greater assurance that they will abide by the principles of the Non-Proliferation Treaty.

I share many of the concerns which have been voiced by our previous witnesses. Both representatives from the Administration, this body, and from the private sector agree on the complexity of the problem of controlling nuclear related technology. We have before us a problem of diplomacy, national security, exports, and jobs. I believe it means that the United States must recognize that other countries may have nuclear policies and programs which differ from our policies and programs. It would be incorrect to attach improper motives to these foreign government policies without carefully considering the motivation for such policies.

I am deeply concerned, however, that certain countries are acquiring nuclear technology with the potential for weapons development free from any restraint by the major Western nuclear powers.

In developing new legislation, or perfecting the law already on the books, we must ask one basic question. Will new legislative remedies work? Will the change we consider make the world safer from irrational action or from potential blackmail and aggression? Will the changes work to make this a safer world?

I am looking forward with great interest to the remarks of our witnesses.
Thank you, Mr. Chairman.

Mr. BONKER. We shall now proceed with the witnesses at the table, the first being Mr. Daniel Poneman, the research fellow, Center for Science and International Affairs at Harvard University, and also author of "Nuclear Power in the Developing World" We shall then proceed with Mr. Dwight Porter, who represents the American Nuclear Energy Council and is the former U.S. Representative to the IAEA.

Then we shall hear from Paul Leventhal, who is president of the Nuclear Control Institute, a nonprofit educational organization.

Finally we will have Mr. Myron Kratzer testify. He is vice president of the International Energy Associates.

I think we are indeed privileged to have such a distinguished panel appearing before us this morning.

Mr. Poneman, we shall begin with you.

STATEMENT OF DANIEL PONEMAN, RESEARCH FELLOW, CENTER FOR SCIENCE AND INTERNATIONAL AFFAIRS, HARVARD UNIVERSITY

Mr. PONEMAN. Thank you very much, Mr. Chairman.

It is a pleasure to be here today to testify on this important issue. I will briefly summarize my remarks.

I agree with the spirit of the two bills that are now before you. The present administration has abandoned the prudent nuclear export policies of its predecessors by permitting American nuclear assistance to go to those who least deserve it.

In return for yielding to the nuclear requests of such non-NPT parties as Argentina, India, and South Africa, the administration has failed to obtain a single open commitment not to produce or use nuclear explosives.

Apparent appeasement broadcasts to nonproliferation treaty parties that the U.S. Government blithely takes them for granted while saving its special favors for those who most flagrantly flout the NPT regime.

While the present nuclear export policies appear dangerously lax, however, I believe that better enforcement of existing law is wiser than adding new legislative restrictions, for four reasons.

First, all nuclear exports are not equally sensitive. Heavy water technology, for example, is less sensitive than enrichment and re

processing technology. I do believe that full-scope safeguards should be the U.S. objective, but to require acceptance of full-scope safeguards as a precondition for all U.S. nuclear exports is excessive. Faced by this all or nothing choice between acceding utterly to United States desires before obtaining even a zero-power, low-enriched uranium test reactor, too many governments would simply shop elsewhere.

Second, a clear distinction should be drawn between governments that are entitled to U.S. assistance and those that are not. Discrimination is unavoidable. A policy either treats equals differently or unequals the same. Either way, someone is bound to be offended.

A good policy discriminates on a sound basis. It is reasonable to discriminate against governments that reject the NPT, that insist on the right to conduct peaceful nuclear explosions, and that engage in secret programs to obtain fissile material.

The law as it stands is sufficient to bar exports to such governments. The new bills reach further, however, restricting certain exports to all nations. This well-intended effort to achieve a nondiscriminatory policy is ultimately untenable and counterproductive; untenable because countries like Japan and the Euratom members will be able to pursue reprocessing with or without U.S. help; counterproductive because a threatened U.S. cutoff of its fellow nuclear suppliers will alienate those governments whose cooperation is essential to any successful nonproliferation policy.

COMMERCIAL CONSIDERATIONS

Third, within the Non-Proliferation Treaty and Non-Proliferation Act ground rules, the United States should remain as commercially engaged in the international nuclear market as possible. Export restraint accomplishes little unless there are exports to restrain.

The days of unbridled U.S. clout in the world market are gone forever, and unless we protect our much reduced but still significant market share, our promotion of responsible export policies by good example will evaporate.

It would not be worthwhile to extend retroactive restrictions beyond those in the Non-Proliferation Act at this time. On the loss side, the damage to the U.S. commercial reputation from retroactive change in the ground rules would be grave; on the gain side might be little. The other nuclear suppliers have not even gone as far as the original 1978 act in export restraint.

A toughened version at best would win few converts and at worst could justify a wholesale rejection of the U.S. approach as capricious and unilateralist. Moreover, if the new provisions are circumvented through Presidential waiver, as has happened in the past with the Tarapur fuel supply, then we would have gained little for our squandered image of commercial responsibility.

REWARDS

Fourth, U.S. nuclear export policy should reward others' commitments to nonproliferation. The proposals and authorizations in sections 8 through 10 of H.R. 3058 are steps in the right direction.

If the enrichment discount is offered, though, it seems to me that the condition-forgone reprocessing-is too strict. I would urge that the discount be offered to all NPT parties, perhaps limited to those who would qualify for special trade treatment under the General Agreements on Tariffs and Trade.

Such a discount would strengthen the Non-Proliferation Treaty without risk, since low-enriched uranium is not an immediately weapons-usable material.

That brings me to a final argument on rewards. Wherever possible, rewards should be limited to those governments that accept formal commitments, such as the NPT, Treaty of Tlatelolco, and full-scope safeguards.

The NPT requires special attention. As more countries become technologically able to produce nuclear weapons, the NPT will become the main obstacle to nuclear proliferation. Unfortunately, the promises of articles V and VI concerning peaceful nuclear explosions and arms control have already petrified.

If we do not breathe some life into article IV's promise of "the fullest possible exchange" of peaceful nuclear assistance, the sense of betrayal by NPT parties that they have been duped into giving up their nuclear weapons option in exchange for unfulfilled promises may begin to tear at the fabric of the treaty. Allowing the Non-Proliferation Treaty to unravel would be the biggest mistake

of all.

Thank you very much for the opportunity to testify on this issue. Mr. BONKER. Thank you, Mr. Poneman. We appreciate your brevity.

[Mr. Poneman's prepared statement follows:]

PREPARED STAtement of DanNIEL PONEMAN, RESEARCH FELLOW, CENTER FOR SCIENCE AND INTERNATIONAL AFFAIRS, HARVARD UNIVERSITY

Mr. Chairman, my name is Daniel Poneman. I am a Research Fellow at the Center for Science and International Affairs at Harvard University, and the author of Nuclear Power in the Developing World. It is a pleasure to testify today on this critical issue.

I agree with the spirit of the two bills now before you. The present Administration has abandoned the prudent nuclear export policies forged under Presidents Ford and Carter, by permitting American nuclear assistance to go to those who least deserve it. The governments of Argentina, India, and South Africa have steadfastly opposed international efforts to restrict the spread of nuclear weapons. Worse yet, in return for yielding to the nuclear desires of these non-NPT parties, the Reagan Administration has failed to obtain a single open commitment not to produce or use nuclear explosives. This is myopic and weak policy. Perhaps there are unreported nonproliferation codicils to these arrangements. But the apparent appeasement broadcasts to Non-Proliferation Treaty parties that the U.S. Government blithely takes them for granted while saving its special favors for those governments who most flagrantly flout the NPT, the Non-Proliferation Act, and other accords. In the long run, this perverse policy can only drive more nations to the intransigence of the NPT rejectionists.

While the present nuclear export policies appear dangerously lax, however, I believe that better enforcement of existing law is wiser than adding new legislative restrictions.

To support this conclusion, I will analyze the two bills in light of the four central elements in a sound nuclear export policy.

First, technologies and materials should be graded according to their relative military and civilian significance. Pure plutonium, highly enriched uranium, and the facilities to produce such fissile materials are critical to weapons production but not to electricity generation. Light water reactors pose little military threat.

These bills rightly single out those technologies related to the production of plutonium and highly enriched uranium. Section H.R. 3058 goes too far, however, in its blanket proscription on the export of heavy water production technology. Heavy water is essential to the natural uranium fuel cycle, and is less directly applicable to weapons production than are the other two technologies.

The request to import the technology to produce heavy water can be based on legitimate desire for energy independence. Heavy water production technology should not be provided to non-NPT parties and, if exported, should be subjected to stringent safeguards. But a total embargo also would apply to—and offend-NPT parties with a legitimate desire for that technology.

All nuclear exports are not equally sensitive. Therefore, although full-scope safeguards should be the ultimate U.S. goal, to require their acceptance as a pre-condition for all U.S. nuclear exports is excessive. Faced by this all-or-nothing choice between acceding utterly to U.S. desires before obtaining even a zero-power, low-enriched uranium research reactor, too many governments would simply shop elsewhere. A graduated scale would be wiser, matching stronger nonproliferation commitments to more sophisticated technologies. This approach, based on incentives rather than on ultimatum, could attract governments to American technology when making their first choices. That in turn would help U.S. efforts to urge the acceptance of stronger commitments in exchange for greater assistance.

Second, a clear distinction should be drawn between governments that are entitled to U.S. assistance and those that are not. Discrimination is unavoidable. A policy either treats equals differently or unequals the same. Either way, someone is bound to be offended. A good policy discriminates on a sensible basis. It is reasonable to discriminate against governments that reject the NPT and other non-proliferation commitments, that insist on the right to conduct peaceful nuclear explosions, and that engage in secret programs to obtain fissile material. The law as it stands is sufficient to bar exports to such governments.

The new bills would reach further, however, baldly restricting certain exports to all nations. This well-intended effort to achieve a nondiscriminatory policy is ultimately untenable and counterproductive: untenable because countries like Japan and the Euratom members will be able to pursue reproecessing with or without U.S. assistance, and most likely would receive waivers under these bills as they have under the Non-Proliferation Act; counterproductive because a threatened U.S. cutoff of its fellow nuclear suppliers will alienate those governments whose cooperation is indispensable to any successful nonproliferation policy. For this reason, I support the principle of advanced consent for reprocessing and plutonium use for specified countries, provided that the consent is conditioned on acceptance of strict nonproliferation standards, such as the NPT or full-scope safeguards.

Making explicit these distinctions among technologies and governments could greatly clarify U.S. Policy.

Unsubsidized access to all but the most sensitive technologies should be granted equally to any government that formally forswears nuclear weapons. No new nuclear assistance at all should be provided to governments that seek dangerous capabilities while refusing to cooperate with international nonproliferation efforts. These groundrules cover the most and least worrisome governments and technologies. In between, as a government's nonproliferation credentials improve, so should its access to nuclear technology.

Third, within these groundrules, the United States should remain as commercially engaged in the international nuclear market as possible. Indeed, without commerce, export guidelines become irrelevant. A policy of export restraint accomplishes little unless there are exports to restrain. The days of unbridled U.S. clout in the international market are gone forever, and unless we protect our much reduced but still significant market share, our promotion of responsible export policies by good example will evaporate.

Specifically, U.S. nuclear exports can promote nonproliferation objectives in two important ways. First, they provide the United States with leverage over the nuclear activities of its trading partners. This leverage can be turned against us, as when U.S.-supplied fuel became hostage to Indian threats of reprocessing, but nevertheless can be useful. Second, the United States is a powerful and in some ways unique competitor. It can not only act as a leader in promoting responsible export policies but also crowd out competition. For example, the United States retains a monopoly the world supply of highly enriched uranium (HEU). As dangerous as that material is, it would be better for the United States to continue to supply it under existing commitments than to phase out HEU exports completely and thereby encourage Urenco or Eurodif to begin producing and selling it with far less restraint than has

33-516 0-84-3

the United States. That's why I fear that the HEU restrictions contained in the bill are too strict.

General support for United States nuclear exports benefits the economy as well as national security. It is needed, also, to encourage American industrial cooperation in United States nonproliferation policy.

For the United States to stay in the leading ranks of nuclear suppliers, several things are required. It must be or become a reliable supplier. Reliable does not mean unprincipled, and cautious export policies are fully compatible with reliability. But it does require predictability. In particular, U.Š. export laws and regulations should avoid retroactive restrictions, so that importers will not find their existing contracts unexpectedly jeopardized over and over by more and more restrictions and conditions.

Similarly, U.S. policies should be cooperative rather than unilateralist wherever possible. To the extent that the rules of the game become obsolete and contract modifications unavoidable, adjustments should be sought first through bilateral and multilateral negotiations, rather than through unilateral fiat.

The Nuclear Non-Proliferation Act of 1978 (NNPA) broke both rules: it increased the restrictiveness of U.S. export policy, and it did so through domestic legislation rather than diplomatic consensus. This required renegotiation of agreements with Euratom, India, and Japan. As a result the United States lost some commercial credibility in foreign markets. But it gained credibility in its efforts to retard nuclear proliferation, and promoted more responsible export policies worldwide.

It would not be worthwhile to add new, retroactive export restraints now. On the loss side, the damage to the U.S. commercial reputation from yet another major change in the rules would be grave. On the gain side would be little. The other nuclear suppliers have not gone even as far as the original NNPA in export restraint. A toughened up version at best would win few converts and at worst could justify a wholesale rejection of the U.S. approach as capricious and unilateralist. Moreover, the NNPA is not even enforced in its present form. If the new provisions are also circumvented through Presidential intervention, as happened with respect to Tarapur fuel supply, then precious little good would come of our squandered commercial reliability.

I would draw a line between retroactive and prospective amendments to the NNPA. Retroactive amendments should be avoided. They include the additional conditions on the approval of reprocessing and export of highly enriched uranium. Prospective amendments merely plug technical loopholes in the original NNPA, and should be supported where they are necessary to the Act's original intent. The inclusion of component exports and substitutions or exchanges under the Act, and its extension to Department of Commerce and Department of Energy Licenses, and reasonable steps in this regard.

Fourth, U.S. nuclear export policy should reward others' commitments to nonproliferation. The proposals and authorizations in Sections 8, 9, and 10 of H.R. 3058 are steps in the right direction. I am not confident though, that the enrichment services discount will persuade governments to forego reprocessing. The present glut of enrichment capacity in the world market has so depressed prices everywhere that the U.S. discount may not be especially attractive. Moreover, unless and until the world nuclear reactor market revives, enrichment discounts will remain a side issue.

If the discount is offered, though, it seems to me that the condition-foregone reprocessing is too strict. In accordance with my proposal to gear incentives to commitments, I would urge that the discount be offered to all developing country NPT parties. This preference could be modeled on the Generalized System of Preferences contained in the Trade Act of 1974 (19 U.S.C. § 2461), in order to provide the discount in an inoffensive way to those countries of greatest nonproliferation concern, without subsidizing the rest. Thus organized, the discount program would strengthen the NPT without risk, since low enriched uranium is not a weapons-usable material.

That brings me to my final argument on rewards. Wherever possible, they should be limited to adherence to formal commitments, such as the NPT, Treaty of Tlatelolco, and full-scope safeguards. The NPT requires special attention. The promises of Articles V and VI, offering peaceful nuclear explosion assistance and arms control, have already petrified. If we do not breathe some life into Article IV's promise of "the fullest possible exchange" of peaceful nuclear assistance, the sense of betrayal by NPT parties that they have been duped into giving up their nuclear weapons option in exchange for unfulfilled promises may begin to tear the fabric of the Treaty. Their ire would be sharpened by the irony of being treated by the nuclear suppliers as poor cousins, when compared to the NPT holdouts. If too long taken for granted, the NPT could unravel.