Diversion of critical technology – a byproduct of global competition?

6 minutes

Global competition for science and technology is heating up

Unless you have been sleeping under a rock these past five years or so, you will be aware that the world is again in an era of great power competition. One key area in which this geostrategic competition is playing out is in science and technology. In addition to the omnipresent competition between businesses, nations are now trying to gain the upper hand for economic and national security reasons in a way we haven’t seen since the end of the Cold War.

Developing a high level of scientific and technological capability maturity takes decades and requires substantial infrastructure, starting with basic education systems all the way to post-doctoral research. The research needs to be supported by a legal, regulatory and financial environment conducive to commercialisation, such as Intellectual Property law, sources of capital investment, and the right government policy settings. Lastly, countries need to have companies capable of converting consumer-ready ideas into products, and the ability to take these products to market.

Where countries or companies cannot or do not wish to take a product to market, they use Technology Transfer mechanisms to assign ownership or control. If you can’t or won’t build these capabilities organically, the alternative offers a fast-track option: Steal it. If you want to take the illicit path, you have three main options: Theft, patent infringement and counterfeiting, or diversion.

medival professionals holding test samples
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What is Diversion in the context of Technology Transfer?

To understand the diversion of critical technology we need to establish some definitions, starting with Technology Transfer. I spent quite a bit of time learning about Technology Transfer at university, but it seems the inherent complexity hasn’t changed in many years. According to a 2011 World Health Organisation (WHO) report, the term “technology transfer has been notoriously difficult to define precisely”.

WHO have chosen to go with a World Intellectual Property Organization (WIPO) definition which defines technology transfer as “a series of processes for sharing ideas, knowledge, technology and skills with another individual or institution (e.g. a company, a university or a governmental body) and of acquisition by the other of such ideas, knowledge, technologies and skills”.

Diversion” refers to the unauthorised or unintended redirection of technology, confidential information, or components / materiel from its intended (authorised) receipient or use to a different party or for use in a different purpose.

Diversion is different to Theft (although they often arise simultaneously): Theft is effectively taking something that isn’t yours without permission (and often without paying for it). For example, going on a laboratory visit, picking up a laboratory notebook and discreetly putting it in your bag for later is theft, not diversion. Although I cannot find evidence of it being discussed in this way in the literature, I consider Diversion a type of Fraud as it typically involves obtaining a benefit (the confidential information or technology) by deception.

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Why should we care about the Diversion of critical technology?

The impact of diverted technology depends on the what the technology actually is and the identity of the perpetrator. Diversion is commonly perpetrated by nation states, competitors, private intelligence collectors, non-state actors (e.g. terrorist groups), and trusted insiders (e.g., employees, supplier’s workforce). Diverted technology can have a number of national security and market competitiveness impacts, which over time erode competitive advantage and can expose companies and countries to undue risk, including:

  1. Military Superiority: Critical technologies often underpin a national defence capabilities. If adversaries or third parties access these technologies, your competitive edge can be eroded.
  2. Economic Competitiveness: Advanced technologies drive economic growth and national competitiveness. At the start of this 4th Industrial Revolution, science and technology goes hand in hand with economic prosperity.
  3. Critical Infrastructure Vulnerabilities: Critical technologies are often used to support critical national infrastructure like energy, transportation, and communication. Diverted technology could be used to identify novel vulnerabilities in systems (including zero-day cybersecurity vulnerabilities), which could be exploited by adversaries leading to widespread disruptions.
  4. Proliferation of Weapons of Mass Disruption and Dual-Use Technologies: Defence and dual-use technologies (those with both military and civil applications) can be diverted to sanctioned groups or nation states, destabilising global security.
  5. Diminished Strategic Autonomy: In this new ere of geostrategic competition, being reliant on another country is a strategic vulnerability (we saw this from the effects of the COVID-19 pandemic). Diversion can lead to increased dependence, potentially compromising a nation’s independence.
  6. Foreign Interference and Espionage: Diverted technology can provide adversaries with insights into a nation’s capabilities, strategies, and operations, potentially undermining its diplomatic and security efforts.

There are many ways in which technology can be diverted, such as False End Users, front companies, use of brokers or intermediaries to obtain information, joint ventures or mergers and acquisitions, IP Licensing agreements, insider threats, foreign student arrangements, and many more. In some cases, once the diverted technology is obtained by the adversary, it will be copied or reverse engineered before going into production (manufacturing). The benefit here means that companies can build a competing product (or military capability) at a cheaper price. without the overheads of having to recover the costs of research and development.

Further Reading

  • Gaida, J., Wong Leung, J., Robin, S., Cave, D., Pilgrim, D. (2023). ASPI’s Critical Technology Tracker – Sensors & Biotech updates, Australian Strategic Policy Institute, https://www.aspi.org.au/
  • Hannas, W., Chang, HM (2021). Unwanted Foreign Transfers of U.S. Technology: Proposed Prevention Strategies, Centre for Security and Emerging Technology, https://cset.georgetown.edu/
  • McBride, J. and Chatzky, A. (2019). Is ‘Made in China 2025’ a Threat to Global Trade?, Council on Foreign Relations, https://www.cfr.org/
  • Toman, D., Famfollet, J. (2022). Protecting Universities and Research from Foreign Interference and Illicit Technology Transfer, European Values Centre for Security Policy, https://europeanvalues.cz/
  • WHO (2011). Pharmaceutical Production and Related Technology Transfer, www.who.int

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