Testimony: Proposed Nuclear Trade Agreement with Japan

Testimony of Gary Milhollin

Director, Wisconsin Project on Nuclear Arms Control

Before the House Committee on Foreign Affairs

March 2, 1988

Mr. Chairman, I am pleased to testify on the proposed nuclear trade agreement with Japan. I am a Professor of Law at the University of Wisconsin, have acted as an Administrative Judge at the Nuclear Regulatory Commission, and as a consultant to the Department of Defense on nuclear non-proliferation.

The proposed agreement is complicated–it has a text with annexes, an implementing agreement with additional annexes, side letters, and notes verbales. It is endorsed by the Departments of State and Energy, but opposed by the Nuclear Regulatory Commission and former Secretary of Defense Weinberger. It raises many questions that have not been answered.

To better assist the Committee, my statement is arranged to help answer the questions most frequently asked about the agreement.

Questions concerning trade

1. Question: Why has a new nuclear trade agreement with Japan been proposed? The present one doesn’t expire until the year 2003.
Answer: Because the Nuclear Non-Proliferation Act of 1978 (NNPA) asked the President to re-negotiate existing agreements. The object was to increase U.S. non-proliferation controls.

2. Question: What is the main effect of the proposed agreement?
Answer: It would reduce Japan’s dependence upon the United States. Japan would no longer need case-by case U.S. consent to extract plutonium from U.S.- supplied reactor fuel. Japan would have blanket approval–extending into the next century–to extract as much plutonium as the United States has now in its nuclear arsenal. Japan would use the plutonium to reduce the amount of reactor fuel it imports from the United States.

3. Question: What is plutonium?
Answer: A man-made nuclear explosive. Thirteen pounds of it made the world’s first nuclear explosion in 1945. It can also fuel nuclear reactors. Before it can be used for either purpose, it must be extracted from spent reactor fuel.

4. Question: Why does Japan want to extract the plutonium?
Answer: Japan says it wants to use it for reactor fuel. However, Japan plans to extract about 40 tons by 1995, could extract over 80 tons by the year 2000, and will only need about 10 tons for reactor fuel. The rest will be stockpiled. Table 1 shows how much plutonium Japan plans to extract.

5. Question: Why does Japan want to use plutonium reactor fuel?
Answer: To reduce its imports from the United States. The plutonium fuel would replace the natural uranium that Japan is now buying from U.S. producers, and the uranium enrichment that Japan is now buying from the U.S. Department of Energy. The plutonium would either replace U.S. fuel in light water reactors, or run breeder reactors that would replace the light water reactors that now use U.S. fuel. Plutonium fuel costs more for Japan to make than U.S. fuel would for Japan to buy, but Japan is willing to pay the higher cost for energy independence.

6. Question: How would this affect the U.S. balance of payments?
Answer: It would increase Japan’s surplus, which now exceeds $50 billion per year.

7. Question: Would the United States lose Japan’s nuclear fuel business without the proposed agreement?
Answer: The agreement is not connected to the business. Japan would remain free to buy its fuel on the world market–as it is now. Japan buys practically none of its uranium from the United States, but has most of its uranium enriched here under contracts with the U.S. Department of Energy. As long as Japan has a balance of payments surplus with the United States, Japan will need to buy valuable U.S. items such as reactor fuel.

8. Question: According to President Reagan, U.S. nuclear exports to Japan “could amount to $1 billion or more each year in the coming decade.” Is this correct?
Answer: No. Over the next decade Japan is only expected to buy $260-$435 million worth of U.S. enrichment per year, and only 2% of its uranium from the United States, according to DOE figures cited by Dr. Milton Hoenig in a study submitted for the record today. Those amounts are not likely to go up. There are no other major nuclear transfers to Japan on the horizon.

9. Question: How much U.S. enrichment might Japan buy in the future?
Answer: Japan’s policy is to reduce its nuclear imports. Japan intends to supply one third of its own enrichment needs by the year 2000 with a new enrichment plant. Japan’s dependence on U.S. enrichment is expected to fall to 25%-50% of its needs by that time. If Japan begins to use plutonium fuel to replace imported U.S. fuel, as it would under the proposed agreement, Japan’s U.S. imports will go down further in proportion to the amount of plutonium used.

10. Question: How much of Japan’s plutonium does the United States control now?
Answer: More than 80%. U.S. control will not fall below 75% until the next century. This means that any Japanese plan to use plutonium on a broad scale in this century is subject to U.S. control under the present agreement. The proposed agreement would give up this control by consenting in advance to Japan’s use of plutonium fuel. Table 1 shows the percentage of U.S. control out to 1995.

11. Question: Will the proposed agreement make nuclear trade with Japan “more stable and predictable,” as the Administration asserts?
Answer: Yes, for Japan. The main source of unpredictability is that the United States could use its consent rights tO interfere with Japan’s use of plutonium in the future. The proposed agreement would remove that uncertainty. It would give U.S. consent in advance (blanket approval) to Japan’s plutonium program. This would make trade more predictable for Japan. There would be less predictability for the United States, however, because of its loss of influence over Japan’s program.

12. Question: Is there instability and unpredictability now in U.S. nuclear trade with Japan?
Answer: No. The United States has granted every request Japan has made for plutonium use. Rigid time limits in U.S. law require quick review of Japan’s requests. “Batch approvals” have been given to make sure Japan is not inconvenienced.

13. Question: Will plutonium extraction help dispose of nuclear waste?
Answer: No. An authoritative international study of the nuclear fuel cycle concluded that extraction did not help dispose of waste. Other studies have agreed. The amount of toxic waste and plutonium is the same after extraction as it is before. However, because the extraction step generates additional processing wastes, the total volume of nuclear waste is actually greater after extraction.

Questions concerning security

14. Question: Will Japan be able to keep track of the large amount of plutonium it will extract?
Answer: Not with existing technology. The measurement uncertainty of plutonium in process is plus or minus one percent–even at the best theoretical level. Scores of tons will be extracted in Japan. Over the life of the proposed agreement, there will be enough material unaccounted for to build hundreds of atomic bombs. When commenting on these facts, the Nuclear Regulatory Commission said: ” we have concerns that.. .200-300 kilograms of plutonium could remain unaccounted for each year.”

15. Question: If better accounting technology were developed, would Japan be required to use it?
Answer: No. Under the present agreement–but not the proposed one–there is a U.S. right to consent to plutonium separation on a case-by-case basis. The United States can withhold the consent in the future if Japan refuses an accounting improvement. The proposed agreement, however, would take away U.S. consent and also the leverage. It would be Japan that would have to consent to any change in accounting methods. Japan would also have the right to extract U.S. plutonium at plants that have not been built. Japan would only have to promise to apply the same accounting methods to those plants that it applies to existing plants that are similar.

16. Question: The proposed agreement contains “safeguards concepts.” Could they be used to prevent a,future Japanese plant from using U.S.-origin plutonium?
Answer: No. The “safeguards concepts” are accounting principles–intended to keep track of plutonium in process. When Japan wants to add a plant to the blanket approval list, Japan must send the United States a notice stating that the accounting principles at the plant are in accordance with one of the concepts. The concepts–spelled out in the “notes verbales”–are general statements of what is desirable. The note on plutonium extraction says that “new and improved techniques… [may bel introduced,” but only “to the extent that undue interference in plant operation is avoided.” It also says that new plants will be “designed and operated.. .to facilitate.. .safeguards (i.e., accounting]” but only “as far as practicable….” When Japan sends a notice to the United States stating that a new plant has satisfied the concept, the agreement limits the U.S. response to “a statement that such notification has been received.” The Nuclear Regulatory Commission, after reviewing this procedure, said: “we question whether an exchange of notes.. .is all that is needed to give the U.S. confidence that all material under its control remains in peaceful safeguarded use.”

17. Question: If plutonium were diverted in Japan, would the United States learn of it in time to react (have “timely warning”) before weapons could be made?
Answer: No. The inspection system (safeguards) of the International Atomic Energy Agency is not designed to report a diversion within the time it takes to make a weapon–one to three weeks for plutonium oxide. It is designed only to detect a diversion within that time. It takes the Agency months to evaluate a discrepancy and report it. Weapons could be made long before the IAEA reported a diversion to anyone. U.S. intelligehce might detect a diversion within one to three weeks, but that is a matter of chance, independent of the agreement.

18. Question: Under U.S. law, U.S. reactor fuel can only be transferred for plutonium extraction when it “will not result in a significant increase in the risk of proliferation beyond that which exists at the time the approval is requested.” Does the proposed agreement meet that requirement?
Answer: No. Sec. 131 of the Atomic Energy Act expressly defines a transfer of spent fuel for plutonium extraction as a “subsequent arrangement.” Such arrangements can only be approved if the Secretaries of Energy and State find that there will be “no significant increase in the risk of proliferation beyond that which exists at the time the approval is requested.” The Secretaries must compare the risk that “exists at the time the approval is requested” to the risk that will be caused by–or exist at the time of–the transfer that is being approved. Such a comparison is only valid for risks that will occur during the time period for which the Secretaries’ information is valid. That is, the Secretaries can only compare risks on the basis of information about the risks, and the risks must occur during the time period covered by the Secretaries’ information. The new agreement approves spent fuel transfers for the next thirty years–and thus exceeds the time for
which current information is valid.

19. Question: Is it realistic to worry about timely warning and proliferation risks in Japan, whose government is not likely to divert nuclear material?
Answer: Yes. The primary risk is not the Japanese government. It is Japanese industry. There is now a massive scandal in Germany caused by corrupt industry managers who, in a scheme of bribery and embezzlement, shipped plutonium between Belgium and Germany in drums not authorized to carry it. There are also allegations that Pakistan may have got nuclear weapon material as part of the deal. The material balance accounts of the IAA have been used to determine whether a shipment to Pakistan actually happened. If such a scheme arose in Japan under the proposed agreement, the large amount of material unaccounted for would make it impossible to know where all the material went. The Toshiba affair shows that Japanese industry is not immune to illegal acts that endanger security.

20. Question: Can the lack of timely warning, and the lack of current information on proliferation risk, be offset by political factors, such as Japan’s open, democratic government, strong ties to the United States, and well-known opposition to nuclear weapons?
Answer: No. The Administration asserts that Japan could not–because of the open nature of its government–divert plutonium without first changing its policy on non-proliferation, or its security alliance with the United States. Such changes, the argument goes, would be overt and the United States would learn of them. However, if Japan did change one or all of these things, and the United States did learn of them, the United States would have no right to take action under the proposed agreement. There is no link between any of these political factors and U.S. rights. The only way the United States can, for example, legally demand the return of its plutonium is if Japan breaches the agreement. Unfortunately, such a breach would not occur until Japan diverted the plutonium. The agreement does not require Japan to have a democratic or open government, support non¬proliferation, or maintain.a security relation with the United States. Because the U.S. right to intervene is triggered only by a diversion, the previously-occurring political factors are irrelevant to any U.S. response. The only important factors–those that affect intervention time and thus timely warning–are the speed of detection (safeguards adequacy) and the time it will take the diverter to make a weapon.

21. Question: Would plutonium in Japan be better protected from theft under the new agreement?
Answer: No. Japan would only be required to protect plutonium according to a guideline set by the International Atomic Energy Agency. The Pentagon recently told Congress that a foreign country’s assurance that it follows that guideline does “not.. .permit a confident conclusion in all cases that the physical protection provided is adequate….”

22. Question: Would plutonium in transport be better protected under the new agreement?
Answer: Only for international air transport. The new agreement’s rules on air transport are much stronger than the IAEA’s guideline. Also, the new agreement requires air transport for international shipments. However, the Administration is already thinking of abandoning air transport because a suitable transport cask might not be found.

23. Question: What if air transport is not used?
Answer: The international guideline apparently would apply. In the early 1980s, Japan attempted to ship 250kg (40 bombs’ worth) of plutonium through the pirate-infested Strait of Malacca on a freighter with only one or two guards. The shipment fully satisfied the guideline. Fortunately, the United States used its consent right to hold the shipment up until there was an escort of Japanese, U.S. and French warships (the shipment came from France) and observation by satellite.

24. Question: Would plutonium under the proposed agreement be as well protected in Japan as it is in the United States?
Answer: No. The international guideline is much weaker than the NRC and DOE regulations that protect plutonium in the United States. It is also much weaker than the DOD regulations that protect U.S. nuclear weapons held abroad.

25. Question: Would the United States be able to require Japan to improve the level of protection in the future?
Answer: No. Without the case-by-case consent rights, the United States will have no effective way to challenge Japan’s level of protection in the future.

26. Question: In the proposed agreement, how important is the U.S. right to suspend the blanket approval?
Answer: It has no legal significance–it only restates the rights the United States would have anyway under international law. The United States could suspend the blanket approval only “in the most extreme circumstances of exceptional concern….” There would also have to be an “exceptional case,” posing a “threat to…(U.S.1 national security,” or a “significant increase in the risk of nuclear proliferation.” The only examples of such cases cited in the agreement are breaches of–or a withdrawal from–the Non-Proliferation Treaty, breaches of international safeguards, or breaches of the new agreement itself. All such cases would breach both the proposed and existing agreements with Japan, and entitle the United States to suspend its performance anyway under international law.

27. Question: What is the difference between the U.S. right to suspend the blanket approval under the proposed agreement–discussed above–and the U.S. right to consent to plutonium extraction under the present agreement?
Answer: Under the proposed agreement, the United States can suspend the blanket approval only after a problem comes up. To take action, the United States must show that Japan has done something extremely grave and threatening to U.S. security. If Japan disagrees with the U.S. suspension, Japan can regard the suspension itself as a breach, entitling Japan to suspend its own performance. Under the present agreement, however, the U.S. right to consent to plutonium extraction allows the United States to suspend Japan’s use of plutonium without question. The control can be used before a problem comes up, and could never be considered a breach.

Questions concerning the role of Congress

28. Question: What would the role of Congress be under the proposed agreement?
Answer: Congress’ role would end when the agreement took effect. Congress would no longer be informed of case-by-case approvals, because there would be none. Congress could not legislate changes in plutonium use policy affecting Japan in the future because the proposed agreement would bind all future Congresses and administrations.

29. Question: What would the role of the U.S. public be under the proposed agreement?
Answer: No greater than the role of Congress.

30. Question: What benefit would the United States get from the proposed agreement?
Answer: Japan will give the United States detailed accounting of the plutonium balances at the new plants added to the agreement in the future, and use a higher level of physical security for international air shipments. However, these benefits could be had under the present agreement through use of the consent rights.

31. Question: What would the United States give up under the proposed agreement?
Answer: The agreement would allow Japan to make the balance of payments worse by reducing its nuclear imports from the United States, create a large stockpile of nuclear weapon material having no civilian use, escape U.S. control over future accounting practices, escape U.S. control over future protection of plutonium from theft, and exclude the U.S. Congress and public from further participation in nuclear policy concerning Japan.

32 Question: What effect will the proposed agreement have as a precedent?
Answer: It will codify the acceptability of commercial plutonium use throughout the world. The United States now controls 75-80% of the plutonium in South Korea, 85-90% of the plutonium in Sweden, and about 90% of the plutonium in Switzerland. The United States has already used its plutonium control to discourage the Swiss from selling South Africa a heavy water plant that posed a proliferation risk. The United States has also discouraged plutonium use in South Korea, a country with nuclear weapon ambitions in a volatile area. Once Japan receives a blanket approval, however, these countries will expect equal treatment. The Department of Energy is already preparing to approve a technology transfer to South Korea that will aid in the study of plutonium-bearing fuels after they have been irradiated.

33. Question: If the United States gets less from the new agreement than it gives up, why not retain the existing agreement?
Answer: The existing agreement should be retained. It does not expire until the year 2003.

34. Question: If the proposed agreement is approved with conditions, what should the conditions be?
Answer: The blanket approval for future plutonium use should be removed. If it is retained, it should be made subject to the following conditions:
1. That Japan protect U.S.-origin nuclear weapon material (plutonium and high-enriched uranium) from theft under regulations at least as detailed and rigorous as those the NRC and DOE apply to U.S. plutonium and high-enriched uranium held in the United States. The Department of Defense and the Nuclear Regulatory Commission should be required to approve the adequacy of the standard that Japan adopts.
2. That no new Japanese plant be added to the blanket approval list unless, at the time it is added, it satisfies Sec. 131 of the Atomic Energy Act. The Secretaries of Energy and State would be required to have information current enough to find that the plant “would not result in a significant increase in the risk of proliferation beyond that which exists at the time the approval is requested.!’ The addition of such a plant would be a “subsequent arrangement” under Sec. 131 and require the customary findings, reports to Congress, and notice in the Federal Register.
3. That no new Japanese plant be added to the blanket approval list unless, at the time it is added, the materials accounting system applied to it is capable of detecting the diversion of not more than some specified minimum number of critical masses of plutonium or high-enriched uranium per unit of time. The Nuclear Regulatory Commission could be asked to recommend such’a number to Congress for approval.

Table 1
Holdings of U.S. controlled plutonium
(metric tons, cumulative)

Pu created in spent fuel
– light water reactors
– gas cooled reactors
– heavy water reactors
– total Pu
Pu subject to U.S. consent for separation
Pu subject to U.S.
safeguards, peaceful use, and retransfer control
Pu in spent fuel contracted for separation
– light water reactors
– gas cooled reactors
– heavy water reactors
– total Pu
– U.S. controlled
Pu in spent fuel approved by U.S. for separation
Pu separated thus far
– in France
– in the U.K.
– in Japan
– total Pu
– U.S. controlled
Separated Pu produced or received this far
– from the U.K. (retransfer)
– from the U.K. (purchase)
– from Euratom (retransfer)
– from U.S. (direct export)
– separated in Japan
– total Pu
– U.S. controlled

Notes to Table 1
a) Letter fram Carol S. Thorup, Vice President, Nuclear Assurance Corporation, Norcross, Georgia, to Arch Roberts, House Committee on Foreign Affairs, May 15, 1985, enclosing an excerpt from FUel Trac.
b) FUel Trac, Reprocessing Status Report, Nuclear Assurance Corporation, Norcross, Georgia, Oct., 1983.
C) This plutonium was made with U.S. enriched uranium. Therefore, according to the current U.S.-Japan agreement, the United States has the right to approve any separation of this plutonium, the right to approve its retransfer, the right to have the plutonium safeguarded (Japan, as a ratifier of the NPT, has already placed its entire nuclear program under safeguards), and the right to its peaceful use. It is possible that the plutonium created by Japan’s experimental heavy water reactor, called Fugen, is also U.S. controlled. In 1976, shortly before Fugen started up, 159.5 tons of U.S.-origin heavy water was retransferred to Japan from the Federal Republic of Germany. NMNSS Reports TJ-23, TJ-7. From 1979 to 1981, the U.S. supplied 17 tons of heavy water to FUgen in direct exports. NMMSS Report TJ-7. The total amount of U.S. controlled plutonium shown in the Table should be increased slightly if FUgen has consistently used U. S. controlled heavy water.
d) The amount of U.S. controlled plutonium is estimated by assuming that the amount of U.S. controlled plutonium to be separated bears the same proportion to the total to be separated as the amount of U.S. controlled discharged bears to the total amount discharged.
e) Reprocessing and Plutonium Use Cases Requested and Approved Under the NNPA From 1978-83; Requests for Reprocessing Approved Pram 1983-85, U.S. Department of Energy. Through late 1985, Japan had received permission to ship 9.1 tons to the United Kingdom and 8.9 tons to France for separation. Apparently, Japan has actually shipped about 11000 tons of spent LWR fuel to the United Kingdom (1,000 tons will yield about 9 tons of plutonium) and the same amount to France. Nuclear Fuel, Mardi 10, 1986, p 6.
f) Albright, Civilian Inventories of Plutonium and Highly Enriched Uranium, International Task Force on Prevention of Nuclear Terrorism (Background Paper), Spring 1986, Table 4.
g) Through fiscal 1984, the Tbkai Reprocessing Plant had reprocessed about 180 tons of spent fuel. The table assumes that 6.7 kilograms of plutonium were extracted per ton. Present Status of Nuclear Development in Japan, Japanese Atomic Energy Cbmmission, August, 1985, p. 10.
h) Near-Term Plutonium Market Outlook, March, 1983, O1NUSUb/83-4011/1, NUclear Assurance Corporation, Norcross, Georgia.
i) The United Kingdom supplied plutonium to Japan in the early 1970s for use in Japan’s breeder program, but the amount is unknown. Nuclear News, April, 1983, p 82; Sizewell B. Public Inquiry, Transcript of Proceedings, March 17, 1983, p. 71.
j) Japan received 250 kilograms by retransfer from France in 1984. Nuclear FUel, NOV. 26, 1984. Japan also received 177 kilograms (139 of U.S. origin) before 1978. Albright, The Availability of Plutonium in Japan to Meet Fliture Needs, Preliminary Draft, Federation of American Scientists, July 31, 1984.
k) NMMSS Report TJ-25.
1) “Analysis of Consents and Approvals Agreed Upon in Conjunction with New Agreement for Cooperation between the Government of the United States of America and the Government of Japan Concerning Peaceful Uses of Nuclear Energy,” Attachment #7 to Memorandum for the President, Oct. 1, 1987, from John C. Whitehead and John S. He