Thursday, June 23, 2005

Bush Policy on Dual-Use to the ChiComs (Headache)

WASHINGTON - (KRT) - The razor-thin sheets of film looked as benign as tin foil. But they were intercepted on their way to the Great Wall Industry Corp., a Chinese aerospace company, and in their neat brown cardboard package they illustrate the conundrum China presents for U.S. military planners.

The foil actually was Kapton, a substance used as a thermal insulator for satellites and rockets. Kapton is a "dual-use" item, one that can be used both for civilian and military purposes, such as in ballistic missiles. Permission to export it is required by the U.S. government.
The exporting company, Valtex International Corp. of Palo Alto, Calif., tried to skirt the law three years ago by mismarking a shipping label after the government denied its exports on two attempts.

The Valtex case is one of a growing number of export-enforcement actions involving Chinese companies and agents intent on acquiring U.S. military technology. (Valtex and its president pleaded guilty in February, and last month they were given probation, ordered to pay $427,000 and banned from making exports for three years).

Such incidents underscore the inherent tension within current U.S. China policy, one that keenly promotes robust trade in hopes that it will lead to democratic reforms while trying to keep China's growing military might - and regional ambitions - in check. The Bush administration recently has raised new concerns about China's military ambitions, with Defense Secretary Donald Rumsfeld early this month questioning China's "continuing large and expanding arms purchases," and has exhorted European nations and Israel not to sell arms to China.
But some China analysts say much more attention should be paid to the U.S. dual-use technology that might go to China for civilian use but find its way into military manufacturing. The list of those items is long and difficult to police, from computer components to manufacturing equipment to the aerospace components like the space-age metal that Valtex tried to supply.

"Almost nothing is denied to the Chinese at this point," said Peter Leitner, a senior analyst at the Pentagon's Defense Technology Security Administration. "The administration overall leans in terms of balance-of-trade concerns, rather than restricting the sale of potential military goods to China."

Commerce Department officials dispute that claim. They said concerns over China's military expansion have heightened enforcement actions and led to increased scrutiny, including a recently launched review of what can be exported without licenses. "What we're doing now is looking at items that don't currently require licenses when they're shipped to China," said Peter Lichtenbaum, the acting undersecretary of commerce. "We don't want any items going to the military."

U.S. manufacturers have long argued that export restrictions often are meaningless because similar goods can be purchased from foreign sources. Still, China is the leading destination for dual-use items, according to government figures. From 2000 to 2002, according to a government audit, U.S. exporters received 2,644 licenses from the Commerce Department to ship dual-use goods to China - more than a third of the licenses granted during that period.

In 2004 and so far this year, U.S. companies have shipped China more than $2 billion in products used in the aerospace industry, another $2 billion in electronics and $81 million in advanced materials, according to figures compiled by the University of Georgia's Center for International Trade and Security.

Concerns over China, a key campaign issue for President Bush in 2000, have been overshadowed by continuing combat operations in Iraq and Afghanistan.
But recently administration officials and members of Congress have begun to speak openly about China's military expansion and what it may mean for security in Asia, and beyond.

In the House, members of both parties recently formed a China caucus and plan to hear from experts on everything from the theft of intellectual property to the range of the latest Chinese missiles. Dual-use exports from the United States are a primary concern, according to the caucus chairman, Rep. Randy Forbes, R-Va.

"One of my big concerns is twofold," Forbes said. "What we're selling to China in a dual-use way and what they can turn back on us. And ... the number of companies forming to come to the United States to get intelligence information from our defense industry."

In January 2004, the General Accounting Office (now known as the Government Accountability Office), Congress' investigative arm, reported that the Commerce Department checked just 6 percent of 7,680 dual-use exports to "countries of concern" to ensure that recipients were using the products for civilian, not military, purposes.

China, the GAO noted in particular, "limits the number of checks each year." The Commerce Department's Lichtenbaum said the United States and China have struck a new agreement that allows inspections and that department investigators have worked through the backlog of inspections. But a congressional aide who tracks the process and requested anonymity said it still is "too early to tell if the process is working or not."

Recent cases also suggest that plenty of Chinese and American businesses are willing to ignore the law altogether.

Three Chinese nationals were charged in April in a federal court in New Jersey with fraud, with prosecutors alleging they bilked their U.S. company out of $1 million while arranging the sale of devices used to control radio signals.

In another recent case, Laurel Industrial Inc. of San Jose, Calif., was charged with violating U.S. export policy in its sale of underwater acoustic detection equipment to a Chinese customer. The company had failed to receive a license and agreed to pay a $44,000 fine.

During a recent defense ministers' conference in Singapore, Rumsfeld said the Pentagon's report on the Chinese military would show that it now has the world's third-largest military budget, after the United States and Russia. A Rand Corp. study issued in May found that China was spending as much as $78 billion annually on defense, or about 2.8 percent of its gross domestic product.

The United States spent $430 billion last year on defense, nearly 4 percent of GDP.
But analysts also cited positive developments in the U.S.-Chinese military relationship, such as exchanges among groups of officers that started in the late 1990s to thaw the diplomatic chill that followed the 1989 massacre of pro-democracy protesters in Beijing's Tiananmen Square.
One group of Chinese generals and admirals visited National Defense University in recent weeks, said Bud Cole, an NDU professor who recently wrote a book on the Chinese navy. Cole and others who have taken part in the exchanges said they have offered U.S. officers unusual insight into the Chinese military and its capabilities.

"We learn a lot more about them than they learn about us in the military exchange programs," said Cole, who was given entree to Chinese Navy ships and facilities while researching his book. "They're such a closed society, one of our military attaches in China would have to scramble to find out things. But we're such an open society, they probably ship stuff they get from open sources back in footlockers."

Most of us are well aware of X42's "What, ME Worry?" attitude to arming Red China. I had kinda hoped that GWB would have put the clamps down.

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