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Obama’s Visit and Strategic Trade Management

Dr Rajiv Nayan is Senior Research Associate at the Manohar Parrikar Institute for Defence Studies and Analyses, New Delhi. Click here for detailed profile.
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  • November 10, 2010

    The India visit was the first halt in US President Barack Obama’s Asian journey. It resulted in several tangible and intangible outcomes. These outcomes were both exciting and lacklustre. Some of the delivered items stimulated the thought process of the wider Indian policy making community. Developments on export controls, now also known as Strategic Trade Management, pleased the policy making community and at the same time made it ponder over the end product. The visit has thrown both opportunities and future challenges.

    The visit yielded positively for India in the American and the multilateral export controls systems. The India-US joint statement issued during the visit noted the removal of Indian organizations from the Entity List maintained in the Export Administration Regulations (EAR) of the US government and support for Indian membership of four multilateral export controls regimes. The joint statement also talked about “realignment of India in U.S. export control regulations.”

    Although the joint statement mentioned that Indian entities are out of the entity list, thereby giving an impression that all Indian organizations are out of the list, the fact remains that only some have been removed from the list. These are: Bharat Dynamics, four subordinate organizations of the Defence Research and Development Organisation (Armament Research and Development Establishment, Defence Research and Development Lab, Missile Research and Development Complex and Solid State Physics Laboratory), and four subordinate organizations of the Indian Space Research Organisation (Liquid Propulsion Systems Centre, Solid Propellant Space Booster Plant, Sriharikota Space Centre and Vikram Sarabhai Space Centre).

    Several subordinate organizations of the Department of Atomic Energy continue to remain on the Entity List. These are: Bhabha Atomic Research Centre, Indira Gandhi Atomic Research Centre, Indian Rare Earths, Nuclear reactors (including power plants) not under International Atomic Energy Agency safeguards, fuel reprocessing and enrichment facilities, heavy water production facilities and their ammonia plants. A section of media reported that the Indian government is in touch with its US counterpart to get these organizations removed from the list as well.

    The question here is: will the removal of these organisations from the Entity List end the dual-use curbs on India? There is no guarantee that all the curbs would go. The removal of organizations from the Entity List has just removed a layer of controls. Despite the removal of most of the organizations from the entity list, India may have to struggle to find some items because of the operation of missile and nuclear weapons related curbs in US policy. The US Administration will have to change the core of its policy for India.

    Apart from regulation and law, orientation, approach and attitude towards a country and its concerned organizations matter a lot. When licensing authorities examine a license application, they have to exercise discretion in deciding a case. Several factors or criteria may cloud their judgment. The US President and his administration may face a challenge in inculcating a different kind of culture in its control bureaucracy. The right kind of atmosphere should be created by the announcement. The task should be to build on that.

    In fact, the Bureau of Industry and Security (BIS) explicitly mentions: “The removal of an entity from the Entity List removes only the additional license requirements imposed by the entity’s listing on the Entity List, and does not modify the license requirements that may be applicable under the EAR [Export Administration Regulation] as a result of an item’s classification on the CCL [Commerce Control List] and the proposed country of destination for the export, reexport or transfer (in-country) of the item. Additionally, if you know or have been informed that the item proposed for export, reexport or transfer (in-country) will be used in a weapons of mass destruction or missile delivery system program, you must seek a license pursuant to the requirements found in part 744 of the EAR.”

    India and the multilateral export controls regimes did not have a very positive relationship. During the visit, the US support for India’s membership in multilateral export control regimes certainly opens a new chapter in the relationship. The US support is for the Nuclear Suppliers Group (NSG), the Missile Technology Control Regime (MTCR), the Australia Group and the Wassenaar Arrangement. The joint statement expects India to take “steps towards the full adoption of the regimes’ export control requirements to reflect its prospective membership, with both processes moving forward together.”

    Although the membership of these consensus-based regimes would require time, yet it may not be discounted that it could be a big step towards India’s mainstreaming into the non-proliferation regime. Whether the UN Security Council or multilateral export controls regimes, US support is vital for gaining access inside. In the current international system, it is impossible to enter into any international organization or amend any international law without the implicit or explicit consent of the US. The membership of the NSG and the MTCR could be strategically very advantageous.

    The entry into the MTCR may be relatively easy, but finding a way into the NSG could be tough. For getting NSG membership, India may have to take membership of either NPT or join one of the Nuclear Weapons Free Zones. India cannot join a Nuclear Weapon Free Zone. It cannot join the NPT as a non-nuclear weapon country. To implement the India-US civil nuclear energy agreement with the US, India harmonized its export controls system with the technology annexes and guidelines of the NSG and the MTCR. India had given specific commitment regarding this in the July 18, 2008 joint statement.

    The joint statement preferred to proceed in a ‘phased manner’ for Indian membership of multilateral export control regimes. For the purpose, the members of these regimes would be consulted. The joint statement is willing “to encourage the evolution of regime membership criteria, consistent with maintaining the core principles of these regimes.” In the Indian strategic community, it implies removing the NPT and Nuclear Weapons Free Zones criteria. Indian and American diplomacy may have to work together on this in the future.

    Admittedly, the Australia Group or the Wassenaar Arrangement could not be very useful for India. The Hyde Act wanted India to adhere to the Australia Group and the Wassenaar Arrangement. It seems it was a balancing act. Getting the membership of these two multilateral regimes could be much easier. If India finally joins the regimes, it would be a great opportunity to participate in global high technology management.