Export controls: An impediment to technology transfer

Export controls currently exercised by the North prevent the transfer of technologies that can be used in biodiversity conservation, sustainable use and equitable benefit sharing. Edward Hammond argues that the issue of export controls must be firmly placed on the CBD agenda and that the CBD must work to reduce the impediments to such transfer.

THE North’s reluctance to adequately regulate the international flow of biotech products is well-known. By attacking alleged ‘barriers’ and ‘impediments’ to the movement of modern biotechnology, usually in the developing world, many Northern countries are helping their biotech companies expand their markets. But the North’s control over biological technology transfer is supported by another, far less publicised and very different barrier: export controls.

The North’s export controls are designed to prevent transfer of certain types of biology-related hardware and knowledge. The controls are not based in treaty, and in fact conflict with technology transfer obligations under the Convention on Biological Diversity and the Biological Weapons Convention (BWC). They are administered by a club of 34 countries called the Australia Group, which is overwhelmingly composed of those countries in which ownership of modern biotechnology is concentrated. Termed an ‘informal arrangement’ by its  members,  the  Australia  Group club functions as a biotechnology cartel.

On the surface, export controls appear to contradict the North’s pressure for the unregulated flow of biotech products. They actually reinforce wealthy countries’ control over biotechnology, however, because there is a critical difference between technologies subject to export controls and the biotech products, such as genetically-engineered maize, that have sparked global controversy. Export controls generally apply to biological production technology (for example laboratory equipment), and not to biotech products. Export controls are thus consistent with other Northern policy: they contribute to Northern control of markets by limiting access to production technology, and they concentrate power over the international flow of biotechnology because Australia Group membership is exclusive.

Export controls are intended to stop transfer of equipment, materials, and knowledge that have potential weapons uses. But, in biology, those same technologies have many peaceful uses.  For example, a fermenter that could produce anthrax might also produce medicines or organisms for biological control or remediation. Because of these overlapping uses, export controls thereby prevent transfer of technologies that can be used in biodiversity conservation, sustainable use, and equitable benefit sharing. Importantly, export-controlled items are used in environmentally controversial applications (e.g. genetic engineering); but also in ways that are more generally regarded as safe and beneficial.

Export controls are palpably and unashamedly inequitable and, for those reasons and others, the North avoids discussing them in multilateral venues. Yet they have a global impact: the 38 countries on which the United States imposes the most stringent controls together comprise more than 50% of the world’s population. At any time, however, the members of the Australia Group may add or delete countries from their export control lists due to any number of reasons, including faulty intelligence or political or other motives unrelated to safety and security. Any country that is not a member of the Australia Group, even if it does not presently encounter problems with export denials, could become subject to them, without international recourse.

Reforming the export control system would remove a major impediment to technology transfer; but should not be construed as an endorsement of the unfettered dissemination of biotechnology. Rather, it is about unilateralism vs. multilateralism in technology transfer, and the power to manage the global flow of many biotechnologies, a power that the North presently reserves unto itself. It concerns equity: reforming export controls is about reforming how the dissemination of science is organised, and whether power to do so is concentrated in a few countries or if it is shared among the world’s peoples.

Countries that choose not to exploit some applications of modern biotechnology should be concerned about export controls. Many export-controlled technologies, such as laboratory safety equipment, can be used in conventional (i.e. non-biotechnological) applications. Export controls not only impede spread of genetic engineering capacities; but development of biomanufacturing and safe disease research facilities in general, irrespective of the use of genetic engineering within them.

Export controls are also established and applied in a fundamentally unfair, arbitrary way. Non-Aligned Movement (NAM)countries have repeatedly denounced this, particularly in meetings of the Biological Weapons Convention. Countries that apply export controls typically adopt a hypocritical position in discussions of technology transfer, including at the Convention on Biological Diversity. On one hand, they complain about Southern import controls and ‘technical’ and ‘administrative’ barriers  and insist that alleged Southern impediments to technology transfer must fall. On the other hand, the North continues to raise its shield of export barriers. Export-controlling countries seek to render the South unable to impose limits on the flow of biotechnology while, simultaneously, reinforcing their autonomy to limit the exchange through the unilateral application of export controls. 

Export controls are complex because of the secrecy that surrounds them and because they are applied to specialised types of technology that are generally low in the public consciousness. To more concretely illustrate the impacts, the following examples demonstrate the application of export controls to academic research and to the bioprocessing industry:

Export controls and a (relatively) modest lab for infectious disease research

Nowhere is the bite of export control felt more strongly than in biomedical research. This example is of a modestly-sized new laboratory at a university health research centre in Dallas, Texas. The lab will produce antibodies and experimental vaccines to prevent a variety of diseases. These products might or might not be genetically-engineered. The lab will use high production standards so that its output may be used in human experimental trials.

This type of lab is necessary to conduct many kinds of research to develop and test treatments for infectious diseases of worldwide concern. In fact, so-called ‘emerging infectious diseases’, often prevalent in the South, are a major focus of the lab’s research. This type of facility could be used in most and perhaps all countries.

By current standards, the lab is relatively inexpensive - the budget for equipment and major supplies (for 5 years) totals US$965,000, plus $115,000 to renovate 45.5 square metres of space to meet appropriate international laboratory safety standards (called ‘P3’ biological containment).

As the table below indicates, while the US lab will encounter no export control difficulties, despite the many worldwide peaceful uses for such a lab, virtually all of the core components are export-controlled for labs in other countries:

Not only do export controls make difficult or prevent transfer of technology useful for disease research, export-controlled technology is used to exploit Southern biodiversity in the North. The California-based company Diversa focuses on microbial bioprospecting, collecting and testing microbes from across the world. Diversa looks for patentable characteristics that it can turn into products. Diversa presently holds approximately 650 patents and patent applications.

Adept at overcoming suspicions about biopiracy, Diversa has cut access deals across the world, amassing a huge microbial diversity library.  In October 2003, its director of drug research told the US business review Forbes magazine that, ‘What we have within Diversa is one of the greatest collections of naturally occurring enzymes that I’ve ever heard of.’ An impressive feat for a company whose operations began less than a decade ago (in May 1994). Presently valued at US$350 million, the company’s annual sales are approaching US$40 million, a  figure  that  Diversa  says will grow. Syngenta owns 15% of Diversa, and the company has agreements with industry heavyweights such as GlaxoSmithKline, Dow Chemical, DuPont, and Aventis. Diversa has also entered into a partnership with the US Department of Energy that is screening and manipulating soil microbes with the goal of producing bioremediation microorganisms.

Diversa’s goods are microorganisms (or products thereof, such as enzymes) that are grown and purified in a laboratory. Its product pipeline includes biochemicals for a myriad of uses, such as animal feed additives, in food processing, as research reagents, etc. Diversa often licenses its patents and others manufacture products that it controls.  In Diversa’s business, obtaining and patenting an enzyme or a microorganism is only part of the commercial equation. Its markets are for lab-manufactured products for pharmaceutical, food, and scientific testing customers. Because they must have a refined and consistent product and because its technology uses microbiological mass production techniques, Diversa and its partners require facilities with a wide variety of high-end hard technology - the same biomanufacturing technology that is most tightly export controlled.

While Diversa uses the world’s biodiversity, the technology required to commercially exploit Diversa’s ‘inventions’ is subject to export controls and, hence, unavailable to many countries. So long as the core technology, knowledge, and facilities necessary for such research and manufacturing remain tightly controlled by the North - and export controls have a major role in maintaining that control - benefits will not accrue to the origin of the biodiversity upon which they may be based. All countries have a stake in how such technology is used. Presently, unless countries can develop the hard technology and related skills indigenously, they are at the not-so-tender mercies of the Australia Group.

Export controls and the failed BWC verification protocol

From the late 1990s and into 2001, export controls were discussed by the Biological Weapons Convention which, at the time, was developing a protocol to strengthen the treaty. The Protocol aimed to alleviate potential mistrust or misunderstanding of biological research activities by establishing a multilateral system of declaration and inspection of biodefense and related facilities. Under the proposed protocol, member countries would detail their relevant biological capacities and research in annual declarations to an international inspectorate. Facilities would be periodically visited by inspectors who would verify the accuracy of the declarations and, if a member of the Protocol suspected illicit activities, could be empowered to conduct a more probing ‘challenge inspection’.

In view of the proposed protocol, Non-Aligned Movement countries put forward arguments that export controls should be reformed. If labs and activities were open to an international inspectorate, then the end-use of technology was always open to verification. They argued that export controls should be placed on a genuinely multilateral footing. NAM members asked, in effect, for genuinely international administration of export controls in lieu of the ‘informal arrangement’ of the Australia Group club. The NAM’s efforts were not welcomed by some countries, particularly the US.

Brazil and others attempted to find a compromise on export controls (one of several sticky issues in the negotiations); but differences remained in 2001 when the Protocol negotiations collapsed. The failure came about when the US abruptly withdrew its support for the negotiations, a policy shift made by the Bush administration.

COP7: Facilitating safe technology transfer on a multilateral basis

Virtually all governments concur that controls over the movement of modern biotechnology are necessary in order to ensure biosafety and biosecurity. Despite this important consensus on principle, a practical agreement on a fair and effective system to ensure safe technology transfer has proven elusive, in large measure because some countries refuse to work multilaterally.

The ‘informal arrangement’ of the Australia Group club is explicitly designed to reinforce Northern control over biotechnology. The Group lacks international support and is prone to political and economic manipulations unrelated to the nonproliferation goals of the system. It is fundamentally inequitable and conflicts with BWC and CBD commitments, which oblige technology transfer for peaceful purposes.

The 7th Conference of the Parties (COP7) to the Convention on Biological Diversity (CBD) will convene in Kuala Lumpur, Malaysia in February 2004. It is expected to establish a working group to discuss technology transfer. This group should, as is the view of some developing countries, take steps toward a new international mechanism to facilitate technology transfer. In contrast, in preliminary talks held in October 2003, the United States appeared eager to use the CBD discussion to attack alleged Southern ‘technical’ and ‘administrative’ barriers to imports of biotechnological products. This tactic - focusing debate on the South’s laws - conveniently deflects attention from the North’s two-track policy. That is, Northern countries insist on the one hand that the South must drop its defences against undesired biotechnology while, on the other hand, wealthy countries are building an increasingly far-ranging export control system.

If the issue of export controls is not firmly placed on the agenda, no matter what the CBD decides, broad ranges of technology and knowledge that are highly relevant to the convention will remain subject to the arbitrary arrangements of the Australia Group. Gene-extractive industries such as Diversa’s and others, including biopharmaceutical manufacturers, will continue to enjoy the unadvertised protection of export controls. Northern compliance with CBD decisions on technology transfer will be conditioned by unilateral application of export controls.

The CBD should work to reduce the export-control impediment to transfer of technology that may be used for the purposes of the Convention. CBD Parties should place the issue of export controls high on the agenda and may request that the Secretariat of the Convention prepare a study that identifies CBD-relevant technologies that are export controlled, and which outlines options for ensuring that such technologies are available for transfer in accordance with Parties’ commitments under the Convention. Parties can also consider how new international mechanisms may facilitate reduction of export control barriers to technology transfer by, for example, creating export-reporting systems.                         

This article is adapted from the report Export Controls: Impediments to Technology Transfer Under the Convention on Biological Diversity (Sunshine Project Backgrounder #13, January 2004), which contains lengthier discussion and detail. That report may be viewed on the Internet at Paper copies are available by writing to The Sunshine Project, 101 West 6th St Suite 607, Austin  TX  78701, USA.

(BOX 1)

On the economic impact of export controls

IF a technology is export-controlled, it may be transferred only upon the issue of a government licence. For transfers between members of the Australia Group club, licences are generally easily obtained. For non-members, the process is more difficult, if at all possible. In the US, and perhaps other countries, a second category of non-members is subject to the tightest controls, including a legal presumption of technology transfer denial.

The number of denials imposed cannot be determined because of secrecy. For example, when the US General Accounting Office (GAO) asked for a full accounting of diplomatic activity related to export denials, the US State Department refused to provide it, despite the fact that GAO is the research office of the US Congress.

In addition to outright denials, export controls preempt technology transfer. If potential importers know they are likely to be denied, they may not ask for a technology. Australia Group members including France, Japan, and Australia promote this effect by ‘informally discouraging’ applications if denial is a significant possibility. Northern manufacturers are also encouraged to police themselves. These additional layers of opacity make it even more difficult to calculate export control impacts.

Defenders of export controls assert that their overall economic impact is small. To support this argument, they focus on the cash value of denied technology transfer. But what few figures are available are unverifiable because the underlying data is secret. Denied sales figures measure only one impact of export controls. The value of preempted transfers is impossible to accurately calculate. Nor is it possible to accurately calculate the losses caused by denied transfers destined for manufacturing, which could themselves generate trade. For example, if a country is denied biomanufacturing technology, the major economic impact is not the denied equipment but the products that were never sold. 

(BOX 2)

One way forward: Export reporting

THE rationale behind export controls is that by preventing acquisition (i.e. transfer) of certain technology, security is enhanced. An alternative (or additional) measure is comprehensive export reporting. Instead of a focus on transfer per se, export reporting would shift focus to make it more difficult to hide illicit activity. If international transfers of biological technologies, goods, and agents are comprehensively reported, impediments to technology transfer may be reduced while, at the same time, abuse would be signalled by unusual import patterns.

Most imports and exports of biological items are already registered, often by more than one government authority (e.g. customs, trade, or sanitary authorities). While it may require a substantial effort to set up a global system to sample, compile and store this data, maintaining the system would pose a small burden, because the data is already collected by governments for other purposes.

Compared to export controls, export reporting can be broader in scope, including additional laboratory equipment, such as glassware, growth media, and ‘low tech’ equipment types that are poorly covered by current controls. As a monitoring scheme, export reporting is less prone to political abuse and may be more easily agreed upon on a truly multilateral level.