Remarks by U.S. Senator Fred Thompson
U.S.-China Commission's Organizational Meeting
Room 128 of the U.S. Capitol
April 24, 2001

PROCEEDINGS (2:11 p.m.)
CHAIRMAN D'AMATO: We were just talking about your effort on the proliferation issue last fall.
SENATOR THOMPSON: Until anybody else shows up, let me just give you my views.
CHAIRMAN D'AMATO: Do you mind if I write while you talk?
SENATOR THOMPSON: No, go ahead. If I say anything noteworthy, please put it down.
(Laughter.)
I'll try to use it again. I come from this as very much a free trader to start with and someone who has supported PNTR all along,. We have to wait and see how things go. But I am increasingly concerned that our export policies are not being given sufficient attention in this global economy that we're working in.
Our policy has been basically for some time now to export as much and as many different things as we can, which I think, generally speaking, is a good policy. But we do have questions that are growing more serious by the day in terms of our dual-use items. I hope I don't step on people's toes, but I'll be very direct with you; this is my view and you'll get it from others as well.
The pressures that bear on Congress have been very intense and very one-sided in terms of promoting trade, particularly high technology and dual use items. There is a debate afoot as to what is controllable and what is not; . I'll get into that a bit more in a minute. What we have been lacking, though, is an honest broker. We all have our views; Some of us have conflicts of interest; Politicians are no different. But no one, either in or out of government, as best I can tell, is really in a position to be objective, or has taken a look to see what the proper balance is between national security and trade. That's where I see the importance of this Commission.
I think one of the greatest public services done in decades was the Rumsfeld Commission. The Commission camein , did an analysis with a bipartisan, group of people and went wagainst common assumptions. The Commission went against the findings of our intelligence community and came up with a different set of analyses and conclusions. We're operating under those today, and I think they are ones that serve our country's interests best.
Here is the way that I see things. I think it's not in dispute that China is undergoing a very significant military build up. They're also making tremendous economic progress. They intend for that economic progress to pour over for the benefit of their military. Yet, while they've announced a significant military build up, we have no idea, really, what that build up really is, or at what itís aimed. But we do know that a great deal of what the Chinese write and say cast the US as its adversary.
The Chinese are very aggressive as far as obtaining western high technology. Their build up includes their nuclear forces, certainly, and their missile capabilities. We know from the Cox Committee's work that they have divertedour dual-use technology to their military benefit to one extent or another. We know from the biannual reports provided to us by the Intelligence Community that they still are a major proliferator of WMD and missile technologies in terms of assisting rogue nations.
I guess the latest example of what we would complain about had to do with the fiber optic network that the PRC evidently sold to Saddam, and that we recently bombed. The network was designed to help shoot our planes down. The writings of Chinaís political leaders and their military leaders quite obviously target us as an enemy. The US is the enemy in their war games now. Based on a compilation of some of their writings by Michael Pillsbury, it's quite clear that the PRC feels like we're in decline, and that they have time lines for when various things are going to happen.
COMMISSIONER LEWIS: Excuse me, you said they have time lines?
SENATOR THOMPSON: Yes, their views as to when the balance of power will shift. Our interests and theirs, quite frankly, are in conflict in terms of the Asia Pacific Region. We just saw the latest example of that over the South China Sea. And incidentally, I don't think we ought to over react to that one incident. I do think it gives us an opportunity to step back to where we should have been before that incident ever happened, that is, from a realistic assessment as to where we really are with Beijing.
If we are going to maintain our interests in Asia, then we arebound, in my opinion, to have conflicts from time to time. Hopefully, there will be an ability to settle them peacefully and quickly. However, the Chinese now have about 300 missiles located opposite Taiwan. I think their goal is to build up to about 600 missiles on their coastline to be used against Taiwan, when and if they feel the need to take action against Taiwan. This is all very dangerous.
That's basically whatconcerns me, with regard to China. As far as the U.S. is concerned, I think the U.S. now ranks second behind Hong Kong in terms of the amount of foreign direct investment in China. Our trade, of course, is substantial. You all know about our trade deficit; the significance of that might probably be one thing to look into because it does have potential national security ramifications. We have aggressively pursued trade with China, to include promoting their entry into the WTO, . We've opened our capital markets to them; they're raising substantial amounts of money in our stock and bond markets. It's not transparent at all,and the PRC is very likely going to use the money they raise there to improve their military or fund illicit activities.
And coming down to more timely considerations, the United Statesí export control laws and policies raise additional concerns. Our export control policies have moved toward greater liberalization across the board over the last eight years. A good example of this has to do with the export of high performance computers. As the Cox Committee pointed out, high performance computers are significant in terms of conducting simulations for nuclear weapons development and so on. During the Clinton Administration, the law required controlling computers based upon MTOP computing levels. The Clinton Administration increased the MTOPs levels substantially during that period of time, and now apparently, the Bush Administration has taken the position that they're going to do away with that metric all together; the MTOPs measure is out of date in their opinion.
The Administration will also likely support the pending Export Administration Act license exemption category of ìmass marketî and re-definition of ìforeign availability.î This has to do not with stopping exports or anything; this just has to do with whether or not a license is even required. So now, if something fits this looser definition of foreign availability, as determined by the Department of Commerce, then no license is required to export an item.
So that's the direction that we've been going in.At least up until recently, we had an audit trail of where stuff was goingand for what uses. Now, I don't think we'll even have much of a trail anymore.
Another component of this issue has to do with the Commerce Departmentís handling of the licensing process . There have been some complaints about holding licenses up and what not. That's debatable, so it might be something else you want to look into.
The export process is one thing that concerned me as I looked into this system as chairman of the Government Affairs Committee. We had hearings about a year and a half ago. We asked all of the IGs whose departments had their fingers into the export process, to go in and take a look and see if the process was working. It was not a pretty picture. In terms of the qualifications of our people who are processing these licenses, in terms of the Commerce Departmentís computer capabilities, and interagency compatibility -- one department talking to another in terms of potential end users and things of that nature ñ the systm was broken. There was also no cumulative effect analysis being done even though it was required by law.
There was very little done in terms of post-shipment verifications. Whether or not that has national security ramifications or not, I don't know; I hope that you'll get a handle on that also. But clearly, no one has taken a thorough look at the whole process. No one, except those people who are directly involved in it, as far as I can tell, has really taken a serious look and analyzed whether or not we are protecting our national security.
I think we need substantial resources committed to the licensing and enforcement process, andto get what we need from the Commerce Department. Nobody wants to hold exporters up so we need good people; and we need to make sure that the process works nd in terms of the check and balances. Right now, I think the process is too weighted toward the Commerce Department. The process looks a lot better on a chart (the organizational chart) For example, the license appeal process sounds better than it works in real life. Given the pressures, time constraints, and the level in which you're workingand so forth, I donít think anyone has ever taken anything to the top of this appeals process. So, I think that's suspect. I think that needs to be looked at.
Under the last Administration, the computer MTOPS levels were, as I said, raised substantially. According to the GAO in hearings just a couple of months ago, the GAO found that, contrary to a legal requirement, the Clinton Administration never conducted national security analysiswith regard to what they were de-controlling.
Also recall, while the MTOPS criteria may be outdated, but despite that the GAO came up with a dozen potential other metrics that might be used to effectively control what needs to be controlled, nobody has ever really analyzed those alternatives to see whether any of them would make sense, or whether any of them would work. Everybody keeps talking about what the US needs to control; that we need to build higher fences around the things we really need to worry about. Well, nobody is willing to define what those higher fences need to be, nor the items that we really need to be worried about.

I'm not sitting here telling you what I think the significance of all this is, because I don't think anybody knows; that's what bothers me. There are tremendous commercial and political pressures that have been brought to bear with regard to exports of sensitive dual-use items. Somebody needs to take a look at these issues and I would only ask that this Commission serve that role. I know that you all will act as honest brokers.
Again, I would only ask that you seriously examine some of these concluding assumptions, the first being that because we cannot control everything, then we should control nothing. We're told that the name of the game nowadays, with computers for example, is not to control hardware, only software applications and data bases. And that the answer to this dilemma is for the U.S. to ìrun fasterî than potential adversaries. All of that very well may be true. The real question, however, is do we assist China and others in running faster also?
The second assumption that I would ask you to examine is this business of ìif we don't sell it to them, somebody else will.î Again, in many cases, I'm sure that this is probably true. But I took a little trip to Europe with a couple of very good staff people a year or so ago, and talked to the people over at the Wassenaar Arrangement in Vienna. A lot of the people there. had the opinion that the United States, especially when it comes to high performance computers, is always leading the way in unilaterally decontrolling dual-use items . Some have been concerned that the US is at the level of breaching, if we haven't already violated, our Wassenaar commitments by being out there further and faster, and doing more for our own commercial interest, while dragging our Wassenaar partners along behind us.
What's been coming from our country is this attitude that ìLook, we'd like to go back to the good old days of COCOM and we'd like for our allies to help us and pull all this together, but since they're not, we're going to go ahead and do this.î The first question is whether or not we should be taking a leadership role in improving multilateral export controls, and second, have we made any effort at all to work with our allies toward some mutual understanding of some of these issues that I'm laying out here? I don't think that we have. Clearly many complaints regarding some of our allies certainly are true; it's also pretty convenient for us. But we're not showing much leadership on export controls.
Thirdly-- and this is very, very broad and until I read your mandate, I was not sure whether or not this came under it-- there is this assumption that if we continue to trade, that commerce in and of itself will democratize China.
Chuck, you got here just in time.
SENATOR HaGEL: Great, I always learn something from you.
SENATOR THOMPSON: The belief, I was saying, is that if we open China up, gambling that if we are able to increase their prosperity, that the Chinese people will throw off their shackles and become more like us ñ the PRC wil democratize. The leadership of China is gambling, of course, that they can become economically prosperous, build up their military, and still keep communist control. That's the big gamble that's taking place.
I would ask you to look at this assumption historically. I think you're the right people to do that. I have read that we had this kind of globalism euphoria back in another time, back before World War I. People believed then that trade and harmony and all that will certainly prevent conflict, but it didn't. I think there are other examples around the world and throughout history where you can have capitalism and free markets to one extent or another, yet still keep a pretty firm control on your population if you're smart about it. Singapore is a good example. So I think that assumption really needs to be studied The young generation in China now is not the Tiananmen Square generation. They're growing up more prosperous; they do not remember the Cultural Revolution. I think the phenomenon we saw over there after the EP-3 incident is that, while they may have just stopped off at McDonald's and they may be wearing Levis, they're acting very anti-American. In fact, they may be out ahead of their leaders in some respects in terms of their attitude toward the U.S..
So I'm not at all sure that we're headed toward democracy in China. God knows we all want that, but my sense is that we should hope for the best and prepare for the worst. Significant parts of that big picture, of course, are ,ñ Questions about what should we do in light of their human rights violations, and what should we do about the PRCís continued proliferation.
It has always seemed rather strange to me that while we're trying to convince the world that we need a missile defense system because of the threats from the rogue nations, and we're going through the pain and agony even in terms of being in conflict with our own allies to a certain extent in order to do that, at the same time our new trading partner(China) is supplying these rogue nations with substantial means to equip themselves with those same weapons of mass destruction.
But anyway I took advantage of being here by myself to go way over my allotted time. Those are my thoughts and I'm just glad that you're doing what you're doing because I think that the Commission is going to be looking at the US-China relationship from a standpoint that nobody else has, or that nobody really has the ability to do. Thank you.
CHAIRMAN D'AMATO: Thank you, Senator, very much.
SENATOR THOMPSON: Appreciate it.
CHAIRMAN D'AMATO: Senator Hegel from Nebraska.
SENATOR HEGEL: Thank you very much for having me. I always feel good when Captain D'Amato is at the throttle and it gives us a more secure feeling up here.
You have assembled, as you know so well, some of the finest thinkers, practitioners and implementers of our foreign policy over the years, so I will begin by taking Fred Thompson's words and embroidering on them a bit, first of all thanking you for what you're doing. It is relevant. It's needed and it's damn important.
I can offer you very little because I know very little, but I begin my China experience observation as one who first went to China in 1983 and I have been back since 1983, six or seven times. So I start from the perspective of what I have seen occur since I landed on January 1, 1983, cold as hell, gray, drab, guards walking around with machine guns, Mao suits and it was not a very pretty picture, as many of you know.
That was my introduction. I went over as a businessman in 1983. I took a representative of Motorola with me. I was in the cellular telephone business, thinking that wireless telephony surely was probably more relevant to developing nations than it was even for ours. Certainly, they were not going to use cellular phones like we use them or we thought we would use back in 1983, but for all the other reasons I thought it was very real.
I went back a few times after that as a businessman and then since I've been a Senator, the last five years, I've been back three times and met with heads of State, government, the Chinese officials, able to go inside China a bit, Szechuan Province, was there a couple of years ago for about four days, went all over. That's the deepest I've been in there. So I tell you all of that so you will fully appreciate that I know very little about China.
Now with that as a bit of background, why I think what you're doing is so important because of what Fred touched upon and there is some difference of opinion up here starting with some of the dynamics in question of whether this is a wise course of action to continue to engage China. If we do engage China, then what are the parameters? Should we have trade? Should we cut that trade off? All of the things you will look at in the general parameter as you sort through what we should be selling and not selling and so on.
I don't have to tell any of you, especially people like Jim Lilley, the world is changing at such a phenomenal rate that none of us can really calibrate and I think it is especially true with China and Asia.

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