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   SOURCES AND METHODS OF FOREIGN NATIONALS ENGAGED IN ECONOMIC AND 
                           MILITARY ESPIONAGE

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

                                HEARING

                               BEFORE THE

                      SUBCOMMITTEE ON IMMIGRATION,
                      BORDER SECURITY, AND CLAIMS

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 15, 2005

                               __________

                           Serial No. 109-58

                               __________

         Printed for the use of the Committee on the Judiciary


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


                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
23-433                      WASHINGTON : 2005
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
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                       COMMITTEE ON THE JUDICIARY

            F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
HENRY J. HYDE, Illinois              JOHN CONYERS, Jr., Michigan
HOWARD COBLE, North Carolina         HOWARD L. BERMAN, California
LAMAR SMITH, Texas                   RICK BOUCHER, Virginia
ELTON GALLEGLY, California           JERROLD NADLER, New York
BOB GOODLATTE, Virginia              ROBERT C. SCOTT, Virginia
STEVE CHABOT, Ohio                   MELVIN L. WATT, North Carolina
DANIEL E. LUNGREN, California        ZOE LOFGREN, California
WILLIAM L. JENKINS, Tennessee        SHEILA JACKSON LEE, Texas
CHRIS CANNON, Utah                   MAXINE WATERS, California
SPENCER BACHUS, Alabama              MARTIN T. MEEHAN, Massachusetts
BOB INGLIS, South Carolina           WILLIAM D. DELAHUNT, Massachusetts
JOHN N. HOSTETTLER, Indiana          ROBERT WEXLER, Florida
MARK GREEN, Wisconsin                ANTHONY D. WEINER, New York
RIC KELLER, Florida                  ADAM B. SCHIFF, California
DARRELL ISSA, California             LINDA T. SANCHEZ, California
JEFF FLAKE, Arizona                  CHRIS VAN HOLLEN, Maryland
MIKE PENCE, Indiana                  DEBBIE WASSERMAN SCHULTZ, Florida
J. RANDY FORBES, Virginia
STEVE KING, Iowa
TOM FEENEY, Florida
TRENT FRANKS, Arizona
LOUIE GOHMERT, Texas

             Philip G. Kiko, General Counsel-Chief of Staff
               Perry H. Apelbaum, Minority Chief Counsel
                                 ------                                

        Subcommittee on Immigration, Border Security, and Claims

                 JOHN N. HOSTETTLER, Indiana, Chairman

STEVE KING, Iowa                     SHEILA JACKSON LEE, Texas
LOUIE GOHMERT, Texas                 HOWARD L. BERMAN, California
LAMAR SMITH, Texas                   ZOE LOFGREN, California
ELTON GALLEGLY, California           LINDA T. SANCHEZ, California
BOB GOODLATTE, Virginia              MAXINE WATERS, California
DANIEL E. LUNGREN, California        MARTIN T. MEEHAN, Massachusetts
JEFF FLAKE, Arizona
BOB INGLIS, South Carolina
DARRELL ISSA, California

                     George Fishman, Chief Counsel

                          Art Arthur, Counsel

                         Allison Beach, Counsel

                 Luke Bellocchi, Full Committee Counsel

                  Cindy Blackston, Professional Staff

                   Nolan Rappaport, Minority Counsel


                            C O N T E N T S

                              ----------                              

                           SEPTEMBER 15, 2005

                           OPENING STATEMENT

                                                                   Page
The Honorable John N. Hostettler, a Representative in Congress 
  from the State of Indiana, and Chairman, Subcommittee on 
  Immigration, Border Security, and Claims.......................     1
The Honorable Sheila Jackson Lee, a Representative in Congress 
  from the State of Texas, and Ranking Member, Subcommittee on 
  Immigration, Border Security, and Claims.......................     2
The Honorable Zoe Lofgren, a Representative in Congress from the 
  State of California, and Member, Subcommittee on Immigration, 
  Border Security, and Claims....................................     5

                               WITNESSES

The Honorable Michelle Van Cleave, National Counterintelligence 
  Executive, Office of the Director of National Intelligence
  Oral Testimony.................................................     7
  Prepared Statement.............................................    10
Dr. Larry Wortzel, Visiting Fellow, The Heritage Foundation
  Oral Testimony.................................................    19
  Prepared Statement.............................................    21
Mr. Maynard Anderson, President, Arcadia Group Worldwide, Inc., 
  and former Deputy Under Secretary of Defense for Security 
  Policy
  Oral Testimony.................................................    23
  Prepared Statement.............................................    25
Dr. William A. Wulf, President, National Academy of Engineering, 
  The National Academies
  Oral Testimony.................................................    30
  Prepared Statement.............................................    34

                                APPENDIX
               Material Submitted for the Hearing Record

Map on the ``Number of Patent Applications and Foreign Students 
  Per County,'' submitted by the Honorable John Hostettler, a 
  Representative in Congress from the State of Indiana, and 
  Chairman, Subcommittee on Immigration, Border Security, and 
  Claims.........................................................    57
Prepared Statement of the Honorable Sheila Jackson Lee, a 
  Representative in Congress from the State of Texas, and Ranking 
  Member, Subcommittee on Immigration, Border Security, and 
  Claims.........................................................    58
New York Times Article submitted by the Honorable Zoe Lofgren, a 
  Representative in Congress from the State of California, and 
  Member, Subcommittee on Immigration, Border Security, and 
  Claims.........................................................    59
The National Counterintelligence Strategy of the United States, 
  submitted by the Honorable Michelle Van Cleave, National 
  Counterintelligence Executive, Office of the Director of 
  National Intelligence..........................................    61
Revised Prepared Statement of Dr. Larry M. Wortzel, Visiting 
  Fellow, The Heritage Foundation................................    75


   SOURCES AND METHODS OF FOREIGN NATIONALS ENGAGED IN ECONOMIC AND 
                           MILITARY ESPIONAGE

                              ----------                              


                      THURSDAY, SEPTEMBER 15, 2005

                  House of Representatives,
                       Subcommittee on Immigration,
                       Border Security, and Claims,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:26 p.m., in 
Room 2141, Rayburn House Office Building, the Honorable John 
Hostettler (Chairman of the Subcommittee) presiding.
    Mr. Hostettler. The Subcommittee will come to order.
    We pride ourselves on being an open society in America. We 
allow millions of foreign nationals to come to our shores each 
year as tourists, business visitors, and students. 
Unfortunately, some of these business visitors have come here 
to take advantage of our openness and engage in economic and 
military espionage.
    Earlier this morning in a closed session, the Subcommittee 
heard a disturbing report given by the Nation's top 
counterintelligence official regarding economic and military 
espionage by foreign nationals in the United States. We will 
shortly hear a sanitized version of this testimony.
    In the past few months alone: American University 
researcher and Chinese national Zhan Gao pled guilty to 
illegally exporting technology that can be used in missile 
guidance and airborne battle management systems for a $590,000 
payment from China. Chinese nationals, Jian Guo-qu and Ruo Ling 
Wang, were arrested in Milwaukee for conspiring to illegally 
export more than $500,000 in restricted electronic military 
radar components to China. Iranian Abbas Tavakolian was 
sentenced to 57 months incarceration for attempting to export 
F-4 and F-14 jet parts to Iran. Kwonhwan Park, a Korean 
national, pled guilty in November to illegally exporting Black 
Hawk helicopter engines to China through a Malaysian front 
company.
    Month after month, publications such as TIME magazine and 
the Washington Times have run stories concerning the theft of 
critical American technologies by foreign nationals embedded at 
research facilities.
    Nationals of many nations come to the United States to 
engage in espionage. Our closest allies are not excluded from 
this list. However, all evidence indicates that certain nations 
are the most egregious violators.
    There is no nation that engages in surreptitious illegal 
technology acquisition for purposes of both commercial piracy 
and military advancement on a scale that approaches that of the 
People's Republic of China.
    The Wall Street Journal reported last month that thousands 
of Chinese military front companies are operating in the United 
States--some as contractors for the United States military--and 
that hundreds of thousands of Chinese tourists, business 
executives and students entered the United States last year.
    Many of these visitors, even when they are visiting for 
legitimate purposes, are tasked with obtaining whatever 
technological information they can.
    There are currently at least 115 students here from China, 
studying nuclear engineering, and thousands more studying 
computer, electrical, civil and chemical engineering. As an 
engineer myself, I must ask how can we be sure that they are 
not bringing back American technological secrets to their home 
country?
    And what about Iran, a country we suspect of endeavoring to 
make nuclear weapons? There are now at least four Iranian 
nationals actively studying nuclear engineering in the U.S., 
according to the Department of Homeland Security, as well as 
350 electrical engineers, 12 biochemists and a host of other 
Iranian students studying in technical fields here.
    What is true of all these individuals is that they came to 
the United States after being approved for visas. They undergo 
Visa Mantis security checks which are designed to weed out 
those visa applicants likely to use these visits to the U.S. to 
acquire sensitive technology.
    However, the State Department's focus over the last several 
years seems to have been devoted to reducing the inconvenience 
of the Visa Mantis security checks for visa applicants as much 
as possible and to be as generous as possible in the issuance 
of multiple-entry visas.
    Now, we all want to facilitate the swift issuance of visas 
to legitimate applicants. But, I am concerned that we might not 
be paying adequate attention to the inherent security risks, 
that we may be being generous to a fault. At jeopardy are our 
military superiority and our economic competitiveness.
    Today we will ask a number of questions including: what can 
be done to enhance the existing security systems in place to 
track foreign nationals at our research facilities? Do 
background checks for visa applicants need to be improved? And 
should aliens suspected of being involved with piracy or 
illegal technology transfer be automatically ineligible for a 
visa to the United States?
    At this time I turn to my colleague, the Ranking Member 
from Texas, Ms. Jackson Lee, for purposes of making an opening 
statement.
    Ms. Jackson Lee. Thank you very much, Mr. Chairman, I want 
first of all to associate myself with the intent of this 
hearing and what I believe the Chairman's intent is and, of 
course, associating myself and joining him with that intent, 
the purpose of this hearing. That would be the legislative road 
map, the guidepost, if you will, to help us effectively become 
the America that we all know and have come to love; a country 
that respects both the investment--both investment and, of 
course, the contributions that immigrants have made over the 
long history of this Nation.
    I have always begun these hearings over the last year that 
I have had the honor of serving my colleagues and the American 
people, saying that we are a nation of immigrants and a nation 
of laws, and of course, that immigrants do not equate to 
terrorists.
    So as we look to the witnesses who are before us, let me 
ask you to keep in mind that it would be, I believe, an 
impractical nonreality to suggest that we would close the door 
to all students, all researchers, and all nationals, 
international persons attempting to do business in the United 
States.
    The subject of this hearing is foreign nationals engaged in 
economic and military espionage. According to the National 
Counterintelligence Executive report to the Congress this year, 
individuals from almost 100 countries attempted to acquire 
sensitive United States technologies in fiscal year 2004.
    The report concludes that foreign access to sensitive 
information with both military and conventional applications 
has eroded the United States military advantage and the greater 
U.S. intelligence community's ability to provide information to 
policymakers and undercut U.S. industry. It goes to my point 
that we must separate sort of the weak from whatever else is 
engaged.
    It is interesting that when all of us travel aboard--abroad 
on behalf of our respective Committees, particularly in this 
instance, the Homeland Security Committee that I am also on, 
are also interacting with heads of government who are thanking 
you for the opportunity of many of their own nationals to 
engage in training activities and opportunities--and research 
opportunities with those in the United States.
    You will constantly hear from your constituents, mostly in 
the medical and science professions, technology professions, 
the importance of the exchange and the ability to interact with 
those from other countries. This report states, however, that 
we are vulnerable to espionage because the United States has 
provided foreign entities with easy access to sophisticated 
American technologies.
    Many people thought that we were on the wrong side of the 
issue when many of our voices rose to oppose the sale of
    Unocal to a Chinese energy company. I happen to be one of 
those, and I come from what is called the energy capital of the 
world, but frankly I do believe there should be a fire wall in 
terms of important technology--and had the opportunity to speak 
to the head of China's petroleum company at the time that the 
sale was being pulled, if you will, and indicated that we hope 
we have the opportunity to do other business efforts with that 
company, but there had to be a line in the sand on important 
technologies.
    New electronic devices have vastly simplified the illegal 
retrieval of storage information, of massive amounts of 
information, including trade secrets and proprietary data. 
Globalization has mixed foreign and American companies in ways 
that have made it difficult to protect the technologies that 
these firms develop or acquire, particularly when that 
technology is required for overseas operation.
    Mr. Chairman, I just a few days ago took my son back to 
college, interacted with a few college students for a couple of 
hours, not a whole day, but I was amazed with the level of 
sophistication and the eagerness to come back and use either 
the school's technology or their own to develop new expertise--
maybe something like what Bill Gates did a decade or more ago--
dealing with now the new Microsoft, this new technology called 
Facebook, which the college students themselves designed.
    We know technologies are being fostered all over America, 
and the simplicity of being able to access some of our most 
delicate information is something we should be concerned about.
    Lastly, sophisticated information systems that transmit--
store and transmit systems have become increasingly vulnerable 
to cyber attacks, an issue that my colleague Congresswoman 
Lofgren has been a leading force on. Apparently, the 
counterintelligence community is uncertain about exactly how 
much of its intelligence collection effort--some intelligence 
collection effort is directed by foreign governments and how 
much is carried out by private businessmen and women, academics 
or scientists, for purely commercial or scientific purposes.
    It is clear, however, that some foreign governments do 
employ state actors. This includes their intelligence services 
as well as commercial enterprises.
    Most of the foreign governments that are attempting to 
acquire American technology employ tools and techniques which 
are easy to use, inexpensive, low risk and sometimes legal. In 
most cases, foreign collectors simply ask for the information 
by e-mail, a phone call, a fax, a letter or in person. The 
report asserts further that increased demand for foreign labor 
in the United States, high-tech industries and the sharp rise 
in foreign investment in the United States over the past decade 
have given foreign governments increased access to American 
businesses and consequently to U.S. trade secrets.
    In addition, recognizing neutral benefits of an unhindered 
exchange of information, the United States has opened its 
military bases, national laboratories and private defense 
suppliers to foreign visitors.
    Mr. Chairman, I am going to ask that the entirety of this 
statement be submitted as I come to a close, and I ask 
unanimous consent that the rest of my statement be submitted 
into the record.
    Mr. Hostettler. Without objection.
    Ms. Jackson Lee. But let me conclude by saying, we know the 
problems, but we also know the value and the benefits that have 
been received by the American people that have been our long-
standing commitment and our values to the opportunity of 
bringing those who are persecuted to the shores, but also those 
who have talent, who are contributors and those who just have 
brawn, who have literally built America.
    Let us not close the door to the opportunity of foreign 
students who--again, as I met with in meetings in China and 
elsewhere, who have learned both our democratic principles but 
also to share in technology and the ability to build systems 
that will benefit not China, not Germany, not the new Iraq, not 
South and Central America or the continent of Africa, but 
humanity. Let us not in our effort to avoid the transmittal of 
important technologies and important concepts here in America, 
not draw technology--draw legislation so restrictive, Mr. 
Chairman, that we cannot find a way to ensure that America 
benefits from the talent of this world. And let us make sure 
that the legislation is reflective of the security needs, but 
also the needs of the American people to be a friend to the 
world. And I yield back.
    Mr. Hostettler. I thank the gentlelady.
    Do any other Members have opening statements?
    Ms. Lofgren. Mr. Chairman, I will not take the full 5 
minutes.
    Mr. Hostettler. I recognize the gentlelady from California.
    Ms. Lofgren. Clearly, every Member of Congress is 
interested, concerned and opposed to espionage in our country. 
So that is a given. The question is how to protect ourselves 
without doing damage to ourselves, and I think it is important 
to recall. I was in elementary school in 1957 when Sputnik went 
up, and we got a little wake-up call that the country was in 
trouble and we were in a huge competition with the Soviet 
Union, and we were behind. We pulled up our socks, and we 
ultimately won that competition.
    I think in a way we are in a similar spot today, the 
American Electronic Association used this phrase: It is the 
difference between then, which was throwing the frog in the 
boiling water; now the frog is in the water as it heats up, and 
a lot of Americans don't realize that we are in this 
competition that is very serious in terms of science and 
technology and engineering talent. We have slipped in the 
number of engineering Ph.D.'s awarded in this country. We are 
falling behind; India and China and the EU are emerging as ever 
more vibrant competitors.
    The AEA--again, they just did a terrific report--cite the 
U.S. graduating 60,000 engineers a year, India graduating 
82,000 engineers a year, and China graduating four times as 
many engineers a year as the United States.
    Now, the Ph.D. level--the National Academy of Sciences 
tells us that 65 percent of the Ph.D. candidates in engineering 
are foreign students, and many of them stay on and become 
Americans with us, and that benefits us greatly. In fact, I 
come from Silicon Valley, and about 40 percent of the start-ups 
in Silicon Valley are from people who were born someplace else 
and became Americans.
    And so we need to keep in mind that if we have to have 
strength in systems to make sure that we are protected, that we 
don't end up shooting ourselves in the foot economically, and I 
would say also militarily, because the new Americans, the best 
and brightest, also help immensely in terms of the technology 
that ultimately is used, not just in the commercial world, but 
also in the defense effort.
    I hope that as we talk further about this, we can think 
about what systems we might put in place, smart systems, so 
that rather than creating bulky systems that have the result of 
deterring people we might want to have come in, and maybe not 
deterring the bad guys, we come up with streamlined systems 
that really target what we need in a way that is efficient and 
does not do damage.
    So that is what I am very interested in, and I yield back 
the balance of my time.
    Mr. Hostettler. I thank the gentlelady.
    Without objection, all Members will have--will be allowed 
to have their opening statements be made a part of the record.
    Mr. Hostettler. At this time, I would like to introduce 
Members of our panel.
    Michelle Van Cleave is the National Counterintelligence 
Executive and, as such, she is the country's top 
counterintelligence official and is charged with integrating 
and providing strategic guidance for counterintelligence 
activities across Government. She reports directly to the 
Director of National Intelligence, John Negroponte, the 
President's principal intelligence advisor.
    In the 105th Congress, Ms. Van Cleave was Chief Counsel for 
the Senate Judiciary Subcommittee on Technology, Terrorism and 
Government Information.
    In 1989, she served on the House Science Committee staff 
and was later Assistant Director in the White House Office of 
Science and Technology Policy. She has also held senior 
positions at the Department of Defense and is a graduate of the 
University of Southern California Law School.
    Dr. Larry Wortzel has been at the Heritage Foundation since 
1989 and has served as Asia Studies Director. He is a former 
Marine, Army Airborne Ranger and Army Colonel, and has worked 
for the Under Secretary of Defense for Policy to develop 
counterintelligence programs. In 1970, he served in the U.S. 
Army intercepting Chinese military communications in Vietnam 
and Laos. Later, his career took him to areas throughout Asia 
under U.S. Pacific Command and as U.S. Army Attache at U.S. 
Embassy Beijing during the Tiananmen massacre, and in 1995.
    Dr. Wortzel is the author of numerous books on Chinese 
military strategy and received his Ph.D. at the University of 
Hawaii.
    Mr. Maynard Anderson is President of Arcadia Group 
Worldwide, Incorporated. He has served in Government as Deputy 
Under Secretary of Defense for Security Policy with the 
responsibility of setting disclosure policy. In 1988, he served 
as Assistant Deputy Under Secretary of Counterintelligence of 
the Department of Defense, setting security policy and 
providing day-to-day oversight.
    Mr. Anderson also chaired the National Foreign Disclosure 
Policy Committee. Privately, he served as Chairman of the 
National Intellectual Property Law Institute Board of 
Directors. Mr. Anderson is a graduate of Luther College in Iowa 
and the Federal Executive Institute.
    William Wulf is President of the National Academy of 
Engineering and Vice Chair of the National Research Council. He 
is on leave from the University of Virginia, where he is AT&T 
Professor of Engineering and Applied Sciences. Mr. Wulf has 
served as Assistant Director of the National Science Foundation 
and Chief Executive Director of Tartan Laboratories, Inc., in 
Pittsburgh. He was also a Professor of Science at Carnegie 
Mellon University. He has authored more than 100 technical 
reports, has written three books and holds two U.S. patents.
    At this time, will the witnesses please rise to take the 
oath.
    [Witnesses sworn.]
    Mr. Hostettler. Thank you. You may be seated. Please let 
the record show that each of the witnesses answered in the 
affirmative.
    Ms. Van Cleave, you are recognized for purposes of an 
opening statement.

   TESTIMONY OF THE HONORABLE MICHELLE VAN CLEAVE, NATIONAL 
   COUNTERINTELLIGENCE EXECUTIVE, OFFICE OF THE DIRECTOR OF 
                     NATIONAL INTELLIGENCE

    Ms. Van Cleave. Thank you, Mr. Chairman. I do have a 
prepared statement I would like to submit for the record.
    Mr. Hostettler. Without objection.
    Ms. Van Cleave. Please let me summarize a few points.
    I appreciate very much the opportunity to appear before you 
today to discuss foreign intelligence threats to U.S. national 
intelligence security and our economic well-being.
    Since some of the Members of the Subcommittee may not be 
familiar with my office, I would like to take a moment to 
describe my duties. In the post-Cold War world, the U.S. 
confronts intelligence challenges from a broad array of foreign 
nations. The singular global Soviet threat of decades gone by 
has been succeeded by a diverse set of adversaries, many of 
whom have become highly skilled in using their intelligence 
services, especially their human collectors, to acquire U.S. 
national security secrets. These include the technological and 
engineering secrets that give our Armed Forces the qualitative 
edge they may need to prevail in a dangerous world.
    While the threats against us are strategic, historically 
the U.S. counterintelligence community has not been organized 
or integrated to accomplish a national strategic mission. On 
the contrary, the various counterintelligence elements have 
long been part of a loose confederation of independent 
organizations with different jurisdictions and capabilities and 
no one in charge of the enterprise.
    CI operations and investigations have tended to focus on 
individual cases with little appreciation of synergy or their 
larger strategic implications. This structural flaw has 
undercut our ability to connect the dots of intelligence 
anomalies or effectively coordinate the different CI arms of 
our Government. To help remedy this situation, the Congress 
created the position of the National Counterintelligence 
Executive, or the NCIX. The law directs that the NCIX shall 
serve as the head of counterintelligence for the U.S. 
Government, subject to the direction and control of the 
Director of National Intelligence.
    I am the first NCIX appointed by the President. It is my 
job to provide strategic direction to our Nation's 
counterintelligence efforts and to assure the integration of 
the disparate CI activities of our Government. It also includes 
the counterintelligence dimension to broad national security 
concerns such as the protection of our Nation's critical 
technologies.
    The primary focus of counterintelligence is to defeat the 
efforts of foreign intelligence services to acquire U.S. 
national security secrets. It is also our job to supply CI 
insights and options to the President and his national security 
leadership. This includes supporting the overall national 
effort to stem the outflow of sensitive technologies, including 
export controls, diplomatic measures, controls on foreign 
investments in sensitive sectors of the U.S. economy and 
industrial security agreements.
    I want to emphasize that by far the vast majority of 
foreign acquisition of U.S. technology is open and lawful, as 
are the transactions of individuals and businesses involved in 
international commerce, as well as the free exchange of ideas 
in scientific and academic forums. But let me turn to the cases 
that fall outside the bounds of what is open and lawful.
    Last year, the counterintelligence community tracked 
efforts by foreign businessmen, scientists, academics, students 
and government entities from almost 100 countries to acquire 
sensitive U.S. technologies protected by export laws or other 
means. Of those, the top 10 countries accounted for about 60 
percent of the suspicious foreign collection efforts against 
cleared defense contractors. Two of the countries that always 
rank near the top of the list are, of course, Russia and China, 
who have particularized interests, especially in dual-use 
technologies with military applications.
    But the top 10 also include some of our close allies, as 
you noted, Mr. Chairman. These allies may exploit their easy 
access to push the envelope into areas where they have not been 
invited.
    In the majority of cases, foreign collectors simply ask. By 
e-mail or phone calls or faxes or letters or in person they ask 
for the information or technology that they are interested in. 
Or they may exploit visits to U.S. businesses or military 
bases, national laboratories and private defense suppliers to 
extract protected information.
    U.S. businessmen and scientists and academics traveling 
abroad provide another valuable source of information for 
foreign countries, as do foreign students, scientists and other 
experts who to come to the U.S. to work or attend conferences.
    One indirect method used to acquire technology is for 
foreign firms to offer their services or technology, 
particularly IT-related support, to firms who have access to 
sensitive items.
    On this point, I should note that the use of cyber tools, 
as a collection technique, is of growing concern. As you know, 
cyber exploitation is inherently difficult to detect, as cyber 
intruders from one country will typically cover their tracks by 
mounting their attacks through compromised computers in other 
countries.
    Finally, state-directed espionage: State-directed espionage 
remains the central threat to our most sensitive national 
security technology secrets.
    While the Chinese, for example, are very aggressive in 
business and good at solicitation and good at positioning 
themselves for strategic investments, and they are adept at 
exploiting front companies, they also have very capable 
intelligence services that target U.S. national security 
secrets. As the Cox Commission report made clear over a decade 
ago, the Chinese did not acquire the most sensitive secret U.S. 
nuclear weapons designs by spending late nights at the library.
    It is one thing to describe these threats to you; it is 
quite another to describe what we need to do about them. We 
will never have leak-proof technology controls, just as we will 
never have enough security to protect us against all the 
threats all the time. Nor would we want to exchange the vast 
blessings of our free society for a security state.
    In my view, good security is not the answer alone. We also 
must have good counterintelligence, meaning that we must be 
more proactive in identifying, assessing and degrading foreign 
intelligence operations against us. We need to prioritize our 
efforts against the most serious threats to U.S. national 
security and our vital defense and foreign policy objectives.
    Now, in March of this year, President Bush approved the 
first national counterintelligence strategy of the United 
States, which I would like to submit for the record, if I may, 
Mr. Chairman.
    Mr. Hostettler. Without objection.
    Ms. Van Cleave. It is the first mission statement of 
counterintelligence as an instrument of U.S. national security 
policy. This is a very different concept of counterintelligence 
than the common perception of catching spies and putting them 
in jail. Counterintelligence encompasses all activities to 
identify, assess and degrade foreign intelligence threats to 
U.S. national security and our foreign policy objectives. And 
central to the President's strategy is the call for U.S. 
counterintelligence to be proactive.
    Now, this Committee has jurisdiction over America's single 
greatest resource for encountering intelligence threats, the 
Federal Bureau of Investigation. In the months to come, the FBI 
will be standing up a new national security branch that will 
span its responsibilities for counterterrorism, intelligence, 
and counterintelligence.
    Building on Director Mueller's efforts to date, the full 
integration of these disciplines should enable the FBI to 
recruit, train and develop a new generation of agents and 
support personnel dedicated to its core national security 
mission. And more complete integration of the FBI with sister 
counterintelligence agencies will augment our nation's ability 
to protect against the most serious foreign intelligence 
threats.
    In closing, Mr. Chairman, I would like to thank you very 
much for this timely hearing, and I welcome your questions.
    Mr. Hostettler. Thank you, Ms. Van Cleave.
    [The prepared statement of Ms. Van Cleave follows:]

        Prepared Statement of the Honorable Michelle Van Cleave




    Mr. Hostettler. Dr. Wortzel.

       TESTIMONY OF DR. LARRY WORTZEL, VISITING FELLOW, 
                    THE HERITAGE FOUNDATION

    Mr. Wortzel. Mr. Chairman, Members of the Committee, thank 
you for the opportunity to testify today on the theft of 
national security secrets and national security sensitive 
technology. I have a longer statement I would like to submit 
for the record, if I may.
    Mr. Hostettler. Without objection.
    Mr. Wortzel. I will focus on the intelligence collection 
posed by China. The manpower pool available to the Chinese 
Government and its intelligence services is nearly limitless, 
and it is impossible to know for certain if people are here to 
study for research or if they are here to steal our secrets.
    The People's Republic of China is methodical in its program 
to gather information from abroad. In 1986, the People's 
Republic of China launched a national high technology research 
and development program with the specific goal of benefiting 
China's medium and long-term high technology development.
    This is a centralized program; it is known as the 863 
Program for the date it was announced, and it allocates money 
to experts in China to acquire and develop things like 
biotechnology, space technology, laser technology, and advanced 
materials. Thousands of Chinese students and scientists were 
sent abroad by China over the years to pursue critical, civil 
and military dual-use technologies, and the practice still 
continues. Thus, the U.S. faces an organized program out of 
China that is designed to gather high technology information of 
military use.
    Now, today, inside China, there are entire high technology 
incubator zones that are designed to attract back students from 
the U.S. or U.S. businesses to bring technology in. It is very 
important to recognize that Chinese diplomatic missions abroad 
monitor the activities of their businessmen and students to 
cultivate informants, and before Chinese citizens get passports 
or travel permission, they are often interviewed by China's 
intelligence security services and sensitized to intelligence 
collection requirements.
    I think it is important to remember that the constitution 
of the People's Republic of China characterizes the state as a 
people's democratic dictatorship. So it is pretty hard for 
legal travelers to simply turn down the Chinese Government in 
that authoritarian state when they get asked to cooperate.
    Now, we know from Chinese defectors and Chinese security 
officials, or diplomats in places like Australia and Canada 
recently, that this approach is used not only to collect 
intelligence in the United States, but also abroad.
    In 2003, the State Department approved some 700,000 visas 
for visitors from China to the United States. That includes 
about 135,000 students. That is just a lot of folks. There were 
40,000 immigrant visas granted to Chinese citizens in 2003. I 
have to say that these numbers make it impossible for the 
Federal Bureau of Investigation to vet every one of these 
people. There are some 3,200 Chinese front companies operating 
in the United States.
    Now, the People's Liberation Army of China went into the 
business of starting companies to bring in technology in the 
1970's, late 1970's and 1980's. The General Equipment 
Department started Polytechnologies; the General Political 
Department, started Kaili or Kerry Corporation, Baoli, the 
logistics department started Xinshidai, or the New Era 
Corporation; and these are separate legal entities, not part of 
the military, but they were authorized to conduct these 
activities by the Central Military Commission of the Chinese 
Communist Party.
    They were originally manned by former officers of PLA or 
their families, in some case active officers, and they operated 
branches in the United States. They regularly brought 
delegations to the U.S. to bring in technology, and today they 
have turned into global conglomerates that have spawned some of 
those 3,200 companies that are operating in our country.
    So the Chief of FBI Counterintelligence Operations, David 
Szady, recently said that these companies are operating in such 
places as Milwaukee, Trenton, New Jersey, and Palo Alto.
    Now, I think that the Government, the U.S. Government 
security intelligence and law enforcement agencies have to 
focus on national security information. They ought to be 
looking for violations in the Arms Export Control Act, or the 
Export Administration Act, but when it comes to corporate or 
industrial espionage, proprietary secrets, that is not national 
security.
    It may be an economic problem for the United States, but I 
think that there the Government owes American companies a good 
legal infrastructure to protect patents, copyrights and 
trademarks; a system of education on industrial security here 
in our country; and a strong effort to ensure that China meets 
its own obligations to create a rule of law that protects the 
rights of ownership and intellectual property. But we shouldn't 
cross over into losing--given the number of people, into losing 
our focus on national security.
    From the standpoint of congressional action, I would point 
out that the Export Administration Act expired in 2001; it was 
a 1979 act. It needs to be revised to take account of the needs 
of 21st century technology. The Senate passed a revision in 
2001; the House did not. I think the Executive Branch has to 
regularly review the Commodity Control List to ensure that 
appropriate national security controls on exports do not unduly 
restrict the ability of American industry to compete in the 
world market.
    Generally speaking, I think that technologies that are 
widely available in the world market and not unique to the 
United States should not be restricted and subject to export 
controls unless they can be multilateral controls. I would also 
recommend that visa officers get educated by the intelligence 
community so that things like the Visas Mantis program, and the 
technology alert list, can work effectively. They have a lot of 
prerogatives when they are out in the embassy.
    Let me close by saying that I don't think it pays for us to 
be paranoid and suspect that every traveler, student and 
businessman from China, or woman from China, is a spy or is out 
to steal technology. Prudent law enforcement programs, 
counterintelligence programs, security education and industrial 
security programs are important ways to protect our Nation. But 
I would note that in places like Taiwan, the Republic of China 
and South Korea, it is these students that came out and learned 
and went back home that changed the political system there and 
created a rule of law and democracy, and that could someday 
happen in China. In the meantime, I do think we need to be 
vigilant.
    And I thank you for the opportunity to testify today.
    Mr. Hostettler. Thank you, Dr. Wortzel.
    [The prepared statement of Dr. Wortzel follows:]

                 Prepared Statement of Larry M. Wortzel

    Mr. Chairman, Members of the Committee,
    Thank you for the opportunity to testify today on the theft of 
national security sensitive technology in the United States. As a 
former military intelligence officer who has tracked the activities of 
the People's Liberation Army and Chinese intelligence services for 35 
years, I know of no more pervasive and active intelligence threat to 
America's national security than that posed by the People's Republic of 
China. The manpower available to the Chinese government and its 
corporations to devote to gathering information in the United States is 
nearly limitless. There are some 300,000 visitors to the United States 
from China each year. It is impossible to know if these people are here 
for study and research or if there are here to steal our secrets.
    In 2003, for example, the State Department granted about 27,000 
visas to Chinese ``specialty workers,'' the H1-B visa. Some of these 
were intra-company transfers coming to the United States from US firms 
operating in China. Indeed, between 1993 and 2003 there were about 
40,000 immigrant visas from China a year. The US government has handled 
about 2,410 asylum cases from China a year. In 2003, there were about 
55,000 student visas granted to Chinese students. The sheer magnitude 
if these numbers presents a great challenge to the Federal Bureau of 
Investigation, particularly when the US is also concerned about 
terrorism.
    The General Political Department of the People's Liberation Army 
has a proprietary company, Kaili, or Kerry Corporation, that operates 
in the U.S. as a real estate and investment company. The General 
Equipment Department of the PLA operates a proprietary company, 
Polytechnologies, which has offices here in the U.S. In addition, the 
Chinese Defense, Science, Technology and Industry Commission operate a 
proprietary called Xinshidai, or New Era, that has offices in our 
nation. These technically are independent legal entities, but they were 
established by the Central Military Commission of China to serve the 
interests of the military industrial complex. The PLA regularly 
operates trade fairs to attract American high technology into China.
    The Deputy Undersecretary of Defense for Technology Security and 
Counterproliferation has testified that there are between 2,000 and 
3,000 Chinese front companies operating in the United States to gather 
secret or proprietary information, much of which is national security 
technology or information.
    The nature of the Chinese state complicates the problem of knowing 
what the large numbers of travelers and students from China are 
actually doing. China is still an authoritarian, one-party state led by 
the Chinese Communist Party with a pervasive intelligence and security 
apparatus. The Chinese government is able to identify potential 
collectors of information and, if necessary, to coerce them to carry 
out missions on behalf of the government because of the lack of civil 
liberties in China. Let me quote the first three sentences of Chapter 
1, Article 1, of the Chinese Constitution: ``The People's Republic of 
China is a socialist state under the people's democratic dictatorship 
led by the working class and based on the alliance of workers and 
peasants. The socialist system is the basic system of the People's 
Republic of China. Disruption of the socialist system by any 
organization or individual is prohibited.''
    The People's Republic of China is methodical in its programs to 
gather information from abroad. In March 1986, the PRC launched a 
national high technology research and development program with the 
specific goal of benefiting China's medium and long-term high 
technology development. This centralized program, known as the ``863 
Program'' for the date when it was announced, allocates money to 
experts in China to acquire and develop bio-technology, space 
technology, information technology, laser technology, automoation 
technology, energy technology and advanced materials. The 863 program 
was proposed by China's strategic weapons scientists to emphasize 
strategic civil and military technology development. Thousands of 
students and scientists were sent abroad by China over the years to 
pursue critical civil and military, dual-use technologies. This 
practice still continues. When I was at the American Embassy in China 
and conducted due diligence checks to confirm the nature of Chinese 
companies seeking to do high technology business in the United States I 
most often found that the address identified for a company on a visa 
application turned out to be a People's Liberation Army or PRC 
government defense research institute. Thus, the United States faces an 
organized program out of China that is designed to gather high 
technology information of military use.
    My colleague today, Mr Maynard Anderson, will discuss some of the 
ways that our government and industry can defend against intelligence 
gathering by China through defensive counterintelligence and security 
education programs. It is also important to know that we have other 
programs to screen out people coming to the United States to gather our 
trade or military secrets. In January 1998, the VISAS MANTIS program 
was developed to assist the American law enforcement and intelligence 
communities in securing U.S.-produced goods and information that are 
vulnerable to theft. Travelers are subject to a world-wide name-check 
and vetting procedure when they apply for visas. The security 
objectives of this program are to prevent the proliferation of weapons 
of mass destruction and missile delivery systems; to restrain the 
development of destabilizing conventional military capabilities in 
certain regions; to precent the transfer of arms and sensitive dual-use 
items to terrorists; and to maintain United States advantages in 
militarily critical technologies. This program operates effectively and 
can vet a Chinese student in as few as 13 days. Non-students may take 
longer, as many as 56 days. However, I can tell you based on my trip to 
China two weeks ago that the American Embassy in Beijing and the 
Consulate in Guanzhou are able to process and vet in about two weeks 
visas for non-student travelers who fully and accurately outline the 
purpose and itinerary of their trip. The government also operates a 
``technology alert list'' to identify legal travelers from China that 
may benefit from exposure to advanced U.S. technology with military 
application.
    Many provinces and municipalities in China now operate high 
technology zones and ``incubator parks'' specifically designed to 
attract back Chinese nationals who have studied or worked overseas in 
critical high technology areas. When students or entrpreneurs return 
with skills or knowledge that the central government deems critical 
they are given free office space in the parks, loans, financial aid, 
and administrative help in setting up a business designed to bring in 
foreign investment and technology. Their companies are given tax 
holidays. Innovative programs such as at Beijing's Zhongguancun High 
Technology Park and Guangzhou's High Technology Economic and Trade Zone 
get central government help. These are admirable programs that will 
develop entrpreneurial skills among well-educated Chinese citizens. 
However, as students and employees of U.S. companies return home, it is 
important to know that they are not taking back American economic or 
military secrets. Good counterintelligence and industrial security 
programs are very important to U.S. security given this threat.
    Mr. Chairman, the enforcement of intellectual property protection 
laws in China is spotty and inconsistent at best. This is one of the 
major complaints of American high technology companies about China's 
compliance with its obligations under the World Trade Agreement. It 
will certainly be a subject discussed by President Bush and Chinese 
President Hu Jintao this week. The tendency to steal intellectual 
property and high technology secrets in China is worsened when 
ijntellectual property laws are not enforced there. And the problem is 
further exacerbated when centralized Chinese government programs, such 
as the ``863 Program'' I mentioned earlier in my testimony, are 
specifically designed to acquire foreign high techology with military 
application. This only creates a climate inside China that rewards 
stealing secrets.
    I believe that U.S. government security, intelligence and law 
enforcement agencies must focus on the national security. They should 
be looking for acts of espionage and for violations of the Arms Export 
Control Act or the Export Administration Act. When it comes to 
corporate or industrial espionage that is not a matter of national 
security, I believe that the government owes American companies a good 
legal infrastructure to protect trademarks, patents and copyrights; a 
system of education on industrial security; and a strong effort to 
ensure that China meets its own obligations to create a rule of law 
that protects the right of ownership and intellectual property. 
However, I do not believe that American intelligence or security 
agencies should focus on forms of economic espionage that do not 
involve national security information. From the standpoint of 
Congressional action, my view is that the Congress should reconsider 
the Export Administration Act with a view toward ensuring that its 
provisions meet the needs of 21st century technology. The 1979 Export 
Administrtion Act expired in 2001. The Senate passed a new Act in 2001, 
but no revision passed the House. And the Executive Branch must 
regularly review the Commodity Control List to ensure that appropriate 
national security controls on exports do unduly restrict the ability of 
American industry to compete in the world market. Generally, 
technologies that are widely available on the world market and not 
unique to the United States should not be unduly restricted unless they 
can be subject to mulitlateral controls.
    Finally, we cannot become paranoid and suspect that every traveler, 
student and businessman from China is a spy or is out to steal 
technology. Prudent law enforcement programs, counterintelligence 
programs, security education and industrial securty programs are 
important means to protect our nation.
    Thank you for your invitation to testify today.

    Mr. Hostettler. Mr. Anderson.

    TESTIMONY OF MAYNARD ANDERSON, PRESIDENT, ARCADIA GROUP 
 WORLDWIDE, INC., AND FORMER DEPUTY UNDER SECRETARY OF DEFENSE 
                      FOR SECURITY POLICY

    Mr. Anderson. Thank you, Mr. Chairman. I too have submitted 
a statement for the record. With your permission, I will 
summarize.
    Mr. Hostettler. Thank you.
    Mr. Anderson. Thank you, sir.
    We have proved that collectors representing foreign 
adversaries and friends use espionage, theft and other illegal 
means to take advantage of the United States and cause 
unauthorized disclosure of protected information.
    We also need to recognize that there are ethical failures 
of trusted personnel who are prepared to traffic in information 
and technology because they are greedy or because they are 
susceptible to foreign pressure, and they are threats as well.
    The United States is an open society and a prime target of 
collectors because it produces more intellectual property than 
any other nation in the world and does, to some extent, a poor 
job of protecting it. World changes, producing new alliances 
and new friendships internationally create more vulnerabilities 
to our technology. America may have won the Cold War, but we 
are losing ground economically to those who would pilfer our 
commercial secrets.
    National security and economic strength are indivisible, 
and the real test in this world of military and economic 
contests for supremacy may not be who first develops technology 
but rather who is the first to use it effectively. Technology's 
application is the key, particularly in an area of dual-use 
technology.
    Integration of the management, protection and use of 
technology is an objective to ensure that we determine what 
needs to be controlled, what can be controlled, and employment 
of the most important control mechanisms. It is imperative that 
we determine accurately whether any other nation wants our 
technology and whether any other nation has it already, because 
we can't afford to spend resources to protect things that don't 
need protection. We need to balance the protection of real 
secrets while maintaining the competitive position of American 
industry in the world market.
    It would seem prudent, therefore, to use all current legal 
remedies available to enforce contracts and personnel actions, 
to enhance enforcement opportunities against current Government 
and contractor employees who break trust, to establish new 
standards and requirements for our foreign visitors, 
particularly students and researchers, and to ensure, probably 
most of all, that our citizens know what is expected of them.
    The easiest, least-expensive and most effective protection 
technique is education. All custodians of protected information 
should be subjected to continuing education concerning threats, 
vulnerabilities and protection of information so that they 
understand the consequences of its unauthorized disclosure, 
which are obviously jobs, loss of profits and diminished 
national security.
    Everyone should be made aware that national security is 
every citizen's responsibility.
    Thank you, Mr. Chairman.
    Mr. Hostettler. Thank you, Mr. Anderson.
    [The prepared statement of Mr. Anderson follows:]

                 Prepared Statement of Maynard Anderson



    Mr. Hostettler. Dr. Wulf.

 STATEMENT OF DR. WILLIAM A. WULF, PRESIDENT, NATIONAL ACADEMY 
             OF ENGINEERING, THE NATIONAL ACADEMIES

    Mr. Wulf. Thank you very much, Mr. Chairman, Members of the 
Committee. I too, like my predecessors here, have a longer 
statement, which I will submit for the record.
    I am pleased to come to the hearing today to remind all the 
Members of the Committee of the important contributions that 
foreign-born scientists and engineers have made and continue to 
make to this country. We are more prosperous and more secure in 
large part because of them.
    Before proceeding, while I don't perhaps have the same 
credentials in intelligence that my predecessors on the panel 
have had, I would note that both my wife and I have been 
advisors to the Department of Defense for decades. We both 
carry Top Secret SCI clearances and my wife served for 5 years 
in the Pentagon as the Director of Research and Engineering, 
where she had responsibility for the oversight of all R&D in 
the Defense Department.
    I am convinced that security, real security, comes from a 
proper balance of keeping out those that would do us harm and 
welcoming those that would do us good. Throughout the last 
century, our greatest successes in creating both wealth and 
military ascendancy have been due in large part to the fact 
that we welcomed the best scientists and engineers from all 
over the world. No other country did that, and nowhere else has 
the genius for discovery and innovation flourished the way it 
has here. I am deeply concerned that our policy reactions to 9/
11 have tipped the balance in a way that is not in the long-
term interest of our Nation's security.
    Fifty years ago, our scientific leaders came from Europe. 
There were the famous names like Einstein, Fermi and Teller, 
without whom we would not have been the first to have the 
atomic bomb; von Braun, without whom we would not be ascendant 
in rockets and space; von Neumann, without whom we would not be 
world leaders in computing and information technology.
    Today, it isn't just Europeans that contribute to our 
prosperity and security. The names are those like Praveen 
Chaudhary, now Director of Brookhaven National Laboratory; C.N. 
Yang, now Nobel Laureate from the Institute for Advanced Study 
at Princeton; and Elias Zerhouni, who was born in Algeria and 
is now the Director of the National Institutes of Health.
    Between 1980 and 2000, the percentage of Ph.D. students and 
scientists and engineers employed in the United States, who 
were born abroad, increased from 24 to 37 percent. The current 
percentage of Ph.D. physicists is about 35 percent; for 
engineers, it is over 50 percent. One-fourth of the engineering 
faculty at U.S. universities were born abroad; between 1990 and 
2004, over one-third of the Nobel Prizes awarded to U.S. 
citizens were to foreign-born scientists. One-third of all U.S. 
Ph.D.'s in science and engineering are now awarded to foreign-
born graduate students.
    We have been skimming the best and brightest minds from 
around the globe and prospering because of it. We need these 
new Americans even more now as other countries become more 
technologically capable.
    If I have one message to convey to this Committee today, it 
is that it is a serious mistake to think that all important 
defense technologies originate in the United States, and hence, 
the problem is to keep our technology from being stolen by 
others.
    We talk proudly about the MIT ``Rad Lab'' that developed 
radar during World War II, but the critical technology came 
from the United Kingdom. At the end of World War II we were a 
distant third in the development of jet engines behind both 
Germany and Russia--the Soviet Union. The World Wide Web was 
invented in Switzerland, not in the United States. I could go 
on and on.
    Many U.S. corporations are now shifting their development 
to overseas locations, research and development to overseas 
locations, not just because foreign labor is cheaper; that is a 
common and comfortable myth. It is frequently because the 
quality is better overseas.
    Again, real security depends upon a very careful balance, 
in this case, a balance of openness and secrecy. Walling 
ourselves off from others, from the otherwise open exchange of 
basic scientific information, is a recipe for being surprised 
and disadvantaged.
    To be sure, 9/11 and globalization have both changed the 
balance point. The balance point for the Cold War was a 
different one than for today. We need to fundamentally rethink 
our policies. However, in my opinion, several recent policy 
changes related to visas, to the treatment of international 
visitors, to this new issue of deemed exports and so on have 
had a chilling effect.
    It has already been mentioned that the applications of 
international students to attend U.S. colleges and universities 
has declined. Scientists have chosen to hold conferences in 
other countries. U.S. businesses have had to shift critical 
meetings to locations outside our borders. In the meantime, 
foreign companies, universities and governments are marketing 
themselves as friendlier places to do business or to get an 
education. In the race to attract top international talent, we 
are losing ground.
    At the same time, science and technology are growing 
rapidly in other parts of the world. Over 70 percent of the 
papers published by the American Physical Society's world 
leading journal, The Physical Review, come from abroad--70 
percent! We do not own all of the science and technology 
information in the world. It is illustrated by a figure in my 
written testimony, the number of first degrees in science and 
engineering awarded per year in Asia is now almost three times 
greater than in North America.
    Permit me to turn to this issue of export controls for a 
minute. They were instituted in 1949 to keep weapons technology 
out of the hands of potential adversaries. In 1994, the 
disclosure of information about a controlled technology to 
certain foreign nationals even in the United States has been 
``deemed'' to be an export of that technology itself. And 
recent reports from the inspectors general of the U.S. 
Department of Commerce and State have suggested that the 
implementation of the rules governing deemed exports should be 
tightened.
    For example, they have suggested that the exemption for 
basic research should be altered and possibly eliminated and 
that the definition of access to controlled technology should 
be broadened. The university community is rightly concerned 
that a literal interpretation of the IG's suggestions would 
essentially preclude foreign graduate students from 
participating in research and would require an impossibly 
complex system to enforce.
    Given that over 55 percent of the Ph.D. students in 
engineering in the United States are foreign born, the effect 
could be catastrophic. Either universities would have to 
exclude these students, or they would have to stop doing 
research on potentially defense-related topics, which, of 
course, includes most of the fastest-moving new technologies. 
Neither of these alternatives strengthens the United States, 
they weaken it.
    One might ask if these policy changes will improve our 
security, I would point out that the United States is not the 
only research-capable country. China and India, for example, 
have recognized the value of research universities to their 
economic development and are investing heavily in them. By 
putting up barriers to the exchange of information about basic 
research, we wall ourselves off from the results in these 
countries and slow our own progress. At the same time, the 
information we are ``protecting'' is often readily available 
from other sources.
    And finally, in a country with an estimated 10 million 
illegal aliens, one must wonder whether onerous visa policies 
or demeaning practices at border crossings will deter the 
committed trained spy or terrorist from entering the country.
    The 2001 Hart-Rudman Commission, which in February of 2001 
predicted a catastrophic terrorist attack on the United States, 
and which then proposed the Department of Homeland Security, 
said, and I quote, ``The inadequacies of our system of research 
and education pose a greater threat to the United States 
national security over the next quarter century than any 
potential conventional war we might imagine.'' Their essential 
point is that further damaging our system of research and 
education, including its relation to foreign-born scholars, is 
a very dangerous strategy.
    The United States still benefits from educating and 
employing a large fraction of the world's best scientists and 
engineers. We have great research universities that remain 
attractive to the world's best and brightest. We are envied for 
our non-hierarchical tradition that allows young scientists 
with new ideas to play leading roles in research.
    We have progressed because we fostered a tradition of free 
exchange of ideas and information and embraced a tradition of 
welcoming talented people from elsewhere in the world. But that 
advantage is eroding under current and proposed policies.
    The international image of the United States was one of a 
welcoming ``land of opportunity.'' We are in the process, 
however, of destroying that image, and replacing it with one of 
a xenophobic, hostile nation. We are in the process of making 
it more likely that the world's best and brightest will take 
their talents elsewhere. The policies that superficially appear 
to make us more secure are, in fact, having precisely the 
opposite effect.
    Protecting Americans from threats must obviously be a high 
priority. But as I said earlier, real security will be achieved 
only by a proper balance of excluding those that would do us 
harm and welcoming those that would do us good by a proper 
balance of openness and secrecy. With selected, thoughtful 
changes to U.S. policies, we can achieve both goals, making our 
homeland safer and our economy stronger.
    I would like to close with another quote from the Hart-
Rudman report, ``Second only to a weapon of mass destruction 
detonated in an American city, we can think of nothing more 
dangerous than a failure to manage properly science, technology 
and education for the common good over the next quarter 
century.''
    Thank you for the opportunity to testify.
    Mr. Hostettler. Thank you, Dr. Wulf.
    [The prepared statement of Mr. Wulf follows:]

                 Prepared Statement of William A. Wulf



    Mr. Hostettler. At this time we will turn to questions from 
Members of the Subcommittee.
    Ms. Van Cleave, about 30 percent of American university 
science and engineering faculty are foreign born, according to 
your testimony, 40 percent of Ph.D.'s in these fields go to 
foreign students. You also say that foreign intelligence 
services place senior scientists and exploit academic 
activities.
    Should there be better reporting of what projects these 
individuals are involved in; and in the case of students, also 
what subjects they are enrolled in, perhaps through an enhanced 
SEVIS system.
    Ms. Van Cleave. Mr. Chairman, it would be extremely helpful 
to U.S. counterintelligence to have that kind of increased 
reporting on these individuals.
    Frankly, it is difficult to gainsay the statement that was 
just made by my fellow panel member here, that what we want to 
do is exclude those who would cause us harm and welcome those 
that would do us good. The trick is figuring out which is 
which.
    Mr. Hostettler. It is possible that an individual from a 
country of concern, if they are applying for a degree in music 
education, for example, if they start taking nuclear 
engineering courses as electives, that it would probably be 
good to know that?
    Ms. Van Cleave. It would be helpful to get the kind of 
reporting of changes in emphasis where students coming for one 
purpose then are switching their majors or emphasis to areas 
that might have national security implications.
    Mr. Hostettler. But they don't have to be major changes, I 
mean, if an individual takes, through the course of a 4-year 
degree, 10 classes in chemical engineering, that doesn't 
necessarily meet the requirements of a minor in chemical 
engineering, but it nonetheless will probably be very helpful 
in their potential work.
    Ms. Van Cleave. Yes.
    Mr. Hostettler. Thank you.
    Your testimony states that Chinese intelligence efforts 
exploit our open economic system to reduce the U.S. military 
advantage and undermine our economic competitiveness. It is 
actually about the only foreign country you have mentioned by 
name in your testimony. Knowing this, wouldn't you agree that 
the Visas Mantis clearance needs better vetting by law 
enforcement agencies, certainly as it relates to a Chinese 
national coming to the U.S.?
    Ms. Van Cleave. Yes, Mr. Chairman. I think that would be 
very helpful. I appreciate the opportunity that we had in 
closed session to discuss in more detail some of the reasons 
why.
    Mr. Hostettler. In your testimony, you state that the top 
10 collectors probably accounted for 60 percent of foreign 
collection at defense contractors last year. Could you tell us 
what countries you are talking about when you talk about the 
top 10, maybe in the order of their collection?
    Ms. Van Cleave. Mr. Chairman, we did have the opportunity 
to do that in closed session. I am reluctant to do that in open 
session. However, I am able to tell you some of the reasons 
why.
    A number of the countries that are on so-called ``top 10'' 
lists, there is not unanimity across the community about what 
countries really constitute the top 10. It depends on whether 
you are looking at incident reports of information that might 
be amalgamated by the defense security services, for example, 
or some of the case loads that the FBI might be reporting; and 
there is a different way of counting them, and so the top 10 
may vary, depending on which source data we are looking at.
    But let me give you another reason why I am reluctant to go 
into certain specifics.
    Ms. Van Cleave. Some of the Members some of the member 
States that are among the top 10 as I believe I mentioned are 
among some of our close allies, and there are many ways that we 
deal with these kinds of incidents different from calling them 
to the carpet in a public forum. There are different kinds of 
approaches that we might make to allies in trying to forestall 
this kind of activity. But the Committee can come to its own 
conclusion and speculation. Those countries that do have 
particular interests in military build up will themselves be 
looking for those technologies that can help assist in that 
military build up, and they will find in the United States a 
very rich environment in which to acquire those kinds of 
technologies. It is also the case that there is some measure of 
economic competition that drives technology acquisition where 
there is commercial advantage to be gained and a lot of money 
to be made that is yet another incentive, and so we see a great 
deal of activity to include many countries beyond just the top 
10, but indeed at least a hundred nations. Nationals from a 
hundred different nations were recorded just last year in 
targeting U.S. technologies.
    Mr. Hostettler. Ms. Van Cleave, I appreciate the point that 
you made with regard to our friends. Actually, in your oral 
testimony you did mention two of those nations, China and 
Russia. Our largest--well, I should say one of our largest 
trading partners--we have ongoing evolving relations with 
Russia. The reason why I asked the question is the exact reason 
you gave why you say you are reluctant to give us that, and 
that is, there is an assumption among many of our constituents, 
many of our citizens of the United States that our friends 
don't spy against us. But as you mentioned, in general, that is 
a very erroneous assumption to be made. And the reason why I 
asked you that question is to put on the record very 
specifically who those people are because, once again, it's 
important for us to know that, for example, through the Visa 
Waiver Program, and through other programs that don't take 
advantage of the Visa Mantis system, that there may be 
requirements for us to change the law with regard to our 
friends. And I mean, I don't mean that with quotation marks. I 
mean friends but that have reasons that may be confusing to a 
lot of us and would be very confusing to a lot of my 
constituents as to why they aggressively commit espionage 
against the United States. And so I will not press you on the 
issue, but I will simply, once again, reiterate that it's 
important for us to, in open session, if it is not classified, 
to divulge this information really for the benefit of this 
Committee and the benefit of our constituents.
    Dr. Wortzel, your testimony states that tens of thousands 
of student visas were given to Chinese nationals last year; in 
fact, one of the highest. Do you believe we're giving 
preference to China in these student visa numbers over our 
allies, over some of our allies?
    Mr. Wortzel. I don't think it's a definite preference 
toward China. I think what you're seeing, first of all, 1.3 
billion people there, there's going to be more students trying 
to get out. We're obviously a very attractive place to get an 
education, whether it's a high technology education or an 
education out in the social sciences. I think our programs are 
actually pretty restrictive. It's difficult to go into an 
American Embassy and get into the United States if you're in 
China. So I think we have to deal with the fact that there are 
just huge numbers of people there. India, only second to that, 
and that probably accounts for the numbers.
    Mr. Hostettler. Do you believe an enhanced SEVIS system 
would allow us to gain better information to provide our 
intelligence community the information they need to----
    Mr. Wortzel. I do. I'm a great advocate of data mining. I 
think that the ability to electronically sort through what is 
open-source data, who's here, what are they doing, whether 
that's by someone in immigration--they've got a right to know 
what somebody's doing at a university. Now, one can argue that 
a U.S. intelligence service getting that information might be 
objectionable to a university president. But if the immigration 
service gave somebody a visa, I think it'd be great to allow 
them, allow Customs to get in, or Immigration, I'm sorry, to 
get in and say, okay, we gave Joe Doe a visa, and he said he 
was coming here to study this. Let me see what he's studying. 
And those are things that can be done quickly, electronically, 
and things can be sorted out. I do think we should be 
approaching it that way, and I think that we have appropriate 
agencies in the Government that could look at that, and then if 
there's a reason to raise concerns about what's going on, they 
turn it over to another agency or counter-intelligence agency.
    Mr. Hostettler. Very good. Without objection, I will grant 
the Chair an additional minute to ask one additional question 
of Dr. Wulf, maybe a couple of questions actually. Very short 
answers. You might not have the information. Dr. Wulf, could 
you tell me, given the fact that Master's and Ph.D. slots for 
engineering are limited in the United States, would you have 
statistics that tell us the number of American citizens who are 
denied Master's applications, who have Master's applications 
denied, as well as Ph.D. applications denied in the United 
States? Would you happen to have those?
    Mr. Wulf. Approximately zero.
    Mr. Hostettler. So it's really unlimited--the number of 
Master's and Ph.D. slots?
    Mr. Wulf. I didn't quite say that. But the number of 
Americans who do not enter graduate programs because there's no 
space is essentially zero.
    Mr. Hostettler. Okay.
    Mr. Wulf. The trouble is they're not applying.
    Mr. Hostettler. So there are zero denied.
    Mr. Wulf. Yeah. Approximately zero. I mean, there may be 
some oddball cases I don't know about.
    Mr. Hostettler. Thank you very much.
    The Chair recognizes the gentlewoman from Texas, Ms. 
Jackson Lee.
    Ms. Jackson Lee. Thank you very much, Mr. Chairman. Your 
initial round of questioning certainly points to a dilemma 
which we face. I'd like to take some remarks that were made 
generally speaking through the testimony presented in the open 
session to indicate my agreement. Let me first of all thank 
Congresswoman Lofgren for recognizing Dr. Wulf and the 
astuteness in which she recognized you in as much as you are 
representing or certainly associated with the University of 
Virginia, and I couldn't think of a better school. I happen to 
be an alumnus. So I thank the Congresswoman very much for her 
astuteness, Dr. Wulf, and I thank you for your service, as well 
as I do the other panel members.
    But you did highlight for us the fact that we do prosper 
because we skim the best scientists from around the world. At 
the same time, I think interwoven into your remarks is the idea 
that we suffer as well from enticing students and graduate 
students into the sciences and other high technologies that are 
necessary. So I'm going to come to you and pose that question. 
But I do want to go to Ms. Van Cleave to ask, what is the 
extent that she feels that we are now able, the United States, 
your industry--your, in terms of counter intelligence--able to 
identify, right now, foreign nationals who are coming into the 
United States to engage in espionage? Do we have that capacity?
    Ms. Van Cleave. We have limited insight into the foreign 
intelligence operations into the United States, which is to 
say, to the extent that we understand the character, make-up 
and operations of foreign intelligence services of concern, we 
can identify individuals that might be sent here for those 
particular purposes. However, much of the intelligence 
collection against the U.S. technology base is carried out not 
by known intelligence officers but rather by those who are 
employing nontraditional collection means against us. And that 
is a much much more difficult problem.
    There I would have to say that we have precious little 
understanding or way of knowing when individuals who ostensibly 
are coming here for legitimate business purposes might, in 
fact, have more troubling objectives in mind.
    Ms. Jackson Lee. So, in essence, part of the road map that 
you're providing for us today is the heaping up, if you will, 
of resources to look at that component that would be 
nontraditional in the way that they would seek to secure 
information. That seems to be where we need some emphasis.
    Ms. Van Cleave. Yes. We're very much in need of tools that 
would enable us to be able to characterize who those people are 
and why they are here, that small slice that is here for 
illegitimate purposes.
    Ms. Jackson Lee. I thank you.
    Dr. Wortzel, I likewise had some agreement with some of the 
remarks that you have made. But let me just say, and I believe 
that we will wind up on the same page. We know that, as I 
started out by saying, the importance of the intellectual 
exchange and the benefits that the United States has gained by 
a vast number of individuals. And we also know, without any 
naming or, if you will, illuminating any closed sessions, we 
know that even our allies have been found to be engaged in some 
activities that we would not support. So I don't want this to 
be a hearing that stigmatizes the entire student body from 
China. They our allies and friends. We have engaged in some 
very positive exchange opportunities, both in terms of our 
student exchange but also our trade exchange. And frankly, we 
are working toward a diplomatic relationship in terms of their 
continuing improvement. And I might add, we certainly want to 
ensure that our military operations are more in sync than in 
conflict. But you did mention, and I was trying to find your 
quote, but let me just say this: I look at it that the overall 
war on terrorism has taken us away from--and don't want to 
suggest that we should diminish that effort, but we need to 
increase, if you will, the resources for the rest of the 
intelligence community. Why don't you comment on where we need 
to, if you will, lift that issue up? And in the meantime, I'll 
be finding one of the quotes that I agree with you on. And I 
guess it is the point that you made about our work should be--
that ties into my question--national security, versus the 
question that many Members--rightly so, because their 
constituents are impacted by this whole economic issue. If you 
go to China, you're inevitably talking about CDs and country 
western music and other music that they have obviously 
utilized. But that's economic. And I think you said something 
about, we should be focusing on national security. Can you 
share that with me?
    Mr. Wortzel. Well, I think we should--thank you, 
Congresswoman. We should focus on national security. We need to 
provide, as I said in the testimony, the legal structure here 
in the United States, and we need to foster a legal structure 
in China that will provide for property rights and intellectual 
property rights. But we need to worry about national security 
here. And I think that's the critical task. Refining the lists 
of controlled commodities, dual-use items, to ensure that we 
protect what is really unique to the United States. I mean, 
there are some things we're just way ahead on that nobody else 
is doing, composites that make stealth technologies, turbine 
and in jet engine technology. Nobody else does this. We need to 
think about that. I would argue generally that basic research 
in universities has got to be open, wide open, but that when 
the Department of Defense or the Department of Energy goes to a 
specific university and funds a program that moves into applied 
research, then we should be able to know who's working on it 
and what they're working on and why they're there. So I 
wouldn't worry, Mr. Chairman, about somebody taking 10 courses 
in chemistry, advanced chemistry. But if he or she is working 
to do research on an applied technology with military 
application or with application for weapons, I'd get really 
nervous about it. And I would want to be able to know that.
    Ms. Jackson Lee. Mr. Chairman, Dr. Wulf, if he might 
respond to the question I raised. Dr. Wulf, that was the 
question dealing with--I started out the whole question dealing 
with the importance of the talent that comes here to the United 
States and the lack of U.S. Citizens engaged in the sciences.
    Mr. Hostettler. No objection. The gentleman will be allowed 
to respond.
    Ms. Jackson Lee. I thank the Chairman, and I'll conclude 
with that.
    Mr. Wulf. As I said in my oral testimony, and it appears 
again in my written testimony, foreign-born nationals represent 
an enormous fraction of the science and engineering talent in 
this country. I tried to give some examples. The fact that 
somewhere between 25 and 30 percent of the faculty in 
engineering schools are foreign-born, the fact that overall, 
something like 37 percent of all of the engineers and 
scientists in the United States are foreign-born, the fact that 
a third of the Nobel Prizes awarded in the last 10 or 15 years 
to U.S. Citizens were to foreign-born. It's just really hard to 
overstate the benefits that we have reaped by skimming off the 
best and brightest minds from around the world. And we are, in 
my opinion, in serious danger of creating an atmosphere that 
those people will not want to put up with.
    Ms. Van Cleave made reference to the fact that, in the 
fifties, a number of Chinese returned to mainland China and set 
up their missile program. I would recommend to any Member of 
the Committee that feels like exploring that, that they take a 
look at a book called, The Thread of the Silk Worm, about the 
man who headed the Chinese missile program, named Tsien Hsue-
shen. He was a professor at Cal Tech, got his Ph.D. at MIT, was 
one of the leading rocket scientists, literally, in the United 
States, and quite improperly and erroneously, got caught up in 
the McCarthy hearings, was held in house arrest for, if I 
remember correctly, 2 years and, finally, in disgust returned 
to China and created the Chinese missile program. Yes, it was a 
returned Chinese. But we drove him there.
    Mr. Hostettler. Will the gentleman concede the fact that it 
was the Communist Chinese missile program?
    Mr. Wulf. Oh, yes. Absolutely.
    Mr. Hostettler. The Chair now recognizes, without 
objection, the gentleman from Texas for questions, 5 minutes.
    Mr. Gohmert. Thank you. Appreciate my colleague allowing me 
to proceed.
    I'm going to ask each of you to name the top two 
immigration practices or omissions that you believe are the 
biggest threat to our national security. But while you're 
thinking about that, I want to ask Ms. Van Cleave, are you 
familiar with the diversity visa program where we provide 
50,000 visas a year on the basis of a lottery? Are you familiar 
with that program?
    Ms. Van Cleave. Congressman, I have to say, no, I'm not.
    Mr. Gohmert. Okay. Well, then I don't guess you can tell me 
how many terrorists may have utilized that program. But anyway, 
I would suggest that you take a look at it. Some of us, we 
voted that out of this Subcommittee, a repeal of that, because 
it seemed ludicrous to some of us that we be awarding visas on 
the basis of a lottery, allowing immigration to abdicate their 
responsibilities. That's a concern of some of ours. But let me 
start with Dr. Wulf and work our way down to my left. Doctor, 
what do you see as the two biggest, two immigration practices 
or omissions that are the biggest threat to our national 
security?
    Mr. Wulf. Two? That's not easy. But the first one I would 
name is the fact that immigration visas are not awarded 
particularly on the basis of the contribution which the 
individual will make to the country. They are more typically 
family based or that sort of thing. I think we ought to give 
special consideration to those people who can really contribute 
to the country. And I have to say, the second one is 
overreaction. I really am concerned that we're in the process 
of making things worse rather than better by overreacting.
    Mr. Gohmert. Thank you.
    Mr. Anderson.
    Mr. Anderson. Yes, sir. I think perhaps the most important 
one to me is that we don't know who is arriving here. We do a 
lot of sort of superficial work, but we're rather poor in 
determining just exactly who's coming. And I don't mean to--I 
don't mean for that to sound discriminatory. But we don't ask 
those folks, for example, students and researchers coming in, 
we don't ask those folks to provide us with a great deal of 
information about who they really are. We ask it of our own 
students. We ask it of our own military personnel. We ask it of 
all kinds of people in the United States, but immigrants really 
are not subjected to very strenuous questions on who they are 
really. And I think that may be, to my mind, the greatest one. 
I'm not sure that--I'm not sure that I could name a second one. 
I don't like quotas. I don't think quotas are good. I don't 
know that that's a--I don't know that that's a threat to us. 
But I think a failure to really identify our immigrants is a 
major issue.
    Mr. Gohmert. Okay. Thank you.
    Ms. Van Cleave.
    Ms. Van Cleave. From the perspective of counter 
intelligence, immigration laws are very clear: where we have an 
individual who may be known or expected to engage in 
intelligence activities and activities inconsistent with U.S. 
laws, visas are denied. But my real concern about immigration 
laws is that, from a CI perspective, they really can't do a 
great deal for us beyond that. I mean, there isn't a panacea 
that enables or immigration laws to protect us against all of 
the things that this hearing has now convened to discuss. I 
would have to say that getting at the real question of who 
these people are who are coming into the United States, 
immigration laws can do, can provide some of that information 
to us. But that really is the point where I think that we need 
to have a layered approach of which immigration controls are 
only one part. The matter that was mentioned a little earlier 
by the Chairman----
    Mr. Gohmert. Can you help me? Maybe my mind's eye is too 
simplistic. I'm just asking you, what do you see as the biggest 
threat to national security? And from a counter intelligence--
you're saying we need a layered approach.
    Ms. Van Cleave. Because, sir, I know----
    Mr. Gohmert. So the biggest threat in your mind is that we 
don't have a layered approach?
    Ms. Van Cleave. I know that foreign intelligence services 
and foreign governments will exploit such loopholes as they can 
find to send personnel here to achieve certain ends.
    Mr. Gohmert. Bingo. That's what I'm looking for. What 
loopholes do you know of that we can fix? Number one problem. 
Number two problem.
    Ms. Van Cleave. And I believe in closed session I was asked 
to take, for the record, that particular question and to 
provide a detailed answer back to the Members of the Committee. 
But in open session, let me say that I am concerned that, where 
there is an opportunity that immigration laws present for 
foreign nationals to enter here because they present themselves 
as residents of another country, and we really don't get true 
disclosure on who they are and where they really come from, 
then that is one particular type of a loophole that I think 
that this Committee may want to consider closing as it is 
reviewing our immigration laws.
    Mr. Gohmert. So we don't get sufficient information on 
where this individual is actually coming from. Is that correct?
    Ms. Van Cleave. In certain instances, that is correct.
    Mr. Gohmert. Number one. I wasn't asking anything 
classified. Just a succinct, what do you say, number one 
problem, number two problem, and then we can go to work from 
there. We can get classified information. We can go beyond. But 
okay, so that's the number one problem. Sufficient information 
on where they're from. What else?
    Ms. Van Cleave. With respect to other aspects of our 
immigration laws, I have to tell you, if it isn't obvious 
already, that I am not an expert in U.S. immigration laws.
    Mr. Gohmert. You're hopefully an expert on counter 
terrorism or counter intelligence.
    Ms. Van Cleave. Yes, sir. That's correct. That is correct. 
And being able to avail ourselves of different kinds of 
databases and information insights on persons who are coming 
into the United States in various categories of immigration 
visas is very valuable to U.S. intelligence. And to the extent 
that we can have more robust databases on persons who are 
coming here and what they do while they are here, it is of help 
to us very much.
    Mr. Gohmert. And I apologize to you if you felt like I was 
trying to make you into an expert on immigration. And I 
apologize if I presumed too much in thinking that someone in 
counter intelligence might overlap or bump into areas of 
immigration policy where a light would go off and you say, oh, 
that's bad for our country that we have this policy. It bumps 
up against everything we know to be true and good as counter 
intelligence. Some of us may individually be counter 
intelligent. But anyway, Dr. Wortzel, if you would, very 
quickly. My time is up.
    Mr. Wortzel. I think that the Technology Alert List and the 
Visa Mantis program as a process is a good idea. I think it can 
be improved by education for the officers that actually stand 
the visa line. And my own experience in embassies is that, when 
you have an ambassador that insists on interdepartmental 
cooperation and screening of visa applications, you end up with 
better educated selections of who's getting a visa and who's 
getting denied. So I would improve that. It's something I think 
we're doing well. I think one of the greatest threats is that 
when we make it too difficult for an American company to bring 
in an intra-company transfer, either to do work in the United 
States, or for a corporate education program, we force that 
company to export its entire R&D effort to a third country or 
to China, a place like China. So I think we have to be very 
careful about this balance of what I just advocated in Visa 
Mantis and Technology Alert Lists and ensuring that when a 
company has a legitimate need for some foreign expert to come 
in here and get educated or do research and go home and manage 
or to work here, we don't force that company to export our R&D 
capability outside of United States.
    Now, Mr. Chairman, I failed to respond to one part of Ms. 
Jackson Lee's question. And if you would indulge me, I could do 
that in a minute.
    Mr. Hostettler. Without objection.
    Mr. Wortzel. Certainly. She asked about the balance between 
counter intelligence responsibilities and antiterrorism 
investigative responsibilities for the FBI. And let me say that 
my experience before and after September 11, 2001, in having to 
deal with FBI agents here in this country that you know I may 
have spoken to or may come to interview me is they're doing a 
pretty good job. I mean, these--they are able, despite the fact 
that they're out hunting terrorists and hunting people that are 
perhaps dealing in weapons of mass destruction, they're still 
able to focus on the big ball park issues that deal with what 
may be Chinese espionage, so that their people can use more 
reinforcement. I think they need more counter intelligence 
agents in the field. They can use more education. I find myself 
talking to FBI counter intelligence agents that don't know the 
history of espionage with China, and you know I'm going back 
over the fact that I'm a little older, and I've been part of 
it. But basically, I'm pretty happy with what they're doing as 
an agency, and I support the changes in the creation of a new 
division.
    Mr. Hostettler. Thank you.
    The Chair recognizes the gentlewoman from California for 5 
minutes, Ms. Lofgren.
    Ms. Lofgren. Thank you, Mr. Chairman.
    I want to focus a little bit on the Visa Mantis process 
because it is bulky and it is slow and it's causing us 
problems. And I'd ask unanimous consent to enter into the 
record an article from the New York Times this August that 
talks about a Ms. Wang, who is a cryptographer, mathematician 
actually, who was one of nine invitees to a conference on 
cryptography that was going to help the United States because 
they found a flaw, and they were going to help us. And they 
were not able actually to get in to provide that help.
    Mr. Hostettler. No objection.
    Ms. Lofgren. I'll just note also, last spring, I met with, 
I won't mention his name but a Nobel Prize winner in 
California, who told me that he will no longer organize 
scientific conferences in the United States because you can't 
get the scientists in. And so I've actually, since he said that 
I've been looking at all the high energy physics, it's all, 
it's in Toronto, it's in Europe. They're not here anymore. And 
so we're going to pay a price for that. The Visa Mantis, 
stepping back, I think someone said we need to take a look at 
our export control system. And I do--we've tried to do that. We 
lost a vote on the floor here. Secretary of State Rice suggests 
we ditch the MTOP standard--it doesn't work--and to go with a 
standard of what's readily available, which makes a lot of 
sense to many of us. If we were to do that, here's the 
question: Wouldn't that help on the Visa Mantis project? 
Because then you would have a much limited set of technologies, 
and you would be protecting it against the things you really 
needed to protect, instead of this broad area of when you go to 
Fry's Electronics and buy it, and if you can buy it at Fry's, 
it's too late. And then, wouldn't that also help on the deemed 
export problem? Because right now, we are controlling on things 
that--I mean these students are just going to go and get the 
same thing at Oxford, or you know, it's not as if we're the 
only people that are studying this. What is your reaction on 
that approach as part of the way to fix the Visa Mantis 
problem?
    Mr. Wortzel. First of all, on MTOPS, I would drop that, 
too. I think it's kind of silly to begin control and speed--I 
think you have to begin to figure out if there are certain 
software applications that have great military or cryptographic 
application that you control. And I think it's getting silly to 
control MTOPS, and I think it's getting silly to control chip 
fencing, whether it's five or 13 microns or whatever. Now, all 
these questions that you're asking really also come down to 
questions on deemed exports. And well, let me give you an 
example. You can study this stuff. I'm a political scientist. 
I'm a military officer. You know, I have done a little bit of 
intelligence work here and there. I'm not an engineer, and I 
never worked in production. And frankly, most consular officers 
on a visa line have not either.
    Ms. Lofgren. They don't know.
    Mr. Wortzel. They don't know. So their education is a very 
important part of it. And here, if you're working in an 
embassy, if you have got a good ambassador or consul general 
he's putting those people in touch with the industry people.
    Ms. Lofgren. Let me just--I know I'm going to run out of 
time. I don't want to be rude. But right now, we have the 
responsibility; the State Department with Commerce does this 
whole list. Just simply by shrinking the list we would help the 
situation to target, it seems. Would you agree Dr. Wulf?
    Mr. Wulf. As long as you shrink it by making it more 
specific. Part of the real problem is here it's a long list or 
its two long lists, and each item on the list is quite generic. 
So you hand this to some poor consular official who doesn't 
have a technical background, and they----
    Ms. Lofgren. Yes it is always easier to say no. You don't 
get called to account for saying no. Only for saying yes.
    Mr. Wulf. Right.
    Ms. Lofgren. The other thing I had, looking at it, the 
slowest part of the whole Visa Mantis program is the FBI. They 
don't have a deadline. And I've often wondered, how much do 
they really have to do? I mean, these are foreign nationals. 
They haven't in most cases been to the U.S.; they're not 
permanent residents. They don't live here. You know, maybe the 
CIA might have something on them, in which case we should get 
that information. But they're not going to be on a rap sheet in 
the FBI's computer. I mean, it just seems to me that if you're 
paying a price by having the top scientists go to other 
countries, having your scientific conferences be shoved abroad, 
or I'll tell you, as I was driving to the airport in 
California, I heard an interview of one of my constituents who 
had a huge telephone network system that he had sold to a 
company abroad. He couldn't get his customer in to teach them 
how to use the system, so he relocated his company to Vancouver 
and left California. So there's a price to be paid on all of 
this. What are we getting for it in terms of security?
    Mr. Wortzel. Well, first of all, I don't think it's wrong 
to ask universities and companies to plan ahead and figure out 
who they're going to invite. So a few months advance notice, 
you know, if you decide tomorrow morning you're going to run a 
conference and you want somebody----
    Ms. Lofgren. Right. No. I don't disagree with that.
    Mr. Wortzel. With respect to--I wouldn't eliminate any part 
of our intelligence or law enforcement community. But I do 
think that of all the agencies, from what I have seen and read 
and experienced, that's the one that can profit the most by a 
systematic automation of the records.
    Ms. Lofgren. Well, it's paper records, and that's why it 
takes so long. I mean, it's pretty shocking that they've still 
got paper.
    Mr. Wortzel. So I wouldn't eliminate it. Instead, I mean, 
you have oversight. That's where I would push for.
    Ms. Lofgren. We've yet to have a hearing on oversight of 
the FBI in the Full Committee in the 10 years I've been on the 
Judiciary Committee. I would just close. I know my time is up. 
We talked about our competitiveness. But if 2 percent of the 
population of China is really, really smart, that's more than 
the entire population of the United States. So that's what 
we're competing against, and we'd better make sure that we've 
got new Americans to do that. And I yield back.
    Mr. Hostettler. I thank the gentlewoman. The Chair 
recognize the gentleman from Iowa, Mr. King, for 5 minutes.
    Mr. King. Thank you, Mr. Chairman.
    I regret that I had to step out of this hearing for a 
period of time, and I missed some of the core of the testimony 
of the witnesses. I thank you all for your testimony and your 
written testimony. I have absorbed some of this testimony when 
the doors were closed and some of it when it's open. And I look 
back at the United States of America in 1959, and I remember 
sitting in the sixth grade when Sputnik went up into space. I 
didn't know at that day, but I found out over the years that I 
had been assigned to, and millions of American students had 
been assigned to, go down the path of science and technology 
and engineering and math and chemistry. And it was, we did an 
all out full court press. We mobilized America to educate our 
young people so that we could prevail in the race to space, and 
in the process of doing so, we also, I believe, laid the 
groundwork to prevail in the Cold War by succeeding 
economically where the Soviet Union was bankrupted and before 
they checkmated us militarily, by the way. And that backdrop of 
the history of what we did in this country to mobilize a nation 
of essentially U.S. citizen students that went into the science 
and technology was the pattern that we had in the past. And I 
would ask, to what level we have a truly, an intellectual 
exchange when we have, I think, far more students here in the 
United States studying science and technology than are studying 
in foreign countries? Is it an exchange, or is it just a 
transfer of our science and technology to foreign countries? 
And then, so then I began to think in terms of what's ahead of 
the next generation of America if we're watching these numbers 
grow. And as Dr. Wulf has testified, 25 to 30 percent of the 
engineering faculty is foreign-born; 37 percent of the 
engineering degrees are foreign-born; one third of the Nobel 
prizes are foreign-born. If that number is growing, and I 
suspect it may be, because more than 50 percent of the 
engineering doctorates are foreign-born. So are we, do we have 
an intellectual transfer here, or are we just slowly 
transferring our intellectual property and our human property 
to foreign countries? A generation from now, are they going to 
need our universities to teach this, or are they going to have 
then established in place an ability to teach that engineering? 
Are we going to send our students there at some point? At what 
point do we reach that critical mass, that tipping point where 
they're not coming to the United States, not because we haven't 
set a climate that says, please come here and learn, but 
because they have now absorbed the science and technology 
necessary for them to be the world leaders? And if we're 
looking at a nation like China, for example, that has 1.3 
billion people and the ability to mobilize all of them if they 
choose or skim the cream off of the crop, get that education, 
bring them back home again, have we already marketed some of 
America's future? And what if--and so within the context of 
that, that generational, what happens in 25 years or 30 or 50 
years? I inject another question. And that is, are the Israelis 
educating Palestinians or Arabs in military or nuclear 
technology or missile technology? Do they have an exchange 
program going on with their neighbors, their people that are 
sworn to kill them and drive them into the sea? I mean, that's 
a little microcosm possibly of this, I'll say, the risk of an 
impending crisis with China and a generation from now. So if 
the Israelis see the wisdom in not doing that with their 
neighbors sworn to their annihilation--and I remember the 
Chinese general that threatened to nuke Los Angeles. And I wish 
Mr. Gohmert were here, because he had a conversation with their 
leadership over there last month to point that out. I pose then 
my question to Mr. Wortzel. Are we thinking generationally in 
this? And what would happen to the future of this country if we 
decided that we didn't want to take a security risk or 
intellectual property risk and wanted to mobilize the young 
people in this country like we did after Sputnik?
    Mr. Wortzel. Well, I would like very much to see 
scholarships targeted toward American students rather than 
bringing foreign students into American universities. 
Particularly when you're dealing with a country that has 790 
something--or $43 billion in foreign reserves. They can afford 
to send their own students to American universities. But 
frankly, I would not keep them out. We do not know the ultimate 
result of our engagement policy with the People's Republic of 
China. It is a latent security threat, and it is certainly a 
real threat in the sense of its strategic nuclear forces 
programs not so much in its conventional forces. But I will 
tell you that there's great change there. The economic freedom 
is opening up. It hasn't resulted in a change in political 
freedom. You find the average, the average Chinese citizen in 
most urban areas, and now that's the majority of them, owns an 
apartment. They have a mortgage. You know, I mean, it's 
changing. So we don't know what the outcome will be. I think 
what we need to do, again, is to identify the most critical 
technologies and military systems--well, not military systems--
but military, dual-use technologies where the United States is 
so clearly ahead and ensure we protect them. But we should not 
be protectionist about keeping Chinese citizens out of this 
country or out of our universities.
    Mr. King. Thank you.
    Dr. Wulf.
    Mr. Wulf. I think we all should put emphasis on how we get 
more U.S. students to study math and science. Just as you 
pointed out, post-Sputnik, it became a national priority, and 
by George, a whole bunch of people from my generation took math 
and science, became engineers and scientists. And we're living 
off of them now. The trouble seems to me, is that science and 
technology is not particularly a priority in this country right 
now. I just got a letter to make a nomination for the 
Millennium Prize. This is a million euro prize that's put up by 
the Finns. Now if I remember correctly, there are 4 million 
Finns. So it's kind of a third of New York City. And they put 
up a yearly million euro prize. We haven't awarded the National 
Medals in Science and Technology for the last 3 years. We've 
named them, but they haven't been awarded. It's not been enough 
of a priority for the President to do that. We have our funding 
for physical science and mathematics, engineering research has 
been flat or declining for 2 decades. Total research budget is 
going up, but it's all going into the life sciences--I just 
read this--as our society as a whole doesn't believe that is a 
priority. And boy that's communicated to the young kids, and 
they don't see that they should be doing all that hard work 
when there's no reward for it.
    Mr. King. Thank you.
    Thank you, Mr. Chairman. I yield back.
    Mr. Hostettler. I thank the Chairman.
    Ms. Jackson Lee. Mr. Chairman, would you yield for just a 
moment?
    Mr. Hostettler. Yes, I yield to the gentlelady.
    Ms. Jackson Lee. Dr. Wulf posed this question before, and I 
won't ask you to repeat it. I'll just make this statement 
because I heard your answer to Congressman King's comments. 
This is not the Science Committee. Both Congresswoman Lofgren 
and myself are Members of the Science Committee. And I would 
simply say that the dearth and the problem is even wider than 
you might have expressed here. There has to be a parallel 
effort in order to surpass or to overcome the dilemma that 
we're in. National security, more resources in intelligence, 
but over here, a ramping up of the training of Americans in the 
sciences and the mathematics and the encouragement of grad 
students and professors and researchers and more dollars in 
basic research. Thank you.
    Mr. Hostettler. The Chair feels compelled to make an 
addition to the record given my background. Being an 
engineering student in the late seventies and early eighties, I 
can't remember a single Federal Government program that 
encouraged me to become an engineer. I do remember the 
influence of family and community and of the economy and the 
fact that I was encouraged to follow my desire to study that 
which I enjoy which is math and physical sciences. It just so 
happened that my graduation also coincided with one of the 
largest build-ups of the United States military where there was 
a huge demand for the applied sciences. And the fact that I 
also graduated at a time when the nuclear industry was, had 
gained ground. But as a result of a very limited number of 
unfortunate incidents in that industry, caused that industry to 
almost evaporate from future growth. Virtually all of my 
encouragement came not from the Federal Government, but came 
from a robust economy and a strong understanding of the strong 
national defense, which all of those needed engineers, and 
there was a tremendous demand for that. I think if we see a, I 
think we can--it's inversely proportional to the level of 
attendance that's been taken on by the Federal Government. 
Since I have been in Congress, as an engineer, I've heard 
continually about this, about the fact that we're spending more 
in the Federal Government on attention to science and 
engineering and that we are getting fewer American scientists 
and engineers. It made, once again--this is not, to reiterate, 
this is not the Science Committee. But this is a Committee that 
is going to look into in the coming months the issue, one of 
the issues that was touched on briefly here, and that is how 
we--what is the relationship between foreign-born, foreign 
nationals and our institutes of higher learning with regard to 
engineering and science and why people aren't doing what they 
did in the late 1970's, and that is going into engineering in 
fairly large numbers. If I remember, the fact that there were a 
few people that were kept out of the programs because of 
restrictions on attendance at that time. So I just make that 
addition simply out of experience.
    And I appreciate the input of all the members of the panel. 
Your testimony has been highly effective and highly beneficial 
to this discussion. All Members will be allowed 2 days to make 
additions to the record. The business before the Subcommittee 
being complete, we are adjourned.
    [Whereupon, at 4:11 p.m., the Subcommittee was adjourned.]


                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

  Map on the ``Number of Patent Applications and Foreign Students Per 
County,'' submitted by the Honorable John Hostettler, a Representative 
 in Congress from the State of Indiana, and Chairman, Subcommittee on 
                Immigration, Border Security, and Claims



       Prepared Statement of the Honorable Sheila Jackson Lee, a 
Representative in Congress from the State of Texas, and Ranking Member, 
        Subcommittee on Immigration, Border Security, and Claims

    The subject of this hearing is, ``Foreign Nationals Engaged in 
Economic and Military Espionage.'' According to the National 
Counterintelligence Executive Office's report to Congress this year, 
individuals from almost 100 countries attempted to acquire sensitive 
United States technologies in FY2004. The report concludes that foreign 
access to sensitive information with both military and commercial 
applications has eroded the United States military advantage, degraded 
the U.S. Intelligence Community's ability to provide information to 
policymakers, and undercut U.S. industry.
    The report states that we are vulnerable to such espionage because 
the openness of the United States has provided foreign entities with 
easy access to sophisticated American technologies. New electronic 
devices have vastly simplified the illegal retrieval, storage, and 
transportation of massive amounts of information, including trade 
secrets and proprietary data. Globalization has mixed foreign and 
American companies in ways that have made it difficult to protect the 
technologies these firms develop or acquire, particularly when that 
technology is required for overseas operations. Lastly, sophisticated 
information systems that create, store, and transmit sensitive 
information have become increasingly vulnerable to cyber attacks.
    Apparently, the Counterintelligence (CI) Community is uncertain 
about exactly how much of the intelligence collection effort is 
directed by foreign governments and how much is carried out by private 
businessmen, academics, or scientists for purely commercial or 
scientific purposes. It is clear, however, that some foreign 
governments do employ state actors. This includes their intelligence 
services as well as commercial enterprises. Most of the foreign 
governments that are attempting to acquire American technology employ 
tools and techniques which are easy to use, inexpensive, low risk, and 
sometimes legal. In most cases, foreign collectors simply ask for the 
information via e-mail, a phone call, a FAX, a letter, or in person.
    The report asserts further that increased demand for foreign labor 
in United States high-tech industries and the sharp rise in foreign 
investment in the United States over the past decade have given foreign 
governments increased access to American businesses and, consequently, 
to U.S. trade secrets. In addition, recognizing the mutual benefits of 
an unhindered exchange of information, the United States opens its 
military bases, national laboratories, and private defense suppliers to 
foreign visitors. There were more than 14,000 requested visits to 
official U.S. facilities in FY2004. Although facilities hosting foreign 
visitors generally employ security measures to minimize the loss of 
trade secrets and sensitive technologies during these visits, the CI 
Community continues to see reports of losses.
    These are real concerns. Nevertheless, the visits from foreign 
nationals are valuable to American companies and the United States 
government. Also, many American industries need highly educated 
professionals from other countries. The employment of such foreign 
professionals has increased American productivity and resulted in more 
jobs for American workers. In the science-oriented sectors, for 
instance, employers often need a professional with cutting edge skills 
and unique expertise and find that qualified American workers are not 
always available to fill these positions. In other fields, such as 
education, shortages exist in specific areas of the country and 
positions continue to go unfilled.
    Foreign students represent half of all United States graduate 
enrollments in engineering, mathematics, and computer science. We do 
not have enough United States students graduating with advanced degrees 
to fill the highly specialized positions and, according to the Bureau 
of Labor Statistics, the demand for these graduates will increase.
    Foreign countries, such as Germany, have updated their immigration 
laws to attract highly educated talent. If our immigration laws do not 
allow these professionals with cutting edge knowledge to remain in the 
United States, they will go to work for our competitors and additional 
jobs that could have remained in the U.S. will follow them abroad. The 
result will be American jobs lost and American projects losing out to 
foreign competition.
    Thank you.
   New York Times Article submitted by the Honorable Zoe Lofgren, a 
        Representative in Congress from the State of California



    THE NATIONAL COUNTERINTELLIGENCE STRATEGY OF THE UNITED STATES, 
       SUBMITTED BY THE HONORABLE MICHELLE VAN CLEAVE, NATIONAL 
   COUNTERINTELLIGENCE EXECUTIVE, OFFICE OF THE DIRECTOR OF NATIONAL 
                              INTELLIGENCE




 Revised Prepared Statement of Dr. Larry M. Wortzel, Visiting Fellow, 
                        The Heritage Foundation

    Mr. Chairman, Members of the Committee,
    Thank you for the opportunity to testify today on the theft of 
national security sensitive technology in the United States. As a 
former military intelligence officer who has tracked the activities of 
the People's Liberation Army and Chinese intelligence services for 35 
years, I know of no more pervasive and active intelligence threat to 
America's national security than that posed by the People's Republic of 
China. The work force available to the Chinese government and its 
corporations to devote to gathering information in the United States is 
nearly limitless. There are some 700,000 visitors to the United States 
from China each year, including 135,000 students. It is impossible to 
know if these people are here for study and research or if they are 
here to steal our secrets. The sheer numbers defy complete vetting or 
counterintelligence coverage.
    In 2003, for example, the State Department granted about 27,000 
visas to Chinese ``specialty workers,'' the H1-B visa. Some of these 
were intra-company transfers coming to the United States from US firms 
operating in China. Between 1993 and 2003, the United States has 
granted an average of 40,000 immigrant visas to Chinese each year. The 
sheer magnitude if these numbers presents a great challenge to the 
Federal Bureau of Investigation, particularly when the US is also 
concerned about terrorism, which occupies a lot of investigative time 
for agents.
    The Chinese People's Liberation Army and the defense establishment 
in China started programs in the late 1970s and 1980s to create 
companies designed to bring in needed defense technology; the goal was 
to produce defense goods for the PLA and for sale to other countries. 
The General Political Department of the People's Liberation Army 
started a proprietary company, Kaili, or Kerry Corporation, that for 
years operated in the U.S. as a real estate and investment company. The 
General Equipment Department of the PLA operated a proprietary company, 
Polytechnologies, or Baoli, that had offices here in the U.S. In 
addition, the General Logistics Department operated a proprietary 
called Xinshidai, or New Era, that had offices in our nation and 
continues to be responsible for a network on PLA manufacturing plants 
in China. These technically are independent legal entities under 
Chinese law, but the Central Military Commission of the Chinese 
Communist Party established them to serve the interests of the PLA and 
the military industrial complex. Active or retired officers of the PLA 
or their families originally staffed these companies. The PLA and 
related defense science and technology research and development 
organizations in China regularly operate trade fairs to attract 
American high technology into China.
    The Deputy Undersecretary of Defense for Technology Security and 
Counterproliferation has testified that there are between 2,000 and 
3,000 Chinese front companies operating in the United States to gather 
secret or proprietary information, much of which is national security 
technology or information. The deputy director of the Federal Bureau of 
Investigation for counterintelligence recently put the number of 
Chinese front companies in the U.S. at over 3,200. Many of these front 
companies are the spawn of the military proprietary companies discussed 
in the preceding paragraph.
    The nature of the Chinese state complicates the problem of knowing 
what the large numbers of travelers and students from China are 
actually doing. China is still an authoritarian, one-party state led by 
the Chinese Communist Party with a pervasive intelligence and security 
apparatus. The Chinese government is able to identify potential 
collectors of information and, if necessary, to coerce them to carry 
out missions on behalf of the government because of the lack of civil 
liberties in China. Let me quote the first three sentences of Chapter 
1, Article 1, of the Chinese Constitution: ``The People's Republic of 
China is a socialist state under the people's democratic dictatorship 
led by the working class and based on the alliance of workers and 
peasants. The socialist system is the basic system of the People's 
Republic of China. Disruption of the socialist system by any 
organization or individual is prohibited.''
    The People's Republic of China is methodical in its programs to 
gather information from abroad. In March 1986, the PRC launched a 
national high technology research and development program with the 
specific goal of benefiting China's medium and long-term high 
technology development. This centralized program, known as the ``863 
Program'' for the date when it was announced, allocates money to 
experts in China to acquire and develop bio-technology, space 
technology, information technology, laser technology, automation 
technology, energy technology and advanced materials. The 863 program 
was proposed by China's strategic weapons scientists to emphasize 
strategic civil and military technology development. Thousands of 
students and scientists were sent abroad by China over the years to 
pursue critical civil and military, dual-use technologies. This 
practice still continues. When I was at the American Embassy in China 
and conducted due diligence checks to confirm the nature of Chinese 
companies seeking to do high technology business in the United States I 
most often found that the address identified for a company on a visa 
application turned out to be a People's Liberation Army or PRC 
government defense research institute. Thus, the United States faces an 
organized program out of China that is designed to gather high 
technology data and equipment of military use.
    My colleague today, Mr Maynard Anderson, will discuss some of the 
ways that our government and industry can defend against intelligence 
gathering by China through defensive counterintelligence and security 
education programs. It is also important to know that we have other 
programs to screen out people coming to the United States to gather our 
trade or military secrets. In January 1998, the VISAS MANTIS program 
was developed to assist the American law enforcement and intelligence 
communities in securing U.S.-produced goods and information that are 
vulnerable to theft. Travelers are subject to a world-wide name-check 
and vetting procedure when they apply for visas. The security 
objectives of this program are to prevent the proliferation of weapons 
of mass destruction and missile delivery systems; to restrain the 
development of destabilizing conventional military capabilities in 
certain regions; to prevent the transfer of arms and sensitive dual-use 
items to terrorists; and to maintain United States advantages in 
militarily critical technologies. This program operates effectively and 
can vet a Chinese student in as few as 13 days. Non-students may take 
longer, as many as 56 days. However, I can tell you based on my trip to 
China two weeks ago that the American Embassy in Beijing and the 
Consulate in Guanzhou are able to process and vet in about two weeks 
visas for non-student travelers who fully and accurately outline the 
purpose and itinerary of their trip. Still, many U.S. companies 
complain about delays in getting visas for travelers they want to bring 
to the United States. Automation and data-mining software can speed 
visa processing to ensure these companies can be competitive. The 
government also operates a ``technology alert list'' to identify legal 
travelers from China that may benefit from exposure to advanced U.S. 
technology with military application. Of course, the consular officers 
manning visa lines in embassies must be trained to look for signs of 
espionage for screening to be effective.
    Many provinces and municipalities in China now operate high 
technology zones and ``incubator parks'' specifically designed to 
attract back Chinese nationals who have studied or worked overseas in 
critical high technology areas. When students or entrpreneurs return 
with skills or knowledge that the central government deems critical 
they are given free office space in the parks, loans, financial aid, 
and administrative help in setting up a business designed to bring in 
foreign investment and technology. Their companies are given tax 
holidays. Innovative programs such as at Beijing's Zhongguancun High 
Technology Park and Guangzhou's High Technology Economic and Trade Zone 
get central government help. These are admirable programs that will 
develop entrpreneurial skills among well-educated Chinese citizens. 
However, as students and employees of U.S. companies return home, it is 
important to know that they are not taking back American economic or 
military secrets. Good counterintelligence and industrial security 
programs are very important to U.S. security given this threat.
    Mr. Chairman, the enforcement of intellectual property protection 
laws in China is spotty and inconsistent at best. This is one of the 
major complaints of American high technology companies about China's 
compliance with its obligations under the World Trade Agreement. It 
will certainly be a subject discussed by President Bush and Chinese 
President Hu Jintao this week. The tendency to steal intellectual 
property and high technology secrets in China is worsened when 
intellectual property laws are not enforced there. And the problem is 
further exacerbated when centralized Chinese government programs, such 
as the ``863 Program'' I mentioned earlier in my testimony, are 
specifically designed to acquire foreign high techology with military 
application. This only creates a climate inside China that rewards 
stealing secrets.
    I believe that U.S. government security, intelligence and law 
enforcement agencies must focus on the national security. They should 
be looking for acts of espionage and for violations of the Arms Export 
Control Act or the Export Administration Act. When it comes to 
corporate or industrial espionage that is not a matter of national 
security, I believe that the government owes American companies a good 
legal infrastructure to protect trademarks, patents and copyrights; a 
system of education on industrial security; and a strong effort to 
ensure that China meets its own obligations to create a rule of law 
that protects the right of ownership and intellectual property. 
However, I do not believe that American intelligence or security 
agencies should focus on forms of economic espionage that do not 
involve national security information. From the standpoint of 
Congressional action, my view is that the Congress should reconsider 
the Export Administration Act with a view toward ensuring that its 
provisions meet the needs of 21st century technology. The 1979 Export 
Administrtion Act expired in 2001. The Senate passed a new Act in 2001, 
but no revision passed the House. And the Executive Branch must 
regularly review the Commodity Control List to ensure that appropriate 
national security controls on exports protect the nation's security but 
do not unduly restrict the ability of American industry to compete in 
the world market. Generally, technologies that are widely available on 
the world market and not unique to the United States should not be 
unduly restricted unless they can be subject to mulitlateral export 
controls.
    Finally, we cannot become paranoid and suspect that every traveler, 
student and businessman from China is a spy or is out to steal 
technology. Many of the people that come to the United States absorb 
our values and bring them home. We must keep in mind that in earlier 
decades, in places like the Republic of China on Taiwan and in South 
Korea, the steady flow of returning students and immigrants who were 
exposed to American values and principles eventually eroded 
dictatorships and produced multi-party democracies. The prudent course 
of action for the United States is to maintain law enforcement 
programs, counterintelligence programs, security education and 
industrial security programs as the means to protect our nation.
    Thank you for your invitation to testify today.