The International Nuclear Industry Today

Paul L. Joskow

From Foreign Affairs, July 1976

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Summary:  Concern and frustration over the rapid spread of nuclear reactors, uranium enrichment facilities and reprocessing plants outside of the nuclear weapons club, to countries such as Brazil, South Korea, and the Union of South Africa, have recently led to suggestions that the United States place a ban on the export of conventional reactor technology, advanced reactor technology such as the breeder reactor, and fuel cycle technology until more acceptable safeguards institutions have been created. For example, in recent congressional testimony, David Lilienthal, the first chairman of the Atomic Energy Commission, suggested that such a unilateral U.S. strategy might be adopted.

Paul L. Joskow is Associate Professor of Economics at the Massachusetts Institute of Technology. This article was based on research funded by the Ford Foundation.

Concern and frustration over the rapid spread of nuclear reactors, uranium enrichment facilities and reprocessing plants outside of the nuclear weapons club, to countries such as Brazil, South Korea, and the Union of South Africa, have recently led to suggestions that the United States place a ban on the export of conventional reactor technology, advanced reactor technology such as the breeder reactor, and fuel cycle technology until more acceptable safeguards institutions have been created. For example, in recent congressional testimony, David Lilienthal, the first chairman of the Atomic Energy Commission, suggested that such a unilateral U.S. strategy might be adopted.

There are several reasons why this approach to the proliferation problem is unlikely to be successful. First, the United States no longer possesses a monopoly over reactor technologies or fuel cycle processes. In fact, in the area of reprocessing and breeder reactor development the United States lags behind other industrialized countries. Countries such as France, Germany, Japan, Canada, and the United Kingdom have the capability to produce and export one or more key elements of the nuclear energy system and could quickly replace the United States as a supplier of nuclear facilities. Second, the nature of the nuclear industries in most of these countries makes it highly unlikely that they would go along with such an embargo; rather, they would be likely to exploit the opportunity for additional nuclear sales to the fullest. Third, such a policy would run the risk of wrecking the existing Nonproliferation Treaty (NPT) which guarantees countries nondiscriminatory access to nuclear technology for peaceful purposes. As a result, even if such a unilateral embargo policy could be effective in the short run, the long-term implications for international agreements in the safeguards area might be extremely undesirable.

These facts have led some, especially those in the domestic nuclear power establishment, to conclude that the current realities of the international nuclear energy industry not only rule out the possibility of an effective unilateral U.S. embargo policy but mandate the elimination of all trade restrictions on the domestic nuclear industry. This is not the conclusion that I come to in the discussion below. Rather, I seek to argue that recent developments in the international nuclear industry have considerably complicated the proliferation problem. Nonproliferation efforts must take account of these realities and recognize that trade in nuclear facilities can be effectively regulated only through cooperative agreements and international institutional arrangements, not by unilateral actions by the United States. The recent agreement to regulate such trade, signed by six key countries, is a step in this direction. But as I shall indicate below, this agreement still leaves much to be desired.

II

When a country considers whether or not to invest in nuclear steam supply systems for generating electricity, it must consider the economics of an entire nuclear energy system of which the nuclear reactor itself is only a part. For the light water reactors that the vast majority of countries are building, the generating facility itself is useless without ...

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