Security Trade Control in Asia: Role of Japan and International Cooperation

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Security Trade Control in Asia Role of Japan and
International Cooperation
November, 2006 Workshop for East Asia Science and
Security Collaborative

• Tatsujiro Suzuki Tadahiro Katsuta Hideaki
  Shiroyama
• University of Tokyo and Central Research
  Institute of Electric Power Industry (CRIEPI)
• University of Tokyo
• University of Tokyo

This presentation is based on the work done by
the Project, "Science, Technology and
International Relations Governance of Dual Use
Technologies," sponsored by Japan Society for
Promotion of Science (JSPS). Project members are
Hideaki Shiroyama, Kazuto Suzuki, Heigo Sato,
Setsuko Aoki, Masayuki Tadokoro and Tadahiro
Katsuta.
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CONTENTS

• Background
• Issues
• National Security Trade Control Programs
• Japan
• Malaysia
• Thailand
• Hong Kong
• Singapore
• Analysis
• Conclusion

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Background

• Export control of sensitive technologies has
  become one of the most important security policy
  issues
• Revelation of so-called A. Q. Khan network
• Response to international terrorism (UN
  resolution 1540, PSI, CSI etc.)
• Developing countries, a group of non-state
  actors, or even individuals can trade sensitive
  technologies
• Such illicit trade network seems to be emerging
  in Asia also

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Issues

• Is Japan's current trade control regime
  sufficient?
• Expanding production network through out in Asia
• Illicit trade involving third country ? need for
  regional approach
• How well are Asian trade partners aware of trade
  control issues? And how can Japan help?
• Will Japan's trade control program be a model for
  other Asian countries?
• Seminar on Export Control for Asia (initiated by
  Japan)
• S. Korea's program is similar to Japan's
• How can Japanese corporation in Asia deal with
  international trade issues?
• Do they comply with Japanese rules even in Asian
  countries?

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Japan's Program(1)

• It is called "security trade control"
• Strong emphasis on "international security"
• Primarily targeted towards "dual use
  technologies" (no export of weapons, all
  developed for civilian purposes)
• Role of Center for Information on Security Trade
  Control (CISTEC) is important
• METI is the sole government agency responsible
  for trade control, but often lacks technical
  capability
• Coordination between industry and government is
  essential
• Increased importance of corporate "compliance
  programs"

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Dual Use Technologies

• "There is no 'civilian' or 'military' technology.
  All high-technologies are 'dual use'
  technologies."
• Mr. Abe, Mitsubishi Electric (from "Militech
  Power," Asahi Shimbun, 1989)
• Japan's Keidanren Seeks for revision of "Three
  Non-Export Rules for Military Technologies"
• Defense related technologies need export market
  to keep competitive advantage (Mainichi Shimbun,
  July 20, 2004)

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Emerging Dual Use Technologies-Japan as a leader-

• List of Japanese Technologies (DOD wanted)

LC display NEC, Toshiba, MELCO
Fine Ceramics Asahi, Toshiba, Nissan, Kyocera
Composite Material Toray, Toho-Tenax, Mitsubishi Rayon
Voice Recognition NEC
Robot, CAD MECLO, FANUC
AI, Super Computer Hitachi, Fujitsu, NEC, MELCO
Source US Department of Defense, "Electronics,"
July 29, 1985
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STC in Japan
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Japan's Program (2)

• Illicit trade" case from Japan to N. Korea
• Nov. 2002 Meishin made an attempt to export
  constant voltage current power devices to North
  Korea, but according to Catch All Control
  regulation, METIs Inform restrained MEISHIN
  from the export.
• April 2003 Meishin cargo boat with the power
  supply devices left for Thailand. METI suspected
  that the company had an intention to export these
  devices to North Korea via Thailand in spite of
  the Inform in 2002.
• METI communicated with Hong Kong authorities to
  attach the devices by Hong Kong Customs.
• On the same day, METI inspected the company in
  Tokyo and the Importer in Thailand also accepted
  voluntary investigations by staff of Japanese
  Embassy.

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Illicit Trade from Japan to N. Korea (2002-2003)
Suspicious Company in North Korea
Importer in Thailand
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Illicit Trade from Japan via Third Country in
Asia - Recent Cases (1) -

• Meisho case (reported on 2006/08/10)
• Illegal export of frozen dryer to N. Korea via
  Taiwan by a Korean-managed Japanese company
  (Meisho Yoko)
• Dryer can be used for biological weapon
  production
• Meisho sold the machine to a trading company in
  Taiwan in 2002, which was eventually exported to
  a trading company (HELM Pyongyang) and then to
  Chosen Runla 888 in N. Korea
• Meisho was aware of its potential military
  application but sold under the name of medical
  application
• Finance was made through a bank (Macao Delta
  Asia) in Macao, HK
• source Nikkei, Tokyo Shimbun, Chunichi Shimbun,

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Illicit Trade from Japan via Third Country in
Asia - Recent Cases (2) -

• Mitsutoyo case (reported on 2006/08/25)
• 2001Mitsutoyo sold two 3-dimensional measurement
  machine to its local subsidiary company in
  Malaysia without METI license
• 2002 Its local company sold two machines to a
  Malaysia company (Scomi Precision Engineering
  SCOPE) which assembled the machines
• SCOPE then sold 1st machine to Dubai (UAE) via
  Iranian ship and found in Libya later
• 2003 Aluminum tube made by SCOPE was found on
  the way to Libya (illegal trade)
• 2nd machine was never sold to Libya
• Later, it was found Mitsutoyo also sold machines
  to Iran and that it reported false capability of
  the machine
• source Asahi, Jiji Tsuhin, Yomiuri,

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Assessment of National System(1) Malaysia

• Had paid little attention to export control
• Strengthen indigenous industrial capability is
  the priority
• Different political strategy from those of US and
  Japan
• Non-intervention and respect of state sovereignty
  and objects Western intervention and unilateral
  approach
• Close association with Islamic countries
• Export control system is very eclectic
• Royal customs do have laws and regulations on
  arms and dual use technologies
• But their regulations do not have coherence
• After the Khan network disclosure, the Govt
  tried to establish coherent legal framework, but
  not completed yet
• Expectation for Japanese Leadership
• It may follow Japanese leadership (not US
  leadership)

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Assessment of National System(2) Thailand

• Trade control programs are not established yet
• Only arms trade regulation exists
• Lack of interests by the Government and Industry
• But they may be willing to cooperate
• Stopping chemical products at port, responding to
  requests from US and Japan (possible export to N.
  Korea)
• Using Hazardous Material Act and Drug Control Act
• Issues
• Low political priorities among the government
• Lack of awareness as a "trade country" of
  sensitive goods
• Difficult to get information from trading
  partners for Japanese companies
• ex. Mitsutoyo exported 3D measurement machine to
  China through Thailand (without Japanese export
  license)
• Lack of enforcement at country borders

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Assessment of National System(3) Hong Kong

• Well established "Security (Strategic) Trade
  Control" programs
• both export and import
• including shipping companies, transshipment and
  transit
• Common standards for international regime
• international cooperation is essential
• Role of "policeman" entrusted from original
  export countries
• Liaison program with industry (like CISTEC)
• Strategic Objective
• Increasing trade with China
• Sustaining competitiveness as an international
  "hub"

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Assessment of National System(4) Singapore

• Legal system has been recently established
• Since 1970s, Singapore has been parties to BWC
  and NPT and ratified CWC, CTBT
• Nov.2002, Strategic Goods (Control) Act
• Jan. 2004, Strategic Good (Control) regulations
  adopted
• A permit is required prior to export/import,
  transshipment
• Strategic objective is put Singapore as Big Hub
  in the region
• Long relationship with China, expanding
  relationship with India
• Implementation issues remain
• Good collaboration with Japan and the US
• 2004, Japan and Singapore signed the Statement on
  Strengthening Bilateral Export Control
  Cooperation

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Summary of Analysis
COCOM Legacy Strategic Objective Administative structure. Relation w.Japan/US
Malaysia None Different from US,Japan Eclectic   Leadership by Japan
Thailand None Low Priority Top down Cooperative (US influence)
Hong Kong Yes Economic Interest/ Gateway to China Established Ahead of Both
Singapore Yes Big Hub Established Cooperative
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Main Issues on Security Trade Control in Asia

• Differences in Importance of Security Trade
  Control
• Perceived as "barrier" to free trade
• But some countries (Hong Kong, Singapore) have
  established programs for their trade interests
• US Factors
• Different attitudes toward US policies
• ex. Malaysia (hostile to US policies) vs.
  Thailand
• Need for Domestic Political Infrastructure
• Lack of political leadership
• Bottom-up approach is also difficult,
  inter-agency conflicts still exist
• Lack of legal infrastructure (in Thai, Malaysia)
• Enforcement
• Even with established legal system,
  implementation and enforcement are difficult
• Hard to capture all trade activities- importance
  of information sharing

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Role of Japan and International Cooperation

• CISTEC Model can be effective
• Coordination among industry and government is
  effective for governance of dual use technologies
• "Model Compliance Programs" are now being
  introduced in Asia
• Relationship with the US
• US influence is still large
• Outreach activities are also done by the US
• Cooperation with the US can be very effective
  (ex. Thai)
• Japan can and should help filling a gap between
  US and some Asian countries (hostile to the US)

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Conclusions Four Options for Japan

• Enhance Corporate Compliance Programs in each
  country
• Emphasis on small-medium size companies
• Promote Japan Model while meeting local
  conditions
• Collaborative relationships between Govt and
  Industry
• Establish regional clearing house of relevant
  information
• Enhance sharing of key sensitive information
• Establish bi-lateral cooperative agreement
• Japan-led CSI-type collaborations to strengthen
  port control