TECHNOLOGY TRANSFER FOR CHINA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85M00363R001102450015-7
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: December 21, 2016
• Document Release Date: August 1, 2008
• Sequence Number: 15
• Publication Date: April 28, 1983
• Content Type: MEMO

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*'csrtir?gton, D.C. 20:520
Apra.; 28, 1983
TO:
FROM.:
SUB; CT:
:issister.: Secrr!crr of State
cr East Asian and Pacific affairs
Members of the China IG
Paul 'riolfo-i _ hairman, China *IG
Technology Transfer for China
For four months we have considered technology transfer
to China. You have seen Commerce's excellent paper. In the
inter-agency NSSD context, OSTP has also made a very valuable
contribution. Its final report is attached (Tab B). I believe
it is now worth summarizing where we stand.
AREAS OF AGREEMENT. No agency wants to tighten controls.
Because of the unique character of Chinese military capabili-
ties, no agency advocates full liberalization, under which
C}:ina would be treated identically to most other countries
outside the Soviet Bloc. All agree improvements can be
made administratively--without changing current guidelines
or altering the level of technology available--to expedite
licensing decisions. A representative.list of these is
attached (Tab A). Agencies also agree that a US-China
understanding on technology transfer, perhaps along the lines
of those we have with Austria, Sweden, and other countries,
would be desirable. .
OPTIONS. The four individual issues in the OSTP paper
are related to one another. For example, the issue of moving
China from Category P to Category V depends partly on whether
one also modifies the technology transfer level. Therefore,
it seems to me that there are three principal packages. of
decisions that have some agency support that the EARB or NSC
should consider:
Maintain tae .Current Level of Technolecv Transfer.
Retain the :resent system of controls and make administrative
imor ve we.^.tS. No ma jcr chances in the amount, types or levels
of technology be licensed wculd be made, but t e syste=
s-cu work more efficiently and be more understandable.
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II. Increase the Level of Technology Transfer.
Retain the present system of national security controls;
make administrative improvements; symbolically raise the
level of technology available to China by moving China from
Category P to Category V; raise the -.level in practice by
rigorously defining those areas within the four mission areas
most critical-to our national security and targetting our
controls more precisely on them. Establish an interagency
committee to do the necessary definitional work and draw up
a selective ("red line") list of the most sensitive tech-
nologies which would be subject to a presumption of denial.
It would establish a second level ("green line") below which
licensing policy would be the same as for all other friendly,
ncn-allied nations. For technologies between these levels,
there would be case-by-case review, with a presumption of
approval unless the export would substantially and directly
enhance China's capabilities in one of the four mission areas
and pose a credible, major risk to our security.
Under this option, there would be a clear Presidential
statement that for purposes of achieving broader US security
objectives, it would be US policy to accept a greater degree
of risk than heretofore in making China licensing decisions.
III. Increase Level of Technology Transfer to 75% of World
Levels. Maintain national security controls; adopt administra-
tive improvements; and set a benchmark level by which to judge
all items falling in the special mission areas. The level
would be set at 75% of the state-of-the-art readily available
to the rest of the world. Below the benchmark, both within
and outside the Lour mission areas, approvals would be the same
as for all other fri.endly,.non-allied countries. Above it,
items in the four mission areas would be approved, case-by-
case, so long as their export did not present a major risk
to national security, while items outside the mission areas
would be approved on the same basis as applied to other
=iendly, non-allied nations. The result would be a signi-
ficant liberalization. China could. be kept in Category P or
moved to Category V.
EARS. The above options now need hither-level delibera-
t on. I suggest that they be discussed at an EXRB meeting next
: cndav, May 2 along with the CSTP draft.
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Succested Administrative lmurcvements
1) Defense should immediately provide Commerce delegations of
authority for cases whose technology levels are below current
COCOM criteria for general exceptions to the international list
of dual-use equipment.
2) No matter what level of technology transfer control is
selected, Commerce, in consultation with all concerned
agencies, should publish within three months, and update
annually, guidance on China cases for each item on the
Commodity Control List. The guidance would indicate the level
of technology permissible for approval (a "green line") and the
level above which there would be a predisposition to deny
licenses (a "red line"). This guidance would be designed to
allow technology transfer up to the green line level by
delegation of authority to Commerce. Between the green and red
lines, there would be case-by-case review. The organizational
administration of the review would remain the same as now.
3) agencies should take action to ensure that ". awl technical
and other data on difficult cases is shared fully and equally
before the case is presented to the Operating Committee of the
Advisory Committee on Export Policy or working Group I of the
Economic Defense Advisory Committee.
4) For those matters requiring case-by-case review, more
discipline should be exercised in meeting licensing deadlines.
Also, cases should not normally be returned more than once to
an exporter for redraft. A way to achieve this goal would be to
have the technology transfer working group meet more often with
technical experts from the-exporter, instead of relying on
written correspondence.
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IV'
TN B
Today, technology transfer ranks only behind Taiwan as an
irritant in bilateral US-?RC relations. More than _
97 percent in dollar terns of all trade tc China in 1982
was approved, however, a number of key Items were dis-
a.proved because they came under national security controls
1:1 the four mission areas. These license denials are most
visible and are of great importance to the ?RC in their
quest for rapid modernization of their nation. (See
background at TA3 B.) During his : ebruary talks with
Chinese leaders in Beijing, Secretary Shultz responded
to Chinese co plaints on this issue by noting that it
was under review and that Science Advisor Keyworth
and Secretary 3aldrige would deal with this issue in their
upcoming visits in May. Therefore, we need to decide prior
to reywcrth's departure on May 7, just how far we are
prepared to move in redefining and modifying our current
technology transfer policy towards China.
Issues for Decision
As part of the Interagency Group preparing the response
to the NSSD on China, an interagency working group was _formed
to examine problems with our current teciTholocy transfer policy
with China and identify issues and options for resolving the
problems. The group has produced an exhaustive analytical
report on this issue (at Tab A) which reflects a consensus
Of v_.ews among its. : arti c_oants . . ollowing is a summary of
the issues for decision along with a brief analysis of the
advantages and disadvantaces in each case. it should be
ncted that these issues are not mutually exclusive and
at the most logical approach may be to co,n.o ne several
steps, e . g.. , improving implementation, redefining the
level of technology.permitted, and changing present controls.
Issue 1: Maintain current system for control of exports but
establish a tighter commodity control list
Durinc the Interagency Review, a number of improvements
zc the overall syste_m^ were identif- ed, including the
establishment of a tighter commodity control 11 s`,
incorporation Of additional implementation emen't- at ion procedures
{see Tab A), and an effo to negotiate a bet-ter undersea riding
W_ - the PRC cn echno_o__ t.~aisfer, particularly reran sfer r
C-n71T
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tC : h=rd p art-es . There is In Interagency Ac- Pemen t that these
rote ::res should be ado: =ed and that- a national security
controls review ccr.rl_ttee be established for this Cur~CSe
to develop this list by around June 1.
o Guidelines for implementing U.S. technology
transfer policy would be sharpened and overail
operating efficiency would be improved.
New list could result in increased
predictability of U.S. actions on export
cases.
Cons
o PRC would continue to complain that they
are being treated as an adversary rather
than as a "friendly" nation.
o Chinese may object to negotiation of an
.understanding unless accompanied by other
changes as in the following issues.
issue 2: Modify Technology Transfer Levol
C e of the mai; obstacles to implementation of the U.S. export
control policy is the definition of the-quantitative level of
control. In practice, the application of to "two-times"
rule when coupled with national security controls to
exports that. fall in the four mission control areas-
of ten results in exports to China which are not sub-
stantially different from exports to Soviet-Bloc countries.
Other technical levels have been proposed as a solution that
involve the replacement of the "two times" rule with a "4 or
5 times" rule. Another approach would be to utilize the
level established for exports to the free world as the
reference point and establish a new level such as 75%
for China as a percentage of the free -world levels. These
proposals, however, have :,acs t of the same d_sadvantaces
:at a7:--end the " =wo times" rule be t_2 _n ' Ce = i nit=on and
implementation, and in addition micht result in risks
=o lone term U.S. na.~i onal security Interests .
c _. _ ands '_-_ _ , f __ ensab__ expcr=s __ _ ?C.
of ..S __cens_nc
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S?C?= /S:NS 7- T J. TE
.
o Might result in risks to lcnc-term U.S
national security interests. -
o Would continue to be difficult to administer.
Issue 3: Move China from Country Group P to Group V
but :seep COCOM and National Security Conz ols
in some cases, the technology transfer level for China
could be the same as that for the free-world. However, we
would retain COCOM controls and national security controls
on specific mission areas of concern (intelligence, nuclear
weapons, ASW, and electronic -war=are) which would enable
i_s to continue to control essential items and tighten the
screws later if needed.
o Change would carry considerable political
significance to the P.RC even with continued
apnlicaticn of COCOM controls and national
security controls.
China could readily identify itself among
other friendly, non-aligned nations, such
as India.
o Change would be far easier to administer
.and would create a presumption that would
help resolve some pending cases.
o Application of national security controls
would in long run continue to be a focus
of Chinese concerns, as some exports
continue to be denied.
O COCOM controls would ccn -' nue to be a
second order scurce of i rriation to the
Chinese since they would not be applied
to T_.- d_a and other Ca ~.egory V countries.
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=sue 4 ?eplace Kati ona Sec. rity Conti ols wi _h _'o,ei an
Po_?cv Controls
Under this aporcach, we could maintain precisely the
same "mission" controls (_ntellicencc, nuclear, ASW and
electronic warfare) on technology exports but wewwouia
lessen the perception that China is considered a military
threat to the U.S. and its allies. Department o Defense
.would remain fully involved in the licensing process but
would lose its statutory veto.
o Taken in combination with a relaxation in
the level oJf' technical transfer to the
PRC, the change would signal a,Gignificant
shift in our overall technolocv transfer
policy. -
o There would be More flexibility in that
the President would not have to inform
Congress that he has overruled the
Secretary o= Defense in disputed cases.
o This would Be the hardest pproach to sell to
Congress since China in effect would no
longer be a naticnal security destraction.
o Foreign policy controls might not be as
effective in limiting exports of items of
serious milita~'y concern.
? t ;
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