After getting the designation of Major Defense Partner in 2016, India’s elevation to Strategic Trade Authorization Tier 1 by the U.S. gives it a wider access to U.S. high tech and military products without individual export licenses. U.S. Secretary of Commerce Wilbur Ross made this announcement during the Indo-Pacific Business Forum on July 30, 2018.

Already having a presence in the Wassenaar Arrangement, the Australia Group, and the Missile Technology Control Regime, India’s entry into STA 1 is a strategic step taken to create a niche in the competitive defense sector for India.

India’s upgrade to STA 1 – the first among Southeast Asia – would provide easier import of high-grade dual-use technology products by the Indian defense industry. U.S. companies will also be able to cater to the growing needs of Indian high technology and military customers. 

 

The significance of the Strategic Trade Authorization

The Strategic Trade Authorization has two lists (STA 1 and STA 2) mainly for export license exceptions published by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS). STA 1 comprises 36 countries at present, either U.S. bilateral allies or NATO allies, allowing exports, re-exports, and in-country transfer of items listed on the Commerce Control List. STA 1 designated nations can have the license-free import of almost 90% of dual-use items, which are subject to control for various purposes such as national security, chemical or biological weapons, nuclear non-proliferation, regional stability, crime control, and/or significant items.

 

Key takeaway  

This strategic move would strengthen the bilateral trade relationship between the U.S. and India in the defense sector, thereby increasing the trade basket for Indian defense importers. Nearly $10 billion worth of U.S. exports in the past seven years that were licensed would now be eligible under license exception. India’s entry to STA 1 would ensure a nearly 50% cut in licenses required for importing dual-use goods from the U.S.

Apart from sales, the industry could establish manufacturing units in India without worrying about the license. Also, third countries willing to set up manufacturing bases which require imports from the U.S. would be exempted from license requirements.

 

India’s position in defense trade

India is one of the largest importers of defense equipment as well as one of the top five spenders on arms and military services. According to the Stockholm International Peace Research Institute (SIPRI), India was the top importer of arms contributing to 13% of global imports in 2016. The U.S., through this move, has indicated its intention to gain a strong foothold in the expanding Indian defense industry.

For more on India–U.S. dual-use trade, visit The Indian Express and The Times of India.