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The United States and India concluded their inaugural Strategic Dialogue with great fanfare in early June in Washington, D.C. But beyond the positive atmospherics and reinvigorated engagement, they announced few tangible policy actions at the end of their meetings. This was especially true in what has become a foundational area of the bilateral relationship but also one of friction: export controls and defence trade. While there has been great progress in the last decade in military-to-military relations, bilateral trade in defence-related items and collaboration on defence technology has yet to fulfill its potential. US and Indian leaders must move ahead in the next few months on export controls and defence trade if they are to achieve ambitious results by the time of President Barack Obama’s visit to India in November.
Expanding defence trade would provide important benefits to both countries. For the United States, benefits include enhancing interoperability between the US and Indian militaries and opening a sizable new market for US defence firms. For India, it would gain access to some of the most sophisticated defence technology in the world. Despite a steady increase in the licensing of US defence items for India, members of the Indian government and Indian industry continue to be frustrated, arguing that the United States needs to further streamline its export control systems relating to ‘dual-use’ and munitions items. They claim that US licensing policy hampers the transfer of high technology from the United States to India and puts US firms at a competitive disadvantage in the Indian market. There is truth to these arguments, but also myths and misunderstandings. |
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Dual-Use Exports
The ‘dual-use’ export control system, which is managed by the US Department of Commerce, involves items that have both commercial and military application. Since the lifting of sanctions on India in 2001 and the inception in 2002 of the US-India High Technology Cooperation Group, the amount of dual-use exports to India requiring licenses has dropped significantly. For calendar year 2009, with total US exports to India of approximately USD 16.3 billion, only USD 49 million of total exports — or 0.3 per cent — required a Commerce Department licence. In other words, due to liberalisation of US policy, only a fraction of dual-use trade with India is now shipped under licence. But further improvements can — and should— occur.
For example, there are currently 11 Indian organisations on the Entity List. These organisations fall into three categories:
(1) Indian Space Research Organisation (ISRO) subsidiaries that are involved in activities related to space launch vehicles (four organisations);
(2) Department of Atomic Energy subordinates, which are involved in nuclear-related activities (three organisations), and all unsafeguarded nuclear reactors and facilities;
(3) Defence Research and Development Organisation (DRDO) subordinates and Bharat Dynamics Limited (four organisations), which are involved in missile technology-related activities.
Many in India consider the very fact that these organisations are on the Entity List as an affront, given their strategic and historical significance. Indians argue that these organisations are not rogue outfits but integral parts of the Indian state apparatus involved in legitimate civil activities that the United States has agreed to support. Indeed, US export licensing statistics do not adequately reflect the deterrent effect on exports to India due to the continuing presence of these organisations on the Entity List.
However, the US government feels that it has good reason to restrict some trade. With regard to ISRO subsidiaries, the United States is concerned that certain technology related to space launch vehicles is relevant to India’s ballistic missile programs. Accordingly, the United States does not generally grant licenses for such items to ISRO subsidiaries on the Entity List. But there should be ways to draw a brighter line between ISRO’s legitimate civil space activities and India’s ballistic missile programs, and enhance confidence that all exported technology is used for the former and not the latter. Such a step would facilitate the removal of these organisations from the Entity List, which would permit closer US-India cooperation in civil space activities, contribute to scientific advancements, and open a new market for the US commercial satellite and space industries.
With regard to the Indian organisations involved in nuclear-related activities, these are either entities that participate in India’s nuclear weapons or sensitive nuclear fuel-cycle activities, or facilities that are not under International Atomic Energy Agency safeguards. For certain entities, such as the Bhabha Atomic Research Center or the Indira Gandhi Atomic Research Center, it may be possible to separate legitimate activities, such as civil power generation and nuclear medicine, from prohibited activities relating to nuclear weapons, enrichment, or reprocessing. With regard to India’s nuclear power reactors and related facilities, Washington has informed New Delhi that, as these facilities are placed under international safeguards, they will not be subject to the Entity List.
The DRDO subordinates were added to the Entity List in the wake of India’s nuclear weapons tests in 1998. The US government has been unwilling to remove these organisations from the Entity List because they are believed to be involved in research related to nuclear weapons delivery systems, including missile technology. However, India has argued that these organisations should be removed because they also engage in non-missile research, including projects to improve the lives of Indian soldiers. As in the case of the ISRO subsidiaries, it may be worthwhile for US and Indian policy makers to explore whether clearer lines can be drawn between DRDO’s strategic missile programs and its other defence programs that the US government might be willing to support.
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