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48–443PDF 2009

EXPORT CONTROLS ON SATELLITE TECHNOLOGY

HEARING

BEFORE THE

SUBCOMMITTEE ON TERRORISM, 

NONPROLIFERATION AND TRADE

OF THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS

FIRST SESSION

APRIL 2, 2009

Serial No. 111–14

Printed for the use of the Committee on Foreign Affairs

(

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

(II)

COMMITTEE ON FOREIGN AFFAIRS 

HOWARD L. BERMAN, California, Chairman 

GARY L. ACKERMAN, New York 

ENI F.H. FALEOMAVAEGA, American 

Samoa 

DONALD M. PAYNE, New Jersey 

BRAD SHERMAN, California 

ROBERT WEXLER, Florida 

ELIOT L. ENGEL, New York 

BILL DELAHUNT, Massachusetts 

GREGORY W. MEEKS, New York 

DIANE E. WATSON, California 

RUSS CARNAHAN, Missouri 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

MICHAEL E. MCMAHON, New York 

JOHN S. TANNER, Tennessee 

GENE GREEN, Texas 

LYNN WOOLSEY, California 

SHEILA JACKSON LEE, Texas 

BARBARA LEE, California 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

MIKE ROSS, Arkansas 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

JIM COSTA, California 

KEITH ELLISON, Minnesota 

GABRIELLE GIFFORDS, Arizona 

RON KLEIN, Florida 

ILEANA ROS-LEHTINEN, Florida 

CHRISTOPHER H. SMITH, New Jersey 

DAN BURTON, Indiana 

ELTON GALLEGLY, California 

DANA ROHRABACHER, California 

DONALD A. MANZULLO, Illinois 

EDWARD R. ROYCE, California 

RON PAUL, Texas 

JEFF FLAKE, Arizona 

MIKE PENCE, Indiana 

JOE WILSON, South Carolina 

JOHN BOOZMAN, Arkansas 

J. GRESHAM BARRETT, South Carolina 

CONNIE MACK, Florida 

JEFF FORTENBERRY, Nebraska 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

BOB INGLIS, South Carolina 

GUS BILIRAKIS, Florida 

RICHARD J. KESSLER, Staff Director 

YLEEM POBLETE, Republican Staff Director 

SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION AND TRADE

BRAD SHERMAN, California, Chairman 

GERALD E. CONNOLLY, Virginia 

DAVID SCOTT, Georgia 

DIANE E. WATSON, California 

MICHAEL E. MCMAHON, New York 

SHEILA JACKSON LEE, Texas 

RON KLEIN, Florida 

EDWARD R. ROYCE, California 

TED POE, Texas 

DONALD A. MANZULLO, Illinois 

JOHN BOOZMAN, Arkansas 

J. GRESHAM BARRETT, South Carolina 

DON MACDONALD, Subcommittee Staff Director 

JOHN BRODTKE, Subcommittee Professional Staff Member 

TOM SHEEHY, Republican Professional Staff Member 

ISIDRO MARISCAL, Subcommittee Staff Associate 

(III)

C O N T E N T S 

Page

WITNESSES 

Mr. Pierre Chao, Senior Associate, Center for Strategic and International 

Studies .................................................................................................................. 17

Larry M. Wortzel, Ph.D., Vice Chairman, U.S.-China Economic and Security 

Review Commission ............................................................................................. 26

Ms. Patricia Cooper, President, Satellite Industry Association ........................... 37

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

The Honorable Edward R. Royce, a Representative in Congress from the 

State of California: Prepared statement ............................................................ 5

The Honorable Gerald E. Connolly, a Representative in Congress from the 

State of Virginia: Prepared statement ............................................................... 9

The Honorable Donald A. Manzullo, a Representative in Congress from the 

State of Illinois: Prepared statement ................................................................. 11

The Honorable Brad Sherman, a Representative in Congress from the State 

of California, and Chairman, Subcommittee on Terrorism, Nonproliferation 

and Trade: Article from the New York Times by William J. Broad, ‘‘For 

U.S. Satellite Makers, a No-Cost Bailout Bid’’ .................................................. 13

Mr. Pierre Chao: Prepared statement .................................................................... 20

Larry M. Wortzel, Ph.D.: Prepared statement ...................................................... 28

Ms. Patricia Cooper: Prepared statement .............................................................. 40

APPENDIX 

Hearing notice .......................................................................................................... 70

Hearing minutes ...................................................................................................... 71

Frank Vargo, Vice President, International Economic Affairs, on behalf of 

the National Association of Manufacturers: Statement .................................... 72

Aerospace Industries Association: Letter addressed to the Honorable Howard 

L. Berman, a Representative in Congress from the State of California, 

and Chairman, Committee on Foreign Affairs, and statement ........................ 76

(1)

EXPORT CONTROLS ON SATELLITE 

TECHNOLOGY 

THURSDAY, APRIL 2, 2009

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION AND TRADE, COMMITTEE ON FOREIGN AFFAIRS, Washington, DC. 

The subcommittee met, pursuant to notice, at 1:05 p.m., in room 

2175, Rayburn House Office Building, Hon. Brad Sherman (chairman of the subcommittee) presiding. 

Mr. SHERMAN. Folks, maybe we could sit down and start the 

hearing. 

As a preliminary matter, two organizations have requested inclusion of written statements for the record of this hearing. They are 

the National Association of Manufacturers and the Aerospace Industries Association. Without objection, those statements will be 

made part of the record. 

I know our witnesses will deliver oral testimony. They are also 

invited to present what I expect will be longer written testimony 

and to append to their testimony whatever materials they would 

like. 

With that, I should note that we are the only country that controls satellite exports as if they were armaments. Critics of this 

policy question whether it is an appropriate way to deal with national security. It is important to remind us of what I think our 

witnesses well know, and that is in the 1990s we experimented 

briefly with controlling satellites not as munitions under State Department jurisdiction, but rather as dual-use items under Commerce Department jurisdiction. Soon after that change was made, 

there was a breach of security in which the Chinese military was 

provided with sensitive information after a failed launch of a 

United States-built satellite. The response was to reclassify satellites as munitions. 

This is what we tend to do in Congress. When a horse escapes 

a barn, after that we close the barn door, and we tend to close only 

the barn door that that horse escaped from, not concerning ourselves with any other barn doors. Keep in mind, those involved in 

the 1990s incident provided information because they had a financial stake in the future success of the Chinese launch program. 

Well, we certainly have not prevented American companies with 

any technological knowledge from having such a stake. We have 

just prohibited them from having a stake as owners of the satellite 

or builders of the satellite. It continues to be legal for American 

2

companies to insure a satellite being launched on a Chineselaunched vehicle, or sell derivatives based on the success or failure 

of the Chinese launch program, or take any other action that might 

tempt them to be rooting for and perhaps adding to the success of 

the Chinese launch program. 

Most people aware of our restrictions on satellite exports would 

assume that it is to protect the content of the satellite, to prevent 

people from looking inside the box. There are ways to prevent countries from looking inside the box without treating the satellite itself 

as a munition. 

We have in effect an embargo on U.S. satellites, or satellites containing U.S. components, from being launched with Chinese rockets 

because we have a law against the export of munitions to China. 

What we ought to have is an overall system that balances our interests first in protecting our satellite technology and then in protecting our technology for launch applications from going to the 

wrong places. 

This can be done in the case of the contents of the satellite 

through an appropriate monitoring system, monitoring until 

launch. And with regard to the launch technology, we either have 

to trust people with a financial interest in the success of the Chinese launch system not to reveal information because it is sensitive; and, frankly, the big headlines of the 1990s by themselves 

may have closed that door. I don’t think anyone in the future could 

say, ‘‘Oops, I slipped,’’ and avoid prosecution should they repeat 

pretty much the same fact pattern we saw in the early nineties. 

But we can, if we wish, go to the point of saying no U.S. company 

that has any technological capacity, whether it is an insurance 

company, whether it is an investment bank selling derivatives, 

whether it is a company that has contracted to own the satellite 

only after it is launched, whether it is a communications firm that 

has a favorable contract to use the satellite, whatever, that no company can have a stake in the success of a Chinese launch. 

Now, the space industry has made credible arguments that the 

International Traffic in Arms Regulations, known as ITAR, has 

hurt business and the space industrial base. This claim is echoed 

in private at least by the Intelligence Community who sometimes 

find it more and more difficult to source satellite-related equipment 

domestically. 

ITAR has hurt the industry to some degree. Part of the perceived 

harm arises from the fact that the use of controlled American parts 

or technology in a product means that American laws follow that 

entire product. This has hurt second- and third-tier suppliers. 

Europeans and other buyers would just rather avoid U.S. regulations. They therefore have focused on an ITAR-free movement. European satellite maker Thales Alenia is now promoting satellites 

and satellite components that are ‘‘ITAR free.’’ What does ITAR 

free mean? It means the product has been put together, carefully 

discriminating against U.S. suppliers. 

I would wonder whether the United States military should, except when absolutely necessary, do business with a company that 

has announced a policy of discriminating against U.S. suppliers 

whenever it can. Perhaps we should discriminate against that supplier whenever we can. This is especially true when the discriminaVerDate 0ct 09 2002 10:52 Jun 23, 2009 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 F:\WORK\TNT\040209\48443.000 HFA PsN: SHIRL
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tion against the U.S. suppliers not only hurts us economically and 

violates the spirit of free trade, but is also specifically designed to 

thwart U.S. foreign policy. 

Now, at the core of this problem is that the Chinese have the 

Long March rocket, not a big winner in terms of reliability, but a 

big winner in terms of cost. This Long March rocket technology is 

the result of Chinese Government subsidies, and one clear response 

for us is to simply subsidize our own launch capacity, keep those 

jobs, that technology, and the national security aspects all in the 

United States; that is to say, the national security knowledge in 

the United States. 

So we do have, I think, a need to legislate. One way is to kick 

this back to the executive branch and allow satellites to be on the 

munitions list or not on the munitions list, subject to the same administrative process as other similar goods. We have to remember, 

though, that the last time this happened we saw it explode in the 

headlines. So I look forward to getting new ideas about how to balance our economic interests in a thriving economic space industry, 

with our national security interest in a way that is logical, that 

prevents the Chinese and others from knowing what is inside the 

satellite, and prevents U.S. persons from having an incentive to 

provide technical knowledge to the Chinese or others who should 

not receive it. 

Now I want to turn this over for an opening statement to a gentleman who has demonstrated his patience by watching me go well 

over the 5-minute limit, our ranking member, Mr. Royce. 

Mr. ROYCE. Thank you, Mr. Chairman. Thank you also for calling this hearing today. I think you are continuing the work on export controls that this subcommittee began in the last Congress. 

This effort, I think we should note, spurred the previous administration into some reform, but more is needed and I look forward to 

exploring how satellite technology might be better handled. 

Many are warning that the U.S. export control system is broken, 

that it is a relic from a past economic and business era. Numerous 

GAO reports have concluded this. We will hear today that satellite 

export controls needlessly target items that are readily available 

anyway on the world market, that they unduly restrict international cooperation, and that they frustrate access to needed foreign technology. 

Several other countries are making impressive technological 

breakthroughs. France, for example, Russia, China, and others 

have built and they have orbited satellites using their own launch 

capabilities. The playing field for this $120-billion-a-year industry 

clearly is more crowded and it is more competitive than it has ever 

been before, and our export control system has poorly responded. 

The economic impacts of export controls are tough to measure. 

The Pentagon, though, has found that satellite export controls have 

hurt U.S. aerospace companies, their business, and long-term ability to innovate in those businesses. 

Several factors are at play, but it is fair to ask if Congress’ 

toughening of satellite licensing 10 years ago has played a role in 

reducing American leadership in satellite communications. Our economic competitiveness is tied to our national security. Simply put, 

4

we will not remain a military superpower without a world-class 

technology base, including satellites. 

A top U.S. military official recently testified to Congress that 

U.S. export controls are hurting the space industrial base, threatening national security. His view should carry considerable weight. 

Any system, especially one devised to counter the former Soviet 

Union, requires constant reform. No doubt a bureaucratic culture 

is a poor match for a world of ever rapidly evolving technology. The 

tendency in a bureaucracy is to play it safe, but bureaucratic safety 

does not promote national security if it is stifling innovation. 

We will hear about the licensing system’s shortcomings, including delays, redundancies, inconsistencies and static control lists. 

Many of these are valid charges. So let’s hear from our witnesses 

on the reform proposals. But we should keep in mind that while 

the growing complexity of satellite technology and production does 

complicate regulation, complexity in and of itself does not argue for 

liberalization. China is central to this debate. 

As one witness will testify, China’s strategic intentions and proliferation record and the PLA’s rapid growth and potential to improve its missile force through international cooperation factored 

into the decision to further restrict satellite exports. So that witness is right on that point. 

Today China’s satellites direct a kill weapon, a sophisticated missile, targeted at our naval fleet. Unfortunately, our allies are eager, 

only too eager, to provide China with advanced satellite technology. 

My concern is that the State and Commerce Departments, frankly, 

are naive about China. 

Misguided faith in the validated end-user program is one example. Chinese spying is pervasive. We knew that here a year ago. 

The whole world knows it today. Chinese spying is pervasive. Export control reforms should be made with a very clear-eyed view of 

Chinese capabilities and intentions. 

Mr. Chairman, satellites are essential to our national defense. So 

I look forward to working with you, beginning today, to find the 

way to control this critical technology that maximizes our security. 

Thank you. 

[The prepared statement of Mr. Royce follows:]

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Mr. SHERMAN. Thank you, Mr. Royce, and thank you for pointing 

out that this hearing builds on prior hearings and that those prior 

hearings, I think, have been successful in getting the State Department to move more quickly on these export applications. But I 

think we have more to do if we are going to strike the right balance 

and help our economy. 

I want to acknowledge former Senator Warner of Virginia who is 

here with us today and thank him for his attendance. We have a 

member of the full committee who is not a member of the subcommittee but, given his interest, probably should be, completing 

our full Southern California panel, Dana Rohrabacher, who I know 

wants to make a brief opening statement. 

Mr. ROHRABACHER. I got that ‘‘brief’’ part there. 

Mr. Chairman, first of all I am a member of the Foreign Affairs 

Committee and have been for 18 years now. But let me also note 

that I am a senior member of the Science Committee and served 

as chairman of the Space Subcommittee of Science for 8 years, so 

I know about this issue, I have followed it, I take it very seriously. 

So let’s be frank. Let’s not beat around the bush about what we are 

really talking about here. 

If you don’t want export control reform to focus on China—if you 

do want to focus on China, that is fine—but if you don’t want us 

to focus on China and you want to focus on how we can reform export controls generally, then take China right off the table, right 

off the bat. 

So any reform that is going to be really effective and that we 

have a chance of succeeding has got to be a two-tiered approach. 

It is as simple as that. That has been something that the industry 

has been unwilling to accept and to take seriously. Because what 

is happening in China and the threat that China poses is something that we cannot ignore, yet that should not be the controlling 

factor of how we regulate high-tech and especially our policies dealing with satellites and in our dealings with all the other countries 

of the world. 

Last week the heads of the world’s largest satellite operators said 

that they want to launch their satellites on Chinese rockets. They 

want to do that because it is cheaper. In fact, every time these satVerDate 0ct 09 2002 10:52 Jun 23, 2009 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 F:\WORK\TNT\040209\48443.000 HFA PsN: SHIRL

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ellite operators are given the chance to discuss ITAR reforms, they 

always tell us that they want permission to launch on the Long 

March rocket. It doesn’t take a rocket scientist to deduce that the 

leading edge of reform efforts in terms of ITAR, then, is actually 

an effort to permit satellites to be launched on Chinese military 

rockets. 

Is that what the debate is really all about? Because you can 

count on me to be working with all of you to try to make sure that 

we decrease the regulations on America’s ability and other people’s 

ability to sell our technology to other countries. 

But let’s be serious and talk about China. It is somewhat offensive for me to hear the SES whose holding company, I might add, 

is in Luxembourg, or Telsat, a Canadian company, or Eutelsat, 

which is French, of course, and then Intelsat, which, of course, pays 

its taxes in Bermuda, it is kind of disturbing to hear all of these 

people lecture us about how we are trying to save jobs in the 

United States by letting foreign companies take advantage of cutrate military launches. 

First of all, these people aren’t concerned about jobs in the 

United States. But what about the jobs in the United States? Don’t 

they count? What about the people who work in our launch industry? They should be part of the equation when we are talking about 

this. 

Now, as a Republican and a believer in free markets, I do not 

begrudge satellite operators who are making millions of dollars of 

profit, I don’t begrudge them that profit. But the fact is that we 

should not be compromising the security, long-term security interests of our country for that short-term profit, and that is why we 

have to focus on China. 

Benjamin Franklin is quoted as saying, ‘‘Sir, please don’t burn 

down my barn to cook your eggs.’’ Well, we have Eutel Satellite basically asking us to endanger our national security in order to fatten profits. And Eutelsat, as I say, is making a profit. 

So let’s take a look at what policies we should have about China 

and let us not forget that the reason why there are the restrictions 

on China that we have got is because China remains a vicious dictatorship. It is the same Chinese regime today that massacred the 

reform movement in China at Tiananmen Square, and that is why 

these restrictions were put on in the first place. 

So I would suggest that those who are very serious about trying 

to make sure that we pay attention to the cumbersome restrictions 

that ITAR puts on high-tech companies, I suggest let’s talk about 

setting up a two-tier system where they are freed from those restrictions and have a realistic policy toward China. 

Thank you very much, Mr. Chairman. 

Mr. Chairman, if I could indulge you, I notice that the administration is not represented here today, and I have a series of questions that I would like to submit for the record that we would like 

the administration to answer in terms of this issue. 

Mr. SHERMAN. They will, without objection, be made part of the 

record. 

Whether those who are not here have an obligation to answer, 

I leave to the Parliamentarian, but certainly I would urge you to 

send those to the administration in the form of a letter, and often 

8

the administration takes seriously the obligation to respond to such 

letters. 

We now have been joined by Congressman Connolly of Virginia, 

who will not only be making an opening statement now, but he will 

be chairing these hearings at 2 o’clock until about 2:15 when I have 

to go vote in the Financial Services Committee. 

The gentleman from Virginia is recognized. 

Mr. CONNOLLY. I thank the distinguished chairman, and thank 

you for holding today’s hearing. I also want to join in welcoming 

my friend, the former senior Senator from Virginia, John Warner. 

I am delighted to see Senator Warner here today. 

I believe the subject of this hearing highlights once again the law 

of unintended consequences. Here we have a case in which a previous Congress, well-intentioned as it might have been, imposed 

tighter export restrictions on the commercial communications satellite industry in the interests of protecting national security based 

on accusations of improper technology-sharing with China. 

I appreciate and support the need to safeguard the propriety of 

our military technologies. However, the practical effect of the International Traffic in Arms Regulations appears to have been to stifle 

innovation and America’s competitive edge in the global satellite 

marketplace. 

The U.S. share of worldwide satellite manufacturing revenue has 

fallen by one-third since these restrictions became law. A DoD survey showed the industry attributes more than $.5 billion in annual 

lost revenue due to administrative problems and the changes in 

regulation. According to the industry, the technology beaming the 

deliberations of this legislative body to television sets back home is 

now more regulated than those industries developing new weapons. 

During the last decade, competitors in other nations stepped in 

to fill the void left by the shrinking U.S. commercial satellite industry. While their technology may not be quite on par with American 

production, it comes with none of the restrictions in selling to unfriendly nations. So while we succeeded in preventing American 

companies from inadvertently providing technology to China or 

other restricted nations, we also helped fuel our global competitors, 

some of whom do not share our concerns for supplying unfriendly 

regimes. 

As if this dynamic were not enough to warrant a fresh review 

from the new administration, we are now hearing from leaders 

within the defense and intelligence agencies who believe the American satellite industry has been so weakened that it is now threatening the sustainability of the very security we are trying to protect. 

Mr. Chairman, this is a sobering reminder that good intentions 

are not enough. Whether it is the overly rigid parameters of No 

Child Left Behind, the lack of regulation for derivatives and nofault swaps—which I was just talking about in the Government Reform and Oversight Committee—or the oversight of commercial 

satellites, it seems to me that it is incumbent upon those of us 

writing the laws to ensure they are more than the enshrinement 

of good intentions. They must be focused on efficacy. 

In this particular case I would say we are overdue for revisiting 

this export policy at the start of a new administration, and our upVerDate 0ct 09 2002 10:52 Jun 23, 2009 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 F:\WORK\TNT\040209\48443.000 HFA PsN: SHIRL
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coming review of the State Department budget provides just such 

an opportunity. I hope today’s hearing will be the start of that important discussion, and I thank you for holding it. 

[The prepared statement of Mr. Connolly follows:]


48443f.eps
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Mr. SHERMAN. I thank the gentleman from Virginia. 

I am about to recognize our witnesses. I will ask them, kind of 

in reference to the comments of Mr. Rohrabacher, if they can weave 

into their opening statements whether there is a way to achieve 

the jobs objective if we completely shut out China, but otherwise 

make changes; and, second, whether we are talking here not just 

about opportunities for the companies, but try to tell us whether 

we are creating U.S. jobs rather than just profits for U.S. companies. 

Without objection, we will enter into the record the opening 

statement submitted by Mr. Manzullo, who is a member of this 

subcommittee, and also a copy of today’s New York Times article 

on the subject of these hearings. 

[The prepared statement of Mr. Manzullo follows:]

11


48443g-1.eps
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48443g-2.eps
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[The article referred to follows:]


48443e-1.eps
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48443e-2.eps
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48443e-3.eps
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48443e-4.eps
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Mr. SHERMAN. With that, let us welcome our first witness, Pierre 

Chao, Senior Associate with the International Security Program of 

the Center for Strategic and International Studies. Mr. Chao was 

a co-chair of the working group on the health of the U.S. space industrial base and the impact of export controls. 

Mr. Chao. 

STATEMENT OF MR. PIERRE CHAO, SENIOR ASSOCIATE, 

CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES 

Mr. CHAO. Mr. Chairman, Mr. Royce, members of the subcommittee, thank you for inviting me to testify before you. If I can 

have my written testimony and a copy of that study included for 

the record, I would be grateful. 

I was asked to talk about this study that we undertook in 2007–

2008. A lot of the conclusions and findings I am hearing quoted, 

so from that perspective that is a good thing. At the time I was a 

full-time employee of the Center for Strategic International Studies. I am now a non-resident senior associate at CSIS. 

The study started in response to mounting concerns on the part 

of the National Security Space Community about the health of its 

industrial base and the rumblings that space-related export controls were causing problems within the industry. We put together 

a working group that we thought was very well balanced, that represented all the different constituencies, because there are multiple 

viewpoints. So we made sure we had on that working group people 

from the Defense Department, people from the State Department, 

people from large companies and small companies, people with congressional experience, people from the new space community. 

We were also able to leverage some outstanding data analysis 

generated by the Bureau of Industry and Security. It was a survey 

done of the industry, the first time anybody had done it, and the 

fact that your CEO would go to jail if they didn’t answer it made 

sure we had a 100 percent response rate. So we had a lot of good 

data related to it. 

We also approached the problem with a couple of key principles: 

First, leadership in space is critically important to U.S. national security. 

Two, there are deep interdependencies between the defense 

space, intelligence space, civil space and commercial space communities. Weakness in one represents a weakness in all, because we 

share the same industrial base. 

Third, it is important to have a strong industrial base. 

Four, a prudent export control policy is important and necessary. 

Finally, we also looked at this whole issue through the lens of 

national security. It was very clear in that 1999 legislation, the intent of the Congress was very clear. It said that national security 

trumps economics in this case, so therefore we examined everything from a national security lens to see are we meeting the goals 

we wanted. 

So what were some of our findings? One, the overall health of the 

industry is good. We put quotes around the word ‘‘good’’ because 

there is a certain amount of fragility to it. There is a lot of capacity, not enough work. And we did recognize some very noticeable 

weaknesses in the second and third tier of the industries, where 

18

there is the beginnings of single points of failure which should be 

of concern. 

Two, the U.S. space industrial base has returned to being very 

dependent and tied to the defense market. Where once upon a time 

it was more broadly based, now 60 percent of the revenues are related to defense, 90–95 percent are related to U.S. Government. We 

are arsenalizing the industry. Philosophically you can make a policy decision and say that is the way I want to do it, but there is 

a price we have to pay for that. And we have to be honest about 

the price in order to keep it as part of an arsenal, or we let it complete more broadly in the global marketplace and diversify and 

broaden its competitiveness. 

Third set of findings. Space capabilities continue to proliferate 

globally. Mr. Chairman, you talked about that. And we are rapidly 

losing the ability to control that proliferation. Many of the countries that have gained capability in space got it from the Russians 

or others. 

So from that perspective, the intent of the Space Export Control 

System has not prevented the rise of these other powers. It may 

have slowed them down, it may have increased the cost of achieving those capabilities, but it has certainly not stopped the arrival 

of other players. 

In fact, in some of the more striking findings they found that the 

Export Control Regime had a perverse—to use your words—a perverse unintended consequence of encouraging others to develop indigenous capabilities, when they told us they would have been 

more than happy to buy American equipment because it is far better; but because of the friction in the system, they couldn’t rely on 

American components. So we were very much struck by that. 

Another set of findings related to the fact that the export control 

regime makes it very difficult to engage in cooperation with our 

close allies, in some cases contrary to what the U.S. national space 

policy is, which says to encourage international cooperation. Again, 

there is a friction in place. 

Then the last set of findings we found is that regardless of what 

study you look at—and I don’t care which one you find—the U.S. 

satellite industry has been losing global market share over the last 

couple of years. And in particular, the biggest burden has landed 

on the second and third tier of the industry that don’t have the resources of the big guys to wind their way through the export control system; that really rely on being able to participate in the global marketplace in order to generate the profits to invest back in 

plants and research and development. 

So we came up with a series of recommendations and I would 

like to highlight a couple of key ones. 

One, it is time for the administration and the Congress to sort 

of review and reconcile the strategic intent of these goals. 

Two, take the technologies and identify the components that you 

want to restrict for China, or for anybody else, because that is what 

we want to get at, rather than putting the entire satellite on it, 

which turned out to be an extremely blunt instrument, because 

once you put a satellite on the munitions list, every component 

down to the simplest bolt becomes a munition. So let’s stop what 

we want to stop going out, which is the critical technology 

19

componentry, allow the overall satellite to be moved back, and if 

someone doesn’t want to put critical technologies on it, they don’t 

have to and they can sell it, and we are still protecting technology 

while generating jobs in the grand scheme of things. 

You need an annual review. This committee has talked about 

that in prior reform. Why? Because the technology changes quite 

a bit. 

Finally, there are other amendments or changes that you can do 

in terms of time of licenses, et cetera, that you have referred to, 

and other reform legislation that you actually—because you have 

a piece of legislation related to the space industry—insert related 

to this topic. 

So, I thank you for allowing me to present our study and thank 

you for taking up this very important topic, and I look forward to 

your questions. 

Mr. SHERMAN. I thank you for that presentation. 

[The prepared statement of Mr. Chao follows:]

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Mr. SHERMAN. I would note that the reason Congress put satellites on the munitions list had, believe it or not, nothing to do 

with the component of the satellite and everything to do with preventing any U.S. entity from having an interest in the success of 

the program. So it wouldn’t really matter whether it was great 

technology or poor technology that was inside the satellite. If you 

bought the rationale for the law we passed in the nineties, you 

would maintain it. 

With that, let us go to Dr. Larry Wortzel, vice chairman of the 

U.S.-China Economic and Security Review Commission. He is a retired U.S. Army colonel with extensive experience in technological 

security and counterintelligence. He served two tours of duty as a 

military attache ́ at the American Embassy in China. 

STATEMENT OF LARRY M. WORTZEL, PH.D., VICE CHAIRMAN, 

U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION 

Mr. WORTZEL. Thank you, Mr. Chairman. Chairman Sherman, 

Ranking Member Royce, satellites form a really major part of military command, control, communications, information gathering and 

targeting systems or C4ISR systems. And I am going to draw from 

some of the conclusions in the annual reports of the U.S.-China 

Economic and Security Review Commission, and I will provide you 

some of my own views in discussing how satellite exports bear on 

the strength of the Chinese People’s Liberation Army, or the PLA. 

Now, the Strom Thurmond National Defense Authorization Act 

for Fiscal Year 1999 turned control over satellite export licensing 

to the State Department under the Arms Export Control Act. Factors driving Congress to make this change were concerns about the 

rapid growth of the PLA, China’s strategic intentions, potential 

threats to the United States, and the potential for proliferation of 

weapons and delivery systems by China. 

Congress also expressed concerns that cooperation with China in 

space and missiles could improve accuracy in Chinese missile programs, assist with the development of multiple independently targeted reentry vehicles, and assist with the development of submarine-launched ballistic missiles. 

I see no reason to change the decision to have satellite exports 

remain on the munitions list. Satellites are now an integral part 

of China’s military architecture. They are used to support intelligence collection, control forces, direct precision missile strikes, 

and for data transfers that improve combat effectiveness. 

The PLA has research that suggests using ballistic missiles with 

maneuvering reentry vehicles to attack U.S. aircraft carrier battle 

groups. A sensor architecture based on satellites would guide such 

attacks. Right now, the PLA has only two tracking and data relay 

satellites in orbit. That is not enough to give them a real time global intelligence collection capability, but is it is more than adequate 

to support their plans to target American aircraft carrier battle 

groups with both hypersonic cruise missiles and those maneuvering 

ballistic missile warheads. 

Now, given the way that satellite programs are being used in 

China, exports of dual-use technologies that would improve China’s 

remote sensing satellite capabilities still require careful control. 

Our Commission’s 2006 annual report concluded that China has 

27

recognized the effectiveness of force multipliers like C4ISR and it 

is enhancing its own capabilities to make its military a more formidable fighting force. These improvements depend directly on satellites. 

In 2007, the Commission’s annual report concluded that China 

has developed an advanced anti-satellite program that consists of 

an array of weapons that could destroy or incapacitate an enemy’s 

satellites. 

My own research shows that China’s military strategists see the 

United States as the most likely potential adversary. A research 

paper that I did for the American Enterprise Institute documents 

that PLA strategists contemplate maneuvering satellites in space, 

among other measures, as a means to degrade an adversary’s 

C4ISR programs. 

Mr. Chairman, I ask that copies of my research be made part of 

the record. 

Mr. SHERMAN. Without objection, so ordered. 

[The information referred to is not reprinted here but is available 

in committee records.] 

Mr. WORTZEL. Although China has not successfully tested a submarine-launched ballistic missile, it has fielded two new ballistic 

missile submarines. A decade ago the House expressed concern 

that satellite cooperation with China could improve its submarinelaunched ballistic missile program. 

I also recommend examining more closely how the United States 

controls the dual-use satellite-related technology. China is working 

with Iran on space and satellite programs, plus other countries. 

Last week, Dr. Eugene Arthurs, who is CEO of the International 

Society for Optical Engineering, told our Commission that technologies used in satellites, such as high-powered chips that support 

lasers, can be part of a space-based weapons system. 

I urge you to keep satellite export controls in the Department of 

State and also to look into implementing some of the findings of 

the ‘‘Beyond Fortress America’’ report related to ensuring that export control processes are more timely, distinguish among technologies, and that regulations are updated to account for advances 

in technology and development. 

I would note in response to Mr. Rohrabacher’s concerns that in 

Fiscal Year 2000, the Congress, despite where satellite controls 

were placed, decided they wanted to move forward and push satellite and space cooperation with Russia, and through executive decisions were able to do that, regardless of where the system was 

administered. 

Thank you very much for the opportunity to be here and testify. 

Mr. SHERMAN. Thank you. 

[The prepared statement of Mr. Wortzel follows:]

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Mr. SHERMAN. Our third witness is Ms. Patricia Cooper, the 

President of the Satellite Industry Association, a Washington, DCbased trade association, representing global satellite operators, 

service providers, manufacturers and launch service providers. Ms. 

Cooper has spent more than 17 years working in the satellite industry and in government. 

Please proceed. 

STATEMENT OF MS. PATRICIA COOPER, PRESIDENT, 

SATELLITE INDUSTRY ASSOCIATION 

Ms. COOPER. Thank you, Mr. Chairman, Mr. Royce, members of 

the subcommittee, Mr. Rohrabacher. Thank you for inviting me to 

testify today on the critical issue of U.S. satellite export controls. 

As president of the Satellite Industry Association, I speak here 

as the unified voice of leading satellite manufacturers, launch providers, satellite operators and service providers. While the satellite 

industry is by no means monolithic, SIA speaks when the industry 

has a common view on policy, regulatory and legislative issues that 

affect its business. We hold such a common view on U.S. export 

policies for satellites and space-related products. 

The commercial satellite industry endorses strong, sensible and 

effective export controls which prevent the most advanced technologies from falling into the hands of our adversaries. But we believe the time is right for Congress to review its decision of more 

than 10 years ago to mandate by legislation that exports of all satellites and related technologies be controlled by the State Department and licensed pursuant to ITAR. 

Notwithstanding their original intent, SIA believes that the current rules governing satellite exports have resulted in overly broad 

regulation that disadvantages U.S. spacecraft and component manufacturers in the global marketplace without necessarily having accomplished their desired intent. The broader U.S. space industry 

has also been impacted, raising concerns about the health of the 

underlying space industrial base that supports the defense, intelligence and civil space communities. 

Satellites are the only commodities included on the U.S. munitions list by congressional mandate versus regulation. As a result, 

the executive branch wields limited discretion authority over satellite exports. SIA questions fundamentally whether commercial 

satellite technology merits this extraordinary and unique position 

of legislative oversight compared with all other sensitive technologies in the USML. 

SIA is also concerned about the U.S. satellite manufacturing sector’s ongoing competitiveness. Until recently, most satellites manufactured anywhere in the world required the inclusion of U.S. 

componentry or subsystems regulated under the ITAR. In other 

words, virtually all satellites had some measure of U.S. export control, no matter where they were made, so the added time, cost and 

uncertainity stemming from ITAR compliance fell in some measure 

on every manufacturer. 

This is no longer the case. In the past few years, European manufacturers have developed the capability to produce the requisite 

parts and components for a spacecraft without any U.S. content. 

One European manufacturer, as mentioned by the chairman, 

38

Thales Alenia Space, has actually begun to market an ITAR-free 

satellite. 

Because European countries do not regulate satellites as munitions as does the United States, these ITAR-free satellites are traded as commercial dual-use products under far less stringent export 

controls. We know of at least six such ITAR-free satellites sold by 

Thales to date, initially to Chinese and Hong Kong customers, and 

more recently to Indonesian, Egyptian and European satellite operators. 

U.S. export policy now has joined price, quality and technical capabilities as a factor when customers consider buying U.S.-made 

satellites. Whether for real or perceived reasons, many prospective 

international satellite customers maintain the belief that U.S. export controls are unpredictable, excessively stringent and time-consuming. 

As a result, U.S. companies face an added constraint in winning 

international business. Our efficiency and competitiveness directly 

affects our ability to retain and grow the quarter of a million highquality, high-paying satellite jobs now within the United States. 

Addressing this challenge requires action on two fronts. First, redouble the State Department’s ongoing efforts to make the ITAR licensing process more efficient, timely and predictable. 

Second, SIA encourages Congress to adopt legislation that would 

return the authority to set export licensing policy for satellites to 

the executive branch where it resides for all critical technologies on 

the USML. Restoring executive authority for satellite export policy 

will allow for expert review of individual satellite technologies, ensuring that the USML focuses exclusively on items that merit control, those products that are critical to our Nation’s security or competitiveness. 

The current satellite chapter remains largely untouched from 10 

years ago, including items that may have been cutting edge in the 

late 1990s but today have limited military or technological sensitivity. Many are now widely available from non-U.S. sources. Careful review and update of all satellite-related USML chapters should 

be an immediate priority. 

Finally, SIA believes that the imperative to review and revise 

overall United States policy on satellite exports is distinct from 

concerns regarding the launch of such technology on Chinese 

launch vehicles. Rigorous safeguards govern the export of any 

United States spacecraft or related technology for launch from 

China. 

Since 1999, no communications satellite or related technologies 

have been launched on Chinese vehicles, nor have there been reports of such permissions being sought. We urge that any consideration of this complex and country-specific issue not impede Congress from timely action and assessment of the appropriateness 

and effectiveness of its blanket mandate to regulate virtually all 

satellite technology under the ITAR. 

The satellite industry remains committed to U.S. export policies 

that safeguard sensitive technology, but we urge Congress and the 

administration to consider legislation that supports U.S. satellite 

exports and the jobs dependent on them by enabling the executive 

39

branch to determine the appropriate licensing treatment for exports of U.S. commercial satellites. 

It is our belief that the reform of these policies will result in a 

healthier satellite sector, reinforcing the American industrial position in the global marketplace and at home, and safeguarding both 

jobs and critical space technology for the Nation. 

On behalf of the members of the Satellite Industry Association, 

I again wish to thank you for the opportunity to testify and look 

forward to your questions. 

[The prepared statement of Ms. Cooper follows:]

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Mr. SHERMAN. Thank you. And if we are going to go forward, we 

are probably going to have to have another hearing before we do 

legislation where we will have a chance to hear from the administration, particularly the incredibly qualified, knowledgeable and 

gifted Ellen Tauscher, who currently serves with us but will be the 

relevant Under Secretary should the Senate do the logical thing, 

which they should do quickly, and that is confirm her. 

Ms. Cooper, what if I let Dana write one section of the bill, because I know what he would write—don’t let the Chinese do anything—and I let you write the rest of the bill. Your testimony said, 

well, don’t let the ‘‘country specific’’ issues prevent a good general 

policy. So you get to write the good general policy, and he gets to 

write the one policy that says the Chinese don’t get involved. 

Does that bill mean more jobs and a stronger satellite industrial 

base for the United States, or does letting Dana write that one section eviscerate the good that the bill would do? 

Ms. COOPER. Mr. Chairman, we believe it will retain U.S. jobs 

and potentially add new jobs. The global satellite market is more 

than——

Mr. SHERMAN. So that is even if we exclude China from everything? 

Ms. COOPER. The global satellite market is more than just China. 

Mr. SHERMAN. So we could have Dana write the stuff on China 

and otherwise allow the administration to decide how to treat satellite and satellite technology, and that would go a long way toward 

achieving the job objectives and the industrial base objectives we 

are trying to achieve? 

Ms. COOPER. I believe that your question about whether that will 

aid the industry, yes, I believe it will. There are plenty of non-U.S. 

customers that are concerned about the ITAR system when purchasing components or when considering purchasing an overall——

Mr. SHERMAN. And these are customers that are not going to use 

China to do the launch? 

Ms. COOPER. If it includes United States technology, it won’t be 

launched on a Chinese vehicle under current law. I will note that 

U.S. satellite operators and manufacturers are disadvantaged when 

they are constrained from access to the same launch vehicles their 

competitors are. 

Mr. SHERMAN. I didn’t say you could write the whole law. He 

gets one section. 

Ms. COOPER. I do think that is an important point. But at this 

point, the Satellite Industry Association is not asking for changes 

in the Chinese policy. 

Mr. SHERMAN. Okay. 

Dr. Wortzel, you spoke about how important it was that China, 

and perhaps others, not get an advancement in their satellite technology. To what extent would we achieve your purposes if we allowed the launch vehicle, the Chinese launch vehicles, to be used, 

but we had, say, a colonel accompany the satellite, you know, with 

10 American armed guards and whatever, to make sure that nobody looked inside it, and assume we were effective in telling 

American companies not to give launch technology or propulsion 

technology to the Chinese? 

Would that achieve our purposes? 

50

Mr. WORTZEL. Thanks for that question, Mr. Chairman. I think 

it would achieve part of the purpose. A very good Air Force colonel 

who is a friend of mine was actually out there on both of those 

launches trying to do that. 

I think it is important to realize the Chinese satellite launchers 

and Great Wall Industries didn’t crack that satellite open to try to 

get a look at technology. Now, there are other concerns about what 

they might develop in terms of fairings and warheads. The failure 

in those two cases, the allegations against Hughes and Loral, were 

the failures of two American engineers. So I think if you strengthen oversight——

Mr. SHERMAN. So any American engineer going with the satellite 

would have to be mute? 

Mr. WORTZEL. Certainly they would have to be extremely careful. 

Mr. SHERMAN. Or just don’t talk. 

Mr. WORTZEL. But if you increased the penalties for unauthorized disclosures of controlled information and really put a couple of 

people in jail and fined them, that helps. 

Mr. SHERMAN. It is not so much to increase the penalties. To say, 

‘‘What happened in that case was inadvertence,’’ was a defense. 

Now, it would be hard just in light of history to use that defense 

again. We could go further and say for this industry, inadvertence 

is not a defense, at least in dealing with China. 

Mr. WORTZEL. Not with the history of what has gone on. But I 

think Mr. Chao made one point with four parts in his testimony, 

when he talked about looking at satellites in terms of their defense 

purposes, their intelligence purposes, their civil application or their 

commercial application. 

When you begin to look at this, and I really like this Beyond Fortress America approach to updating and changing how we handle 

a broken export control system, but if you look at those things, you 

could perhaps begin to parse out technology in satellites or the uses 

of satellites that really are inherently military or intelligence related, and others that are truly commercial. 

Mr. SHERMAN. Is there any evidence that China or anyone else 

has gotten any information about satellite technology, as opposed 

to propulsion and launch technology, through any inadvertence of 

a United States company? 

Mr. WORTZEL. The Chinese have stolen such information in cyber 

attacks that I frankly don’t know what is gone. 

Mr. SHERMAN. Let me refine the question. As a result of their capacity to launch satellites, have they gotten any information about 

what is inside either a European or American satellite that they 

weren’t supposed to get, and speak only of what is in the public domain. Don’t tell me anything classified. 

Mr. WORTZEL. Sir, I know of no instance where they violated the 

integrity of a satellite. 

Mr. SHERMAN. I am sure they have plenty of intelligence 

operatives trying to hack their way into Ms. Cooper’s clients, scurry 

around the outside perimeter or sneak inside, but nothing we do 

here is going to affect that. 

Now, Ms. Cooper, I am told that the economics are usually that 

the satellite is very valuable compared to the launch costs, and yet 

Newsweek reports that people are willing to pay a 5 or 10 percent 

51

premium for an ITAR-free satellite so they can use the Long March 

rocket, which is a 20 percent discount compared to an American 

rocket. 

I am not a rocket scientist. I am an accountant. You do the math, 

and it looks like these companies not only are undercutting what 

should be joint Western foreign policy, but they are costing themselves money; because paying even 5 percent more for the satellite 

to get a 20 percent discount on the rocket—in most cases that 

means you are paying more. 

Is the launch vehicle usually only 10 or 20 percent of the cost of 

the satellite? 

Ms. COOPER. It depends on the kind of satellite. Satellites are 

somewhere between $200 million and $500 million, and the launch 

in most Western or non-Chinese launch vehicles, as a ballpark, is 

around $80 million. The Chinese launch vehicles, from our understanding, are around $40 million. 

Mr. SHERMAN. So Newsweek may have it wrong, in that the discount by using the Chinese launch vehicle may be as much as 50 

percent as compared to using a Western vehicle. 

Mr. Chao or Dr. Wortzel, do you agree generally with those numbers, that a Western launch vehicle is going to be $80 million, the 

Chinese about $40 million? 

Ms. COOPER. In general, that is what we understand. I will 

say——

Mr. SHERMAN. I am asking the other two witnesses whether they 

have an understanding that clashes with that. 

Mr. WORTZEL. Well, I will tell you, based on what we have 

learned at the U.S.-China Economic and Security Review Commission, I have looked at the subsidized launch services——

Mr. SHERMAN. I am only looking at this from the standpoint of 

the owner of the satellite. They don’t really care whether the Chinese are efficient or subsidized. 

Mr. WORTZEL. They just want to save money. It makes a lot of 

sense. 

Mr. SHERMAN. Right. And I am saying you save about $40 million on the launch when you go from the European or United 

States launch vehicle to the Chinese? 

Mr. WORTZEL. That seems to be true. 

Mr. SHERMAN. And to get it ITAR-free, you are going to be pay- ing another $20 million for the satellite, at least. So the savings 

are slight, but the fear is there that—well, Ms. Cooper, is an ITARfree satellite selling at a 5- or 10-percent premium, or is the ITARfree satellite the same cost as one that is not ITAR-free? 

Ms. COOPER. We understand the ITAR-free satellites are more 

expensive. I think that range is about right. 

I would note that cost isn’t the only consideration when choosing 

a launch vehicle generally. It is also availability of timing. The 

schedule to try to get to orbit is pretty important, and that may 

be a consideration. 

Mr. SHERMAN. So subsidizing our program might be helpful, both 

in terms of providing more launch vehicles and providing a price 

that reflects what the Chinese are providing. 

At this point, the gentleman from Virginia will chair these hearings as I go vote in Financial Services, and he will be recognizing 

52

the most senior Republican member in the room. You can chair it 

from your own desk. This one has nifty things. 

Mr. CONNOLLY. It is too soon, Mr. Chairman. 

Mr. CONNOLLY [presiding]. Mr. Rohrabacher. 

Mr. ROHRABACHER. Thank you very much. I am wondering if 

back during the late 1930s we would have decided that it was really cost effective to contract with the Germans to launch things into 

space. After all, Hitler had a V–2 rocket, which was much more 

cost effective than what the Allies had or anybody that was friendly to the United States. 

Perhaps we should think of that as a comparison here because 

perhaps launching something in and of itself doesn’t mean that 

Hitler would have received the benefit of what was in the satellite, 

and, Colonel, we are not talking about what is in the satellite. We 

are talking about the relationship that is established, will it further the ability of an adversary or potential enemy of the United 

States if we enter into that relationship? 

And I don’t think anyone here would be advocating that we start 

use utilizing the V–2 rocket back in 1939 or 1940. That would have 

furthered Hitler’s efforts because it would have enabled Hitler to 

develop that rocket a lot sooner than he did. 

What we do know is that the last time we dealt with the Chinese, and it was almost de ́ja` vu all over again when I heard the 

chairman talking about we are going to have armed guards down 

there and would this make a difference, and the fact is that I 

signed on to permitting American satellites to be launched on Chinese rockets with that very same guarantee. 

And the minute the relationship was established, it was—all the 

safeguards disappeared and the relationship that was established, 

let us remember this, resulted in what? 

The Chinese now, the Long March Rocket Company, by the way, 

which is a People’s Liberation Army-owned company. So we are 

talking about the Army of Communist China, of the regime of Communist China went from a situation where the Long March rocket 

was a relatively ineffective and inefficient because it would blow up 

all the time. Nine out of ten flights were—they couldn’t have afford 

to have satellites being launched on it—went from being the most 

undependable to the most dependable rocket launched, right, under 

that time we were having our relationship with them. 

It went to the point where a Long March rocket before could only 

launch one, in the 1 out of 10 times they were successful, it had 

the payload of one, and after our relationship the Long March miraculously could launch three different payloads. 

So it wouldn’t—one would conclude from that that we basically 

had through our relationship permitted a vicious dictatorship, 

which still puts religious people in jail, which allows no freedom of 

speech, no opposition parties, and still considers the United States 

their most likely enemy, that we actually, in our relationship, permitted them to MIRV their rockets from their military rockets and 

improve their stage separation, which is what their major problem 

was, from what I understand, improve their stage separation to the 

point that now they have rockets that succeed in launching rather 

than fail. 

53

And I might add, they also have gyroscopes. Just miraculously, 

gyroscopes used to be huge things like this, and now they are on 

chips and about that big. And, miraculously, the Chinese rockets 

have the gyroscopes that were developed by hundreds of millions 

of dollars of research in the United States. 

So we aren’t just looking about, talking about whether we have, 

when we are letting the Chinese enter into this relationship. I am 

just talking about what they will get by opening up a satellite, because that is not the worry. But the relationship will increase the 

potential of a country, which is the world’s worst human rights 

abuser, who looks at us as their most likely potential enemy. And 

until that changes, we should have them regulated on a different 

level than we are regulating how we deal in the relationships that 

we establish with Brazil or England or Italy or any of these other 

countries like that. 

Now, Ms. Cooper, I was very happy to hear that the satellite industry has recognized that, yes, it would be a good thing to reform 

our system even if it did leave out China, because the rest of the 

reform package would actually be beneficial as well. 

So am I correct in assuming that we can all work together now 

and try to find out what that area of reform is, because I will let 

everybody on notice, if we are going to loosen the controls on this 

vicious dictatorship and our relationship there, I will fight that, 

and I will make sure that people—and there is a lot of people will 

agree with that. 

However, if we can agree on the rest of the world and make 

things better for it, maybe we should do that. 

Mr. CONNOLLY. The gentleman’s time has expired. If the panel 

wants to briefly respond. 

Ms. COOPER. Yes, Mr. Rohrabacher, although I have mentioned 

that satellite manufacturers and operators are disadvantaged when 

they don’t have access to the same resources that their competitors 

do, we recognize that policy with regards to China includes a different level of complexity, a different set of stakeholders, a different set of allies, a different set of considerations. 

As a result, the Satellite Industry Association is not now seeking 

change to those unique prohibitions and restrictions on United 

States satellite technology being launch from China. 

In fact, I would note again the study that Mr. Chao described 

that seems to indicate that our export rules are actually encouraging the development of comparable technology from European 

manufacturers, which can then be launched from Chinese vehicles 

without the controls comparable to U.S. ITAR controls. 

Thank you. 

Mr. WORTZEL. Mr. Rohrabacher, I would go a little further than 

you. I think you have to look at the fact that the chief of China’s 

strategic rocket forces, who also is responsible for some of these 

satellite launch missiles, has twice visited Brazil and Argentina on 

space cooperative programs. 

So you really have to be careful about what you loosen and who 

is cooperating with whom in space. 

I am going to reinforce one of your points by noting that the 

House Select Committee on U.S. National Security and Military/

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pressed concerns a decade ago that China could improve its submarine-launched ballistic missile program. 

Mr. ROHRABACHER. Correct. 

Mr. WORTZEL. They just put a new submarine base in Hainan Island, building two new ballistic missile submarines. But they don’t 

yet have a missile they can launch from it, so we really don’t want 

to do anything to help them along with that either. 

Mr. CONNOLLY. Mr. Chao, briefly. 

Mr. CHAO. Yes, I want to tease out a thing that you mentioned 

that is very important in what you said to the extent of identifying 

who, because in many ways I think that is at the basis of what real 

export control reform can be about today. We obsess and focus on 

the what, when in the reality, the decision in the end is about the 

who. And because we focus on the what versus the who, we are 

treating good allies and friends like the U.K. And Australia exactly 

the same way we are treating the Chinese, and that is where all 

the friction is showing up in the system. If you sort of reverse the 

lens and focused more on who, I would suspect you would get—you 

would find a lot more flexibility and movement and loosening of the 

friction in the system, because it is meaningless to obsess about 

whether the Brits are getting bolts for an airplane. 

On the other hand, I want to pay close attention to certain satellite technology or semiconductor technologies or biotech technologies in terms of who they are flowing to. 

Mr. CONNOLLY. Thank you. Let me ask the panel, in 1997, U.S. 

companies controlled 65.1 percent of the world satellite manufacturing market. By 2007 that was down to 41.4 percent. To what do 

you attribute the decline? 

Ms. COOPER. Some of the decline was for Chinese customers that 

United States companies could no longer seek, and I think some of 

the additional changes in the demographics, the market share for 

U.S. manufacturers, do have to do with the additional restraints 

placed on ITAR. I would note, however, that the market share for 

U.S. companies, U.S. satellite manufacturers, has remained very 

stable at about 40 percent now. 

We will be very interested to see statistics in the next year or 

so when the contrast is between U.S. ITAR-regulated satellites and 

European non-ITAR-regulated satellites. That contrast hasn’t been 

as clear or apparent in years previous to the development of an 

ITAR-free satellite. 

Mr. CHAO. In our study we tried to unpack that data and get behind it. There is a clear drop that you can see when you draw the 

line. There are lots of factors in it and so people will just push back 

and just say you can’t blame export controls, and that is a true 

statement. The European industry has been rising at the same 

time. 

But if we didn’t find the smoking gun, we at least got a whiff 

of gunpowder, is the way I put it, to the extent that in specific 

cases you saw customers saying that I will not buy from America 

now because of the ITAR. And it is not really the issue of getting 

to the technology—in some ways, one of the answers to Chairman 

Sherman’s question about why would you take—pay 5 percent 

more, a lot of it has to do with the timing and the uncertainty related to the launch. 

55

There is all the lost revenues that if you are late by 60, 90, 180 

days that they just cannot stand. And there is that economic component that is fed into it that I think has contributed to that market share loss, much to the frustration of the American industry 

that provides a fine product. They are just looking for that predictability and visibility that is lacking. 

Mr. WORTZEL. Mr. Chairman, my understanding is that there 

has been, not related to China or these export control restrictions, 

such a decline in the American space launch industry that today 

we don’t make our own rocket motors. I mean, we are using Russian rocket motors. 

So I think the source of those differences and the data may have 

a lot more to do with the way the technology and the industry 

globalized than on export controls. 

If you can’t make a rocket motor, you are not going to have much 

of an independent industry. 

Mr. CONNOLLY. One of the things that you both were talking 

about was maybe you could, you know, return to some more sensible kind of export control that would strip out the ITAR-related 

things or the things that we now do not consider sensitive that 

maybe were considered sensitive, as you mentioned, Ms. Cooper, in 

1999 but no longer are, and commercialize that and sell it. 

The question, I guess, for you is twofold, one is there really such 

a bright line that we can recognize strictly commercial uses versus 

something else; and what about the whole issue of dual technology, 

dual-use technology? Because I would assume with sophisticated 

technology, that line gets blurred more often than not. 

Mr. CHAO. I think you have hit on the key point, from—and, 

again, same thing with Mr. Rohrabacher. If you are watching everything, you are watching nothing, right, and so the issue becomes 

prioritization of resources, technology, et cetera, et cetera. 

We believe there are clear bright lines, and in some of the initial 

work that we did you can find them, the bolts, the commonly available, you know, solar panels, the tubing, the coolant systems that 

are commonly available. There is a clear line. 

There is a very clear line on the other side of some very sensitive 

things you absolutely do not want anybody to get, even our closest 

friends, that you would not. 

But by doing that, what it would leave is the resources of the export control system to then focus on the difficult questions, and 

that is where you want to be putting your brain power and all the 

intellectual capital rather than trying to track everything. 

So we think you can—what you want to do is get the common 

stuff off, the bright line, never ship it away, and then let’s spend 

our time figuring out the really hard parts. 

Ms. COOPER. I would concur with that. I believe that the current 

legislative mandate doesn’t give the executive branch the permission or the sense of permission to do that evaluation. And I expect 

that the experts in the Department of Defense, the Intelligence 

Community, civil space and the State Department and Commerce 

Department can come up with a very clear list of those that should 

be in and those that ought not to be in, and there may be a gray 

area in between that would merit discussion. 

56

But the current legislative mandate of one-size-fits-all simply 

doesn’t permit that differentiation. 

I would just note that I, too, like the conclusions within the Fortress America report, and would echo the phrase brought out by my 

colleague, Dr. Wortzel, saying distinguish among technologies. As 

Mr. Chao said, what? 

Mr. CONNOLLY. Dr. Wortzel, and then my time has expired, Mr. 

Chairman. 

Mr. WORTZEL. Sir, I think you can distinguish among some of the 

technologies, but I just can’t overemphasize the fact that whether 

you control it on a munitions list or on a commodities control list, 

the export control system is bureaucratic, and they really make 

that case very well in this report, that it is broken. 

You have engineers that have never seen a production line trying 

to make decisions off a list about what the state of global production on a technology is. You have government bureaucrats who 

mean very well, good counterintelligence guys, that say we are just 

not going to do this, that don’t know what’s available. So that you 

really have to look at improving—government, industry panels that 

can develop an appellate process, that can do it rapidly, and that 

can really review what is cutting edge technology that matters and 

what you can buy at Ace Hardware. 

Mr. SHERMAN [presiding]. The time of the gentleman has expired. 

We will now recognize the gentleman from California. 

Mr. ROYCE. Thank you, Mr. Chairman. 

I was going to ask does the State Department regulate and monitor the use or follow the content of ITAR-licensed satellites. Do 

they monitor that? Do you think it is monitored? 

Mr. WORTZEL. Yes, I believe that they do look at the content of 

the satellites, and I think that they do that in coordination with 

the Department of Defense and the intelligence communities, sir. 

Mr. ROYCE. And that is regulated by them. 

Mr. WORTZEL. They must do that because the satellites are on 

the munitions list. They are ITAR controlled. 

Mr. ROYCE. Okay. Because one of the questions that one of my 

staff members had was, was it possible to prevent the military, the 

Chinese military, from utilizing the services of ITAR-licensed satellites operated by foreign companies? 

Mr. CHAO. If it has a U.S. component—one of the other things 

that the legislation did and that the regulation has done, you are—

if you are going to go oversees you are required to actually pay to 

have somebody follow that satellite along with it. 

Mr. ROYCE. Pardon? 

Mr. CHAO. You are actually required to pay somebody to kind of 

monitor and follow along that satellite as a satellite as a service 

provider in order to safeguard it. 

Mr. ROYCE. I see. Well, let me ask Ms. Cooper a question. 

You advocate that we redouble our ongoing efforts to make the 

licensing program, the ITAR licensing program, more efficient and 

predictable and timely. And I was wondering what grades you 

would give the reform efforts made by the late Bush administration 

in this. 

57

Ms. COOPER. My members tell me that the licensing time has improved and that their efforts more recently to improve the process 

have borne fruit. I would note that the kinds of licenses that satellite manufacturers require for trade are more complex. So they 

take a little bit longer than some of the other kinds of export licenses that may not be program licenses but specific product exchanges. 

I think there is probably more streamlining that can be done for 

those many licenses that an individual satellite program requires, 

as many as six licenses for the transfer of one spacecraft. 

Mr. ROYCE. Are you suggesting in your testimony here that the 

commercial availability of satellite components from non-U.S. 

sources is not considered in current reviews of the munitions list? 

Give me your view of what is going wrong there and pull microphone closer to you, if you will. 

Ms. COOPER. I don’t believe foreign availability is a consideration 

at all. 

Mr. ROYCE. Pardon. 

Ms. COOPER. I don’t believe foreign availability is a consideration 

in the current U.S. munitions list. 

Mr. SHERMAN. Excuse me, let me interrupt for a second. I am 

going to leave because we have one vote, I will be back. 

Diane Watson will chair the hearing as long as she is in the 

room. When she is out of the room, the hearing is adjourned until 

such time I am back. 

Mr. ROYCE. Let me ask you then, what is your position on doing 

business with China? In other words, what does the industry desire, really, is the question here, and how do you view China’s strategic objectives as they pertain to satellite technology? 

Ms. COOPER. The satellite manufacturers, operators, and launch 

providers, haven’t done business with China since 1998. So I don’t 

know what their intentions are to resume that activity. What we 

have had is internal discussions of great vibrancy with respect to 

our current request, and our current request is that no change be 

instituted for the current prohibitions. 

I do think that the competitiveness of satellite manufacturers 

and operators is affected when there is a considerable difference in 

their availability of resources like launch vehicles, but we are not 

asking for changes now. 

Mr. ROYCE. What is the relevance, in your view, if any, to China’s anti-satellite efforts to your policy recommendations? Is that 

why the recommendation is no change, or give me your view. 

Please pull that microphone closer. The acoustics in here for me 

are not very good and I can’t hear you. 

Ms. COOPER. Okay. The ASAT test has not been a consideration 

in that factor, except to add to the conclusion that any attempt to 

create a coalition of interests to change Chinese launch policy 

would be a different track of policy and requests, completely different ball of wax. 

And so the ASAT test certainly changes the environmental level 

of concern, but we feel that the changes that we are asking for here 

have an immediacy to them. And we don’t see any change in China 

policy, anything near and immediate timeframe. 

Mr. ROYCE. Thank you, Ms. Cooper. 

58

My time has expired, Chairwoman. 

Ms. WATSON [presiding]. Yes. I am going to ask one question, 

and then we are going to recess for the chair to come back, so that 

we can all go and vote. 

I will address this to Ms. Cooper. What measures has the Defense Department taken to effectively monitor and prevent unlicensed technology from occurring in the investigation of satellite 

launch failures? 

Ms. COOPER. For every U.S. satellite that is launched on a nonU.S. launch, non-NATO vehicle, DoD monitors are required. And as 

Mr. Chao mentioned, they are paid for by the satellite operator. So 

that is a part of the activity understood in every non-U.S. launch. 

Ms. WATSON. Great. I will have other questions, but we will wait 

until after the recess. And I would suggest that we will probably 

be back around 3 o’clock if the audience and if the witnesses can 

wait. Yes, maybe quicker than that. We just have one vote on the 

floor. 

Thank you very much. We will go into recess now. 

[Recess.] 

Mr. SHERMAN [presiding]. We will reconvene the hearing. I will 

try to drag out my questioning for this second round long enough 

for my colleagues to return. If they don’t return, then we will gavel 

the hearing down. 

Ms. Cooper, these ITAR-free satellites, are they exclusively using 

the Long March rocket or are there people bothering to buy ITAR 

free and then launching them on American or French or Russian 

rockets? 

Ms. COOPER. To date, all but one of the ITAR-free satellites that 

we are aware of have all been either launched on the Chinese Long 

March vehicle or are slated to be launched on that vehicle, yes. 

Mr. SHERMAN. Do the current rules imposing ITAR prevent 

somebody from buying a satellite made in the United States and 

launching on a Russian vehicle? If it is classified as a munition, 

does that mean it can’t go to Moscow? 

Ms. COOPER. It is not prohibited from being launched on a Russian vehicle, no. 

Mr. SHERMAN. Dr. Wortzel, I see you are—how do our laws with 

regard to satellites today, listing them as munitions, what is the 

practical effect with regard to launching in Russia? 

Mr. WORTZEL. That is really part of the regulation and not the 

legislation, as I understand it, and it is the way the regulation is 

administered by the Department of State and the Department of 

Defense and, in fact, as I mentioned earlier, sir, it was the Fiscal 

Year 2000 Defense Authorization Act that specifically encouraged 

work with Russia on satellites and the space program. So that was 

one of the points I tried to make. 

Mr. SHERMAN. And so we don’t have a blanket prohibition on 

selling munitions to Russia; we do have such a blanket prohibition 

on the transfer of munitions in general? 

Mr. WORTZEL. That is correct. That is because of the Tiananmen 

sanctions, post-1989 Tiananmen sanctions. 

But the President has waived those in a couple of cases, and we 

sold munitions list items to China prior to the Olympics and during 

the Olympics. 

59

Mr. SHERMAN. Let me take a moment to announce that we will 

leave the record open for 10 days to accommodate all members who 

wish to make submissions and, likewise, those of our witnesses 

that wish to make submissions. 

Now, this is really a debate over which of two agencies is going 

to be handling things. As Dr. Wortzel points out, you can go to 

State and get a license to export a munition to China, and that 

could very well be a satellite. 

The average, and perhaps to some degree as a result of the hearings in this subcommittee, the average processing time for a license 

of a Category 15 item, which includes satellites, has gone down 

from 76 days to 23 days. 

Ms. Cooper, what is 23 days among friends? Why not just keep 

the law the way it is and, if somebody wants an ITAR-laden satellite to go up on a Chinese rocket, apply for a license? 

Ms. COOPER. Well, let me make——

Mr. SHERMAN. Which I assume would be conditioned on that 

mythical colonel that I talked to Dr. Wortzel about accompanying 

the satellite. But I am sure you are willing to do that. 

Ms. COOPER. First is perhaps a nuanced clarification, which is 

that a launch of United States technology from China is not actually prohibited. 

Mr. SHERMAN. Yes. 

Ms. COOPER. There are requirements that are effectively prohibitive, a process that is complicated and a high enough level of complexity that no one has sought it since they have been imposed. 

There is not actually a prohibition, to be clear. 

And the difference is, perhaps, not 23 days, the difference is, for 

technical assistance agreements and the kinds of authorizations 

that typically are required for satellite programs, they do take 

quite a lot longer. 

Mr. SHERMAN. Why would there need to be technical assistance 

to the Chinese just if they are launching the rocket? 

Ms. COOPER. This has nothing to do with China. This is just the 

routine authorizations that are required to export satellite information, marketing data, eventually the design and materials, to describe it to a customer, the actual export of a satellite upon launch, 

if it is being launched from a non-U.S. location. 

Mr. SHERMAN. So one alternative here is not changing the law 

but asking the new under secretary to come in here and expressing 

our view that she ought to take what is it, a 17-step program, and 

turn it into a 7-step program. 

I will ask, first, Mr. Chao, then Dr. Wortzel. If we left the law 

the same and redid that 17-step program to something more practical, could we do something that was both feasible for the industry 

and would protect international security? Mr. Chao. 

Mr. CHAO. There is yet another subtlety, which is more than 

just, you know, the differences between two organizations. It is two 

entirely different regimes. 

The mere fact that under the ITAR, the instant you declare 

something a munition, anything that touches it or is a component 

of it also is a munition while on the commerce sort of dual-use side; 

you have the ability to designate different gradations. 

60

Therefore, a chip of certain technology, of teraFLOPs or a solar 

panel of certain power can be restricted, while others are deemed 

to be commercial. 

You have none of that flexibility on the munitions side. So once 

designated a munition, it is a munition. 

Mr. SHERMAN. But if we have got this 17-step process which is 

burdensome, if we left the law the same and had you and Ms. Cooper change the 17 steps down to 7 steps, could we achieve both our 

national security objectives and our commercial objectives? 

Mr. CHAO. If somebody believed you could do that and get it 

down to—and the key thing is not the day; 23 days versus 90 or 

whatever, is not the real trigger. The trigger is, how does that compare to a business cycle? So if a request for proposal has to be answered in 15 days, it doesn’t matter if I have got 23 days. I now, 

under that level, in terms of how rapidly the export control system 

responds—if you can get it down to a reasonable date and with certainty and visibility, the three things that the industry asks for, 

people wouldn’t be complaining. 

Mr. SHERMAN. Dr. Wortzel, what if I let you withdraw the 17 

steps, would we achieve our objective? 

Mr. WORTZEL. You must address the complexity of the approval 

process for licensing. But to be completely candid, I am not certain 

that if you went in for a commodity control list, dual-use license, 

and you move satellites there, it would go that much faster. 

I mean, because of the embedded technologies and the use of the 

satellite. That is why these distinctions between defense and technology——

Mr. SHERMAN. Well, I mean there are two aspects as to whether 

it is State or Commerce that is going to control. One is, and I 

wouldn’t have even thought of this until it happened, the U.S. company has an incentive to get the rocket off the pad and that might 

cause them to slip and provide information. 

What most of your testimony is focused on is the technology inside the satellite. And we have had our mythical colonel. Why 

wouldn’t Commerce just look at it and say we don’t care what is 

inside the satellite, because the Chinese are never going to see 

what’s inside the satellite? 

Does that—and then you tell me why we can’t let China know 

what is inside the satellite. If we have got a colonel with the satellite, then why doesn’t that make State or Commerce or Congress 

feel secure? 

Mr. WORTZEL. Well, I think Mr. Rohrabacher effectively made 

that case when he went through the fact that the variability and 

the technical assistance provided to China so it could release two 

or three satellites in space, move them forward on multiple independent re-entry vehicles, they don’t use farings, and this comes 

from a Cox Commission report on their Long March launch vehicles, but Cox Commission was concerned that they would learn how 

to use farings more are effectively. 

Mr. SHERMAN. Farings? 

Mr. WORTZEL. Farings are things you put over the nose of a missile, and that is why they can’t master a submarine launched ballistic missile, because they still haven’t mastered the farings that 

go over it. Mr. Rohrabacher expressed those concerns properly. 

61

Mr. SHERMAN. Your answer is noted. Let’s say, Ms. Cooper, your 

industry was told if you are going to launch on a Chinese rocket, 

you can tell the Chinese how much it weighs, you can send them 

a clay mockup if they care to know what shape it is, and aside from 

that you cannot talk to them, except about price, date of launch. 

But you can’t tell them that more of the weight is in the left part 

of the satellite or the right part of the satellite, looked at a particular view. And, more importantly, you can’t talk to them about 

what kind of faring you are going to have, anything else. 

In effect, you just don’t let American engineers talk to the Chinese. You just let accountants talk to the Chinese. Trust me, they 

could torture me. They wouldn’t learn anything about their rocket 

program. 

So what if we had a rule that only accountants could talk to the 

Chinese? Would that impair the ability of this tenuous partnership 

between the United States satellite maker and a Chinese launch 

to be effective, or do you have to have the engineers talk to each 

other for this to work? 

Ms. COOPER. I don’t know. 

Mr. SHERMAN. That is a good answer. 

Ms. COOPER. The hypothetical sounds good. 

Mr. SHERMAN. Dr. Wortzel, we are asking if you might know. If 

we just had a rule that only accountants who know nothing about 

rocketry are allowed to talk to the Chinese and, you know, accountants can talk about, well, when are you going to put it up. 

Mr. WORTZEL. You can never find an insurer to underwrite that 

satellite launch if you didn’t allow some kind of technical data exchange. 

Mr. SHERMAN. So there has to be technical data exchange for it 

to work? 

Mr. WORTZEL. I believe so. I am not a rocket scientist, didn’t 

sleep in a Holiday Inn Express, but I am pretty sure, I am pretty 

sure there has got to be technical data exchanged. 

Mr. CHAO. Can I deconstruct the question? 

Mr. SHERMAN. Yes, Mr. Chao, I don’t know if you are a rocket 

scientist either. 

Mr. CHAO. I went to MIT, but I wasn’t a rocket scientist. 

There are two sets of the industry, I think, that we care about, 

the satellite manufacturers and most of the questions you have 

been asking about relate to the sale of satellites. But there is an 

entire other constituency, which is the manufacturer of the parts, 

that all of the work around and the things we are talking about 

in relation to China and how to accommodate those concerns is, 

once again, as long as we are using the blunt instrument of the 

ITAR controlling act, does nothing for those—the parts components 

guys who are just as interested in selling their parts into an American satellite as they are into a European satellite being sold back 

to an American, which today they cannot do. Or, they can, but they 

find it——

Mr. SHERMAN. I think you are a little off my question. The question is, it doesn’t matter whether the whole satellite is made in the 

United States or whether a component is made in the United 

States. Under the regime I was putting forward, nobody on the 

62

Western side of the transaction could talk in ‘‘engineering talk’’ to 

anybody on the Chinese side of the transaction. 

The purpose, from a national security perspective, is to prevent 

the Chinese from learning anything about rocketry. The impediment is that, therefore, those engineers involved with the satellite 

on the Western side couldn’t share the useful information. 

If that happened, do you have any insight as to whether that 

would be practical? 

Mr. CHAO. I think Dr. Wortzel is right. No insurance company 

would insure that satellite launch. 

Mr. SHERMAN. Okay. So as a practical matter. 

Mr. CHAO. Practical matter. 

Mr. SHERMAN. We want to prevent anybody who knows more 

about rocket science than the Chinese do from talking to the Chinese, and this system is designed to prevent not only American 

companies but any European company that is dependent upon 

American parts from talking rocket science to the Chinese. 

What is interesting is that we have this giant hole, and that is 

we are doing nothing to discourage insurance companies from talking to the Chinese, and the insurance company—I mean, I could 

think that sometimes, just maybe, somebody who owns the satellite 

is hoping it blows up on the pad, providing the insurance company 

is not AIG. 

But the insurance company is always rooting for the satellite to 

make it into space. And do the insurance companies know enough 

about rocketry to be dangerous to our national security? 

Mr. Chao. 

Mr. CHAO. They—so, again, this is where your point about the 

financial interests comes into play. And part of the issue back in 

1999, my understanding, was partly driven by the insurance company saying you better have those guys figure out what’s going on, 

because I don’t want to blow up—I don’t want to pay——

Mr. SHERMAN. So the insurance companies may not understand 

engineering, and they may not know anything about rocketry, but 

they do know what I have just learned here, and that is the engineers at the satellite company need to talk to the engineers at the 

launch company for the launch to be successful. And once you have 

engineers talking to each other, somebody may slip and reveal 

some engineering information we don’t want revealed. 

Dr. Wortzel, I don’t know if you had a—you look like you have 

an additional comment. I don’t know if you do. 

Mr. WORTZEL. Well, in the Hughes and Loral cases, apparently 

the Chinese technicians just weren’t getting it. You know, these 

were not Americans that were out to do harm to the United States. 

Mr. SHERMAN. Yes. 

Mr. WORTZEL. They just realized that this wasn’t going to work 

unless they told them how to solve a couple of problems. 

And that is, again, where Mr. Rohrabacher’s problems come. 

Mr. SHERMAN. The natural tendency is for people to root for their 

partners and try to be helpful to their partners. 

And if you are in—if American companies are in partnership 

with China to launch vehicles, it is against human nature—it is 

usually successful; 99 times out of 100 the Loral engineer doesn’t 

63

reveal any information, but it is against human nature to say don’t 

help your partner. 

Mr. CHAO. Your point about barn doors being closed, that issue 

was very specifically addressed in the legislation in terms of—it is 

called anomaly resolution, right, where it requires all kinds of additional licensing in order to do that. 

The unintended consequence of the licensing related to anomaly 

resolution, and the NASA Administrator testified to this, is on normal, cooperative, Western cooperative civilian satellites, it becomes 

so hard to do an anomaly resolution amongst friends that, again, 

they are afraid of putting our components on board scientific missions for a risk that I can’t get a license fast enough if the satellite 

is about to tumble out of the sky, where I need an answer in 3 

hours, I actually have to go through a licensing process to be able 

to talk to somebody about that. 

So it is another case where, once again, we are trying to stop 

something, we have caused some unintended consequences in other 

places. 

Ms. COOPER. If I could. 

Mr. SHERMAN. Yes. 

Ms. COOPER. I think Mr. Chao’s comment is well founded. If you 

look at the percentage of Chinese launches compared to the overall 

number of orbital launches from last year, the Chinese launched 11 

and there were 69 orbital missions last year. 

There are a number of other commercial transactions and launch 

considerations that we are not focusing on here because we are 

spending our time talking about China. Not to say we shouldn’t be 

evaluating that, but I think there is a larger impact. 

Mr. SHERMAN. Okay, we talked about a bill that you and Dana 

would write. I know what is going to be in his part. Dealing with 

the non-China universe, what should be the description and then 

how do you make sure that any knowledge that we impart to the 

French doesn’t then go to China? 

Ms. COOPER. First, we would return export licensing authority to 

the executive branch. We would encourage——

Mr. SHERMAN. You mean to Commerce. It is in the executive 

branch. 

Ms. COOPER. The State Department and Defense Department do 

not believe that they have got the authority to evaluate the U.S. 

munitions list. 

Mr. SHERMAN. Well, yes. In other words, return the authority to 

determine which satellites and satellite components are munitions 

and which are not. 

Ms. COOPER. Correct. 

Mr. SHERMAN. To the executive branch. 

Mr. SHERMAN. Go ahead. 

Ms. COOPER. Remove the block. 

Mr. SHERMAN. Right. 

Ms. COOPER. Request an immediate and thorough technical view 

of the products that are in the U.S. munitions list that you can 

focus the controls on those products that are actually technologically sensitive. 

64

It is not clear at this point. We haven’t done that review. Whether there are technologies that would allow us to have a non-ITAR 

satellite, I don’t know because we haven’t done that review. 

But the products that have no military or technological sensitivity should be export licensed by Commerce. 

Mr. SHERMAN. If the satellites launched in the 1990s by the Chinese actually were just pure junk, it wouldn’t have mattered. It is 

not what was inside the box. 

So to say that a widget that is used on a satellite should be in 

one list, but a super widget should be on another list, makes sense 

if you think the Chinese are going to look in the box and see how 

the super widget was made. 

Ms. COOPER. But it has an economic impact on the overall trade, 

the component manufacturers, subsystems manufacturers and the 

practical licensing requirements for prime manufacturers and 

launch providers, operators are all subject to. It narrows the focus 

to those products that we care about. 

Mr. SHERMAN. Now, let’s say you are a U.S. satellite manufacturer. Does this ITAR rule prevent you from offshoring the creation 

of one of the components? Let’s say you are a U.S. satellite manufacturer, you already booked space on a U.S. rocket. In the past 

you have done everything in the United States and so you are not 

importing or exporting anything. 

And now, all of a sudden, somebody comes to you and says, you 

know, there is a European company that can make the widget for 

it. Does our law have the unintended benefit of making it—or detriment, depending upon your point of view, from being able to import this—this United States satellite maker to import the widget 

from France or Britain or China or whatever? 

Ms. COOPER. I think United States manufacturers do import certain components from European suppliers. 

Mr. SHERMAN. And the fact that we call it a munition, does that 

mean that we in any way restrict imports in a way that we couldn’t 

if it was a dual-use item. 

Mr. CHAO. It does. There are a couple of anecdotal evidences 

where there was a particular technology developed by Europeans, 

who would not give it to us for fear that once they gave it to us 

it would then become ITAR controlled and they couldn’t get it back 

out again. 

Mr. SHERMAN. So this was a case where they had an item for a 

satellite, they wanted to send it to the United States for integration 

or processing, and then send it back to Europe? 

Mr. CHAO. Right. And the instant that it touched our shores on 

our satellite, and so they said, whoops, no, we would rather not sell 

it to you. 

Mr. SHERMAN. I mean, the point of my question is, to what extent does our current morass of regulations actually protect U.S. 

jobs from outsourcing? 

Dr. Wortzel, can you, do you see a circumstance in which this 

U.S. satellite manufacturer would just as soon not import one of 

the components? 

Mr. WORTZEL. Well, in my view, what has happened to American 

manufacturing and industry in general makes your case, that if 

you can get it cheaper by offshoring it, and there is no policy supVerDate 0ct 09 2002 10:52 Jun 23, 2009 Jkt 000000 PO 00000 Frm 00068 Fmt 6633 Sfmt 6633 F:\WORK\TNT\040209\48443.000 HFA PsN: SHIRL
65

port for maintaining an industrial base of that type in the United 

States, they are going to buy it cheaper. 

Mr. SHERMAN. Yes. But what I am asking is, do our regulations 

add a lot of red tape to the effort to import a satellite component 

from abroad? 

Mr. WORTZEL. I do not know the answer to that, sir. 

Mr. CHAO. It does. And in our study, we are also able to get and 

quantify the burden on the second and third tier in order to work 

your way through the system, costs them about $60 million as a 

whole. It costs them 2 or 3 percentage points of profit, which they 

could have used to hire other people. 

Mr. SHERMAN. Yes. I mean, my question is, are we protecting 

American jobs with these regulations by discouraging American 

companies from importing components? 

Mr. CHAO. Not as much as we are damaging them in terms of 

exporting, so it is a net loss. 

Ms. COOPER. I would agree. 

Mr. SHERMAN. But it is a netting. We lose these exports, but we 

prevent certain imports? 

Ms. COOPER. I would just like to address the outsourcing issue. 

I agree with my colleagues that the ITAR regulatory regime has actually encouraged manufacturing capability to be developed offshore. 

So, in your terms——

Mr. SHERMAN. I am aware that these regulations cause a commercial problem. I am trying to see whether there is a——

Ms. COOPER. But I think those jobs have moved, some jobs have 

moved offshore, not because they are cheaper but because they 

evade regulation. 

And I think we need to be realistic that not all jobs make sense 

to be outsourced. In this world, where the technology is highly complex, and can’t be retrieved or repaired once it is launched 22,000 

miles off of the Earth’s surface, there is a great deal of caution and 

conservatism about the sourcing of your componentry. This is not 

a technology where people take a lot of risks on suppliers. 

So the flexibility to move jobs over—up to unknown supplier 

sources with limited initial experience is a high barrier, in my estimation. 

Mr. SHERMAN. Okay. Drawing to a close here, Dr. Wortzel, let’s 

say we go with this bill, Ms. Cooper writes all the provisions, Rohrabacher writes the anti-China provision. 

Do you see a threat to national security to letting some imports 

and exports and launches from Russia, France, et cetera? 

Mr. WORTZEL. I think you have to be very careful, as you draw 

up such a bill, to look at the multilateral and bilateral space and 

satellite cooperation programs that China has, in some cases, with 

our allies. 

So if your goal is to sort of cordon off China, then you have to 

ask, well, what are they doing with Brazil, Argentina, France, and 

how does that affect the way you have written the legislation? 

Mr. SHERMAN. Would you be focused on rocket technology or satellite component technology? 

Mr. WORTZEL. I would focus on rocket technology and the launch 

aspects of it because, again, they haven’t cracked satellites. 

66

Mr. Rohrabacher took me to task for that statement. 

Mr. SHERMAN. They haven’t what? 

Mr. WORTZEL. They haven’t cracked open a satellite to steal the 

technology in it. 

Mr. SHERMAN. Okay. But if we are cooperating with Brazil or 

France in manufacturing satellites, then the Brazilians and the 

French are going to learn something, and you don’t have to crack 

open a satellite, you just crack open a Frenchman or a Brazilian. 

Mr. WORTZEL. That is right. And I think there is always the danger that some of that information, if they are in a separate bilateral program with China, is going to get there. 

The question is, what is the risk to the national security if that 

happens? 

Mr. SHERMAN. So, certainly, any legislation, if it grants to the executive branch this kind of authority, has got to require a review 

of what technology is going to go to our ally and what controls that 

ally has to make sure the technology doesn’t go anywhere else. 

Mr. WORTZEL. Yes, sir, and we regularly license technologies to 

allies and place restrictions on the reexports of data and information. 

So, usually, they are pretty good about it. 

Mr. SHERMAN. What about Russia? Does Russia already know as 

much about rocketry as they are likely to discover by launching 

American satellites? 

Mr. WORTZEL. My sense from the Fiscal Year 2000 Defense Authorization Act, where we encouraged all the space cooperation 

with Russia, is it is not just that—they are pretty well advanced, 

so there is not much to worry about. 

But both of us have enough nuclear warheads aimed at each 

other that it doesn’t make a material difference in the national security——

Mr. SHERMAN. So Russia might learn something, but it doesn’t 

make them materially any more of a menace? 

Mr. WORTZEL. You are going to get 2,000 warheads one way or 

the other. 

Mr. SHERMAN. Mr. Chao. Any comment on that? 

Mr. CHAO. No. In all the industries, you know, the space industry has been one of the few that they have been investing in. And 

in some cases, because they invested in it, it actually turns out 

they have the world-class technology, you know, much to our chagrin, frankly. Motors, for example, is a good example. 

Mr. SHERMAN. Ms. Cooper, is there any way to provide tax incentives or subsidies to the launch industry, which is a segment of 

your organization, to get all the—you know, the jobs and all the national security advantages of beating the Long March? 

Ms. COOPER. I think we would be interested in working with you 

on ways to courage U.S. launch capabilities. There are new entrants to the U.S. launch industry, and I think there is a great deal 

of work we can do to try to encourage domestic launch capabilities 

and capacity. 

Mr. SHERMAN. Well, one approach is tax credits for those who 

use it. Another approach is to say that those in that particular industry don’t have to pay payroll taxes, if the U.S. taxpayer would 

do that for them. 

67

One approach is just direct subsidy, and a final approach that I 

can think of is that the U.S. Government act as the launcher, albeit contracting with U.S. companies to make the rocket. 

I hope you pursue those, but I would hope you would also come 

up with some other ideas. 

It is nice to hear that, yes, there are things that we could do. So, 

you are brilliant, figure them out, bring them back. 

Mr. CHAO. Subsidized or paid for insurance, too, would——

Mr. SHERMAN. Yes. Another way to do that is either to pay for 

insurance or act as the guarantor, free insurance. 

So, I mean obviously, if we get—if the best way to put something 

in space is to have the Americans put it in space for you, we have 

solved most of these problems. 

I think at this point we stand adjourned. 

[Whereupon, at 3:05 p.m., the subcommittee was adjourned.] 

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