August 1, 2018

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

After a year-and-half of hectic negotiations, India has joined an elite group of allies of the US, including a majority of NATO allies, to become a part of a club of countries which can get access to 90 per cent of defence technology and equipment — all of them for dual-use — supplied by the US government and its defence industry.

A source told The Indian Express, “This is the Holy Grail of defence partnership with the US. Although we got the Major Defence Partner status by the US in 2016, we started negotiating on this about a year and half ago. It is a big leap…sends out a strong political message and a robust signal to the defence industry on India’s status.”

With this, the Indian defence industry can get licenses to import sensitive US dual-use items and technology. Sources said that this is applicable to not only sale of equipment, but also to their manufacture in India. This opens doors for US and other foreign companies, as well as Indian companies to manufacture items, which were restricted to be procured under US law. Ahead of the 2+2 dialogue between Indian and US foreign and defence ministers on September 6, this is a major takeaway, as India inches closer to realizing the potential of being designated a “Major Defence Partner” since 2016.

For the record, India will be the third Asian country, after Japan and South Korea, to avail of this exemption, under what is called the Strategic Trade Authorization-1 (STA-1) list. The STA-1 list has 36 countries, either they are major US allies or NATO allies or members of all four multilateral export control regimes.

India is neither an ally of the US, nor a NATO ally, and is a member of only three — out of four multilateral export control regimes. Countries like UK, France, Australia, Germany and Canada are part of the list. India was so far, part of STA-2 list, where it got some form of license exemption, unless the technology or the item impacted US national security. STA-2 list has eight countries, which include Singapore, Taiwan and Israel.

China, Pakistan, Russia are not part of either STA – I and STA- 2 countries list. Even Israel, which is a close US partner, is not an STA-1 country. Traditionally, US licensing of defence equipment was very restrictive but the Barack Obama administration started relaxing it in its first term.

In the US system, there is a munitions list which has all defence equipment and technology, and license to import them is controlled by the US State Department. And there is a dual-use items list, which is controlled by the US Commerce department.

While the Obama administration tried to rationalise the lists by moving items from the munitions list to the dual-use list, the STA-1 and 2 lists are a factor of “political determination” by the US government.

Countries come under STA-1 list, when the US is reasonably sure that the technology will not endanger regional stability, does not pose a threat to US national security and has minimum to zero risk of proliferation.
In the STA-2 list, countries get the technology unless it poses a threat to regional stability. This is a key determinant which led to India not getting items under this list. Interestingly, though India is not a member of NSG (Nuclear Suppliers Group), the fact that it has got into the STA-1 list is a testament to its credentials, sources said.
According to the government’s own estimates, India lost out on technology and items worth about 10 billion USD in the last seven years.

“With India on the STA-1 list, companies will be more ready to import and manufacture defence and dual-use technology, without having to go through complex licensing procedures. Since 90 per cent of the technology is going to be license-free,” a source said, adding that trade and commerce in defence equipments is likely to go up.
The Ministry of External Affairs official spokesperson Raveesh Kumar called Washington’s decision a logical culmination to India’s designation as a major defence partner of the US and a “reaffirmation” of its “impeccable record” as a responsible member of the concerned multilateral export control regimes.

“We look forward to the US side operationalising the decision at an early date,” Kumar said. Sources said that the next step is US issuing an official notification in the Federal Register in the next few days.


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