Beijing's Boeing missile connection

Who knows what happened to the military machinery that Boeing's merger partner McDonnell sold to China? Or even where it is?

WHILE THE HEADLINES AND FEDERAL INVESTIGATORS have focused on possible compromises of US missile technology through electronics exports to China, a local company has, with less fanfare, come under similar scrutiny. The Boeing Company may have to answer questions about how some of its own aerospace technology wound up in the hands of the Chinese military.

Federal probers are still sorting out just what, and when, the company knew about a diversion of metal-fabrication equipment to a Chinese missile factory four years ago. These football field­sized computerized production units were used by Boeing merger partner McDonnell Douglas to make B-1 bombers. They were sold, for the bargain price of $5.4 million, after the Clinton administration eased restrictions on trade with China in 1994, arguably to please party backers.

The Justice Department is taking a new look at the transfer, and a House panel headed in part by Rep. Norm Dicks may also take up the issue. Government and company officials say that McDonnell was reluctant to sell the surplus machinery to China, but eager to secure a $1 billion contract to build commercial planes there. University of Wisconsin professor Gary Milhollin, who has studied the transfer for several years, says the US and Chinese officials exerted what amounted to "blackmail" to make McDonnell comply.

Company and US government officials worried that the Chinese could use the equipment to manufacture Chinese missiles or fighter jets. But they say they were persuaded to go along by Commerce Secretary Ron Brown, who was personally brokering overseas trade deals for the administration.

After agreeing to regularly report on the machinery's whereabouts, McDonnell made the transfer. Its onsite inspections soon revealed that the equipment was not installed where it was supposed to be; satellite photos subsequently confirmed that the Chinese had moved the units to a Silkworm missile factory 800 miles from Beijing. The United States protested, and months later the machinery was moved to a commercial zone. It's not clear if the Chinese ever used it for military production.

Boeing, which acquired McDonnell Douglas last year, denies it did anything wrong. Technology expert Milhollin agrees, to an extent. In a recent 60 Minutes interview, he called the sale "blackmail. The Chinese were telling McDonnell Douglas, 'look, if you want to make a big airline package deal... we want some sensitive machine tools that you would not otherwise sell us.... And we want the administration to close its eyes." Boeing hopes to transfer the machinery (now in storage at a plant in Singapore) to commercial production via CATIC, the China National Aero-Technology Import-Export Corporation—if Clinton approves. "As far as I know," Milhollin recently told Seattle Weekly, "the stuff is still in crates in China, and Boeing and CATIC are working on a deal."

THE US JUSTICE DEPARTMENT and Dicks' House panel are meanwhile exploring another dubious technology transfer. The federal probers want to know if the Loral Corporation may have been allowed to export critical missile technology to China in return for donations to Clinton's 1996 campaign; questions have also been raised about Hughes Electronics' dealings with China's military. Thickening the plot is the fact Loral's CEO Bernard Schwartz, a major Democratic Party contributor, accompanied Brown on the 1994 China lobbying trip that firmed up the $1 billion McDonnell deal and machinery transfer. That Loral-to-Boeing link could bring Boeing officials into the spotlight of ongoing House hearings.

Should that happen, Dicks might find himself quizzing some of his friends and supporters. The House Appropriations veteran, who rousingly supports Boeing trade with China, has always been a key angel for Boeing; he was instrumental in passing a $222 million measure last year to help Boeing build helicopters with Bell Textron. Dicks is also a major recipient of Boeing campaign donations—$35,000 in the past ten years just from the company's PAC. But the Democratic congressman's first concern may be the allegations of more campaign-finance violations by his party—besides Schwartz's donations, infamous Demo money-finder Johnny Chong says $100,000 of the donations he raised came from Chinese military sources. But Dicks intends to take the high if narrow road. When he was named to the panel in June, he noted, "I hope we can keep this focused on the Loral transaction and whether there was a compromise of national security."

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