26 May 1999
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See Cox Report: http://www.house.gov/coxreport
USIS Washington
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_________________________________
25 May 1999
(White House says most recommendations "constructive") (3140) Washington -- The Clinton Administration and the House Select Committee on Intelligence share the common objective of ensuring that U.S. national secrets are protected and that civilian technology is not diverted for military purposes, the White House said in a May 25 statement. "We found most of the recommendations (in the Committee's report) constructive and we are in the process of implementing them," the White House said. "We look forward to working with Congress on any necessary additional measures to strengthen protections and export controls." An unclassified, redacted version of the Committee's report can be found at: http://www.house.gov/coxreport/ Following is the text of the White House statement and the text of the select committee's recommendations, as they appear in Chapter 11 of the report: (begin White House text) THE WHITE HOUSE Office of the Press Secretary (Aboard Air Force One) May 25, 1999 STATEMENT BY THE PRESS SECRETARY Release of Cox Report The President received the classified version of the Select Committee's report on January 4, 1999, and the President provided his response to the recommendations of the Select Committee on February 1, 1999. While we do not agree with all of the report's analysis, the Administration and the Select Committee share a common objective: ensuring that U.S. national secrets are protected and that our civilian technology is not diverted for military purposes. We found most of the recommendations constructive and we are in the process of implementing them. In many cases, the Administration had already been implementing the substance of the recommendations as a matter of policy, practice and as required by law. We look forward to working with Congress on any necessary additional measures to strengthen protections and export controls. (end White House text) (begin Select Committee text) Chapter 11 Text RECOMMENDATIONS OF THE SELECT COMMITTEE TRANSMITTED ON JANUARY 3, 1999 TO THE PRESIDENT AND CONGRESS Nuclear Weapons 1. Semi-Annual Report by the President on PRC Espionage The Select Committee recommends that the President report to the Speaker and Minority Leader of the House, and the Majority Leader and Minority Leader of the Senate, no less frequently than every six months on the steps, including preventive action, being taken by the Department of Energy, the Department of Defense, the Federal Bureau of Investigation, the Central Intelligence Agency, and all other relevant Executive departments and agencies to respond to espionage by the People's Republic of China (PRC) as typified by the theft of sophisticated U.S. nuclear weapons design information, and the targeting by the PRC of U.S. nuclear weapons codes and other national security information of strategic concern. 2. Urgent Priority to Department of Energy Counterintelligence Program As a matter of urgent priority, the Select Committee believes the Department of Energy must implement as quickly as possible and then sustain an effective counterintelligence program. To this end, the Select Committee recommends the following: 3. Implementation and Adequacy of PDD-61 The appropriate congressional committees should review, as expeditiously as possible, the steps that the Executive branch is taking to implement Presidential Decision Directive 61 and determine whether the Administration is devoting, and Congress is providing, sufficient resources to such efforts and whether additional measures are required to put an adequate counterintelligence program in place at the Department of Energy at the earliest possible date. 4. Comprehensive Damage Assessment The appropriate Executive departments and agencies should conduct a comprehensive damage assessment of the strategic implications of the security breaches that have taken place at the National Laboratories since the late 1970s (or earlier if relevant) to the present and report the findings to the appropriate congressional committees. 5. Legislation to Implement Urgent and Effective Counterintelligence The appropriate congressional committees should report legislation, if necessary, to facilitate accomplishment of the objectives set forth above. 6. Five-Agency Inspectors General Examination of Scientific Exchange Program Risks to National Security The Select Committee recommends that the Secretaries of State, Defense, and Energy, the Attorney General, and the Director of Central Intelligence direct their respective Inspectors General and appropriate counterintelligence officials to examine the risks to U.S. national security of international scientific exchange programs between the United States and the PRC that involve the National Laboratories. Such Executive department and agency heads shall transmit the results of these examinations, together with their views and recommendations, to the Speaker and the Minority Leader of the House, the Majority and Minority Leaders of the Senate, and appropriate congressional committees no later than July 1, 1999. 7. Congressional Examination of Whether Department of Energy Should Maintain U.S. Nuclear Weapons Responsibility The Select Committee recommends that the appropriate congressional committees consider whether the current arrangements for controlling U.S. nuclear weapons development, testing, and maintenance within the Department of Energy are adequate to protect such weapons and related research and technology from theft and exploitation. 8. Intelligence Community Failure to Comply with National Security Act; Need for Congressional Oversight In light of the fact that the heads of Executive departments and agencies of the intelligence community failed adequately to comply with congressional notification requirements of the National Security Act with respect to the theft of secrets from the National Laboratories, the Select Committee urges Congress to insist again on strict adherence to such legal obligations. International Actions With respect to international actions by the United States, the Select Committee recommends: 9. Need for PRC Compliance with the Missile Technology Control Regime The United States should insist that the PRC adhere fully to, and abide by, the Missile Technology Control Regime and all applicable guidelines. 10. Need for U.S. Leadership to Enforce Missile Technology Control Regime The United States must vigorously enforce, and seek multilateral compliance with, the Missile Technology Control Regime. 11. Need for U.S. Leadership to Establish Binding International Proliferation Controls In light of the demise of the Coordinating Committee on Multilateral Export Controls (COCOM) and the insufficiency of the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies, the United States should work, including in the context of the scheduled 1999 review of the Wassenaar Arrangement, to establish new binding international controls on technology transfers that threaten international peace and U.S. national security. 12. U. S. Action to Improve Multilateral Tracking of Sensitive Technology Exports In light of the demise of COCOM and the insufficiency of the Wassenaar Arrangement, the Select Committee recommends that the United States take appropriate action, including in the context of the scheduled 1999 review of the Wassenaar Arrangement, to improve the sharing of information by nations that are major exporters of technology so that the United States can track movements of technology and enforce technology control and re-export requirements. 13. U.S. Action to Stem Russian Weapons Proliferation to PRC In light of the PRC's aggressive military technology acquisition campaign and its record as a proliferator, the United States should work to reduce the transfers of weapons systems and other militarily significant technologies from Russia and other nations to the PRC. These actions should include strengthening international measures, including economic incentives, to encourage Russia to become a full partner in stemming the proliferation of weapons. 14. New Legal Requirements for Executive Branch Reporting on Proliferation Appropriate congressional committees should report legislation requiring the Secretary of State, the Director of Central Intelligence, and the heads of other relevant Executive departments and agencies to report in a timely fashion to appropriate congressional committees, including the House Permanent Select Committee on Intelligence and the Senate Select Committee on Intelligence, on technology transfers that raise a proliferation concern and on the implementation of all the foregoing recommendations for international actions by the United States. Satellite Launches 15. Implementation of the Strom Thurmond National Defense Authorization Act for FY 1999 The Select Committee expects that the Executive branch will aggressively implement the Satellite Export Control Provisions of the Strom Thurmond National Defense Authorization Act for FY 1999. 16. State Department Should Have Sole Satellite Licensing Authority To protect the national security, the congressional judgment that the Department of State is the appropriate agency for licensing both exports of satellites and any satellite launch failure investigations must be faithfully and fully implemented. 17. State Department Need for Adequate Personnel and Resources for Satellite Export Licensing To protect the national interest in foreign commerce, the Department of State must ensure, consistent with national security, that satellite export licenses and notices to Congress are acted on in a timely fashion and that exporters are informed about the progress of their applications and have access to appropriate dispute resolution procedures. In order to achieve the foregoing, the Executive branch and the Congress should ensure that the Department of State has adequate personnel and resources devoted to processing export license applications. 18. Corrective Tax Legislation for Satellite Exports To ensure that satellite manufacturers are not disadvantaged in such collateral areas as tax credits by the transfer to the State Department of responsibility to license satellite exports, the appropriate congressional committees should report necessary legislation. 19. Heightened Requirements for Defense Department Monitoring of Foreign Launches The Department of Defense must give high priority to its obligations under the Strom Thurmond National Defense Authorization Act, including requirements for (i) recruiting, training, and maintaining a staff dedicated to monitoring launches in foreign countries of U.S. satellites; and (ii) establishing and monitoring technology control plans to prevent any transfer of information that could be used by the PRC to improve its missile launch capabilities. 20. Defense Department, Not Satellite Firms, Should Be Responsible for Security at Foreign Launches The Select Committee recommends that the appropriate congressional committees report legislation providing that, in connection with foreign launches of U.S. satellites, the Department of Defense shall contract for security personnel who have undergone background checks to verify their loyalty and reliability. The number of guards shall be sufficient to maintain 24-hour security of the satellite and all related missile and other sensitive technology. The satellite export licensee shall, as a condition of licensure, be required to reimburse the Department of Defense for all associated costs of such security. 21. Need for Adequate and Permanent Force of Well Trained Defense Department Monitors The Department of Defense shall ensure sufficient training for space launch campaign monitors and the assignment of adequate numbers of monitors to space launch campaigns. The Department of Defense also shall ensure continuity of service by monitors for the entire space launch campaign period, from satellite marketing to launch, and, if necessary, completion of a launch failure analysis. In addition, the Department of Defense shall adopt measures to make service as a monitor an attractive career opportunity. 22. Need for Full and Timely Reporting of Technology Passed to PRC, and of Foreign Launch Security Violations The Department of Defense monitors shall maintain logs of all information authorized for transmission to the PRC, including copies of any documents authorized for transmittal, and reports on launch-related activities. Such information shall be transmitted on a current basis to the Departments of Defense, State, and Commerce, and to the Central Intelligence Agency. Such documents shall be retained for at least the period of the statute of limitations for violations of the International Traffic in Arms Regulations (ITAR). In addition, the Department of Defense shall adopt clear written guidelines providing monitors the responsibility and the ability to report serious security violations, problems, and issues at the overseas launch site directly to the headquarters office of the responsible Defense Department agency. 23. Application of Export Control Laws to Space Launch Insurers The Select Committee recommends that relevant Executive departments and agencies ensure that the laws and regulations establishing and implementing export controls are applied in full to communications among satellite manufacturers, purchasers, and the insurance industry, including communications after launch failures. 24. Expansion of U.S. Launch Capacity in National Security Interest In light of the impact on U.S. national security of insufficient domestic, commercial space-launch capacity and competition, the Select Committee recommends that appropriate congressional committees report legislation to encourage and stimulate further the expansion of such capacity and competition. High Performance Computers The Select Committee supports the sale of computers to the PRC for commercial but not military purposes. The Select Committee recommends that the appropriate congressional committees report legislation that requires the following: 25. Legislation to Require Comprehensive Testing of HPCs, Clustering, and Massive Parallel Processing in National Security Applications The Select Committee recommends that appropriate congressional committees report legislation directing the Department of Energy, in consultation with the Department of Defense, to conduct a comprehensive review of the national security implications of exporting high-performance computers (HPCs) to the PRC. This review should include empirical testing of the extent to which national security related operations can be performed using clustered, massively-parallel processing or other combinations of computers. 26. Annual Threat Assessment of HPC Exports to PRC The Select Committee recommends that appropriate congressional committees report legislation directing the Intelligence Community to conduct an annual comprehensive threat assessment of the national security implications of the export to the PRC of HPCs and other computers that can be clustered or combined through massively parallel processing. 27. End Use Verification for PRC Use of HPCs The Select Committee recommends that the appropriate congressional committees report legislation that requires: -- As a condition to U.S. HPC export licensing, the establishment by the PRC of an open and transparent system by September 30, 1999, which provides for effective end-use verification for HPCs sold or to be sold to the PRC and, at a minimum, provides for on-site inspection of the end-use and end-user of such HPCs, without notice, by U.S. nationals designated by the U.S. Government. -- Failure to establish such a system by that date should result in the U.S. Government's lowering the performance level of HPCs that may be exported to the PRC, the denial of export licenses for computers destined to the PRC, or other appropriate measures. -- An independent evaluation of the feasibility of improving end-use verification for HPCs in the PRC, and preventing the use of such HPCs for military purposes. 28. U.S. Leadership for Multinational HPC Export Policies The Select Committee recommends that the appropriate congressional committees report legislation that requires efforts by the Executive branch to encourage other computer-manufacturing countries, especially those countries that manufacture HPCs, to adopt similar policies toward HPC exports to the PRC. Export Legislation and Other Technology Controls The Select Committee believes that it is in the national interest to encourage commercial exports to the PRC, and to protect against the export of militarily sensitive technologies. To this end: 29. Reauthorization of Export Administration Act The Select Committee recommends that the appropriate congressional committees report legislation to reenact the Export Administration Act, with particular attention to re-establishing the higher penalties for violation of the Act that have been allowed to lapse since 1994. 30. Prioritization of National Security Concerns With Controlled Technologies; Continuous Updating Relevant Executive departments and agencies should establish a mechanism to identify, on a continuing basis, those controlled technologies and items that are of greatest national security concern. 31. Executive Department Approvals for Exports of Greatest National Security Concern With respect to those controlled technologies and items that are of greatest national security concern, current licensing procedures should be modified: -- To provide longer review periods when deemed necessary by any reviewing Executive department or agency on national security grounds; and -- To require a consensus by all reviewing Executive departments and agencies for license approval, subject to appeal procedures. 32. Streamlined Licensing Procedures With respect to controlled technologies and items that are not of greatest national security concern, current licensing procedures should be modified to streamline the process and provide greater transparency, predictability, and certainty. 33. Effect of Maintaining Looser National Security Controls for Hong Kong Since Its Absorption by PRC on July 1, 1997 The Select Committee recommends that appropriate congressional committees report legislation requiring appropriate Executive departments and agencies to conduct an initial study, followed by periodic reviews, of the sufficiency of customs arrangements maintained by Hong Kong with respect to the PRC and the appropriateness of continuing to treat the Hong Kong S.A.R. differently from the PRC for U.S. export control purposes. Such a study should consider, among other things, the implications of unmonitored border crossings by vehicles of the People's Liberation Army. 34. Mandatory Notice of PRC or Other Foreign Acquisition of U.S. National Security Industries The Select Committee recommends that appropriate congressional committees report legislation amending the Defense Production Act of 1950 to require notice to the Committee on Foreign Investment in the United States (CFIUS) by all U.S. companies that conduct national security-related business of any planned merger, acquisition, or takeover of the company by a foreign entity or by a U.S. entity controlled by a foreign entity. The amendment also should require Executive departments and agencies to notify CFIUS of their knowledge of any such merger, acquisition, or takeover. Intelligence/Counterintelligence Issues 35. Comprehensive Counterintelligence Threat Assessment of PRC Espionage Supplementing its recommendations with respect to security at the National Laboratories, the Select Committee further recommends that Executive departments and agencies with counterintelligence expertise undertake a comprehensive counterintelligence threat assessment of PRC espionage targeted against U.S. public and private entities. 36. Legislation to Improve Sharing of Sensitive Law Enforcement Information within the Executive Branch The Select Committee recommends that appropriate congressional committees report legislation to authorize and direct the Department of Justice to promptly share national security information, on a classified basis, with appropriate Executive departments, agencies, and entities. To achieve this objective, the Select Committee recommends the creation of an appropriate interagency mechanism. 37. Five-Agency Inspectors General Examination of Countermeasures Against PRC Acquisition of Militarily Sensitive Technology The Select Committee recommends that appropriate congressional committees require the Secretaries of State, Defense, Commerce, and the Treasury and the Director of Central Intelligence to direct their respective Inspectors General to investigate the adequacy of current export controls and counterintelligence measures to protect against the acquisition by the PRC of militarily-sensitive U.S. technology, and to report to Congress by July 1, 1999, regarding their findings and measures being undertaken to address deficiencies in these areas. 38. All-Source Intelligence Analysis of PRC Plans for Technology Acquisition The Select Committee recommends that appropriate congressional committees report legislation directing the Intelligence Community to undertake and maintain a current, all-source analysis of PRC aims, goals, and objectives with respect to the acquisition of foreign, and particularly U.S., technologies, including, for example, PRC efforts to exploit the open character of U.S. society by penetrating businesses, academic and social institutions, and political practices. Such legislation should include a requirement to report on the adequacy of resources, encouragement, and priority status accorded all-source intelligence collection and analysis by relevant Executive departments and agencies concerning the PRC and PRC counterintelligence. (end Select Committee text)
25 May 1999
(Agrees with substance of nearly all recommendations) (2560) Washington -- The Clinton Administration agrees with the substance of nearly all the recommendations made in the report of the Select Committee on U.S. National Security and Military/Commercial Concerns with The People's Republic of China -- also called the Cox Report. In a statement released May 25, the White House points out that the Administration has been implementing many of the recommendations for months, and in some cases, years. Although the Administration shares the Committee's objective of strengthening export controls and counterintelligence, while encouraging legitimate commerce for peaceful purposes, the statement said, the White House and the Committee differ on some specific issues. Following is the text of the White House response to the report: (begin text) THE WHITE HOUSE Office of the Press Secretary ________________________________________________________________________ For Immediate Release May 25, 1999 RESPONSE TO THE REPORT OF THE SELECT COMMITTEE ON U.S. NATIONAL SECURITY AND MILITARY/COMMERCIAL CONCERNS WITH THE PEOPLE'S REPUBLIC OF CHINA The Select Committee submitted its classified report to President Clinton on January 4, 1999, including 38 recommendations to address issues related to export controls and counterintelligence. On February 1, 1999, the President provided a written response to the Select Committee's recommendations, a portion of which was declassified and released to the public. In its response, the Administration agreed with the Committee on the need to maintain effective measures to prevent the diversion of U.S. technology and prevent unauthorized disclosure of sensitive military information. This applies to our exports worldwide. We also agree with the Committee's recommendation to support U.S. high tech competitiveness consistent with national security. This has been a longstanding premise of the Clinton Administration's technology transfer policies. In this regard, the Administration agrees with the substance of nearly all the Committee's recommendations, many of which we have been implementing for months, and in some cases, years. We have worked cooperatively with the Committee to declassify as much of the report as possible so that the American public can be informed on these important issues, consistent with the need to protect sensitive national security and law enforcement information. The declassified report, released today, provides the Committee's detailed assessments and investigations underlying its recommendations. Although the Administration does not agree with all of the Committee's analysis, we share the Committee's objective of strengthening export controls and counterintelligence, while encouraging legitimate commerce for peaceful purposes. With regard to the specific issues raised in the report: Security at U.S. National Laboratories The Administration is deeply concerned about the threat that China and other countries are seeking to acquire sensitive nuclear information from the U.S. National Laboratories. Security at the labs has been a long-term concern, stretching back more than two decades. In 1997, the Administration recognized the need to respond to this threat with a systematic effort to strengthen counterintelligence and security at the U.S. National Laboratories. In response, President Clinton issued a Presidential Decision Directive (PDD-61) in February 1998. This directive is the most comprehensive and vigorous attempt ever taken to strengthen security and counterintelligence procedures at the Labs. The FBI, in cooperation with DOE, is continuing its investigation into the possible source and extent of sensitive information that China may have acquired. We welcome the Select Committee's support for PDD-61. As the President indicated in February, the Administration agrees with all of the Committee's recommendations concerning lab security, and we are carrying out these recommendations: -- The President asked the Director of Central Intelligence to conduct a formal Intelligence Community damage assessment on China, which was reviewed by an independent panel headed by Admiral David Jeremiah. This review was completed and briefed to Congress on April 21, 1999. -- The DCI will, at the President's direction, also consider the recommendations made by Admiral Jeremiah's group on intelligence collection and resources. -- President Clinton asked the DOE to lead an interagency assessment of lab-to-lab programs with China, Russia, and other sensitive countries, which is scheduled for completion on June 1, 1999. The Administration believes that these programs serve the national security interest, but we are committed to ensuring that appropriate protections are in place to prevent compromise of classified information. -- Energy Secretary Bill Richardson is aggressively implementing PDD-61 on an expedited basis, and has been following the implementation plan that was submitted to Congress on January 5, 1999. By the end of 1999, the DOE CI program will be as good as the best in the U.S. Government. -- In addition, Secretary Richardson has instituted a number of additional actions to improve counterintelligence security and safeguards at the National Laboratories, including in the critical area of cyber security. Secretary Richardson ordered a 14-day "stand-down" of all classified computers at the weapons labs, has initiated a massive reorganization of department security functions, and has greatly increased the cyber security posture at DOE. -- On March 29,1999, the Department of Energy submitted to Congress its annual Report on Safeguards and Security at the Department of Energy Nuclear Weapons Facilities. The report found that no nuclear material at DOE was at risk, but rated some areas "marginal". DOE initiated a thorough upgrade of all physical security and has committed to making all necessary upgrades so that all sites receive the highest rating by January 2000. -- The Director of Central Intelligence, in coordination with appropriate agencies, is preparing a semi-annual report to Congress on the measures that are being taken to protect against espionage efforts by China to obtain nuclear weapons and other national security information of strategic concern. In addition to the above steps recommended by the Select Committee, the President has requested Senator Warren Rudman, as Chairman of the bipartisan President's Foreign Intelligence Advisory Board, to evaluate security at the labs. Senator Rudman has assembled an excellent team of Board members to examine the issue. Finally, the President asked the National Counterintelligence Policy Board to recommend measures to strengthen controls over nuclear information at facilities aside from the National Laboratories that handle nuclear weapons issues. Missile & Space Technology The Administration agrees with the Select Committee on the need to ensure that the launch of U.S.-manufactured civilian satellites by China or any other foreign country does not inadvertently transfer missile technology. The Department of Justice is continuing to investigate the allegations of improper transfers cited by the report, and it is inappropriate to comment on the specifics of these cases. The Administration also agrees with the Committee on the need to establish procedures to ensure timely processing of licenses, consistent with national security. In this regard, the Administration agrees with and is carrying out all of the Committee's recommendations concerning satellite launches: -- The Administration has implemented the provisions of the FY99 Defense Authorization Act, by, among other things, transferring licensing for communications satellite exports from the Department of Commerce to the Department of State. -- As recommended by the Select Committee, the Department of State has developed new procedures for timely review of licenses, and is increasing its licensing staff to ensure the procedures are implemented properly. -- The Department of State has taken steps to ensure that the affected U.S. companies understand and comply with the requirements of law and regulation for data that may be provided to the space insurance industry. The Department of Defense is implementing several measures proposed by the Committee to strengthen monitoring of foreign launches. Specifically: -- DoD has established a new organization called the Space Launch Monitoring Division within the Technology Security Directorate of the Defense Threat Reduction Agency, and is hiring 39 additional staff for this function. The new division fulfills the congressional requirement in the FY 1999 National Defense Authorization Act to recruit, train, and maintain a staff dedicated to all aspects of monitoring the export of space launch and satellite technology from the U.S. -- The new dedicated, professional staff in DoD will provide end-to-end monitoring of controlled space launch and satellite technologies from the first export license application through to launch -- and failure analyses if necessary. The monitors will review and approve all technology transfer controls plans, and all controlled technical data proposed for export. Monitors will participate in all technical interchange meetings and other discussions involving controlled technical data. Monitors will also deploy to launch sites as a cohesive group with expertise in space launch security operations, and satellite and launch vehicle technologies. -- Plans are also in place to ensure that there are also resources available within DoD to augment the full-time monitoring staff should that be necessary to meet temporary surges in requirements for monitoring of meetings and other activities. As well, State and DoD are requiring industry to establish electronic archiving of technical data to ensure a complete and readily accessible data base of all controlled data exported as part of a satellite launch campaign. -- Training for the monitor staff is being enhanced through a program of initial and recurring training and evaluation. The training will be managed as a formal program through the Defense Threat Reduction Agency's training facilities at Kirtland Air Force Base in New Mexico. The program will encompass the complete monitoring activities outlined in the FY 1999 National Defense Authorization Act. -- Finally, DoD is examining the recommendation regarding contracting for security personnel to provide physical security at foreign launch sites. DoD looks forward to a dialogue with the appropriate congressional oversight committees on this matter. The Administration is encouraging development of the U.S. domestic launch industry, to reduce our dependence on foreign launch services. Since 1994, the Administration has fostered the international competitiveness of the U.S. commercial space launch industry by pursuing policies and programs aimed at developing new, lower cost U.S. capabilities to meet both government and commercial needs. For instance, DoD is investing $3 billion in partnership with U.S. commercial space companies to develop and begin flying two competing families of Evolved Expendable Launch Vehicles (EELV) with a goal of significantly reducing launch costs for government and commercial payloads. For the longer term, NASA has committed nearly $1 billion toward work with industry in developing and demonstrating technology for next generation reusable launch vehicles (RLVs). NASA's goal is to reduce launch costs by a factor of 10 within 10 years. To address the shifting balance from mostly government to predominantly commercial space launches in the U.S., the Administration recently initiated an interagency review to assess the appropriate division of roles and responsibilities between government agencies and the U.S. commercial space sector in managing the operation, maintenance, improvement, and modernization of the U.S. space launch bases and ranges. Together, these measures comprise an effective strategy aimed at strengthening domestic U.S. space launch capabilities and our industry's international competitiveness. Domestic and International Export Policies The Administration agrees with the Committee that the end of the Cold War and dissolution of COCOM in 1994 has complicated efforts to control transfers of militarily important dual-use goods and technology. In this regard, the Administration agrees with the Committee on the desirability of strengthening the Wassenaar Arrangement to improve international coordination and reporting on the export of militarily useful goods and technology, and to prevent transfers of arms and sensitive dual-use items for military end-uses if the situation in a region, or the behavior of a state is or becomes a cause of serious concern to the participating states. All Wassenaar members currently maintain national policies to prevent such transfers to Iran, Iraq, Libya, and North Korea. We are making a concerted effort this year to strengthen and enhance existing transparency mechanisms and to expand restraint measures. We do not believe that other countries are prepared to accept a legally binding international regime like COCOM directed against China and we are not seeking such a regime. We note that a COCOM-style veto could act against U.S. interests by letting other countries block U.S. sales to our own security partners. The Administration agrees with the Committee on the need to enact a new Export Administration Act with new penalties. We have operated for too long without updated legislation in this very important area. The Administration will work with the appropriate Committees in Congress and U.S. industry to obtain a new Export Administration Act. The Administration believes that the existing dual-use export licensing system allows adequate time for careful review of license applications and provides effective procedures to take account of national security considerations in licensing decisions. High Performance Computers The Administration agrees with the Committee that we should encourage the sale of computers to China for commercial, but not military, purposes. The Administration has not licensed high performance computers (HPC) to China for military purposes. -- As recommended by the Committee, we are reviewing the potential national security uses of various configurations of computers, the extent to which such computers are controllable, and the various consequences to the U.S. industrial base of imposing export controls on such computers. Our target date for completing this review is May 1999. -- We also agree with the Committee that we need the capability to visit U.S. HPCs licensed for export to China to observe how they are being used. During President Clinton's visit to China in June 1998, we secured a long sought Chinese agreement to arrangements to conduct on-site visits in China to help verify the civilian use of HPCs and other dual-use technology. We have been working to expand and strengthen this arrangement. We believe that it is not possible to obtain agreement by China or any other country to a no-notice verification regime for U.S. goods. Chinese Technology Acquisition and Proliferation Activities The Administration is well aware that China, like other countries, seeks to obtain sensitive U.S. technology for military uses. We maintain strict policies prohibiting the export to China of munitions and dual-use items for military use. As recommended by the Select Committee, the FBI and CIA plan to complete their annual comprehensive threat assessment of PRC espionage by the end of May, 1999, and the Inspector Generals of State, Defense, Commerce, Energy, Treasury, and CIA expect to complete their review of export controls by June 1999. The Administration agrees with the Select Committee on the need to obtain more responsible export behavior by China. Through our policy of engagement, we believe that significant gains have been realized on this front. For example, at our initiative China has committed not to provide assistance to unsafeguarded nuclear facilities in Pakistan or elsewhere -- a commitment we believe is being observed by Beijing, terminated assistance to Iran on a project of nuclear proliferation concern and refrained from new civil and military nuclear cooperation with Iran, stopped exports of C-802 cruise missiles to Iran, and strengthened export controls over nuclear and chemical weapons related materials. China has also, with our urging, ratified the Nuclear Nonproliferation Treaty and the Chemical Weapons Convention, and has signed the Comprehensive Test Ban Treaty, which are the key pillars of the international nonproliferation regime. On regional security, China has provided concrete assistance in dealing with proliferation threats in North Korea and South Asia. The Administration agrees with the Committee that we should seek Chinese adherence to the MTCR. In June 1998, President Jiang announced that China will actively study MTCR membership. The Administration intends to continue actively pressing the Chinese on this issue and other proliferation issues of concern. (end text)