67. Paper Prepared in Response to Section III of Presidential Review Memorandum 241

[Omitted here is the table of contents.]

PRM–24, Section III

Executive Summary


Section III of the PRM–24 response considers what measures, if any, the United States should take to relax controls over the transfer of defense-related technology and equipment to the People’s Republic of China.

Summary of Report

The study is divided into five sections and an annex:2

—The Introduction notes that increased Chinese access to US and other Western sources of defense-related technology and equipment might serve two US objectives: improved bilateral relations with the PRC and a desire to see the PRC, and our relations with it, remain a check on Soviet power, influence, and freedom of action. It also summarizes the limits on China’s willingness and ability to import and exploit significant amounts of such technology, and the risks such increased access could involve to our relations with the Soviet Union, and to US security and that of our allies.

Section 2 describes the current state of Chinese defense-related technology, and Chinese policy toward imports from the West in this area. China [Page 264] has failed to keep pace with Soviet or Western technological developments. Measured against the Soviet threat, Chinese military needs are great and the gap between Soviet and Chinese military capabilities has been widening. It would take a major flow of defense-related equipment and technology from the West to have a significant impact on Chinese capabilities. However, China’s ability and willingness to acquire significant amounts of defense-related technology and equipment from the West and Japan will continue to be limited by economic and cultural/political factors, and by its absorptive capacity. While China may increase its imports of specialized military-related items in the future, the PRC is unlikely to want to become dependent upon major purchases of actual military end items from the West. A detailed description of Chinese technology by sector, and its relationship to military capabilities, is in the annex to the study.

Section 3 analyzes four major factors bearing on a decision on the issue:

1. Policy Benefits: A major factor in considering the liberalization of controls on the export of defense-related technology and equipment to the PRC would be the potential benefits of a US initiative in this area. Since it appears unlikely that China would dramatically increase imports of such technology and equipment from the US, the major impact of a liberalization of controls would be measured in political terms rather than in terms of a significant increase in Chinese military capabilities or major commercial benefits for the US. The study discusses two potential benefits. First, liberalization of controls might provide a supplemental means of improving US–PRC bilateral relations, particularly in the absence of progress toward normalization. Second, a modest and limited US initiative in this area could emphasize to the Soviet Union the potential of improved US–PRC relations. However, the agencies participating in the study do not agree on the possible risks to US-Soviet relations in attempting to use transfers of defense-related technology and equipment to the PRC for this purpose. This is discussed further below. As for potential commercial benefits, they are probably modest, but should not be entirely dismissed as a factor in considering our policy.

2. Potential Threats to the US and its Interests: The current Chinese military threat to the US is extremely limited, and none of the possible initiatives outlined in the study would significantly increase this threat. Improvements in Chinese capabilities could, however, increase somewhat the potential threat to certain Asian areas, notably Taiwan, and the ROK, through PRC support to North Korea.

3. Soviet Perceptions: The study concludes that the degree of Soviet concern and the nature of its response to any US initiative in this area would probably be determined by five variables:

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a) the timing of the transfers in the context of overall US relations with the USSR and China;

b) the size of the exchange, and its impact on Chinese military capabilities;

c) whether the transfer involved production technology or actual military end-items;

d) whether the material transferred was also available to the Soviet Union; and

e) whether the transfers were from the US or other Western sources.

Depending on these variables, there is a wide range of possible Soviet reactions to a US initiative. At one end of the spectrum is the possibility that the Soviets would be more forthcoming on Soviet-American issues—a development which the Department of Defense and the CIA find plausible under certain circumstances but which the Department of State views as unlikely. At the other extreme would be the possibility of a serious Soviet rethinking of fundamental policies toward the US.

4. Attitudes and Policies of our Allies: Primarily for economic reasons, our NATO allies have generally been willing to see export controls liberalized, for the USSR as well as China. Japan also favors more liberalization but would be concerned if this led to an increase in actual PRC military strength. Other Asian countries would be more concerned on this score, because of geographical promixity and historical apprehensions of China. Fears in Taiwan, of course, would be particularly keen.

Section 4 describes US export controls on defense-related technology and equipment to communist countries, including the PRC, and shows how they are related to those of our major allies through the Coordinating Committee (COCOM). Possible US initiatives toward China are constrained by the 1951 Battle Act, which prohibits sales of “arms, ammunition and implements of war”, as well as materials and technology with military applications, to nations threatening US security. To date all communist countries except Yugoslavia have been subject to this embargo. Exceptions from the embargo are permitted, however, for industrial and scientific items with civil as well as military applications. Recent revisions to the Export Administration Act permit a more liberal approach to sales of these “multi-use” items to communist countries, though they do not require a loosening of the embargo toward the PRC or any other communist country. To date, US sales to China of multi-use items have been modest: in 1976, 85 exceptions cases were approved, for a total value of $13 million. We are also constrained from taking initiatives by the fact that export control procedures are in principle the same for China as for the Soviet Union, although here again the new Export Administration Act contemplates differentiating among various countries.

Section 5 illustrates five alternative courses of action for the US. Of the four alternatives involving a liberalization of PRC access to defense[Page 266]-related technology and equipment the first two are modest steps, while the third and fourth are more substantial. All of them are generally designed more for political effect than for their impact on PRC military capabilities. There are no proposals for security assistance to China, nor do any of the alternatives involve sales of weapons to China by the US. The alternatives are:

1. Maintaining Current Policy and Controls.

2. Marginal Pro-China Tilt within the General Guidelines of Current Policy: This would entail marginal adjustments in current control procedures. We would apply the criteria for approving exceptional sales to the PRC less stringently and by explicit directive would not necessarily consider sale of controlled items to the PRC a precedent for a sale to the USSR. The aim would be to remove minor irritants in our relations with the PRC through smoother, more expeditious and somewhat more lenient consideration of the occasional more sensitive sales to the PRC of controlled equipment and technology.

3. Even-Handed Liberalization of PRC and Soviet Access to Controlled Technology and Equipment: This would involve removing control on selective items of equipment and technology with both civil and military applications, but not on actual military equipment or weapons. Items to be de-controlled would be selected with a view toward being more attractive to China than to the Soviet Union, but they would be available to both countries in order to avoid the risk to US-Soviet relations of overt favoritism toward the PRC.

4. Explicit Pro-PRC Liberalization: This alternative would establish separate control procedures for China and the Soviet Union, with controls over sales to the PRC less extensive than those to the Soviets. It would be administered either by a shorter list of embargoed items for China, or by a broad policy of more favorable treatment of exceptions cases for the PRC. As in the previous alternative, the extent of liberalization would be limited, and no military equipment or weapons would be sold.

5. Major Liberalization of PRC Access: This alternative would establish the same separate control procedures for China and the Soviet Union as the previous one, but would go further by permitting the sale of certain types of military equipment and technology (to include production technology). It would not, however, involve the sale of weapons systems or facilities for their manufacture.

In addition to these five alternatives, Section 5 discusses as a separate issue the question of the US attitude toward defense-related sales to China by our principal allies, including sales of weapons. The study notes that there have been recent indications of possible Chinese interest in purchasing military items in Western Europe and Japan. It notes that existing US legislation would make it difficult for us to en[Page 267]courage or acquiesce in third-country sales of equipment and technology if US exporters are prohibited from selling the items in question. The study notes potential gains from third country sales to China in terms of strengthening China, but questions the benefit for US–PRC relations and identifies the limited advantages in terms of Soviet reactions that a policy of encouraging such sales has over bilateral dealings between the US and China. Nonetheless, we may have to address this issue anyway, if Western European or Japanese sales to the PRC begin to materialize.

Each of the five alternatives is analyzed in terms of its advantages and disadvantages. The study does not examine specific items which might be transferred to the PRC under any of the alternatives. Nor does it make recommendations on which course of action the US should follow.

Major Policy Problems

The study illuminates five major problems which must be considered in making a decision on possible defense-related transfers to the PRC:

1. Chinese Attitudes. The Chinese are well aware of their weakness vis-a-vis the Soviet Union, but there is mixed evidence on the extent to which they would be prepared to use imports from the West, particularly the United States, to improve their military position. China’s new leadership has emphasized modernization, both in the civilian and military sectors, and there have been a number of recent intelligence reports indicating Chinese interest in defense-related imports from the West. On the other hand, major economic and political constraints, particularly China’s desire to avoid dependence on foreign technology to the extent possible, make it unlikely that the PRC would take significant advantage of such an opportunity. If the Chinese did step up such imports they might be more likely to turn to Western Europe and Japan than to the US, although this could change if normalization of US-Chinese relations were to occur. Hence, there are distinct limits on the extent to which US initiatives in this area might advance our bilateral relations with the PRC. The study concludes that such initiatives could not substitute for progress toward normalization of US–PRC relations, though they could have a marginal utility as a supplemental action to deepen US–PRC relations.

2. Soviet Perceptions and Reactions. The impact of US initiatives in this area on our relations with the Soviet Union is a crucial, and controversial, problem. A US initiative sufficiently far-reaching to improve China’s relatively backward military capabilities, or significantly enhance US-Chinese bilateral relations, would involve risks in our relations with the Soviet Union.

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The agencies participating in the study effort do not agree on the extent of this risk, or on the nature of the potential Soviet reaction to different US initiatives toward China. The Department of State believes that Soviet tolerance would be low, and that even modest US initiatives in this area would run the risk of hardening Soviet positions on important bilateral issues with us. This is particularly the case during a period of general cooling in US-Soviet relations and succession uncertainties within the Kremlin, when defense-related initiatives to China would certainly be interpreted by the Soviets as a US measure to aggravate the differences between us. It rates low the chances that even a very limited and cautious expansion of defense-related exports to China would prompt the Soviets to be more forthcoming with the US, as a means of heading off a deeper US-Chinese relationship. On the other hand, the view of the Central Intelligence Agency and the prevailing view within the Department of Defense is that the Soviets would react less strongly, provided the US did not attempt to improve Chinese strategic capabilities. Under these circumstances the Department of Defense rates the chances higher that the Soviets would adopt a more cooperative posture toward the US, to prevent our going further with China.

3. Timing of an Initiative. The question of the timing of any US initiative is vital. This would involve judgements on the current state of relations among the members of the US-Soviet-PRC triangle. The study does not specifically address the current state of US relations with China and broad US policy choices toward the PRC, which are dealt with in Section I of the PRM response.3 We would have to consider, however, whether an initiative on defense-related sales would be appropriate until we have a clearer idea of the chances for progress toward normalization of relations with China.

4. Impact on US Security and Relations with Allies. We must also weigh the possible benefits of defense-related transfers to China against potential threats to our own security and that of our allies, and against strains in our political relationships, particularly with Asian allies. While the Chinese threat to us, including our forces in the Western Pacific, is low and likely to remain so, the threats to Taiwan, the ROK and even Japan are more real. Taiwan is particularly important, since it is the most plausible area for a US–PRC confrontation. Any substantial improvements in China’s strategic capabilities could increase the threat to us and our allies. Significant improvements in China’s air and naval capabilities would be particularly relevant to the PRC’s capability against Taiwan. (Air and ground force improvements are most relevant to the Soviet threat.) Even modestly increased Chi[Page 269]nese access to defense-related technology and equipment, designed essentially for political effect rather than to enhance China’s armed strength significantly, would probably be greeted with concern by the ROK and some alarm by Taiwan.

On the other hand, to the extent that they believed a modest liberalization of Chinese access helped to prevent a deterioration in US–PRC relations, some of our East Asian allies—with the notable exception of Taiwan—might see it as beneficial. However, they might prefer to see US–PRC relations made secure through other US initiatives with less potential for increasing Chinese military capabilities.

5. Problems of Export Controls. Finally, there are problems which arise from the nature of our export controls on defense-related equipment and technology. Currently these controls are the same for China as for the Soviet Union, despite the disparity in the nature and level of threats which the two countries pose to the US. Theoretically, the most efficient method of increasing China’s access to our technology would be to establish separate controls for China and the USSR, with those for China less stringent. Such an overt pro-China tilt, however, would be most provocative to the Soviets. On the other hand, if we maintain the current even-handed treatment of China and the Soviet Union, we would be limited in the kinds of equipment and technology we could make available to China, since it would also have to be made available to the Soviet Union.

Moreover, there is a conflict between the requirements of those who must administer our export controls and those of the policy-maker. The former need clear and concrete guidelines on what we would and would not be prepared to sell to the Chinese. The latter will wish to have greater flexibility, so that sales to China might be timed and orchestrated to fit the changing patterns of our relations with Peking and Moscow.

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  1. Source: Carter Library, National Security Affairs, Staff Material, Far East, Oksenberg Subject File, Box 56, Policy Process: 9–12/77. Secret. Tarnoff sent Brzezinski this paper under a November 12 covering memorandum. (Carter Library, NSC Institutional Files (H-Files), Box 42, PRM–24[2]) PRM 24 is Document 24.
  2. The annex is attached but not printed.
  3. See Document 32.