China's New Export Controls[*]

Stephanie Lieggi

INTRODUCTION:

Over the past few weeks, China has issued comprehensive new export control regulations that cover missile technology, chemical weapons precursors and technology, and biological agent related items. In addition, the government has also amended the regulations controlling exports of military products. These new regulations and their corresponding control lists have largely brought Chinese export controls in line with existing weapons of mass destruction (WMD) export control regimes such as the Missile Technology Control Regime (MTCR) and the Australia Group. China finally has openly published export controls that cover the major classes of weapons of mass destruction (nuclear, chemical, and biological weapons) and their chief delivery systems (ballistic missiles). This policy shift can be attributed to China's increased recognition of the dangers that proliferation of these sorts of weapons and weapons systems posed to its own security and to an effort to improve relations with the United States. Chinese government officials have spoken of a desire to end persistent conflicts with the United States over proliferation and to "move nonproliferation to the positive side of the ledger" in bilateral relations.

The new export control regulations fill most of the gaps identified by U.S. policy makers in China's earlier export control regime. The items whose reported transfer caused the United States to recently impose sanctions on Chinese companies are included in the new control lists.[1] Even more significantly, China has included 'catch all' articles in all three of its recent export control regulations. Catch all clauses, which are recommended in both the MTCR and Australia Group guidelines, cover any items that could be exported to entities involved in WMD programs, regardless of whether the items are specifically listed in export control lists. In the case of the new missile related export controls, in some aspects China has exceeded the requirements of the MTCR.

The new regulations and control lists will consolidate China's emerging domestic export control system by developing and nurturing rule-based export practices. In the past, one of the controversies over Chinese proliferation activities was that the government often claimed the companies implicated were in violation of official regulations, when in fact no clearly defined regulations and lists were publicly available. In this respect, the new regulations and control lists mean that the Chinese government will now shoulder greater responsibility should future violations occur.

The newest regulations were issued on the eve of Jiang Zemin's summit visit to the United States to meet with President Bush (which will probably be his last such visit before stepping down as China's president.) The Bush administration has made it clear that improvements in China's nonproliferation behavior are essential for better bilateral relations. Creating a positive atmosphere ahead of the summit is an important motivation for Beijing's timing on the release of these new regulations. At the same time, last year's terrorist attacks have heightened China's awareness of its own security needs with regards to the spread of WMD and their delivery systems. The regulations likely reflect a growing sense that proliferation of nuclear weapons and missiles to countries like North Korea may stimulate reactions that destabilize the security environment in Asia and damage China's own security interests.

Although the new regulations are a significant step in the right direction with regards to limiting dangerous proliferation of WMD and their delivery systems, China's views on some contentious nonproliferation issues have not changed. It is notable that while China has accepted the substance of Australia Group and MTCR guidelines, it is still reluctant to join these bodies officially due to concerns about their discriminatory nature. In addition, China has continued to call for protection of "normal" trade between states. This policy can be interpreted as China's intention to implement its new regulations based on its own understanding of what states are risks to the nonproliferation regime. Although the new regulations close loopholes that have previously been exploited by Chinese companies, the Chinese government will retain the right to issue export licenses based on its own assessment of the risks associated with specific technologies and specific end-users. In other words, the regulations as issued will not necessarily limit China's trade of controlled items with countries like Iran, who is a State Party to the CWC and NPT. How the new export controls are implemented, and how rigorously the Chinese government enforces them, will determine their ultimate effectiveness in stopping exports of Chinese technology that can be used to produce WMD and WMD delivery systems.

BACKGROUND ON CHINESE EXPORT CONTROLS:[2]

The promulgation of China's nuclear export controls in 1997 significantly reduced concerns about China's proliferation of nuclear technology. However, Chinese chemical weapons export controls had significant gaps compared to Australia Group standards, and produced a series of U.S. sanctions and accusations of proliferation of technology that could be used in chemical and biological weapons programs. Chinese missile technology exports have been an equally contentious issue in Sino-U.S. relations. Despite a November 2000 pledge to issue missile export controls, China did not openly publish missile technology export controls until August 2002.

Chemical and Biological Weapons: One of the most significant difficulties facing Beijing's efforts at chemical export controls is China's large and diffused chemical industry, which creates major challenges for implementation. In an earlier assessment of China's export controls in Proliferation: Threat and Response (January 2001), the Department of Defense claimed that:

"China's chemical industry has the capability to produce many chemicals, some of which have been sought by states trying to develop a chemical warfare capability. Foreign sales of such chemicals have been a source of foreign exchange for China. The Chinese government has imposed restrictions on the sale of some chemical precursors and its enforcement activities generally have yielded mixed results."

Prior to the new regulations and control lists, China's chemical related export controls consisted of a number of regulations and directives passed in the mid to late 1990's. Taken together, these regulations met China's responsibilities under the CWC and covered some aspects of the Australia Group control list. However China has consistently railed against the existence of the Australia Group and has been reluctant to acknowledge its legitimacy. Beijing resisted U.S. demands that it include chemicals from the AG control lists in their chemical and biological agent related regulations, arguing that the Australia Group was inconsistent with the CWC. However, in conjunction with the Clinton-Jiang Summit in 1998, China expanded the scope of its chemical controls to cover 10 of the 20 dual-use chemicals from Australia Group's control list that were not included in the CWC schedules.

However, gaps between Australia Group guidelines (and thus U.S. demands) and China's CBW related export controls still existed. These gaps were a source of tension in U.S.-China bilateral relations, with the United States calling on China to follow the stricter guidelines set by the AG and Beijing insisting that it was meeting its obligations under the CWC. As a result of this tension, the United States sanctioned Chinese companies and citizens on numerous occasions over the last few years. In 2002 alone, the U.S. government sanctioned Chinese entities on three separate occasions.

In January 2002, the United States imposed Australia Group related sanctions on three Chinese firms accused of supplying Iran with materials used in the manufacture of chemical and biological weapons. As with earlier sanctions, Beijing reacted to these by reiterating that China has never violated the CWC or the BWC, and pointed out that that these conventions both explicitly allow for normal trade and cooperation between State Parties in the chemical industrial field. In the Chinese view, U.S. domestic laws restricting trade based on decisions by the Australia Group or that target specific CWC State Parties such as Iran are in direct violation of the CWC and the BWC.

The new regulations and control lists covering chemical and biological agents that China issued in October 2002, fill the gaps that previously existed between China's CBW export regulations and the Australia Group guidelines. Although reports on recent sanctions have not officially specified the items that triggered U.S. actions, indications have been that they were related to U.S. laws based on AG guidelines. Since the new chemical and biological agent regulations and control lists put China's controls in line with these guidelines, the items in question would also be covered by the new regulations. However it should be noted that many of the U.S. sanctions were also based solely on the end-user – namely Iran. China's new regulations do not single out any country, and statements coming from Beijing have stressed that these export controls will not interfere with normal trade between states allowed under the CWC and BWC.

Missiles and Missile-related Technology: Although not a member of the MTCR, China agreed in 1991 to abide by the regime's original 1987 Guidelines and Parameters. China further clarified the nature of its adherence to the MTCR in 1994 when it agreed to completely ban the export of ground-to-ground missiles, which went beyond MTCR's requirements. In addition, China accepted the concept of "inherent capability," agreeing to control missiles which "could generate sufficient energy to deliver a 500 kg payload at least 300 km, regardless of its demonstrated or advertised combination of range and payload." This concept aimed to prevent the export of missiles that could exceed MTCR parameters if their range and payload were adjusted. For example, China argued in the past that its M-11 missile exports to Pakistan did not violate the MTCR because the advertised range and payload of the missile (290km/800kg) did not exceed the MTCR parameters of 300km/500kg.

China was not included in the original negotiations of the MTCR in the 1980s. As a result, China initially argued in the late 1980s and early 1990s that it should not be held to MTCR restrictions because it did not take part in the MTCR's formation. These arguments were initially used to deflect U.S. opposition to China's DF-3 sale to Saudi Arabia and its possible missile sales to Syria, Iran and Pakistan. Furthermore, China criticized the regime for being discriminatory, for failing to restrict ground-attack aircraft (which China argues are equally capable delivery systems for WMD), and for interfering with the internal affairs of sovereign countries. The United States and other members of the MTCR have opposed Chinese participation in the process of drafting the guidelines due to their concern that China may get access to sensitive missile design information.

In 1991 and 1993, the United States imposed sanctions on China for transferring M-11 missile technology to Pakistan. China responded by calling the sanctions groundless and threatening to scrap its promise to abide by MTCR guidelines. The impasse was broken in October 1994, when China pledged in a joint statement to ban all exports of MTCR-class missiles, while the United States agreed to lift sanctions.

In November 2000, the Chinese Foreign Ministry issued its most stringent and specific policy statement on missile nonproliferation to date. In this statement, China promised to issue export control laws covering missile technologies and stated that the new laws would include such regulations as license application and review, end-user certifications, and a "catch-all" clause. China did not, however, specifically reference the MTCR or its control list and the statement did not mention when China would issue the new export control law. Some experts argued that the latter elements represented a major loop-hole in the accord. The Chinese government also denied that it engaged in illegitimate trade with either Iran or Pakistan.

Despite the November 2000 pledge, in September 2001 the U.S. government imposed economic sanctions on a Chinese company for shipping missile technology to Pakistan. The Bush administration also invoked a ban on new licenses for U.S. companies to put their satellites on Chinese rockets or transfer satellite technology. Beijing's new missile related export control regulations and expanded control list finally fulfill China's November 2000 pledge. The new regulations include the MTCR's "presumption of denial" approach, end-user certifications, and a "catch-all" clause. The regulations and control list are comprehensive and closely follow the MTCR's definitions and categories. Although there are some deviations between the Chinese control list and the MTCR list that are potentially significant, for the most part the Chinese regulations closely match the guidelines in the MTCR Annex.

CONCLUSION:

The new and amended regulations governing missile, chemical and biological related exports represent a major step forward in Chinese nonproliferation policy, but significant challenges lie ahead in their effective implementation. By complying with the provisions of stricter export controls regimes such as the Australia Group and MTCR, Beijing is implicitly acknowledging that its own safety is enhanced by controls that go beyond the obligations in international treaties such as the CWC and NPT.

One potential future contentious issue will be the interpretation of these regulations and the way in which the Chinese government chooses to enforce them. So long as Beijing remains outside the key multilateral export control regimes, it will use different criteria to weigh the balance between effective nonproliferation export controls and promotions of what it considers to be normal, peaceful trade. Another element affecting effective implementation will be the Chinese government's capacity in terms of resources, personnel and working procedures regarding license application, review, approval/disapproval, customs check, and post-shipment end-use and end-user verification. Questions remain, therefore, as to whether: (1) China will eventually join the MTCR and Australia Group rather than merely adhering to the standards of these groups; (2) whether the new export controls will be interpreted and enforced in ways that address U.S. concerns about possible continued trade with Iran; and (3) whether the promulgation of these controls will be matched with effective implementation.