Release Date: March 3, 2000
Balancing Trade and Security in the 21st Century
Presented at The
Heritage Foundation
Good afternoon. I want to talk to you for a few minutes about the
convergence and the upcoming clash between two areas of vital concern to the
United States: trade and national security.
With regard to national security, the central fact is this: because of the
proliferation of weapons of mass destruction, the world is a more dangerous
place in many respects than ever before. I remember a couple of years ago tuning
into C-Span late one Saturday evening. Former Senator Sam Nunn was speaking to
the University of Houston. He spoke of what he considered to be the most
dangerous threats to our country. First on his list was the proliferation of
weapons of mass destruction.
Several evenings later, I tuned into the Charlie Rose show. His guest was
former Secretary of State Warren Christopher. He listed his threats to the
future security of the United States. Number one on his list was the
proliferation of weapons of mass destruction. They had seen the problem from the
inside. Since then, there has been a steady drum beat of warnings.
Congress received the Rumsfeld Report, published in July 1998, which stated:
"Ballistic missiles armed with WMD payloads pose a strategic threat to the
United States. This is not a distant threat...A new strategic environment now
gives emerging ballistic missile powers the capacity, through a combination of
domestic development and foreign assistance, to acquire the means to strike the
U.S. within about five years of a decision to acquire such a capability."
Since it is almost certain that rogue states made such a decision years ago,
the conclusion is that states like Iran and North Korea may be able to strike
United States' territory in under five years, if they cannot already do so.
Certainly they, along with Iraq, Syria, Libya, and others today can strike our
allies and our troops stationed abroad.
Shortly after that, North Korea surprised our intelligence agencies by
successfully launching a three-stage rocket over Japan, essentially confirming
the Rumsfeld conclusions.
In July, 1999 the Deutch Commission concluded that "weapons of mass
destruction pose a grave threat to U. S. citizens and military forces, to our
allies and to our vital interest in many regions of the world."
Last September the Intelligence Community released a new national
intelligence estimate of the ballistic missile threat. This report asserted
that, "during the next 15 years, the United States most likely will face ICBM
threats from Russia, China and North Korea, probably from Iran and possibly from
Iraq." The report concluded that North Korea could deliver a light payload —
sufficient for a biological or chemical weapon — to the United States, now. It
also said that some rogue states may have ICBMs much sooner than previously
thought and those missiles will be more sophisticated and dangerous than
previously estimated. The September 1999 estimate also concluded that there is
now a greater risk of WMD attack upon the United States or US forces or
interests than "during most of the Cold War." The classified briefings are even
more disconcerting.
So we have been told in numerous ways on numerous days of this threat facing
our country. And, although it has amazingly received little attention in the
media and has been met with little action by our nation's leadership, this
direct and growing threat to our national security has to be at the very top of
our priority list. The writers of the Constitution understood that protecting
national security is our first priority.
The second point I would like to make is that this threat to our national
security is being fueled in no small measure by the Peoples Republic of China.
The Director of the CIA has stated that China is perhaps the most
significant supplier of weapons of mass destruction and missile technology to
the world. Countries around the world from Asia to Africa to the Middle East are
rapidly building up their nuclear and missile capabilities and are being
supplied all or in part by China.
The Rumsfeld Commission reported that:
"China also poses a threat to the U.S. as a significant proliferator of
ballistic missiles, weapons of mass destruction and enabling technologies. It
has carried out extensive transfers to Iran's solid-fueled ballistic missile
program. It has supplied Pakistan with a design for a nuclear weapon and
additional nuclear weapons assistance."
The CIA report provided to Congress in late January said that as late as
June of last year,
"firms in China provided missile-related items, raw materials and/or
assistance to several countries of proliferation concern" including Iran, North
Korea and Pakistan. And that's just the stuff we know about.
Because of China's help, some of these rogue nations are now developing
their own manufacturing facilities and have started to trade among themselves.
What has been the Administration's response to this unbroken pattern of
reckless activity producing a real and imminent danger to the United States?
They have responded with an incredible amount of negligence and naivete. With an
attitude of engagement at all cost, they have rarely missed an opportunity to
excuse or overlook China's behavior.
They refuse to sanction the PRC even though the law requires it and our
intelligence community produces clear and unambiguous evidence of their
proliferation activities. When the Chinese break a promise, the Administration's
remedy is to get a new promise.
We catch the PRC selling M-ll ballistic missiles to Pakistan, but we are
told that we only have proof that they transferred missile transport canisters.
We couldn't prove, the Administration said, that there were actually missiles
inside the canisters.
When sales of missiles or nuclear-related equipment or technology have been
discovered, the Administration has raised the standard of proof required by our
intelligence community to almost unreachable heights.
As the President himself has said, in order to achieve the Administration's
policy goals they have to "fudge" the facts sometimes so that a conclusion of no
violation can be the result.
The Chinese sell ring magnets to a Pakistani nuclear facility in violation
of the Nuclear Non-Proliferation Treaty but the Administration says we can't
prove that China's senior-most leaders approved the sale. The list goes on and
on.
There has been, in short, a complete disconnect between U.S. policy, China's
behavior, and our response.
Not content to turn a blind eye toward China's proliferation activities, the
Administration has actively contributed to the problem by weakening export
controls.
First, the Administration helped dissolve COCOM in 1994—and fashion a
feckless substitute---so that there was no longer any international regime with
any real teeth to control the sale of dual-use technologies.
Then they proceeded to weaken our system for the benefit of Ron Brown, the
Commerce Department and political contributors. In the six years since the
Export Administration Act expired in 1994, the Administration:
o Approved export licenses over the objections of the Departments of State
or Defense;
o Gave the Secretary of Commerce greater authority and discretion to manage
the export licensing program;
o Reduced the amount of time available for agencies to conduct application
reviews by 25%;
o Oversaw a Post Shipment Verification process that has dismally low
inspection rates. For example, out of the 191
high performance computers shipped to China in 1998, only one post shipment
verification occurred;
o According to testimony before our Governmental Affairs Committee, Clinton
Administration officials — even within
the Pentagon — have ignored, hassled and pressured technical experts who had
the temerity to raise questions about
proposed export licenses. The Defense Technology Security Agency, or DTSA,
was even marginalized physically, its
office having been literally moved out of the Pentagon.
Lest we forget, this is the same Administration that transferred all
commercial satellites from the US Munitions List to the Commerce Control List so
that if the Administration were ever forced to impose missile proliferation
sanctions on China, at least we would still be free to do satellite deals with
them.
And, of course, we know at least some in the Pentagon believe that satellite
technology transfers have already damaged our national security, since the same
technology necessary to place a satellite in orbit also place ICBMs into space.
It must amuse and baffle the Chinese that we are so casual with regard to
our sensitive military-related technology in dealing with them, at the same time
they are supplying terrorist nations with the ability to reach the United States
with weapons of mass destruction.
In August 1998, after many of the Administration's various export control
problems had come to light, I wrote to the Inspector Generals at six federal
agencies: Commerce, Defense, State, Treasury, Energy, and the CIA. I asked them
to undertake a comprehensive review of US export control practices, and then
report their findings back to the Governmental Affairs Committee---which I
chair.
Their reports and testimony revealed a system full of holes — one clearly
favoring trade over national security. For example:
o Although the law requires it, not one of the six agencies has a formal
program for training licensing officers;
o Commerce does not properly check to see if the conditions imposed upon
export licenses are complied with, so
they don't know if product diversion is taking place;
o Pre-license checks and post shipment verifications are often canceled by
Commerce without notice to other
agencies;
o There are no effective procedures in place to control or monitor sensitive
dual-use technology information shared
with foreign nationals who visit the US, despite the fact that export
licenses are required for these information
transfers;
o Finally, even though the law requires it, our government has no overall
system for analyzing the cumulative effect of
our exports to other countries.
The net effect of all these changes, poor administration, and general lack
of concern for security, has been the loosening of important export control
restrictions, and the markedly increased availability of important technologies.
This has damaged America's national security by allowing potential
adversaries to advance their WMD and missile programs, as well as close the
technological gap when it comes to military hardware, precision munitions,
advanced communications, overhead surveillance, and so on.
Therefore, we have the following situation:
1) We clearly face a dangerous and increasing threat to our national
security;
2) China is making significant contributions to that threat; and
3) The United States is acting as if the threat doesn't exist.
By turning a blind eye to China's proliferation, dismantling the
international export control regime, and emasculating our own export controls,
we are jeopardizing our national security in many ways----most importantly our
plans for a national missile defense system.
I recently returned with a Congressional delegation from Munich where we met
with our European allies. The question of whether there is really a rogue nation
threat to the U.S. was clearly an important issue to them in determining if they
were going to support our national missile defense plans.
The Administration's actions, however, would indicate that we have very
little concern about WMD threats. This mismatch between rhetoric and action
regarding the threat and export controls sends a mixed message to our allies,
and frustrates our attempts to build support for our strategic goals.
This is the background from which we will soon be dealing with the WTO
matter and the Senate consideration of permanent normal trade relations with
China. I believe that this debate must bring these national security issues into
play. In light of what we have just recounted, how can we consider this as
simply a trade issue? If, in fact, China is contributing to a threat to this
country's national security, and if, in fact, up until now we have misguidedly
sent signals to them and the rest of the world that we do not take the matter
seriously, then we must take steps to:
1) avail ourselves of any opportunity to encourage a change of attitude by
PRC, and
2) demonstrate emphatically to China, our allies, and the rest of the world,
that, this Administration's actions
notwithstanding, the United States takes the matter of proliferation very
seriously.
I believe that the WTO debate gives us that opportunity. It can raise these
national security issues to the level of public attention and Congressional
consideration which they have long deserved.
We should not complicate an opportunity to expand trade, however, without
good reason. Trade liberalization has been of great benefit to the United
States. Generally speaking, I believe we should do everything that we can to
help open up markets. Expanding trade makes for market economies, which the
world is now enjoying in record numbers. Market economies lead to greater
economic freedom, which may lead to political reform.
But arguments for free trade alone don't resolve the tensions between trade
and security. It is time that the Administration and other supporters consider
the fact that permanent NTR may not pass unless, in conjunction with its
passage, certain other things happen that will help change the PRC's behavior
regarding proliferation.
Of course, we could just vote down PNTR to China. This would certainly make
a statement to the world that we are serious. It would undoubtedly shock the
Chinese who must think they have a locked deal since they show no hesitancy in
threatening to invade Taiwan, embarrassing our high-level diplomatic delegation
and reminding us of their ability to lob an ICBM onto one of our cities -- all
practically on the eve of PNTR consideration. We would still have trade with
China, since it would be to their benefit as well as ours, though not under the
more preferable conditions agreed to in the bilateral.
But would denial of PNTR benefit US national security? There is little doubt
in my mind that after an initial cooling off period, China would have a powerful
incentive to alter its behavior in order to obtain PNTR. However, denial of PNTR
would probably be a one time lever. We could probably make gains with a denial,
but if we then granted it later, as we probably would, all of our leverage would
be gone. What we really are seeking instead is a sustained ability to influence
Chinese behavior.
Other down sides are obvious -- both to our commercial interest and the risk
of seriously unraveling a relationship between the two countries that is not
doing too well as it is. Chinese reformers have put their reputations and
credibility on the line.
So should we then grant PNTR -- straight out? There is little question that
the bi-lateral that has been negotiated is favorable to us in many respects. As
I've suggested, there are many potential benefits from expanded trade. However,
I am convinced that continuing to ignore China's consistent pattern of conduct,
which is inimical to our national security would be a mistake in the long run.
It is often said that the Chinese think in much longer time frames than we do.
It would be folly to be so concerned with economic benefits and our immediate
relationship with the current leaders of China that we do nothing to minimize
the long-term dangers we face.
A third option would be to pass PNTR with amendments that would enhance our
anti- proliferation efforts. We can't amend the bilateral treaty with China, but
we can amend the permanent NTR legislation in ways that have nothing to do with
trade. I think there may be many good ways to do this.
• First, we can begin by establishing an annual review mechanism that
assesses China's behavior.
• Next, we need strong principled leadership from the President and Congress
on these national security matters. We
can start by passing an Export Administration Act that balances trade with
national security—as opposed to the
current proposed legislation that would further loosen export controls.
• Third, the United States should work with the other industrialized
countries, beginning with our Allies, to establish a
new multilateral export control regime. This will not come easily or
quickly, but given time, effort and the right
initiatives, I am confident that we can achieve this end.
• Fourth, we should look at adding or incorporating parts of the Taiwan
Security Enhancement Act into such
an amendment. Perhaps conditioning or triggering parts of that Act on
China's behavior.
• Finally, another intriguing ideas was implicit in some of the findings of
the Cox Committee and the Deutch
Commission. The Cox Committee reported that "the (PRC) is using capital
markets as a source of central
government funding for military and commercial development." Let me expand
on this.
According to recent estimates, the PRC is presently involved in US bond
markets to the tune of approximately $14.5 billion. I believe that this may be
an economic lever that could be used. We already know that we are financing some
bad actors, including a notorious PRC arms dealer. In fact, the PRC, itself, is
the largest Chinese borrower of dollars in the United States — some $3.2 billion
in sovereign bond offerings. We have no idea what these funds were used for.
That is why we should also pass legislation which brings greater
transparency to all foreign companies that use our markets. The SEC provides
little information on these companies now, many of whom, in the case of China,
are front companies. We need to require more detailed information in
prospectuses regarding the specific identity and activities of foreign
government related firms applying for entry into our capital markets.
This would give pension fund managers something to look at in order for them
to develop their own national security criteria for investments. This would also
give Congress, as part of an annual review, a mechanism whereby companies, or
even countries, who engage in proliferation activities are denied access to our
debt and equity markets.
This is leverage. Perhaps enough to cause China to reconsider some of those
missile sales.
The threat of denying MFN each year was empty and the Chinese knew it.
However, these statutory provisions, perhaps along with others, would be a card
we could actively play without damaging ourselves.
In conclusion, it goes without saying that we do not want a shaky
relationship with a country as important as China to degenerate further for any
appreciable period of time. It is equally obvious that a policy of all carrots
and no sticks, has not improved our relationship with China; we must demonstrate
strength as well as restraint to them and the rest of the world. I believe that
involves engaging and trading and hoping for the best while at the same time
establishing a frame work in which the Chinese can be penalized for bad
behavior. I do not believe we should take the one approach without the other.
Not when our national security is involved.
Thank you
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