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18 June 1998

United States Information Service Washington File

18 June 1998

TEXT: REINSCH 6/18 REMARKS ON U.S. SATELLITE EXPORT POLICY

(Chinese communications satellites benefit U.S.)  (3100)


Washington -- Allowing Chinese launches of U.S.-manufactured
communications satellites is in the interest of the United States,
according to William Reinsch, under secretary of commerce for export
administration.

"I believe this Administration's policy on the export of commercial
communications satellites to China both protects our national security
and facilitates our economic well-being," Reinsch said at a June 18
joint hearing of the House Committee on National Security and the
House Committee on International Relations.

Reinsch acknowledged the security concerns surrounding satellite
launches, but noted that "Commerce licenses for communications
satellites contain numerous conditions and provisos developed in
conjunction with the Departments of Defense and State."

Under Commerce licenses, exporters are obliged to comply with the
following terms of the satellite technology safeguards agreement
between the United States and China:

-- develop a technology transfer control plan which identifies the
level and extent of technical data to be released, and which also
includes plans for securing the satellite during its transportation to
the launch site;

-- have all technical data under the license reviewed by the Defense
Department prior to its release to the launch service provider and
have a Defense Department monitor present at technical meetings and
launch activities with the Chinese launch service provider;

-- transport the satellite in a sealed container allowing no access to
equipment or technical data and with U.S. monitors to accompany the
satellite if it is transported on a non-U.S. aircraft;

-- have a separate cryptographic equipment safeguard plan for
communications security equipment; and

-- limit technology which can be released under the Commerce license
to only form, fit and function data used to mate the satellite to the
rocket and require the exporter, in the event of a launch failure, to
obtain a license from State before releasing any new technical data.

"In light of these safeguards, I believe the existing Commerce
licensing system fully protects our nationals security and foreign
policy concerns," Reinsch said. "There have been no allegations
regarding export control violations of Commerce satellite licenses
since the transfer of jurisdiction."

Reinsch noted that satellites also play an important role in
facilitating communications services such as telephone, television,
and the Internet.

"I believe such services are an integral part of any effort to bring
democracy and freedom to China," he said. "History has shown that it
was the successful example of the West -- not only in military
strength but in standard of living and freedom of expression -- that
brought the Cold War to an end. Our goal should be to bring not only
our products but our ideas and values to China, but we cannot do that
if they do not have the technological tools to receive them."

Following is the text of Reinsch's remarks, as prepared for delivery:

(begin text)

TESTIMONY OF
WILLIAM A. REINSCH
UNDER SECRETARY FOR EXPORT ADMINISTRATION
U.S. DEPARTMENT OF COMMERCE

BEFORE THE
HOUSE COMMITTEE ON NATIONAL SECURITY
AND
HOUSE COMMITTEE ON INTERNATIONAL RELATIONS
SATELLITE EXPORT POLICY TO CHINA
JUNE 18, 1998

Mr. Chairman, I want to thank the subcommittee for this opportunity to
testify on the export of commercial communications satellites to
China. I believe this Administration's policy on the export of
commercial communications satellites to China both protects our
national security and facilitates our economic well-being. In allowing
China to launch U.S. satellites and transferring licensing
jurisdiction for commercial communications satellites to Commerce,
this Administration has continued and enhanced the policy of the
Reagan and Bush Administrations and has been consistent with Congress'
expressed intent.

Our current policy continues the decision by previous administrations
to allow China to launch U.S.-built satellites subject to bilateral
agreements on price, number of launches and technology safeguards.
President Reagan began this policy in light of the growing demand for
satellite launches, a demand which could not be met by U.S. launch
service providers. His decision was a wise one, and he deserves credit
for ensuring that the U.S. would continue its lead of the commercial
communications satellite industry. Our view, like that of Presidents
Reagan and Bush, is that under the appropriate safeguards these
launches need not pose a risk to national security. In a moment I will
describe these safeguards as they apply to Commerce licensed
commercial communications satellites.

Commerce licensing of commercial communications satellites grew out of
a 1990 decision by President Bush to veto a revised Export
Administration Act which would, among other things, have moved all
communications satellites to Commerce jurisdiction. President Bush's
veto was not related to the satellite issue, but in his veto message
he directed that State review its control list to determine if a range
of items, including communications satellites, could be moved to
Commerce jurisdiction, in light of the strong interest expressed by
members of both parties in the jurisdictional issue and as the U.S.
was the only country in the world to control communications satellites
as munitions items. As a result of this directive, the State
Department transferred an initial tranche of roughly half of all
commercial communications satellites to Commerce licensing
jurisdiction at the end of the Bush Administration. President Clinton
committed in 1993 to continue the list rationalization exercise begun
by President Bush. It is also worth noting that in 1990 and 1992 both
houses of Congress passed legislation that would have transferred
jurisdiction over commercial communications satellites to Commerce,
and in 1994, committees in the House introduced and in the Senate
reported bills with this provision. These actions are in addition to
the letters the Administration received from a number of Members of
Congress urging either the jurisdiction transfer or the export of
satellites to China.

The 1992 transfer had established nine technical parameters relating
to communications satellites' components and capabilities. Satellites
with capabilities above the parameters were controlled by State. Those
with lesser capabilities were controlled by Commerce. A 1995 review,
undertaken by a working level group of technical experts led by the
State Department, attempted to adjust these parameters to see if
additional satellites could be moved to Commerce jurisdiction.
However, this technical working group was unable to resolve several
issues. Rapid technological change in the current generation of
commercial communications satellites meant that the nine parameters
could not consistently separate "military" from "commercial"
communications satellites. These changes made the parameters outdated
and illustrate the migration of military technology into the
commercial communications satellite sector as the demand for satellite
telecommunications services grows.

A cursory review of some of the parameters illustrates the problem.
For example, a satellite flown at high earth orbit has a larger
"footprint" on the ground than one flown at a low earth orbit. Even
though the two satellites could be exactly the same, the one with the
larger footprint would be treated as a munition if it flew at a higher
orbit. As satellites become lighter, the same propulsion system
provides greater acceleration. This means that new satellites, which
weigh less than old models, would be controlled as munitions only
because of their lighter weight.

Another parameter, cross-link capability, allows satellites to
exchange data without going through an intermediary ground station. In
1990, only military satellites needed to "talk," but the development
of communications satellites for a global mobile phone network means
that civil satellites also needed to be able to ensure global coverage
and to avoid the expense of numerous ground stations. Satellite
antennae size was also a parameter. Satellite antennas allow the
transmission and reception of signals from the ground. The larger the
antenna, the better it can receive signals from small transmitters
like cell phones. Successful implementation of global mobile telephone
systems required that future civil communications satellites use these
specialized antennas. Using these parameters to determine licensing
jurisdiction means that Iridium, Teledesic and other satellite systems
would now be licensed as arms exports.

With respect to the transfer of jurisdiction, Secretary of State
Christopher, in a June 8 statement in the Los Angeles Times, makes
clear that his 1995 decision was to task State and its industry
advisory group to continue the process begun by President Bush in 1990
to determine what additional communications satellites could be moved
to Commerce control. It was the Secretary's instruction that led to
the eventual transfer of all satellites to Commerce, a decision which
all agencies involved -- State, Defense, Commerce -- supported.

As Secretary Christopher noted, this unanimous recommendation was due
in part to President Clinton's December 1995 Executive Order 12981,
which revised the Commerce licensing process. This executive order
provided the participating agencies -- State, Defense, Energy, and
ACDA -- with the right to review and make recommendations on any
Commerce license application they wished, and it established time
lines and rules for interagency review and procedures for dispute
resolution and allows any agency the chance to object to proposed
exports through a hierarchy of committees from the working level all
the way to the President. Moreover, as part of the transfer of
jurisdiction, President Clinton amended Executive Order 12981 to
specifically give State, Defense, Energy, and ACDA greater ability to
object to a proposed export of commercial communications satellites.

In reality, no licenses have ever been sent to either Cabinet
Secretaries or the President in this Administration, but disagreements
go as high as the assistant secretary level in perhaps five percent of
our cases. Every license approved by Commerce for commercial
communications satellites since the 1996 transfer has had the
unanimous assent of State, Defense, and ACDA, has been subject to the
same level of stringent technology safeguards as satellites licensed
at State, and has made clear to exporters that no rocket technology
could be transferred.

The President's decision applied only to commercial communications
satellites and the minimum equipment and technology needed for launch.
Space launch vehicles and all detailed design or manufacturing data
for space launch vehicles or communications satellites were not
transferred to Commerce as part of this decision. Nor was there a
transfer of numerous satellite components, if they were being exported
separately rather than as part of a single satellite launch package.

The Presidents decision to transfer jurisdiction required that
Commerce impose enhanced controls on satellites. These new controls
excluded commercial communications satellites from certain provisions
of the Commerce regulations, such as foreign availability, which can
be used to release items from licensing. In addition, the enhanced
controls created a new and higher standard for reviewing
communications satellite licenses which requires a review of every
application to determine if the export is consistent with U.S.
national security and foreign policy interests. Language from the Arms
Export Control Act was used with the intent of providing the same
level of control under Commerce regulations as was found under State
regulations.

Commerce licenses for communications satellites contain numerous
conditions and provisos developed in conjunction with the Departments
of Defense and State. Under Commerce licenses, exporters are obliged
to comply with the terms of the satellite technology safeguards
agreement between the U.S. and China, which requires them to:

-- develop a technology transfer control plan which identifies the
level and extent of technical data to be released, and which also
includes plans for securing the satellite during its transportation to
the launch site;

-- have all technical data under the license reviewed by the Defense
Department prior to its release to the launch service provider and
have a Defense Department monitor present at technical meetings and
launch activities with the Chinese launch service provider;

-- transport the satellite in a sealed container allowing no access to
equipment or technical data and with U.S. monitors to accompany the
satellite if it is transported on a non-U.S. aircraft;

-- have a separate cryptographic equipment safeguard plan for
communications security equipment;

-- limit technology which can be released under the Commerce license
to only form, fit and function data used to mate the satellite to the
rocket and require the exporter, in the event of a launch failure, to
obtain a license from State before releasing any new technical data.

In light of these safeguards, I believe the existing Commerce
licensing system fully protects our nationals security and foreign
policy concerns. There have been no allegations regarding export
control violations of Commerce satellite licenses since the transfer
of jurisdiction.

I understand there have been questions raised about an analysis
conducted of the 1995 APSTAR II launch failure. After that failure,
the company involved conducted an analysis without the participation
of the Chinese launch service provider. The analysis was written in
order to satisfy insurance requirements. The analysis was reviewed by
the Department of Commerce, which determined that it contained only
information already authorized for export under the original Commerce
license issued in February 1994. The unclassified report was provided
first to a consortium of Western insurance companies and later to the
Chinese launch service provider.

I would also like to correct some misunderstandings which have arisen
regarding the Commerce licensing process as a result of an earlier
review by the General Accounting Office. In particular, GAO asserted
that there are five differences in the treatment of satellite licenses
at Commerce and at State. A closer look shows these differences do not
affect national security. GAO reported that:

-- Congressional notification of individual licenses is not required
in the Commerce system. Commerce regularly briefs the Hill, issues
annual reports, provides licensing documentation and answers inquiries
upon request. We have provided briefings on satellite exports, and we
briefed on the transfer of jurisdiction in 1996. We are not aware that
the Congress has ever objected to any satellite export, and the
message that Congress has consistently sent is that it wants
satellites controlled as dual-use items under the Export
Administration Act, which does not generally provide for Congressional
review of individual licenses. In the specific case of satellites, of
course, there can be no exports to China without a Tiananmen Square
waiver which is notified to the Congress.

-- Sanctions for missile proliferation do not apply to Commerce
licenses. Sanctions do apply to Commerce in cases of Category I
violations, and the President generally has flexibility to include
dual use export sanctions in other cases. Normally, however, Category
II missile sanctions apply only to munitions and dual-use items
controlled under the Missile Technology Control Regime. Commercial
communications satellites fall into neither category. Congress clearly
intended Category II sanctions to be less onerous than Category I
sanctions, which do cover dual use items.

-- Defense's power to influence the decision making process has
diminished. DOD's authority has not diminished in this regard.
Commerce has denied licenses when Defense has raised national security
concerns found credible by the reviewing agencies, but Executive Order
12981 does not give Defense or any other agency a veto over licensing,
which would be contrary to legislative authorities and Congressional
intent. It does, however, permit an agency, including DOD, to prevent
approval of any license until the President has heard and decided on
its objections.

-- Technical information may not be as clearly controlled under
Commerce procedures. Since Commerce technology conditions are almost
identical to those used at State, it is hard to see how the level of
control on technology has changed.

-- The additional controls placed on communications satellites
transferred in 1996 do not apply to those transferred in the Bush
Administration. This the assertion misses the point. In practice, all
satellite applications subject to Commerce license after the transfer
are subject to the same safeguards, and the other agencies have the
same review and escalation rights.

Let me also suggest that as a matter of policy there are several
reasons why allowing Chinese launches of U.S.-manufactured satellites
is in our interest. First, this is a large and important industry that
is growing rapidly. U.S. industry revenues last year were $23.1
billion, a 15% increase from the previous year. Employment in 1997 was
over 100,000, a 10% increase from the previous year. The industry
indicates that it currently has $1.7 billion in launch contracts on
Chinese rockets, with 8,000 U.S. aerospace jobs directly supported by
those contracts. With over 1200 satellites expected to be launched
over the next ten years, it is clear that the U.S. industry will
continue to need access to the fill range of launch providers if it is
to remain the world's leader. And that is a status I think we all
support, because it is not only good for our economy, it is good for
our military and our national security as well. As the line between
military and civilian technology becomes increasingly blurred, what
remains clear is that a second class commercial satellite industry
means a second class military satellite industry as well -- the same
companies make both products, and they depend on exports for their
health and for the revenues that allow them to develop the next
generation of products.

Second, some of these satellites bring telephone, television, and
Internet services to the Chinese people. I believe such services are
an integral part of any effort to bring democracy and freedom to
China. History has shown that it was the successful example of the
West -- not only in military strength but in standard of living and
freedom of expression -- that brought the Cold War to an end. Our goal
should be to bring not only our products but our ideas and values to
China, but we cannot do that if they do not have the technological
tools to receive them.

International security since the end of the Cold War poses very real
problems for the United States. We are in the midst of a serious
debate as to whether we should seek to constructively engage those
with whom we have disputes or whether we should simply try to punish
them through unilateral embargoes and sanctions. It may make us feel
good to impose Cold War-style embargoes on these countries -- even
though they rarely work -- but they do not help us achieve our
objective of changing the other country's behavior. Those who find it
in their interest to exaggerate the threat of trade with China seem
incapable of defining our relations with this emerging power in any
terms but those of military conflict. However, we believe that
treating China as a committed adversary is the quickest way to ensure
it becomes one, and we remain convinced that it is better to engage
China frankly in dialogue, in trade, and in ideas than it is to seek
to isolate them.

(end text)