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Import of dual-use tech from US: Dual use, multiple benefits

After 1½ years of negotiations, the US has eased controls on high-technology dual-use exports to India, granting exemption under the Strategic Trade Authorisation-1 list. What is the significance of this move?

Written by Shubhajit Roy | New Delhi |
Updated: August 3, 2018 6:43:59 am
For India’s government, scientific community, and the defence and high-technology industry, the move from STA-2 to STA-1 is a leap. (Illustration: CR Sasikumar)

After 1½ years of negotiations, the US has eased controls on high-technology dual-use exports to India, granting exemption under the Strategic Trade Authorisation-1 list. What is the significance of this move?

The background

One of India’s key objectives in signing the civil nuclear deal with the United States in 2008 was to gain access to high technology that it had been denied, especially from the 1970s through the 90s. Towards the end of Barack Obama’s term as President, the US recognised India as a “Major Defence Partner”, and committed itself to sharing technology to the same level as its closest allies and partners, and to collaboration for defence co-production and co-development.

The status of Major Defence Partner is, however, unique to India. The US either has military alliances such as the North Atlantic Treaty Organisation (NATO) or bilateral defence treaties. Indian and American negotiators had to thus sit down to draw up the framework of what the status of a Major Defence Partner would entail.

As things stand, the export of defence and dual-use technology by the US is almost always a political call — what Washington DC insiders refer to as “political determination”. Two factors — US national security, and the recipient’s regional stability — are key to the political determination of whether the US will give or deny to another country an item or technology that can be put to both military and civilian use.

The US has traditionally had a very restrictive export licensing regime. The Munitions List, which contains defence items and technology, is controlled by the State Department; the Commerce Control List, which has items of dual-use technology, is with the Department of Commerce. In August 2009, Obama announced a comprehensive review of the US export control system with the aim to simplify Cold War era practices that were intended mainly to prevent technologies from falling into Soviet hands, and to make the American tech industry more competitive and create more jobs. Gradual changes have been under way ever since.

Read | Import of dual-use tech from US: Curbs set to be eased, India in select club

STA-1 and STA-2

In 2011, as part of the export control reforms initiative, the US government came up with the concept of Strategic Trade Authorisation (STA) — a move towards a licence-free or license exemption regime. Two lists were created — STA-1 and STA-2 — and countries that were not part of either list had to apply for a licence for every item on the Commerce Control List (of dual-use items). STA-1 and STA-2 established a hierarchy among those the US was willing to certify as “good countries” that would not contribute towards “proliferation” in the world.

The STA-1 list has 36 countries — including NATO allies and bilateral treaty allies like Japan, South Korea, and Australia — whose non-proliferation controls the US considers to be the best in the world. These countries are also among those that are part of the four multilateral export control regimes — the Nuclear Suppliers’ Group (NSG), Missile Technology Control Regime (MTCR), Australia Group and the Wassenaar Arrangement. STA-1 countries, America’s most trusted allies, have licence-free access to almost 90% of dual-use technology, and are eligible to import items that are controlled for reasons of national security, chemical or biological weapons, etc., irrespective of whether the technology or item impacts regional stability or American national security.

Countries in the STA-2 list enjoy some form of licensing exemption, but cannot access dual-use items/technology that may impact regional stability, or contribute to nuclear non-proliferation, etc. Before being elevated to STA-1 this week, India was in this list, along with seven other countries — Albania, Hong Kong, Israel, Malta, Singapore, South Africa, and Taiwan.

It is important to flag some points here:
* A vast majority of countries remain outside both STA-1 and STA-2, and cannot access high technology from the US without specific licences.
* Albania is a NATO member, but is still in STA-2. Israel, a major US ally, is not in STA-1. The Philippines, another major non-NATO ally, is on neither list.
* China and Pakistan, too, are on neither list. Expectedly, Russia isn’t either.

Read | India-US Military Communications Pact: US team in Delhi next week, India demands five assurances

Coming closer

For India’s government, scientific community, and the defence and high-technology industry, the move from STA-2 to STA-1 is a leap. New Delhi considers the STA-1 list as the “holy grail” of the Indo-US defence partnership. Membership of this elite club of US allies is expected to lead to greater high-technology trade and commerce. According to US estimates, India’s not being part of STA-1 has resulted in a “lost opportunity” worth $10 billion over the last seven years since 2011.

For the Indian high-tech industry, being part of STA-1 could open up doors for both sales and manufacturing in India. “Industry can set up manufacturing bases in India without worrying whether the licence will come through. Even third countries seeking to set up high-technology manufacturing units that require import of dual-use equipment from the US, will not have to go through the process of obtaining a licence,” a source said. This, the source said, was important in boosting confidence — “earlier, one would not even go for an exam because one feared one would fail.”

The fact that India is now part of STA-1, despite not being member of all four multilateral export control regimes, is a testament to its non-proliferation credentials. (China has been blocking India’s entry into the NSG.) Ahead of the 2+2 dialogue between the Indian and US Foreign and Defence Ministers on September 6, this is a major takeaway, as India inches closer to realising the potential of being a Major Defence Partner of the US. Ministry of External Affairs spokesperson Raveesh Kumar has described the decision to put India in STA-1 a logical culmination of its 2016 designation as Major Defence Partner, and a “reaffirmation” of its “impeccable record” as a responsible member of multilateral export control regimes. In the longer arc of India-US relations, another step has been taken to overcome the “hesitations of history”, and to forge closer defence and commerce partnerships, notwithstanding the political change in Washington DC.

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