The Hindu : Opinion / Leader Page Articles : India, U.S. & trade in technology

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Monday, Sep 27, 2004

Opinion

Opinion - Leader Page Articles

India, U.S. & trade in technology

By R. Ramachandran

The just-concluded India-U.S. agreement on high-technology trade contains only cosmetic changes to the policy on dual-use items.

THERE HAS been unwarranted hype about the India-United States talks on high-technology trade following the signing of an agreement by the External Affairs Secretary, Shyam Saran, and the U.S. Under Secretary of Commerce, Kenneth Juster, on September 17. Actually, no substantive movement forward has occurred. The agreement is said to mark the conclusion of Phase I of the Next Steps in Strategic Partnership (NSSP) Initiative. Media reports have tended to greatly exaggerate its impact, terming it a diplomatic triumph that would result in increased flow of dual-use goods into Indian civilian space and nuclear activities.

The NSSP was announced by the U.S. President, George W. Bush, in January 2004 as a follow-up to the Bush-Vajpayee agreement of November 2001 for cooperation in civilian nuclear and space programmes and high-technology trade. They had also agreed to "expand the dialogue on missile defense." A series of "reciprocal steps" are envisaged for progress in these areas of cooperation. India may have even yielded something without gaining anything substantial in return.

A major India-U.S. space conference in June followed the NSSP announcement. As it became clear at the conference, U.S. export control laws have severely limited such cooperation and trade. These laws include controls that follow from the U.S. commitment to multilateral agreements, such as the Nuclear Suppliers Group (NSG) and the Missile Technology Control Regime (MTCR), as well as those it imposed unilaterally. In particular, export of `dual-use' goods is controlled by stringent Export Administration Regulations (EAR) of the U.S. Department of Commerce (DoC). In addition, several units of the Indian Space Research Organisation (ISRO), the Department of Atomic Energy (DAE) and the Defence Research and Development Organisation (DRDO) remained on the DoC's Entity List (EL) following post-Pokhran sanctions.

One of the `guiding principles' of the Bush-Vajpayee agreement is that such strategic partnership will be consistent with U.S. domestic laws and national security and foreign policy objectives, including compliance with international commitments. This already greatly constrains the extent to which cooperation and high-tech trade can occur. The partnership initiative will, therefore, have significance for India only if the U.S. is willing to exploit the flexibility in its domestic laws to expand space and nuclear cooperation and trade in dual-use goods. This flexibility lies in how the U.S. wishes to define its "national security and foreign policy objectives." Progress in this regard has been negligible; the latest development does not significantly alter that situation.

The high-point of the Saran-Juster statement is supposed to be the "modifications to U.S. export licensing policies that will foster cooperation in commercial space programs and permit certain exports to power plants at safeguarded nuclear facilities." A closer analysis, however, reveals that the announced changes are merely cosmetic. More pertinently, these are in reciprocation for India's "implementation of measures to address proliferation concerns and to ensure compliance with U.S. export controls." The Ministry of External Affairs (MEA) has not informed the nation about the measures taken for compliance with U.S. export control laws. Do they compromise Indian sovereignty?

The EAR control export of dual-use goods for a variety of reasons — nuclear proliferation, missile technology, chemical and biological weapons, national security, foreign policy, anti-terrorism — through what is called the Commerce Control List (CCL). Each item has a specific Export Control Classification Number (ECCN) along with specified one or more reasons for control. Every ECCN has five characters XXXXX, where the second character is one of the alphabets A to E and the rest are digits 0 to 9. The set `XX999' of items comprises low-tech goods that normally do not require a licence but are unilaterally controlled by the U.S. mainly for anti-terrorism reasons and are thus embargoed for countries such as Iraq, North Korea, Sudan and Syria.

There is also a basket of even lower level goods, called EAR99 items, controlled for non-specific contextual reasons but otherwise not requiring a licence. These do not figure in the CCL or have an ECCN or have specified reasons for control, but the DoC reserves the right to control their export. Post-Pokhran, an export licence was required for sending EAR-controlled goods, including EAR99 items, to the sanctioned entities in the EL, with a presumption of denial. After the October 2001 revision, licence was still required for all controlled items, but there was a presumption of approval only for EAR99 items.

The specific changes made to the export control policies following the September 17 agreement were first stated in a DoC press release. The corresponding amendments to the EAR were made through a U.S. Federal Register Notification dated September 22. There are glaring inconsistencies, within the Notification as well as with the earlier press release, as regards the nuclear-related changes. The U.S. Embassy in New Delhi could not clarify matters either. According to MEA sources, however, the intended changes are correctly reflected in the summary statement in the Notification. They are:

Removing ISRO Headquarters, Bangalore, from the EL;

Removing licensing requirement for dual-use items classified as EAR99 and XX999 for export to the seven ISRO subordinate entities that remain on the EL;

A "presumption of approval" policy for all dual-use items not controlled for nuclear proliferation reasons, if intended for the "balance-of-plant" or non-nuclear, back-end, part — turbines, generators, controllers and power distribution — of the nuclear plants TAPS 1&2 and RAPS 1&2, which are under International Atomic Energy Agency safeguards.

What does each one of these imply for Indo-U.S. high-tech trade? ISRO's headquarters is mainly an administrative wing. It is not directly engaged in any satellite or launch vehicle projects. At best, it coordinates certain science-based multi-institutional projects involving universities and other institutions. So, import of high-tech goods by ISRO's headquarters is minimal. Removing it from the EL is, therefore, of little consequence. If sanctions against all the subordinate units too had been lifted, it would have constituted a significant first step in the NSSP initiative.

Removal of licensing requirement for the two sets — XX999 and EAR99 — of low-level dual-use items for the other ISRO units is also no big deal. For, being low-tech goods, they do not contribute to the expanded high-tech trade being talked about. In any case, there was a presumption of approval for EAR99 items after October 2001. Only the bureaucratic process of licence approval has now been dispensed with. However, DAE and DRDO units on the EL still require licence for EAR99 items, though there is a presumption of approval.

The third modification pertains to the nuclear field. Export of nuclear goods and technologies, corresponding to NSG's Trigger List, is governed by the U.S. Nuclear Proliferation Prevention Act, 1978 and controlled by the Nuclear Regulatory Commission. Not being an NPT signatory, these items are out of bounds for India.

Nuclear-related dual-use goods, on the other hand, form part of the CCL and are controlled by EAR for nuclear proliferation reasons. There are in all 115 such items. Of these 12 are unilaterally controlled by the U.S. These include goods that would find use in the reactor part or the balance-of-plant, and could be of interest to India. Since even the NSG allows these to be exported to safeguarded facilities of a non-NPT signatory — not necessarily under a full-scope regime — the U.S. could have always exported these to Indian facilities like TAPS 1&2 and RAPS 1&2. But, given its paranoid proliferation concerns, these are embargoed.

What the present relaxation amounts to is a "presumption of approval" for dual-use items not controlled for proliferation reasons. That too only for balance-of-plant operations of TAPS 1&2 and RAPS 1&2. That is, the 115-odd proliferation-controlled items, which are actually significant to nuclear plant operations, are totally excluded. From the remaining controlled goods on the CCL, there is little that may be of direct relevance to balance-of-plant operations, which Indian industry cannot supply. According to Nuclear Power Corporation sources, the company has never in recent years sought to import any U.S. item for balance-of-plant operations. Even in this inconsequential nuclear-related modification, the upcoming Koodankulam plant, though under safeguards, has been excluded.

Coming back to space cooperation, the more important issue with regard to the export of U.S. satellites, subsystems and components — controlled by the U.S. State Department — does not seem to have been addressed at all. With U.S.-made systems dominating the satellite market, this has prevented ISRO from entering the launch services market despite low launch costs. Launch from India would require a licence for re-export by the customer, which is usually denied. This policy has also prevented interested companies such as Boeing from partnering ISRO to fabricate satellites. Boeing required a licence even to exchange data with ISRO. Some discussions have taken place and Boeing has shown interest in some of ISRO's satellite structures for mounting its payloads. If this has to fructify, more concrete policy measures from the U.S. are necessary than the cosmetic changes being touted.

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