U.S. GOVERNMENT PRINTING OFFICE

64–899 cc WASHINGTON : 2000

S. Hrg. 106–613

THE WASSENAAR ARRANGEMENT AND THE

FUTURE OF MULTILATERAL EXPORT CONTROLS

HEARING

BEFORE THE

COMMITTEE ON

GOVERNMENTAL AFFAIRS

UNITED STATES SENATE

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

APRIL 12, 2000

Printed for the use of the Committee on Governmental Affairs

(

For sale by the Superintendent of Documents, Congressional Sales Office

U.S. Government Printing Office, Washington, DC 20402

(II)

COMMITTEE ON GOVERNMENTAL AFFAIRS

FRED THOMPSON, Tennessee, Chairman

WILLIAM V. ROTH, Jr., Delaware

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

GEORGE V. VOINOVICH, Ohio

PETE V. DOMENICI, New Mexico

THAD COCHRAN, Mississippi

ARLEN SPECTER, Pennsylvania

JUDD GREGG, New Hampshire

JOSEPH I. LIEBERMAN, Connecticut

CARL LEVIN, Michigan

DANIEL K. AKAKA, Hawaii

RICHARD J. DURBIN, Illinois

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

JOHN EDWARDS, North Carolina

HANNAH S. SISTARE, Staff Director and Counsel

CHRISTOPHER A. FORD, Chief Investigative Counsel

MARK T. ESPER, Professional Staff Member

JOYCE A. RECHTSCHAFFEN, Minority Staff Director and Counsel

LAURIE RUBENSTEIN, Miniority Chief Counsel

DARLA D. CASSELL, Administrative Clerk

(III)

C O N T E N T S

Opening statements: Page

Senator Thompson ............................................................................................ 1

Senator Lieberman ........................................................................................... 3

Senator Akaka .................................................................................................. 18

WITNESSES

WEDNESDAY APRIL 12, 2000

Hon. John D. Holum, Senior Advisor for Arms Control and International

Security, U.S. Department of State .................................................................... 5

Hon. William A. Reinsch, Under Secretary for Export Administration, U.S.

Department of Commerce .................................................................................... 7

Frank J. Gaffney, Jr., President, Center for Security Policy ............................... 27

Stephen J. Hadley, Former Assistant Secretary for International Security

Policy, U.S. Department of Defense ................................................................... 29

Henry D. Sokolski, Executive Director, The Nonproliferation Policy Education

Center .................................................................................................................... 31

ALPHABETICAL LIST OF WITNESSES

Gaffney, Frank J. Jr.,

Testimony .......................................................................................................... 27

Prepared statement .......................................................................................... 61

Hadley, Stephen J.:

Testimony .......................................................................................................... 29

Prepared statement .......................................................................................... 67

Holum, Hon. John D.:

Testimony .......................................................................................................... 5

Prepared statement .......................................................................................... 49

Reinsch, Hon. William A.:

Testimony .......................................................................................................... 7

Prepared statement .......................................................................................... 55

Sokolski, Henry D.:

Testimony .......................................................................................................... 31

Prepared statement with attachments ........................................................... 79

(1)

THE WASSENAAR ARRANGEMENT AND THE

FUTURE OF MULTILATERAL EXPORT CONTROLS

WEDNESDAY, APRIL 12, 2000

U.S. SENATE,

COMMITTEE ON GOVERNMENTAL AFFAIRS,

Washington, DC.

The Committee met, pursuant to notice, at 10:05 a.m., in room

SD–342, Dirksen Senate Office Building, Hon. Fred Thompson,

Chairman of the Committee, presiding.

Present: Senators Thompson, Lieberman, and Akaka.

OPENING STATEMENT OF SENATOR THOMPSON

Chairman THOMPSON. All right. Let us come to order, please. We

appreciate very much our witnesses coming to be with us here

today. We are considering a subject that a lot of people consider to

be one of the most important subjects that we have to deal with.

We spend an awful lot of time dealing with things that many of

us think do not amount to much, but this is clearly an area that

does. I remember shortly after I came to town, I was watching television, I flipped on a speech that Senator Nunn, former Senator

Nunn, was giving in Houston. He was talking about the proliferation of weapons of mass destruction as the greatest threat that this

country faced. A few days later I watched former Secretary of State

Christopher on a Charlie Rose show and Charlie put the question

to him what was the greatest danger to our national security? He

gave the same answer. I know Secretary Cohen in the recent past

has basically said the same thing.

I think there is a growing realization that we do not have the

one big threat that we had back during the days of the Coordinating Committee on Export Controls (or COCOM), but we now

have a different kind of threat. In many ways, it is more dangerous

and more insidious. Of course, what we do not agree upon is exactly what we ought to be doing to deal with it. We have a major

debate going on about this right now in terms of the Export Administration Act. I hear that it is going to be brought to the floor shortly. I think the current EAA bill is a mistake. I think we have not

spent enough time on it. There are several committees, including

this Committee, that have jurisdiction in these areas and we are

just kind of going lickety-split. I know the Banking Committee has

spent a lot of time on it, but we are just now getting our focus on

the issue and we are going too fast because there is great pressure

in terms of the issues of trade and commerce to get this done.

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But anyway, we will have that debate. Also, I think most of us

do agree that we need to do what we can in terms of multilateral

regimes, arrangements, treaties, and what not to cut down on the

proliferation of weapons of mass destruction, ballistic missiles, and

biological, chemical, or dual-use items.

We are dealing here today primarily with to one of those multilateral arrangements, the Wassenaar Arrangement, which I guess

you might say deals with the other edges of our concern. We have

more consensus in the area of missiles, nuclear, biological, and

chemical weapons than we do with regard to the sort of dual-use

items controlled by Wassenaar, for example. So we are not together

with our allies on exactly what we should be doing.

Some of us are going to be talking to our allies over this next

recess about those issues, and while we could spend an awful lot

of time disagreeing—as I’m sure I do with our first two witnesses

on some aspects of our export control policy and about what I believe to be an unjustified loosening in terms of many of these

areas—clearly we now live in a different world. We do not live in

a COCOM world anymore. There is more foreign availability of sensitive technologies than ever before, but we have dangers that are

increasing—as we are told by the Rumsfeld Commission, as we see

with the North Koreans launching their three-stage rockets and

other things that come as a great surprise to us, as we read the

Cox Report that the Chinese are using our high performance computers to enhance their own nuclear capabilities, as we see diversions in high performance computers to China and to Russia, as we

see with the Loral problem, and now the Lockheed problem, and

as we read the Inspector Generals’ reports concerning what they

believe to be a lack of training, lack of end-user verification, and

other controls of that nature. I simply believe that instead of pushing forward with what I would call a further loosening across the

board, especially in terms of high speed computers, encryption and

things of that nature where the technological pace is picking up,

instead of doing that, we ought to sit back and have a new assessment of some kind.

The more I get into this, the more I see that all points have certain validity. And what we really need is not for Congress to sit

here and decide whether or not ‘‘x’’ item ought to be exported or

not. What we need is to make sure we have a process where all

of the relevant interests are presented, whether it be through a

separate, independent agency or whatever. I think we need to reassess that. Perhaps our view in terms of what we ought to be controlling should be changed. Now I read where some people are saying we ought to control fewer items, build higher fences around

fewer items.

Some are also saying that we need to concentrate more on catchall provisions in terms of what countries we are sending things to—

that is, not to control so many things, but to concentrate more on

bad destinations. That sort of thing. I do not pretend to have the

answers to all of these questions, but the more I get into it, the

more I am convinced nobody else does either. Perhaps it is time

that we really sit back and take a look at the fact that we are in

a new world: One with more foreign availability and more opportunities for even our allies to undercut us if we do not trade, but also

3

many new dangers from many other countries. Even countries

whose people are starving to death apparently have the ability

today to launch chemical and biological weapons onto this country,

and perhaps shortly nuclear ones as well. I am referring to, of

course, North Korea.

So, in that kind of world, what should we be doing? I believe we

should be trying to exercise some leadership with regard to our allies, which gets us into the Wassenaar and these other multilateral

arrangements, which is what we are dealing with here today. So

after saying I did not want to get into all that, I got into all of that.

But now, I really am going to try—and others can follow their own

lead, but I really am going to try—to direct my attention toward

what should we be doing in terms of these arrangements. Are they

really helping? What are our successes, our failures? What are we

trying to do as a nation in terms of exercising leadership with regard to these arrangements?

What are our criteria for success? How do we know how much

good we are doing? Could things be done differently? How important is it? To what extent are we getting cooperation from our allies? How important is the fact that we have different views, clearly, on some things?

We all seem to agree that there is a certain list of items that

ought to be of concern, and we pretty much agree what that list

is. We all agree that there are a certain group of countries that

ought to be of concern, but we certainly do not agree with our allies

with regard to what to do about that. And we disagree not only

about what to do about the so-called rogue nations, but with regard

to China. So that is why we asked you to come here today: To get

your views on the significance of these arrangements, and the significance particularly of the Wassenaar Arrangement because we

saw with Iraq that this dual-use issue is very important and that

controlling such items is very difficult.

Where are we and where should we be going? So, gentlemen, I

appreciate your being here with us today to discuss these issues.

Thank you. Senator Lieberman.

OPENING STATEMENT OF SENATOR LIEBERMAN

Senator LIEBERMAN. Thanks, Mr. Chairman. Thanks for a

thoughtful statement and thanks for calling the hearing today because it does give us the opportunity to explore this important

issue of export controls from a perspective that often does not get

the attention it deserves and that is the multilateral perspective.

As you indicated, we are living in an age of remarkable

globalization. It is a different world and a world of stunning technological innovation, both of which have brought extraordinary

benefits to our country and to the world, but, as we have become

increasingly aware, there are some downsides to our entrance into

the otherwise happy post-Cold War global cyberage.

With the release of the Cox Committee Report last year and

other more recent allegations of improper transfers of sensitive

technology, we have all become aware that the proliferation of socalled dual-use technology, which is to say technology with both civilian and military applications, has important and potentially dangerous ramifications for our national security.

4

Nowhere is addressing this concern more complicated than in the

context of multilateral export controls. During the decades of the

Cold War in our confrontation with the Soviet Union, we and our

allies were pretty much able to keep our enemies from obtaining

significant amounts of potentially harmful technology. We were

able to do this because our allies broadly shared our concerns and

our strategic views and because much of the technology that we

wanted controlled was, in fact, capable of being controlled by our

allies and us.

But with the end of the Cold War and our entrance into a period

of extraordinary technological advancement, all of that has now

changed. We live clearly in a multipolar rather than a bipolar

world, and our allies no longer share our strategic views on some

important issues. To cite the obvious example, some of our key perceptions regarding countries like China, Iraq and Iran different

fundamentally from that of our allies.

Just as importantly, private industry today, not government supported military research, stands at the forefront of many new technological advances with security and military implications. So governments have to run hard to stay in place technologically and so

they usually do not own or control new technologies in the same

way we did at an earlier stage of history.

All of that means that the old system under which the United

States through COCOM was able to essentially tell our allies not

to transfer sensitive items or technology and usually have them

abide by that decision and thereby keep dangerous technology out

of the hands of our enemies—that system no longer does or in some

measure can exist. Our allies no longer see a reason to give us a

veto over their export decisions. And the proliferation of readily accessible technology makes it very difficult for us to exercise the

control that we once did.

This all has very significant consequences for our national security in the traditional sense by which I mean that it clearly can expose us to threats that are serious from those who wish us ill. And

if we and our allies cannot agree on who to sell to and who not to

sell to, it also potentially harms our national security in another

sense. If, for example, our allies decide to sell advanced technologies such as satellites or supercomputers to places that we will

not allow our American companies to sell to, our action may not

only fail to prevent a potential adversary from obtaining what they

want to obtain, but it may also do damage to our ability to maintain the robust technology and defense industries that are critical

to providing for our own defense.

These are not easy questions to balance. In some sense, as I believe the Chairman said earlier, there is a lot of right on all sides.

But the bottom line is that we have to figure out how to protect

our national security in this very different world. We must do what

we can, but we also obviously have to work with our allies, understanding that they are not always going to see things the way we

do.

This is a complicated problem that our witnesses today have

thought long and hard about. I am grateful that they are here and

I look forward to hearing their views on how best we can work in

this new multilateral high technology context to achieve both our

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1The prepared statement of Mr. Holum appears in the Appendix on page 49.

central national goal of protecting our national security and also in

the process trying to keep the world as safe as we can. Thank you.

Chairman THOMPSON. Thank you very much.

Gentlemen, your statements will be made a part of the record.

If you would summarize those for us, we would appreciate it. Mr.

Holum.

TESTIMONY OF HON. JOHN D. HOLUM,1 SENIOR ADVISOR FOR

ARMS CONTROL AND INTERNATIONAL SECURITY, U.S. DEPARTMENT OF STATE

Mr. HOLUM. Thank you, Mr. Chairman, and thank you for having this hearing and for laying the basis, both you and Senator

Lieberman, for I think a productive discussion. We appreciate presenting the Department of State the opportunity to discuss the

Wassenaar Arrangement and the future of multilateral export controls. It is important to note at the outset, as both of you have

noted, that Wassenaar is not and cannot be COCOM.

COCOM and other multilateral control mechanisms had a clearly

defined, mutually agreed strategic threat, and addressed that

threat by embargoing exports of arms and sensitive dual-use items

to proscribed destinations. Along with our allies, we agreed on procedures for controlling exports to those destinations including allowing for any Nation to veto a specific export.

The end of the Cold War, the disintegration of the Soviet Union,

moves toward democracy and market-based economies in the

former Warsaw Pact, deep cuts in the strategic arsenals of both

sides, and the goal of assuring or assisting economic and political

reform in Eastern Europe, Russia and other newly independent

States rather than retarding their economic development, all led

our allies to the view that the COCOM arrangement had outlived

its strategic rationale and could not be sustained.

The United States eventually joined this view when it became

clear that our trading partners would no longer agree to follow the

procedures outlined in the COCOM arrangement. In the waning

days of COCOM, the United States sought to preserve the controls

for as long as possible and push to establish a new world wide arrangement to cover conventional arms and related technologies. It

was only through United States leadership that we were able to

stem the flow of arms and sensitive technologies to places such as

Iraq, Iran, North Korea and Libya, destinations largely ignored by

the former COCOM.

The world has changed for the better. The targets of COCOM

now are members of Wassenaar as well as trading partners, friends

and in some cases treaty allies. And our former COCOM partners

recognize that responsible national export controls and policies remain indispensable to promote international peace and security in

the post Cold War environment even though they opposed and continue to oppose any COCOM-like control regime. COCOM members, eventually with participation by Russia, designed a new multilateral export control regime to address the new challenges posed

by regional instability in States whose behavior threatened international security.

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The new regime, Wassenaar, is the first global multilateral arrangement covering both conventional weapons and sensitive dualuse goods and technologies. It was negotiated and established in

the mid-1990’s at the same time that COCOM was disbanded. As

you noted, Iraq’s build up of arms before the Gulf War demonstrated the need for some form of global export regime and the

Wassenaar Arrangement responded to this challenge by covering

more than just dual-use items as had been COCOM’s focus.

The Wassenaar Arrangement which began operation in September 1996 is designed to prevent destabilizing accumulations of

arms and dual-use goods and technologies. The arrangement encourages transparency, responsibility, consultation, and where appropriate national policies of restraint. In doing so, it fosters accountability in transfers of arms and dual-use goods and technologies.

It also provides a venue in which governments can consider collectively the implications of various transfers on their international

and regional security interests. It also seeks to enhance cooperation

to prevent dangerous transfers. Wassenaar members maintain export controls on items covered by the munitions and dual-use lists,

which are regularly reviewed by experts as needed.

However, the decision to transfer or deny any controlled items

remains the responsibility of individual member states. There are

no, as there were in COCOM, case-by-case prior reviews of proposed exports to proscribed destinations or vetoes on proscribed or

proposed exports. But members do report on their decisions to

transfer or deny to non-members certain classes of weapons and

dual-use technologies.

Again, unlike COCOM, Wassenaar members are not constrained

to honor each other’s denials, but consultations are encouraged in

such cases. Although no country is an explicit target of the

Wassenaar Arrangement, members are committed to dealing firmly

with states whose behavior is a cause for serious concern. There is

broad agreement that these states presently are Iran, Iraq, Libya

and North Korea. Wassenaar members deal with these countries of

concern by preventing through shared national policies of restraint

their acquisition of armaments and sensitive dual-use goods and

technologies for military end-use.

So Wassenaar provides for the first time a global mechanism for

controlling transfers of conventional armaments and a forum in

which governments can examine and debate the implications of

various transfers on their international and regional security interests.

I have in my statement a further elaboration of some of the

achievements of Wassenaar which I hope we can get into in the

questions and answers, but I see my time has expired. So I will

conclude there.

Chairman THOMPSON. Thank you very much. Mr. Reinsch.

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1The prepared statement of Mr. Reinsch appears in the Appendix on page 55.

TESTIMONY OF HON. WILLIAM A. REINSCH,1 UNDER SECRETARY FOR EXPORT ADMINISTRATION, U.S. DEPARTMENT

OF COMMERCE

Mr. REINSCH. Thank you, Mr. Chairman. In light of what you

and Senator Lieberman said and also what Mr. Holum said, I think

I can abbreviate my remarks, since I understand you will put the

whole statement in the record anyway.

Chairman THOMPSON. All right.

Mr. REINSCH. Let me concentrate for a few moments on the relationship between Wassenaar and COCOM and then conclude with

some suggestions as to what we might usefully do next, which I

think is what you said you wanted to focus on.

As both you and Mr. Holum made clear and in contrast to

COCOM, Wassenaar’s membership has a much broader base. It is

not limited to NATO members. One of what we think is the major

successes of the Wassenaar Arrangement is that Russia, Ukraine

and other former Warsaw Pact countries are members and have

committed to develop effective export controls and to end destabilizing arms sales to Iran.

Wassenaar’s members also include countries that have been outside of NATO during the Cold War such as Austria, Sweden and

Switzerland and new industrial powers such as the Republic of

Korea and Argentina. We think this broad membership needs to be

considered as one the successes of Wassenaar.

Now, in retrospect, we are trying to, if you will, meld the legacy

of COCOM with the new realities that both senators so eloquently

described in their remarks. We inherited from COCOM a long list

of goods to be controlled. The selection of those goods was based on

preventing the Soviet Union from improving its weapons and its

high tech industries. That list is out of date. It is out of date in

terms of the objective. It is out of date in terms of the technologies.

And we believe it needs a good deal of work.

In addition, we inherited some mistrust that had arisen as a result of debates in COCOM, and this was an obstacle to progress in

building the new regime. Most importantly, COCOM permitted the

United States and other COCOM members to share a common approach to export controls. As you noted, as we discovered via Iraq,

this changed after the collapse of the Soviet Union.

Our export control policies and those of our allies differ widely

in some respects. The Europeans have made clear, for example,

that they have no intention of adopting our unilateral sanctions.

The Wassenaar Arrangement, covering as it does both conventional

arms and related dual-use equipment, also does not have the same

degree of consensus we find in other regimes. This is because there

is much legitimate trade in the items controlled by Wassenaar so

the kind of blanket denial policies found in the MTCR or the nuclear suppliers group for weapons of mass destruction or the embargo approach found in COCOM will not work.

The United States is a major exporter of arms and military technologies and considers its ability to make such transfers a necessary tool of foreign policy. Many of the items controlled by

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Wassenaar are also becoming widely available through the kind of

globalization that we were discussing earlier.

One thing our Wassenaar partners have consistently made clear

for the last 7 years is that they will never submit to the kind of

consensus arrangement for export approval known as a veto that

was found in COCOM. The military threat to European security

that justified a veto no longer exists. In addition, as the Europeans

have made clear in other contexts, they have no intention of adopting our unilateral sanctions such as those against Iran or Cuba or

our sanctions against India or Pakistan. And they believe that if

they accepted a veto, we would attempt to use it to enforce such

sanctions.

No other export control regime has a veto rule for export decisions, and I believe we would be mistaken if we think we can persuade Wassenaar or the other regimes to adopt it. It is also worth

noting that one aspect of the veto debate is that some transfers we

make to our allies and security partners would likely trigger a veto

from other Wassenaar members. Unlike the other members, the

United States has global security commitments, and I am not sure

that we would want Russia or others to sit in judgment on our exports to our security partners in certain states in Asia or in the

Middle East.

And there is skepticism among our partners, frankly, as to how

we would react to a veto if we believed that our national interests

were at stake; in other words, if the tables were turned. Our

Wassenaar partners have also consistently made clear that China

is not a target of the regime. Many Wassenaar members wish to

see China join the arrangement. For the most advanced industrial

economies in Wassenaar, China is an important market, not a

threat. And they have told us that it is a market that they will

service.

The most salient examples are in machine tools and semi-conductor manufacturing equipment. We often hear criticism of sales

of five access machine tools to China. The United States has approved only two in recent years, but in the same period our

Wassenaar partners have approved more than 20. In fact, exports

to China of the most advanced machine tools more than doubled in

the last year, and they did not come from the United States.

For semi-conductor manufacturing equipment, we have been told

by the other major producers, Japan, Netherlands and Germany,

that they will sell to China even if we will not. A good example of

that is China’s Project 909, where Japan approved the joint venture using the most advanced chip making equipment before the

United States had even finished debating whether to allow its companies to apply for a license.

Now let me make some suggestions in closing, Mr. Chairman, for

the future. First, we need to recognize that much of the debate in

the United States over export controls is out of sync with the rest

of the industrialized world. This reflects in part larger differences

over security policies, threat perceptions, or trans-Atlantic cooperation. But it forms a crucial backdrop to improving multilateral controls.

Second, we need to consult with our allies and with other regime

members on the scope for cooperation and improving controls. For

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conventional arms and related dual-use equipment, it may be less

than we would wish. Related to that, we should continue our efforts to promote adoption of catch-all controls by our regime partners in order to ensure that adequate authority exists for controlling a wide range of technology to specific end-users of concern.

Third, we need to refocus the list of those items that are controllable and critical to advance military capabilities. The globalization

of technology poses new challenges in that regard, as Senator

Lieberman pointed out.

Fourth, we need to give up the ghost of COCOM. COCOM was

a valuable tool for NATO in the Cold War, but it is gone and cannot be resurrected.

Fifth, we need to continue efforts to get China to participate in

multilateral regimes such as Wassenaar. To this, China will need

to make progress in adhering to the international norms for nonproliferation and arms sales. There is no question that they are not

there yet.

We must continue our efforts to encourage non-members to adhere to regime standards. The Commerce Department, working

closely with State and Defense, Customs and others, has worked

with the countries of the former Soviet Union and Warsaw Pact to

develop comprehensive and effective export control systems.

We have often found that even in cases where these governments

are willing to take the hard steps to keep items out of the hands

of unreliable parties, they do not have the practical means or the

legal basis to do so. We have had some success in encouraging

them to take all the necessary steps including adopting the control

lists of the multilateral regimes to allow them to adhere to the objectives of the regimes. But we need to do more in that area.

Finally, we need to continue to work towards national consensus

or as close as we can get to consensus in our national discussions

over export controls. The recent legislative debate, as you have

noted, Mr. Chairman, reveals the differences among us are wide in

some respects, and those differences do not provide a firm basis for

U.S. leadership at this time. So I think it is particularly important

that we try to get together and see if we can develop a common

view. Thank you.

Chairman THOMPSON. Thank you very much.

Let us kind of summarize for a moment. See if I am right, and

correct me if I mischaracterize anything, but under COCOM, basically each Nation had a veto over the other nations’ export of any

particular item. The world changed and we moved away from

COCOM. Just a bit of history. I hear different things from different

people about how the demise of COCOM came about. I have always

read that the United States took the lead in doing away with

COCOM and moving to another arrangement.

In fact, did not President Clinton campaigned on this point? I do

not know specifically, but in terms of loosening controls I recall

that he thought many were out of date and too onerous. He kept

that commitment and took the lead in changing the COCOM arrangement, moving away from that. Now the administration suggests that the United States was kind of dragged away reluctantly

from COCOM and tried to keep what remnants of it we could as

we were being pulled away from it against our will.

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I do not know exactly whether you were in the middle of that,

Mr. Holum, at the time that it came about, but could you give us

a little history on this point in terms of your understanding?

Mr. HOLUM. I was not in the middle of it because at that time

I was Director of the Arms Control and Disarmament Agency. We

were involved but not centrally, but my understanding of that period is that the United States was anxious to maintain as rigorous

an international control regime as we could. And when we consulted with our allies and our former COCOM partners who had

long since begun agitating with the fall of the Soviet Union for a

liberalized regime, we found that there was very limited stomach

for that kind of an arrangement, and particularly, even during the

COCOM regime, some members had chaff against the veto arrangement.

So at the end of the Cold War, it was our leadership which led

to a successor regime. I think there were some, certainly not all,

who would have been content to let the COCOM process disappear

and let things revert to national decision-making. And we pressed

very hard for a continued multilateral arrangement recognizing

that it could not have the same rules and procedures as COCOM.

But it did keep alive the export control lists and the basic arrangements for consultation.

Chairman THOMPSON. So we went into the Wassenaar Arrangement, which basically did away with the veto, as we were talking

about. It is an arrangement that has no large staff or anything like

that, but they have annual meetings. There is an agreed upon list

that countries agree to pay attention to. There’s an agreed upon

list of bad countries that the members agree to pay attention to,

but they do not commit to do any particular policy with regard to

dual-use items.

They will make their own decisions. Each country makes its own

decisions as to what it should do. There is no agreement to notify

before a transaction is made. There is no agreement not to undercut. In other words, if one Nation turns down a sale or a transfer,

there is no agreement that somebody else will not come along and

take that opportunity instead.

There are discussions concerning problem areas and problem

items. But basically, some might consider it generally only a discussion society whereby the United States, and others, have an opportunity to persuade people to generally move in the right direction. And then you have Russia, who is a member of Wassenaar,

whose general interest and attitudes and behavior some might say

are quite different than those of most of our allies, not only in

terms of their proliferation activities but in terms of some of the

issues that they have taken on in the foreign policy and export control arena.

My understanding is that Russia has been most reluctant or one

of the more reluctant to do anything with regard to issues such as

prior notification or undercutting or anything of that nature.

I want to focus in one aspect of all this, and it has to do with

what Mr. Reinsch mentioned, the catch-all provision—which basically to me means that you look to the country the item is going,

and take that into consideration, and give additional weight and

consideration to where it is going, and not concentrate so much on

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having a strict control of the item or prohibiting it from being

moved per se.

The allies agree that there is a problem country list, but they do

not agree specifically as to what to do. What I would like is your

assessment of exactly where we are with regard to our allies on

that issue. They agree somehow to pay special attention to those

countries but do not agree to do anything specifically one way or

another.

Is it not true in practice that many of our allies require that

there be some very direct evidence of danger before they will stop

an export of a dual-use item that we might consider very sensitive?

That before they will stop such an export, for them there needs to

be shown a direct relationship between that export and the production of weapons of mass destruction or their delivery systems?

In other words, it is easy to give lip service to export controls—

to say, yes, we agree. To say, ‘‘These rogue countries are problems

and we are going to give them special attention,’’ but when it

comes right down to brass tacks, many of our allies have different

criteria than we do. And I am talking about our European allies

now. Do they not as to what they ought to do with regard to exports to those countries? Is that a fair assessment, and could you

elaborate on that a little bit?

Mr. HOLUM. Well, I think it is a fair assessment that we have

far more consensus in regimes other than Wassenaar on sensitive

technologies. In the Missile Technology Control Regime and the

Australia Group, the Nuclear Suppliers Group, the Zanger Committee, all the other multilateral informal arrangements that are

nonetheless focused on weapons of mass destruction have a far

easier time reaching consensus on what should be controlled and

to where.

And the rules are much stricter. You have to look at Wassenaar

in the context of that, and as you said earlier, we are on the edges

of the technologies that contribute to arms programs. And the

United States in general is more active, more anxious and interested in controlling dual-use technologies with other weapons applications than some of our Wassenaar partners are.

That said, they all do have dual-use control lists that go beyond

the WMD regimes and delivery system regimes. And it is more

than a matter of persuasion. I think the existence of the

Wassenaar Arrangement and the continuous discussion in that context has helped to bolster countries’ national export control policies

on both dual-use and munitions. But I would agree or I would

argue that absent Wassenaar, those regimes would be or those national controls would be less rigorous.

Chairman THOMPSON. Well, that is an argument that can be

made. I am more interested right now, I guess, in understanding

exactly what their position is—if we can generalize with regard to

our allies—about how that works in the real world. There are supposed to be notification requirements after sales are made periodically twice a year—notification requirements for certain things, certain sales that are made so everybody can kind of keep up with

what everybody else is doing. The notification is not item specific,

as I understand it. It is in categories. But it is still, I suppose,

somewhat helpful.

12

Can you give us a feel—I do not know to what extent you deal

with Wassenaar, to tell you the truth—but can you give us a feel

for the extent to which our European allies are, in fact, exporting

dual-use items to problem countries that cause us concern? Can

you explain the extent to which there is discussion between our

country and our European allies about those matters? Have there

been any instances where they have refrained from such exports

because of perhaps intelligence that we had that we imparted to

them and that changed their mind? How much give and take is

going on? How much impact are we having? Lastly, can we say

that things are better than if we did not have Wassenaar or that

it is successful?

What criteria are we using? Is there any indication that there is

in the works a system whereby problem items can be kept from

winding up in these problem nations? In terms of government management, we are getting into a performance-based system around

here in trying to get the Results Act implemented. So it is not

enough anymore for agencies to say ‘‘we process this many pages

of paper’’ or ‘‘we approved this many applications’’ and ‘‘we had this

many discussions.’’ We want to know: Is it really working? Is there

any indication that we are keeping bad stuff out of bad hands that

otherwise would go there?

Mr. HOLUM. Yes, I think there is. Some of it I cannot go into any

open session for reasons you understand. Generally, for example,

there is a decline in arms shipments to the four countries, to terrorist list countries, under Wassenaar. I am not saying that

Wassenaar is the only reason for that. Part of the reason obviously

is that after the Iraq war Russia was not giving as much away and

was not able to sell as much.

In the dual-use area, my assessment is that the greatest accomplishments are bilateral rather than multilateral. But the multilateral regime creates the framework and the overall political commitment to control sensitive technologies. But we have four committees in the United States that the State Department chairs that examine transfers or potential transfers. We sift intelligence. We see

what is likely to happen and go to our Wassenaar partners or to

others and demarche them in case we see a bad shipment to a dangerous destination.

And we have success in that process. I think Wassenaar contributes to our ability to have success. But I think the bilateral component of it is also indispensable. The Wassenaar environment also

is a regime in which countries agree more generally on what are

the problem destinations. I have mentioned the four, but they have

also focused on areas in conflict. They focused on the Sudan. They

focused on Afghanistan and other regions where shipments are less

likely to take place. So there is a collective judgment rendered.

It is very difficult to do these things multilaterally for all the reasons you know including the membership of Russia in Wassenaar.

Russia does take a different view on many of the issues. Given that

Russia has many of the technologies that we want to control, I

think it is better to have them in than to have them out, but it

makes consensus harder to achieve.

Chairman THOMPSON. It seems to me that you could almost

make the argument, on the other hand, that the Wassenaar ArVerDate 11-MAY-2000 13:23 Aug 22, 2000 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 64899.TXT SAFFAIRS PsN: SAFFAIRS
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rangement might hinder these bilateral activities. After all, you

have got the umbrella of approval with regard to certain things out

there that countries might not be as willing to take a chance on

if they did not know that others were doing it. You are going to

have to be reporting this periodically anyway. Everybody is going

to see that if you go ahead and do it, regardless of the United

States’ objection, there will be no problem. So the next country

might be tempted to do the same thing.

I do not know. I have just one other follow-up. My time is over,

but I have a follow-up on something you said. How easy or difficult

is it for us to share our intelligence even with our allies concerning

these things? Is that flow going the way that it should?

Mr. HOLUM. It is always very difficult. It varies obviously with

the country, but there is a constant struggle to be able to share as

much intelligence information as we have and to tell as much as

we know to the country we are trying to influence because of

sources and methods problems and that is a legitimate concern of

the intelligence community. I will not dispute that it exists. I do

not want us to not have information, but it is a problem when you

have information and cannot act fully on it because you cannot release it.

Chairman THOMPSON. If you will indulge me, Senator, just one

more question. We clearly in this country do have a different view

of how to deal with the rogue nations. But why is this? And I wonder if it relates to the intelligence part? Do our allies not perceive

the same kinds of threats that we do, especially with regard to

Iran? There seems to be a disconnect there. Why is it that our allies do not see some of these nations being as much of a potential

threat as we do? Does it have to do with the nations, or does it

have to do with the kinds of items, dual-use items, that are often

at issue and that are going to these nations?

Mr. HOLUM. I think it has to do to some extent with both. I think

there is a perception among some of our allies that the best way

to deal with Iran, for example, is engagement, that we will change

their approach by being willing, for example, to transfer peaceful

nuclear technologies.

At the same time, I think it is important to note that our allies

generally have agreed with us on the conclusion that Iran is seeking a nuclear weapons capability. So none of our European allies

engage in even peaceful nuclear cooperation with Iran. Russia obviously is a different story so they have a different perception of Iran

overall and think engagement can lead to positive results.

But I think at the same time, they have accepted our premise,

at least on the nuclear front and on the missile front, that these

are dangers. But again when you get into the level of dual-use

items where Wassenaar is applicable, it is more difficult to reach

a consensus.

Chairman THOMPSON. Senator Lieberman.

Mr. REINSCH. May I add something to that, Mr. Chairman? I

think the other perspective is some of these countries have a different, a different history, a different commercial relationship with

these countries where the breaking of ties and the whole hostage

episode which they did not experience has created a different attitude.

14

Chairman THOMPSON. France and Libya, for example.

Mr. REINSCH. Pardon me?

Chairman THOMPSON. France and Libya, for example?

Mr. REINSCH. Well, Italy and Libya in particular, yes.

Chairman THOMPSON. Italy and Libya.

Mr. REINSCH. I mean those are good examples. We also have

global commitments and a global perspective and despite what

some of our allies may say from time to time, they do not necessarily. They do not look at Iran from the standpoint of a global

perspective. They look at it from a narrower perspective which

makes it easier to look at it commercially.

Chairman THOMPSON. Thank you. Senator Lieberman.

Senator LIEBERMAN. Thanks, Mr. Chairman. Very briefly, first, I

am interested if either of you know from a historical perspective

whether there was an attempt as the Wassenaar Agreement was

coming together to have veto authority within it. Was it discussed

at any point and rejected, or was it just assumed that we were in

a new world and it was——

Mr. HOLUM. Yes, I would have to get back to you on the specifics,

but my understanding is that we concluded after consultations that

it was hopeless to try to include it so it was not actively proposed.

Mr. REINSCH. My understanding is the same, Senator. We had

to, we had to do something because COCOM was aimed at the Soviet Union and we were concerned about Iran, Iraq, Libya and

North Korea.

Senator LIEBERMAN. Right.

Mr. REINSCH. The pariah states necessitated a change. My understanding is our allies made it very clear from the beginning that

a veto wasn’t one of the options that they were prepared to consider.

Senator LIEBERMAN. And as a result, we have not at any point

since initiated discussions about putting veto authority into

Wassenaar just because we thought it was a non-starter?

Mr. HOLUM. That is right, although we have made a very active

effort including in the 1999 assessment. I was the head of the delegation. Under Secretary Reinsch was also a participant in December in trying to strengthen the regime, in particular to provide for

notifications of all dual-use denials. One of our major objectives in

this context is to achieve a no undercut process.

It is not the same as a veto. You cannot force somebody not to

sell, but if we deny a license to somebody, we would like to report

that and have other members know than if they undercut, they are

going to be under a lot of pressure. Now that is available in a limited way for very sensitive items on the dual-use list. But it is not

available for all items, and that is what we would like to accomplish.

Mr. REINSCH. I am advised, Senator, that we did repeatedly propose a veto in various forms in the 1993–94 period, but we haven’t

proposed it recently.

Senator LIEBERMAN. And those efforts were rejected?

Mr. REINSCH. That is correct.

Senator LIEBERMAN. Help me understand. When a nation, when

a member Nation of Wassenaar violates the agreement by exportVerDate 11-MAY-2000 13:23 Aug 22, 2000 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 64899.TXT SAFFAIRS PsN: SAFFAIRS
15

ing an item on the agreed upon list, what are the sanctions that

are possible?

Mr. HOLUM. Well, there are no sanctions because ultimately the

decision making belongs to the countries. It is consultative arrangement rather than a sanctions arrangement. Now individual countries can make their own determinations. If we decide as a matter

of national policy that we want to sanction somebody for an export

that goes beyond Wassenaar, we tend to do that in other areas, but

there is not a formal group sanction.

Senator LIEBERMAN. So this leads to me to the question I wanted

to ask, which is that some have suggested that we should consider

creating our own stronger hammer outside of Wassenaar, such as

trade sanctions against countries that are involved in the transfer

of dual-use technology, and I wanted to ask you what you think

about that idea?

Mr. HOLUM. I think as a general matter, we certainly need to

consider unilateral controls, and we do apply unilateral controls

and restraints, limits, for rare circumstances. But I think the entire process of proceeding unilaterally in this area is a loser over

the long term, that the technology has spread so widely around the

world and is available from a lot of different places that pursuing

unilateral controls and sanctions will not achieve the objective, that

you really have to choose the best basis for getting multilateral

consensus among the suppliers.

Mr. REINSCH. I would agree with that, Senator. The only thing

I would add is that the Congress has, as I understand your question, done that with respect to various pieces of legislation on Iran,

Iraq and Cuba.

Senator LIEBERMAN. Right.

Mr. REINSCH. I think I would leave to you to judge whether those

have been more effective than what we’re describing.

Senator LIEBERMAN. Well, as the sponsor of a few of those, I hope

it has.

Mr. HOLUM. Well, one of the things they do is, and can have a

tactical advantage in persuading other countries that were serious

and as part of the efforts to bolster diplomacy, but I think they are

always more effective in the threat or the potential for doing them

than they are if you actually have to carry them out.

Senator LIEBERMAN. Let me come at this a different way, going

back to something I said in my opening statement, which is the extent to which our ability, U.S. ability, to maintain military dominance depends on technological developments and to some extent

a vibrant technology industry here may depend on that industry

exporting.

So I wanted to ask you to what extent would you say that those

kinds of concerns, which we certainly hear from the industries involved, express themselves or play a part in our approach to

Wassenaar and the whole question of controlling dual-use technologies? How do we balance the relative, the various national interests we have here?

Mr. HOLUM. Well, we clearly do with the decline in defense budgets and with the growth in reliance of defense industry and our security agencies on technologies developed in the private sector outside of the defense sector. It is unquestionably true that our ability

16

to maintain a cutting edge in both military and dual-use technologies depends on exports and depends on a healthy industrial

base.

We take a slightly different view, and Under Secretary Reinsch

will want to comment on the dual-use side of this, slightly different

approach on munitions than we do on dual-use items.

Senator LIEBERMAN. Right.

Mr. HOLUM. If there is a security reason not to export a munitions item, it will not be done whether or not there is an economic

consideration in favor of it. We do consider the industrial base as

part of our conventional arms transfer policy. But if the Department of Defense, which has the primary security oar, says this sale

should not be made, the State Department will not issue the license.

In dual-use, there is more of a balancing between the risks and

the costs, but——

Mr. REINSCH. Yes. If I could add, Senator, I think that is a very

interesting question and one that deserves, I think, more thought

than we can put into it right now. The main impact of what you

are talking about occurs as each nation makes its own national decisions about whether to approve a license or not.

Senator LIEBERMAN. Right.

Mr. REINSCH. Particularly on the dual-use side. One of the arguments that we have made frequently with respect to a number of

sectors is that the real security issue is those sectors’ health and

their ability to supply the Defense Department and that, in turn,

depends on their ability to export and plow their profits back into

R&D and so on, has been said.

As far as the international or the multilateral process is concerned, at one level that is a little bit of a destabilizing factor rather than an easy factor because we are making that analysis with

respect to our own industry. Presumably the European nations are

making that analysis with respect to their own industries which

are competing with us.

Our interest is, for example, to take a current one, the health of

our computer industry and the health of our satellite and telecommunications industry because we think they are essential to

our security. The Europeans have the same concern about their

computer industry and their satellite industry. It does not necessarily lead them to the same licensing decisions.

It is not a secret, and I know it will not be a surprise to you that

for years in COCOM—I have heard this less in Wassenaar, but I

am sure it is true—that all parties have occasionally accused other

parties of either making decisions or pressing positions on what

should be listed and what should not that had more to do with

local commercial interests than the larger good of nonproliferation.

All countries routinely deny that accusation when it is made, but

there is some history there.

Senator LIEBERMAN. Thanks. Let me ask a last question in a different area which is, as we all know, the Export Administration

Act, which is our major domestic export control, lapsed several

years ago and we have not yet reauthorized it, but we have continued the controls through executive orders. Has the absence of the

reauthorization, had any effect on our participation in the WasVerDate 11-MAY-2000 13:23 Aug 22, 2000 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 64899.TXT SAFFAIRS PsN: SAFFAIRS
17

senaar Agreement? Or have the executive orders basically had the

same force and not diminished our position there?

Mr. HOLUM. Well, what I miss most about the Export Administration Act is the level of penalties that are available because they

are outdated. Bill, you might add to it?

Mr. REINSCH. I think in the spirit of detente with the Chairman,

I was not going to get into the Export Administration Act, but you

have asked an important question.

Senator LIEBERMAN. It was much too peaceful here.

Chairman THOMPSON. I am going to violate it again, go ahead.

[Laughter.]

Mr. REINSCH. Well, you have asked an appropriate and important question. The biggest problem, I think, is absence of penalties,

but there are also police power problems from our standpoint. We

have to go be deputized marshals. It makes enforcement more difficult, the penalties are the cost of doing a business. It also has

caused us some legal difficulties. The law contained a confidentiality provision that precluded us from making public proprietary

industrial information, for example.

We are now in the midst of two court battles where via FOIA requests that kind of information has been sought, and the argument

of the plaintiff is that we have no authority to keep it confidential

because the act has expired. We are concerned about the litigation

risk here.

On the anti-boycott side, which is part of the statute it is the

same thing. Any lawyer worth his salt in an anti-boycott claim

would argue that under IEEPA the government has no authority

to pursue the anti-boycott law because it has expired.

In the multilateral context, the biggest problem I have seen is as

we go out to countries of the former Soviet Union particularly,

where we have a quite extensive program that I alluded to in our

testimony—I know Secretary Holum could talk about—to try to

help those countries develop export control systems of their own.

We have helped them draft laws. We have helped them draft regulations. We have helped train their Customs and border officials.

We have helped them adopt control lists and done a wide variety

of things including providing hardware and software so they can

keep track of their exports, and we have done it on the theory that

while we do have policy differences with some of those governments, we also have policy congruities. There are areas where they

would like to stop that technology from leaking outside their borders, and they do not have the means to do it.

We can help them do that. In that context, our absence of a law

has been a problem because we go to them and say you need a law

and you need a regulation and you need all this stuff, and they say

you do not have one. And it really, I think, has damaged our credibility with countries whose performance we are trying to beef up.

I think with the UK and our NATO allies, it has been less of an

issue.

Senator LIEBERMAN. Did you want to add anything, Mr. Holum?

Mr. HOLUM. No, I agree with the basic conclusion that we should

have a new law as soon as we can.

Senator LIEBERMAN. Yeah.

Mr. HOLUM. But we want it to be a good law.

18

Senator LIEBERMAN. Right. Well, absolutely. I did not want to destroy the detente too much by saying though there are some negatives associated with no reauthorization, obviously that does not

mean we should adopt any law.

Chairman THOMPSON. We all agree we need a law. We have a

small problem with what goes into the law.

Senator LIEBERMAN. That is right.

Mr. REINSCH. If you will just do exactly what we want, Mr.

Chairman, then everything will be fine.

Senator LIEBERMAN. That is all it takes.

Chairman THOMPSON. That was what the Executive Orders did.

Senator LIEBERMAN. Thank you, both. Thanks, Mr. Chairman.

Chairman THOMPSON. Senator Akaka.

OPENING STATEMENT OF SENATOR AKAKA

Senator AKAKA. Thank you very much, Mr. Chairman. Glad we

are having this hearing and hope maybe that we can come back

and reexamine this as was indicated. The end of the Cold War has

not meant an end to our concern about the diversion of technology

to the wrong parties for the wrong things. But it has meant a loosening of export controls. Mr. Chairman, I ask that my opening

statement be made a part of the record.

Chairman THOMPSON. Without objection.

[The prepared statement of Senator Akaka follows:]

PREPARED STATEMENT OF SENATOR AKAKA

Mr. Chairman and Senator Lieberman I commend you for calling today’s hearing.

The end of the Cold War has not meant an end to our concern over the diversion

of technology to the wrong parties for the wrong things.

But it has meant a loosening of export controls.

Unfortunately, the loosening of controls has come at the same time that the information to develop weapons of mass destruction—chemical, biological or nuclear—

has become more widely available and the technology to manufacture these weapons

more easily obtained.

A building the size of this hearing room—perhaps smaller—would be sufficient—

I am told—to house a biological weapons plant. This makes it easy for a country

to hide its weapons program. I am also told that the technology to develop biological

and chemical weapons is widely available, making it easy for a state to develop such

weapons.

While the technology has become easier to obtain, the end of the Cold War has

also made it harder for the United States to convince other countries to share our

concern about states, such as Iran, whom we believe are secretly developing weapons of mass destruction.

When we voice our fears, our allies charge us with trying to hinder their economic

growth, preventing competition in order to preserve American dominance of world

markets.

It has become sometimes harder to work with our friends and allies to ensure security in the world.

It has been made even more difficult by globalization. Corporations span international boundaries. Investments involve a multitude of businesses and nationalities. This is especially true in high technology areas—aerospace, for example.

How to make progress without providing the seeds for our own destruction is the

central challenge of this century.

I welcome the witnesses to today’s hearing. It promises to be a lively debate and

I hope not the only time this Committee examines this problem.

Senator AKAKA. And I would like to ask a few questions of Mr.

Holum. You state that countries in 1999 agreed only to a modest

increase in arms transparency. What were our proposals concerning transparency?

19

Mr. HOLUM. Essentially what we did accomplish, first, is members are now going to report reconnaissance troop command and

electronic warfare equipment in the armored combat vehicle category. There are several changes along that line that expand the

reporting requirements in certain Wassenaar categories of arms.

We proposed a number of additional categories which were not accepted. But we did make some modest headway.

The main thing we wanted to accomplish is to require reporting

on denials of dual-use exports or export licenses, which would lead

to then a no undercut possibility, the possibility of consulting if another country moves to export something that you have already denied. We think that is a fundamentally important reform of

Wassenaar to make it stronger. We also wanted to pursue in the

Wassenaar context a common approach to the export of

MANPADS, man-portable surface to air missiles, which have a

very grave threat or pose a very grave threat in the context of terrorist use, for example.

The subject was remanded to the general working group. They

agreed we should continue to work on it, but we did not get as far

as we wanted in that area. So those are the kinds of priorities we

will continue to pursue.

Senator AKAKA. Just to get your comments of a witness that will

appear on the next panel. Henry Sokolski raises concerns that the

United States shows a—and I quote from him—‘‘willingness to subsidize known proliferating entities.’’ And he cites several examples

such as the U.S. Export-Import Bank guaranteeing exports to the

Nanjing Chemical Company, which was proliferating chemical

weapons equipment to Iran. Do you agree with Mr. Sokolski that

we should not subsidize exports to foreign companies which proliferate and could you give me your reasons one way or the other?

Mr. HOLUM. As a matter of principle, I would like to look at the

specific cases to see if my perception of the facts is the same as Mr.

Sokolski’s, but as a general proposition, no, I do not think we

should subsidize proliferators.

Senator AKAKA. Mr. Reinsch, what do you think of the recommendation by Henry Sokolski, again, that the United States

should take steps to limit or prohibit the licensing of American exports to companies our intelligence agencies have clearly identified

as proliferators? Do we do this already?

Mr. REINSCH. Yes, we do. And I think it is an appropriate way

to go. The key word there is the word you emphasized, Senator

Akaka, which is the word ‘‘clearly.’’ One of the problems of intelligence, particularly the kind of intelligence we are talking about

here, is that it often is not clear. You are putting together two plus

two plus two, and you are assuming it is six, but you do not really

know because there are pieces missing.

The intelligence community often gives us as clear a picture as

they can and they tell us what they know and they tell us what

they do not know. I think the process works in the way that Henry

is recommending. That is, when we have that information, we act

on it, and when the intelligence community presents a clear picture

of a bad end-user, if you will, the licensing process has pretty consistently denied those exports. When the intelligence community

20

presents a mixed picture, then sometimes we have more of a debate.

Senator AKAKA. Steve Hadley, who will appear, in his testimony

quotes a Defense Science Board report to support his proposal that

export controls should be targeted on what is unique, military, critical and controllable. Do you think this approach is workable or has

a distinction between what is of critical military use and what is

of civilian use been blurred by today’s technologies?

Mr. REINSCH. Well, it has been blurred. There is no question

about that. I attended most of the sessions of that review board

task force, and I recommend it to all of you. It is a very thoughtful

piece that was produced primarily by ex-military officers and exDefense Department officials from the last two administrations primarily. So it is a very, I think, objective piece that is most useful

in its discussion of how the world has changed, which is something

that Mr. Hadley’s testimony also comments on.

The recommendation that you are making, which is a variation

of what the Chairman alluded to, higher fences, smaller items—I

mean the reality is that we all give that speech. I have heard Senator Thompson give a variation of that speech. Senator Gramm has

given that speech. I give that speech all the time. The difficulty is

translating the speech into the specifics of saying what is going to

be on that list.

And once you get beyond fissile material and stealth technology,

and a couple other things, agreement over what those really critical

items are becomes a lot more difficult to reach, and people simply

do not always agree. One of the reasons they do not always agree

is the point that you made—because these things have both military and civilian application.

Night vision equipment is a classic case. This is absolutely essential to the Army and its ability to outmaneuver its adversaries in

twilight or darkness. At the same time, you can buy them in an

L.L. Bean catalog. Night fisherman and boatmen use virtually the

same stuff. It is classic dual-use. There is not any question what

this is, but making decisions about a technology that we very much

do not want to fall into other people’s hands creates dilemmas. Is

that critical or is it not? And the DSB report for all of its strengths

conveniently does not provide a suggested list. It suggested that we

create a list and, as I think you have discovered in the EAA debate,

that is a difficult task, and people of goodwill and good intentions

have honest disagreements over what should be on it and what

should be off it.

Mr. HOLUM. There is another caution I would add, and that is

that if we are talking about munitions, we have always treated,

and I think should continue to treat, exports of arms as a foreign

policy decision, whatever the level of technology. In Africa, in the

last decade, the AK–47 has been a weapon of mass destruction.

And I do not think the United States wants to be competing for all

those markets. I think the decision to export even low-tech munitions must remain a matter of national determination.

We consider in the munitions realm where equipment that goes

to allies is likely to end up. We attach re-export control limitations,

for example. So this is an area that we need to focus on as well.

It is not only a question of technologies, and I agree that we can

21

and should explore liberalizing transfers of technologies to close allies and we are very much engaged in that kind of an effort. But

we have to treat munitions differently from dual-use technologies

because these are direct instruments of conflict.

Mr. REINSCH. And the Commerce Department agrees completely

with that. The issue that you are raising, which is the key issue,

is what is a weapon and what is not? And there I think the fact

is if it is an F–15, it is clear. If it is a computer, I think it is also

clear. But the reality is there are some things that are more in the

middle of that spectrum, and that is what some of these debates

that we have been involved in have been about.

Senator AKAKA. Mr. Chairman, let me conclude by mentioning to

both of our witnesses if, as Mr. Holum has said, that unilateral

controls do not work and if we have difficulty getting unilateral

agreement—multilateral agreement—where are we left at the end

of the day? Do we give up or do we keep pushing at the proverbial

open door while these dangerous goods get exposed to dangerous

countries? Can the situation become, as Senator Thompson has indicated, any more frustrating?

Mr. HOLUM. I think it could become much more frustrating, but

it seems to me that we have no choice but to work to build the

strongest multilateral regimes we can. And I am not as pessimistic

as some about that. I think it is very important to decide what the

critical technologies are, what the proscribed destination should be,

and continue our efforts to work with other suppliers, principally

through multilateral regimes. Where countries are not party to a

regime, we should try to broaden it to have them—such as China—

to have China live up to the standards that would allow it to become a member, for example, of the Missile Technology Control Regime, the Wassenaar Arrangement. They are certainly not qualified

now, but I think it would serve our interests for them to be subject

to the same constraints as other members.

Mr. REINSCH. The thing to keep in mind, Senator, from my perspective is these regimes are works in progress. None of them

started with a whole loaf, if you will. And you do not get the whole

loaf in negotiation. It simply is not that easy. Brick by brick we

build them and make them better. As Secretary Holum pointed out,

we did not get everything we wanted in Wassenaar in 1999. We

will be back at the plenary in 2000 trying again. And the people

that come after us will be back the following year and eventually

we will get what we want.

But these things do not happen overnight and one of the main

characteristics that I think you have to demonstrate in Mr.

Holum’s business in particular as a negotiator is patience.

Senator AKAKA. Thank you very much, Mr. Chairman.

Chairman THOMPSON. Thank you very much. One or two more

questions. What are we trying to get? What is on the table? What

was discussed in your December 1999 meeting? We have talked

about catch-all provisions, undercutting, and all those things. Are

these things that we are actively trying to get some movement on?

What are the most important things that realistically we could expect some movement on perhaps in the future?

Mr. HOLUM. I think the most important single step we can take

is notification of dual-use denials that would lead to the possibility,

22

to something akin to a veto, at least an opportunity to persuade

with knowledge that somebody is undercutting a dual-use transfer.

That is the highest priority, I think, because of the threat it poses.

Getting some action on MANPADS is also crucial. We at the last

session, and I—in fact, Under Secretary Reinsch and I both made

a number of trips to engage in bilateral consultations leading up

to the December session. We wanted to expand the list. We found

a way to expand the list by not changing the number but adding

more reporting requirements in the various categories, and I can

supply you a list that would probably be useful for you to have before you leave on your trip of the kinds of things that we think

would strengthen the regime.

Chairman THOMPSON. There are some notifications for dual-use

denials, are there not?

Mr. HOLUM. For very sensitive items on the list.

Chairman THOMPSON. You are talking about broadening that?

Mr. HOLUM. That is the objective.

Chairman THOMPSON. On the catch-all that you referred to, Mr.

Reinsch, I take it that this is not realistic in the short term? I

mean, this issue has to do with their viewing end-user countries,

if you want to put it that way, the same way we do or with concentrating more on them than they are willing to right now. Is that

a correct assessment?

Mr. REINSCH. No, not exactly, Mr. Chairman. We have made a

good bit of progress getting our allies to adopt the catch-all, but we

have to keep in mind, I think, what the catch-all was designed to

do. It was invented in the last administration when we discovered

a circumstance in which we had identified a bad end-user but were

going to send something that was not at that moment under control, yet we wanted to stop it because of its significance to that enduser and our high level of confidence as to how it would be used.

Chairman THOMPSON. We have learned there are some things

that are not on anybody’s control list necessarily but that are problems when they are going to the wrong place.

Mr. REINSCH. Well, exactly, and that is what catch-all is about.

It is designed to provide in our case a regulatory basis for stopping

things that would not normally require a license because we know

the nature of the end-use and because we have a high level of confidence it is going to be used for proliferation purposes. This is even

more important for some of our allies whose legal authority to control exports is rooted in the multilateral list.

In other words, they do not have a unilateral list of their own

that goes beyond whatever is on the Wassenaar and the other lists

they belong to. So on occasion, we have gone to them and said this

bad thing is about to go there and they will say, well, we agree

with you, it is a bad thing; we have no legal authority to do anything about it. A catch-all provision, if we can persuade them to

adopt it, gives them a legal basis to respond to the kinds of dialogue Secretary Holum wants to have with them when we discover

these things.

In fact, we have had a lot of success with the Japanese and with

I think—I cannot give you a number—I think the State Department can—most of our allies in getting them to put this into place.

Now, the next step, of course, is to watch it, observe it, and take

23

advantage of it when we see something going notwithstanding the

catch-all, to go back and remind them that they have one and they

can take these steps.

Chairman THOMPSON. I see what you are talking about. On the

undercutting provision—I take it we are trying to get some movement on that also——

Mr. HOLUM. Yes, sir.

Chairman THOMPSON. Could that turn around and bite us on any

occasion, such as an outright veto might? You point out the downside of the veto. I am wondering about whether or not there would

likely be instances where one of our allies would come forth and

say, they approached us first and we denied them these sales and

therefore, you, the United States, cannot sell these things to your

allies.

Mr. HOLUM. That raises the same point why a number of people

think a veto is not in our national interests. We are a country that

leads in technology.

Chairman THOMPSON. But this is not an outright veto, of course.

Mr. HOLUM. This is not an outright veto.

Chairman THOMPSON. It is a no-undercutting arrangement.

Mr. HOLUM. We would have to be able to stand up and defend

our decision if we had made a decision to undercut. I think the reason something like this would serve our interests is the United

States is unquestionably the most aggressive country in the world

in terms of controlling exports of arms and dual-use items. The

likelihood of our being caught in that kind of a bind and being unwilling to defend our self is limited compared to others.

Chairman THOMPSON. Finally, Mr. Reinsch, I cannot resist the

temptation, since you kind of opened the door here a few minutes

ago in terms of credibility.

Mr. REINSCH. I am going to pay for that.

Chairman THOMPSON. What does it say about our credibility

when we have our intelligence experts, our CIA analysts come before this Committee and tell us that China is still one of the

world’s greatest proliferators? The same countries that they are

selling to we are told by the Rumsfeld Commission and others are

posing an ever-increasing threat. And yet we are engaging more

and more in dual-use trade with China, expanding the MTOP performance level export license threshold for supercomputers, what

have you. I wonder what our allies think when they look at what

we are doing with regard to China. Senator Akaka referred to one

of the other witnesses’ statements about the fact that when they

use our capital markets, they raise billions of dollars for stateowned companies. Some think the money goes back to enhance

their military. We do not know where it goes because there is no

transparency.

Even leaving all the other human rights issues and so forth

aside, they seem to be thumbing their nose at us in every respect,

reminding us that they can lob a missile on to our cities, and

threatening Taiwan. From the front page of the Washington Post

today it looks like the Great Leap Forward guys in Beijing are having their say now, brooking no dissent and all that. What does it

say to our allies when we so aggressively pursue trade with China

when the PRC is so clearly proliferating to nations that our own

24

people tell us are increasing threats to us? I mean does that

not——

Mr. REINSCH. We are dividing the answer, Mr. Chairman, and

Mr. Holum is going to go first.

Chairman THOMPSON. All right.

Mr. HOLUM. I think putting it in a broader context, we are certainly dissatisfied with China’s performance on non-proliferation

standards, but we also have to proceed on the basis of two other

realities. One is that we are not going to solve the non-proliferation

problem if we do not have China assisting, if we do not have them

actively participating in control regimes and agreeing to contain

their transfers of technologies and especially WMD and delivery

system items. That is one reality.

Another reality is we have had some considerable success in pursuing those efforts through a combination of steps that include

sanctions, that include positive inducements, that include the full

range of diplomatic engagement at every level up to and including

the President.

In 1994, as part of a process to lift sanctions related to missile

transfers to Pakistan, China agreed not to transfer MTCR class

missiles to anyone. That goes beyond the MTCR commitment. And

they have lived up to it. They have as near as we can tell not since

that time transferred such missiles anywhere. They have agreed,

and President Zhang said they would not transfer CA801 or 802

missiles to Iran.

Chairman THOMPSON. When they get caught on a particular

thing, they make only very specific agreements not to do very specific things.

Mr. HOLUM. I agree, but it is a step in the right direction to have

them agree to that. I would like to have them in the MTCR. If they

can meet the standards of that regime, I would like to have them

in that regime so that they would be constrained like other members are. But their nuclear——

Chairman THOMPSON. But there is really no—I mean that is not

even on the distant horizon. They do not have adequate export controls. They do not adhere to existing nonproliferation regimes. They

do not have responsible policies towards the so-called rogue nations. All of those are requirements for becoming a part——

Mr. HOLUM. That is right.

Chairman THOMPSON [continuing]. Of the Wassenaar Agreement.

And they do not, they will not be a part of any regime that requires

full IAEA controls. I mean, what in the world gives us reason to

even hope that they might change their policies enough that they

might qualify even for the Wassenaar Arrangement?

Mr. HOLUM. If they will not, they will not be members. But what

I am saying is I want to continue the effort to make them part of

the solution because if they are part of the problem, we are not

going to solve the problem. And we have made some headway. In

the nuclear area after the 1996 ring magnets case, they agreed to

not transfer nuclear technology to countries without full scope safeguards. They have continued, lived up to that obligation. They are

not cooperating except for a couple of winding down projects with

Iran’s nuclear program, unlike Russia.

25

All I am trying to say is we are not happy with their performance, but this is a mixed picture, and we need to keep working it.

If we give up, we are not going to solve the proliferation problem.

Chairman THOMPSON. That is good enough for me unless you

just want to add something?

Mr. REINSCH. Well, I was going to say also, first, Mr. Chairman,

on the export control side, we have had a series of encounters with

our counterpart in China, which is MOFTEC, not the Ministry of

Foreign Affairs, which actually administers Chinese export controls, and have had two sessions last year which were essentially

training and information sharing sessions in which they sent I

think virtually all their people here a week at a time to learn about

how to maintain a competent export control system.

We are planning to go back now in the fall. This was arranged

last week. We are planning to go back in the fall to Shanghai and

meet with their businesses. This is a slow process. We are doing

the same thing in Russia. We are doing the same thing in Ukraine.

I mean Mr. Holum is right. It is a mixed picture. It is coming

along.

On the industry side, I would just say that I urge you not to let

the computer issue obscure all the other issues. One of the comments I made earlier was that in the last couple of years, we sold

them two machine tools, five axis machine tools, while our European friends sold them 20.

We actually maintained quite tight controls over manufacturing

technology and production technology going to China, and if you

want to have a panel of the machine tool people and semi-conductor manufacturing equipment people here, they will tell you

their long litany of complaints about this administration’s repeated

denials of things that they want to send, and we will tell you our

repeated efforts to demarche our European friends not to sell either, which have not been very successful.

Computers are a different story. It is a different technology. They

make them themselves. They make high performance computers

themselves. The reality, the commercial reality in China right now

is Legend, which is a Chinese company, is now fourth in computer

marketing in the Asia-Pacific region. It is the largest producer in

China. At the PC level, they are eating American companies’ lunch.

Chairman THOMPSON. They do not need ours anymore. That is

good news.

Mr. REINSCH. Well, that is what is happening. If you think about

it from the standpoint of economic development history, this is

going to be like everything else. They are moving up the valueadded chain and they are going to start making the bigger PCs.

They are going to start making the servers. They are going to start

making work stations, and they are going to displace us in the

marketplace there. The thing that people forget about regarding

the proliferation issue, if you are the PLA and you want to use a

high performance computer for something, keeping in mind that

most of the things you would want to use a computer for, you can

use an ordinary PC for in the weapons area, which is what we did

for our designs—all the weapons in our arsenal were designed with

computers of a thousand MTOPS or below—there are many ways

to acquire them.

26

I mean the technology is way out of the box. But if they want

an HPC, they make them. They do not make enough of them to

compete with us. They are not as good as ours, they are not as

cheap as ours, but, if you are the PLA, what do you need? Ten, 20?

They can do that in a few months. So what we have tried to do

about that technology, not all technologies, but that technology, is

take a realistic view of what is going on in the world an get a sense

of what is most in the interest of our security, which we think is

a healthy industry, but I would not extrapolate that history or that

case to cover all technologies or our entire policy.

Mr. HOLUM. Mr. Chairman, I am sorry I need to correct something. I was playing my last answer through in my head, and I

think I said that China agreed not to transfer nuclear technology

to countries without full scope safeguards. That is not correct. They

agreed not to assist unsafeguarded nuclear facilities.

Chairman THOMPSON. Because Pakistan would not fit that criterion.

Mr. HOLUM. That is right. That is an important distinction. I

think I misspoke.

Chairman THOMPSON. All right. Thank you.

Senator AKAKA. Mr. Chairman, may I follow up with a quick

question?

Chairman THOMPSON. Yes, go ahead, Senator Akaka.

Senator AKAKA [continuing]. On China. Mr. Holum, you said that

you hoped to broaden membership in the Wassenaar and suggested

including China in it. And the Missile Technology Control Regime.

Has not China said that it would adhere to the MTCR?

Mr. HOLUM. China has said it would consider membership in the

MTCR and they gave us a long list of questions that were serious

questions that they wanted answered, but they would have to live

up to the obligations of the MTCR and so this would be a decisionmaking process on our part as well as the other members. But at

this stage, they are not prepared.

Senator AKAKA. Thank you, Mr. Chairman.

Chairman THOMPSON. OK. Well, we can continue our discussion

on these other items at a later date. It will be ongoing. I would

refer anyone who is interested in this to make part of their reading

the Cox Report, but I appreciate your being here with us today. We

have another panel that is patiently waiting, so we will move on

to that. Thank you, gentlemen.

Senator LIEBERMAN. Thank you.

Chairman THOMPSON. I would like to ask our second panel to

come forward. Our first witness will be Frank Gaffney, Director of

the Center for Security Policy. He will be followed by Henry

Sokolski, Executive Director of the Nonproliferation Policy Education Center, and the Hon. Stephen Hadley, former Assistant Secretary for International Security Policy at the Department of Defense.

Thank you for being with us today. It just occurred to me I do

not think I ever introduced our last two gentlemen. But I think Mr.

Reinsch and Mr. Holum are so well known I suppose they did not

need any introduction. Mr. Gaffney, do you have an opening comment or two?

27

1The prepared statement of Mr. Gaffney appears in the Appendix on page 61.

TESTIMONY OF FRANK J. GAFFNEY, JR.,1 PRESIDENT, CENTER

FOR SECURITY POLICY

Mr. GAFFNEY. I have about 20 minutes of opening comments, Mr.

Chairman, to be honest. And I will try to reduce it to the time that

light will give me. I appreciate very much the chance to appear and

ask you to submit for the record my entire tome and will try to

summarize three main points.

Chairman THOMPSON. Your statements will be made a part of

the record.

Mr. GAFFNEY. Thank you, sir. Three main points. The first is

really in the nature of an acknowledgement and a thank you to you

personally, Mr. Chairman, and many other members of this Committee and the Senate, for taking this issue up. I have had the

privilege of working on it off and on for about 20 years, starting

back when I worked for a member of this Committee, Scoop Jackson. And I believe we are in serious danger when there is not aggressive oversight by the Congress in this area. And so I commend

you both for what you are doing to look at the multilateral side of

this and, of course, the activities that look like they are going to

resurface today on the floor in terms of the domestic EAA and I

wish you well in that regard.

I will turn second and quickly to how we got here and you have

heard a little bit of what I would consider to be revisionist history

of the demise of COCOM and the construction of the Wassenaar accord. I have indicated in my testimony several themes that I think

actually contributed materially to the decision to end COCOM. And

there is no getting around it, the allies wanted it ended, but I remember one of my first tasks working for Senator Jackson, as a

matter of fact, was supporting an effort he made in 1977 to prepare

for then the new president Jimmy Carter a strategic arms control

proposal that would involve the kind of radical reductions that ultimately characterized President Reagan’s initiatives.

And that proposal was taken to Moscow and presented by Cyrus

Vance and a negotiating team including Paul Warnke who wanted

no part of that agreement any more than the Soviets did. And I

would suggest to you that you had precisely the same kind of phenomenon at work here. This administration, I regret to say, populated senior positions in several departments, but most notably in

the Defense Department, with responsibility for export controls

with people who had a very clear record of hostility to export controls in general and specifically to COCOM.

When you had such people going to our allies and saying we need

to keep that veto, if they did indeed do that, it was not credible,

and the fate of a very valuable, very important institution, not only

during the Cold War but I believe arguably even more so today,

was a foregone conclusion.

I will not belabor some of these other points except to say that

I think the principle that we can trust people who regard as clients

countries we regard as rogue states, to be full and reliable allies

and partners in these kinds of multilateral arrangements is foolish

in the extreme.

28

It is not an accident, in other words, that quite apart from many

of our allies, who frankly are not terribly reliable in these areas either, some of our long-time adversaries have proven to be part of

the problem. To hear Secretary Holum talking about getting them

into these multilateral arrangements and thus making them part

of the solution I think, in fact, preordains that there will be no solution at least through this approach.

Quickly, I would like to just cover a couple of the points that I

think you need to think about concerning what do we do now? I

know you do not want to talk about it and I will not except to say:

First, do no harm. And the EAA bill before the Senate today will

do more harm, I believe. We need to reestablish an appropriate balance. We all agree there are subjective judgments and a lot of nuances here, but we need to reestablish balance between commercial

interests and national security interests, a balance that I think has

been egregiously lacking in this administration.

To start with, you need to have a focus. And as you said, Mr.

Chairman, and I think Senator Lieberman and others, it is obvious

that the old Soviet focus is no longer relevant. But I am afraid as

your colloquy just now indicates a focus on China and for that matter a focus on Russia ought to be part and parcel of what we understand to be a continuing contributing force in the problem export

controls are designed to address.

We need to reestablish in the Pentagon a real voice for a national

security-minded approach to export control. This involves personnel

questions. It involves organizational questions. It demands really

your attention, if I may be so bold as to suggest, particularly this

Committee, because others have not given it the attention that it

requires.

I would like to leave you with one further thought. It is now pretty clear that because of the complications that have been introduced with the destruction of COCOM, because of the proliferation

of a lot of technologies that contribute to proliferation, that it is

going to be very hard to get the genie back in the bottle. I think

therefore it is incumbent upon us, before we do more damage, to

be insisting upon some kind of rigorous exercise. I have come up

with the term of a ‘‘qualitative edge impact statement.’’ Because let

us be clear. To the extent that we are contributing to the arming

of potential adversaries, we are having a negative effect on the

qualitative edge that our military has relied upon and I will believe

will continue to require to assure its ability to prevail on the battlefield, minimize casualties and so on.

This has a corollary. We not only need to understand what we

are doing to harm our qualitative edge, we need to be introducing

new energy into the need to restore it. This means a really concerted effort in the research and development area. And I would

suggest—and maybe this is heretical, but I would suggest that the

very companies that are so keen to contribute, not intentionally, of

course, but practically to deteriorating the qualitative edge of our

military ought to be assigned the task of helping to restore it, to

build it up, using some of perhaps the same technologies and capabilities and certainly know-how that would go into their exports.

Finally, Mr. Chairman, I would just suggest that there is a question of leverage. You have asked—I think both of you have asked—

29

1The prepared statement of Mr. Hadley appears in the Appendix on page 67.

what do you do now that we have destroyed COCOM. We have gotten rid of a veto, a veto which I believe on balance, if you do not

have the Russians exercising it, is still in our interest to have exercised. I think you have leverage in a couple of areas.

Secretary Hadley will speak to the question of access to U.S.

technology. I would like to just address, though, access to our markets. To the extent that companies or for that matter their countries are bound and determined to sell harmful technologies over

our objections to potential adversaries, we ought to let them know

that there is a cost to doing so. And that cost could—in my judgment, should—be that they will not be able to sell their products

to our market. And I think in that calculus most people would prefer to sell to the American economy than to Iran’s or North Korea’s.

Last, I wanted also just again to commend you, Mr. Chairman.

You have personally taken an interest in an issue that I know

Henry Sokolski is going to speak to, too, and that is a new front

that is being opened up in the proliferation fight. That is the front

of companies and their governments coming to our capital markets

to finance their proliferation and technology acquisition and espionage and other hostile activities. The most recent of these, of

course, was the very controversial IPO issued last week by Petro

China, a company with close ties both to the Chinese government

and the largest oil giant in China. The parent company is doing

business with Sudan, helping Sudan’s government engage in weapons of mass destruction and proliferation—Bill Safire has written

about possible missile construction there—but also genocide and

slave trading.

So this is an area that I commend to your further attention and

urge you to focus on as well as these other very complex but very

important questions. Thank you, sir.

Chairman THOMPSON. Thank you very much. Mr. Hadley.

TESTIMONY OF STEPHEN J. HADLEY,1 FORMER ASSISTANT

SECRETARY FOR INTERNATIONAL SECURITY POLICY, U.S.

DEPARTMENT OF DEFENSE

Mr. HADLEY. Mr. Chairman, if my statement could be submitted

for the record.

Chairman THOMPSON. It will be part of the record.

Mr. HADLEY. It is a real privilege to have the opportunity to be

with you today. I would like to focus on the broader question of

multilateral export controls and how to improve them. Much of my

statement in the beginning talks about how the world has changed,

and the opening statements that you made and Senator Lieberman

made are clear that you understand this fact and I will not go over

it.

My basic point is that we need, in light of all the changes that

we have seen, a fundamental relook at the whole export control

issue. What truly is in our national security interest? What do we

want to protect? How best to protect it? I think only if we conduct

this kind of intensive review are we going to be in position to go

to our allies effectively and to get them to do more from a multilateral export control standpoint.

30

Just about three or four points on that theme, if I might. The Defense Science Board Report, which was referred to earlier, is interesting because it really suggests that military advantage is going

to come in a different way in the future than it has in the past.

Rather than developing capabilities in the military establishment

and fielding them, the prize is going to go to the country that can

take what is available, primarily commercially, and incorporate it

quickly into military hardware put in the hands of well trained and

well led military forces. I am not competent to say whether that

analysis is right. It is interesting that it comes from a group of people that have had long experience in a number of administrations

with the defense establishment.

And for me it underscores the need for a new look, particularly

at this issue of what do we want to be controlling through export

controls. So far as I know the last major look was 1991 and 1992

when the United States began to move out of the Cold War. The

military led that effort and the most difficult issue was to identify

the criteria to use to try to identify the technologies and capabilities to protect.

We, at that time, came up with what we called gap closing technologies. Was it a technology or capability that could really allow,

in that case the Soviet Union, to close a gap with our own military

forces? I do not know if that is the right criteria for the new context in which we find ourselves in but I am convinced that it is this

kind of analysis that we need to give content to some of the things

Frank Gaffney has talked about. When we say preserving our technological edge, we need to know what that means and in concrete

terms what that means we need to protect.

I talk, in the statement, about some of the questions that I think

this review ought to undertake, some of the implications the answers may have for our approach to export control. I also think

that once we have completed that review, we need to have a different approach with respect to our allies. I think our tendency is

to go over and want to talk to them about export controls and the

details of the Wassenaar Agreement. I think that is the wrong approach. I think we have to go back much further in the analysis

and talk to them about our assessment of the serious risks of proliferation of various kinds, what are the countries of concern, why

we are worried about countries like Iran. I think we really see Iran

very differently in strategic terms and I do not think we are going

to make progress on export controls until we have an intensive dialogue that tries to get our allies to understand how we see Iran and

why.

We then need to start talking about strategies that will be focused on the states of concern and that will use all the various

tools that are available—of which export controls is one but only

one. And I think only if we have this kind of active engagement

with our allies are we going to be able at the end of the day to get

a strengthened approach to multilateral export controls. Thank you

very much.

Chairman THOMPSON. Thank you very much. Mr. Sokolski.

31

1The prepared statement of Mr. Sokolski with attachments appears in the Appendix on page

79.

TESTIMONY OF HENRY D. SOKOLSKI,1 EXECUTIVE DIRECTOR,

THE NONPROLIFERATION POLICY EDUCATION CENTER

Mr. SOKOLSKI. Thank you very much. Having worked up here, I

am reminded of a story. I used to work for a little known senator

from Indiana, Dan Quayle. And I would come in and complain

about things. One day he turned on me and he said, Henry, what

is it with you? It is always doom and gloom. What is the good

news? What I told him then is what I will tell you now.

The good news, Senator, is that you still have not fired me, and

you will ask the questions necessary to get to the bottom of what

I am complaining about. I think in essence what you are doing

with these hearings will only be useful if you keep it up. I urge you

to keep asking the very questions both of you asked at the beginning because those are the right questions. It is going to take a

long time to get the answers, but if you keep asking, you will get

to where you want to go.

In that regard, let me try to speak to some things which have

not been raised. I ask that the balance of my remarks be placed

in the record.

Chairman THOMPSON. Without objection.

Mr. SOKOLSKI. Thank you very much. Look, as you have all now

established, post-Cold War trends have made controlling strategic

weapons goods much more difficult. I think this highlights the need

for three new kinds of restraint.

First, we need to prevent not just listed strategic commodities,

but unlisted strategic goods from going to foreign weapons projects.

We focus on lists because the analytical work has to be done to

know what it is we should worry about. But there will never be a

list that will be perfect. And in that regard, we need to get other

nations to adopt the kind of catch-all controls the United States

and the European Union are using and apply them with existing

multilateral export controls regimes, not just Wassenaar. I know

this Committee is focused on Wassenaar, but it turns out other

control regimes have no undercut provisions. And we can use them.

And the coverage of items these regimes control is pretty good. It

is not as expansive as Wassenaar and what they look at, but it is

pretty good.

Second, as these charts will demonstrate, getting a more accurate inventory on the status and amounts of nuclear weapons usable materials worldwide and especially with Russia is imperative.

I know the Committee wants to talk about dual- use controls, but

if we want to talk about multilateral proliferation controls, we need

to understand that there is a limited budget of political capital and

you have to pick what you want to emphasize. I would say the

trends here are really disturbing and have major implications for

national security.

Finally, and a point that I think both of you have raised, we have

got to strengthen our authority as a nation to negotiate on any of

this. The two recommendations I have are ending U.S. subsidies to

known proliferators and upholding U.S. nonproliferation laws particularly with regard to U.S. trade and nonproliferation cooperation

32

with, and I emphasize the word, known, proliferators in Russia,

China and North Korea.

Let me make a few comments beyond what I have made to amplify these three points. On the first point, I think encouraging the

multilateral use of catch-all controls is our best bet for preventing

risky exports to bad end-users. This approach avoids the fruitless

multilateral debates over what items should be controlled to what

destination and instead gives control regime members an incentive

to exchange threat assessments. In essence, if you want to get engagement, you have got to have something operational and concrete

to bring to your ally or friend and say, look, this left-handed

franostat, whether it is on a list or not, if it goes to Country X, is

going to do this kind of harm.

When you present it that way, and you do a denial and you ask

for no undercut, you get the dialogue that you need. I think we can

go much further than we have in producing that dialogue, however.

We, in fact, drag our feet. How? We listen to the exporting community demand that we develop a list again of what those things that

should be controlled and because we cannot get a list, we do not

do the no undercut and catch-all controls the way we could by simply taking actions instead of focusing on endless debates about the

list.

Now, I am going to move very quickly because my time is running out. These charts I believe are self-explanatory and they are

in the testimony. At the height of the Cold War, almost all the

fissile that could be made into bombs was in bombs. If you take a

look at the middle chart, you will notice, and just as a peg, United

States now only deploys about 6,000 nuclear weapons. The civil

material that is not only in Russia but Japan and Europe can

make many, many times more than that number of bombs now.

That overhang did not used to exist during the Cold War.

In addition, we have only the vaguest idea of the various categories of nuclear materials Russia has. Now the United States is

an open country. People know what all the categories are and the

numbers are for the United States and its nuclear holdings. We

need to get others to step up to the plate and start showing some

nuclear candor as well. If we cannot, that has enormous implications. You will notice that the only categories of materials that can

be most quickly deployed as bombs are those highlighted on the

chart. We do not pay, our policies do not pay any attention to the

other categories. Those other things are very dangerous as well.

That then brings me to the last point and that is to get a better

fix on all of these things and to do better, we have got to stop being

part of the problem and I am afraid we are. The earlier admission

by one of the administration witnesses that we export controlled

items to proliferators I thought was chilling. Look, the intelligence

community does know who the proliferators are. It is the other

agencies that do not want to listen to the facts. I know, I was in

the Pentagon. I did nonproliferation for the Pentagon for 4 years.

The problem is not a lack of intelligence. It is a lack of will to use

what intelligence we have got.

I think with that, I will conclude except to put one ad for one

piece of legislation. I would not be useful if I did not plug something. You cannot possibly not want to demand that the worst

33

proliferator not receive U.S. nuclear cooperation until it has lived

up to the nonproliferation obligations it has admitted and others

have admitted it has violated. I am talking about North Korea.

There is a piece of legislation that was introduced yesterday by

Congressmen Gilman and Markey, that passed last fall overwhelmingly by 300 votes, it included a lot of Democrats. I sure hope

somebody picks that up over here. That concludes my remarks.

Chairman THOMPSON. Thank you very much. Senator Lieberman,

do you want to start?

Senator LIEBERMAN. Thanks. I have to go. I thank you for your

testimony. I will just take advantage of your courtesy to ask one

question which is the extent to which we can do a better job engaging our allies in this effort and underneath that is the question

which I gather was being suggested by the first panel, that we are

at a point in the multipolar, post-Cold War world where, yes, of

course, we have overlap of interest with our allies, but they are

limited now when it comes to both vision of some of these rogue

nations that we are very worried about and commercial interests.

So I guess my question is—because I think you are right that we

do need to more directly engage our allies on this—do you feel that

we have not adequately done it? In other words, is there a gap here

that is overcomeable, if there is such a word?

Mr. GAFFNEY. Well, I might just kick it off by saying I think that

there is no getting around the fact that for many of our allies, the

syndrome that I tried to address in my testimony concerning our

own government is even more rampant. That is the idea that really

there is not any security problem, period. And therefore there is no

further impediment to doing whatever feels good or whatever

would be lucrative in terms of either the company’s quarterly bottom line or the country’s GDP.

I believe, Senator, that there are in most of the governments that

run our allies’ nations these days still people who appreciate that

that is probably not true. I think they are undercut, however, within their own councils when they witness how our government conducts itself. Giving Secretary Holum the benefit of the doubt about

our government-to-government representations, bilateral or multilateral, the allies see that as sort of going through the motions in

which we say, we really don’t think you should do that. Yet, they

are watching what is actually the policy of our government. And

this is why, whether we want to talk about it or not, what you are

going to be debating today and the next couple of days is so important.

They are looking at what kind of laws will be enacted in this government that will, in fact, make it harder still for us to exercise

export controls and to inject national security into our decisionmaking about exports.

So I think that we must look to our own sins first and why I am

so proud really of what you all are trying to do here to have some

accountability in this area and to do some second-guessing of judgments that are being made. I think that will almost certainly help,

at least at the point where we have a U.S. Government that is willing forcefully to go in and not just issue what my friend, Richard

Perle, used to call ‘‘demarshmellows’’ but really raise hell with alVerDate 11-MAY-2000 13:23 Aug 22, 2000 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6601 64899.TXT SAFFAIRS PsN: SAFFAIRS
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lies that what they are doing is contrary not only to our security

but to theirs as well.

Senator LIEBERMAN. Richard Perle never issued a

‘‘demarshmellow.’’

Mr. GAFFNEY. Not willingly.

Senator LIEBERMAN. Mr. Sokolski, do you want to add anything

to that?

Mr. SOKOLSKI. Yeah. You come at these questions that are big

usually at high and low levels. Let us start low because that is

easier.

Senator LIEBERMAN. OK.

Mr. SOKOLSKI. It would be useful for someone on this staff to get

the poor assignment—I notice everyone is looking back there—how

backed up are our denial notices and other’s denial notices, how are

these things working, please? Because the no undercut plus catchall, in theory, can work. In practice, of course, it does not. But it

is up to you to find out how bad is it. And if you do not ask, they

will say it is working pretty well. So that is point one.

Point two, I know that there is a book—this is ears-only intelligence—that lists every piece of code word information on every

proliferation action that has taken place since I was in office. I

know because I created the book. That was back in 1990. It is there

somewhere in the government. Go find it. Because when you do,

you will see mismatch between what we know and what we do.

And by the way, it is a bipartisan equal opportunity critic machine.

This is not going after this administration. It is going after the system. You want to take a look at that if you can find it.

Finally, Export-Import Bank and who we are exporting to? A

useful thing to look into. A nice bipartisan thing. Now that is the

low road.

High road. I served on a commission that had a name that went

on forever and ever. It was going to tell you how to organize our

government. It was pretty funny. The acronym was so long, we did

not use it. It was the Commission to Assess the Organization of the

Federal Government to Combat the Proliferation of Weapons of

Mass Destruction. OK. Big acronym.

One of the things that we did stumble into despite all of our efforts not to look at it was that this country does not have a longterm set of objectives, time phased goals, and never mind strategy—let us leave that alone—with regard to key countries that are

troublemakers for us. When we asked the State Department, and

Mr. Holum, by the way, he was very candid about this—I think he

is a great man—when he came to the commission, he admitted

there was a problem. When we asked what are our time-phased objectives regarding North Korea, he said, well, we have got them

written down, but they are not very good.

And then he sent us a performance report produced because of

the laws coming out of this Committee that went 12 months into

the future. That was it. And you know what it was—implementation of the Agreed Framework. That was all. If you do not have

more than that going with regard to North Korea and can explain

it publicly and privately, you are not going to get any allies to do

anything on the low road with you. But if you do, it is amazing

what you can get. But if you do not, there is no hope.

35

You should be asking what our time phased objectives are with

regard any two countries—I do not care which ones they are—that

you think are important, get people up here in closed and open

hearings and see whether or not we’ve got a plan.

Senator LIEBERMAN. Thank you. You have given our staff and us

some things to do. Thanks, Mr. Chairman.

Chairman THOMPSON. Thank you very much. Those performance

reports are supposed to be in March 31. I have not seen them yet,

but I am looking forward to it. Because for most agencies, we found

out that the goals they set out is how much paper they are supposed to shuffle next year or how many phone calls they are to answer—and not whether lives are being saved or whether there are

fewer proliferators than there were before, and so forth. That is

going to be another one of those long processes, getting the Results

Act to work.

Mr. SOKOLSKI. Right.

Chairman THOMPSON. This is an area where it really could go do

some good because it will focus people on the fact, if nothing else,

that they have no real goals.

Mr. SOKOLSKI. Absolutely. Our commission interviewed people in

the Department of Energy, who when talking about Nunn-Lugar,

said we have scientist-to-scientist programs and we asked how

many scientists do we need to reach by when? And they looked at

us like you must be crazy. Well, they said, a million. I said, well

how have you engaged? Well, they said, we have got 6,000 that we

have touched. You got to do better than that. And whether you are

for that program or not, that is not a program with serious timephased goals. You cannot measure success or failure.

Chairman THOMPSON. While we are on that subject, what do you

think about the Cooperative Threat Reduction programs and NunnLugar and all that? You have pointed out something here that is

extremely important. Of course, as far as I know, nobody has ever

developed so far a nuclear capability solely based on what they

have stolen—except perhaps the Soviets. Unfortunately, they have

developed it on what they have been able to buy on the open market plus a little help from their friends. But you pointed out the

tremendous potential out there, and that it is another one of those

good case/bad case scenarios.

The good case is that we are getting the START agreements. The

bad case is that the more we do there, the more we have got stuff

arriving from off the books and nobody knows how much and

where it is, or how rapidly it could be taken and put back in to

weapons. And we are spending hundreds of millions of dollars trying to get some security and some fences around some places and

placating some scientists and things like that.

I think you are right. I am not sure that we have any feel for

how much good it is doing yet, but everybody agrees that we’ve got

to do something. So this is what we are doing. What do you think

about those programs?

Mr. SOKOLSKI. Look at the charts. You see the highlighted categories. Arms control as we know it, START, reduces the number

of deployed nuclear weapons. It takes the warheads and puts them

on a shelf and maybe it cuts up the missile or the bomber. NunnLugar takes whatever is declared by us and the Russians as miliVerDate 11-MAY-2000 13:23 Aug 22, 2000 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6601 64899.TXT SAFFAIRS PsN: SAFFAIRS
36

tary surplus and tries—it has not done it yet—tries to push this

material to the last category which makes it locked up in spent fuel

or spent fuel equivalent, either by irradiating it in mox or by literally taking it and mixing it up with spent fuel and making it into

logs.

You will notice our policies in toto, never mind cooperative threat

reduction, ignores all the other categories. It does not do anything

with regard to them. The civil plutonium holdings, which I use

very conservative figures, is something I know you worked with.

The numbers keep rising. We have got conservatively five times the

number of nuclear weapons that could be made out of civil fuel,

and we do not even have the exact figure. And it hanging around

and literally floating around as it is being shipped between the Europe and Japan. Talk about terrorism problems.

When you get to the United States and Russia, we can tell you

essentially what the U.S. surplus military fissile holdings are. You

can go Natural Resource Defense Council. They have pretty good

figures. Maybe we can make them a little bit better, but even Tom

Cochran, who I talk with a lot, says they are pretty good. What we

do not know is within—what is it—23,000 advance weapons—what

Russia’s surplus holding are. An advanced nuclear weapon is where

you have two warheads mated together to make one. So the real

figure if you want crude weapons is like—I don’t know—50,000

weapons. I mean the mind boggles. We have no idea of whether

they have that breakout capability.

Now it seems to me, whether you are a hawk or you are a dove,

whether you like nuclear weapons, whether you want to test or you

do not, whether you like missile defenses or you do not, you want

to reduce that certainty budget. You want to at least fail at trying.

We have not tried. We have not even talked about this seriously

or put it at the head of the list. It is interesting. Apparently someone read an editorial of mine—I think it was Paul Wolfowitz, and

got Candidate Bush to put that in his speech.

Now I am not so sure that Gore would not agree on that one.

Maybe if we succeeded, we do not have to spend so much money.

You know what we spend a year on nuclear weapons hedge? It is

a lot. I think it is like several billion dollars. What is it? Eight billion? That could go to missile defense or something else.

Mr. GAFFNEY. Senator, could I just add a point. This Committee

is especially well suited for what I think is desperately needed in

this area. I have worked with Senator Nunn and Senator Lugar,

as you have, for a long time, and I think in no small measure out

of a sense of respect for them, as much as out of a sense of what

else are you going to do, this program has gotten precious little rigorous oversight. There are a slew of General Accounting Office reports that document what would under any other program I think

be considered to be at least abuse, if not fraud, and perhaps most

certainly waste.

We are in many cases I think building as you said yourself higher fences, better padlocks, better surveillance systems, and the like

for some of the repositories of this stuff. Unfortunately, this takes

into no account at all, as best I can tell, the underlying problem.

And that is the guy who has got the key to those better padlocks

may be part of the problem.

37

Maybe what we are doing by enhancing the security of these facilities is just maximizing his monopoly over the sale of what is in

them. But this is an area that I entreat you to take a hard look

at.

Chairman THOMPSON. Freeing up some of his resources to put in

another place.

Mr. GAFFNEY. Absolutely, fungibility.

Mr. SOKOLSKI. Well, actually, fundamentally, we gave $12 billion

over the next 20 years to Minatom for highly enriched uranium.

We have no idea where that money is going. If we are lucky, it is

going into dachas as just corruption. If we are not, it is going into

weapons or financing weapons sales to Iran. We need to find out

where the money is going.

Mr. HADLEY. I think the issue here is not priority. I think this

ought to be—the Nunn-Lugar ought to be a priority. I think the

issue is effectiveness in the things that Henry and Frank have

raised. And in some sense, it is very important for this Committee

or others to look into the issue of effectiveness because the program

is too important not to be effective—not to be doing as much as it

can be doing as effectively as it can do it. So I think the issue is

not priority or importance. It’s effectiveness.

Chairman THOMPSON. OK. Mr. Hadley, you talked about taking

kind of a new look at this whole thing. We are about to start the

discussion on the Export Administration Act apparently. It is kind

of mind-boggling really when you think about it. I guess people

have been around here a lot longer than I have who have spent a

lot of time on this. I do not know. You have got a committee called

the Banking Committee that produces this and the rest of us are

kind of scrambling to read various iterations of changes and so

forth as it is going to the floor. And we’re all haggling over national

security matters and staffs are arguing with each other over stuff.

I wonder who if anybody has read it? You talk about the high

road and the low road. That is the real low road. On the other

hand, we have got all these grandiose multilaterals agreements

that we are trying to do. And people seem to think that the more

people we can get into them, the better, regardless of fact that

some countries spend all their time trying to undercut us once they

are in.

I am amazed, coming in from the outside, to find that nobody has

got a handle on all this stuff. I mean nobody really knows. You

know I started out thinking probably the more controls the better—

a pretty simplistic view, I suppose. But I can see now that nobody

really knows what the right answers is. I mean we ought to have

a plan. The government ought to have a plan as to where we are

trying to go in this world that we live in while we all talk about

catch-alls and so forth. But it doesn’t make sense to say that you

cannot do any good in restricting exports unilaterally—and that we

should no longer try—and then to complain that our own allies will

not cooperate with us multilaterally because they don’t trust us not

to take unilateral trading advantage. How does that work?

Mr. Sokolski, with regard to the catch-all matter, how would that

work in practice? You would have some kind of a deal that says

when we do ‘‘x’’, the catch-all provision will kick in. Clearly what

is going on is a bilateral deal. I guess we are doing that, and we

38

will always be able to do that. It could be coupled with a no undercut, I suppose. But how would that actually work?

Mr. SOKOLSKI. I can tell you how it has worked in the few instances where I have worked it. First, before you go anywhere, you

do not simply go to some general forum, even as general as NATO,

you go bilaterally, MOD to MOD first, because it’s the ministries

of defense that will either save or break this. It is not the Commerce Departments. They will break it but they will not make it.

They will always say, no, it is a bad idea to control.

And the state departments of the foreign ministries, they are

torn frequently. They are sort of in between. But if the ministries

of defense do not care about something, you can count on the other

two saying yes to some export. So you have got to establish relations between ministries of defense. Now we did that in the Bush

administration. I set up threat bilaterals with the only two countries that have ever bled with us and projected force. That is

France and Great Britain. And, boy, were they interesting. They

were telling us stuff we did not know, telling us to pay more attention to this, this, and this.

When it got to circumstance with regard to Brazil, it was, where

some French Viking liquid fueled engines were going to go to

Brazil. I went with my assistant secretary. I was just a deputy dog.

And we went and had a discussion with our French counter parts.

You know they never explicitly blocked the export, but it never

went. They said they had no authority to block it, but the rocket

engine never went.

So I see it working the same way. I have talked with some of my

former employees who are still in the bowels of the Pentagon. They

actually are telling me that we need to do more. For example, recently there is a steel that is made for SCUDS, apparently if you

take one ingredient out, it is still pretty good but it is not controlled. And guess what? Someone was trying to sell it to the wrong

person. That is stuff that was not on the list.

Now in this case, the country in question was informed but they

chose not to act because they did not have catch-all authority.

Change that.

Mr. HADLEY. Mr. Chairman, I think that is really the answer.

Chairman THOMPSON. Give them legal cover to do what they

might want to do anyway.

Mr. SOKOLSKI. Encourage it. Really pursue it.

Mr. HADLEY. Right. And it is something, it is a marker you can

put down on your upcoming trip. The answer to Senator

Lieberman’s question is to pick up Frank’s point; there are people

in these governments that care about these issues. We need to

reach out to them and establish a dialogue with them to in some

sense empower them within their own bureaucracies. It has got to

be our intelligence communities having a dialogue with their intelligence communities, our defense department having a dialogue

with their defense officials. It has got to be at that level. Have a

strategic dialogue about why we are concerned about Iran. The

kind of specific examples that Henry Sokolski was talking about

you can put in the hands of people in the ministries of defense and

intelligence communities there.

39

Chairman THOMPSON. But how would it actually work? What

would the language be for a situation that is not on anybody’s control list but is a problem—and one ally goes to the other? I mean

what kind of language do you use to cover situations like that?

Mr. SOKOLSKI. Sure. Literally what happens is this. And we had

it occur during the Consare case, which was a furnace, an induction furnace, which frankly was going to be used for missile purposes, not nuclear, and we had to use a nuclear catch-all law to get

it. And essentially there was a German firm that could make it as

well. What we did after we did our denial is we went to that country and said don’t you dare send yours to the same spot.

Now, with these regimes, Missile Technology Control Regime,

Australia Group, Nuclear Suppliers Group, they all have dual-use

items on their lists. In fact, if you put them all together, what you

have is not much different than Wassenaar. But unlike Wassenaar,

they have no undercut provisions. Work it.

Mr. HADLEY. Could you give him language that you would have

the Senate adopt that would give them the authority?

Mr. SOKOLSKI. I do not think you have to give them language.

It is working now with like-minded countries. I will tell you where

the difference comes. When the French came to us in 1990 and said

you need to worry about Iran and they gave us a better intelligence

brief than we could give them, we were able to work on a couple

of things.

What you need and I think what both Steve and Frank have

raised is enough studies, enough public diplomacy, enough analysis

about what are the kinds of problems with China, for example, and

Russia so that you do not necessarily condemn the whole country,

but you get down to specific concerns such that you then got the

public diplomacy to do the no undercut and the catch-all with likeminded countries.

There is a limit to what you can do. You cannot convince people

that do not agree with you, but we are not even trying to convince

people of what the problems are.

Mr. GAFFNEY. But on that point, Mr. Chairman, could I just put

in a word for unilateral steps, too. I do not think it is correct to

say we should rule them out. Even John Holum was saying there

are some places where you—we have a case right now where Germany is reported to be providing phosgene manufacturing capabilities to Iran, shades of the earlier effort to provide, as it happens,

a deeply buried manufacturing facility we believe for poison gas in

Libya.

Now, I do not think that foreign availability, taken to its logical

extreme, suggests we ought to be competing to do that. The fact

that we are not going to do it and the fact that we could raise hell

about them doing it on the basis of us saying that is not in any

of our interests gives us the kind of leverage, moral suasion, behind

the scenes, public diplomacy, whatever you want to call it—that I

think can help produce results.

But I am afraid it is now increasingly pushed off the table, witness what you are going to be debating this afternoon. The very

fact that foreign availability or mass market availability is asserted

is going to suddenly make it fair game for anybody who wants to

do anything in those areas. That is just not right.

40

Chairman THOMPSON. And we are acting as if there is no threat

at a time when we are trying to convince our allies that we need

a national missile defense system, for example. We are behaving in

every respect as if we really perceive no problem with regard to the

threat from rogue nations and as if we do not believe the Rumsfeld

Commission or the Deutch Commission results or any of these reports with regard to our failure to impose sanctions on known

proliferators.

Mr. GAFFNEY. To the contrary, we are actually rewarding, in the

case of North Korea most especially, we are now, as you probably

know, the largest purveyor of foreign aid to North Korea in the

world.

Mr. SOKOLSKI. Yes.

Mr. GAFFNEY. Why is that? I suggest it is because they now have

a ballistic missile with which to threaten us, which we assess—

CBS, by the way, the other night, in ‘‘Failsafe’’ said North Korea

now has the bomb. If they do not, they shortly will.

This is evidence, I am afraid, not only that we are not taking the

threat seriously. Steve Hadley and you are among those who have

been working on missile defense for a long time. We feel frustrated

that we are not doing something on that front, but we are certainly

signaling to our allies—look at South Korea, Japan, Italy, European Union—that we want these guys to engage with North Korea

just as fully as they can. What does that mean? Trade. What does

that mean? More access to precisely this kind of technology.

Chairman THOMPSON. And it tells our allies that we are in less

position to protect them. It tells other rogue nations that all you

need to be able to do is blackmail the United States. Mr. Hadley,

you talked about doing more to explain our security risk to our allies. I have talked a long time to people over in the State Department about this. I keep asking why do not our allies understand

what we understand? Don’t our allies read the public reports that

we get in here, the CIA assessments, the Rumsfeld Commission Report, and what have you?

The impression I get is that they think our allies fully appreciate

it, but they just don’t care. And that our allies just place trade

above everything else. And that while they appreciate the danger

of what some of these countries are doing, unless the particular export directly relates to the production of weapons of mass destruction or their means of delivery, our allies say it does not count.

Now obviously they would care if they thought that they were delivering something that in the next few weeks would be fashioned

into a weapon to hit even us—maybe not them, but even us, they

would care about that. But where is the disconnect there in your

opinion? From your statement, you seem to think that—and this

was my first suspicion, and I guess it still is—we are certainly not

doing enough to convince our allies of the nature of the threat or

not doing enough to share intelligence where we can share it. And

there’s also the fact that our own behavior is sending the message

that we do not really think there is much of a threat.

Mr. HADLEY. Right.

Chairman THOMPSON. What do you think?

Mr. HADLEY. I think we have a disconnect in some sense between

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41

ational steps. I will give an example. If you have an opportunity

to meet with the commander-in-chief of our forces for CENTCOM,

one of the questions you might like to ask him is does he have

someone on his staff who everyday gets up in the morning and asks

themselves, ‘‘What am I doing today to set back Iran’s efforts to get

a nuclear weapon? Be it finding out where Iran is are trying to acquire equipment or technology and trying to intervene to stop it,

whether it is disinformation, whatever. I think we are not operationally serious enough about the problem.

I think if we could establish these links between intelligence

communities, DOD people, uniformed military, with our allies, we

would start giving them the ammunition they need to be able to

make their governments more serious about it. The allies, particularly Europeans, have a lot on their plate. They are very regionally

focused. They seem to think that proliferation is a global problem

and that it is our problem; we have to handle it. But

specifically——

Chairman THOMPSON. Or under more economic stress than we

are.

Mr. HADLEY. Right. So that is the hurdle we have to, that is the

sort of barrier we have to break through. But, if you just think

about how we would have had to run the Gulf War if Saddam Hussein had, for example, a long-range ballistic missile that could have

come down even with a conventional warhead on one of their capitals, there could have been a different vote in the Senate and

would have been a different issue in terms of the activities of our

allies. And I think it is those kinds of pointed discussions—plus the

kind of particular intelligence cases that Henry was talking

about—that we need to use in the discussion with our allies at

every level and engaging all of the relevant agencies. It is hard

work. It is a full-time job.

But if we really believe, as everyone seems to say, that proliferation—particularly of weapons of mass destruction—is our No. 1

problem, then it seems to me that it is worth the effort. That is

the best answer I can give you.

Mr. GAFFNEY. Senator, the other part of this disconnect, and I

think Steve is exactly right, is one that is very much within your

purview. The president has said—he did not know that he was saying it in a public forum, but he said it, that when it comes to implementing pieces of legislation, famously the Gore-McCain Act, but

others as well, that require certification when something is being

done like transfer of cruise missile technology to bad guys——

Chairman THOMPSON. He has to fudge the facts.

Mr. GAFFNEY. He has to fudge the facts. Now what signal does

that send to people who are at least as willing to ignore—the phenomenon the psychologists call cognitive dissonance, you are not

seeing what you do not want to see. I believe that they are very

much keying off what they judge to be a very cynical and commercially as well as politically expedient policy on the part of the U.S.

Government. They are not going to be more righteous about this,

by and large.

There are exceptions. I think the Japanese on the supercomputer

example, for instance, were more righteous than we were and were

undercut by our cynicism.

42

Mr. SOKOLSKI. Actions that are successful speak louder than

words that fail. And in this regard, when you bend your law, you

waive your law concerning nonproliferation, that is troublesome.

One of the things I have actually publicly come out in favor of, just

to radicalize and zero—base the debate, is to sunset all the sanctions. I will settle for you just not subsidizing nonproliferators and

freeing up those assets in the intelligence community to pick two

or three countries, get that darn time-phased set of objectives and

go hit the role and operationalize.

By the way, a lot of people will probably vote for that formula

including the intelligence agencies. But then you better have some

time-phased goals so you can judge whether or not you are getting

your money’s worth because otherwise you will get baffle gabble. I

do not care who is in office. They will tell you everything is fine.

I think finally that brings everything back. If nonproliferation is

just export control, you are in a world of hurt, not simply because

you cannot control everything. It is because export control is not

taken seriously. Foreign policy is. And so if nonproliferation is not

at the tip of the iceberg of foreign policy, you are not going to get

very far. And that is, in essence, the problem. We have so succeeded because of our victory in the Cold War, we do not really

want to talk about how we might have foreign policy failures again

and as a result, no one takes it seriously when we do raise problems about the prospects of bad things happening in the future.

Chairman THOMPSON. Do we need to take a whole new look at

our export control policies? What do you gentlemen think about

this EAA debate? You know we are down to the fine print again

and sometimes I wonder if we’re just totally missing the point. The

whole thing needs to be shaken up. You know, some of our allies

at least have one agency controlling all this, a separate agency.

Mr. SOKOLSKI. Yes.

Chairman THOMPSON. You talk about Defense. Everybody has

got their own constituency.

Mr. SOKOLSKI. Yes.

Chairman THOMPSON. Commerce obviously has got theirs. State

wants to keep peace among their allies. But even the Pentagon,

they want low cost weapons——

Mr. SOKOLSKI. Right.

Chairman THOMPSON [continuing]. And things. Everybody has

got an interest except those components that have national security

solely in mind, I guess you might say. But we are consolidating

those components within others now in this administration, so that

they have less effect. And we’re putting the DTSA people out in

Dulles and all of that. What about our export policy in general, and

as this EAA thing comes up again?

Mr. SOKOLSKI. I am sorry. Go ahead.

Mr. HADLEY. I do not know. The answer to your question is yes,

we need a fundamental look. It is hard to stop the train and stop

the world while we do it, but it seems to me part of any EAA ought

to be a commitment and legislation that calls for exactly the kind

of look that would address the issues that you have raised today

and have a schedule for doing that. It seems to me that is a minimum of something that ought to come out of this EAA debate.

43

Mr. GAFFNEY. But would you not think you would start doing it

before you start legislating? I have got to reinforce the point you

made, Mr. Chairman, because it underscores the thing I said at the

outset. With all due respect to the Banking Committee, it does not

have the ability to take into account all of the equities that are at

stake here. The failure frankly of other committees—I think rather

less so yours, in part thanks to your leadership—but other committees that have jurisdiction and have responsibility in this area to

ensure that precisely this kind of oversight has driven a review and

has formed answers to the kinds of questions we are all wrestling

with here before you start legislating is maddening.

Chairman THOMPSON. Mr. Sokolski.

Mr. SOKOLSKI. Having lived through so many extensions of the

EAA, I do not want to trivialize the difficulties raised by Mr.

Holum, but if you do not do your homework and you act simply on

those sets of concerns, even he admitted not a good idea. I think,

however, you cannot bureaucratically solve the problem of what is

the problem on this commission.

The first meeting, Mr. Deutch said, well, we have seven solutions

that are possible and he listed them, make the national security

adviser, have one agency, and other. I said that is great. What is

the problem? They had spent a year and a half discussing solutions. What probably needs to be done in doing a reevaluation is

get those what we call green line/red line studies. I mean who are

your problems? It is probably China. It is probably North Korea.

Mr. GAFFNEY. It is Russia.

Mr. SOKOLSKI. It is Russia. Well, certainly parts of Russia for

darn sure. And so you then have to say, OK, what is it that we

have to worry? Now I do not think you want to have a list and say,

ah, this is all we have to control, but it gives you some idea if you

have a list of what you have to worry about. And I think you need

to have that work done.

Now one of the nice things that Congress can do and has been

doing and it has been doing really great work is that it asks for

certain certifications and sometimes some useful reports. The difficulty is sometimes the staff reads the reports and that is it. You,

Senator, have a bully pulpit. If you use it, do not underestimate

what you can do.

Chairman THOMPSON. Mr. Hadley, I think you too in your statement indicated that we might ought to concentrate on less and do

more. How does that translate? It is kind of what you are talking

about, I think, Mr. Sokolski. How does that translate into a policy?

What do we concentrate on with regard to areas of concern and

countries of concern? What do we do with regard to that?

Let us say, on the other side of the ledger, you can take some

things off the dual-use control list and say they are not controllable

anymore. We are going to free up some people, maybe free up some

assets, some time. But in terms of concentration, concentrating on

the problem areas, it gets back to a major political question. I

mean it does not matter what your rules and regulations say if you

have an administration who will not impose sanctions under any

conditions and who will certify that proliferators are not

profilerating. But even with regard to the rogue nations, if we

44

adopted a policy more in that direction, what would that mean in

practical terms?

Mr. HADLEY. You would have to have, I think, military people,

technologists, sitting down and asking what are the kinds of capabilities that we need to have and that we do not want our enemies

to have, and list them. And this is what we did in 1991 and 1992

and it was a shrunken list but an important list. And then you

say—let us assume it is stealth technology. All right. What are the

components that go into giving another country having stealth

technology?

What are those components? Who has got them? How hard are

they to get? And what are the really critical ones? And you may

find, as you do that analysis, that there is a variety of dual-use

items that are elements of stealth technology, but they are too proliferated, you cannot control them. And what you hope is that you

can do a strategic analysis of stealth technology and find the three,

four, five things that are critical to the capability that we have a

shot at controlling. And you focus on those.

And if you focus on those to give a focus for our own export control approach, it gives you an agenda when you go to your allies.

But it is hard to give more than an example because it is very

nitty-gritty and you really need to get technologists and military

people who know this stuff in a room sorting it out. That is the

process I think we need.

Chairman THOMPSON. What do you think?

Mr. SOKOLSKI. I would be most interested in the list of capabilities. I would be very leery about how a quote-unquote ‘‘critical list’’

might be used and let me explain why. There were numerous cases

on my watch where folks just wanted to control I think it was the

State Department proposal. Well, we really only have to worry

about reentry vehicles they said, not the rest of the missile. Now

that is an extreme cartoon of how these critical lists can go.

But clearly you are most concerned about controlling against the

capabilities and frequently that will mean going outside of the current or latest list. I would say that the listmaking is to be expansive, not focused so much, but expansive so that you are flexible

enough to go after things maybe that are not on lists.

Chairman THOMPSON. If you had a catch-all approach, you would

not need to worry about that so much, would you?

Mr. SOKOLSKI. Well, but the analysis that Mr. Hadley is talking

about needs to be done so that you are alert to that kind of metal

that one less ingredient from which still works would be something

you would want to control. But I would not want to not have to

have it on the list to control it. I would want the list as the template for what to control, as some way to keep bureaucrats alert

to what they need to be paying attention to.

Chairman THOMPSON. Did you want to comment on it?

Mr. HADLEY. Yes, just on your effectiveness point. The reason I

think you want to take the kind of strategic approach I described

is, that if you have too many things on the list, people show that

they have a tough export control regime by how many things they

are controlling and how many licenses they issue. But the question

is are we preventing somebody from getting critical capabilities?

And I am concerned that if you do not really try and focus on what

45

is important and critical, you will lose effectiveness. That is the

concern I would have. It is a tradeoff.

Mr. GAFFNEY. Mr. Chairman, we have been talking for a long

time frankly about smaller numbers of things and higher walls. At

some point I think we actually crossed over into having a lot of

things that are important outside of the walls. And while I take the

point that you got to have a rigorous process and you have got to

have people focused and so on, we are doing exactly the opposite

of that right now and your point about DTSA is a perfect example.

Right now we have emasculated the one agency of the government that at least during the Reagan years and I think during the

Bush years you could count on to be doing the kind of focused serious national serious-minded analysis on export contracts. It was

not always perfect by any means, and in some places it was downright uneven, but at least it was not subject to the same kinds of

pressures that as you say yourself are so much in evidence elsewhere. That is just not the case today.

So where is the check in the check and balance? Where is the

focus, the wall on a variety of things, some of which are now going

through without any kind of controls at all?

Chairman THOMPSON. Good. One final area. This DSB Report.

When I hear about these reports, the first thing I always want to

know is who are the guys that wrote it and who do they work for?

I do not want to cast any aspersions on anyone, but there are a

lot of people out there who have a lot of interest in maybe doing

things differently.

And I look at what I understand it to be saying—and what you

say that it is saying—and that is that the name of the game in the

future should not be trying to develop new technology and holding

onto it, and keeping anybody else from getting it. The name of the

game in the future is to be able to integrate that technology more

rapidly into a military system in good hands.

I can understand the second part, but why not have both? Why

not be able to rapidly integrate but also take steps to maintain an

advantage in those areas, weapons areas, in which we have such

advantages in so many ways? I mean, why not do both?

Mr. HADLEY. I think you should.

Chairman THOMPSON. I am asking you about the Report.

Mr. HADLEY. Yes. I would do both, but again it is this issue of

what is strategic, what matters, and what can we really realistically control? But I would try and do both. On your question, that

is one of the things I thought was interesting about the study. I

mean, we all have our lists, but when I got it I went first to the

list of who prepared it and there were some names on that list that

gave me some confidence that it was a serious effort.

And thirdly, one of the reasons I think it is a good time for a review of this issue is that two people who I read on this subject are

Bill Schneider and Richard Perle, and they have both talked

about—Bill Schneider, for example, was one of the principal authors of parts of that Defense Science Board Report. He has given

some——

Chairman THOMPSON. That makes me feel better. I have a great

deal of respect for both of those gentlemen.

46

Mr. HADLEY. I do as well. And Richard Perle has been talking

about the need, as he says, to focus more on the bad actors and

beefing up our ability to focus on the efforts by bad actors to acquire things we do not want them to have. And focusing on that

end of the spectrum with better intelligence, law enforcement and

a whole host of other steps with a constant program of interdiction

and disruption. And that is the question that I would have you put

to CENTCOM, does he have that kind of program, because I think

that it is also a high leverage opportunity for an updated approach

to this whole problem which we sort of say export controls, but it

really is the proliferation issue. It is a very hard issue. We have

got about ten things we have got to do of which export control is

one of them, an important one, but only one of them, and we need

to bring our allies along because we need their help on a lot of

them.

Mr. SOKOLSKI. What makes nuclear weapons, missiles and to

some extent chemical and biological weapons and perhaps a handful of other things that we can argue about different is that staying

ahead is not a real sure thing. In the immortal words of one of the

scientists in the Manhattan Project, a better nuclear weapon in

many instances does not neutralize a worse one.

Now that is the nature of this beast, unlike the competition of

the Cold War. What you really want to do is slow the other fellow

down to have time to do something and I would suggest if you want

to think big, it is regime change in some cases. That is what we

are talking about. It is a Russia that is orderly, that is not just

democratic but orderly. It is a China that is not communist, but finally not that at all; it is liberal and democratic. It is a lot of things

that are big foreign policy.

So, first of all, you have got to have some time lines with some

big objectives. Iran may become a decent regime at the rate it is

going. Who knows? Iraq may not be under this maniac. You have

got to have those kinds of objectives. Figure out what the time

lines are. And one other thing. You got to start acting now as if

you might fail.

A lot of the things that you need to do if Iran gets a nuclear

bomb are the things you should be doing that make sure it does

not get one. It is getting closer to Turkey so it does not decide to

get a bomb. It is getting closer to Saudi Arabia so it does not make

a deal with Iran. It is making sure Egypt does not get some crazy

idea that it should get nuclear weapons to take care of business.

Now it turns out doing these things now may actually help you

do nonproliferation, too. But I think we need to start thinking what

happens if there is failure and particularly act where it is not at

cross-purposes with nonproliferation and then be ready for the

event.

Finally, let us be optimistic. We won the Cold War. At least the

Soviets lost it. And the problem sets that we have now frankly look

trivial in comparison. We ought to be able to get through to that

better future. So let us not despair too much, but let us get to

work.

Chairman THOMPSON. We have got a window of opportunity here

now.

Mr. SOKOLSKI. I think so.

47

Mr. GAFFNEY. Just the other thing that ought to be on his list,

and I know it is, is missile defense.

Mr. SOKOLSKI. Well, clearly.

Chairman THOMPSON. I was thinking about that.

Mr. GAFFNEY. This is something that I consider to be a tremendous export control technique in terms of curbing the impact of

these exports that are getting away from us.

Mr. SOKOLSKI. Clearly.

Chairman THOMPSON. Gentlemen, thank you very much. This

has been extremely beneficial and helpful, and I hope that it lays

the groundwork for some future cooperation among ourselves. We

would certainly like to be able to call on you as we go forward here.

Thank you very, very much for your contribution.

[Whereupon at 12:45 p.m., the Committee was adjourned.]

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