Security Trade Control in Asia: Role of Japan and International Cooperation Tatsujiro Suzuki* Tadahiro Katsuta** Hideaki Shiroyama*** *University of Tokyo and Central Research Institute of Electric Power Industry (CRIEPI) ** University of Tokyo ***University of Tokyo November, 2006 Workshop for East Asia Science and Security Collaborative 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.

2 CONTENTS Background Issues National Security Trade Control Programs –Japan –Malaysia –Thailand –Hong Kong –Singapore Analysis Conclusion

3 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

4 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?

5 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"

6 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)

7 Emerging Dual Use Technologies -Japan as a leader- List of Japanese Technologies (DOD wanted) LC displayNEC, Toshiba, MELCO Fine CeramicsAsahi, Toshiba, Nissan, Kyocera Composite MaterialToray, Toho-Tenax, Mitsubishi Rayon Voice RecognitionNEC Robot, CADMECLO, FANUC AI, Super ComputerHitachi, Fujitsu, NEC, MELCO Source: US Department of Defense, "Electronics," July 29, 1985

8 STC in Japan METI MOF, CustomMOFA CISTEC Private CP Police Research Community, Network?

9 Japan's Program (2) “Illicit trade" case from Japan to N. Korea –Nov Meishin made an attempt to export constant voltage current power devices to North Korea, but according to Catch All Control regulation, METI’s “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 –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.

10 Illicit Trade from Japan to N. Korea ( ) Suspicious Company in North Korea Importer in Thailand

11 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,

12 Illicit Trade from Japan via Third Country in Asia - Recent Cases (2) - “Mitsutoyo” case (reported on 2006/08/25) 2001:Mitsutoyo 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 1 st 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) –2 nd 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,

13 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 Gov’t tried to establish coherent legal framework, but not completed yet Expectation for Japanese Leadership –It may follow Japanese leadership (not US leadership)

14 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

15 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"

16 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

17 Summary of Analysis COCOM Legacy Strategic Objective Administative structure. Relation w.Japan/US Malaysia NoneDifferent from US,Japan Eclectic Leadership by Japan Thailand NoneLow PriorityTop down Cooperative (US influence) Hong Kong YesEconomic Interest/ Gateway to China EstablishedAhead of Both Singapore YesBig HubEstablishedCooperative

18 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

19 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)

20 Conclusions: Four Options for Japan 1.Enhance Corporate Compliance Programs in each country Emphasis on small-medium size companies 2.Promote “Japan Model” while meeting local conditions Collaborative relationships between Gov’t and Industry 3.Establish “regional clearing house” of relevant information Enhance sharing of key sensitive information 4.Establish bi-lateral cooperative agreement Japan-led “CSI”-type collaborations to strengthen port control