms. Liu, of course, is an executive or a lieutenant colonel in the Chinese military. Her father's the highest ranking member in the military and in the leadership of the Communist Party.

And incidentally, the company of Mrs. Liu's parent company tests and provides equipment for Chinese -- the Chinese nuclear arsenal and The Great Wall Industries Company (ph). The company also launches private satellites. And that company, incidentally, is the one that was sanctioned by this country back in '93 for transferring satellites to Pakistan.

So those are all matters that we will save for another time. But I look forward to that also.

Thank you very much.

COCHRAN: Thank you, Senator Thompson.

Senator Collins.

COLLINS: Thank you very much, Mr. Chairman.

I want to start by commending you, Mr. Chairman, for your long leadership in the area of technology transfer. I know this is an issue that has been of great concern to you for many years, and you've been a leader in Congress in this area.

Certainly, recent events have conspired to give the subject of this hearing this morning even more relevance than usual.

COLLINS: On February 15th, 1996, a so-called Long March booster rocket lifted off its launch pad in the People's Republic of China only to explode spectacularly some moments later. Because this explosion destroyed a $200 million satellite owned by Loral Space and Communications and Hughes Electronics, February 15th was a grim day for these American companies.

This launch failure, however, was perhaps not entirely unwelcome from the perspective of the United States national security interests.

It has recently been reported that at least 13 of China's 18 intercontinental ballistic missiles are targeted on American cities. Significantly, if ever launched, the nuclear warheads on these missiles would be carried to their American targets by rocket boosters similar to the Long March system that exploded on that day in February 1996.

Significantly, the defects that the two American companies subsequently found in the exploding Long March booster were reportedly symptomatic of more general engineering or design flaws in Chinese rockets. If the Long March blew upon on launching, in other words, we could hope that if the Chinese missiles were ever released against Washington, Chicago, New York, Denver, Dallas or San Francisco, they too might well blow up.

Now ordinarily one might think that a previously undiscovered defect in Chinese ballistic missiles would be good news for all Americans. Loral and Hughes, however -- and with them it appears the White House itself -- did not think so. The details of how these companies and the administration cooperated to facilitate improvements in Chinese missile reliability now seems likely to be the subject of considerable investigation by Congress.

The reports of this missile episode, however, highlight the importance of the export control matters that we are considering today. They suggest some very real problems in the way that U.S. policy attempts simultaneously to promote American business interests and to protect American national security.

Security policymaking in a democracy often requires enormously difficult trade-offs. Among these many balancing acts is the tension between free trade and export controls. No matter what the economic benefits from free trade, however, surely arming potential adversaries with weapons they cannot otherwise obtain is foolhardy.

It is on the strength of this insight that we have built our system of national security export controls. Today, they revolve

around such things as ICBM launch-control systems, supercomputers, and multiple warhead delivery systems.

With regard to ICBMs, we should make no mistake. The technologies used in military and civilian space launch systems have always been inexorably intertwined. The space programs and the ICBM programs in both the United States and the Soviet Union, for example, shared a common origin in Hitler's V-2 rocket program. The V-2 mastermind Wernher von Braun, in fact, went on to help us build our earliest ICBMs and to develop our civilian satellite program.

Space launch technologies have always been dual-use technologies.

Now I do not mean to suggest that we can never insulate civilian technology transfers from military ones. My point simply is that it takes great care and diligence to do this correctly. It requires constant attention from real security professionals. And it requires the White House not to interfere with the decisions of those professionals.

There is considerable reason to believe that our government has failed to follow these requirements. I look forward to hearing the expert witnesses that we have before us today. And again, I commend the chairman for his long-standing leadership in this area.

COCHRAN: Thank you very much, Senator.

If we now can move to the statements of our witnesses, we'll call on Dr. Graham first, and Mr. Pike and Dr. Schneider will follow in that order.

Dr. Graham, welcome.

GRAHAM: Thank you, Mr. Chairman, senators.

I'd like to briefly address the benefits of commercial space launch assistance and use for foreign intercontinental ballistic missile programs this morning. The design, engineering, testing and operation of ballistic missiles and of space launch vehicles -- sometimes called SLVs -- have a great deal in common. This is particularly true for intercontinental ballistic missiles.

The maximum velocities of ICBMs can be slightly less than that of SLVs. But from an orbital mechanic's point of view, ICBMs can be considered space launch vehicles whose orbit intersect the earth at the target.

There's a misperception in some circles that ICBMs are more sophisticated and complex than space launch vehicles. In reality, the opposite is true.

The preponderance of SLVs are ICBMs with additional elements. Put another way, if you have a special launch vehicle, you also have an ICBM -- by removing those additional elements, the satellite in particular, and adding a re-entry vehicle containing a nuclear or other type of warhead.

Most of the current U.S. unmanned space launch vehicles are derived from ICBM systems and are closely related to them. This is true for foreign countries as well.

In the case of China, the Long March III (ph) was derived from the DF-5 ballistic missile technology. And India's Agni medium-range ballistic missile is based on the design of its first space launch vehicle, the SLV III, which in turn is a copy of U.S. space launch vehicle.

Space launch vehicles produced in nonmarket economies have been offered to U.S. and other satellite manufacturers at attractive prices for launching high altitude geo-synchronous communication satellites -- which support the demand for long distance telephony, data transmission, pagers, radio feeds and television feeds, as we've seen

this week with the failure of the Galaxy 4 satellite, and also in the coming years, lower altitude satellites to provide infrastructure for commercial remote sensing, cell phones and pagers.

Because these commercial satellites are expensive and time- consuming to build, and are instrumental in generating profits for the communications industry, American satellite manufacturers have strong incentives to ensure that foreign SLVs transport their satellites to the intended orbits reliably and employ the satellites in good working order.

This assistance, however, can equally aid in the development and the reliability of foreign ICBM's.

The essential elements of an SLV, space launch vehicle, are its propulsion; structure; staging; guidance and control; ground support and launch equipment and procedures; overall systems integration; payload; satellite, or re-entry vehicle with warhead; the payload development -- the payload deployment; and the development, testing and engineering and facilities of the space launch vehicle.

These essential elements of an ICBM are the same with the exception of the payload, which for an ICBM, as I mentioned, is a re- entry vehicle containing some type of warhead, rather than a satellite. And I will briefly discuss each of these elements.

Propulsion -- there are basically two types of propulsion systems used in rockets -- liquid fuel propulsion systems and solid fuel propulsion systems. The liquid fuel systems are all derivatives and extensions of the B-2 technology that was developed during World War II, and that applies all the way from the B-2 itself to the space shuttle main engines that are used today.

These liquid propulsion systems are very efficient, and at the same time, require some care in handling in preparation for launching. The propellants themselves are very, very energetic chemicals that have to be managed by experts.

Solid propellants, on the other hand, are much more inert materials until they're ignited and are much more appropriate for a ballistic missile force that has to stay on a high state of alert for long times -- years -- and still launch in very short notice, minutes. This is an advanced ballistic missile force, and in fact, similar to the technology that the U.S., and by and large, Russia use today.

Both of these technologies can be used for space launch vehicles and both have been used for space launch vehicles. In general, developing countries tend to prefer the greater efficiency of the liquid systems for their first space launch vehicles.

And in terms of structure, ICBMs and space launch vehicles must both be very light, since they're being accelerated against the force of gravity to velocities in the range of 24,000 feet per second, about 10 times the speed of a typical rifle bullet, but still must be very strong. The acceleration of launch produces several gravities worth of load on the structure during the ascent phase, and the aerodynamic loads are large during portions of the trajectory when the vehicle is high in the atmosphere.

Structural requirements place a premium on materials designed and fabrication for both ICBMs and SLVs. And these structures are very highly integrated in order to save weight. And that integration goes through the payload itself, either the warhead or an ICBM or the satellite.

GRAHAM: The structural requirements place a premium on materials, design and fabrication for both ICBM and SLVs. And these structures are very highly integrated in order to save weight. And that integration goes through the payload itself, either the warhead for an ICBM or the satellite.

Staging is a common procedure designed to throw away part of the mass of the space launch vehicle or the ICBM before it gets to orbit. So you've heard of one-, two- and three-stage rocket systems in which elements are sequentially discarded after the fuel has been expended.

Stage separation, which is commanded by the vehicle's control system immediately after the propulsion of the stage is terminated, is used to minimize the amount of structure, and furthermore, is a very delicate process that has to be done quite precisely so that it doesn't disorient or otherwise damage the stages remaining to go to orbit, or for that matter, disrupt the satellite.

Guidance and control subsystem of both space launch vehicles and ICBMs keep track of where the vehicle is and where it's supposed to go. Where it's supposed to go is a combination of velocity and location in orbit for a space launch vehicle or a point on the surface of the earth for an ICBM. This system calculates the direction and duration of the rocket thrust that must be commanded to reach the target and then controls the direction of thrust so that it satisfies that calculation. This process occurs several times each second during powered flight.

In the past the location of the vehicle during ascent was determined by inertial measuring units, comprised of gyroscopes and accelerometers. But the opportunity exists today to use U.S. global positioning satellite systems and the Russian GLONASS system to establish the rocket's location with high accuracy by reference to precision satellite beacons.

While high-precision inertial measuring units are expensive and difficult to make, GPS and GLONASS assisted navigation units are potentially more accurate and less expensive, and I might add the basic elements are widely available today.

ICBMs designed to destroy targets specifically hardened to nuclear attack require a more accurate guidance than do space launch vehicles. However, for attacking all other targets, such as cities, space launch vehicle guidance systems are very sufficient in their accuracy for ICBM use as well.

Ground support and launch equipment and procedures are also an important part of both ICBMs and space launch vehicles. And in fact, they are the same for the propulsion and guidance elements of both these types of systems.

From a personnel standpoint, space launch vehicle crews are automatically capable of being ICBM launch crews.

The ground support for preparation, monitoring and checkout of the specific payloads for space launch vehicles and ICBMs is different, since the payloads are different. But satellite payloads for SLVs tend to be more complex and require more advanced ground support than do ICBM warheads.

A very important area that is sometimes overlooked is the overall system integration, which in general is a field in which the U.S. has world leadership. Even after the individual components and subsystems of a space launch vehicle or ICBM are functioning properly, they must still be integrated into a complete system that can work together.

Instabilities in propulsion, control or other subsystems often depend upon the coupling of two or more subsystems in unanticipated ways. Incipient instabilities can lead to rough rides to orbit. Additional mechanical stress is placed on the payload, and extreme manifestations of these instabilities can, and unfortunately has, caused the breakup and destruction of the entire vehicle in powered flight.

The integration of the propulsion, guidance control, structure, and aerodynamics is the same for space launch vehicles and ICBMs, while the integration of the payload is unique to the specific design. However, the analytical tools, such as the structural dynamics analysis software, are the same for both and are used widely.

GRAHAM: The integration of the payload, like other aspects of system integration, require an intimate knowledge of both the payload and the launch vehicle. In the case of a space launch vehicle, a great deal of detailed technical information must be exchanged between the satellite designers, the satellite attachment and aerodynamic shroud designers, and the vehicle designers to integrate the payload into the system. And there must be a close working relationship between the space launch vehicle and satellite engineers and technicians to assure a successful launch mission.

Mr. Chairman, this is not like putting a load in the back of a pickup truck. This is a very, very highly integrated system.

The more that can be done to improve the ride to orbit by reducing the mechanical stresses, the more that can be done throughout the SLV system to increase its overall reliability, and the more likely that a successful launch and orbital insertion will be achieved. Measures taken to increase the performance and reliability of space launch vehicles translate directly into performance and reliability improvements in ICBM's.

U.S. and Russian ICBM development programs have used more test flights than have their space launch vehicle counterparts. This is a result of U.S. and Russian efforts to achieve both high reliability and high accuracy, goals that may not be as important to other countries.

Payloads for space launch vehicles and ICBMs are different, and that has been noted in the opening statements and is certainly worth repeating. On the other hand, the integration problems, as I've mentioned, are the same and all the ascent problems are very similar.

Payload deployment is another area of common technology. The release of a single satellite payload and a single warhead payload are similar operations. Both require the proper deployment, positioning and orientation of the payload. The deployment of multiple satellites from the space launch vehicle and multiple warheads from the ICBM are also similar operations.

The Iridium system, for example, which has been deployed from Chinese launch vehicles among others, deploys several satellites during one mission and requires a deployment platform to do that. This, of course, is very similar to the technology for multiple reentry vehicles, such as we have on our Minuteman III system, and for that matter, Peacekeeper.

Information and experience gained from one of these activities can be applied directly to the other.

The development testing, engineering and facilities is another area of common technology. They are very similar for those required for space launch vehicles and for ICBM vehicle development. These include engine test stands (ph) and testing, guidance and navigation test laboratories and facilities, test light ranges, and vehicle diagnostics and telemetry systems.

One, perhaps the most critical technology that can be transferred is the engineering skill and experience required for interpreting and rectifying design problems that occur during system development, and are reflected in the telemetry and system performance during testing.

In addition to advancing the ICBM capabilities of other countries, U.S. assistance in supporting and developing space launch vehicle capability assists these countries in being able to use space for military purposes more effectively. These purposes include reconnaissance, communications, meteorology among others.

Such capabilities can then also be provided in term to other countries for military, political or financial support.

GRAHAM: Transferring space launch technology to the developing world provides space access to many potential adversaries of the U.S. and is a serious matter that carries substantial risk to the U.S. and its allies around the world.

Thank you, Mr. Chairman.

COCHRAN: Thank you very much, Dr. Graham, for your statement.

Mr. Pike, we will now here from you.

PIKE: Mr. Chairman, members of the committee, I appreciate the opportunity to testify to you this morning -- a morning in which the world is a more dangerous place than it was a month ago or a year ago, and a morning on which I think it's going to be a more dangerous place a month and a year from now.

We're witnessing the birth pains of an arms race in the Indian subcontinent, rumors of war in Kashmir. Ratification of the Comprehensive Test Ban in the United States or the START II agreement in Russia seem less likely than even a few weeks ago.

And this committee, in particular, has been instrumental in alerting the nation to these and other dangers, many of which transcend the traditional Cold War litany. Fortunately, however, the subject of today's hearing does not rank very high on this list, and I welcome this opportunity to inject some much needed balance to the increasingly controversial questions of the relationship between missile and space launch technology and the adequacy of existing export control mechanisms to maintain this distinction.

You might recall that Werner von Braun aimed for the moon and hit London. Since the dawn of the space age and the missile area, the primary distinction between space launch vehicles and missiles has been attitude, and only secondarily, altitude.

The first American, Soviet satellites were launched on converted military missiles, and derivatives of these missiles continue to be used by both countries.

It remains trivially true that many of the major technical arts applicable to the challenges of missilery are equally applicable to space launch operations. The more challenging question is to unravel the actual military significance of specific technologies.

Concerns have been raised as to whether the interactions with American commercial satellite operators could have led to the transfer

of technical information that would have been useful to the Chinese in improving the reliability or capability of their missiles.

Given the ongoing investigations of these matters and the consequent limited public availability of detailed technical information, it's difficult to form a definitive view on this matter, but several general observations are possible and necessary at this juncture.

For nearly three decades, the Chinese have maintained a small arsenal of ICBMs capable of targeting American cities. It is the fact of the existence of this force, rather than the fine-grain details of their technical characteristics, that has defined their existential deterrent posture relative to the United States.

The space launch industry is extremely sensitive to questions of launcher reliability with launchers exhibiting reliability lower than the prevailing 90 to 95 percent reliability rates, placing potentially prohibitive insurance premiums. Unlike space launch vehicles, the difference between 75 percent and 90 percent reliability of the Chinese missile force would have no material bearing on the quality of the existential deterrents in terms of American or Chinese calculation.

High confidence in high reliability of missiles has been an abiding concern of the United States. But we face a very different operational requirement of achieving prompt hard target kill against a large number of Russian ICBM silos. I am concerned that in the absence of rampant and significant reductions in American and Russian nuclear arsenals, China may over the coming decades build up to current American force levels if we choose not to build down to there's and develop an appetite for high confidence and reliability.

Hopefully, we can forestall this development. But should we fail, we will not confront a Chinese arsenal of liquid fuel DF-5s, such as they have today, but rather a more numerous arsenal of their new solid fuel DF-31 and DF-41 missiles.

Any insight, however marginal, into the reliability of the DF-5 gained in the 1990s would surely be of vanishingly little relevance to the reliability of the utterly unrelated 31s and 41s deployed decades hence.

While accuracy is also of interest in the missile and launch fields, divergent considerations apply. Satellite operators generally set standards for launch vehicles, placing their satellites into some proximity of the destination orbit. But the margin for error in the real world is normally many miles. And since satellites always carry their own maneuvering propellant, it's left to the satellite rather than the launcher to reach the ultimate destination. And in the case of deploying multiple satellites, this deployment can take place over a period of hours or days rather than the minutes found in the case of a multiple warhead missile.

The warheads carried on missiles have no such supplementary guidance or propulsion capability, and rely entirely on the missile and equality of the re-entry vehicle body to reach their terrestrial destination.

The accuracy of existing Chinese missiles is not well- characterized in the open literature, but is surely denominated in miles, rather than the hundreds of yards characteristic of American missiles.

Such accuracy is consistent with the deterrent role of the existing Chinese missile force.

PIKE: Close does count in horse shoes, hand grenades and global thermonuclear war. It matters little to China or America precisely which part of Los Angeles is the actual ground zero. It should be recalled that the atomic bomb dropped on Nagasaki actually missed by a wide margin, a fact lost on the citizens of that unfortunate city.

Again, over time, this may change, and we may a few decades hence confront a Chinese nuclear arsenal that is both as numerous and as accurate as that deployed by the United States today.

While this would represent a profound policy failure on the part of the United States to the extent that it was in our control, the potential transfer of technical data related to current Chinese launch vehicles would not materially contribute to this failure.

And given the ongoing investigation of allegations, it's also difficult at this point and in this forum to provide a definitive answer to the adequacy of current export control regulations. But the course taken over this decade with respect to the Chinese launch vehicles has had diverse benefits, and on balance, manageable risks.

This set of policies has strengthened the American satellite industry, enhancing our global dominance of this strategic sector, and in the process, increasing the diversity and capability of communications available to our military forces worldwide.

It's engaged the energies of the Chinese aerospace industry and perhaps moved them toward seeing space development -- rather than missiles -- as a central focus of their emerging role in the world. It's given us leverage in discouraging their transfer of special weapons technologies to other countries, notably Pakistan.

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

We should not allow controversies to obscure the fundamental soundness of this approach, but even more critically, we should not allow the current controversy to distract us from the more-pressing and significant challenges American security faces today.

Thank you.

COCHRAN: Thank you, Mr. Pike.

Dr. Schneider, we will hear from you now.

SCHNEIDER: Thank you. Thank you very much, Mr. Chairman. And I appreciate the privilege of testifying before this committee and also appreciate your leadership on this particularly important subject. I'll just summarize a few remarks concerning the regulatory aspects of this problem.

The U.S. government has historically regulated communication satellites, even when they were having strictly commercial applications, because of the close association of space launch and space satellites with national defense purposes.

And over time, the enabling technologies for this civil and military applications began to converge, and there were relatively few differences between them for either civil or military applications of communication satellites.

The primary differences between the commercial communication satellites and military communication satellites was focused on measures to assure the survivability of those satellites. And those measures were generally developed through the Department of Defense and hence justified the regulation of the communications satellites even for commercial purposes under munitions lists auspices.

Due to the growth in space launch services reliability, as Dr. Graham and Mr. Pike referred, especially in Russia and China, it created the possibility of creating a worldwide commercial launch industry. This coincided with the U.S. government's policy change seeking to renationalize the space launch industry and convert it into a commercial industry.

However, for national security as well as the commercial considerations, the U.S. government chose, in the 1980s, to limit the use of Russian and Chinese space launch services. This was done through continuing munitions list licensing of communications satellites and a system of launch quotas because of the fact that China and Russia at the time were nonmarket countries.

A policy change undertaken, as referred to in 1996, is an important philosophical change. And I think it should be noted -- because of the difference between the concept of munitions license regulation and commercial or Department of Commerce regulation -- the philosophy under munitions licensing is that the matter to be exported is exported for achieving the national security purposes of the United States. And nothing is permitted to be exported that addresses those purposes unless specifically authorized.

SCHNEIDER: And as a consequence, when a communications satellite or space launch services or anything else that is identified on the munitions list as proposed for export, the technology is very thoroughly disaggregated to the point where perhaps two dozen offices in the national security community, the Department of Defense, Department of State, intelligence community and other agencies, depending on the details of the technology, will review it very carefully based upon very detailed documentation required to be submitted by the applicant.

And this differs from the philosophy of products that are licensed under the Department of Commerce licensing, which is mainly done to promote the economic interests of the United States. And the aim is to facilitate the passage of this technology or services or hardware into international commerce for the benefit of U.S. industry. Typically, the technology associated with it is focused primarily on the functionality of the system. That is, what purpose would it be used for rather than a disaggregated review of the technology as is the case in munitions licensing.

And the -- these philosophical differences are important because as we -- to the degree to which technology is transferred under a commodity jurisdiction change from the munitions list to the Department of Commerce list, the technology is more likely to go into the public domain and indeed, to be done in a way that is generally not subject to U.S. monitoring.

And I think the trends in this can be underscored by the degree to which liberalization has taken place. When I served in the Department of State in the mid-'80s, the Department of Commerce issued nearly 150,000 validated export licenses due to this equipment.

In fiscal year '97, that figure dropped to about 11,000, underscoring the dramatic degree to which advanced technology has been liberalized, and indeed the most common items licensed on the Department of Commerce list is shotguns. So the degree of liberalization is indeed very substantial. If added to that, there is commodity jurisdiction change, based on the philosophical differences between the two licensing systems, it reflects a change in underlying public policy.

And the circumstances that we face with communications satellites is that it is on the -- at the nexus of the problem of balancing between these commercial aspirations of the United States, which are extremely important as our society and economy are information-driven, and our national security concerns. And I appreciate the work of this committee in trying to understand the issue and achieve appropriate balance in them. Thank you, Mr. Chairman.

COCHRAN: Thank you, Dr. Schneider for your assistance to the committee and for your statement.

Dr. Graham, you pointed out how there are a lot of similarities between space launch activities and Intercontinental Ballistic Missile activities in terms of the testing and building and launching of these types of vehicles.

COCHRAN: We happen to have a chart here that was prepared for the committee by the Central Intelligence Agency, although it is unclassified and it's available there. And it compares different parts of the missile system with a space-launch vehicle.

Does this, in your view, and based on your experience and knowledge of these systems, describe in a helpful way or an accurate way how interchangeable so many of the parts of these systems are?

GRAHAM: Yes, Mr. Chairman. I think this is a good representation of it.

I would only add that for Third World countries that are developing longer-range rockets, they can also take the strap-on boosters you see on the space launch vehicle and apply them to the ballistic missile as well. So there is, in fact, a little more commonality than that chart shows, but it's basically correct.

COCHRAN: In 1993, on the question of whether the State Department would continue to license technical data-sharing for the commercial satellites already moved to the Commerce Department's licensing jurisdiction, a Defense Department memorandum to the Department of State said, and I quote, "While all of the USML..." -- meaning U.S. munitions list -- "... controlled technical data is of concern, that technical data which covers launch vehicle integration services is of the utmost importance to DOD and the missile tech community because any technical data on the launch vehicle other than electrical and mechanical integration data directly relates to ballistic missile proliferation concerns."

My question is -- Do you think the Department of Defense memorandum in 1993 is still a valid expression of concern?

GRAHAM: Yes, Mr. Chairman. If anything, I think it was an understatement of the concern. It excludes the mechanical integration information but, in fact, the mechanical integration of the payload with the booster is very important.

For example, both ballistic missiles and space launch vehicles tend to bend while they're flying upwards -- sort of like this. And the control system has to be able to take that out by dynamic control. The weight of the satellite or the payload on top is also moving back and forth. You can't let that body -- it's called the body mode -- either damage the satellite or its mount or somehow have that mass at the top of the missile adversely affect dynamical response of the rest of the vehicle.

So I think, if anything, the concerns are a little more extensive than they voice there. But they're basically correct.

COCHRAN: In the next year, January of '94, there was a Washington Times article which reported that licenses had been approved for the launch of two Martin Marietta satellites -- EchoStar (ph) and AsiaSat II (ph) -- in China.

The Commerce Department export licenses reportedly permitted martin Marietta to assist the Chinese with integration analysis of the satellites to the space-launch vehicle. According to the article -- and I quote from it -- it said, "A Martin Marietta spokesman confirmed that his company's sale would include an integration analysis package." End of quote.

My question to you is -- What is this integration analysis that is being discussed there? And how could it be helpful to Chinese missile programs?

GRAHAM: The integration analysis is the analysis of the overall performance of the space-launch vehicle with the satellite on board. It's a very important part of space launch activities because if, in fact, the missile or the booster is not well suited to the satellite launch -- if it provides a rough ride or high accelerations to the satellite -- one of two things will happen.

GRAHAM: Either you'll have to put more structure in the satellite, which means you have less useful payload in it, or you will experience a failure in the satellite either from the mechanical stresses on it or on the attachment it has to the space-launch vehicle.

Similarly, if the satellite isn't the right mass and balance, it can affect adversely the rocket booster itself. So there is not a way to separate the integration of the satellite with the integration of the space booster. They have to be done as one single unit, and you have to understand the performance of that whole system to have a successful launch to orbit.

There's not a -- technically not a divide between what the booster design people need to know and what the satellite people need to know. They both need to know almost everything about the mechanical and electrical characteristics of the system.

COCHRAN: Your statement is, in essence, a conclusion based on your experience and knowledge of these systems that, by allowing China to launch U.S. commercial satellites, we're actually helping improve China's missile and satellite launch capabilities and their infrastructure.

Does this also relate to providing a higher state of readiness for those involved in China in these programs?

We hear a lot about training and being able to immediately respond in cases of emergencies. Does launching U.S. satellites also help keep China's launch team in a higher state of readiness than it otherwise would be?

GRAHAM: Well, it certainly provides strong economic support to the cadres of rocket scientists and engineers that China has. We essentially pay for part of their training and their infrastructure. That gives China an overall greater ballistic missile as well as satellite launch capability.

It also keeps those cadres active in preparing launching rockets, and that again helps their readiness to launch whatever China dictates that they launch.

Finally, in the longer run, the next step in guidance systems, for example, is going to be to global positioning satellite-assisted guidance -- both for space-launch vehicles and for ICBMs. And that will make both of these much, much more accurate in their performance and ability to hit targets.

COCHRAN: Dr. Schneider, in your discussion of the regulatory regime and its evolution and the changes that have taken place of the last several years, you mentioned the impact of the change of philosophy as well as regulation that occurred in 1996.

I have a copy of a letter that was written to the chairman of the Senate Foreign Relations Committee from the Department of State signed by Barbara Larkin, who was assistant secretary for legislative affairs. It's dated September 20, 1996, and it's notifying the United States Senate -- specifically the chairman of the Foreign Relations Committee -- of these changes that had taken place under the Export Administration Act.

One of the things -- and I'm going to -- I'm going to give you a copy of this so you can -- you can have it available to you -- one thing that is mentioned in this letter is that not only is there a removal from State Department to the Commerce Department, from the munitions list to the so-called Commerce Control List of militarily sensitive components of commercial satellites, but it noted that additional controls would be placed on these items by commerce to bolster its export control regime.

And then the letter says this. "These satellites would not be eligible for a Commerce Department general license." The question (audio gap) what is meant by the terms general license? Is this some kind of jargon for saying a formal export license from the government is not necessary to export the item? And how is this different from an individual validated license?

SCHNEIDER: Thank you, Mr. Chairman.

SCHNEIDER: The general destination license is essentially equivalent to and not requiring an export license. The technology that's so identified or the product that's so identified can be exported by the exporter without need for additional authority from the U.S. government. The individual validated license which is, that is the category I mentioned that has been the beneficiary of substantial liberalization from about 150,000 now down to about 11,000 in fiscal 1997. Individual validated license means that the applicant has to provide information on what he wishes to export and who the end user is, and other bits of information relating to it. And that is assessed by the Department of Commerce and in some cases referred to other agencies. And if the agencies agree, then the Department of Commerce will issue a license for the intended purpose. And that is an individual validated license.

COCHRAN: Thank you, for the purpose our record, I'm going to ask that a copy of the letter dated September 20, 1996 be included in the record. Senator Levin.

LEVIN: Thank you, Mr. Chairman. First I'd like to go back to 1988 when President Reagan decided to allow for the transfer of satellites for Chinese launch, and that was apparently a highly controversial decision. It was opposed by many members of Congress. This is what The Washington Post article says, September 10, 1988, which I would ask be made part of the record, Mr. Chairman.

COCHRAN: Without objection, it will be made a part of the record.

LEVIN: It says that President Reagan in a move that's designed to expand trade between the United States and China is given conditional approval to plans to launch three American made communications satellite on China's Long March (ph) rocket boosters, the State Department announced yesterday. If the decision is not blocked by Congress or by a special Western bloc commission that monitors technology transfers to communist nations, it will mark the first time U.S. satellites have been launched from a non-Western or communist country.

The administration's approval of export licenses, and I'm shortening this, that's why I want the whole article in the record. The administration's approval of export licenses for the satellites was condemned by several members of Congress as threatening national security by giving the Chinese an opportunity to see American satellite technology. China has promised it will not examine the satellites which will be shipped for launch in sealed containers. But some U.S. officials have said that there is no way to ensure the security of the satellites once they're in China awaiting launch.

So apparently this decision, it just says here, by the way, this is a victory, according to The Post for the Chinese government, 1988. Apparently, it was a highly controversial decision at the time because of some of the concerns Dr. Graham, which I heard from you this morning. The very launch of an American satellite from a Chinese rocket contributes to the advancement of rocket science in China. Is that fair?

GRAHAM: Yes senator, that's fair.

LEVIN: Now, since that time and since Tiananmen Square, there's been a requirement for a presidential waiver for a transfer of a satellite for a Chinese launch. And those waivers have been forthcoming under both, President Bush and President Clinton. There must be a national security review as I understand it before those waivers. And that waiver in effect supersedes the licensing requirement because the agency, whether it's State Department or Commerce Department is going to license something where there's been a presidential waiver.

LEVIN: Once it's gone through that wavier process I doubt that there's very much left for the agency to decide. The waiver process kind of supersedes the licensing process. If the president waves a transfer it's kind of hard to imagine his Commerce Department or his State Department is not going to issue the license following that.

Do you know, Dr. Schneider, whether or not the number of agencies involved in that presidential review are fewer than they are for a munitions list review when there's a State Department licensing? Do you know if the number of agencies is fewer?

SCHNEIDER: I'm not intimately acquainted with the process that's being used, but my expectation would be that the same agencies at the cabinet level would be involved. The issue that is not known to me is the degree to which the technology is in fact disaggregated and sent to the special offices that have the particular knowledge of the technology, and that might make a difference in how the review would come out.

LEVIN: So within each agency you're not sure whether or not inside that agency it goes to the same sub agency groups for review, but it might.

SCHNEIDER: It might yes. I would hope it would.

LEVIN: Now yesterday the House passed an amendment which reverses this policy and says no more satellites can be transferred to China. It basically reverses the decision. There's also a couple other amendments too which change the munitions list issue, but the fundamental amendment adopted yesterday by the House said no more satellites can go to China for launch.

Regardless of what President Reagan's done, what President Bush had done, what President Clinton has done in terms of permitting this with waivers, or with scrutiny, the fundamental issue here seems to me is the one that Dr. Graham has raised and a few others have commented on. Should the satellites be permitted to go to China for launch? By a vote yesterday of 417 to 4 following I believe a 10 minute debate on the amendment, but a much longer debate on the whole issue, the House of Representatives said that there will be a prohibition -- here it is, no satellites the United States in origin, including commercial satellites and satellite components may be exported or re-exported to the Peoples Republic of China. Do you agree with that decision Dr. Graham?

GRAHAM: Senator Levin, I -- just as a brief word of background. I first worked on ballistic missiles in 1964 when I was an officer in

the Air Force and have worked on several ballistic missiles since then and also helped, when I was at NASA, resurrect the U.S. Unmanned Space Launch Vehicle Program. So I have considerable familiarity with both of those. I was the director of the Office of Science and Technology Policy when the issue came forward in 1988, as well as science adviser to the president, and based on my experience at that time, I opposed sending those first three satellites to China for launch. I still think that an unsound policy and therefore think the measures the House have taken yesterday are in fact correct.

LEVIN: In 1988 you opposed President Reagan's action?

GRAHAM: No Senator. There was an inter agency review of the prospect of allow those satellites to be transferred to China for launch. And during that inter agency review process I opposed them being transferred.

LEVIN: That's what I mean. During that process it was your opinion that those satellites should not have been transferred. We should not have started down that road.

GRAHAM: That's correct Senator.

LEVIN: And that's still your opinion.

GRAHAM: That's correct.

LEVIN: Mr. Pike yesterday vote, do you think it is wise or wise, is the fundamental issue?

PIKE: Well I think that it was certainly very poorly premised and that's one of the reasons I'm hoping that this hearing today is going to be able to put this matter in a slightly better perspective. If one examines the statements that have been made on the floor of the House, the floor of the Senate over the last several weeks regarding the situation with respect to Chinese strategic forces, it seems to me that the House was making a decision that was at best extremely poorly informed.

We've heard charges that there are now hundreds of Chinese nuclear missiles aimed at the United States. Although I think we've had probably a more realistic assessment of that here this morning. The suggestion that there were no Chinese missiles capable of reaching the United States until last year, and that this change and all kinds of other horrific changes have been solely due to the events that I take it are going to be subject to further investigation here and elsewhere, I think is obviously and fundamentally at variance with the facts.

And so if the House is basing it's decision with respect to launching Chinese satellites on -- American satellites on Chinese rockets, I think the notion that this policy has somehow resulted in some profound immediate obvious irrefutable degradation in American security due to the ability of the Chinese to fire hundreds of nuclear missiles at the United States today, whereas they were utterly incapable of doing so a year ago, I think that it's astonishing that the House could be making a decision on the basis of such erroneous information.

LEVIN: I take it then you don't agree with the House decision.

PIKE: I think it was very poorly premised, and I'm hopeful that the Senate will be able to set matters straight, hopefully on the basis of the record we're making in the hearing today.

LEVIN: Dr. Schneider did the House -- was the House doing the right thing yesterday in prohibiting the transfer, export of satellites or components to China?

SCHNEIDER: I know any president wishes to have discretion in the ability to manage foreign policy and restrictions imposed by the Congress are often resisted for that reason, but because of the risks of proliferation I think it was the right choice.

LEVIN: Yesterday, just simply no more commercial satellites were launched in China.

SCHNEIDER: Now unless we can come up with a technique that isolates China's access to the technology transfer that we've been discussing here.

LEVIN: But doesn't the very launch of those satellites contribute somewhat to their knowledge for the reasons Dr. Graham went into and you went into some...

SCHNEIDER: Yes and the -- hypothetically the only way I can imagine doing it is if they export the satellites to an off shore user acceptable to the United States where all the launch integration services would be performed by people outside of China.

LEVIN: My understanding of the waiver provision which as been used by President Bush and by President Clinton is that -- and this following Tiananmen Square, is that the Congress has an opportunity to overturn the waivers that were on that chart that I put up, those 20 waivers. Is that your understanding? Does any one know if that is correct? Excuse me, the license technically which follows the waiver. Do you know if that's technically correct, anybody that Congress has, I think, 30 days after the license is issued following the waiver that China to overturn that license?

SCHNEIDER: That's not my understanding Mr. Chairman. That process to the best of my knowledge applies only to exports under the arms export control act where there's a Congressional...

LEVIN: OK. Well, all right, but 17 of those 20 were munition list items. So in those 17 cases where in the State Department had the technical licensing thing following the waiver, in those cases Congress had 30 days to object, is that correct?



THOMPSON: ...the process by which these decisions were made.

THOMPSON: So, I think when we acknowledge that there are several waivers at several different times, we have to go a little further than that in determining exactly what was waived and under what circumstances, and what were the processes.

Now you've mentioned the difference, some of the different standards between Commerce and State as I understand it, there's one license required at Commerce, two licenses at State.

SCHNEIDER: Yes, there are different types of licenses. For example, to market products that are licensed by state, you need one type of license. Then to transfer technical data, you need another type of license. And then to actually transfer the hardware, you need yet a different type of license. So, the aim is to protect as best can be done through the regulatory process, access to defense-related technology.

THOMPSON: Well it's State -- a matter under State on the munitions list. Don't you have to have a license even to begin to enter into discussions with the Chinese for example?

SCHNEIDER: Yes, yes.

THOMPSON: That's not true with Commerce, is it?

SCHNEIDER: That's correct.

THOMPSON: And as I understand it, according to this GAO report that the Bush interagency group and subsequently the Clinton interagency group all agreed that if these satellites contain militarily sensitive characteristics, integrated in them, they should remain at State. Right?

SCHNEIDER?: Correct.

THOMPSON: Are you familiar with these nine sensitive characteristics, anti-germ capability, antenna cross-links, encryption devices, pointing accuracy and all of that. Are you generally familiar with those...

SCHNEIDER: Yes. Yes, I am senator.

THOMPSON: Do you agree with the interagency determinations there that that if those sensitive military matters are present within these

satellites, they should remain under the stricter standards of State. Do you agree with that?

SCHNEIDER: Yes, I do sir.

THOMPSON: Is it not also true that now, sense 1976 and the shift has taken, that even if a satellite contains any or all of these characteristics, pointing accuracy, propulsion systems, the others that I mentioned, that that's still vests (ph) and rests with Commerce now.

SCHNEIDER: That's correct.

THOMPSON: All right. There has been some writing in the professional journals concerning no one article in the "International Defense Review" concerning the intangible know how. And Dr. Graham, you might respond to this or either all of you that hardware is one thing, but one of the things that we need to be most concerned about is the intangible no how, the conversations that might go on, the information that might be transferred pursuant to us trying to make sure that these rockets work, launching facilities. Do you share that concern?

GRAHAM?: Yes, senator. Engineers are, and I'm an engineer speaking with this criticism. But we are trained our whole lives to look at equipment capabilities, analyze it, look for flaws, errors, things that cause failure or trouble and try to solve the problem. And that's what engineers do. It's almost impossible to stop them from doing that. And almost no matter where you put them down, that's what they're going to do. And that's the intangible knowledge that can very easily be transferred to foreign engineers, if you put U.S. engineers together with them.

THOMPSON: Well I understand that the statement is made sometimes in response to that. But there is a monitoring that goes on. But my information is that there is no absolute requirement that the Department of Defense monitor and be present at all times with regard to discussions, the mating process, the launching and all of that. But in fact, with regard to the May 19th, the Lockheed Martin Marietta launch, that they went to the DOD and asked them to monitor them. Are you familiar with that point?

GRAHAM: I'm generally familiar with the fact that Martin initiated the request for monitoring, not the U.S. government, senator.

THOMPSON: Do you know whether or not in practice, there's absolute requirement that DOD monitor and be present at all stages?

GRAHAM: I would defer to Dr. Schneider for this specific....

THOMPSON: Dr. Schneider.

SCHNEIDER: My understanding is no, that is not the case. And this illustrates a difference between a commercial license and a State Department license. The State Department license limits what technology can be transferred, and there are procedures that a vendor's required to follow that restricts even the amount of informal knowledge he is allowed to transmit. He's told, exactly what he can transmit. The vendor is required to submit a technology transfer control plan in most cases so that they know exactly how the information will be transferred, under what procedures and so forth.

But with a commerce license the idea is to transfer the asset and its functionality. And there is not a procedure in ordinary commerce licenses for the control of this informal transmission of information. And the idea of a monitor would probably be of some help. But, would still, it would still be difficult to control the transfer of information if there was not otherwise a requirement and a license to do so.

THOMPSON: Alright, let me ask you one more question. Are you, any of you gentlemen familiar with the coordinating committee for multilateral export controls, which the United States was a member of?

SCHNEIDER: Yes, I'm familiar with it.

THOMPSON: Dr. Schneider, what was the function of that entity, and why did we get out of it?

SCHNEIDER: It was established in 1949 among the U.S. and our European allies to restrict the flow of initially arms to the Warsaw Pact. But later controlled the flow of technology that would enhance the military performance of the Warsaw Pact. And it was a non-treaty based organization, headquartered in Paris that coordinated the export control activities of the member states. And at the end of the Cold War, the U.S. government was unable to persuade allied governments to continue the existence of the COCOM (ph) organizations. So, a new entity was established in 1994 called the Wasenar (ph) arrangement after the, a river in the Netherlands, where the meeting was held. And this arrangement does not control the transfer of technology, but only limits the flow of let's say, requires notification after sale of military equipment to essentially pariah states.

THOMPSON: Did the United States remove itself from the original organization?

SCHNEIDER: It, the United States agreed not to continue COCOM (ph) and to seek a new...

THOMPSON: When, excuse me, when did that happen?


THOMPSON: In 1993. Did COCOM (ph) as you've referred to it, would that have placed stricter requirements on the exports of these commercial satellites than what we have today?


THOMPSON: That's all.

COCHRAN: Senator Collins.

COLLINS: Thank you, Mr. Chairman. I want to follow-up on some questions that Senator Thompson posed to you about the differences between the procedures used by the Department of State and the Department of Commerce. It seems to me one basic difference is also in the mission of the two departments. And indeed, when you look at the people who are appointed to be the Commerce secretary, they often have considerable political experience. But, I can't think of any in recent history who had national security expertise.

COLLINS: And this area is very technical and does obviously involve national security. I'd like to ask each of you which department or agency you believe should have primary responsibility in the area of export control of space technology? Dr. Graham, I'll start with you.

GRAHAM: It's my personal view that the greatest expertise in that area resides in the Department of Defense, since they are the agency that develops or at least used to develop ballistic missiles for the United States, and also is an extensive user of space launch technology. So, from a national security and generally, national benefit point of view, I would feel most comfortable if it resided ultimately in the Department of Defense.

COLLINS: Mr. Pike.

PIKE: I think that the current arrangement where the Bureau of Export Administration at the Department of Commerce has primary responsibility for dual use technologies is the correct arrangement. The challenge of course that we have is that unlike the situation in the Cold War where we were mainly concerned with primarily military exports, the concern today is primarily with dual use technologies like super computers, like space launch components. And I think that the Bureau of Export Administration, it's proper place is trying to strike the balance with American competitiveness and other interests.

COLLINS: Dr. Schneider.

SCHNEIDER: The two export control regimes, the question that the Department of Commerce regime and the arms export control regime have their origin in different statutes with different purposes. The State Department export controls over the U.S. munitions list is derived from the Arms Export Control Act. And the purposes of that act are to ensure the congruence of exports with the foreign policy and national security interests of the United States.

The export control regime managed by the Department of Commerce is derived from the Export Administration Act. And the purpose of that is to promote the Commerce of the United States. And for that reason, I believe that the licensing apparatus should be managed by the national security apparatus because of the coupling of this technology to the, to U.S. national security interests. And I think the arrangement that the Department of State manages with interagency consultation where the office with the most expertise, whether it's the Department of Defense or the Department of Energy or whatever is the one that dominates the licensing decision. And I think that is an acceptable way of managing it and should be continued.

COLLINS: So Dr. Schneider, you would disagree with the decision that the Clinton Administration made to transfer the primary responsibility from State to Commerce?


COLLINS: Thank you. Dr. Graham, I'm interested in the issue of technology transfer that can happen in the event of a large failure. It's been reported that a so-called black box contain encryption hardware is missing from one of the satellites launched unsuccessfully by China, one of the ones that presumably blew up. The New York Times has reported that similar devices are used to communicate with American spy satellites, and that the Pentagon and intelligence agencies were concerned that anyone who could crack the code could take control of the satellites themselves.

Now the National Security Adviser, Sandy Berger has dismissed technology transfer concerns on the grounds that China had no access to the technology in U.S. satellites because such devices are sealed into a container that's not opened until the satellite actually leaves the booster in space. But isn't there a danger in the event of a failure that there would be unexpected access to technology, to very sensitive technology?

GRAHAM: Yes there is, Senator Collins. I am not familiar with the details of this particular satellite and its encoding devices. But it's common to provide some degree of encryption in what is called the telemetry command and control or housekeeping system for the satellite so that unauthorized users can't come in disorient or otherwise cause the satellite to malfunction, once it's on orbit.

GRAHAM: You basically protect yourself against rogue data streams coming into the satellite. That is impart embedded into the hardware in the satellite and in part in the software. That hardware will be placed inside black boxes in the satellite and should the satellite and booster fail on the way to orbit those black boxes will be scattered over the landscape or the seascape, depending on where it comes down, and are available for whoever finds them first.

And while they will tend to be rather damaged looking from the outside, my experience with such failures is that you can learn a great deal by taking them apart and basically reverse engineering them.

COLLINS: Mr. Pike do you share the concerns expressed by the Pentagon and intelligence agencies and Dr. Graham about the access that could occur in the event that a satellite blows up?

PIKE: Well this is obviously dependent on technical details. It can't be discussed in an unclassified forum. I mean I think that it's certainly safe to say that for instance in the immediate aftermath of the Challenger accident one of the very highest priorities that the United States government had was not recovering the bodies of the astronauts but was rather recovering the cryptographic support materials that were on the communications satellite carried by the shuttle.

Now the cryptologic systems used by American military satellites are obviously of a different type and at different standard than those used on commercial satellites, however, obviously commercial satellite operators have an interest in making sure that backyard enthusiasts can't commandeer the satellite, have their own pirate television stations, as was done before these cryptographic systems were implemented in the early 1980's.

At the same time normally these systems are embedded in chips that have been hardened to make it extremely difficult to open the packaging of the chip without completely destroying the underlying chip, and even having access to the cryptosystems electronics hardware might enable you to replicate that type of hardware, but it is not going to give you the keys to getting access to enable you to commandeer a commercial satellite and certainly not a military satellite. Now of course the United States has been trying to get other countries to implement these type chip based cryptologic systems to make it easier for the national security agency to read their communications. So the notion that the Chinese are going to be trying to replicate a cryptographic system whose chief virtue is that it's certified to be readable by the National Security Agency is not

something I'm terribly worried about. I don't think they'd want to do that.

COLLINS: Dr. Schneider do you have a concern in this area?

SCHNEIDER: Yes, I think it logically follows if the public policy was to protect the access to the contents of the satellite before it went on, then it follows that if the satellite should be destroyed and the contents accessible to unauthorized parties that it would be a concern of the United States.

COLLINS: It seems that it would be to me also. Thank you Mr. Chairman.

COCHRAN: Thank you Senator Collins. Dr. Schneider in your capacity as undersecretary of state you had a responsibility for supervising this munitions list that we've talked about. And you've served in that capacity for how long?

SCHNEIDER: Four years sir.

COCHRAN: And now I understand you are chairman of the State Department's Defense Trade Advisory Group. Is that correct?

SCHNEIDER: That's correct Mr. Chairman.

COCHRAN: Can you tell us based on your experience in these positions if there is a substantial difference between a technical assistance agreement that was required when a munition list item was to be sold or transferred and the current policy in this administration.

COCHRAN: And if there is a difference what is that difference and what was the reason for the technical assistance agreement?

SCHNEIDER: You mean the difference between a TAA and the State Department and the Commerce Department?

COCHRAN: Yes, the current license or...

SCHNEIDER: OK. A technical assistance agreement is required under a munitions license anytime you transfer technical data that is not in the public domain. This can be classified or unclassified. It requires this review, and the review is extremely thorough and very few licenses are issued without what are called provisos which are further restrictions on how the technical data can be transferred.

And it has a high order of rigor because the technical data is often the key to understanding the performance of the system. Because of the differing philosophies between the two export control regimes, the Commerce Department normally doesn't license technical data, in some cases they do, but it's not a primary feature of Commerce Department licenses because of the philosophy of the export control. They are mainly transferring the functionality of the system, and don't seek, in most cases, to control the transfers of the technical data per se.

COCHRAN: There is a list that I have been given of 14 categories of technical data, and I'm advised that these relate to missile launch activities or characteristics or components. I'm given a copy, ask the staff to give a copy to each witness and each Senator, and I will also ask that a copy be made a part of the record.

Now I'm wondering if you can tell us if these technical data categories would have been included in a required technical assistance agreement as part of a license if the transfer of commercial satellites were still a munitions list item?

SCHNEIDER: Yes they would and there would be additional ones to that.

COCHRAN: Can you tell us what the significance of these technical data items would be in terms of technology transfers that could be harmful to the United States if in the hands of the wrong country?

SCHNEIDER: Each of the items on this list pertains to matters relating to the integration of the payload to the booster, and that's why they would be considered categories that the applicant would have

to provide if it was a Department of State munitions license. And they would have to, in addition to providing the information, the license would specify exactly what form fit and function data could be transferred, and frequently they will say in addition what cannot be transferred. And the applicants are required to do a substantial amount of record keeping and recording and so forth relating to the implementation of that license.

COCHRAN: And as I understand it the Commerce Department's control list and it's licensing requirements and rules don't include any such technical data categories or specific authority to discuss technical data. Is that correct?

SCHNEIDER: It's -- in the case of the arrangements that were made during the transfer of the commodity jurisdiction the Department of Commerce has undertaken a higher order of review than is the case normally in Department of Commerce licenses with respect to the transfer of satellite systems. And as Senator Levin mentioned the Commerce Department leads an inter agency process that undertakes reviews that can't cover this particular material.

SCHNEIDER: As I mentioned, I'm not intimate with the details of how the interagency process is being conducted, so I can't really comment as to whether they take each of these items in detail, but it's the fact that they have an expanded would certainly give the agencies the authority to comment on these issues if they chose to do so.

COCHRAN: I understand that some companies despite the absence of a requirement to do so, are continuing to go to the State Department to obtain -- what amounts to -- a technical assistance agreement, TAA license, is that your understanding, and if...

SCHNEIDER: Yes, I have heard that and that may be for applicants who previously had export licenses issued by the Department of State and are following up on that. I don't have any specific knowledge of why they've chosen to do that.

COCHRAN: Based on all of these facts that you have given us, is it fair to conclude that export control requirements on commercial satellites have become less stringent since being moved from the munition list to the commerce control list?

SCHNEIDER?: I believe that's the case.

COCHRAN: On October 8, last year, the manager for export compliance at the Hughes Space and Communication's company wrote a letter to the Commerce Department seeking guidance on whether the technical of data I mentioned -- these 14 categories of technical data -- requires an export license and I understand the Commerce Department has not replied to that letter -- over seven and a half months ago.

Even though for the first 10 categories, the official with Hughes wrote and I quote, "We believe that this data is classified as EAR-99 exportable under commerce license exception NLR" unquote, and I'll ask that this letter be made a part of the record and a copy provided and also note that the commerce license exception NLR stands for, I think, no license required.

For the last four categories, the Hughes official wrote, and I quote, "Since there is some difference of opinion as to what event triggers the ability to utilize a Commerce Department license exception, please clarify conditions under which the exception is applicable," end of quote.

What is your reaction to that in terms of the Defense Department memorandum that we earlier talked about that mentioned transferring jurisdiction of this data -- these 14 categories to commerce and

commerce handling it -- how important do you consider the licensing oversight of technical information transfer under these circumstances to be?

SCHNEIDER: I think it's very important if the technology is pertinent to matters relating to national defense. I think for items that are not so required that it would constitute a burden on commerce.

COCHRAN: Dr. Graham, you have in front of you this list that I refer to that was included in the Hughes letter. What is your opinion about whether we should be concerned that one of the major air space companies is operating on the impression that 10 of these 14 categories requires no technical assistance license? -- or for that matter any license -- and that for the last four categories -- clarification of administration's policy is necessary.

GRAHAM: Well Mr. Chairman, these are just categories, of course, but in looking at them I would be very concerned that there -- if there were an unconstrained dialogue or cooperative engineering work that was performed even seemingly simple looking ones like mass involve far more than just how heavy the satellite is -- there -- the distribution of the mass that concentricity of the mass, the moments that it provides to the missile are very important in the -- not just the weight but also how it effects the dynamic response of the missile of -- rather the space launch vehicle satellite system and that is picked up in item five again, dynamic environmental.

When you get into a dynamic analysis of the space launch vehicle and it's satellite, here again, I believe it would be virtually impossible for an American engineer to look at a space launch vehicle satellite combination, observe some kind of a serious problem, or perhaps even critical flaw in the space launch vehicle and go ahead and let the satellite be launched on that with a high degree of knowledge that it might not reach orbit without saying something about it, of course correcting flaws in either the structural, electrical or other elements of the system are also directly applicable to both liquid and sold ICBM systems.

Telemetry is another component of that. tells you how well it's working on its way to orbit and tells you what problems it's having, if any, so I think each of the elements on these lists warrant further exploration, but some of them are just clear areas of potential technology transfer that would be adverse to the U.S.

COHCRAN: And it seems if I'm concluding correctly from the Hughes letter, that they believe this data is exportable under the commerce license rules and according to what I understand from you and Dr. Schneider, these are items and technical data items that could very well be employed by the recipient country -- in a militarily useful way -- it could endanger our national security, is that correct?

SCHNEIDER: Yes, if these items are transferred and are applied to military purposes, yes they could be.

COCHRAN: And how does that compare with the State Department notice about the transfer of these munition list items to commerce licensing regime and then the statement that enhance regulations have been developed and agreed upon and individual validation license will be required for all destinations, etcetera, and obviously Hughes and others had copies of these regulations and then for them to be able to conclude no license are required for 10 of these items, didn't seem to me that these are enhanced regulations, these are much more relaxed regulations -- is that the conclusion that you come to as well?

SCHNEIDER: The process that was set up under the Department of State notification could produce the same result and I haven't, say, audited the process to see if how it's actually working, but if the situation spends out as you describe it, it could produce unintended transfers of technology that's pertinent to military purposes.

COCHRAN: Thank you.

PIKE: That is not self evident from this ...

COCHRAN: Mr. Pike, I didn't ask you. I'll ask you a question a later. Senator Levin.

LEVIN: Thank you. Relative to the shift from state to commerce, this occurred after 17 licenses were issued for transfer to -- for a launch in China, is that correct?

SCHNEIDER: That's correct.

LEVIN: So the vast majority, including the one that blew up, was on the munition's list.


LEVIN: Then when the transfer was made with the last three, Congress had an opportunity for 30 days for someone to fill a bill or someone to object -- I don't know of any effort on the part of Congress or anyone in Congress to object to that transfer -- so none of our witnesses seem to know of any effort at that point either, but there's another point and that is that when we come to China, it is the same process in terms of a presidential waiver whether or not you had a State Department or a Commerce Department issuing the license.

Now again with the vast majority since '88, since president Reagan started down this road -- and the vast majority, 17 out of 20 -- it was a State Department -- that means the munitions list issue and they all got approved, but in all 20 of the 20, there was a presidential waiver, but you involved the National Security Council recommendation to the president.

Now, do any of you know relative to that National Security Counsel recommendation, that occurred with all 20 of these -- it gets us a little closer to your point, it seems to me Dr. Graham, about getting the DOD involved in this, because I think that is a critical issue -- relative to that National Security Council recommendation to a president -- be it president Bush or president Clinton -- is, was that process in those 20 instances any different, whether or not the State Department started down the licensing road in 17 of the 20 or the Commerce Department started down the road.

Do you know of any differences in that waiver review, which involves the national security council -- do you know of any differences Dr. Schneider? -- in that review process?

SCHNEIDER: No, the waiver is a separate process from the analysis of the transfer itself.

LEVIN: All right. Do you know -- are you familiar with that process?

SCHNEIDER: Not in detail. I only -- in the structure that you described -- I have heard of before.

LEVIN: Do you know of any difference in the national security council involvement in this waiver process, be it under the first 17 whether it was State Department or the last three under Congress.

PIKE: There was certainly important differences in terms of the policy objectives that were solved and granting the waivers, because

we have not been granting these waivers simply because American satellite companies wanted to fly on Chinese launch vehicles. This has been part of our non proliferation policy with respect to China.

On several occasions, we have withheld these pending resolution on non proliferation concerns with the Chinese and they were all then brought forward once the Chinese had made representations that were satisfactory at the concerns that would have been raised, but apart from that very important policy difference, which I think highlights a lot of why we have been doing this procedurally, I think there was approximately the same (ph).

LEVIN: As far as you know, the procedure used with a presidential waiver ...

PIKE: Essentially, to the first ...

LEVIN: As far as you know is the same whether it's State Department or Commerce Department. Do you know Dr. Graham?

GRAHAM: Senator, I haven't followed this process since I left the government, so I don't know either way.

LEVIN: Alright. There are some differences between State Department and Commerce Department -- there's not doubt about it -- and items are shifted by the way, from one list to another, with notice to Congress, and there are differences. But in the case of China, when we're talking about satellites, you have a totally different track -- whether it starts up here at the State Department, which it did 17 out of 20 or up here, the last three with Commerce.

LEVIN: It then gets into a single track which goes through a process, interagency process and then a recommendation from the National Security Council to the president. DOD is deeply involved as it should be in that track by the way. But I think it's important that we know the difference between Commerce and State, I think that's a very relevant issue. But it's not nearly as relevant, and indeed may be totally irrelevant relative to these particular transfers.

Because in the case of China with the satellites they all go through this presidential review process involving the National Security Council. And I think Mr. Chairman that it would be very useful for us to have somebody either answer for the record or somehow or other tell us whether or not there is any difference in that National Security Council process dependent on whether or not it started off on the State Department track or on the Commerce Department track.

I don't believe there is, if there isn't it seems to me relative at least to the satellite issue that this distinction between State and Commerce is not relevant.

It is a relevant distinction for a whole lot of other issues, but when it comes to the issue of export or transfer to China of satellites it's not relevant, if the key issue is a presidential waiver, made on recommendation of the National Security Council no matter whether or not the initial review started in State with that munitions list or started in Commerce with it's own list.

So Mr. Chairman, I would like to ask for the record from the National Security Council whether or not their process of review for a presidential waiver purpose is any different dependent on whether or not that process was initiated, the licensing process began with State or with Commerce. If we could do that for the record, I'd be ...

COCHRAN: Yes, I suggest we draft a letter, you and I sign it and we send it to them and ask them for a response for our record.

LEVIN: Thank -- one last question. A number of other countries apparently, allegedly do not treat civilian satellites on their comparable munitions list, or as munitions. Is that correct Dr. Schneider?

SCHNEIDER: Yes that's correct Mr. Chairman and I think that's been one of the frustrations that has lead to the change in commodity jurisdiction, that the U.S., I believe, is the only producer of satellite that had maintained satellites on the munitions list.

LEVIN: Could you -- we were the only producer of commercial satellites which at one point had them on a munitions list?

SCHNEIDER: That's correct.

LEVIN: And the other countries that produced satellites did not?

SCHNEIDER: Did not. Yes. And I think that, as I said, that's one of those things that stimulated the efforts to move it from the munitions list to the Commerce list.

LEVIN: Thank you so much. Thank you Mr. Chairman.

COCHRAN: Thank you. Senator Thompson.

THOMPSON: Thank you very much. I think we still have a bit to understand about the distinction between the waiver process and the license process. By the time a waiver gets down the department I would assume they would know what their boss, the President of the United States, would want, and I think that some might assume that the review process would be just a rigorous under those circumstances as if they were on the munitions list for example, I question that.

But let me as you about -- reference has been made to the explosion that happened in February of '96, $200 million satellite apparently, Hughes-Loral. There was an investigation conducted, in a sense cause some controversy as to whether or not sensitive information was given to the Chinese pursuant to that investigation.

THOMPSON: Gentlemen, are you generally familiar with that situation? And what can you do to enlighten us with regard to what happened and what the potential problems are there? Let me tell you what my understanding is and then you can correct me or fill in to the extent that you can.

My understanding is that after that explosion Hughes-Loral did an investigation and prepared a report. And determined apparently that it was the guidance system that was essentially the problem. And there was a question raised as to whether or not that information should have been given to the Chinese and, I think even the Hughes- Loral people voluntarily, I think the phrase was used, turned themselves in. Whether or not that's a correct phrase or not.

And I've also read where the Department of Defense has determined that national security was harmed by this. What do you know about the instance and what is the significance? Dr. Graham?

GRAHAM: Senator Thompson, let me address just what I've seen in the press about it. I've seen statements that in fact the Defense Department as you said, have judged that arising from the review of the launch failure with Loral, in cooperation with the Chinese that information was transferred by Loral to the Chinese which would benefit their construction and operation of both space launch vehicles and ballistic missiles in the future. I have not seen any statements in the press which state that by the Defense Department or by any other government agency that contradicts that conclusion. I'm afraid I have to leave it there in this particular forum.

THOMPSON: As far as what happened -- the facts, Dr. Schneider can you elaborate on that in anyway?

SCHNEIDER: I read the same material and that's my understanding of what took place. And from a regulatory perspective, my presumption is that transferring information about the guidance section would require a separate license. And if that is indeed what happened, then that activity would of course need to be licensed for authorization.

THOMPSON: Is this one of the kinds of problems that just arise in these sorts of things? I mean it stands to reason that you put up a $200 million satellite, and it's destroyed, you want to tell the people who going to put the next one up, maybe what went wrong. And therein lies the inherent problem, I suppose.

What about with regard to the May launch of the Motorola satellites? Are you familiar with, my understanding is they were using dispensing technology. Can you describe dispensing technology and how that is used commercially? What purpose it serves?

SCHNEIDER?: Yes, the Motorola launch, I believe was for one of the sets of irridium (ph) satellites that will form a low altitude or low orbit constellation of basically cellular telephone base stations. Each of these satellites is relatively small, smaller than the payload of, of certainly of the Long March or most other space launch vehicles. And therefore, it's economical to put several of these satellites on the same space launch vehicle and take them to orbit simultaneously. But of course, you don't want to put them in exactly the same orbit.

SCHNEIDER?: You want to at least disburse them enough so that they won't interfere with each other while they finish the maneuvers to get to the final desired orbits that they're going to, and therefore you have to be able to release them independently and allow them to follow a preplanned orbit...

THOMPSON: It's been said -- it's been written that this is the same thing as MIRV technology. Is that essentially correct in your opinion?

SCHNEIDER: This is very similar to MIRV technology.

THOMPSON: Now Mr. Pike, he can speak for himself, but I understand Mr. Pike your point was that with regard to the commercial satellites they dispensed the satellites more slowly than in a military situation.

PIKE: That's correct.

THOMPSON: Which is a rapid dispensing.

PIKE: An ICBM basically has about half an hour from launch to impact. The MIRV busing phase typically you're only looking at about ten minutes or so. I'm not familiar with precise deployment sequence in the case of Motorola irridium (ph), but in the case of U.S. intelligence community satellites where you have multiple deployments, those typically take place over a period of several days.

I think that the Motorola people were able to go to the Chinese with some confidence that they would succeed in this regard because the Chinese had demonstrated a multiple launch capability off a single launch vehicle, the ability to deploy several satellites on a single launch vehicle about two decades ago, so there was nothing particularly novel or in my view immediately militarily significant in the irridium (ph) launch.

THOMPSON: Well what -- doing something and how you do it are two different things and then perfecting it I think would be also, but I assume that that leads you to the conclusion that it's not that big a problem if we can enhance the Chinese capability to use this dispensing technology because that transfer from the commercial the military is, I assume in your opinion, not significant as a lot of other people think it might be. Dr. Graham what's your response to that?

GRAHAM: Well I think it can be quite significant. In the first place we need to look at the time lines on the irridium (ph)

deployment, but in fact with ICBM's we do some final maneuvering much as we do with satellites when we insert independent reentry vehicles in independently targeted reentry vehicles. The device on the ICBM's is usually called the bus. It moves the satellites around in space and velocity until it has them on the right line to the target and then releases it.

A similar process is done with the space launch satellites. In fact, if anything the time lines for the space launch are longer but in fact can be the same for the ICBM without damage to the space launch, it just depends on how you want to go about doing it.

THOMPSON: So you don't think that difference in timing is that significant?

GRAHAM: No Senator.

THOMPSON: That's all I have Mr. Chairman. Thank you very much.

COCHRAN: During my last questions of the witnesses I mentioned a letter from Hughes Space and Communications Company. I'm going to make that letter a part of the record which included the 14 categories of technical data, it was the subject of their inquiry about whether or not license was required, permit required in those instances, and a copy will be made available to all Senators as well.

One other characteristic of the policy that you administered Dr. Schneider at the Department of State was that a Department of Defense monitor, a person who would observe discussions and transfer of data was required a part of the process and procedure.

COCHRAN: What is in your view the importance of having that monitor involved in the process, and does the absence of such a monitor now under current policy present any particular problems for our national security?

SCHNEIDER: Well, the incorporation of provisions for a Department of Defense monitor occurred subsequent to my departure from the government. But during my service on China exports, there were several cases where there was a requirement for a U.S. monitor. And the general purpose of this is to assure compliance with the terms of the license, that the license was implemented by the specific end user identified in the license. And for the purposes identified in the license.

The monitor would also prevent or is designed to monitor efforts to divert the product transferred to an end use that was not specified in the license. And the absence of a monitor then creates a compliance issue as to whether or not compliance can be monitored by other means.

COCHRAN: But do you think the lack of a requirement under current regulations for the president's Department of Defense monitors to be a weakness in the current policy?

SCHNEIDER: Well, if they don't have any other means of monitoring compliance, then there could be some difficulty. And I haven't seen the details of the licenses as to whether they have, perhaps other U.S. government officials other than the Department of Defense doing the monitoring or some other means to sustain compliance. But, if they have no one monitoring it, then there presumably is no other way to assure compliance.

COCHRAN: Dr. Graham, when we were preparing for the hearing, we learned that there was an impending Chinese launch scheduled of a Lockheed Martin China Star No. 1 (ph) satellite. The China Star I (ph) license was granted in 1996, and according to Lockheed Martin officials, the license required no Department of Defense monitor for any phase of the export. We were told that Lockheed Martin requested the monitors despite the absence of a licensing requirement.

My question is by not having Department of Defense monitors present at these meetings between the satellite builder or vendor and the Chinese launch team officials, does this increase the risk in your opinion of technology transfer and intangible know how transfer that could be militarily useful to the Chinese?

GRAHAM: I believe it does Senator Cochran. As you know, I'm not in favor of this process in any of its forms. This would be an effort to mitigate the damage done to the U.S. by adverse technical transfer to the Chinese. And it could have some of that effect if there were a set of clear terms of reference, guidelines and constraints imposed on the contractor before the discussions began. The government monitors or chaperons were competent to know when those terms were being observed and when they were being violated. And it would also provide the opportunity for the contractor to hold side discussions on issues before materials presented to the Chinese. Once you have said something or given some material, it doesn't come back.

GRAHAM: So, it's a very irrevocable act. So, while I would not encourage any of this type of technological interchange or transfer, if it's going to be done, I think having the strongest possible chaperons present would be in the U.S. interest.

COCHRAN: Mr. Graham, Dr. Graham would it surprise you if an engineer or scientist were to identify a problem as suggest how it could be fixed in the case of a launch vehicle, give the financial situation and the risk of a loss of an expensive satellite, is it your view that these kinds of temptations under the current situation are too great to overcome and to stand and remain silent while a launch is about to take place that might very well be risky or destined to fail, and not point out some deficiency?

GRAHAM: Well the economic issues certainly drive the process toward tech transfer, but even beyond that engineers are trained and practiced all their lives to find problems, point them out and fix them. So it would surprise me only if the engineer did not do something to try to rectify the problem once he saw it.

COCHRAN: There have been many low earth orbit communication satellite constellations deployed or planned for the future and are driving the demand by U.S. satellite manufacturers for foreign launch services. What needs to be done, in your opinion to keep these launches or at least more of them within the United States? Do we not have the launch capability here to handle the volume of launches that are in demand now by the communication companies, and if we don't what should we consider doing about it?

GRAHAM: Senator Cochran in the early 1960's we built a thousand Minutemen missiles in something on the order of six years. It is inconceivable that the industrial base of the U.S. couldn't provide adequate launch systems for all the satellites that the U.S. builds. I believe this is basically an economic issue where satellite owners and builders are attempting to take advantage of the prices that these non-market economies such as China are willing to provide, and to receive in term the recognition of their ballistic missile and satellite capability, the technology they'll get from it, and the western hard currency to sustain their rocket infrastructure. But the U.S. could certainly do this without any difficulty.

COCHRAN: Dr. Schneider one aerospace executive told us, as we were preparing for the hearing, that he views the DOD monitors that you and I were talking about as important because companies tend to view their foreign launch service providers as customers. Hence when the customer wants something you want to try to help him out. And U.S. companies try to respond in a way that establishes a good relationship for future business dealings.

Do you think this attitude is prevalent or a problem among American satellite manufacturers, and what, if anything, can be done to prevent it from making technology transfer common place?

SCHNEIDER: Well I don't think there's necessarily a conflict because in the case of munitions list, transfers of says convention munitions to conventional arms to allies in abroad, the ally abroad is of course a customer as well, but the terms of the license restrict the U.S. vendor from transferring information.

And my own experience in the Department of State is that the vendor community was very familiar with these restrictions and would inform the customer that they cannot give them information of a specific type because it was proscribed by the terms of the license.

SCHNEIDER: And so I think in -- because this practice generally works pretty well, there is not a normal requirement for a Department of Defense monitor to be associated with all munitions lists transfers. The licensees enforce the transfers themselves, because there are indeed draconian penalties for failure to do so.

COCHRAN: Thank you very much, Dr. Schneider. Senator Levin.

LEVIN: I withhold any additional questions for the record. Thank you very much and thanks to these witnesses.

COCHRAN: Senator Thompson.

THOMPSON: Just a -- just one more observation. It occurs to me that -- and I certainly want to understand more about this process myself. With waiver, it first must be obtained for these satellites, and the question of whether or not will we have a national security process to go through are the same regardless.

You know, we saw the administration's national security process at work. Secretary Christopher convened an interagency group consisting of the Department of Defense, State Department, Arms Control and Disarmament Agency, Commerce, CIA, NSA, and the entire intelligence community. And it was overridden on the recommendation of Ron Brown.

So that's the process that we saw work in one instance, in terms of the -- of the waiver and I wonder too if the waiver process for an item that is not on the munitions list is as stringent as it would be if the item were on the munitions list, then why take it off the munitions list to start with?

That is -- I think it implies less to China than perhaps to other markets. That the munitions list treatment of any item is imposes a greater burden on the exporter than does the Commerce Department license. And I think that has been what is driven people to seek the commodity jurisdiction transfer to the Department of Commerce. But, because of the special circumstances of China, there has been this process of approving a waiver after the licensing activity's been undertaken by the inter agency process.

And that is the device that's intended to assure compliance with the U.S. national security objectives. And -- if the administration is set up a system where the president gets to make the -- the final call that's all that can be done, I believe.

THOMPSON: That's all I have.

LEVIN: Mr. Chairman, can I just briefly comment ...

COCHRAN: Certainly, Senator Levin.

LEVIN: My understanding is that the Ron Brown references was not to a waiver situation, but was to a transfer from the munitions list issue. That the State Department approved every single one of the waivers. But, that's the kind of factual determination we can make when that answer comes from the record. But I don't believe that the Ron Brown position related to a waiver at all. It related to a transfer from munitions list to the Commerce Department list, which he of course was fighting for.

I'll repeat that I believe that every single one of those waivers was approved by the State Department.

COCHRAN: I should have done this at the beginning of the hearing, but I hope you'll forgive me for omitting this, but for the record, could you state your professional training and qualifications and education, Dr. Graham, and Mr. Pike, and Dr. Schneider?

GRAHAM: Mr. Chairman, I have a bachelors degree in physics and a Ph.D in electrical engineering. I've served as an Air Force project officer, working at the Air Force weapons lab and working on, among other things, the Minuteman Two and Three Missile Systems, the Polaris and Poseidon Sea Launch Ballistic Missile Systems, and subsequent working, after I left the Air Force and have generally been involved with ballistic missile programs for about 35 years.

I've also serving as the Deputy Administrator of NASA, was involved in trying to resurrect the space launch capability -- the unmanned space launch vehicle capability of the U.S. Those are my primary involvements with this particular area.

COCHRAN: Thank you. Mr. Pike.

PIKE: I fear my involvement slightly less illustrious than my colleagues here.

PIKE: I've been director of the Space Policy Project at the Federation of American Scientists for the last 15 years. I've done consulting work with NASA, the United Nations and I'm a fellow of the British Interplanetary Society.

C0CHRAN: What is your educational experience?

PIKE: I attended Vanderbilt in Nashville, Tennessee as an undergraduate.

COCHRAN: As an undergraduate? Dr. Schneider.

SCHNEIDER: Mr. Chairman I'm an economist, a Ph.D from New York University, I have worked for 16 years in the federal government including four years in the Department of State dealing with matters pertaining to export control, and subsequent to my departure from the Department of State I served as chairman of the General Advisory Committee on Arms Control and Disarmament and have monitored the export control system throughout my career.

THOMPSON: Mr. Chairman if I may comment just very briefly. While it is true, the instance I mentioned was not a waiver, it had to do with something much more significant that a waiver, it had to do with the entire transfer of the entire process, and it had to do with a national security process which I think is instructive when we consider the process they may be going through with regard to any individual waiver. Thank you very much.

COCHRAN: This has been a very interesting and I think productive hearing for our committee, and I appreciate very much the attendance of the witnesses and the Senators for participating. I think we've learned first that there can't be any question about the potential military utility of commercial satellite launches for ballistic missile and satellite programs.

And when commercial satellites received export licenses from the State Departments munition list, a license was necessary for technical data that was shared with China and others, and DOD monitors were required to be present in all meetings and launch activities. Third, since commercial satellites were moved to the Commerce control list the requirement for a license to share technical information is at best ambiguous, with some companies proceeding with them, and some without them.

Furthermore the requirements for a DOD technical monitor is also ambiguous with some companies requesting monitors on their own volition and other companies proceeding without them. This sounds to

me like a situation where militarily significant technology transfer can occur, and probably has occurred. It a situation at odds with the administration's September '96 representation to the Congress that enhanced regulations have been developed and agreed upon by the interested departments that would provide for both national security and foreign policy controls under the Export Administration Act for commercial satellites.

It's hard to understand why the administration has failed to respond to a request seven and a half months ago from the Hughes Corporation for clarification of the current regulations. I think it's clear the administration's export control policy for commercial satellites isn't doing a good enough job of reducing risks to American security.

We will continue to explore this issue. Our subcommittee will have another hearing on this subject in June at a date that we will announce later. We will invite the Commerce Department to testify and explain why it worked so hard to gain control of export licensing for commercial satellites, but has done little to control their exports since gaining the authority to do so.

We will likely invite some of the aerospace companies as well to send representatives to discuss the licensing process, until then the subcommittee will stand in recess.


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