nonproliferation anti-terrorism export controls, starting with the policies and programs of the G-8 and other key members of the supplier arrangements. Frankly, we simply do not know enough. A critical lack of information and analysis of these policies, as well as broader export control policies, exists. We need to do more.

Second, the U.S. Government should consider providing more funding, technical assistance, and critical information to help U.S. partners implement and coordinate their intelligence, licensing, and enforcement activities related to nonproliferation anti-terrorism export controls. This includes an increase in efforts and support for U.S. export control outreach programs worldwide. We do have an extensive program through the Department of Commerce and also the Department of Energy to do work in the former Soviet Union and elsewhere and there has been some work now in China and India, but it needs to be much more extensive in order to succeed-and the United States has to take the lead on this.

Third, the U.S. Government should consider creating priorities in its list of items of greatest nonproliferation anti-terrorism concern as a basis for international negotiations. It is not clear from our current list of, for instance, dual-use items, which items are more important than others to control for anti-terrorism purposes. There are very few items that are controlled for anti-terrorism purposes alone. For most of the others, it appears that if there is a requirement related to chemical, biological proliferation, nuclear nonproliferation, or missile proliferation, we just tack anti-terrorism on to that as well, and I am not sure that that is an appropriate way to address the problem. Some items may be more important to control than others, and if we do not see that, maybe some of our allies will.

Fourth, the U.S. Government should also consider creating priorities for listed terrorists and terrorist organizations that pose the greatest weapons of mass destruction threat as a basis for negotiations. I think one might start by differentiating among those individuals and entities on the specially designated terrorist list or the foreign terrorist organizations list according to the weapons of mass destruction risk they present.

Finally, I think the U.S. Government should consider creating new standards for industry export control compliance programs, including certification of the substantive knowledge of export administrators regarding nonproliferation anti-terrorism controls. Export administrators in several of the national laboratories, for example, have expressed keen interest in certification as a means of ensuring the highest standards of compliance with nonproliferation export controls, and I think this would also hold true for related antiterrorism controls.

Again, let me thank the Subcommittee both for holding the hearing and for allowing me to present my views. Thank you very much.

TESTIMONY OF JAMES A. LEWIS,1 SENIOR FELLOW AND DIRECTOR OF TECHNOLOGY POLICY, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES

Mr. LEWIS. Let me thank you for the opportunity to testify on this important subject. I think that since September 11, we have an opportunity and a need for a new look at nonproliferation and controlling export of technology.

Changes in international security and the global economy have made export controls less effective in preventing technology transfer. In particular, technological change and economic integration pose real challenges for both nonproliferation and counterterrorism. This decline in effectiveness is less noticeable in the nonproliferation regimes because of their strength. The Missile Technology Control Regime, the Australia Group, and the Nuclear Suppliers Group have strong support from their members. They focus their efforts on key proliferation technologies and they have good mechanisms for information exchange.

In contrast, there is another arrangement called the Wassenaar Arrangement. It is ineffective. There is little consensus. This would be a problem except for the fact that most of what Wassenaar controls is unimportant for nonproliferation purposes, and I think we would get more benefit if we paid less attention to Wassenaar and more attention to strengthening both our own national catch-all controls and helping foreign countries strengthen their catch-all controls, as well.

Another problem that we have with the export control debate in the United States, Mr. Chairman, is that we have not spent enough time perhaps looking at some of the larger problems. First, the rationale for nonproliferation export controls needs to be reexamined, and hearings like this are very helpful in advancing the thinking of the United States.

Export controls were designed, as many of my colleagues have said, and it is amazing to me how, at least with the first panel and I think some of the others, I will be repeating many of the things they said, which is the problem for being last, but export controls for nonproliferation were designed to make programs more costly and to buy time for diplomacy. This worked very well for the last 10 years, but we are now facing a hard core of countries-Iraq, Iran, and North Korea-where export controls are going to be very less effective and we will need some new approach.

In addition to that level of problem, we face new problems with non-state actors who seek to acquire weapons of mass destruction. They pose a serious challenge to current nonproliferation controls, which are aimed at countries and large government programs. Nonproliferation is now more than an arms control problem that can be approached in the traditional diplomatic and military context.

Export licensing will be less important for dealing with terrorist organizations. Terrorists will not be applying for licenses and they may not even try to export materials. A more plausible scenario is that terrorists will attempt to acquire WMD-related materials in

the country where they intend to use them, bypassing all of our current export control mechanisms.

For example, many of the previous speakers have noted the dangers of radiological weapons. While all countries have good export controls on nuclear fuel, it is not clear that they have all taken the necessary steps to safeguard this fuel from theft, and this includes Western European countries. A terrorist organization could steal spent nuclear fuel and use it to build radiological weapons.

Similarly, security measures at U.S. and foreign laboratories may not be adequate to prevent the theft of dangerous biological samples, and in this sense, internal security measures are important to nonproliferation as are export controls.

Nonproliferation must become part of the larger system of homeland defense and the response to terrorism that the administration is building. Proliferation regimes can make an important contribution to this by identifying the key WMD-related items that need additional safeguards and by coordinating effective security measures. Efforts to ensure that WMD does not fall into the hands of terrorists must become part of the multilateral defense against terrorism, and the support we have received since September 11 could be channeled into reinvigorating nonproliferation.

Let me just touch on one of the issues that your staff raised, which is deemed exports. Making nonproliferation a part of the larger counterterrorism and homeland defense effort has implications for deemed exports. Students coming to the United States to study and do research have been a problem for proliferation here and in other countries for many years. The important thing to realize is that the benefits we receive from having these people in the United States probably outweighs the costs of any potential leak of technology, and when I say this, I am reiterating a conclusion that the Reagan Administration came to in its National Security Decision Directive 189.

The answer to deemed exports may lie less in export controls, but thinking in terms of the larger approach to homeland security. Immigration control is one of the most serious vulnerabilities revealed by September 11. All of the terrorists were able to enter the United States, passing through multiple checkpoints both here and in allied countries. Some sort of improved screening for people coming to the United States that included some nonproliferation criteria would probably be more useful than export licensing.

In conclusion, Mr. Chairman, I think export controls can still play a role in nonproliferation and national security, but this role is shrinking. In looking at where we might want to move ahead, it would help to reexamine the fundamental approach to nonproliferation export controls. It would be good to find ways to use the strengths of the three nonproliferation regimes to support homeland defense and counterterrorism. Deemed exports would probably be better treated as part of a broader solution to screening immigrants. And finally, when we move ahead with building export controls, picking up on what Dr. Moodie and Dr. Tucker said, we probably should start with the lists and procedures of the regimes, the use of catch-all controls, and improved immigration

I would like to thank you and I will be happy to take any questions. Senator AKAKA. Thank you very much, Dr. Lewis. Dr. Milhollin. TESTIMONY OF GARY MILHOLLIN,1 DIRECTOR, WISCONSIN PROJECT ON NUCLEAR ARMS CONTROL

Mr. MILHOLLIN. Thank you, Mr. Chairman. It is both an honor and a privilege to appear before this distinguished Subcommittee and testify on this important topic.

I would like to address my remarks to four points: First, whether export controls are succeeding in protecting our security; second, whether they are now being weakened; third, whether violations are being punished; and fourth, what could be done to make export controls stronger.

First, it is very important to realize that export controls can work if they are given a chance. There are success stories in the world that export controls can claim. Argentina and Brazil decided to give up nuclear weapons because, in large part, export controls were imposing great costs on the development of those countries. We know from U.N. inspections in Iraq that Saddam Hussein's nuclear weapon developers could not import certain parts. They had to reverse engineer them, which took time and it is not even clear that they worked. Also, export controls pretty much stopped Saddam Hussein's most ambitious rocket program.

Today, export controls are slowing down India and Pakistan in their efforts to miniaturize their warheads and to build more effective long-range missiles. As long as we have export controls that work decently, that will be true in the future.

However, despite clear successes, American export controls are now weaker than they have ever been in history. Since 1998, when Saddam Hussein was building his mass destruction arsenal, export controls in the United States have been cut about 90 percent. Today, the Commerce Department is receiving about a tenth as many applications as it received in the late 1980's, and when the applications do come in, they are almost always approved. In the last fiscal year, only 4 percent of the applications were denied.

This system imposes virtually no burden on industry and it is a system that seemed to please us quite well in peacetime. Now, however, we are not in peacetime and we know that there are terrorist organizations that want to do us harm and we know that weapons of mass destruction in their hands would threaten our way of life.

I would just like to give you some examples of cases in which our export control system has allowed technology, American technology, to threaten American Armed Forces. Perhaps the most recent case is that of Huawei Technologies, a Chinese company that was caught earlier this year helping Iraq improve its air defense network. These air defenses are designed to shoot down our pilots.

This Chinese firm helped Iraq in defiance of the international embargo against this kind of transaction. At the time the assistance was discovered, Motorola had an export license application

1 The prepared statement of Mr. Milhollin with an attachment appears in the Appendix on

pending at the Commerce Department to help this company improve its ability to build high-speed switching and routing equipment, which would be ideal for an air defense network.

In the recent past, the Commerce Department has licensed a series of sensitive items to Huawei Technologies. Huawei was allowed to buy high-performance computers from Digital Equipment Corporation, IBM, and Hewlett Packard, and Sun Microsystems. In addition, Huawei got $500,000 worth of telecommunication equipment from Qualcomm. Other U.S. firms have helped Huawei by setting up joint operations. These include Lucent Technologies, AT&T, Motorola, and IBM.

As a result of all this American assistance, Huawei's sales are projected to reach $5 billion in 2001. This company began as a $1,000 start-up in 1988, so the result is that U.S. technology, some of which is controlled for export but licensed, and other technology going through joint operations, has built out of virtually nothing a Chinese company that now is able to help Iraq improve its air defenses and put the lives of U.S. servicemen and women at risk. These exports no doubt made money for American companies, but at a cost of threatening our pilots.

Huawei, unfortunately, is not an isolated case. There are two others mentioned in my testimony. One is a situation in which the Commerce Department approved exports to a company in China that supplied anti-ship missiles to Iran and was sanctioned for missile proliferation. We, the United States, sold that company computer equipment for simulating wind effects. If you are building anti-ship missiles, a computer to simulate wind effects is quite useful.

Also, only last month, the Washington Times reported that Iran was installing another large JY-14 radar near its border with Afghanistan. This radar is a very aggressive and powerful air defense radar. It was sold to Iran by a Chinese company called China National Electronics Import-Export Corporation. Before that sale occurred, the U.S. Government approved a series of exports to that company that would be very useful for making that very radar. So again, we are facing a situation where our pilots, if we ever get in a fight with Iran, will have to face equipment probably made with our own technology.

The second point I would like to make is that export controls are now being weakened. In response to the attacks on September 11, the U.S. Government dropped export control sanctions on a series of Indian and Pakistani companies. In my testimony, I provided descriptions and photographs of some of the companies that were dropped from the control list.

One of them is Hindustan Aeronautics. It makes major components for India's largest rockets. In my testimony, there is a photograph of nose cones made by that company.

Another company is Godrej and Boyce. It also makes components for India's largest rockets. It makes a rather powerful liquid fuel rocket engine, which is depicted in a photograph in my testimony. A third firm is India's National Aerospace Laboratory. It conducts missile research. In my testimony, I have a picture of a mis