-Caveat Lector-
Published Sunday, February 21, 1999, in the San Jose Mercury News
Security vs. tech exports
House report: Valley's shipments to China, others threaten national
defense.
BY MICHAEL DORGAN
Mercury News Staff Writer
WASHINGTON -- A classified congressional report detailing Chinese
espionage in the United States has put the nation's computer industry
on a collision course with Congress.
Release of the report, scheduled for next month, appears certain to
trigger a high-stakes showdown over export controls involving billions
of dollars in potential corporate earnings as well as allegations that
high-technology executives have sacrificed the nation's security in
pursuit of profits.
``I believe we are in for a very, very difficult time,'' Rep. Tom
Campbell, R-Campbell, said of his Silicon Valley district, the world's
leading source of high technology. ``I'm saying this is the most
difficult time in my 11 years in public life regarding the export of
high technology to China in specific and to other countries considered
unreliable.''
Campbell, a strong supporter of his district's high-tech industry,
says the mood of his congressional colleagues is such that current
regulations controlling technology exports are likely to be tightened
in coming months. That would be devastating news to computer
companies, some of which export half of their production and almost
all of which complain that current controls already are unreasonably
restrictive.
``Our biggest concern is what happens to us later this year and next
year and beyond with the existing set of controls, forget about any
rollbacks,'' said Dan Hoydysh, chairman of the Computer Coalition for
Responsible Exports, a lobbying group representing some of the
nation's leading computer companies, including Compaq, Dell,
Hewlett-Packard, IBM, Intel and Unisys. ``Even if rollbacks are not
enacted, the existing system will bring us into crisis for getting
approvals (for exports).''
Under current regulations, he noted, any computer with merely a pair
of the new Intel Pentium III chips would be powerful enough to require
a license if sold to such ``tier 3'' countries as India, Israel,
Pakistan, Russia or to the world's fastest-growing computer market,
China.
If rollbacks are imposed, the new generation of chips will ``bring
individual desktop PCs into the licensing regime'' and overwhelm the
export-control system, Hoydysh said.
Computer executives, and some U.S. government officials, say a denial
of easy access to those emerging markets would cripple the global
competitiveness of U.S. companies while boosting the growth of foreign
companies. The result, they say, would be a weakened national security
because the U.S. defense industry depends on this country's
leading-edge technology companies to keep America's weapons systems
more advanced than any potential enemy's.
``Exports equal healthy high-tech companies equal a strong defense,''
Undersecretary of Commerce William Reinsch, head of the department's
export bureau, told a group of Mercury News editors and reporters
during a recent visit to Silicon Valley to warn high-tech officials
that the future growth of their companies could be sharply curtailed.
Reinsch's equation may sound like basic math to the high-tech
community, but it increasingly has been challenged by some within
Congress and the Defense Department.
They say making advanced technology easily accessible to potential
adversaries diminishes the margin of technical superiority needed to
deter conflict or win a decisive victory.
Export restrictions
Controls relaxed after the end of Cold War
During the Cold War, even computers puny by today's standards were
strictly banned for export to countries deemed unfriendly. But
following the collapse of the Soviet Union, the multinational
commission that regulated technology exports was scrapped. Then, under
former Defense Secretary William Perry, a Stanford University
engineering professor and defense technology specialist, export
controls were greatly loosened to allow U.S. high technology to flow
freely into foreign markets.
Peter Leitner, a senior official in the Defense Department's Threat
Reduction Agency, says many high-tech companies have shown ``reckless
disregard'' for national security in their pursuit of those markets.
He says high-tech executives are often blindered by greed and
ambition, and can be dangerously naive when it comes to assessing
threats posed by their technology.
``They have a self-serving and distorted view,'' he said in an
interview.
Leitner said the industry's success in recent years in pressing for
relaxation of export controls has helped countries like China -- which
the CIA has identified as the world's leading source of the
proliferation of weapons of mass destruction -- procure the technology
needed to develop or improve nuclear arsenals.
Key to the design, development and testing of those weapons are
high-speed computers. But Leitner said export controls are so lax that
no one knows what kind of work is being done on most of the hundreds
of high-speed computers U.S. companies have sold to China in recent
years.
``What you have is a big black hole,'' he said. ``Nobody knows what's
going on.''
He blames not only computer companies for lax export practices but
also the Commerce Department, the government agency most responsible
for monitoring exports. He said the department is geared to promote
trade rather than protect national security, and that Reinsch is
merely a ``salesman'' for the industry's products.
Technology export policies and practices are just one part of the
forthcoming congressional report. Rep. Christopher Cox, the Southern
California Republican who chairs the House select committee that
produced the study, said much of it deals with the ``sustained and
successful'' espionage effort by China to obtain U.S. military
secrets.
Cox, in an interview, said the committee's most alarming findings
concern China's use of secrets stolen from U.S. national weapons labs
to significantly advance its nuclear weapons arsenal.
Those findings are certain to be politically explosive. They will
arrive at a time of mounting tension between the United States and
China over issues ranging from China's rough treatment of
pro-democracy advocates to U.S. plans to build a so-called Theater
Missile Defense system in the Pacific.
Just seven months after President Clinton visited China and proclaimed
a ``strategic partnership,'' the two countries increasingly are
preoccupied by disputes. Likely to add to the tensions will be a
forthcoming Defense Department study that reportedly documents a
dramatic increase in the number of missiles China has aimed at Taiwan,
an informal U.S. ally that China regards as a renegade province.
Added security
Panel's report seeks tighter controls
``A broad debate on China is brewing,'' said Professor Michel
Oksenberg, a Stanford University China expert. ``A number of strands
are coming together, and the Cox committee report could serve as a
catalyst for that debate.''
Already heated disagreement has been sparked by a release of some of
the committee's recommendations, along with White House responses.
They call for tighter controls on exports of high-speed computers,
stricter security at Lawrence Livermore and other U.S. nuclear weapons
labs, and closer monitoring of foreign investment in defense-related
industries. The recommendations also call for a reassessment of the
``appropriateness'' of continuing to apply a looser standard of export
controls to Hong Kong than to the rest of China.
A Pentagon official who spoke on condition he not be identified said
Hong Kong, which in 1997 was reunited with China as a ``special
administrative region,'' often serves as a conduit for U.S. technology
that is restricted from export to China. That apparently is suspected
by the Cox committee, which said the review should consider, among
other things, ``the implications of unmonitored border crossings by
vehicles of the Peoples' Liberation Army.''
Among the recommendations on high-speed computers is that China be
required to allow unannounced on-site inspections by U.S. agents to
assure that the computers are not being used for military purposes.
Paul Brownell, director of trade regulations for the American
Electronics Association, describes that recommendation as
``breathtaking in its audacity.'' Brownell, whose organization
represents many of the nation's computer companies, said such an
affront to China's sovereignty would be a deal killer.
Another deal killer, he said, would be the proposal that officials
from the State and Defense departments be given expanded roles in
reviewing sales.
``The recommendations really hit the computer industry hard,'' he
said. ``They are fairly unworkable and fairly unacceptable.''
Nonetheless, they are likely to be made law, Campbell says. Citing the
unanimous endorsement of the recommendations by the nine-member,
bipartisan Cox committee as an indication of the Congress' mood,
Campbell says tighter export restrictions also are likely for the
satellite industry, which also looks to China as a huge potential
market.
Licensing PCs
Campbell fears chips defined as `high-speed'
One of his foremost concerns, Campbell said, is that Congress will
entomb in statute a definition of high-speed computers that will be
difficult to adjust to keep pace with technological advances.
Currently, computers sold to China and other tier 3 countries require
licensing if they exceed 2,000 MTOPS, or millions of theoretical
operations per second. Individual chips trigger the licensing
requirement at 1,200 MTOPS.
Intel's new Pentium IIIs will run in that range, and chips scheduled
to hit the market next year will be more than twice as powerful,
according to Intel's David Rose.
``If the government limit remains unchanged, it means millions of
mass-market products will be caught by export controls,'' Rose said.
He predicted that the entire export-control system would be
overwhelmed and that China would quickly develop the capability to
make its own advanced chips.
Arms-control expert Leitner's response: So be it. The global marketing
of advanced technology not only diminishes America's advantage, he
said, but requires the U.S. military to upgrade its hardware and
software at taxpayer expense.
America's high-tech companies, he said, ``should show a little civic
responsibility and restraint.'' [INLINE]
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