Foreign Affairs

Administration Poised to Subsidize China’s Nuclear Industry

A Japanese-owned company is building nuclear power plants for Communist China, and the Bush administration is ready to use U.S. taxpayer dollars to subsidize the deal to the tune of $5 billion. Although China’s government-owned nuclear industry has a long record of illegal nuclear deals with Iran and Pakistan, administration officials say the technology is not transferable to nuclear weapons, and that the subsidy will create 5,000 jobs in Pennsylvania.

The Export-Import Bank of the United States (Ex-Im) is a federal agency that subsidizes U.S. exports by lending taxpayer money to foreign buyers (such as the Chinese government), or guaranteeing private loans, so that the foreign buyer can purchase U.S. goods.

Westinghouse Electric is a wholly owned subsidiary of the Japanese company Toshiba. Westinghouse manufactures the AP 1000 — a new model of nuclear power generator — in Monroeville, Pa.

In February 2005, Ex-Im’s board of directors granted preliminary approval for a $5 billion subsidy — an unspecified combination of loans and guarantees — to the China National Nuclear Corporation (CNNC) as a way of aiding Westinghouse’s bid for the contract (a French company and a Russian company were also competing for the contract.)

This year, the Chinese government awarded the contract to Westinghouse, bringing the record subsidy closer to reality, although the preliminary approval does not guarantee Ex-Im will provide financing. A Westinghouse spokesman told HUMAN EVENTS the company was in the process of applying for Ex-Im financing. Ex-Im spokesman Phil Cogan told HUMAN EVENTS that while a preliminary commitment is by no means a promise by Ex-Im, it indicates that “this is the kind of thing” Ex-Im would subsidize.

Congressional critics from both ends of the spectrum, including Senator Bernie Sanders (I.-Vt.) and Republican Representatives Ron Paul (Tex.), Jeff Fortenberry (Neb.), and Ed Royce (Calif.), have resisted this deal.

For the critics, the deal is problematic on at least three fronts. First, China’s state-owned nuclear industry has a long history of illegal nuclear weapons proliferation, and this subsidy enriches that very industry. Second, some of the jobs generated by this record subsidy deal will not be in the U.S. Finally, aiding China’s nuclear power industry could boost its military capabilities including its nuclear submarine programs.

Rewarding Proliferators

The CNNC is the branch of the Chinese government that manages both nuclear weapons and nuclear power. In recent months, CNNC and other state agencies founded the State Nuclear Power Technology Company (SNPTC). SNPTC, entirely owned by the Chinese government, is now the official purchaser of the nuclear reactors from Westinghouse.

CNNC is a known serial proliferator of nuclear weapons materials. In the late 1990s, U.S. intelligence agencies found that the CNNC had sold 5,000 ring magnets to Pakistan’s A.Q. Khan Research Laboratory. Later, the CIA found that the CNNC sold Pakistan high-temperature furnaces. Both the furnaces and the ring magnets are crucial tools used in enriching uranium to produce fissionable —  i.e., weapons grade —  uranium. Shortly after these sales, Pakistan tested its first nuclear weapon.

In 2004, A.Q. Khan, the Pakistani scientist on the buying end of the CNNC’s sales, was arrested for selling centrifuge materials to Libya. Khan is also known to have aided the nuclear weapons programs of North Korea and Iran. CNNC has, on at least two occasions, had dealings with Iran’s nuclear weapons program, but it is not clear if China has ever actually executed a sale of nuclear weapons materials to Iran.

American Jobs?

Westinghouse and Ex-Im officials have defended this subsidy by pointing out that without it, China would still build the nuclear power plants, but in collaboration with the Russians or the French. By greasing the skids for the Westinghouse contract with its preliminary commitment in 2005, Ex-Im has helped make work for 5,000 manufacturing workers in Monroeville, Pa. In April, however, Westinghouse announced that portions of the power plants would be built in South Korea and other parts in China. Ex-Im cannot finance an export unless most of the goods are made in the U.S.

Westinghouse and the Bush administration point out, however, that if these cutting-edge reactors do well in China, it would spur domestic and world-wide business for Westinghouse, making more jobs in Pennsylvania.

Helping China’s Military?

In late May, Representatives Christopher Smith (R.-N.J.), Diane Watson (D.-Calif.), Fortenberry, and Royce, asked Secretary of Defense Robert Gates in a letter whether the sale could boost China’s military capabilities.

Henry Sokolski, executive director of the Nonproliferation Policy Education Center said that there are reasons to worry about providing China with this technology. “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,” the Christian Science Monitor quoted Sokolski.

Last year, during the debate on reauthorizing Ex-Im, the House passed by a 331-to-114 vote an amendment by Representatives Paul and Sanders that would have blocked a subsidy for this deal. The measure, however, was not in the final bill.

As of Tuesday morning, Ex-Im had not yet received an application from Westinghouse or any of its partners with regard to the sale.  Sanders, Paul, or Fortenberry will likely act once Ex-Im receives the application, and possibly hold hearings on the deal, which would be the largest subsidy in Ex-Im history.


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