U.S. finances China nukes

WASHINGTON – Here's one that tops the Dubai Ports World deal – but, so far, no one is complaining.

U.S. taxpayers are lending Westinghouse Electric Co. almost $5 billion to build nuclear power plants in China – even though the company, based in Pennsylvania, is about to be sold to Japan's Toshiba Corp., and even though the company is currently owned by British Nuclear Fuels Ltd.

And, so far, no one in the U.S. government is showing any interest in scrutinizing the sale over the transfer of nuclear-power technology – or in halting the loan from the Export-Import Bank.

The saga began just over a year ago when the board of directors of the Export-Import Bank of the U.S., a federal agency whose board members are appointed by the president, approved a request from Westinghouse for a combination of guaranteed and direct loans of up to almost $5 billion to support export sales to construct four nuclear power plants at two sites in China.

The Ex-Im Bank, as it is known, boasts of assisting in financing U.S. goods and services to developing markets around the world. It typically finances around $15 billion in U.S. exports annually.

While that deal got almost no notice at the time – despite China's record of spreading nuclear technology throughout the world – last month the British parent company that owns Westinghouse agreed to sell it off to Toshiba, a Japanese conglomerate, for $5.4 billion in cash, a deal that is expected to close later this year.

Undersecretary for Export Administration David McCormick said Wednesday in a speech in Pennsylvania he had no plans to review the bid on the basis of the nuclear-transfer issue.

"The deal is not being formally reviewed," said McCormick, who heads the Commerce Department agency. "It's unclear if this deal required (U.S. government) review or not. Scrutiny would be justified, he said, if "there's a perceived or actual threat to national security."

Congress has not opposed the Westinghouse sale. In fact, the only member to call for scrutiny, Rep. Ralph Hall, R-Texas, a senior member of the House Energy and Commerce Committee, recently dropped his concerns. In a letter to Rep. Tim Murphy, R-Pennsylvania, whose district includes Monroeville, where Westinghouse is based, Hall called Japan "one of our finest allies."

Meanwhile, Westinghouse, armed with the $5 billion in loans from U.S. taxpayers, may have a better shot at the $8 billion in nuclear contracts bid by China. Its chief competitor for the project, the state-controlled French company Areva SA is considering dropping its bid because of concerns about nuclear-technology transfers to the Chinese. Areva SA has reportedly refused to match the offer from Westinghouse.

Another puzzling aspect of the deal is the fact that China has run massive trade surpluses with the U.S. for many years. In fact, trade statistics from the U.S. Census Bureau demonstrate that China has built up over $1 trillion in surpluses with the U.S. since 1993.

In the last five years, here is the trend on China trade surpluses with the U.S.:

# 2001 $83 billion
# 2002 $103 billion
# 2003 $124 billion
# 2004 $162 billion
# 2005 $201 billion

In U.S.-China trade, that's a total of $673 billion in trade surpluses for the Chinese (or trade deficits for America) in just the last five years.

Not only is the U.S. government not questioning the deal to build nuclear reactors in China, it is actively financing it and using political influence at the highest levels to consummate the arrangement.

"The U.S. government has been very supportive of overall China-U.S. nuclear cooperation,'' says Gavin Liu, Westinghouse's representative in Beijing. "It's a very, very critical market for Westinghouse.''

China's nuclear-power market is growing faster than any other in the world. The four planned reactors are the first of more than 20 in a $54 billion push to quadruple Chinese nuclear-power capacity by 2020 – an effort to ease power shortages in an economy that grew 9.5 percent last year.