U.S.-India Tech Partnership Through the Lens of U.S. Export Controls

Introduction

The bonhomie between India and the United States in recent years has been hard to miss. With India joining a host of U.S.-driven initiatives, such as the Mineral Security Partnership and the Artemis Accords, and new tech initiatives such as the initiative on Critical and Emerging Technology (iCET) and the India-U.S. Defense Acceleration Ecosystem (INDUS-X), bilateral relations are on an upswing.

Underlying most of these tech initiatives is the legislative framework of U.S. export controls that determine issues like tech transfer, information sharing, co-production, and co-development—the foundation for long-lasting and sustainable bilateral technological cooperation. With Prime Minister Narendra Modi’s upcoming visit to the United States, now is an opportune moment to take stock of the progress in export controls between the two countries over the last four years. This commentary will trace the growing momentum in the bilateral tech partnership under the Modi and Biden administrations, how it has shaped U.S. export controls, and how, in some cases, the tech partnership may be shaped by them going ahead.

Export Control Issues and the India-U.S. Strategic Trade Dialogue

The 2005 U.S.-India civilian nuclear agreement led to a significant liberalization of U.S. export control policies with respect to India. For instance, it removed the Indian Space Research Organization (ISRO) from the so-called entities list of organizations banned from receiving U.S. exports. Consequently, U.S. exports to India requiring export licenses fell from 25 percent in 1999 to 0.1 percent in 2008. The processing time for export license applications also improved, falling from fifty-two days in 2003 to thirty-three in 2007, in line with the timelines for Israel, France, and the UK.¹

Despite this progress, certain issues still linger—lack of awareness regarding the applicable U.S. export control laws; a low volume of commerce (around $7.7 million in 2022) transacted under the Strategic Trade Authorization Tier 1 (STA-1) status that was granted to India in 2018; and the general convoluted nature of any export control regime, especially unavoidable due to constant, and often imperfect, updates to keep up with technological changes.

The key question here is whether there was a significant issue between the two countries regarding U.S. export controls. To assess this, we rely on data from the Bureau of Industry and Security (BIS) under the U.S. Department of Commerce, the only source that tracks export control data vis-à-vis the two countries.

The most recently available data shows that in 2022, trade under a BIS license for “commodities, software, and technologies” amounted to $187.4 million, and $444.2 million under a BIS license exception. Export license applications worth $1.4 billion for India were reviewed by BIS in 2022, just 2.5 percent of the overall U.S. exports to India, valued at about $47.2 billion. This raises the question of whether both sides should be focusing on 2.5 percent of the trade value that BIS has reviewed.

The Indian government and the Biden administration might have recognized the need for higher-level engagement on these issues and laudably instituted the India-U.S. Strategic Trade Dialogue (IUSSTD) in March 2023 to review bilateral export control regulations.

Both sides may have found trade in high-tech exports underwhelming due to the complexity of export control laws, which can discourage companies from applying for licenses in the first place. A recent book on U.S. export controls attests to this—

“…export controls are invisible because they are embedded in the complex bureaucratic structures of the federal government, where they are not exactly easily accessible… They are invisible because they are one of its fundamental, taken-for-granted raisons d’être. Corporations that depend on export markets for their profits and university administrations that hold international cooperation as a core value go out of their way to comply with them on pain of grievous sanction. We don’t see them at work because most people impacted by them make sure that they comply with their injunctions.”²

Therefore, an equally plausible explanation is that high-tech trade is low because many applicants see the export item as unlikely to be approved and don’t wish to apply for an export license. The IUSSTD, with its ancillary objective of building resilient supply chains for the technologies identified under the iCET, is a much-welcome step. It seeks to enhance and build awareness among industry, academia, and other stakeholders through workshops and related activities. Since March 2023, many such workshops have been hosted in Bengaluru, New Delhi, and other Indian cities to demystify export control laws and better acquaint Indian stakeholders with the U.S. export control regime.

Recent Laws and the Way Ahead

The IUSSTD is indeed a much-needed mechanism to streamline issues related to export control laws that may inhibit tech transfer between India and the United States. However, in the coming months, the IUSSTD should not only look at legacy export control issues but also at legislative proposals that could inhibit a tech partnership.

For example, a recent set of legislative proposals under the existing STA could impact high-tech trade. India is currently classified as an A5 country under the Strategic Trade Authorization exception. However, the proposed amendments to the STA regime, if implemented, could club India (an A5 country) with A6 countries. For instance, the proposed STA amendment rules remove STA eligibility for export of software used for UAVs for A5 countries and brings such A5 countries at par with A6 countries, which was not the case earlier.

Other laws may further complicate matters. In May 2024, a bipartisan group of lawmakers in the U.S. House of Representatives introduced the Enhancing National Frameworks for Overseas Restriction of Critical Exports (ENFORCE) Act, which would make it easier for any U.S. administration to impose export control measures on artificial intelligence (AI) models. Notably, the Bill does not have a carve-out for open-source AI models, defining artificial intelligence systems as “any software or hardware implementation of artificial intelligence, including artificial intelligence model weights and any numerical parameters associated with the artificial intelligence implementation.”

This is a potential concern for Indian AI firms, which rely heavily on open-source AI models. The IUSSTD platform could serve as a forum to address this possible roadblock to further cooperation on AI.

Conclusion

It should be noted that the ENFORCE Act and the proposed STA amendments mentioned above are not aimed at India and do not necessarily target high-tech commerce between the two countries. These are likely part of the massive shifts U.S. export control rules are currently undergoing, making it difficult to carve out exceptions for a sole country.

It should be noted that India has not been included either in the group of countries subject to stringent export controls or among the beneficiaries of certain relaxations, such as the AUKUS. That is to the credit of deft maneuvering on the part of the Biden administration and the Modi government to institute a dedicated mechanism that looks at such issues in a focused manner. Perhaps, going ahead, the IUSSTD can serve as a reliable mechanism to guide further coordination on the issue of U.S. export control liberalization for India.