WASHINGTON-Just when it appeared the United States and China were on the verge of a major
trade agreement promising huge wireless export opportunities and Chinese membership in the World Trade
Organization, a high-tech espionage controversy has erupted that throws both would-be breakthroughs into doubt and
gives Republicans a fresh political opening to criticize the Clinton administration for putting China engagement ahead
of national security.
Last week, responding to new espionage allegations and GOP criticism, Energy Secretary Bill
Richardson fired Chinese-American scientist Wen Ho Lee from the Los Alamos National Laboratory in New Mexico
after he failed a polygraph test and refused to cooperate with FBI agents during questioning about whether he played a
role in China gaining U.S. nuclear secrets more than a decade ago.
Lee’s dismissal follows recently completed U.S.-
China talks in Beijing on trade and other issues, and comes just weeks before Chinese Premier Zhu Rongji is due to
visit the nation’s capital.
The recent Beijing visit by Secretary of State Madeleine Albright, U.S. Trade
Representative Charlene Barshefsky and other administration officials was made awkward enough by the White House
decision to deny-on national security grounds-export licenses Hughes Electronics Co. sought to complete a $450
million deal to sell two satellites to a China-led consortium for an Asia-Pacific mobile phone system.
Nevertheless,
administration officials sent out positive signals afterward that substantial progress was made on trade with China, the
U.S.’ fifth-largest trading partner. Last year, U.S. telecom exports to China totaled more than $726 million, while
imports of Chinese telecom goods reached $1.9 billion. That’s part of the problem: The United States was $57
billion in the red insofar as China trade last year.
The fact that Chinese telecom infrastructure investment hit a
record $21.2 billion in 1998 makes U.S. wireless firms salivate at the thought of getting a chunk of that business. While
China has relaxed wireless equipment trade barriers, U.S. firms have found it rough making inroads into China’s
wireless services sector.
Still, the promise of U.S.-Sino wireless telecom trade could prove elusive as more
revelations surface about alleged technology transfers and high-tech espionage by China.
In addition to the Lee
case, a federal grand jury in Boston last week indicted Chinese scientist Yao Yi and Canadian Collin Shu on charges of
conspiring to break export control laws by trying to ship fiber-optic gyroscopes to China. The gear can be used to
enhance missile guidance systems.
News about the Los Alamos probe, believed leaked from a 700-page report due
to be released shortly by a House panel probing U.S. high-tech trade with China, adds fuel to claims that lax U.S.
oversight led to satellite technology transfers to China that improved its nuclear capabilities. Lee has not been
charged.
Rep. Christopher Cox (R-Calif.), head of the House China panel, previously said the probe concluded that
U.S. national security was compromised by U.S. high-tech trade with China.
Behind the scenes, tempers are rising
on Capitol Hill as lawmakers continue to negotiate with the White House over which portions of the Cox report to
declassify.
The Justice Department, for its part, is investigating satellite transfer accusations against Loral Corp.,
whose Chairman Bernard Schwartz contributed lavishly to the Clinton-Gore campaign, and Hughes, whose former
chairman Michael Armstrong (now AT&T Corp. head) successfully used aggressive lobbying tactics to win
administration support for satellite export licenses to China.
Vice President Gore, particularly vulnerable to China-
related criticism in the 2000 presidential election, defended the administration last week by saying the alleged security
breach occurred during the previous GOP administration.
China, too, denied any wrongdoing. “There are
some people who want to stop the United States from exporting normal high-technology products to China,” said
Chinese Foreign Minister Tang Jiaxuan.
But Republicans, though acknowledging that major world powers spy on
each other, were not buying the White House line.
“What is … incredibly disturbing is apparently the
administration didn’t take the charges seriously,” said Senate Commerce Committee Chairman John McCain (R-
Ariz.), himself a possible GOP presidential candidate. “The Congress was not informed.”
Sen. Richard
Shelby (R-Ala.), chairman of the Intelligence Committee, said he will hold hearings soon. “We’ve been on top of
this lax security for a number of years. We’ve been pushing, we’ve been prodding the administration to do more, to
tighten up security.”
Clinton in 1997 was informed of the alleged Chinese theft of U.S. nuclear secrets at Los
Alamos, but congressional Republicans-reeling from the public backlash over the now-concluded impeachment
proceedings-suggested the president was slow to investigate the matter and implement stricter security controls because
he didn’t want it to interfere with Chinese President Jiang Zemin’s U.S. visit later that year.
About the same time, in
1997, the administration was under heavy fire from Congress for allegedly accepting political contributions funneled by
Beijing into Democratic campaign coffers.
American mobile satellite operators rely on China and Russia for
satellite launches because the two countries can do it faster and cheaper than anything available in the United States.
That has prompted Sen. John Breaux (D-La.) to push legislation to foster space launch business in the United
States.
The heavy dependence on other nation’s-particularly those with pugilistic prowess-for space launches has
created fears that commercial satellite technology is being transferred and converted into military applications by
China.
Last year, Congress passed a bill returning export license oversight to the State Department. The Commerce
Department, which oversaw dual-used export licensing for much of Clinton’s tenure, disagrees with defense,
intelligence and national security officials in the administration over the harm U.S. high-tech exports to China may
have caused.
It is unclear what impact the high-tech espionage allegations against China will have on U.S. efforts to
further pry open China’s telecom equipment and services sector and on China’s campaign for WTO
membership.
“I think it should be out of the question,” said Senate Majority Leader Trent Lott (R-Miss.)
as to whether China should be allowed into the WTO in light of the new developments.
For sure, the timing is
inauspicious as Commerce Secretary William Daley and U.S. wireless firms prepare for a trade summit, March 30-
April 2, in Guangzhou, China.
Joining Daley in meetings later this month with Chinese Minister Wu Jichuan and
other high-level officials from China’s Ministry of Information Industry will be executives from Motorola Inc., Lucent
Technologies Inc., Qualcomm Inc., Iridium L.L.C., L.M. Ericsson, Nortel Networks and other companies.
The
Telecommunications Industry Association is helping to coordinate the China-U.S. Telecommunications Summit
’99.
TIA President Matthew Flanigan, in recent congressional testimony, expressed cautious support for China’s
entry into the WTO.
“China’s accession to the WTO will require it to liberalize its markets, including that for
telecommunications goods and services. The more China liberalizes, the more competition it will host, the more
telecom networks will be built and the more infrastructure China will house. This, in the world’s fastest-growing
market, meaning positive growth prospects for the U.S. telecom equipment industry tha
t TIA represents,” said
Flanigan.
Various news sources contributed to this story.
