WASHINGTONInterests within the Pentagon and the Commerce Department are seemingly at odds over whether to loosen or tighten federal control over exports to China, the world's largest potential electronics market as well as a potentially potent military rival. The pendulum appears to be swinging toward more strident export restrictions in the aftermath of the Sept. 11 terrorist attacks. But the tension between the sides persists, fueled in part by the lobbying of U.S companies.
Critics of export controls maintain that they are ineffective and that the United States should focus instead on maintaining its technological dominance. The U.S. electronics industry has long argued that China will buy from foreign competitors if it can't get technologies from U.S. companies. That view is gaining currency among trade officials who want to promote U.S. business while imposing strict end-user rules on U.S. technology exports.
"The choice for us as export control officials is often whether to allow a U.S. company to export an item, which in turn allows the U.S. government to strictly condition or limit its end use and monitor compliance with such conditions, or to allow a foreign competitor to sell the same item and relinquish the ability to further control or monitor its use," said James Jochum, assistant secretary of commerce for export control.
The rub is divining China's military intentions. "Nobody is smart enough to know whether China will be a friend or foe 10 to 20 years from now, which makes the evaluation of technology transfer more difficult," said Michael Ledeen, a former U.S. official and vice chairman of the U.S.-China Security Review Commission.
Asked recently by commission members whether a technologically advanced China represents an immediate military threat to the United States, former Pentagon official Donald Hicks responded, "I don't see them as a military threat now, and I don't see them as a military threat for some time."
But others are concerned. "China's being very aggressive, obviously for economic reasons, but with military implications," said Michael Borrus, a veteran observer of the global electronics industry.
China's "grand strategy" is to develop a world-class electronics industry and draw on it for military applications if needed, said Roger Cliff, a researcher with the government-backed Rand Corp.
Commerce and Pentagon officials are thus working to fashion mutually agreeable licensing policies aimed at denying dual-use manufacturing technology to China while accounting for technologies that are widely available from foreign suppliers. The Pentagon upgraded the status of its Defense Technology Security Administration in August to address concerns about technology transfer and weapons proliferation.
Since the release of a 1999 congressional report on the potential Chinese threat to U.S. national security, experts have been debating the elements of a coherent policy toward dual-use technology exports. While the Cox Commission report on China highlighted mostly warhead, missile and supercomputer technologies, the focus of the debate has since shifted to more fundamental technologies, including electronics.
Among the reasons is the alarming shift of IC production capacity to mainland China at a time when electronic devices are assuming an ever-increasing role in weaponry and warfare.
A recent study on improving multilateral export controls recommended that technology transfer issues be accorded a high priority in U.S.-China relations. The current "all-or-nothing" approach to export controls needs to be fixed, said Kathleen Walsh, co-author of the study and a senior associate at the Henry L. Stimson Center, a Washington-based national security think tank. "There is a middle ground," she said.
Pentagon studies have found that China's military strategy focuses on advances in such key technologies as long-range precision-strike weapons, information warfare, automated command and control and integrated air defenses. "In support of these efforts, Beijing has identified the development of an indigenous microelectronics industry as one of its highest priorities," Lisa Bronson, deputy undersecretary of defense for technology security policy and counter-proliferation, said at a January hearing on export policy toward China.
Signaling what some see as a harder line on technology exports to China, Bronson added, "Our review of microelectronics dual-use [export] licenses is colored by our evolving understanding of what China wants."
Commerce officials said China now accounts for the highest volume of export license applications, about 1,300 out of 11,000 applications in 2001. Most are approved. The DOD and the State Department also review virtually all license applications for dual-use technology, according to Jochum of Commerce.
Observers, including former government officials, said U.S. policy on electronics exports to China seeks to keep it at least two generations behind the United States. DOD officials dispute that, but others said the de facto strategy would preserve U.S. military superiority for several more decades.
Pockets of excellence
Analysts agreed that China's sprawling defense industry pales in comparison to that of the United States. China is focusing on electronics as a key to modernization, with Taiwan serving as its top semiconductor supplier.
"China has extensive defense industries, but they are very old and not capable of absorbing modern Western technology," said James Lewis, director of technology policy at the Center for Strategic and International Studies.
Rand's Cliff, author of a 2001 report on the military potential of China's commercial technology, concurred. Commercial technologies "don't seem to be working themselves into the defense industry. There are 'pockets of excellence' but the diffusion [of commercial technology] appears to be happening slowly."
For its part, the U.S. semiconductor industry favors scrapping the current U.S. export controls on commercial products while concentrating on technology superiority as a hedge against Chinese military modernization.
The chip industry "is global and commercial, not national and military," Daryl Hatano, vice president of the Semiconductor Industry Association, told the U.S.-China Commission.
One of the industry's key demands is to remove export controls on IC process technologies as well as manufacturing equipment and materials. There is growing economic pressure to do so: China's goal is to become a $24 billion IC market by 2010.
An emerging concern is the growth of Chinese R&D centers and the difficulty of determining what they are working on, said Walsh, the Stimson Center researcher. The latest example is the China Electronic Technology Corp., which reportedly includes 46 institutes and 26 companies. Walsh is heading up a yearlong study to determine how China defines R&D and what joint venture partners contribute to the research efforts.