Testimony: US Export Controls on Dual-Use Technology

Testimony of Gary Milhollin

Professor, University of Wisconsin Law School and
Director, Wisconsin Project on Nuclear Arms Control

Before the Senate Armed Services Committee

July 9, 1998

I am pleased to appear today before this distinguished Committee. In accordance with the Committee’s request, I will discuss the adequacy of U.S. export controls on dual-use technology.

The most important thing to recognize about export controls is that they work. They buy the time needed to turn a country off the nuclear weapon path. Argentina and Brazil agreed to give up nuclear weapons in part because of the costs that export controls imposed upon them. And in Iraq, documents discovered by the United Nations inspectors showed that export controls on dual-use equipment seriously hampered the Iraqi nuclear weapon design team. The Iraqis spent time and money making crucial items that they could not import. The same controls also stopped Iraq’s drive to make a medium-range missile. In addition, these controls are now hampering India’s effort to build an ICBM and will hamper the efforts of both India and Pakistan to weaponize their nuclear arsenals.

But how much do export controls cost? Are they a drag on the U.S. economy? How many jobs are at stake? The total American economy was about 6.7 trillion dollars in 1994, the last year for which I have been able to find complete export licensing data. Of that, only two tenths of one percent ($10.7 billion) even went through Commerce Department licensing. And only $141 million in applications were denied–which is less than one hundredth of one percent of the U.S. economy. Export control is not a jobs issue. It is a security issue. It has only a microscopic effect on employment. Reducing export controls will not stimulate the U.S. economy; it will only stimulate the proliferation of weapons of mass destruction.

And what about the end of the cold war? Does that mean that export controls are less important? If anything, they are more important. With bipolar stability gone, regional tensions are growing. These tensions stimulate the appetite for weapons of mass destruction. The nuclear and missile arms race has just shifted into high gear in South Asia and is continuing in the Middle East. It is illogical to say that because the Cold War is over, proliferation is the main international threat, and that export controls, which are one of the best ways of containing that threat, should be reduced.

In fact, the lesson of Iraq was that export controls need to be stronger instead of weaker. But today’s export controls are only a shadow of what they were before the Gulf War, when Saddam Hussein was buying the means to make his mass destruction war machine. Since 1988, applications to the Commerce Department have dropped by roughly 90%. Cases have fallen from nearly 100,000 in 1989 to 8,705 in 1996 and 11,472 in 1997. The reason is simple: fewer items are controlled, so fewer applications are required. The number of items controlled now is so small that we have virtually given up export control as a foreign policy tool.

I would like to discuss two technologies that show what is wrong with our present export control policy: supercomputers and satellites. The way we have handled these technologies shows how far we have gone in putting trade interests above national security.


In January 1996, the Clinton Administration decided to slash controls on supercomputers. It abolished controls on computers operating at less than 7,000 Mtops (million theoretical operations per second) to most countries. It did so on the strength of a government-sponsored study in 1995 that predicted that computers operating at 7,000 Mtops would become so common by 1997 that it would no longer be feasible to control them for export.

In fact, the situation predicted in 1995 never came to pass. Computers operating at 7,000 Mtops are not commonly available even today. A more recent government-sponsored study by the same author finds that machines operating at much lower speeds could still be controlled until the year 2000. An independent study by the General Accounting Office comes to the same conclusion. Thus, the decontrol was a mistake.

The result of the decontrol was a series of scandals, in which IBM and Silicon Graphics were caught outfitting Arzamas-16 and Chelyabinsk-70, Russia’s key nuclear weapons laboratories, and Silicon Graphics was caught supplying the Chinese Academy of Sciences, a leading Chinese nuclear and missile research site. In addition, IBM and the Digital Equipment Corporation have supplied supercomputers to the Indian Institute of Science in Bangalore, one of India’s main missile research sites.

Supercomputers are the most powerful tools known for designing nuclear weapons and the missiles to deliver them. They can model the thrust of a rocket, calculate the heat and pressure on a warhead entering the Earth’s atmosphere and simulate virtually every other force affecting a missile from launch to impact. Because of the billions of computations needed to solve these problems, a supercomputer’s speed is invaluable for efficiently finding design solutions.

Arzamas-16 is the Russian equivalent of our Los Alamos National Laboratory. It pioneered Russia’s nuclear weapon program. Chelyabinsk-70 claims to have developed the world’s most powerful hydrogen bomb and is roughly equivalent to our Lawrence Livermore National Laboratory. The American supercomputers are estimated to have increased the computing power available to these Russian laboratories by a factor of ten.

The Chinese Academy of Sciences oversees institutes that perform missile and military research as well as research related to nuclear weapons. The Academy helped develop the DF-5 intercontinental missile, which can target U.S. cities with nuclear warheads. It has also developed advanced rocket propellant, guidance for torpedoes, sonar for nuclear submarines, and separation membranes to enrich uranium by gaseous diffusion. Its Institute of Mechanics has studied the effects of underground nuclear weapon tests and ways to protect against nuclear explosions.

The new Silicon Graphics computer is available through a network, so any Chinese organization that is designing nuclear weapons or long-range missiles can have access. In effect, Chinese weapon designers can use the Silicon Graphics machine to design lighter nuclear warheads to fit on longer-range and more accurate missiles capable of reaching U.S. cities.

The Indian Institute of Science is on the British government’s official list of organizations that procure goods and technology for India’s missile programs. It develops India’s most advanced rocket propellants, guidance systems and nose cones. Its wind tunnels and other equipment analyze rocket fuel combustion and flight performance. It has even been linked in published reports to India’s new nuclear-capable missile called the “Sagarika,” intended to be launched from submarines.

Thus, American supercomputers are now helping Russia design nuclear weapons, helping India design nuclear-capable missiles, and probably helping China design both nuclear weapons and missiles.

Under investigation, or under the rug?

The Administration has responded to the IBM and Silicon Graphics cases only by saying that they are “under investigation.” But how much is there to investigate? The sales to Russia came to light more than a year ago. The computers clearly required an export license and did not have one. The Silicon Graphics sale to China is even older. Silicon Graphics sent its computer directly to a buyer engaged in nuclear, missile and military work, and this sale too needed an export license and did not have one.

To these cases one must add the now-celebrated McDonnell Douglas case. In that case, China deliberately diverted U.S. machine tools to a military aircraft and missile plant in 1994, and the matter has been under investigation since. When will that investigation end?

Our export control system is simply not working. After slashing controls to the bone, the Administration is now ignoring or minimizing violations of the few controls that remain. We are facing either a lack of will or a lack of ability to prosecute what appear to be clear violations of the law. The phrase “under investigation” is beginning to mean “under the rug.”


This Committee is aware of the fact that the Clinton Administration has transferred licensing authority over satellites from the State Department to the Commerce Department. That process is now complete. It occurred under great pressure from the satellite industry and, as the industry expected, it will allow trade interests to dominate national security in U.S. export policy.

One of the main effects of this transfer has been to remove satellites from the list of items that are subject to U.S. sanctions for missile proliferation. In effect, the transfer has given Chinese firms a green light to sell missile technology to Iran and Pakistan. Chinese companies can now sell components for nuclear capable missiles without worrying about losing U.S. satellite launch contracts.

Our sanctions laws, as written by Congress, are based on a simple idea. A foreign company cannot import American missile technology with one hand and proliferate missile technology with the other. If a Chinese company decides to sell Iran or Pakistan a nuclear-capable missile or the means to make one, that company has to forget about importing any missile-related American technology. U.S.-made satellites were originally part of this equation, because they contain missile-related American components.

That simple idea has now been abandoned by the executive branch. When the Administration transferred licensing authority over satellites from the State Department to the Commerce Department, satellites were effectively removed from the list of U.S. exports subject to missile sanctions.

Let me explain why this is so. If a Chinese company sells whole missiles to a country like Iran or Pakistan, the company would be guilty of what is known as a “Category One” violation. This is because whole missiles are listed on Category One of the Annex to the Missile Technology Control Regime, an agreement among countries that are trying to curb missile proliferation by controlling their exports. For selling a Category One item, the sanctions bar the guilty company for at least two years from importing any item controlled by the Export Administration Act. Category One sanctions would thus bar satellites even if controlled by the Commerce Department, which administers that Act.

China did export whole missiles to Pakistan in the fall of 1992. Since then, however, China has changed its tactics. It now exports missiles piecemeal, as components. An example would be a piece of guidance equipment. These items are on Category Two of the MTCR Annex. A “Category Two” violation bars only the export of U.S. “missile equipment or technology ” under the Export Administration Act and under Section 73 of the Arms Export Control Act.

But what is “missile equipment or technology”? According to the licensing practice of the State Department, a missile-related item retains its identity as a missile item even if it is embedded in a commercial satellite. Thus, if a Chinese company were sanctioned, the export of satellites would be blocked by the State Department because satellites have missile-related items embedded in them. In the view of the Commerce Department, however, a missile-related item loses its identity as a missile item if it is incorporated into a commercial satellite. Thus, the export of satellites would not be blocked by the Commerce Department even though the satellites contained items that would be considered missile-related if not embedded. These embedded items are such things as radiation-hardened computer chips, gyroscopes, and accelerometers.

The result is that now, satellites are insulated from missile sanctions because control over everything associated with launching them has been transferred to the Commerce Department, where sanctions will not be applied.

It is important to realize that the same Chinese companies that launch U.S. satellites also sell missiles to places like Iran and Pakistan. Who are these companies? China Great Wall Industries, China Aerospace International Holdings Ltd. (CASIL, of Hong Kong) and their parent, China Aerospace Industry Corporation. These companies launch satellites on China’s Long March rockets. The United States has sanctioned both China Great Wall and China Aerospace Corporation in the past for supplying missile technology to Pakistan.

It is also important to realize that a satellite launch contract is one of the most lucrative things a Chinese aerospace company can get from the United States. Thus, by removing satellites from the threat of sanctions, the Administration has surrendered one of the most important levers America has to stop Chinese missile proliferation. Chinese companies are free to proliferate missile technology without risking their most lucrative source of revenue.

This result sends an important message to the world. The Clinton Administration is saying–quite clearly–that the United States thinks it is more important to make money from satellite exports than to stop missile proliferation.


Our government’s export policy on satellites has enabled Chinese companies to sell missile components to Pakistan without fear of punishment. Thus, it may be that we are asking the wrong question about how our satellite export policy affects missile proliferation.

Whether or not our satellite policy has caused U.S. missile technology to go to China, it has certainly made it easier for Chinese missile technology to go to Pakistan.

India, of course, has watched this happen. India watched China help Pakistan make not only missiles but the nuclear warheads to go on them. India also watched the United States invent every excuse possible not to do anything about it. We asked the Indians to show restraint in nuclear testing, but we were unwilling to put restraints on our own satellite companies by sanctioning China for missile proliferation. The Indians no doubt concluded that we were against the spread of the bomb unless it might cost us something. It should not surprise us if our non-proliferation policy lacks credibility.