Thursday, May 17, 2007

Warning to Chinese Americans: FBI Still Obsessed With Chinese-American ‘Spies’

New America Media, Commentary, George Koo, Posted: May 17, 2007

Editor’s Note: A Chinese-American professional in Silicon Valley reviews recent federal prosecution against Chinese Americans for espionage and finds the real guilty party to be the FBI. NAM contributor Dr. George Koo has been a consultant for American companies in China for 30 years.

When a Chinese American is accused of spying for China, other Chinese Americans feel a chill, especially professionals like myself in Silicon Valley.

The May 10 conviction of Chi Mak, an electronics engineer employed by a defense contractor, is the latest case in point. Ultimately found guilty of the much lesser charge of being an unregistered foreign agent, when Mak was first arrested, he was depicted as the worst undercover agent for China the United States had ever seen.

When the defense pointed out that Mak had become a naturalized citizen who has lived quietly in his modest suburban home for 27 years, the FBI countered that this simply exposed Mak as a deep and effective mole.

Mak’s colleagues testified that the papers he copied in the CDs intended for a Chinese university were his own published work, and were already in the public domain. They posed no threat to U.S. national security.

The prosecution countered that Mak had failed to apply for an export license for the CDs, and charged him with failure to register as a foreign agent.

The prosecution also accused Mak of lying to the FBI during the initial interrogation. Somehow, the FBI failed to record this interrogation so it boiled down to a case of “we said, he said” in court.

The prosecution said Mak’s handler was a mysterious Mr. Pu in Guangzhou. Mak testified that Pu was an academic friend looking after one of his relatives. If the government knew more about Pu than Mak did, it was not disclosed in court.

The prosecution claimed a great victory in this case. According to the government, the fact that such a spectacular opening ended with a modest conviction simply demonstrates the difficulty of prosecuting Chinese spies in the United States.

Denise Woo, a former FBI agent, was assigned to conduct an undercover investigation on Jonathan Wang, another Chinese American working for a defense contractor who was suspected of spying. Woo challenged the reliability of the source who fingered Wang as a suspect.

The FBI clearly was not pleased to hear that they had been wasting taxpayer money on an investigation going nowhere. Instead of dropping the case, they charged Woo with five felony counts alleging breach of national security and abetting an enemy agent.

Woo contested the charges and was defended pro bono by Mark Holscher, the attorney who had represented Wen Ho Lee when he faced 59 counts of espionage. Woo eventually copped to a misdemeanor charge so that she could get on with her life and was fined $1,000.

Her case bears a striking similarity to Wen Ho Lee’s, whose prosecution fell apart when the FBI agent in charge admitted to lying in court.

In a move to save face, the 59 counts were reduced to one, for illegally downloading computer information, in exchange for the months of solitary confinement Lee had already served. The presiding judge apologized to Lee for unfair and inhumane treatment.

The FBI is convinced that China is a patient collector of bits and pieces of intelligence, mostly from Chinese Americans sympathetic to their homeland.

Those of us working in the technology industry find the notion ludicrous that obsolete tidbits could add up to a leading edge in military intelligence. But to the FBI, even information in the public domain points to espionage if China is involved and if the conveyor is an ethnic Chinese.

The chilling conclusion is that any Chinese American could become willing – or unsuspecting – gatherers of valuable data to Beijing.

When the FBI agent comes calling, there is only one thing to do. Get a lawyer before talking to them.

Tuesday, May 15, 2007

U.S. Export Control Policy Hurts American Interests in China

American insistence on enforcing the existing export control policy can only damage the interests of the American high tech industry and not improve national security.

This is because the U.S. is no longer the sole source for much of the high technology. If other nations will not follow the U.S. on restricting exports to China, then the policy can not be effective. Unilateral control by the U.S. only shackles American high tech firms from being able to compete in China.

In 2000, China’s market for semiconductors was a mere one-fifth the size of the U.S. market. In 5 years, China has overtaken the U.S. to become the world’s largest market representing more than 21% of the market. In another five years by 2010, China will be buying $124 billion worth of integrated circuits equivalent to 40% of the world consumption.

Where is the growth coming from? The obvious answer is that China has become the preferred electronics factory of the world. Semiconductor chips are put into the laptops, camera phones, MP3 players, digital cameras, flat panel TVs, DVD players and many other consumer electronics made in China. In 2005, China exported over $137 billion worth of electronic goods, 88% of this coming from foreign invested factories.

China needs to greatly increase their semiconductor fabrication capacity in order to meet this demand, but the U.S. export control process keeps American companies from being competitive in this fastest growing market for semiconductor equipment. Everybody in China knows that they can buy equivalent equipment from European or Japanese supplier much more readily than from the American supplier.

Sam Wang, the Silicon Valley based senior executive for SMIC of Shanghai, said at a luncheon forum that for their first fab in China, they knew that if they ordered a piece of equipment from Europe, they can get it in 2 weeks; if from Japan, in two months. But if the source was from the U.S., they would not know if the order will be honored even after six months.

Washington officials have pointed out that the value of orders subject to export approval is barely 1% of the total trade deficit between China and the U.S., inferring that export control has little impact on bilateral trade. According to China’s own trade statistics, they imported $247 billion worth of high tech products in 2006. The U.S. share of China’s import was barely 8% of that total behind EU and S. Korea and well behind Japan, Taiwan and the ASEAN countries. Our success in China should not be measured by the value of orders submitted for export approval but by opportunities lost to suppliers from other countries.

Recently, the Bureau of Industry and Security of Department of Commerce has proposed to broaden control by including some 47 categories of “dual use” goods and technology. Industry responded that most of the products are available from other countries without restraint. In some cases, China has been making technologically more advanced versions than those being considered for restricted export.

The U.S. government defines dual use as any product and technology that could find military as well as civilian application. The problem with such a definition is that virtually any technology based products could conceivably have military use. A far more important but overlooked question should have been: “Is dual use relevant?” All the other countries that compete with American companies in China do not think so.

Indeed, the Government Accountability Office of Congress and experts that testified before Congress have stated on numerous occasions that dual use items do not affect China’s military prowess and are irrelevant to perceived national security of the U.S.

While the existing export control process cannot impact national security, it can hurt American firms’ ability to compete for business. The $50 billion a year semiconductor equipment industry is case in point. This is one industry created and owned by the Americans. Today, American companies’ market share in China is less than 45% and falling.

Clearly, U.S. government’s export control policy is in need of serious reform. As it currently exists, the policy and practice work against our own national interest rather than enhance national security.
A version of this commentary appeared in July 19, 2007 issue of Electronic Design.