```

[Senate Hearing 114-760]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 114-760

 THE CIVIL NUCLEAR AGREEMENT WITH CHINA: BALANCING THE POTENTIAL RISKS 
                              AND REWARDS

=======================================================================

                                HEARING

                               BEFORE THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 12, 2015

                               __________

       Printed for the use of the Committee on Foreign Relations
       
       
 [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]      

      Available via the World Wide Web: http://www.gpo.gov/fdsys/
      
      
      
                               __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
28-950 PDF                  WASHINGTON : 2018                     
          
-----------------------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free). 
E-mail, gpo@custhelp.com.      
      

                COMMITTEE ON FOREIGN RELATIONS         

                BOB CORKER, TENNESSEE, Chairman        
JAMES E. RISCH, Idaho                BENJAMIN L. CARDIN, Maryland
MARCO RUBIO, Florida                 BARBARA BOXER, California
RON JOHNSON, Wisconsin               ROBERT MENENDEZ, New Jersey
JEFF FLAKE, Arizona                  JEANNE SHAHEEN, New Hampshire
CORY GARDNER, Colorado               CHRISTOPHER A. COONS, Delaware
DAVID PERDUE, Georgia                TOM UDALL, New Mexico
JOHNNY ISAKSON, Georgia              CHRISTOPHER MURPHY, Connecticut
RAND PAUL, Kentucky                  TIM KAINE, Virginia
JOHN BARRASSO, Wyoming               EDWARD J. MARKEY, Massachusetts

               Lester Munson III, Staff Director        
           Jodi B. Herman, Democratic Staff Director        
                    John Dutton, Chief Clerk        

                              (ii)        

  

                            C O N T E N T S

                              ----------                              
                                                                   Page

Hon. Bob Corker, U.S. Senator From Tennessee.....................     1
Hon. Benjamin L. Cardin, U.S. Senator From Maryland..............     3
Hon. Thomas M. Countryman, Assistant Secretary, Bureau of 
  International Security and Nonproliferation, U.S. Department of 
  State, Washington, DC..........................................     6
    Prepared statement...........................................     7
Lt. Gen. Frank G. Klotz, USAF, Retired, Under Secretary for 
  Nuclear
  Security and NNSA Administrator, U.S. Department of Energy,
  Washington, DC.................................................    10
    Prepared statement...........................................    12

              Additional Material Submitted for the Record

Responses of Thomas M. Countryman to questions submitted by 
  Senator Bob Corker.............................................    34
Responses of Lt. Gen. Frank G. Klotz to questions submitted by 
  Senator Bob Corker.............................................    37
Response of Lt. Gen. Frank G. Klotz to questions submitted by 
  Senator Marco Rubio............................................    38
Responses of Thomas M. Countryman to questions submitted by 
  Senator Marco Rubio............................................    39
Response of Thomas M. Countryman to question submitted by Senator 
  Tim Kaine......................................................    39

                                 (iii)

  

 
 THE CIVIL NUCLEAR AGREEMENT WITH CHINA: BALANCING THE POTENTIAL RISKS 
                              AND REWARDS

                              ----------                              

                         TUESDAY, MAY 12, 2015

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 2:25 p.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Bob Corker 
(chairman of the committee) presiding.
    Present: Senators Corker, Risch, Johnson, Gardner, Perdue, 
Cardin, Menendez, Shaheen, Murphy, Kaine, and Markey.

             OPENING STATEMENT OF HON. BOB CORKER, 
                  U.S. SENATOR FROM TENNESSEE

    The Chairman. The Foreign Relations Committee will come to 
order. I know we have a vote at 2:45. So we will try to get 
through opening comments and your comments and then maybe come 
back and begin the questioning.
    Today we begin the exercise of our statutory 
responsibility, a responsibility Congress requested, to review 
agreements between the United States and foreign nations 
related to cooperation on civil nuclear programs.
    We must examine the political, economic, and security 
aspects of this agreement, weighing the risks and benefits. In 
doing so, we must dig beneath the surface of the agreement to 
expose and thoroughly examine those issues that cause concern 
in engaging in such an agreement.
    We also should consider how this agreement could 
potentially impact U.S. strategic interests in the Asia-
Pacific.
    The agreement before us represents a continuation of a 
relationship that originally began in 1985 with the 
congressional approval of the ``Agreement Between the U.S. and 
the Peoples Republic of China Concerning Peaceful Uses of 
Nuclear Energy.'' It expires on December the 30th, 2015 and, 
without a new agreement, the civil nuclear cooperation we have 
will cease.
    At the time of submission of the 1985 agreement, China was 
engaged in activities that caused significant concerns--related 
to proliferation, lack of safeguards, lack of export controls--
in Congress, and the agreement lacked key assurances to 
alleviate those concerns. In passing a joint resolution 
expressing its approval of the agreement, Congress required 
several certifications to address its concerns prior to the 
issuance of any export licenses pursuant to the agreement.
    The challenges in the relationship with China and its 
actions relevant to the required certifications were such that 
certifications could not and were not made by the 
administration until 1998, 13 years after the agreement 
originally entered into force. Some of those concerns still 
exist, maybe to lesser degrees, but they still exist.
    The agreement before us now continues civil nuclear 
cooperation for another 30 years.
    I am glad the administration chose to hear the concerns 
raised by this committee last year about civil nuclear 
agreements that extended in perpetuity, including a termination 
of this agreement after 30 years. Thank you for that.
    It is right that agreements of this consequence should be 
periodically reviewed by Congress to ensure that they continue 
to be in the national interest.
    Notably, and not present in the current agreement, the 
United States provides advance consent to enrich U.S.-supplied 
uranium up to 20 percent U-235 and to reprocess U.S.-obligated 
material. I am sure I am not alone in questioning this change 
in the relationship. I hope that the administration can 
adequately explain why it is in the U.S. interest to allow for 
this type of activity using U.S.-supplied or obligated 
material.
    The President's transmission letter to Congress states that 
this agreement is ``based on a mutual commitment to nuclear 
nonproliferation.'' But I have some misgivings. The commitment 
may not be so mutual. It will be incumbent upon the 
administration to expediently allay concerns raised by our 
members.
    The Nonproliferation Assessment Statement, also known as 
the NPAS, required to be submitted to Congress with the 
agreement, identifies several potential issues of concern. 
According to the NPAS, ``China's strategy for strengthening its 
military involves the acquisition of foreign technology as well 
as greater civil-military integration and both elements have 
the potential to decrease developmental costs to accelerate 
military modernization. This strategy requires close scrutiny 
of all end users of U.S. technology under the proposed 
Agreement.''
    Further, the NPAS says ``China's provision to Pakistan of 
reactors beyond Chasma I and II is inconsistent with Chinese 
commitments made when it joined the NSG [Nuclear Suppliers 
Group] in 2004.''
    Finally, according to NPAS, China updated its regulations 
and ``improved actions in some areas,'' but proliferation 
involving Chinese ``entities'' remains of concern. State-owned 
enterprises and individuals have been sanctioned by the United 
States on several occasions for transferring proliferation 
sensitive dual-use materials and technologies.
    Congress should also consider China's record as it relates 
to missile proliferation. The 2011 Director of National 
Intelligence Worldwide Threat Assessment said ``North Korea and 
entities in Russia and China continue to sell technologies and 
components in the Middle East and South Asia that are dual-use 
and could support WMD [weapons of mass destruction] and missile 
programs.''
    The 2014 State Department compliance report said, ``in 
2013, Chinese entities continue to supply missile programs in 
countries of concern. The United States notes that China made a 
public commitment in November 2000 not to assist in any way any 
country in the development of ballistic missiles that can be 
used to deliver nuclear weapons.''
    Concerns persist about Chinese willingness and ability to 
detect and prevent illicit transfers. I would like the 
administration to specifically address why Congress should feel 
confident that China will prevent illicit transfers going 
forward.
    Concerns aside, the United States has realized benefits 
from the current agreement. Economic benefits include an $8 
billion sale of four nuclear reactors by Westinghouse in 2007, 
still under construction today.
    We are also gaining valuable insight from lessons learned 
in the construction of the AP1000 reactors that will cause 
domestic construction to be more efficient, timely, and cost 
less.
    China has also developed and articulated stronger 
nonproliferation policies and export control regulations.
    It will now be up to Congress to determine if the concerns 
about the agreement are outweighed by the benefits. If so, we 
should approve the agreement without delay. If not, but the 
concerns can be mitigated, we should work diligently to find 
grounds upon which we can support the agreement. If the 
concerns cannot be alleviated, we should disapprove the 
agreement.
    All this is to say that we have a difficult task ahead of 
us but one that I know we can approach seriously and with the 
best political, economic, and security interests of the United 
States in mind.
    I thank our witnesses for joining us today to begin this 
examination and look forward to working with them and their 
colleagues in the weeks ahead. Again, thank you for being here.

         OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, 
                   U.S. SENATOR FROM MARYLAND

    Senator Cardin. Mr. Chairman, let me thank you for 
conducting this hearing. It is a very important hearing. The 
relationship between the United States and China is one of our 
most difficult foreign policy challenges.
    This week we are holding two hearings in our committee. 
Later this week, we will have a hearing on the territorial 
disputes in the South and East China Seas. I am looking forward 
to that hearing. I think it is a very important subject. Today 
we will focus on the elements of the United States-China 
relation with the recently signed U.S.-China Civilian Nuclear 
Cooperation Agreement.
    The current agreement, as you pointed out, is set to expire 
on December 30 of this year. It was signed 30 years ago by 
President Reagan. It is interesting to point out that the 
implementation of that agreement had to wait for 13 years 
because of the Senate conditions on China's proliferation 
activities and then because of the aftermath of the Tiananmen 
Square massacre.
    Up front, I want to indicate that I am supportive of the 
development of nuclear power. It remains a smart and effective 
way for the United States to achieving independence and to 
reduce our carbon emissions. U.S. nuclear cooperative 
agreements with other countries provide the United States a 
number of important benefits.
    First and foremost, the 123 agreement can help achieve our 
nonproliferation objectives because we seek to uphold the 
highest nonproliferation standards in these agreements, 
including ensuring nuclear technology and material are never 
misused for military purposes. That will be an issue I expect 
our committee will want to explore.
    Second, these agreements are critical for maintaining a 
robust nuclear industry. The enormous growth in Chinese nuclear 
power generation represents a major opportunity for U.S. 
business and one that they have already taken advantage of. The 
reactors that the United States is building in China are 
already creating high quality jobs in the United States, 
including in my home State of Maryland.
    And finally, these agreements are an important opportunity 
for the United States to assist nations in reducing their 
carbon emissions. China is the world's largest carbon emitter, 
and its carbon emissions will continue to grow for at least the 
next decade. As part of the joint announcement by the United 
States and China on climate, China committed to get 20 percent 
of its energy from clean sources by 2030. Nuclear power is a 
way China can lower its carbon emissions and in turn foster 
global action to address climate change.
    So these are important reasons to move ahead with 123 
agreements, and I fully understand that.
    But as the chairman pointed out, despite the benefits of 
this agreement, there are a number of concerns that I hope the 
witnesses will address during this hearing.
    While progress has been made, China's nonproliferation 
policies remain problematic. Multiple State Department reports 
document Chinese companies and individuals who continue to 
export dual-use goods relevant to nuclear and chemical weapons 
and ballistic missile programs in Iran and North Korea. Year 
after year, these individuals have been sanctioned related to 
their efforts to proliferate weapons of mass destruction. What 
is preventing the Chinese from taking action against the 
companies and individuals who we have identified to them?
    I would like to hear whether China's nonproliferation 
record was addressed during these negotiations. To me, this 
agreement presents us with a golden opportunity to place 
pressure on China to halt these dangerous activities.
    My second set of concerns focuses on Chinese plans to 
export nuclear power plants based upon technology provided them 
by Westinghouse. Under a deal signed in 2007, Westinghouse 
agreed to transfer its reactor technology to China. This allows 
Chinese firms to increase their share of the nuclear work with 
the ultimate goal of exporting reactors themselves. We know 
China has an aggressive move into many markets that the United 
States used to have the leading share. The transfer of the most 
advanced U.S. technologies may provide China the keys for 
dominating the world nuclear power industry. That could cost us 
jobs. So I would be interested in our witnesses' analysis as to 
what the future holds in regards to the U.S. companies' ability 
to dominate the international market on reactors.
    Relating to this issue is China's decision to continue 
building power reactors in Pakistan. Pakistan does not have 
safeguard inspections by the International Atomic Energy Agency 
and has not been approved as a recipient state by the Nuclear 
Suppliers Group. China argues its contracts with Pakistan were 
in place before it agreed to abide by the rules of the Nuclear 
Suppliers Group. However, as China makes plans to export 
nuclear reactors, reactors based upon U.S. technology, to other 
countries, one has to wonder about its commitment to 
nonproliferation standards that it signed up to.
    My last concern is about safety, safety in the Chinese 
nuclear plants. I know we have worked extensively with China on 
their regulatory and safety regimes. But I am concerned that 
nothing in this agreement squarely addresses the issue of the 
next Fukushima or Chernobyl happening in China. China is 
building a nuclear fleet that will be bigger than any other 
country in the world. China is an authoritarian country, which 
has a history of problems with regulatory structure. Although 
we can never make nuclear power 100 percent safe, we should 
strive to make them as resilient as possible to natural 
vulnerabilities and national security threats.
    These are all issues that I think need to be addressed so 
that we can weigh the pluses of an agreement but the risk 
factors of entering into such an agreement with China.
    And I look forward to hearing from our witnesses.
    The Chairman. Senator Cardin, thank you for your leadership 
here.
    I think what we will do--last night, I know we had an 
extensive classified briefing, but I know we still want to hear 
the public comments that will be made. So why do we not briefly 
adjourn, sprint to vote, come back, and then start? I know we 
have to finish for our 4 o'clock briefing on another issue. But 
I think that would be best. Okay? And if you all do not 
object--I am sorry we started a few minutes late, but I think 
that is best for you. Thank you.

[Recess.]

    The Chairman. Thank you for your patience.
    I know we had a very good and extensive briefing last 
evening, and I know numbers of members were here. But I am 
going to go ahead and introduce you and let you begin your 
public statements. Again, I apologize for the late start and 
interruption.
    Our first witness is the Honorable Thomas M. Countryman. He 
currently serves as Assistant Secretary of State for 
International Security and Nonproliferation. In this capacity, 
Mr. Countryman leads the Bureau at the head of the U.S. effort 
to prevent the spread of nuclear, chemical, and biological 
weapons, their related materials, and delivery systems. And we 
appreciate your many appearances with us both here but also on 
the phone and other places.
    Our second witness is Lt. Gen. Frank Klotz, U.S. Air Force, 
retired. He currently serves as Under Secretary of Energy for 
Nuclear Security and the Administrator of the National Nuclear 
Security Administration. In this capacity, he is responsible 
for the management and operation of NNSA, as well as matters 
across the Department of Energy and NNSA enterprise in support 
of President Obama's nuclear security agenda. Prior to his 
service at the Department of Energy, General Klotz served 
nearly 38 years in uniform in a variety of military and 
national security positions relevant to today's discussion.
    I want to thank you both for being here and sharing your 
thoughts. I will remind you your full statements will be 
entered into the record, without objection. So be as brief as 
you wish, and we look forward to you answering our questions 
and again appreciate you being here.

 STATEMENT OF HON. THOMAS M. COUNTRYMAN, ASSISTANT SECRETARY, 
  BUREAU OF INTERNATIONAL SECURITY AND NONPROLIFERATION, U.S. 
              DEPARTMENT OF STATE, WASHINGTON, DC

    Mr. Countryman. Chairman Corker, Ranking Member Cardin, 
members of the committee, thank you for the opportunity to 
continue today in open session the briefings and consultations 
we have had with members and staff since these negotiations 
began, continuing through the initialing, right up to the 
signature and submission of this agreement to the Senate.
    This agreement advances the primary goal we have in every 
123 agreement, which is strengthening the longstanding 
nonproliferation policy of successive administrations. It also 
has important commercial and diplomatic benefits that I will 
talk to only briefly, since you have my prepared statement.
    The U.S. relationship with China is one of the most 
important and complex relationships in the world. This 
administration's approach to China combines building high 
quality cooperation on a range of bilateral, regional, and 
global issues and constructively managing our differences. 
Peaceful nuclear cooperation is a key example of that type of 
cooperation, and this agreement is in the best interests of the 
United States. This agreement is not a favor that we give to 
China or that China gives to us. It is in the mutual interests 
of both countries.
    Like all 123 agreements, it is a framework within which 
decisions on export of technology and materials are made. The 
agreement contains all the U.S. nonproliferation guarantees 
required by the Atomic Energy Act, safeguards, peaceful use 
assurances, physical protection assurances, U.S. consent rights 
on storage, retransfer, enrichment, and reprocessing of U.S.-
obligated material. It contains enhanced features beyond those 
contained in the current United States-China 123 agreement.
    China's nonproliferation record has improved markedly since 
the 1985 123 agreements. It can do still better, and we expect 
it to do better in the nonproliferation field. Implementing 
this agreement will better position the United States to 
continue to influence the Chinese Government in a positive 
direction on nonproliferation objectives.
    The current agreement has allowed and this agreement will 
continue to facilitate deepened cooperation on threat 
reduction, export control, border security, nuclear safety, and 
nuclear security norms.
    This agreement also has economic benefits. China has the 
fastest growing nuclear energy program in the world. It 
constitutes one-third of the global market in civilian nuclear 
energy. American nuclear suppliers are there now and they are 
keen to play an even larger role in the Chinese market. These 
opportunities could support tens of thousands of high-paying 
American jobs, and the U.S. nuclear industry strongly supports 
this agreement.
    As Senator Cardin noted, the agreement can also help both 
of us to deploy non-fossil-based energy sources to address 
global climate change. Last year, President Obama and President 
Xi announced our respective post-2020 climate targets. China 
believes the large-scale development of civilian nuclear power 
is key to meeting these targets, and their commitments 
reinforce opportunities for U.S. suppliers in the Chinese 
market.
    On the other hand, if civil nuclear cooperation with China 
lapses, our influence on Chinese practices in nonproliferation 
and other fields will be placed in serious jeopardy. We will 
lose insight into China's civil program. The vacuum of 
cooperation with China would be filled by other nuclear 
suppliers who do not have the same approach as the United 
States to nonproliferation and technology transfer concerns. 
And China would view such a lapse as evidence that the United 
States is less willing to engage China at a high level on 
important commercial, energy, and security-related issues.
    In sum, we believe that the strategic nonproliferation, 
economic, and environmental benefits of this agreement prove 
that continuing nuclear cooperation with China is in our best 
interests. We have no illusions about the challenges of working 
with China in nuclear energy or in any other field. But we must 
remain engaged. We must constructively manage our difference 
and work collaboratively to advance the numerous objectives we 
have in common. The passage of this agreement is the best way 
to continue to influence and to benefit from the world's 
largest nuclear market.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Countryman follows:]

               Prepared Statement of Thomas M. Countryman

    Mr. Chairman and Ranking Member, good afternoon. It is a pleasure 
to testify before the committee today regarding the President's 
submission of an agreement for peaceful nuclear cooperation between the 
United States and China.
    As you know, the U.S. relationship with China is one of the most 
important and complex relationships we have in the world. Over the last 
6 years, the Obama administration has established a ``new normal'' of 
U.S. engagement with the Asia-Pacific that includes relations with 
China defined by building high quality cooperation on a range of 
bilateral, regional, and global issues while constructively managing 
our differences and areas of competition. Through the implementation of 
this policy, the United States and China continue to improve diplomatic 
coordination to address the regional and global challenges of nuclear 
nonproliferation, energy security, and climate change, while growing 
both our economies. Peaceful nuclear cooperation with China is an 
example of collaboration that touches on all these challenges, and I 
would like to explain why the administration believes it is in the best 
interests of the United States to continue this important area of 
cooperation.
                        description of agreement
    Like all 123 agreements, this agreement is first and foremost an 
asset that advances U.S. nonproliferation policy objectives. It took 
approximately two and a half years to negotiate the agreement, and 
after numerous interventions by senior U.S. Government officials 
throughout this period, our negotiators were able to win inclusion of 
significant new nonproliferation conditions that strengthen the 
agreement. The President's transmittal of the agreement, and the 
Nonproliferation Assessment Statement that accompanied it, include a 
detailed description of the contents of the agreement so I will not 
repeat that here, but the agreement contains all the U.S. 
nonproliferation guaranties required by the Atomic Energy Act and 
common to 123 agreements, including conditions related to International 
Atomic Energy Agency (IAEA) safeguards, peaceful uses assurances, 
physical protection assurances, and U.S. consent rights on storage, 
retransfer, enrichment, and reprocessing of U.S.-obligated nuclear 
material. The agreement clearly states that equipment, information, and 
technology transferred under the agreement shall not be used for any 
military purpose, and the new text includes a right for the United 
States to suspend cooperation in the event of Chinese noncompliance, as 
well as our long-standing right to cease cooperation altogether. It 
also has a fixed duration of thirty (30) years. It is worth noting that 
the agreement does not commit the United States to any specific exports 
or other cooperative activities, but rather establishes a framework of 
nonproliferation conditions and controls to govern any subsequent 
commercial transactions.
            differences between the 1985 and 2015 agreements
    The 2015 agreement enhances several U.S. nonproliferation controls 
beyond those contained in the current U.S.-China 123 agreement, which 
was signed in 1985. Unlike the 1985 agreement, the 2015 agreement 
requires China to make all U.S.-supplied nuclear material and all 
nuclear material used in or produced through U.S.-supplied equipment, 
components, and technology subject to the terms of China's safeguards 
agreement with the IAEA. The 2015 agreement also contains additional, 
elevated controls on unclassified civilian nuclear technology to be 
transferred to China. Further, the agreement requires the two Parties 
to enhance their efforts to familiarize commercial entities with the 
requirements of the agreement, relevant national export controls, and 
other policies applicable to imports and exports subject to the 
agreement--a requirement that will be implemented through joint 
training by U.S. and Chinese officials of commercial entities in both 
countries.
    The background underlying the agreement has also changed. China's 
nonproliferation record has improved markedly since the first U.S.-
China 123 agreement was signed in 1985, though it can still do better. 
Over the past 30 years, China has undertaken a variety of efforts to 
enhance its global standing on nonproliferation issues while 
significantly expanding its civil nuclear sector. Since the 1980s, 
China has become a party to several nonproliferation treaties and 
conventions and worked to bring its domestic export control authorities 
in line with international standards. China joined the Nuclear 
Nonproliferation Treaty in 1992, brought into force an additional 
protocol with the International Atomic Energy Agency in 2002, and 
joined the Nuclear Suppliers Group in 2004.
                      justification for agreement
    In addition to the improved nonproliferation conditions that I have 
already described, the agreement will have benefits for the U.S.-China 
bilateral relationship, for nuclear safety in the United States and 
worldwide, for our economy, and for the climate. I would like to touch 
on each of these for a moment.
    Bringing a new 123 agreement with China into force will improve not 
only our bilateral nonproliferation relationship but also our overall 
bilateral relationship, and reflects the U.S. Government effort to 
better rebalance our foreign policy priorities in Asia. We strongly 
believe that implementing this agreement will better position the 
United States to influence the Chinese Government to act in a manner 
that advances our global nuclear nonproliferation objectives. 
Conversely, failing to do so would set us back immeasurably in terms of 
access and influence on issues of nonproliferation and nuclear 
cooperation. The current China 123 agreement has allowed for, and the 
agreement will continue to facilitate, deepened cooperation with China 
on nonproliferation, threat reduction, export control, and border 
security. We believe that continuing cooperation with China will allow 
us to push China further to adhere to international norms in this area 
and meet U.S. standards of nonproliferation, nuclear safety and 
security.
                             nuclear safety
    With respect to nuclear safety, as U.S. and Chinese experts work 
together in the development of Westinghouse's AP1000 reactors in China, 
their collaboration enhances the strength of the safety culture in the 
Chinese civil nuclear program. Even the choice of AP1000 technology, 
with passive safety systems, over other, older, less safe technologies, 
enhances nuclear safety in China. It is fundamentally in the U.S. 
interest to promote the spread of U.S. best practices in nuclear safety 
as a nuclear accident anywhere is a global problem. The United States 
will have a far greater influence on Chinese nuclear safety practices 
if cooperation is continued than if it is cut off. When we export U.S. 
civil nuclear technology, we also export an American nonproliferation, 
safety, and security culture that encourages a safe and responsible 
Chinese civil nuclear program.
                           economic benefits
    There are also very significant economic reasons to remain engaged 
with China in nuclear cooperation. China has the fastest growing 
nuclear energy program in the world, with twenty-seven (27) nuclear 
power plants in operation, twenty-four (24) under construction, and 
dozens more planned. Over one-third of the world's nuclear power plants 
currently under construction are in China. Westinghouse estimates the 
value of China's second wave of six reactors at $25 billion with the 
potential for $2.5 billion in U.S. export content. In addition, U.S. 
civil nuclear companies are supplying China--and if this agreement is 
brought into force, could continue to supply China--with equipment and 
components as well as a broad range of services, including engineering, 
construction, fuel cycle expertise, and training. The proposed 
agreement would allow for future joint U.S.-Chinese supply partnerships 
if China were to become a larger nuclear supplier in the future. These 
export opportunities could support tens of thousands of high-paying 
American jobs. For all of these reasons, the U.S. nuclear industry 
strongly supports the agreement. Indeed, the Department of Commerce's 
Civil Nuclear Trade Advisory Committee identified the renewal of the 
U.S.-China 123 agreement as one of its top priorities and a top 
priority for the U.S. civil nuclear industry.
                             climate change
    The agreement can also help both of our countries to deploy 
nonfossil-based energy sources to address the effects of global climate 
change. In November 2014, President Obama and Chinese President Xi took 
a historic step for climate change action and for the U.S.-China 
relationship by jointly announcing the two countries' respective post-
2020 climate targets. The announcement was the culmination of a major 
effort between the two countries, inspired by our serious shared 
concern about the global effects of climate change and our commitment 
to leadership as the world's largest economies, energy consumers, and 
carbon emitters. One of China's announced targets is to increase the 
share of non-fossil energy to around 20 percent by 2030--an approximate 
doubling from current levels. China sees the large scale development of 
civil nuclear power as key to meeting this and other climate targets, 
and these commitments strongly reinforce opportunities for U.S. nuclear 
suppliers in the Chinese market.
                     negative consequences of lapse
    I would also like to take a moment to highlight some of the 
negative consequences should the United States cease nuclear 
cooperation with China. A failure, or delay, to put in place a new 
agreement to replace the current expiring agreement would undermine 
U.S. nonproliferation policy and our nuclear industry and would have a 
significant effect on the broader U.S.-China bilateral relationship.
    As I described earlier, the current 123 agreement has been a 
vehicle for significant U.S. influence on China's nonproliferation 
policy. If cooperation ceases, U.S. influence on Chinese 
nonproliferation practices will be placed in serious jeopardy. A lapse 
in the agreement would most likely lead to a suspension of our 
nonproliferation dialogues, to include recently established mechanisms 
seeking to enhance China's export control enforcement capabilities, 
thereby damaging our cooperation in countering shared proliferation 
challenges. In addition, if the United States does not maintain its 
nuclear cooperation with China, that vacuum will be filled by other 
nuclear suppliers who do not share the same nonproliferation and 
safety-focused practices in the execution of their civil nuclear 
cooperation.
    Ending U.S.-China cooperation would also be devastating for our 
nuclear industry. All significant nuclear commerce between the United 
States and China would stop, and a large number of high-paying American 
jobs would likely be lost. More broadly, unilateral termination of this 
relationship would discredit the United States as a reliable supplier, 
undermining the ability of the U.S. civil nuclear industry to compete 
globally and enabling competitors such as Russia and France to gain a 
greater foothold in China's nuclear energy market, as well as in other 
markets. The construction of four Westinghouse AP1000 reactors in China 
is driving innovation in the U.S. civil nuclear industry, helping us 
domestically to make the AP1000 reactors currently under construction 
in the United States safer and more efficient. Without this continuous 
learning process, the United States will lose global market share. If 
there is no successor agreement, U.S. civil nuclear companies with 
joint ventures in China will also lose the technology and hardware they 
have already provided to China--there is no U.S. Government right of 
return at the expiration of the agreement--and the United States will 
not benefit from future sales arising from these ventures.
    Finally, it is worth emphasizing that China would view a lapse of 
this agreement as evidence that the United States is less willing to 
engage China at a high level on important commercial, energy, 
environmental, and security related issues. Stopping U.S.-China 
cooperation would also strengthen the position of those in China who 
advocate a more confrontational approach to the bilateral relationship 
and create new difficulties in our efforts to manage this complex 
relationship.
                               conclusion
    In sum, we believe that the strategic, nonproliferation, economic, 
and environmental benefits of this agreement demonstrate that the 
continuing nuclear cooperation with China is in the best interests of 
the United States. We are mindful of the challenges that this 
relationship and this agreement present, and yet we firmly believe the 
clear path forward is to remain engaged with China, constructively 
manage our differences, and work collaboratively to advance our 
numerous common objectives while bringing China toward international 
norms of behavior. This is not just a matter of U.S. engagement with 
China, it is frankly a test of U.S. leadership and our ability to 
continue to play a decisive and prominent role in crucial sectors such 
as the civilian nuclear power industry. The entry into force of this 
agreement will allow the United States to continue to develop and 
participate in the world's largest nuclear power market, which is the 
best way to ensure that fundamental U.S. national interests in this 
area are advanced in the long term.

    The Chairman. General.

  STATEMENT OF LT. GEN. FRANK G. KLOTZ, USAF, RETIRED, UNDER 
  SECRETARY FOR NUCLEAR SECURITY AND NNSA ADMINISTRATOR, U.S. 
              DEPARTMENT OF ENERGY, WASHINGTON, DC

    Mr. Klotz. Chairman Corker, Ranking Member Cardin, and 
distinguished members of this committee, thank you for the 
opportunity to testify on behalf of the Department of Energy on 
the proposed United States-China agreement for peaceful nuclear 
cooperation.
    I am very pleased to join my colleague from the State 
Department, Tom Countryman.
    I too have provided a written statement, so I will be brief 
in summarizing what is in that.
    First, let me note that Secretary of Energy Moniz and I 
fully share the thoughts expressed by Tom Countryman this 
morning, and we also share the view that the proposed agreement 
provides a comprehensive framework for nuclear cooperation with 
China while fully protecting and advancing U.S. interests and 
policy objectives with respect to nuclear nonproliferation and 
the peaceful uses of nuclear energy. Thus, the Department of 
Energy supports entry into force of this agreement following 
the requisite congressional review period.
    This agreement is fully consistent with the law and 
incorporates all the terms required by section 123 of the 
Atomic Energy Act. Moreover, it reflects important advances 
over the current agreement, several of which we discussed 
during classified briefings to both members and staff of this 
committee.
    Specifically, the successor agreement enhances the 
provisions under which we would allow China to enrich and 
reprocess U.S.-obligated nuclear material by requiring that 
such enrichment and reprocessing take place only at facilities 
in China that fall under their International Atomic Energy 
Agency safeguards agreement.
    It also provides for enhanced controls on the export of 
nuclear technology to China, and it commits both sides, both 
the United States and China, to deliver export control training 
to all U.S. and Chinese entities under the 123 agreement.
    Taken together, these elements, not included in the 1985 
agreement, provide an unprecedented level of insight into 
commercial transactions.
    Since the preceding 123 agreement was signed 30 years ago, 
we have witnessed China make significant strides in its civil 
nuclear program. As Secretary Countryman pointed out, China now 
has over 20 nuclear power plants in operation, over 20 under 
construction, and dozens more planned. In fact, over one-third 
of nuclear power plants currently under construction in the 
world are in China. China increasingly seeks services, 
technology, and equipment from U.S. and other foreign 
commercial companies for its civil nuclear program. We believe 
it is in the best interest of the United States to support U.S. 
industry's ability to compete in this fast-growing and 
expanding market.
    American civil nuclear companies already have numerous 
joint ventures with China, as well as significant assets on the 
ground there. They are also supplying China with equipment and 
components, as well as a broad range of services, including 
engineering, construction, and training.
    The successor 123 agreement will facilitate continued 
nuclear cooperation with China, subject of course to U.S. 
Government review of specific requests to transfer nuclear 
technology, information, material, equipment, and components.
    On the other hand, if the agreement lapses or is not 
renewed, U.S. industry would essentially be cut off from this 
market, constituting a potentially serious commercial threat to 
the overall health and well-being of our civil nuclear 
industry. U.S. industry would also be precluded from taking 
advantage of future opportunities in the world's fastest 
growing civil nuclear energy market.
    In addition to these economic benefits, the successor 123 
agreement will also serve as an umbrella for continuing other 
forms of United States-China bilateral cooperation in promoting 
the important U.S. policy objectives with respect to enhancing 
nuclear safety and nuclear security around the world, an 
objective which directly supports U.S. national interests, as 
well as those of our allies and partners.
    United States-China cooperation in the civil nuclear realm, 
such as under the 1998 U.S. Peaceful Uses of Nuclear Technology 
Agreement, has been absolutely invaluable in this regard. And 
in fact, just last week, senior U.S. officials met with their 
Chinese counterparts in Chengdu under the auspices of the PUNT 
Joint Coordinating Committee. They discussed many of the issues 
that the ranking member expressed a concern about, including 
not only nuclear technology but security, safeguards, 
environmental concerns, waste management, emergency management, 
and the security of radiological sources. The U.S. participants 
have reported to me that they had unique and unprecedented 
access to a number of construction, scientific, and academic 
sites in China. This level of interaction and access is only 
possible because of the value China places on having a 123 
agreement with the United States and the desire to cooperate 
with the most advanced, safest, and most reliable nuclear 
program in the world.
    Without entry into force of this successor agreement, we 
will lose a critical mechanism for influencing China's 
nonproliferation behavior. We will lose potential economic 
advantages, and we will lose the insight that we have into 
China's nuclear programs, including its nuclear research and 
development.
    So again, Mr. Chairman, thank you for the opportunity to 
appear before you today. I look forward to answering any 
questions you or the other members of the committee may have.
    [The prepared statement of Mr. Klotz follows:]

       Prepared Statement of Lt. Gen. Frank G. Klotz, USAF (Ret.)

    Chairman Corker, Ranking Member Cardin, and distinguished members 
of the committee, I appreciate the opportunity to submit this testimony 
in support of the proposed successor U.S.-China agreement for peaceful 
nuclear cooperation, or the so-called ``123 Agreement.'' The proposed 
agreement provides a comprehensive framework for peaceful nuclear 
cooperation with China based on a mutual commitment to nuclear 
nonproliferation. The Department of Energy (DOE), as a member of the 
interagency negotiating team, strongly supports entry into force of 
this agreement following the requisite congressional review period. 
This Agreement is fully consistent with the law and incorporates all of 
the terms required by Section 123 of the Atomic Energy Act of 1954 
(AEA). This agreement will replace an existing 123 agreement with China 
that has been in place since 1985.
                        status of the agreement
    The agreement was submitted by President Obama for congressional 
review on April 21, 2015, along with the required unclassified Nuclear 
Proliferation Assessment Statement (NPAS) and two accompanying 
classified annexes. The Secretary of State and the Secretary of Energy 
recommended that the President make the legal determination that the 
agreement ``will promote, and will not constitute an unreasonable risk 
to, the common defense and security.'' The Secretary of Energy and I 
share that view based upon a number of factors detailed in this 
testimony. Our complex relationship with China presents both challenges 
and opportunities. One of the most dynamic areas of collaboration we 
have is in the energy sector, which is why continuing U.S.-China civil 
nuclear cooperation remains in the best interest of the United States.
                    justification for the agreement
    The State Department will review the agreement, and the 
accompanying NPAS provides details on all of the provisions of the 
agreement, but let me briefly highlight some important elements and why 
this agreement is essential for upholding our shared nonproliferation, 
energy, and commercial goals.
    The proposed 123 agreement is an important element in promoting 
strong nonproliferation policies and our interest in seeing China 
further advance its already improved record on proliferation issues. 
The successor agreement not only complies with all of the 
nonproliferation measures and controls required by U.S. law, but it 
also includes new elements that provide for further assurances that 
this cooperation is solely peaceful in nature and will not be 
redirected for other purposes. In particular, the agreement includes 
requirements that adequate physical protection measures be maintained 
with respect to U.S.-obligated nuclear material and equipment; the U.S. 
right to prior consent to any retransfer from China of U.S.-obligated 
nuclear material, equipment, or components; and the requirement that no 
U.S.-obligated nuclear material may be enriched or reprocessed without 
the prior approval of the United States.
    Many on this committee may be interested to know how we can proceed 
with nuclear cooperation with China in a way that protects our vital 
national security interests. In the view of the Department of Energy, 
the conclusion of a 123 agreement with China will enhance our ability 
to manage and mitigate the risk of China diverting sensitive nuclear 
technology to its military programs or re-exporting it without U.S. 
permission. Indeed, it is my view that we are better off from a 
national security perspective by completing this agreement than we are 
without any 123 agreement in place at all.
       technology transfer provisions in the successor agreement
    The challenges that arise regarding nuclear cooperation with China 
are not unique to China. In working with any foreign partner, the 
United States places emphasis on measures to ensure that nuclear 
technology transferred from U.S. companies is not used or retransferred 
in a manner that is prohibited by the terms of the Nuclear Non-
Proliferation Treaty (NPT), other treaties, or U.S. statutory law, or 
is inconsistent with U.S. commitments to the Nuclear Suppliers Group 
(NSG), and all other U.S. nonproliferation commitments and policies.
    To address the opportunities and challenges presented in ongoing 
civil nuclear cooperation with China, the United States negotiated new 
and unique provisions in the proposed 123 agreement.
    First, we elevated the level of authorization required for the 
provision or transfer of civil nuclear technology to China. Under the 
new agreement, technology transfers will now be authorized under the 
provisions of the 123 agreement itself. The terms of the proposed 123 
agreement establish a mechanism for the United States to greatly 
increase our oversight of proposed technology transfers from the United 
States to China. In effect, all of the nonproliferation assurances and 
other provisions in the 123 agreement would now apply to technology 
covered by subsequent arrangements that the Secretary may issue 
pursuant to section 131 of the AEA. This is a far more robust process 
than the government-to-government nonproliferation assurances that are 
provided by the Government of China for technology transfers authorized 
by the Secretary of Energy pursuant to 10 CFR Part 810 (Part 810).
    Furthermore, under the proposed agreement, the United States and 
China would now review, on an annual basis, requests from U.S. industry 
to identify projects and end-users that are eligible for receipt of 
nuclear technology subject to the 123 agreement, upon entry into 
section 131 subsequent arrangements. This is a new element that was not 
included in the 1985 agreement and would provide an unprecedented level 
of insight into commercial transactions.
    As compared to the current regulatory pathway, this method would 
provide for greater oversight of all the covered activities, and would 
allow for more timely decisions regarding technology transfer requests 
so that U.S. companies may be increasingly competitive in the Chinese 
market. It would also make the failure to comply with the technology 
transfer authorizations issued under the 123 agreement a breach of the 
legally binding terms of the agreement.
         joint training requirements in the successor agreement
    It is important to highlight that the new terms regarding 
technology control also mean that both the United States and China will 
need to educate our respective industries on the new process, its 
goals, how it would work, and most importantly, the terms and 
limitations of the successor 123 agreement. We are building upon the 
significant efforts already underway regarding the training of China's 
export control officials and experts. To do so, we have included as a 
requirement in the agreement that the United States and China jointly 
provide training to commercial entities in both countries regarding the 
requirements of the successor 123 agreement, including controls and 
policies applicable to exports and imports subject to the agreement. 
This training would emphasize the legal obligations that: (1) there 
would be no diversion of materials, equipment, components, technology, 
or assistance to nonpeaceful or military uses; and (2) there would be 
no retransfer without prior consent. This is the first time that this 
kind of training and educational component has been included in any 123 
agreement; neither U.S. nor Chinese commercial entities will be able to 
claim to be unaware of the terms of the agreement or their 
corresponding legal obligations.
                        commercial implications
    DOE and State considered many factors in the negotiation of this 
agreement, including the recognition that China has an advanced civil 
nuclear program that is heavily dependent on U.S. commercial vendors. 
The Department of Commerce has identified China as one of the largest 
and most important markets for the U.S. nuclear industry. China has the 
fastest growing nuclear energy program in the world with 26 nuclear 
power plants in operation, 24 under construction, and dozens more 
planned. China increasingly seeks services, technology, and equipment 
from U.S. and other foreign commercial vendors for its civil nuclear 
program. We believe it is in the best interest of the United States to 
continue to support U.S. vendors' ability to compete in this fast 
growing market.
    The growth of Chinese clean nuclear energy demonstrates its 
commitment to combating the challenges of global climate change. Last 
November, in a Joint Announcement between our two Presidents, China 
announced its intention to increase the share of nonfossil fuels in its 
primary energy consumption to around 20 percent by 2030 as part of its 
effort to meet its post-2020 climate change targets. Nuclear power will 
be an important part of those targets, providing a significant 
commercial opportunity for U.S. vendors while advancing U.S. interests 
in facilitating China's pledge to peak its greenhouse gas emissions by 
about 2030.
    A failure to allow the proposed 123 agreement to go forward would 
essentially cut off U.S. vendors from this market, constituting a 
potential serious commercial threat to the overall health and well-
being of our civil nuclear industry. For example, DOE invests in a 
variety of research and development programs that work with industry to 
develop the next generation of nuclear reactors. These interactions 
have yielded significant commercial interest from Chinese entities 
seeking U.S. nuclear technologies. Absent a successor 123 agreement, 
these vendors will be unable to compete in a burgeoning Chinese market.
    U.S.-China collaboration on peaceful nuclear cooperation provides 
us with invaluable insights into not only China's civil nuclear 
program, but also its science, engineering, and technology programs, as 
well as its research and development priorities. If the United States 
fails to replace the expiring U.S.-China 123 agreement, all of this 
important work could be put in jeopardy.
    Finally, failure to bring the agreement into force with China would 
significantly impact diplomatic relations and likely eliminate the 
broad range of U.S.-China cooperative programs that the United States 
uses to strengthen China's nonproliferation, safety, and security 
culture in its nuclear industry, which are intended to ensure that 
China develops its civil nuclear program in a safe and responsible 
manner. Should Chinese civil nuclear programs no longer be able to rely 
on technology, material, and equipment from the United States, they 
will turn to other providers whose nonproliferation and safety 
standards may not be on par with those of the United States.
         export control and peaceful use cooperation with china
    Bilateral cooperation on the peaceful uses of nuclear technology is 
governed by the legal framework provided in the subsequent 1998 U.S.-
China Peaceful Uses of Nuclear Technology (PUNT) Agreement, which falls 
under the umbrella of the current U.S.-China 123 agreement. This 
cooperation has been invaluable in strengthening both countries' civil 
nuclear power programs. Without a legal framework to facilitate 
collaboration with China, the United States ability to influence safety 
and nonproliferation design considerations in China as it moves forward 
with the development and deployment of advanced reactor and fuel cycle 
technologies would be diminished. This is especially important in light 
of China's growing efforts to promote its technologies worldwide.
    DOE/NNSA's export control outreach program is also reliant on the 
123 agreement and PUNT framework, which has been working since 2007 in 
China under the PUNT umbrella. This program has trained over 100 
governmental officials per year from six different Chinese agencies 
that have various export control and internal compliance 
responsibilities. DOE/NNSA also has trained dozens of additional 
industry personnel on the subjects of internal compliance and best 
practices of China's export controls. Provided the successor 123 
agreement is brought into force, DOE/NNSA expects to expand 
significantly the number of industry officials engaged through a train-
the-trainer awareness-raising approach, to underscore the importance of 
the principal of nondiversion to nonpeaceful or military purposes which 
is outlined under the 123 agreement.
               science and energy cooperation with china
    The Department also has broader science and energy cooperation with 
China that is made possible by the 123 agreement. Collaboration has 
been taking place for over 30 years in important areas including high 
energy physics, magnetic fusion, materials research, synchrotron and 
neutron science, and topics relevant to environmental management (EM). 
U.S.-China cooperation in these areas continues to benefit the United 
States as China has increased its funding significantly for basic 
research and our scientists have the chance to work with some of the 
world China's brightest scientists and engineers. There is also 
extensive cooperation with China in the area of civil nuclear energy 
research and development. The scope of this collaboration is broad and 
deep; it includes advanced R&D in separations technologies, fast 
reactor technologies and safety analysis, molten salt reactor coolant 
systems, fuels and materials development, nuclear safety enhancement, 
spent fuel storage, repository science, and uranium extraction from 
seawater.
                               conclusion
    When reviewing the successor 123 agreement, it is important to 
consider the specific provisions of all our 123 agreements. The United 
States requires our trading partners to provide guaranties consistent 
with the legal requirements contained in section 123 of the AEA. These 
requirements are intentionally stringent and set the global standard 
for nuclear commerce. It is therefore in the U.S. national interest to 
encourage other governments that are considering commercial nuclear 
programs and that are in compliance with their nuclear nonproliferation 
obligations to sign 123 agreements with the United States. Our 123 
agreements feature the highest nonproliferation standards, thereby 
discouraging a nonproliferation ``race to the bottom,'' in which 
potential partners negotiate peaceful nuclear cooperation agreements 
with suboptimal nonproliferation controls.
    Replacing the 123 agreement with China continues a path that 
Congress started down 30 years ago when the current 123 agreement was 
negotiated. Since the 1985 agreement was negotiated, the United States 
has witnessed China make great strides in the area of nonproliferation 
and in its civil nuclear program, even though we know there is more 
work to do. Some of these strides were made specifically because of the 
value that China placed on having a 123 agreement with the United 
States and the desire to cooperate with the most advanced, safest, and 
reliable civil nuclear program in the world. Without this 123 
agreement, the United States will lose a critical mechanism for 
influencing China's nonproliferation behavior, and the insight and 
transparency into China's nuclear programs as a result of the thirty 
years of cooperation to date in this area.

    The Chairman. Well, I want to thank you both, and I 
appreciate what you do for our country.
    And I know yesterday evening, you all had mentioned you all 
were going to make the public comments as to why this was good 
for our Nation, and certainly you did not disappoint.
    But let me ask you a question. According to NPAS--and I 
know we have talked about this in other settings--and I quote--
``China's strategy for strengthening its military involves the 
acquisition of foreign technology, as well as a greater civil 
military integration.'' And both elements have the potential to 
decrease development costs and accelerate military 
modernization. I included that in my opening comments.
    So there is no question that we understand going into this 
agreement that what we are doing here--the Chinese, regardless 
of what they say, are going to be utilizing this to accelerate 
their military development. Is that correct?
    Mr. Countryman. What I would say, sir, is that there is no 
doubt, based on the historical record, that China will make 
every attempt to benefit from technology transfer, whether in 
the economic or commercial or military field. Our job, which 
only begins with this 123 agreement, but is actually carried 
out through the licensing procedure, is to frustrate that 
effort. We have every intention of doing so and believe we have 
the means to do so.
    The Chairman. So now that we have established that, that in 
fact this is going to happen, you mentioned that our 
involvement with them would help cause proliferation not to 
occur. I just would like to ask a question. Are they 
organically interested as a nation--forget the fact that in 
doing business with us, we champion nonproliferation and other 
kinds of issues--but organically do you believe that China 
cares about nonproliferation and nuclear safety?
    Mr. Countryman. The short answer is yes. I do believe that 
China takes far more seriously than it did 30 years ago or even 
10 years ago its obligations under the Nonproliferation Treaty, 
as a member of the Nuclear Suppliers Group, and in other fields 
as well. They take it seriously.
    I cannot say that they yet have the level of political 
commitment that will enable them to spend the resources you 
need to effectively control the export from the second biggest 
economy in the world, a very high-tech economy, and one that 
they do not have a long track record in controlling exports as 
effectively as the U.S. and other nations. I do believe they 
are trying. I do believe that they need a higher level of 
political commitment to meet the standards to which they 
aspire.
    The Chairman. In the past when we have had these types of 
agreements--you know, of course, we have the gold standard 
agreement that we like to stick to--but we typically do not 
give advance consent for enrichment and reprocessing. Certainly 
the first agreement we had with them in 1985 that was not 
implemented until 1998 did not do that.
    Can you explain to us and to the American people why in 
this particular case we decided to give advance consent?
    Mr. Countryman. China is a nuclear weapon sate under the 
Nuclear Nonproliferation Treaty. It already possesses and 
developed on its own numerous enrichment and reprocessing 
facilities. There is not a logical reason nor would there be a 
practical effect to prevent China from enrichment and 
reprocessing.
    The Chairman. And then under the Nuclear Suppliers Group 
guidelines, is China upholding those? I know we have had some 
issues relative to the nuclear plants in Pakistan. Could you 
talk with us a little bit about that and whether they are 
actually honoring the NSG guidelines?
    Mr. Countryman. When China became a member of the Nuclear 
Suppliers Group, there was a consensus from the other members 
to grandfather construction of plants in Pakistan, which China 
had initiated.
    However, there was not agreement that that was an open-
ended clause. The problem is that China has since announced 
other power plants that it intends to build in Pakistan, and 
this is not consistent with the rules of the Nuclear Suppliers 
Group, which it joined. We raised this issue both as a 
bilateral issue and within the context of the Nuclear Suppliers 
Group.
    The Chairman. So they are not honoring the NSG guidelines. 
We have issues there. We know for a fact that they will take, 
even though this agreement states that you cannot take this 
civil nuclear agreement and use it to move along more swiftly 
their military development--we know they are going to do that.
    So if you would step back--I know this is a way for a 
former U.S.-based company and others I know through the supply 
chain to enhance their business and obviously create some U.S. 
jobs, but could you step back and just talk about why this is 
in our national interest?
    Mr. Countryman. Yes, sir. As I said at the beginning, jobs 
are important. My responsibility is to ensure that we promote 
the highest standards of nonproliferation policy in the world, 
and that is what successive administrations have done with 
strong congressional support for decades. We would not have 
concluded this agreement if I were not satisfied that this was 
the best way to improve China's record on nonproliferation, to 
maintain our capability to have influence on that record. That 
is a very short answer.
    Frank may want to add to this.
    Mr. Klotz. If I could, Mr. Chairman. The fact that we have 
an agreement like this--and hopefully we will have a successor 
agreement--also allows us to engage in dialogue and discussion 
with the Chinese in a variety of different venues on a variety 
of different fronts. For instance, we have discussions, as I 
mentioned earlier, in the PUNT Joint Coordinating Committee on 
a whole host of safety, security, emergency response issues. We 
have the opportunity to discuss issues associated with nuclear 
smuggling detection. We have been involved in the business of 
educating and training their people on export controls. We have 
helped them in the development of a center of excellence that 
will do training in the area of safeguards and security. So it 
is along these various avenues, which we engage them, not just 
the insight that we gain through commercial interactions with 
them that help move them along on issues associated with 
nonproliferation and with safety and security and safeguards.
    The Chairman. Well, look, I know that the initial input, as 
we were walking through this, from staff, as you all are 
dealing with them as you were moving through, leaned on the 
positive side.
    I do want to say that I understand our desire to continue 
to be involved with other countries with our superior nuclear 
technology. I do think there are important reasons for us to do 
so. I do hope, as we move through this process, again we will 
realize we are dealing with a country that plans to sap all of 
our technology and move totally to indigenous methods of doing 
this as quickly as possible. Now, they are going to use this to 
develop their military. I know this is the third time I am 
going to say it, but to develop their military more quickly and 
that they are not honoring the existing Nuclear Suppliers Group 
guidelines.
    So I understand, you know, again it is economically driven. 
I know we have a lot of companies that involve themselves with 
you on these agreements. I do hope, as we move through this, we 
will take into account all of the liabilities and the benefits 
that come with it.
    And again, I thank you very much for your service to our 
country.
    And with that, our distinguished member, Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman.
    Secretary Countryman, let me ask you. In the last few 
years, China's nonproliferation policies remain from my view 
problematic. Chinese companies and individuals continue to 
export dual-use goods relevant to nuclear and chemical weapons 
and ballistic missile programs to Iran and North Korea. 
Numerous Chinese individuals and companies have been sanctioned 
for those activities.
    Were these issues addressed during our negotiations to 
renew the 123 agreement?
    Mr. Countryman. I have addressed these issues constantly in 
the 3\1/2\ years I have been on this job, not in the context of 
the 123 negotiations, but in the context of a number of regular 
dialogues.
    Senator Menendez. I appreciate that. But within the context 
of the 123 agreement, they were not addressed.
    Mr. Countryman. No.
    Senator Menendez. So is that not an opportunity to pressure 
China to halt these activities?
    Mr. Countryman. As I said, we press for stronger Chinese 
performance at all times, not just when we are in the middle of 
a negotiation. Did this negotiation offer additional leverage? 
If this were a giveaway program, perhaps. But it is not. It is 
one that provides mutual benefit to both countries and provides 
a foundation within which we can cooperate on difficult issues.
    Senator Menendez. But clearly it is something that China 
wants as much as we do. Or do we want it more than China wants?
    Mr. Countryman. I do not know. Maybe we should ask Frank if 
he wants to comment.
    Do we want it more than China wants it? I think both of us 
recognize that the failure to renew this agreement would have 
repercussions throughout the bilateral relationship. I think 
both countries are fully aware of that.
    Senator Menendez. Let me ask you a different question. If 
the Congress were to place certification conditions on licenses 
for the export of new reactors, beyond the four that have 
already been licensed, to the effect that the Government of 
China is fully and completely cooperating with U.S. requests to 
halt and prosecute the actions by Chinese companies to export 
technology and equipment for ballistic missiles to Iran and 
North Korea, would the administration be able to make such 
certifications?
    Mr. Countryman. It is the first time I have heard of the 
idea. I would have to look at the exact details. I believe the 
Chinese Government is making an effort. I do not believe the 
effort is yet sufficient.
    Senator Menendez. Well, you had said before in your answer 
to my previous question that you have raised these issues a 
series of times outside of the 123. So it would seem to me that 
you would be deeply engaged in the knowledge as to whether or 
not the administration could go ahead and certify that the U.S. 
requests to halt and prosecute the actions by Chinese companies 
to export technology and equipment for ballistic missiles to 
Iran and North Korea would be able to be made. So from the 
knowledge that you have from all of the times that you have 
raised this with the Chinese, do you believe if we included 
such a provision, that the certification by the administration 
could be made to that effect?
    Mr. Countryman. Again, I would have to look at the exact 
language. What I could say now is that we could certify that 
there is an improving trend, that the Chinese have been 
responsive to us on a number of cases that we have raised, but 
I could not certify 100 percent satisfaction. No.
    Senator Menendez. So we have--your words--an improving 
trend, but we do not have what we need.
    Why would such a certification requirement not be useful 
for the administration's efforts to persuade China to halt 
these activities?
    Mr. Countryman. It would not be useful if it were absolute. 
Neither China nor a number of other countries with whom we work 
intensively on such issues are 100 percent efficient and 
effective in their law enforcement efforts. And if the standard 
were absolute, I am not sure which country would be able to 
meet it.
    Senator Menendez. Well, you know, I understand maybe some 
countries where there is a strong private sector that developed 
its own technology and proliferates in that respect, but China 
is a pretty command-and-control country. It is not like you 
raise your hand and say I want to go a different way. So it 
seems to me that this is a real concern.
    Let me ask you this. Curtiss-Wright Corporation produces 
the pumps that cool the reactors which propel U.S. naval 
submarines. They also produce a scaled-up version of this pump 
for the AP1000 reactors Westinghouse is selling to China. Could 
China reverse engineer the pumps that they are receiving from 
Westinghouse for their own nuclear submarine program? Is the 
Chinese military seeking to divert these civilian nuclear 
technologies to its naval reactor program? Do you have any 
information on that?
    Mr. Countryman. I do and we discussed it in some detail in 
last night's briefing, sir.
    Senator Menendez. So you can only respond to that in a 
classified setting.
    Mr. Countryman. I think that would be wiser, yes, sir.
    Senator Menendez. It would be wiser or necessary?
    Mr. Countryman. Necessary.
    Senator Menendez. Wiser is one thing. Necessary is another.
    Mr. Countryman. I think it would be not only necessary but 
also wiser to have someone more expert than me on the topic.
    Senator Menendez. All right. We will have to go through 
that.
    One last question then. What measures have been built into 
the agreement to prevent China from exporting nuclear 
technology to countries that are a proliferation risk? Because 
China says it will abide by the Nuclear Suppliers Group's rules 
for exports, but it is already violating these rules through 
its continuing work on Pakistani reactors.
    Mr. Countryman. The agreement prohibits the transfer of any 
U.S.-provided technology to another country without U.S. 
consent.
    Senator Menendez. But it is already violating these rules 
through its continuing work on Pakistani reactors.
    Mr. Countryman. There is, I think, a difference between 
violating NSG rules--and of course, the Chinese would say their 
action is a matter of interpretation rather than violation. 
There is a difference between that and violating a 123 
agreement particularly when this agreement, unlike the 
agreement it replaces, has a specific clause that calls for 
temporary suspension or permanent suspension in case of 
violation.
    Senator Menendez. Well, you know, in your written 
testimony, you talk about advancing our global nuclear 
nonproliferation objectives. And, Mr. Chairman, I begin to what 
exactly those are and can they be mitigated as we wish them to 
be instead of having a clear objective. Of course, I am 
concerned about what we are doing with Iran, but I am concerned 
here that we seem to be able to look the other way when we want 
to. So I am trying to figure out what our nuclear 
nonproliferation objectives are and how much of a standard we 
are truly setting in the world. I was always an admirer that 
U.S. policy was about actually stopping nuclear proliferation 
not managing it. And increasingly, when I see testimony like 
this, I get the sense that we are moving away from stopping it, 
preventing it, to managing it, and that is a whole new world.
    Thank you, Mr. Chairman.
    The Chairman. You bring an interesting point. When we know 
they are going to violate the civil military piece, are they 
going to violate this other piece?
    But Senator Johnson.
    Senator Johnson. Thank you, Mr. Chairman.
    Assistant Secretary Countryman, you answered the chairman's 
question on whether China was committed to nonproliferation 
with a simple yes. Is that correct?
    Mr. Countryman. That is the short answer.
    Senator Johnson. It does not sound very accurate.
    Mr. Countryman. As all short answers are, yes, sir.
    Senator Johnson. You said that they are not controlling 
their exports of nuclear technology. Is that because they are 
unable or unwilling?
    Mr. Countryman. Well, first, I would have to disagree that 
China is purely a command-and-control economy. It has a vibrant 
private sector. It is something of the wild west in terms of 
being free from government regulation and government control. 
And in particular, the high-tech sector does aggressively seek 
other markets. And in addition, there is a number of Chinese 
businessmen who seek the opportunity to be brokers between 
North Korea or Iran and producers in China and elsewhere. And 
there are such brokers in other countries besides China.
    It is our assessment that the Chinese Government simply 
does not have currently the bureaucratic enforcement capability 
and does not yet have all the legislation it ought to have in 
order to adequately control dual-use exports.
    Senator Johnson. So your answer is that they are unable to 
control the export.
    Mr. Countryman. My answer is that they have not yet 
committed the resources that would be necessary for an economy 
of that size and sophistication.
    Senator Johnson. How difficult would it be for them and how 
many resources would it take?
    Mr. Countryman. Sorry. I do not have a short answer to that 
one.
    Senator Johnson. You seem to indicate in your testimony 
that if we do not move forward with this, if we do not provide 
the technology, they will just get it someplace else, and then 
we will be on the outside looking in, effectively losing 
whatever influence we have. What are their alternatives in 
terms of supply?
    Mr. Klotz. Senator, there are a number of different 
countries which are in this market space. Countries that 
immediately come to mind are Russia, France, South Korea, 
Japan, all of which are looking for opportunities to pick up on 
the growing interest in using nuclear energy to solve energy 
demands in a number of countries, but also, as has been pointed 
out, to move to cleaner types of energy to deal with concerns 
about global climate change. So we are one of the most 
sophisticated, one of the most effective in terms of the civil 
nuclear power industry, but there are other competitors out 
there.
    Senator Johnson. How advanced is our technology in 
comparison with those other competitors? Are we a cut above or 
is it all comparable?
    Mr. Klotz. Well, I am chauvinistic enough to say that I 
think we are a cut above. But they are very sophisticated in 
terms of their technology and the French, the Russians are 
succeeding in making sales of not only full reactors but also 
of important components and services associated with the civil 
nuclear industry around the world.
    Senator Johnson. Are we a cut above significantly, and is 
it significant from the standpoint of military conversion?
    Mr. Klotz. Well, in terms of military conversion, one of 
the things that we look very, very carefully at under the 
existing 123 agreement and one of the things that will be 
strengthened under the 123 agreement, the successor agreement, 
is to look very carefully at the information, the technology, 
the materials, the components which we as a Government will 
review before we give approval for that to be transferred to 
China.
    One of the other things that comes up in this new successor 
agreement is the fact that both sides will sit down annually 
and review the inventory of all the shared U.S. and Chinese 
technologies and determine whether or not that ought to be 
renewed. So we go into this I think with eyes wide open, 
understanding the potential risk, but also balancing against 
the potential benefits of being in this important and expanding 
commercial market.
    Senator Johnson. Having come from the private sector and 
participating in it for over 30 years, actually exporting to 
China, and evaluating whether we should actually start an 
operation in China, I have witnessed repeatedly Chinese 
companies reverse engineer and basically take over the 
manufacturing themselves. I would assume that would certainly 
be a risk.
    How quickly do you believe China could become self-
sufficient?
    Mr. Klotz. I do not have a good answer for you on that, 
Senator.
    Senator Johnson. My concern, obviously----
    Mr. Klotz. I mean, there are a lot of variables involved in 
the process in terms of moving forward. Our assumption is that 
even if they eventually start to manufacture more and more 
capability indigenously, there will still be a role for U.S. 
industry and industry of other countries to participate in 
producing particular components that are necessary and 
providing particular after-sale services both domestically in 
China and in those countries to which China might export 
reactor technology.
    Senator Johnson. Changing the direction a little bit, 
Assistant Secretary Countryman, can you just tell me a little 
bit about what China's attitude is toward the advancement in 
North Korea of their nuclear capabilities?
    Mr. Countryman. Very briefly, China says--and I think it is 
borne out by their actions--that they do not support North 
Korea as a nuclear weapons state and that they wish to see the 
entire Korean Peninsula denuclearized.
    Senator Johnson. How much help has China given to North 
Korea over the years?
    Mr. Countryman. I do not know about long-ago history, but 
in recent years no indication that China is assisting the North 
Korean nuclear weapons program.
    Senator Johnson. I have no further questions.
    The Chairman. Senator Markey, who is no stranger to this 
issue.
    Senator Markey. Thank you, Mr. Chairman, very much. Thank 
you for having this hearing.
    Back in 1985, I was the chairman of the energy subcommittee 
in charge of the Nuclear Regulatory Commission and the Nuclear 
Regulatory Commission, Department of Energy. So that I played a 
role in the construction of that 1985 123 agreement. And what I 
worked for was the imposition of two conditions before 
implementation. The first was the preparation of a report 
examining Chinese proliferation risks, and second, presidential 
certification that China was following sufficient 
nonproliferation policies and practices. During the final floor 
consideration, I argued that the agreement carried high risk 
and that the conditions were in fact not as strong as they 
could have been, but at least it is that minimal mitigation 
standard, fraud, nonproliferation concerns.
    The Reagan administration's efforts to comply with the 
agreement's conditions revealed substantial Chinese 
proliferation risk. The agreement was shelved until 1997, when 
the Clinton administration certified that China was not 
proliferating nuclear weapons or technology and moved forward 
to implement the agreement.
    And again, I disagreed because of concern about Chinese 
proliferation to Pakistan and Iran at that time. Together with 
a bipartisan group of Members of Congress, I attempted to 
prevent the agreement from going forward.
    And here we are today just as we were in 1985 and 1989 and 
1996, 1997, 1998. I have deep concerns about whether China is 
complying with the current 123 agreement and other 
nonproliferation commitments.
    Concerns have been raised that China may be diverting U.S. 
nuclear power technology to its nuclear naval program. Would 
such a transfer violate the peaceful use provisions of the 1985 
nuclear cooperation agreement?
    Mr. Countryman. Yes, both the current agreement and the 
successor agreement. It would be a violation.
    Senator Markey. During the 1990s China supplied Iran with 
uranium and during the past 3 years, both the intelligence 
community and the State Department have expressed continuing 
concern the Chinese Government and private entities have 
proliferated technologies concerning and related to nuclear 
weapons to countries of concern. A glaring example of private 
sector proliferation is Li Fangwei, also known as Karl Lee, who 
has been designated, sanctioned, and indicted by the United 
States as a serial proliferator of nuclear weapons-related 
technology. China has given repeated assurances that they are 
investigating but reportedly have not taken enforcement action 
in this case.
    My question is, can you confirm that the United States 
Government, including the State Department, no longer believe 
that entities in China are selling dual-use technologies or 
technologies that could assist with nuclear weapons development 
or delivery systems to North Korea or other countries?
    Mr. Countryman. No.
    Senator Markey. You cannot.
    Second, in light of the Karl Lee case, do you believe that 
China enforces nonproliferation requirements on both public and 
private Chinese actors to the same standard as the United 
States does?
    Mr. Countryman. No.
    Senator Markey. In May 2014, five members of the Chinese 
military were indicted on charges of hacking into U.S. 
companies' systems and stealing trade secrets. These thefts 
occurred in 2010 and 2011 and included information related to 
the Westinghouse AP1000 nuclear reactor.
    During the identical timeframe that these thefts were 
taking place, the Nuclear Regulatory Commission authorized 
dozens of Chinese nationals to have unescorted access to five 
U.S. nuclear power plants for 2 months. Unescorted access to 
five U.S. nuclear power plants. I have been told by the Nuclear 
Regulatory Commission that this matter remains under 
investigation by the Department of Justice.
    Can you tell me whether any of the Chinese nationals who 
were placed at U.S. nuclear reactors unescorted assisted or 
attempted to assist the efforts of the members of the Chinese 
military who were indicted?
    Mr. Countryman. I am unable to answer a question on the 
connection between the two. I do know that in terms of Chinese 
visitors who were allowed access to operating nuclear power 
plants, in the same way that American experts are allowed 
access to Chinese nuclear power plants, the NRC I believe has 
corresponded with you several times on this and noted that it 
is essentially not a matter of NRC approval of such visits.
    Senator Markey. Do you know if the investigation has been 
closed?
    Mr. Countryman. I do not know that.
    Senator Markey. So can you give the committee a report on 
the status of that investigation and when they intend on 
closing the investigation? Because I think it is directly 
relevant to the treaty that we are now considering.
    Mr. Countryman. I will endeavor to get more information, 
yes, sir.
    Senator Markey. I think it is very, very important.
    In 2013, a DOD report to Congress states, quote, China is 
using its computer network exploitation capability to support 
intelligence collection against the United States diplomatic, 
economic, and defense industrial base sectors that support U.S. 
national defense programs.
    I would like you to tell me whether Chinese Government 
entities have attempted to hack into either the Department of 
Energy or the Department of State.
    Mr. Countryman. As discussed last night, we will give you 
information on that soon.
    Senator Markey. General.
    Mr. Klotz. I agree. We will provide you the information we 
have.
    Senator Markey. Yes. I think it is very important so that 
we understand especially whether or not they have tried to 
access nuclear weapons information from the Department of 
Energy or other sensitive military information, and that would 
be both Energy and State, but also Defense and other related 
agencies.
    So my concern here, Mr. Chairman, is that it is quite clear 
that there are entities within China who continue to sell 
materials that could have dual-use application into this 
international nuclear weapons and ballistic missiles 
marketplace in the same way A.Q. Khan was doing it out of 
Pakistan. The gentleman who I referred to and others inside of 
China are continuing to do the same thing today. I think it is 
preposterous to conclude that the Chinese Government is 
incapable of shutting this down. I think it exists at the 
sufferance of the Chinese Government. I think that it is 
absolutely critical that safeguards be put in place to make 
sure that there are conditions that are attached to this 
agreement that ensure that there is not a continued recurrence 
of dangerous activity that will come back to haunt our country 
and the world because of China's unwillingness to actually 
police the export of these very dangerous technologies into the 
hands of those who we know will endanger the world if they gain 
access to it.
    So I am not confident that I can support this agreement. I 
think it needs additional strengthening if we are going to be 
confident that the policy that we have right now does not help 
China far, far more than it is going to harm the long-term 
nuclear and ballistic missile nonproliferation agenda, which we 
put at the highest pinnacle of American public policy.
    Thank you, Mr. Chairman.
    The Chairman. Well, we look forward to your input in that 
regard, and it is fascinating that our witnesses clearly state 
that China is in violation of the existing agreement and yet we 
are extending the relationship with a new agreement.
    Senator Perdue.
    Senator Perdue. Thank you, Mr. Chairman.
    And thank you, General and Mr. Secretary, for your lifelong 
dedication and service to this country. And thank you for your 
testimony last night in a classified environment.
    I will be very brief, Mr. Chairman. I agree with Senator 
Markey. I have done business in China, and if it was consistent 
with their strategic initiatives and objectives, I believe they 
could police this.
    You have touched on several of these proliferation 
questions already, so I will not belabor the point. But in 
1997, China pledge to the United States that it would not begin 
new nuclear projects in Iran. The 2011 Worldwide Threat 
Assessment by the Director of National Intelligence listed 
missile proliferation from Chinese entities as a concern at 
that point. Again in 2011, the same threat assessment said, 
quote, ``North Korea and entities in Russia and China continue 
to sell technologies and components to the Middle East and 
South Asia that are dual-use and could support WMD and missile 
programs.'' The 2015 statement did not include similar 
language.
    General, could you just give us again just a highlight of 
your perception now, your assessment on the current 
proliferation activity in the region that China is initiating 
between Iran specifically and North Korea?
    Mr. Klotz. Senator, that is just not an area that falls 
under the purview of what we deal with.
    I think the issues, in terms of Chinese activities in other 
parts of the world, more properly falls under the State 
Department and the intelligence community.
    Senator Perdue. Thank you.
    Mr. Secretary.
    Mr. Countryman. I guess that is me.
    First to be clear, the 1997 agreement was about official 
Chinese Government support to research and development 
activities and construction of facilities in Iran that could 
have contributed to a nuclear weapons program in Iran. In 
keeping with the terms of its pledge in 1997, China terminated 
those activities.
    The separate question of whether every entity, every 
crooked businessman in China has stopped attempting to sell 
dual-use materials to Iran and North Korea is a very different 
question. And I agree that it requires both additional 
resources and additional political will in China in order to 
put a stop to such activities. But it is a separate question 
from direct Chinese Government assistance to a nuclear research 
program in Iran.
    Senator Perdue. In this deal, do you think that we could 
influence them to change their ability to detect that? I 
understand it takes investment, but is that not really the 
question behind what we are trying to do here? It is either 
they are going to do business with us and proliferate, or they 
will do business with someone else and proliferate. And so 
engagement is the higher objective here. I get that.
    But before we get to that point, is it not possible to 
influence them to actually enhance their detection 
capabilities?
    Mr. Klotz. Well, I mean, that is an extraordinarily 
important question, Senator.
    And just let me give you one vignette. The Department of 
Energy and NNSA has had an export control outreach program that 
relies upon the 123 agreement and the PUNT framework that I 
mentioned earlier. And it has been working since 2007 in China 
to train over 100 government officials each year from six 
different Chinese agencies that have a various role to play in 
export control, internal compliance responsibilities. We have 
also trained dozens of additional industry personnel on 
subjects of export control, internal compliance, and best 
practices, and provided that this successor 123 agreement comes 
into force, we expect to expand significantly the number of 
industry officials that are engaged in ``train the trainer'' 
approach to drive home that nondiversion to peaceful and 
military purposes as outlined under the 123 agreement are 
issues that the Chinese have to focus on.
    So, again, if we are going to engage, if we are going to 
continue the journey of bringing the Chinese more into what we 
consider to be the international norm and standard related to 
nonproliferation, related to nuclear security, and related to 
nuclear safety standards, it involves us interacting with them 
from the Department of Energy's perspective at the level of the 
technicians and the plant managers and the scientists that 
actually have to carry out this work. We cannot do that unless 
we have the legal framework that allows us to engage in those 
types of discussions.
    Senator Perdue. I understand, and I have supported 
engagement over the last 30 years personally. And I think I 
agree with you technically that that is a better way to go if 
in fact we can influence through that engagement.
    Specifically on a CAP1400 reactor, this is one that the 
Chinese might reverse engineer off of one of our reactors. Is 
there any way to police that? Would we consider that a U.S. 
design even though it was, let us just say, reversed engineered 
off of our design, and would that come under the restrictions 
that we have on our products?
    Mr. Klotz. Well, without talking about the specifics of 
that, I mean, it is ultimately up to industry to decide which 
of its technology, its patents, its trademarks it is willing to 
part with in essentially a commercial business deal. They have 
to make the business case for what makes the most sense either 
in terms of the immediate sale or in terms of what they expect 
to gather from the sale of spare parts or services down the 
road.
    What happens at the U.S. Government level is all of those 
requests to transfer a particular type of technology, a 
component, material, know-how has to go through the Department 
of Energy. We consult with the rest of Government to--again, 
eyes wide open--try to understand what the implications of that 
are from our national security nonproliferation perspectives 
before that goes forward. Under this new agreement, any 
decisions along those lines will be published in the Federal 
Register and it will take a waiting period to make sure that we 
have dotted all the ``I's'' and crossed all the ``T's'' with 
respect to technology transfer.
    Senator Perdue. Very quickly on that one point, when we 
detect violations, what can we do to bring them back into 
compliance, if anything at all?
    Mr. Klotz. Well, within the terms of this new framework 
agreement, either party has the right to raise it with the 
other party and to ultimately suspend the agreement if they are 
not satisfied with the response.
    Senator Perdue. Thank you, Mr. Chairman.
    The Chairman. Very good questioning.
    Ranking Member Cardin, thank you so much.
    Senator Cardin. Thank you, Mr. Chairman.
    Again, I thank both of you for not only being here but for 
the important public service that you are providing to people 
of this country. These are extremely important issues.
    I am somewhat troubled by why there was not an effort made 
in these negotiations to deal with cooperation from China in 
regards to proliferation to Iran and North Korea by Chinese 
companies. We all acknowledge that there are Chinese companies 
that are violating the international norms on transfer of 
material and equipment to North Korea and Iran. We have spent a 
great deal of effort to try to prevent Iran from becoming a 
nuclear weapon state, and it would seem to me that we would 
want to use every opportunity we could. So why was there not a 
greater effort made to use the 123 agreement, which admittedly 
benefits both sides--do not get me wrong--but to use this as an 
opportunity to advance an important goal of nonproliferation?
    Mr. Countryman. No, it is a very good question, Senator. 
Let me talk about it first in the past tense with the current 
agreement and then in the negotiation of the successor 
agreement.
    In the 1990s, when the 123 was in effect but before any 
exports were approved, as a consequence of the standards that 
the Congress asked us to certify, China made a number of 
specific commitments on nuclear nonproliferation and export 
control, which they fulfilled. And they included joining the 
Nuclear Suppliers Group and adhering to those standards. It 
included ending the cooperation that they had initiated with 
Iran. It included ending certain forms of cooperation with 
Pakistan, and crucially it included them publishing for the 
first time the list of both nuclear material and dual-use 
materials that were controlled under their national 
legislation. Prior to that time, they had no definition of what 
it was they were seeking to control. That is an example of the 
kind of dialogue within the context of a 123, but not in the 
context of a 123 negotiation, that brought about a 
demonstrable, concrete improvement in Chinese performance.
    What we seek to do today is the same, and so well before my 
tenure began in 2011, but aggressively under my tenure, we have 
engaged with the Chinese not with a general complaint that you 
got to do more, but with a combination of very specific bits of 
information upon which we expect them to act, as well as 
concrete offers of cooperation, of training in customs 
enforcement, of training in border security, of discussion of 
ways to change legislation and to change national control lists 
to make them more effective. And as a consequence, we see more 
and more cases in which Chinese authorities have taken action 
on specific bits of information, not only from the United 
States, but that they have developed themselves in order to 
prevent transfer of dual-use material.
    More importantly, over the last 15 years or 20 years, if 
you prefer, what we have seen is that Chinese state-owned 
enterprises are out of the business of proliferating technology 
to North Korea and Iran. It is rather a very dynamic, very 
high-tech private sector in China, which the state has not yet 
shown the capability and, as Senator Markey, I would agree--not 
yet shown the political will to control adequately.
    Senator Cardin. But is it your view that the successful 
completion of the 123 agreement will end up making China more 
sensitive to and more effective in blocking the export of dual-
use technology?
    Mr. Countryman. Yes, and I think this hearing will also 
contribute to the same goal.
    Senator Cardin. Thank you. I appreciate that.
    I would like to talk a little bit about--one of the selling 
points of a 123 agreement is jobs here in the United States 
because a lot of the reactor work is done by Americans, and we 
have companies that are located here. But the technology will 
be absorbed in China. China is interested in producing reactors 
for export. And there is some fear that we are accelerating the 
international competition from China which may end up costing 
American jobs, knowing the way that Chinese use their trade 
practices in the international marketplace.
    Can you give us any assurances that this 123 agreement will 
not end up costing us our domestic jobs in this area because we 
may instead be inadvertently accelerating the Chinese ability 
to compete internationally using American technology?
    Mr. Klotz. Thank you, Senator.
    Our sense is, again, the decision as to what specific 
aspects of what is U.S. origin technology, patented, 
trademarked, that U.S. companies decide in their engagement in 
the Chinese market or working with the Chinese in the export 
market is a decision which----
    Senator Cardin. Just to interrupt for one second. Part of 
the entry into China very much is negotiated with the private 
companies, which could very well affect China's ability to use 
technology. Would it not?
    Mr. Klotz. It does. But even if the Chinese are engaged in 
building reactors within their own country indigenously or if 
they are making for export reactors, there is still U.S. 
Content in that. There are still specialized components that 
the United States has a comparative advantage and a 
technological lead in providing after-sale services, 
consulting, engineering. There is just a whole range of things 
which U.S. industry, not just the major manufacturers of 
reactors but a whole range of sub-vendors will benefit from by 
being involved in this expanding and growing market.
    Senator Cardin. It makes me a little nervous. I hear what 
you are saying.
    Let me ask one final question, if I might, on safety 
issues, which is something we have not touched on. And that is, 
what type of assessment can you give us that the use of nuclear 
power in China will be with the highest safety standards, 
recognizing the uncertainty of climate conditions, as well as 
national security issues?
    Mr. Klotz. Well, for us, the Department of Energy and the 
NNSA, of course safety and security are paramount in all of our 
engagements, both with our own laboratories and production 
plants and facilities here in the States, but also in China.
    As I said in the opening oral statement, we just had a 
meeting under the PUNT Joint Coordinating Committee, the 
Peaceful Uses of Nuclear Technology Committee, in China in 
which a whole range of safety and security-related safeguard 
issues, environmental concerns, waste management concerns were 
raised. And indeed, this is one of the reasons why we think it 
is important as the Department of Energy and NNSA to be 
involved in this process is to ensure that we communicate with 
other countries, including China, best practices in the safety 
and security area, including lessons learned from the Fukushima 
accident several years ago. There are a lot of things which we 
are implementing domestically. There are a lot of things which 
power plants overseas are implementing that draw from that.
    But, again, it gets back to the comment that was made 
earlier, and it is that engagement of the nuclear safety 
experts, the technicians, the laboratory experts in dealing 
with very, very complex and technical issues associated with 
that that helps promote safety and security across the globe.
    Senator Cardin. Thank you.
    The Chairman. Thank you very much.
    Senator Gardner.
    Senator Gardner. Thank you, Mr. Chairman. Thanks for 
holding this hearing today, and thank you to the witnesses for 
being part of the briefing last night as well.
    This is obviously a very important strategic discussion 
that we are having, securing peaceful nuclear cooperation with 
China to create significant business opportunities for U.S. 
exporters. China has right now about 26 nuclear reactors--is 
that correct--with an additional 23 reactors under 
construction. It plans to build up to about 100 more by 2030. 
For comparison, there are only 99 nuclear reactors currently in 
the United States.
    China announced in December of last year that it would 
spend about $11.2 billion on reactor construction during the 
next 10 years. It is an incredible amount of money to spend to 
invest in nuclear technology and for U.S. businesses to plan 
that activity.
    But I think you have heard concern from others on this 
panel, and I would like to echo that concern about the past 
proliferation record of certain entities in China and what may 
portend as China's nuclear and ballistic programs grow. We need 
an ironclad commitment from China that sensitive U.S. 
technology will be secure for the duration of this agreement 
and not be used for nefarious purposes by either the Chinese 
Government or third parties.
    And so as we look at the strategic implications of this 
agreement, we must also use it as an opportunity to raise with 
China a pressing need to curb North Korea's growing nuclear 
program and to stop Pyongyang's belligerence toward our allies 
in the region. After the ascent of Kim Jong-Un as North Korea's 
leader, there seems to be a significant cooling in Beijing 
toward Pyongyang, though the fundamental policy has remained 
the same.
    Most recently, we have heard from Chinese nuclear 
scientists that North Korea has as many as 20 nuclear warheads, 
which could double by next year. That is a much more aggressive 
estimate than what we and our own intelligence community have 
said and perhaps a sign that Beijing may finally have had 
enough of Pyongyang's antics. American diplomats--and I hope 
this will continue--must try and exploit this potential opening 
at every level.
    And so to Assistant Secretary Countryman, the 2011, as 
discussed on the panel today, Director of National Intelligence 
Worldwide Threat Assessment report stated that North Korea and 
entities in Russia and China continue to sell technologies and 
components in the Middle East and South Asia that are dual-use 
and could support WMD and missile programs. But as we have 
discussed on the panel, the 2015 DNI report made no mention of 
these concerns.
    I think there have been answers to the question of whether 
or not the Chinese entities are currently engaged in these 
types of activities.
    And so I guess I would ask a specific question of you, and 
I do not think I have heard this answer today. Which Chinese 
individuals and companies remain under U.S. sanctions related 
to proliferation of weapons of mass destruction or missile 
technology?
    Mr. Countryman. No, it is a good question, and I will get 
you a detailed list as rapidly as possible. They are primarily 
not state-owned enterprises but rather individual brokers and 
technology firms that are not under direct state control.
    Senator Gardner. And you will get that list to us.
    Mr. Countryman. I shall.
    Senator Gardner. Thank you.
    And in talking about the terms of the agreement entered 
into, if we do not enforce the terms of the bargain, does that 
not lead to a conditioned willingness to ignore the plain 
letter of the agreement?
    Mr. Countryman. Absolutely. That is why we enforce it 
strictly.
    Senator Gardner. The message that the President sent to 
Congress states this. This is again from the message that the 
President sent on the announcement of the agreement for 
cooperation. And I quote. ``It does not permit transfers of any 
restricted data. Transfers of sensitive nuclear technology, 
sensitive nuclear facilities, and major critical components of 
such facilities may only occur if the agreement is amended to 
such transfers.''
    In this conversation that we are having today, it sounds 
like this is not--that this statement is at odds with your 
testimony. Would you agree with that?
    Mr. Countryman. No, Senator. Sensitive nuclear technology 
has a particular meaning in the Argo of nonproliferation, and 
it is defined elsewhere in the text. It does not refer, for 
example, to the major components of a reactor since it is 
reactors we are selling. It could refer to other kinds of 
technology with noncivilian applications.
    Senator Gardner. The State Department's 2014 report on 
adherence to and compliance with arms control nonproliferation 
and disarmament agreements and commitments stated--and I 
quote--``in 2013, Chinese entities continued to supply missile 
programs in countries of concern.''
    In this open setting, can you share more information of the 
type of missile programs in countries of concern?
    Mr. Countryman. Yes. As has already been mentioned, a 
gentleman named Li Fangwei, who uses the name Karl Lee as well, 
has been a primary procurement agent for Iran's nuclear 
ballistic missile program and has provided a variety of dual-
use equipment from China and from other destinations to the 
Iranian ballistic missile program. So that would be the number 
one individual that we would be concerned with in that 
category.
    Senator Gardner. Any countries including North Korea--
conversations?
    Mr. Countryman. There are other procurement agents in China 
who work knowingly or unknowingly on behalf of North Korea to 
acquire technology in China.
    Senator Gardner. Thank you, Mr. Chairman.
    The Chairman. Thank you very much for that question.
    Just to follow up on that, what is China specifically 
doing? We are all aware of the Karl Lee situation. What are 
they specifically doing, to really get back to some of Senator 
Perdue's questioning, to end that?
    Mr. Countryman. We are engaged in an intensive dialogue. 
Well, it is a longstanding dialogue about Karl Lee that has 
intensified recently in which we are seeking to understand 
better each other's information and the capabilities in our 
legal system, for example, why we are able to indict him in the 
United States and whether the Chinese would be able to do 
something similar in China. I will be happy to come back when 
it produces some meaningful results.
    The Chairman. Again, in questioning with Senator Perdue, 
the mention of the agreement being suspended if they violate 
it--is that threat real? I sit here and I am just going to add 
to that question with another question.
    First of all, you all have been great witnesses, and I 
think last night and today, you were very transparent on the 
things that--even more so last night--that we have concerns 
about, obviously in a different setting.
    So we have U.S. interests that want to do business. We have 
a country like China that is not honoring the spirit of the 
law. They are not honoring previous agreements with the Nuclear 
Suppliers Group. We know they are going to take this 
information and use it for military purposes. We know that, 
even though the agreement says they will not do it.
    So we have companies that want to do business with them 
that are U.S.-based and have superior technology, and we also 
know, by the way, they are going to use that technology in ways 
that they should not.
    So talk to me a little bit about the dynamics. You have 
Westinghouse, a division of Toshiba, pressing you to do 
business, pressing you to allow this agreement to go forward. 
We have other companies that want to do business. You also have 
to consider our national interests, if you will. You have a 
country that--let us face it--does not honor agreements. Talk 
to us a little bit about the internal dynamic, if you will, to 
give us a flavor of the various pressures that you are dealing 
with because it does feel a little bit like mercantilism is 
trumping the specifics of agreements being honored relative to 
nonproliferation.
    Mr. Countryman. Sir, let me repeat. I will ask General 
Klotz if he wants to comment on economic and commercial issues.
    But my job is to look after the nonproliferation policy of 
the U.S. that has been consistent across administrations, 
supported by Congresses, and that is why negotiation of these 
treaties falls within my bureau. And I repeat. We would still 
be negotiating if I were not satisfied that this is in the best 
interests of promoting our strong nonproliferation policy. Jobs 
are important. The relationship with China is important. But my 
job, entrusted when confirmed by the Senate, is to look after 
nonproliferation policy. And as we briefed a year ago on our 
general 123 policy, that is the primary topic in all of our 
negotiations.
    Mr. Klotz. I guess, Senator, I would look at it this way. 
Our well-being as a nation rests on a number of different 
pillars or foundations. It rests on our national security and 
defense capabilities. It also rests on our economic strength as 
a country both domestically and in the international markets, 
and it depends upon our scientific, technical, engineering 
infrastructure that underlies that.
    And so, you know, the difficult challenge we face as 
decisionmakers, whether it be in the executive branch or in the 
legislative branch, is to strike the right balance between all 
of those competing interests. I think what this agreement does 
is it sets up a mechanism by which licensing goes through the 
Nuclear Regulatory Commission. The approval to transfer various 
and sundry information and materials and components goes 
through the Department of Energy in consultation with the rest 
of the Government. I know for a fact, having spent 38 years in 
the military in the Defense Department, that our colleagues 
over there will look very carefully and very closely, as will 
the intelligence community, when the issues of licenses and the 
issues of approval for transfer come up, and as they are 
reviewed, as they will, under this new agreement on an annual 
basis in terms of what has been transferred and what is on the 
inventory list.
    The Chairman. Senator Cardin.
    Senator Cardin. Thank you again very much.
    Senator Markey. Mr. Chairman?
    The Chairman. Yes, sir.
    Senator Markey. Thank you, Mr. Chairman, very much.
    A little bit on Karl Lee. Karl Lee is wanted by the 
Department of Justice as a principal contributor of Iranian 
ballistic missile programs. Recent U.S. sanctions have 
confiscated $8.6 million in funds from Chinese bank accounts. 
He is linked to manufacturing and exporting missile guidance 
components, has an extensive network of shell companies inside 
and outside of China to hide his activity. What they have done 
over time is every time we catch him, they change the name of 
the firm. So he has had a relationship with 12 to 26 firms, 
many of which were just shell companies, again in sending 
ballistic missile technology to Iran. He has had 16 aliases, 
multiple bank accounts. But he is kind of running this nuclear 
e-Bay out of China selling into countries in the world that we 
do not want to have access to these materials.
    We have a $5 million reward for information leading to his 
arrest. In April of 2014, he was charged with conspiring to 
commit fraud and bank wire fraud and bank fraud and money 
laundering in Manhattan. He has a large network of industrial 
companies based in eastern China.
    So the Chinese Government says they cannot figure this out. 
They cannot figure out how to shut him down or guys like him. 
But the good news is they can figure out other things in China. 
They figured out how to arrest five women who belonged to a 
feminist organization last year. They figured out how to jail 
44 journalists last year. They figured out how to put 27,000 
Muslim minorities in the Uighur region in prison last year. 
They can figure that out. That they can do. But they cannot 
figure out Karl Lee. It is just too hard for them. Maybe it is 
too much evidence, too many shell companies, too many times.
    On the other hand, maybe China has just subcontracted this 
out to the private sector. It is a trend in America for cost-
cutting reasons. Maybe China has done this in order to protect 
the guilty, you know, the Chinese Government, the Peoples 
Liberation Army, so their fingers are not on it, but yet they 
can do the favors for Iran or Pakistan or other countries. That 
is what I think is going on. I think it is pretty clear what is 
going on.
    When they want to crack down, they know how to crack down. 
If they want to crack down on Facebook, they want to crack down 
on Twitter, they do it. It is shut down overnight. They shut 
that site down. They move in.
    They have got military all over these other areas of 
Chinese life that they believe are threats to their regime. But 
when it comes to threats to a nuclear nonproliferation regime, 
they just shrug their shoulders. They cannot figure it out. It 
is too hard. And the reason it is too hard is that they have 
subcontracted this out to Karl Lee. He would be in prison right 
now. He would be paying a big price.
    The Pakistanis could not figure it out with A.Q. Khan for 
like 25 years. We know why. We know why he is living in a nice 
private residence in Pakistan, not under arrest. He was a hero, 
not a felon in the eyes of the establishment.
    That is how we are going to get in trouble here. China gets 
a lot out of this. China in nuclear power is a lot like the 
Japanese were in the automotive industry in the 1950s. We were 
laughing at them. But I have had the honor--very few of us can 
say this. I have had the honor of bailing out Chrysler twice 
with votes in Congress, 1979 and then again in 2009. The 
Japanese just kept coming. The rest of the world just kept 
coming.
    So they want this technology. They want to reverse engineer 
it. They want to be the big marketer of nuclear power plants. 
They will use the ostensible guise of their concern about 
climate change. And we are going to pay a big price in the long 
term.
    So we got to start out now where we want to wind up in the 
long run because it will be prettier that way from a policy 
perspective. Much prettier if we insist on very tough standards 
now on the Chinese before we finalize anything with them. They 
have to prove to us that they are serious about this, that 
people who violate nuclear nonproliferation policy, ballistic 
missile policy pay a price. And if we pretend that they cannot 
do it, if we pretend that they do not have an authoritarian 
government, if we pretend that they are a capitalist and not a 
Communist nation, which they are with state control over 
everything at a certain level, then we are just going to 
pretend away on nuclear nonproliferation policy.
    So this is a big moment for us. We have to attach 
conditions to this that do not allow them to derive the 
commercial long-term benefits of having access to our top-of-
the-line nuclear technology while simultaneously turning a 
blind eye to what we know is a simultaneous geopolitical agenda 
which they have and which is a constant throughout the last 4 
or 5 decades in Pakistan, in Iran, and other places.
    So I guess what I would say to you is that from my 
perspective, we have a big responsibility here to condition 
this in the tightest possible way, to expect action from China 
and not words, to not allow the short-term diplomatic, 
commercial interests of any administration to trump the long-
term nonproliferation goals, which we all say are at the 
highest level. We are here today because we short-changed 
nonproliferation policy.
    That is why you, Mr. Chairman, and the ranking member had 
to do such a great job on this Iran resolution. We just turned 
a blind eye to it. We were selling six nuclear power plants to 
the Shah of Iran in 1977, 1978, and 1979. Thank God we did not 
transfer it before he fell. That was Jimmy Carter policy.
    So in each iteration so far, we have kind of dodged the big 
bullet, but each year that goes by, every compromise of the 
policy, especially when we are dealing with Pakistan and Iran, 
we are running a big risk. And so all I can say here is I am 
going to work very hard to make sure the conditions that are 
attached to this reflect the seriousness with which we should 
take the lack of seriousness that the Chinese Government has 
evinced in their nuclear nonproliferation policy.
    And I thank you, Mr. Chairman.
    The Chairman. Thank you.
    And the ranking member shares the input we have from all of 
our members. I think we have an outstanding committee. And it 
is interesting on different topics, the different input that 
members weigh in with. I really appreciate Senator Markey's 
contribution, as I do everyone's, here today.
    I see your light on. I do not know if you want to follow up 
on something.
    Senator Cardin. No. I just wanted to point out, of course, 
this is the second day of our hearings. The first day was in a 
closed session. And I think the information we have received 
will be very helpful to us, and I do appreciate the 
participation of all our members, particularly Senator Markey's 
history on this and the work that you did when you were in the 
House of Representatives.
    The Chairman. Just to follow up on his question before we 
close this out, on the Karl Lee issue with China, do you think 
it is a lack of capacity or a lack of desire to end that 
particular situation?
    Mr. Countryman. I think it is a little bit of both. I think 
the quibbles I would have with Senator Markey's description is, 
first, he is not a nuclear e-Bay. He is more a primary agent 
for the Iranian ballistic missile program, rather than all 
kinds of programs in all kinds of places. He has got a primary 
sponsor.
    The second point. I do not think it is so much a question 
of subcontracting government functions to a private facility. 
You are right. That happens in a lot of countries. I think it 
is a different problem that again is not unique to China. Mr. 
Lee has money and lawyers, and the Uighurs and the women's 
NGO's and the others do not.
    The Chairman. Well, listen, my sense is that as we move 
ahead, there may be a series of conditions that the Senate may 
want to place on this particular agreement. And I would 
encourage members and staffs who are here to work with us to 
see if, indeed, that is the case.
    But, again, I want to thank you both for your transparency 
always in answering questions in the way that you do. And I 
want to thank you for being here.
    The record will be open until Thursday afternoon. So if you 
receive additional questions, please answer them promptly.
    Thank you for your service to our country.
    And with that, the committee will be adjourned.
    [Whereupon, at 4:12 p.m., the hearing was adjourned.]
                              
                              ----------                              

              Additional Material Submitted for the Record

            Responses of Thomas M. Countryman to Questions 
                    Submitted by Senator Bob Corker

    Question. How does the 123 agreement with China advance U.S. 
nonproliferation objectives?

    Answer. This successor 123 agreement advances U.S. nonproliferation 
objectives and strengthens the legal framework for peaceful nuclear 
energy cooperation relative to the 1985 China 123 agreement. The 
agreement establishes clear U.S. consent rights on the storage, 
retransfer, enrichment, and reprocessing of U.S.-obligated nuclear 
material, and it contains additional, elevated controls on unclassified 
civilian nuclear technology that may be transferred to China. This 
agreement also requires the two Parties to enhance their efforts to 
familiarize commercial entities with the requirements of the agreement, 
relevant national export controls, and other policies applicable to 
imports and exports subject to the agreement--a requirement that will 
be implemented by U.S. and Chinese officials through joint training of 
commercial entities in both countries. And unlike the 1985 agreement, 
this agreement requires China to make all U.S.-supplied nuclear 
material and all nuclear material used in or produced through U.S.-
supplied equipment, components, and technology subject to the terms of 
China's safeguards agreement with the International Atomic Energy 
Agency.
    Continuing U.S.-Chinese nuclear cooperation would allow for 
deepened cooperation on nonproliferation, threat reduction, export 
control, and border security issues. Without the agreement, China may 
not be willing to engage in current bilateral dialogues to discuss 
these important nonproliferation issues. We believe that continuing 
cooperation with China under the successor 123 agreement will allow us 
to push China further to adhere to international norms in this area and 
meet U.S. standards of nonproliferation, nuclear safety and security.

    Question. The U.S. relationship with China is marked by ups and 
downs. When addressing issues as important as continuing a civil 
nuclear relationship, why should we not review the whole of the 
relationship instead of compartmentalizing as we are being asked to do?

    Answer. This agreement intersects multiple areas of U.S.-China 
engagement and as such, we looked across the range of relevant energy, 
environment, economic, nonproliferation, and national security issues 
when approaching the negotiations of a successor agreement. Our 
relations with China are very complex and are marked by elements of 
both cooperation and competition. We seek to expand areas of 
cooperation where our interests are in accord and to effectively manage 
and narrow areas of difference and disagreement. The United States has 
much to gain by continuing civil nuclear cooperation with China and as 
such, it is in the national interest to approach the agreement through 
this lens. Thus, we do not suggest that the committee should ignore the 
wider U.S.-China relationship; on the contrary, we believe that such 
consideration provides further support for this agreement.
    We strongly believe that implementing this agreement will better 
position the United States to influence the Chinese Government to act 
in a manner that advances our global nuclear nonproliferation 
objectives and adheres to international norms. We also believe that 
this agreement will improve not only our bilateral nonproliferation 
relationship, but also our overall bilateral relationship, thus 
reflecting the U.S. Government effort to better rebalance our foreign 
policy priorities in Asia.
    We believe that the strategic, nonproliferation, economic, and 
environmental benefits of this agreement demonstrate that continuing 
nuclear cooperation with China is in the overall best interests of the 
United States. We are mindful of the challenges that this relationship 
and this agreement present, and yet we firmly believe the clear path 
forward is to remain engaged with China, constructively manage our 
differences, and work collaboratively to advance our numerous common 
objectives while bringing China toward international norms of behavior.

    Question. What are the key administration concerns regarding this 
agreement and what measures will be taken to mitigate those concerns?

    Answer. The U.S.-China relationship is complex and is marked by 
elements of cooperation and competition across many issues, and 
nonproliferation is no exception. Looking at China's nonproliferation 
record and position over the course of the last 30 years, it has been 
well demonstrated that U.S. engagement with China has improved China's 
proliferation behavior. We recognize that challenges do remain, 
including those we discussed with the committee in closed session such 
as China's continued supply of civil nuclear technology to Pakistan.
    To mitigate those challenges, this agreement enhances several U.S. 
nonproliferation controls beyond those contained in the 1985 U.S.-China 
123 agreement. This agreement contains additional controls on the 
transfer of unclassified civilian nuclear technology to China, 
including a requirement for additional assurances from the Chinese 
Government pursuant to the agreement. It also requires China to make 
all U.S.-supplied nuclear material and all nuclear material used in or 
produced through U.S.-supplied equipment, components, and technology 
subject to the terms of China's safeguards agreement with the 
International Atomic Energy Agency (IAEA).
    China has agreed to work together with the United States to enhance 
its efforts to jointly train all commercial entities transferring 
technology under the agreement to ensure they understand the 
requirements of the agreement, relevant national export controls, and 
the need for strong export compliance to ensure that all of the terms 
of the 123 agreement are met. Finally, beyond the standards in the 
agreement, we will have the opportunity to continuously review Chinese 
adherence to end user commitments throughout the term of the Agreement 
and, as we review new export license applications over the course of 
the agreement, make adjustments as necessary to mitigate this risk. The 
agreement requires the Parties meet annually to review lists of 
technology approved for exchange.

    Question. What does it mean to be a ``safeguarded facility'' in 
China? Is it subject to the same regular and rigorous inspections and 
reporting as a ``safeguarded facility'' in a nonweapon state? Only 
applied at eligible sites at the request of the supplier state.

    Answer. The implementation of safeguards for a State is governed by 
a comprehensive safeguards agreement and, where applicable, the 
Additional Protocol (AP), concluded between the International Atomic 
Energy Agency (IAEA) and the State or States concerned. For a nuclear 
weapon state Party to the Treaty on the Non-Proliferation of Nuclear 
Weapons (NPT) like China and the United States, the main safeguards 
agreement is a so-called Voluntary Offer Agreement (VOA). China entered 
into its VOA with the IAEA, INFCIRC/369, in October 1989. For VOA 
States, safeguards are applied on nuclear material in facilities 
selected under each VOA. Under its VOA, China provides a declaration of 
facilities to the IAEA that are eligible for safeguards. The IAEA, in 
turn, may select a facility or facilities to apply safeguards; however, 
it is not obligated to do so. If a facility is selected under China's 
VOA, the IAEA will apply safeguards in order to detect any withdrawal 
of nuclear material from safeguards in that facility, as provided for 
in the agreement.
    The most likely location where U.S.-obligated material would be 
enriched in China is one of two Russian-constructed enrichment 
facilities where safeguards are currently being applied. Regarding 
reprocessing, the agreement provides U.S. advance consent for the 
reprocessing or alteration in form or content of U.S.-obligated 
material only after both sides agree on a set of arrangements and 
procedures under which such these activities will occur. These 
arrangements and procedures would establish the location(s) where 
reprocessing my take place. As China and France are continuing 
negotiations regarding the construction of an Areva reprocessing 
facility to be built in China at which IAEA safeguards would be 
applied, the United States expects that any such activities would occur 
at the French facility. If they do, the French reprocessing facility 
would be subject to the same level of IAEA safeguards as those in a 
nonnuclear weapons state.

    Question. The Agreed Minute includes right to appoint personnel for 
inspection and installation of device. How will this provision be used 
by the United States?

    Answer. In accordance with the terms of paragraph 3 of Article 9 of 
the agreement, the provisions in the Safeguards section of the Agreed 
Minute, including the right to appoint personnel for inspection and the 
installation of essential devices, would only come into effect in the 
event that the Safeguards Agreement between China and the International 
Atomic Energy Agency is not being implemented. In this hypothetical 
situation, the United States and China would consult and establish a 
mutually acceptable alternative to the China-International Atomic 
Energy Agency (IAEA) Safeguards Agreement. However, the United States 
considers this to be an unlikely scenario. Nonetheless, the United 
States includes such bilateral safeguards arrangements in all 123 
agreements to ensure that the safeguards requirements of the agreement 
are met through bilateral measures even if the relevant IAEA safeguards 
agreement is not being implemented.

    Question. What tangible outcomes have been gained by investment in 
training Chinese officials on detection and interdiction?

    Answer. Training Chinese officials on detection and interdiction is 
a critical component of our nonproliferation engagement with China. In 
2011 the National Nuclear Security Administration (NNSA) signed a 
memorandum of understanding with China to open a Radiation Detection 
Training Center (RDTC). Commissioned in 2014, the RDTC has developed a 
curriculum, classrooms, and a mock port of entry. The RDTC offers China 
Customs a national level training center to provide uniform and 
specialized training for officers in the detection of smuggled nuclear 
materials. The radiation detection techniques being taught at the RDTC 
are already being applied at ports of entry across China, thereby 
helping to prevent the smuggling of nuclear materials to proliferators 
and terrorists. To date, China Customs has trained over 200 officers at 
the RDTC.
    Along with the RDTC, through the Nuclear Smuggling Detection and 
Deterrence program we were able in 2015 to transition a radiation 
detection system to Chinese Customs at the Port of Yangshan. These two 
programs have served as important confidence building measures between 
our two governments. China Customs is also now working, at its own 
cost, to add additional detection equipment at the Ports of Yangshan 
and Tianjin. NSDD is providing technical advice and guidance for these 
efforts. Overall, NNSA believes that its initial investments in 
training and detection have prompted China to adopt this mission and 
complete additional deployments and training courses on their own and 
at their own cost.
    Training and outreach is also being conducted directly with Chinese 
companies. Over the years we have held meetings and training workshops 
with a number of Chinese companies to help in their development of 
internal compliance programs.
                                 ______
                                 

           Responses of Lt. Gen. Frank G. Klotz to Questions 
                    Submitted by Senator Bob Corker

    Question. China is seeking to indigenize the AP1000. How will this 
impact the U.S. competitiveness in China and globally? Will this 
capability, derived originally from U.S. technology, directly compete 
with the AP1000?

    Answer. The Department of Energy and our interagency partners are 
not privy to the full commercial terms of Westinghouse's contracts. 
Westinghouse itself, however, would be the appropriate party to discuss 
details on Westinghouse's business plans and arrangements in China. 
China's energy plan calls for continued expansion/installation of 
nuclear energy plants with an expected announcement pace of 6-10 units 
per year, which could involve up to $14 billion in U.S. company 
contracts and over 50,000 U.S. jobs over the program's duration, per 
the Department of Commerce.

    Question. How much of the current program of construction and the 
provision of services could be accomplished by license under the Part 
810 rule? Specifically identify what aspects of cooperation with 
China's civil nuclear program cannot be achieved absent a 123 
agreement.

    Answer. In order for U.S. companies to construct reactors outside 
of the United States, vendors must be able to provide all the technical 
elements of nuclear reactors including: technology, hands-on 
assistance, and major and minor components. Absent a 123 agreement, 
technology and assistance could be provided upon approval and a license 
from the Department of Energy and the Department of Commerce for minor, 
dual-use components. The AEA requires a 123 agreement be in place for 
the Nuclear Regulatory Commission to authorize the export of nuclear 
reactors, major reactor components, and nuclear material.
    The specific amount of construction that could be completed without 
U.S.-supplied major reactor components is dependent upon how much China 
is able to indigenize from the technology and other non-U.S. assistance 
that might be provided from countries that do not have the same 
requirements in their nuclear cooperation agreements.

    Question. What can be expected, what is the role of, the Nuclear 
Security Center of Excellence currently under construction outside of 
Beijing?

    Answer. Among its primary missions, the Center of Excellence (COE) 
will address China's domestic nuclear security training requirements, 
provide a forum for bilateral and regional best practice exchanges, and 
serve as a venue for demonstrating advanced technologies related to 
nuclear security. First, it is a key component in meeting the domestic 
nuclear security training needs of China's civilian nuclear complex, 
which is expected to experience significant growth in the number of 
nuclear power plants and related fuel cycle facilities. Second, the COE 
is expected to serve as a regional facility, hosting partners from 
around Asia and the International Atomic Energy Agency (IAEA) for 
nuclear security forums, workshops and training. Finally, China hopes 
the COE will be able to host demonstrations of new technologies (their 
own and from other partners) and approaches to nuclear security, 
through future regional and international forums and partnerships. 
Ultimately, the United States is seeking to indigenize nuclear security 
trainings to improve and sustain nuclear security practices in China.
    For the United States, the focus is on promoting Chinese adoption 
of modern nuclear security best practices by supporting the training 
mission of the COE.

    Question. The United States has been generous in its support for 
and contributions to providing training and a range of equipment to the 
Chinese. What investment, using national funds, is China making toward 
nuclear security and safety?

    Answer. As China makes progress on the rapid expansion of its 
nuclear power program, it is working to develop the nuclear safety and 
security culture and capacity to ensure that its program can be 
adequately maintained. In October 2012, the State Council approved the 
``12th Five-Year Plan for Nuclear Safety and Radioactive Pollution 
Prevention and Vision for 2020,'' in which China stated its plans to 
spend CNY 79.8 billion (US$13billion) over a 3-year period toward 
programs meant to address safety improvements or correctness measures 
for existing nuclear facilities, radioactive waste treatment, nuclear 
safety, science and technology innovation, emergency response and 
nuclear regulatory capability-building. In addition, the China National 
Nuclear Safety Administration (C-NNSA) issued a policy statement 
requiring all future nuclear power plants to develop probabilistic 
safety assessments (PSA) for potential accidents. In response, most 
Chinese nuclear power plants have spent considerable resources on 
developing PSA capabilities, including equipment reliability databases, 
human reliability analyses, and risk-informed regulations.
    Since 2010, the Department of Energy has conducted training 
workshops with Chinese utilities on PSA applications that have 
generated increasing interest throughout the Chinese Government. 
Recently, C-NNSA has organized and conducted its own workshops within 
China to disseminate the lessons learned from the DOE workshops to a 
broader audience. In early 2014, C-NNSA began building a national 
Equipment Reliability Database, to which all operating plants in China 
will submit their data.
    Since the Fukushima accident, China has developed an R&D program on 
accident tolerant fuels with improved performance, reliability, and 
safety characteristics during normal operations and accident 
conditions. DOE has a similar research program and is engaging with 
China on common areas for collaboration.
    China's significant contribution to its Center of Excellence (COE) 
demonstrates the growing emphasis it places on nuclear security in 
China and in the region. Under a cost-sharing arrangement, China is 
responsible for the majority of expenditures on the COE, including the 
costs of procuring the land and developing the detailed design for the 
COE, as well as for constructing, operating, and staffing the facility. 
The United States is responsible for providing technical advice during 
the design and construction phase and some assistance in equipping the 
facility.
    China has stated its investment in constructing the COE is 
approximately $80-$120 million, but the Department of Energy/National 
Nuclear Security Administration (DOE/NNSA) estimates their costs are 
likely much higher if staffing and operations are taken into account. 
DOE/NNSA is investing $35 million in equipment and support for 
development of the COE, which represents less than 30 percent of the 
total reported investment by the United States and China. Once the 
facility is operational, the United States will continue to support 
nuclear security best practices engagement through workshops and 
training at the COE.
                                 ______
                                 

           Response of Lt. Gen. Frank G. Klotz to Questions 
                    Submitted by Senator Marco Rubio

    Question. 1. Is it correct that exports of nuclear technology and 
expertise could continue to China even if the nuclear cooperation 
lapsed, given the Department of Energy's Part 810 approval process?
    2. If that is incorrect, then what types of cooperation would not 
be allowed to continue under Part 810?

    Answer 1 and 2. Although the Atomic Energy Act (AEA) requires a 123 
agreement to be in place for transfers of nuclear material, nuclear 
reactors, and major components of reactors, transfers of nuclear 
technology and assistance could proceed to China under DOE Regulations 
at 10 CFR Part 810, which implement subsection 57 b.2 of the AEA, even 
if the proposed U.S.-China 123 agreement is not brought into force 
before the current agreement expires. The types of technology transfers 
covered by Part 810 regulations include consulting services, 
blueprints, computer-added drawings, etc. One of the key features of 
the 2015 U.S.-China 123 Agreement, however, is the expectation that 
technology transfers will also be authorized under the agreement. 
Pursuant to subsection 57b of the AEA, the Secretary of Energy may 
authorize U.S. persons to engage in direct or indirect assistance in 
the production of Special Nuclear Material (SNM). There are two 
separate pathways created by the AEA--assistance authorized under a 
section 123 agreement for cooperation including through a section 131 
subsequent arrangement (subsection 57b.1) or assistance authorized by 
the Secretary of Energy after a determination that it will not be 
inimical to the interest of the United States (subsection 57b.2). The 
text you have before you--the successor U.S.-China 123 agreement--does 
not commit the United States to any specific exports of nuclear 
material, equipment, technology, or other cooperative activities. 
Rather, the proposed agreement establishes a framework to govern 
subsequent commercial and governmental transactions and will expedite 
legitimate nuclear trade with China.
                                 ______
                                 

            Responses of Thomas M. Countryman to Questions 
                    Submitted by Senator Marco Rubio

    Question. A/S Countryman indicated that transfers of civilian 
technology to China's nuclear naval program would violate the peaceful 
use provisions of the 1985 Nuclear Cooperation Agreement. Were U.S. 
concerns about this issue raised with China during the negotiations of 
the new nuclear cooperation agreement? If not, why not?

    Answer. Throughout the 123 agreement negotiations, U.S. negotiators 
stressed to Chinese officials the importance the U.S. Government places 
on all of the nonproliferation guarantees contained in the agreement, 
and specifically highlighted the significant concern the United States 
would have about any potential diversion of U.S. technology for 
nonpeaceful purposes.

    Question. In President Obama's nonproliferation speech in Prague on 
April 5, 2009, he stated that countries that break the rules ``will 
face consequences'' and that ``Rules must be binding. Violations must 
be punished. Words must mean something.'' Is it the view of the 
administration that these words apply to a nuclear cooperation 
agreement with China? If so, what consequences will the United States 
impose for any violation of the nuclear cooperation agreement by China?

    Answer. The successor U.S.-China 123 agreement is consistent with 
the President's nonproliferation and peaceful nuclear cooperation 
policy objectives. If the United States had reason to believe that 
China may have violated the terms of the agreement, the United States 
would have a wide variety of potential responses it could employ. For 
example, in accordance with Article 12 of the successor agreement, the 
United States could exercise its right to temporarily suspend or cease 
further cooperation if China does not comply with the agreement. The 
United States also retains the right to terminate the agreement at any 
time for any reason upon at least 1 year's written notice.

    Question. Given concerns about potential violations, was any 
thought given to making this agreement shorter in duration than 30 
years?

    Answer. A 30-year duration for the agreement provides U.S. 
suppliers (and potential investors in those suppliers) a higher degree 
of certainty and reliability for their commercial activities than would 
be permitted under a shorter agreement. The agreement is solely a 
framework for cooperation and does not require any specific activities 
to be performed. The terms of the agreement are designed to protect 
U.S. interests over the entire 30-year length of the agreement. In 
addition, Article 12 of the agreement gives the United States the right 
to temporarily suspend or cease further cooperation if China does not 
comply with the agreement. The United States also retains the right to 
terminate the agreement at any time upon at least 1 year's written 
notice. As a result, arbitrarily shortening the duration of the 
framework for cooperation would not create new benefits for U.S. 
interests, but it would reduce the certainty and predictability faced 
by U.S. companies looking to pursue commercial opportunities that are 
also compatible with U.S. national security interests.

    Question. When did the U.S. Government first learn about the 
potential diversion of U.S. civilian technology to China's military 
sector? When was Congress first notified of any potential diversion?

    Answer. The risk of diversion of U.S. civilian technology to 
China's military is a common challenge across all dimensions of U.S. 
trade engagement with China and we have approached all technology 
transfers related to civil nuclear cooperation with this reality in 
mind. I refer you to the Intelligence Community for questions about 
potential Chinese diversion.
                                 ______
                                 

             Response of Thomas M. Countryman to Question 
                     Submitted by Senator Tim Kaine

    Question. In addition to the China 123 agreement, three Protocols 
to Nuclear Weapon Free Zone Treaties are now before the Senate, which 
cover South Pacific, Africa, and Central Asia. When joined together 
with the Latin American Zone, which the United States ratified under 
President Reagan in 1981, the entire Southern Hemisphere will be 
covered under nuclear weapons-free zones. These clearly protect U.S. 
national security interests, while also demonstrating our commitment to 
global nuclear nonproliferation.

   How do these protocols fit into the larger U.S. Government 
        strategy to advance nonproliferation, and how do they 
        complement or enhance agreements such as the China 123 
        agreement or other 123 agreements?

    Answer. The President transmitted the African and South Pacific 
Nuclear-Weapon-Free Zone Treaty protocols to the Senate in May 2011. On 
April 27, the President also transmitted the protocol to the Treaty on 
a Nuclear-Weapon-Free Zone in Central Asia to the Senate for its advice 
and consent to ratification. We support ratification of the protocols 
as a measure that advances regional security, the goals of the Nuclear 
Non-Proliferation Treaty (NPT) and broader international 
nonproliferation efforts.
    These protocols and our bilateral 123 agreements are mutually 
complementary in advancing U.S. nonproliferation objectives. Both of 
them establish nonproliferation standards that complement and in some 
cases go beyond those established by the NPT. For example, the Central 
Asia Treaty limits nuclear trade with any state that has not concluded 
an Additional Protocol with the IAEA, reinforcing U.S. efforts to 
promote the Additional Protocol as an instrument for nonproliferation. 
Similarly, the Africa Treaty, like our 123 agreements, establishes 
research on and development of nuclear explosive devices as prohibited 
activity. Taken together, support for nuclear weapon free zone treaty 
protocols and 123 agreements create added momentum for strict 
observance of the highest nonproliferation standards.
    We hope the Senate can agree to favorably consider all three 
pending treaty protocols as a measure of long-standing U.S. support and 
leadership for nonproliferation.

                                  [all]
```