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Statement by

Dr. Peter M. Leitner

before the

Joint Economic Committee
United States Congress

June 17, 1997

Feeding the Dragon: Technology Transfer and the Growing Chinese Threat

      Mr. Chairman, members of the committee, I am the author of the book entitled Decontrolling Strategic Technology 1990-1992: Creating the Strategic Threats of the 21st Century published by University Press of America. I need to state up front that the opinions and analysis I express here are my own and do not represent the views of the Defense Department, the United States Government, or any other organization.

      I am honored to appear before you today. I am quite pleased by the vision and concern that the chairman and committee members have shown regarding the long-term effects that technology acquisition by potential adversaries, particularly China, may have upon the military and economic security of the United States.

      My motivation in writing this book stemmed from the dramatic politicization of the export control process. I have seen the blatant manipulation of honest technical and engineering analyses that warned of the dangers to U.S. national security posed by the proliferation of advanced dual-use technologies. Unfortunately, as I have documented, the campaign to weaken or eliminate the concept of "non-proliferation" by undermining the export control system -- its chief operational vehicle -- has been remarkably successful and can accurately be characterized as a scorched-earth policy. It has been so successful, in fact, that CoCom and the national security export controls that we came to know and rely upon no longer exist. In their place are a handful of weak, ineffectual regimes which are little more than cardboard cut-outs designed to maintain the facade of an international technology security system but offer virtually no protection from nations seeking to develop advanced conventional weapons or weapons of mass destruction.

      These so-called follow-on regimes are limited notification fora, similar in function to a post office box, where nations inform each other of denials of technology transfers if they so desire. The national discretion nature of decision making common to these regimes -- to include: Wassenaar, the Nuclear Suppliers Group, the Missile Technology Control Regime, and the Australia Group -- ensures that suppliers may do what they wish so long as some post facto notification is made to the partners. This de minimis approach is a far cry from CoCom's consensus-based regime where pre-notification was the rule and a negative vote cast by any of the 16 member states could actually prevent a dangerous transfer from taking place.

      The current administration was responsible for the elimination of CoCom before any replacement regime was installed. The result was the loss of any possible negotiating leverage in ensuring that a follow-on regime would have any teeth. The so-called Wassenaar Agreement which was eventually formed is little more than a kabuki-like construct intended to provide the appearance of technology control while affording none. The unnecessary destruction of CoCom opened the floodgates of technology to China as it was subject to few restraints other than in the narrow realms of ballistic missile and nuclear technology. As the Chinese are already a nuclear and ballistic missile power the restraints serve only to place obstacles in front of Chinese acquisition of technology they already have while allowing the unrestricted flow of militarily important power projection and C4I technology that they need.

      It is with these facts in mind that I focused on the relationship between the decontrol actions and the potential neutralization of billions of dollars this nation has invested in advanced technology -- stealth for example. I describe how, in a quest for a few hundred million dollars in potential sales, we have made available the means to offset not only enormous U.S. investments in sophisticated military systems but our future ability to project power into hostile airspace as well.

      This book also documents many of the internal organizational and systemic failures that led to the embrace of a fundamentally irrational doctrine called "counterproliferation;" which is characterized by an escalating series of draconian responses to problems the United States has decided not to prevent. By gutting an effective export control regime rather than redirecting or reforming it we are left with an option of last resort as our primary instrument of policy. By so doing, the administration has placed itself in the hypocritical position of supporting the wholesale transfer of U.S. equipment, technology, skills, and jobs abroad knowing that it, or an unfortunate successor, will one day come to Congress for its blessing to attack the military threat that will inevitably result from their policies.

      This dramatic weakening of the international system of export controls lies at the heart of a series of independent developments that are gnawing away at our defense industrial base and are spilling over into our civil industrial base as well. Several parallel developments have long-term implications for the economic health and competitiveness of our economy as well as the safety of our men and women in the armed forces. They include:

  • The open penetration of U.S. high-tech industries, and national and military labs by Chinese and other foreign nationals who carry home critical military or manufacturing technology

  • The massive unilateral U.S. decontrol of supercomputers and supercomputer manufacturing technology (see Attachment A)

  • The wholesale transfer of military factories to China, including a Columbus, Ohio, B-1 Bomber, C-17 Airlifter, and ICBM factory as documented most thoroughly in John Fialka's book War by Other Means

  • The widespread auctions of defense manufacturing plant and equipment, often to foreign buyers, and the loss of skilled personnel, experience, and productive capacity for our industrial base (see Attachment B)

  • Permitting Chinese agents to purchase state-of-the-art military parts, components, and weapons systems directly from DoD surplus property auctions, as reported by U.S. News and 60 Minutes

  • Forcing the introduction of 'commercial-off-the-shelf' (COTS) technology into our weapons systems and the phasing out of MILSPEC requirements (see Attachment C)

  • The flooding of the domestic and international market with state-of-the-art manufacturing equipment at cut-rate prices and the undermining of efforts to strengthen the American machine tool industry

  • The lease of the former Long Beach Naval Station to a shady arm of the Chinese government and the construction of a Chinese "Wholesale Mall" next door to the recently closed George Air Force Base in San Bernardino County, Ca. George AFB is strategically located 70 miles from the Navy's China Lake weapons development center, only 40 miles from the Palmdale stealth and "black program" aerospace test facility, and just 30 miles from Edwards AFB -- the primary U.S. military aerospace test flight center. George AFB has been selected as the production site for the "Predator" RPV, which will incorporate the most advanced sensor technology available. If a permanent PRC presence develops at such a strategic location it may offer China unparalleled eavesdropping and intelligence collection opportunities. (see Attachment D)
      These are but a few of many datapoints in a massive process that is converting portions of the U.S. defense industrial base into the Chinese defense industrial base. Who knows what other PRC-related activities are developing at the dozens of recently closed military bases throughout the United States. With two more rounds of base closings proposed in the Quadrennial Defense Review the prospects are frightening.

      Instead of preparing prescriptive remedies to serious potential threats, the administration diverts attention by focusing exclusively on small, almost irrelevant, pariah states such as Cuba, Syria, Sudan, Iraq, Iran, and Libya to deflect attention away from the fact that big money was being made modernizing our most likely future adversaries. Chief among them is China.

      The consequences of the reckless dismantlement of the export control system may be seen even in the case of the pariahs. For example, much is made of Libya's installation of a chemical weapons factory inside a mountain but there is no discussion of how the Libyans were able to hollow out a mountain to create an impregnable fortress. Instead, official rhetoric is geared toward the further vilification of Qadhafi -- who needs no help qualifying as a world-class villain. A chemical factory is a standard part of the infrastructure of any nation with ambitions of economic development and import substitution. Unfortunately, most chemical plants are capable of producing chemical and nerve agents as well as pesticides and fertilizer. But this particular plant, located in a bomb-proof installation, is a different story. A simple air raid or stand-off cruise missile attack may not be capable of destroying this facility if the need arises. It is likely that only the introduction of ground forces or the use of nuclear or other weapons of mass destruction can effectively eliminate such a target.

      The key issue here from a technology security perspective is how they were able to hollow out the mountain and effectively constrain U.S. options? More than likely some form of Western-supplied tunnel-boring equipment was used to create this fortress. Although such equipment was removed from the export control system several years ago it is precisely this type of highly specialized tool that moves the factory from a tactical to a strategic response. Weigh for a moment the potential costs of requiring a company to apply for an export license against having to live with this latent threat.

      Mr. Chairman, the greatest single point of failure in maintaining a credible export control system was the neutering of the Defense Department's traditional role as the conservative anchor of the process. This action was carried out very quickly by freezing DoD's key staff out of the chain of command and isolating them from the decision-making process within DoD. DoD abandoned its traditional role and instructed DoD employees to side with the Commerce Department and isolate the State Department and ACDA on many issues. This bizarre role change finds the State Department at times in the farcical position of being the lone agency making the national security case and opposing liberalization positions from DoD. An almost comical situation develops with the State representative scratching his head in bewilderment over how he wound up anchoring the right-wing view. I don't know about you, but I view reliance upon the State Department as the bulwark of our national security with more than a little disquiet.

      Beyond these actions our strategic position is being further eroded from other angles. The much-ballyhooed "Dual-Use Initiative" was advertised as the Defense Secretary's plan to cut DoD procurement costs by using commercial technology in weapons systems wherever possible. This initiative is unfortunately a double-edged sword, which, while promising some potential cost savings, will also slash critical advantages in U.S. technological superiority by forcing weapons systems to use the same decontrolled technology potential enemies are now allowed to build their own weapons around. It also forces our military to rely upon critical microelectronics and components that are designed and manufactured abroad, thus making them extremely vulnerable to supply cut-offs, countermeasures, spoofing, or even sabotage. These are the very same dual-use technologies that the administration has actively decontrolled.

Threats to U.S. National Security

      Former Secretary of Defense Dick Cheney observed in 1992 that "world events repeatedly defy even near-term predictions. In early 1989, few predicted Eastern Europe would escape Soviet domination by Thanksgiving. In early 1990, few predicted America would be headed for war by Labor Day, or would have half a million troops in Saudi Arabia by New Year's Day. Even at the end of that war, few appreciated the strength of Saddam's nuclear program. In early 1991, few predicted the Soviet Union would be gone by Christmas. In earlier times, we failed to predict the Soviet development of atomic weapons and Sputnik, the North Korean invasion of the South, or the Japanese attack on Pearl Harbor."[1], [2]

      He also emphasized, "We field the most technologically advanced weapons in the world. This factor partially offsets the need to match potential adversaries' quantitative advantages. The combination of the technological superiority of U.S. military systems and the result of forty-nine years of preparation to fight a global war provided us with the capability to effectively contain and counter aggression."

      However, current policies, which emphasize the funding of research and development activities but put production and implementation in abeyance, will further compound the erosion of the technology gap that the taxpayer worked so hard to achieve. Attachment D depicts the nature of DoD weapons development money and the firewall between R&D and mass production. One of the questions for your Committee to consider is whether the military need to fund the production of new systems would have been as soon, as expensive, or in as great a number had an effective non-proliferation regime been kept in place.

      Unfortunately, the technological gap between the United States and many potential adversaries, in particular China, is closing from both ends of the strategic equation. Fold in the unabated takeovers of U.S. defense companies by foreign entities and the process accelerates further and takes on overtones of irreversibility.[3] My view of this relationship is depicted in a notional manner below and is expressed in a development economics context wherein many of the aforementioned factors contribute to the narrowing of the life or death technology gap historically enjoyed by the men and women in our armed forces.[4]

Technology and Weapons Systems

      Technological superiority is not an absolute term. It is measured against an adversary's overall military capability. As such it is a fluid concept rooted in the state of technological development characteristic of each side, the degree to which the military capability of each side benefits from the pace of technological advancement, and the rate and extent of the metamorphosis of new ideas into fielded military systems.

      In the United States, a major weapons system takes approximately fifteen years from initial concept formulation to introduction in the field. It is a well-accepted fact that military product development cycles in the United States drag on gruesomely long, usually resulting in military systems that incorporate electronic components several generations behind the existing state of the art. For example, it took eleven years for products incorporating the military's first very high speed integrated circuits (VHSIC's) to appear on the market even though the VHSIC program's major purpose was rapid insertion of advanced components in weaponry.[5] Even the top-billed U.S. defense weapons used in the Persian Gulf were not as modern or as sophisticated as much commercial technology. The much-acclaimed Patriot and Tomahawk missiles were developed over twenty years [earlier], and many of their parts are even older. For example, the 8088 microprocessor used in the Patriot missile was developed by the Intel Corporation fifteen years earlier.[6]

      Unfortunately, the administration persists in clinging to a methodology that has no technical merit or basis; that is, the case-by-case judgment whether a particular technology transfer will close the technology gap between the recipient and the U.S. Unfortunately, the National Security Council and the Joint Chiefs of Staff applied this flawed concept in conjunction with the sweeping CoCom decontrols of 1990-92. This demonstrated a fundamental oversight, or lack of appreciation, of the incremental nature of technological advancement or the symbiotic relationship between disparate technologies when incorporated into a weapons system. It is the amassing and integration of a variety of interdisciplinary building blocks that defines technological superiority. The persistent U.S. refusal to recognize these facts will guarantee the failure to protect critical military technology, which, in my view, will result in long-term strategic disadvantages and a future back-breaking burden for the taxpayer to desperately finance an eleventh-hour spending frenzy. (see Attachment E)

      Underlying the administration's refusal to protect U.S. technology and our defense industrial base is the identity fallacy: the notion that big effects must have big causes, that big events must have big consequences, and conversely that small events must have small consequences. These assumptions are often erroneous and contrary to the principle of nonlinearity, which relates seemingly small events as essential catalysts to a degree of change well in excess of what may be expected by casual observers. Such a catalyst initiates a reaction among a series of independent, and seemingly unrelated, simultaneous events to create a nonlinear or disproportionate result. For instance, the assassination of the Austrian archduke in Sarajevo was only the catalyst that set in motion the chain of events resulting in the first World War. So, too, are the scores of relatively small, seemingly unrelated, military technologies released to potential adversaries over the past few years. Attachment F demonstrates the staggering consequences and costs that may result from the transfer of key enabling technologies. This notional study shows how the transfer of laser technology can be used against us and may force the redefinition of the nature of air combat, power projection, and even sensor technology.

      The Central Intelligence Agency's Technology Transfer Assessment Center undertook the only known systematic attempt to array a variety of militarily critical technologies against the weapons systems in which they are found. The CIA data found in Attachment G underscore the pervasive nature of certain technologies.

      These tables "relate all technologies to all military systems" and assign three levels of criticality to each entry: helpful, important, and essential. The CIA methodology draws strength from identifying "Western technologies and equipment which are required for the development and production of future Soviet military systems."[7] Unlike the current system, which is heavily biased toward developing a universal set of "militarily critical technologies," the CIA system returns to the original reason for U.S. and multinational export controls -- [foreign] military needs."[8]

Neutralizing Stealth

      The cumulative effect of the unrestricted decontrol of technologies such as radars, computers, displays, traveling wave tubes, fiber optic cables,[9] signal/array processors, and software, and their incorporation into hostile military air defense networks, will be to neutralize the manned bomber component of the U.S. strategic triad and place in great jeopardy the multi-billion-dollar U.S. investment in stealth technology. The integration of these technologies make possible the detection and tracking of U.S. stealth aircraft. Conversely, the decontrol of composite materials, production equipment, and know-how will advance the stealth efforts of potential adversaries as well.

      "Stealth" is neither a magical concept nor a black art. It represents the merger of a variety of new materials, long-standing engineering principles, and state-of-the-art computational modeling capabilities into an airframe capable of attenuating or deflecting radar impulses away from an enemy radar receiver.

      If these transfers result in the loss of even one B-2 bomber, the financial loss alone would greatly exceed any potential profits to be realized by the sale of equipment. The loss of two B-2s would be the dollar equivalent of losing a nuclear-powered aircraft carrier with its eighty-plus aircraft aboard. In addition, the resulting erosion of the manned bomber leg of the U.S. strategic triad is of fundamental import to U.S. defense planning, yet the defense planning establishment, including Congress, was not a party to this decision-making process. Unfortunately, the ability to detect and track low-radar cross sections so critical to stealth detection is the same capability required for defense against cruise missiles.

      Both of the stealth aircraft shown to the public so far (the Lockheed F-117A and the Northrop B-2) appear to be designed for intruder rather than air-defense purposes, but what is now obvious is that very low radar cross sections (RCS) are achievable. Reductions in RCS are the primary basis for achieving low observability, and the effect can be calculated quite simply because all radars conform to an immutable law of physics -- that detection range varies with the fourth root of the RCS measured in square units. For any given aspect, if the RCS is reduced by a factor of ten, then the detection range should be divided by 1.78. Thus, if an aircraft with an RCS of ten meters squared (m2) could be detected at 100 nautical miles (nm) range, then a reduction to 1 m2 RCS will result in a pick-up range of 56 nm. A further reduction to 0.1 m2 brings the range down to approximately 32 nm.[10] The two factors held to be of greatest significance in determining RCS are shape and the material used in the object's construction. However, achieving true stealth is not just a matter of reducing the RCS. Other critical factors concern system design, including size, shape, aspect, and materials; and reduction of detectable noise (both acoustic and electronic), infrared emissions, and trails (smoke or vapor).

      I believe that the two most devastating technology decontrols cover machine tools and high-speed computers ( machine tools from two perspectives -- first, their ubiquitous presence in the manufacture of all advanced military systems, particularly where high precision or complex geometry is required. Second is their criticality to U.S. industrial competitiveness.

      The U.S. strategic advantage over most foreign weapons systems relies on mission effectiveness and lethality, both of which develop at the subsystem level, contrary to the logic of the "gap-closer" approach, and saw ample demonstration in Iraq. For example, the so-called opto-mechanical devices found in advanced targeting systems are produced on machine tools in the ±5-9 micron range as are the miniaturized guidance systems in state-of-the-art missiles. In addition, critical components in advanced cruise missile warheads and "smart weapons" are produced on machines in the ±5-9 micron range.

      The relationship ofÊcomputers and advanced machine tools to the proliferation problem is often posed in simplistic terms: Since the U.S. did not need computers or computer-controlled machine tools to develop nuclear weapons and ballistic missiles, there is little need to control either technology for these purposes. The argument ignores the fact that computers and computer-controlled machine tools have become an essential tool for many activities that were previously accomplished either by secretly amassing dozens of Nobel laureates, supported by hundreds of top physicists, in the mountains of New Mexico for several years or by metalworking artisans fashioning unique parts for small lot production. Computers and computer controlled machine tools have made themselves central by defining the very way technical goals are accomplished, and can substantially enhance the effectiveness of the limited pool of talent often available to a proliferant country while providing the capability for mass production of highly effective weapons systems.

      Proliferant countries operate under constraints that the U.S. nuclear program did not: economic/political sanctions, lack of physical (test facilities, expendable fissile material, etc.) and/or financial resources, threat of possible pre-emptive attack by a concerned neighbor, etc., which would make computer simulation of paramount importance. This is also increasingly the case for ballistic missile testing as well, and fewer tests will mean such programs are less visible, less vulnerable to international opinion, and more difficult to assess and guard against. Computers and computer controlled machine tools are particularly useful for the more advanced proliferants as they develop a more sophisticated military arsenal. At whatever stage of development, it is in the USG interest to make a weapon of mass destruction (WMD) and ballistic missile program as difficult, expensive, and unreliable as possible.

Decontrol by Metaphor

      The unremitting drumbeat for decontrol is not without its creative side. Perhaps its greatest example was the clever use of simple terminology such as "hot sections" to mask radical decontrol measures which have swept away most restraints on the export of advanced propulsion technology. As displayed in Attachment H, using terms that have no intrinsic meaning has been an effective vehicle with which to decontrol the underlying materials, techniques, and equipment for the manufacture of even the most advanced military engine technology.

We've Heard This Song Before

      While it is impossible to "child-proof" the world, strategic export controls have been, and can continue to be, an effective restraint on a potential adversary's ability to inflict grave military damage on the United States and its allies.

      Mr. Chairman, the massive technology decontrols and the sell-off of U.S. defense assets throughout the mid-1990's [particularly to China] and the failure to recognize growing threats to our national security are chillingly reminiscent of the disastrous French armaments policies on the eve of World War Two. According to William Manchester in his excellent biography of Winston Churchill The Last Lion, in 1940, the French high command decided to sell its tanks abroad. The R-35 was a better tank than any German model. Of the last 500 produced before May l0, 1940, nearly half -- 235 -- were sold to Turkey, Yugoslavia, and Rumania, with the result that when the Germans struck only 90 were on the French front. Moreover, while Nazi troops, Stukas, and armored divisions were massing in the Rhineland for their great lunge westward, the generals charged with the defense of French soil gathered representatives of countries not regarded as unfriendly to France and auctioned off 500 artillery pieces, complete with ammunition, and 830 antitank guns -- at a time when the French army was desperately short of both weapons.

      Perhaps even more to the point was the British cabinet decision in 1934 to sell 118 Rolls-Royce Merlin engines to Germany. You may recall that the Merlin engine became the principal powerplant in the Spitfire airplane that literally saved England from Hitler's advances and destroyed his plan to invade England just a few years later. In fact the Supermarine Spitfire is undoubtedly one of the most famous fighters of all time. When the Battle of Britain began on August 12, 1940, nineteen Spitfire Mk 11 squadrons and thirty -- two Hawker Hurricane squadrons stood to face the German onslaught. For the next 80 days, 3,500 German bombers and fighters fought against fewer than 1,000 Spitfires and Hurricanes as the most important battle of World War Two raged. The faster, more maneuverable Spitfires were used against fighters while the Hurricanes fought the German bombers. When the fighting ended on October 31st the Spitfires and Hurricanes had downed 1,733 German aircraft.

      Manchester also documented how "Chamberlain had insisted upon approval of the sale as a matter of high principle and he stated 'trade, like religion, should recognize no frontiers.' The engines, he insisted, had been designed for civilian use, and he chose to ignore the fact that they could also be used in small fighter planes. When Churchill was informed of this export to Germany, he refused to believe it; until the actual bill of lading arrived in a plain envelope. Immediately he proposed a total ban on aircraft deliveries abroad. The Royal Air Force needed every plane it could get, he said, and none should be sold to any other country -- certainly not to Nazi Germany. Chamberlain, speaking for the cabinet, rejected his proposal because the trade policy of His Majesty's government required that 'deficiencies in the Defense Forces should be made up with the least possible interference with the export trade.'"

      Chamberlain's obstinate refusal to face up to the reality of growing military threats to national security and the placement of the balance of trade and the short-term profits of private companies ahead of military preparedness is one of the hallmarks of current U.S. policy. The similarity in tone, manner, philosophy, and outcome between the two can be seen most clearly in the U.S. approach to China.

      I am afraid that we are witnessing history repeat itself. Chamberlain called Churchill a warmonger for his warnings of the dangers posed by the German monster looming in the East. Chamberlain even came out and said, in 1934, that he could only base his decisions upon his predictions for the next two years. Looking beyond that limited horizon could not be done. Unfortunately, the United States is conducting its foreign and military policies in much the same myopic fashion. Preparing for future threats is given credence and funding only when it does not interfere with moneyed interests or large adversaries.

      Mr. Chairman, the fact that these hearings are being conducted today indicates to me that the foresight and courage that Churchill personified is present in these halls as well.

      I would be pleased to answer any questions you may have.

      Peter M. Leitner, Decontrolling Strategic Technology, 1990-1992: Creating the Strategic Threats of the 21st Century. Lanham, MD: University Press of America, 1995.


1. Peter M. Leitner, Decontrolling Strategic Technology, 1990-1992: Creating the Strategic Threats of the 21st Century. Lanham, MD: University Press of America, 1995.

2. Statement by Secretary of Defense Dick Cheney to House Budget Committee, (Feb. 5, 1992): 1-2.

3. Larry Skantze, "Prototype Mentality a False Path: U.S. Must Realize Technology's Value Lies in Exploitation," Defense News (September 10, 1990): 24; Linda Spencer, Foreign Investment in the United States: Unencumbered Access, (Washington, D.C.: Economic Strategy Institute, 1991).

4. The most critical feature is the expression:

      In the left side of this expression, MTC = Military Technology Capabilities. The first portion of the right side of the expression represents the traditional building blocks of the economic development function, comprised of the following factors: C = Capital, L = Labor, E = Education, N = Natural Resources, and S = Sociological factors, i.e., birthrate, mortality, etc. The second portion accounts for those factors, beyond the building blocks, that are essential to the development of advanced military technologies. While not all-inclusive, they are representative of the major factors. These include the following: I = Industrial Base, DV = Diversification, R&D = Extent of resources dedicated to military research and development, P = Political will to sustain activity, IT = Indigenous technology, AT = Access to relevant foreign technology. The factors are bounded by Time.

5. Michael Borrus and John Zysman, "Industrial Competitiveness" Rethinking America's Security: Beyond Cold War to the New World Order. Graham Allison and Gregory F. Treverton, eds., New York: W.W. Norton and Company, 1992, 173.

6. Ibid., 123.

7. U.S. Central Intelligence Agency, National Security and Export Controls: A Decision Aid, (Undated, Circa. 1990): 1.

8. Ibid., 1.

9. Michael S. Lelyveld, "Fiber-Optic Curbs on Ex-USSR Tied to Missile Fear," Journal of Commerce, (March 24, 1992), 1.

10. M. B. Elsam, Air Defense, London: Brassey's, 1989, 78.