Satellite Exports Getting Review

Three years ago, Republicans in Congress launched a ferocious attack on President Clinton for approving the export of satellites to China in a way they said harmed America’s security.

Now, with a Republican in the White House and a satellite industry complaining of lost business, Washington is singing a different tune.

Amid the furor of the late 1990s, the Republican Congress enacted legislation making it harder for companies to win government approval of satellite exports. Meanwhile, Clinton put satellite export applications to China on hold.

Now Congress is considering legislation that would reverse the changes enacted in 1999. Separately, the Bush administration is thinking of clearing the way for U.S. companies to have their satellites launched on Chinese rockets again.

All of this is happening at the instigation of a U.S. satellite industry that says hundreds of millions of dollars in sales have gone to European competitors because of delays caused by the stricter procedures.

Most of the country’s leading satellite firms are based in California, where the industry employs an estimated 25,000 people, mostly engineers and other high-skilled workers. Rep. Dana Rohrabacher (R-Huntington Beach) has heard their plea.

As recently as two years ago, Rohrabacher was perhaps the harshest Republican critic of the Clinton administration’s China policy and its approval of satellite exports.

Now he is one of two co-sponsors of a bill to undo the Clinton-era reforms.

“I’m trying to be practical here,” Rohrabacher explained. “I wasn’t out to destroy any satellite industry. If we can trade with Communist China in a way that doesn’t put our country and our national security at risk, that’s fine.”

In 1999, Congress transferred authority over satellite exports from the Commerce Department to the State Department. The Commerce Department is considered more sympathetic to business and has quicker, looser licensing requirements than the State Department, where national security considerations are paramount.

Under a separate law passed after China’s 1989 repression of protests in Tiananmen Square, satellites may not be exported to the country without a special presidential waiver.

The State Department is reviewing at least three applications for satellite launches in China, and it could submit one or more for President Bush’s final approval soon. One of these comes from Loral Space and Communications Corp., the company that was at the heart of the Clinton-era controversy.

Any satellite application that Bush approves still is subject to a congressional veto. In April, while China was holding the crew of a U.S. reconnaissance plane, several experts suggested that the incident might so inflame public opinion that it would cause a long-term freeze on U.S. satellite launches in China.

Now, however, with the uproar over the plane incident subsiding, State Department officials privately predict that at least one application for a satellite launch in China may be approved soon.

“If you’d talked to me a month ago, I’d have said there was no way this was going to happen,” said an executive at one of the satellite firms now applying for a license at the State Department. “Back then, it would have been ridiculous to send up a request to Congress.”

Satellite companies often are required to pay millions of dollars in penalties if licensing delays cause them to postpone a launch.

Loral said earlier this year that the company would have to refund $134 million and pay $11 million in penalties if it couldn’t win U.S. approval for the launch of a satellite in China. Another firm, Intelsat, has said it faces a July deadline.

Ever since Congress shifted authority over satellite exports to the State Department, industry representatives have been arguing that the new rules are too cumbersome.

“It’s not just a time issue,” said Clayton Mowry, executive director of the Satellite Industry Assn. “There are several other factors that make it more difficult to be competitive under the State Department system.

“Anything valued at over $50 million has to be sent up to Congress, which adds uncertainty to the licensing process. Anything on the State Department list can be the subject of economic sanctions. And it also requires many more licenses to do the same business under the State Department system than at the Commerce Department.”

There is an underlying rationale for the State Department’s tougher requirements. Generally, the State Department regulates the sale of weapons and other military equipment, while the Commerce Department controls the export of commercial items that are intended for commercial use but might still have military applications.

As a result of the China controversy, Congress three years ago effectively reclassified satellites as military items, making them covered by the tighter rules of the State Department’s munitions list.

The China dispute centered on Loral and another U.S. firm, Hughes Space and Communications (now Boeing Satellite Systems). In the mid-1990s, experts at the two firms were found to have shared some sensitive data with Chinese officials about the failure of Chinese rocket launches. Pentagon officials said the sensitive information could have helped China improve the capabilities of its missile systems.

In 1998, while the Justice Department was investigating the two firms, Clinton gave permission for Loral to export another satellite for launch in China. Loral’s chairman, Bernard Schwartz, had been the largest single personal contributor to the Democrats during the 1995-96 election cycle, when Clinton was running for a second term.

News stories about the satellite dispute prompted the House Republican leadership to appoint a special committee, headed by Rep. Christopher Cox (R-Newport Beach), to investigate how China obtained U.S. technology.

That committee concluded that “to protect the national security, . . . the Department of State is the appropriate agency for licensing . . . exports of satellites.” The chief counsel for the Cox committee, Lewis Libby, is now Vice President Dick Cheney’s chief of staff.

A spokesman for Loral refused to discuss the company’s pending application with the State Department for a satellite launch in China. “It’s the government that needs to make a move here,” he said. “We’re in the same position we were in years ago.”

The spokesman also refused to say whether Loral was backing the legislation to transfer satellite licenses back to the Commerce Department. Loral is, however, one of the members of the Satellite Industry Assn., which actively supports the bill.

The legislation was introduced by two California congressmen, Rohrabacher and Rep. Howard L. Berman (D-Mission Hills).

While making the Commerce Department the main agency for satellite exports, the legislation gives the Pentagon and State Department a time-limited right to review the applications. Rohrabacher says the proposed legislation amounts merely to “fine-tuning the process.”

Two years ago, Rohrabacher pointedly warned satellite industry leaders not to try to undo Congress’ decision to give licensing to the State Department.

“I agree that the State Department is way too slow, restrictive and bureaucratic,” he said in a 1999 speech. “But industry’s claim that State is intrinsically the wrong agency isn’t credible, given what occurred under Commerce.”

Rohrabacher is chairman of the House Science Subcommittee on Space. Campaign finance records compiled by the Center for Responsive Politics show that satellite and aerospace companies are among his leading campaign contributors.

Rohrabacher’s biggest single contributor in the 2000 election cycle was Lockheed-Martin; the company’s employees and political action committee gave $7,500. The Boeing Co. also was on his list of top 10 contributors, at $3,500.

Asked in a recent interview whether congressional Republicans overreacted when they took satellite licensing away from the Commerce Department, Rohrabacher replied, “There’s no way you can overreact to American businessmen intentionally betraying their country in a way that leaves Americans vulnerable to nuclear attack.”

The question of whether to ease the licensing requirements for satellites is causing some anguish on the Republican right. Three months ago, the conservative Heritage Foundation issued a paper that sympathized with the difficulties faced by satellite firms without endorsing their campaign to be free of State Department regulation.

“A stricter export control regime might hinder the industry’s ability to recover its market share, but the worthwhile trade-off is keeping sensitive technology from proliferating to those who would harm America,” wrote Larry M. Wortzel, director of the Heritage Foundation’s Asian studies center.

The satellite issue is merely one part of the much deeper divide within the Republican Party between free-traders and security hawks concerning the issue of export controls.

In recent months, congressional Republicans have been at odds over a proposal to liberalize export controls on supercomputers, machine tools and other so-called dual-use technologies and limit the Pentagon’s power to stop these sales. This broader legislation also would apply to satellite exports.

Pro-trade Republicans led by Sens. Phil Gramm of Texas and Mike Enzi of Wyoming have argued that the rules need to be eased to help U.S. exporters. Pro-security Republicans such as Sens. John W. Warner of Virginia, Richard C. Shelby of Alabama and Jesse Helms of North Carolina disagree.

So far, congressional Democrats have tended to stay out of these disputes, happy to let the Republicans bicker among themselves.

Some Democrats predict that the Republicans eventually will come around to a more tolerant view concerning satellite exports, now that the president is one of their own.

“This issue got all caught up in the tensions between Clinton and the congressional Republicans,” Berman said in an interview. “I think the Republicans will be a little more receptive now than they would have been under Clinton.”