Confounded By the Chinese Puzzle

By Kevin Fedarko

Little wonder no one knows what U.S. policy toward China is these days. At the same time that Clinton Administration officials are threatening to curtail trade by revoking Beijing's most-favored-nation status because of China's dismal human-rights record, the Administration is quietly poised to approve one of the largest sales of U.S. military hardware and technology ever to the People's Liberation Army. The deal, which could be worth as much as $2 billion, involves gas turbine engines. The Chinese say they want to use them for jets, but some nuclear nonproliferation experts insist that Beijing has more sinister plans.

While the transaction involves neither military secrets nor cutting-edge American technology, it has nevertheless become a symbol of confusion within the Administration. The deal circumvents trade sanctions on military equipment enacted after the 1989 Tiananmen Square massacre and appears to contravene Defense Department efforts to engage China in defense conversion, not modernization. To benefit an American company, the U.S. may allow the transfer of equipment that some experts say could enable China to develop a longer- range cruise missile, capable of lofting nuclear warheads as far as Japan and India. If approved, the sale would provide a graphic demonstration of the constant collision of competing goals in Bill Clinton's foreign policy: protecting human rights, controlling proliferation of weapons of mass destruction and nurturing American trade.

The deal began in 1987, when Garrett, an engine company based in Phoenix, Arizona, beat out rivals from France, Britain and Canada for a contract to supply engines to Nanchang Aircraft, a Chinese government-owned manufacturer. Nanchang said it needed the engines for a light military jet trainer, the K-8, that was destined to be sold abroad. In November 1991, the U.S. Commerce Department, which had been moving aggressively to promote American trade by cutting through export barriers, quietly dropped national security controls originally imposed during the cold war, allowing the engines to be shipped to China without an export license.

As the first order of goods was being shipped, however, the picture changed again. Officials at the Defense Technology Security Administration learned about the deal after they read a wire between the U.S. embassy in Beijing and the State Department. Fearing that China intended to use the Garrett engine to extend the range and payload capacity of its Silkworm missile, the agency raised furious objections.

Garrett's parent company, AlliedSignal, had no intention of abandoning the sale -- especially since the Chinese by then had expressed interest in purchasing as many as 500 engines over 20 years. Including service and peripherals, the company estimated the deal could gross $500 million and support 440 jobs at Garrett and its subcontractors. AlliedSignal's lobbyists began pressing the Pentagon to drop its opposition. To dispel fears that the engines might be used for missiles, AlliedSignal's spokesman Arch Niesmith told congressional investigators not to worry. "Our engine has a diameter of nearly three feet," he said, "whereas a cruise missile is roughly one-third that size." Assistant Secretary of Defense Ashton Carter and his deputy Mitch Wallerstein signed off on the deal. Wallerstein circulated a memo predicting that AlliedSignal's sales to China might soar to 2,000 engines. The company quickly disavowed Wallerstein's numbers as unrealistic after critics within the Department of Defense began questioning China's need for so many jet trainers.

Some nonproliferation experts take issue with AlliedSignal's claim that the engines cannot be adapted to an improved Chinese cruise missile. Within the Defense Technology Security Administration, specialists are worried that the engine is perfectly suited to powering a long-range cruise missile. CIA studies have warned that if AlliedSignal sells not just the engine but the technology to build it, China will gain high-quality military technology, which could be used for a new generation of cruise missiles. Even more disturbing is the conclusion of an internal Defense Department study. A missile such as this, say the authors, would put most of the rest of Asia within range of a Chinese nuclear attack.

No less worrisome is the possibility that unless China curbs its profligacy in peddling weapons to virtually anyone with the cash to pay for them, the improved missiles could wind up in the hands of countries like Syria, Iran and Pakistan -- all three of which have long bought missiles from Beijing.

But other experts say such analysis is unnecessarily alarmist and damaging to American business. "I think those engines don't mean squat," says Charles Bernard, a former Pentagon official. "The French make an engine that size, as well as the Brits and the Germans. A lot of people would sell them an engine. There are mysterious, scary transactions, but this ain't one."

Regardless of whether the engine eventually becomes the centerpiece of a Chinese cruise missile, the Garrett deal undermines the noisy debate over whether the U.S. should extend China's most-favored-nation status. Viewed against the backdrop of assurances by Secretary of State Warren Christopher that the Clinton Administration will cut off MFN unless China improves its human-rights behavior, the Garrett sale only reinforces Beijing's impression that U.S. demands are a charade.

With reporting by Elaine Shannon and Kenneth R. Timmerman/Washington and Mia Turner/Beijing