February 1, 2006  

License to steal

How the Commerce Department is helping China obtain sensitive U.S. technology

In a mid-December commentary, Commerce Department Undersecretary David McCormick announced that his department would soon publish guidelines to govern which foreign nationals can gain access to sensitive technology in America’s research labs, industrial sector and academic institutions. The key, according to McCormick, will be an individual’s “most recent country of citizenship or permanent residency, not [his or her] country of birth.” Why? Because the department believes that “by acquiring permanent residency or citizenship in another country, foreign nationals have demonstrated strong ties to their adopted country and are subject to rigorous screening processes by our closest allies.”

For a country like the United States, a nation built by immigrants, such a policy will certainly fall on receptive ears. Moreover, there are sound, practical reasons to support this approach. One of America’s core strengths is its position as global leader in technology and technology development. And a key to that position is the fact that many of the world’s best and brightest come to the U.S. to help develop and work with the next generation of technological advances. For example, according to National Science Foundation figures, more than a quarter of the science and engineering faculty members employed in America’s universities are foreign-born. And that figure is likely to grow.

All of this makes sense, but for one huge exception: China.

At virtually the same time the Commerce Department was sorting out these new guidelines, the press was reporting the arrest and detention of Chi Mak and his wife by federal agents for attempting to pass sensitive technology along to the Chinese government. Mak, an engineer for a California defense firm, and his wife were born in China and became U.S. citizens two decades ago. Also arrested were Chi Mak’s brother, Tai Mak, and his wife for their possible role in helping transfer the information to China.

Ask virtually any American counterintelligence official about this case and they will tell you that it is not surprising. As then-FBI assistant director Dan Szady stated publicly last February, the intelligence threat posed by China is huge. Or, as another bureau official put it: “The Chinese are stealing us blind. The 10 years’ technological advantage we had is vanishing.”

Since the late 1970s China has placed an emphasis on acquiring civilian and defense technology it believes it is missing or lags behind in. And the effort is supported from the top, with scientists and engineers tasked to monitor what the collection requirements are and how well they are being met.

What makes dealing with this threat so difficult are the various tools the Chinese use to collect information and the numbers they throw at the problem. This is not your Cold War spy paradigm, in which CIA and KGB officers spent almost all their time trying to recruit individual, highly placed sources with access to a government’s crown jewels. The Chinese intelligence services play that game as well. But they also use joint, U.S.-China commercial ventures, thousands of front companies, investments in American firms and, not least of all, an immense array of nonintelligence agency individuals who are ethnically Chinese.

The result is a collection effort that is less select, more vacuumlike, more decentralized in how it is controlled and, as a result, more difficult to track and counter by traditional law-enforcement and counterintelligence methods. Taking advantage of America’s open economy and university system, the Chinese have plugged themselves into every conceivable point of access to gain advanced technology.

What makes the effort effective is that it is well-known that there is money to be made in passing technology to China. Equally important is national pride in China’s rise and a sense of obligation on the part of individuals to help China continue that rise. Combined with China’s own view that Chinese who live outside of China, whether citizens of that country or not, are still “overseas Chinese,” these motives have combined to give the Chinese government a virtual army of collectors. Clearly, most Chinese who have become U.S. citizens are law-abiding and are innocent of any taint of espionage. Yet, if even a small percentage is not so innocent, it still outstrips America’s ability to prevent or even effectively monitor their clandestine collection activities.

Further compounding the problem is that, with advances in information technology being what they are, secreting out sensitive materials in bulk is no longer a problem for even the most amateur of industrial or military spies. The information-technology revolution has made the retrieval, storage and transportation of massive amounts of data far easier than the days of microdots and dead drops. A lot more can be copied, stolen and transferred in a much shorter period of time than one could have imagined even a decade ago.

Not all the information going out the door is secret, of course. Much of it is proprietary or sensitive. Yet leaks of such information still matter. Take, for example, the case of the Maks. They are not being charged with espionage or with stealing classified data. But what they were preparing to ship to the Chinese did apparently involve information on the survivability of warships and a quiet, electric-drive propulsion system for U.S. submarines that would make the ships stealthier. Presumably, because the material was not classified, it was not information that bore directly on U.S. military capabilities. But that does not mean it was of no significance to the Chinese.

Similarly, a substantial amount of unclassified high-technology and know-how is increasingly “dual use.” This is especially true in the areas of information processing and sensors — the eyes, ears and nervous system of the modern revolution in military affairs. The fact that a computer processor is now well below what the U.S. considers state of the art hardly means it wouldn’t be a significant improvement over what the Chinese employ in their systems.

So, what’s to be done? As the Mak family example shows, counting on citizenship or green cards will not solve the security problem the U.S. faces from Chinese technology espionage. And note: The Commerce Department is not saying that the citizenship or legal alien status has to be “made in the U.S.A.” Do we really want to count on German or Dutch or Italian “screening” processes to determine whether someone should have access to these technology programs? It’s not even clear what screening could be done. The security problem in this instance has its roots in individuals’ ties to relatives and associates back in China, something even U.S. counterintelligence and security officials will have a near-impossible time checking out for lack of capabilities in China.

For fear of looking like it is singling out a particular ethnic group, the U.S. government will be reluctant to put a higher hurdle for newly minted Chinese-Americans or Chinese permanent residents to gain access to American labs and sensitive work places. But if security criteria are set broadly, with no discrimination among groups, then the U.S. government really will put at risk the very openness that underpins America’s economic and technological strength.

Ironically, the Commerce Department’s inspector general commented last year that the department’s own strictures for licensing “deemed exports” was less strenuous than those required by the State Department. In contrast with State, Commerce “only recognizes a foreign national’s most recent citizenship or permanent residency. As such, this policy allows foreign nationals originally from countries of concern to obtain access to controlled dual-use technology without scrutiny if they maintain current citizenship or permanent resident status from a country to which the export of the technology would not be controlled.” Concerned that this was allowing a back door through which sensitive technology could find its way into the wrong hands, the inspector general recommended that Commerce “require U.S. entities to apply for a deemed export license for employees or visitors who are foreign nationals and have access to dual-use controlled technology if they were born in a country where the technology transfer in question is ? controlled regardless of their most recent citizenship or permanent resident status.”

Obviously, finding the right balance between openness and security is not an easy matter. Nevertheless, American security requires the U.S. government to be more hard-headed than where the Commerce Department seems to be going with its regulations. Commerce seems to be both ignoring the “tradecraft” employed by Chinese in acquiring sensitive technology and the fact that we are engaged in a military competition with China arising out of a possible conflict in the Taiwan Strait. The question others in the administration and members of Congress should ask is: Do we really want to increase the costs of that competition by “subsidizing” China’s research and development programs by lax security? Or, more bluntly, do we really want to increase the potential cost in human life by increasing China’s military’s capabilities by allowing it ready access to enhanced American technology and know-how? The U.S. government has spent a good deal of time and effort over the past few years trying to prevent Europe and Israel from providing China with technology and weaponry that could advance its military capabilities. Although the kind of sensitive technology Commerce is dealing with here is not itself military hardware, often it is applicable to improving existing or future platforms and systems.

Doing business with Beijing is one thing; allowing China to borrow and steal the technology that keeps us pre-eminent globally is just bad business.

Gary Schmitt is director of strategic programs at the American Enterprise Institute and former executive director of the President’s Foreign Intelligence Advisory Board.