AUSTRALIA GROUP'S OUTREACH TO CHINA ON

S E C R E T SECTION 01 OF 03 BEIJING 002614 SIPDIS DEPT FOR ISN/CB, EAP E.O. 12958: DECL: 06/26/2033 TAGS: PARM KSTC PREL PGOV ETTC ETTRD BEXP CH SUBJECT: AUSTRALIA GROUP'S OUTREACH TO CHINA ON NONPROLIFERATION Classified By: Acting Political Section Chief Ben Moeling. Reasons 1.4 (b/d. Summary -------------- ¶1. (S) In a June 25 meeting with Australia Group (AG) Chair Ian Biggs, PRC MFA Deputy Director General for Arms Control Li Song objected to news that an AG representative would be dispatched to Taiwan "shortly" as part of the AG's outreach program. Biggs said that China should not be surprised by this as an AG representative visited Taiwan following the 2006 outreach meeting between China and the AG. Biggs told Li he would relay China's objections regarding Taiwan to the AG Plenary. Li stated that China fully supports nonproliferation regimes such as the AG, Missile Technology Control Regime (MTCR) and the Nuclear Suppliers Group (NSG), and is fully compliant with the standards set by these international groups. Li reiterated China's support for the AG and similar regimes, and looked forward to continued dialogues and exchanges with the AG. One MFA official noted that China had recently levied a monetary fine on a company found to have illegally produced and exported glass line equipment to Iran. End Summary AG Outreach to Taiwan -------------- ¶2. (C) Poloff was invited to attend a June 25 outreach meeting between the AG Chairman and Chinese Government representatives. Biggs provided Li with an update on the outcome of the AG's 2008 plenary meeting and told Li that the AG would send a representative to Taiwan following the plenary meeting. Li expressed surprise and said he understood AG membership to be open to states and outreach conducted to state actors exclusively. Taiwan is an extremely sensitive topic to China, continued Li, and China hopes that the AG's actions in sending a representative to Taiwan "will not have a negative impact on relations between the AG and China." China is confident, said Li, that it can implement international standards on nonproliferation for all of China, including Taiwan. He emphasized that the AG should not talk to a local office (meaning Taiwan) without first consulting the Central Government. Li said he "did not like" the practice of the AG sending a representative to Taiwan and that the AG should be more careful in dealing with such sensitive issues. In a sarcastic tone, Li said that he hoped that there were no more surprise announcements by the AG Chair. ¶3. (S) Apparently caught off-guard by Li's strong statements, Biggs responded that Taiwan is a large chemical producer and that the AG's decision to send a representative to Taiwan is not intended to make a political statement but is merely a means of sharing information. Though the AG does not conduct outreach with any other non-state actors, the exchange with Taiwan is on a different level than other outreach programs aimed at states. Biggs said that he was surprised at Li's reaction because, in the name of transparency, China was informed by the then-AG Chair that a representative would be sent to Taiwan immediately following its outreach meeting with China in 2006. Biggs told Li that he would share China's concerns about Taiwan with the AG Plenary. China's Compliance with International Standards -------------- -- ¶4. (S) Li stressed the high degree of importance that China places on preventing the proliferation of WMD, adding that China views proliferation as a strategic issue which affects international and national peace, security and social development. China has a clear policy to oppose any form of proliferation and not to assist any country seeking to proliferate or acquire WMD, Li added. China has improved its efforts to prevent proliferation and has promulgated specific laws and regulations on export controls. China continues to commit greater resources to its efforts to deal with changing technologies and markets and seeks out opportunities to work with other countries. To demonstrate China's commitment on nonproliferation, Li pointed out the 2004 China-European Union Joint Declaration on Arms Control, China's application for admission into the Missile Technology Control Regime and its involvement with the Nuclear Suppliers Group. Li highlighted the importance of such exchanges to China and expressed his hope for continued cooperation and further development of these relationships. Li also proposed that BEIJING 00002614 002 OF 003 the AG and China co-chair seminars or forums on nonproliferation in the future. ¶5. (S) Yang provided examples of China's statutory nonproliferation updates, such as the January 2006 statutory update on dual-use items, the July 2006 update of the national control list and November 2006 addition of nuclear and dual-use items to the national control list based on NSG criteria. Yang added that in August 2006, authority over all unlisted items was transferred to the provincial level to allow greater efficiency and flexibility. Recently, said Yang, an interagency team on export controls, consisting of officials from MFA, Ministry of Commerce (MOFCOM),Customs and other Chinese organizations, was formed to rapidly respond to emergency situations involving proliferation concerns. Yang added that the team has the ability, on very short notice, to stop a shipment from leaving China. The team responds mostly to leads based on intelligence gathered and is statutorily required to adjudicate the issue within 45 days. ¶6. (S) MOFCOM Deputy Director Sun Jian said MOFCOM has responsibility for regulating the export of all categories of dual-use items and is responsible for the issuance of all export licenses in China. For conventional arms, approval is required from the newly formed Bureau for National Defense Technology before MOFCOM can issue the license. For chemical exports, the Chemical Weapons Convention (CWC) of the National Development Reform Commission (NRDC) is the approving authority for the export of 54 chemical items, while MOFCOM retains authority over 10 chemical items. MOFCOM generally issues export licenses for the one time export of specific items, but also issues general and bulk licenses on a case-by-case basis, Sun stated. Moreover, MOFCOM issues exemptions where no export licenses are needed, for example in the case of commercial jet engines. In issuing export licenses, MOFCOM also incorporates a "catch-all" provision as well as China's new regulations on intangible technology transfers. In 2007, Sun summarized, MOFCOM issued approximately 12,000 export licenses. Approximately 10 percent, or 1,200, were chemical exports, mostly consisting of sodium sulfide used in leather tanning. Approximately 0.4 percent, or 48 licenses, were biological exports focusing mainly on freeze drying equipment. ¶7. (S) Zhao Yinong from the CWC Office of the NDRC said that all chemical producers are required to have in place an Internal Control Program (ICP) before his office issues a chemical producer's license. The ICP, once in place, must be reviewed every five years and the control list used in the ICP is updated every two years. At a minimum, the ICP must include the following: 1) a leader or responsible party, 2) review of procurement orders, 3) records of customer orders, and 4) internal training. Currently, Zhao offered, 60 percent of all chemical producers and 80 percent of all chemical exporters have in place an ICP program. Several major producers have implemented comprehensive ICP programs which include a CWC office and ICP branch offices at each location, Zhao said. ¶8. (S) Zhou Yahan from China General Administration of Customs (Customs) outlined China's enforcement efforts. Customs has 50,000 national and local officers who are responsible for 245 ports of entry within China. Zhou stressed that Customs is an independent organization with no outside reporting responsibilities. Throughout China, Customs operates four chemical exam centers, 55 container examination machines, 193 vehicle identification devices, 568 electronic strobes, 808 container identification devices, and 652 x-ray machines. Customs works closely with MOFCOM in enforcement efforts and in keeping their national control list up to date, Zhou said. Enforcement Action -------------- ¶9. (S) When asked by Poloff regarding recent enforcement actions, Li deferred to Yang. Yang said that China recently levied penalties in an export enforcement case. Yang said that a "company" (Note: MFA officials confirmed on 27 June that this case referred to Zibo Chemet) was found to have illegally produced and exported glass lined equipment to Iran. The information was provided to China in 2006 by a "friendly nation" and investigations began thereafter. In December 2007, MOFCOM, after determining that the company's Iran-related export activities were in violation of China's BEIJING 00002614 003 OF 003 export laws, fined the company approximately RMB 45,000 (USD 6,569)(the Chinese participants were unsure of the exact amount of the fine). Li and Zhou added that Customs is still investigating to see if anti-smuggling charges apply. When asked by Poloff if criminal punishments might apply, Li and Zhou replied that criminal punishment is a possibility. ¶10. (U) Participants: AUSTRALIA -- Ian Biggs, Chair of Australia Group and Assistant Secretary, Australian Ministry of Foreign Affairs and Trade -- Nick Purtell, Second Secretary, Australian Embassy -- Murray Edwards, Counsellor, Australian Embassy UNITED STATES -- William Oh, Second Secretary, Embassy Beijing CHINA -- Li Song, Deputy Director General, Department of Arms Control and Disarmament, MFA -- Yang Yi, Deputy Director, Department of Arms Control and Disarmament, MFA -- Jiang Bo, Attache, Department of Arms Control and Disarmament, MFA -- Sun Jian, Deputy Director, Ministry of Commerce -- Zhao Yinong, National Implementation Office for CWC, National Development Reform Commission -- Zhou Yahan, General Administration of Customs RANDT