Globalization and Export Controls

Karlheinz Schnägelberger © Karlheinz Schnägelberger

Karlheinz Schnägelberger © Karlheinz Schnägelberger

Today, it is almost impossible to keep trade and security separate. To ensure that global trade and security go hand in hand, strong cooperation on the international level is necessary. National go-it-alone strategies are not the right way, warns Karlheinz Schnägelberger, head of export controls at Merck KGaA and chairman of the BDI Export Controls Working Group

Mr. Schnägelberger, in view of the turbulences in trade policy and the increasing number of trade sanctions, your job as the head export control officer of a large company cannot have gotten any easier in recent months, has it?

No, it certainly has not! The policy environment has become much more difficult. As chairman of the BDI Export Controls Working Group, I am confronted with the problems, which companies increasingly face, on a day-to-day basis. Particularly the withdrawal of the United States from the agreement with Iran is a major cause of concern for us. While business with Iran is not that important overall when measured in total volume, one thing is clear: that the liberal success formula of integrated value chains – that is, economic areas that are interlinked and bound to one another – is being increasingly subjected to short-term political interests. This poses an enormous threat to globally oriented companies.

What do you mean by “short-term interests”?

As export control officer, I am convinced that both the state and industry have an important role to play and must assume responsibility in shaping globalization and safeguarding security. To this end, companies require a stable and predictable legal framework, which today can no longer be purely national. International treaties on protection against NBC weapons, ballistic missile delivery systems, and dual-use items form an ever more important framework for the activities of companies. Of course, industry respects the primacy of politics when, for example, the issue at hand is sanctioning Russia. But in the case of the Iran agreement, things are much more complicated. The United States has not only unilaterally withdrawn from the agreement; it is furthermore calling for its sanctions to be extraterritorially binding for the rest of the world. However, for this to happen, all other countries would have to ditch the consensus that was reached by the United Nations Security Council. Such acts are damaging to the existing multilateral order.

But isn’t the withdrawal of the United States from the agreement the exception rather than the rule?

If the United States, as the largest global economy, can act in this way, then such behaviour can soon become the norm. Confidence in international agreements and institutions has been weakened, which, in turn, will all too likely have an impact on how binding other global partners think international agreements are. Export controls and sanctions are legitimate instruments of foreign policy. However, they are effective only if based on broad and solid international consensus. In a globalized world, no one can shape foreign policy on their own.

So, unilateral sanctions miss their target. To what extent are German companies affected by nations going it alone?

For certain regions of the world, German companies will find it increasingly difficult to obtain export authorizations, while suppliers from other Western countries will be able to continue selling to the respective regions. Meanwhile, “German free” and “U.S. free” have become labels that customers in other countries are making a point for which they look. Global supply is interconnected and complex. Thus, we need to find a good balance between political and economic interests.

Karlheinz Schnägelberger is Vice-President for Export Controls and Customs Regulations at Merck KGaA and Chairman of the BDI Export Controls Working Group.