September 5, 1998

THERE IS NOTHING ROUTINE ABOUT PRESIDENT CLINTON’S POLICY ON TRANSFERING TECHNOLOGY TO CHINA

From all indications, President Clinton has put a higher priority on "flacking" U.S. exports than on national security, and in the process strengthened the Chinese Army’s ability to target weapons on the U.S. and fostered missile proliferation around the world. Here is what press accounts tell us:

Sanctions and Technology Transfer Policy

• In the wake of the Space Shuttle Challenger disaster in 1986, U.S. companies began using Chinese rocket launch services to place satellites into orbit.

• However, following the Tiananmen Square massacre and the discovery of Chinese missile technology transfers to Pakistan, Congress and President Bush levied a myriad of sanctions against Communist China in 1990 and 1991.

• These sanctions prohibited further technology transfers to that country, including satellite exports. Since 1989, the sanctions imposed for the Tiananmen crackdown have been waived 13 times in the name of national interest -- 3 times by President Bush and 10 times by President Clinton.

• In March 1996, President Clinton announced that he was going to transfer control of satellite exports from the State Department to the Commerce Department -- over the opposition of then-Secretary of State Warren Christopher.

• By transferring licensing authority from the "security conscious" State Department to the "use-at-any-time" Commerce Department, the export of U.S. satellites for launch in China would be exempt from missile proliferation sanctions -- even if the U.S. government concluded that China had sold missile components to Pakistan or Iran, something China has been accused of several times.

• In October and November of 1996, the Commerce Department’s Bureau of Export Administration and the State Department issued regulations to formally implement the transfer of commercial satellites from control under the State Department’s "Munitions List" to the Commerce Control List.

The Loral Investigation

• On February 15, 1996, a Chinese Long March 3B rocket exploded moments after liftoff, destroying a commercial communications satellite built by Space Systems/Loral, killing at least six people and injuring many others.

• In May 1996, Loral executives discovered that they had provided a Loral report on the February 15^th rocket explosion to Communist China without consultation with federal officials. Allegedly, the report discussed weaknesses in the Chinese rocket’s guidance and control systems.

• In May 1997, a 200-page Pentagon report concluded that the transfer of information in the Loral report created "national security harm" and "significantly improved" China’s ballistic missile capabilities.

• Four months later, the Justice Department opened a preliminary criminal investigation into allegations that Loral and Hughes Aircraft illegally passed technical assistance to China.

• In February 1998, President Clinton issued another waiver allowing Loral to export a satellite to China. This new waiver will arguably make it impossible to prosecute any past wrongdoing by Loral because the waiver effectively sanctions that company’s behavior. In fact, the Justice Department argued just that point when it learned that the White House planned to issue the new waiver.

• According to a recent article in the Washington Post, newly released documents from the White House suggest that the February 1998 waiver was not routine. The decision to approve the satellite transfer was "treated as an urgent matter not because of its importance to national security, but because the company was facing heavy fines for delay," possibly losing a $20 million contract if the waiver was not granted by January 20, 1998.

• In April the CIA concluded that 13 of China’s 18 long-range strategic missiles are aimed at the U.S.

Alleged Illegal Chinese Contributions

• The most troubling question surrounding the President’s decision to grant the Loral waivers is whether the decision was influenced by the fact that Loral’s CEO, Bernard Schwartz, is a close friend of the president and the largest personal contributor to the Democratic Party in the 1996 elections. Since 1993, Schwartz has donated more than $1 million to the Democratic National Committee.

• The Justice Department is also investigating whether the People’s Liberation Army funneled payments to the Democrat Party during the 1996 elections. Democrat fund-raiser Johnny Chung has told federal prosecutors he funneled tens of thousands of dollars from the People’s Liberation Army to the Democrats during the 1996 election campaign. He told prosecutors that the money was given to him by a PLA officer, Liu Chao-ying, who is a senior Hong Kong executive of the PLA’s China Aerospace Corporation, responsible for satellite technology, missile sales, and rocket launches.

• Liu Chao-ying is also the daughter of the PLA’s then-senior ranking military commander, General Liu Huaqing. He served as a vice-chairman of the Central Military Commission and was also a member of the Standing Committee of the Chinese Communist Party’s Politburo—the apex of Chinese political power. He was then in charge of China’s program to acquire modern Western military technology, using the proceeds of weapons sales around the world. When Liu Chao-ying began her relationship with Chung, she and her father were involved in a project to improve China’s rocket program. In 1991 and 1993 the U.S. sanctioned China Aerospace units for illegal missile sales to Pakistan when Liu was associated with sanctioned company. These sales, defense experts argue, contributed to the arms race in South Asia and the recent nuclear bomb tests in India and Pakistan.

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