James Martin Center for Nonproliferation Studies
Combating the spread of weapons of mass destruction with training & analysis

TESTIMONY OF LEONARD S. SPECTOR
on behalf of himself and JING-DONG YUAN and PHILIP C. SAUNDERS

Monterey Institute Center for Nonproliferation Studies

Before the U.S.-CHINA ECONOMIC and SECURITY REVIEW COMMISSION

Hearing on China's Proliferation Policies and Practices
July 24, 2003

Prepared Statement by Leonard S. Spector, Jing-dong Yuan, and Phillip C. Saunders
Center for Nonproliferation Studies
Monterey Institute of International Studies

In assessing China's progress toward meeting international nonproliferation standards and evaluating the remaining problems outlined in the Commission's invitation, it is useful to begin by reviewing the historical evolution of U.S. concerns about China's proliferation potential and U.S. expectations about how China should behave. I will then briefly review factors underlying improvements in China's nonproliferation behavior and examine concerns about ongoing Chinese proliferation activities. My testimony will conclude with suggestions about ways the United States can influence China's nonproliferation policies and behavior in positive directions.

Evolving U.S. Proliferation Concerns and Expectations

As China moved towards its first nuclear weapons test in the early 1960s, U.S. security experts feared that a Chinese nuclear weapons capability could have major destabilizing effects on regional and international security. Three concerns were cited: fears that nuclear weapons might stimulate aggressive and irresponsible Chinese actions; the possibility that other countries in the region, such as Japan and India, might respond by developing their own nuclear weapons capability; and the prospect that China might provide nuclear weapons material and technology to many other developing countries. The official statement following China's October 1964 nuclear weapons test declared that the superpower "nuclear monopoly" had been broken. U.S. expectations about prospects for responsible Chinese behavior or U.S. ability to influence China's proliferation behavior were minimal. Indeed, fears about the consequences of a Chinese nuclear weapons capability had led the U.S. government to develop secret contingency plans for a possible military strike against Chinese nuclear weapons facilities.[1]

As U.S.-China relations improved in the early 1970s, the United States came to see China's nuclear weapons as something that could help balance against Soviet power. China's strategic alignment with the United States eased fears that China might use nuclear weapons irresponsibly or assist countries hostile to the United States in acquiring weapons of mass destruction (WMD). China's planned economy and tight central government controls over the nuclear weapons complex and foreign trade meant that there was little prospect for exports of WMD or WMD technology without government authorization. In the 1970s and early 1980s, U.S. nonproliferation efforts focused mainly on persuading China to join or participate in the formal treaties and institutions that comprise the nonproliferation regime. The emphasis was mainly on moving China from outside the nonproliferation regime to a position inside the regime that would enhance the universality and legitimacy of nonproliferation norms and treaties.

The Chinese economic reforms that began in 1979 loosened controls on exports and reduced government support for China's defense industrial complex. The result was a surge in Chinese proliferation activity, as Chinese defense enterprises took advantage of new opportunities to seek foreign markets for their products, including exports of ballistic missiles, nuclear technology, and precursor chemicals and equipment useful for the production of chemical weapons. Chinese government officials approved many of these deals as a means of funding China's defense modernization efforts (and in some cases Chinese officials probably profited personally). China's most egregious proliferation activities involved sales to U.S. allies. (China provided Pakistan with a nuclear weapons design and weapons-grade uranium in the early 1980s and sold DF-3 (CSS-2) medium-range ballistic missiles to Saudi Arabia in 1988.) The U.S. government responded with increased efforts to persuade China to join the key nonproliferation treaties, calls for China to adhere to international standards restricting exports of technologies that could be used in weapons of mass destruction, and the use of sanctions and incentives to influence China's nonproliferation behavior. The United States also pressured China to cancel specific sales that threatened the stability of key regions such as the Middle East. As a result, China eventually cancelled contracts to sell M-9 ballistic missiles to Syria and a nuclear reactor to Iran.

In the early and mid-1990s, U.S. diplomacy re-emphasized the importance of China joining and adhering to the obligations in international nonproliferation treaties and accepting the standards of multilateral export control arrangements. U.S. nonproliferation efforts focused mainly on blocking Chinese efforts to export ballistic missiles and nuclear reactors to countries in the Middle East and South Asia. During this period China joined key treaties such as the Nonproliferation Treaty and the Chemical Weapons Convention that required strict controls over exports of nuclear materials and technology and chemicals that could be used for chemical weapons. However, China refused to join key multilateral export-control arrangements such as the Nuclear Suppliers Group (NSG), the Australia Group (AG), the Wassenaar Arrangement, and the Missile Technology Control Regime (MTCR), which it regarded as discriminating against developing countries. China agreed in 1991 to abide by the key parameters of the MTCR, but continued to exploit loopholes and ambiguities in its bilateral commitments to the United States to export missile components and missile production technology to countries such as Pakistan and Iran. (China also exported 34 complete M-11 missiles to Pakistan in 1991-92, its last known transfers of complete MTCR Category I-class missile systems.)

By the mid-1990s, China had stopped transfers of complete missile systems and major sales of unsafeguarded nuclear materials and technology, but continued to export a range of dual-use equipment and technology that could contribute to WMD and ballistic missile development programs. Many of the exports of proliferation concern fell into gaps between China's formal commitments under nonproliferation treaties and the tougher standards of multilateral export control regimes. (For example, China was sanctioned repeatedly for selling dual-use chemicals to Iran that are covered by the Australia Group control list but that are not on the Chemical Weapons Convention control list.) Because China was not a member of these export control regimes, U.S. officials pressed China to modify its domestic export control regulations and control lists to fill these gaps. In addition, the U.S. government sought to block a number of authorized deals that violated China's bilateral and treaty commitments (notably continuing Chinese transfers of missile technology to Pakistan) and urged the Chinese government to control unauthorized exports such as the 1995 sale of ring magnets to Pakistan (which could be used in centrifuges to enrich uranium).

The opaque nature of China's export control system (which included secret lists governing which technologies were controlled) contributed to these problems. U.S. officials emphasized the need for China to implement comprehensive controls over exports of proliferation concerns. From 1994 to 1998, China issued a series of laws and regulations governing exports of chemicals, nuclear materials, military equipment, and dual-use technologies. (See Appendix I for details.) These regulations helped formalize Chinese nonproliferation commitments, but did not formally cover missile technology or plug the gaps between Chinese laws and international standards. In November 2000, the Chinese Foreign Ministry issued a statement promising to issue export control laws covering missile technologies that would include provisions such as license application and review, end-user certifications, and a "catch-all" clause. The missile technology regulations were finally issued in fall 2002 along with revised (and public) chemical, biological, and military products export control regulations and control lists. The new regulations close most of the gaps between China's export control system and the standards of multilateral export control regimes.[2] U.S. nonproliferation experts and government officials have praised the new regulations, but also warn that effective implementation and enforcement will be critical if the regulations are to close proliferation loopholes in practice. Like any export control system, Chinese export controls allow considerable scope for discretion about whether licenses for particular dual-use goods should be granted to particular end-users.

In the post- 9-11 environment, U.S. concerns about proliferation have intensified and have focused heavily on the threat of terrorist groups acquiring WMD and on transfers that could help Iran, Iraq, and North Korea develop WMD or WMD delivery systems. The U.S. National Security Strategy issued in September 2002 declared that the United States would be willing to use pre-emptive attacks against countries whose possession of WMD posed an imminent threat, a doctrine that has now been put into practice in Iraq.[3] The intensification of U.S. efforts to combat WMD has heightened U.S. expectations about Chinese nonproliferation efforts. The United States now wants China to support U.S. Korea policy by pressuring North Korea to rein in its nuclear weapons program and to engage in multilateral talks about securing a Korean Peninsula free of nuclear weapons. U.S. officials also expect China to enforce its new export control regulations effectively and to use catch-all clauses in export controls to block any transfers that could potentially aid Iranian or North Korean WMD or missile programs, regardless of the proliferation significance of the items or whether they are covered by international control lists. These heightened expectations of what China should do to fight proliferation move beyond compliance with international standards to encompass new demands that China interpret and enforce its domestic regulations and shape parts of its foreign policy to accommodate specific U.S. security interests.

The administration's focus on China's actual proliferation behavior (rather than on China's laws and procedures) is the right standard. However efforts to set thresholds for imposition of sanctions that are stricter than the relevant international standards and to demand that China accommodate U.S. security interests are likely to generate resentment and resistance. For China, the trend for U.S. nonproliferation policy to target specific countries raises important concerns about national sovereignty, differing U.S. and Chinese security interests, and reciprocity. China is concerned about what it views as the increasingly discriminatory nature of U.S. nonproliferation policy, as evident in U.S. willingness to accept India as a nuclear weapons state. The more the United States pushes China to act on the basis of specific U.S. security concerns rather than international nonproliferation norms and rules, the more likely China is to push the United States to accommodate its own security concerns on issues, such as those regarding Taiwan.

China's Changing Nonproliferation Policy

These increasing U.S. expectations come against a background of significant improvements in Chinese nonproliferation policy and behavior in the 1990s. During this decade, Chinese proliferation activities narrowed in terms of both their scope and character. Chinese transfers moved away from sales of complete missile systems to exports of largely dual-use nuclear, chemical, and missile components and technologies. At the same time, the number of recipient countries has declined significantly. Iran, Pakistan, and North Korea are among the few remaining recipients of Chinese nuclear, chemical, and missile related technologies. Beijing signed major international nonproliferation treaties such as the NPT, CWC, and Comprehensive Test Ban Treaty (CTBT); made a series of commitments through bilateral arrangements with the United States on both nuclear and ballistic missile transfers; and gradually developed a domestic export control system. These changes were the product of Chinese efforts to remove a major irritant in Sino-U.S. relations, a growing recognition that WMD proliferation could pose a threat to China's own security, and a desire to maintain and improve China's image as a responsible global power.

One critical factor in China's changing nonproliferation policy is Sino-U.S. relations. The Bush administration came into office with a skeptical view of China, with key Bush administration officials regarding China as a long-term strategic competitor. Washington sought to consolidate alliances with its major East Asian allies, elevate the level of unofficial contacts with Taiwan, and became more willing to provide Taipei with advanced weapons. The September11 terrorist attacks on the United States and U.S. war on terrorism raised the profile of WMD proliferation in Washington's security policy and provided an opportunity for Beijing to improve relations with the United States. China has supported the new U.S. emphasis on international cooperation against terrorism and sought to make cooperation on nonproliferation issues a positive aspect of bilateral relations. Beijing seized the opportunity to join the U.S.-led campaign against terrorism, even though some aspects of the war on terrorism contravene Beijing's long-held principles of sovereignty and non-interference in the internal affairs of other countries. Beijing clearly recognizes that maintaining a stable relationship with the world's sole superpower is imperative, especially given China's growing economic ties with the United States. China's efforts to enhance its nonproliferation export controls should be understood as an effort to smooth out a contentious issue in bilateral relations.

A second important factor is a significant shift in Chinese views about the potential for WMD proliferation to have a negative impact on regional stability and on China's own security, either through the direct impact of proliferation of WMD and delivery systems or the reactions of other countries to emerging WMD capabilities. This shift in perceptions was evident in the Chinese response to the Indian and Pakistani nuclear tests in May 1998 and is also clear in China's response to the current North Korean nuclear crisis. The stakes for China in Korea are very high. A nuclear North Korea could trigger a proliferation domino effect, with South Korea, Japan, and even Taiwan following suit. Similarly, a North Korean resumption of ballistic missile tests could cause regional instability and accelerate deployments of ballistic missile defenses in Northeast Asia.

Beijing's initial approach to the Korean nuclear crisis was rather low-key given the stakes. Chinese statements emphasized three points: (1) peace and stability on the Korean Peninsula should be preserved; (2) the peninsula should remain nuclear-free; and (3) the dispute should be resolved through diplomatic and political methods. These positions have continued to form the core of Chinese approach to the Korean nuclear crisis. Beijing will support efforts that it believes contribute to peace and stability on the Korean peninsula, but will be reluctant to take actions that might lead to military conflict or the dissolution of the North Korean regime. At the same time, China is wary of North Korea's reckless behavior and concerned that the nuclear crisis might spin out of control. Beijing believes that Pyongyang's nuclear gamble stems from its acute sense of vulnerability and insecurity and that any resolution must address this issue. China's continued support for North Korea is no longer driven by the need to prop up an ideological bedfellow, but rather by China's long-term strategic interests.

Beijing worries that hard-line positions maintained by both Pyongyang and Washington will produce a stalemate that could push North Korea to take even riskier steps and possibly precipitate a devastating military confrontation. Fears of the security consequences of negative outcomes have prompted China to take a more proactive diplomatic approach to broker a solution to the nuclear crisis, an effort that included hosting the trilateral talks between China, North Korea, and the United States in Beijing in late April. China has been willing to apply diplomatic (and to a lesser extent economic) pressure to get North Korea to come to the negotiating table. China's concern has been to prevent the crisis from escalating into a military confrontation and to try to broker an acceptable diplomatic solution. China is open to the possibility of multilateral talks that include South Korea and Japan (and possibly Russia). However it views the United States and North Korea as the critical actors in the crisis.

A third factor behind improvements in China's nonproliferation behavior has been a desire to be viewed as a responsible member of the international community. Despite an emphasis on the importance of national sovereignty, Beijing is actually sensitive to international opinion and wary about being isolated in international settings. China does not want to be viewed as violating established international norms by proliferating weapons of mass destruction. The most significant progress in China's proliferation behavior has come in areas such as nuclear technology where international norms are firmly established. Conversely, one of the most problematic areas has been ballistic missiles and missile technology, where no formal nonproliferation treaty exists and international norms are weak.

Continuing Concerns and Controversies

Despite these generally positive developments, some serious concerns remain about China's proliferation policy and activities. The record of Chinese proliferation activities over the past decade remains mixed and contentious. Continued Chinese transfers of dual-use equipment that can be used in WMD programs draw attention to the gap between Beijing's public pronouncements on nonproliferation and its reported proliferation activities, raising questions about China's commitment to nonproliferation. U.S. intelligence reports continue to identify China as one of the few major suppliers of WMD-related items and technologies to countries of proliferation concerns such as Pakistan, Iran, and North Korea. The Bush administration has already imposed sanctions on Chinese individuals and companies seven times over the past two and half years, compared to a total of two during the Clinton administration's entire eight years.

One issue contributing to tensions with the United States is Beijing's general approach to nonproliferation. On the one hand, China has acceded to most international treaties and conventions that are broadly based with universal membership (e.g., NPT, CWC) and has largely complied with their norms and rules. On the other hand, China remains critical of the key multilateral export-control arrangements, which it regards as discriminating against developing countries. While supporting the general principle of nonproliferation, China has emphasized the need for a balance between nonproliferation obligations and legitimate peaceful use of nuclear, chemical, and space technologies. China also regards conventionally armed ballistic missiles as useful military weapons. Beijing may simply view many of the controversial transfers as legitimate commercial transactions allowed by international treaties. At the same time, economic reforms have encouraged domestic defense enterprises to seek overseas markets for their products to compensate for declining military procurement. Commercial interests and a different perspective on nonproliferation may explain why Beijing has interpreted some of its treaty obligations narrowly and in ways that allow continued transfers of dual-use equipment and technologies that alarm Washington.

Another issue limiting Chinese commitment to tough export controls is growing Chinese concerns over what they view as Washington's increasing use of WMD proliferation as a pretext for domestic inference in states of proliferation concern and efforts to promote regime change through international pressure and military operations. Indeed, U.S. military campaigns against terrorism and its shifting military doctrine of preemption deeply worry China. Although China raised few concerns about U.S. intervention in Afghanistan, Beijing is concerned about whether the U.S. military presence in Central Asian countries along China's border will be permanent. China did not support U.S. military intervention in Iraq, which it regards as a dangerous and worrisome precedent. U.S. efforts to confront Iran over its alleged nuclear weapons program and to isolate North Korea are regarded as confrontational policies that may provoke a military crisis rather than resolve proliferation concerns. Although China has declined to directly confront the United States, Washington's willingness to act unilaterally is a matter of great concern in Beijing. U.S. counterproliferation initiatives such as the new Proliferation Security Initiative that attempt to target particular countries and that are not grounded in international treaties are unlikely to win support from Beijing, although Chinese opposition will likely be muted unless Beijing sees direct threats to its own security interests.

The limits on Chinese cooperation with the United States in the Korean nuclear crisis illustrate these concerns. Although Beijing could potentially affect Pyongyang's behavior due to China's position as a key supplier of energy and food assistance, China has been reluctant to use this leverage to pressure North Korea to abandon its nuclear weapons program. Beijing believes outside pressure is unlikely to force North Korea to change its nuclear policies and that it could even be counterproductive by driving Pyongyang to desperate measures or by causing the regime to collapse. While Beijing cut off its oil supplies to Pyongyang for a few days in February 2003 to encourage North Korea to accept trilateral talks, China is unlikely to support U.S. efforts to use economic sanctions or pressure to promote regime change. Chinese and Russian efforts to block a UN Security Council resolution on North Korea are a clear indication of the limits of Chinese cooperation. While both China and the U.S. share a common interest in a nuclear-free Korean Peninsula, their desired endgames for North Korea are quite different. Beijing wants a reformist North Korean regime without nuclear weapons, while many in Washington view regime change as the only means of assuring that North Korea's nuclear weapons potential is eliminated.

A third issue is the underdeveloped nature of China's domestic export control system and the inability of the central government to fully monitor, much less control, the activities of Chinese companies engaged in proliferation. Over the last decade, Chinese exports have increased dramatically, outstripping the government's ability to monitor the behavior of Chinese companies driven by market opportunities rather than government plans. During this period, China has established and developed a domestic export control system in order to comply with international treaty provisions and meet its nonproliferation commitments. The promulgation of the 2002 export control regulations and control lists is a significant step forward, but the Chinese export control system has a number of weaknesses including lack of resources and training for those administering the effort, ambiguous inter-agency coordination procedures, and conflicts over the relative priority of nonproliferation and commercial interests. (The United States export control system suffers from some of the same problems, albeit to a lesser degree.) The Chinese government's capacity and willingness to implement and enforce its export control regulations is a critical factor in determining their effectiveness. Factors such as the transition to WTO membership, the decentralization and diversification of export-oriented companies, trade in dual-use technology, and increasing globalization all add to the challenge. Lack of central government capacity to enforce export controls probably explains a significant portion of Chinese proliferation transfers, although it is impossible to determine precisely how much by relying solely on open sources.

How Can the United States Shape Chinese Nonproliferation Behavior?

In many respects, U.S. long-term efforts to shape Chinese nonproliferation in positive directions have been remarkably successful. Although serious concerns remain, Chinese proliferation behavior has improved significantly over the last decade. As the first section suggested, U.S. expectations of what China should do in the realm of nonproliferation policy have increased significantly in the aftermath of the 9-11 terrorist attacks. As the United States pushes China to move beyond compliance with international standards to accommodate specific U.S. security interests, tensions with China over nonproliferation issues are likely to increase.

Sanctions remain a useful nonproliferation policy tool, albeit one that must be used carefully. It is unrealistic to expect economic sanctions to force China to act in ways counter to its fundamental security interests. However sanctions are still useful as a way to illustrate U.S. concerns about proliferation and as leverage to push China to block specific proliferation transfers. They probably also ensure closer Chinese government scrutiny of proposed deals to countries of proliferation concern. Sanctions can also have a useful "shaming" impact if persuasive evidence is presented that Chinese proliferation activities have violated China's international treaty commitments. The most recent U.S. sanctions against China have been based on executive orders and U.S. domestic legislation rather than on China's formal nonproliferation commitments. Although the Bush administration has not publicly specified what goods were transferred, the sanctions appear to be for transfers of dual-use goods that are not specifically included on international control lists.

Lack of information makes it difficult to evaluate the significance of the Chinese activities that prompted the most recent sanctions. Sanctioned transfers that made major contributions to WMD and missile programs, that continued despite China's new export control regulations and improved bilateral cooperation since September 11th, or that received formal government approval by the issuance of export licenses would be of greatest proliferation concern. Sanctioned transfers that involved dual-use goods of marginal proliferation value, that predate the new regulations, or that do not require the issuance of export licenses would be of lower concern.

Another critical question is the Chinese government's capacity to implement effective export controls. U.S. government officials have urged China to issue comprehensive export controls for the past decade. The new Chinese regulations largely meet international standards, but resources and political will are necessary for effective implementation. Rather than adopting a "wait and see" attitude, the United States should actively assist China in efforts to implement its new export control regulations. U.S. government assistance could play a major role in improving China's capacity to turn its new regulations into an effective, functioning export control regime. U.S. cooperative threat reduction programs have played a valuable role in helping Russia and other countries in the former Soviet Union to establish and improve their export control systems. Political obstacles have inhibited government-to-government nonproliferation cooperation between the United States and China in the past, but the post 9-11 security environment and recent improvements in bilateral relations have provided a new opportunity for the two countries to cooperate in fighting the proliferation of weapons of mass destruction. Appendix II suggests a number of areas where U.S. assistance could help improve the effectiveness of the Chinese export control system.

All export control systems require officials to interpret regulations and make judgment calls about the proliferation risks of specific exports. Although the new Chinese regulations contain "catch-all" clauses, the Chinese government must be willing to use these clauses to restrict Chinese companies from supplying goods and technologies to WMD and missile programs in other countries. Beijing currently uses different criteria to weigh effective nonproliferation export controls against promotion of what it regards as normal, peaceful trade. Strategic dialogue and regular discussions about nonproliferation issues can help create more common ground between the United States and China about proliferation risks and raise the priority of nonproliferation in Chinese decision-making. Nonproliferation training and education can also help inculcate greater awareness of proliferation risks among Chinese government officials, which will shape future decisions about nonproliferation policies and specific transfers. Increasing acceptance of the argument that proliferation works against China's own security interests is likely to be the most effective and lasting way of changing China's proliferation behavior. (It is instructive to note that Professor Shi Yinhong, one of the most prominent critics of the Chinese government's Korea policy, participated in a nonproliferation training program hosted by the Monterey Institute's Center for Nonproliferation Studies in 2000.)

Despite considerable progress, nonproliferation remains a divisive issue in Sino-U.S. relations. The U.S. government should 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.

Appendix I: Evolution of China's Export Control System since the 1990s[4]

Appendix II: Potential Areas for U.S. Assistance in Enhancing Chinese Export Controls[5]

Just as it has done in the former Soviet states, the United States could help China develop the capacity to implement its export control regulations effectively. This appendix outlines areas where U.S. assistance might be useful.

Shaping China's perspectives on proliferation and seeking Chinese 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. The United States should encourage China to join the key multilateral export control regimes. As long as China remains outside these organizations, problems in harmonizing export control policies among key technology suppliers will continue to exist. U.S.-China dialogue on proliferation should not focus only 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 multilateral export control regimes remains under debate: whether Beijing and other prospective member states need to meet existing regime standards for admission, or whether they should be admitted with the expectation that they will 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 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, have helped the newly independent states develop export control systems and prevented the former Soviet Union from becoming an international nuclear bazaar. Similar efforts have not been applied elsewhere because of insufficient attention, lack of interest, a dearth of resources, and (in China's case) concerns about congressional willingness to fund cooperation with the Chinese government. Limited U.S.-Japan efforts to promote export control awareness in East Asia stand as a partial exception. A global effort is necessary. Resources invested in helping China improve implementation of its new export controls would be a wise investment.

Developing a legal framework in China for export controls. Compared to the United States and other major Western countries, China's export control practice remains largely administrative rather than firmly grounded in detailed legislation. The most recent regulations, which include openly published control lists, are a significant step forward. However, the large scope for discretion in interpreting administrative rules impedes reliable enforcement and predictability. Development of a comprehensive legal framework for export controls 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 effectively adjudicate potential violations and disputes. This objective is particularly important in order to hold companies with important political connections accountable.

Capacity Building and Infrastructure Development. Capacity building is an urgent and critical task. At the moment, Chinese agencies responsible for implementing the new export controls have very few qualified personnel devoted to export control licensing review and approval procedures. For instance, the Export Control Division of the Science and Technology Department of the Ministry of Foreign Trade and Economic Cooperation (MOFTEC), the lead agency in the export control review process, has no more than ten officers conducting case-by-case license reviews. This situation is no better for chemical weapons controls, where the National CWC Implementation Office has fewer than ten people. Training qualified personnel over the coming years will be a major challenge (and a necessary investment) if China is to implement its new regulations. Education and training of export control personnel should be a relatively uncontroversial area where concrete and immediate work can take place. This undertaking could involve seminars, workshops, and site visits to demonstrate methods for handling paperwork, shipment inspections and records, and other training. The critical need is to develop standardized operating procedures to streamline the review process and reduce unnecessary delays. The United States and Japan have held a series of export control seminars for East Asian countries; this practice should continue. In addition, the U.S. government could assist China in the development of a national data bank 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, freeing enforcement resources to focus on problem companies or to tackle new developments.

Encouraging government-business cooperation on export controls. Although 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. China could encourage greater government-business cooperation on export controls by supporting training workshops and developing incentives for businesses to comply with export regulations. 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 share due to delays in license review and approval are not unreasonable and will be increasingly important following China's accession to the World Trade Organization.

Providing technical advice on interagency 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 process. Confusion over responsibility has sometimes caused the U.S. system to run less smoothly; China could learn to avoid similar mistakes. Efforts may involve interagency consultation and coordination and establishment of effective and enforceable post-shipment verification to monitor end use. In addition, there should be regular exchanges of information and intelligence among exporters and importers. China cannot rely on the goodwill of recipient states to ensure proper use; it must begin developing its own post-shipment verification to track and monitor its exported dual-use items.

Additional areas where cooperation between the United States and China might be productive include:

• Comparing the U.S. and Chinese export control systems, with an eye toward identifying common problems and "best practices" that could be adopted by both sides
• Developing benchmarks for assessing the effectiveness of Chinese export controls, including a tracking system for export licenses
• Helping China to prioritize proliferation risks and focus enforcement efforts on high-priority items
• Training in use of open-source information to evaluate potential end users (possibly in cooperation with the IAEA)
• Organizing training workshops for Chinese customs officials and border guards to improve their ability to detect smuggled nuclear materials and to identify problems with export licenses, possibly providing both training and detection equipment.

[5] This appendix is adapted from Saunders, Yuan and Lieggi, "Recent Developments in China's Export Controls: New Regulations and New Challenges."