China Eyes U.S. Ports

China Eyes U.S. Ports
Posted Nov. 18, 2002

By J. Michael Waller 

The Smart and Secure Tradelanes (SST) system, driven by shipping, port services and communications companies with the support of Sen. Patty Murray (D-Wash.), is supposed to improve supply-chain and transportation-container security. More than 80 percent of U.S. imports arrive daily in 17,000 shipping containers at 361 Atlantic and Pacific seaports, many of which are near major population centers. SST, a corporate statement says, "aims to enhance the safety, security and efficiency of cargo containers and their contents moving through the global supply chain into U.S. ports." It is a security system designed to "demonstrate the principles of the U.S. Customs Container Security Initiative (CSI), Customs-Trade Partnership Against Terrorism (C-TPAT) and the U.S. Department of Transportation Security Agency's (TSA) maritime security initiatives, such as Operation Safe Commerce." 

According to the security manufacturer Savi Technology of Sunnyvale, Calif., SST is designed to deploy hardware and software for automated tracking, inspection, detection, security and auditing of shipping containers from foreign freight terminals to U.S. ports. Port operators can monitor the security of each container, verify that it was loaded in a secure facility and decrease the possibility of tampering with the container and its contents. 

The system is patterned on the Pentagon's Total Asset Visibility (TAV) network deployed worldwide. TAV tracks all U.S. military land and sea shipments, ranging from food to weapons, from the factory to the war zone. Retired Army Gen. John Coburn, who led implementation of the TAV network for the Pentagon, now is with the new commercial SST venture. "We're all motivated by a desire to make sure world commerce remains secure and free of threats," Coburn says. "The ports and shippers are demanding realistic solutions that can be tested today and adapted and built upon in the future. This is the one solution that's been proven to work and will provide a real-life model that both government and industry can leverage and learn from in order to rapidly build an international system for cargo security."

Savi Technology, a wireless automatic ID pioneer, developed the system with federal support through the Defense Advanced Research Projects Agency (DARPA) and private investments. According to the Wall Street Journal, one-half of Savi's $40 million in revenue this year is expected to come from the Pentagon.

"This is a model for how our nation can improve port security," said Sen. Murray at the little-noticed July news conference unveiling SST. As chairman of the Senate Appropriations subcommittee on Transportation, responsible for writing the budget of the Coast Guard and the new TSA, Murray claims she has been "the leading voice in Congress to improve port security." She inserted a $28 million earmark in the appropriations bill to test the system.

The funds are for "a pilot project to push the American border back, so Customs [Service] officials would be in a foreign port taking a manifest of what goes into those containers, then securely locking them down and tracking them as they went into a U.S. port," Murray spokesman Todd Webster tells Insight.

So far, so good. But alarm bells are sounding about the involvement in SST of Hong Kong-based Hutchison Whampoa. Advocates say that Hutchison Whampoa is the world's largest seaport owner and administrator, with a history beginning in the 19th century when the firm was founded by the British. With partners PSA and P&O Ports, Hutchison Whampoa handles 70 percent of the world's container traffic. In a statement to Insight, the company says it is a purely commercial enterprise and rejects allegations that it might be influenced by the Chinese government.

But those familiar with Hutchison Whampoa's ties to the Chinese military are concerned. "This is a conflict of interest for a non-U.S. company," says Al Santoli, a congressional national-security consultant and director of the Asia Pacific Initiative of the American Foreign Policy Council. Santoli is troubled that Tacoma, Wash., is an initial U.S. port for the program testing.

"The Chinese have been working hard to get into the ports near Seattle. They are among our most vital commercial ports and are home to key U.S. military bases." Those bases are the home port of the USS Carl Vinson aircraft-carrier battle group at Bremerton and a strategic ballistic-missile submarine base in Bangor. "It's a major site for espionage for our rivals and adversaries," he says. "It's absolutely mind-boggling that our national-security leaders would even consider a contract with a company that would at the very least have a questionable national-security status as Hutchison Whampoa."
Sen. Murray defends Hutchison Whampoa's involvement in the pilot program. "They are one of the largest port operators in the world," says Webster. "To ignore Hutchison Whampoa is to ignore some of the largest port facilities in the world that send millions of containers to the United States every year." The company, he says, is not receiving U.S. tax dollars earmarked for the project.

Insight first reported about Hutchison Whampoa's control of ports at both ends of the Panama Canal following the U.S. military pullout from Panama in 1999 [see "China's Beachhead at Panama Canal," Aug. 16, 1999]. The report raised concerns about Hutchison Whampoa's reported connections to the Chinese People's Liberation Army (PLA) and the Chinese Communist Party leadership, and how its control of Panamanian ports could threaten U.S. interests.

Clinton White House spokesman Joe Lockhart dismissed the Insight story and the surrounding controversy as "silly stuff."

However, the year before, in 1998, a secret U.S. Army intelligence report raised concerns about how the Chinese government was anticipating the American pullout from Panama and the role Hutchison Whampoa could play in Beijing's strategy to have a presence in the world's major shipping choke points. A Defense Intelligence Agency (DIA) information report stated that "Li Ka-shing, the owner of Hutchison Whampoa Ltd. (HW) and Cheung Kong Holdings Ltd. (CK), is planning to take control of Panama Canal operations when the U.S. transfers it to Panama in Dec. '99." 

The report, obtained by Judicial Watch under the Freedom of Information Act (FOIA), stated: "Li is directly connected to Beijing and is willing to use his business influence to further the aims of his own son, Victor Li, to replace him in certain CK and HW operations such as HW's Hong Kong International Terminals (HIT)."

According to a DIA analysis, "Li's interest in the canal is not only strategic, but also a means for outside financial opportunities for the Chinese government. China, the canal's third-largest user, consequently has a significant amount of influence. If China were to assume control of the canal operations, it would have to abide by the neutrality requirements of the Torrijos-Carter treaties."

Critics of Hutchison Whampoa's involvement in Panama focused on Beijing's ability in time of crisis to sabotage or control traffic in the Panama Canal. But critics had other worries, too, including the Chinese government's reported massive smuggling operations worldwide. There also were concerns about how private companies influenced or controlled by Beijing, to say nothing of the state-owned China Ocean Shipping Company (COSCO), which is a major containerized shipping and trucking firm with reach into the heartland of the United States, could be used to subversive effect. 

Referring to the Panama Canal controversy that Insight's reports sparked in August and September 1999, a secret DIA memo dated Oct. 26 of that year cautioned, "Hutchison's containerized shipping facilities in the Panama Canal, as well as the Bahamas, could provide a conduit for illegal shipments of technology or prohibited items from the West to the PRC [People's Republic of China], or to facilitate the movement of arms and other prohibited items into the Americas."

Hutchison Whampoa does not stand accused of knowingly handling illegal technology or arms shipments, and industry officials say the company has a solid professional record. However, Insight correctly has described Chief Executive Officer Li Ka-shing as "an important cog in the economic machinery of the Chinese Communist Party and the PLA. Li is a board member of the Chinese government's main investment arm, the China International Trust and Investment Corp. (CITIC), run by official PLA arms marketer and smuggler Wang Jun." 

Some China watchers are worried that the Chinese government, or elements therein, could exploit the assets of the firm and even apply leverage to utilize the port company as an intelligence-collection or operations asset. Insight spoke to British and American employees of Hutchison Whampoa, who call the idea preposterous.

Sen. Murray's office appeared to be unaware of the DIA reports.

Western policymakers and business leaders have little or no idea of China's grand strategy and how Beijing's leaders want to situate their country for the next century. When, in 1999, Sen.Trent Lott (R-Miss.) sent Insight's report, "China's Beachhead at Panama Canal," to then defense secretary William Cohen, he called for a full national-security appraisal of the problem. Lott told Cohen, "U.S. naval ships will be at the mercy of Chinese-controlled pilots and could even be denied passage. It appears we have given away the farm." 

At Lott's request, the Senate Armed Services Committee held a hearing in which four Clinton-administration witnesses testified that Hutchison Whampoa posed no security challenges to the United States [see "PC Answers on Panama Canal," Nov. 22, 1999]. But not one of the witnesses could answer the fundamental question, posed by Sen. Robert Smith (R-N.H.): "Do you believe the People's Republic of China uses commercial enterprises to advance their military interests?"

Bill Clinton's assistant secretary of defense, Brian E. Sheridan, who had issued a defense of Hutchison Whampoa, confessed, "I don't know." Alberto Aleman Zubieta, whom Clinton had appointed to run the Panama Canal until 2005, didn't answer either. Neither did Joseph W. Cornelison, the deputy administrator of the Panama Canal Commission, nor Lino Gutierrez, then principal deputy assistant secretary of state for Western Hemisphere Affairs. All had contradicted their testimony. Only Marine Gen. Charles E. Wilhelm, then chief of the U.S. Southern Command, answered affirmatively to whether Beijing uses commercial enterprises to advance its military interests, saying only: "I think so."

That was it. And apparently the government has learned little since. "Many of those who are engaged in China policy or who invest there remain blithely ignorant of Chinese goals to replace the United States as the reigning world power," says Thomas Woodrow, a former senior China analyst at the Defense Intelligence Agency, who authored a recent Jamestown Foundation article arguing that China's future energy needs likely mean its development of a blue-water navy capable of projecting power around the world.

To advocates, the involvement of a Chinese company may be a necessary evil. "The administration, in the war on terrorism, is cooperating with a number of countries who might not be the best people on the planet, but their cooperation is necessary to ensure American security and the safety of the American people," says Sen. Murray's spokesman Webster. "I think the administration has been willing to make that trade off."

According to Woodrow, "China has already adjusted its foreign policy and energy strategy to accommodate its need for a larger share of the world's oil reserves. It has forged major oil deals with Sudan, Venezuela, Iraq and Kazakhstan. With these deals have come important military and security agreements. For instance, thousands of Chinese oil workers ... maintain security at facilities in Sudan. During Chinese leader Jiang Zemin's spring 2001 visit to Venezuela, he was greeted by that oil-producing nation's leader, Hugo Chavez, with the declaration that the Chinese Maoist revolution was the source of his own social revolution. ... The Kazakh deals involve the construction of a massive pipeline across China from the huge Kazakh oil fields. China hopes to become a land bridge for future oil deliveries to Japan and South Korea, giving Beijing important leverage in its strategic goal to replace the United States as the major power in the Eastern Asian basin."

All this means big headaches for the United States and its allies, say Asia specialists, and adds to the concerns of some in the security community about Hutchison Whampoa's control of port facilities and shipping services along the world's sea lines of communication, or SLOCs. 

But the company also is a leader in the SLOC's electronic equivalents in the cyberworld. Hutchison Whampoa has invested heavily in telecom companies around the world since the late 1980s, and has arranged satellite deals between the Hughes Corp. and a Chinese firm tied to the PLA. Hutchison Whampoa's recent purchase of a 61 percent stake in the troubled fiber-optic giant Global Crossing also has raised national-security concerns, as the company operates much of the hardware on which U.S. telecommunications, including military and intelligence channels, operate. That deal, at least, is under review.

J. Michael Waller is a senior writer for Insight.