Note:

Below follow Assistant Secretary Ford's remarks to the FBI-Department of Commerce conference on "Counterintelligence and Export Control," held in Indianapolis, Indiana, on September 13, 2018.  They may also be found on the website of the U.S. State Department's Bureau of International Security and Nonproliferation.

Good afternoon everyone, and thank you for the kind introduction.

As a native-born Ohioan – and from Cincinnati, no less, just a few miles from the Indiana border – it is a pleasure for me to have the chance revisit the great American Midwest, and I’m glad to have the chance to speak to you here today.

This pleasure is all the greater because it gives me the opportunity to talk to you about an important area on which we are spending more and more time in my bureau at the U.S. Department of State. I run the Department’s Bureau of International Security and Nonproliferation (ISN). Our core mission at ISN is to lead U.S. diplomatic efforts to address the myriad threats and policy challenges facing the United States as a result of the spread of weapons of mass destruction (WMD), delivery systems, and advanced conventional weapons.

But fighting the proliferation of those technologies to rogue proliferator states and terrorists is not all we do. As I explained in my testimony to a Senate committee a couple of weeks ago, we also have an important and growing role in supporting U.S. strategy vis-à-vis great-power competitors.

This is a very important theme for this Administration. The new U.S. National Security Strategy, for instance, calls out “the contest for power” as a “central continuity in history,” and warns about challengers – specifically, “the revisionist powers of China and Russia, the rogue states of Iran and North Korea, and transnational threat organizations” – that “are actively competing against the United States and our allies and partners.” In our new National Defense Strategy, we make clear that “[t]he central challenge to U.S. prosperity and security” today is “the reemergence of long-term, strategic competition,” and that “[b]oth revisionist powers and rogue regimes are competing [with the United States] across all dimensions of power.”

My discussion in the Senate centered upon our implementation of sanctions targeting Russia’s destabilizing arms transfers to foreign clients. With you today, however, I would like to emphasize a different aspect of U.S. responses to the so-called “near-peer” challengers: U.S. competitive strategy toward China.

As I tried very hard to point out in my scholarly work out of government in between the George W. Bush and Donald J. Trump Administrations, China has for a great many years been diligently engaged in a long-term strategy to regain the global power and influence Chinese leaders believe were lost in the 19th century to Western imperialist powers. The stated objective of the Chinese Communist Party’s strategy is not merely to acquire power and influence for itself on the world stage, but in fact to  displace U.S. power and influence as China reclaims the central geopolitical status and role of which the Party has convinced itself that China was robbed in the 19th Century by Western imperialism.

As Chinese leaders openly articulate these goals, the stated objective is to achieve – or, to put things in the context of these longstanding feelings of historical grievance,  re-achieve – the “Chinese Dream” of geopolitical preeminence, thereby making up for what the Chinese describe as the “century of humiliation,” which they felt to have arisen out of the painful collapse of China’s ancient geopolitical stature. More specifically, to help make the world right again, the Chinese Communist Party (CCP) aims to achieve for China great-power status and dominate the East Asian region by at least as early as 2049 – that is, the 100th Anniversary of the Party’s coming to power.

As noted in the Pentagon’s just-released report to Congress on China’s military power, Chinese leaders – including President Xi Jinping himself – have characterized the 21st century’s initial two decades as a “period of strategic opportunity.” During this period, they think, international conditions will facilitate domestic development and the expansion of China’s so-called “comprehensive national power” in support of President Xi’s “China Dream of national rejuvenation.”

“Comprehensive national power” is felt to have many elements, but for the CCP, a critical point of emphasis is for China to become a high technology economy. For Beijing, this is critical not only in order to improve economic competitiveness, but also in order to facilitate development of the high-technology military capabilities Chinese leaders believe they need in order to challenge the United States.

The economic component of this strategy is outlined in multiple industrial plans, including a strategy known as “Made in China 2025,” in which China seeks to climb the industrial production value chain through development of advanced manufacturing capabilities. The  military component of this strategy is outlined in Chinese statements and policies on what Chinese officials term “Military-Civilian Fusion” – but which I’ll just call “MCF” – in which China seeks to develop a world class, high-technology military through acquisition and development of the most advanced military and technological capabilities in the world.

Chinese writings explain that MCF is the engine driving the new “revolution in military affairs” that is said to be underway as advanced technologies catalyze dramatic advances in combat power. These writings liken these current dynamics to  prior revolutions in military affairs, such as the development of gunpowder or military aviation, and China hopes to ride the next wave to its “Chinese Dream.”

Developing or acquiring state-of-the-art military technology is considered critical for China because it has long believed that it was its own  inferior military capabilities that led to disastrous military defeat at the hands of Britain in the Opium Wars – bringing about China’s traumatic slide from being the self-described “Middle Kingdom,” feeling itself to be at the peak and center of human civilization, to perceiving itself as a weakened state suffering subjugation by imperial powers. In effect, the “Chinese Dream” seeks to claw back that imagined role and status, and MCF is designed to help give China the military tools its needs to achieve this.

What this means, in practice, is that it is a huge Chinese priority to develop or acquire advanced technology, including Western technology - and including, especially, militarily-useful technology. This may occur through licit means such as technology transfers and joint research and development with foreign firms, or through collaboration with foreign universities. But it also occurs illicitly, through theft and both traditional and cyber-facilitated espionage – and a raft of U.S. indictments over the past decade demonstrate illicit Chinese targeting of U.S. corporations to gain economic advantage and to improve military capabilities. Either way, however, a key enabler for China’s military modernization and economic expansion has been its access to the U.S. economy, including America’s sophisticated industrial and technology sectors and our world-class universities. Our know-how has been essential to making China rich, and this has benefited many millions of people, but it has also helped make China strong – and this may have some very problematic implications indeed.

There are, therefore, powerful reasons to be very attentive to the risk that technology transferred to China will be employed in uses that will undermine U.S. foreign policy interests and threaten U.S. national security. Indeed, based on the explicit premises of the CCP’s MCF strategy, if any given technology is in any way accessible to China, and officials there believe it can be of any use to the country’s military as Beijing challenges Washington for leadership in the Indo-Pacific, one can be quite sure that the technology  will be made available for those purposes.

As a result, it is imperative that we – not just the United States alone, but also acting together with as many international partners as possible – find an appropriate balance between the economic and strategic advantages of an open economy, the allure of the Chinese market, and the real risks posed by collaboration with Chinese entities that must ultimately take orders from the Communist Party. We’ve clearly  not gotten that balance quite right in the past, so how can we be safer in the future?

As I see it, finding a good answer has to start with acknowledging the problem – and this is why we’re doing more to draw attention to MCF and the worrisome military and geopolitical ambitions that underlie Chinese technology-transfer policy. We need to be clear-eyed about these things, and make sure that China’s  other international trading partners are clear-eyed as well.

Traditional approaches to technology transfer and export control policy tend to focus on specific items, end-users, and declared end-uses. A technology that would be safe in one entity’s hands might be very problematic in those of someone else, and the “usual” approach is to try to insist upon clear demarcations, including through eliciting promises of compliance or even the use of end-user verification protocols. Military-Civilian Fusion, of course, makes a hash of such distinctions – as indeed it is the very  point of MCF to ensure the free flow of technology and material between civilian and military enterprises. So we need to be far more careful, and to develop new approaches and procedures that are alive to the magnitude of the tech-transfer problem as it exists with China.

Understanding MCF also means that the “security culture” of tech-transfer awareness needs to be expanded. In countries with sophisticated technology sectors, exporters hopefully already are (or should be) sensitized to the importance of exercising greater care in their transactions. Similarly, licensing and border control officials are (or should be) attuned to the importance of carefully vetting proposed transfers for potential national security impact.

The advent of MCF, however, means that in dealing with China, at least, they cannot rely upon end-use promises in the usual fashion. The traditional question for national security export controls and licensing determinations is something like: “To whom is this being sent and what will they do with it?” The more appropriate question, given Chinese strategy under MCF, however – and this is, of course, a much harder one to answer – may now be a bit more like: “Could this item or technology be of significant value to  anyone, anywhere in China and in ways that would help the regime augment its military power?” This is a different game than we once assumed we were playing, and we will all need to improve how we approach these challenges.

We also need to be more aware of the issue of “deemed exports” – that is, the more intangible and sometimes even inadvertent transfer of technology that can occur through an enormously wide variety of contacts and engagements well beyond simply shipping some widget overseas. Even things like casual “shop talk” with a visiting colleague from China, for instance, or helpful graduate students seeking to work in a university laboratory, can be important sources of militarily-useful technology transfer.

You should not assume that the architects of China’s technology-collection strategy haven’t thought of this, or that any given imparting of information is too innocuous to be of interest to the MCF apparatus. Their system is designed both to create opportunities for such transfers and to exploit the proceeds of even seemingly innocent contacts for economic  and for military gain.

And, of course, that’s not even counting the potential for  illicit transfers through industrial espionage, traditional spying, or cyber penetration – which are also arenas in which it is now quite clear that the Chinese government excels. Our security awareness, and our “security culture” of approaching tech-transfer challenges, clearly need to improve. We need to build much greater, more systematic, more routinized caution into our approaches than ever before.

This caution, moreover, needs to include things to which we have paid insufficient attention in the past – including the need to screen visa applications for a much broader range of national security concerns. In addition to things such as law enforcement concerns, it’s quite traditional to screen visa applications for potential problems related to the proliferation of weapons of mass destruction (WMD) or missile technology. Indeed, we already vet over 100,000 applications for such concerns every year. In light of the broader context of MCF and Chinese technology-transfer challenges we now understand, however, it’s clear that more is needed.

Four out of five full-time graduate students in computer science and electrical engineering in the United States, for instance, are international students. That we are able to attract top minds from all over the world speaks to the strength of our values, our education system, and our scientific prowess, and our universities’ programs are all the stronger as a result. Many international students make significant contributions to science and technology, and would probably like to  stay in the United States, but a good number will return home, and some of these will have worked on research involving sensitive technologies. In a country such as China – where, under the MCF strategy, there is now essentially no reliable distinction between civilian and military end users – this knowledge acquired in the United States will inevitably end up making its way to the Chinese military. As we review visa applications we must therefore keep in mind China’s own system of funding military research and development at its universities, and consider how that corresponds to the proposed research and development that will be taking place in U.S. universities and labs.

Accordingly, we need to improve screening procedures against intellectual property and technology theft, develop more effective conditions or restrictions upon employment or research access, improve potential mitigation measures, and be more willing than before to say “no” in cases where the risk of a problem transfer appears too high.

Another one of the ways we are learning that the Chinese system has been seeking to build up China’s military technological capabilities and geopolitical power is by leveraging gaps in the procedures by which we vet proposed investments in and engagements with the U.S. domestic economy. Last month, the President signed into law new legislation that strengthens and modernizes the Committee on Foreign Investment in the United States (CFIUS) – that is, the system through which we screen potential corporate acquisitions for national security implications.

This was an important step, for this reform had become necessary – indeed, overdue – in response to our growing understanding of how Chinese entities have been systematically acquiring technologies that could threaten our national security through joint ventures and minority investment structures that previously fell outside the reach of CFIUS vetting. The new law adds several additional types of transaction that will fall under CFIUS rules, including even a “catch-all” provision that would permit CFIUS to address  any sort of transaction, transfer, agreement, or arrangement that is designed to circumvent CFIUS jurisdiction. We are taking urgent steps to implement these new rules and use them effectively.

So far, most of what I have been describing relates to new U.S. priorities in fighting the tech-transfer problem presented by the Chinese Communist Party’s Military-Civilian Fusion strategy. But this challenge is not one for the United States alone. After all, many countries possess technologies that China would like to use, if it can, to augment its military capabilities and enhance its “comprehensive national power” – and  the world stands to lose if Beijing tries to achieve its “Chinese Dream” in ways that destabilize the Indo-Pacific region and deprive a growing number of countries of their political autonomy by making them into Chinese tributary states.

For this reason, we and our international partners cannot approach these problems in isolation; we must coordinate our responses to these threats. We need to continue our efforts, for example, to ensure that the multilateral control lists that help guide implementation of national export licensing and control systems around the world are updated quickly and thoughtfully on an ongoing basis, and increase our focus on emerging technologies that could present security threats against the unique challenges Chinese strategies pose in early phases of technology development.

Because taking all the measures needed in order to respond to these challenges is hard work, moreover, we also need to do more to engage with our international friends – both in government and in the private sector – in helping each other succeed. We should do more to mobilize technology-holding partners into effective “coalitions of caution” in order to share information on tech-transfer threats and to develop and promulgate “best practices” through which we can together be both safer and more prosperous in the future.

Furthermore, where others in the international community may be struggling to bring their own efforts up to such best practices, we should expand effective programs to help them – so that they do not become “weak links” in the international system, through which military-facilitating technologies can flow to China, to our collective detriment. My bureau at the State Department does extensive programming around the world helping countries with export control and border security issues related to preventing the spread of materials and technologies related to nuclear, chemical, and biological weapons, WMD delivery systems, and conventional weapons. Why not expand capacity-building programming in order to help partners “improve their game” in becoming “harder targets” in the face of systematic Chinese efforts to acquire technologies in support of Beijing’s military and geopolitical power? This is what I hope to do, and I have directed the development of a new initiative in which we will seek to build capacity among partners in the manner that I’ve just described.

So these are all areas in which we are working to do more, and to do better, across the U.S. interagency and with our international partners. This is a problem that – in my view – earlier generations of American leaders did not take seriously enough, and as a result, we still have a long way to go. Fortunately, however, we are now working on these questions informed by keen understandings both of the need for competitive strategy and of the threats presented by  others’ competitive strategy.

And that’s why I am particularly pleased to be able to emphasize these points to this conference on economic espionage and export control challenges – for you have picked your topic well. For those of you who have been aware of these growing challenges for some time, I hope that my remarks can offer you some reassurance that Washington finally “gets it,” and that we are indeed working to devise better answers. For those of you to whom these themes may be new, I hope that this discussion can help alert you to the problems we face, and that we must work hard to confront together.

Thank you for inviting me.

-- Christopher Ford