SPEAKERS       CONTENTS       INSERTS    
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50–151 CC
1998
IMPLEMENTATION OF THE U.S.-CHINA NUCLEAR COOPERATION AGREEMENT

HEARING

BEFORE THE

COMMITTEE ON
INTERNATIONAL RELATIONS
HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS

SECOND SESSION

FEBRUARY 4, 1998

Printed for the use of the Committee on International Relations

COMMITTEE ON INTERNATIONAL RELATIONS
BENJAMIN A. GILMAN, New York, Chairman
WILLIAM GOODLING, Pennsylvania
JAMES A. LEACH, Iowa
HENRY J. HYDE, Illinois
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DOUG BEREUTER, Nebraska
CHRISTOPHER SMITH, New Jersey
DAN BURTON, Indiana
ELTON GALLEGLY, California
ILEANA ROS-LEHTINEN, Florida
CASS BALLENGER, North Carolina
DANA ROHRABACHER, California
DONALD A. MANZULLO, Illinois
EDWARD R. ROYCE, California
PETER T. KING, New York
JAY KIM, California
STEVEN J. CHABOT, Ohio
MARSHALL ''MARK'' SANFORD, South Carolina
MATT SALMON, Arizona
AMO HOUGHTON, New York
TOM CAMPBELL, California
JON FOX, Pennsylvania
JOHN McHUGH, New York
LINDSEY GRAHAM, South Carolina
ROY BLUNT, Missouri
KEVIN BRADY, Texas
LEE HAMILTON, Indiana
SAM GEJDENSON, Connecticut
TOM LANTOS, California
HOWARD BERMAN, California
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GARY ACKERMAN, New York
ENI F.H. FALEOMAVAEGA, American Samoa
MATTHEW G. MARTINEZ, California
DONALD M. PAYNE, New Jersey
ROBERT ANDREWS, New Jersey
ROBERT MENENDEZ, New Jersey
SHERROD BROWN, Ohio
CYNTHIA A. McKINNEY, Georgia
ALCEE L. HASTINGS, Florida
PAT DANNER, Missouri
EARL HILLIARD, Alabama
BRAD SHERMAN, California
ROBERT WEXLER, Florida
STEVE ROTHMAN, New Jersey
BOB CLEMENT, Tennessee
BILL LUTHER, Minnesota
JIM DAVIS, Florida
RICHARD J. GARON, Chief of Staff
MICHAEL H. VAN DUSEN, Democratic Chief of Staff
WALKER ROBERTS, Senior Professional Staff
KIMBERLY ROBERTS, Staff Associate C O N T E N T S

WITNESS

    The Honorable Robert Einhorn, Deputy Assistant Secretary for Nonproliferation, the Department of State
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APPENDIX
Prepared statements:
The Honorable Benjamin A. Gilman, a Representative in Congress from New York and Chairman, Committee on International Relations
The Honorable Sherrod Brown, a Representative in Congress from Ohio
The Honorable Robert Einhorn, plus attachments
Additional material submitted for the record:
The White House Certification Package submitted by Representative Gilman
Background memo prepared by the Congressional Research Service
Document entitled ''China's Non-Proliferation Words vs. China's Nuclear Proliferation Deeds'' prepared by Nuclear Control Institute
Questions submitted by Representative Gilman 1
Questions submitted by Representative Berman 1
Unclassified responses to questions submitted by The Honorable Robert Einhorn

1 Classified responses by The Honorable Robert Einhorn can be found in the files of the Committee on International Relations.
IMPLEMENTATION OF THE U.S.-CHINA NUCLEAR COOPERATION AGREEMENT

WEDNESDAY, FEBRUARY 4, 1998
House of Representatives,
Committee on International Relations,
Washington, DC.

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    The Committee met, pursuant to notice, at 10 a.m. in room 2172, Rayburn House Office Building, Hon. Benjamin A. Gilman (chairman of the Committee) presiding.

    Chairman GILMAN. The hearing will come to order.
    Our witness today is the Honorable Robert Einhorn, Deputy Assistant Secretary of State for Nonproliferation. Thank you for coming. Welcome.
    The central question before us today is how U.S. national interests are served by engaging in nuclear cooperation with China and, in particular, how U.S. nonproliferation objectives are fulfilled by such cooperation.
    In a Full Committee hearing on October 11, 1997, the Committee spelled out its criteria for passing judgment on the U.S.-China Nuclear Cooperation Agreement. Included were three basic points.
    First, we said the Administration must keep the Congress apprised of its intentions with regard to the agreement. We urged them to brief regularly the Committee and to lay out the Administration's rationale for implementing the agreement before the October 1997 summit. I believe the Administration has worked in good faith to try to fulfill those requests.
    Second, we asked that in order to implement the agreement, the Administration must make the required certification and report pursuant to the 1985 and 1990 laws that set conditions on any nuclear cooperation agreement. We said that the certification must stand on its own; that the Administration must adhere to the letter of the law.
    The Administration submitted a certification on January 12, 1998. In part, the purpose of today's hearing is to have the Administration make its case for its certification. Until that case is heard, we will reserve judgment on whether the certification meets the requirements of the law.
    Third, we said that perhaps—most importantly—the Administration would need to convince our Committee that now is the time to change the status quo with regard to nuclear cooperation with China. In that regard, I reiterate that it is not only China's nuclear nonproliferation record that is on trial. Clearly, Members must be convinced that China has stopped assisting Pakistan's nuclear weapons procurement program and Iran's efforts to develop an indigenous nuclear weapons capability.
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    Just as importantly, Members need to know that China is engaging in responsible nonproliferation behavior across the board, including all weapons of mass destruction as well as conventional weapons.
    In addition, Members need to understand why we have appeared to lower our nonproliferation standards by not insisting that China become a member of the Nuclear Suppliers Group before we engage in nuclear cooperation with them.
    Finally, our Members need to be convinced that beyond issuing pieces of paper, China has in place an effective and fully functioning export control system. In that regard, we have been denied the ability to conduct post shipment verifications for our dual use exports into China, a common practice for safeguarding our exports in many countries of the world, including Syria. It should be clear that we have noted the complete absence of any penalties or sanctions in the Chinese export control decrees.
    It is in these areas that I do not believe the evidence supports engaging China in nuclear cooperation at this time.
    Before proceeding further, there are a couple of procedural matters I want to address. We worked out an arrangement with the Administration whereby we will remain in open session as long as Members have questions to address to Mr. Einhorn that can be answered in our open forum. When it is clear that all questions have been exhausted that can be addressed in an open session, we will continue the hearing in closed session with Mr. Einhorn, to be joined by Mr. John Lauder, who is director of the Nonproliferation Center, Central Intelligence Agency.
    The House and Committee rules require that we take a rollcall vote with the majority of the Committee present to go into closed session. Accordingly, I want to alert our witness and the Committee that when we have a majority of the Members present I will entertain a motion to go into closed session. Assuming that vote allows us to go into closed session, we will then continue our session until all Members have exhausted their questions.
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    At this point I have a series of unanimous consent requests to make. I ask unanimous consent that a copy of the January 12, 1998 certification package submitted by the President be inserted in the record at the appropriate place, without objection.
    [The information referred to appears in the appendix.]
    Chairman GILMAN. I ask unanimous consent that the background memorandum prepared by the Congressional Research Service be placed at the appropriate place in the record.
    I want to commend Shirley Kan at the CRS for her work in support of our Committee on that issue.
    [The information referred to appears in the appendix.]
    Chairman GILMAN. Further, I ask unanimous consent that a document entitled ''China's Nonproliferation Words vs. China's Nuclear Proliferation Deeds'' be inserted in the record at the appropriate place.
    [The information referred to appears in the appendix.]
    Chairman GILMAN. If there is no objection, we will consider those as having been adopted.
    Mr. Hamilton, would you care to make an opening statement?
    Mr. HAMILTON. Thank you very much, Mr. Chairman. I want to join you in welcoming our distinguished witnesses, Robert Einhorn, Deputy Assistant Secretary of State for Nonproliferation, and Mr. John Lauder, Director of the Nonproliferation Center of the CIA, and to extend my thanks to them for coming.
    I want to thank you also, Mr. Chairman, for scheduling this very important hearing on the U.S.-China agreement on peaceful uses of nuclear energy.
    I think it is important to say quite clearly at the outset that China's overall nonproliferation record leaves much to be desired. Even in the nuclear field, for instance, China has apparently assisted Pakistan's unsafeguarded nuclear program and engaged in significant nuclear cooperation with Iran. It exercises little supervision over its exports of nuclear materials, equipment or components.
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    Until now, no President has been able to make the required certifications regarding China's nonproliferation policies, without which peaceful nuclear cooperation between our countries is prohibited by law.
    At the same time, it is important to recognize that China has taken steps in recent years to join most of the rest of the world in the effort to halt the spread of weapons of mass destruction. It has acceded to the Nonproliferation Treaty, the cornerstone of the nonproliferation regime; signed the Chemical Weapons Convention; promised to abide by the guidelines and parameters of the Missile Technology Control Regime designed to halt the spread of ballistic missiles; has stopped nuclear testing; and has signed the Comprehensive Test Ban Treaty. It has worked with us and our international partners to contain the threat posed by North Korea's nuclear ambitions. It has pledged not to assist in an unsafeguarded nuclear facility anywhere in the world.
    Now, some of my colleagues have argued that the President should not certify China in the nuclear area because we are not satisfied with China's record in the areas of missiles and chemical weapons. Indeed, I think in your testimony here in a few minutes you will tell us that the Administration recognizes the progress of the Chinese in the nonnuclear areas as lagging behind the progress on nuclear issues. I think there is no question that Chinese behavior in nonnuclear areas is not satisfactory. More progress is required, and the Administration must continue to press China very hard.
    The question now is what is the best way to ensure that China's record on nonproliferation continues to improve. First, we are obviously going to have to continue to monitor Chinese nonproliferation behavior very closely.
    Second, we have to remember that we do not give up our leverage now that the President has made the certification we will be examining today. We can deny export licenses for goods and technology at any point if China reverts to unacceptable behavior. We will, in other words, continue to have a stick alongside the carrot of peaceful nuclear cooperation.
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    Finally, I think it is important not to allow the perfect to become the enemy of the good. At some point we have to pocket the progress we have achieved, rather than hold out for additional concessions and risk that the Chinese will conclude negotiations with us at some point.
    Last, there are risks with proceeding with peaceful nuclear cooperation with China, but we should also knowledge that there are risks as well in not proceeding.
    In any event, these are important hearings and I am very pleased our witnesses are with us and that you, Mr. Chairman, have scheduled it. Our judgment, of course, will be based on the evidence of the law and an overall assessment of whether this agreement promotes the American national interest.
    Thank you, Mr. Chairman.
    Chairman GILMAN. Thank you, Mr. Hamilton.
    Do any other Members seek recognition?
    Mr. Bereuter.
    Mr. BEREUTER. Thank you, Mr. Chairman. I want to say at the beginning of the hearing that the Administration has a significant burden to prove that all the requisite certifications under U.S. law are met, and that this Member will, as I'm sure my colleagues intend, carefully scrutinize the certification made by the President of the United States to the Congress.
    Nevertheless, the Congress should not rush to move the goal posts on this process. It is always easy for us to second-guess and say that the Administration could have negotiated one more concession from China on any set of negotiations. It was true with the intellectual property rights negotiations, true with the WTO negotiations, and it could be true with the nuclear talks.
    However, we must remind ourselves of several key points. First, written guarantees from the PRC to control the export of nuclear technology to countries such as Iran and Pakistan is a major nonproliferation achievement. It will give us a bright line benchmark to gauge the PRC's willingness to honor its commitments in the future.
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    Second, it is in the U.S. interest to ensure that China has a safe nuclear power generation program.
    Third, it is in our interest to ensure that China not overly rely on dirty coal for their energy needs.
    Fourth, it is in our interests to ensure that China not look to Iran for its energy needs.
    Fifth and finally, it is in our interests to help build reactors that will be built with or without us. It is clear that since the United States has imposed an export embargo on nuclear technology to China, that China has turned to the Canadians, the Russians, the French and others to begin building what will amount to be an important part of the energy infrastructure for the 21st century. I intend to keep these things in mind and urge my colleagues to do likewise.
    Thank you, Mr. Chairman.
    Chairman GILMAN. Thank you, Mr. Bereuter.
    Mr. Menendez.
    Mr. MENENDEZ. Thank you, Mr. Chairman. I want to thank you for holding this hearing. I have some very serious and very real concerns about China's commitment to the nuclear cooperation agreement. Among the outstanding concerns are China's continued sales to Pakistan of missile-related technology and materials, China's sale to Iran of nuclear technology and equipment, and its assistance to Iran in developing medium-range ballistic missiles at the missile industrial complex near Tehran.
    Recently there were more than 100 Chinese and North Korean experts working on this site, and that is both a cause for concern and skepticism. In November I sent a letter to the President, and several other Members did, asking that he certify that China has halted all exports of nuclear technology to nations with unsafeguarded nuclear facilities before implementing the 1985 agreement.
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    Presidents Reagan and Bush were unable to provide the necessary certification, and I hope, Mr. Secretary, that you will be able to shed some light on what progress China has made that allowed President Clinton to sign the required certification on January 12 of this year. In particular, I am concerned about reports that China has sold ring magnets and a high temperature furnace to Pakistan for use at a nuclear reactor being built in Pakistan without any IAEA safeguards in 1996.
    We also know that China continues to be a key supplier to Iranian nuclear projects. China has built a system for enriching uranium to be used at the safeguarded site in Karach in Iran, and speculation continues about China's plans to sell a facility to Iran to convert uranium ore into uranium hexafluoride gas which could be enriched to weapons-grade material.
    Given these outstanding reports, we need to seriously consider the possibility that the Chinese are making nice in public while simultaneously undermining the agreement and the security of the Middle East and the subcontinent. So I hope, Mr. Secretary, you will speak to some of these issues and what steps the United States is prepared to take if the Chinese continue to sidestep the agreement.
    Thank you, Mr. Chairman.
    Chairman GILMAN. Thank you, Mr. Menendez.
    Mr. Fox.
    Mr. FOX. Thank you, Mr. Chairman. I join my colleagues in thanking you for your leadership in holding these hearings, along with Mr. Hamilton, and I thank Mr. Einhorn and Director Lauder for joining us today.
    As we move through this hearing I think it is important that we have as one of our hopeful goals that the Administration explain why it is in our national interest to engage in nuclear cooperation with China, and in particular how our U.S. nonproliferation objectives will be forwarded by this cooperation with regard to certification. Has China ended its longstanding practice of assisting Pakistan, and why would the United States extend their cooperation to a country which is not a member of the Nuclear Suppliers Group?
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    We only have to look to the fact of China's nonproliferation words versus their deeds. In 1997 they stated, ''I wish to emphasize once again China has never transferred nuclear weapons or relevant technology to other countries, including Iran.'' Then the actual reports of facts show that China is a key supplier of nuclear technology to Iran and supporting over $60 million annually. Yet in 1996 China's position was clear, it does not advocate or encourage nuclear proliferation. Yet another report shows China was the single most important supplier of equipment and technology for weapons of mass destruction worldwide.
    I hope we can get to the bottom of this and move ahead jointly with the Administration. I thank the Chairman for holding these hearings.
    Chairman GILMAN. Thank you, Mr. Fox.
    Is there any other Member seeking recognition?
    If there are no other Members seeking recognition, we again welcome Robert Einhorn, Deputy Assistant Secretary for Nonproliferation, Bureau of Politico-Military Affairs in the Department of State, responsible for nuclear, chemical, and biological missile nonproliferation and regional arms control.
    Mr. Einhorn previously served as senior adviser to the policy and planning staff, Department of State, responsible primarily, again, for arms control and nonproliferation, and was formerly the representative of the U.S. Arms Control and Disarmament Agency at the START negotiations.
    Welcome, Mr. Einhorn. You may submit your full statement or you may summarize it, whichever you deem appropriate.

STATEMENT OF ROBERT EINHORN, DEPUTY ASSISTANT SECRETARY FOR NONPROLIFERATION, BUREAU OF POLITICO-MILITARY AFFAIRS, DEPARTMENT OF STATE
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    Mr. EINHORN. Mr. Chairman, thank you very much for giving me the opportunity to appear before the Committee. I would like to have permission to submit my prepared statement for the record and then open with some briefer remarks.
    Chairman GILMAN. Without objection.
    Mr. EINHORN. Thank you, Mr. Chairman.
    The United States has a major national security interest in China being a force for stability in the 21st century, committed to a variety of critical international norms, including nonproliferation. But, as a number of Members have already pointed out this morning, China's past record on proliferation has been a source of serious concern.
    In the 1980's it provided assistance to Pakistan's nuclear weapons program. It has not shown sufficient restraint in transfers of missile equipment and technology, dual use chemicals and chemical production equipment, and conventional arms, especially to Iran and Pakistan. It has not had effective export controls, so that even when China has wanted to show restraint, its ability to show restraint has sometimes been inadequate.
    Given these problems, the Administration has assigned a very high priority to encouraging a positive evolution in China's policies and practices in the area of nonproliferation. We saw a promising opportunity to do so in negotiations on implementing the long-dormant 1985 U.S.-China agreement for nuclear cooperation.
    The Chinese have wanted to implement this agreement in order to enable them to buy U.S. nuclear equipment and technology which they apparently believe could make an important contribution to their ambitious nuclear energy plans. But the agreement had been approved by the Congress on the condition that it could not be implemented until the President certified, in effect, that China was not assisting any nonnuclear weapons state to acquire nuclear weapons.
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    In early 1985 we entered into negotiations on steps that China could take in the area of nuclear nonproliferation to meet U.S. legal requirements for implementing the 1985 agreement. In the course of over 2 1/2 years we believe we have achieved some important results.
    First, China committed in May, 1996 not to provide assistance to unsafeguarded nuclear facilities in Pakistan or anywhere else. Since then, we are not aware of any transfers of equipment or material by Chinese entities to Pakistan's unsafeguarded program. We have discussed with Chinese officials some cases of potential concern involving contacts between Chinese entities and elements associated with Pakistan's nuclear weapons program. However, our current information indicates that China appears to be acting consistently with its 1996 pledge.
    Second, China has agreed to phase out its nuclear cooperation with Iran, even cooperation under IAEA safeguards. It has already suspended the sale of two nuclear power reactors, canceled the transfer of a uranium conversion facility, and turned down Iranian requests for other sensitive equipment and technology. And it has provided a clear assurance that it is not going to engage in new nuclear cooperation with Iran, and that it will complete a few existing projects within a relatively short period.
    Third, China is putting in place for the first time a comprehensive nationwide system of controls over nuclear-related exports. These controls are embodied in formal directives and regulations issued by China's State Council, and they involve control lists substantively identical to those used by the Nuclear Suppliers Group.
    Fourth, last October China became a member of the Zangger NPT Exporters Committee, the first time China has joined a multilateral nonproliferation export control regime.
    These recent steps satisfy and in some instances even exceed the standards set by U.S. law for implementing the 1985 agreement. The progress can be measured in concrete steps already taken, not just promises for future behavior.
    Moreover, these specific steps should be viewed together with other actions China has taken during the 1990's that demonstrate its growing acceptance of international nonproliferation norms. Mr. Hamilton mentioned a number of those steps: China's adherence to the nonproliferation treaty, its termination of nuclear testing and its signature of the Comprehensive Test Ban Treaty, as well as its support for a Fissile Material Cutoff Treaty.
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    Taken together, these developments constitute a marked positive shift in China's nuclear nonproliferation policies and practices. On the basis of this record, the President announced this past October 29 that he would submit to the Congress the certifications and reports required to implement the 1985 agreement.
    Mr. Chairman, the implementation of the 1985 agreement will bring important benefits to the United States. It will provide an effective means of encouraging China to live up to its recent commitments in the area of nuclear nonproliferation.
    It is essential to point out that the agreement makes China eligible to receive U.S. nuclear exports. It does not guarantee that China will receive them. Under our nuclear licensing procedures, individual transactions will have to be approved on a case-by-case basis. If the Chinese do not abide by their assurances, we can withhold approval of any new licenses and we can even revoke previously approved ones.
    We will be monitoring China's behavior very carefully. If and when problems or uncertainties arise, we will raise them promptly with the Chinese. With the 1985 agreement in effect, and prospects for continued nuclear cooperation potentially at risk, the Chinese will have strong incentives to prevent or stop any activities inconsistent with their commitments.
    Activating this agreement will also give us the most promising basis for making further progress in the nonproliferation area. The Chinese have already agreed that, with implementation of this agreement as a necessary first step, we can soon begin government-to-government cooperation in such important areas as nuclear materials security, international safeguards, and nuclear safety.
    We also plan in the period ahead to press the Chinese for progress on missile, chemical, and conventional arms issues. These are issues where serious problems remain in China's policies and practices. Implementing the nuclear cooperation agreement will show the Chinese that if they make hard decisions and bring their behavior into conformance with international norms, then they can expect that there will be benefits for both sides. This will encourage the Chinese to take similarly hard decisions on nonnuclear issues.
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    While proliferation has been the main focus of our efforts to promote implementation of the agreement, we have also been aware of the likely commercial benefits. Activation of the agreement will allow U.S. companies to participate in the fastest growing nuclear power market in the world today.
    These benefits are difficult to quantify, they are difficult to predict. But the market in China for nuclear reactors alone is a multi-billion dollar one, so we would expect the benefits in terms of the U.S. balance of trade and industrial job creation at home to be substantial.
    Mr. Chairman, the Administration believes the arguments for our proceeding now with implementation of the agreement are strong. At the same time, we listened carefully to concerns raised by you and by some other Committee Members in November's floor debate. I would like to turn briefly to three of those concerns.
    First, some Members asked whether the Chinese could be trusted to live up to their new commitments in light of the past record. We would respond that the issue before us is not that of the historical record, which we recognize is unsatisfactory. It is whether China is now abiding by its commitments and will do so in the future.
    Chinese behavior for close to 2 years now has been encouraging. It appears to reflect a level of seriousness and commitment we simply did not see before. Will this positive pattern continue? Will Beijing be up to the challenge of applying its new export control system to China's numerous and far-flung governmental and private entities? The reality is that we cannot pretend to know the answers to these questions.
    We must, therefore, approach implementation of the agreement with a healthy skepticism. President Reagan's advice to trust but verify is clearly warranted here. So we will be monitoring China's behavior carefully, and the Chinese will know that any actions inconsistent with their commitments will jeopardize future cooperation.
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    Second, some Members suggest that implementation of the agreement be made conditional upon improvement in China's export policies and practices, not just in the nuclear area but in the missile, chemical, and conventional arms areas as well.
    The Administration can report, in this connection, that some significant progress has already been made in the nonnuclear areas, including China's commitment no longer to export complete MTCR-class ground-to-ground missiles, its adherence to the Chemical Weapons Convention, and its recent pledge to stop transfers to Iran of antiship cruise missiles and related production technology.
    But we would be the first to say that progress in these nonnuclear areas has lagged behind progress in the nuclear issues. A major focus with China in the months ahead will be to press for additional progress in the nonnuclear agenda.
    However, we could not support linking implementation of this nuclear agreement to movement on these nonnuclear issues. Our laws are very clear on this. They say that implementation requires performance only in terms of China's nuclear nonproliferation policies and practices. To insist now on additional steps would be seen as moving the goal posts and would stand very little chance of success.
    Third, a number of Members suggest that we further postpone implementation of the agreement to acquire a better track record for evaluating Chinese behavior. Our response is that in a very real sense we already have a substantial track record. We focused heavily on China's nuclear export activities in recent years, and especially since May, 1996.
    As noted earlier, the recent record is promising. Uncertainties remain. We fully appreciate that. But such uncertainties will almost surely continue to arise. It is in the nature of intelligence-gathering and in the kinds of activities we are focusing on.
    The best way to resolve these uncertainties is not to postpone implementation. Rather, it is to proceed now with implementation and to use the incentives provided by the agreement—namely, China's stake in nuclear cooperation with the United States—to press for answers to our questions and insist on strict compliance.
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    Moreover, China is moving ahead now with its future nuclear power plans. If we wait much longer, China will opt for non-American partners. We could lose not just the commercial benefits but the important nonproliferation benefits already achieved.
    Chairman GILMAN. Mr. Einhorn, if I might interrupt you, we are trying to hold a quorum here to go into our closed session. Let me interrupt you for a moment so that we can do some housekeeping.
    As the Chair mentioned earlier, we would like to take testimony from Mr. Lauder following the testimony of Mr. Einhorn. Mr. Lauder, as you know, is from our Central Intelligence Agency, and he cannot testify in open session. Members will also have the opportunity to hear further from Mr. Einhorn if they would like him to elaborate on some matters he has raised earlier.
    Because disclosure of classified national security information would endanger the national security, we would like to proceed later today in closed session. Since a quorum appears to be present, I will recognize the gentleman from Nebraska, Mr. Bereuter, to make a motion at this time.
    Mr. BEREUTER. Mr. Chairman, I move pursuant to rule 4(b) of the rules of the Committee that at a time and date to be subsequently designated by the chairman or his designee, after consultation with the Ranking Democrat Member, the Committee shall receive testimony in closed session on the grounds that disclosure of the testimony, evidence, or other material to be considered would endanger the national security.
    Chairman GILMAN. Is there any debate on this question?
    The question, then, is on the motion of the gentleman from Nebraska. Under the Rules, the vote must be taken by rollcall. The majority of the Committee must be present.
    The Clerk will call the roll.
    The CLERK. Mr. Gilman?
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    Chairman GILMAN. Aye.
    The CLERK. Mr. Gilman votes yes.
    Mr. Goodling?
    [No response.]
    The CLERK. Mr. Leach?
    [No response.]
    The CLERK. Mr. Hyde?
    Mr. HYDE. Aye.
    The CLERK. Mr. Hyde votes yes.
    Mr. Bereuter?
    Mr. BEREUTER. Aye.
    The CLERK. Mr. Bereuter votes yes.
    Mr. Smith?
    [No response.]
    The CLERK. Mr. Burton?
    [No response.]
    The CLERK. Mr. Gallegly?
    [No response.]
    The CLERK. Ms. Ros-Lehtinen?
    [No response.]
    The CLERK. Mr. Ballenger?
    [No response.]
    The CLERK. Mr. Rohrabacher?
    Mr. ROHRABACHER. Aye.
    The CLERK. Mr. Rohrabacher votes yes.
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    Mr. Manzullo?
    [No response.]
    The CLERK. Mr. Royce?
    [No response.]
    The CLERK. Mr. King?
    [No response.]
    The CLERK. Mr. Kim?
    Mr. KIM. Aye.
    The CLERK. Mr. Kim votes yes.
    Mr. Chabot?
    Mr. CHABOT. Aye.
    The CLERK. Mr. Chabot votes yes.
    Mr. Sanford?
    Mr. SANFORD. Aye.
    The CLERK. Mr. Sanford votes yes.
    Mr. Salmon?
    [No response.]
    The CLERK. Mr. Houghton?
    Mr. HOUGHTON. Yes.
    The CLERK. Mr. Houghton votes yes.
    Mr. Campbell?
    Mr. CAMPBELL. Yes.
    The CLERK. Mr. Campbell votes yes.
    Mr. Fox?
    Mr. FOX. Yes.
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    The CLERK. Mr. Fox votes yes.
    Mr. McHugh?
    Mr. MCHUGH. Yes.
    The CLERK. Mr. McHugh votes yes.
    Mr. Graham?
    [No response.]
    The CLERK. Mr. Blunt?
    [No response.]
    The CLERK. Mr. Brady?
    Mr. BRADY. Yes.
    The CLERK. Mr. Brady votes yes.
    Mr. Hamilton?
    Mr. HAMILTON. Aye.
    The CLERK. Mr. Hamilton votes yes.
    Mr. Gejdenson?
    Mr. GEJDENSON. Yes.
    The CLERK. Mr. Gejdenson votes yes.
    Mr. Lantos?
    [No response.]
    The CLERK. Mr. Berman?
    Mr. BERMAN. Yes.
    The CLERK. Mr. Berman votes yes.
    Mr. Ackerman?
    Mr. ACKERMAN. Yes.
    The CLERK. Mr. Ackerman votes yes.
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    Mr. Faleomavaega?
    [No response.]
    The CLERK. Mr. Martinez?
    [No response.]
    The CLERK. Mr. Payne?
    [No response.]
    The CLERK. Mr. Andrews?
    [No response.]
    The CLERK. Mr. Menendez?
    [No response.]
    The CLERK. Mr. Brown?
    [No response.]
    The CLERK. Ms. McKinney?
    [No response.]
    The CLERK. Mr. Hastings?
    Mr. HASTINGS. Yes.
    The CLERK. Mr. Hastings votes yes.
    Ms. Danner?
    Ms. DANNER. Aye.
    The CLERK. Ms. Danner votes yes.
    Mr. Hilliard?
    [No response.]
    The CLERK. Mr. Sherman?
    Mr. SHERMAN. Aye.
    The CLERK. Mr. Sherman votes yes.
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    Mr. Wexler?
    Mr. WEXLER. Yes.
    The CLERK. Mr. Wexler votes yes.
    Mr. Rothman?
    Mr. ROTHMAN. Aye.
    The CLERK. Mr. Rothman votes yes.
    Mr. Clement?
    Mr. CLEMENT. Aye.
    The CLERK. Mr. Clement votes yes.
    Mr. Luther?
    [No response.]
    The CLERK. Mr. Davis?
    Mr. DAVIS. Yes.
    The CLERK. Mr. Davis votes yes.
    Chairman GILMAN. The Clerk will call the absentees.
    The CLERK. Mr. Goodling?
    [No response.]
    The CLERK. Mr. Leach?
    [No response.]
    The CLERK. Mr. Smith?
    [No response.]
    The CLERK. Mr. Burton?
    [No response.]
    The CLERK. Mr. Gallegly?
    [No response.]
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    The CLERK. Ms. Ros-Lehtinen?
    [No response.]
    The CLERK. Mr. Ballenger?
    [No response.]
    The CLERK. Mr. Manzullo?
    [No response.]
    The CLERK. Mr. Royce?
    [No response.]
    The CLERK. Mr. King?
    [No response.]
    The CLERK. Mr. Salmon?
    [No response.]
    The CLERK. Mr. Graham?
    [No response.]
    The CLERK. Mr. Blunt?
    [No response.]
    The CLERK. Mr. Lantos?
    [No response.]
    The CLERK. Mr. Faleomavaega?
    [No response.]
    The CLERK. Mr. Martinez?
    [No response.]
    The CLERK. Mr. Payne?
    [No response.]
    The CLERK. Mr. Andrews?
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    [No response.]
    The CLERK. Mr. Menendez?
    Mr. MENENDEZ. Aye.
    The CLERK. Mr. Menendez votes yes.
    Mr. Brown?
    [No response.]
    The CLERK. Ms. McKinney?
    [No response.]
    The CLERK. Mr. Hilliard?
    [No response.]
    The CLERK. Mr. Luther?
    [No response.]
    Chairman GILMAN. The Clerk will report the vote.
    The CLERK. On this vote there were 24 ''ayes'' and zero ''noes''.
    Chairman GILMAN. The motion is agreed to. I thank the Members for responding to the quorum call.
    Mr. Einhorn, please continue.
    Mr. EINHORN. Thank you, Mr. Chairman. I only have a few concluding remarks.
    Mr. Chairman, Members of this Committee attach great importance to China's adherence to international nonproliferation norms. So does the Administration.
    The record of recent years demonstrates clearly that the most promising means of promoting progress with the Chinese now is through tough, frank, persistent engagement, using a combination of carrots and sticks. Implementing the 1985 agreement now, in full conformity with U.S. law, will provide an essential vehicle for pursuing this effort.
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    We know this is a hard issue for you and for Members of the Committee. The Administration recognized it was a hard issue nearly 3 years ago, but promoting changes in China's behavior in the proliferation area was seen as critical to U.S. national security, so we decided to take it on.
    We put a major effort into this, and at all levels. We believe we have made some real progress. Any open-minded observer can see that. But the job is incomplete and the outcome is uncertain. We know that. We are committed to press ahead to demand strict compliance with existing commitments, and to push for progress where progress has so far been inadequate.
    But to continue making progress and finish the job, we must remain engaged. We cannot insist on near-term perfection and walk away if it is not achieved. We have to be in this for the long haul, however frustrating it may sometimes be. But we need the tools, and the most important tool at this juncture is implementation of the 1985 agreement. We urge your support. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Einhorn appears in the appendix.]
    Chairman GILMAN. Thank you, Mr. Einhorn.
    Mr. Einhorn, as you know, China continues to provide assistance to safeguarded facilities in Pakistan. The second paragraph on page 7 of the unclassified report included in the certification states, ''We have not asked that China end safeguarded nuclear cooperation with Pakistan as a condition for implementing the peaceful nuclear cooperation agreement.''
    I ask, why not, Mr. Einhorn? And let me continue a moment.
    The next sentence in that paragraph reads, and I quote, ''But we have on numerous occasions warned China that the risk of providing assistance to the peaceful nuclear program of a country such as Pakistan is that some of the assistance may be diverted to unsafeguarded activities.''
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    Mr. Einhorn, I am asking you, does China clearly understand that nuclear cooperation will be halted, and by that I mean that NRC licenses will not be granted, if there is conclusive evidence that Pakistan diverts Chinese assistance from its safeguarded to unsafeguarded program?
    Mr. EINHORN. Thank you, Mr. Chairman. We did have a long discussion with the Chinese about acceptance of full-scope safeguards as a condition of nuclear supply. We urged China to join members of the Nuclear Suppliers Group and insist on full-scope safeguards.
    But the Chinese pointed out to us that the Chinese are now engaged in supply of a power reactor to Pakistan under safeguards, and insistence on this principle, full-scope safeguards, would have disrupted their ongoing nuclear cooperation arrangement under safeguards with Pakistan. They were not ready to do that. We did impress that upon them.
    We didn't insist on it at this stage for a number of reasons. Foremost, acceptance of full-scope safeguards as a condition of supply is not a requirement of the NPT. It is not a requirement for nuclear certification under the current laws, so we did not press. We did secure China's agreement to join the Zangger Committee, the NPT Exporters Committee, which doesn't require full-scope safeguards as a condition of supply.
    This was a very important step, and it brings China into multilateral discussions for the first time. We will continue to press the Chinese to go the additional step beyond the NPT to accept full-scope safeguards as a condition of supply.
    At the same time, we have had discussions with the Chinese about the difficulties of engaging in safeguarded cooperation with a country like Pakistan that also has unsafeguarded facilities. We have warned them of the risks, and we have suggested to them that they take strong steps to ensure that their safeguarded assistance not be diverted to unsafeguarded facilities or uses. If we were to discover that their safeguarded assistance were being diverted to such unsafeguarded uses, we would want to take it up with the Chinese and talk to them about what strict measures they could adopt to avoid any such diversion.
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    Chairman GILMAN. Is that the extent of our remedy, that we would talk to them about that? What are the red lines? As the Administration's top expert on nonproliferation, could you explain to our Committee what kinds of Chinese behavior would lead you to recommend that nuclear cooperation be halted?
    Mr. EINHORN. If the Chinese acted inconsistently with the assurance they have given to us, if they would provide assistance to unsafeguarded facilities anywhere in the world, this would be a violation of our commitments and this would be grounds for withholding our consent to nuclear licenses.
    On the question of a third country diverting China's safeguarded assistance to an unsafeguarded facility, this is something that we would want to raise with China, and to talk to them about adopting additional measures to avoid such diversion.
    We would also want to speak to the IAEA and urge them to take strong steps to prevent such a diversion because, after all, they have the responsibility to apply safeguards to that material and to ensure that it is not diverted.
    Chairman GILMAN. Mr. Einhorn, let me explore just a little further.
    If the Chinese heavy water is determined to be in Khushab, are you prepared to recommend that our Nation halt nuclear cooperation with China? Has China been specifically advised that nuclear cooperation would be halted under those circumstances?
    Mr. EINHORN. I think the question of this Khushab reactor is one that can best be taken up in closed session. You are raising a hypothetical case as to whether there is Chinese heavy water there or not. There is a question of whether there is Chinese heavy water there or some other heavy water, and how it got there.
    These are all complicated questions, and it is perhaps easier to discuss these various possibilities in closed session.
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    Chairman GILMAN. Mr. Einhorn, I am not asking you for evidentiary conclusions. I am asking you, if there were to be found heavy water there, what would be our policy?
    Mr. EINHORN. Again, it is hard to answer that in the abstract. If there were to be heavy water there, the issue is, where did they get the heavy water? Did they produce it themselves? Did they get it from another country, not China, or produce it themselves? Was it diverted by Pakistan from a safeguarded facility?
    Chairman GILMAN. Assume it came from China. Would that be a violation?
    Mr. EINHORN. If China provided heavy water outside of safeguards to the Khushab facility, that would be a violation.
    Chairman GILMAN. What would our recommendation be then?
    Mr. EINHORN. Our recommendation would be the same if it occurred after May 1996 as in the case of any provision of assistance to an unsafeguarded facility anywhere in the world. We would say this would be a violation of China's assurances to us, and this would be grounds for withholding cooperation with them.
    Chairman GILMAN. My time has run out.
    Mr. Hamilton.
    Mr. HAMILTON. Mr. Einhorn, I just want to get the procedure in mind here. The President has made the certification under the law. There is a 30-day period. And what is that, continuous legislative days? So it will end up when, approximately?
    Mr. EINHORN. It is 30 days of continuous legislative session, and so depending on the kind of weekends you spend here, it could end up as soon as, I think, March 7 or so. And if you take a few 4-day weekends over the next month or so, it could go until perhaps late April.
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    Mr. HAMILTON. And the agreement goes into effect unless the Congress passes a resolution of disapproval, is that correct?
    Mr. EINHORN. That is correct, sir.
    Mr. HAMILTON. And that of course is subject to a veto, so what you really are confronted with here, if you want to cancel this agreement, is that you have to deal with that Presidential veto and get two-thirds of the vote, right?
    Mr. EINHORN. That is correct, sir.
    Mr. HAMILTON. So in all likelihood, then, the agreement goes into effect in that time period.
    Now just in a very broad way, with all of this difficulty we have in the U.S.-China relationship, why is it in the U.S. national interest to go ahead with this U.S.-China Nuclear Cooperation Agreement? In the broadest terms, why is it in our interests?
    Mr. EINHORN. Because encouraging China to conform to nonproliferation norms is in our vital security interests, and we believe that is the best way of continuing to press the Chinese to go forward, as you put it in your opening remarks, to pocket the gains we have already achieved and to move on. We think this provides useful leverage to keep moving the Chinese in the right direction.
    Mr. HAMILTON. Now, the people that have been critical of this agreement on several scores most often mention that we ought to attain more progress on other nonproliferation issues like missiles and chemical weapons, the so-called nonnuclear issues, before we move forward with this agreement. You spoke to this in your testimony but I want to make sure we can nail it down.
    As I understand it, you said that U.S. law today is very clear on that point, and that in order to implement the 1985 agreement we require performance in terms of Chinese nuclear nonproliferation policies. That is in the law. Congress passed that and the President signed it. Was that law enacted in 1985?
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    Mr. EINHORN. 1985, and in addition we had the 1990 law.
    Mr. HAMILTON. So we ourselves have set the standards to judge here in law?
    Mr. EINHORN. That is correct. The standards are very clear. The reports we were to make, the certifications that we were to make, apply to the nuclear record.
    Mr. HAMILTON. If we come along and say to China, ask them to perform with respect to nonnuclear standards in both missiles and chemical weapons and all the rest of it, then we ourselves are, in effect, changing the rules of the game, moving the goal posts, are we not?
    Mr. EINHORN. That would be correct. Let us remember, we have asked the Chinese to do some very difficult things here. We have asked them to curtail certain cooperation with Pakistan. We have asked them to stop even safeguarded cooperation with Iran. These are hard steps for any sovereign government to take, but they took them on the expectation that we would meet our end of the bargain. If we would move the goal posts now, what incentives would the Chinese have to take additional hard steps in the area of chemical and missile and conventional arms?
    Mr. HAMILTON. You recognize that in those areas progress has been less than we would like to see?
    Mr. EINHORN. There has been progress, and I enumerated some examples, but certainly it has been less than we would want.
    Mr. HAMILTON. If you look back over several years here of Chinese performance, and I think it is always important to get a trend rather than a snapshot, are you more impressed with the progress that has been made by China in meeting the international norms on nonproliferation, or are you more impressed with China's flouting of those norms?
    Mr. EINHORN. In the 1990's, and given the steps that I mentioned in my statement, we see a marked positive shift in China's behavior. Is it perfect? No, of course not, we need to see further movement. But the trend, as you put it, the pattern is absolutely clear. I think it is clear to the greatest skeptic on this point. Our view is that we have to continue this trend, and implementing this agreement is the best way to continue it.
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    Mr. HAMILTON. Thank you, Mr. Chairman.
    Chairman GILMAN. Thank you, Mr. Hamilton.
    Mr. Rohrabacher.
    Mr. ROHRABACHER. Thank you very much. Would you characterize the Chinese as having basically an honest relationship with us or a dishonest relationship with us?
    Mr. EINHORN. I would characterize it as a self-interested relationship with us. I think they do what is in their own national self-interest. We have to understand those interests, try to find a way that our interest is served by their choosing to move in the direction of their own interest. Implementing this nuclear cooperation agreement I think is win-win for both of us.
    Mr. ROHRABACHER. Let me ask it in a different way, then, if you don't want to answer the question that I asked. Would you say that they basically have a truthful relationship with us or an untruthful relationship with us?
    Mr. EINHORN. Again, if you are getting at some of the historical record, I don't want to be in a position to certify the veracity of some previous Chinese statements. That would be a tough burden on me or anyone else. The issue is current behavior, and we need to measure current behavior. That is the standard.
    Mr. ROHRABACHER. So the current behavior is what you have to focus on? In order for us to move forward with trying to assume that they are OK today, we just have to block out the past?
    Mr. EINHORN. We have to be conscious of the past, and in being conscious of the past we need to see the kind of pattern we have been discussing. It has been improvement.
    Mr. ROHRABACHER. Let me ask you about the past, then, besides blocking it out and just ignoring it.
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    In the past when the Chinese were involved with violating these nonproliferation requirements, would they simply thumb their nose at the requirements and say, ''We are not going to abide by this,'' or did they lie to us about it?
    Mr. EINHORN. Again, rather than talk about this Chinese statement or that Chinese statement, I would choose to look at their behavior. As I said in my opening statement——
    Mr. ROHRABACHER. You refuse to look at their behavior?
    Mr. EINHORN. Absolutely not. We need to look at their behavior.
    Mr. ROHRABACHER. I am asking about their behavior in the past. There was a certain behavior.
    Mr. EINHORN. I understand.
    Mr. ROHRABACHER. Did they say, ''We don't care about your requirements,'' or did they say, ''We are obeying these requirements,'' and just lie about it? Which one was it?
    Mr. EINHORN. Let me refer you to my prepared statement. In it we point out that in the 1980's China engaged in actions—namely, support for Pakistan's unsafeguarded nuclear program—that would have been violations of the NPT had China been a party to the NPT at that time. That was egregious behavior. We recognize that openly.
    The point is, has that behavior changed? We believe that there has been a change.
    Mr. ROHRABACHER. So you are suggesting that if there is some word that is given on their part, that we can trust their word now. Is that what you are saying?
    Mr. EINHORN. I am not saying that we should rely on trust. As I mentioned before——
    Mr. ROHRABACHER. Verify.
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    Mr. EINHORN. Given the past, we have to apply a healthy skepticism. We have to use our monitoring capabilities to find out whether they are living up to their word. If they are not, we can suspend further cooperation.
    Mr. ROHRABACHER. To your knowledge, are they being truthful with us today?
    Mr. EINHORN. As I mentioned before, the signs in recent years are encouraging.
    Mr. ROHRABACHER. That is not what I asked you.
    Mr. EINHORN. No, I am going to answer it.
    For example, the very important pledge they made in May, 1996, not to provide assistance to unsafeguarded nuclear facilities, we don't have any evidence that China has indeed transferred material or equipment to Pakistan's unsafeguarded nuclear program.
    Do we have questions? Are we sure about the future? Of course we have questions.
    Mr. ROHRABACHER. Let me be more specific. Rather than getting this run-around answer, let me be more specific with you. Do you know of a case through your sources of intelligence information in which the Chinese at this moment, in the area of nonproliferation, are lying to us?
    Mr. EINHORN. Congressman, I would encourage you to remain here for the closed session and we can get into specifics.
    Mr. ROHRABACHER. You can bet I am going to do that.
    Mr. EINHORN. But what we are focusing on this morning is the record in the area of nuclear nonproliferation, where we can say we are seeing real positive signs. In some of the areas the record is disappointing.
    Chairman GILMAN. The gentleman's time has expired.
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    Mr. Berman.
    Mr. BERMAN. Thank you, Mr. Chairman.
    Mr. Einhorn, first I just want to tell you that I don't know of anybody in the U.S. Government who works harder to try to achieve what I think are the critical goals of reducing proliferation of weapons of mass destruction than you do. So I just want to thank you for what you do for us. It sounds like a song or something.
    A couple of questions. Why do we have a different standard for nuclear cooperation with Iran—that is, end all nuclear cooperation with Iran, safeguarded or unsafeguarded—than we do with Pakistan? And I hope you will not draw an implication from that question that I think we should curtail our approach toward nuclear cooperation with Iran.
    Mr. EINHORN. First, Congressman Berman, thank you very much for those kind remarks.
    On the question of Iran and Pakistan, right now fortunately we believe Iran's nuclear weapons program is at an early stage. We believe that any nuclear cooperation with Iran, even under safeguards, could make a contribution to Iran's nuclear weapons aspirations. Even if not directly, it could provide the expertise, the infrastructure. It could move Iran up the nuclear learning curve, so we would discourage any nuclear cooperation with Iran, even under safeguards.
    Pakistan is in a different situation. It has a much more mature nuclear program, and especially it has a much more mature nuclear weapons program. We do not believe that continued safeguarded cooperation, if effectively safeguarded, would contribute to Pakistan's nuclear weapons program.
    Would we prefer that there be no nuclear cooperation with states without full-scope IAEA safeguards? Yes, we would. But we have to take it a step at a time, and the most important step for China to take was to terminate all unsafeguarded cooperation with Pakistan.
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    Mr. BERMAN. In your answer to Chairman Gilman you spoke of the Chinese resistance to any nuclear cooperation under safeguarded conditions because of a nuclear reactor project that they are constructing for Pakistan. Is it your sense that it is that specific project that pushes the Chinese position, that this is sort of almost a contract sanctity kind of an issue? They want to finish that project, and at that particular point China would take another look at the question of ending nuclear cooperation with Pakistan?
    Mr. EINHORN. I think the Chinese believed that having already taken certain steps to limit or cut off cooperation with Pakistan, they could not take the additional step of disrupting peaceful nuclear cooperation continued under safeguards.
    Perhaps sometime in the future when some time has passed, and especially if no new plans for nuclear cooperation exist between China and Pakistan beyond this one 300-megawatt reactor, China will come to the conclusion that it can afford to insist on full-scope safeguards and essentially stop cooperating with Pakistan altogether. But I think doing it now would be seen as an abrupt shift that the Chinese would have felt could have done real damage to their political relationship with Pakistan.
    Mr. BERMAN. The President states I guess in his certification that China's nuclear cooperation with Iran has significantly lessened. What does that mean? Is China still assisting in the Iranian nuclear program?
    Mr. EINHORN. China was Iran's main supplier of nuclear equipment and technology under safeguards. It was the main provider. What we have seen is a gradual curtailment, and now we have a commitment, a clear assurance from China, that it will phase out all nuclear cooperation.
    We had the cancellation of this uranium conversion facility. Mr. Menendez mentioned it earlier. This was a very serious problem. It was a key link in the chain of Iran's nuclear weapons program. They canceled it. They suspended the sale of two nuclear power reactors. They turned down Iranian requests for some other sensitive cooperation.
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    Now they have pledged to us, no new cooperation, and completion of a few existing projects within a relatively short period. One of those projects is already over. So we are getting to the point where there is very little going on between China and Iran.
    Mr. BERMAN. Mr. Chairman, I would ask, have we verified that the June 1997 list of controlled nuclear items that the Chinese have claimed is identical to the Nuclear Suppliers Group trigger list is in fact identical, that their export control list is what it is claimed to be and supposed to be?
    Mr. EINHORN. We have two lists. One list we got in September. We have looked at it carefully. It is substantively identical to the nuclear trigger list.
    The list we got in June is a dual-use list. We are proceeding methodically through the translation of it. It appears to be substantively identical to the NSG's part 2 dual-use list. A final list on dual-use items will come out by mid–1998, and we will make sure that this is substantively identical to the NSG lists. But we have no reason to believe that they are not identical.
    Chairman GILMAN. The gentleman's time has expired.
    Mr. Brady.
    Mr. BRADY. Thank you, Mr. Chairman. Mr. Einhorn, thank you for being here today and your testimony.
    Like other Members, I am skeptical about this agreement. I am skeptical because in issues of human rights, religious persecution, protection of intellectual property rights and open markets, the Administration counsels Congress to be patient; that this historical, ancient Chinese ship of state is slow to change, and that this engagement will work.
    But on the issue of nuclear assistance to rogue nations, where their track record is very poor, we are given the impression that this ship of state can essentially turn on a dime and can change in a very short period, which seems very inconsistent with their track record and the Administration's position in so many other areas dealing with China.
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    So my question is, I think you are right to read the trends, and that is fair. I think it is absolutely consistent for us to, in any contractual agreement, to discuss performance and the measurement of performance and our reaction if they don't perform.
    My question is, more specifically, can you share with us how we will measure their performance, and not just that an export control system is in place, but the outcome of it? How many of the measurement indicators are objective and independent, and don't measure a symptom but in fact the true actions that are going on underneath it, that are at the heart of this, that will determine our ability and the Administration's ability to ensure that this agreement is being lived up to?
    Mr. EINHORN. Mr. Brady, you are absolutely right. We need to see real deeds, not just words, not just commitments. It is important that China has put in place these regulations and directives and published their control list, but the true test will be implementation of this new system.
    So far, in the last couple of years we monitored behavior carefully and we have a number of indicators. One indicator is, are we getting reports of continued shipments of material or equipment to Pakistan's unsafeguarded program? The answer is no, we haven't gotten those reports, which is an encouraging indicator. We saw some cooperation with Iran going forward, plans for pursuing the sale of power reactors. Those were suspended. We saw plans for constructing the sensitive uranium conversion facility. That was canceled. We know that.
    So we see indicators, but look, the returns are not all in. There are inherently going to be uncertainties in this. We will see, in our intelligence, ambiguities that will take a while to sort out. When we get into closed session, Mr. Lauder could explain some of the complexities, but there are objective indicators. We are not relying just on paper commitments.
    Mr. BRADY. Could you, just because I am new around here and still learning the process, could you share with our office and the Committee a list, in the future or fairly soon, about some of those indicators specifically, so we can become more knowledgeable about it?
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    Mr. EINHORN. We can do that on a classified basis, and I mention to you something that your Committee staff knows very well. We are available to come to brief Members, to brief staff, to keep you currently informed on developments in these areas. We would like to do that.
    Mr. BRADY. Thank you.
    Mr. Chairman.
    Chairman GILMAN. Thank you. Mr. Menendez.
    Mr. MENENDEZ. Thank you, Mr. Chairman. Thank you for your testimony and for your service, Mr. Secretary.
    Let me ask you, in response to one of my colleague's questions and in your testimony here, with reference to China easing away from Iran, participation with Iran, the wording here is important, because they say China has suspended the sale of two nuclear power reactors to Iran and canceled the uranium conversion facility. We are happy to see that cancellation. It is a major issue of great concern. Now, why suspend the sale of the nuclear power reactors and not cancel the sale?
    Mr. EINHORN. Mr. Menendez, I don't know. It may be a polite way of telling the Iranians it is a cancellation. I think maybe that is the case.
    Mr. MENENDEZ. Is it any less polite to cancel the uranium and not cancel—maybe it is the lawyer in me, but when you suspend something, you leave open the possibility that it can be reengaged. When you cancel something, you cancel it, have to start a whole new negotiation. Why not a cancellation of the nuclear power reactors to Iran?
    Mr. EINHORN. Well, I guess the way the Chinese see it, there is not much proliferation risk in power reactor transfers. But we explained to them we saw a risk in it, and beyond that, they had some siting problems and financial difficulties with the sale of the power reactors. Given all of these considerations, they basically agreed to take it off the table, and I think that is how they would regard it today.
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    I don't mean to suggest that there is any real difference between the two. I think the practical reality is that the Chinese are not moving forward with the power reactors or with the transfer of this uranium conversion facility, and they gave us a clear assurance that they would not engage in nuclear cooperation.
    Mr. MENENDEZ. Is there any reason why we would not seek a cancellation of the nuclear power reactors?
    Mr. EINHORN. I think we saw a clear assurance that China would not engage in cooperation with Iran other than two specific projects that they enumerated to us, and those two specific projects did not include the power reactors. So I think we have gotten a very explicit assurance that they are not going to pursue the power reactor sale.
    Mr. MENENDEZ. Let me ask you, with reference to another statement in your record, in the statement on page 2 you said that an acute deficiency in China's nonproliferation record has been the absence of an effective nationwide system of controls for sensitive exports, and even when it has been willing to exercise restraint, its ability to do so has been particularly limited with respect to dual-use goods and technologies.
    Why has that changed? Is that not still existent?
    Mr. EINHORN. They have taken, in the last few years, steps to improve that. You cited, sir, in your opening remarks the case of the ring magnets. Here is a case where some dual use items, fairly simple equipment, ring magnets, were transferred to an unsafeguarded facility in Pakistan for Pakistan's uranium enrichment program. We think that one of the reasons for this was that China had an inadequate basis of control over these dual-use items. We think they have taken steps since then to correct this.
    The ring magnet case was a real embarrassment to China, because what it indicated was that either China was intentionally helping Pakistan's program, or it didn't have the ability to control its own system well enough to prevent this assistance from going to Pakistan. This caused them, as I mentioned, real embarrassment internationally, and I think there was——
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    Mr. MENENDEZ. Do they have the ability now to control it? Are we satisfied they have that ability now?
    Mr. EINHORN. They have put in place since then real changes in their structure, in their laws, in their legal authority. It appears to be doing some good. But again, it takes a while to put in place a fully effective system, and the returns are not in.
    Mr. MENENDEZ. One last question. Going back to the suspension of the nuclear reactors to Iran, what if they reengaged, lifting the suspension, and went ahead and made an agreement? Even though I know you are going to tell me you don't foresee it, what if they did? Would that be a violation in terms of our understanding?
    Mr. EINHORN. Would be inconsistent with our understanding.
    Mr. MENENDEZ. That would have us do what?
    Mr. EINHORN. We have made clear to the Chinese that our willingness to proceed with nuclear cooperation depends on their living up to their commitments.
    Mr. MENENDEZ. So we would halt the nuclear cooperation?
    Chairman GILMAN. The gentleman's time has expired. The Committee will stand in recess and will reconvene following the vote.
    [Recess.]
    Mr. ROHRABACHER. [Presiding.] The Committee will come to order. I am going to be chairing here until the Chairman returns. Mr. Gilman has asked me to perform his duty for a few minutes.
    Mr. Einhorn, could you give me a little bit of an understanding of what kind of money we are talking about in putting new restrictions on the Communist Chinese Government? What kind of money would they be deriving, or how much money did they derive in the past from these exchanges of nuclear technology? How much do we think they are denying themselves with our putting restrictions on them, or by agreeing to these restrictions, I should say?
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    Mr. EINHORN. Mr. Rohrabacher, it is very hard to predict the economic implications of implementing the 1985 agreement, because the amount of reactor sales that U.S. firms could enjoy will depend entirely on commercial arrangements between U.S. firms and the Chinese Government.
    I should point out, though, that China has a nuclear power program, a nuclear power plant. It plans to have a certain amount of electricity generated by nuclear power by the year 2010, 2020, and so forth. Now, they will meet those requirements either through purchasing American reactors or French or Russian or Canadian.
    So when you say how much do we deny, or how much money do we give, it is not a question of our giving because they are going to spend that hard currency to buy reactors. The question is where are they going to spend it.
    Mr. ROHRABACHER. That is actually not the direction I was going in. How much money are they making from Iran? What I am saying, Iran and Pakistan, and many other countries we are talking about here that are the recipients of Chinese technology, how much money is being given to them by these countries?
    Mr. EINHORN. I see what you are getting at.
    Mr. ROHRABACHER. That we are asking them to forego that.
    Mr. EINHORN. I understand that. I think with Iran, the main big ticket item was the two power reactors. The Chinese are obviously foregoing a significant amount from Iran from foregoing those two power reactors. A lot of the other cooperation was not very high in dollar equipment value, so I think basically the Chinese made a calculation, do we want to cooperate with Iran or do we want to cooperate with the United States. The Administration, and the President personally, basically put that choice to the Chinese: With whom do you want to cooperate? And the Chinese made the decision, and they wanted to cooperate with the United States, and not necessarily for any dollar reasons. I think they had broad reasons for doing that.
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    Mr. ROHRABACHER. Were the Chinese then losing $1 billion with the Iranians for these contracts?
    Mr. EINHORN. I don't know what the contracts were or the negotiations were. But for two power reactors, it could well have been more than $1 billion.
    Mr. ROHRABACHER. OK. In terms of the possibility that the Chinese are still engaged with selling nuclear technology to the Iranians or Pakistanis, you are telling us today that is a thing of the past and that they agreed not to do that?
    Is part of your testimony that if this is still going on, it is being done by rogue companies and not as a policy of the government?
    Mr. EINHORN. Let me be clear. On Iran, the agreement is to phase out all nuclear cooperation. Our estimate is that they are only engaged in cooperation in one remaining project.
    For Pakistan, the commitment is to terminate all unsafeguarded cooperation. They have not agreed to terminate their support for a nuclear power reactor at Chasma in Pakistan, so that will continue presumably toward completion.
    Mr. ROHRABACHER. OK. I will go on to my colleagues in one moment.
    Then you are saying that the activities that are going on in this direction with Iran, they are being carried out—you are saying that they are over with? I am giving you a chance now to say that they are over with officially, but there might be some things going on below the surface or nonofficially.
    Mr. EINHORN. What the Chinese have done is said that they are going to phase out the cooperation. There is still some low-level cooperation taking place. Within a few years that should be terminated.
    Mr. ROHRABACHER. If the Chinese resume their cooperation with the Iranians and we find evidence of that, what will be your policy or the policy of the government?
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    Mr. EINHORN. This then gets to the question where I was saved by the buzzer. It was Congressman Menendez's question. I will give you my own view, and obviously I can't speak for the Administration on that.
    If China were to go ahead and sell power reactors to Iran, I would consider that inconsistent with China's commitment to us not to engage in new nuclear cooperation with Iran. I would recommend under those circumstances that we withhold our approval of nuclear cooperation with China.
    Mr. ROHRABACHER. I understand you are stating that as your position. I would hope that this Administration will state very clearly for the Chinese exactly what they can expect if they follow that policy; rather than having it your opinion, that it should be delineated. They should know what price they are going to pay if they go down that path or continue to go down that path, and we should also demand an honest exchange when we are talking with these people.
    Frankly, in the past it doesn't sound like they have been truthful to us, and we should demand truth and we should give them the truth of our policies, this is what will happen to you if you go that other direction.
    Mr. EINHORN. I would agree with you, Congressman. Let me just say one thing. We did say to the Chinese when we concluded this arrangement on Iran that our willingness to go forward with implementation of the 1985 agreement did depend on their meeting their commitments with respect to Iran. So we did state that at an authoritative level.
    Mr. ROHRABACHER. Earlier on in our relationship with the Chinese there were the words ''strategic ambiguity'' used. And it is not just this Administration, but I am afraid that the United States has been afraid to just lay it on the line, to let these people know exactly what their actions will bring about. I am not just saying it is this Administration, it has been true for quite a long time. That doesn't do either one of our countries any good.
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    Mr. Sherman.
    Mr. SHERMAN. Thank you, Mr. Chairman. I think a lot of what I have to say builds on what you have had to say. The Chinese are focused on their own economics. I don't think giving nuclear weapons to Iran is in their long-term interest. I could see a day when the Iranians support secessionist movements in the western provinces of China, which are predominantly Muslim.
    But the Chinese are rather clever and they are focused on the bottom line. They get some money from Iran and Pakistan, and they may get a better deal with oil by cooperating on Iran as well. They get some limited economic benefit from this nuclear cooperation. They don't get anything they couldn't buy from Europe. They may get a better value, they may get a better price. Every public works purchaser that I'm aware of in the United States would like to have another competent bidder involved in the job.
    But this nuclear cooperation status gives China only limited and modest economic benefit. The big economic benefit that China gets is the $55-billion-a-year trade surplus with the United States that they receive because they have most-favored-nation status.
    I think the most important goal is to contain the spread of weapons of mass destruction, and our most important goal with China is to make sure that they are full partners in that effort. Yet, our tools for achieving that, unfortunately, are rather limited. If we don't give them nuclear cooperation, they buy the nuclear reactors from another country.
    What they have chosen to do in response to this very, very modest carrot is they comply a little bit, they refuse a little bit, and they lie a little bit. And if they get caught, then maybe they will just have to buy the French nuclear reactors. Big deal.
    What we need is another tool. Most-favored-nation status is unfortunately the nuclear bomb of changing economic relations. What we need is, instead, a smart bomb. I would hope this year when we look at MFN, it is not just an all-or-nothing vote; no MFN status, the business community goes crazy, the votes are there to extend it, we are told the United States will enter into a depression, et cetera, et cetera, et cetera.
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    Instead, we ought to have an opportunity to deny China 10 or 20 percent of the benefits of MFN; determine what the tariff structure would be if they were denied MFN, look at the tariff on each class of goods if they were given MFN, deny 10 or 20 percent of that benefit. With that kind of weapon, with the ability to raise tariffs by a few percentage points and cut their exports to the United States by $5, $10 or $15 billion, I think we would get the kind of responsiveness that we need: full cooperation, not hesitant, partial cooperation on the surface, with a little lying included in some of that.
    With that in mind, I do have a question for the witness. It is somewhat similar to the previous questions you have addressed. That is, can you simply tell us, does China continue to provide ballistic missiles and ballistic missile technology to Iran?
    Mr. EINHORN. Ballistic missiles, no. Ballistic missile technology, yes.
    Mr. SHERMAN. And chemical weapons?
    Mr. EINHORN. Chemical weapons, no. And to our knowledge they have never provided chemical weapons to anyone. Dual-use chemical precursors, dual-use chemical production and equipment technology, yes. We see continuing cooperation there.
    Mr. SHERMAN. Are there precursors that China will sell to Iran that our allies in Europe would refuse to sell? I mean, all technologies and chemistry used in the creation of chemical weapons.
    Mr. EINHORN. All our allies in Europe are members of the Australia Group, and they are very conscientious about meeting their requirements. The Australia Group has a long list of chemical precursors, and our allies exercise great caution in selling anything on that list to Iran.
    The problem with China is that it has joined the Chemical Weapons Convention (CWC), which is a good thing, but the controls required by the CWC are narrower than those required of the Australia Group, so you have precursors controlled by the Australia Group and not controlled by the CWC. We need to encourage the Chinese to adopt a stronger international standard.
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    Mr. SHERMAN. Mr. Chairman, if I could just make a comment, we are not going to see honest and full cooperation from China on all of our efforts until we simply say, not that we might not export something to China, but until we threaten their import stream to the United States.
    Mr. ROHRABACHER. Thank you, Mr. Sherman. I would hope that you would be supporting our efforts on the floor to make sure that no money from Export-Import Bank or the World Bank would be provided, or guarantees for loans for business in China, which is somewhere between most-favored-nation status and——
    Mr. SHERMAN. My focus is on limiting, threatening, or conditioning Chinese exports to the United States. I tend to like U.S. exports to China.
    Mr. ROHRABACHER. Even if they are setting up manufacturing companies and putting people out of work?
    Mr. SHERMAN. Again, the focus is on jobs for Americans, and the way to achieve that is to increase exports and to condition imports.
    Mr. ROHRABACHER. Thank you.
    Mr. Berman, do you have further questions?
    Mr. BERMAN. No.
    Mr. ROHRABACHER. On the last question, I didn't quite understand the answer that you gave to Brad, the last answer. Could you say that a different way so I could understand it in terms of these chemicals that are being sold by China to Iran?
    Mr. EINHORN. The problem with the chemical trade is that you can sell a lot of chemicals and equipment that have dual uses. They can be used for legitimate civilian purposes. They can also be used in a chemical weapons program. Nobody really says ''DX nerve agent,'' but if you are not careful, you can sell ingredients that could enable a recipient to make nerve agents, and so forth.
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    Mr. ROHRABACHER. I see.
    Mr. EINHORN. Virtually everything we are concerned about is of this dual-use nature.
    Mr. ROHRABACHER. What you are suggesting, then, is Iran or China may be unintentionally selling these types of chemicals to Iran that would permit them to produce chemical weapons, unintentionally?
    Mr. EINHORN. I don't believe China as a government wants Iran to have chemical weapons. China has a decentralized and very extensive chemical industry, and in the past we have seen Chinese companies sell chemical ingredients, chemical precursors, to Iranian entities that we believe are actually part of Iran's chemical weapons program. And in fact in May, 1997, less than a year ago, we imposed trade sanctions on seven Chinese entities for making this contribution to Iran's chemical program.
    What we need to do with the Chinese Government now is to get them to tighten up their system so that all Chinese entities behave more responsibly, and that they get government approval for the kinds of transfers that contribute to the chemical weapons program in Iran.
    Mr. ROHRABACHER. I will have to say that every time I talk, and it is not just this Administration and it is not just you, but it seems that we are always bending over backwards to give the very best analysis that we can possibly give to these bums. I mean, these people, what do they have to do to prove their intentions? I mean, when they sell nuclear technology to somebody, they mean us ill if that person or that country they are selling to happens to be an enemy to the United States.
    And it just it seems to me, whether it is the answer you just gave or answers we have heard not just from you but from the Administration, we are always trying to give them the benefit of the doubt. I don't know, when do we reach the threshold of saying they have lied to us so often in the past that we are no longer going to give these people the benefit of the doubt?
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    Mr. EINHORN. Congressman, we didn't give them the benefit of the doubt when we imposed sanctions against Chinese entities for helping Iran's chemical weapons program.
    Mr. ROHRABACHER. I think that you are giving the benefit of the doubt to the leaders of China, saying that they don't have an iron-fisted control over what happens in their country. It is one thing to explain away rogue companies and rogue elements down there in Tsinkiang or someplace, but in fact we are talking about a very powerful central government that has it in their ability to carry out an order that they give from Beijing.
    Mr. EINHORN. Congressman, you are raising a very, very important question, maybe the most fundamental question in dealing with China on this. I would suggest when we go into closed session you ask Mr. Lauder about these points.
    The reality is that especially in the case of dual-use equipment and technology, and certainly in the chemical industry, there is a lot of decentralization, and especially when you are dealing with chemicals that could be used for pesticides as well as for nerve agents, you are not getting high-level central control. The Chinese have to adopt a stricter approach toward the control. But it is very possible, and we believe that the senior-most Chinese officials are not aware of this.
    Mr. ROHRABACHER. I will ask these two questions that Mr. Gilman wants, to make sure we get them on the record.
    One last thing, what about Libya?
    We haven't mentioned the Chinese relationship with Libya. Are they involved with these same types of questionable dealings with the Government of Libya?
    Mr. EINHORN. Libya has been under a very substantial U.N. embargo for quite some time, and dealings with Libya are very minimal. In terms of contacts with some of the Libyan programs, I suggest we defer this to the closed session.
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    Mr. ROHRABACHER. OK. Fine. Thank you.
    Chairman GILMAN. [Presiding.] Thank you, Mr. Rohrabacher, for sitting in for us while we were voting.
    Mr. Einhorn, just one or two questions and then we will go into closed session. In your testimony you argue that we can best modify China's nonproliferation policies and practices by supporting implementation of the 1985 agreement. You also argue that if the Chinese engage in bad behavior, that then we will halt further cooperation with China.
    Why should this Committee have any confidence that our Nation will halt nuclear cooperation with China, given the Administration's difficulties in imposing sanctions pursuant to nonproliferation sanction laws? And isn't such an argument particularly implausible, given the tremendous commercial pressures that you would be under in recommending a halt to cooperation?
    Mr. EINHORN. I do not think it is implausible, Mr. Chairman. A moment ago I cited an instance in May, 1997 when we imposed trade sanctions against Chinese chemical companies for assisting Iran's chemical weapons program.
    Also, as you know, we have imposed trade sanctions against China twice for transfers of M–11 related items to Pakistan. But the case that is most germane to our subject here is the nuclear one, and I cited it in my prepared statement.
    When we had the ring magnet problem, if you remember, the Administration used authority at its disposal actually to put a hold on all Export-Import Bank loans to China in early 1996. This was not just loans to the Chinese entity that had engaged in the questionable transaction, it was a hold on all Export-Import Bank loans to China for that 3-month period. I am sure that this registered on the Chinese. They understood what was involved in this. I think this demonstrated our seriousness in dealing with the problem.
    Chairman GILMAN. Thank you.
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    One more question, Mr. Einhorn. It is my view that our Nation should hold China to a higher standard of goals than the ones the Administration set for ''sufficient progress'' toward ending nuclear proliferation.
    One important goal in nuclear nonproliferation policy of all major nuclear suppliers, except China, is a requirement for full-scope safeguards that were intended to prevent diversions to other nuclear facilities. Although our Nation has championed full-scope safeguards and all 35 members of the Nuclear Suppliers Group require them, the President has certified China, despite China's failure to adhere to this international norm.
    You argue that it was not an achievable goal to have China require full-scope safeguards before Presidential certification. So I am wondering if the Administration was driven by the need to have goals that are attainable or deliverable by the time of the U.S.-China summit in October 1997, which precluded the difficult negotiation NSG membership would entail.
    Is it not a drop in U.S. nuclear nonproliferation standards to ease off the pressure on China to require full-scope safeguards? And further, is proceeding with the agreement a pardon for China as it continues to flout the international norms as the sole nuclear supplier to Pakistan, a nation that has refused to sign a nuclear nonproliferation treaty and refuses to allow inspections at all facilities?
    I know that is a mouthful, but if you could address those, I would welcome it.
    Mr. EINHORN. Mr. Chairman, you asked if we were driven by the deadline of the October 29 summit in essentially setting standards for compliance. We were driven by the requirements of our law. We think the nuclear certification package meets all of the requirements of our law.
    One of those requirements is not to insist that China adopt a policy insisting on full-scope safeguards as a condition of supply. This clearly goes beyond our certification requirements. It even goes beyond the requirements of the NPT. That is clear because the Nuclear Suppliers Group didn't adopt that position until 1992, when the NPT came into force in 1970. So full-scope safeguards goes beyond our legal requirements and the NPT requirements.
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    We want China to require full-scope safeguards. In Pakistan, hopefully, when we keep pressing on this, ultimately they will agree with us and join the consensus of all nuclear suppliers.
    Chairman GILMAN. We hope that will come about. The Administration has yet to demonstrate to Congress it has put in place procedures and mechanisms designed to address criticisms of the General Accounting Office in 1994 with regard to the study of licensing procedures for dual-use nuclear exports.
    In its study, GAO found inadequate criteria for selecting pre-license checks and post-shipment verifications, ineffective methods used to perform these inspections, and the lack of verification of government-to-government assurances against nuclear end uses.
    Can you tell us why China still insists that no post-shipment verifications can be undertaken by our government officials to check on the end use of our dual-use exports to China?
    Mr. EINHORN. It is interesting you raised this question, Mr. Chairman, because this goes to a very important provision of our agreement for cooperation with China. What this agreement includes is an arrangement for visits and exchanges of information that enables us to verify firsthand that China is living up to its commitments and not diverting anything we supply to uses not provided for in the agreement.
    But we have a memorandum of understanding. It lays out procedures. It gives us the right, after shipment—you mentioned post-shipment verification. We have the right on a regular basis to visit any reactors we sell, to visit any components, any materials we provide, and to assure ourselves firsthand that these materials and equipment have not been diverted to nonpeaceful uses. This is very clear. We have submitted this to the Congress. It is there in black and white for you to see.
    Chairman GILMAN. Thank you.
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    Mr. Rohrabacher, any further questions of Mr. Einhorn before we proceed to a closed session?
    Mr. ROHRABACHER. No.
    Chairman GILMAN. Mr. Einhorn, we thank you for your patience and for being with us.
    Pursuant to the earlier vote of the Committee, we will go to executive session. Before we do that, if there is no objection, I would ask that the Committee record be kept open it so that additional questions could be submitted in writing to Mr. Einhorn, and if that be the case, I hope you would respond expeditiously. Thank you again for being with us, Mr. Einhorn.
    Mr. EINHORN. Thank you Mr. Chairman.
    Chairman GILMAN. Now I am going to ask Mr. John Lauder to appear. We will have to clear the room, except for Committee Members, their designated staff, as well as witnesses and their staff.
    [Whereupon, at 12:25 p.m., the Committee proceeded in executive session.]

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