China Trades for U.S. Technology

0 Comments | Insight on the News, Nov 8, 1999 | by Timothy W. Maier

McDonnell Douglas may by indicted for selling high-tech machinery to Beijing capable of building nuclear warheads. but it did so with the Clinton administration's approval.

For nearly five years it appeared McDonnell Douglas Corp. would walk away unscathed from a Justice Department probe into an aerospace contract that furious intelligence experts claim aided the nuclear capabilities of Beijing's People's Liberation Army, or PLA. On the surface the deal seemed innocent enough. The aerospace contractor, which merged with the Boeing Co. in August 1997, shipped tools from its Columbus, Ohio, plant to Beijing to help build commercial aircraft. Except these weren't ordinary tools: the machinery was capable of doing so much more -- such as building nuclear warheads. Still, as long as the tools didn't end up with the PLA, there was no harm.

Soon Americans were being asked to believe that a naive Clinton administration just didn't understand the dynamics of how Beijing diverts dual-use technology. True, all the Clinton team had to do was look at the Defense Intelligence Agency, or DIA, chart of China's Defense Industrial Trading Organizations to see that every import transaction is reviewed by Beijing's crafty Commission of Science, Technology and Industry for National Defense, or COSTIND. This organization coordinates and oversees "defense-related development, production, technology transfer and marketing," according to DIA documents obtained by Insight. Those McDonnell Douglas tools certainly must have been a hot ticket for COSTIND review.

Besides, there is evidence that Beijing long had been staking out the targeted McDonnell Douglas plant. In fact, a year before the deal went through, many Chinese nationals visited the Ohio factory known as Plant 85, according to Wall Street Journal reporter John Fialka, author of War By Other Means: Economic Espionage in America. Fialka, who has testified before several congressional committees probing Chinese espionage, says some of those Chinese visitors carried video cameras and slowly panned the length of the biggest machines. The visitors turned out to have been from a subsidiary of China's National Aero-Technology Import-Export Corporation, or CATIC, which eventually cut the deal with McDonnell Douglas for those machine tools.

When rumors began to circulate in the Ohio plant that the Clinton administration was going to allow the sale to Beijing of the machinery that helped build the B-1 bomber, the space shuttles and the C-17 heavy-duty military-transport plane, fury erupted. The 4,000 blue-collar workers at the plant began shouting at the Chinese visitors and overturned tables to prevent the guests from getting too close to the machines.

McDonnell Douglas told its employees the rumors about such sales were false, says Fialka. It certainly didn't seem to make sense since the FBI had instigated a large-scale espionage investigation following reports from intelligence agencies that Beijing was proliferating weapons of mass destruction to Pakistan and rogue Middle Eastern countries. Turning over such machinery to Beijing would enable communist China to build more sophisticated nuclear warheads. What lunatic would approve that?

Beijing knew it couldn't just steal the machines. So it did the next best thing: China put a $1 billion aircraft order on the table for McDonnell Douglas as part of a package deal that included a $5 million contract for the machines. The aerospace company knew that for this lucrative deal to go through it would have to get export licenses to ship the machines to Beijing. The ploy worked. Soon the White House, Commerce and State departments favored the deal. Even Secretary of Defense William Perry went against the advice of Pentagon experts and signed on for the sale after being heavily courted by McDonnell Douglas lobbyists. Under this 1994 deal the U.S. government licensed the tools to CATIC as if for use on commercial aircraft.

About 275 truckloads later, the machines were on their way to the PLA. Ohio Plant 85 was shut down in March 1994, leaving thousands of Americans unemployed. A former union leader, Fred Lassahn, put it this way: "Now they can build military aircraft, missiles, whatever they want. We better duck. I can't believe our government let this happen."

According to a June 1994 unclassified document published in The Year of the Rat by Edward Timperlake and William Triplett, 90 to 95 percent of the purloined plant was defense-related, and "doubts had been raised on how these machines would be delivered to China." Timperlake and Triplett, both intelligence specialists, say that by 1995 it was clear the facility the Chinese claimed to be building to construct commercial aircraft was a phony. "It never existed," they report.

McDonnell Douglas may have agreed to this contract because of a decline in its airline business. After World War II, the Douglas DC airliners flew 90 percent of the free world's civilian passengers but, by the 1990s, that number had dwindled to 10 percent of the market. A cash-hungry McDonnell Douglas swallowed the golden Chinese hook.