2014 Workshop on Strategic Trade Controls

September 2-3, 2014
Taipei, Taiwan

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Conference Report

The Pacific Forum CSIS, in partnership with National Chengchi University’s Institute of International Relations, and with support from the US Department of State’s Export Control and Related Border Security (EXBS) program, held a workshop on strategic trade controls in Taipei, Taiwan, on September 2-3, 2014. The group included approximately 35 participants and observers from 13 countries, all attending in their private capacity. Discussions focused on UN Security Council Resolution 1540 implementation and the four multilateral export controls regimes, the role of control lists and the interagency process in managing trade of strategic goods, regional organizations, implementation of strategic trade controls in free trade zones, good practices in detection and enforcement of strategic trade controls, and the economic impact of strategic trade controls. Key findings include:

There is growing acceptance throughout the Asia-Pacific that adopting strategic trade controls allows states to gain broader acceptance as legitimate trading partners. In particular, such controls are seen as a means to increase participation in high-tech manufacturing sectors.

UN Security Council Resolution 1540 has helped develop a powerful nonproliferation norm and has encouraged states to adopt and implement strategic trade controls. Momentum for implementation is likely to become self-sustaining, for two reasons. First, governments are beginning to recognize the value of trade controls for promoting high tech trade and integration into the global supply chain. Second, as companies implement internal compliance programs, they appreciate the value of these controls as a risk-management tool. 

Continental Southeast Asian states continue to lag behind on implementing strategic trade management programs in comparison with their Asia-Pacific counterparts. Suspicions remain in these states about the limits such controls may place on trade. Representatives from Cambodia, Myanmar, Thailand, and Vietnam stressed that officials in their respective countries, however, are interested in learning more about such controls, however.

A better understanding of programs designed to provide assistance to states interested in adopting strategic trade controls is needed. More work should be done to improve coordination among such programs to avoid duplication of efforts and take advantage of economies of scale and comparative advantages of each.

CSCAP Memorandum No. 14 on “Guidelines for Managing Trade of Strategic Goods” outlines the baseline for regional states interested in developing such controls. More specific guidelines are needed to assist states in implementing strategic trade controls. Recommendations were made for the drafting of national status reports on implementation efforts in order to benchmark progress.

Adoption and implementation of strategic trade controls needs a national champion. The Malaysian experience suggests that a single point of contact or dedicated agency is invaluable to coordinate organizations involved in the process of adopting and implementing such controls, foster understanding and trust among them, ensure effective communication and information exchange, and secure commitment at all levels.

The EU Control Lists are becoming the reference for implementation of strategic trade controls. While adoption of the lists by states saves considerable time and energy, work is constantly needed to integrate periodic updates and changes. Participants also noted that delays in finalizing translation of the lists have been a persistent problem. The European Union could distribute the lists prior to finalizing them in all EU languages to expedite implementation outside the European Union.

The control lists of the four multilateral export-control regimes can help states implement their obligations under UN Security Council Resolution 1540. Although the regimes and Resolution 1540 were not designed to work in tandem – the former are closed groups meant to control sensitive technology transfers while the latter is required of all states and intended to limit transfer to non-state actors – they have both contributed to improving the control of trade in strategic goods.

In addition to relying on the control lists of the four multilateral export-controls regimes, states can use the standards developed by the World Customs Organization (WCO) to implement strategic trade controls. While complete linkage between the WCO Harmonized System (HS) codes and the Export Control Numbers (ECN) developed to control strategic goods is unlikely, it is possible to use both systems to better detect suspicious shipments. 

Better detection and enforcement of strategic trade controls requires more synergy between the WCO’s SAFE Framework of Standards to Secure and Facilitate Global Trade and strategic trade management principles. This is particularly important for promoting better information on trans-shipment and transit cargo.

Greater public-private partnerships are critical to enhance detection and enforcement of strategic trade controls. As exporters, freight forwarders, and brokers develop a better understanding of the principles of managing strategic goods, they can quickly identify trusted partners and recognize unusual patterns in movement of goods.

Integrating principles for managing strategic goods into the ASEAN Economic Community (AEC) should be a priority for ASEAN members. While 2015 implementation of the AEC is a work in progress, integrating these principles into its agenda will facilitate broader implementation within the member economies and promote standardization across the community. 

Previous academic research suggests that strategic trade controls do not have a negative impact on trade. Yet, skepticism remains. Results of the pilot survey assessing perceptions in the Asia-Pacific suggest that controls are seen in a positive light. Significantly, international prestige is cited as a primary benefit. Results also show that both political and institutional/technical barriers are thought to hinder progress toward adoption and implementation. Meeting participants believe the pilot survey should be expanded and administered to a wider audience. One participant suggested that an expanded version be administered to participants at the annual Asian Export Control Seminar, while another said that it would be beneficial to poll individual at companies that regularly comply with strategic trade controls.