Ambush of security controls

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Chapter 4 of the Pentagon's new report on Chinese military power released May 23 starts with a quote from President Hu Jintao:

"We need to build an innovative system of defense science and technology... to create a good structure under which military and civilian high technologies are shared and mutually transferable." This highlights the danger of "dual use" items U.S. firms provide Chinese business partners being used to strengthen Beijing's defense industry and military capabilities.

To meet this threat, the Bush administration proposed new export controls on trade last year. Some items would be prohibited, while special licenses would be needed for others. There would be more background checks and transaction oversight. The new regulations are supposed to be out by the end of this month.

Establishing national security as the priority in international economics has not set well with two groups: American firms wanting to sell high-tech goods and profit from helping China rise; and the Chinese government, which wants to acquire technology it does not yet have.

Beijing has for years argued high-tech exports could cut the huge U.S. trade deficit, which topped $201 billion last year. Mr. Hu mentioned this on the White House lawn during his meeting with President Bush April 20. But as James Sasser, ambassador to China during the Clinton administration, has said "The Chinese really don't do any lobbying. The heavy lifting is done by the American business community."

According to press reports, the computer, aerospace and machinery industries have been lobbying the Commerce Department for less restrictive rules and a shorter list of controlled products. Among the items taken off the list include aircraft engines, ball bearings, machine tools and virtual-reality systems. Our business leaders are not stupid. They know they are helping build China's strategic industrial base. They just don't care, as long as the checks clear.

President Hu's "good structure" is already in place. One-third of the Chinese economy is still in the hands of state-owned firms, and much of the private sector is run by elites with direct ties to the government and the Communist Party.

No U.S. agency has the manpower to police the use of U.S. technology once delivered in a country the size of China, even if Beijing cooperated, which it doesn't. A 2002 report by the Government Accountability Office (GAO) concluded: "The current export control system has not effectively slowed China's ability to obtain billions of dollars worth of advanced semiconductor equipment as part of its national strategy to modernize its semiconductor industry." The GAO found licenses were routinely approved and there were inadequate follow-up inspections to confirm that purchased items were not being used for military purposes.

The claim that high-tech equipment sales to China can significantly reduce the trade deficit does not add up. Sales of military or "dual-use" technology would not be on the scale needed to balance trade. For example, 2003 was a peak year for Russian arms sales to China, not just technology, but entire weapons systems including fighters, missiles and warships. But the total was only $5.1 billion. In 2004, European Union companies sold military helicopters, fire-control radar, aircraft engines, submarine technology and airborne early warning systems to China, but grossed only $400 million. Selling technology to China narrows the military more than the trade gap. China has shown itself quite adept at taking a few samples and replicating them, making the technology its own without further payments.

Some individual companies might make a short-term profit were restrictions lifted, but if the result was higher Chinese weapons performance, the potential cost to America in blood and treasure would be greater by orders of magnitude.

For example, Toshiba Machine sold four nine-axis and four five-axis milling machines to the Soviet Union in 1982-1984. The machines were used to make improved propellers for Russian submarines, which made them quieter and harder to detect -- knowledge Beijing has since acquired from Moscow. Toshiba Marine rang up $17 million for the sales, but the U.S. spent several billions of dollars trying to regain the ability to track those improved submarines. Private profit is a wholly inappropriate factor against national security in trade with potential adversaries.

The National Security Strategy of the United States released in March states: "Our strategy seeks to encourage China to make the right strategic choices for its people, while we hedge against other possibilities." Part of that hedging involves redeploying aircraft carriers and submarines to the Pacific, developing new deep-strike weapons and strengthening Asian alliances. But export controls also play a proper role, to prevent having to face a Chinese regime given by irresponsible companies the critical capabilities needed to advance its ambitions.

William Hawkins is senior fellow for national security studies at the U.S. Business and Industry Council.