November 2006 Workshop for East Asia Science and

November, 2006 Workshop for East Asia Science and Security Collaborative 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 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.

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

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 3

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? 4

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" 5

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) 6

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 7

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

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, 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 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. 9

Illicit Trade from Japan to N. Korea (2002 -2003) Suspicious Company in North Korea Importer in Thailand 10

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, 11

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, 12

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) 13

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 3 D measurement machine to China through Thailand (without Japanese export license) – Lack of enforcement at country borders 14

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" 15

Assessment of National System(4) Singapore • Legal system has been recently established – Since 1970 s, 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 16

Summary of Analysis COCOM Legacy Strategic Objective Administative Relation structure. w. Japan/US Malaysia None Different from US, Japan Eclectic Thailand None Low Priority Top down Cooperative (US influence) Economic Established Interest/ Gateway to China Ahead of Both Big Hub Cooperative Hong Kong Yes Singapore Yes Established Leadership by Japan 17

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 18

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) 19

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 20