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95–516PDF 2015

REVIEWING THE U.S.–CHINA CIVIL NUCLEAR

COOPERATION AGREEMENT

JOINT HEARING

BEFORE THE

SUBCOMMITTEE ON ASIA AND THE PACIFIC

AND THE

SUBCOMMITTEE ON TERRORISM, 

NONPROLIFERATION, AND TRADE

OF THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTEENTH CONGRESS

FIRST SESSION

JULY 16, 2015

Serial No. 114–74

Printed for the use of the Committee on Foreign Affairs

(

Available via the World Wide Web: http://www.foreignaffairs.house.gov/ or

http://www.gpo.gov/fdsys/

(II)

COMMITTEE ON FOREIGN AFFAIRS 

EDWARD R. ROYCE, California, Chairman 

CHRISTOPHER H. SMITH, New Jersey 

ILEANA ROS-LEHTINEN, Florida 

DANA ROHRABACHER, California 

STEVE CHABOT, Ohio 

JOE WILSON, South Carolina 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

MATT SALMON, Arizona 

DARRELL E. ISSA, California 

TOM MARINO, Pennsylvania 

JEFF DUNCAN, South Carolina 

MO BROOKS, Alabama 

PAUL COOK, California 

RANDY K. WEBER SR., Texas 

SCOTT PERRY, Pennsylvania 

RON DESANTIS, Florida 

MARK MEADOWS, North Carolina 

TED S. YOHO, Florida 

CURT CLAWSON, Florida 

SCOTT DESJARLAIS, Tennessee 

REID J. RIBBLE, Wisconsin 

DAVID A. TROTT, Michigan 

LEE M. ZELDIN, New York 

DANIEL DONOVAN, New York 

ELIOT L. ENGEL, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

THEODORE E. DEUTCH, Florida 

BRIAN HIGGINS, New York 

KAREN BASS, California 

WILLIAM KEATING, Massachusetts 

DAVID CICILLINE, Rhode Island 

ALAN GRAYSON, Florida 

AMI BERA, California 

ALAN S. LOWENTHAL, California 

GRACE MENG, New York 

LOIS FRANKEL, Florida 

TULSI GABBARD, Hawaii 

JOAQUIN CASTRO, Texas 

ROBIN L. KELLY, Illinois 

BRENDAN F. BOYLE, Pennsylvania

AMY PORTER, Chief of Staff THOMAS SHEEHY, Staff Director

JASON STEINBAUM, Democratic Staff Director 

(III)

SUBCOMMITTEE ON ASIA AND THE PACIFIC

MATT SALMON, Arizona Chairman 

DANA ROHRABACHER, California 

STEVE CHABOT, Ohio 

TOM MARINO, Pennsylvania 

JEFF DUNCAN, South Carolina 

MO BROOKS, Alabama 

SCOTT PERRY, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

BRAD SHERMAN, California 

AMI BERA, California 

TULSI GABBARD, Hawaii 

ALAN S. LOWENTHAL, California 

GERALD E. CONNOLLY, Virginia 

GRACE MENG, New York

SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE

TED POE, Texas, Chairman 

JOE WILSON, South Carolina 

DARRELL E. ISSA, California 

PAUL COOK, California 

SCOTT PERRY, Pennsylvania 

REID J. RIBBLE, Wisconsin 

LEE M. ZELDIN, New York 

WILLIAM KEATING, Massachusetts 

BRAD SHERMAN, California 

BRIAN HIGGINS, New York 

JOAQUIN CASTRO, Texas 

ROBIN L. KELLY, Illinois 

(V)

C O N T E N T S 

Page

WITNESSES 

The Honorable Thomas M. Countryman, Assistant Secretary, Bureau of International Security and Nonproliferation, U.S. Department of State ................ 7

Lieutenant General Frank G. Klotz, USAF, Retired, Under Secretary for 

Nuclear Security, Administrator, National Nuclear Security Administration, 

U.S. Department of Energy ................................................................................. 20

Mr. Henry D. Sokolski, executive director, The Nonproliferation Policy Education Center ........................................................................................................ 39

Mr. Daniel Lipman, vice president, Supplier and International Programs, 

Nuclear Energy Institute ..................................................................................... 48

Ms. Sharon Squassoni, director and senior fellow, Proliferation Prevention 

Program, Center for Strategic and International Studies ................................ 61

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

The Honorable Thomas M. Countryman: Prepared statement ............................ 9

Lieutenant General Frank G. Klotz, USAF, Retired: Prepared statement ........ 22

Mr. Henry D. Sokolski: Prepared statement ......................................................... 41

Mr. Daniel Lipman: Prepared statement ............................................................... 50

Ms. Sharon Squassoni: Prepared statement .......................................................... 63

APPENDIX 

Hearing notice .......................................................................................................... 86

Hearing minutes ...................................................................................................... 87

Internet link for access to material submitted for the record by the Honorable 

Brad Sherman, a Representative in Congress from the State of California, 

and Mr. Henry D. Sokolski .................................................................................. 88

(1)

REVIEWING THE U.S.–CHINA CIVIL NUCLEAR 

COOPERATION AGREEMENT 

THURSDAY, JULY 16, 2015

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON ASIA AND THE PACIFIC AND

SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE,

COMMITTEE ON FOREIGN AFFAIRS,

Washington, DC. 

The subcommittee met, pursuant to notice, at 9:03 a.m., in room 

2172, Rayburn House Office Building, Hon. Matt Salmon (chairman of the subcommittee) presiding. 

Mr. SALMON. The subcommittee will come to order. Let me start 

by recognizing myself and the ranking member to present our 

opening statements. And without objection, the members of the 

subcommittee can present brief remarks if they choose to or they 

can submit them for the record. 

We convened this hearing today to discuss the merits of the U.S.-

China Civil Nuclear Cooperation Agreement, which was submitted 

to Congress in late April, this 30-year agreement, which is required 

by section 123 of the Atomic Energy Act of 1954 and is a prerequisite for any significant nuclear cooperation with any country, 

any other country other than the United States. 

The movement of nuclear material and technology across borders 

deserve close examination. Today, we expect to hear from our distinguished witnesses on their assessment of the viability of our 

civil nuclear cooperation with China, as well as what their concerns 

may be about nuclear proliferation and the transfer of technology 

and knowledge for military purposes. We also expect to hear about 

the potential benefits of the 123 Agreement, including expanded 

engagement with China, building mutual confidence, increasing 

clean energy sources, and supporting U.S. businesses. 

China’s nuclear power program is the most rapidly expanding in 

the world, so the U.S.-China 123 Agreement could provide a unique 

opportunity for U.S. businesses. The Department of Energy approved a bid by Westinghouse to build four nuclear reactors in 

China and six more are planned. But as many as 30 more are proposed. Currently, China has an additional 23 reactors under construction and plans to build up to 100 more by 2030. 

The PRC announced in December 2014 that it would spend about 

$11.2 billion annually on reactor construction during the next 10 

years. However, I am concerned about the U.S. transferring its 

technology to China because Chinese firms may eventually re-exVerDate 0ct 09 2002 13:51 Sep 01, 2015 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 F:\WORK\_AP\071615\95516 SHIRL
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port reactor technology to other countries without proper U.S. 

checks. 

Approximately 30 percent of the work outlined under current 

contracts is being performed in the United States by Westinghouse 

or its subcontractors and suppliers, which has created or is sustaining approximately 8,000 direct jobs and another approximately 

20,000 indirect jobs in the United States, in 20 United States. But 

technology transfer provisions in the contract would reduce U.S. 

participation in Chinese nuclear projects over time. I would be interested to hear from out witnesses how we would secure jobs for 

American workers with these limitations in the provisions in the 

agreement. 

The agreement also raises important security questions. The Defense Intelligence Agency warned in February 2015 that China will 

continue to be a source of dual-use, WMD-applicable goods, equipment, and materials to countries of concern like Iran, North Korea, 

and Syria. 

Furthermore, the Nonproliferation Assessment Statement submitted with the administration’s proposed agreement states that 

despite updates to regulations and improved actions in some areas, 

proliferation involving Chinese entities remains a significant concern. Without proper U.S. oversight of continued civil nuclear cooperation, I would be hesitant to condone an agreement that would 

pose major risks to our national security, and I would like hear 

from our administration witnesses as to how we can address those 

concerns. 

The second concern involves military diversion. Experts have debated whether China has already diverted or intends to divert U.S. 

civilian nuclear technology for military purposes, including in naval 

reactors, which would violate the existing 123 Agreement. Chairman Royce voiced his concern as far back as 2007, and at a Senate 

Foreign Relations hearing in May of this year, it seemed to confirm 

that suspicion. I would like to hear what the administration intends to do to remedy potential violations and hear how the United 

States will safeguard our sensitive technology from Chinese military diversion in the future. 

Lastly, I am concerned with China’s plan to re-export nuclear 

power plants based on U.S. technology. Westinghouse’s AP1000 

technology is a crucial component to China’s planned nuclear export program, though China only holds a license to use that technology domestically. What safety considerations exist during the reexport of U.S. reactor technology? 

Aggressive Chinese exports of nuclear technology, particularly to 

countries that do not currently have nuclear power, could pose proliferation risks. In fact, the Nonproliferation Assessment Statement 

noted that China’s ongoing construction of new nuclear power 

plants in Pakistan as inconsistent with its Nuclear Suppliers 

Group commitments. 

Nearly 30 years ago, President Reagan said he was particularly 

proud of the agreement, saying it will open broad opportunities for 

joint work in development of the energy base which China needs 

for her modernization. At the time, the United States and China 

made mutual pledges of cooperation, nonproliferation, and safety. 

3

We are here today to discuss whether China has met those obligations. 

When President Obama submitted the new 123 Agreement, he 

said that the agreement will advance the nonproliferation national 

security interests of the United States. I would like to hear from 

the administration why Congress should feel confident that China 

will live up to nonproliferation commitments, that we will have 

measures in place to prevent military diversion of our technology, 

and how we could safeguard our economic, political, and military 

interests. 

Members present are going to be permitted to submit written 

statements to be included in the official hearing record. And without objection, the hearing record will remain open for 5 calendar 

days to allow statements, questions, and extraneous materials for 

the record subject to the length limitation rules. 

I now recognize Ranking Member—actually, I am going to recognize Mr. Keating, who is the ranking member here today, for any 

remarks he would like to make. And then I will recognize the other 

chairman. 

Mr. KEATING. Thank you, Chairman Salmon, Ranking Member 

Sherman, and Chairman Poe. Ranking Member Sherman will be 

here during the course of the hearing. 

In continuing the United States’ longstanding commitment to 

preventing nuclear proliferation around the world, it is critical we 

provide the U.S.-China Civil Nuclear Cooperation Agreement with 

proper scrutiny. 

Our relationship with China is multifaceted and complex. There 

is no denying that the U.S. has a much different posture toward 

China than we did when the last 123 Agreement was entered into 

in 1985. In many ways, the Chinese Government has improved its 

nonproliferation efforts since joining the Nuclear Nonproliferation 

Treaty and Nuclear Suppliers Group in 1992 and 2004, respectively. 

However, there remains little doubt that the Chinese Government still has work to do when it comes to enforcing its own export 

control laws, preventing the sale of dual-use goods, and prosecuting 

individuals and companies involved in proliferation to countries 

like North Korea and Iran. 

China’s unfortunate track record of stealing trade secrets by 

means of cyber attacks and other methods is a further reason to 

be cautious about unduly trusting China when it comes to technological transfers. 

While I am encouraged that the new China 123 Agreement includes stronger enforcement of nonproliferation controls, I remain 

concerned about whether China will meet its nonproliferation obligations. In particular, I am interested to determine whether under 

this new agreement China will be able to re-export nuclear reactors 

based on U.S. design technology without having to obtain permission from the U.S. Government. China’s obligations under this 

agreement in the case of re-transfers to third countries need to be 

clearly defined and understood. 

In addition, I question whether China could divert elements of 

U.S. reactor designs for use in their nuclear submarine reactors, a 

prospect that could challenge U.S. naval superiority. 

4

These are among the concerns I look forward to hearing addressed at today’s hearing with our witnesses. And I hope that the 

hearing will contribute to a productive and detailed dialogue regarding our current nuclear energy cooperation with China and the 

security risks we have at hand. 

With that, I yield back. 

Mr. SALMON. Thank you. 

I now recognize Chairman Poe. 

Mr. POE. Thank you, Chairman Salmon, for working with our 

subcommittee to put together this important hearing about the 

U.S.-China 123 Agreement. The current agreement was negotiated, 

as you said, by the Reagan administration 30 years ago. It has allowed us to cooperate with China on civilian nuclear energy and it 

is supposed to expire in December. 

China is the world’s largest market for nuclear technology. By 

2032, China will become the world’s largest generator of nuclear 

power. There are major U.S. economic interests at stake. Chinese 

contracts to American companies have created billions of dollars in 

U.S. exports and thousands of American jobs, and we have 

partnered with China in valuable joint ventures and development 

projects. For example, in July 2007, the contract awarded to Westinghouse will supply China with four AP1000 nuclear power 

plants at an estimated cost of $8 billion. 

Proponents of the new agreement make the point that if this 

agreement is not renewed, the United States nuclear industry will 

face billions of dollars of lost revenue. They are also concerned that 

without these new Chinese contracts, the U.S. industry will struggle to keep up with its expertise. 

Our engagement with China under the current 123 Agreement 

has advanced China’s nuclear nonproliferation policies and practices. American equipment and technology exports have allowed 

China to use the safest technology in the industry. The new agreement required China to notify us before approving technology 

transfers and limits these transfers to countries committed to using 

them for peaceful purposes only. 

Our nuclear engagement with China has been crucial in reducing 

China’s carbon emissions as well. Proponents of renewing the 123 

Agreement argue that ending our cooperation will disrupt China’s 

nuclear development plans and have a negative environmental effect. 

Despite that, there are several concerns regarding the renewal of 

our nuclear cooperation with China. China has yet to show it has 

the political will to prevent Chinese-based companies from exporting nuclear technology and equipment to countries such as Iran, 

North Korea, and Syria. Even this week, we have heard of a Karl 

Lee, the so-called A.Q. Khan, helped Iran get nuclear technology 

from China, namely, high missile technology that is illegal. The 

Chinese Government response to this action was they never heard 

of him or go fishing. 

The Congressional Research Service’s last unclassified review of 

China’s proliferation record in January spotlighted China’s proliferation activities related to Pakistan, North Korea, and Iran. The 

current 123 Agreement does not require China to place civilian nuclear facilities under IAEA safeguards. Another point missing from 

5

the current agreement is nuclear consent right provisions. That 

means that China is not required to seek U.S. consent to manufacturer or re-export U.S.-designed reactors or U.S. nuclear components. 

And we also don’t know what extent China is diverting technology from its civilian nuclear energy program to its nuclear 

weapons and military programs. Experts have noted that Chinese 

civil and nuclear entities are alarmingly close and may already be 

cooperating. The President’s Nonproliferation Assessment Statement explicitly points out China’s longstanding tradition of using 

civil technology for its military programs. 

So this hearing today will help us better understand the advantages for renewing this 123 Agreement, what is in the best national 

security interest of the United States. And I thank the chairman. 

I will yield back. 

Mr. SALMON. Thank you. 

The Chair recognizes Mr. Connolly. 

Mr. CONNOLLY. Thank you, Mr. Chairman. 

I think when we look at the proposed pending agreement, it is 

a balancing act for the United States. I think our national security 

and global nonproliferation goals need to be preeminent, but we 

can’t be ignorant of the business implications and the competition 

for the Chinese market that is hot. 

Congressional objections to a 123 Agreement with China are not 

new. The current agreement, as has been noted, began during the 

Reagan administration, submitted in 1985 to Congress. Congress 

then saw fit to place conditions on the implementation of the agreement in the joint resolution relating to the approval and implementation of the proposed agreement fornuclear cooperation between 

the U.S. and the PRC and the Foreign Relations Authorization Act 

for Fiscal Years 1990 and 1991. 

The Presidential certifications contained in these pieces of legislation represented the far-reaching concerns Congress had then 

and in many cases still continues to have about China. Before the 

agreement was implemented, a full 13 years after being submitted 

to Congress, the President had to make certifications with respect 

to China’s assurance that it was not transferring nuclear weapons 

technology to non-nuclear states. Chinese nonproliferation policies 

and political reforms were being made by the PRC Government. 

The nonproliferation landscape in China has changed since then. 

China acceded to the Treaty on Non-Proliferation of Nuclear Weapons in 1992 as a nuclear weapon state, and since has become a 

member of the Nuclear Suppliers Group. China implemented a 

safeguards agreement with the IAEA in 1989 and agreed to the additional protocol in 2002. 

It should be noted that integrating China into the international 

nonproliferation regime does add a level of transparency previously 

lacking. Considering the growth of the nuclear technology industry 

in China, this integration and its accompanying benefits could be 

seen as welcome developments. Today, China has 26 operational 

nuclear reactors, with 23 under construction, and a plan to build 

another 100 by the year 2030. As a matter of comparison, the 

United States has 99. 

6

China and Chinese entities, however, have a nuclear track record 

that cannot be wiped under the carpet. The U.S. Government has 

certified that China provided assistance to the nuclear weapons 

program in Pakistan. China transferred gaseous uranium 

hexafluoride to Iran for centrifuge enrichment research. And the 

U.S. continues to sanction state-owned enterprises and small and 

medium enterprises in China that have been sources of illicit dualuse technology for foreign buyers. 

There is a demonstrated wanton disregard for export restrictions 

in China, and the PRC seemingly refuses to take enforcement action against those violators. At the Senate Foreign Relations Committee hearing in May, the Assistant Secretary for the Bureau of 

International Security and Nonproliferation stated that China has 

neither the bureaucratic capability nor the political will adequately 

to control dual-use exports. That is especially concerning provided 

that North Korea and Iran have documented operations to procure 

sensitive nuclear technologies in China. 

During our review period, we are going to have to consider these 

among lots of other issues. And Congress takes seriously its commitment to nonproliferation, as we know the administration does 

as well. 

So I look forward, Mr. Chairman, to hearing the testimony today 

and hearing how we address some of these thorny issues that, as 

I said, cannot be ignored during this review record. 

I yield back. 

Mr. SALMON. Thank you. 

Mr. Wilson. 

Mr. WILSON. Thank you, Mr. Chairman. 

With over 20 nuclear reactors currently in operation and 28 more 

under construction, China is one of the largest and fastest growing 

nuclear energy markets in the world. Private companies in other 

countries, such as the Russian Federation and France, can openly 

compete for construction operations contracts for Chinese reactors 

and share best practices to avoid delays, reduce costs, and expedite 

construction. 

In South Carolina, SCANA and Santee Cooper each are successfully operating a Westinghouse AP1000 nuclear reactor built by 

Chicago Bridge & Iron identical to the reactors currently being 

built in China now. I regularly hear from their employees about 

the benefits of sharing lessons learned and best practices. 

We should reauthorize the agreement to ensure that American 

companies have the same opportunity to compete for Chinese nuclear contracts and to share resources. I am grateful to sponsor 

House Joint Resolution 56, which provides for the approval of the 

new U.S.-China Nuclear Cooperation Agreement. 

I would like to thank Chairman Matt Salmon and Chairman Ted 

Poe for putting together this hearing with very credible panelists 

and look forward to the continuation of the U.S.-China civilian nuclear cooperation, which is personal me to me, as my father served 

in China in 1944 and 1945, where he developed an appreciation of 

the people of China as a member of the U.S. Army Air Corps defending the people of China. 

I yield back my time. 

Mr. SALMON. Thank you. 

7

Do any other members seek recognition? 

We have two panelists today. And I believe we are going to get 

a wealth of knowledge regarding this issue. And I appreciate the 

expertise of the folks that are here today. 

First of all, I would like to introduce Assistant Secretary Thomas 

Countryman, who heads the Bureau of International Security and 

Nonproliferation at the Department of State, and Lieutenant General Frank Klotz, Under Secretary for Nuclear Security and Administrator of the National Nuclear Security Administration and Department of Energy. 

Mr. Countryman. 

STATEMENT OF THE HONORABLE THOMAS M. COUNTRYMAN, 

ASSISTANT SECRETARY, BUREAU OF INTERNATIONAL SECURITY AND NONPROLIFERATION, U.S. DEPARTMENT OF 

STATE 

Mr. COUNTRYMAN. I would like to thank the two chairmen, Mr. 

Salmon and Judge Poe, and the ranking members and all the members for this opportunity. The agreement you have before you replaces the agreement originally negotiated in the Reagan administration in 1985, and it is an improvement over that agreement in 

all respects. 

This agreement is not a commercial contract. It does not provide 

for the sale of nuclear equipment or technology to China. Rather, 

it provides a framework under which the United States can make 

the decisions on particular requests for export of nuclear technology to China. 

It is not a giveaway. It rather is a mutual recognition that the 

U.S. and China have reciprocal obligations to each other that each 

must meet. And it recognizes also that the world is different from 

1985 and that China is now among the world leaders in nuclear 

technology. 

It is not a lever. It is not something that is simply given away 

to China with which we can extract concessions from China in unrelated fields. 

This agreement meets all the requirements of the Atomic Energy 

Act. It also reflects the consistent position of this administration 

that a negotiation of 123 Agreements, our highest priority are nonproliferation standards. 

The agreement has important benefits, as noted already, in the 

field of economic interests of the United States, including jobs. It 

also, of course, is an essential element in helping to manage the 

complex bilateral relationship that we have with the People’s Republic of China. 

But my responsibility in leading negotiations and the responsibility that both Congress and the administration have given is to 

ensure that nonproliferation concerns are uppermost, and I believe 

we have fully met that standard. 

This is not to say that we are satisfied with the performance of 

China on a number of issues, particularly on export control issues. 

As was noted, I testified to the Senate 2 months ago that China 

has not shown the necessary capability and will to fully enforce export control requirements, its own legislation, and its obligations 

under U.N. Security Council resolutions. 

8

And I welcome higher-level political attention being given to 

those issues. It is necessary that the Chinese Government hear 

that this is an issue of significant political and security concern. 

At the same time, it is important to recognize, as Congressman 

Connolly has, that the performance of China in nonproliferation 

standards is far different from what it was 30 years ago. It continues to improve. We are in no way satisfied with the degree of 

improvement, and we will continue to press for China to meet its 

obligations more fully. 

But it would be incorrect to think that Chinese performance 

would improve if this agreement is not implemented. I am convinced exactly the opposite would happen. 

On the military issues and technology transfer issues that have 

been raised, I refer back to a closed briefing that we provided last 

month, to the briefing provided at that point by the experts in nuclear propulsion technology, and the reasons that we gave at that 

point for the President’s conclusion that this agreement does not 

pose an unacceptable risk to America’s national security. We are, 

of course, happy in closed session to repeat all of those briefings individually or for the committee as a whole. 

With those comments that I hope are responsive to the initial 

concerns you have raised, I recommend to you this agreement. 

Thank you. 

[The prepared statement of Mr. Countryman follows:]

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Mr. SALMON. Thank you. 

General. 

STATEMENT OF LIEUTENANT GENERAL FRANK G. KLOTZ, 

USAF, RETIRED, UNDER SECRETARY FOR NUCLEAR SECURITY, ADMINISTRATOR, NATIONAL NUCLEAR SECURITY ADMINISTRATION, U.S. DEPARTMENT OF ENERGY 

General KLOTZ. Thank you, sir. 

Chairman Salmon, Chairman Poe, Ranking Member Keating, 

and distinguished members of the subcommittee, thanks for the opportunity to testify on behalf of——

Mr. CONNOLLY. Mr. Chairman, could I ask the General to put—

thank you—move it closer to your mouth. Thank you. 

General KLOTZ. I am pleased to join my colleague from the State 

Department, Assistant Secretary Tom Countryman. I am pleased 

also to represent the Department of Energy in discussing this proposed U.S.-China Agreement for Peaceful Nuclear Cooperation. I 

have provided a written statement for the record, and I respectfully 

request that it be submitted for the record. 

Secretary of Energy Moniz and I share the view that the proposed agreement provides a comprehensive framework for nuclear 

cooperation with China, while fully protecting and advancing U.S. 

interests and policy objectives with respect to nuclear nonproliferation and the peaceful uses of nuclear energy. Thus, the Department 

of Energy fully supports entry into force of this agreement following the requisite congressional review period. 

The agreement is fully consistent with law and incorporates all 

terms required by section 123 of the Atomic Energy Act. Moreover, 

it reflects important advances over the current agreement, several 

of which were discussed during the classified briefing to members 

of this committee that Assistant Secretary Countryman just alluded to. 

Specifically, the successor agreement enhances the provisions 

that allow China to enrich and repross U.S.-obligated nuclear material by requiring that such enrichment and reprocessing take 

place only at facilities in China that fall under the International 

Atomic Energy Agency’s safeguards agreement. It also provides for 

enhanced controls on the expert of nuclear technology to China, 

and it commits both sides to deliver export control training to all 

U.S. and Chinese entities under the 123 Agreement. 

Taken together, these elements, not included in the 1985 agreement, provide an unprecedented level of insight into commercial 

transactions. 

Since the preceding 123 Agreement was signed 30 years ago, we 

have witnessed China make significant strides in its civil nuclear 

program. The Department of Commerce, in fact, has identified 

China as one of the largest and most important markets for the 

U.S. nuclear industry, with over 20 nuclear power plants in operation, over 20 under construction, and dozens more planned. And 

China will continue to invest heavily in its nuclear industry to 

meet its own expanding energy needs and to meet growing global 

interests in and demand for nuclear power as a source of clean energy. 

21

The rapid growth of China’s civil nuclear energy program could 

have significant benefits for U.S. industry, as well as our scientific 

and technical base. American civil nuclear companies already have 

numerous joint ventures with China, as well as significant assets 

on the ground in China. They are supplying China with equipment 

and components, as well as a broad range of services, including engineering, construction, and training. 

The successor 123 Agreement will facilitate continued nuclear cooperation with China, subject, as always, to U.S. Government review of specific requests to transfer nuclear technology, information, material, equipment, and components. 

On the other hand, if the agreement lapses or is not renewed, 

U.S. industry will not be able to continue with the current ventures 

and could lose significant investments it has already made in China’s civil nuclear program. U.S. industry would also be precluded 

from taking advantage of opportunities in the world’s fastest growing civil nuclear energy market. 

In addition to these economic benefits, the successor 123 Agreement will also serve as an umbrella for other forms of U.S.-China 

bilateral cooperation in promoting important U.S. policy objectives 

with respect to enhancing nuclear safety and security around the 

world, an objective which directly supports our U.S. national interest, as well as those of our allies and partners. 

U.S.-China cooperation in the civil nuclear realm, such as under 

the 1998 U.S.-China Peaceful Uses of Nuclear Technology, or 

PUNT, Agreement, has been absolutely invaluable in this regard. 

Just recently, senior U.S. officials met with their Chinese counterparts in Chengdu under the auspices of the PUNT Joint Coordinating Committee. They discussed nuclear technology, security, 

and safeguards, environmental and waste management, emergency 

response operations, the security of radiological sources, and so on. 

U.S. participants have reported to me that they had unique and 

unprecedented access to a number of construction, scientific, and 

academic sites. 

This level of interaction and access is only possible because of the 

value that China places in having a 123 Agreement with the 

United States and its desire to cooperate with us. Without entry 

into force of the successor agreement, we will lose a critical mechanism for influencing China’s nonproliferation behavior, we will lose 

economic and commercial benefits, and we will lose the insight we 

have into China’s nuclear programs. 

Again, thank you for the opportunity to appear before you today, 

Chairman. And I look forward to any questions that you all may 

have. 

[The prepared statement of General Klotz follows:]

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Mr. SALMON. Thank you. 

General Klotz, I would like to begin my questioning with you. Regarding the new technology transfer mechanism in the agreed 

minute, how would the new process affect the existing technology 

transfer authorization process under the 810 authorization? Would 

the agreed minute supplement or replace the 810 authorization? 

General KLOTZ. Mr. Chairman, in fact, the 810 authorization 

process is already a very rigorous review process in which, as the 

Secretary of Energy considers each of the applications for the 

transfer of technology, we go and work very, very closely with the 

other departments, Department of State, Department of Commerce, 

Nuclear Regulatory Commission, Department of Defense. 

And we also consult very closely with the intelligence community. Recall that the Department of Energy is one of the 17 organizations that are part of the intelligence community. And we draw 

upon the intelligence expertise resident within our national labs. 

So that process will continue to be followed for all applications 

under the 810 process. 

Mr. SALMON. My understanding is that under the new agreement, that these transfers are authorized by the agreement itself. 

Previously, DOE shared these requests, as well as any decisions 

you made on them with Congress. My understanding is that process is being streamlined and altered pretty dramatically. Is that 

not a correct understanding? 

General KLOTZ. Well, to address the issue of streamlining, we 

have gone through a number of steps in the past several months 

in response to direction from Congress, in response to a report rendered by the GAO to make the process for 810 applications more 

efficient and more transparent. 

One of the issues that has been a problem in slowing down that 

process has been the need for approval of each application, the requirement for the Department of State to go to whatever country 

that we are considering a 123 Agreement with to get nonproliferation assurances. 

What this particular agreement does is to wrap those nonproliferation assurances into the 123 Agreement. In effect, it escalates it from the 810 process into the 123 process, so the nonproliferation assurances are moved to that level of a state-to-state 

agreement. 

So with that, we will still go through the very rigorous, robust 

vetting of each and every 810 application through the interagency 

process, which, as I said, includes all of the national security agencies, as well as the Department of Commerce and the Nuclear Regulatory Commission. 

Mr. SALMON. I just have a concern that given their likely violation of their pledge not to divert U.S. civilian technology for military purposes under the existing 123, maybe we should be tightening the tech transfer authorizations rather than streamlining 

them as in the agreed minute. That is my concern. 

I am going to yield to Mr. Keating for any questions he might 

have. 

Mr. KEATING. Thank you, Mr. Chairman. 

First of all, I would like to thank both of the gentlemen for their 

service to their country. And I was interested in Mr. Countryman’s 

28

opening remarks when he brought up the fact that he thought it 

would be great to engage in more political intervention. 

I realize the nature of the agreement and the importance of the 

agreement and the time significance with the old agreement, how 

the world has changed, and the need for this. However, I am curious, since you brought it up, what kind of a political engagement 

are you considering? What would you recommend, given your background, your prior background as well? 

Mr. COUNTRYMAN. Well, I hesitate to make recommendations to 

Members of the Congress. My point is that we have literally hundreds of issues on the bilateral agenda with China. It is the most 

complex bilateral relationship in the world today. We have a complex structure of dialogues with China, government to government, 

and those hundreds of issues are covered. 

It is more than possible that the Chinese Government loses sight 

of what I consider to be a crucial issue, ineffective enforcement of 

their own trade control laws, they lose sight of that when it is 

packaged together with the other 99 issues that are essential to the 

bilateral relationship. 

And although the State Department has raised this issue with 

high levels of the Chinese Government, I think that repetition from 

a variety of sources will help the Chinese Government to find the 

will and the resources to more effectively enforce its own laws. 

Mr. KEATING. I do suspect that most of the concern this morning 

will be based on not the agreement itself, per se, but the lack of 

enforcement. Their dealings with Pakistan and the violating of 

their own laws. 

And I just want to ask both of you, what do you think can be 

done about their own—to improve their own enforcement? And if 

you could speculate, I know it is hard to speculate on the Chinese, 

how much of it is, if any, is their inability to enforce it versus their 

just compliance and letting that occur? I know that is broad, but 

I think it is going to be central to what we are probing this morning. 

Mr. COUNTRYMAN. First, in terms of enforcement, you should 

have no doubt, as we have briefed repeatedly and are always ready 

to brief again, that we have a rigorous examination process before 

exports of technology are approved and that they include all relevant expertise of the United States Government, not just these 

two guys here. Our enforcement will be strong, and we have the 

mechanisms within the 123 to suspend or cease cooperation if there 

are violations on the Chinese side. 

In terms of Chinese enforcement of trade controls, first, Li 

Fangwei or Karl Lee, who has been mentioned, is not a new name 

to us. We have worked on this issue for years. We have had some 

success for the Chinese in limiting his activities. And yet he remains active. I would point out he remains active primarily in the 

ballistic missile technology realm, rather than in the nuclear 

realm, and has provided important technology to Iran in that respect. 

It is kind of a chicken-and-egg question to say whether the Chinese need to find the will or the resources. They have a Wild West 

economy with a number of private entrepreneurs who are capable 

of utilizing both high technology companies and, I assume, good 

29

connections within the Chinese bureaucracy to pursue trade that 

ought to be controlled. 

We strongly believe that the Chinese Government can do more, 

needs to make a political decision to do more. We will continue to 

press them to do that. And the 123 Agreement is exactly what provides us the access to continue to press that issue. 

Mr. KEATING. General, could you comment, if you could, too, 

given the shortness of time, also reference the CAP1400 issue in 

terms of our ability, what we might be able to do to limit which 

country China goes to export things. 

General KLOTZ. Well, let me, if I could, sir, follow up on your 

original question. Another element of the 123 Agreement, which I 

think is extraordinarily important, is that the provision that for 

tech transfers, that we engage in joint training of U.S. entities and 

Chinese entities on what the requirements of the tech transfer is. 

This is very, very important as a means of educating Chinese 

counterparts of what the specific rules are. We also go through that 

process in our other engagements across the range of issues associated with safety, security, research, and development on new approaches to reactor design, as well as fuel fabrication. 

On the specific issue of the AP1000 and the CAP1400, any tech 

transfer which is approved by the Secretary of Energy is subject to 

the provisions within the 123 Agreement on diversion of technology 

to military purposes and the export or re-export of that technology 

to other countries. So if that were an issue, that is something that 

we would address directly and squarely. 

Mr. KEATING. Thank you. I yield back. 

Mr. SALMON. Thank you. 

Chairman Poe. 

Mr. POE. Thank you both for being here. And thank you, Mr. 

Countryman, for being available to answer questions before this 

hearing to all of us on the panel here. 

I would like to look at this from a little higher level. This is an 

agreement between the United States and China to let us do business with China in the nuclear industry. Is that a fair statement? 

Civilian nuclear capability. 

Mr. COUNTRYMAN. Essentially correct. As General Klotz pointed 

out, it also provides for other areas of cooperation directly between 

Department of Energy and counterparts in China. 

Mr. POE. But, anyway, it is an agreement to do business in civilian nuclear capability. So we decide we are not going to do that, 

we are just not going to do business with the Chinese. The void, 

and just correct me if I am wrong, what would occur is then that 

our nuclear technology, which I think is the best in the world, bar 

none, rather than they being in China helping them develop their 

nuclear capability—and I mean in China, they would be there 

physically to monitor the construction of these plants. Is that a fair 

statement? 

Mr. COUNTRYMAN. Yes, sir. 

Mr. POE. Which is jobs and income to American companies. That 

is not going to happen. But the void then would be filled by some 

other country. Is that a fair statement? 

Mr. COUNTRYMAN. Absolutely. There are other countries that are 

eager to sell nuclear power plants to China. 

30

Mr. POE. Like France, Russia maybe? 

Mr. COUNTRYMAN. France, Russia, Japan, South Korea. 

Mr. POE. Japan. There is a whole bunch. But we are the best in 

the world, so the China preferably would do business with us because we do it better than anybody else. Is that a fair statement 

or not? 

Mr. COUNTRYMAN. I agree. 

Mr. POE. General, do you want to make that comment? 

General KLOTZ. No, I would agree with that statement. 

Mr. POE. Okay. So not agreeing to do business with them causes 

a void that is going to be filled by somebody else. And all of the 

issues that were discussed with the problems, possible problems 

with the Chinese cheating—I know we would be shocked if they 

did—are still going to occur, all of those issues are still going to 

occur with their proliferation with other countries, if they choose 

to do so. Is that right or wrong? 

Mr. COUNTRYMAN. Yes, sir. And our ability to engage with the 

Chinese on all of those issues will be diminished. 

Mr. POE. Because we don’t have an agreement to do business 

with them. 

Also under this agreement, does the U.S. Government and our 

different departments manage and control and authorize what we 

actually sell to China? 

Mr. COUNTRYMAN. Yes. 

Mr. POE. Okay. 

Let me ask you a question, General. I know you are an Air Force 

guy, as I was. But I saluted folks like you being just a sergeant. 

This canned coolant pump, I understand that the submarines, that 

is the new wave of naval activity throughout the world, and the 

coolant pump helps them get real quiet. We have heard some concerns about the canned coolant pumps and that technology being 

transferred to China. Can you fill me in on that? 

General KLOTZ. Sir, we discussed that at some length in the 

closed briefing that we had for members of the committee. As Assistant Secretary Countryman said, we had representatives from 

naval reactors in the intelligence community there. 

I would love to follow up with you on that discussion. Obviously, 

technology associated with our submarine program and naval propulsion is extraordinary sensitive. So I would be very, very happy 

to pursue that with you. 

Mr. POE. All right. We will follow up on some other basis. 

So based on everything you know, both of you, this is my last 

question, based upon everything you know, the criticism, the concerns, the Chinese, the deal with dealing with them on an arm’s 

length basis, do you recommend that Congress approve or disapprove this agreement? 

Mr. COUNTRYMAN. I strongly recommend that we approve it. As 

the President said in his message, this is in the national security 

interests of the United States. It succeeds if we implement it faithfully and carefully, and that is what both of our agencies are 

pledged to do. And, of course, we are pledged to keep the Congress 

closely briefed as we do so. 

General KLOTZ. I would agree——

Mr. POE. General? 

31

General KLOTZ. I would agree, sir. It is important to us both for 

our nonproliferation objectives, as well as commercial interests in 

this growing market for nuclear power around the world. 

And I am also convinced that we have put into place through this 

agreement, as well as the 810 process and the other reviews and 

the way in which we approve specific transfers of technology components, materials, a very rigorous way of ensuring that our interests are protected. 

Mr. POE. Thank you. 

I yield back, Mr. Chairman. 

Mr. SALMON. Thank you. 

Mr. Connolly. 

Mr. CONNOLLY. Thank you. 

General Klotz, I want to make sure I understood your answer to 

the question about CAP1400. So if we provide a certain technology, 

nuclear technology to the Chinese and they significantly modify it 

for retransfer to some other countries, what exactly does this agreement give us by way of right of review and approval? 

General KLOTZ. Sir, any technology related to the main nuclear 

technology parts of a reactor exported from the United States constitutes U.S. technology under the terms of the——

Mr. CONNOLLY. Irrespective of modification? 

General KLOTZ. That would have to be something that would be 

reviewed on a case-by-case basis to determine the level of modification, to what extent U.S. technology was involved, or to what extent indigenous development had taken place. 

But any technology that is exported falls under that. And we 

have informed our Chinese counterparts and companies of our review that inclusion of U.S. technology in the CAP1400 requires 

U.S. consent prior to its retransfer from China. 

Mr. CONNOLLY. And have they agreed to that? 

General KLOTZ. I don’t think we have gotten to that stage yet 

where they have exported the CAP1400. 

Mr. CONNOLLY. Well, I guess I would just note for you that if I 

were looking at a list of things that give me concern and pause, 

that is one of them. Your words notwithstanding, it is not entirely 

reassuring, especially the caveat that, well, it would depend on the 

extent of the modification. If I were a Chinese lawyer, that would 

be a big hole I would drive a big PLA truck through, or at least 

know I could. 

Mr. Countryman, a devil’s advocate question, for maybe both of 

you, but maybe I could start with you. I mean, this is a well-intentioned agreement. It provides a framework without which we don’t 

have any leverage or control. It is a growing market. It looks like 

China is on track to maybe being the biggest nuclear market by 

2030 or 2040, bigger than our own. It certainly is the only big, new 

expanding market because we are not expanding here that much. 

If I were Westinghouse, I would definitely want to be in that market. 

But your own testimony in May before the other body was that, 

frankly, they don’t have the capability to manage everything they 

have got, let alone this big expansion, from the point of view of the 

concerns of this agreement. 

32

We do know they have a history of proliferating. I mean, while 

they are part of P5+1, and I am glad they are, on the other hand, 

they helped the Iranian nuclear development program, they helped 

the Pakistan nuclear development program. 

And so what about this agreement gives us any level of confidence that we can deter that pattern of behavior, that we are 

turning over a new leaf with a reinvigorated agreement from 30 

years ago that catches the behavior we have witnessed in that time 

period when we had an agreement in place? Is it a matter of enforcement? Is it a matter of capability and training? Is it a matter 

of political will here? Or is it a matter of just a relentless pattern 

of probing and cheating and clandestine activity by the Chinese 

Government that, frankly, we are not going to catch and we are not 

going to deter? 

Mr. COUNTRYMAN. Well, thank you, sir. It is a good question. 

And if the turning point in Chinese behavior were 2015, it would 

be the crucial question. But,in fact, the turning point in Chinese 

behavior occurred in the 1990s. 

The conditions that Congress established in 1985 on the original 

Reagan administration agreement included ceasing support to the 

Iranian and Pakistani nuclear weapons programs. And China did 

that. It joined the Nuclear Nonproliferation Treaty. It joined the 

Nuclear Suppliers Group. Its record, as I said, in terms of what we 

call strategic trade controls, export controls, remains inadequate. 

On the question of can they manage all of these obligations, I 

think that they can manage a large nuclear program. What we are 

urging them to do is to devote a fraction of the resources, money, 

and personnel that they devote to managing a big nuclear program 

to managing an export control program. We believe that they can 

do that. 

Do we take for granted that their performance will improve? No. 

And the assurances that are contained here are not by themselves 

adequate. As in every other part of the 123 Agreement, it requires 

constant, persistent follow-up, and that is exactly what you will 

have. 

Mr. SALMON. Thank you. 

The Chair recognizes Mr. Rohrabacher. 

Mr. ROHRABACHER. A question not related to today, but does 

India have nuclear weapons? 

Mr. COUNTRYMAN. India has nuclear weapons. 

Mr. ROHRABACHER. Okay. My colleague and I were discussing 

that. 

Let me ask you about this. What we are talking about here is 

setting up a guideline so that we can do business and sell designs 

that will come from the United States and our designs for a nuclear reactor, a peaceful use of nuclear weapons program. Will we 

be selling also, does this set the guidelines, will we be selling actual equipment? Will we be exporting equipment that is built in 

the United States as well? 

General KLOTZ. Yes. The agreement serves as a framework for 

specific authorization, licensing by the Department of Energy and/

or the Nuclear Regulatory Commission to do that. 

33

Mr. ROHRABACHER. So we would expect both our technical designs and also our actual machinery to be sent, available to China, 

as a result of this agreement? 

General KLOTZ. Yes. If licensed again, if approved again by 

the——

Mr. ROHRABACHER. If approved, yes, of course. 

Let me ask you this. In terms of the type of nuclear reactor that 

we are approving, are these light water reactors? Are these the 

light water reactors that we will be sending? 

General KLOTZ. Yes. 

Mr. ROHRABACHER. Okay. So light water reactors are—how different will the light water reactors be that—we guaranteed that 

Japan, for example, would have the ability, and they did, followed 

through on the foolproof nuclear reactors that we sent them. Are 

these reactors going to be different than the ones we sent Japan 

that have proven not to be foolproof? 

General KLOTZ. I assume you are referring to the Fukushima accident? 

Mr. ROHRABACHER. I would make that assumption, yes. 

General KLOTZ. And, of course, that was a seminal event that got 

the attention of the nuclear industry and nuclear scientists, technicians, and engineers across the world. And a lot of changes have 

been made domestically in terms of the safety procedures that have 

been put in place here in the United States and overseas. The Chinese went through a pause in terms of approving new construction 

and certifying plants that had already been constructed as a result 

of their review of their own processes and procedures postFukushima. 

We are moving through successive generations of nuclear reactors. The AP1000 represents a gen III-plus with a lot of passive 

safety features, which are designed to ensure that the plant remains safe, not necessarily always with human intervention, if 

there is some major catastrophic breakdown in the system or some 

external event. 

Mr. ROHRABACHER. But they are still light water reactors. 

Let me just note that there are new generations people say we 

are capable of building that would leave light water reactors in the 

past. Meaning, that is old stuff. And what we are doing is putting 

little improvements on old technology when you talk about light 

water reactors. 

I am dismayed that our economy and our Government and our 

establishment here has been unable to go to the next generation 

of nuclear power, which I understand we are capable of building, 

which does not have leftover plutonium, for example, and doesn’t 

have the waste problem in terms of—by the way, does this, are we 

permitting the type of nuclear reactors that will have leftover material that needs to be protected, put into the Yucca Mountain of 

China for a 1,000 years? 

Mr. COUNTRYMAN. In short, yes. 

Mr. ROHRABACHER. Okay. Thank you. I think that is absolutely 

absurd for us to be shipping things like that to China or building 

them here when we have the capabilities of moving on to a new 

generation of nuclear reactors that don’t have that problem. And I 

34

am on the Science Committee, so I have been involved in this thing 

for a while. 

And we have already talked about the Chinese track record. I 

don’t think the Chinese do have a good track record in terms of it 

is my understanding that they have had something to do with the 

proliferation of nuclear weapons to Pakistan, not to mention there 

is a controversy about how much influence they have on Korea. 

And Korea has certainly not played a positive role. 

Let me ask you this in terms of—well, let me put it this way. 

The last time I was confronted by these arguments, and I have 

been here for 26 years, there are two mistakes I have made in Congress. 

Number one was to—well, I have made lots of mistake in Congress. But the ones I regret the most were, number one, following 

George W. Bush into Iraq and just taking his word about they were 

having a nuclear program in Iraq, which was, I believe, a fraudulent claim because it would have taken them 20 years to build a 

nuclear weapon or maybe even longer, if they could have ever built 

it at all. We went into Iraq for some other reason. It was a disaster. 

The other thing that I regret, however, the most that I regret, 

is that when I was talked into agreeing that American satellites 

could be launched on Chinese rockets. It was back in the 1990s. 

And I will tell you that we had people just like yourselves here testifying how that in no possibility would there ever be any type of 

technology transfer, this is going to be so controlled. And guess 

what happened? We ended up with a major transfer of missile technology to China. 

And to the degree that China today threatens us, it threatens us 

because of the rocket technology, the MIRVing that we provided 

them, the stage separation that we provided them. And we had 

people just like yourselves here guaranteeing us that that would 

never happen. 

And I am sure you are very sincere, and I believe you, but I don’t 

believe our system actually is efficient enough to back up the promises that you have made. So I would oppose expanding this type of 

thing to China. 

Thank you very much. 

Mr. SALMON. Thank you. 

Ms. Gabbard. 

Ms. GABBARD. Thank you, Mr. Chairman. 

I wonder if you could speak about how you assess this agreement 

will impact our security interests within the Asia-Pacific region 

and relationships with our allies and partners. 

Mr. COUNTRYMAN. Thank you very much. It is a great question. 

First, as I said, in the complex bilateral relationship we have 

with China, affirming our nuclear relationship, which is at heart 

a commercial relationship with security controls from our side, is 

essential to being able to talk to the Chinese as partners, as a 

growing power with whom we have to contend, who is both a partner and a rival. 

The other states of the region, I believe, support this agreement 

because it provides for an element of stability in the U.S.-China relationship. 

35

I will note that you also have before you the similar 123 Agreement with the Republic of Korea for your consideration. I also recommend it strongly. 

These are,in fact, the ROK, China, and Japan, I consider to be 

our three most important global partners in civilian nuclear power 

on both the technological and the commercial sense. And so this 

provides an element of stability. 

It also provides, crucially, an important step toward the development of carbon-free energy sources. And Asia is, of course, the region that is more threatened by rising sea levels than any other 

part of the world. 

So I see it only as positive. I am not aware of any criticism from 

any of our friends in Asia about this agreement. 

Ms. GABBARD. Thank you. 

General KLOTZ. Could I add to that please? Because it is a very 

important question. 

The way we would look at it, I think, from the Department of 

Energy and the National Nuclear Security Administration is it is 

important for all the countries in the region, our allies, China, that 

if they are going to operate civilian nuclear power programs, that 

it be done in the safest possible manner, the securest possible manner, with all appropriate safeguards in force. 

And so our ability to engage in dialogue with the Chinese on 

these important issues is extraordinarily important not just for 

China, but for our allies and partners in the region as well. 

Ms. GABBARD. Thank you. 

My next question has to do with the effectiveness of both our 

ability as well as the Chinese Government’s ability to monitor and 

control exports by private companies. My assumption is, and I 

would like to hear what you have to say, that there is a lot of room 

for improvement. And if so, what is the plan to improve that area? 

Mr. COUNTRYMAN. Well, first of all, I am always impressed when 

I see the programs administered primarily by the Department of 

Commerce, but also by other U.S. agencies, that improve the capability of American exporters to watch what they are exporting, to 

be aware of laws and regulations that change regularly. And major 

defense and high technology contractors have effective internal control programs that ensure they don’t get in trouble with their own 

government. 

We recommend such programs strongly, and, in fact, we have 

partnered with the Department of Commerce to assist the Chinese 

in providing that kind of training to major exporters within China. 

We have encouraged that model. 

But it is ultimately the responsibility of the Chinese Government 

to devote those kind of resources and to make that kind of training, 

that kind of internal control program a more regular feature among 

Chinese enterprises. 

Ms. GABBARD. If there is an illicit transfer that has been identified by the United States, is China, the Chinese authorities cooperating in how they are handling that or stopping that from moving 

forward? 

Mr. COUNTRYMAN. The record is mixed. There are more cases in 

recent years of the Chinese taking action to block such transfers, 

but it is far from a complete or a satisfactory record. 

36

Ms. GABBARD. All right. Thank you. 

Thank you, Mr. Chairman. 

Mr. SALMON. Thank you. 

The Chair yields to Mr. Wilson. 

Mr. WILSON. Thank you, Mr. Chairman. 

And, Mr. Countryman, while I understand the need for information sharing between China and the United States, both in my 

home State and in Georgia we have reactors under construction. 

And can you explain to us what the extent of the construction of 

Chinese reactors plays in terms of our diplomatic and economic relationship with China? 

Mr. COUNTRYMAN. That is a big question, very hard to summarize, sir. As I noted, there are 100 different issues in terms of our 

bilateral relationship with China. Nuclear trade is very large, and 

yet it is a small fraction, and I will try to get you a percentage of 

the overall volume of U.S.-Chinese trade. 

It has, however, a political significance that is greater than the 

actual percentage volume of bilateral trade. It is for the Chinese 

a recognition that we have a partnership between countries that 

are approaching the similar level of technological development in 

the nuclear energy field. And for that reason, it is not a matter of 

ego, it is a matter of assurance to the Chinese that we take them 

seriously on issues that are to our mutual advantage. 

But hard for me to be more precise given the extreme range of 

bilateral issues that we work on. 

Mr. WILSON. But the bottom line, it is beneficial? 

Mr. COUNTRYMAN. Absolutely. 

Mr. WILSON. And I appreciate that you recognize the carbon-free 

energy production. And somehow we need for you to get this message across that carbon-free energy production in China is also carbon-free energy production within the United States, and that it is 

very beneficial. And somehow the definition in one part of the 

world should apply around the world. So I appreciate you raising 

that. 

General Klotz, it is always great to see you. I appreciate so much 

your service to our country. As a member not only of this committee, but the Armed Services Committee with four sons currently 

serving in the U.S. military myself, ensuring our national security 

is my top priority. 

That said, can you describe and offer assurance to this committee, maybe even to members of the committee from California, 

that this 123 Agreement takes the necessary measures to ensure 

China does not divert U.S. commercial nuclear technology for military use? 

General KLOTZ. What I can assure you of, Congressman—and I 

appreciate those very kind words—what I can assure you of is that 

we have set up, I think, a framework agreement here that is an 

advance over the 1985 agreement in terms of the processes which 

are there, the potential downside risk to the Chinese if we come 

to the conclusion that they are not living up to their agreements 

in terms of diversion of military technology and the nonproliferation provisions that are written into the 123 Agreement. 

And I can assure you that we will be as diligent as the Congressman from California said, we will be as diligent as we can be in 

37

terms of our processes within the executive branch and in consultation with Congress to ensure that we go into each and every one 

of these applications for technology transfer, component transfer, 

hardware transfer with eyes wide open. 

Mr. WILSON. And I appreciate that very much. 

And additionally, Mr. Countryman, what is your assessment of 

the current proliferation activity between China and Iran or North 

Korea? 

Mr. COUNTRYMAN. First, they are two very different situations 

with similarities. In the case of Iran, we do assess that Li Fangwei, 

or Karl Lee, is the most important procurement agent for the Iran 

ballistic missile program; that he remains active; that although 

Chinese authorities have frustrated him on some occasions, he remains pretty much free to operate. And that is a primary concern 

of ours in our dialogue with China, one that we continue to press. 

North Korea is a somewhat different case. North Korea is less 

dependent on outside economies for development of its nuclear and 

ballistic missile program than Iran is. But it still seeks acquisition 

of high technology equipment and technology in China, as well as 

in Russia and in other locations. And we believe that the Chinese 

Government can and must do more to prevent such procurement 

networks that are specifically prohibited by United Nations resolutions. 

Mr. WILSON. Thank you very much. 

Mr. SALMON. Mr. Boyle. 

Mr. BOYLE. Thank you. And I want to thank the chairmen and 

the ranking members of the subcommittees for holding today’s important hearing and inviting me to appear. 

I introduced, along with my colleague Mr. Wilson, House Joint 

Resolution 56, the approval resolution of the agreement that we are 

discussing today, of course, the new 123 Agreement. 

In today’s testimony, I am directing this probably most appropriately to Mr. Countryman. In today’s testimony, and in similar 

testimony to the Senate Foreign Relations Committee, you said, 

‘‘The proposed agreement would strengthen the bilateral relationship between the U.S. and China, benefit the U.S. economy, enhance nuclear safety in China, and improve the environment.’’

Could you expand on these four advantages of the proposed 

agreement? And if you could specifically focus on the benefit to the 

U.S. economy and jobs here at home. 

Mr. COUNTRYMAN. Okay, I might ask my colleague, General 

Klotz, to talk a little more about the economic benefit. On the other 

points, as I have said, it is important to the bilateral relationship, 

greater, as I said, than the economic value of the agreement itself 

in both positive and a negative direction. It is an important symbol 

of partnership and cooperation for the Chinese, and failure to implement it would be taken by the Chinese as a step backwards by 

the United States from our professed desire to be partners where 

we can and to manage our differences where we have them. 

On the environmental side, the point is that nuclear power is a 

carbon-free energy source. It is very much, as President Obama has 

said, part of our all-of-the-above pursuit of clean energy in the 

United States and around the world. And this is the important contribution it makes. 

38

On nuclear safety, as General Klotz has said, we believe strongly 

and objectively that U.S. nuclear power plants have the safest design in the world, and more importantly, U.S. involvement on the 

ground in China helps to inculcate the habits of safety that prevent 

accidents in the future. 

And let me ask General Klotz to talk about economic benefits 

here. 

General KLOTZ. Thank you, Congressman, for the question. I believe in your second panel you will have people who can cite chapter and verse and specific statistics in terms of what the economic 

impact is in jobs, dollars, and that sort of thing. 

But just let me say generally, it has already been pointed out, 

in terms of nuclear technology we are the best in the world. Our 

scientists, technicians, and engineers are world class and leaders in 

this particular field. So from an economic point of view we have a 

comparative advantage in this commercial sector. 

And the benefits for U.S. industry are not just in the sale of a 

particular piece of hardware, but all the other things that go with 

it, the post-sale servicing, the technical engineering, the instrumentation and control that affects not just primary vendors, but a host 

of subvendors across the country in practically every State in this 

country. 

So it is a huge market that is growing there, and it has already 

been pointed out, if we are not there, someone else will be there. 

There are other people who build reactors and are aggressively 

marketing their technology to not just China, but other countries 

as well. 

Mr. BOYLE. Well, thank you. 

And I will just say briefly before yielding back, such an important point that this isn’t a choice of either we do this or it doesn’t 

happen. No, it is going to happen. The question is, do we do it or 

do our competitors beat us to it. 

Thank you. 

And again, I thank the chairman. 

Mr. SALMON. Thank you. 

Mr. Countryman and General Klotz, we appreciate your time 

today and your testimony and responses to our questions. Thank 

you very much. 

When Mr. Countryman and General Klotz leave the panel, if we 

can get the other panel seated as quickly as possible, we would appreciate that. 

Mr. SALMON. We are thankful to be joined by a private panel this 

afternoon as well, and maybe you can answer some of the other 

questions that were asked up here on economic issues and others. 

We are pleased to be joined today by Henry Sokolski. And did I 

say that right? 

Mr. SOKOLSKI. You did. 

Mr. SALMON. Close enough? 

Mr. SOKOLSKI. No, spot on direct. 

Mr. SALMON. All right. Executive director of The Nonproliferation 

Policy Education Center. Daniel Lipman, vice president for Supplier and International Programs at the Nuclear Energy Institute. 

And Sharon Squassoni is a senior fellow and director of the ProVerDate 0ct 09 2002 13:51 Sep 01, 2015 Jkt 000000 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 F:\WORK\_AP\071615\95516 SHIRL
39

liferation Prevention Program at the Center for Strategic and 

International Studies. 

And we will start with you, Mr. Sokolski. 

STATEMENT OF MR. HENRY D. SOKOLSKI, EXECUTIVE DIRECTOR, THE NONPROLIFERATION POLICY EDUCATION CENTER 

Mr. SOKOLSKI. Members of the committee, my message today is 

pretty simple. Although it would be a mistake to block this deal—

and I think the way this hearing has been framed, that seems to 

be the only question—it is the wrong question. Nobody is blocking 

this deal. It is going to go through. So you need to go a little bit 

deeper than that question. 

I think you need to approach this deal’s implementation with 

your eyes wide open—someone read my testimony, they used that 

phrase already once—lest it encourage more Chinese military nuclear diversions and proliferation of the sort already reported by 

the administration. They want you to go into classified hearings to 

find out about what is going on. Do it. I think when you do, you 

should be disturbed. 

To avoid this, Congress should condition the agreement two ways 

that would neither require China’s blessing, nor hold up its implementation. I think that is very important. You need to understand 

where the critics are coming from. They are not going in the direction you are worried about. 

First, before the executive authorizes any Chinese recycling of 

nuclear weapons usable-plutonium, it is called reprocessing, generated in U.S.-designed reactors, the President should certify that 

he will secure case-by-case authorizations for each reprocessing 

campaign the Chinese might attempt as the U.S. currently requires 

of Russia. We are not picking on China, just treating them like 

Russia. 

Congress should also ask the executive to publish a clear definition of what U.S.-designed reactor and reactor components are to 

clarify what materials require such reprocessing authorization and 

to take care of this question about the CAP1400, which is a very 

serious line of inquiry. 

Second, the President should certify that the agreement’s call for 

creating preapproved nuclear activities, technologies, and foreign 

entities won’t supersede or interfere with current technology review 

procedures. Now, to the extent that they claim it doesn’t, that 

should be an easy thing to pass because no one is going to say that 

they are not doing it. Great. Pass a law. Make sure of that. It 

doesn’t look like that in the annex to me. 

Congress also should ask that the Director of National Intelligence participate in current reviews of nuclear technology transfer authorization requests and that these requests be shared with 

the appropriate committees of Congress as they used to be. 

Finally, Congress should ask the intelligence community to assess routinely how Beijing might exploit its civilian infrastructure 

and American civil nuclear technology for military purposes and 

what China’s future military nuclear requirements might be. I 

think this needed to be done. You might have avoided some of the 

problems with the canned coolant pumps. Why bother? 

40

You have mentioned that Chairman Royce 8 years ago, along 

with several Members, wrote the Defense Secretary about the 

canned coolant pumps, and they were also concerned about the possibility of reprocessing resulting in nuclear weapon stockpiles. Essentially, they were told don’t worry. 

Now we are told China probably diverted the pump technology. 

They don’t want to quite say that because it raises legal issues if 

they actually say it. But it really looks like a duck and it is waddling like that. It looks like they diverted to upgrade it nuclear 

submarines. To my knowledge, no one has been disciplined for this 

slip, nor has our nuke tech transfer process been tightened. 

The proposed deal, in fact, would loosen this process by creating 

lists of nuclear activities, technologies, and end uses for 

preapproval. Industry has long pined for such streamlining. Congress approves it for a country that is suspected of having diverted 

nuclear technology, count on industry in other countries, including 

the riskiest ones, demanding similar treatment. 

The deal also gives China advance consent to extract as much 

nuclear weapons-usable plutonium as it wants from spent fuel generated in U.S.-designed reactors. All China must do is settle up 

front on safeguards and physical security. Unlike the nuclear deal 

we cut with Russia which requires approval for each effort to reprocess U.S.-origin spent fuel case-by-case, this deal gives blanket 

advance consent that only our closest allies enjoy. 

The security implications regionally of this are potentially enormous. Japan is contemplating opening a large plutonium reprocessing plant next spring capable of producing 1,500 bombs’ worth of 

plutonium a year. If Congress fails to further condition Chinese reprocessing, both China and Japan are more likely to proceed. This, 

in turn, would pressure South Korea to renew its demand that the 

U.S. allow it to reprocess. Within 10 to 20 years, expect tens of 

thousands of weapons’ worth of plutonium mounting up in East 

Asia. 

As my former boss, Andrew Marshall at the Office of Net Assessment, has written, this could produce a potential nuclear avalanche 

that could be triggered by the least provocations. 

In conclusion, you have a chance to wire brush this deal. Regrettably, in 1957, Congress didn’t even bother to review the 123 with 

Iran. Sixty-two years later, we now know how that turned out. 

[The prepared statement of Mr. Sokolski follows:]

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Mr. SALMON. Thank you. 

Mr. Lipman. 

STATEMENT OF MR. DANIEL LIPMAN, VICE PRESIDENT, SUPPLIER AND INTERNATIONAL PROGRAMS, NUCLEAR ENERGY 

INSTITUTE 

Mr. LIPMAN. Thank you, and good morning, Chairmen Poe and 

Salmon and Ranking Member Keating. I appreciate the opportunity to be here. 

I also would like to thank Representative Boyle and Representative Wilson for offering their resolution to approve this new agreement. 

And I would be remiss if I didn’t also thank Chairman Poe and 

Ranking Member Keating for their hearing in May regarding trade 

promotion agencies and U.S. foreign policies. We were here to talk 

about the 123, but when you talk about nuclear exports, financing 

and the Export-Im Bank is critical and improves the competitiveness of our industry, just as this 123 has a critical impact on the 

competitiveness of our industry. 

You have all talked earlier, so I won’t belabor what was said 

about the job creation and other benefits economically, but I would 

add that what some people may not know is today there are over 

40 American companies doing business in China, of all sizes, large 

and small, and they do it in a wide variety of technical and commercial applications. 

So this agreement, in addition to having had benefits from job 

creation and revenue creation, have also hit on a couple of other 

major national interests, and that is nuclear safety and nuclear 

nonproliferation. 

Mr. Rohrabacher, I think correctly, and I would agree, brought 

up earlier the notion of the importance of nuclear safety. It is 

something that all of us in the U.S. nuclear industry think about 

all the time. And having this agreement in place will allow us to 

cooperate on advanced nuclear technologies that do improve safety, 

as Mr. Rohrabacher suggested. 

So the timing is important in this agreement. Yes, it is a growing 

market, but China is expanding at a rate that requires our engagement right now. We are well positioned in the U.S. industry for 

success in China. You have discussed the landmark AP1000 contracts, of which I was very proud to be a part. There are currently 

another 10 reactors being discussed and a third tranche of about 

another 30 plants. 

But we are, as some of you have said, not the only potential partner. There are others out there who would like to take our place, 

to be involved, as we are, in a critical role in the Chinese nuclear 

industry. 

So I am going to conclude by really saying, if the U.S. industry 

is not permitted to participate in the Chinese market, it impacts 

our reliability as a supplier and the Chinese do have other options. 

We are not their only potential partner. 

Our abdication of this key market results in the loss of very 

high-paying jobs in technology and a loss of U.S. influence, as Secretary Countryman said, in nonproliferation, and I would argue 

also in nuclear safety and nuclear security. 

49

If the U.S. were to terminate or significantly curtail cooperation 

with this market, it is also going to have spillover effects in other 

potential nuclear markets. Think about what it would look like if 

you are a country that is thinking of purchasing U.S. nuclear technology if they see a U.S. agreement with China being fraught with 

difficulty and not renewed, or somehow encumbered. 

So we in the industry urge you to allow this new agreement to 

enter into force without delay or without undue encumbrance on 

commercial cooperation or export licensing. 

I look forward to your questions. Thank you very much. 

[The prepared statement of Mr. Lipman follows:]

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Mr. SALMON. Thank you. 

Ms. Squassoni. 

STATEMENT OF MS. SHARON SQUASSONI, DIRECTOR AND SENIOR FELLOW, PROLIFERATION PREVENTION PROGRAM, 

CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES 

Ms. SQUASSONI. Thank you, and good morning. Thank you Chairmen Salmon and Poe, Ranking Member Keating, and other members of the subcommittees for the opportunity to discuss the U.S.-

China Nuclear Cooperation Agreement today. I would like to submit my written statement for the record and just make a few 

points. 

I think all of the panel members that you have heard this morning have said, on the one hand, China has made some important 

strides, but on the other hand, its record in nonproliferation is a 

little bit checkered. 

And I think I would like to point out that some things have remained really constant over the last 20 years, since we have been 

involved in nuclear cooperation with China: China’s intense drive 

for indigenizing foreign technology, a porous division between civilian and military nuclear activities, anemic resources for export controls in this hear-no-evil, see-no-evil, speak-no-evil approach to export violations. 

So I would like to offer some recommendations, that greater 

transparency, enhanced dialogue, and benchmarks for progress in 

Chinese export control would be welcome improvements to this 

agreement. 

So in the agreement itself, what should Congress look for? It is 

an improvement, but I think you are right to focus on this, what 

I call the fast track for technology transfer authorizations. And 

Congress should be careful to assess how well this fast track, which 

as Henry quite rightly pointed out, sets up approved, preapproved 

entities, preapproved nuclear technologies, and other things for 

streamlining, whether this really creates incentives for better Chinese compliance with intellectual property rights. 

Second, the advance consent for reprocessing that the agreement 

provides in Article 6 should be monitored to ensure that if U.S.-origin material is reprocessed, that it is indeed safeguarded. The 

agreement allows for the option of reprocessing in a facility on China’s eligible facilities list, but that doesn’t mean the IAEA will actually inspect it. And please note that our agreement with Russia 

does not allow for this kind of advance consent to reprocessing. 

And third, Article 6 contains unique language on managing separated safeguarded plutonium, and this is a mild reminder to China 

of the risks of plutonium stocks. For the committee’s reference, 

Japan considers reasonable working stocks at a reprocessing plant 

to be 10 tons or more of separated plutonium. That is a lot of nuclear weapons. 

More broadly, Congress needs to consider whether the agreement 

overall provides adequate nonproliferation assurances regarding 

the separation of civilian and military nuclear activities, the continued provision of civilian nuclear cooperation by China to Pakistan, 

and the robustness of China’s export control implementation. 

62

So does the agreement provide adequate nonproliferation assurances? China’s porous boundaries between civil and military nuclear activities and its intense drive to indigenize foreign technology have resulted in the concerns that you have heard here 

today about the use of U.S. canned pump technologies in Chinese 

naval reactors. 

Safeguards are designed to help address that porous boundary, 

and the fast-track procedures for technology and information transfers that place part 810 transfers squarely under the Nuclear Cooperation Agreement are designed to increase accountability within 

the entities in the Chinese Government. 

But Congress could strengthen transparency in a resolution of 

approval by requiring reporting on steps that the Chinese Government has taken to create firewalls between civilian nuclear and 

military nuclear sites, facilities, and personnel. Additionally, Congress should require reporting on the new fast track procedures for 

technology transfer on an annual or biannual basis to assess their 

effectiveness. 

Second, Congress should look for assurances that the U.S. Government is actively working to persuade China to cap its nuclear 

assistance to Pakistan, or at least recognize reasonable limits so 

that it stops undermining Nuclear Supplier guidelines policies. You 

could also require reporting on the steps that the U.S. Government 

has taken in that regard. 

And finally, Congress should seek assurances that China is improving its export controls, at least in the nuclear area. You could 

require certifications every 5 years that China has taken appropriate and effective steps to improve its export control system and 

to halt transfers of WMD-related material, equipment, and technology to states of proliferation concern. 

You should also require the Director of National Intelligence to 

provide annual unclassified and classified reports to Congress on 

WMD-related acquisitions and transfers, specifically from China. 

This would replace the Section 721 reports that have now stopped. 

My written remarks also include recommendations for Congress 

to strengthen its oversight generally to reflect new realities and 

support longstanding policies on nuclear cooperation, and I am 

happy to discuss those in the Q&A. Thank you. 

[The prepared statement of Ms. Squassoni follows:]

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Mr. SALMON. Thank you. 

My first question would be directed to Mr. Sokolski and Mr. 

Lipman, and it would actually be regarding some of the thoughts, 

and maybe others, that Ms. Squassoni has recommended. 

Some of the recommendations, that we would have additional review for export licenses and subsequent arrangements involving 

components and technology that could be used for naval propulsion, 

stronger Chinese Government control of proliferation by private 

Chinese entities, or assurances on halting Chinese thefts of U.S. 

nuclear technology. 

So if those conditions were established on the implementation of 

the U.S.-China 123 Agreement, how would that potentially impact 

the U.S.-China nuclear commerce? Would it drive them to not deal 

with the United States as much if we put those kind of additional 

safeguards in place? Or given what we heard in the first panel, we 

have the best technology in the world, is that good enough to keep 

them at the table? And then how would it potentially affect nonproliferation goals and carbon emissions? 

So I will start with you. 

Mr. SOKOLSKI. Well, never let it be said that you don’t ask a lot 

of questions in one question. 

Mr. SALMON. Nobody has ever accused me of that. 

Mr. SOKOLSKI. Yes, well, you are a good journalist. 

Let me try to keep it simple. I think there is a danger if you 

start conditioning this agreement on getting the Chinese to agree 

to anything. I wouldn’t do that. 

People are concerned about jobs. By the way, I am not sold that 

there are that many jobs, and we can get into that in a moment. 

I think you don’t want to upset the Chinese.You know why? Our 

Government is not doing a great job in managing affairs in East 

Asia. We don’t need additional headaches. That is what I would 

worry about, not the jobs. 

That said, everything I suggested does not require holding up the 

agreement or getting the Chinese to admit that they have done 

something wrong. 

There are two things. The reprocessing consent rights need to be 

forced into a situation where if they go down that route and they 

open up reprocessing—by the way, we should discourage it—then 

they have to be treated like Russia, and the President is just going 

to have to certify that that is how he is going to do it. And he needs 

to announce that now to discourage them from going down that 

route, because they don’t need that to promote nuclear power. 

The second thing is, you need to get that U.S. design definition 

down. They defer to industry, essentially, is the testimony we got 

May 12, to decide what is and is not of U.S. design. But that is 

a conflict of interest. Westinghouse, in particular, sells technology 

as part of the package. We want the government to be in the business of controlling. It has to define what is U.S. designed. 

And I think you need to focus on those things, and I would focus 

certainly on the recommendations in my testimony, which are modest. They are twofold. There are some additional requirements that 

have you more involved, and that is it. I would not hold the deal 

up and I would not try to get the Chinese to say certain things. 

75

Let the deal go forward, but curtail the two excesses that are 

identified in the testimony, the reprocessing, which was unnecessary to give advance consent, and I would really get someone to actually say in writing we are not going to let preapprovals circumvent the existing procedures, because if anything, the Chinese 

have established they are not to be trusted on this issue. 

Mr. SALMON. Mr. Lipman, if we go ahead and implement the 

things that have just been recommended, which seem reasonable, 

does it jeopardize any kind of a relationship, or, as he said, if we 

just say this is the deal, take it or leave it, this is what we are 

going to do? What are your thoughts? 

Mr. LIPMAN. Certainly, any kind of ultimatum-like language that 

says take it or leave it is not something any reasonable 

businessperson would concur with. 

Second, to Henry’s earlier point, if they are using U.S. technology, and they are, then export controls are in place. I mean, that 

is one of the reasons you transfer technology, is you want other 

countries to use your technology. Because if they are not using your 

technology, then you are on the outside looking in, commercially. 

So as long as U.S. technology is used, U.S. export controls are in 

effect. 

I would urge you to look at, as I think Mr. Countryman did, the 

Korea program, which this committee has reviewed in the past. 

That technology has been in play by the Koreans for decades, since 

the early 1980s. They have improved upon it, they have developed 

it further, yet it still maintains U.S. export controls. 

Relative to some of Sharon’s suggestions, I would preface some 

remarks on them by simply saying, I agree with General Klotz that 

we have a very robust, thorough, and I will add time-consuming 

approach to the processing of export control licensing. And certainly anything that lengthens the cycle time is not helpful. In fact, 

it is a disadvantage for U.S. countries. 

However, I think there are some points Sharon made that I 

would concur with. And I am not going to, I think, catch them all, 

but in reading her testimony earlier, the creation of firewalls between civilian and nuclear military sites, facilities, personnel, that 

sounds very reasonable to us. 

Requirements for reporting on steps. The United States Government has taken to seek Chinese restraint regarding civil nuclear 

cooperation with Pakistan, both within China and I think she said 

the NSG also, that sounds reasonable to us too. 

Certifications on the surface sound reasonable, but you have to 

be careful what you are certifying. I mean, the language is very important there. 

Transparency is a good thing. Having the Directorate of National 

Intelligence providing an annual report, classified and unclassified, 

sounds like a good thing, but it ought to focus on those things controlled by the 123 and not get too far afield. Let’s stick to the knitting and the spindling. So reporting on the administrative implementation of tech transfer on an annual or biannual basis to assess 

their effectiveness also sounds like something that is reasonable to 

us. 

So I think those are things that are reasonable. I might depart 

company from Sharon with respect to the reprocessing, in that the 

76

Chinese have indicated that their intent is to reprocess civilian 

spent fuel in a civilian facility and that that facility will be open 

to IAEA safeguards and/or what is known as a voluntary arrangement. 

Now, Sharon made a point, but you have to make sure they inspect. That is fair enough. But to me, the offer to put a facility 

under safeguards and to have it voluntarily inspected is, to me, evidence of good faith. 

Thank you. 

Mr. SALMON. Thank you. 

Mr. Keating. 

Mr. KEATING. Thank you, Mr. Chairman. 

I just want to touch base on the environmental impact and risk 

issues. What does the adoption of the passive safety measures of 

the AP1000 mean in terms of environmental impact and risk? 

Maybe Mr. Lipman or Ms. Squassoni could comment on that. 

Mr. LIPMAN. Okay. So I might ask for a clarification on ‘‘environment,’’ because having lived in China for 4 years, it has got some 

of the worst environment. It has got some of the worst air and 

water quality that I have personally ever experienced. And having 

asthma as a result of living there for 4 years, it is the gift that 

keeps on giving. 

So I am for anything that is going to improve Chinese air and 

water, environment, environmental quality. I think it is important. 

Like the United States, the Chinese population lives in the east. 

Coal is in the north and the west. It gets transported. It gets 

burned over major population centers. The Chinese understand 

this, and the Chinese are taking steps, and it is going to need more 

than just nuclear energy to help. 

Mr. KEATING. Oh, I know we can’t solve their environmental 

problems. I mean, in terms of this particular agreement, and the 

AP1000 in particular. And if they move away from that kind of design, if they are not involved in this, what would that mean in 

terms of environmental impact and risk? 

Mr. LIPMAN. So let’s talk about the risk. That is very, very critical. Clearly, the adoption of passive safety technology like the 

AP1000 is an order of magnitude improvement over the current 

generation of reactors, and that is important. So it mitigates risk. 

Nuclear safety is important. We do have concerns that a very 

rapid expansion of the nuclear energy program has to be done in 

a way that maintains the highest standards, no short-cutting of 

any sort whatsoever. 

Passive safety technology allows for less operator intervention. It 

allows for natural phenomena, like condensation, evaporation, and 

convection to cool the reactor in the case of a major reactor upset 

like we saw in Fukushima. So we want them to use these technologies with advanced safety concepts. 

Other companies in the U.S. are talking to the Chinese about 

small modular reactors, which represent yet another step forward 

in terms of nuclear safety improvement. 

And all of these would be critical within the confines of the 123. 

So we want this agreement to go through so that kind of safety cooperation can continue and mitigate risk. 

77

Mr. KEATING. I can associate myself with many of those concerns 

coming from my own district, where design there is antiquated and 

we see some of those problems. And we don’t have those passive 

safety measures even here at home. 

Would you like to comment, Ms. Squassoni, on that? 

Ms. SQUASSONI. Yes, just on that point. I think it is important 

for the committee to remember that in at least the nuclear safety 

and nuclear security regimes there are no internationally binding 

standards. And so I guess in that sense, the role of industry is very 

important. 

I guess I would caveat that by saying while it is true that China 

is building, they are building EPRs, French technology, American 

technology, I would also support the U.S. technology as having excellent safety. 

Mr. KEATING. I only have 60 seconds left. I just want you to comment on the agreed minute provision in this. Evidently, given some 

of the testimony, there are some concerns about the effectiveness 

of that. If you could, just in the little time that remains. 

Mr. LIPMAN. Thank you, Congressman. 

My view of the agreed minute and placing technology transfer to 

some degree under the 123 is an important improvement. The concern is somehow that things will get rushed through. I see it as differently. I see it is that if there is a concern or a problem or that 

the Chinese perpetrate some sort of violation of export controls, it 

is now a treaty violation. It is not just a violation of an export control rule, it is a treaty violation. And not being an attorney, though, 

my understanding is that that is much more of a serious problem 

for the Chinese. 

Mr. KEATING. To come full circle with the testimony of Mr. Countryman, when he mentioned politics, I think that shows how maybe 

some of that can reenter into this afterwards if necessary. 

I yield back. 

Mr. SALMON. Thank you. 

Chairman Poe. 

Mr. POE. Thank you all for being here. 

Mr. Lipman, your colleagues have made several recommendations to us to put in the 123 Agreement. Do you agree with those 

recommendations? Without going through all of them, do you agree 

with them or not agree with them? 

Mr. LIPMAN. I agree with some of the recommendations indicated, Sharon’s in particular. I generally would like to see this 

agreement go through without encumbrance. 

I do understand, separate from this committee, that in fact there 

are other concerns in other committees relative to the military diversion issue. We understand those are being addressed. 

We do concur with the role of the intelligence community. We 

think they are already engaged in this process. But others would 

like to see a stronger role. 

We, of course, as patriotic Americans, want to make sure that 

our technology is only utilized for peaceful purposes, and involvement of the intelligence community and other branches of government that assure that in a process that allows us to go forward 

commercially is something we would support. 

78

Mr. POE. How much money are we talking about as far as industry goes that the U.S. would be able to benefit if we go and build 

it and maintain it, as opposed to the French? 

Mr. LIPMAN. Okay. So this is a 30-year agreement, and so it is 

hard to——

Mr. POE. If you can kind of cut to the chase, Mr. Lipman. 

Mr. LIPMAN. Yes, sir. So I would say you have got $12 billion in sales under the current agreement. You probably have another $30 

billion to $60 billion under current negotiation, and one might say 

that going forward in a 30-year basis you would have several billion dollars per annum in sales in each of the 30 years of the agreement. 

Mr. POE. And as I asked Mr. Countryman when he was here, 

having a presence in China building it has an advantage over not 

having a presence and somebody else building it. Would you agree 

with that or not? 

Mr. LIPMAN. Absolutely correct. 

Mr. POE. Because when you build it, you monitor it, the safety, 

the security. Is that correct or not? 

Mr. LIPMAN. You not only build it, but you are there for in many 

aspects for decades to come, because you service the plant, you refuel the plant, you sell renewal parts, you are working with the 

Chinese in a variety of different industrial cooperative relationships. 

Mr. POE. So you don’t build it and then you come back to Texas, 

so to speak. 

Mr. LIPMAN. No, sir. 

Mr. POE. You stay over there, maintain it, supervise it, like you 

would any other project that you would build. 

Mr. LIPMAN. That is correct. We are not selling Pepsi, Chairman, 

we are there for the long haul. 

Mr. POE. Or Dr. Pepper in Texas. 

Mr. LIPMAN. Yes, sir. 

Mr. POE. Let me ask you this. We have a 123 Agreement with 

Russia. It expires in 28 years, I believe. It is a 30-year agreement. 

Were you involved in that at all? 

Mr. LIPMAN. No, sir. 

Mr. POE. Were any of you involved in the Russia 123 Agreement? 

Mr. SOKOLSKI. Yes. 

Mr. POE. You were involved in it. Okay. 

Your recommendation is when we design this 123 Agreement 

with China, we make sure the same rules that we requested and 

have with Russia are in this agreement. Is that a fair statement? 

Mr. SOKOLSKI. Let’s not discriminate. 

Mr. POE. Treat them the same. Treat the Chinese and the Russians the same? 

Mr. SOKOLSKI. At least on the reprocessing, on that issue you 

treat them the same. 

Mr. POE. On reprocessing. Okay, thank you for that recommendation. 

Let me ask you another question. If my list is correct—let me say 

it this way. I think the public is concerned about a lot of things. 

We are concerned about—when you mention nuclear capability people get nervous. So we have civilian nuclear capability. We have 

79

military nuclear capability. And then we have intercontinental ballistic missile capability to deliver nuclear weapons. Those are kind 

of the three things I think we are all concerned about. 

If my understanding is correct, there are nine countries that 

have nuclear weapon capability as of today: U.S., Russia, United 

Kingdom, France, China, India, Israel, Pakistan, and the latest 

being North Korea in 2006. 

Look down the road, if you would. Where do we see nuclear 

weapon capability going? Who is next? Who is next? Any predictions? 

Mr. SOKOLSKI. I just wrote a book. 

Mr. POE. I know. I got your book up here. I got your book. So 

tell me the countries that we should be concerned about. 

Mr. SOKOLSKI. I would worry a lot about East Asia. 

Mr. POE. Specifically who? 

Mr. SOKOLSKI. Japan, South Korea, and it is even conceivable 

Taiwan. 

Mr. POE. How about Saudi Arabia, Egypt, Turkey? 

Mr. SOKOLSKI. Well, you asked which ones are the quickest. In 

time, yes, you get a benefit of possible competition in the Middle 

East, and all of the ones that you have heard, all of the ones that 

you have said, get thrown in as well. 

The reason you have to worry about the Far East, however, is 

because the line between civil and military is much more blurred 

there than any other place in the world, with a possible exception 

of India. 

And the Japanese have been playing a game of plutonium poker 

for many decades. They pile up plutonium. They don’t burn it. That 

gets our attention. It gives you a nuclear guarantee. It gets the attention of China and South Korea, who are very upset about it. 

There is no agreement about reprocessing in China. Now, there 

is clear proof. It is not in the 5-year plan yet. I spoke with the 

chairman, the former chairman of the Chinese National Nuclear 

Corporation, which makes the nuclear weapons and is interested in 

promoting the reprocessing. He said: We do worry about safety. 

That is the reason we need to have your cooperation, because we 

are going primarily with the American design. 

The French, by the way, I don’t think you need to worry about 

the French. They are in receivership, sir. They are not competitive. 

They may not even make another reactor at the rate they are going 

given the troubles they have. 

Korea and Japan, let’s just say they will follow our lead. 

I think you need to be a little more upbeat about what is possible 

and understand that the Chinese also see this deal as something 

that might benefit them. And we need to be aware of that. Don’t 

hold it up, but focus on the reprocessing, because it is contingent. 

You do not want those Asian countries piling up plutonium. And 

I would pay attention to the export control stuff. 

Mr. POE. I yield back. 

Mr. SALMON. Thank you. 

Mr. Sherman. 

Mr. SHERMAN. Thank you. Mr. Chairman, thank you for holding 

these hearings. The White House decided to convene a meeting 

that conflicted with these on the Iran nuclear deal. This nuclear 

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deal may not be getting the same level of publicity, but also poses 

interesting policy questions. 

Mr. Lipman, we are going to be restricting China from re-exporting U.S. technology. The issue is, what is U.S. technology? One can 

imagine a gallon of paint that is American with one drop of Chinese technology in it. One can imagine a gallon of Chinese technology with one drop of American technology in it. What is the definition of U.S. technology subject to export control? 

Mr. LIPMAN. Thank you, Mr. Sherman, Ranking Member Sherman. I don’t think there is something formulaic, but I will give you 

a business guy’s response to it. 

Technology is generally comprised in technology transfer agreements, commercial technology transfer agreements, as foreground 

technology and background technology and joint technology. And 

there are definitions, business definitions in these agreements. 

If the Chinese have taken AP1000 technology and modified it, 

the so-called CAP1400, as some have indicated, that is still U.S. 

technology. Why is that U.S. technology? Because under definitions 

of the tech transfer agreements between the two companies—and 

I was then a Westinghouse executive involved in that—that clearly 

has a basis in U.S. technology. 

Over time, as designs evolve and change, and change fairly radically, they can change fairly radically, that becomes far more tenuous. But certainly, as we look forward over the next decade or 

more and we look at the evolution of Chinese designs, which we 

can, and which we do, because we are involved in them, they are 

clearly based, at least the advanced passive technology, are clearly 

based on U.S. technology in our view. 

Mr. SHERMAN. Japan has constructed a large reprocessing facility 

which it wants to take online in the next few years. I think Mr. 

Sokolski has commented on that. South Korea has been interested 

in reprocessing and demanded that the United States agree to a 

process enshrined in the new 123 Agreement that we have with 

South Korea, currently pending before Congress, whereby in about 

6 or 7 years we would have to decide whether to give them consent. 

We would have to say yes or no. 

China’s agreement with the U.S., which is the one we are having 

these hearings on, provides, it appears to be, an advance consent 

to reprocess subject only to the facility being made available for 

safeguarding. 

We just had hearings yesterday. Apparently China, Japan, and 

South Korea are not always real happy with each other and may 

not be sanguine as one or the other moves toward reprocessing, 

may be anxious to stop reprocessing in one of the others. 

Mr. Sokolski, should we be concerned that we would have many 

tons of separated plutonium available for weapons in each country 

that may be reprocessing, as all three may be reprocessing in the 

future? And perhaps would these countries be interested in a mutual moratorium on reprocessing, or are they more interested in reprocessing themselves or causing one of their neighbors, perhaps, 

to not reprocess for a while? 

Mr. SOKOLSKI. I took a trip, actually two trips, to try to promote, 

and for what it is worth, I talked with the government, our GovernVerDate 0ct 09 2002 13:51 Sep 01, 2015 Jkt 000000 PO 00000 Frm 00086 Fmt 6633 Sfmt 6633 F:\WORK\_AP\071615\95516 SHIRL
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ment, before I went. I did not go commando. There is material I 

want to place in the record. 

One of the pieces is that proposal that we floated. And it was, 

we should back off going ahead with the program President Obama 

is uncomfortable with, and that is the Savannah River Project, 

which is a plutonium fuel project. Japan should not open up 

Rokkasho in March of next year because it doesn’t have any way 

to fabricate the fuel and they have already indicated they want to 

pile up another 3 tons of material, minimum. 

By the way, when you say ton, it is 1,000 kilograms. Divide by 

roughly 4 or 5 and you get the number of bombs worth. It is a lot 

of material. 

The Koreans were apoplectic when they heard about this. The 

Chinese have gone public in their opposition. One of the people I 

talked with in China who is very highly placed said: We may not 

come to the Nuclear Security Summit; if you don’t put a collar on 

this, we don’t work on this. 

Each of them made very clear that their plans to go ahead were 

not fixed, and even the Japanese that I spoke with would like to 

figure out some way to get an off-ramp to what they have done. 

They have local constituents just like we do and they are pressing 

for jobs. But if there was an international effort to take a time out, 

you could speak to them and say: Well, there are higher priorities. 

I think this is the moment. It is one of the reasons I am very 

anxious that you say something about reprocessing in this deal, because if China gets green lighted it will encourage Japan to just 

go ahead. If Japan goes ahead, then the Chinese will say: Well, we 

need to hedge our bets. You do not need to do this for commercial 

nuclear power. It is not economic. You lose money. It is a dangerous weapons-related activity for the most part. 

Mr. SHERMAN. Thank you. I would comment that we may want 

to have a Pacific nations conference on reprocessing to discuss all 

three countries’ and perhaps our own reprocessing, and maybe 

countries would see mutual security in that. 

I would ask unanimous consent to put in the record a letter from 

the IBEW, my own opening statement, an article from Foreign Affairs, and other scholarly articles. 

Mr. SALMON. Without objection. 

Mr. Boyle. 

Mr. BOYLE. Yes, thank you. 

And I wanted to follow up on a question that I had asked the 

last panel, and they mostly answered it, but when I specifically 

asked about the economic impact and jobs they deferred to the second panel. 

And Mr. Lipman, in reading all your testimony, including the 

very helpful appendix, which is entitled ‘‘Economic Impacts of U.S. 

Nuclear Exports to China,’’ I think perhaps you would be the best 

person to direct this question toward. 

Mr. LIPMAN. Thank you, Mr. Boyle. 

The job creation from nuclear exports to China under the current 

agreement have been very, very significant. About 12,000 to 15,000 

direct jobs and an equal number of what they call induced or direct 

jobs were also part of this. 

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But as you go forward in the implementation of the agreement 

under consideration, the renewal, the estimates, as you will have 

seen in the report, indicate, I think, between about 30,000 to 

35,000 direct jobs created and sustained—and sustained—over a 

30-year period. 

It is very, very significant job creation. And it is job creation of 

high technology, high-skill type of work, which is, I think, very, 

very important. 

And I know the comment was made earlier: Well, you know, 

maybe we don’t worry about the jobs. But the very submittal that 

Ranking Member Sherman just talked about, he talked about the 

IBEW letter, well, you all know the position of trade unions on 

trade agreements. You just went through something here in the 

last month. So it is very significant that all of the major unions, 

the IBEW, the United Association, and the Boilermakers, have all 

come out in support of this renewal. 

Now, why would that be? Well, because there are jobs created. 

There are jobs created for pathway into the middle class. These are 

jobs that pay a family wage. 

And so we are very, very concerned. We do worry about the jobs, 

the jobs creation here. Thank you, Mr. Boyle. 

Mr. BOYLE. Well, and I would say, just not to repeat everything 

you have just said, but clearly we are not talking about minimum 

wage jobs. We are talking about well-paying jobs. 

And certainly, toward the point that Mr. Sokolski interjected earlier, that is certainly not the only consideration. We are, after all, 

in a Foreign Affairs Committee setting. It is by far not the only 

consideration. But it is still a legitimate and valid consideration 

and one that I think in each one of our 435 districts we have been 

approached and talked about the importance of jobs and familysustaining jobs. Well, here we have a wonderful opportunity. 

I don’t know if, in the interest of fairness, if you wanted to comment since you had questioned the extent to which you think—not 

to put words in your mouth, but I got the impression that you 

thought that maybe the number of jobs is being overstated. Is 

that——

Mr. SOKOLSKI. You know, I don’t want to wade into other people’s turf. I think you should be skeptical, however, over the long 

haul as to what the Chinese are up to. They like making their own 

stuff. 

If you take a look at the complaints they have had about the 

canned coolant pumps, which were defective, some of the valves, 

they want to make them there themselves. One of the reasons I 

think they raided our various servers was to get the information. 

Now, that said, information isn’t enough. They are going to need 

our advice. You don’t really need a 123 Agreement to get that advice, by the way. There are other ways you can do things. 

I don’t think that should be what is driving how you think about 

this. If there are jobs, fine. If there aren’t, fine. 

The bigger questions are the security questions. After all, nothing that has been said at this panel stops this deal. It doesn’t even 

stop reprocessing. But there is a certain laxness, or lax—what do 

you call it?—looseness with regard—and enthusiasm for doing cerVerDate 0ct 09 2002 13:51 Sep 01, 2015 Jkt 000000 PO 00000 Frm 00088 Fmt 6633 Sfmt 6633 F:\WORK\_AP\071615\95516 SHIRL
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tain things in the deal that I would condition and I wouldn’t ask 

the Chinese for permission. 

It isn’t take it or leave it. It is just good governance. So I don’t 

think you have to choose between the deal and no deal, or reprocessing and no reprocessing, no. 

Mr. BOYLE. All right. Well, I thank the panel for their participation. Again, I want to thank the chairmen and ranking members 

for inviting me here today. 

Mr. SALMON. I thank the panelists for their testimony and their 

answering of questions. We really appreciate it. 

And without further objection, this committee will be adjourned. 

[Whereupon, at 11:04 a.m., the subcommittees were adjourned.] 

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A P P E N D I X 

MATERIAL SUBMITTED FOR THE RECORD

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[NOTE: Material was submitted for the hearing record by the Honorable Brad Sherman, a Representative in Congress from the State of California, ranking member 

of the Subcommittee on Asia and the Pacific, and Mr. Henry D. Sokolski, executive 

director, The Nonproliferation Policy Education Center. Those materials are not reprinted here but may be accessed from the hearing page on the Internet at:

http://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=103718.] 

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