V. Controlling technology transfers and foreign direct investment: The limits of export controls

Chapter:

10. Dual-use and arms trade controls

Source:

SIPRI Yearbook 2019

Author(s):

Mark Bromley

A key focus of national and multilateral controls on the export of dual-use items and arms is regulating transfers of ‘sensitive’ or ‘strategic’ technology. In the context of export controls, technology is defined as ‘specific information which is required for the “development”, “production” or “use” of a controlled item’.¹ Detecting unauthorized transfers of technology defined in this way is a particularly challenging aspect of export controls. Unlike almost all other items that are subject to export control, technology can take an intangible form (e.g. knowledge that is carried in an individual’s head) and be transferred using intangible means (e.g. emails or other means of transferring data electronically).² In its broadest sense, technology refers to ‘machinery and equipment developed from the application of scientific knowledge’.³ Transfers of this type of technology are regulated by a range of different instruments, including systems for screening and blocking foreign direct investment (FDI). FDI is ‘Investment from one country into another (normally by companies rather than governments) that involves establishing operations or acquiring tangible assets, including stakes in other businesses’; it ‘is not just a transfer of ownership as it usually involves the transfer of factors complementary to capital, including management, technology and organisational skills’.⁴ In recent years a number of states, including the United States and several European states, have taken steps to strengthen their FDI screening tools for two sets of related reasons.