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18 June 1998

Source: http://www.usia.gov/current/news/latest/98061808.elt.html?/products/washfile/newsitem.shtml

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)