APPENDIX 12
Memorandum submitted by the Defence Manufacturers
Association of Great Britain (DMA)
A. OPENING COMMENTS
It is clear that the Foreign and Commonwealth
Office (FCO), in its 1998 Annual Report, has built upon the commendable
exercise in openness and transparency represented by the 1997
Annual Report. The UK can now be proud of the fact that it has
the most detailed breakdown of its strategic exports made publicly
available by any nation in Europe, and one which is at least comparable
to any other nation's in the World. The model established by the
FCO is one that other nations should be strongly encouraged to
follow. We remain extremely supportive of the Government's desire
for greater openness and transparency, and welcome the publication
of the 1998 Annual Report in this regard.
B. THE BRITISH
DEFENCE INDUSTRY
As a percentage of GDP, the UK has the World's
second largest defence industrial base, currently comprising c.11,140
privately-owned, commercially operated companies (figure from
the last MoD(UK) Defence Contractors List) employing some 355,000
people (figures from the 1999 UK Defence Statistics). The Defence
Industry employs c.10 per cent of the UK's total manufacturing
industrial workforce and accounts for c.11 per cent of the country's
industrial manufacturing output. The Defence Sector accounts for
some 50 per cent of both the aerospace and shipbuilding industrial
manufacturing that takes place in the UK, and some 40 per cent
of the electronics industry.
Since 1980 the British Defence Industry has
completed a major restructuring, which has seen the loss of over
300,000 jobs. As a result, it is now well placed to compete in
the increasingly competitive defence export market, both for the
supply of new equipment and for the upgrading of existing material
of all types.
The highly diverse Defence Industry enjoys a
key position in the UK's manufacturing industry, with many British
companies in the forefront of Western high technology development,
production and innovation. A broad product range of equipment
is offered which encompasses the complete gamut of materiel requirements,
from high profile platform systems such as aircraft, warships
and armoured fighting vehicles, through major subsystems, including
communications, radars, propulsion systems, munitions and support
services, to basic equipment, eg clothing and footwear. The UK's
Global reputation for technical and qualitative excellence is
well known in many of these fields. The UK especially demonstrates
great strength in the high technology sub-systems sphere, where
it has a particularly strong record in most sectors. In consequence,
a considerable proportion of defence export contracts won each
year have been for subsystems, components, spares, etc and there
are very few major Western high technology programmes which do
not have some level of British subcontractor participation.
The primary role of the highly diverse UK Defence
Industry is to meet the requirements of the British Armed Forces.
This role is paramount, and is the fundamental raison d'étre
for the maintenance of the Defence Industry. Many countries
have learnt that reliance upon foreign sources of supply to meet
their defence equipment needs undermines their national security
interests. As a result, an increasing number of nations have been
seeking to enhance their own indigenous defence industrial capabilities
in order to protect their national security. Historical examples
of this include the UK, itself. The Royal Navy was reliant upon
optical range-finding systems supplied from German companies in
the early years of the Twentieth Century, only to find that this
source of supply was no longer available to it from August 1914.
More recently, the British Army tried, unsuccessfully, to purchase
artillery ammunition from Belgium in 1990, for use in Operation
Desert Storm. The importance of the Defence Industry has been
clearly recognised by the UK Government, with the Secretary of
State for Foreign and Commonwealth Affairs stating, on 28 July
1997: "The Government is committed to the maintenance
of a strong defence industry, which is a Strategic part of our
industrial base, as well as of our defence effort."
C. THE GROWING
IMPORTANCE OF
EXPORTS
The over-riding raison d'étre
for the UK Defence Industry is, always has been, and always will
be, the supply of the equipment and services needed by the British
Armed Forces to ensure the protection of the country's national
security interests. However, exports are becoming increasingly
vital for the continued maintenance of a viable defence industrial
base in the UK. The Industry cannot be sustained by reliance upon
procurement by the Ministry of Defence (UK) alone. Due to the
high technology and cost of a large proportion of the Defence
Industry's output, it is essential to lengthen production runs
to reduce unit costs and, therefore, it is vital to export.
The British Defence Industry has a long and
successful history of doing business around the World and providing
the equipment required by both the UK's own Armed Forces, as well
as those of its overseas customers. The British Defence Industry
currently exports some 40 per cent (c.£6.685 billion in 1997)
of its output. The Defence Sector is one of British Industry's
great success stories-in recent years the UK has repeatedly taken
over 20 per cent of the World's annual defence export market,
a figure that no other British Industrial sector can match. In
1996-98 the UK's Defence export performance was even more impressive,
with Britain taking 25-26 per cent of the total Global market.
The UK's performance is particularly impressive when it is realised
that there are a large number of countries, which are major defence
material importers, to whom Her Majesty's Government refuses to
allow the UK Defence Industry to sell equipment. Furthermore,
Britain does not have a Government subsidised Foreign Military
Sales-type programme, as a number of the UK's major competitors
do.
The benefit of these defence exports is felt
not just by the British companies concerned, but also by UK Industry
as a whole, as they can serve as a catalyst for national economic
and technological development. Exports also help to defray the
UK's own Research and Development costs and the MoD(UK) has estimated
that defence exports, through extended production runs, reduced
unit costs and the Commercial Exploitation Levy, save some £350-400
million per annum from the UK's Defence Budget.
Today over a third (c.130,000) of the UK's defence
industrial jobs are export-related and over a third of production
output is for export. The above employment figures do not take
account of the additional jobs which are dependent upon the spending
of those who are employed in the Defence Industry.
Whilst the global defence market has been in
steady decline since the mid-1980s, it is still lucrative and
valuable financially (in 1998 being worth an estimated US$39 billion),
whilst also having important intrinsic strategic and political
implications. The benefits for the companies involved and for
the wider British economy, are substantial and also protect the
UK's national interest through the maintenance of our indigenous
manufacturing capability and British political influence around
the World. It must also be stated that companies often fund a
considerable portion of their R&D activities (developing the
equipment needed by the British Armed Forces) from export-generated
income. Thus, exports help to keep the UK at the cutting edge
of high technological development, giving our Armed Forces a technological
advantage.
Worldwide, the Defence Industrial sector, despite
some downsizing and rationalisation in recent year, still has
considerable excess capacity. Competition in the very lucrative
defence market is getting ever more intense, with increasing numbers
of competitors vying for decreasing numbers of potential business
opportunities. With most Western Defence Budgets being cut, many
defence companies, especially in the USA, which have previously
been able to rely upon their own domestic markets for their business
are now being forced to look abroad for new business. In addition,
in recent years a number of new competitor nations (eg South Africa)
have been able to emerge on the World market, whilst a growing
feature of defence exporting has been the need to foster collaboration,
co-production and technology transfer. In such a highly competitive
market, any disadvantage placed on British Industry, that impedes
its ability to compete competitively, is something which must
be avoided.
The value of defence exports to the nation has
already been highlighted not just in terms of the contribution
to GDP and trade balance, but also in the employment created and
maintained in this country, which would otherwise be lost, and
the political significance and influence that such sales can give
the UK in major customer nations. That explains why so many Governments
around the World are very keen and supportive of their own Defence
Industries' efforts to promote and pursue potential export sales.
If the British Defence Industry's export activities were to be
curtailed, it would be likely that large sections of Industry
would wither and die, with the UK losing many areas of indigenous
defence industrial capability and having to become reliant upon
meeting these from foreign sources of supply. Meanwhile, the costs
to the Ministry of Defence (UK), and, thus, the British tax payer,
of the UK-sourced equipment that is required by the British Armed
Forces would increase.
The UK Defence Industry has enjoyed considerable
sales success in recent years, enabling it to retain its capabilities
at a time when the UK's own Armed Forces have been reducing their
expenditure and procurement programmes. Exports have helped to
cushion the Defence Industry from the worst of the potential impact
of the downturn in MoD(UK) spending.
This has protected a considerable number of
jobs, and defence industrial capabilities, which would otherwise
have been lost, to the detriment not just of the economy, but
also national security, as the UK would have become dependent
on foreign sources of supply.
D. EXPORT LICENCE
REFUSALS
We note from the Annual Report that the rate
for refusals of SIEL applications has gone significantly up from
recent levels. In 1994 refusals equated to just 0.79 per cent
of licence applications received, whilst the figure for 1995 was
0.55 per cent. The figures given in the 1997 Annual Report equated
to just 0.69 per cent. However, those for 1998 (on page 8) reveal
that some 1.2 per cent of the 9,991 SIEL applications received
in that period were refused.
A near doubling of the rate of refusals is not
only due to the FCO's enforcement of much tighter and more rigorous
criteria used when assessing applications. An additional factor
is that the total number of SIELs received has been gradually
declining in recent years, as the Department of Trade and Industry
has sought to provide a more focused SIEL system concentrating
on proposed exports of greatest concern, and expanding the open
licensing system. As the use of OIELs and OGELs increases, and
the SIEL system becomes more focused on exports that require more
detailed consideration, the proportion of SIELs refused will increase.
Therefore, in recognition that 122 refusals in a 12 month period
does not represent a numerical increase on previous years (86
in 1995, 137 in 1994) as the proportion would appear to indicate,
we are not unduly concerned that the FCO's July 1997 criteria
are causing an inappropriate increase in the number of refusals
being given.
We would still argue, as we stated in our memorandum
of 20 May 1999 on the 1997 Annual Report, that:
"The DTI's Export Control Organisation used
to produce useful Annual Reports of its own (the last of which
we saw was that covering 1995). The single table that used to
be produced in these reports for licence refusals was, in many
respects, more user friendly than the FCO's report, in which a
reader has to go through the whole publication to try to pull
together the information on how many refusals there were for which
destinations. The inclusion of a summary table, along the lines
of the one that the DTI used to produce, in an Appendix to future
editions of the FCO's Annual Report, would be recommended by us."
E. FORMAT OF
THE REPORT
The format of the report is clearly the most
informative of any such report published anywhere in Europe. It
is noticeable, especially when comparing it to that of Sweden,
that the UK's Annual Report is far more open and transparent,
containing a wealth of valuable data. We believe that the Annexes
are well organised and laid out, very clear and informative, providing
a valuable amount of essential background information, that was
missing from the 1997 Annual Report.
F. COMMERCIAL
CONFIDENTIALITY
British Industry's biggest single concern about
the efforts to introduce a greater level of openness and transparency
that the FCO's Annual Reports represent is over the issue of the
need to preserve commercial confidentiality, and the need to tread
the fine line that divides greater openness and giving away information
that can be used by a potential competitor. There is clearly some
reluctance on the part of some NGOs and others to accept that
the argument, that we, amongst others from Industry, have made,
about potential threats to "commercial confidentiality"
had any real substance. It has been stated that the public's right
to know should be more important than commercial confidentiality.
Such observations are clearly made by people with limited personal
knowledge or experience of the commercial World, and whose jobs
would not be put in potential jeopardy as a result of such greater
openness. Those in Industry who are in that position take a somewhat
different view!
It has been questioned why Defence Companies
should have any such commercial confidentiality concerns, when
civilian commercial companies, "such as sock manufacturers",
appear not to do so. In response to those observations, we would
briefly point out some concerns, which do have substance, as examples:
The Customer: It is frequently stated
that the Defence Sector is somewhat secretive, in nature. In most
cases companies would be only too happy to release details of
sales contracts that have been awarded. Keeping such information
to themselves does not do their shareholders any favours! It is
usually the customers who expressly require confidentiality. NGOs
will frequently state that this is an example of undemocratic
military dictatorships trying to keep their populations from knowing
what their national wealth is being spent on. However, a case
of which we are aware involves Greece (which can hardly be defined
in such terms) specifically demanding confidentiality concerning
a particular contract with a UK company, for non-offensive equipment,
because of fears that Turkey would hear about it. If the company
could not have provided such assurances, the contract would have
been awarded to another, overseas, firm which could. We are not
aware of any similar circumstances that might arise in the civil
commercial sector.
Pricing Information: Prices of seemingly
identical material frequently vary from customer to customer,
for perfectly legitimate commercial reasons, such as variations
in the spares, training and support packages on offer. This can
be hard to explain to customers, and is best avoided by the non-release
of such data. In the UK frequently the media will report on differences
in pricing (eg the cost of various items of shopping or a pint
of beer from one town or city to another), which can result in
some controversy. This can be increased many times, due to the
cost and political significance involved, with the supply of defence
material compared to mundane, every day items.
Whilst it is correct to point out that there
is greater openness with regard to US exports, to go further by
stating that, as they are still the number one largest defence
exporter, clearly such greater openness cannot really affect export
performance, is incorrect. It has to be stated that comparison
of the US and UK is not comparing like with like in many respects.
The sheer scale of purchases by the US Armed Forces mean that
the economies of scale that this provides gives US contractors
a competitive edge on the World market. This is further enhanced
by the US Government's Foreign Military Sales and Foreign Military
Aid programmes. These certainly seem to help to overcome some
potential customers' concerns over confidentiality, although we
are aware of instances where this has created problems.
If the UK Government would like to offer to
provide British Industry with similar FMS and FMA style programmes
and to place considerably larger contracts than at present, we
would be only too delighted to accept!
A perception, that some people have, that companies
must know where their markets are, and be aware of what opportunities
there are to be pursued, is not borne out in the real World.
"Speaking to a Royal Aeronautical Society
audience in 1992, Mr Alan Nicholson-Florence, British Aerospace
Defence Marketing Vice President, said: " . . . information
and intelligence on the defence market is difficult to obtain
with complete accuracy'. The statement was an excellent example
of the British tendency towards understatement." (Financial
Times Management Report on Defence Outlook—Western Europe:
Market Structures and Opportunities, by Yvonne Headington and
Robert Jarman, published 1993, page 97, paragraph 8.4).
Whilst we would accept that there is much information
available, in the public domain, as to major contract opportunities
around the World for high value capital systems, such as naval
vessels, aircraft and armoured vehicles, the same is not true
of lower tier areas. For the vast majority of companies involved
in these areas there is very little published information, and
any intelligence, even on recent contracts that have been awarded,
is ravenously sought, and of great potential value. Thus, the
value to companies, both in the UK and overseas, of the information
contained within the Annual Report to expand their own market
intelligence regarding potential business opportunities.
The blithe statement that, of course, companies,
and their competitors, all know where the potential opportunities
are is just not true. We, ourselves, in the course of our services
to our Member companies, try to provide advice to UK firms on
where to look for opportunities, and, thus, are aware of the true
extent of many companies' market knowledge (or lack of it!). We
have also been intimately involved in a number of particular programmes
for packages of equipment, which could provide to be extremely
lucrative for UK Industry, and which has involved/will involve
the temporary export of demonstration equipment for trials, of
which we are totally convinced that no rivals overseas have yet
become aware. This has given the UK a clear competitive advantage.
G. VALUES AND
QUANTITIES
It is clear that many NGOs, and others, would
like to see much more detailed information given as to the values
of licensed goods and the quantities covered by the licences.
These demands cause Industry grave concerns. We have argued for
some time that giving details of values on export licence application
forms should be unnecessary, given the overall purpose of the
export licensing system, which is to protect the UK's strategic
interests, and would not welcome the public dissemination of such
information as companies do provide, in confidence, to HMG.
If it was to be decided that information on
values of export licences should be given, we would strongly argue
that a general accumulated total for export licences approved,
when there are more than half a dozen or so such licences for
a particular nation, and when, thus, the values of individual
licences would be hidden to some extent, at least, might be the
only acceptable way in which this information could be provided.
It does, however, have to be pointed out that there is at present
no statutory obligation on companies to have to provide accurate
statistics of values of exports, and unless primary legislation
was to be introduced to provide for this the compilation of such
statistics could prove to be somewhat problematical.
With regard to quantities involved, whilst we
believe that there are some commercial confidentiality concerns,
over giving details of quantities, in our view these are less
substantial than the issue of values. We are, however, in sympathy
with the Secretary of State for Foreign and Commonwealth Affairs'
observation that the need to provide such additional information
in the Annual Report will place an increased burden on the FCO's
already over-worked officials, and could result in it taking even
longer to compile future Annual Reports.
H. THE INCLUSION
OF INFORMATION
ON TEMPORARY
LICENCES
An area of grave concern for us is the inclusion
in the Annual Report of information on temporary licences, and
their clear identification (with a `T') in the products listings
for each customer nation. We note that well over 900 items are
identified in the Annual Report as relating to Temporary licences
that have been approved. We really are not convinced that information
on such temporary shipments should be included in the Annual Report,
which, we believe, should concern itself exclusively with export
sales. The inclusion of information on temporary licences adds
a number of complications that can result in misleading impressions
being given to the uninitiated, as well as raising potential commercial
confidentiality concerns.
Commercial Confidentiality
Our gravest concerns over commercial confidentiality
of information in the Annual Report is over Temporary licences.
Whilst, as stated above, we have concerns over information being
given on licences for export sales, at least these concern contracts
which have been awarded and won by UK companies. For temporary
licences this is not necessarily the case (due to the frequently
long timescales involved), and by the time that the information
is published in the Annual Report there is a strong possibility
that a number of the Temporary licences itemised will be related
to programmes that have not yet been concluded and contracts awarded.
Including information on these could seriously undermine UK firms'
marketing efforts in pursuit of business opportunities of which
potential rivals have little, if any, knowledge.
Exhibitions
The Annual Report figures appear to show that
France was one of the UK's largest export markets, with some 362
SIELs being approved (pages 37-39)—the third highest figure
after the USA and Germany—and exports worth some £242.95
million noted by HM Customs & Excise (page 129)—the
second highest figure after Saudi Arabia. However, in reality,
France is not one of the UK's largest defence export markets,
and has certainly not appeared, to the best of our knowledge,
in the MoD (UK)'s Defence Export Services Organisation's list
of top priority markets around the World in any of the last 7
years, at least. It is only on closer examination that it can
be noticed that a very large proportion (c.46 per cent) of the
goods listed as having received export licence approval (pages
37-39) relate to Temporary licences. With a knowledge of the Industry
and its activities, it can be seen that this large number was
probably the result of the need to ship goods for display at the
Eurosatory (land equipment) and Euronaval (naval equipment) exhibitions,
that took place in Paris in June and October 1998, respectively.
Similarly the high proportion of Temporary licences listed in
the FCO's 1997 Annual Report (pages 42-43) for France at some
40 per cent) was probably due to UK companies participating at
the Paris Airshow (June 1997) and the Milipol (police and security
equipment) exhibition in November 1997.
Similarly, the figures given for Malaysia in
the 1998 Annual Report (pages 62-63) are confusingly affected
by the very high proportion of temporary licences approved (c.48
per cent), many of which may well have been related to the Defence
Services Asia 1998 exhibition, one of the largest and most important
in the World, that took place in Kuala Lumpur in April 1998.
Also, the figures given for Greece in the 1998
Annual Report (page 42) include a large proportion of temporary
licences (c.56 per cent), many of which may well have been associated
with the Defendory exhibition in Athens, in October 1998.
In the entry for Sweden (page 86) it can be
noted that there are a large number of Temporary licences approved
for NBC equipment and materials—this was probably related
to the important CBW Symposium in Stockholm in June 1998.
In our view, the inclusion of data on temporary
export licensed goods for exhibition overseas within the general
information provided presents an unbalanced picture. It should
also be remembered that companies will very commonly not participate
at overseas exhibitions just to promote themselves to potential
customers in the host nation, but also to the large number of
other visitors from neighbouring nations who will be attending.
Thus, participation at the Eurosatory exhibition in Paris does
not necessarily indicate that the company was seeking to promote
its equipment to the French Armed Forces/Defence Industry.
Peripheral Activities
There are a number of peripheral activities
that are caught up in the UK's export licensing system, that are
almost certainly included in the Annual Report (without being
identified) and further distort the value of the information given.
For instance, we are aware of at least three major, and a number
of minor, UK companies who provide props to the film industry,
and, in particular specialise in the supply of deactivated firearms
for use in movies around the World. These firms also have to apply
for export licences for shipping their stocks, temporarily, for
use on the sets of movies in other countries.
Therefore, there can be doubt, when the Annual
Report shows that a temporary licence was approved for the shipping
of small arms of all types abroad, as to whether this was for
the promotion and demonstration by a UK supplier with a view to
a possible future sale, or for temporary use on a movie set. Examples
from the 1998 Annual Report might include: Ecuador (assault rifles,
page 32); El Salvador (assault rifles, page 43), Mexico (assault
rifles, page 64) and Tajikistan (machine pistols, semiautomatic
pistols, sub-machine guns, page 89).
We are not completely convinced that the control
of film props, and their temporary shipment overseas for use in
movies, should really be included in the Annual Report, or, indeed
should be caught up in the UK's strategic export controls system
at all.
Conclusion
The inclusion of information on temporary licences
distorts the picture given by the Annual Report, giving an untrue
impression of the real situation. We have noted the Secretary
of State for Foreign and Commonwealth Affairs' statement to the
Committee on 3 November 1999 that there could be "no presumption
that any subsequent licence applications should have been approved"
resulting from the granting of temporary licences. In view of
this, and given that the Annual Report is intended to give public
oversight of HMG's strategic export sales policy, we would argue
that the Annual Report should concern itself exclusively with
export licences covering sales of equipment only.
I. PARLIAMENTARY
SCRUTINY
It has frequently been argued that greater Parliamentary
transparency and direct oversight are required of the UK's defence
exports. This matter has been raised on a number of occasions,
including in the DTI's July 1998 White Paper on Strategic Export
Controls. We believe that we need to comment on this suggestion
in more depth and identify the major causes of concern that Industry
would have about the practicality of such a system.
Attached, at Annex A, is a copy of an extract
from the DMA's response to the White Paper which provides our
summarised views on this suggestion, and lays out the basics of
our resulting concerns, which we feel must be addressed in greater
depth.
Swedish Model
It is frequently commented that the Swedish
system, which includes Parliamentary scrutiny of individual export
licence applications, is one that could usefully be used for the
introduction of a similar system in the UK. The Swedish Advisory
Council for Foreign Affairs established an Advisory Board on Exports
of Military Equipment in 1984, which was reorganised into the
current Export Control Council in 1996. The 10-member Council
meets on a monthly basis, is chaired by the Inspector-General
of Military Equipment, and receives input from the Ministry of
Foreign Affairs and the Ministry of Defence on the export licence
applications under consideration. Attached at Annex F is a copy
of the Swedish Ministry of Foreign Affairs' Swedish Arms Exports
in 1998 Government Report.[74]
It is illuminating to compare this with the information contained
within the FCO's Strategic Export Controls Annual Report 1998
and the level of transparency given about what goods have been
exported to which nations. It is clear from this that the FCO's
Strategic Export Controls Annual Report 1998 contains far more
such information and transparency.
Comparisons with the Swedish System
The scale of the UK's export licensing system
is much greater than that of the Swedish one. The Swedish system
deals with c 1,600 such applications, whilst the UK system has
to deal with 10-12,000 standard individual export licence applications
(SIELs) each year. Therefore, the Swedish system deals with an
average of c.6 licence applications each working day, or c 130-140
such applications at each monthly meeting of the Export Control
Council. Meanwhile, the UK system receives an average of some
38+ licence applications every working day, which equates to c
800+ each month. Thus, the UK system deals with about the same
number of licence applications every 2 months as the Swedish system
processes every year.
Scale of Workload
Even if a Parliamentary Committee were just
to focus on a few countries specifically identified as "of
concern", the scale of the workload would not necessarily
be much reduced. At Annex B is a copy of the July 1995 version
of the DTI's list of "Destinations subject to special licensing
procedures".
At Annex C is a table of a few countries which
NGOs might wish to be included in a list of such nations, with
figures from the FCO's Strategic Export Controls Annual Report
1998 covering numbers of SIEL applications processed in 1998.
This is far from an exhaustive list, and it may well be that others
would wish for additional countries to be included.
Whilst it may be possible to identify a list
of countries "of concern", the potential political and
diplomatic impact resulting from the inclusion of some nations
on such a list could be quite serious. This worry led to the FCO
deciding in 1997-98 to withdraw the DTI's list of "Destinations
subject to special licensing procedures" (at Annex B).
We are not sure how easy it would be to get
common agreement by all concerned as to which countries should
be included in such a list. Concentration on countries on the
basis of their human rights records is unbalanced by the very
large number of countries subject to such criticisms in one way
or another.
As an illustration of this, Annex D lists nations
criticised in the Amnesty International Report 1999. At Annex
E is the list of countries which are not criticised in the Amnesty
International Report 1999, few of whom offer potential for defence
exports. Any attempt to divide nations up into "safe"
and "non-safe" groupings is fraught with difficulty.
We are not sure how it would be possible to find common agreement
on where to draw the line, for instance, on the Observer's 24
October 1999 (page 26) Human Rights Index of 194 Nations, which
is worth comparing to our Annexes D and E.
There is also the question of what types of
licences would be examined by any Parliamentary Committee—should
it be restricted just to SIELs or should shipments under Open
General Export Licences (OGELs) and applications for or shipments
under Open Individual Export Licences (OIELs) also have to be
scrutinised. This would raise the scale of workload involved to
an even higher level.
Composition of the Committee
We would not wish to cast doubts upon the abilities
of British Members of Parliament or to imply that they are any
less qualified than their Swedish counterparts, however, we wonder
how easy it would be to identify MPs who had the necessary:
— technical knowledge to be able to
assess particular equipments to be exported;
— geo-political knowledge of all countries
around the World to assess them as customers, given the UK's much
more extensive portfolio of trading partners, than that of other
nations, such as Sweden;
— the willingness to commit themselves
to sit on such a Committee for c.250 days a year;
Confidentiality
There is a significant divide between Industry,
which would want commercial and political confidentiality to be
ensured, and the NGOs and others, who want even more openness
and transparency in the system. The Parliamentary Security and
Intelligence Committee might be able to serve as an existing body
that could undertake the work in a confidential way, and, thus
satisfying the concerns of Industry.
Regularity of Meetings
Whilst the Swedish Export Control Council meets
on a monthly basis, as stated previously, this would be insupportable
for the UK, and any Committee would almost certainly have to meet,
in order to cope with the scale of workload it would face, on
at least a weekly basis, with no recesses.
Outside Advice
As with the Swedish system, we believe that
it would be essential for any Committee to receive guidance from
the FCO, the MoD and other Government Departments, in order to
provide it with the necessary geo-political knowledge of all countries
around the World to assess them as customers and technical knowledge
to be able to assess particular equipments to be exported.
We know that the various NGOs have selflessly
offered to provide outside advice and guidance on export licence
applications to any Parliamentary Committee. In the interests
of balance and fair play, we would assert that similar advice
and guidance would also be needed from the company who submitted
the application and the DMA, or other similar body, on their assessment
on the impact on Industry in general.
Timescales
Above all else, Industry is extremely concerned
that any system to allow for Parliamentary scrutiny would merely
have the affect of delaying the processing system yet further
by adding another layer of bureaucracy. In the modern, commercial
World speed of delivery is a vital aspect of doing business. We
would fully endorse the Secretary of State for Foreign and Commonwealth
Affairs' statement to the Joint Committee on 3 November that Industry
would have very serious concerns that greater Parliamentary scrutiny
could have the affect of delaying the licence processing system
yet further, without any tangible benefits.
J. OTHER ISSUES
We know that the NGOs have expressed dissatisfaction
over the vague and generalised nature of some of the definitions
of the types of equipment exported. We have pointed out in our
memorandum of 20 May that amongst the examples given in the 1997
Annual Report, an instance of a non-generic, immediately identifiable
brand name had been used, that enabled the individual company
involved to be identified. We are pleased that there is no repeat
of this circumstance in the 1998 Annual Report. Clearly care has
been taken to avoid this, which we welcome.
The greater involvement of the Department For
International Development in the export licensing process does
not cause great concern, provided, as the NGOs have stated, that
it has the resources and knowledge base necessary to be able to
cope with the resultant workload as expeditiously as possible.
The potential increased involvement of the Home Office also causes
us few concerns, provided that it, too, is sufficiently resourced
to be able to cope, without adding yet another layer of bureaucracy,
which delays the decision making process yet further. In that
regard, and in recognition of the Secretary of State for Foreign
and Commonwealth Affairs' statement to the Committee on 3 November
1999 of his desire for DFID not to be marginalised in the export
licensing process, it would have been advisable if DFID's contact
details had been included on page 177 in the list of useful addresses.
We would also have thought that reference to the DTI's highly
informative and valuable website (http://www.dti.gov.uk/export.control)
would have been extremely relevant, and are somewhat surprised
by its absence.
We have notes that there is no reference in
the Annual Report to the MoD(UK)'s 680 system. Whilst not a compulsory
system for UK Industry to make use of, we would welcome the inclusion
of statistical data, perhaps in the section covered on page 126,
on the 680 system, the number of 680 applications received, approved
or refused and the lengths of time taken to process them.
We would welcome more information being provided
on the length of time taken to process export licence applications,
whilst acknowledging the value of the information provided on
page 126. It is the timescale for the processing of licences which
cause UK firms most exasperation and difficulty. Many companies
would welcome Parliament, and the public having greater visibility
of the delays with which they have to cope.
Ideally the composition of a table detailing
the lengths of time taken to process SIEL applications for individual
countries, would be invaluable for companies. Entries could appear
thus:
|
| Country | >20 days
| 21-30 days | 31-40 days
| 41-50 days | 51-60 days
| 60 days+ |
|
| Oman | 58% | 20%
| 14% | 6% | 1%
| 1% |
| Pakistan | 12% | 22%
| 40% | 22% | 3%
| 1% |
|
This would considerably help companies to plan, by giving
them some general idea as to likely timescales for a particular
nation, some of which will, by their very nature, be more difficult
and require more careful consideration, than others.
We would also like to see the inclusion of a simple list
of the top 20 or so worst case "horror stories", of
delays, (for both applications approved and refused) which could
be formatted thus:
|
| Country | Rating
| Days taken to process |
|
| Columbia | ML7 | 250 working days
|
|
We are extremely pleased to hear that the NGOs (section 8
of the 15 June 1999 oral evidence session) recognise that intended
end-use of the goods in question is, in many ways, as important
as the issue of the goods themselves, the example being given
of the supply of body armour to the Indonesian Navy for anti-piracy
operations. This is a vital point to make, and one which we wholeheartedly
support. This is the reason why Her Majesy's Government adopts
the policy of judging export licence applications on a case-by-case
basis, and refusing to give generalised guidance on what can be
exported to individual countries, in advance of a licence (or
680) application being made.
Mis-classification and inconsistency in decision-making,
as highlighted by the NGOs, are concerns that UK Industry shares.
Whilst the NGOs may complain about the confusion of classification,
they should try working within the Export of Goods (Control) Order
in order to understand what real confusion is!
We note that the name Portugal is missing from the table
on page 104.
We note that page 130 has a confusing inconsistency—everywhere
else in the Annual Report reference is made (under K) to "Korea,
Republic of", whilst on page 130 the same nation is listed
(under S) as "South Korea".
K. INTERNATIONAL ACTION
Along with the NGOs we would strongly argue that other nations
should be encouraged to provide identical data to that to be provided
in the UKs Annual Report, so that there is a "level playing
field". We have noted that questions have been raised about
the impact of the EU's Code of Conduct on our EU partners. In
an effort to assess this we have sounded out our sister trade
association in other EU countries. Copies of replies received
are enclosed[75]. We
hope that they may be of some assistance to the Committee.
SUMMARY
We hope that this paper, and its enclosures, may assist the
Committee in its deliberations.
25 November 1999
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