A unified front

European Commission seeks to harmonize export control among its member states    The European Commission wants to have European Union member states on the same page when it comes to administrating and enforcing export control regulations, and has recently embarked on an ambitious reform initiative to achieve that goal.
   While the commission for the past 20 years has provided the European Union with a regulatory export control framework, it has been up to individual member states as to how rigorously they implement and enforce those rules nationally.
   “There’s absolutely no indication that the framework is voided,” Stephane Chardon, external relations directorate general for the European Commission in Brussels, said in a recent sitdown with the Adam Smith Project. “It comes down to how it’s implemented, and there is evidence that some members apply export controls differently from others.”
   The EU export control regime has been repeatedly refined and updated incrementally since its implementation in the late 1990s. These export controls are largely focused on the movement of dual-use items, or products with both civilian and military applications.
   The EU Control List today covers about 1,600 dual-use items across 10 categories, namely nuclear materials, facilities and equipment; special materials and related equipment; materials processing; electronics; computers; telecommunications and information security; sensors and lasers; navigation and avionics; marine; and aerospace and propulsion.
   While a number of large companies in Europe produce and export dual-use items, there are also thousands of small and midsized companies that are engaged in the production of these products. While it’s estimated that the value of dual-use exports in the European Union represents about 2 percent of total exports, these controls indirectly impact a much larger “export domain” of up to about 20 percent of total EU export value.
   The European Commission says the foundation for its controls derive from various international obligations, such as the UN Security Council Resolution 1540, the Chemical Weapons Convention and the Biological Weapons Convention, and are in line with commitments agreed upon in multilateral export control regimes, including the Wassenaar Agreement (national security), Missile Technology Control Regime, Australia Group (chemical and biological weapons), and Nuclear Suppliers Group.
   However, many European companies are frustrated by the “significant variations in terms of processing time for export licenses and diverging interpretations of EU rules,” which was acknowledged in a recent report by the European Commission about the EU export control regime.
   Also noted in this report, companies told the commission that “distortions of competition may result from differences in laws and regulations including different exclusions and exemptions and other facilitation arrangements, from an outdated EU control list, from delays to delivery caused by license application regimes that certain competitors do not have to contend.”
   In June 2012, the commission launched its Dual-use e-System (DUeS), a secured and encrypted electronic information exchange system, to encourage EU member states to exchange information amongst themselves and the commission. Since then, the system has been continuously developed and its level of usage by individual EU country authorities has been improving.
   Regulatory enforcement of export controls in Europe are the responsibility of national authorities, such as customs and intelligence agencies. A challenge, however, is that these authorities generally do not sufficiently communicate across borders with their counterparts in other EU countries on export control enforcement matters, Chardon said.

A challenge is that national authorities generally do not sufficiently communicate across borders with their counterparts in other EU countries on export control enforcement matters

   In late September 2016, the European Commission proposed to the European Parliament a significant “upgrade” to the EU export control system to make it “more efficient and more effective,” and most importantly bring about more uniformity in their application and enforcement by member states.
   “The proposal will further harmonize controls so that risky transactions are controlled in the same manner throughout the EU,” the commission said. “More consistent controls means better security, and a level playing field for exporters. This shows that trade and security can be mutually reinforcing.”
   Specifically, the commission’s proposal will introduce new EU General Export Authorizations that are expected to improve the administration of export controls and reduce export licensing costs.
   The simplification of controls on the intra-EU transfers of highly sensitive items and technologies will reduce these related costs for companies by about 40 percent, and “will facilitate the operation of business within the Single Market while maintaining a good level of security, since that trade remains within the EU and thus does not pose a high risk for international security,” the commission said.
   The proposed changes also address the oversight of technology transfers, such as those licensable software transactions that are increasingly being conducted through the cloud.
   “Authorities have an easier time controlling the physical movement of dual-use items, whereas stopping illicit transfers of software is more difficult,” Chardon said.
   Another area of the European Commission’s export control reform is the inclusion of stricter oversight of technology exports that could be used for surveillance purposes, such as monitoring centers and data retention systems, by foreign governments in violation of human rights.
   “It is essential to ensure that regulations allow EU authorities to stop exports in cases where they could be misused for human rights violations, for repression or armed conflict,” the commission said.
   The European Parliament is currently reviewing the proposal and it’s hoped that the export control reforms will be approved by early next year. Afterwards, it will take some time for individual EU members’ regulatory regimes to implement the reforms.
   Chardon said the EU export control reform will not replace the enforcement of those regulations at the national level, but it should go a long way to bringing about a more organized approach to these activities across Europe.
   “There’s strength at the national level,” he said. “Individual countries know their exporters and what’s happening. What we need to do, through this reform, is to reinforce the interaction between them so that we act more efficiently and effectively together.”