1997 Congressional Hearings
Special Weapons
Nuclear, Chemical, Biological and Missile



     PREPARED STATEMENT WILLIAM SCHNEIDER, JR., FELLOW, HUDSON INSTITUTE

                 PROLIFERATION AND U.S. EXPORT CONTROLS
                                HEARING
                               before the
                SUBCOMMITTEE ON INTERNATIONAL SECURITY,
                  PROLIFERATION, AND FEDERAL SERVICES
                                 of the
                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE
                             JUNE 11, 1997


    Mr. Chairman and Members of the Committee: Thank you for offering 
me the privilege of testifying before this Committee today. I am 
William Schneider, Jr. I formerly served as Under Secretary of State 
(1982-86) in the U.S. Department of State where I had responsibility 
for the management of the Department's export control functions as well 
as interagency coordination of export control policy as Chairman of the 
Senior Interagency Group on Strategic Trade Controls. I subsequently 
served as Chairman of the General Advisory Committee on Arms Control 
and Disarmament (1987-93), a statutory advisory committee. My testimony 
will address the subject of the role export controls can play as a 
dimension of national policy to limit the risk posed to U.S. interests 
by the proliferation of weapons of mass destruction (WMD) and their 
means of delivery as well as a advanced conventional weapons.
The threat posed to U.S. interest by proliferation
    The nature of the Cold War limited the potential for the 
proliferation of technologies associated with weapons of mass 
destruction and their means of delivery as well as advanced 
conventional weapons. The dynamics of U.S. and former Soviet Union's 
leadership role of competing ideological blocs established conditions 
which limited the degree to which the military application of advanced 
technologies was proliferated to non-allied states. The implementation 
of a successful multilateral export control regime (The Coordinating 
Committee on Strategic Trade--COCOM) limited the flow of advanced dual-
use as well as munitions-list technology between the blocs, and in 
parallel, constrained access to this technology to many non-COCOM 
members as well. The limited counter-proliferation enforcement 
arrangements supporting the Nuclear Non-Proliferation Treaty of 1968 
was supplemented by a U.S.-led Nuclear Suppliers Group which 
considerably improved the formal enforcement apparatus of the NPT. 
Somewhat similar arrangements were established under the Missile 
Technology Control Regime (for military missiles) and the Australia 
Group (chemical weapons).
    The collapse of the former Soviet Union in 1991 materially changed 
the environment associated with the proliferation problem, both 
increasing incentives for proliferation and diminishing the role of the 
export control apparatus as the first line of defense against 
proliferation. The COCOM organization was disbanded in 1994, and 
replaced by a much less effective and far more narrowly focused entity 
known as the Wassenaar Arrangement. In parallel with the dismantling of 
the multilateral structure of export control coordination was the sharp 
decline in national controls. During the period of my service in the 
Department of State in the mid-1980s, nearly 150,000 validated export 
licenses for dual-use products were issued annually. Successive waves 
of decontrol have reduced the number of such licenses to less than 
8,000 despite a much larger volume of trade. The virtual abandonment of 
dual-use export controls as an instrument of public policy has been 
matched or exceed by U.S. allies. As a result, the international 
structure of export controls for dual-use technologies has been largely 
disbanded as well. At the same time, the number of munitions licenses 
has declined only about twenty percent during the same period (to about 
45,000 today) despite a 50% decline in the size of international arms 
market and total U.S. munitions list exports. This trend reflect an 
increase in regulatory activity in the United States concerning 
munitions list (i.e. defense products and services) exports.
    An unanticipated consequence of the collapse of the former Soviet 
Union was the centrifugal forces in international affairs unleashed by 
the end of the Cold War. Regions of the World which were once primary 
sources of Cold War confrontation such as the Middle East became 
secondary security considerations for nations outside of the region. 
The loss of activism within the U.S. national security apparatus in the 
details of local security arrangements and the alliances such interests 
produced a result which has been reflected in the Post Cold War 
increase in the scale of the proliferation. Affected nations attended 
to their own security aims knowing that the end of the Cold War 
diminished the interest of extra-regional players in local or regional 
security. Indigenous arms development programs supplemented offshore 
procurements of defense products and services. Weaker nations sometimes 
turned to WMD and their means of delivery to achieve their regional 
security objectives. These developments in turn destabilized several 
areas of the world.
    The best known events occurred in the Middle East. Both Iran and 
Iraq sought to develop their own military ballistic and cruise missiles 
as well as weapons of mass destruction. In conjunction with offshore 
procurements of conventional defense products, they produced formidable 
military establishments posing an overwhelming threat to U.S. allies. 
Iraq's invasion of Kuwait in 1990 required a vast multinational effort 
to reverse, but not before it had terrorized the region's population 
with ballistic missile attack and the prospective threat of weapons of 
mass destruction. According to the testimony of the head of the UN's 
Special Commission on Iraq (UNSCOM), despite an unprecedented UN 
mandate, and more than five years of UN inspections in Iraq, the 
international community has been unable to prevent Iraq from continuing 
its development of ballistic missiles and weapons of mass destruction. 
While UN sanctions imposed on Iraq continue, the threat posed to the 
region in the short term, and to the U.S. in the medium/long-term by 
Iraq's WMD/missile program endures. The loosening of the fabric of 
diplomatic obstacles and political incentives to proliferate WMD/
missiles and advanced conventional weapons has produced an troublesome 
post-Cold War irony--the proliferation threat to the United States and 
its allies has become more serious following the Cold War than was the 
case during the Cold War.
Changes in the application of advanced technology for military purposes
    Throughout much of the Cold War period, the imperatives of the 
military competition between the U.S. and Soviet blocs caused the 
military establishment to be at the leading edge of the development and 
application of advanced technology. Many developments such as high 
performance computers, advanced aircraft and propulsion systems, 
microelectronics, materials, signal processing, optics, space, and 
others found their most sophisticated and demanding applications in the 
defense sector. The underlying scientific and industrial technology 
supporting the defense industrial base was also at the cutting edge of 
advanced technology whose performance characteristics exceeded the 
needs of the civil sector.
    Under these circumstances, the civil sector was the beneficiary of 
advanced technology developed for military purposes. Advanced 
aerodynamic and hot section metallurgy for example, developed for 
military aircraft and propulsion systems was a crucial factor in 
advances in civil aviation that propelled the United States to world 
leadership in the industry. The military requirements for the use of 
space for large communications, weather, and surveillance satellites 
created a space-launch services capability that was exploited by the 
private sector albeit slowly, during the 1970s and more rapidly during 
the 1980s. The military requirements in these and other fields of 
advanced technology skewed the availability of these capabilities, 
however. Military space launch demands limited the commercial sector to 
relatively large costly satellites in space. This pattern of military 
requirements produced a demand for advanced technology that was 
subsequently exploited by the private sector for civil applications.
    This situation began to change in the 1970s, and accelerated 
rapidly since the 1980s. The driving force producing advanced military 
capabilities are the civil sector's demand for advanced technologies 
which are frequented exploited prior to the use of the technology in 
defense applications. The requirements for advanced civil applications 
of modern technology now regularly exceed--often far exceed--military 
requirements. As a consequence the defense sector is now the recipient 
of ``trickle down'' technology from the civil sector.
    The change in the path of the development and application of 
advanced technology for military purposes has been recognized by the 
Department of Defense. A series of initiatives undertaken by former 
Secretary of Defense William Perry has put the Department on track to 
incorporate these trends into defense planning. Commercial technologies 
and practices will increasingly supplement, and perhaps eventually 
supplant the technologically isolated industrial apparatus surrounding 
DOD-unique military specifications. This has been reinforced by the 
results of the Quadrennial Defense Review whose report was published 
last month. The QDR envisions a future defense posture for the United 
States that will emphasize information-driven military capabilities 
largely derived from advanced technologies in the civil sector.
The new path to proliferation
    The threat posed to American interests by the proliferation of WMD/
missiles, and to a lesser extent advanced conventional capabilities has 
become widely understood. What is not so well understood is the 
changing process of applying advanced technologies for military 
purposes. In the past WMD technologies, especially nuclear weapons 
design, development, manufacturing, and test information was protected 
by the secrecy afforded by a unique security classification process 
established by statute (The Atomic Energy Act) for the military 
applications of atomic energy. Missile technology was more difficult to 
protect. Public policy embedded in the statute creating the National 
Aeronautics and Space Administration (NASA) made dissemination of space 
technologies an affirmative object of public policy. This produced a 
co-mingling of military and civil applications of space which has 
limited the success of the MTCR. Chemical weapons and the underlying 
technologies were already well known due to their employment on an 
industrial scale in World War I. Control efforts are largely focused on 
containing the transfer of precursor chemicals on an industrial scale 
to potential proliferators.
    The leakage of nuclear weapons design technology over time has 
become a flood in recent years. A telling recent example has been a 
decision by the Department of Energy to release to the public most of 
the computer codes associated with nuclear weapon design (apart from 
weapon dynamics). These data can be purchased commercially on a single 
CD-ROM and will enable potential proliferators to overcome design 
problems in nuclear weapons when placed in the hands of experienced 
physicists. One experienced physicist was able to add a few hundred 
lines of computer code to the data released by the U.S. Government to 
replicate the information needed to produced advanced fission and 
thermonuclear weapons Thus, the problems facing potential proliferators 
has evolved from a problem of basic scientific design to one of 
industrial processes today. Access to advanced modeling and simulation 
and industrial production capabilities are now the pacing obstacles to 
proliferation. The crucial difference from the situation which obtained 
during much of the Cold War period is that the enabling technologies 
for proliferation are almost entirely found in the civil sector, not 
the defense sector.
    We have two recent examples which underscore the manner in which 
the path to proliferation has changed as a result of the shift in the 
focus of advanced technology requirements from the military to the 
civil sector.
Iraq
    The troublesome role of Iraq in Middle East security was widely 
understood during the 1970s and 1980s. Its support for international 
terrorism, its implacable hostility to Israel, and its Cold War 
affiliation with many of the aims of the former Soviet Union in the 
region made U.S. relations with Iraq an adversarial one. As a result, 
the U.S. Government declined to sell munitions list technology to Iraq, 
even during a brief period when U.S. and Iraqi foreign policy interests 
overlapped in the mid-1980s (preventing Iran's military domination of 
the Northern Gulf region). Although the former Soviet Union was a major 
supplier of conventional military equipment, with but a few exceptions, 
most U.S. allies agreed to abstain from providing Iraq with advanced 
conventional weapons technology.
    However, no effort was made to prevent the sale of advanced 
commercial and industrial technology to Iraq; to the contrary, such 
sales were promoted. Indeed, the sale of such products was seen as 
offering an affirmative benefit to U.S. foreign policy in the late 
1980s. Promoting Iraq's industrial and commercial development would 
produce a set of interests in Iraq some argued, that would ultimately 
undermine the military domination of Iraq's political culture. 
Providing commercial and industrial opportunities for Iraq's aspiring 
and politically moderate middle class would serve long-term U.S. 
interests.
    Iraq was flooded with American, European, and Asian advanced 
commercial technology. This technology was diverted into a clandestine 
network within Iraq's defense industrial establishment. Advanced 
western commercial technology enabled Iraq to extend the range of its 
SCUD ballistic missiles to enable it to become a weapon of terror 
throughout the region from the Eastern Mediterranean to Iran. 
Reassuring ``estimates'' of Iraq's potential for deploying nuclear 
weapons of a decade or more were based on a belief in the success of 
NPT-derived export controls aimed at frustrating Iraq's ability to 
produce fissile material. MTCR controls were seen as effective because 
no state producing long-range (>500 km.) theater ballistic missiles had 
transferred such systems or components of systems to Iraq. Subsequent 
events affirmed the proposition that presumption is the mother of 
error.
    Iraq's access to advanced industrial, not military technology from 
the West permitted it to become a major security threat to the United 
States interests in the Middle East. Rather than being a threat only to 
its contiguous neighbors, it was able to extend the reach of its 
threatening aspirations throughout the Middle East region. The 
decontrol of advanced civil sector ("dual use") technology among the 
industrialized nations of the world was the enabling policy change 
which contributed to Iraq's indigenous capability for WMD and military 
missiles.
China
    Since mid-1989, the U.S. has declined to provide China with 
munitions list technologies. A parallel understanding with most U.S. 
allies (apart from Israel) has caused them to limit their own transfers 
of munitions list technology and equipment. China's acquisition of 
advanced military equipment and technology has been limited to two 
sources; Russia and Israel. Russia is the only nation providing China 
with integrated military end-items (e.g. Kilo-class submarines, Su-27 
strike aircraft, etc.). Israel's cooperation according to press 
reports, is limited to providing advanced military subsystem technology 
which is subsequently integrated into end products by China defense-
industrial establishment. Illustrations of this collaboration includes 
the avionics for China's F-10 aircraft now under development and 
Russia-Israeli cooperative program to produce an airborne early warning 
aircraft (a counterpart to the U.S. AWACS).
    Despite the aim of U.S. policy to deny China advanced military 
capabilities through ban on the transfer of munitions list technology 
to China, U.S. exports of advanced civil sector (i.e. dual-use) 
technology to China have become the enabling feature of China's ability 
to modernize its armed forces. The U.S. is providing no military 
technology, but is providing China with the manufacturing capabilities 
to produce advanced military equipment based on military technology 
obtained from other nations. An irony of these circumstances is that 
because the U.S. is providing advanced civil sector rather than 
military technology, China's military modernization is proceeding more 
rapidly than would be the case had China been dependent on imports of 
U.S. munitions list technologies.
    China's ability to do so is facilitated by the manner in which 
existing export controls are managed. End user verification--a routine 
feature of advanced technology exports to China in the 1980s--have been 
abandoned. This has permitted advanced technology imports to be 
routinely diverted from nominal civil application to defense product 
manufacturing processes. Moreover, the monitoring activities of the 
U.S. Government have abstained from a focus on the transfer of advanced 
civil sector technology to China's defense industry. The monitoring has 
focused instead on the production of military systems which often do 
not emerge until several years after the enabling manufacturing 
technology has reached its defense industrial establishment.
    The recent case of the transfer of modern machine tools to China 
for the manufacture of aircraft to China underscores problems of 
policy, intelligence, and enforcement of the export control function. 
Advanced machine tools developed in the U.S. for the manufacture of 
military aircraft, but excess to the needs of U.S. industry were sold 
to China for civil aviation manufacturing purposes. China has refused 
to permit end-use verification making it infeasible for U.S. 
authorities to ascertain the use of this equipment. Subsequent evidence 
revealed that the machine tools and related equipment was transferred 
to a military aircraft production facility. This facility will produce 
advanced military aircraft derived from military technologies China has 
obtained from other suppliers. In the end, allied nations in Asia will 
face China's armed forces able to field advanced military capabilities 
in significant numbers because of manufacturing technology provided 
from the U.S. civil sector.
    These two examples illustrate the path most likely to be adopted by 
potential proliferators; to acquire advanced civil sector (i.e. dual 
use) rather than military technology to permit the development, 
production, test, and support of advanced military capabilities. This 
approach is abetted by the process of decontrolling the export of a 
large fraction of modern technology pertinent to the production of 
advanced military capabilities. This result is an unintended 
consequence of current export control policy and regulation.
Recommendations for modernization of U.S. export controls
    U.S. munitions list export controls under the Arms Export Control 
Act are effective in supporting the aim of public policy; assuring the 
congruence between U.S. foreign policy objectives and arms transfer 
policy. President Clinton's Conventional Arms Transfer policy 
promulgated in February, 1995 published general arms transfer policy 
criteria that has contributed to the effective management of arms 
transfer policy.
    The more problematic area for public policy are export controls for 
dual use technologies, equipment, and services. Both the Clinton and 
Bush administrations have liberalized export controls on dual use 
technology, equipment, and services that has had the unintended 
consequence of facilitating the process of proliferating WMD and their 
means of delivery as well as advanced conventional weapons. Export 
control policy and regulation needs to be modernized to allow it to be 
brought into alignment with public policy relating to the management of 
problem of proliferation.
Export control policy
    Current policy understates the relevance of dual-use technology to 
the problem of proliferation. This in turn has led to very extensive 
process of decontrol that has facilitated rather than limited the 
proliferation of WMD, ballistic/cruise missiles, and advanced 
conventional weapons technology. Export controls need to recapture dual 
use technologies, products, and services relevant to the development, 
manufacture, test, and support of WMD, ballistic/cruise missiles, and 
advanced conventional weapons. The aim of such a policy is to limit 
access of proliferation-prone end-users to dual use technologies, 
equipment, and services which abet proliferation.
Intelligence collection and processing
    Effective intelligence collection and processing is crucial to 
successful constraints on the dispersion of advanced dual-use 
technologies pertinent to proliferation. Diplomatic coordination with 
nations allied with the U.S. in the counter-proliferation struggle 
depend on timely and precise U.S. intelligence information concerning-
efforts by proliferators to obtain controlled dual-use technology, 
equipment, and services. Systematic collection and processing of 
pertinent information by the intelligence community for use by U.S. 
diplomats and law enforcement personnel can have a significant impact 
on the effectiveness of U.S.--counter-proliferation policy.
Export control regulatory practice
    The international market for advanced dual-use technology is 
important to sustaining American industrial competitiveness. The 
management of export controls should not become an instrument for 
inadvertently frustrating legitimate exports because of poorly 
implemented regulations. Maintenance of a data-base on end-users, 
diversion channels, and the requirements of proliferation-prone end 
users can significantly facilitate the effective management of export 
controls without preventing legitimate commerce in advanced technology. 
Restoration of end-user checks for transactions involving a significant 
proliferation risk is an illustration of an important deterrent to 
diversion. This should be a practical measure to achieve since funding 
and numbers of Full Time Equivalent (FTE) personnel in the Bureau of 
Export Administration (BXA) in the Department of Commerce remains high 
despite low levels of export licensing activity compared to 
circumstances a decade ago. BXA has over 300 FTE to support the 
management of approximately 8,000 validated export licenses. The 
Department of State's Office of Defense Trade Controls issues 
approximately 45,000 licenses per year with fewer than 50 FTEs.
Diplomatic support for export control management
    The disestablishment of the COCOM organization in 1994 eliminated 
the primary international organization to coordinate dual-use export 
controls on a multilateral basis with like-minded nations. The focus of 
the Wassenaar Arrangement on constraining (or in its presently limited 
role, monitoring) conventional arms transfers to sensitive destinations 
(primarily the ``pariah'' states such as Iran and Libya) makes it 
unlikely that this institution will be an appropriate venue for the 
coordination of multinational transfers of sophisticated dual-use 
technologies to proliferation-prone end-users. In the interim, a series 
of bilateral measures are the most likely to achieve success. If 
intelligence support for U.S. diplomacy is effective, direct bilateral 
diplomacy can be effective. An ability to provide timely and accurate 
information on impending dual-use transfers can contain covert 
procurements of controlled technology.
    The expansion of dual use technologies controlled for counter-
proliferation purposes should be included in national control lists 
managed by allied nations. In many cases, U.S. allies abandon most of 
their national export control apparatus when the U.S. decontrolled most 
advanced technology exports. Diplomatic efforts carried out on a 
bilateral basis can help rebuild a ``virtual'' multilateral export 
control structure despite the absence of formal institutions designed 
for the purpose. This aim is facilitated by the widespread consensus 
among most allied nations on the need to contain proliferation.
Enforcement and international sanctions
    Sanctions against export control violations has proven to be an 
effective instrument to facilitate compliance in the case of munitions 
list controls. As it can be argued that the diversion of sophisticated 
dual-use technology, equipment, and services to proliferation prone 
end-users poses no less a long-term danger to American interests, 
sanctions for noncompliance with dual-use should be no less severe than 
for munitions list violations.
    International sanctions for violations of export control violations 
are honored more in the breach than the observance. This has 
significantly diminished the credibility of sanctions. China's sale of 
cruise missiles to Iran in 1996 in explicit violation of the Gore-
McCain sanctions legislation approved in the aftermath of the Gulf War, 
for example, have not been imposed due to the conflict of sanctions 
with other U.S. policy objectives. The widespread practice of ignoring 
statutory sanctions requirements for munitions list cases makes it 
difficult for the U.S. to encourage allied states to establish 
effective enforcement of national export control regulations.
Interagency coordination
    Post Cold War optimism about the impact of the collapse of the 
former Soviet Union on U.S. security interests abroad has led to a 
separation of U.S. advanced technology trade from security interests. 
Interagency coordination that would permit policy management of U.S. 
advanced technology trade pertinent to the proliferation problem has 
declined substantially from Cold War period practice. An appropriate 
interagency apparatus led at the Under Secretary level would provide a 
desirable balance between regular policy oversight and flexible and 
integrated management of the export control system to include all 
pertinent agencies including the Departments of State, Defense, 
Commerce, the NSC, the intelligence community, and other agencies as 
appropriate.

                               * * * * *

    Export controls are an important instrument of foreign policy in 
coping with one of the most enduring problems of national security--the 
ability of potentially hostile states to use international commerce to 
facilitate the creation of a security threat to the U.S. and its 
allies. I look forward to an opportunity to respond to your questions.