US embassy cable - 04THEHAGUE1145

UNCLAS SECTION 01 OF 02 THE HAGUE 001145 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EUR/UBI/HOLLIDAY 
 
E.O. 12958: N/A 
TAGS: KSTC, ETTC, PARM, NL, CH 
SUBJECT: DUTCH VIEWS ON ADC LICENSE HARMONIZATION 
 
REF: STATE 77513 
 
1. (U) This message is sensitive but unclassified.  Please 
protect accordingly. 
 
2.  (SBU) On May 7 econoff received the GONL response to 
reftel non-paper.  The response came in the form of a letter 
to AS Wolf from Dirk Bruinsma, DG of Foreign Economic 
Relations of the Ministry of Economic Affairs.  Text of the 
letter follows in para 4. 
 
3.  (SBU) Bruinsma,s letter restates the Netherlands, 
desire to reach an understanding with the U.S. on controlling 
the export of high-speed 14-bit ADCs to China (10th para) and 
comments favorably on most of the conditions suggested by the 
U.S. for inclusion in such an understanding (fifth para). 
The letter takes issue, however, with the idea of 
differential conditions for fully- and non-fully-PRC-owned 
manufacturers (sixth and seventh paras), and suggests that a 
flat non-reexport clause would be preferable to identifying 
specific countries for such a prohibition (eighth and ninth 
paras). 
 
4.  (SBU) BEGIN TEXT. 
 
The U.S. Embassy in The Hague presented me on April 14th 2004 
a non-paper titled &U.S. VIEWS ON ADC LICENSE HARMONIZATION 
UNDERSTANDING8.  In reply I would like to give the following 
reaction. 
 
Let me first assure you that the Netherlands export control 
authorities are equally pleased to work closely with their 
U.S. colleagues on a wide range of issues.  Be it issues of 
mutual concern, of common interest or both.  This applies to 
our efforts within the framework of the Wassenaar Arrangement 
as well as to our work on issues that might be more 
fruitfully approached and dealt with on a bilateral basis. 
 
As to the conditions that could be attached to supplies of 
high speed 14 bit ADCs to manufacturers of telecommunications 
equipment in China, we have been studying whether it would be 
reasonable and feasible to impose robust and yet viable parts 
control plans on the recipients of such supplies. 
 
Both the U.S. and the Netherlands have come to the conclusion 
that withholding high speed 14 bit ADCs from the Chinese 
efforts to create a 3rd generation mobile telecommunication 
infrastructure is neither a desirable nor ) considering the 
pace of development in this area ) a credible option. 
Therefore, our common focus is not to prevent foreign 
supplies, but to limit the risk of diversion of supplied ADCs 
from manufacturers of telecommunications equipment to 
military applications. 
 
In this respect we have appreciated a previous U.S. 
non-paper, provided to us in the wake of the visit of U.S. 
officials last October, that described the kind of elements 
of parts control plans that could be envisaged to deal with 
such a risk.  We equally appreciate the opportunity to 
include the ) in part ) additional conditions presented in 
the current non-paper in our studies.  Especially the 
proposed conditions  a,,  b,,  c,,  d,,  f,,  g,, 
and  i, will be taken into account in our assessment. 
 
The U.S. proposal to seek only an understanding to apply 
these or similar conditions to supplies to 
non-wholly-PRC-owned enterprises does not meet our support. 
In the Netherlands view such an understanding would have to 
cover the conditions attached to supplies of high speed 14 
bit ADCs to any and all manufacturers of telecommunications 
equipment in China.  Either a parts control plan limits the 
risk of diversion to a sufficient degree or it does not. 
 
A distinction between State owned or partially private or 
even partially foreign owned manufacturers hardly provides 
for additional assurances or safeguards but could at the same 
time very well limit the Chinese ADC market for foreign 
supplies to the extent that competition is unreasonably 
impeded. 
 
As to the proposed conditions  e, and  h, of the current 
non-paper, it is our view that the concerns we might have 
over possible diversion of ADCs within China or elsewhere 
will most likely be more effectively alleviated by a 
straightforward non-re-export-clause than by including 
elaborate conditions to possible re-export. 
 
The Chinese efforts to create a 3rd generation mobile 
telecommunication infrastructure to cover the whole or at 
least the most relevant part of the PRC is destined to drive 
the production capacity of existing Chinese manufacturers of 
telecommunications equipment to the limit.  Therefore, a more 
strict non-re-export-clause attached to foreign supplies 
should not present a problem for any of the current license 
applications. 
 
Finally, the Netherlands export control authorities, once the 
appropriate conditions to be fulfilled by Chinese recipients 
of significant quantities of high speed 14 bit ADCs have been 
identified and declared applicable, are interested to come to 
some sort of bilateral license harmonization understanding 
with the U.S. 
 
An exchange of letters at the appropriate level, describing 
the conditions decided upon as well as identifying the 
consignees and end-users that have declared to abide by these 
conditions, would in my view be adequate to structure and 
ensure such a harmonization of policy.  This exchange of 
letters should of course also constitute an understanding 
that any changes in our respective policies towards this 
particular concern would have to be communicated to each 
other well in advance of being applied. 
 
END TEXT. 
SOBEL