China, nuclear technology, and a US sale

Critics of a deal to sell China cutting-edge reactors hope to stall it in Congress by questioning the sale's taxpayer-backed financing.

China has its heart set on buying a cutting-edge US design for a nuclear-power reactor, and the Bush administration has said it is willing to sell because the transaction will mean jobs for Americans and pave the way for a "nuclear [power] renaissance in the US."

But critics of the mammoth $5 billion-plus sale are raising concerns that China might not use the advanced technology strictly for peaceful purposes, perhaps intending to "reverse engineer" pieces of it for military purposes.

That worry surfaced this month in a letter four members of Congress sent to Defense Secretary Robert Gates. The May 18 letter asked whether the sale of four nuclear-power reactors to China, approved by the administration in December, could end up enhancing Beijing's military, including its ability to produce nuclear fuel for bombs and increase the stealthiness of its submarines.

"This transaction presents potential security concerns that Congress will have to consider," wrote Reps. Jeff Fortenberry (R) of Nebraska, Ed Royce (R) of California, Christopher Smith (R) of New Jersey, and Diane Watson (D) of California. All serve on foreign or international relations committees of the House of Representatives.

The sale of US civilian nuclear technology to China has long been a matter of contention. The debate is intensifying now because Westinghouse Electric Co. is expected within weeks to apply for up to $5 billion in loans from the US Export-Import Bank to finance the sale of the reactors to China. When it comes, the application will trigger a review by Congress, where critics of the deal hope to raise enough questions about it to hold it up, perhaps for good.

If approved, the deal would be the largest by far in the history of the bank, a taxpayer-supported entity charged with creating and sustaining jobs by financing sales of US goods to international buyers.

Besides security, an array of concerns

Though security concerns are paramount, any congressional hearings on the deal are likely to address the following sensitive topics, as well:

•Financing of the sale. Should US taxpayers be financing a multibillion-dollar loan to China at a time when China is running a massive trade surplus with the US? What do the taxpayers, who by some estimates contributed at least $300 million to Westinghouse Electric's advanced reactor design, get out of the deal – especially considering that a Japanese firm now owns 77 percent of Westinghouse?

•Technology transfer. China reportedly will get most of the new AP1000 technology, the latest US reactor design, as part of the sale. Some nonproliferation experts say the design of the reactor's coolant pump is of particular concern, and that China might be able to reverse-engineer it for use on its nuclear submarines. Westinghouse spokesman Vaugn Gilbert, though, says the company is bound by a federal technology transfer agreement "that precludes certain elements of that pump technology from being provided to China – therefore we will not be providing it."

Experts are concerned about the technology transfer issue and whether the sale will compromise America's technological lead on nuclear-power systems for subs.

"You're building an infrastructure that can be used and retooled to help out in [China's] naval reactor sector – and they do want this for nuclear subs," says Henry Sokolski, executive director of the Nonproliferation Policy Education Center, a think tank on nuclear-policy issues.

Because China is already a nuclear-weapon nation, others don't see a problem with sharing US light-water power-reactor technology, a design considered less useful for making bomb fuel. But they do have other worries.

"Our concern is more about whether the US should be supporting building a commercial nuclear infrastructure when there are serious questions about whether the Chinese regulatory system [for nuclear-waste disposal] can do this safely," says Edwin Lyman, a nonproliferation expert at the Union of Concerned Scientists, an environmental group.

A boon to US industry?

Westinghouse and administration officials say the sale is economically justified and concerns about technology transfer unwarranted.

"This deal ... would affirm that the US remains a leader in the design and construction of civilian nuclear-power plants," said David Pumphrey, a deputy assistant secretary at the Department of Energy (DOE) in February testimony before the US-China Economic and Security Review Commission. It would also create "some 5,500 new jobs in the US," he said. He echoed DOE Secretary Samuel Bodman, who spoke in December of the deal's potential to "spur development of a nuclear renaissance in the US."

Westinghouse's Mr. Gilbert says a key benefit is simply getting the new design working the first time in China, thereby working out any glitches and lowering costs for at least 10 new plants in the US that would use the same design.

To some, however, it's unclear how much the US benefits or whether the technology will help China's military. Others question whether the deal will create enough US jobs to merit billions in public financing.

"You've got the Japanese making most of the big parts, [and] the Chinese doing at least half the construction and absorbing all the technology to do it themselves later on," Mr. Sokolski says. "I fail to see any boon to US industry."

"We don't think these economic impact and jobs estimates are done very well," says Thea Lee, policy chief for the AFL-CIO, who sits on the advisory board of Export-Import Bank. "It's been our sense that the bank's process of verifying such claims is very inadequate and that there's a lot of phony job-padding going on."

Westinghouse officials say the deal will "load Westinghouse design centers" in Pennsylvania and other states with work and create positions in 20 states – to the tune of about 5,000 jobs.

Though the deal doesn't sit all that well with Lawrence Wortzel, a commissioner with the US-China Economic and Security Review Commission, he does not favor blocking it.

"While I have reservations about the financing and technology transfer to third parties, I still wouldn't recommend taking action to block the sale," he says, noting that China certainly has the money to finance the deal itself and has a huge trade surplus with the US.

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