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Weapons of Mass Destruction (WMD)

[CRS Issue Brief for Congress]

92056: Chinese Proliferation of
Weapons of Mass Destruction:
Current Policy Issues

Updated June 1, 1998

Shirley A. Kan

Foreign Affairs and National Defense Division

SUMMARY

Policymakers in Congress have focused on issues concerning Chinese transfers of technology suspected of contributing to proliferation of weapons of mass destruction (WMD) or missiles that could deliver them. Recent issues have involved Chinese sales of chemical, nuclear, and missile technology to Pakistan and Iran.

Since 1992, Beijing has taken important steps to mollify concerns about its nonproliferation commitments. These steps include the following: February 1992 promise to abide by the Missile Technology Control Regime (MTCR); March 1992 accession to the Nuclear Nonproliferation Treaty (NPT); January 1993 signing and subsequent ratification of the Chemical Weapons Convention (CWC); October 1994 statements on the MTCR and fissile material production; November 1995 white paper on arms control and disarmament; May 1996 statement on making only safeguarded nuclear transfers; July 1996 announcement of a moratorium on nuclear testing; signing of the Comprehensive Test Ban Treaty in September 1996; and joining the Zangger Committee in October 1997.

There are reports, however, that China continues to supply missile, nuclear, and chemical technology inconsistent with nonproliferation goals -- particularly to Pakistan and Iran. Some of China's transfers have raised questions about violations of the NPT and/or contradictions of the MTCR or U.S. laws, which may require sanctions. China also has not joined some informal, but important, international nonproliferation groups, including the Nuclear Suppliers Group and Australia Group.

The Clinton Administration has pursued a policy of "engagement" with Beijing, seeking to improve bilateral relations. Others argue that policy has failed and a tougher approach is needed to advance U.S. nonproliferation interests. As agreed at a summit, the President on January 12, 1998, issued certifications to implement the Nuclear Cooperation Agreement. After a period of Congressional review which ended on March 18, the agreement is now implemented. The Administration has also proposed to support China's membership in the MTCR and expand the numbers of satellite launches from China. However, the Administration is accused of allowing missile-related technology transfers to China stemming from satellite exports. After reports of nuclear tests conducted by India and Pakistan in May 1998, China's relationship with Pakistan faces renewed criticisms.

Congress has debated whether to link non-proliferation conditions to normal, or most-favored-nation (MFN), trade treatment for China and questions of whether to impose unilateral sanctions under various U.S. laws. Most recently, sanctions were imposed on May 21, 1997, for Chinese chemical weapon proliferation in Iran. Besides sanctions and MFN conditions, other unilateral, bilateral, and multilateral policy options include policies on trade controls, nonproliferation and arms control, foreign and defense policies, international lending, and China's legislature.

MOST RECENT DEVELOPMENTS

The Justice Department is conducting an investigation into illicit assistance given by Loral Space and Communications Co. and Hughes Electronics Corp. to China's missile program after looking into the cause of an explosion of a Chinese rocket on February 15, 1996, that destroyed a satellite built by Loral. A cited, classified Pentagon report concluded that U.S. national security was harmed (New York Times, April 13, 1998). The Administration has proposed increased satellite exports for Chinese missile nonproliferation. After India and Pakistan conducted nuclear tests in May 1998, China faces criticism for its nuclear cooperation with Pakistan and failure to stop Pakistan's nuclear tests.

BACKGROUND AND ANALYSIS

Congress has been concerned about Chinese transfers suspected of contributing to the proliferation of weapons of mass destruction (WMD). This proliferation problem refers to the threat of nuclear, chemical, or biological weapons and missiles that could deliver them. This issue brief will discuss current policy issues and options concerning Chinese proliferation of WMD.

Recent Chinese Proliferation Issues

Nonproliferation Commitments and Compliance

Since 1992, Beijing -- facing significant U.S. pressures -- has taken several steps to advance its nonproliferation commitments. China promised to abide by the Missile Technology Control Regime (MTCR) in February 1992 and reaffirmed that commitment in its October 4, 1994, statement. (The MTCR is not an international agreement and has no legal authority. It is a set of voluntary guidelines which seek to control the transfer of missiles that are inherently capable of carrying at least a 500 kg payload to at least 300 km.) China acceded to the Nuclear Nonproliferation Treaty (NPT) on March 9, 1992. (The NPT does not ban peaceful nuclear projects.) China signed the Chemical Weapons Convention (CWC) in January 1993. In November 1995, China issued its first public defense white paper, which focused on arms control and disarmament. On May 11, 1996, the Chinese issued a statement promising to make only safeguarded nuclear transfers. China, on July 30, 1996, began a moratorium on nuclear testing and signed the Comprehensive Test Ban Treaty (CTBT) in September 1996. (The CTBT has not entered into force.) On April 25, 1997, China deposited its instrument of ratification of the CWC. (The CWC entered into force on April 29, 1997.) Premier Li Peng issued new nuclear export control regulations on September 10, 1997. On October 16, 1997, China joined the Zangger Committee.

Nevertheless, Chinese transfers of proliferation concern have continued. The Director of Central Intelligence (DCI), in June 1997, submitted a required report to Congress stating that during July-December 1996, "China was the most significant supplier of WMD-related goods and technology to foreign countries." On January 28, 1998, DCI George Tenet testified to the Senate Select Intelligence Committee that "there is no question that China has contributed to WMD advances" in Pakistan and Iran. He argued for close monitoring of Chinese transfers, adding that "the jury is still out on whether the recent changes are broad enough in scope and whether they will hold over the longer term." Some have argued that certain Chinese transfers have violated China's international commitments, including the NPT, and/or have contravened U.S. laws that require sanctions. Even if no laws or treaties are violated, many view China's transfers as undermining U.S. national security interests.

Nuclear Technology Sales to Pakistan

Ring Magnets and May 11, 1996, Commitment. In early 1996, some in Congress called for sanctions after reports said that China sold unsafeguarded ring magnets to Pakistan, apparently in violation of the NPT and U.S. laws, including the Arms Export Control Act and Export-Import Bank Act (as amended by the Nuclear Proliferation Prevention Act of 1994). On February 5, 1996, the Washington Times first disclosed intelligence reports that the China National Nuclear Corporation, a state-owned corporation, transferred to the A.Q. Khan Research Laboratory in Kahuta, Pakistan, 5,000 ring magnets, which can be used in gas centrifuges to enrich uranium. According to the report, intelligence experts believed that the magnets provided to Pakistan are to be used in special suspension bearings at the top of rotating cylinders in the centrifuges. The facility in Kahuta is not under IAEA safeguards. The New York Times of May 12, 1996, reported that the shipment was made after June 1994 and was worth $70,000. The Chinese company involved was China Nuclear Energy Industry Corporation, a subsidiary of the China National Nuclear Corporation. The State Department's report on nonproliferation efforts in South Asia (January 21, 1997) stated, "between late 1994 and mid-1995, a Chinese entity transferred a large number of ring magnets to Pakistan for use in its uranium enrichment program."

The Clinton Administration's decision-making was apparently complicated by considerations of trade interests of U.S. corporations with business in China. Administration officials reportedly considered imposing then waiving sanctions or focusing sanctions only on the China National Nuclear Corporation, rather than large- scale sanctions affecting the entire Chinese government and U.S. companies, such as Westinghouse Electric Corporation (which had deals pending with China National Nuclear Corporation) and Boeing Aircraft Company. At the end of February 1996, then-Secretary of State Christopher instructed the Export-Import Bank to suspend financing for commercial deals in China for one month. Christopher reportedly required time to try to obtain more information to make a determination of whether sanctions would be required. Meanwhile, then-CIA Director John Deutch reportedly said at a White House meeting that Chinese officials at some level likely approved the sale of magnets. This view was said to have been supported by Defense Secretary Perry, but disputed by officials from the Commerce and Treasury Departments and the U.S. Trade Representative office, who cited a lack of solid proof. (Washington Post, April 1, 1996) Observers noted the latter departments are interested in promoting trade. On May 10, 1996, the State Department announced that China and Pakistan would not be sanctioned, citing a new agreement with China. Administration officials said China promised to provide future assistance only to safeguarded nuclear facilities, reaffirmed its commitment to nuclear nonproliferation, and agreed to consultations on export control and proliferation issues. The Administration also said that Chinese leaders insisted they were not aware of the magnet transfer and that there is no evidence that the Chinese government had willfully aided or abetted Pakistan's nuclear weapon program through the magnet transfer. (Congress responded by adding "persons" to hold companies responsible.) Thus, the State Department announced that sanctions were not warranted, and Export-Import Bank considerations of loans for U.S. exporters to China were returned to normal.

On May 11, 1996, China's foreign ministry issued a statement that "China will not provide assistance to unsafeguarded nuclear facilities." In any case, China since 1984 has declared a policy of nuclear nonproliferation and requirement for recipients of its transfers to accept IAEA safeguards. China formalized this policy by acceding to the NPT in 1992.

Furnace and Diagnostic Equipment. The October 9, 1996, Washington Times reported on a September 14, 1996, CIA report that China sold a "special industrial furnace" and "high-tech diagnostic equipment" to unsafeguarded nuclear facilities in Pakistan. In September 1996, Chinese technicians in Pakistan reportedly prepared to install the dual-use equipment. The deal was allegedly made by the China Nuclear Energy Industry Corporation, the same firm which sold the ring magnets. Those who suspect that the transfer was intended for Pakistan's nuclear weapons program say that high temperature furnaces are used to mold uranium or plutonium. The CIA report was said to state that "senior-level government approval probably was needed" and that Chinese officials planned to submit false documentation on the final destination of the equipment. The report said that the Chinese equipment was set to arrive in early September 1996. The Washington Post, on October 10, 1996, reported that the equipment was intended for a nuclear reactor to be completed by 1998 at Khushab in Pakistan. This facility is not under IAEA safeguards. One U.S. aim is to prevent China from providing reprocessing technology to this facility for separating plutonium from spent fuel (Nucleonics Week, August 14, 1997).

On October 9, 1996, the State Department responded that it does not conclude that China has violated its statement that was issued on May 11, 1996 (see above). However, the State Department's statement did not address whether the reported transfers occurred before May 11, 1996, or violated the NPT or contradicted U.S. laws (including the Arms Export Control Act, Export-Import Bank Act, and the Nuclear Proliferation Prevention Act of 1994), which may require sanctions.

There are still concerns about Chinese assistance to Pakistan's nuclear weapon-related facilities. Referring specifically to Pakistan's efforts to acquire equipment, material, and technology for its nuclear weapon program, the DCI's June 1997 report for the last half of 1996 (after China's May 1996 pledge) stated that China was the principal supplier. In August 1997, ACDA's annual report for 1996 stated that questions remain about contacts between Chinese entities and parts of Pakistan's nuclear weapon program. The Washington Times (Mar. 13, 1998) reported that Robert Einhorn and John Lauder, head of the CIA's Nonproliferation Center, testified to the Senate Foreign Relations Committee about reports, "in the past few weeks," of "a few potentially troubling contacts" concerning Chinese entities and those in Pakistan involved in nuclear weapon research.

Missile Technology Sales to Pakistan

Sanctions and October 4, 1994, Statement. Transfers of Chinese M-11 short range ballistic missiles or related equipment exceed MTCR guidelines, because the missile has the inherent capability to deliver a 500 kg warhead to 300 km. U.S. sanctions were imposed on transfers of Chinese M-11 missile-related technology (not missiles) to Pakistan. Sanctions were imposed twice under Section 73(a) of the Arms Export Control Act and Section 11B(b)(1) of the Export Administration Act. In June 1991, the Bush Administration first imposed sanctions on China for transferring M-11 technology to Pakistan. The sanctions affected exports of supercomputers, satellites, and missile technology. The Administration later waived the sanctions on March 23, 1992. On August 24, 1993, however, the Clinton Administration determined that China had again transferred M-11 equipment to Pakistan and imposed new sanctions (affecting exports of satellites). Later, Secretary of State Christopher and Foreign Minister Qian Qichen signed a joint statement on October 4, 1994, that Washington would waive the August 1993 sanctions and Beijing would not export ground-to-ground missiles "inherently capable" of delivering a 500 kg warhead 300 km. (Missile technology was not mentioned.) The sanctions were waived on November 1, 1994.

Continuing Sales. There are reports that China continues to sell or transfer missile technology or missiles to Pakistan despite its commitments to the MTCR. A June 1995 report said that the CIA found that China delivered "in the last three months" missile parts to Pakistan that could be used in M-11s (International Herald Tribune, June 23, 1995). Also, the U.S. intelligence community reportedly agreed in a National Intelligence Estimate that China is providing blueprints and equipment to Pakistan to build a plant for making missiles that would violate MTCR guidelines (Washington Post, August 25, 1996). There is disagreement, however, about whether the plant will manufacture some major missile components or whole copies of the M-11 missile. Construction of the plant in the city of Rawalpindi allegedly began in 1995, and it will be operational in one or two years. On August 25, 1996, Vice President Al Gore acknowledged U.S. concern about the plant. The November 1997 report by the Office of the Secretary of Defense (Proliferation: Threat and Response) also confirmed construction of the facility.

According to the Washington Times (March 14, 1997), "numerous" intelligence reports have indicated that M-11 missiles are "operational" in Pakistan. These findings have been disputed by some policy-makers, the paper said. On April 10, 1997, Robert Einhorn, Deputy Assistant Secretary of State for Nonproliferation, testified that "concerns about transfers of missile-related components, technology, and production technology persist, raising serious questions about the nature of China's commitment to abide by the MTCR guidelines." In June 1997, the DCI reported that in the last half of 1996, China was a major supplier of "a tremendous variety" of technology and assistance to Pakistan's ballistic missile program, which seeks to have an indigenous capability. Time alleged on June 30, 1997, that the Administration will not discuss possible sanctions based on intelligence on the missile plant. The Defense Secretary's report of November 1997 stated that "China remains Pakistan's principal supplier of missile-related technology and assistance." The report did not say whether China violated the MTCR.

Gordon Oehler, former head of the CIA's Nonproliferation Center, revealed on November 19, 1997, that Pakistan has Chinese M-11 missiles and is developing the Ghauri, a medium-range ballistic missile (MRBM) that can travel 1,500 km (932 mi). Pakistan conducted a flight-test of the Ghauri on April 6, 1998. Acting Undersecretary of State John Holum confirmed on April 9 that the Administration is "actively reviewing" whether any of the technology for the Ghauri originated in China.

Nuclear Technology Sales to Iran

Suspecting that any nuclear technology would be used to build a scientific and technical infrastructure for Iran's clandestine nuclear weapon program, Washington has urged China (and Russia) not to sell any nuclear technology to Iran. However, peaceful nuclear energy projects are allowed by the NPT, and Iran cooperates with IAEA inspectors. However, Chinese transfers may contradict U.S. laws, including the Iran-Iraq Arms Nonproliferation Act, Arms Export Control Act, and the Export-Import Bank Act.

In 1995, China suspended a sale of nuclear reactors to Iran. In August 1997, Israeli Prime Minister Benjamin Netanyahu reported in public that Chinese Vice Premier Li Lanqing said that China canceled plans to build the reactors. However, there have been other controversial Chinese nuclear deals with Iran which have pointed to an Iranian nuclear weapon program. Chinese technicians built a calutron, or electromagnetic isotope separation system, for enriching uranium at the Karaj nuclear research facility, according to "confidential reports" submitted to President Rafsanjani by his senior aides. The Chinese system is similar to the one used in Iraq's secret uranium enrichment program. (Washington Times, September 25, 1995.) Iran's nuclear facility at Karaj is not under IAEA safeguards. The Secretary of Defense reported in April 1996 that "the Iranians have purchased an electromagnetic isotope separation unit from China." In June 1997, the DCI reported that in the last half of 1996, China, as a "key supplier," continued to have some large nuclear projects with Iran.

The China Nuclear Energy Industry Corporation reportedly had plans to sell Iran a facility to convert uranium ore into uranium hexaflouride gas, which could be enriched to weapons-grade material (Washington Post, April 17, 1995; June 20, 1996). According to past intelligence reports, the deal was proceeding with Chinese nuclear experts going to Iran to build the new uranium conversion plant near Esfahan (Washington Times, April 17, 1996). However, some Chinese civilian nuclear officials indicated to the IAEA and U.S. officials that China will not transfer the uranium conversion facility, ostensibly because of Iran's inability to pay. Some analysts point to changes as stemming from Iran's turn to Russian reactors and China's increasing dependence on Mideast oil. Also, China may be responding to concerns of Israel (a key supplier to China's military). Robert Einhorn reportedly told Members of Congress that China has canceled this deal but had provided Iran with a blueprint to build the facility (Washington Post, September 18, 1997). On the eve of a U.S.-China summit, Chinese Foreign Minister Qian Qichen provided a secret letter to Secretary of State Madeleine Albright promising not to begin new nuclear cooperation specifically with Iran, after building a small nuclear research reactor and a factory to fabricate zirconium cladding to encase fuel rods in nuclear reactors (Washington Post of October 30, 1997). U.S. officials say the projects are not of significant concern for nuclear proliferation.

As uncovered during a closed hearing of the Senate Foreign Relations Committee on Mar. 12, 1998, the Washington Post reported that, in January 1998, the China Nuclear Energy Industry Corporation negotiated with Iran's Isfahan Nuclear Research Center to provide "a lifelong supply" of hundreds of tons of anhydrous hydrogen fluoride (AHF), or hydrofluoric acid, under falsified documents about end-users. The AHF chemical could be used to produce uranium hexafluoride used in uranium conversion facilities. AHF is also a precursor for the chemical weapon agent Sarin. After Washington protested, Beijing reportedly stopped the sale. While the Administration argues that Beijing responded positively and the chemical is controlled by the Australia Group (on chemicals) and not on a nuclear control list, critics say that Beijing is using "denial and deception." The Washington Times (March 13, 1998) reported that Robert Einhorn and John Lauder, head of the CIA's Nonproliferation Center, testified about reports, in the past few weeks, of "a few potentially troubling contacts" concerning Chinese entities and those in Iran and Pakistan.

Missile Technology Sales to Iran

C-802 Anti-Ship Cruise Missiles. In January 1996, Vice Admiral John Scott Redd, as Commander of the U.S. Fifth Fleet, reported that China supplied to Iran C-802 anti-ship cruise missiles (Washington Times, March 27, 1996). In 1997, General J.H. Binford Peay, Central Command commander, said that China transferred 20 patrol boats with 15 equipped with C-802 missiles (Washington Times, January 29, 1997). China may have transferred hundreds of C-802s, although the number of missiles transferred is not publicly known. The C-802 is a subsonic (0.9 Mach) missile which has a range of 120 km. (75 mi.) and carries a 165 kg. (363 lb.) warhead. No international agreement bans transfers of anti-ship missiles, and the C-802 is not covered by the MTCR, which controls exports of ballistic and cruise missiles that can deliver 500 kg. warheads to 300 km. Nevertheless, some argue that the transfer has violated the Iran-Iraq Arms Nonproliferation Act (P.L. 102-484), which requires sanctions for transfers that contribute to Iranian or Iraqi efforts to acquire "destabilizing numbers and types of advanced conventional weapons" (including cruise missiles) or WMD.

On April 10, 1997, Deputy Assistant Secretary of State for Nonproliferation, Robert Einhorn, testified that "especially troubling to us is that these cruise missiles pose new, direct threats to deployed U.S. forces." Einhorn also stated that "we have concluded that the C-802 transfers that have occurred so far are not of a destabilizing number and type." Arguments against sanctions are in part based on the case that anti-ship cruise missiles are not a new type of weapon in Iran's arsenal. China previously transferred Silkworm anti-ship cruise missiles to Iran. Others, including some in Congress and Pentagon officials, argue that U.S. sanctions should be imposed on China for the delivery of C-802 anti-ship cruise missiles to Iran which are "destabilizing" to the region. (See H. Res. 188 and S. 1083.)

China has now equipped Iran with air-launched, anti-ship cruise missiles. According to Reuters, on June 17, 1997, Secretary of Defense Cohen reported Iran had test-fired Chinese air-launched, anti-ship cruise missiles. They were C-801 missiles fired from F-4 fighters. Cohen added that the U.S. military is watching very closely and has "the capability to defeat any weapon system that Iran might possess." China Precision Machinery Import-Export Corporation markets air-launched anti-ship cruise missiles called C-801K and C-802K. The subsonic C-801K has a range of 50 km (31 mi). The Secretary of Defense in his November 1997 report confirmed that China sold to Iran land-, sea-, and air-launched cruise missiles.

After seeking to clarify apparently vague Chinese assurances made at the U.S.-China summit in October 1997, Defense Secretary Cohen said in Beijing on January 20, 1998, that the Chinese President promised that China will not transfer to Iran additional anti-ship cruise missiles, including those under contract, or technology to achieve over-the-horizon capability or indigenous production (Reuters, January 20, 1998).

Ballistic Missiles. The CIA reportedly found that China delivered dozens or perhaps hundreds of missile guidance systems and computerized machine tools to Iran sometime between mid-1994 and mid-1995, according to the International Herald Tribune (June 23, 1995). The November 21, 1996, the Washington Times cited a CIA report which said that China agreed in August 1996 to sell to Iran's Defense Industries Organization gyroscopes, accelerometers, and test equipment, which could be used to build and test components for missile guidance. On the same day, State Department spokesman Glyn Davies did not comment on the details of the report, but said that "we believe at this stage that, in fact, the Chinese are operating within the assurances they have given us." Depending on the specifications of the equipment and whether the equipment will be delivered, China may violate its commitment to observe the MTCR and U.S. laws, including the Iran-Iraq Arms Nonproliferation Act, Arms Export Control Act, and Export Administration Act. In response to Senator Bennett's question posed on January 8, 1997, Secretary of State Albright wrote that "we are deeply troubled by reports of Chinese missile cooperation with Iran." The DCI reported in June 1997 that China, in the second half of 1996, was a primary supplier, contributing "a tremendous variety of assistance" to Iran's ballistic missile program.

The Washington Times, on September 10, 1997, cited Israeli and U.S. intelligence sources as saying that China Great Wall Industry Corp. (also the satellite launch provider) was providing telemetry equipment used in flight-tests to Iran for its development of the Shahab-3 and Shahab-4 medium-range ballistic missiles (with ranges, respectively, of 800 mi. and 1,240 mi.). Over 100 Chinese and North Korean experts are reportedly working there (Washington Times, November 23, 1997; Washington Post, December 31, 1997).

CBW Sales to Iran and Latest Sanctions

Concerning sales for chemical and biological weapons (CBW), the Washington Post of March 8, 1996, reported that U.S. intelligence had been monitoring transfers of precursor chemicals and chemical-related equipment from China to Iranian organizations affiliated with the military or the Revolutionary Guards. The equipment includes glass-lined vessels for mixing the caustic precursors and special air filtration equipment to prevent poison gas leaks. Iran is also buying Chinese technology for indigenous and independent production. In June 1997, the DCI reported that China, during July-December 1996, provided "considerable CW-related assistance" to Iran, including production equipment and technology.

A CIA report said that China, in the summer of 1996, delivered almost 400 metric tons of chemicals, including carbon sulfide, "used in" the production of nerve agents, according to the Washington Times of November 21, 1996. Nevertheless, chemicals are dual-use items with civilian applications, and carbon sulfide is not on the list of chemicals controlled by the Department of Commerce in conformity to controls set by the Australia Group. It is not publicly known what other chemical China reportedly transferred to Iran. Jane's Defense Weekly of January 8, 1997, cited intelligence sources that "there is now clear evidence" that Chinese dual-use chemicals are being shipped to front companies of the Iranian chemical weapons program. On April 10, 1997, Robert Einhorn, testified that the Administration is "deeply concerned" by "substantial information" that "various Chinese entities have transferred chemical precursors, chemical production equipment, and production technology to Iran, which we expect will use them in its chemical weapons program." He cited "dual-use chemical-related transfers to Iran's CW program..."

On May 21, 1997, the Clinton Administration imposed sanctions on two Chinese companies, five Chinese citizens, and a Hong Kong company for transfers to Iran contributing to chemical weapon proliferation. U.S. sanctions, affecting U.S. government procurement and imports, were imposed under the Arms Export Control Act and Export Administration Act (as amended by the Chemical and Biological Weapons Control and Warfare Elimination Act). Sanctions were not imposed on the Chinese or Hong Kong governments. The State Department said that it has no evidence that those governments were involved in the transfers. Sanctions were not imposed under the Iran-Iraq Arms Nonproliferation Act, because the transfers in question apparently occurred before February 10, 1996, the date when provisions for sanctions on proliferation of WMD went into effect. Two days before, President Clinton announced that he will extend normal, MFN trade status to China for another year.

An intelligence report says that China completed in June 1997 a plant in Iran for making glass-lined equipment used in producing chemical weapons, wrote the Washington Times on October 30, 1997. The Nanjing Chemical and Industrial Group build the factory, and North Chemical Industries Corporation (NOCINCO) brokered the deal. (NOCINCO is likely a part of NORINCO.) However, the Chinese government is holding up supplies of raw materials.

As for biological weapons, in response to a question dated January 8, 1997, from Senator Bennett, Secretary of State Albright wrote that "we have received reporting regarding transfers of dual-use items from Chinese entities to Iranian government entities which raise concern." A January 24, 1997, Washington Times report cited a U.S. intelligence official as saying that the Chinese supplies involved dual-use equipment and vaccines.

Competing Policy Approaches and Options

Chinese proliferation as a policy issue concerns the priority of this issue relative to other interests(i.e., other security issues, human rights, and trade), the Administration's response, including the enforcement of nonproliferation laws, and possible legislation to reduce the danger. Congress has been concerned about the appropriate U.S. response to Chinese transfers which may have violated international agreements and/or contradicted U.S. laws.

The Clinton Administration has pursued a policy of "engagement" with China and has sought to improve relations with Beijing. Administration officials tend to cite Chinese nonproliferation statements and agreements as indications that the policy is advancing U.S. goals, especially on nuclear nonproliferation. Supporters of this approach also say that U.S. sanctions are counterproductive and are too broad. Rather, China needs to recognize nonproliferation for its national interests and develop export controls. Also, China would be more cooperative if brought in to draw up "the rules."

Others argue that Chinese sales to Iran and Pakistan have continued and Chinese assurances have proved to be unreliable. Also, U.S. security interests are better served with a tougher approach to deter China's transfers, which may include appropriate sanctions in response to Chinese violations of commitments. Some have argued that the United States should not be "subsidizing" China's missile and nuclear industries. These proponents tend to view the U.S. position as stronger than that of China's. They may also point out that China's suspension of its participation in the Middle East Arms Control effort ended it, and China weakened wording about on-site inspections during negotiations on the CTBT.

No matter what options are pursued, many argue that they should be part of a forward-looking and coherent U.S. strategy for dealing with China's rising power and influence in world affairs. A strategic approach might underpin short-term responses to violations and use both positive and negative sources of leverage. Besides sanctions and MFN conditions, other unilateral, bilateral, and multilateral options may be considered.

Trade Controls

Satellite Launches. Allowed by export licenses and Presidential waivers of post-Tiananmen crackdown sanctions (in P.L. 101-246) , the United States exports satellites and/or related technologies to China for launch by the China Great Wall Industry Corp. The National Security Council, in a Secret memo on bilateral talks leading up to the summit in June (dated March 12, 1998 and printed in the Washington Times), proposed to expand space cooperation with Beijing, increase the number of satellites that China can launch, issue a blanket Presidential waiver of sanctions, and support China's membership in the MTCR -- in return for effective Chinese export controls on missiles. A recent controversy involves an ongoing investigation by the Justice Department (since September 1997) into illicit assistance given by Loral Space and Communications Co. and Hughes Electronics Corp. to China's missile program after looking into the cause of an explosion of a Chinese rocket on February 15, 1996, that destroyed a satellite built by Loral. A cited, classified Pentagon report concluded that U.S. national security was harmed (New York Times, April 13, 1998).

Nuclear Cooperation Agreement. On January 12, 1998, President Clinton signed certifications (as required by P.L. 99-183) about China's nuclear nonproliferation policy and practices to implement the 1985 Nuclear Cooperation Agreement, as agreed during the U.S.-China summit in October 1997. According to President Clinton, the agreement serves U.S. national security, environmental, and economic interests, and "the United States and China share a strong interest in stopping the spread of weapons of mass destruction and other sophisticated weaponry in unstable regions and rogue states -- notably, Iran." He cited China's "clear assurances" on nuclear nonproliferation, which provided a basis for implementing the agreement. Clinton also said that he is "completely convinced" that the agreements are "sufficiently specific and clear" to meet the requirements of the law and that U.S. national security will be advanced. In addition, the President waived a sanction imposed after the Tiananmen crackdown (in P.L. 101-246), and the U.S. Department of Energy (DOE) and the Chinese State Planning Commission signed an agreement of intent to begin bilateral cooperation in peaceful uses of nuclear technology -- including use of nuclear facilities.

The House International Relations Committee held a hearing, with a closed session, on February 4, 1998. The Senate Foreign Relations Committee held a closed hearing on March 12, 1998. Congressional review ended on March 18, 1998, and the agreement is now implemented. U.S. firms may apply for Export-Import Bank financing and licenses to export nuclear technology to China, and foreign firms may apply to re-export U.S. technology.

Congress has several options to affect the agreement's implementation. On Nov. 5, 1997, the House passed a bill (H.R. 2358) with an amendment sponsored by Rep. Gilman that would extend Congressional review for implementation of the agreement from 30 to 120 days and provide for expedited review procedures. Congress may also pass legislation at any time to add Congressional oversight of licensing procedures for nuclear exports to China, prohibit funds for implementation, or limit Export-Import Bank financing.

Some in Congress, the nonproliferation community, and elsewhere are skeptical that Chinese policies have changed sufficiently to warrant the certifications and that they are in U.S. interests. First, past Chinese assurances have proven unreliable and there are still concerns about China's nuclear, missile, and chemical weapon-related transfers (especially to Pakistan and Iran). On January 28, 1998 -- just two weeks after the President issued his certifications -- DCI George Tenet testified to Congress that "China's relations with some proliferant countries are long-standing and deep" and that "the jury is still out on whether the recent changes are broad enough in scope and whether they will hold over the longer term." The closed hearings also reportedly uncovered concerns about continuing sales even after the Presidential certifications. The Chinese did not promise to stop nuclear cooperation with Pakistan and did not make a public pledge to stop nuclear assistance for Iran. (See sections on Nuclear Technology Sales to Pakistan and Iran.) Also, China has not shown a satisfactory track record on nuclear export controls nor adopted all international nonproliferation standards (by joining the Nuclear Suppliers Group). Second, there are concerns that any potential sanctions would hurt U.S. businesses involved with China National Nuclear Corporation. Third, some are concerned that China could re-transfer U.S. technology to countries seeking nuclear weapon technology and indirectly use the technology in China's nuclear weapon program. Last, some are skeptical of any huge potential for U.S. exports, saying that China aims to expand foreign competitors for its business and adopt U.S. technology in its own designs to reduce imports.

Supporters in the Administration, particularly the Departments of State and Energy, U.S. nuclear industry, and others say that nuclear technology offers a source of leverage to advance U.S. goals and the agreements with China so far should be "pocketed." China has ambitious plans to expand its nuclear power generation and needs Western technology. U.S. nuclear cooperation is a positive incentive for the Chinese nuclear industry to stop sales that contribute to nuclear proliferation. Referring to China's May 11, 1996, commitment, President Clinton stated in a speech on China on October 24, 1997, that "China has lived up to its pledge not to assist unsafeguarded nuclear facilities in third countries." Some add that conditions for U.S.-China nuclear cooperation should not be changed in the middle of negotiations. Also, supporters argue that French, Canadian, and Russian companies are already selling nuclear technology to China. Washington would have control over U.S. technology exports. U.S. companies say that they are losing out on more than $1.6 billion in annual U.S. nuclear exports to China and that China is a potentially large market for reactors, equipment, and technology. DOE says that China will account for one-third of the increase in the world's nuclear power in the next 20 years. U.S. companies, such as Westinghouse Electric Corp. and Bechtel Power Corp., are seeking approvals for exports as well as Export-Import Bank loans. Currently, China has 2,100 megawatts of nuclear power generating capacity and has contracts to increase that capacity by 2005 to 10,100 megawatts. China plans to have 20,000 megawatts of nuclear power by 2010, or 4 percent of electric generation (from less than 1 percent today).

The Administration urged China to adopt "comprehensive, nationwide regulations on nuclear export control." China responded by implementing a set of regulations (not a law) on nuclear export controls signed by Premier Li Peng on September 10, 1997. The regulations permit nuclear exports to only facilities under IAEA safeguards. However, one of the organizations to control nuclear exports, the China Atomic Energy Authority (CAEA), is headed by the president of the China National Nuclear Corporation which makes nuclear exports. Also, it is unclear whether China's nuclear weapon labs (and their contacts with Pakistan) are covered. The Foreign Ministry lacks a routine role in reviewing exports, and the regulations lack an enforcement record. China also joined the Zangger Committee on October 16, 1997. However, China still refuses to require full-scope safeguards intended to prevent diversions to unsafeguarded facilities and to join the Nuclear Suppliers Group. China said it will not issue regulations on dual-use nuclear exports until mid-1998.

Nonproliferation Sanctions. Policy debates concerning Chinese technology transfers have often centered on the question of whether to impose unilateral sanctions as required by various U.S. laws. While certain Chinese transfers may not violate any international treaties, U.S. sanctions may be required under U.S. laws. Congress has passed numerous laws to set U.S. nonproliferation policy and enforce nonproliferation treaties and guidelines with unilateral sanctions in response to violations. Underlying the question of whether sanctions should be used are disagreements about the most effective approach for curbing dangerous Chinese sales and promoting U.S. interests. While the Soviet threat dominated assessments of foreign and defense policy, the elimination of that threat fostered sharp debates about the primacy of security interests over business or other foreign policy interests.

Those who argue for the imposition of U.S. sanctions cite the legal obligation of the executive branch to implement and enforce U.S. laws passed by Congress. They also place a greater priority on nonproliferation as a national interest and view the strict enforcement of laws as vital to stemming proliferation. They refer to reports that China continues to transfer dangerous technology in defiance of the nonproliferation regimes and note the lack of Chinese participation in some significant international groups, such as the Nuclear Suppliers Group. This school of thought believes that Chinese transfers may pose a threat in the long-term and that a necessary military response to resulting threats against Americans or our allies would be terribly costly -- as in the 1991 Persian Gulf War. They also argue that the narrow interests of an individual firm or industry should not determine national security policy. Some who argue for a tough approach say that China has made commitments to nonproliferation after facing U.S. pressures and is more likely to restrain its proliferation activities if there are concrete and costly consequences tailored to penalize specific Chinese violators. Moreover, those urging a tough policy response assert that, not only are national security interests at stake, but U.S. credibility is diminished if the U.S. policy of opposing proliferation is not strictly carried out. They add that international nonproliferation regimes have proven to be inadequate, and until they are strengthened, U.S. laws are vital to enforcing compliance with the regimes. In this way, the United States has played the critical leadership role for a long time and should push to capitalize on decades of effort. Some are concerned that if U.S. commitment to peace and stability in Asia and the Middle East is perceived to have weakened, arms races would result when states seek to boost their defensive capabilities.

Those who argue against the imposition of unilateral sanctions, including placing conditions on MFN trade status, tend to focus on the harm to U.S. trade or business interests. Advocates for certain industries or companies lobby against policy actions deemed harmful to American businesses, especially when they benefit European or Japanese rivals. They argue that the United States needs to stay "commercially engaged" in China to influence Chinese policies, especially over the longer term. U.S. policy since the 1970s has been one of "engagement," to bring China into the world community with subsequent acceptance of the international "rules of conduct." Those arguing against the use of sanctions often say that sanctions are too broad or are not warranted, and refer to the progress China has made since 1992 in joining nonproliferation regimes. They also argue that this improvement needs to be sustained by a "strategic dialogue." They add that exchanges with China's military leaders are significant, because they have important influence over arms sales. In order to have a strategic dialogue, a normal military-to-military relationship must be cultivated. When sanctions were imposed, the dialogue tended to focus on lifting sanctions, rather than how to stop proliferation. This side of the debate argues that bilateral and multilateral options may be more effective and would not affect American businesses in an unequal way.

MFN Trade Treatment. In the 1990s, Congress has annually debated whether to link conditions to most-favored-nation (MFN) trade treatment (extended to most countries) for China. Because China has an increasing and significant trade surplus with the United States (second to Japan's) and the Chinese economy depends on the U.S. market, some believe that trade is a powerful policy instrument which could be used to advance vital U.S. goals. President Clinton has separated MFN renewal from proliferation issues. The Clinton Administration has continued the decades-old policy of "engagement" with China. The Administration has argued that MFN treatment is too broad a policy tool and would affect a large number of American companies. In the past, a majority in Congress have rejected legislation seeking to deny MFN status for China. President Clinton announced on May 19, 1997, that he will extend MFN status to China. Two days later, the Administration announced sanctions for chemical weapon proliferation.

U.S. Import Controls. To avoid broad sanctions or steps that may affect U.S. companies, some have proposed controls on imports of products produced by Chinese military or defense-industrial companies suspected of contributing to WMD proliferation. Import controls have been included as possible sanctions in response to missile proliferation (Section 73(a)(2)(C) of the Arms Export Control Act).

U.S. Export Controls. U.S. export controls are an important policy tool because U.S. technology provides one source of leverage over Beijing; at the same time, some in Congress are concerned about U.S. technology reaching hostile states with WMD programs through Chinese re-transfers. After the Cold War, U.S. export restrictions have been reduced to focus on items that contribute significantly to the development and production of WMD. Congress may strengthen controls over missile-related technology. A GAO report said in April 1995 that U.S. end-use controls on missile-related technology are only marginally effective, the effectiveness of sanctions is unknown, and that some missile export controls are weak. U.S. military sales to China have not been allowed since sanctions were imposed after the 1989 Tiananmen Crackdown, but there is increasing demand to export dual-use technology that could enhance China's military capabilities.

Multilateral Export Controls. China might be urged to join the 33-member Wassenaar Arrangement. After the end of the Cold War, the Coordinating Committee on Multilateral Export Controls (CoCom) was abolished in March 1994. It has been replaced by the Wassenaar Arrangement, which 31 countries agreed to implement on July 12, 1996. It refocuses export control from communist to proliferation threats.

Nonproliferation and Arms Control

Nonproliferation Regimes. Another policy approach is to strengthen the international nonproliferation regimes. There are two prongs in such efforts: increase their legal authority to enforce compliance and fill in the gaps in China's participation. For nuclear nonproliferation, the U.N. Security Council has recognized the limits to the effectiveness of the NPT/IAEA safeguards system (as shown by Iraq's and North Korea's advanced, clandestine nuclear weapons programs) and has tried to strengthen the IAEA's verification authority. On May 16, 1997, the IAEA adopted a more intrusive system of inspections. To strengthen the Biological Weapons Convention (BWC), negotiators are drafting a verification protocol for on-site inspections to monitor compliance.

The United States and others might encourage China to join the MTCR (as a member after it establishes a record of compliance and effective export controls), Nuclear Suppliers Group (NSG), Australia Group (on chemical and biological weapons), and Wassenaar Arrangement (military and dual-use export controls). Indeed, the National Security Council in a Secret memo, dated March 12, 1998 (printed in the Washington Times), proposed to expand space cooperation with Beijing increase the number of satellites that China can launch, issue a blanket Presidential waiver of post-Tiananmen sanctions on satellite launches, and support China's membership in the MTCR -- in return for effective Chinese missile export controls. (Also see Satellite Launches.) Membership in the MTCR would exempt China from certain sanctions, provide it with intelligence, give it a role in decision-making, and relax missile-related export controls to China. China joined the Zangger Committee (on nuclear trade) on October 16, 1997. However, China is the only major nuclear supplier to refuse to join the 35-nation NSG, whose members require "full-scope safeguards"(i.e., IAEA inspections of all other declared nuclear materials and facilities in addition to the facility importing supplies to prevent diversions to unsafeguarded facilities.) Some say that including China would capitalize on its desire to be treated as a "great power" and perceived as a responsible world leader. In addition, China might be more cooperative if it helped to draw up the "rules." Others argue that China's participation would obstruct efforts for tighter export controls, derail arms control efforts, link them to the Taiwan issue (e.g., the Mideast arms control talks), or weaken provisions (e.g., the CTBT).

Regional Security Talks. Chinese support may be sought for regional arms control groups, such as multilateral talks for South Asia. On October 3, 1996, Pakistani Prime Minister Bhutto proposed that the U.N. General Assembly convene a multilateral conference on security in South Asia. Then-President Bush's 1991 initiative for Arms Control in the Middle East (ACME), or Permanent Five, talks might be revived in some form. The ACME talks were to include bans on nuclear bomb materials and ballistic missiles in the Middle East. After Bush's decision, announced on September 2, 1992, to sell Taiwan 150 F-16 fighters, China suspended its participation in the talks. The ASEAN Regional Forum (ARF) has become an important venue for multilateral security discussions in Asia.

INF Treaty. Some, including Kenneth Adelman, the Director of the Arms Control and Disarmament Agency in the Reagan Administration, have proposed an expansion of the U.S.-Russian Intermediate Nuclear Forces (INF) Treaty into a worldwide ban on missiles with ranges between 500 and 5,500 km. Such an agreement would cover volatile regions like the Middle East and South Asia. Yet, Adelman acknowledged that there would be significant resistance from certain countries, including France and China, which would opt to keep such missiles. Indeed, there was reportedly consensus at a special MTCR meeting in the summer of 1995 against a global INF treaty.

Fissile Materials Production. The United States has sought Chinese cooperation on negotiating a global ban on the production of fissile materials for nuclear weapons and other nuclear explosive devices. On October 4, 1994, the United States and China agreed to "work together to promote the earliest possible achievement of a multilateral, non-discriminatory, and effective verifiable convention" banning fissile materials production.

Foreign and Defense Policies

"Strategic Partnership" and Summits. The Clinton Administration has resumed high-level military exchanges and discusses a "strategic partnership" with China to advance U.S. security goals, including nonproliferation. A series of high-level exchanges has taken place, including Secretary of Defense Perry's visit to Beijing in October 1994. One result was China's first defense white paper in November 1995, entitled "China: Arms Control and Disarmament." President Clinton held a summit with Chinese President Jiang Zemin in Washington on October 29, 1997. However, Jiang did not make a public pledge about changes in nonproliferation policy. The President is set to visit China in late June 1998.

Missile Defense. Missile defense is another possible response to the problem of missile proliferation. The Defense Department's "U.S. Security Strategy for the East Asia-Pacific Region" published in February 1995 called WMD a "major threat" to the security of the United States and its allies and friends. Regional theater missile defense systems were said to have a key role in the strategy to counter the threat. However, ballistic missile defense is an issue with China. China is concerned that U.S. missile defense programs would create an arms race in space and the effectiveness of China's missiles would be affected. Beijing is particularly concerned about Japan's and Taiwan's acquisition of missile defense systems.

Linkage to the Taiwan Issue. China has increasingly tried to link nonproliferation issues to the Taiwan issue, particularly U.S. arms sales to Taiwan. On January 8, 1997, at a hearing to confirm Madeleine Albright as Secretary of State, Senator Craig Thomas inquired about the U.S. position. Albright opposed any such linkage.

International Lending and Japanese Aid

Congress may seek to link U.S. support for loans made by international financial institutions to China's nonproliferation record. (See H.R. 87.) The Iran-Iraq Arms Nonproliferation Act requires U.S. opposition to MDB loans for sanctioned countries (Section 1605(b)(2)). However, U.S. influence is limited, and the World Bank and the Asian Development Bank have resumed and increased substantial lending to China. Moreover, as part of the sanctions imposed after the 1989 Tiananmen crackdown, the United States has supported only international loans for basic human needs in China.

Coordination with Japan is important, since it provides the most significant bilateral aid to China and was the only country to use aid to pressure China to stop nuclear testing. In May 1995, Tokyo suspended the small, grant portion of its aid program in China to protest Chinese nuclear testing. The U.S.-Japan Joint Declaration on Security Alliance for the 21st Century (signed on April 17, 1996) cited agreement on coordination of policies and cooperation on the prevention of the proliferation of WMD and their means of delivery. While China was the only country to conduct nuclear tests, Tokyo postponed talks on untied yen loans. After Beijing started a moratorium on nuclear testing on July 30, 1996, Tokyo restored the suspended grant aid (worth about $56 million) and began negotiations on the fourth yen loan package to China for 1996-1998 (worth about $5.3 billion).

Congressional Engagement of China's Legislature

While various departments, including State, Defense, and Commerce, have engaged the Chinese government in encouraging further cooperation in nonproliferation, Congress may seek to engage its counterpart, the National People's Congress (NPC). Implementation of nonproliferation policies in China requires effective export controls, which need new laws. The NPC plays an increasingly independent role in drafting and passing China's laws. Since the fledgling NPC in the Chinese system is not as influential as the U.S. Congress, such engagement would be a long-term effort.

LEGISLATION

H.R. 87 (Solomon)

Requires the Secretary of the Treasury to oppose assistance for China from international financial institutions unless there is a Presidential certification that China is in strict compliance with all U.S. laws relating to nonproliferation of advanced weaponry and weapons of mass destruction, and other matters. Introduced on January 7, 1997, and referred to the Committee on Banking and Financial Services.

H.R. 2011 (Hutchinson)

China Sanctions and Human Rights Advancement Act. Sec. 8 would express the sense of Congress that the President should determine whether sanctions should be imposed on Chinese transfers and require a report on each determination. Introduced June 23, 1997, and referred to the Committees on International Relations, Banking and Financial Services, Ways and Means, and the Judiciary.

H.R. 2358 (Ros-Lehtinen)

Amendment (Gilman) extends Congressional review for implementation of the U.S.-China nuclear cooperation agreement from 30 to 120 days and provides for expedited review procedures. House passed amendment (393-29) and bill (416-5) on Nov. 5, 1997. Received in the Senate and referred to the Committee on Foreign Relations on Nov. 7.

H.R. 2709 (Gilman)

Iran Missile Proliferation Sanctions Act of 1997 to impose certain sanctions on foreign persons who transfer items contributing to Iran's efforts to acquire, develop, or produce ballistic missiles. Passed House (voice vote) on November 12, 1997. Read the second time in the Senate and placed on the calendar on January 27, 1998.

H.Res. 188 (Gilman)

Urging the executive branch to enforce the Iran-Iraq Arms Non-Proliferation Act of 1992 with respect to the acquisition by Iran of C-802 model cruise missiles. Agreed to in House (414-8) on November 6, 1997.

S. 495 (Kyl)

Chemical and Biological Weapons Threat Reduction Act of 1997. Finds that China and other countries possess chemical and biological weapons and the means to deliver them; Sec. 204 would require a presidential report on chemical and biological weapons proliferation. Passed Senate (53-44) on April 17, 1997.

S. 1083 (Mack)

Sec. 105 urges the President to enforce the Iran-Iraq Arms Nonproliferation Act of 1992 with respect to the acquisition by Iran of C-802 model cruise missiles. Introduced on July 29, 1997; referred to the Committee on Foreign Relations.

S. 1164 (Abraham)

China Policy Act of 1997. Would impose sanctions against Chinese military companies engaged in proliferation, require sanctions for transfers of C-802 missiles to Iran, and require a report from the State Department on the process for determination of sanctions. Hearings held on September 17,

1997.

S. 1303 (Lieberman)

U.S.-China Relations Act of 1997. Would require a report analyzing the effectiveness of existing weapon proliferation export controls and sanctions relating to China and urge the President to enforce the Iran-Iraq Arms Nonproliferation Act of 1992. Introduced and referred to the Committee on Finance on Oct. 21, 1997.

S. 1311 (Lott)

Iran Missile Proliferation Sanctions Act of 1997 to impose certain sanctions on foreign persons who transfer items contributing to Iran's efforts to acquire, develop, or produce ballistic missiles. Read and referred to the Committee on Foreign Relations on Oct. 23 1997.



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