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. Last Updated: 07/27/2016

Cocom Still Barrier To Chinese Market

BEIJING -- The Cold War may be dead but its legacy lives on in communist China -- a cruel irony for Western technology leaders who are virtually frozen out of one of the world's hottest markets.

What is keeping them out is Cocom, a soon-to-be-disbanded Cold War relic whose curbs on high-tech exports to Communist countries have pushed China to an uncomfortable crossroads of technology and ideology.

Cocom, the Coordinating Committee for Multilateral Export Controls, was set up in 1949 to restrict Soviet bloc and Chinese access to Western technology with military applications. It includes almost all NATO states and operates by informal agreement.

Despite China's stock exchanges, property speculation, flashy millionaires and "socialist market economy," Beijing is still subject to Cocom controls because of its Communist creed. Russia is also still afflicted by some Cocom controls

That means Intel Corp., AT&T, IBM, Digital Equipment and other Western powerhouses can only dream of bringing their best technology to China where demand for telecommunications and computers is soaring on an economic boom.

"All of our plans here depend on Cocom and the Chinese government," said Joseph Lin, who runs the Beijing office of U.S. semiconductor giant Intel.

The stakes are huge for Western exporters who have been flocking to what they see as the world's next big technology marketplace. Many call Cocom a critical barrier.

China's computer market was growing 30 percent a year and demand for computers based on Intel's i386, i486 and Pentium microchips was running even faster, Lin said.

Already well known, Intel blankets China with its "Intel Inside" advertising and has unannounced plans to import one of its U.S. chip factories to meet demand.

But Cocom forbids direct imports of Intel chips, much less the technology to make them. Intel chips could enter China only as components of complete computers or motherboards, Lin said.

Likewise, AT&T can import only modest telephone switches, not its topflight microchip and high-speed switch technology -- even though China has budgeted to spend billions of dollars to drag its antique telecom system into the 21st century.

Cocom fears that semiconductor and digital switch technology could, despite their peaceful uses, improve China's nuclear bombs and enable it to retaliate after a nuclear strike.

Would-be investors are particularly frustrated at the likelihood that Cocom-style limits will live on in new forms even after Cocom itself is disbanded.

Calling Cocom a post-Soviet dinosaur, members have pledged to dissolve it by March 31. Erstwhile enemy Russia is expected to join a non-ideological successor which will keep military technology away from Iran, Iraq, North Korea and Libya.

But will post-Cocom curbs also apply to China?

"China is no longer a pariah state, so it's a big question: How will this Cocom successor treat China?" said a diplomat from a Cocom nation who monitors Chinese technology.

He said China -- rapidly adding economic and political muscle to its nuclear clout -- should reevaluate its arms sales against the high cost of non-access to technology.

China has taken steps toward a more responsible arms policy, joining the Nuclear Nonproliferation Treaty and embracing the Missile Technology Control Regime.

But the United States, in particular, still sees China's weapons sales as an important problem. Allaying Western fears would not be easy, diplomats said.

China would not be welcome in the post-Cocom fold until it developed effective arms export control systems and laws, said another Cocom-member diplomat in Beijing.

"It would be nice to adopt a post-Soviet approach, but it would be very naive to expect all sweetness and light once Cocom is gone," he said.