[Senate Hearing 106-613]
[From the U.S. Government Printing Office]

                                                        S. Hrg. 106-613




                               BEFORE THE

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION


                             APRIL 12, 2000


      Printed for the use of the Committee on Governmental Affairs

64-899 cc                   WASHINGTON : 2000
For sale by the Superintendent of Documents, Congressional Sales Office
         U.S. Government Printing Office, Washington, DC 20402


                   FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware       JOSEPH I. LIEBERMAN, Connecticut
TED STEVENS, Alaska                  CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine              DANIEL K. AKAKA, Hawaii
GEORGE V. VOINOVICH, Ohio            RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico         ROBERT G. TORRICELLI, New Jersey
THAD COCHRAN, Mississippi            MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania          JOHN EDWARDS, North Carolina
JUDD GREGG, New Hampshire
             Hannah S. Sistare, Staff Director and Counsel
            Christopher A. Ford, Chief Investigative Counsel
                Mark T. Esper, Professional Staff Member
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
               Laurie Rubenstein, Miniority Chief Counsel
                 Darla D. Cassell, Administrative Clerk

                            C O N T E N T S

Opening statements:
    Senator Thompson.............................................     1
    Senator Lieberman............................................     3
    Senator Akaka................................................    18

                        Wednesday April 12, 2000

Hon. John D. Holum, Senior Advisor for Arms Control and 
  International Security, U.S. Department of State...............     5
Hon. William A. Reinsch, Under Secretary for Export 
  Administration, U.S. Department of Commerce....................     7
Frank J. Gaffney, Jr., President, Center for Security Policy.....    27
Stephen J. Hadley, Former Assistant Secretary for International 
  Security Policy, U.S. Department of Defense....................    29
Henry D. Sokolski, Executive Director, The Nonproliferation 
  Policy Education Center........................................    31

                     Alphabetical List of Witnesses

Gaffney, Frank J. Jr.,
    Testimony....................................................    27
    Prepared statement...........................................    61
Hadley, Stephen J.:
    Testimony....................................................    29
    Prepared statement...........................................    67
Holum, Hon. John D.:
    Testimony....................................................     5
    Prepared statement...........................................    49
Reinsch, Hon. William A.:
    Testimony....................................................     7
    Prepared statement...........................................    55
Sokolski, Henry D.:
    Testimony....................................................    31
    Prepared statement with attachments..........................    79



                       WEDNESDAY, APRIL 12, 2000

                                       U.S. Senate,
                         Committee on Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:05 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Fred 
Thompson, Chairman of the Committee, presiding.
    Present: Senators Thompson, Lieberman, and Akaka.


    Chairman Thompson. All right. Let us come to order, please. 
We appreciate very much our witnesses coming to be with us here 
today. We are considering a subject that a lot of people 
consider to be one of the most important subjects that we have 
to deal with. We spend an awful lot of time dealing with things 
that many of us think do not amount to much, but this is 
clearly an area that does. I remember shortly after I came to 
town, I was watching television, I flipped on a speech that 
Senator Nunn, former Senator Nunn, was giving in Houston. He 
was talking about the proliferation of weapons of mass 
destruction as the greatest threat that this country faced. A 
few days later I watched former Secretary of State Christopher 
on a Charlie Rose show and Charlie put the question to him what 
was the greatest danger to our national security? He gave the 
same answer. I know Secretary Cohen in the recent past has 
basically said the same thing.
    I think there is a growing realization that we do not have 
the one big threat that we had back during the days of the 
Coordinating Committee on Export Controls (or COCOM), but we 
now have a different kind of threat. In many ways, it is more 
dangerous and more insidious. Of course, what we do not agree 
upon is exactly what we ought to be doing to deal with it. We 
have a major debate going on about this right now in terms of 
the Export Administration Act. I hear that it is going to be 
brought to the floor shortly. I think the current EAA bill is a 
mistake. I think we have not spent enough time on it. There are 
several committees, including this Committee, that have 
jurisdiction in these areas and we are just kind of going 
lickety-split. I know the Banking Committee has spent a lot of 
time on it, but we are just now getting our focus on the issue 
and we are going too fast because there is great pressure in 
terms of the issues of trade and commerce to get this done.
    But anyway, we will have that debate. Also, I think most of 
us do agree that we need to do what we can in terms of 
multilateral regimes, arrangements, treaties, and what not to 
cut down on the proliferation of weapons of mass destruction, 
ballistic missiles, and biological, chemical, or dual-use 
    We are dealing here today primarily with to one of those 
multilateral arrangements, the Wassenaar Arrangement, which I 
guess you might say deals with the other edges of our concern. 
We have more consensus in the area of missiles, nuclear, 
biological, and chemical weapons than we do with regard to the 
sort of dual-use items controlled by Wassenaar, for example. So 
we are not together with our allies on exactly what we should 
be doing.
    Some of us are going to be talking to our allies over this 
next recess about those issues, and while we could spend an 
awful lot of time disagreeing--as I'm sure I do with our first 
two witnesses on some aspects of our export control policy and 
about what I believe to be an unjustified loosening in terms of 
many of these areas--clearly we now live in a different world. 
We do not live in a COCOM world anymore. There is more foreign 
availability of sensitive technologies than ever before, but we 
have dangers that are increasing--as we are told by the 
Rumsfeld Commission, as we see with the North Koreans launching 
their three-stage rockets and other things that come as a great 
surprise to us, as we read the Cox Report that the Chinese are 
using our high performance computers to enhance their own 
nuclear capabilities, as we see diversions in high performance 
computers to China and to Russia, as we see with the Loral 
problem, and now the Lockheed problem, and as we read the 
Inspector Generals' reports concerning what they believe to be 
a lack of training, lack of end-user verification, and other 
controls of that nature. I simply believe that instead of 
pushing forward with what I would call a further loosening 
across the board, especially in terms of high speed computers, 
encryption and things of that nature where the technological 
pace is picking up, instead of doing that, we ought to sit back 
and have a new assessment of some kind.
    The more I get into this, the more I see that all points 
have certain validity. And what we really need is not for 
Congress to sit here and decide whether or not ``x'' item ought 
to be exported or not. What we need is to make sure we have a 
process where all of the relevant interests are presented, 
whether it be through a separate, independent agency or 
whatever. I think we need to reassess that. Perhaps our view in 
terms of what we ought to be controlling should be changed. Now 
I read where some people are saying we ought to control fewer 
items, build higher fences around fewer items.
    Some are also saying that we need to concentrate more on 
catch-all provisions in terms of what countries we are sending 
things to--that is, not to control so many things, but to 
concentrate more on bad destinations. That sort of thing. I do 
not pretend to have the answers to all of these questions, but 
the more I get into it, the more I am convinced nobody else 
does either. Perhaps it is time that we really sit back and 
take a look at the fact that we are in a new world: One with 
more foreign availability and more opportunities for even our 
allies to undercut us if we do not trade, but also many new 
dangers from many other countries. Even countries whose people 
are starving to death apparently have the ability today to 
launch chemical and biological weapons onto this country, and 
perhaps shortly nuclear ones as well. I am referring to, of 
course, North Korea.
    So, in that kind of world, what should we be doing? I 
believe we should be trying to exercise some leadership with 
regard to our allies, which gets us into the Wassenaar and 
these other multilateral arrangements, which is what we are 
dealing with here today. So after saying I did not want to get 
into all that, I got into all of that. But now, I really am 
going to try--and others can follow their own lead, but I 
really am going to try--to direct my attention toward what 
should we be doing in terms of these arrangements. Are they 
really helping? What are our successes, our failures? What are 
we trying to do as a nation in terms of exercising leadership 
with regard to these arrangements?
    What are our criteria for success? How do we know how much 
good we are doing? Could things be done differently? How 
important is it? To what extent are we getting cooperation from 
our allies? How important is the fact that we have different 
views, clearly, on some things?
    We all seem to agree that there is a certain list of items 
that ought to be of concern, and we pretty much agree what that 
list is. We all agree that there are a certain group of 
countries that ought to be of concern, but we certainly do not 
agree with our allies with regard to what to do about that. And 
we disagree not only about what to do about the so-called rogue 
nations, but with regard to China. So that is why we asked you 
to come here today: To get your views on the significance of 
these arrangements, and the significance particularly of the 
Wassenaar Arrangement because we saw with Iraq that this dual-
use issue is very important and that controlling such items is 
very difficult.
    Where are we and where should we be going? So, gentlemen, I 
appreciate your being here with us today to discuss these 
issues. Thank you. Senator Lieberman.


    Senator Lieberman. Thanks, Mr. Chairman. Thanks for a 
thoughtful statement and thanks for calling the hearing today 
because it does give us the opportunity to explore this 
important issue of export controls from a perspective that 
often does not get the attention it deserves and that is the 
multilateral perspective.
    As you indicated, we are living in an age of remarkable 
globalization. It is a different world and a world of stunning 
technological innovation, both of which have brought 
extraordinary benefits to our country and to the world, but, as 
we have become increasingly aware, there are some downsides to 
our entrance into the otherwise happy post-Cold War global 
    With the release of the Cox Committee Report last year and 
other more recent allegations of improper transfers of 
sensitive technology, we have all become aware that the 
proliferation of so-called dual-use technology, which is to say 
technology with both civilian and military applications, has 
important and potentially dangerous ramifications for our 
national security.
    Nowhere is addressing this concern more complicated than in 
the context of multilateral export controls. During the decades 
of the Cold War in our confrontation with the Soviet Union, we 
and our allies were pretty much able to keep our enemies from 
obtaining significant amounts of potentially harmful 
technology. We were able to do this because our allies broadly 
shared our concerns and our strategic views and because much of 
the technology that we wanted controlled was, in fact, capable 
of being controlled by our allies and us.
    But with the end of the Cold War and our entrance into a 
period of extraordinary technological advancement, all of that 
has now changed. We live clearly in a multipolar rather than a 
bipolar world, and our allies no longer share our strategic 
views on some important issues. To cite the obvious example, 
some of our key perceptions regarding countries like China, 
Iraq and Iran different fundamentally from that of our allies.
    Just as importantly, private industry today, not government 
supported military research, stands at the forefront of many 
new technological advances with security and military 
implications. So governments have to run hard to stay in place 
technologically and so they usually do not own or control new 
technologies in the same way we did at an earlier stage of 
    All of that means that the old system under which the 
United States through COCOM was able to essentially tell our 
allies not to transfer sensitive items or technology and 
usually have them abide by that decision and thereby keep 
dangerous technology out of the hands of our enemies--that 
system no longer does or in some measure can exist. Our allies 
no longer see a reason to give us a veto over their export 
decisions. And the proliferation of readily accessible 
technology makes it very difficult for us to exercise the 
control that we once did.
    This all has very significant consequences for our national 
security in the traditional sense by which I mean that it 
clearly can expose us to threats that are serious from those 
who wish us ill. And if we and our allies cannot agree on who 
to sell to and who not to sell to, it also potentially harms 
our national security in another sense. If, for example, our 
allies decide to sell advanced technologies such as satellites 
or supercomputers to places that we will not allow our American 
companies to sell to, our action may not only fail to prevent a 
potential adversary from obtaining what they want to obtain, 
but it may also do damage to our ability to maintain the robust 
technology and defense industries that are critical to 
providing for our own defense.
    These are not easy questions to balance. In some sense, as 
I believe the Chairman said earlier, there is a lot of right on 
all sides. But the bottom line is that we have to figure out 
how to protect our national security in this very different 
world. We must do what we can, but we also obviously have to 
work with our allies, understanding that they are not always 
going to see things the way we do.
    This is a complicated problem that our witnesses today have 
thought long and hard about. I am grateful that they are here 
and I look forward to hearing their views on how best we can 
work in this new multilateral high technology context to 
achieve both our central national goal of protecting our 
national security and also in the process trying to keep the 
world as safe as we can. Thank you.
    Chairman Thompson. Thank you very much.
    Gentlemen, your statements will be made a part of the 
record. If you would summarize those for us, we would 
appreciate it. Mr. Holum.


    Mr. Holum. Thank you, Mr. Chairman, and thank you for 
having this hearing and for laying the basis, both you and 
Senator Lieberman, for I think a productive discussion. We 
appreciate presenting the Department of State the opportunity 
to discuss the Wassenaar Arrangement and the future of 
multilateral export controls. It is important to note at the 
outset, as both of you have noted, that Wassenaar is not and 
cannot be COCOM.
    \1\ The prepared statement of Mr. Holum appears in the Appendix on 
page 49.
    COCOM and other multilateral control mechanisms had a 
clearly defined, mutually agreed strategic threat, and 
addressed that threat by embargoing exports of arms and 
sensitive dual-use items to proscribed destinations. Along with 
our allies, we agreed on procedures for controlling exports to 
those destinations including allowing for any Nation to veto a 
specific export.
    The end of the Cold War, the disintegration of the Soviet 
Union, moves toward democracy and market-based economies in the 
former Warsaw Pact, deep cuts in the strategic arsenals of both 
sides, and the goal of assuring or assisting economic and 
political reform in Eastern Europe, Russia and other newly 
independent States rather than retarding their economic 
development, all led our allies to the view that the COCOM 
arrangement had outlived its strategic rationale and could not 
be sustained.
    The United States eventually joined this view when it 
became clear that our trading partners would no longer agree to 
follow the procedures outlined in the COCOM arrangement. In the 
waning days of COCOM, the United States sought to preserve the 
controls for as long as possible and push to establish a new 
world wide arrangement to cover conventional arms and related 
technologies. It was only through United States leadership that 
we were able to stem the flow of arms and sensitive 
technologies to places such as Iraq, Iran, North Korea and 
Libya, destinations largely ignored by the former COCOM.
    The world has changed for the better. The targets of COCOM 
now are members of Wassenaar as well as trading partners, 
friends and in some cases treaty allies. And our former COCOM 
partners recognize that responsible national export controls 
and policies remain indispensable to promote international 
peace and security in the post Cold War environment even though 
they opposed and continue to oppose any COCOM-like control 
regime. COCOM members, eventually with participation by Russia, 
designed a new multilateral export control regime to address 
the new challenges posed by regional instability in States 
whose behavior threatened international security.
    The new regime, Wassenaar, is the first global multilateral 
arrangement covering both conventional weapons and sensitive 
dual-use goods and technologies. It was negotiated and 
established in the mid-1990's at the same time that COCOM was 
disbanded. As you noted, Iraq's build up of arms before the 
Gulf War demonstrated the need for some form of global export 
regime and the Wassenaar Arrangement responded to this 
challenge by covering more than just dual-use items as had been 
COCOM's focus.
    The Wassenaar Arrangement which began operation in 
September 1996 is designed to prevent destabilizing 
accumulations of arms and dual-use goods and technologies. The 
arrangement encourages transparency, responsibility, 
consultation, and where appropriate national policies of 
restraint. In doing so, it fosters accountability in transfers 
of arms and dual-use goods and technologies.
    It also provides a venue in which governments can consider 
collectively the implications of various transfers on their 
international and regional security interests. It also seeks to 
enhance cooperation to prevent dangerous transfers. Wassenaar 
members maintain export controls on items covered by the 
munitions and dual-use lists, which are regularly reviewed by 
experts as needed.
    However, the decision to transfer or deny any controlled 
items remains the responsibility of individual member states. 
There are no, as there were in COCOM, case-by-case prior 
reviews of proposed exports to proscribed destinations or 
vetoes on proscribed or proposed exports. But members do report 
on their decisions to transfer or deny to non-members certain 
classes of weapons and dual-use technologies.
    Again, unlike COCOM, Wassenaar members are not constrained 
to honor each other's denials, but consultations are encouraged 
in such cases. Although no country is an explicit target of the 
Wassenaar Arrangement, members are committed to dealing firmly 
with states whose behavior is a cause for serious concern. 
There is broad agreement that these states presently are Iran, 
Iraq, Libya and North Korea. Wassenaar members deal with these 
countries of concern by preventing through shared national 
policies of restraint their acquisition of armaments and 
sensitive dual-use goods and technologies for military end-use.
    So Wassenaar provides for the first time a global mechanism 
for controlling transfers of conventional armaments and a forum 
in which governments can examine and debate the implications of 
various transfers on their international and regional security 
    I have in my statement a further elaboration of some of the 
achievements of Wassenaar which I hope we can get into in the 
questions and answers, but I see my time has expired. So I will 
conclude there.
    Chairman Thompson. Thank you very much. Mr. Reinsch.


    Mr. Reinsch. Thank you, Mr. Chairman. In light of what you 
and Senator Lieberman said and also what Mr. Holum said, I 
think I can abbreviate my remarks, since I understand you will 
put the whole statement in the record anyway.
    \1\ The prepared statement of Mr. Reinsch appears in the Appendix 
on page 55.
    Chairman Thompson. All right.
    Mr. Reinsch. Let me concentrate for a few moments on the 
relationship between Wassenaar and COCOM and then conclude with 
some suggestions as to what we might usefully do next, which I 
think is what you said you wanted to focus on.
    As both you and Mr. Holum made clear and in contrast to 
COCOM, Wassenaar's membership has a much broader base. It is 
not limited to NATO members. One of what we think is the major 
successes of the Wassenaar Arrangement is that Russia, Ukraine 
and other former Warsaw Pact countries are members and have 
committed to develop effective export controls and to end 
destabilizing arms sales to Iran.
    Wassenaar's members also include countries that have been 
outside of NATO during the Cold War such as Austria, Sweden and 
Switzerland and new industrial powers such as the Republic of 
Korea and Argentina. We think this broad membership needs to be 
considered as one the successes of Wassenaar.
    Now, in retrospect, we are trying to, if you will, meld the 
legacy of COCOM with the new realities that both senators so 
eloquently described in their remarks. We inherited from COCOM 
a long list of goods to be controlled. The selection of those 
goods was based on preventing the Soviet Union from improving 
its weapons and its high tech industries. That list is out of 
date. It is out of date in terms of the objective. It is out of 
date in terms of the technologies. And we believe it needs a 
good deal of work.
    In addition, we inherited some mistrust that had arisen as 
a result of debates in COCOM, and this was an obstacle to 
progress in building the new regime. Most importantly, COCOM 
permitted the United States and other COCOM members to share a 
common approach to export controls. As you noted, as we 
discovered via Iraq, this changed after the collapse of the 
Soviet Union.
    Our export control policies and those of our allies differ 
widely in some respects. The Europeans have made clear, for 
example, that they have no intention of adopting our unilateral 
sanctions. The Wassenaar Arrangement, covering as it does both 
conventional arms and related dual-use equipment, also does not 
have the same degree of consensus we find in other regimes. 
This is because there is much legitimate trade in the items 
controlled by Wassenaar so the kind of blanket denial policies 
found in the MTCR or the nuclear suppliers group for weapons of 
mass destruction or the embargo approach found in COCOM will 
not work.
    The United States is a major exporter of arms and military 
technologies and considers its ability to make such transfers a 
necessary tool of foreign policy. Many of the items controlled 
by Wassenaar are also becoming widely available through the 
kind of globalization that we were discussing earlier.
    One thing our Wassenaar partners have consistently made 
clear for the last 7 years is that they will never submit to 
the kind of consensus arrangement for export approval known as 
a veto that was found in COCOM. The military threat to European 
security that justified a veto no longer exists. In addition, 
as the Europeans have made clear in other contexts, they have 
no intention of adopting our unilateral sanctions such as those 
against Iran or Cuba or our sanctions against India or 
Pakistan. And they believe that if they accepted a veto, we 
would attempt to use it to enforce such sanctions.
    No other export control regime has a veto rule for export 
decisions, and I believe we would be mistaken if we think we 
can persuade Wassenaar or the other regimes to adopt it. It is 
also worth noting that one aspect of the veto debate is that 
some transfers we make to our allies and security partners 
would likely trigger a veto from other Wassenaar members. 
Unlike the other members, the United States has global security 
commitments, and I am not sure that we would want Russia or 
others to sit in judgment on our exports to our security 
partners in certain states in Asia or in the Middle East.
    And there is skepticism among our partners, frankly, as to 
how we would react to a veto if we believed that our national 
interests were at stake; in other words, if the tables were 
turned. Our Wassenaar partners have also consistently made 
clear that China is not a target of the regime. Many Wassenaar 
members wish to see China join the arrangement. For the most 
advanced industrial economies in Wassenaar, China is an 
important market, not a threat. And they have told us that it 
is a market that they will service.
    The most salient examples are in machine tools and semi-
conductor manufacturing equipment. We often hear criticism of 
sales of five access machine tools to China. The United States 
has approved only two in recent years, but in the same period 
our Wassenaar partners have approved more than 20. In fact, 
exports to China of the most advanced machine tools more than 
doubled in the last year, and they did not come from the United 
    For semi-conductor manufacturing equipment, we have been 
told by the other major producers, Japan, Netherlands and 
Germany, that they will sell to China even if we will not. A 
good example of that is China's Project 909, where Japan 
approved the joint venture using the most advanced chip making 
equipment before the United States had even finished debating 
whether to allow its companies to apply for a license.
    Now let me make some suggestions in closing, Mr. Chairman, 
for the future. First, we need to recognize that much of the 
debate in the United States over export controls is out of sync 
with the rest of the industrialized world. This reflects in 
part larger differences over security policies, threat 
perceptions, or trans-Atlantic cooperation. But it forms a 
crucial backdrop to improving multilateral controls.
    Second, we need to consult with our allies and with other 
regime members on the scope for cooperation and improving 
controls. For conventional arms and related dual-use equipment, 
it may be less than we would wish. Related to that, we should 
continue our efforts to promote adoption of catch-all controls 
by our regime partners in order to ensure that adequate 
authority exists for controlling a wide range of technology to 
specific end-users of concern.
    Third, we need to refocus the list of those items that are 
controllable and critical to advance military capabilities. The 
globalization of technology poses new challenges in that 
regard, as Senator Lieberman pointed out.
    Fourth, we need to give up the ghost of COCOM. COCOM was a 
valuable tool for NATO in the Cold War, but it is gone and 
cannot be resurrected.
    Fifth, we need to continue efforts to get China to 
participate in multilateral regimes such as Wassenaar. To this, 
China will need to make progress in adhering to the 
international norms for non-proliferation and arms sales. There 
is no question that they are not there yet.
    We must continue our efforts to encourage non-members to 
adhere to regime standards. The Commerce Department, working 
closely with State and Defense, Customs and others, has worked 
with the countries of the former Soviet Union and Warsaw Pact 
to develop comprehensive and effective export control systems.
    We have often found that even in cases where these 
governments are willing to take the hard steps to keep items 
out of the hands of unreliable parties, they do not have the 
practical means or the legal basis to do so. We have had some 
success in encouraging them to take all the necessary steps 
including adopting the control lists of the multilateral 
regimes to allow them to adhere to the objectives of the 
regimes. But we need to do more in that area.
    Finally, we need to continue to work towards national 
consensus or as close as we can get to consensus in our 
national discussions over export controls. The recent 
legislative debate, as you have noted, Mr. Chairman, reveals 
the differences among us are wide in some respects, and those 
differences do not provide a firm basis for U.S. leadership at 
this time. So I think it is particularly important that we try 
to get together and see if we can develop a common view. Thank 
    Chairman Thompson. Thank you very much.
    Let us kind of summarize for a moment. See if I am right, 
and correct me if I mischaracterize anything, but under COCOM, 
basically each Nation had a veto over the other nations' export 
of any particular item. The world changed and we moved away 
from COCOM. Just a bit of history. I hear different things from 
different people about how the demise of COCOM came about. I 
have always read that the United States took the lead in doing 
away with COCOM and moving to another arrangement.
    In fact, did not President Clinton campaigned on this 
point? I do not know specifically, but in terms of loosening 
controls I recall that he thought many were out of date and too 
onerous. He kept that commitment and took the lead in changing 
the COCOM arrangement, moving away from that. Now the 
administration suggests that the United States was kind of 
dragged away reluctantly from COCOM and tried to keep what 
remnants of it we could as we were being pulled away from it 
against our will.
    I do not know exactly whether you were in the middle of 
that, Mr. Holum, at the time that it came about, but could you 
give us a little history on this point in terms of your 
    Mr. Holum. I was not in the middle of it because at that 
time I was Director of the Arms Control and Disarmament Agency. 
We were involved but not centrally, but my understanding of 
that period is that the United States was anxious to maintain 
as rigorous an international control regime as we could. And 
when we consulted with our allies and our former COCOM partners 
who had long since begun agitating with the fall of the Soviet 
Union for a liberalized regime, we found that there was very 
limited stomach for that kind of an arrangement, and 
particularly, even during the COCOM regime, some members had 
chaff against the veto arrangement.
    So at the end of the Cold War, it was our leadership which 
led to a successor regime. I think there were some, certainly 
not all, who would have been content to let the COCOM process 
disappear and let things revert to national decision-making. 
And we pressed very hard for a continued multilateral 
arrangement recognizing that it could not have the same rules 
and procedures as COCOM. But it did keep alive the export 
control lists and the basic arrangements for consultation.
    Chairman Thompson. So we went into the Wassenaar 
Arrangement, which basically did away with the veto, as we were 
talking about. It is an arrangement that has no large staff or 
anything like that, but they have annual meetings. There is an 
agreed upon list that countries agree to pay attention to. 
There's an agreed upon list of bad countries that the members 
agree to pay attention to, but they do not commit to do any 
particular policy with regard to dual-use items.
    They will make their own decisions. Each country makes its 
own decisions as to what it should do. There is no agreement to 
notify before a transaction is made. There is no agreement not 
to undercut. In other words, if one Nation turns down a sale or 
a transfer, there is no agreement that somebody else will not 
come along and take that opportunity instead.
    There are discussions concerning problem areas and problem 
items. But basically, some might consider it generally only a 
discussion society whereby the United States, and others, have 
an opportunity to persuade people to generally move in the 
right direction. And then you have Russia, who is a member of 
Wassenaar, whose general interest and attitudes and behavior 
some might say are quite different than those of most of our 
allies, not only in terms of their proliferation activities but 
in terms of some of the issues that they have taken on in the 
foreign policy and export control arena.
    My understanding is that Russia has been most reluctant or 
one of the more reluctant to do anything with regard to issues 
such as prior notification or undercutting or anything of that 
    I want to focus in one aspect of all this, and it has to do 
with what Mr. Reinsch mentioned, the catch-all provision--which 
basically to me means that you look to the country the item is 
going, and take that into consideration, and give additional 
weight and consideration to where it is going, and not 
concentrate so much on having a strict control of the item or 
prohibiting it from being moved per se.
    The allies agree that there is a problem country list, but 
they do not agree specifically as to what to do. What I would 
like is your assessment of exactly where we are with regard to 
our allies on that issue. They agree somehow to pay special 
attention to those countries but do not agree to do anything 
specifically one way or another.
    Is it not true in practice that many of our allies require 
that there be some very direct evidence of danger before they 
will stop an export of a dual-use item that we might consider 
very sensitive? That before they will stop such an export, for 
them there needs to be shown a direct relationship between that 
export and the production of weapons of mass destruction or 
their delivery systems?
    In other words, it is easy to give lip service to export 
controls--to say, yes, we agree. To say, ``These rogue 
countries are problems and we are going to give them special 
attention,'' but when it comes right down to brass tacks, many 
of our allies have different criteria than we do. And I am 
talking about our European allies now. Do they not as to what 
they ought to do with regard to exports to those countries? Is 
that a fair assessment, and could you elaborate on that a 
little bit?
    Mr. Holum. Well, I think it is a fair assessment that we 
have far more consensus in regimes other than Wassenaar on 
sensitive technologies. In the Missile Technology Control 
Regime and the Australia Group, the Nuclear Suppliers Group, 
the Zanger Committee, all the other multilateral informal 
arrangements that are nonetheless focused on weapons of mass 
destruction have a far easier time reaching consensus on what 
should be controlled and to where.
    And the rules are much stricter. You have to look at 
Wassenaar in the context of that, and as you said earlier, we 
are on the edges of the technologies that contribute to arms 
programs. And the United States in general is more active, more 
anxious and interested in controlling dual-use technologies 
with other weapons applications than some of our Wassenaar 
partners are.
    That said, they all do have dual-use control lists that go 
beyond the WMD regimes and delivery system regimes. And it is 
more than a matter of persuasion. I think the existence of the 
Wassenaar Arrangement and the continuous discussion in that 
context has helped to bolster countries' national export 
control policies on both dual-use and munitions. But I would 
agree or I would argue that absent Wassenaar, those regimes 
would be or those national controls would be less rigorous.
    Chairman Thompson. Well, that is an argument that can be 
made. I am more interested right now, I guess, in understanding 
exactly what their position is--if we can generalize with 
regard to our allies--about how that works in the real world. 
There are supposed to be notification requirements after sales 
are made periodically twice a year--notification requirements 
for certain things, certain sales that are made so everybody 
can kind of keep up with what everybody else is doing. The 
notification is not item specific, as I understand it. It is in 
categories. But it is still, I suppose, somewhat helpful.
    Can you give us a feel--I do not know to what extent you 
deal with Wassenaar, to tell you the truth--but can you give us 
a feel for the extent to which our European allies are, in 
fact, exporting dual-use items to problem countries that cause 
us concern? Can you explain the extent to which there is 
discussion between our country and our European allies about 
those matters? Have there been any instances where they have 
refrained from such exports because of perhaps intelligence 
that we had that we imparted to them and that changed their 
mind? How much give and take is going on? How much impact are 
we having? Lastly, can we say that things are better than if we 
did not have Wassenaar or that it is successful?
    What criteria are we using? Is there any indication that 
there is in the works a system whereby problem items can be 
kept from winding up in these problem nations? In terms of 
government management, we are getting into a performance-based 
system around here in trying to get the Results Act 
implemented. So it is not enough anymore for agencies to say 
``we process this many pages of paper'' or ``we approved this 
many applications'' and ``we had this many discussions.'' We 
want to know: Is it really working? Is there any indication 
that we are keeping bad stuff out of bad hands that otherwise 
would go there?
    Mr. Holum. Yes, I think there is. Some of it I cannot go 
into any open session for reasons you understand. Generally, 
for example, there is a decline in arms shipments to the four 
countries, to terrorist list countries, under Wassenaar. I am 
not saying that Wassenaar is the only reason for that. Part of 
the reason obviously is that after the Iraq war Russia was not 
giving as much away and was not able to sell as much.
    In the dual-use area, my assessment is that the greatest 
accomplishments are bilateral rather than multilateral. But the 
multilateral regime creates the framework and the overall 
political commitment to control sensitive technologies. But we 
have four committees in the United States that the State 
Department chairs that examine transfers or potential 
transfers. We sift intelligence. We see what is likely to 
happen and go to our Wassenaar partners or to others and 
demarche them in case we see a bad shipment to a dangerous 
    And we have success in that process. I think Wassenaar 
contributes to our ability to have success. But I think the 
bilateral component of it is also indispensable. The Wassenaar 
environment also is a regime in which countries agree more 
generally on what are the problem destinations. I have 
mentioned the four, but they have also focused on areas in 
conflict. They focused on the Sudan. They focused on 
Afghanistan and other regions where shipments are less likely 
to take place. So there is a collective judgment rendered.
    It is very difficult to do these things multilaterally for 
all the reasons you know including the membership of Russia in 
Wassenaar. Russia does take a different view on many of the 
issues. Given that Russia has many of the technologies that we 
want to control, I think it is better to have them in than to 
have them out, but it makes consensus harder to achieve.
    Chairman Thompson. It seems to me that you could almost 
make the argument, on the other hand, that the Wassenaar 
Arrangement might hinder these bilateral activities. After all, 
you have got the umbrella of approval with regard to certain 
things out there that countries might not be as willing to take 
a chance on if they did not know that others were doing it. You 
are going to have to be reporting this periodically anyway. 
Everybody is going to see that if you go ahead and do it, 
regardless of the United States' objection, there will be no 
problem. So the next country might be tempted to do the same 
    I do not know. I have just one other follow-up. My time is 
over, but I have a follow-up on something you said. How easy or 
difficult is it for us to share our intelligence even with our 
allies concerning these things? Is that flow going the way that 
it should?
    Mr. Holum. It is always very difficult. It varies obviously 
with the country, but there is a constant struggle to be able 
to share as much intelligence information as we have and to 
tell as much as we know to the country we are trying to 
influence because of sources and methods problems and that is a 
legitimate concern of the intelligence community. I will not 
dispute that it exists. I do not want us to not have 
information, but it is a problem when you have information and 
cannot act fully on it because you cannot release it.
    Chairman Thompson. If you will indulge me, Senator, just 
one more question. We clearly in this country do have a 
different view of how to deal with the rogue nations. But why 
is this? And I wonder if it relates to the intelligence part? 
Do our allies not perceive the same kinds of threats that we 
do, especially with regard to Iran? There seems to be a 
disconnect there. Why is it that our allies do not see some of 
these nations being as much of a potential threat as we do? 
Does it have to do with the nations, or does it have to do with 
the kinds of items, dual-use items, that are often at issue and 
that are going to these nations?
    Mr. Holum. I think it has to do to some extent with both. I 
think there is a perception among some of our allies that the 
best way to deal with Iran, for example, is engagement, that we 
will change their approach by being willing, for example, to 
transfer peaceful nuclear technologies.
    At the same time, I think it is important to note that our 
allies generally have agreed with us on the conclusion that 
Iran is seeking a nuclear weapons capability. So none of our 
European allies engage in even peaceful nuclear cooperation 
with Iran. Russia obviously is a different story so they have a 
different perception of Iran overall and think engagement can 
lead to positive results.
    But I think at the same time, they have accepted our 
premise, at least on the nuclear front and on the missile 
front, that these are dangers. But again when you get into the 
level of dual-use items where Wassenaar is applicable, it is 
more difficult to reach a consensus.
    Chairman Thompson. Senator Lieberman.
    Mr. Reinsch. May I add something to that, Mr. Chairman? I 
think the other perspective is some of these countries have a 
different, a different history, a different commercial 
relationship with these countries where the breaking of ties 
and the whole hostage episode which they did not experience has 
created a different attitude.
    Chairman Thompson. France and Libya, for example.
    Mr. Reinsch. Pardon me?
    Chairman Thompson. France and Libya, for example?
    Mr. Reinsch. Well, Italy and Libya in particular, yes.
    Chairman Thompson. Italy and Libya.
    Mr. Reinsch. I mean those are good examples. We also have 
global commitments and a global perspective and despite what 
some of our allies may say from time to time, they do not 
necessarily. They do not look at Iran from the standpoint of a 
global perspective. They look at it from a narrower perspective 
which makes it easier to look at it commercially.
    Chairman Thompson. Thank you. Senator Lieberman.
    Senator Lieberman. Thanks, Mr. Chairman. Very briefly, 
first, I am interested if either of you know from a historical 
perspective whether there was an attempt as the Wassenaar 
Agreement was coming together to have veto authority within it. 
Was it discussed at any point and rejected, or was it just 
assumed that we were in a new world and it was----
    Mr. Holum. Yes, I would have to get back to you on the 
specifics, but my understanding is that we concluded after 
consultations that it was hopeless to try to include it so it 
was not actively proposed.
    Mr. Reinsch. My understanding is the same, Senator. We had 
to, we had to do something because COCOM was aimed at the 
Soviet Union and we were concerned about Iran, Iraq, Libya and 
North Korea.
    Senator Lieberman. Right.
    Mr. Reinsch. The pariah states necessitated a change. My 
understanding is our allies made it very clear from the 
beginning that a veto wasn't one of the options that they were 
prepared to consider.
    Senator Lieberman. And as a result, we have not at any 
point since initiated discussions about putting veto authority 
into Wassenaar just because we thought it was a non-starter?
    Mr. Holum. That is right, although we have made a very 
active effort including in the 1999 assessment. I was the head 
of the delegation. Under Secretary Reinsch was also a 
participant in December in trying to strengthen the regime, in 
particular to provide for notifications of all dual-use 
denials. One of our major objectives in this context is to 
achieve a no undercut process.
    It is not the same as a veto. You cannot force somebody not 
to sell, but if we deny a license to somebody, we would like to 
report that and have other members know than if they undercut, 
they are going to be under a lot of pressure. Now that is 
available in a limited way for very sensitive items on the 
dual-use list. But it is not available for all items, and that 
is what we would like to accomplish.
    Mr. Reinsch. I am advised, Senator, that we did repeatedly 
propose a veto in various forms in the 1993-94 period, but we 
haven't proposed it recently.
    Senator Lieberman. And those efforts were rejected?
    Mr. Reinsch. That is correct.
    Senator Lieberman. Help me understand. When a nation, when 
a member Nation of Wassenaar violates the agreement by 
exporting an item on the agreed upon list, what are the 
sanctions that are possible?
    Mr. Holum. Well, there are no sanctions because ultimately 
the decision making belongs to the countries. It is 
consultative arrangement rather than a sanctions arrangement. 
Now individual countries can make their own determinations. If 
we decide as a matter of national policy that we want to 
sanction somebody for an export that goes beyond Wassenaar, we 
tend to do that in other areas, but there is not a formal group 
    Senator Lieberman. So this leads to me to the question I 
wanted to ask, which is that some have suggested that we should 
consider creating our own stronger hammer outside of Wassenaar, 
such as trade sanctions against countries that are involved in 
the transfer of dual-use technology, and I wanted to ask you 
what you think about that idea?
    Mr. Holum. I think as a general matter, we certainly need 
to consider unilateral controls, and we do apply unilateral 
controls and restraints, limits, for rare circumstances. But I 
think the entire process of proceeding unilaterally in this 
area is a loser over the long term, that the technology has 
spread so widely around the world and is available from a lot 
of different places that pursuing unilateral controls and 
sanctions will not achieve the objective, that you really have 
to choose the best basis for getting multilateral consensus 
among the suppliers.
    Mr. Reinsch. I would agree with that, Senator. The only 
thing I would add is that the Congress has, as I understand 
your question, done that with respect to various pieces of 
legislation on Iran, Iraq and Cuba.
    Senator Lieberman. Right.
    Mr. Reinsch. I think I would leave to you to judge whether 
those have been more effective than what we're describing.
    Senator Lieberman. Well, as the sponsor of a few of those, 
I hope it has.
    Mr. Holum. Well, one of the things they do is, and can have 
a tactical advantage in persuading other countries that were 
serious and as part of the efforts to bolster diplomacy, but I 
think they are always more effective in the threat or the 
potential for doing them than they are if you actually have to 
carry them out.
    Senator Lieberman. Let me come at this a different way, 
going back to something I said in my opening statement, which 
is the extent to which our ability, U.S. ability, to maintain 
military dominance depends on technological developments and to 
some extent a vibrant technology industry here may depend on 
that industry exporting.
    So I wanted to ask you to what extent would you say that 
those kinds of concerns, which we certainly hear from the 
industries involved, express themselves or play a part in our 
approach to Wassenaar and the whole question of controlling 
dual-use technologies? How do we balance the relative, the 
various national interests we have here?
    Mr. Holum. Well, we clearly do with the decline in defense 
budgets and with the growth in reliance of defense industry and 
our security agencies on technologies developed in the private 
sector outside of the defense sector. It is unquestionably true 
that our ability to maintain a cutting edge in both military 
and dual-use technologies depends on exports and depends on a 
healthy industrial base.
    We take a slightly different view, and Under Secretary 
Reinsch will want to comment on the dual-use side of this, 
slightly different approach on munitions than we do on dual-use 
    Senator Lieberman. Right.
    Mr. Holum. If there is a security reason not to export a 
munitions item, it will not be done whether or not there is an 
economic consideration in favor of it. We do consider the 
industrial base as part of our conventional arms transfer 
policy. But if the Department of Defense, which has the primary 
security oar, says this sale should not be made, the State 
Department will not issue the license.
    In dual-use, there is more of a balancing between the risks 
and the costs, but----
    Mr. Reinsch. Yes. If I could add, Senator, I think that is 
a very interesting question and one that deserves, I think, 
more thought than we can put into it right now. The main impact 
of what you are talking about occurs as each nation makes its 
own national decisions about whether to approve a license or 
    Senator Lieberman. Right.
    Mr. Reinsch. Particularly on the dual-use side. One of the 
arguments that we have made frequently with respect to a number 
of sectors is that the real security issue is those sectors' 
health and their ability to supply the Defense Department and 
that, in turn, depends on their ability to export and plow 
their profits back into R&D and so on, has been said.
    As far as the international or the multilateral process is 
concerned, at one level that is a little bit of a destabilizing 
factor rather than an easy factor because we are making that 
analysis with respect to our own industry. Presumably the 
European nations are making that analysis with respect to their 
own industries which are competing with us.
    Our interest is, for example, to take a current one, the 
health of our computer industry and the health of our satellite 
and telecommunications industry because we think they are 
essential to our security. The Europeans have the same concern 
about their computer industry and their satellite industry. It 
does not necessarily lead them to the same licensing decisions.
    It is not a secret, and I know it will not be a surprise to 
you that for years in COCOM--I have heard this less in 
Wassenaar, but I am sure it is true--that all parties have 
occasionally accused other parties of either making decisions 
or pressing positions on what should be listed and what should 
not that had more to do with local commercial interests than 
the larger good of nonproliferation. All countries routinely 
deny that accusation when it is made, but there is some history 
    Senator Lieberman. Thanks. Let me ask a last question in a 
different area which is, as we all know, the Export 
Administration Act, which is our major domestic export control, 
lapsed several years ago and we have not yet reauthorized it, 
but we have continued the controls through executive orders. 
Has the absence of the reauthorization, had any effect on our 
participation in the Wassenaar Agreement? Or have the executive 
orders basically had the same force and not diminished our 
position there?
    Mr. Holum. Well, what I miss most about the Export 
Administration Act is the level of penalties that are available 
because they are outdated. Bill, you might add to it?
    Mr. Reinsch. I think in the spirit of detente with the 
Chairman, I was not going to get into the Export Administration 
Act, but you have asked an important question.
    Senator Lieberman. It was much too peaceful here.
    Chairman Thompson. I am going to violate it again, go 
ahead. [Laughter.]
    Mr. Reinsch. Well, you have asked an appropriate and 
important question. The biggest problem, I think, is absence of 
penalties, but there are also police power problems from our 
standpoint. We have to go be deputized marshals. It makes 
enforcement more difficult, the penalties are the cost of doing 
a business. It also has caused us some legal difficulties. The 
law contained a confidentiality provision that precluded us 
from making public proprietary industrial information, for 
    We are now in the midst of two court battles where via FOIA 
requests that kind of information has been sought, and the 
argument of the plaintiff is that we have no authority to keep 
it confidential because the act has expired. We are concerned 
about the litigation risk here.
    On the anti-boycott side, which is part of the statute it 
is the same thing. Any lawyer worth his salt in an anti-boycott 
claim would argue that under IEEPA the government has no 
authority to pursue the anti-boycott law because it has 
    In the multilateral context, the biggest problem I have 
seen is as we go out to countries of the former Soviet Union 
particularly, where we have a quite extensive program that I 
alluded to in our testimony--I know Secretary Holum could talk 
about--to try to help those countries develop export control 
systems of their own. We have helped them draft laws. We have 
helped them draft regulations. We have helped train their 
Customs and border officials. We have helped them adopt control 
lists and done a wide variety of things including providing 
hardware and software so they can keep track of their exports, 
and we have done it on the theory that while we do have policy 
differences with some of those governments, we also have policy 
congruities. There are areas where they would like to stop that 
technology from leaking outside their borders, and they do not 
have the means to do it.
    We can help them do that. In that context, our absence of a 
law has been a problem because we go to them and say you need a 
law and you need a regulation and you need all this stuff, and 
they say you do not have one. And it really, I think, has 
damaged our credibility with countries whose performance we are 
trying to beef up. I think with the UK and our NATO allies, it 
has been less of an issue.
    Senator Lieberman. Did you want to add anything, Mr. Holum?
    Mr. Holum. No, I agree with the basic conclusion that we 
should have a new law as soon as we can.
    Senator Lieberman. Yeah.
    Mr. Holum. But we want it to be a good law.
    Senator Lieberman. Right. Well, absolutely. I did not want 
to destroy the detente too much by saying though there are some 
negatives associated with no reauthorization, obviously that 
does not mean we should adopt any law.
    Chairman Thompson. We all agree we need a law. We have a 
small problem with what goes into the law.
    Senator Lieberman. That is right.
    Mr. Reinsch. If you will just do exactly what we want, Mr. 
Chairman, then everything will be fine.
    Senator Lieberman. That is all it takes.
    Chairman Thompson. That was what the Executive Orders did.
    Senator Lieberman. Thank you, both. Thanks, Mr. Chairman.
    Chairman Thompson. Senator Akaka.


    Senator Akaka. Thank you very much, Mr. Chairman. Glad we 
are having this hearing and hope maybe that we can come back 
and reexamine this as was indicated. The end of the Cold War 
has not meant an end to our concern about the diversion of 
technology to the wrong parties for the wrong things. But it 
has meant a loosening of export controls. Mr. Chairman, I ask 
that my opening statement be made a part of the record.
    Chairman Thompson. Without objection.
    [The prepared statement of Senator Akaka follows:]

    Mr. Chairman and Senator Lieberman I commend you for calling 
today's hearing.
    The end of the Cold War has not meant an end to our concern over 
the diversion of technology to the wrong parties for the wrong things.
    But it has meant a loosening of export controls.
    Unfortunately, the loosening of controls has come at the same time 
that the information to develop weapons of mass destruction--chemical, 
biological or nuclear--has become more widely available and the 
technology to manufacture these weapons more easily obtained.
    A building the size of this hearing room--perhaps smaller--would be 
sufficient--I am told--to house a biological weapons plant. This makes 
it easy for a country to hide its weapons program. I am also told that 
the technology to develop biological and chemical weapons is widely 
available, making it easy for a state to develop such weapons.
    While the technology has become easier to obtain, the end of the 
Cold War has also made it harder for the United States to convince 
other countries to share our concern about states, such as Iran, whom 
we believe are secretly developing weapons of mass destruction.
    When we voice our fears, our allies charge us with trying to hinder 
their economic growth, preventing competition in order to preserve 
American dominance of world markets.
    It has become sometimes harder to work with our friends and allies 
to ensure security in the world.
    It has been made even more difficult by globalization. Corporations 
span international boundaries. Investments involve a multitude of 
businesses and nationalities. This is especially true in high 
technology areas--aerospace, for example.
    How to make progress without providing the seeds for our own 
destruction is the central challenge of this century.
    I welcome the witnesses to today's hearing. It promises to be a 
lively debate and I hope not the only time this Committee examines this 

    Senator Akaka. And I would like to ask a few questions of 
Mr. Holum. You state that countries in 1999 agreed only to a 
modest increase in arms transparency. What were our proposals 
concerning transparency?
    Mr. Holum. Essentially what we did accomplish, first, is 
members are now going to report reconnaissance troop command 
and electronic warfare equipment in the armored combat vehicle 
category. There are several changes along that line that expand 
the reporting requirements in certain Wassenaar categories of 
arms. We proposed a number of additional categories which were 
not accepted. But we did make some modest headway.
    The main thing we wanted to accomplish is to require 
reporting on denials of dual-use exports or export licenses, 
which would lead to then a no undercut possibility, the 
possibility of consulting if another country moves to export 
something that you have already denied. We think that is a 
fundamentally important reform of Wassenaar to make it 
stronger. We also wanted to pursue in the Wassenaar context a 
common approach to the export of MANPADS, man-portable surface 
to air missiles, which have a very grave threat or pose a very 
grave threat in the context of terrorist use, for example.
    The subject was remanded to the general working group. They 
agreed we should continue to work on it, but we did not get as 
far as we wanted in that area. So those are the kinds of 
priorities we will continue to pursue.
    Senator Akaka. Just to get your comments of a witness that 
will appear on the next panel. Henry Sokolski raises concerns 
that the United States shows a--and I quote from him--
``willingness to subsidize known proliferating entities.'' And 
he cites several examples such as the U.S. Export-Import Bank 
guaranteeing exports to the Nanjing Chemical Company, which was 
proliferating chemical weapons equipment to Iran. Do you agree 
with Mr. Sokolski that we should not subsidize exports to 
foreign companies which proliferate and could you give me your 
reasons one way or the other?
    Mr. Holum. As a matter of principle, I would like to look 
at the specific cases to see if my perception of the facts is 
the same as Mr. Sokolski's, but as a general proposition, no, I 
do not think we should subsidize proliferators.
    Senator Akaka. Mr. Reinsch, what do you think of the 
recommendation by Henry Sokolski, again, that the United States 
should take steps to limit or prohibit the licensing of 
American exports to companies our intelligence agencies have 
clearly identified as proliferators? Do we do this already?
    Mr. Reinsch. Yes, we do. And I think it is an appropriate 
way to go. The key word there is the word you emphasized, 
Senator Akaka, which is the word ``clearly.'' One of the 
problems of intelligence, particularly the kind of intelligence 
we are talking about here, is that it often is not clear. You 
are putting together two plus two plus two, and you are 
assuming it is six, but you do not really know because there 
are pieces missing.
    The intelligence community often gives us as clear a 
picture as they can and they tell us what they know and they 
tell us what they do not know. I think the process works in the 
way that Henry is recommending. That is, when we have that 
information, we act on it, and when the intelligence community 
presents a clear picture of a bad end-user, if you will, the 
licensing process has pretty consistently denied those exports. 
When the intelligence community presents a mixed picture, then 
sometimes we have more of a debate.
    Senator Akaka. Steve Hadley, who will appear, in his 
testimony quotes a Defense Science Board report to support his 
proposal that export controls should be targeted on what is 
unique, military, critical and controllable. Do you think this 
approach is workable or has a distinction between what is of 
critical military use and what is of civilian use been blurred 
by today's technologies?
    Mr. Reinsch. Well, it has been blurred. There is no 
question about that. I attended most of the sessions of that 
review board task force, and I recommend it to all of you. It 
is a very thoughtful piece that was produced primarily by ex-
military officers and ex-Defense Department officials from the 
last two administrations primarily. So it is a very, I think, 
objective piece that is most useful in its discussion of how 
the world has changed, which is something that Mr. Hadley's 
testimony also comments on.
    The recommendation that you are making, which is a 
variation of what the Chairman alluded to, higher fences, 
smaller items--I mean the reality is that we all give that 
speech. I have heard Senator Thompson give a variation of that 
speech. Senator Gramm has given that speech. I give that speech 
all the time. The difficulty is translating the speech into the 
specifics of saying what is going to be on that list.
    And once you get beyond fissile material and stealth 
technology, and a couple other things, agreement over what 
those really critical items are becomes a lot more difficult to 
reach, and people simply do not always agree. One of the 
reasons they do not always agree is the point that you made--
because these things have both military and civilian 
    Night vision equipment is a classic case. This is 
absolutely essential to the Army and its ability to outmaneuver 
its adversaries in twilight or darkness. At the same time, you 
can buy them in an L.L. Bean catalog. Night fisherman and 
boatmen use virtually the same stuff. It is classic dual-use. 
There is not any question what this is, but making decisions 
about a technology that we very much do not want to fall into 
other people's hands creates dilemmas. Is that critical or is 
it not? And the DSB report for all of its strengths 
conveniently does not provide a suggested list. It suggested 
that we create a list and, as I think you have discovered in 
the EAA debate, that is a difficult task, and people of 
goodwill and good intentions have honest disagreements over 
what should be on it and what should be off it.
    Mr. Holum. There is another caution I would add, and that 
is that if we are talking about munitions, we have always 
treated, and I think should continue to treat, exports of arms 
as a foreign policy decision, whatever the level of technology. 
In Africa, in the last decade, the AK-47 has been a weapon of 
mass destruction. And I do not think the United States wants to 
be competing for all those markets. I think the decision to 
export even low-tech munitions must remain a matter of national 
    We consider in the munitions realm where equipment that 
goes to allies is likely to end up. We attach re-export control 
limitations, for example. So this is an area that we need to 
focus on as well. It is not only a question of technologies, 
and I agree that we can and should explore liberalizing 
transfers of technologies to close allies and we are very much 
engaged in that kind of an effort. But we have to treat 
munitions differently from dual-use technologies because these 
are direct instruments of conflict.
    Mr. Reinsch. And the Commerce Department agrees completely 
with that. The issue that you are raising, which is the key 
issue, is what is a weapon and what is not? And there I think 
the fact is if it is an F-15, it is clear. If it is a computer, 
I think it is also clear. But the reality is there are some 
things that are more in the middle of that spectrum, and that 
is what some of these debates that we have been involved in 
have been about.
    Senator Akaka. Mr. Chairman, let me conclude by mentioning 
to both of our witnesses if, as Mr. Holum has said, that 
unilateral controls do not work and if we have difficulty 
getting unilateral agreement--multilateral agreement--where are 
we left at the end of the day? Do we give up or do we keep 
pushing at the proverbial open door while these dangerous goods 
get exposed to dangerous countries? Can the situation become, 
as Senator Thompson has indicated, any more frustrating?
    Mr. Holum. I think it could become much more frustrating, 
but it seems to me that we have no choice but to work to build 
the strongest multilateral regimes we can. And I am not as 
pessimistic as some about that. I think it is very important to 
decide what the critical technologies are, what the proscribed 
destination should be, and continue our efforts to work with 
other suppliers, principally through multilateral regimes. 
Where countries are not party to a regime, we should try to 
broaden it to have them--such as China--to have China live up 
to the standards that would allow it to become a member, for 
example, of the Missile Technology Control Regime, the 
Wassenaar Arrangement. They are certainly not qualified now, 
but I think it would serve our interests for them to be subject 
to the same constraints as other members.
    Mr. Reinsch. The thing to keep in mind, Senator, from my 
perspective is these regimes are works in progress. None of 
them started with a whole loaf, if you will. And you do not get 
the whole loaf in negotiation. It simply is not that easy. 
Brick by brick we build them and make them better. As Secretary 
Holum pointed out, we did not get everything we wanted in 
Wassenaar in 1999. We will be back at the plenary in 2000 
trying again. And the people that come after us will be back 
the following year and eventually we will get what we want.
    But these things do not happen overnight and one of the 
main characteristics that I think you have to demonstrate in 
Mr. Holum's business in particular as a negotiator is patience.
    Senator Akaka. Thank you very much, Mr. Chairman.
    Chairman Thompson. Thank you very much. One or two more 
questions. What are we trying to get? What is on the table? 
What was discussed in your December 1999 meeting? We have 
talked about catch-all provisions, undercutting, and all those 
things. Are these things that we are actively trying to get 
some movement on? What are the most important things that 
realistically we could expect some movement on perhaps in the 
    Mr. Holum. I think the most important single step we can 
take is notification of dual-use denials that would lead to the 
possibility, to something akin to a veto, at least an 
opportunity to persuade with knowledge that somebody is 
undercutting a dual-use transfer. That is the highest priority, 
I think, because of the threat it poses. Getting some action on 
MANPADS is also crucial. We at the last session, and I--in 
fact, Under Secretary Reinsch and I both made a number of trips 
to engage in bilateral consultations leading up to the December 
session. We wanted to expand the list. We found a way to expand 
the list by not changing the number but adding more reporting 
requirements in the various categories, and I can supply you a 
list that would probably be useful for you to have before you 
leave on your trip of the kinds of things that we think would 
strengthen the regime.
    Chairman Thompson. There are some notifications for dual-
use denials, are there not?
    Mr. Holum. For very sensitive items on the list.
    Chairman Thompson. You are talking about broadening that?
    Mr. Holum. That is the objective.
    Chairman Thompson. On the catch-all that you referred to, 
Mr. Reinsch, I take it that this is not realistic in the short 
term? I mean, this issue has to do with their viewing end-user 
countries, if you want to put it that way, the same way we do 
or with concentrating more on them than they are willing to 
right now. Is that a correct assessment?
    Mr. Reinsch. No, not exactly, Mr. Chairman. We have made a 
good bit of progress getting our allies to adopt the catch-all, 
but we have to keep in mind, I think, what the catch-all was 
designed to do. It was invented in the last administration when 
we discovered a circumstance in which we had identified a bad 
end-user but were going to send something that was not at that 
moment under control, yet we wanted to stop it because of its 
significance to that end-user and our high level of confidence 
as to how it would be used.
    Chairman Thompson. We have learned there are some things 
that are not on anybody's control list necessarily but that are 
problems when they are going to the wrong place.
    Mr. Reinsch. Well, exactly, and that is what catch-all is 
about. It is designed to provide in our case a regulatory basis 
for stopping things that would not normally require a license 
because we know the nature of the end-use and because we have a 
high level of confidence it is going to be used for 
proliferation purposes. This is even more important for some of 
our allies whose legal authority to control exports is rooted 
in the multilateral list.
    In other words, they do not have a unilateral list of their 
own that goes beyond whatever is on the Wassenaar and the other 
lists they belong to. So on occasion, we have gone to them and 
said this bad thing is about to go there and they will say, 
well, we agree with you, it is a bad thing; we have no legal 
authority to do anything about it. A catch-all provision, if we 
can persuade them to adopt it, gives them a legal basis to 
respond to the kinds of dialogue Secretary Holum wants to have 
with them when we discover these things.
    In fact, we have had a lot of success with the Japanese and 
with I think--I cannot give you a number--I think the State 
Department can--most of our allies in getting them to put this 
into place. Now, the next step, of course, is to watch it, 
observe it, and take advantage of it when we see something 
going notwithstanding the catch-all, to go back and remind them 
that they have one and they can take these steps.
    Chairman Thompson. I see what you are talking about. On the 
undercutting provision--I take it we are trying to get some 
movement on that also----
    Mr. Holum. Yes, sir.
    Chairman Thompson. Could that turn around and bite us on 
any occasion, such as an outright veto might? You point out the 
downside of the veto. I am wondering about whether or not there 
would likely be instances where one of our allies would come 
forth and say, they approached us first and we denied them 
these sales and therefore, you, the United States, cannot sell 
these things to your allies.
    Mr. Holum. That raises the same point why a number of 
people think a veto is not in our national interests. We are a 
country that leads in technology.
    Chairman Thompson. But this is not an outright veto, of 
    Mr. Holum. This is not an outright veto.
    Chairman Thompson. It is a no-undercutting arrangement.
    Mr. Holum. We would have to be able to stand up and defend 
our decision if we had made a decision to undercut. I think the 
reason something like this would serve our interests is the 
United States is unquestionably the most aggressive country in 
the world in terms of controlling exports of arms and dual-use 
items. The likelihood of our being caught in that kind of a 
bind and being unwilling to defend our self is limited compared 
to others.
    Chairman Thompson. Finally, Mr. Reinsch, I cannot resist 
the temptation, since you kind of opened the door here a few 
minutes ago in terms of credibility.
    Mr. Reinsch. I am going to pay for that.
    Chairman Thompson. What does it say about our credibility 
when we have our intelligence experts, our CIA analysts come 
before this Committee and tell us that China is still one of 
the world's greatest proliferators? The same countries that 
they are selling to we are told by the Rumsfeld Commission and 
others are posing an ever-increasing threat. And yet we are 
engaging more and more in dual-use trade with China, expanding 
the MTOP performance level export license threshold for 
supercomputers, what have you. I wonder what our allies think 
when they look at what we are doing with regard to China. 
Senator Akaka referred to one of the other witnesses' 
statements about the fact that when they use our capital 
markets, they raise billions of dollars for state-owned 
companies. Some think the money goes back to enhance their 
military. We do not know where it goes because there is no 
    Even leaving all the other human rights issues and so forth 
aside, they seem to be thumbing their nose at us in every 
respect, reminding us that they can lob a missile on to our 
cities, and threatening Taiwan. From the front page of the 
Washington Post today it looks like the Great Leap Forward guys 
in Beijing are having their say now, brooking no dissent and 
all that. What does it say to our allies when we so 
aggressively pursue trade with China when the PRC is so clearly 
proliferating to nations that our own people tell us are 
increasing threats to us? I mean does that not----
    Mr. Reinsch. We are dividing the answer, Mr. Chairman, and 
Mr. Holum is going to go first.
    Chairman Thompson. All right.
    Mr. Holum. I think putting it in a broader context, we are 
certainly dissatisfied with China's performance on non-
proliferation standards, but we also have to proceed on the 
basis of two other realities. One is that we are not going to 
solve the non-proliferation problem if we do not have China 
assisting, if we do not have them actively participating in 
control regimes and agreeing to contain their transfers of 
technologies and especially WMD and delivery system items. That 
is one reality.
    Another reality is we have had some considerable success in 
pursuing those efforts through a combination of steps that 
include sanctions, that include positive inducements, that 
include the full range of diplomatic engagement at every level 
up to and including the President.
    In 1994, as part of a process to lift sanctions related to 
missile transfers to Pakistan, China agreed not to transfer 
MTCR class missiles to anyone. That goes beyond the MTCR 
commitment. And they have lived up to it. They have as near as 
we can tell not since that time transferred such missiles 
anywhere. They have agreed, and President Zhang said they would 
not transfer CA801 or 802 missiles to Iran.
    Chairman Thompson. When they get caught on a particular 
thing, they make only very specific agreements not to do very 
specific things.
    Mr. Holum. I agree, but it is a step in the right direction 
to have them agree to that. I would like to have them in the 
MTCR. If they can meet the standards of that regime, I would 
like to have them in that regime so that they would be 
constrained like other members are. But their nuclear----
    Chairman Thompson. But there is really no--I mean that is 
not even on the distant horizon. They do not have adequate 
export controls. They do not adhere to existing 
nonproliferation regimes. They do not have responsible policies 
towards the so-called rogue nations. All of those are 
requirements for becoming a part----
    Mr. Holum. That is right.
    Chairman Thompson [continuing]. Of the Wassenaar Agreement. 
And they do not, they will not be a part of any regime that 
requires full IAEA controls. I mean, what in the world gives us 
reason to even hope that they might change their policies 
enough that they might qualify even for the Wassenaar 
    Mr. Holum. If they will not, they will not be members. But 
what I am saying is I want to continue the effort to make them 
part of the solution because if they are part of the problem, 
we are not going to solve the problem. And we have made some 
headway. In the nuclear area after the 1996 ring magnets case, 
they agreed to not transfer nuclear technology to countries 
without full scope safeguards. They have continued, lived up to 
that obligation. They are not cooperating except for a couple 
of winding down projects with Iran's nuclear program, unlike 
    All I am trying to say is we are not happy with their 
performance, but this is a mixed picture, and we need to keep 
working it. If we give up, we are not going to solve the 
proliferation problem.
    Chairman Thompson. That is good enough for me unless you 
just want to add something?
    Mr. Reinsch. Well, I was going to say also, first, Mr. 
Chairman, on the export control side, we have had a series of 
encounters with our counterpart in China, which is MOFTEC, not 
the Ministry of Foreign Affairs, which actually administers 
Chinese export controls, and have had two sessions last year 
which were essentially training and information sharing 
sessions in which they sent I think virtually all their people 
here a week at a time to learn about how to maintain a 
competent export control system.
    We are planning to go back now in the fall. This was 
arranged last week. We are planning to go back in the fall to 
Shanghai and meet with their businesses. This is a slow 
process. We are doing the same thing in Russia. We are doing 
the same thing in Ukraine. I mean Mr. Holum is right. It is a 
mixed picture. It is coming along.
    On the industry side, I would just say that I urge you not 
to let the computer issue obscure all the other issues. One of 
the comments I made earlier was that in the last couple of 
years, we sold them two machine tools, five axis machine tools, 
while our European friends sold them 20.
    We actually maintained quite tight controls over 
manufacturing technology and production technology going to 
China, and if you want to have a panel of the machine tool 
people and semi-conductor manufacturing equipment people here, 
they will tell you their long litany of complaints about this 
administration's repeated denials of things that they want to 
send, and we will tell you our repeated efforts to demarche our 
European friends not to sell either, which have not been very 
    Computers are a different story. It is a different 
technology. They make them themselves. They make high 
performance computers themselves. The reality, the commercial 
reality in China right now is Legend, which is a Chinese 
company, is now fourth in computer marketing in the Asia-
Pacific region. It is the largest producer in China. At the PC 
level, they are eating American companies' lunch.
    Chairman Thompson. They do not need ours anymore. That is 
good news.
    Mr. Reinsch. Well, that is what is happening. If you think 
about it from the standpoint of economic development history, 
this is going to be like everything else. They are moving up 
the value-added chain and they are going to start making the 
bigger PCs. They are going to start making the servers. They 
are going to start making work stations, and they are going to 
displace us in the marketplace there. The thing that people 
forget about regarding the proliferation issue, if you are the 
PLA and you want to use a high performance computer for 
something, keeping in mind that most of the things you would 
want to use a computer for, you can use an ordinary PC for in 
the weapons area, which is what we did for our designs--all the 
weapons in our arsenal were designed with computers of a 
thousand MTOPS or below--there are many ways to acquire them.
    I mean the technology is way out of the box. But if they 
want an HPC, they make them. They do not make enough of them to 
compete with us. They are not as good as ours, they are not as 
cheap as ours, but, if you are the PLA, what do you need? Ten, 
20? They can do that in a few months. So what we have tried to 
do about that technology, not all technologies, but that 
technology, is take a realistic view of what is going on in the 
world an get a sense of what is most in the interest of our 
security, which we think is a healthy industry, but I would not 
extrapolate that history or that case to cover all technologies 
or our entire policy.
    Mr. Holum. Mr. Chairman, I am sorry I need to correct 
something. I was playing my last answer through in my head, and 
I think I said that China agreed not to transfer nuclear 
technology to countries without full scope safeguards. That is 
not correct. They agreed not to assist unsafeguarded nuclear 
    Chairman Thompson. Because Pakistan would not fit that 
    Mr. Holum. That is right. That is an important distinction. 
I think I misspoke.
    Chairman Thompson. All right. Thank you.
    Senator Akaka. Mr. Chairman, may I follow up with a quick 
    Chairman Thompson. Yes, go ahead, Senator Akaka.
    Senator Akaka [continuing]. On China. Mr. Holum, you said 
that you hoped to broaden membership in the Wassenaar and 
suggested including China in it. And the Missile Technology 
Control Regime. Has not China said that it would adhere to the 
    Mr. Holum. China has said it would consider membership in 
the MTCR and they gave us a long list of questions that were 
serious questions that they wanted answered, but they would 
have to live up to the obligations of the MTCR and so this 
would be a decision-making process on our part as well as the 
other members. But at this stage, they are not prepared.
    Senator Akaka. Thank you, Mr. Chairman.
    Chairman Thompson. OK. Well, we can continue our discussion 
on these other items at a later date. It will be ongoing. I 
would refer anyone who is interested in this to make part of 
their reading the Cox Report, but I appreciate your being here 
with us today. We have another panel that is patiently waiting, 
so we will move on to that. Thank you, gentlemen.
    Senator Lieberman. Thank you.
    Chairman Thompson. I would like to ask our second panel to 
come forward. Our first witness will be Frank Gaffney, Director 
of the Center for Security Policy. He will be followed by Henry 
Sokolski, Executive Director of the Nonproliferation Policy 
Education Center, and the Hon. Stephen Hadley, former Assistant 
Secretary for International Security Policy at the Department 
of Defense.
    Thank you for being with us today. It just occurred to me I 
do not think I ever introduced our last two gentlemen. But I 
think Mr. Reinsch and Mr. Holum are so well known I suppose 
they did not need any introduction. Mr. Gaffney, do you have an 
opening comment or two?

                        SECURITY POLICY

    Mr. Gaffney. I have about 20 minutes of opening comments, 
Mr. Chairman, to be honest. And I will try to reduce it to the 
time that light will give me. I appreciate very much the chance 
to appear and ask you to submit for the record my entire tome 
and will try to summarize three main points.
    \1\ The prepared statement of Mr. Gaffney appears in the Appendix 
on page 61.
    Chairman Thompson. Your statements will be made a part of 
the record.
    Mr. Gaffney. Thank you, sir. Three main points. The first 
is really in the nature of an acknowledgement and a thank you 
to you personally, Mr. Chairman, and many other members of this 
Committee and the Senate, for taking this issue up. I have had 
the privilege of working on it off and on for about 20 years, 
starting back when I worked for a member of this Committee, 
Scoop Jackson. And I believe we are in serious danger when 
there is not aggressive oversight by the Congress in this area. 
And so I commend you both for what you are doing to look at the 
multilateral side of this and, of course, the activities that 
look like they are going to resurface today on the floor in 
terms of the domestic EAA and I wish you well in that regard.
    I will turn second and quickly to how we got here and you 
have heard a little bit of what I would consider to be 
revisionist history of the demise of COCOM and the construction 
of the Wassenaar accord. I have indicated in my testimony 
several themes that I think actually contributed materially to 
the decision to end COCOM. And there is no getting around it, 
the allies wanted it ended, but I remember one of my first 
tasks working for Senator Jackson, as a matter of fact, was 
supporting an effort he made in 1977 to prepare for then the 
new president Jimmy Carter a strategic arms control proposal 
that would involve the kind of radical reductions that 
ultimately characterized President Reagan's initiatives.
    And that proposal was taken to Moscow and presented by 
Cyrus Vance and a negotiating team including Paul Warnke who 
wanted no part of that agreement any more than the Soviets did. 
And I would suggest to you that you had precisely the same kind 
of phenomenon at work here. This administration, I regret to 
say, populated senior positions in several departments, but 
most notably in the Defense Department, with responsibility for 
export controls with people who had a very clear record of 
hostility to export controls in general and specifically to 
    When you had such people going to our allies and saying we 
need to keep that veto, if they did indeed do that, it was not 
credible, and the fate of a very valuable, very important 
institution, not only during the Cold War but I believe 
arguably even more so today, was a foregone conclusion.
    I will not belabor some of these other points except to say 
that I think the principle that we can trust people who regard 
as clients countries we regard as rogue states, to be full and 
reliable allies and partners in these kinds of multilateral 
arrangements is foolish in the extreme.
    It is not an accident, in other words, that quite apart 
from many of our allies, who frankly are not terribly reliable 
in these areas either, some of our long-time adversaries have 
proven to be part of the problem. To hear Secretary Holum 
talking about getting them into these multilateral arrangements 
and thus making them part of the solution I think, in fact, 
preordains that there will be no solution at least through this 
    Quickly, I would like to just cover a couple of the points 
that I think you need to think about concerning what do we do 
now? I know you do not want to talk about it and I will not 
except to say: First, do no harm. And the EAA bill before the 
Senate today will do more harm, I believe. We need to 
reestablish an appropriate balance. We all agree there are 
subjective judgments and a lot of nuances here, but we need to 
reestablish balance between commercial interests and national 
security interests, a balance that I think has been egregiously 
lacking in this administration.
    To start with, you need to have a focus. And as you said, 
Mr. Chairman, and I think Senator Lieberman and others, it is 
obvious that the old Soviet focus is no longer relevant. But I 
am afraid as your colloquy just now indicates a focus on China 
and for that matter a focus on Russia ought to be part and 
parcel of what we understand to be a continuing contributing 
force in the problem export controls are designed to address.
    We need to reestablish in the Pentagon a real voice for a 
national security-minded approach to export control. This 
involves personnel questions. It involves organizational 
questions. It demands really your attention, if I may be so 
bold as to suggest, particularly this Committee, because others 
have not given it the attention that it requires.
    I would like to leave you with one further thought. It is 
now pretty clear that because of the complications that have 
been introduced with the destruction of COCOM, because of the 
proliferation of a lot of technologies that contribute to 
proliferation, that it is going to be very hard to get the 
genie back in the bottle. I think therefore it is incumbent 
upon us, before we do more damage, to be insisting upon some 
kind of rigorous exercise. I have come up with the term of a 
``qualitative edge impact statement.'' Because let us be clear. 
To the extent that we are contributing to the arming of 
potential adversaries, we are having a negative effect on the 
qualitative edge that our military has relied upon and I will 
believe will continue to require to assure its ability to 
prevail on the battlefield, minimize casualties and so on.
    This has a corollary. We not only need to understand what 
we are doing to harm our qualitative edge, we need to be 
introducing new energy into the need to restore it. This means 
a really concerted effort in the research and development area. 
And I would suggest--and maybe this is heretical, but I would 
suggest that the very companies that are so keen to contribute, 
not intentionally, of course, but practically to deteriorating 
the qualitative edge of our military ought to be assigned the 
task of helping to restore it, to build it up, using some of 
perhaps the same technologies and capabilities and certainly 
know-how that would go into their exports.
    Finally, Mr. Chairman, I would just suggest that there is a 
question of leverage. You have asked--I think both of you have 
asked--what do you do now that we have destroyed COCOM. We have 
gotten rid of a veto, a veto which I believe on balance, if you 
do not have the Russians exercising it, is still in our 
interest to have exercised. I think you have leverage in a 
couple of areas.
    Secretary Hadley will speak to the question of access to 
U.S. technology. I would like to just address, though, access 
to our markets. To the extent that companies or for that matter 
their countries are bound and determined to sell harmful 
technologies over our objections to potential adversaries, we 
ought to let them know that there is a cost to doing so. And 
that cost could--in my judgment, should--be that they will not 
be able to sell their products to our market. And I think in 
that calculus most people would prefer to sell to the American 
economy than to Iran's or North Korea's.
    Last, I wanted also just again to commend you, Mr. 
Chairman. You have personally taken an interest in an issue 
that I know Henry Sokolski is going to speak to, too, and that 
is a new front that is being opened up in the proliferation 
fight. That is the front of companies and their governments 
coming to our capital markets to finance their proliferation 
and technology acquisition and espionage and other hostile 
activities. The most recent of these, of course, was the very 
controversial IPO issued last week by Petro China, a company 
with close ties both to the Chinese government and the largest 
oil giant in China. The parent company is doing business with 
Sudan, helping Sudan's government engage in weapons of mass 
destruction and proliferation--Bill Safire has written about 
possible missile construction there--but also genocide and 
slave trading.
    So this is an area that I commend to your further attention 
and urge you to focus on as well as these other very complex 
but very important questions. Thank you, sir.
    Chairman Thompson. Thank you very much. Mr. Hadley.


    Mr. Hadley. Mr. Chairman, if my statement could be 
submitted for the record.
    \1\ The prepared statement of Mr. Hadley appears in the Appendix on 
page 67.
    Chairman Thompson. It will be part of the record.
    Mr. Hadley. It is a real privilege to have the opportunity 
to be with you today. I would like to focus on the broader 
question of multilateral export controls and how to improve 
them. Much of my statement in the beginning talks about how the 
world has changed, and the opening statements that you made and 
Senator Lieberman made are clear that you understand this fact 
and I will not go over it.
    My basic point is that we need, in light of all the changes 
that we have seen, a fundamental relook at the whole export 
control issue. What truly is in our national security interest? 
What do we want to protect? How best to protect it? I think 
only if we conduct this kind of intensive review are we going 
to be in position to go to our allies effectively and to get 
them to do more from a multilateral export control standpoint.
    Just about three or four points on that theme, if I might. 
The Defense Science Board Report, which was referred to 
earlier, is interesting because it really suggests that 
military advantage is going to come in a different way in the 
future than it has in the past.
    Rather than developing capabilities in the military 
establishment and fielding them, the prize is going to go to 
the country that can take what is available, primarily 
commercially, and incorporate it quickly into military hardware 
put in the hands of well trained and well led military forces. 
I am not competent to say whether that analysis is right. It is 
interesting that it comes from a group of people that have had 
long experience in a number of administrations with the defense 
    And for me it underscores the need for a new look, 
particularly at this issue of what do we want to be controlling 
through export controls. So far as I know the last major look 
was 1991 and 1992 when the United States began to move out of 
the Cold War. The military led that effort and the most 
difficult issue was to identify the criteria to use to try to 
identify the technologies and capabilities to protect.
    We, at that time, came up with what we called gap closing 
technologies. Was it a technology or capability that could 
really allow, in that case the Soviet Union, to close a gap 
with our own military forces? I do not know if that is the 
right criteria for the new context in which we find ourselves 
in but I am convinced that it is this kind of analysis that we 
need to give content to some of the things Frank Gaffney has 
talked about. When we say preserving our technological edge, we 
need to know what that means and in concrete terms what that 
means we need to protect.
    I talk, in the statement, about some of the questions that 
I think this review ought to undertake, some of the 
implications the answers may have for our approach to export 
control. I also think that once we have completed that review, 
we need to have a different approach with respect to our 
allies. I think our tendency is to go over and want to talk to 
them about export controls and the details of the Wassenaar 
Agreement. I think that is the wrong approach. I think we have 
to go back much further in the analysis and talk to them about 
our assessment of the serious risks of proliferation of various 
kinds, what are the countries of concern, why we are worried 
about countries like Iran. I think we really see Iran very 
differently in strategic terms and I do not think we are going 
to make progress on export controls until we have an intensive 
dialogue that tries to get our allies to understand how we see 
Iran and why.
    We then need to start talking about strategies that will be 
focused on the states of concern and that will use all the 
various tools that are available--of which export controls is 
one but only one. And I think only if we have this kind of 
active engagement with our allies are we going to be able at 
the end of the day to get a strengthened approach to 
multilateral export controls. Thank you very much.
    Chairman Thompson. Thank you very much. Mr. Sokolski.


    Mr. Sokolski. Thank you very much. Having worked up here, I 
am reminded of a story. I used to work for a little known 
senator from Indiana, Dan Quayle. And I would come in and 
complain about things. One day he turned on me and he said, 
Henry, what is it with you? It is always doom and gloom. What 
is the good news? What I told him then is what I will tell you 
    \1\ The prepared statement of Mr. Sokolski with attachments appears 
in the Appendix on page 79.
    The good news, Senator, is that you still have not fired 
me, and you will ask the questions necessary to get to the 
bottom of what I am complaining about. I think in essence what 
you are doing with these hearings will only be useful if you 
keep it up. I urge you to keep asking the very questions both 
of you asked at the beginning because those are the right 
questions. It is going to take a long time to get the answers, 
but if you keep asking, you will get to where you want to go.
    In that regard, let me try to speak to some things which 
have not been raised. I ask that the balance of my remarks be 
placed in the record.
    Chairman Thompson. Without objection.
    Mr. Sokolski. Thank you very much. Look, as you have all 
now established, post-Cold War trends have made controlling 
strategic weapons goods much more difficult. I think this 
highlights the need for three new kinds of restraint.
    First, we need to prevent not just listed strategic 
commodities, but unlisted strategic goods from going to foreign 
weapons projects. We focus on lists because the analytical work 
has to be done to know what it is we should worry about. But 
there will never be a list that will be perfect. And in that 
regard, we need to get other nations to adopt the kind of 
catch-all controls the United States and the European Union are 
using and apply them with existing multilateral export controls 
regimes, not just Wassenaar. I know this Committee is focused 
on Wassenaar, but it turns out other control regimes have no 
undercut provisions. And we can use them. And the coverage of 
items these regimes control is pretty good. It is not as 
expansive as Wassenaar and what they look at, but it is pretty 
    Second, as these charts will demonstrate, getting a more 
accurate inventory on the status and amounts of nuclear weapons 
usable materials worldwide and especially with Russia is 
imperative. I know the Committee wants to talk about dual- use 
controls, but if we want to talk about multilateral 
proliferation controls, we need to understand that there is a 
limited budget of political capital and you have to pick what 
you want to emphasize. I would say the trends here are really 
disturbing and have major implications for national security.
    Finally, and a point that I think both of you have raised, 
we have got to strengthen our authority as a nation to 
negotiate on any of this. The two recommendations I have are 
ending U.S. subsidies to known proliferators and upholding U.S. 
nonproliferation laws particularly with regard to U.S. trade 
and nonproliferation cooperation with, and I emphasize the 
word, known, proliferators in Russia, China and North Korea.
    Let me make a few comments beyond what I have made to 
amplify these three points. On the first point, I think 
encouraging the multilateral use of catch-all controls is our 
best bet for preventing risky exports to bad end-users. This 
approach avoids the fruitless multilateral debates over what 
items should be controlled to what destination and instead 
gives control regime members an incentive to exchange threat 
assessments. In essence, if you want to get engagement, you 
have got to have something operational and concrete to bring to 
your ally or friend and say, look, this left-handed franostat, 
whether it is on a list or not, if it goes to Country X, is 
going to do this kind of harm.
    When you present it that way, and you do a denial and you 
ask for no undercut, you get the dialogue that you need. I 
think we can go much further than we have in producing that 
dialogue, however. We, in fact, drag our feet. How? We listen 
to the exporting community demand that we develop a list again 
of what those things that should be controlled and because we 
cannot get a list, we do not do the no undercut and catch-all 
controls the way we could by simply taking actions instead of 
focusing on endless debates about the list.
    Now, I am going to move very quickly because my time is 
running out. These charts I believe are self-explanatory and 
they are in the testimony. At the height of the Cold War, 
almost all the fissile that could be made into bombs was in 
bombs. If you take a look at the middle chart, you will notice, 
and just as a peg, United States now only deploys about 6,000 
nuclear weapons. The civil material that is not only in Russia 
but Japan and Europe can make many, many times more than that 
number of bombs now. That overhang did not used to exist during 
the Cold War.
    In addition, we have only the vaguest idea of the various 
categories of nuclear materials Russia has. Now the United 
States is an open country. People know what all the categories 
are and the numbers are for the United States and its nuclear 
holdings. We need to get others to step up to the plate and 
start showing some nuclear candor as well. If we cannot, that 
has enormous implications. You will notice that the only 
categories of materials that can be most quickly deployed as 
bombs are those highlighted on the chart. We do not pay, our 
policies do not pay any attention to the other categories. 
Those other things are very dangerous as well.
    That then brings me to the last point and that is to get a 
better fix on all of these things and to do better, we have got 
to stop being part of the problem and I am afraid we are. The 
earlier admission by one of the administration witnesses that 
we export controlled items to proliferators I thought was 
chilling. Look, the intelligence community does know who the 
proliferators are. It is the other agencies that do not want to 
listen to the facts. I know, I was in the Pentagon. I did 
nonproliferation for the Pentagon for 4 years. The problem is 
not a lack of intelligence. It is a lack of will to use what 
intelligence we have got.
    I think with that, I will conclude except to put one ad for 
one piece of legislation. I would not be useful if I did not 
plug something. You cannot possibly not want to demand that the 
worst proliferator not receive U.S. nuclear cooperation until 
it has lived up to the nonproliferation obligations it has 
admitted and others have admitted it has violated. I am talking 
about North Korea. There is a piece of legislation that was 
introduced yesterday by Congressmen Gilman and Markey, that 
passed last fall overwhelmingly by 300 votes, it included a lot 
of Democrats. I sure hope somebody picks that up over here. 
That concludes my remarks.
    Chairman Thompson. Thank you very much. Senator Lieberman, 
do you want to start?
    Senator Lieberman. Thanks. I have to go. I thank you for 
your testimony. I will just take advantage of your courtesy to 
ask one question which is the extent to which we can do a 
better job engaging our allies in this effort and underneath 
that is the question which I gather was being suggested by the 
first panel, that we are at a point in the multipolar, post-
Cold War world where, yes, of course, we have overlap of 
interest with our allies, but they are limited now when it 
comes to both vision of some of these rogue nations that we are 
very worried about and commercial interests.
    So I guess my question is--because I think you are right 
that we do need to more directly engage our allies on this--do 
you feel that we have not adequately done it? In other words, 
is there a gap here that is overcomeable, if there is such a 
    Mr. Gaffney. Well, I might just kick it off by saying I 
think that there is no getting around the fact that for many of 
our allies, the syndrome that I tried to address in my 
testimony concerning our own government is even more rampant. 
That is the idea that really there is not any security problem, 
period. And therefore there is no further impediment to doing 
whatever feels good or whatever would be lucrative in terms of 
either the company's quarterly bottom line or the country's 
    I believe, Senator, that there are in most of the 
governments that run our allies' nations these days still 
people who appreciate that that is probably not true. I think 
they are undercut, however, within their own councils when they 
witness how our government conducts itself. Giving Secretary 
Holum the benefit of the doubt about our government-to-
government representations, bilateral or multilateral, the 
allies see that as sort of going through the motions in which 
we say, we really don't think you should do that. Yet, they are 
watching what is actually the policy of our government. And 
this is why, whether we want to talk about it or not, what you 
are going to be debating today and the next couple of days is 
so important.
    They are looking at what kind of laws will be enacted in 
this government that will, in fact, make it harder still for us 
to exercise export controls and to inject national security 
into our decision-making about exports.
    So I think that we must look to our own sins first and why 
I am so proud really of what you all are trying to do here to 
have some accountability in this area and to do some second-
guessing of judgments that are being made. I think that will 
almost certainly help, at least at the point where we have a 
U.S. Government that is willing forcefully to go in and not 
just issue what my friend, Richard Perle, used to call 
``demarshmellows'' but really raise hell with allies that what 
they are doing is contrary not only to our security but to 
theirs as well.
    Senator Lieberman. Richard Perle never issued a 
    Mr. Gaffney. Not willingly.
    Senator Lieberman. Mr. Sokolski, do you want to add 
anything to that?
    Mr. Sokolski. Yeah. You come at these questions that are 
big usually at high and low levels. Let us start low because 
that is easier.
    Senator Lieberman. OK.
    Mr. Sokolski. It would be useful for someone on this staff 
to get the poor assignment--I notice everyone is looking back 
there--how backed up are our denial notices and other's denial 
notices, how are these things working, please? Because the no 
undercut plus catch-all, in theory, can work. In practice, of 
course, it does not. But it is up to you to find out how bad is 
it. And if you do not ask, they will say it is working pretty 
well. So that is point one.
    Point two, I know that there is a book--this is ears-only 
intelligence--that lists every piece of code word information 
on every proliferation action that has taken place since I was 
in office. I know because I created the book. That was back in 
1990. It is there somewhere in the government. Go find it. 
Because when you do, you will see mismatch between what we know 
and what we do. And by the way, it is a bipartisan equal 
opportunity critic machine. This is not going after this 
administration. It is going after the system. You want to take 
a look at that if you can find it.
    Finally, Export-Import Bank and who we are exporting to? A 
useful thing to look into. A nice bipartisan thing. Now that is 
the low road.
    High road. I served on a commission that had a name that 
went on forever and ever. It was going to tell you how to 
organize our government. It was pretty funny. The acronym was 
so long, we did not use it. It was the Commission to Assess the 
Organization of the Federal Government to Combat the 
Proliferation of Weapons of Mass Destruction. OK. Big acronym.
    One of the things that we did stumble into despite all of 
our efforts not to look at it was that this country does not 
have a long-term set of objectives, time phased goals, and 
never mind strategy--let us leave that alone--with regard to 
key countries that are troublemakers for us. When we asked the 
State Department, and Mr. Holum, by the way, he was very candid 
about this--I think he is a great man--when he came to the 
commission, he admitted there was a problem. When we asked what 
are our time-phased objectives regarding North Korea, he said, 
well, we have got them written down, but they are not very 
    And then he sent us a performance report produced because 
of the laws coming out of this Committee that went 12 months 
into the future. That was it. And you know what it was--
implementation of the Agreed Framework. That was all. If you do 
not have more than that going with regard to North Korea and 
can explain it publicly and privately, you are not going to get 
any allies to do anything on the low road with you. But if you 
do, it is amazing what you can get. But if you do not, there is 
no hope.
    You should be asking what our time phased objectives are 
with regard any two countries--I do not care which ones they 
are--that you think are important, get people up here in closed 
and open hearings and see whether or not we've got a plan.
    Senator Lieberman. Thank you. You have given our staff and 
us some things to do. Thanks, Mr. Chairman.
    Chairman Thompson. Thank you very much. Those performance 
reports are supposed to be in March 31. I have not seen them 
yet, but I am looking forward to it. Because for most agencies, 
we found out that the goals they set out is how much paper they 
are supposed to shuffle next year or how many phone calls they 
are to answer--and not whether lives are being saved or whether 
there are fewer proliferators than there were before, and so 
forth. That is going to be another one of those long processes, 
getting the Results Act to work.
    Mr. Sokolski. Right.
    Chairman Thompson. This is an area where it really could go 
do some good because it will focus people on the fact, if 
nothing else, that they have no real goals.
    Mr. Sokolski. Absolutely. Our commission interviewed people 
in the Department of Energy, who when talking about Nunn-Lugar, 
said we have scientist-to-scientist programs and we asked how 
many scientists do we need to reach by when? And they looked at 
us like you must be crazy. Well, they said, a million. I said, 
well how have you engaged? Well, they said, we have got 6,000 
that we have touched. You got to do better than that. And 
whether you are for that program or not, that is not a program 
with serious time-phased goals. You cannot measure success or 
    Chairman Thompson. While we are on that subject, what do 
you think about the Cooperative Threat Reduction programs and 
Nunn-Lugar and all that? You have pointed out something here 
that is extremely important. Of course, as far as I know, 
nobody has ever developed so far a nuclear capability solely 
based on what they have stolen--except perhaps the Soviets. 
Unfortunately, they have developed it on what they have been 
able to buy on the open market plus a little help from their 
friends. But you pointed out the tremendous potential out 
there, and that it is another one of those good case/bad case 
    The good case is that we are getting the START agreements. 
The bad case is that the more we do there, the more we have got 
stuff arriving from off the books and nobody knows how much and 
where it is, or how rapidly it could be taken and put back in 
to weapons. And we are spending hundreds of millions of dollars 
trying to get some security and some fences around some places 
and placating some scientists and things like that.
    I think you are right. I am not sure that we have any feel 
for how much good it is doing yet, but everybody agrees that 
we've got to do something. So this is what we are doing. What 
do you think about those programs?
    Mr. Sokolski. Look at the charts. You see the highlighted 
categories. Arms control as we know it, START, reduces the 
number of deployed nuclear weapons. It takes the warheads and 
puts them on a shelf and maybe it cuts up the missile or the 
bomber. Nunn-Lugar takes whatever is declared by us and the 
Russians as military surplus and tries--it has not done it 
yet--tries to push this material to the last category which 
makes it locked up in spent fuel or spent fuel equivalent, 
either by irradiating it in mox or by literally taking it and 
mixing it up with spent fuel and making it into logs.
    You will notice our policies in toto, never mind 
cooperative threat reduction, ignores all the other categories. 
It does not do anything with regard to them. The civil 
plutonium holdings, which I use very conservative figures, is 
something I know you worked with. The numbers keep rising. We 
have got conservatively five times the number of nuclear 
weapons that could be made out of civil fuel, and we do not 
even have the exact figure. And it hanging around and literally 
floating around as it is being shipped between the Europe and 
Japan. Talk about terrorism problems.
    When you get to the United States and Russia, we can tell 
you essentially what the U.S. surplus military fissile holdings 
are. You can go Natural Resource Defense Council. They have 
pretty good figures. Maybe we can make them a little bit 
better, but even Tom Cochran, who I talk with a lot, says they 
are pretty good. What we do not know is within--what is it--
23,000 advance weapons--what Russia's surplus holding are. An 
advanced nuclear weapon is where you have two warheads mated 
together to make one. So the real figure if you want crude 
weapons is like--I don't know--50,000 weapons. I mean the mind 
boggles. We have no idea of whether they have that breakout 
    Now it seems to me, whether you are a hawk or you are a 
dove, whether you like nuclear weapons, whether you want to 
test or you do not, whether you like missile defenses or you do 
not, you want to reduce that certainty budget. You want to at 
least fail at trying. We have not tried. We have not even 
talked about this seriously or put it at the head of the list. 
It is interesting. Apparently someone read an editorial of 
mine--I think it was Paul Wolfowitz, and got Candidate Bush to 
put that in his speech.
    Now I am not so sure that Gore would not agree on that one. 
Maybe if we succeeded, we do not have to spend so much money. 
You know what we spend a year on nuclear weapons hedge? It is a 
lot. I think it is like several billion dollars. What is it? 
Eight billion? That could go to missile defense or something 
    Mr. Gaffney. Senator, could I just add a point. This 
Committee is especially well suited for what I think is 
desperately needed in this area. I have worked with Senator 
Nunn and Senator Lugar, as you have, for a long time, and I 
think in no small measure out of a sense of respect for them, 
as much as out of a sense of what else are you going to do, 
this program has gotten precious little rigorous oversight. 
There are a slew of General Accounting Office reports that 
document what would under any other program I think be 
considered to be at least abuse, if not fraud, and perhaps most 
certainly waste.
    We are in many cases I think building as you said yourself 
higher fences, better padlocks, better surveillance systems, 
and the like for some of the repositories of this stuff. 
Unfortunately, this takes into no account at all, as best I can 
tell, the underlying problem. And that is the guy who has got 
the key to those better padlocks may be part of the problem.
    Maybe what we are doing by enhancing the security of these 
facilities is just maximizing his monopoly over the sale of 
what is in them. But this is an area that I entreat you to take 
a hard look at.
    Chairman Thompson. Freeing up some of his resources to put 
in another place.
    Mr. Gaffney. Absolutely, fungibility.
    Mr. Sokolski. Well, actually, fundamentally, we gave $12 
billion over the next 20 years to Minatom for highly enriched 
uranium. We have no idea where that money is going. If we are 
lucky, it is going into dachas as just corruption. If we are 
not, it is going into weapons or financing weapons sales to 
Iran. We need to find out where the money is going.
    Mr. Hadley. I think the issue here is not priority. I think 
this ought to be--the Nunn-Lugar ought to be a priority. I 
think the issue is effectiveness in the things that Henry and 
Frank have raised. And in some sense, it is very important for 
this Committee or others to look into the issue of 
effectiveness because the program is too important not to be 
effective--not to be doing as much as it can be doing as 
effectively as it can do it. So I think the issue is not 
priority or importance. It's effectiveness.
    Chairman Thompson. OK. Mr. Hadley, you talked about taking 
kind of a new look at this whole thing. We are about to start 
the discussion on the Export Administration Act apparently. It 
is kind of mind-boggling really when you think about it. I 
guess people have been around here a lot longer than I have who 
have spent a lot of time on this. I do not know. You have got a 
committee called the Banking Committee that produces this and 
the rest of us are kind of scrambling to read various 
iterations of changes and so forth as it is going to the floor. 
And we're all haggling over national security matters and 
staffs are arguing with each other over stuff.
    I wonder who if anybody has read it? You talk about the 
high road and the low road. That is the real low road. On the 
other hand, we have got all these grandiose multilaterals 
agreements that we are trying to do. And people seem to think 
that the more people we can get into them, the better, 
regardless of fact that some countries spend all their time 
trying to undercut us once they are in.
    I am amazed, coming in from the outside, to find that 
nobody has got a handle on all this stuff. I mean nobody really 
knows. You know I started out thinking probably the more 
controls the better--a pretty simplistic view, I suppose. But I 
can see now that nobody really knows what the right answers is. 
I mean we ought to have a plan. The government ought to have a 
plan as to where we are trying to go in this world that we live 
in while we all talk about catch-alls and so forth. But it 
doesn't make sense to say that you cannot do any good in 
restricting exports unilaterally--and that we should no longer 
try--and then to complain that our own allies will not 
cooperate with us multilaterally because they don't trust us 
not to take unilateral trading advantage. How does that work?
    Mr. Sokolski, with regard to the catch-all matter, how 
would that work in practice? You would have some kind of a deal 
that says when we do ``x'', the catch-all provision will kick 
in. Clearly what is going on is a bilateral deal. I guess we 
are doing that, and we will always be able to do that. It could 
be coupled with a no undercut, I suppose. But how would that 
actually work?
    Mr. Sokolski. I can tell you how it has worked in the few 
instances where I have worked it. First, before you go 
anywhere, you do not simply go to some general forum, even as 
general as NATO, you go bilaterally, MOD to MOD first, because 
it's the ministries of defense that will either save or break 
this. It is not the Commerce Departments. They will break it 
but they will not make it. They will always say, no, it is a 
bad idea to control.
    And the state departments of the foreign ministries, they 
are torn frequently. They are sort of in between. But if the 
ministries of defense do not care about something, you can 
count on the other two saying yes to some export. So you have 
got to establish relations between ministries of defense. Now 
we did that in the Bush administration. I set up threat 
bilaterals with the only two countries that have ever bled with 
us and projected force. That is France and Great Britain. And, 
boy, were they interesting. They were telling us stuff we did 
not know, telling us to pay more attention to this, this, and 
    When it got to circumstance with regard to Brazil, it was, 
where some French Viking liquid fueled engines were going to go 
to Brazil. I went with my assistant secretary. I was just a 
deputy dog. And we went and had a discussion with our French 
counter parts. You know they never explicitly blocked the 
export, but it never went. They said they had no authority to 
block it, but the rocket engine never went.
    So I see it working the same way. I have talked with some 
of my former employees who are still in the bowels of the 
Pentagon. They actually are telling me that we need to do more. 
For example, recently there is a steel that is made for SCUDS, 
apparently if you take one ingredient out, it is still pretty 
good but it is not controlled. And guess what? Someone was 
trying to sell it to the wrong person. That is stuff that was 
not on the list.
    Now in this case, the country in question was informed but 
they chose not to act because they did not have catch-all 
authority. Change that.
    Mr. Hadley. Mr. Chairman, I think that is really the 
    Chairman Thompson. Give them legal cover to do what they 
might want to do anyway.
    Mr. Sokolski. Encourage it. Really pursue it.
    Mr. Hadley. Right. And it is something, it is a marker you 
can put down on your upcoming trip. The answer to Senator 
Lieberman's question is to pick up Frank's point; there are 
people in these governments that care about these issues. We 
need to reach out to them and establish a dialogue with them to 
in some sense empower them within their own bureaucracies. It 
has got to be our intelligence communities having a dialogue 
with their intelligence communities, our defense department 
having a dialogue with their defense officials. It has got to 
be at that level. Have a strategic dialogue about why we are 
concerned about Iran. The kind of specific examples that Henry 
Sokolski was talking about you can put in the hands of people 
in the ministries of defense and intelligence communities 
    Chairman Thompson. But how would it actually work? What 
would the language be for a situation that is not on anybody's 
control list but is a problem--and one ally goes to the other? 
I mean what kind of language do you use to cover situations 
like that?
    Mr. Sokolski. Sure. Literally what happens is this. And we 
had it occur during the Consare case, which was a furnace, an 
induction furnace, which frankly was going to be used for 
missile purposes, not nuclear, and we had to use a nuclear 
catch-all law to get it. And essentially there was a German 
firm that could make it as well. What we did after we did our 
denial is we went to that country and said don't you dare send 
yours to the same spot.
    Now, with these regimes, Missile Technology Control Regime, 
Australia Group, Nuclear Suppliers Group, they all have dual-
use items on their lists. In fact, if you put them all 
together, what you have is not much different than Wassenaar. 
But unlike Wassenaar, they have no undercut provisions. Work 
    Mr. Hadley. Could you give him language that you would have 
the Senate adopt that would give them the authority?
    Mr. Sokolski. I do not think you have to give them 
language. It is working now with like-minded countries. I will 
tell you where the difference comes. When the French came to us 
in 1990 and said you need to worry about Iran and they gave us 
a better intelligence brief than we could give them, we were 
able to work on a couple of things.
    What you need and I think what both Steve and Frank have 
raised is enough studies, enough public diplomacy, enough 
analysis about what are the kinds of problems with China, for 
example, and Russia so that you do not necessarily condemn the 
whole country, but you get down to specific concerns such that 
you then got the public diplomacy to do the no undercut and the 
catch-all with like-minded countries.
    There is a limit to what you can do. You cannot convince 
people that do not agree with you, but we are not even trying 
to convince people of what the problems are.
    Mr. Gaffney. But on that point, Mr. Chairman, could I just 
put in a word for unilateral steps, too. I do not think it is 
correct to say we should rule them out. Even John Holum was 
saying there are some places where you--we have a case right 
now where Germany is reported to be providing phosgene 
manufacturing capabilities to Iran, shades of the earlier 
effort to provide, as it happens, a deeply buried manufacturing 
facility we believe for poison gas in Libya.
    Now, I do not think that foreign availability, taken to its 
logical extreme, suggests we ought to be competing to do that. 
The fact that we are not going to do it and the fact that we 
could raise hell about them doing it on the basis of us saying 
that is not in any of our interests gives us the kind of 
leverage, moral suasion, behind the scenes, public diplomacy, 
whatever you want to call it--that I think can help produce 
    But I am afraid it is now increasingly pushed off the 
table, witness what you are going to be debating this 
afternoon. The very fact that foreign availability or mass 
market availability is asserted is going to suddenly make it 
fair game for anybody who wants to do anything in those areas. 
That is just not right.
    Chairman Thompson. And we are acting as if there is no 
threat at a time when we are trying to convince our allies that 
we need a national missile defense system, for example. We are 
behaving in every respect as if we really perceive no problem 
with regard to the threat from rogue nations and as if we do 
not believe the Rumsfeld Commission or the Deutch Commission 
results or any of these reports with regard to our failure to 
impose sanctions on known proliferators.
    Mr. Gaffney. To the contrary, we are actually rewarding, in 
the case of North Korea most especially, we are now, as you 
probably know, the largest purveyor of foreign aid to North 
Korea in the world.
    Mr. Sokolski. Yes.
    Mr. Gaffney. Why is that? I suggest it is because they now 
have a ballistic missile with which to threaten us, which we 
assess--CBS, by the way, the other night, in ``Failsafe'' said 
North Korea now has the bomb. If they do not, they shortly 
    This is evidence, I am afraid, not only that we are not 
taking the threat seriously. Steve Hadley and you are among 
those who have been working on missile defense for a long time. 
We feel frustrated that we are not doing something on that 
front, but we are certainly signaling to our allies--look at 
South Korea, Japan, Italy, European Union--that we want these 
guys to engage with North Korea just as fully as they can. What 
does that mean? Trade. What does that mean? More access to 
precisely this kind of technology.
    Chairman Thompson. And it tells our allies that we are in 
less position to protect them. It tells other rogue nations 
that all you need to be able to do is blackmail the United 
States. Mr. Hadley, you talked about doing more to explain our 
security risk to our allies. I have talked a long time to 
people over in the State Department about this. I keep asking 
why do not our allies understand what we understand? Don't our 
allies read the public reports that we get in here, the CIA 
assessments, the Rumsfeld Commission Report, and what have you?
    The impression I get is that they think our allies fully 
appreciate it, but they just don't care. And that our allies 
just place trade above everything else. And that while they 
appreciate the danger of what some of these countries are 
doing, unless the particular export directly relates to the 
production of weapons of mass destruction or their means of 
delivery, our allies say it does not count.
    Now obviously they would care if they thought that they 
were delivering something that in the next few weeks would be 
fashioned into a weapon to hit even us--maybe not them, but 
even us, they would care about that. But where is the 
disconnect there in your opinion? From your statement, you seem 
to think that--and this was my first suspicion, and I guess it 
still is--we are certainly not doing enough to convince our 
allies of the nature of the threat or not doing enough to share 
intelligence where we can share it. And there's also the fact 
that our own behavior is sending the message that we do not 
really think there is much of a threat.
    Mr. Hadley. Right.
    Chairman Thompson. What do you think?
    Mr. Hadley. I think we have a disconnect in some sense 
between our rhetoric of concern about proliferation and our 
actual operational steps. I will give an example. If you have 
an opportunity to meet with the commander-in-chief of our 
forces for CENTCOM, one of the questions you might like to ask 
him is does he have someone on his staff who everyday gets up 
in the morning and asks themselves, ``What am I doing today to 
set back Iran's efforts to get a nuclear weapon? Be it finding 
out where Iran is are trying to acquire equipment or technology 
and trying to intervene to stop it, whether it is 
disinformation, whatever. I think we are not operationally 
serious enough about the problem.
    I think if we could establish these links between 
intelligence communities, DOD people, uniformed military, with 
our allies, we would start giving them the ammunition they need 
to be able to make their governments more serious about it. The 
allies, particularly Europeans, have a lot on their plate. They 
are very regionally focused. They seem to think that 
proliferation is a global problem and that it is our problem; 
we have to handle it. But specifically----
    Chairman Thompson. Or under more economic stress than we 
    Mr. Hadley. Right. So that is the hurdle we have to, that 
is the sort of barrier we have to break through. But, if you 
just think about how we would have had to run the Gulf War if 
Saddam Hussein had, for example, a long-range ballistic missile 
that could have come down even with a conventional warhead on 
one of their capitals, there could have been a different vote 
in the Senate and would have been a different issue in terms of 
the activities of our allies. And I think it is those kinds of 
pointed discussions--plus the kind of particular intelligence 
cases that Henry was talking about--that we need to use in the 
discussion with our allies at every level and engaging all of 
the relevant agencies. It is hard work. It is a full-time job.
    But if we really believe, as everyone seems to say, that 
proliferation--particularly of weapons of mass destruction--is 
our No. 1 problem, then it seems to me that it is worth the 
effort. That is the best answer I can give you.
    Mr. Gaffney. Senator, the other part of this disconnect, 
and I think Steve is exactly right, is one that is very much 
within your purview. The president has said--he did not know 
that he was saying it in a public forum, but he said it, that 
when it comes to implementing pieces of legislation, famously 
the Gore-McCain Act, but others as well, that require 
certification when something is being done like transfer of 
cruise missile technology to bad guys----
    Chairman Thompson. He has to fudge the facts.
    Mr. Gaffney. He has to fudge the facts. Now what signal 
does that send to people who are at least as willing to 
ignore--the phenomenon the psychologists call cognitive 
dissonance, you are not seeing what you do not want to see. I 
believe that they are very much keying off what they judge to 
be a very cynical and commercially as well as politically 
expedient policy on the part of the U.S. Government. They are 
not going to be more righteous about this, by and large.
    There are exceptions. I think the Japanese on the 
supercomputer example, for instance, were more righteous than 
we were and were undercut by our cynicism.
    Mr. Sokolski. Actions that are successful speak louder than 
words that fail. And in this regard, when you bend your law, 
you waive your law concerning nonproliferation, that is 
troublesome. One of the things I have actually publicly come 
out in favor of, just to radicalize and zero--base the debate, 
is to sunset all the sanctions. I will settle for you just not 
subsidizing nonproliferators and freeing up those assets in the 
intelligence community to pick two or three countries, get that 
darn time-phased set of objectives and go hit the role and 
    By the way, a lot of people will probably vote for that 
formula including the intelligence agencies. But then you 
better have some time-phased goals so you can judge whether or 
not you are getting your money's worth because otherwise you 
will get baffle gabble. I do not care who is in office. They 
will tell you everything is fine. I think finally that brings 
everything back. If nonproliferation is just export control, 
you are in a world of hurt, not simply because you cannot 
control everything. It is because export control is not taken 
seriously. Foreign policy is. And so if nonproliferation is not 
at the tip of the iceberg of foreign policy, you are not going 
to get very far. And that is, in essence, the problem. We have 
so succeeded because of our victory in the Cold War, we do not 
really want to talk about how we might have foreign policy 
failures again and as a result, no one takes it seriously when 
we do raise problems about the prospects of bad things 
happening in the future.
    Chairman Thompson. Do we need to take a whole new look at 
our export control policies? What do you gentlemen think about 
this EAA debate? You know we are down to the fine print again 
and sometimes I wonder if we're just totally missing the point. 
The whole thing needs to be shaken up. You know, some of our 
allies at least have one agency controlling all this, a 
separate agency.
    Mr. Sokolski. Yes.
    Chairman Thompson. You talk about Defense. Everybody has 
got their own constituency.
    Mr. Sokolski. Yes.
    Chairman Thompson. Commerce obviously has got theirs. State 
wants to keep peace among their allies. But even the Pentagon, 
they want low cost weapons----
    Mr. Sokolski. Right.
    Chairman Thompson [continuing]. And things. Everybody has 
got an interest except those components that have national 
security solely in mind, I guess you might say. But we are 
consolidating those components within others now in this 
administration, so that they have less effect. And we're 
putting the DTSA people out in Dulles and all of that. What 
about our export policy in general, and as this EAA thing comes 
up again?
    Mr. Sokolski. I am sorry. Go ahead.
    Mr. Hadley. I do not know. The answer to your question is 
yes, we need a fundamental look. It is hard to stop the train 
and stop the world while we do it, but it seems to me part of 
any EAA ought to be a commitment and legislation that calls for 
exactly the kind of look that would address the issues that you 
have raised today and have a schedule for doing that. It seems 
to me that is a minimum of something that ought to come out of 
this EAA debate.
    Mr. Gaffney. But would you not think you would start doing 
it before you start legislating? I have got to reinforce the 
point you made, Mr. Chairman, because it underscores the thing 
I said at the outset. With all due respect to the Banking 
Committee, it does not have the ability to take into account 
all of the equities that are at stake here. The failure frankly 
of other committees--I think rather less so yours, in part 
thanks to your leadership--but other committees that have 
jurisdiction and have responsibility in this area to ensure 
that precisely this kind of oversight has driven a review and 
has formed answers to the kinds of questions we are all 
wrestling with here before you start legislating is maddening.
    Chairman Thompson. Mr. Sokolski.
    Mr. Sokolski. Having lived through so many extensions of 
the EAA, I do not want to trivialize the difficulties raised by 
Mr. Holum, but if you do not do your homework and you act 
simply on those sets of concerns, even he admitted not a good 
idea. I think, however, you cannot bureaucratically solve the 
problem of what is the problem on this commission.
    The first meeting, Mr. Deutch said, well, we have seven 
solutions that are possible and he listed them, make the 
national security adviser, have one agency, and other. I said 
that is great. What is the problem? They had spent a year and a 
half discussing solutions. What probably needs to be done in 
doing a reevaluation is get those what we call green line/red 
line studies. I mean who are your problems? It is probably 
China. It is probably North Korea.
    Mr. Gaffney. It is Russia.
    Mr. Sokolski. It is Russia. Well, certainly parts of Russia 
for darn sure. And so you then have to say, OK, what is it that 
we have to worry? Now I do not think you want to have a list 
and say, ah, this is all we have to control, but it gives you 
some idea if you have a list of what you have to worry about. 
And I think you need to have that work done.
    Now one of the nice things that Congress can do and has 
been doing and it has been doing really great work is that it 
asks for certain certifications and sometimes some useful 
reports. The difficulty is sometimes the staff reads the 
reports and that is it. You, Senator, have a bully pulpit. If 
you use it, do not underestimate what you can do.
    Chairman Thompson. Mr. Hadley, I think you too in your 
statement indicated that we might ought to concentrate on less 
and do more. How does that translate? It is kind of what you 
are talking about, I think, Mr. Sokolski. How does that 
translate into a policy? What do we concentrate on with regard 
to areas of concern and countries of concern? What do we do 
with regard to that?
    Let us say, on the other side of the ledger, you can take 
some things off the dual-use control list and say they are not 
controllable anymore. We are going to free up some people, 
maybe free up some assets, some time. But in terms of 
concentration, concentrating on the problem areas, it gets back 
to a major political question. I mean it does not matter what 
your rules and regulations say if you have an administration 
who will not impose sanctions under any conditions and who will 
certify that proliferators are not profilerating. But even with 
regard to the rogue nations, if we adopted a policy more in 
that direction, what would that mean in practical terms?
    Mr. Hadley. You would have to have, I think, military 
people, technologists, sitting down and asking what are the 
kinds of capabilities that we need to have and that we do not 
want our enemies to have, and list them. And this is what we 
did in 1991 and 1992 and it was a shrunken list but an 
important list. And then you say--let us assume it is stealth 
technology. All right. What are the components that go into 
giving another country having stealth technology?
    What are those components? Who has got them? How hard are 
they to get? And what are the really critical ones? And you may 
find, as you do that analysis, that there is a variety of dual-
use items that are elements of stealth technology, but they are 
too proliferated, you cannot control them. And what you hope is 
that you can do a strategic analysis of stealth technology and 
find the three, four, five things that are critical to the 
capability that we have a shot at controlling. And you focus on 
    And if you focus on those to give a focus for our own 
export control approach, it gives you an agenda when you go to 
your allies. But it is hard to give more than an example 
because it is very nitty-gritty and you really need to get 
technologists and military people who know this stuff in a room 
sorting it out. That is the process I think we need.
    Chairman Thompson. What do you think?
    Mr. Sokolski. I would be most interested in the list of 
capabilities. I would be very leery about how a quote-unquote 
``critical list'' might be used and let me explain why. There 
were numerous cases on my watch where folks just wanted to 
control I think it was the State Department proposal. Well, we 
really only have to worry about reentry vehicles they said, not 
the rest of the missile. Now that is an extreme cartoon of how 
these critical lists can go.
    But clearly you are most concerned about controlling 
against the capabilities and frequently that will mean going 
outside of the current or latest list. I would say that the 
listmaking is to be expansive, not focused so much, but 
expansive so that you are flexible enough to go after things 
maybe that are not on lists.
    Chairman Thompson. If you had a catch-all approach, you 
would not need to worry about that so much, would you?
    Mr. Sokolski. Well, but the analysis that Mr. Hadley is 
talking about needs to be done so that you are alert to that 
kind of metal that one less ingredient from which still works 
would be something you would want to control. But I would not 
want to not have to have it on the list to control it. I would 
want the list as the template for what to control, as some way 
to keep bureaucrats alert to what they need to be paying 
attention to.
    Chairman Thompson. Did you want to comment on it?
    Mr. Hadley. Yes, just on your effectiveness point. The 
reason I think you want to take the kind of strategic approach 
I described is, that if you have too many things on the list, 
people show that they have a tough export control regime by how 
many things they are controlling and how many licenses they 
issue. But the question is are we preventing somebody from 
getting critical capabilities? And I am concerned that if you 
do not really try and focus on what is important and critical, 
you will lose effectiveness. That is the concern I would have. 
It is a tradeoff.
    Mr. Gaffney. Mr. Chairman, we have been talking for a long 
time frankly about smaller numbers of things and higher walls. 
At some point I think we actually crossed over into having a 
lot of things that are important outside of the walls. And 
while I take the point that you got to have a rigorous process 
and you have got to have people focused and so on, we are doing 
exactly the opposite of that right now and your point about 
DTSA is a perfect example.
    Right now we have emasculated the one agency of the 
government that at least during the Reagan years and I think 
during the Bush years you could count on to be doing the kind 
of focused serious national serious-minded analysis on export 
contracts. It was not always perfect by any means, and in some 
places it was downright uneven, but at least it was not subject 
to the same kinds of pressures that as you say yourself are so 
much in evidence elsewhere. That is just not the case today.
    So where is the check in the check and balance? Where is 
the focus, the wall on a variety of things, some of which are 
now going through without any kind of controls at all?
    Chairman Thompson. Good. One final area. This DSB Report. 
When I hear about these reports, the first thing I always want 
to know is who are the guys that wrote it and who do they work 
for? I do not want to cast any aspersions on anyone, but there 
are a lot of people out there who have a lot of interest in 
maybe doing things differently.
    And I look at what I understand it to be saying--and what 
you say that it is saying--and that is that the name of the 
game in the future should not be trying to develop new 
technology and holding onto it, and keeping anybody else from 
getting it. The name of the game in the future is to be able to 
integrate that technology more rapidly into a military system 
in good hands.
    I can understand the second part, but why not have both? 
Why not be able to rapidly integrate but also take steps to 
maintain an advantage in those areas, weapons areas, in which 
we have such advantages in so many ways? I mean, why not do 
    Mr. Hadley. I think you should.
    Chairman Thompson. I am asking you about the Report.
    Mr. Hadley. Yes. I would do both, but again it is this 
issue of what is strategic, what matters, and what can we 
really realistically control? But I would try and do both. On 
your question, that is one of the things I thought was 
interesting about the study. I mean, we all have our lists, but 
when I got it I went first to the list of who prepared it and 
there were some names on that list that gave me some confidence 
that it was a serious effort.
    And thirdly, one of the reasons I think it is a good time 
for a review of this issue is that two people who I read on 
this subject are Bill Schneider and Richard Perle, and they 
have both talked about--Bill Schneider, for example, was one of 
the principal authors of parts of that Defense Science Board 
Report. He has given some----
    Chairman Thompson. That makes me feel better. I have a 
great deal of respect for both of those gentlemen.
    Mr. Hadley. I do as well. And Richard Perle has been 
talking about the need, as he says, to focus more on the bad 
actors and beefing up our ability to focus on the efforts by 
bad actors to acquire things we do not want them to have. And 
focusing on that end of the spectrum with better intelligence, 
law enforcement and a whole host of other steps with a constant 
program of interdiction and disruption. And that is the 
question that I would have you put to CENTCOM, does he have 
that kind of program, because I think that it is also a high 
leverage opportunity for an updated approach to this whole 
problem which we sort of say export controls, but it really is 
the proliferation issue. It is a very hard issue. We have got 
about ten things we have got to do of which export control is 
one of them, an important one, but only one of them, and we 
need to bring our allies along because we need their help on a 
lot of them.
    Mr. Sokolski. What makes nuclear weapons, missiles and to 
some extent chemical and biological weapons and perhaps a 
handful of other things that we can argue about different is 
that staying ahead is not a real sure thing. In the immortal 
words of one of the scientists in the Manhattan Project, a 
better nuclear weapon in many instances does not neutralize a 
worse one.
    Now that is the nature of this beast, unlike the 
competition of the Cold War. What you really want to do is slow 
the other fellow down to have time to do something and I would 
suggest if you want to think big, it is regime change in some 
cases. That is what we are talking about. It is a Russia that 
is orderly, that is not just democratic but orderly. It is a 
China that is not communist, but finally not that at all; it is 
liberal and democratic. It is a lot of things that are big 
foreign policy.
    So, first of all, you have got to have some time lines with 
some big objectives. Iran may become a decent regime at the 
rate it is going. Who knows? Iraq may not be under this maniac. 
You have got to have those kinds of objectives. Figure out what 
the time lines are. And one other thing. You got to start 
acting now as if you might fail.
    A lot of the things that you need to do if Iran gets a 
nuclear bomb are the things you should be doing that make sure 
it does not get one. It is getting closer to Turkey so it does 
not decide to get a bomb. It is getting closer to Saudi Arabia 
so it does not make a deal with Iran. It is making sure Egypt 
does not get some crazy idea that it should get nuclear weapons 
to take care of business.
    Now it turns out doing these things now may actually help 
you do nonproliferation, too. But I think we need to start 
thinking what happens if there is failure and particularly act 
where it is not at cross-purposes with nonproliferation and 
then be ready for the event.
    Finally, let us be optimistic. We won the Cold War. At 
least the Soviets lost it. And the problem sets that we have 
now frankly look trivial in comparison. We ought to be able to 
get through to that better future. So let us not despair too 
much, but let us get to work.
    Chairman Thompson. We have got a window of opportunity here 
    Mr. Sokolski. I think so.
    Mr. Gaffney. Just the other thing that ought to be on his 
list, and I know it is, is missile defense.
    Mr. Sokolski. Well, clearly.
    Chairman Thompson. I was thinking about that.
    Mr. Gaffney. This is something that I consider to be a 
tremendous export control technique in terms of curbing the 
impact of these exports that are getting away from us.
    Mr. Sokolski. Clearly.
    Chairman Thompson. Gentlemen, thank you very much. This has 
been extremely beneficial and helpful, and I hope that it lays 
the groundwork for some future cooperation among ourselves. We 
would certainly like to be able to call on you as we go forward 
here. Thank you very, very much for your contribution.
    [Whereupon at 12:45 p.m., the Committee was adjourned.]
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