Font size: 
But the absence of clear details in the U.S. end-user policy regarding India, the program’s lackluster impact in China, and the elaborate system the United States has set up to ensure that its high technology is not used to undermine its interests, indicate that the lane may be too narrow for any significant volume of trade to occur, at least in the short run, say experts.
Some also feel that given the wide – and perhaps cheaper – choice of competing technologies available elsewhere in the world, freer access to U.S. high technology may hold more political than practical significance for India.
On the face of it though, the June 17 decision to designate GE India as a “validated end-user” in India – allowing the company to enter a pre-approved, export express lane as a trusted end user – is a landmark. Ever since the United States finalized its VEU policy in June 2007, India is only the second country in the world – after China – to be included in what many consider one of the most progressive U.S. policies to promote high-tech trade between two countries.
“The VEU program is a significant initiative that promotes high technology trade while protecting U.S. national security,” said Commerce Acting Undersecretary for Industry and Security Daniel O. Hill. Companies that apply and are qualified by the U.S. Department of Commerce as validated end-users thus become eligible to receive, without red tape, specified high technology items of the most powerful and technologically advanced countries of the world.
According to the DoC, qualification for VEU benefits both the foreign participants and U.S. exporters by limiting the paperwork that must be completed for shipment authorization, thereby allowing export on demand as well as resource savings.
“However it may be too early to uncork the bubbly yet. It is not that the U.S. has given blanket access to GE India for any of its technologies; GE India may have been given access to a certain number of notified items of technology from a huge list of controlled stores under its VEU system,” said retired Major General Mrinal Suman, considered one of India’s foremost defense analysts, who advises the industry and the Confederation of Indian Industry in crafting high-technology policies.
“We need to know how many of the controlled items has the U.S. opened for India and also what level or generation of technology the country will allow to be exported to India. Only time will tell whether the inclusion of India in the VEU program could result in substantial benefits or not.”
The list is limited. “The GE India VEU designation covers dual-use civil aircraft technology and explosive detection equipment,” said a DoC spokesperson in response to an emailed questionnaire.
Admittedly, the free flow of high technology from the U.S. border through the VEU route is more complex than it looks. For one, it requires extensive coordination of the various departments like Commerce, State, Defense, Energy and sometimes even the Treasury, for a high-tech item to flow through the VEU route.
Moreover, participating companies must pass a rigorous national security review and agree to strict follow-on compliance obligations prior to qualification. “That may come as a big deterrent for many Indian companies to participate in the VEU process,” said the CEO of a high-technology equipment maker belonging to one of the largest industrial groups in India, requesting anonymity.
“While the U.S. is an undisputed leader in the area of high technology, it is also important to note that competing technologies could be obtained from other countries as well, where the cost of acquisition is often lower,” he said. “Israel and many countries in Europe for instance impose far less conditions for exporting their technologies.”
The other significant hurdle is the strict end-user monitoring system that protects the country’s cutting-edge technologies from being used against its interests. Through a regulatory framework that notably includes the Arms Export Control Act and the Foreign Assistance Act, “the US government has put in place an elaborate system to ensure that their technologically advanced equipment is not used in a manner detrimental to U.S. interests,” said Suman.
Then there are concerns about intellectual property rights. “Weak protection of intellectual property rights in India has been a top concern for both the U.S. government and U.S. industry for many years now,” said the DoC spokesperson.
“Piracy and counterfeiting are still a serious problem and India's criminal enforcement regime remains weak,” he said. “We understand the logistical challenges involved with strengthening these measures, and we applaud the government of India for undertaking reforms to modernize its IP offices and to increase enforcement efforts. But we urge India to continue strengthening protections for patents, copyrights and trade secrets to remove obstacles to investment and collaboration.”
Therefore, with or without the VEU, “U.S. end–user monitoring will ensure all technology exports are strictly controlled and undergo rigorous and demanding interagency review,” added Suman.
Although the VEU program encourages bilateral trade by facilitating collaboration between the United States and partner countries, judging by the China experience, its track record is hardly encouraging.
China was the first country to benefit from the VEU program when five companies located there were approved by the DoC in October 2007. In announcing the approval, the DoC said it hoped that “as the program expands and matures, it could facilitate millions of dollars of U.S. exports to China,” which in turn “will help to keep high-paying, good-quality technology jobs in the United States.”
However, a review in April this year showed that only US$19 million in high-tech items had been shipped to China under VEU authorization. This is despite the fact that the five companies imported US$54 million worth of U.S. goods under licenses in 2006 – about 18 percent of total licensed exports to China.
The DoC said it is committed to facilitating bilateral trade with India, but given the demands of the program, “It is essentially going to be a one-way street for the time being,” said Suman.
Tejpreet Chopra, chief executive of GE India, said the VEU approval showed the U.S. commitment to expand the India-U.S. relationship in trade and business. It also provides GE India an opportunity to introduce “very advanced technology” to its research facility in India, to develop products for the Indian market.
“We can now sell very advanced systems to the Indian market for the police forces, health sector and for even socially significant sectors like water management and control,” said Chopra. GE India’s VEU status does not include military technology, he said.
The goal of the VEU program is to create efficient bilateral trade through secure supply chains. Therefore, benefits can accrue either through direct exports to Indian suppliers or through the transfer of technology to Indian collaborators which, as in the case of GE India, can enhance U.S. companies' global competitiveness and lead to the next generation of innovation.
Vivek Lall, vice president and India country head of Integrated Defense Systems Boeing Company, is optimistic. “It may appear to begin as a one-way flow, but certainly as the cooperation begins to increase between the two countries, I see this as an opportunity to increase trade both ways,” he said.
