Washington - The United States has strengthened its economic interests and protected its security interests by improving its export control policy on sales to China of technologies with dual civilian and military use, says David McCormick, under secretary of commerce for industry and security.

McCormick was invited to speak about "China Policy and High Technology Trade" by the Technology and Public Policy Program of the Center for Strategic and International Studies, a Washington research institute, on June 9.

"U.S. policy should facilitate sales of American-made semiconductors to companies in China for use in stereos or [video games], but not for advanced missile systems or submarines," he told the audience.  "Strengthening our economic interests and our security interests in China need not be a zero sum game."

McCormick said the U.S. Commerce Department's Bureau of Industry and Security (BIS) has made considerable progress over the last several years in increasing the effectiveness of its strategic trade controls, which has supported the growth of legitimate civilian technology trade. 

"We have an increasingly healthy high-tech trade relationship with China with over $12 billion in U.S. high-tech exports to China last year," he said. 

ADJUSTING TO CHINA'S GROWING POWER

China's emergence as a major economic power is a significant development that has led the United States to review "major facets" of its policies, McCormick said. 

"The Bush Administration has responded to China's rise by encouraging it to act as a responsible stakeholder - that is, to take greater responsibility for the health and success of the global system from which China has significantly benefited," he said.  "Our goal is straightforward: that China's development be both peaceful and prosperous."

Cooperation between the two countries has created tremendous opportunities, McCormick said, but real challenges remain, requiring "careful and candid dialogue."  For example, he noted, the United States continues to be concerned about China's failure to protect the intellectual property rights of U.S. producers and its lagging record on safeguarding human rights.

"China's military modernization is a third area of concern, and one which is particularly central to export control policy," he said. 

McCormick cited a recent study by the RAND Corporation, which found that China has sought to acquire dual use technologies that could be incorporated in its defense systems.

"It is important to note that China's growing and nontransparent military budget has risen faster than its overall economy," he said. 

China's declared military budget grew at an average annual rate of about 16 percent between 1994 and 2004, he said, with annual expenditures possibly reaching $90 billion in 2005.  Only the United States and Russia spent more on military-related expenses.

A report from the U.S. Department of Defense warned that China's military capabilities could become a "credible threat" to other forces operating in the region if these trends continue, McCormick said. 

China's focus on obtaining technology that can be used to strengthen its missile capabilities and naval forces has created uncertainty about its intentions, he said, forcing the United States and other countries in the region to take precautions.

"U.S. policy - export control policy in particular - must reflect this caution and this concern," he said. 

EXPORT CONTROL POLICY FOCUSING ON BUYERS

In April, McCormick said, the U.S.-China Joint Commission on Commerce and Trade, a government-to-government consultative mechanism on trade and commercial issues, announced the establishment of a high-tech strategic trade working group.  The working group's mission was to improve the effectiveness of U.S. export controls in order to facilitate legitimate civilian technology trade.

New U.S. export-control policy requires "closer scrutiny of key technology purchasers in China," the under secretary said.

To become eligible to import "certain technologies," he said, Chinese companies must undergo a certification process in which they "demonstrate an established record of nonproliferation and responsible civilian use of U.S. imports." 

The change has taken a burden off U.S. exporters of potential dual use items such as semiconductors and electronics, McCormick said.  These companies will no longer be required to apply for export licenses, which earlier applied to "potentially hundreds of millions of dollars worth of sales."

The under secretary cautioned that the certification process "will require unprecedented openness and cooperation on the part of Chinese companies."

But it also will have tangible benefits, he said, because it creates incentives for those companies "to demonstrate good faith and sound practices." 

The policy will strengthen U.S. security, McCormick said, because it allows the U.S. government to focus on particular cases and areas of risk that have the greatest significance. 

The United States also will continue to conduct "on-the-ground spot checks in China to reduce the risk that civilian exports are diverted to third parties or to China's own military purposes," he added.

Policies that involve national security and economic objectives often are believed to require "tradeoffs that inevitably promote one at the expense of the other," McCormick said.

"These changes to technology export controls are 'win-win'," he said.  "They enhance both U.S. economic and security interests while encouraging China to act as a responsible stakeholder now and in the future."

For additional information on U.S. policies, see The United States and China  and International Security.

The full text of McCormick's remarks is available on the Commerce Department Web site.