Strengthening China's Export Control SystemJing-dong Yuan, Ph.D. EXECUTIVE SUMMARYOver the last decade, China has developed a nascent domestic export control system. Regulations governing exports of nuclear and nuclear dual-use, chemical, missile, and conventional weapons and related technologies are now in place. These positive developments are encouraging, but future challenges remain how Beijing is to close the gaps between China's export control system and existing multilateral export control regimes. The Chinese government's capacity and willingness to implement and enforce its regulations will be a critical factor determining the effectiveness of Chinese export controls. Several aspects of China's export control system could be improved to enhance its overall effectiveness:
The United States should encourage and assist China in efforts to strengthen its export control regulations. The long term U.S. objective should be to harmonize China's system with existing multilateral export control regimes. In the short-run, the U.S. government should find ways to enhance the Chinese government's ability to implement its existing export control regulations. Nonproliferation is a global challenge, and requires global efforts. A more effective Chinese export control system is in the interest of both China and the United States. Political obstacles have inhibited government-to-government cooperation in the past, but the post-September 11th security environment and recent improvements in bilateral relations have provided an opportunity for new initiatives in fighting the proliferation of weapons of mass destruction. Areas where cooperation between the United States and China might be productive include:
INTRODUCTION Over the past decade, the People's Republic of China (PRC) has initiated and gradually consolidated a domestic export control system. Along with its increasingly pro-active participation in international arms control and nonproliferation organizations and greater commitments to comply with international treaty provisions, China's domestic export control regulations and decrees contribute to international efforts to stem, arrest, and prevent the proliferation of weapons of mass destruction (WMD) and their delivery systems. While these positive developments are encouraging, gaps remain between the coverage of China's export control system and that maintained by existing multilateral export control regimes, which Beijing has mostly refused to join. In significant ways, the Chinese government's capacity and willingness to implement and enforce its regulations will be a critical factor in determining the effectiveness of Chinese export controls. Serious problems remain and continue to be an irritant in Sino-U.S. relations. Beijing differs from the United States in its perspectives on arms control and nonproliferation, and tends to interpret its commitments narrowly. There have been continuing controversies over Chinese transfers of nuclear, chemical, and missile components and technologies to countries of proliferation concern. Discrepancies between Beijing's policy declarations and its actual practices have presented successive U.S. administrations with significant challenges. Shaping Chinese perspectives on nonproliferation and encouraging resource commitments in a time marked by the enormous tasks of managing the transition to WTO membership, the decentralization and diversification of export-oriented companies, trade in dual-use technology, and increasing globalization will be critical factors in ensuring the effectiveness and success of China's export controls. Closing the gap between the coverage of China's export control system and the standards of existing multilateral export control regimes will be a major challenge in the coming years. The U.S. government must continue efforts to shape Beijing's perspectives on nonproliferation by engaging China in strategic dialogue. At a more technical level, the real test is the extent to which export control regulations are implemented and enforced. Effective implementation will depend on the resources China's central government is willing to put into improving and strengthening its export control infrastructure through personnel training, dissemination of export control regulations, corporate compliance education, interagency review and approval processes streamlining, and the establishment of a viable post-shipment end user/use verification system. The United States could play an important role in facilitating the accomplishment of these goals, with implementation and capacity building as the key short-term targets. AN EVOLVING CHINESE EXPORT CONTROL SYSTEM[1] In the 1980s, China emerged as one of the leading suppliers of arms and dual-use technologies. Towards the end of the 1980s, revelations of Chinese nuclear and missile transfers to countries in the Middle East, the Persian Gulf and South Asia raised serious proliferation concerns and were a contributing factor in the U.S. "China threat" debate.[2] Among the controversial Chinese arms transfers were the sale of the Dong Feng 3 (CSS-2) intermediate-range ballistic missiles to Saudi Arabia, the sale of HY-2 (Silkworm) anti-ship missiles to Iran, the nuclear reactor deal with Algeria, and missile-related transfers to Pakistan. Since the end of the Cold War, Beijing has made gradual yet significant progress in its nonproliferation policy, specifically in three key areas:
An important indicator of China's acceptance of international nonproliferation norms can be found in its participation in major international treaties and conventions (see Table 1). Since the early 1990s, China has joined the NPT (1992), signed (1993) and ratified (1997) the CWC, and signed the CTBT (1996). Beijing has on various occasions enunciated in clear terms the three principles governing its nuclear exports: (1) IAEA safeguards; (2) peaceful use; and (3) no re-transfers to a third country without China's prior consent. In May 1996, the Chinese government further pledged not to provide assistance to unsafeguarded nuclear facilities. In October 1997, China formally joined the Zangger Committee. Table 1. China and International Nonproliferation Regimes
East Asia Nonproliferation Program, Center for Nonproliferation Studies. <http://www.nti.org/db/china/index.html> Beijing has also reached a number of bilateral agreements, including an understanding with the United States that China would adhere to the original 1987 MTCR guidelines, and not export missiles "inherently capable of reaching a range of at least 300 km with a payload of at least 500 kg."[3] In addition, China promised in a November 2000 statement that it would not assist states in developing "ballistic missiles that can be used to deliver nuclear weapons" and that it would issue "at an early date" a "comprehensive" list of missile-related and dual-use items that would require government licenses for export.[4] A third significant development in China's evolution toward international nonproliferation norms over the last decade has been the introduction of domestic export control regulations (see Table 2). Beginning with the May 1994 Foreign Trade Law, the Chinese government has issued a series of regulations, decrees, and circulars. In August 2002, China finally issued the long-awaited Regulations on Export Control of Missiles and Missile-related Items and Technologies and the Control List. [5] In October, Beijing further issued regulations and controls lists governing the exports of chemical and biological materials that could be used in WMD development. In addition, the Chinese government amended in the same month the regulations governing military product exports. Taken together, these regulations constitute a nascent export control system.[6] In addition, arms control and nonproliferation is increasingly assuming a higher profile in the making of China's national security policy. In April 1997, a new Department of Arms Control and Disarmament was established within the Ministry of Foreign Affairs (MFA), and there has been increasing coordination among MFA, MOFTEC (Ministry of Foreign Trade and Economic Cooperation), and CAEA (China Atomic Energy Agency) officials in implementing export control regulations. In conventional arms trade, the Commission on Science, Technology, and Industry for National Defense (COSTIND) and the People's Liberation Army General Armament Department take a leading role.[7] Table 2. Evolution of China's Export Control System since
the 1990s
Nonproliferation Program, Center for Nonproliferation Studies. REMAINING ISSUES AND CONTROVERSIES Despite these generally positive developments, the US continues to have serious concerns over China's proliferation policy and activities. One remaining concern is over Beijing's general approach to nonproliferation principles and practices. On the one hand, China has acceded to most broad-based international treaties and conventions with universal membership (e.g., NPT, CWC), and has for the most part complied with their norms and regulations. On the other hand, China remains critical and has declined to join the key multilateral export-control regimes including the Nuclear Suppliers Group (NSG), the Australia Group (AG), the Wassenaar Arrangement, and the MTCR. The record of Chinese proliferation activities over the past decade remains mixed and contentious.[8] These controversies draw attention to the gap between Beijing's public pronouncements on nonproliferation and its reported proliferation activities, and raise questions about China's commitment and intentions.[9] Recent reports by the National Intelligence Council and the Central Intelligence Agency continue to identify China as one of the key suppliers of materials and technologies that contribute to the proliferation of weapons of mass destruction and their delivery systems.[10] U.S.-Chinese disputes over nonproliferation issues remain a serious problem in bilateral relations. Over the years, successive U.S. administrations have sought to influence Chinese policy through a combination of inducements and sanctions. These range from the suspension of technology transfers and imposition of economic sanctions against selected Chinese companies in violation of U.S. laws, to incentives in the forms of technology transfers to and commercial space launch contracts with China.[11] Table 3 summarizes U.S. sanctions against China over the years. Table 3. U.S. Nonproliferation Sanctions against China,
1989-2002
East Asia Nonproliferation Program, Center for Nonproliferation Studies. DEVELOPING WORKABLE SOLUTIONS: THE U.S. GOVERNMENT'S ROLE Problems related to China's export control system result from a number of factors. These include China's perspectives on the balance between nonproliferation obligations and legitimate civilian trade; commercial and geo-strategic interests in South Asia, the Persian Gulf, and the Middle East; deliberate lapses in enforcement as a response to certain U.S. policies such as arms sales to Taiwan and Beijing's growing attempts at issue linkage; and the nascent nature of its export control system. Studies at the Center for International Trade and Security (CITS) and elsewhere indicate that there remains a considerable gap between China's domestic export control system and the more stringent standards of existing multilateral export control regimes. Needless to say, these multilateral regimes themselves are also facing enormous challenges. These include diversity in perspectives, the growing number of potential suppliers, increasing indigenous capacity for WMD acquisition, discrepancies in national export control systems, and lack of prompt institutional responses to globalization and the diffusion of dual-use technology.[12] China's inability to monitor and control its business community is partly a product of the nascent nature of its domestic export control system; ambivalence about inter-agency policy coordination on issues ranging from license review and approval to customs inspections further compounds this problem.[13] Meanwhile, decentralization and institutional pursuit of parochial interests encourage companies to dodge regulations and even openly defy rules. The controversial sale of 5,000 ring magnets to Pakistan has often been cited as such an example, and illustrates the inadequacy of government oversight. In addition, the sheer size of the chemical industry and the growing number of dual-use items make control efforts exceedingly difficult. China's current nuclear export controls consist of three main components[14]: (1) a May 1997 State Council circular on nuclear and nuclear-related dual use export controls, (2) the September 1997 nuclear export control regulations (with an attached control list that mirrors the Nuclear Suppliers Group (NSG) control list on nuclear items (INFCIRC/254 Part I)) and (3) the June 1998 regulations covering dual use nuclear export (with attached an control list that is the same as the NSG's control list on nuclear related dual use items (INFCIRC/254 Part II). These regulations give legal effect to China's three nuclear export principles (see below) and its May 11, 1996 pledge not to provide assistance to unsafeguarded nuclear facilities. According to the regulations, only State Council-designated entities can conduct nuclear exports. China's current conventional arms export controls are based on the October 1997 Regulations on Export Control of Military Items. The regulations, which took effect on January 1, 1998, give legal effect to China's conventional arms export principles. The regulations will include a control list, to be completed in early 1998. According to the regulations, only State Council-designated entities can conduct military exports. No control list is available. Exports of missiles and missile-related technology are governed by the recently released Regulations of the People's Republic of China on Export Control of Missiles and Missile-related Items and Technologies and the Missiles and Missile-related Items and Technologies Export Control List.[15] China's current chemical export controls consist of three main components: (1) the December 1995 Regulations on Controlled Chemicals (with a Schedule of Chemicals based on the regulations and three schedules of chemicals contained in the Chemical Weapons Convention (CWC)); (2) the March 1997 Supplement to the December 1995 chemical export control regulations, issued in preparation for China's April 1997 ratification of the CWC; and (3) the August 1997 Ministerial Circular on strengthened chemical export controls. According to the regulations, only State Council-designated entities can export Schedule 1-3 chemicals. The Chinese government is currently working on more detailed regulations and control lists for chemical and biological materials and may release them prior to Chinese President Jiang Zemin's upcoming October visit to Crawford, Texas. Following the format developed by CITS, an objective and comprehensive assessment of the Chinese export control system should cover the following areas:
The U.S. government could and should more actively assist China in improving its export control system. Two principal objectives should guide such efforts: increasing the level of compatibility between China's export control system and the multilateral regimes, and strengthening implementation of Chinese export control regulations. The latter of these two objectives would involve assistance in capacity building, including but not confined to: personnel training; infrastructure development; control list harmonization and refinement; technical advice on inter-agency review process; and the establishment of a national databank. Shaping China's perspectives and seeking its membership in multilateral export control regimes. Supply-side control measures can only be effective if all major supplier states share broadly similar foreign policy preferences in specific issue-areas. If key suppliers remain outside the export-control arrangements, nonproliferation efforts will be less effective in achieving their stated objectives. Clearly, the need to encourage China to join multilateral export control regimes must continue to remain on the U.S.-China strategic dialogue agenda. This dialogue should not merely focus on U.S. concerns over specific Chinese proliferation activities, but also on the potential threats that WMD proliferation can pose to China's own security. One issue regarding China's membership in these multilateral export control regimes remains under debate and in need of resolution: whether Beijing, and other prospective member states, needs to meet existing regime standards for admission or whether they should be admitted with the expectation that existing rules and guidelines will constrain their behavior while they gradually adapt to regime standards. The U.S. government has accumulated invaluable experience over the years in drawing Russia and the former Soviet republics into the multilateral export control regimes. These efforts have slowed if not completely prevented the proliferation of nuclear materials and have enjoyed bipartisan support in Congress. The attention and resources devoted through intensive and sustained efforts such as the Nunn-Lugar Initiative to helping the newly independent states develop export control systems helped prevent the former Soviet Union from becoming an international nuclear bazaar.[16] Similar efforts have not been applied elsewhere due to insufficient attention, lack of interest, and a dearth of resources. Limited U.S.-Japan efforts to promote export control awareness in East Asia stand as a partial exception.[17] A global effort is necessary. Developing a legal framework in China for export controls. China has issued a series of export control regulations over the years. Compared to the United States and other major Western countries, China's practice remains largely administrative rather than legalistic both in weight and execution. The development of a legal framework for export control would remove arbitrariness and enhance transparency, in particular for companies involved in relevant areas of trade. It could also contribute to the development of an independent judicial system that could play an increasingly important role in adjudicating potential violations and disputes. This is particularly critical with regard to companies that have important connections at the top. Encouraging China to harmonize with and adapt its control lists to those maintained by multilateral export control regimes would also help close potential loopholes and remove potential disputes between China and the United States. China's recently released missile control list is reasonably comprehensive and follows the MTCR Annex. However, critical omissions remain and could cause problems in the future.[18] Personnel training and infrastructure development. Education and training of export control personnel should be a relatively controversy-free area where concrete and immediate work can be done. This could involve seminars, workshops, and site visits to demonstrate to Chinese officials' methods for handling paperwork, shipment inspections and records, and so on. The critical element is to develop standardized operating procedures to streamline the review process and reduce unnecessary caseload stoppage and slowdown. The United States and Japan have held a series of export control seminars for East Asian countries; this practice could and should continue. In addition, the U.S. government could assist China in the development of a national databank to store information on license applications and applicants, compliance records, and approval/rejection ratios. Companies that comply with end-use provisions and have clean records could be given preference in terms of license review and granting. This practice could free enforcement resources to focus on other problems and/or tackle new developments. Encouraging government-business cooperation on export controls. While in the past the Chinese government could use its centralized planning system to discipline companies, economic reforms have made it harder for the government to enforce laws. There is a need to educate industries on the importance of compliance with existing export regulations. The U.S. experience suggests that control measures must be crafted with clearly defined scope, purpose, and enforcement measures in place, and implemented with streamlined license reviewing and granting procedures. Industry concerns over lost sales and market shares due to delays in license review and approval are not unreasonable, and will be increasingly applicable following China's accession to the World Trade Organization (WTO). Technical advice on inter-agency coordination on export control procedures. The United States has extensive experience to share given its long history of export controls. One area deserving particular attention is the license review and approval procedure. Confusion over responsibility has caused the system to run less smoothly; China could learn to avoid similar mistakes. This may involve inter-agency consultation and coordination, and effective and enforceable post-shipment verification to monitor end-use. In addition, there should also be greater and more regular exchange of information and intelligence among exporters and importers. China cannot just rely on the good will of recipient states to ensure proper use; it must begin developing its own post-shipment verification to tract and monitor its exported dual-use items. The U.S. government could assist in this area as well. Nonproliferation is a global challenge, and requires
global efforts. A more effective Chinese export control system is in the
interest of both China and the United States. Political obstacles have inhibited
government-to-government cooperation in the past, but the post-September 11th
security environment and recent improvements in bilateral relations have
provided an opportunity for new initiatives in fighting the proliferation of
weapons of mass destruction. This memo illustrates some areas where cooperation
between the United States and China might be productive.
[*] The author thanks Phillip Saunders
and Robert Mauksch for their support and helpful
comments.
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