- The Washington Times - Monday, March 1, 2010

U.S. policy toward China increasingly sounds like a spoof from “Saturday Night Live.” Google has accused China of launching cyber-attacks on it and least 20 other companies. The Obama administration has all but implicated Beijing in a recent electronic warfare campaign against critical computer networks throughout the U.S. government, military and the broader economy. And for good measure, the Obama Pentagon has identified China’s growing military might - powered by is burgeoning technological prowess - as a major threat to U.S. interests not only in East Asia, but also globally.

Yet, all the while, America’s outsourcing multinational companies - including Google - are lobbying the Obama administration, so far successfully, to enable them to strengthen China’s technological prowess still further. Specifically, these companies have persuaded the White House to support easing America’s controls on the export of defense-related goods and technologies to China and other countries of concern.

And here’s icing on the cake: The multinationals and their administration allies complain that today’s export controls cover too many of their products and deprive them of billions in sales to China and elsewhere. But China’s emerging high-tech military threat to U.S. national security - and sometimes to these companies’ own interests - has resulted largely from years of indiscriminate corporate technology transfer to the People’s Republic. Many such transfers have been explicitly permitted under this supposedly overly strict export controls system. Many others have simply snuck past it, or tried to.

The latter category of transfers has attracted most of the attention. For example, in the late 1990s and in 2000, Space Systems Loral, Hughes Electronics and Lockheed Martin were fined tens of millions of dollars for violating U.S. controls and helping China improve its long-range rockets - which, incidentally, can carry nuclear warheads and hit American territory. All three companies are pushing to relax export controls.

But at least as important has been corporate activity that’s fully approved by the export control system. For example, China is obviously full of computer whizzes. But surely the PRC’s state-of-the-art hacking and cyberwarfare capabilities have benefited greatly from Google’s 2005 decision to open a product research and development (R&D) center in China aimed at “attracting and developing” Chinese talent.

Similar results have surely been generated by Yahoo’s 2009 establishment of its own global R&D center in Beijing. This facility will “engage with the Chinese technology community” in areas such as “search, advertising, cloud computing and other personal Internet tools and technologies.” Much more high-tech acumen has no doubt been transferred to China by Microsoft, which began R&D in China in late 1998, and which expects its Chinese R&D employment to hit 3,000 in the next three to five years.

Hardware companies have worked hard to build up China’s high-tech capabilities as well. IBM established its China Research Laboratory in 1995. Located near the Beijing campus of Tsinghua University, “China’s MIT,” the facility currently employs 80, and describes itself as providing China with “a bridge to the most advanced technologies, a cradle for developing talents in technology and management.”

In 1999 Cisco, the world’s leading manufacturer of Internet “backbone” systems, announced plans to build 11 “networking academies” in the People’s Republic. These academies aimed “to teach high school, college, and university level students how to design, build and maintain computer networks that support local, national, and global businesses.” The company opened a $32 million R&D lab in Shanghai in 2005.

Intel, the world’s largest computer chip maker, has been transferring advanced technology to China since 1998, when it established a $50 million research center in Beijing. Its China R&D facilities work not only on semiconductors, but also on communications technologies, networks, computer architecture, and wireless technologies. According to Intel, its strategy in the PRC includes the goal “to close the technology gap in China.”

Advanced MicroDevices, National Semiconductor and Texas Instruments have engaged in similar activities in China for years as well. No wonder the U.S. Government Accountability Office concluded in 2002 that China’s “improvements in semiconductor manufacturing capability are the direct result of the involvement of European, Japanese, and U.S. integrated circuit manufacturers in China. …”

These entirely legal transfers of technology are also undoubtedly augmenting more conventional forms of China’s military might, as well as its cybercapabilities. After all, as repeatedly emphasized by the Defense Department and numerous outside experts, China believes that the two recent Iraq wars and the Afghanistan conflict teach an unmistakable lesson: Transmitting real-time information to and among fighting forces with advanced electronics systems is the biggest key to battlefield success.

The Chinese have developed some such capabilities on their own, but still lag the U.S. military. As a result, according to the Pentagon’s latest annual report on Chinese military power, the PRC is continuing its “systematic effort to obtain dual-use and military technologies from abroad” to create “an information-based, network-enabled force.” China’s prime targets, according to DOD? “Software, integrated circuits, computers, electronics, semiconductors, telecommunications, and information security systems.”

China has plenty of other technology acquisition priorities: Missile guidance and control systems, turbine engine technology, precision machine tools, advanced diagnostic and forensic equipment, and computer-assisted design and manufacturing systems. The U.S. Defense Department emphasizes that the Chinese have no compunction about breaking the law to satisfy their needs.

How do the multinationals justify lobbying to make China’s technology procurement even easier? With two spurious economic arguments. They claim that current export controls needlessly rob American businesses of sales and job-creation opportunities made more important than ever by the economic crisis. And they insist that European and Japanese competitors already fill vacuums created in China by existing U.S. controls.

But U.S. controls affect only a tiny fraction of U.S. exports. At the heart of the companies’ complaints are exports to China and 21 other countries of civilian products with possible military uses - the so-called dual-use exports. According to the latest (2007) U.S. government data, however, total U.S. exports to these countries came to only 6.9 percent of total U.S. exports. And of all the exports to these “controlled destinations,” a bare 0.8 percent required a Commerce Department license. So the job and growth effects of U.S. export controls clearly are minimal.

As for America’s export-happy competitors, many do indeed make competitive dual-use products. But for the most part, American-made goods - especially those with the biggest military implications - represent the state of the art. That’s why the Chinese and others work so hard to obtain them. Where the United States no longer enjoys the lead, it is better advised to exercise leadership and pressure its allies to enforce strict multilateral transfer standards rather than meekly accept the existing status quo and acquiesce in the ill-advised transfers already taking place.

Indeed, the flood of advanced technology currently being transferred abroad does indicate a need to reexamine today’s export control system. But the focus should be on tightening, not loosening them. Too much of China’s military power has already been made-in-America.

Kevin L. Kearns is president of the U.S. Business and Industry Council.

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