[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]





      REVIEWING THE U.S. CHINA CIVIL NUCLEAR COOPERATION AGREEMENT

=======================================================================


                             JOINT HEARING

                               BEFORE THE

                  SUBCOMMITTEE ON ASIA AND THE PACIFIC

                                AND THE

         SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 16, 2015

                               __________

                           Serial No. 114-74

                               __________

        Printed for the use of the Committee on Foreign Affairs

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



Available via the World Wide Web: http://www.foreignaffairs.house.gov/ 
                                  or 
                       http://www.gpo.gov/fdsys/
                                ______
   
                         U.S. GOVERNMENT PUBLISHING OFFICE 

95-516 PDF                     WASHINGTON : 2015 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Publishing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001
                          














                      COMMITTEE ON FOREIGN AFFAIRS

                 EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida         BRAD SHERMAN, California
DANA ROHRABACHER, California         GREGORY W. MEEKS, New York
STEVE CHABOT, Ohio                   ALBIO SIRES, New Jersey
JOE WILSON, South Carolina           GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas             THEODORE E. DEUTCH, Florida
TED POE, Texas                       BRIAN HIGGINS, New York
MATT SALMON, Arizona                 KAREN BASS, California
DARRELL E. ISSA, California          WILLIAM KEATING, Massachusetts
TOM MARINO, Pennsylvania             DAVID CICILLINE, Rhode Island
JEFF DUNCAN, South Carolina          ALAN GRAYSON, Florida
MO BROOKS, Alabama                   AMI BERA, California
PAUL COOK, California                ALAN S. LOWENTHAL, California
RANDY K. WEBER SR., Texas            GRACE MENG, New York
SCOTT PERRY, Pennsylvania            LOIS FRANKEL, Florida
RON DeSANTIS, Florida                TULSI GABBARD, Hawaii
MARK MEADOWS, North Carolina         JOAQUIN CASTRO, Texas
TED S. YOHO, Florida                 ROBIN L. KELLY, Illinois
CURT CLAWSON, Florida                BRENDAN F. BOYLE, Pennsylvania
SCOTT DesJARLAIS, Tennessee
REID J. RIBBLE, Wisconsin
DAVID A. TROTT, Michigan
LEE M. ZELDIN, New York
DANIEL DONOVAN, New York

     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

               Jason Steinbaum, Democratic Staff Director
                  Subcommittee on Asia and the Pacific

                     MATT SALMON, Arizona Chairman
DANA ROHRABACHER, California         BRAD SHERMAN, California
STEVE CHABOT, Ohio                   AMI BERA, California
TOM MARINO, Pennsylvania             TULSI GABBARD, Hawaii
JEFF DUNCAN, South Carolina          ALAN S. LOWENTHAL, California
MO BROOKS, Alabama                   GERALD E. CONNOLLY, Virginia
SCOTT PERRY, Pennsylvania            GRACE MENG, New York
SCOTT DesJARLAIS, Tennessee

                                 ------                                

         Subcommittee on Terrorism, Nonproliferation, and Trade

                        TED POE, Texas, Chairman
JOE WILSON, South Carolina           WILLIAM KEATING, Massachusetts
DARRELL E. ISSA, California          BRAD SHERMAN, California
PAUL COOK, California                BRIAN HIGGINS, New York
SCOTT PERRY, Pennsylvania            JOAQUIN CASTRO, Texas
REID J. RIBBLE, Wisconsin            ROBIN L. KELLY, Illinois
LEE M. ZELDIN, New York













                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

The Honorable Thomas M. Countryman, Assistant Secretary, Bureau 
  of International Security and Nonproliferation, U.S. Department 
  of State.......................................................     7
Lieutenant General Frank G. Klotz, USAF, Retired, Under Secretary 
  for Nuclear Security, Administrator, National Nuclear Security 
  Administration, U.S. Department of Energy......................    20
Mr. Henry D. Sokolski, executive director, The Nonproliferation 
  Policy Education Center........................................    39
Mr. Daniel Lipman, vice president, Supplier and International 
  Programs, Nuclear Energy Institute.............................    48
Ms. Sharon Squassoni, director and senior fellow, Proliferation 
  Prevention Program, Center for Strategic and International 
  Studies........................................................    61

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

The Honorable Thomas M. Countryman: Prepared statement...........     9
Lieutenant General Frank G. Klotz, USAF, Retired: Prepared 
  statement......................................................    22
Mr. Henry D. Sokolski: Prepared statement........................    41
Mr. Daniel Lipman: Prepared statement............................    50
Ms. Sharon Squassoni: Prepared statement.........................    63

                                APPENDIX

Hearing notice...................................................    86
Hearing minutes..................................................    87
Internet link for access to material submitted for the record by 
  the Honorable Brad Sherman, a Representative in Congress from 
  the State of California, and Mr. Henry D. Sokolski.............    88

 
      REVIEWING THE U.S.-CHINA CIVIL NUCLEAR COOPERATION AGREEMENT

                              ----------                              


                        THURSDAY, JULY 16, 2015

                       House of Representatives,

                Subcommittee on Asia and the Pacific and

        Subcommittee on Terrorism, Nonproliferation, and Trade,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The subcommittee met, pursuant to notice, at 9:03 a.m., in 
room 2172, Rayburn House Office Building, Hon. Matt Salmon 
(chairman of the subcommittee) presiding.
    Mr. Salmon. The subcommittee will come to order. Let me 
start by recognizing myself and the ranking member to present 
our opening statements. And without objection, the members of 
the subcommittee can present brief remarks if they choose to or 
they can submit them for the record.
    We convened this hearing today to discuss the merits of the 
U.S.-China Civil Nuclear Cooperation Agreement, which was 
submitted to Congress in late April, this 30-year agreement, 
which is required by section 123 of the Atomic Energy Act of 
1954 and is a prerequisite for any significant nuclear 
cooperation with any country, any other country other than the 
United States.
    The movement of nuclear material and technology across 
borders deserve close examination. Today, we expect to hear 
from our distinguished witnesses on their assessment of the 
viability of our civil nuclear cooperation with China, as well 
as what their concerns may be about nuclear proliferation and 
the transfer of technology and knowledge for military purposes. 
We also expect to hear about the potential benefits of the 123 
Agreement, including expanded engagement with China, building 
mutual confidence, increasing clean energy sources, and 
supporting U.S. businesses.
    China's nuclear power program is the most rapidly expanding 
in the world, so the U.S.-China 123 Agreement could provide a 
unique opportunity for U.S. businesses. The Department of 
Energy approved a bid by Westinghouse to build four nuclear 
reactors in China and six more are planned. But as many as 30 
more are proposed. Currently, China has an additional 23 
reactors under construction and plans to build up to 100 more 
by 2030.
    The PRC announced in December 2014 that it would spend 
about $11.2 billion annually on reactor construction during the 
next 10 years. However, I am concerned about the U.S. 
transferring its technology to China because Chinese firms may 
eventually re-export reactor technology to other countries 
without proper U.S. checks.
    Approximately 30 percent of the work outlined under current 
contracts is being performed in the United States by 
Westinghouse or its subcontractors and suppliers, which has 
created or is sustaining approximately 8,000 direct jobs and 
another approximately 20,000 indirect jobs in the United 
States, in 20 United States. But technology transfer provisions 
in the contract would reduce U.S. participation in Chinese 
nuclear projects over time. I would be interested to hear from 
out witnesses how we would secure jobs for American workers 
with these limitations in the provisions in the agreement.
    The agreement also raises important security questions. The 
Defense Intelligence Agency warned in February 2015 that China 
will continue to be a source of dual-use, WMD-applicable goods, 
equipment, and materials to countries of concern like Iran, 
North Korea, and Syria.
    Furthermore, the Nonproliferation Assessment Statement 
submitted with the administration's proposed agreement states 
that despite updates to regulations and improved actions in 
some areas, proliferation involving Chinese entities remains a 
significant concern. Without proper U.S. oversight of continued 
civil nuclear cooperation, I would be hesitant to condone an 
agreement that would pose major risks to our national security, 
and I would like hear from our administration witnesses as to 
how we can address those concerns.
    The second concern involves military diversion. Experts 
have debated whether China has already diverted or intends to 
divert U.S. civilian nuclear technology for military purposes, 
including in naval reactors, which would violate the existing 
123 Agreement. Chairman Royce voiced his concern as far back as 
2007, and at a Senate Foreign Relations hearing in May of this 
year, it seemed to confirm that suspicion. I would like to hear 
what the administration intends to do to remedy potential 
violations and hear how the United States will safeguard our 
sensitive technology from Chinese military diversion in the 
future.
    Lastly, I am concerned with China's plan to re-export 
nuclear power plants based on U.S. technology. Westinghouse's 
AP1000 technology is a crucial component to China's planned 
nuclear export program, though China only holds a license to 
use that technology domestically. What safety considerations 
exist during the re-export of U.S. reactor technology?
    Aggressive Chinese exports of nuclear technology, 
particularly to countries that do not currently have nuclear 
power, could pose proliferation risks. In fact, the 
Nonproliferation Assessment Statement noted that China's 
ongoing construction of new nuclear power plants in Pakistan as 
inconsistent with its Nuclear Suppliers Group commitments.
    Nearly 30 years ago, President Reagan said he was 
particularly proud of the agreement, saying it will open broad 
opportunities for joint work in development of the energy base 
which China needs for her modernization. At the time, the 
United States and China made mutual pledges of cooperation, 
nonproliferation, and safety. We are here today to discuss 
whether China has met those obligations.
    When President Obama submitted the new 123 Agreement, he 
said that the agreement will advance the nonproliferation 
national security interests of the United States. I would like 
to hear from the administration why Congress should feel 
confident that China will live up to nonproliferation 
commitments, that we will have measures in place to prevent 
military diversion of our technology, and how we could 
safeguard our economic, political, and military interests.
    Members present are going to be permitted to submit written 
statements to be included in the official hearing record. And 
without objection, the hearing record will remain open for 5 
calendar days to allow statements, questions, and extraneous 
materials for the record subject to the length limitation 
rules.
    I now recognize Ranking Member--actually, I am going to 
recognize Mr. Keating, who is the ranking member here today, 
for any remarks he would like to make. And then I will 
recognize the other chairman.
    Mr. Keating. Thank you, Chairman Salmon, Ranking Member 
Sherman, and Chairman Poe. Ranking Member Sherman will be here 
during the course of the hearing.
    In continuing the United States' longstanding commitment to 
preventing nuclear proliferation around the world, it is 
critical we provide the U.S.-China Civil Nuclear Cooperation 
Agreement with proper scrutiny.
    Our relationship with China is multifaceted and complex. 
There is no denying that the U.S. has a much different posture 
toward China than we did when the last 123 Agreement was 
entered into in 1985. In many ways, the Chinese Government has 
improved its nonproliferation efforts since joining the Nuclear 
Nonproliferation Treaty and Nuclear Suppliers Group in 1992 and 
2004, respectively.
    However, there remains little doubt that the Chinese 
Government still has work to do when it comes to enforcing its 
own export control laws, preventing the sale of dual-use goods, 
and prosecuting individuals and companies involved in 
proliferation to countries like North Korea and Iran.
    China's unfortunate track record of stealing trade secrets 
by means of cyber attacks and other methods is a further reason 
to be cautious about unduly trusting China when it comes to 
technological transfers.
    While I am encouraged that the new China 123 Agreement 
includes stronger enforcement of nonproliferation controls, I 
remain concerned about whether China will meet its 
nonproliferation obligations. In particular, I am interested to 
determine whether under this new agreement China will be able 
to re-export nuclear reactors based on U.S. design technology 
without having to obtain permission from the U.S. Government. 
China's obligations under this agreement in the case of re-
transfers to third countries need to be clearly defined and 
understood.
    In addition, I question whether China could divert elements 
of U.S. reactor designs for use in their nuclear submarine 
reactors, a prospect that could challenge U.S. naval 
superiority.
    These are among the concerns I look forward to hearing 
addressed at today's hearing with our witnesses. And I hope 
that the hearing will contribute to a productive and detailed 
dialogue regarding our current nuclear energy cooperation with 
China and the security risks we have at hand.
    With that, I yield back.
    Mr. Salmon. Thank you.
    I now recognize Chairman Poe.
    Mr. Poe. Thank you, Chairman Salmon, for working with our 
subcommittee to put together this important hearing about the 
U.S.-China 123 Agreement. The current agreement was negotiated, 
as you said, by the Reagan administration 30 years ago. It has 
allowed us to cooperate with China on civilian nuclear energy 
and it is supposed to expire in December.
    China is the world's largest market for nuclear technology. 
By 2032, China will become the world's largest generator of 
nuclear power. There are major U.S. economic interests at 
stake. Chinese contracts to American companies have created 
billions of dollars in U.S. exports and thousands of American 
jobs, and we have partnered with China in valuable joint 
ventures and development projects. For example, in July 2007, 
the contract awarded to Westinghouse will supply China with 
four AP1000 nuclear power plants at an estimated cost of $8 
billion.
    Proponents of the new agreement make the point that if this 
agreement is not renewed, the United States nuclear industry 
will face billions of dollars of lost revenue. They are also 
concerned that without these new Chinese contracts, the U.S. 
industry will struggle to keep up with its expertise.
    Our engagement with China under the current 123 Agreement 
has advanced China's nuclear nonproliferation policies and 
practices. American equipment and technology exports have 
allowed China to use the safest technology in the industry. The 
new agreement required China to notify us before approving 
technology transfers and limits these transfers to countries 
committed to using them for peaceful purposes only.
    Our nuclear engagement with China has been crucial in 
reducing China's carbon emissions as well. Proponents of 
renewing the 123 Agreement argue that ending our cooperation 
will disrupt China's nuclear development plans and have a 
negative environmental effect.
    Despite that, there are several concerns regarding the 
renewal of our nuclear cooperation with China. China has yet to 
show it has the political will to prevent Chinese-based 
companies from exporting nuclear technology and equipment to 
countries such as Iran, North Korea, and Syria. Even this week, 
we have heard of a Karl Lee, the so-called A.Q. Khan, helped 
Iran get nuclear technology from China, namely, high missile 
technology that is illegal. The Chinese Government response to 
this action was they never heard of him or go fishing.
    The Congressional Research Service's last unclassified 
review of China's proliferation record in January spotlighted 
China's proliferation activities related to Pakistan, North 
Korea, and Iran. The current 123 Agreement does not require 
China to place civilian nuclear facilities under IAEA 
safeguards. Another point missing from the current agreement is 
nuclear consent right provisions. That means that China is not 
required to seek U.S. consent to manufacturer or re-export 
U.S.-designed reactors or U.S. nuclear components.
    And we also don't know what extent China is diverting 
technology from its civilian nuclear energy program to its 
nuclear weapons and military programs. Experts have noted that 
Chinese civil and nuclear entities are alarmingly close and may 
already be cooperating. The President's Nonproliferation 
Assessment Statement explicitly points out China's longstanding 
tradition of using civil technology for its military programs.
    So this hearing today will help us better understand the 
advantages for renewing this 123 Agreement, what is in the best 
national security interest of the United States. And I thank 
the chairman. I will yield back.
    Mr. Salmon. Thank you.
    The Chair recognizes Mr. Connolly.
    Mr. Connolly. Thank you, Mr. Chairman.
    I think when we look at the proposed pending agreement, it 
is a balancing act for the United States. I think our national 
security and global nonproliferation goals need to be 
preeminent, but we can't be ignorant of the business 
implications and the competition for the Chinese market that is 
hot.
    Congressional objections to a 123 Agreement with China are 
not new. The current agreement, as has been noted, began during 
the Reagan administration, submitted in 1985 to Congress. 
Congress then saw fit to place conditions on the implementation 
of the agreement in the joint resolution relating to the 
approval and implementation of the proposed agreement 
fornuclear cooperation between the U.S. and the PRC and the 
Foreign Relations Authorization Act for Fiscal Years 1990 and 
1991.
    The Presidential certifications contained in these pieces 
of legislation represented the far-reaching concerns Congress 
had then and in many cases still continues to have about China. 
Before the agreement was implemented, a full 13 years after 
being submitted to Congress, the President had to make 
certifications with respect to China's assurance that it was 
not transferring nuclear weapons technology to non-nuclear 
states. Chinese nonproliferation policies and political reforms 
were being made by the PRC Government.
    The nonproliferation landscape in China has changed since 
then. China acceded to the Treaty on Non-Proliferation of 
Nuclear Weapons in 1992 as a nuclear weapon state, and since 
has become a member of the Nuclear Suppliers Group. China 
implemented a safeguards agreement with the IAEA in 1989 and 
agreed to the additional protocol in 2002.
    It should be noted that integrating China into the 
international nonproliferation regime does add a level of 
transparency previously lacking. Considering the growth of the 
nuclear technology industry in China, this integration and its 
accompanying benefits could be seen as welcome developments. 
Today, China has 26 operational nuclear reactors, with 23 under 
construction, and a plan to build another 100 by the year 2030. 
As a matter of comparison, the United States has 99.
    China and Chinese entities, however, have a nuclear track 
record that cannot be wiped under the carpet. The U.S. 
Government has certified that China provided assistance to the 
nuclear weapons program in Pakistan. China transferred gaseous 
uranium hexafluoride to Iran for centrifuge enrichment 
research. And the U.S. continues to sanction state-owned 
enterprises and small and medium enterprises in China that have 
been sources of illicit dual-use technology for foreign buyers.
    There is a demonstrated wanton disregard for export 
restrictions in China, and the PRC seemingly refuses to take 
enforcement action against those violators. At the Senate 
Foreign Relations Committee hearing in May, the Assistant 
Secretary for the Bureau of International Security and 
Nonproliferation stated that China has neither the bureaucratic 
capability nor the political will adequately to control dual-
use exports. That is especially concerning provided that North 
Korea and Iran have documented operations to procure sensitive 
nuclear technologies in China.
    During our review period, we are going to have to consider 
these among lots of other issues. And Congress takes seriously 
its commitment to nonproliferation, as we know the 
administration does as well.
    So I look forward, Mr. Chairman, to hearing the testimony 
today and hearing how we address some of these thorny issues 
that, as I said, cannot be ignored during this review record.
    I yield back.
    Mr. Salmon. Thank you.
    Mr. Wilson.
    Mr. Wilson. Thank you, Mr. Chairman.
    With over 20 nuclear reactors currently in operation and 28 
more under construction, China is one of the largest and 
fastest growing nuclear energy markets in the world. Private 
companies in other countries, such as the Russian Federation 
and France, can openly compete for construction operations 
contracts for Chinese reactors and share best practices to 
avoid delays, reduce costs, and expedite construction.
    In South Carolina, SCANA and Santee Cooper each are 
successfully operating a Westinghouse AP1000 nuclear reactor 
built by Chicago Bridge & Iron identical to the reactors 
currently being built in China now. I regularly hear from their 
employees about the benefits of sharing lessons learned and 
best practices.
    We should reauthorize the agreement to ensure that American 
companies have the same opportunity to compete for Chinese 
nuclear contracts and to share resources. I am grateful to 
sponsor House Joint Resolution 56, which provides for the 
approval of the new U.S.-China Nuclear Cooperation Agreement.
    I would like to thank Chairman Matt Salmon and Chairman Ted 
Poe for putting together this hearing with very credible 
panelists and look forward to the continuation of the U.S.-
China civilian nuclear cooperation, which is personal me to me, 
as my father served in China in 1944 and 1945, where he 
developed an appreciation of the people of China as a member of 
the U.S. Army Air Corps defending the people of China.
    I yield back my time.
    Mr. Salmon. Thank you.
    Do any other members seek recognition?
    We have two panelists today. And I believe we are going to 
get a wealth of knowledge regarding this issue. And I 
appreciate the expertise of the folks that are here today.
    First of all, I would like to introduce Assistant Secretary 
Thomas Countryman, who heads the Bureau of International 
Security and Nonproliferation at the Department of State, and 
Lieutenant General Frank Klotz, Under Secretary for Nuclear 
Security and Administrator of the National Nuclear Security 
Administration and Department of Energy.
    Mr. Countryman.

  STATEMENT OF THE HONORABLE THOMAS M. COUNTRYMAN, ASSISTANT 
        SECRETARY, BUREAU OF INTERNATIONAL SECURITY AND 
           NONPROLIFERATION, U.S. DEPARTMENT OF STATE

    Mr. Countryman. I would like to thank the two chairmen, Mr. 
Salmon and Judge Poe, and the ranking members and all the 
members for this opportunity. The agreement you have before you 
replaces the agreement originally negotiated in the Reagan 
administration in 1985, and it is an improvement over that 
agreement in all respects.
    This agreement is not a commercial contract. It does not 
provide for the sale of nuclear equipment or technology to 
China. Rather, it provides a framework under which the United 
States can make the decisions on particular requests for export 
of nuclear technology to China.
    It is not a giveaway. It rather is a mutual recognition 
that the U.S. and China have reciprocal obligations to each 
other that each must meet. And it recognizes also that the 
world is different from 1985 and that China is now among the 
world leaders in nuclear technology.
    It is not a lever. It is not something that is simply given 
away to China with which we can extract concessions from China 
in unrelated fields.
    This agreement meets all the requirements of the Atomic 
Energy Act. It also reflects the consistent position of this 
administration that a negotiation of 123 Agreements, our 
highest priority are nonproliferation standards.
    The agreement has important benefits, as noted already, in 
the field of economic interests of the United States, including 
jobs. It also, of course, is an essential element in helping to 
manage the complex bilateral relationship that we have with the 
People's Republic of China.
    But my responsibility in leading negotiations and the 
responsibility that both Congress and the administration have 
given is to ensure that nonproliferation concerns are 
uppermost, and I believe we have fully met that standard.
    This is not to say that we are satisfied with the 
performance of China on a number of issues, particularly on 
export control issues. As was noted, I testified to the Senate 
2 months ago that China has not shown the necessary capability 
and will to fully enforce export control requirements, its own 
legislation, and its obligations under U.N. Security Council 
resolutions.
    And I welcome higher-level political attention being given 
to those issues. It is necessary that the Chinese Government 
hear that this is an issue of significant political and 
security concern.
    At the same time, it is important to recognize, as 
Congressman Connolly has, that the performance of China in 
nonproliferation standards is far different from what it was 30 
years ago. It continues to improve. We are in no way satisfied 
with the degree of improvement, and we will continue to press 
for China to meet its obligations more fully.
    But it would be incorrect to think that Chinese performance 
would improve if this agreement is not implemented. I am 
convinced exactly the opposite would happen.
    On the military issues and technology transfer issues that 
have been raised, I refer back to a closed briefing that we 
provided last month, to the briefing provided at that point by 
the experts in nuclear propulsion technology, and the reasons 
that we gave at that point for the President's conclusion that 
this agreement does not pose an unacceptable risk to America's 
national security. We are, of course, happy in closed session 
to repeat all of those briefings individually or for the 
committee as a whole.
    With those comments that I hope are responsive to the 
initial concerns you have raised, I recommend to you this 
agreement. Thank you.
    [The prepared statement of Mr. Countryman follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    
                              ----------                              

    Mr. Salmon. Thank you.
    General.

STATEMENT OF LIEUTENANT GENERAL FRANK G. KLOTZ, USAF, RETIRED, 
 UNDER SECRETARY FOR NUCLEAR SECURITY, ADMINISTRATOR, NATIONAL 
   NUCLEAR SECURITY ADMINISTRATION, U.S. DEPARTMENT OF ENERGY

    General Klotz. Thank you, sir.
    Chairman Salmon, Chairman Poe, Ranking Member Keating, and 
distinguished members of the subcommittee, thanks for the 
opportunity to testify on behalf of----
    Mr. Connolly. Mr. Chairman, could I ask the General to 
put--thank you--move it closer to your mouth. Thank you.
    General Klotz. I am pleased to join my colleague from the 
State Department, Assistant Secretary Tom Countryman. I am 
pleased also to represent the Department of Energy in 
discussing this proposed U.S.-China Agreement for Peaceful 
Nuclear Cooperation. I have provided a written statement for 
the record, and I respectfully request that it be submitted for 
the record.
    Secretary of Energy Moniz and I share the view that the 
proposed agreement provides a comprehensive framework for 
nuclear cooperation with China, while fully protecting and 
advancing U.S. interests and policy objectives with respect to 
nuclear nonproliferation and the peaceful uses of nuclear 
energy. Thus, the Department of Energy fully supports entry 
into force of this agreement following the requisite 
congressional review period.
    The agreement is fully consistent with law and incorporates 
all terms required by section 123 of the Atomic Energy Act. 
Moreover, it reflects important advances over the current 
agreement, several of which were discussed during the 
classified briefing to members of this committee that Assistant 
Secretary Countryman just alluded to.
    Specifically, the successor agreement enhances the 
provisions that allow China to enrich and repross U.S.-
obligated nuclear material by requiring that such enrichment 
and reprocessing take place only at facilities in China that 
fall under the International Atomic Energy Agency's safeguards 
agreement. It also provides for enhanced controls on the expert 
of nuclear technology to China, and it commits both sides to 
deliver export control training to all U.S. and Chinese 
entities under the 123 Agreement.
    Taken together, these elements, not included in the 1985 
agreement, provide an unprecedented level of insight into 
commercial transactions.
    Since the preceding 123 Agreement was signed 30 years ago, 
we have witnessed China make significant strides in its civil 
nuclear program. The Department of Commerce, in fact, has 
identified China as one of the largest and most important 
markets for the U.S. nuclear industry, with over 20 nuclear 
power plants in operation, over 20 under construction, and 
dozens more planned. And China will continue to invest heavily 
in its nuclear industry to meet its own expanding energy needs 
and to meet growing global interests in and demand for nuclear 
power as a source of clean energy.
    The rapid growth of China's civil nuclear energy program 
could have significant benefits for U.S. industry, as well as 
our scientific and technical base. American civil nuclear 
companies already have numerous joint ventures with China, as 
well as significant assets on the ground in China. They are 
supplying China with equipment and components, as well as a 
broad range of services, including engineering, construction, 
and training.
    The successor 123 Agreement will facilitate continued 
nuclear cooperation with China, subject, as always, to U.S. 
Government review of specific requests to transfer nuclear 
technology, information, material, equipment, and components.
    On the other hand, if the agreement lapses or is not 
renewed, U.S. industry will not be able to continue with the 
current ventures and could lose significant investments it has 
already made in China's civil nuclear program. U.S. industry 
would also be precluded from taking advantage of opportunities 
in the world's fastest growing civil nuclear energy market.
    In addition to these economic benefits, the successor 123 
Agreement will also serve as an umbrella for other forms of 
U.S.-China bilateral cooperation in promoting important U.S. 
policy objectives with respect to enhancing nuclear safety and 
security around the world, an objective which directly supports 
our U.S. national interest, as well as those of our allies and 
partners.
    U.S.-China cooperation in the civil nuclear realm, such as 
under the 1998 U.S.-China Peaceful Uses of Nuclear Technology, 
or PUNT, Agreement, has been absolutely invaluable in this 
regard. Just recently, senior U.S. officials met with their 
Chinese counterparts in Chengdu under the auspices of the PUNT 
Joint Coordinating Committee. They discussed nuclear 
technology, security, and safeguards, environmental and waste 
management, emergency response operations, the security of 
radiological sources, and so on. U.S. participants have 
reported to me that they had unique and unprecedented access to 
a number of construction, scientific, and academic sites.
    This level of interaction and access is only possible 
because of the value that China places in having a 123 
Agreement with the United States and its desire to cooperate 
with us. Without entry into force of the successor agreement, 
we will lose a critical mechanism for influencing China's 
nonproliferation behavior, we will lose economic and commercial 
benefits, and we will lose the insight we have into China's 
nuclear programs.
    Again, thank you for the opportunity to appear before you 
today, Chairman. And I look forward to any questions that you 
all may have.
    [The prepared statement of General Klotz follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                              ----------                              

    Mr. Salmon. Thank you.
    General Klotz, I would like to begin my questioning with 
you. Regarding the new technology transfer mechanism in the 
agreed minute, how would the new process affect the existing 
technology transfer authorization process under the 810 
authorization? Would the agreed minute supplement or replace 
the 810 authorization?
    General Klotz. Mr. Chairman, in fact, the 810 authorization 
process is already a very rigorous review process in which, as 
the Secretary of Energy considers each of the applications for 
the transfer of technology, we go and work very, very closely 
with the other departments, Department of State, Department of 
Commerce, Nuclear Regulatory Commission, Department of Defense.
    And we also consult very closely with the intelligence 
community. Recall that the Department of Energy is one of the 
17 organizations that are part of the intelligence community. 
And we draw upon the intelligence expertise resident within our 
national labs.
    So that process will continue to be followed for all 
applications under the 810 process.
    Mr. Salmon. My understanding is that under the new 
agreement, that these transfers are authorized by the agreement 
itself. Previously, DOE shared these requests, as well as any 
decisions you made on them with Congress. My understanding is 
that process is being streamlined and altered pretty 
dramatically. Is that not a correct understanding?
    General Klotz. Well, to address the issue of streamlining, 
we have gone through a number of steps in the past several 
months in response to direction from Congress, in response to a 
report rendered by the GAO to make the process for 810 
applications more efficient and more transparent.
    One of the issues that has been a problem in slowing down 
that process has been the need for approval of each 
application, the requirement for the Department of State to go 
to whatever country that we are considering a 123 Agreement 
with to get nonproliferation assurances.
    What this particular agreement does is to wrap those 
nonproliferation assurances into the 123 Agreement. In effect, 
it escalates it from the 810 process into the 123 process, so 
the nonproliferation assurances are moved to that level of a 
state-to-state agreement.
    So with that, we will still go through the very rigorous, 
robust vetting of each and every 810 application through the 
interagency process, which, as I said, includes all of the 
national security agencies, as well as the Department of 
Commerce and the Nuclear Regulatory Commission.
    Mr. Salmon. I just have a concern that given their likely 
violation of their pledge not to divert U.S. civilian 
technology for military purposes under the existing 123, maybe 
we should be tightening the tech transfer authorizations rather 
than streamlining them as in the agreed minute. That is my 
concern.
    I am going to yield to Mr. Keating for any questions he 
might have.
    Mr. Keating. Thank you, Mr. Chairman.
    First of all, I would like to thank both of the gentlemen 
for their service to their country. And I was interested in Mr. 
Countryman's opening remarks when he brought up the fact that 
he thought it would be great to engage in more political 
intervention.
    I realize the nature of the agreement and the importance of 
the agreement and the time significance with the old agreement, 
how the world has changed, and the need for this. However, I am 
curious, since you brought it up, what kind of a political 
engagement are you considering? What would you recommend, given 
your background, your prior background as well?
    Mr. Countryman. Well, I hesitate to make recommendations to 
Members of the Congress. My point is that we have literally 
hundreds of issues on the bilateral agenda with China. It is 
the most complex bilateral relationship in the world today. We 
have a complex structure of dialogues with China, government to 
government, and those hundreds of issues are covered.
    It is more than possible that the Chinese Government loses 
sight of what I consider to be a crucial issue, ineffective 
enforcement of their own trade control laws, they lose sight of 
that when it is packaged together with the other 99 issues that 
are essential to the bilateral relationship.
    And although the State Department has raised this issue 
with high levels of the Chinese Government, I think that 
repetition from a variety of sources will help the Chinese 
Government to find the will and the resources to more 
effectively enforce its own laws.
    Mr. Keating. I do suspect that most of the concern this 
morning will be based on not the agreement itself, per se, but 
the lack of enforcement. Their dealings with Pakistan and the 
violating of their own laws.
    And I just want to ask both of you, what do you think can 
be done about their own--to improve their own enforcement? And 
if you could speculate, I know it is hard to speculate on the 
Chinese, how much of it is, if any, is their inability to 
enforce it versus their just compliance and letting that occur? 
I know that is broad, but I think it is going to be central to 
what we are probing this morning.
    Mr. Countryman. First, in terms of enforcement, you should 
have no doubt, as we have briefed repeatedly and are always 
ready to brief again, that we have a rigorous examination 
process before exports of technology are approved and that they 
include all relevant expertise of the United States Government, 
not just these two guys here. Our enforcement will be strong, 
and we have the mechanisms within the 123 to suspend or cease 
cooperation if there are violations on the Chinese side.
    In terms of Chinese enforcement of trade controls, first, 
Li Fangwei or Karl Lee, who has been mentioned, is not a new 
name to us. We have worked on this issue for years. We have had 
some success for the Chinese in limiting his activities. And 
yet he remains active. I would point out he remains active 
primarily in the ballistic missile technology realm, rather 
than in the nuclear realm, and has provided important 
technology to Iran in that respect.
    It is kind of a chicken-and-egg question to say whether the 
Chinese need to find the will or the resources. They have a 
Wild West economy with a number of private entrepreneurs who 
are capable of utilizing both high technology companies and, I 
assume, good connections within the Chinese bureaucracy to 
pursue trade that ought to be controlled.
    We strongly believe that the Chinese Government can do 
more, needs to make a political decision to do more. We will 
continue to press them to do that. And the 123 Agreement is 
exactly what provides us the access to continue to press that 
issue.
    Mr. Keating. General, could you comment, if you could, too, 
given the shortness of time, also reference the CAP1400 issue 
in terms of our ability, what we might be able to do to limit 
which country China goes to export things.
    General Klotz. Well, let me, if I could, sir, follow up on 
your original question. Another element of the 123 Agreement, 
which I think is extraordinarily important, is that the 
provision that for tech transfers, that we engage in joint 
training of U.S. entities and Chinese entities on what the 
requirements of the tech transfer is.
    This is very, very important as a means of educating 
Chinese counterparts of what the specific rules are. We also go 
through that process in our other engagements across the range 
of issues associated with safety, security, research, and 
development on new approaches to reactor design, as well as 
fuel fabrication.
    On the specific issue of the AP1000 and the CAP1400, any 
tech transfer which is approved by the Secretary of Energy is 
subject to the provisions within the 123 Agreement on diversion 
of technology to military purposes and the export or re-export 
of that technology to other countries. So if that were an 
issue, that is something that we would address directly and 
squarely.
    Mr. Keating. Thank you. I yield back.
    Mr. Salmon. Thank you.
    Chairman Poe.
    Mr. Poe. Thank you both for being here. And thank you, Mr. 
Countryman, for being available to answer questions before this 
hearing to all of us on the panel here.
    I would like to look at this from a little higher level. 
This is an agreement between the United States and China to let 
us do business with China in the nuclear industry. Is that a 
fair statement? Civilian nuclear capability.
    Mr. Countryman. Essentially correct. As General Klotz 
pointed out, it also provides for other areas of cooperation 
directly between Department of Energy and counterparts in 
China.
    Mr. Poe. But, anyway, it is an agreement to do business in 
civilian nuclear capability. So we decide we are not going to 
do that, we are just not going to do business with the Chinese. 
The void, and just correct me if I am wrong, what would occur 
is then that our nuclear technology, which I think is the best 
in the world, bar none, rather than they being in China helping 
them develop their nuclear capability--and I mean in China, 
they would be there physically to monitor the construction of 
these plants. Is that a fair statement?
    Mr. Countryman. Yes, sir.
    Mr. Poe. Which is jobs and income to American companies. 
That is not going to happen. But the void then would be filled 
by some other country. Is that a fair statement?
    Mr. Countryman. Absolutely. There are other countries that 
are eager to sell nuclear power plants to China.
    Mr. Poe. Like France, Russia maybe?
    Mr. Countryman. France, Russia, Japan, South Korea.
    Mr. Poe. Japan. There is a whole bunch. But we are the best 
in the world, so the China preferably would do business with us 
because we do it better than anybody else. Is that a fair 
statement or not?
    Mr. Countryman. I agree.
    Mr. Poe. General, do you want to make that comment?
    General Klotz. No, I would agree with that statement.
    Mr. Poe. Okay. So not agreeing to do business with them 
causes a void that is going to be filled by somebody else. And 
all of the issues that were discussed with the problems, 
possible problems with the Chinese cheating--I know we would be 
shocked if they did--are still going to occur, all of those 
issues are still going to occur with their proliferation with 
other countries, if they choose to do so. Is that right or 
wrong?
    Mr. Countryman. Yes, sir. And our ability to engage with 
the Chinese on all of those issues will be diminished.
    Mr. Poe. Because we don't have an agreement to do business 
with them.
    Also under this agreement, does the U.S. Government and our 
different departments manage and control and authorize what we 
actually sell to China?
    Mr. Countryman. Yes.
    Mr. Poe. Okay.
    Let me ask you a question, General. I know you are an Air 
Force guy, as I was. But I saluted folks like you being just a 
sergeant. This canned coolant pump, I understand that the 
submarines, that is the new wave of naval activity throughout 
the world, and the coolant pump helps them get real quiet. We 
have heard some concerns about the canned coolant pumps and 
that technology being transferred to China. Can you fill me in 
on that?
    General Klotz. Sir, we discussed that at some length in the 
closed briefing that we had for members of the committee. As 
Assistant Secretary Countryman said, we had representatives 
from naval reactors in the intelligence community there.
    I would love to follow up with you on that discussion. 
Obviously, technology associated with our submarine program and 
naval propulsion is extraordinary sensitive. So I would be 
very, very happy to pursue that with you.
    Mr. Poe. All right. We will follow up on some other basis.
    So based on everything you know, both of you, this is my 
last question, based upon everything you know, the criticism, 
the concerns, the Chinese, the deal with dealing with them on 
an arm's length basis, do you recommend that Congress approve 
or disapprove this agreement?
    Mr. Countryman. I strongly recommend that we approve it. As 
the President said in his message, this is in the national 
security interests of the United States. It succeeds if we 
implement it faithfully and carefully, and that is what both of 
our agencies are pledged to do. And, of course, we are pledged 
to keep the Congress closely briefed as we do so.
    General Klotz. I would agree----
    Mr. Poe. General?
    General Klotz. I would agree, sir. It is important to us 
both for our nonproliferation objectives, as well as commercial 
interests in this growing market for nuclear power around the 
world.
    And I am also convinced that we have put into place through 
this agreement, as well as the 810 process and the other 
reviews and the way in which we approve specific transfers of 
technology components, materials, a very rigorous way of 
ensuring that our interests are protected.
    Mr. Poe. Thank you.
    I yield back, Mr. Chairman.
    Mr. Salmon. Thank you.
    Mr. Connolly.
    Mr. Connolly. Thank you.
    General Klotz, I want to make sure I understood your answer 
to the question about CAP1400. So if we provide a certain 
technology, nuclear technology to the Chinese and they 
significantly modify it for retransfer to some other countries, 
what exactly does this agreement give us by way of right of 
review and approval?
    General Klotz. Sir, any technology related to the main 
nuclear technology parts of a reactor exported from the United 
States constitutes U.S. technology under the terms of the----
    Mr. Connolly. Irrespective of modification?
    General Klotz. That would have to be something that would 
be reviewed on a case-by-case basis to determine the level of 
modification, to what extent U.S. technology was involved, or 
to what extent indigenous development had taken place.
    But any technology that is exported falls under that. And 
we have informed our Chinese counterparts and companies of our 
review that inclusion of U.S. technology in the CAP1400 
requires U.S. consent prior to its retransfer from China.
    Mr. Connolly. And have they agreed to that?
    General Klotz. I don't think we have gotten to that stage 
yet where they have exported the CAP1400.
    Mr. Connolly. Well, I guess I would just note for you that 
if I were looking at a list of things that give me concern and 
pause, that is one of them. Your words notwithstanding, it is 
not entirely reassuring, especially the caveat that, well, it 
would depend on the extent of the modification. If I were a 
Chinese lawyer, that would be a big hole I would drive a big 
PLA truck through, or at least know I could.
    Mr. Countryman, a devil's advocate question, for maybe both 
of you, but maybe I could start with you. I mean, this is a 
well-intentioned agreement. It provides a framework without 
which we don't have any leverage or control. It is a growing 
market. It looks like China is on track to maybe being the 
biggest nuclear market by 2030 or 2040, bigger than our own. It 
certainly is the only big, new expanding market because we are 
not expanding here that much. If I were Westinghouse, I would 
definitely want to be in that market.
    But your own testimony in May before the other body was 
that, frankly, they don't have the capability to manage 
everything they have got, let alone this big expansion, from 
the point of view of the concerns of this agreement.
    We do know they have a history of proliferating. I mean, 
while they are part of P5+1, and I am glad they are, on the 
other hand, they helped the Iranian nuclear development 
program, they helped the Pakistan nuclear development program.
    And so what about this agreement gives us any level of 
confidence that we can deter that pattern of behavior, that we 
are turning over a new leaf with a reinvigorated agreement from 
30 years ago that catches the behavior we have witnessed in 
that time period when we had an agreement in place? Is it a 
matter of enforcement? Is it a matter of capability and 
training? Is it a matter of political will here? Or is it a 
matter of just a relentless pattern of probing and cheating and 
clandestine activity by the Chinese Government that, frankly, 
we are not going to catch and we are not going to deter?
    Mr. Countryman. Well, thank you, sir. It is a good 
question. And if the turning point in Chinese behavior were 
2015, it would be the crucial question. But,in fact, the 
turning point in Chinese behavior occurred in the 1990s.
    The conditions that Congress established in 1985 on the 
original Reagan administration agreement included ceasing 
support to the Iranian and Pakistani nuclear weapons programs. 
And China did that. It joined the Nuclear Nonproliferation 
Treaty. It joined the Nuclear Suppliers Group. Its record, as I 
said, in terms of what we call strategic trade controls, export 
controls, remains inadequate.
    On the question of can they manage all of these 
obligations, I think that they can manage a large nuclear 
program. What we are urging them to do is to devote a fraction 
of the resources, money, and personnel that they devote to 
managing a big nuclear program to managing an export control 
program. We believe that they can do that.
    Do we take for granted that their performance will improve? 
No. And the assurances that are contained here are not by 
themselves adequate. As in every other part of the 123 
Agreement, it requires constant, persistent follow-up, and that 
is exactly what you will have.
    Mr. Salmon. Thank you.
    The Chair recognizes Mr. Rohrabacher.
    Mr. Rohrabacher. A question not related to today, but does 
India have nuclear weapons?
    Mr. Countryman. India has nuclear weapons.
    Mr. Rohrabacher. Okay. My colleague and I were discussing 
that.
    Let me ask you about this. What we are talking about here 
is setting up a guideline so that we can do business and sell 
designs that will come from the United States and our designs 
for a nuclear reactor, a peaceful use of nuclear weapons 
program. Will we be selling also, does this set the guidelines, 
will we be selling actual equipment? Will we be exporting 
equipment that is built in the United States as well?
    General Klotz. Yes. The agreement serves as a framework for 
specific authorization, licensing by the Department of Energy 
and/or the Nuclear Regulatory Commission to do that.
    Mr. Rohrabacher. So we would expect both our technical 
designs and also our actual machinery to be sent, available to 
China, as a result of this agreement?
    General Klotz. Yes. If licensed again, if approved again by 
the----
    Mr. Rohrabacher. If approved, yes, of course.
    Let me ask you this. In terms of the type of nuclear 
reactor that we are approving, are these light water reactors? 
Are these the light water reactors that we will be sending?
    General Klotz. Yes.
    Mr. Rohrabacher. Okay. So light water reactors are--how 
different will the light water reactors be that--we guaranteed 
that Japan, for example, would have the ability, and they did, 
followed through on the foolproof nuclear reactors that we sent 
them. Are these reactors going to be different than the ones we 
sent Japan that have proven not to be foolproof?
    General Klotz. I assume you are referring to the Fukushima 
accident?
    Mr. Rohrabacher. I would make that assumption, yes.
    General Klotz. And, of course, that was a seminal event 
that got the attention of the nuclear industry and nuclear 
scientists, technicians, and engineers across the world. And a 
lot of changes have been made domestically in terms of the 
safety procedures that have been put in place here in the 
United States and overseas. The Chinese went through a pause in 
terms of approving new construction and certifying plants that 
had already been constructed as a result of their review of 
their own processes and procedures post-Fukushima.
    We are moving through successive generations of nuclear 
reactors. The AP1000 represents a gen III-plus with a lot of 
passive safety features, which are designed to ensure that the 
plant remains safe, not necessarily always with human 
intervention, if there is some major catastrophic breakdown in 
the system or some external event.
    Mr. Rohrabacher. But they are still light water reactors.
    Let me just note that there are new generations people say 
we are capable of building that would leave light water 
reactors in the past. Meaning, that is old stuff. And what we 
are doing is putting little improvements on old technology when 
you talk about light water reactors.
    I am dismayed that our economy and our Government and our 
establishment here has been unable to go to the next generation 
of nuclear power, which I understand we are capable of 
building, which does not have leftover plutonium, for example, 
and doesn't have the waste problem in terms of--by the way, 
does this, are we permitting the type of nuclear reactors that 
will have leftover material that needs to be protected, put 
into the Yucca Mountain of China for a 1,000 years?
    Mr. Countryman. In short, yes.
    Mr. Rohrabacher. Okay. Thank you. I think that is 
absolutely absurd for us to be shipping things like that to 
China or building them here when we have the capabilities of 
moving on to a new generation of nuclear reactors that don't 
have that problem. And I am on the Science Committee, so I have 
been involved in this thing for a while.
    And we have already talked about the Chinese track record. 
I don't think the Chinese do have a good track record in terms 
of it is my understanding that they have had something to do 
with the proliferation of nuclear weapons to Pakistan, not to 
mention there is a controversy about how much influence they 
have on Korea. And Korea has certainly not played a positive 
role.
    Let me ask you this in terms of--well, let me put it this 
way. The last time I was confronted by these arguments, and I 
have been here for 26 years, there are two mistakes I have made 
in Congress.
    Number one was to--well, I have made lots of mistake in 
Congress. But the ones I regret the most were, number one, 
following George W. Bush into Iraq and just taking his word 
about they were having a nuclear program in Iraq, which was, I 
believe, a fraudulent claim because it would have taken them 20 
years to build a nuclear weapon or maybe even longer, if they 
could have ever built it at all. We went into Iraq for some 
other reason. It was a disaster.
    The other thing that I regret, however, the most that I 
regret, is that when I was talked into agreeing that American 
satellites could be launched on Chinese rockets. It was back in 
the 1990s. And I will tell you that we had people just like 
yourselves here testifying how that in no possibility would 
there ever be any type of technology transfer, this is going to 
be so controlled. And guess what happened? We ended up with a 
major transfer of missile technology to China.
    And to the degree that China today threatens us, it 
threatens us because of the rocket technology, the MIRVing that 
we provided them, the stage separation that we provided them. 
And we had people just like yourselves here guaranteeing us 
that that would never happen.
    And I am sure you are very sincere, and I believe you, but 
I don't believe our system actually is efficient enough to back 
up the promises that you have made. So I would oppose expanding 
this type of thing to China.
    Thank you very much.
    Mr. Salmon. Thank you.
    Ms. Gabbard.
    Ms. Gabbard. Thank you, Mr. Chairman.
    I wonder if you could speak about how you assess this 
agreement will impact our security interests within the Asia-
Pacific region and relationships with our allies and partners.
    Mr. Countryman. Thank you very much. It is a great 
question.
    First, as I said, in the complex bilateral relationship we 
have with China, affirming our nuclear relationship, which is 
at heart a commercial relationship with security controls from 
our side, is essential to being able to talk to the Chinese as 
partners, as a growing power with whom we have to contend, who 
is both a partner and a rival.
    The other states of the region, I believe, support this 
agreement because it provides for an element of stability in 
the U.S.-China relationship.
    I will note that you also have before you the similar 123 
Agreement with the Republic of Korea for your consideration. I 
also recommend it strongly.
    These are,in fact, the ROK, China, and Japan, I consider to 
be our three most important global partners in civilian nuclear 
power on both the technological and the commercial sense. And 
so this provides an element of stability.
    It also provides, crucially, an important step toward the 
development of carbon-free energy sources. And Asia is, of 
course, the region that is more threatened by rising sea levels 
than any other part of the world.
    So I see it only as positive. I am not aware of any 
criticism from any of our friends in Asia about this agreement.
    Ms. Gabbard. Thank you.
    General Klotz. Could I add to that please? Because it is a 
very important question.
    The way we would look at it, I think, from the Department 
of Energy and the National Nuclear Security Administration is 
it is important for all the countries in the region, our 
allies, China, that if they are going to operate civilian 
nuclear power programs, that it be done in the safest possible 
manner, the securest possible manner, with all appropriate 
safeguards in force.
    And so our ability to engage in dialogue with the Chinese 
on these important issues is extraordinarily important not just 
for China, but for our allies and partners in the region as 
well.
    Ms. Gabbard. Thank you.
    My next question has to do with the effectiveness of both 
our ability as well as the Chinese Government's ability to 
monitor and control exports by private companies. My assumption 
is, and I would like to hear what you have to say, that there 
is a lot of room for improvement. And if so, what is the plan 
to improve that area?
    Mr. Countryman. Well, first of all, I am always impressed 
when I see the programs administered primarily by the 
Department of Commerce, but also by other U.S. agencies, that 
improve the capability of American exporters to watch what they 
are exporting, to be aware of laws and regulations that change 
regularly. And major defense and high technology contractors 
have effective internal control programs that ensure they don't 
get in trouble with their own government.
    We recommend such programs strongly, and, in fact, we have 
partnered with the Department of Commerce to assist the Chinese 
in providing that kind of training to major exporters within 
China. We have encouraged that model.
    But it is ultimately the responsibility of the Chinese 
Government to devote those kind of resources and to make that 
kind of training, that kind of internal control program a more 
regular feature among Chinese enterprises.
    Ms. Gabbard. If there is an illicit transfer that has been 
identified by the United States, is China, the Chinese 
authorities cooperating in how they are handling that or 
stopping that from moving forward?
    Mr. Countryman. The record is mixed. There are more cases 
in recent years of the Chinese taking action to block such 
transfers, but it is far from a complete or a satisfactory 
record.
    Ms. Gabbard. All right. Thank you.
    Thank you, Mr. Chairman.
    Mr. Salmon. Thank you.
    The Chair yields to Mr. Wilson.
    Mr. Wilson. Thank you, Mr. Chairman.
    And, Mr. Countryman, while I understand the need for 
information sharing between China and the United States, both 
in my home State and in Georgia we have reactors under 
construction. And can you explain to us what the extent of the 
construction of Chinese reactors plays in terms of our 
diplomatic and economic relationship with China?
    Mr. Countryman. That is a big question, very hard to 
summarize, sir. As I noted, there are 100 different issues in 
terms of our bilateral relationship with China. Nuclear trade 
is very large, and yet it is a small fraction, and I will try 
to get you a percentage of the overall volume of U.S.-Chinese 
trade.
    It has, however, a political significance that is greater 
than the actual percentage volume of bilateral trade. It is for 
the Chinese a recognition that we have a partnership between 
countries that are approaching the similar level of 
technological development in the nuclear energy field. And for 
that reason, it is not a matter of ego, it is a matter of 
assurance to the Chinese that we take them seriously on issues 
that are to our mutual advantage.
    But hard for me to be more precise given the extreme range 
of bilateral issues that we work on.
    Mr. Wilson. But the bottom line, it is beneficial?
    Mr. Countryman. Absolutely.
    Mr. Wilson. And I appreciate that you recognize the carbon-
free energy production. And somehow we need for you to get this 
message across that carbon-free energy production in China is 
also carbon-free energy production within the United States, 
and that it is very beneficial. And somehow the definition in 
one part of the world should apply around the world. So I 
appreciate you raising that.
    General Klotz, it is always great to see you. I appreciate 
so much your service to our country. As a member not only of 
this committee, but the Armed Services Committee with four sons 
currently serving in the U.S. military myself, ensuring our 
national security is my top priority.
    That said, can you describe and offer assurance to this 
committee, maybe even to members of the committee from 
California, that this 123 Agreement takes the necessary 
measures to ensure China does not divert U.S. commercial 
nuclear technology for military use?
    General Klotz. What I can assure you of, Congressman--and I 
appreciate those very kind words--what I can assure you of is 
that we have set up, I think, a framework agreement here that 
is an advance over the 1985 agreement in terms of the processes 
which are there, the potential downside risk to the Chinese if 
we come to the conclusion that they are not living up to their 
agreements in terms of diversion of military technology and the 
nonproliferation provisions that are written into the 123 
Agreement.
    And I can assure you that we will be as diligent as the 
Congressman from California said, we will be as diligent as we 
can be in terms of our processes within the executive branch 
and in consultation with Congress to ensure that we go into 
each and every one of these applications for technology 
transfer, component transfer, hardware transfer with eyes wide 
open.
    Mr. Wilson. And I appreciate that very much.
    And additionally, Mr. Countryman, what is your assessment 
of the current proliferation activity between China and Iran or 
North Korea?
    Mr. Countryman. First, they are two very different 
situations with similarities. In the case of Iran, we do assess 
that Li Fangwei, or Karl Lee, is the most important procurement 
agent for the Iran ballistic missile program; that he remains 
active; that although Chinese authorities have frustrated him 
on some occasions, he remains pretty much free to operate. And 
that is a primary concern of ours in our dialogue with China, 
one that we continue to press.
    North Korea is a somewhat different case. North Korea is 
less dependent on outside economies for development of its 
nuclear and ballistic missile program than Iran is. But it 
still seeks acquisition of high technology equipment and 
technology in China, as well as in Russia and in other 
locations. And we believe that the Chinese Government can and 
must do more to prevent such procurement networks that are 
specifically prohibited by United Nations resolutions.
    Mr. Wilson. Thank you very much.
    Mr. Salmon. Mr. Boyle.
    Mr. Boyle. Thank you. And I want to thank the chairmen and 
the ranking members of the subcommittees for holding today's 
important hearing and inviting me to appear.
    I introduced, along with my colleague Mr. Wilson, House 
Joint Resolution 56, the approval resolution of the agreement 
that we are discussing today, of course, the new 123 Agreement.
    In today's testimony, I am directing this probably most 
appropriately to Mr. Countryman. In today's testimony, and in 
similar testimony to the Senate Foreign Relations Committee, 
you said, ``The proposed agreement would strengthen the 
bilateral relationship between the U.S. and China, benefit the 
U.S. economy, enhance nuclear safety in China, and improve the 
environment.''
    Could you expand on these four advantages of the proposed 
agreement? And if you could specifically focus on the benefit 
to the U.S. economy and jobs here at home.
    Mr. Countryman. Okay, I might ask my colleague, General 
Klotz, to talk a little more about the economic benefit. On the 
other points, as I have said, it is important to the bilateral 
relationship, greater, as I said, than the economic value of 
the agreement itself in both positive and a negative direction. 
It is an important symbol of partnership and cooperation for 
the Chinese, and failure to implement it would be taken by the 
Chinese as a step backwards by the United States from our 
professed desire to be partners where we can and to manage our 
differences where we have them.
    On the environmental side, the point is that nuclear power 
is a carbon-free energy source. It is very much, as President 
Obama has said, part of our all-of-the-above pursuit of clean 
energy in the United States and around the world. And this is 
the important contribution it makes.
    On nuclear safety, as General Klotz has said, we believe 
strongly and objectively that U.S. nuclear power plants have 
the safest design in the world, and more importantly, U.S. 
involvement on the ground in China helps to inculcate the 
habits of safety that prevent accidents in the future.
    And let me ask General Klotz to talk about economic 
benefits here.
    General Klotz. Thank you, Congressman, for the question. I 
believe in your second panel you will have people who can cite 
chapter and verse and specific statistics in terms of what the 
economic impact is in jobs, dollars, and that sort of thing.
    But just let me say generally, it has already been pointed 
out, in terms of nuclear technology we are the best in the 
world. Our scientists, technicians, and engineers are world 
class and leaders in this particular field. So from an economic 
point of view we have a comparative advantage in this 
commercial sector.
    And the benefits for U.S. industry are not just in the sale 
of a particular piece of hardware, but all the other things 
that go with it, the post-sale servicing, the technical 
engineering, the instrumentation and control that affects not 
just primary vendors, but a host of subvendors across the 
country in practically every State in this country.
    So it is a huge market that is growing there, and it has 
already been pointed out, if we are not there, someone else 
will be there. There are other people who build reactors and 
are aggressively marketing their technology to not just China, 
but other countries as well.
    Mr. Boyle. Well, thank you.
    And I will just say briefly before yielding back, such an 
important point that this isn't a choice of either we do this 
or it doesn't happen. No, it is going to happen. The question 
is, do we do it or do our competitors beat us to it.
    Thank you.
    And again, I thank the chairman.
    Mr. Salmon. Thank you.
    Mr. Countryman and General Klotz, we appreciate your time 
today and your testimony and responses to our questions. Thank 
you very much.
    When Mr. Countryman and General Klotz leave the panel, if 
we can get the other panel seated as quickly as possible, we 
would appreciate that.
    Mr. Salmon. We are thankful to be joined by a private panel 
this afternoon as well, and maybe you can answer some of the 
other questions that were asked up here on economic issues and 
others.
    We are pleased to be joined today by Henry Sokolski. And 
did I say that right?
    Mr. Sokolski. You did.
    Mr. Salmon. Close enough?
    Mr. Sokolski. No, spot on direct.
    Mr. Salmon. All right. Executive director of The 
Nonproliferation Policy Education Center. Daniel Lipman, vice 
president for Supplier and International Programs at the 
Nuclear Energy Institute. And Sharon Squassoni is a senior 
fellow and director of the Proliferation Prevention Program at 
the Center for Strategic and International Studies.
    And we will start with you, Mr. Sokolski.

  STATEMENT OF MR. HENRY D. SOKOLSKI, EXECUTIVE DIRECTOR, THE 
            NONPROLIFERATION POLICY EDUCATION CENTER

    Mr. Sokolski. Members of the committee, my message today is 
pretty simple. Although it would be a mistake to block this 
deal--and I think the way this hearing has been framed, that 
seems to be the only question--it is the wrong question. Nobody 
is blocking this deal. It is going to go through. So you need 
to go a little bit deeper than that question.
    I think you need to approach this deal's implementation 
with your eyes wide open--someone read my testimony, they used 
that phrase already once--lest it encourage more Chinese 
military nuclear diversions and proliferation of the sort 
already reported by the administration. They want you to go 
into classified hearings to find out about what is going on. Do 
it. I think when you do, you should be disturbed.
    To avoid this, Congress should condition the agreement two 
ways that would neither require China's blessing, nor hold up 
its implementation. I think that is very important. You need to 
understand where the critics are coming from. They are not 
going in the direction you are worried about.
    First, before the executive authorizes any Chinese 
recycling of nuclear weapons usable-plutonium, it is called 
reprocessing, generated in U.S.-designed reactors, the 
President should certify that he will secure case-by-case 
authorizations for each reprocessing campaign the Chinese might 
attempt as the U.S. currently requires of Russia. We are not 
picking on China, just treating them like Russia.
    Congress should also ask the executive to publish a clear 
definition of what U.S.-designed reactor and reactor components 
are to clarify what materials require such reprocessing 
authorization and to take care of this question about the 
CAP1400, which is a very serious line of inquiry.
    Second, the President should certify that the agreement's 
call for creating preapproved nuclear activities, technologies, 
and foreign entities won't supersede or interfere with current 
technology review procedures. Now, to the extent that they 
claim it doesn't, that should be an easy thing to pass because 
no one is going to say that they are not doing it. Great. Pass 
a law. Make sure of that. It doesn't look like that in the 
annex to me.
    Congress also should ask that the Director of National 
Intelligence participate in current reviews of nuclear 
technology transfer authorization requests and that these 
requests be shared with the appropriate committees of Congress 
as they used to be.
    Finally, Congress should ask the intelligence community to 
assess routinely how Beijing might exploit its civilian 
infrastructure and American civil nuclear technology for 
military purposes and what China's future military nuclear 
requirements might be. I think this needed to be done. You 
might have avoided some of the problems with the canned coolant 
pumps. Why bother?
    You have mentioned that Chairman Royce 8 years ago, along 
with several Members, wrote the Defense Secretary about the 
canned coolant pumps, and they were also concerned about the 
possibility of reprocessing resulting in nuclear weapon 
stockpiles. Essentially, they were told don't worry.
    Now we are told China probably diverted the pump 
technology. They don't want to quite say that because it raises 
legal issues if they actually say it. But it really looks like 
a duck and it is waddling like that. It looks like they 
diverted to upgrade it nuclear submarines. To my knowledge, no 
one has been disciplined for this slip, nor has our nuke tech 
transfer process been tightened.
    The proposed deal, in fact, would loosen this process by 
creating lists of nuclear activities, technologies, and end 
uses for preapproval. Industry has long pined for such 
streamlining. Congress approves it for a country that is 
suspected of having diverted nuclear technology, count on 
industry in other countries, including the riskiest ones, 
demanding similar treatment.
    The deal also gives China advance consent to extract as 
much nuclear weapons-usable plutonium as it wants from spent 
fuel generated in U.S.-designed reactors. All China must do is 
settle up front on safeguards and physical security. Unlike the 
nuclear deal we cut with Russia which requires approval for 
each effort to reprocess U.S.-origin spent fuel case-by-case, 
this deal gives blanket advance consent that only our closest 
allies enjoy.
    The security implications regionally of this are 
potentially enormous. Japan is contemplating opening a large 
plutonium reprocessing plant next spring capable of producing 
1,500 bombs' worth of plutonium a year. If Congress fails to 
further condition Chinese reprocessing, both China and Japan 
are more likely to proceed. This, in turn, would pressure South 
Korea to renew its demand that the U.S. allow it to reprocess. 
Within 10 to 20 years, expect tens of thousands of weapons' 
worth of plutonium mounting up in East Asia.
    As my former boss, Andrew Marshall at the Office of Net 
Assessment, has written, this could produce a potential nuclear 
avalanche that could be triggered by the least provocations.
    In conclusion, you have a chance to wire brush this deal. 
Regrettably, in 1957, Congress didn't even bother to review the 
123 with Iran. Sixty-two years later, we now know how that 
turned out.
    [The prepared statement of Mr. Sokolski follows:]
   
   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
   
                              ----------                              

    Mr. Salmon. Thank you.
    Mr. Lipman.

 STATEMENT OF MR. DANIEL LIPMAN, VICE PRESIDENT, SUPPLIER AND 
        INTERNATIONAL PROGRAMS, NUCLEAR ENERGY INSTITUTE

    Mr. Lipman. Thank you, and good morning, Chairmen Poe and 
Salmon and Ranking Member Keating. I appreciate the opportunity 
to be here.
    I also would like to thank Representative Boyle and 
Representative Wilson for offering their resolution to approve 
this new agreement.
    And I would be remiss if I didn't also thank Chairman Poe 
and Ranking Member Keating for their hearing in May regarding 
trade promotion agencies and U.S. foreign policies. We were 
here to talk about the 123, but when you talk about nuclear 
exports, financing and the Export-Im Bank is critical and 
improves the competitiveness of our industry, just as this 123 
has a critical impact on the competitiveness of our industry.
    You have all talked earlier, so I won't belabor what was 
said about the job creation and other benefits economically, 
but I would add that what some people may not know is today 
there are over 40 American companies doing business in China, 
of all sizes, large and small, and they do it in a wide variety 
of technical and commercial applications.
    So this agreement, in addition to having had benefits from 
job creation and revenue creation, have also hit on a couple of 
other major national interests, and that is nuclear safety and 
nuclear nonproliferation.
    Mr. Rohrabacher, I think correctly, and I would agree, 
brought up earlier the notion of the importance of nuclear 
safety. It is something that all of us in the U.S. nuclear 
industry think about all the time. And having this agreement in 
place will allow us to cooperate on advanced nuclear 
technologies that do improve safety, as Mr. Rohrabacher 
suggested.
    So the timing is important in this agreement. Yes, it is a 
growing market, but China is expanding at a rate that requires 
our engagement right now. We are well positioned in the U.S. 
industry for success in China. You have discussed the landmark 
AP1000 contracts, of which I was very proud to be a part. There 
are currently another 10 reactors being discussed and a third 
tranche of about another 30 plants.
    But we are, as some of you have said, not the only 
potential partner. There are others out there who would like to 
take our place, to be involved, as we are, in a critical role 
in the Chinese nuclear industry.
    So I am going to conclude by really saying, if the U.S. 
industry is not permitted to participate in the Chinese market, 
it impacts our reliability as a supplier and the Chinese do 
have other options. We are not their only potential partner.
    Our abdication of this key market results in the loss of 
very high-paying jobs in technology and a loss of U.S. 
influence, as Secretary Countryman said, in nonproliferation, 
and I would argue also in nuclear safety and nuclear security.
    If the U.S. were to terminate or significantly curtail 
cooperation with this market, it is also going to have 
spillover effects in other potential nuclear markets. Think 
about what it would look like if you are a country that is 
thinking of purchasing U.S. nuclear technology if they see a 
U.S. agreement with China being fraught with difficulty and not 
renewed, or somehow encumbered.
    So we in the industry urge you to allow this new agreement 
to enter into force without delay or without undue encumbrance 
on commercial cooperation or export licensing.
    I look forward to your questions. Thank you very much.
    [The prepared statement of Mr. Lipman follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
                              ----------                              

    Mr. Salmon. Thank you.
    Ms. Squassoni.

STATEMENT OF MS. SHARON SQUASSONI, DIRECTOR AND SENIOR FELLOW, 
  PROLIFERATION PREVENTION PROGRAM, CENTER FOR STRATEGIC AND 
                     INTERNATIONAL STUDIES

    Ms. Squassoni. Thank you, and good morning. Thank you 
Chairmen Salmon and Poe, Ranking Member Keating, and other 
members of the subcommittees for the opportunity to discuss the 
U.S.-China Nuclear Cooperation Agreement today. I would like to 
submit my written statement for the record and just make a few 
points.
    I think all of the panel members that you have heard this 
morning have said, on the one hand, China has made some 
important strides, but on the other hand, its record in 
nonproliferation is a little bit checkered.
    And I think I would like to point out that some things have 
remained really constant over the last 20 years, since we have 
been involved in nuclear cooperation with China: China's 
intense drive for indigenizing foreign technology, a porous 
division between civilian and military nuclear activities, 
anemic resources for export controls in this hear-no-evil, see-
no-evil, speak-no-evil approach to export violations.
    So I would like to offer some recommendations, that greater 
transparency, enhanced dialogue, and benchmarks for progress in 
Chinese export control would be welcome improvements to this 
agreement.
    So in the agreement itself, what should Congress look for? 
It is an improvement, but I think you are right to focus on 
this, what I call the fast track for technology transfer 
authorizations. And Congress should be careful to assess how 
well this fast track, which as Henry quite rightly pointed out, 
sets up approved, preapproved entities, preapproved nuclear 
technologies, and other things for streamlining, whether this 
really creates incentives for better Chinese compliance with 
intellectual property rights.
    Second, the advance consent for reprocessing that the 
agreement provides in Article 6 should be monitored to ensure 
that if U.S.-origin material is reprocessed, that it is indeed 
safeguarded. The agreement allows for the option of 
reprocessing in a facility on China's eligible facilities list, 
but that doesn't mean the IAEA will actually inspect it. And 
please note that our agreement with Russia does not allow for 
this kind of advance consent to reprocessing.
    And third, Article 6 contains unique language on managing 
separated safeguarded plutonium, and this is a mild reminder to 
China of the risks of plutonium stocks. For the committee's 
reference, Japan considers reasonable working stocks at a 
reprocessing plant to be 10 tons or more of separated 
plutonium. That is a lot of nuclear weapons.
    More broadly, Congress needs to consider whether the 
agreement overall provides adequate nonproliferation assurances 
regarding the separation of civilian and military nuclear 
activities, the continued provision of civilian nuclear 
cooperation by China to Pakistan, and the robustness of China's 
export control implementation.
    So does the agreement provide adequate nonproliferation 
assurances? China's porous boundaries between civil and 
military nuclear activities and its intense drive to indigenize 
foreign technology have resulted in the concerns that you have 
heard here today about the use of U.S. canned pump technologies 
in Chinese naval reactors.
    Safeguards are designed to help address that porous 
boundary, and the fast-track procedures for technology and 
information transfers that place part 810 transfers squarely 
under the Nuclear Cooperation Agreement are designed to 
increase accountability within the entities in the Chinese 
Government.
    But Congress could strengthen transparency in a resolution 
of approval by requiring reporting on steps that the Chinese 
Government has taken to create firewalls between civilian 
nuclear and military nuclear sites, facilities, and personnel. 
Additionally, Congress should require reporting on the new fast 
track procedures for technology transfer on an annual or 
biannual basis to assess their effectiveness.
    Second, Congress should look for assurances that the U.S. 
Government is actively working to persuade China to cap its 
nuclear assistance to Pakistan, or at least recognize 
reasonable limits so that it stops undermining Nuclear Supplier 
guidelines policies. You could also require reporting on the 
steps that the U.S. Government has taken in that regard.
    And finally, Congress should seek assurances that China is 
improving its export controls, at least in the nuclear area. 
You could require certifications every 5 years that China has 
taken appropriate and effective steps to improve its export 
control system and to halt transfers of WMD-related material, 
equipment, and technology to states of proliferation concern.
    You should also require the Director of National 
Intelligence to provide annual unclassified and classified 
reports to Congress on WMD-related acquisitions and transfers, 
specifically from China. This would replace the Section 721 
reports that have now stopped.
    My written remarks also include recommendations for 
Congress to strengthen its oversight generally to reflect new 
realities and support longstanding policies on nuclear 
cooperation, and I am happy to discuss those in the Q&A. Thank 
you.
    [The prepared statement of Ms. Squassoni follows:]
   
  [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
    

    
                              ----------                              

    Mr. Salmon. Thank you.
    My first question would be directed to Mr. Sokolski and Mr. 
Lipman, and it would actually be regarding some of the 
thoughts, and maybe others, that Ms. Squassoni has recommended.
    Some of the recommendations, that we would have additional 
review for export licenses and subsequent arrangements 
involving components and technology that could be used for 
naval propulsion, stronger Chinese Government control of 
proliferation by private Chinese entities, or assurances on 
halting Chinese thefts of U.S. nuclear technology.
    So if those conditions were established on the 
implementation of the U.S.-China 123 Agreement, how would that 
potentially impact the U.S.-China nuclear commerce? Would it 
drive them to not deal with the United States as much if we put 
those kind of additional safeguards in place? Or given what we 
heard in the first panel, we have the best technology in the 
world, is that good enough to keep them at the table? And then 
how would it potentially affect nonproliferation goals and 
carbon emissions?
    So I will start with you.
    Mr. Sokolski. Well, never let it be said that you don't ask 
a lot of questions in one question.
    Mr. Salmon. Nobody has ever accused me of that.
    Mr. Sokolski. Yes, well, you are a good journalist.
    Let me try to keep it simple. I think there is a danger if 
you start conditioning this agreement on getting the Chinese to 
agree to anything. I wouldn't do that.
    People are concerned about jobs. By the way, I am not sold 
that there are that many jobs, and we can get into that in a 
moment.
    I think you don't want to upset the Chinese.You know why? 
Our Government is not doing a great job in managing affairs in 
East Asia. We don't need additional headaches. That is what I 
would worry about, not the jobs.
    That said, everything I suggested does not require holding 
up the agreement or getting the Chinese to admit that they have 
done something wrong.
    There are two things. The reprocessing consent rights need 
to be forced into a situation where if they go down that route 
and they open up reprocessing--by the way, we should discourage 
it--then they have to be treated like Russia, and the President 
is just going to have to certify that that is how he is going 
to do it. And he needs to announce that now to discourage them 
from going down that route, because they don't need that to 
promote nuclear power.
    The second thing is, you need to get that U.S. design 
definition down. They defer to industry, essentially, is the 
testimony we got May 12, to decide what is and is not of U.S. 
design. But that is a conflict of interest. Westinghouse, in 
particular, sells technology as part of the package. We want 
the government to be in the business of controlling. It has to 
define what is U.S. designed.
    And I think you need to focus on those things, and I would 
focus certainly on the recommendations in my testimony, which 
are modest. They are twofold. There are some additional 
requirements that have you more involved, and that is it. I 
would not hold the deal up and I would not try to get the 
Chinese to say certain things.
    Let the deal go forward, but curtail the two excesses that 
are identified in the testimony, the reprocessing, which was 
unnecessary to give advance consent, and I would really get 
someone to actually say in writing we are not going to let 
preapprovals circumvent the existing procedures, because if 
anything, the Chinese have established they are not to be 
trusted on this issue.
    Mr. Salmon. Mr. Lipman, if we go ahead and implement the 
things that have just been recommended, which seem reasonable, 
does it jeopardize any kind of a relationship, or, as he said, 
if we just say this is the deal, take it or leave it, this is 
what we are going to do? What are your thoughts?
    Mr. Lipman. Certainly, any kind of ultimatum-like language 
that says take it or leave it is not something any reasonable 
businessperson would concur with.
    Second, to Henry's earlier point, if they are using U.S. 
technology, and they are, then export controls are in place. I 
mean, that is one of the reasons you transfer technology, is 
you want other countries to use your technology. Because if 
they are not using your technology, then you are on the outside 
looking in, commercially. So as long as U.S. technology is 
used, U.S. export controls are in effect.
    I would urge you to look at, as I think Mr. Countryman did, 
the Korea program, which this committee has reviewed in the 
past. That technology has been in play by the Koreans for 
decades, since the early 1980s. They have improved upon it, 
they have developed it further, yet it still maintains U.S. 
export controls.
    Relative to some of Sharon's suggestions, I would preface 
some remarks on them by simply saying, I agree with General 
Klotz that we have a very robust, thorough, and I will add 
time-consuming approach to the processing of export control 
licensing. And certainly anything that lengthens the cycle time 
is not helpful. In fact, it is a disadvantage for U.S. 
countries.
    However, I think there are some points Sharon made that I 
would concur with. And I am not going to, I think, catch them 
all, but in reading her testimony earlier, the creation of 
firewalls between civilian and nuclear military sites, 
facilities, personnel, that sounds very reasonable to us.
    Requirements for reporting on steps. The United States 
Government has taken to seek Chinese restraint regarding civil 
nuclear cooperation with Pakistan, both within China and I 
think she said the NSG also, that sounds reasonable to us too.
    Certifications on the surface sound reasonable, but you 
have to be careful what you are certifying. I mean, the 
language is very important there.
    Transparency is a good thing. Having the Directorate of 
National Intelligence providing an annual report, classified 
and unclassified, sounds like a good thing, but it ought to 
focus on those things controlled by the 123 and not get too far 
afield. Let's stick to the knitting and the spindling. So 
reporting on the administrative implementation of tech transfer 
on an annual or biannual basis to assess their effectiveness 
also sounds like something that is reasonable to us.
    So I think those are things that are reasonable. I might 
depart company from Sharon with respect to the reprocessing, in 
that the Chinese have indicated that their intent is to 
reprocess civilian spent fuel in a civilian facility and that 
that facility will be open to IAEA safeguards and/or what is 
known as a voluntary arrangement.
    Now, Sharon made a point, but you have to make sure they 
inspect. That is fair enough. But to me, the offer to put a 
facility under safeguards and to have it voluntarily inspected 
is, to me, evidence of good faith.
    Thank you.
    Mr. Salmon. Thank you.
    Mr. Keating.
    Mr. Keating. Thank you, Mr. Chairman.
    I just want to touch base on the environmental impact and 
risk issues. What does the adoption of the passive safety 
measures of the AP1000 mean in terms of environmental impact 
and risk? Maybe Mr. Lipman or Ms. Squassoni could comment on 
that.
    Mr. Lipman. Okay. So I might ask for a clarification on 
``environment,'' because having lived in China for 4 years, it 
has got some of the worst environment. It has got some of the 
worst air and water quality that I have personally ever 
experienced. And having asthma as a result of living there for 
4 years, it is the gift that keeps on giving.
    So I am for anything that is going to improve Chinese air 
and water, environment, environmental quality. I think it is 
important.
    Like the United States, the Chinese population lives in the 
east. Coal is in the north and the west. It gets transported. 
It gets burned over major population centers. The Chinese 
understand this, and the Chinese are taking steps, and it is 
going to need more than just nuclear energy to help.
    Mr. Keating. Oh, I know we can't solve their environmental 
problems. I mean, in terms of this particular agreement, and 
the AP1000 in particular. And if they move away from that kind 
of design, if they are not involved in this, what would that 
mean in terms of environmental impact and risk?
    Mr. Lipman. So let's talk about the risk. That is very, 
very critical. Clearly, the adoption of passive safety 
technology like the AP1000 is an order of magnitude improvement 
over the current generation of reactors, and that is important. 
So it mitigates risk.
    Nuclear safety is important. We do have concerns that a 
very rapid expansion of the nuclear energy program has to be 
done in a way that maintains the highest standards, no short-
cutting of any sort whatsoever.
    Passive safety technology allows for less operator 
intervention. It allows for natural phenomena, like 
condensation, evaporation, and convection to cool the reactor 
in the case of a major reactor upset like we saw in Fukushima. 
So we want them to use these technologies with advanced safety 
concepts.
    Other companies in the U.S. are talking to the Chinese 
about small modular reactors, which represent yet another step 
forward in terms of nuclear safety improvement.
    And all of these would be critical within the confines of 
the 123. So we want this agreement to go through so that kind 
of safety cooperation can continue and mitigate risk.
    Mr. Keating. I can associate myself with many of those 
concerns coming from my own district, where design there is 
antiquated and we see some of those problems. And we don't have 
those passive safety measures even here at home.
    Would you like to comment, Ms. Squassoni, on that?
    Ms. Squassoni. Yes, just on that point. I think it is 
important for the committee to remember that in at least the 
nuclear safety and nuclear security regimes there are no 
internationally binding standards. And so I guess in that 
sense, the role of industry is very important.
    I guess I would caveat that by saying while it is true that 
China is building, they are building EPRs, French technology, 
American technology, I would also support the U.S. technology 
as having excellent safety.
    Mr. Keating. I only have 60 seconds left. I just want you 
to comment on the agreed minute provision in this. Evidently, 
given some of the testimony, there are some concerns about the 
effectiveness of that. If you could, just in the little time 
that remains.
    Mr. Lipman. Thank you, Congressman.
    My view of the agreed minute and placing technology 
transfer to some degree under the 123 is an important 
improvement. The concern is somehow that things will get rushed 
through. I see it as differently. I see it is that if there is 
a concern or a problem or that the Chinese perpetrate some sort 
of violation of export controls, it is now a treaty violation. 
It is not just a violation of an export control rule, it is a 
treaty violation. And not being an attorney, though, my 
understanding is that that is much more of a serious problem 
for the Chinese.
    Mr. Keating. To come full circle with the testimony of Mr. 
Countryman, when he mentioned politics, I think that shows how 
maybe some of that can reenter into this afterwards if 
necessary.
    I yield back.
    Mr. Salmon. Thank you.
    Chairman Poe.
    Mr. Poe. Thank you all for being here.
    Mr. Lipman, your colleagues have made several 
recommendations to us to put in the 123 Agreement. Do you agree 
with those recommendations? Without going through all of them, 
do you agree with them or not agree with them?
    Mr. Lipman. I agree with some of the recommendations 
indicated, Sharon's in particular. I generally would like to 
see this agreement go through without encumbrance.
    I do understand, separate from this committee, that in fact 
there are other concerns in other committees relative to the 
military diversion issue. We understand those are being 
addressed.
    We do concur with the role of the intelligence community. 
We think they are already engaged in this process. But others 
would like to see a stronger role.
    We, of course, as patriotic Americans, want to make sure 
that our technology is only utilized for peaceful purposes, and 
involvement of the intelligence community and other branches of 
government that assure that in a process that allows us to go 
forward commercially is something we would support.
    Mr. Poe. How much money are we talking about as far as 
industry goes that the U.S. would be able to benefit if we go 
and build it and maintain it, as opposed to the French?
    Mr. Lipman. Okay. So this is a 30-year agreement, and so it 
is hard to----
    Mr. Poe. If you can kind of cut to the chase, Mr. Lipman.
    Mr. Lipman. Yes, sir. So I would say you have got $12 
billion in sales under the current agreement. You probably have 
another $30 billion to $60 billion under current negotiation, 
and one might say that going forward in a 30-year basis you 
would have several billion dollars per annum in sales in each 
of the 30 years of the agreement.
    Mr. Poe. And as I asked Mr. Countryman when he was here, 
having a presence in China building it has an advantage over 
not having a presence and somebody else building it. Would you 
agree with that or not?
    Mr. Lipman. Absolutely correct.
    Mr. Poe. Because when you build it, you monitor it, the 
safety, the security. Is that correct or not?
    Mr. Lipman. You not only build it, but you are there for in 
many aspects for decades to come, because you service the 
plant, you refuel the plant, you sell renewal parts, you are 
working with the Chinese in a variety of different industrial 
cooperative relationships.
    Mr. Poe. So you don't build it and then you come back to 
Texas, so to speak.
    Mr. Lipman. No, sir.
    Mr. Poe. You stay over there, maintain it, supervise it, 
like you would any other project that you would build.
    Mr. Lipman. That is correct. We are not selling Pepsi, 
Chairman, we are there for the long haul.
    Mr. Poe. Or Dr. Pepper in Texas.
    Mr. Lipman. Yes, sir.
    Mr. Poe. Let me ask you this. We have a 123 Agreement with 
Russia. It expires in 28 years, I believe. It is a 30-year 
agreement. Were you involved in that at all?
    Mr. Lipman. No, sir.
    Mr. Poe. Were any of you involved in the Russia 123 
Agreement?
    Mr. Sokolski. Yes.
    Mr. Poe. You were involved in it. Okay.
    Your recommendation is when we design this 123 Agreement 
with China, we make sure the same rules that we requested and 
have with Russia are in this agreement. Is that a fair 
statement?
    Mr. Sokolski. Let's not discriminate.
    Mr. Poe. Treat them the same. Treat the Chinese and the 
Russians the same?
    Mr. Sokolski. At least on the reprocessing, on that issue 
you treat them the same.
    Mr. Poe. On reprocessing. Okay, thank you for that 
recommendation.
    Let me ask you another question. If my list is correct--let 
me say it this way. I think the public is concerned about a lot 
of things. We are concerned about--when you mention nuclear 
capability people get nervous. So we have civilian nuclear 
capability. We have military nuclear capability. And then we 
have intercontinental ballistic missile capability to deliver 
nuclear weapons. Those are kind of the three things I think we 
are all concerned about.
    If my understanding is correct, there are nine countries 
that have nuclear weapon capability as of today: U.S., Russia, 
United Kingdom, France, China, India, Israel, Pakistan, and the 
latest being North Korea in 2006.
    Look down the road, if you would. Where do we see nuclear 
weapon capability going? Who is next? Who is next? Any 
predictions?
    Mr. Sokolski. I just wrote a book.
    Mr. Poe. I know. I got your book up here. I got your book. 
So tell me the countries that we should be concerned about.
    Mr. Sokolski. I would worry a lot about East Asia.
    Mr. Poe. Specifically who?
    Mr. Sokolski. Japan, South Korea, and it is even 
conceivable Taiwan.
    Mr. Poe. How about Saudi Arabia, Egypt, Turkey?
    Mr. Sokolski. Well, you asked which ones are the quickest. 
In time, yes, you get a benefit of possible competition in the 
Middle East, and all of the ones that you have heard, all of 
the ones that you have said, get thrown in as well.
    The reason you have to worry about the Far East, however, 
is because the line between civil and military is much more 
blurred there than any other place in the world, with a 
possible exception of India.
    And the Japanese have been playing a game of plutonium 
poker for many decades. They pile up plutonium. They don't burn 
it. That gets our attention. It gives you a nuclear guarantee. 
It gets the attention of China and South Korea, who are very 
upset about it.
    There is no agreement about reprocessing in China. Now, 
there is clear proof. It is not in the 5-year plan yet. I spoke 
with the chairman, the former chairman of the Chinese National 
Nuclear Corporation, which makes the nuclear weapons and is 
interested in promoting the reprocessing. He said: We do worry 
about safety. That is the reason we need to have your 
cooperation, because we are going primarily with the American 
design.
    The French, by the way, I don't think you need to worry 
about the French. They are in receivership, sir. They are not 
competitive. They may not even make another reactor at the rate 
they are going given the troubles they have.
    Korea and Japan, let's just say they will follow our lead.
    I think you need to be a little more upbeat about what is 
possible and understand that the Chinese also see this deal as 
something that might benefit them. And we need to be aware of 
that. Don't hold it up, but focus on the reprocessing, because 
it is contingent. You do not want those Asian countries piling 
up plutonium. And I would pay attention to the export control 
stuff.
    Mr. Poe. I yield back.
    Mr. Salmon. Thank you.
    Mr. Sherman.
    Mr. Sherman. Thank you. Mr. Chairman, thank you for holding 
these hearings. The White House decided to convene a meeting 
that conflicted with these on the Iran nuclear deal. This 
nuclear deal may not be getting the same level of publicity, 
but also poses interesting policy questions.
    Mr. Lipman, we are going to be restricting China from re-
exporting U.S. technology. The issue is, what is U.S. 
technology? One can imagine a gallon of paint that is American 
with one drop of Chinese technology in it. One can imagine a 
gallon of Chinese technology with one drop of American 
technology in it. What is the definition of U.S. technology 
subject to export control?
    Mr. Lipman. Thank you, Mr. Sherman, Ranking Member Sherman. 
I don't think there is something formulaic, but I will give you 
a business guy's response to it.
    Technology is generally comprised in technology transfer 
agreements, commercial technology transfer agreements, as 
foreground technology and background technology and joint 
technology. And there are definitions, business definitions in 
these agreements.
    If the Chinese have taken AP1000 technology and modified 
it, the so-called CAP1400, as some have indicated, that is 
still U.S. technology. Why is that U.S. technology? Because 
under definitions of the tech transfer agreements between the 
two companies--and I was then a Westinghouse executive involved 
in that--that clearly has a basis in U.S. technology.
    Over time, as designs evolve and change, and change fairly 
radically, they can change fairly radically, that becomes far 
more tenuous. But certainly, as we look forward over the next 
decade or more and we look at the evolution of Chinese designs, 
which we can, and which we do, because we are involved in them, 
they are clearly based, at least the advanced passive 
technology, are clearly based on U.S. technology in our view.
    Mr. Sherman. Japan has constructed a large reprocessing 
facility which it wants to take online in the next few years. I 
think Mr. Sokolski has commented on that. South Korea has been 
interested in reprocessing and demanded that the United States 
agree to a process enshrined in the new 123 Agreement that we 
have with South Korea, currently pending before Congress, 
whereby in about 6 or 7 years we would have to decide whether 
to give them consent. We would have to say yes or no.
    China's agreement with the U.S., which is the one we are 
having these hearings on, provides, it appears to be, an 
advance consent to reprocess subject only to the facility being 
made available for safeguarding.
    We just had hearings yesterday. Apparently China, Japan, 
and South Korea are not always real happy with each other and 
may not be sanguine as one or the other moves toward 
reprocessing, may be anxious to stop reprocessing in one of the 
others.
    Mr. Sokolski, should we be concerned that we would have 
many tons of separated plutonium available for weapons in each 
country that may be reprocessing, as all three may be 
reprocessing in the future? And perhaps would these countries 
be interested in a mutual moratorium on reprocessing, or are 
they more interested in reprocessing themselves or causing one 
of their neighbors, perhaps, to not reprocess for a while?
    Mr. Sokolski. I took a trip, actually two trips, to try to 
promote, and for what it is worth, I talked with the 
government, our Government, before I went. I did not go 
commando. There is material I want to place in the record.
    One of the pieces is that proposal that we floated. And it 
was, we should back off going ahead with the program President 
Obama is uncomfortable with, and that is the Savannah River 
Project, which is a plutonium fuel project. Japan should not 
open up Rokkasho in March of next year because it doesn't have 
any way to fabricate the fuel and they have already indicated 
they want to pile up another 3 tons of material, minimum.
    By the way, when you say ton, it is 1,000 kilograms. Divide 
by roughly 4 or 5 and you get the number of bombs worth. It is 
a lot of material.
    The Koreans were apoplectic when they heard about this. The 
Chinese have gone public in their opposition. One of the people 
I talked with in China who is very highly placed said: We may 
not come to the Nuclear Security Summit; if you don't put a 
collar on this, we don't work on this.
    Each of them made very clear that their plans to go ahead 
were not fixed, and even the Japanese that I spoke with would 
like to figure out some way to get an off-ramp to what they 
have done. They have local constituents just like we do and 
they are pressing for jobs. But if there was an international 
effort to take a time out, you could speak to them and say: 
Well, there are higher priorities.
    I think this is the moment. It is one of the reasons I am 
very anxious that you say something about reprocessing in this 
deal, because if China gets green lighted it will encourage 
Japan to just go ahead. If Japan goes ahead, then the Chinese 
will say: Well, we need to hedge our bets. You do not need to 
do this for commercial nuclear power. It is not economic. You 
lose money. It is a dangerous weapons-related activity for the 
most part.
    Mr. Sherman. Thank you. I would comment that we may want to 
have a Pacific nations conference on reprocessing to discuss 
all three countries' and perhaps our own reprocessing, and 
maybe countries would see mutual security in that.
    I would ask unanimous consent to put in the record a letter 
from the IBEW, my own opening statement, an article from 
Foreign Affairs, and other scholarly articles.
    Mr. Salmon. Without objection.
    Mr. Boyle.
    Mr. Boyle. Yes, thank you.
    And I wanted to follow up on a question that I had asked 
the last panel, and they mostly answered it, but when I 
specifically asked about the economic impact and jobs they 
deferred to the second panel.
    And Mr. Lipman, in reading all your testimony, including 
the very helpful appendix, which is entitled ``Economic Impacts 
of U.S. Nuclear Exports to China,'' I think perhaps you would 
be the best person to direct this question toward.
    Mr. Lipman. Thank you, Mr. Boyle.
    The job creation from nuclear exports to China under the 
current agreement have been very, very significant. About 
12,000 to 15,000 direct jobs and an equal number of what they 
call induced or direct jobs were also part of this.
    But as you go forward in the implementation of the 
agreement under consideration, the renewal, the estimates, as 
you will have seen in the report, indicate, I think, between 
about 30,000 to 35,000 direct jobs created and sustained--and 
sustained--over a 30-year period.
    It is very, very significant job creation. And it is job 
creation of high technology, high-skill type of work, which is, 
I think, very, very important.
    And I know the comment was made earlier: Well, you know, 
maybe we don't worry about the jobs. But the very submittal 
that Ranking Member Sherman just talked about, he talked about 
the IBEW letter, well, you all know the position of trade 
unions on trade agreements. You just went through something 
here in the last month. So it is very significant that all of 
the major unions, the IBEW, the United Association, and the 
Boilermakers, have all come out in support of this renewal.
    Now, why would that be? Well, because there are jobs 
created. There are jobs created for pathway into the middle 
class. These are jobs that pay a family wage.
    And so we are very, very concerned. We do worry about the 
jobs, the jobs creation here. Thank you, Mr. Boyle.
    Mr. Boyle. Well, and I would say, just not to repeat 
everything you have just said, but clearly we are not talking 
about minimum wage jobs. We are talking about well-paying jobs.
    And certainly, toward the point that Mr. Sokolski 
interjected earlier, that is certainly not the only 
consideration. We are, after all, in a Foreign Affairs 
Committee setting. It is by far not the only consideration. But 
it is still a legitimate and valid consideration and one that I 
think in each one of our 435 districts we have been approached 
and talked about the importance of jobs and family-sustaining 
jobs. Well, here we have a wonderful opportunity.
    I don't know if, in the interest of fairness, if you wanted 
to comment since you had questioned the extent to which you 
think--not to put words in your mouth, but I got the impression 
that you thought that maybe the number of jobs is being 
overstated. Is that----
    Mr. Sokolski. You know, I don't want to wade into other 
people's turf. I think you should be skeptical, however, over 
the long haul as to what the Chinese are up to. They like 
making their own stuff.
    If you take a look at the complaints they have had about 
the canned coolant pumps, which were defective, some of the 
valves, they want to make them there themselves. One of the 
reasons I think they raided our various servers was to get the 
information.
    Now, that said, information isn't enough. They are going to 
need our advice. You don't really need a 123 Agreement to get 
that advice, by the way. There are other ways you can do 
things.
    I don't think that should be what is driving how you think 
about this. If there are jobs, fine. If there aren't, fine.
    The bigger questions are the security questions. After all, 
nothing that has been said at this panel stops this deal. It 
doesn't even stop reprocessing. But there is a certain laxness, 
or lax--what do you call it?--looseness with regard--and 
enthusiasm for doing certain things in the deal that I would 
condition and I wouldn't ask the Chinese for permission.
    It isn't take it or leave it. It is just good governance. 
So I don't think you have to choose between the deal and no 
deal, or reprocessing and no reprocessing, no.
    Mr. Boyle. All right. Well, I thank the panel for their 
participation. Again, I want to thank the chairmen and ranking 
members for inviting me here today.
    Mr. Salmon. I thank the panelists for their testimony and 
their answering of questions. We really appreciate it.
    And without further objection, this committee will be 
adjourned.
    [Whereupon, at 11:04 a.m., the subcommittees were 
adjourned.]
                                     

                                     

                            A P P E N D I X

                              ----------                              


                   Material Submitted for the Record


      [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
      
      
      
[Note: Material was submitted for the hearing record by the Honorable 
Brad Sherman, a Representative in Congress from the State of 
California, ranking member of the Subcommittee on Asia and the Pacific, 
and Mr. Henry D. Sokolski, executive director, The Nonproliferation 
Policy Education Center. Those materials are not reprinted here but may 
be accessed from the hearing page on the Internet at: 
http://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=103718.]
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      

                                 [all]