The European Union’s export control regulatory framework has emerged as a universal standard in global trade control harmonisation. The EU Dual-Use List is nearly ubiquitous outside the EU, particularly among governments seeking to enhance strategic trade control systems and non-proliferation capabilities. As the European Parliament seeks to reform dual-use trade controls to fight trafficking, it must build upon existing policies to carefully balance the symbiotic relationships between international security and commerce.
The challenge: staying one step ahead of the traffickers, without stifling business
Regulation (EC) No. 428/2009 provides an innovative and essential regulatory equilibrium between concerns about proliferation of weapons of mass destruction (WMD) and global trade facilitation. But it must evolve. Export control policy makers in the EU and elsewhere face seemingly insurmountable obstacles as supply chains become increasingly sophisticated. Technology transfer controls have become more difficult to enforce through the prevalence of internet communications and cloud computing. Additionally, governments lack the capability to identify proliferation risks associated with rapidly emerging technologies, ergo incorporate new technologies into existing control lists. Moreover, over-burdensome regulation on dual-use trade has the potential to stifle economic competitiveness of European firms, impede national defence capabilities, hamper beneficial research & development, and ultimately direct foreign traders to other markets where dual-use items face less cumbersome restrictions.
Private sector as a line of defence
In order to realistically address proliferation vulnerabilities in a highly competitive global market where existing dual-use trade controls are becoming increasingly difficult to enforce, the EU must recognise that private companies often serve as the initial, and perhaps most potent defence against proliferators, traffickers, terrorist networks, and international crime syndicates attempting to circumvent export controls. In order to implement an effective dual-use control policy, the EU should supplement existing government outreach initiatives by incentivising dual-use traders and industry to reduce exposure to proliferation networks through the development of counter-proliferation-oriented internal compliance programs (ICP), with mechanisms for companies to self-regulate the full-range of proliferation-sensitive transactions, including intangible technology transfers, e.g. via the Web, deemed exports, and re-exports.
Fast track screening as an incentive
An excellent example for incentivising dual-use traders to develop robust ICPs can be found in the European Union’s existing regulation governing intra-EU defence transfers, Directive 2009/43/EC of the European Parliament and of the Council of 6 May 2009 on Simplifying Terms and Conditions of Transfers of Defence-Related Products within the Community. The directive enables defence companies with reliable ICPs to become established as certified and reputable intra-EU traders in the defence marketplace, and subsequently eligible to trade in defence products under preferential licensing conditions. Such incentives have the ability to stimulate secure trade and reinforce cooperation between the public and private sector.
Wanted: dual-use database to lower costs, focus on high risk
The European Commission has already articulated sound reasoning with the development of “fast track” export authorizations for reliable dual-use exporters with reputable ICPs. In addition to fast-track export authorisations, the EU should establish a public database of certified dual-use firms, mirroring the Certified Enterprises Register (CERTIDER) for defence companies. Such a database would enhance firms’ reputations, and consequently assuage compliance concerns for other trading partners by reducing exposure to unauthorized transactions or end-uses. And while most governments still face volatile fiscal uncertainties, reducing administrative costs for licensing low-risk transactions and reputable traders will be essential to strengthening the efficacy of the EU’s dual-use trade control system. For example, a database of reliable dual-use traders would allow licensing and enforcement authorities to direct resources toward high-risk transactions, and focus on more resource-intensive tasks, such as end-user verification and monitoring. EU Member States could also use reputable firms as “mentors” in government outreach initiatives for emerging high-tech firms struggling to keep pace with the myriad export control regulations in the EU and elsewhere, through seminars, workshops and consulting.
Ultimately, as the pace of globalisation and technological progress accelerate, private firms will remain an essential component in the fight against global proliferation networks and arms trafficking. The European Parliament must continue to incentivise, engage, and leverage private industry as a vital partner in international non-proliferation efforts, regardless of the direction it takes in its overall export control policy reforms. Together, the EU and responsible businesses can be a powerful force to halt the spread of weapons of mass destruction, making the world that much safer.
 See “Communication from the Commission to the Council and the European Parliament,” March 24, 2014, here.
 “Certified Enterprises Register,” European Commission, 2014. here.
This article is part of Friends of Europe’s upcoming discussion paper on the future of dual-use technologies in Europe.
The full discussion paper will be available in early September. Read the other articles here.