Global Strategic Trade Management: How India Adjusts its Export Control System for Accommodation in the Global System

195 Pages·2019·2.17 MB·English

by  Rajiv Nayan

Rajiv Nayan
Global
Strategic Trade
Management
How India Adjusts its Export Control
System for Accommodation in the
Global System
Global Strategic Trade Management
Rajiv Nayan
Global Strategic Trade
Management
How India Adjusts its Export Control System
for Accommodation in the Global System
123
Rajiv Nayan
TheInstitute for Defence Studies
andAnalyses
NewDelhi, Delhi, India
ISBN978-81-322-3924-6 ISBN978-81-322-3926-0 (eBook)
https://doi.org/10.1007/978-81-322-3926-0
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Dedicated to
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and
Shri R P Singh
Preface
In 2016, India joined the Missile Technology Control Regime (MTCR). This was
followedbyIndiajoiningtheWassenaarArrangementandtheAustraliaGroup.All
three are multilateral export control regimes. India is also seeking to become a
member of the fourth important multilateral export control regime—the Nuclear
Suppliers Group (NSG). Actually, in 2016, all versions of the media discussed the
issue intensely after India had submitted its formal application for the membership
of the Nuclear Suppliers Group. Discussions on the subject highlighted the exis-
tence of wide gaps in the understanding of the subject. This study is an attempt to
fill in these gaps.
Export control, strategic trade control and strategic trade management often
appear in the policy literature. All the synonyms convey different stages of the
journey of the phenomenon of the regulation of goods, technology and services
with the military, especially Weapons of Mass Destruction, implications going out
of the country. The phrases need special understanding when embedded in global
politics and in various levels of security.
Thestrategictrademanagementtraditionisnormallyconnectedtothedeveloped
industrialised nations which supply a large number of items to the world and
involve a number of practices which look simple but contain special meanings.
However,theUnitedNationsSecurityCouncilResolution1540hasheraldedanew
era in strategic trade management. To a great extent, the dominant practices of
strategic trade management are now harmonised in the international community,
with a vast array of countries having adopted them.
On the surface, strategic trade control and its practices appear like any other
terms of economics and foreign trade. However, many of these practices have
different meanings, which need to be understood and explained. Practices existing
in other trade or security activities are applied for strategic trade management, but
some specific ideas for strategic trade management have also been evolved or
invented by the international community. This book discusses the key ideas of
strategic trade management which have been adopted by a large part of the world.
vii
viii Preface
When the context is India, a work on the subject has to resolve several
complicatedproblems.WithchangesinIndia’sworldoutlook,thecountryhashad
tochangealargenumberofpolicyareasatdifferentstages.India’sassociationwith
strategictrademanagementorexportcontrolhasbeeninexistenceforalongperiod
of time. However, its even deeper engagement with the subject in the twenty-first
centurynecessitatesastudythatexaminesitsrelationshipwithallthepracticesand
valuesofthephenomenon.Infact,Indiahassharedaveryuneasyandtroubledpast
with strategic trade control or export control. The UNSCR 1540, combined with
India’s engagement with and accommodation in the multilateral export control
regimes, has begun a new era in India’s outlook on strategic trade management.
Any study of India’s policy regarding strategic trade management which
involves multiple principles and procedures is always challenging. The idea of
strategic trade control has been evolving very quickly in the Indian system, espe-
cially in the last decade and a half. As a result, laws and regulations as well as
India’s global engagement threaten to outpace any attempt to capture the current
stateofaffairsrelatingtoIndia’sstrategictrademanagement.Thisspeeddetersany
writer from taking up the task of writing a definitive book—although this is also
true, to an extent, for even those countries which have relatively settled or stable
national export control systems. However, the fast-paced changes seem to have
settled down greatly after the 2017 harmonisation of the Indian export control
systemwiththeWassenaarArrangementandtheAustraliaGroup.Relativelyminor
changesdonotappeartobedisturbingthebroadcontoursofthenowconsiderably
crystallised Indian strategic trade management system.
It is this encouraging serenity in the Indian strategic trade environment that has
made it possible to write this book. This does not rule out the possibility forth-
coming procedural changes because of new technological developments or fresh
security challenges. However, it is hoped that these changes will be easily
accommodated and placed within given policy parameters and the now highly
evolvedlegalandregulatoryframework.Today,thepillarsofIndianstrategictrade
management policy look firmly fixed.
Global Strategic Trade Management: How India Adjusts its Export Control
SystemforAccommodationintheGlobalSystemisthefirstfull-lengthbookwritten
on India and strategic trade management or global export control. Generally, the
authors publish their papers in journals or as chapters in books. The different
chaptersofthisbookdiscussboththedifferentstrategictrademanagementpractices
whichIndiahasadoptedandhowtheyhavebeensimultaneouslyintegratedintothe
global system. The book is designed to introduce readers to the Indian strategic
trade management system in the context of global practices of strategic trade
management which are discussed in the initial chapters. These initial chapters
examine global practices in order to elucidate and illuminate how India’s strategic
trademanagementhasbeenintegratedandaccommodatedintotheglobalsystem—
the subject of the subsequent chapters.
IamgratefultoallthosewhoencouragedmetowriteabookonIndia’sstrategic
trade management or export control system. I would especially like to thank
Dr. Ajey Lele for giving me the idea to write a book on the subject and
Preface ix
Dr. Amandeep Singh Gill for always encouraging me to finish it. I am especially
indebtedtoShriR.P.Singhwhoinitiatedmeintothesubject;toShriK.Santhanam
whoaskedmetofocusonitattheInstituteforDefenceStudiesandAnalyses,New
Delhi, and develop an expertise on subject; and to the late Professor Matin Zuberi
for supervising my thesis on Missile Technology Control, my first work on the
subjectcompletedmorethantwodecadesago.IamthankfultoDr.UttamK.Sinha,
Ms. Preeti Singh and Ms. Radha Joshi for editing and giving shape to my
manuscript.
Springer is indeed an exemplary and extremely understanding publisher. I am
grateful to the entire team, especially Mr. Anil Chandy who introduced me to
Springer and Ms. Sagarika Ghosh for signing the contract and remaining uncom-
plainingandcool.Imissedseveraldeadlines,butshewasalwaysconsiderate.This
bookwouldnothavebeenpossiblewithoutSpringer’sMs.NupoorSinghwhomay
have acted tough but forced me to finish it.
Last butnotleast, special gratitudetomyfamily—mymother,mywifeandmy
twodaughters.Iusedthetime thatshouldhavebeenreservedforthemtoworkon
this book. All provided unending inspiration, though at times, they were—like
many others—sarcastic and sceptical regarding the completion of the book.
Needless to say, the news of the conclusion of the book has cheered them all.
New Delhi, India Rajiv Nayan
August 2018
Contents
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2 Dominant Practices in Strategic Trade Management . . . . . . . . . . . 9
2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.3 Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.4 Traditional Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.4.1 End-Use and End-User Control. . . . . . . . . . . . . . . . . . . 15
2.4.2 List Based Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.4.3 Licenses: Types of License. . . . . . . . . . . . . . . . . . . . . . 19
2.5 Emerging Practices for New Challenges. . . . . . . . . . . . . . . . . . 20
2.5.1 Transhipment/Transit Control . . . . . . . . . . . . . . . . . . . . 20
2.5.2 Intangible Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.5.3 Brokering Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.5.4 Catch-All Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.6 Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.7 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3 Enforcement Practices in Strategic Trade Management . . . . . . . . . 33
3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.2 Network of Specialised Institutions . . . . . . . . . . . . . . . . . . . . . 34
3.3 Preventive Enforcement Activities . . . . . . . . . . . . . . . . . . . . . . 37
3.3.1 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.3.2 Risk Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.4 Export Control Compliance Culture. . . . . . . . . . . . . . . . . . . . . 40
3.5 Post-shipment Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.6 International Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
xi
xii Contents
3.7 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
4 Comparing the Major Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.2 Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
4.3 Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
4.4 Institution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
4.5 Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
4.6 International Cooperation and Outreach . . . . . . . . . . . . . . . . . . 66
4.7 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
5 Philosophy of Indian Strategic Trade Management . . . . . . . . . . . . 71
5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
5.2 Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
5.3 Non-proliferation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
5.4 Responsible State: Commitment to International Obligations
and Treaties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
5.5 Multilateralism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
5.6 Pragmatism in Balancing Interests . . . . . . . . . . . . . . . . . . . . . . 83
5.7 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
6 Indian Legal Framework for Strategic Trade Management . . . . . . 89
6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
6.2 Heritage Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
6.2.1 The Atomic Energy Act, 1962 . . . . . . . . . . . . . . . . . . . 90
6.2.2 The Arms Act, 1959 . . . . . . . . . . . . . . . . . . . . . . . . . . 93
6.2.3 The Environment Protection Act. . . . . . . . . . . . . . . . . . 95
6.2.4 The Explosive Substances Act . . . . . . . . . . . . . . . . . . . 95
6.2.5 The Explosives Act, 1884 . . . . . . . . . . . . . . . . . . . . . . 96
6.2.6 The Unlawful Activities (Prevention) Act, 1967. . . . . . . 97
6.2.7 Other Heritage Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 97
6.3 Fulfilling International Obligations: The Chemical Weapons
Convention Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
6.4 Bridging the Gap: The Weapons of Mass Destruction Act. . . . . 99
6.5 Licensing: The Foreign Trade (Development
and Regulation) Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
6.6 Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
6.6.1 The Customs Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
6.6.2 The Indian Evidence Act, 1872. . . . . . . . . . . . . . . . . . . 106
6.7 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108