APPENDICES TO THE MINUTES OF EVIDENCE
TAKEN BEFORE THE TRADE AND INDUSTRY COMMITTEE
Confederation of British Industry's submission
on the White Paper on Strategic Export Controls presented to Parliament
by the President of the Board of Trade July 1998 (Cm 3989)
1. The CBI made known its views to Sir Richard
Scott's Inquiry into Exports of Defence Equipment and Dual-Use
Goods to Iraq in July 1993. It was pleased that so many of the
points it made to the Scott Inquiry were considered and referred
to in Sir Richard Scott's Report when it was published in February
1996, and that his proposals for the improvement of export control
procedures reflected so closely the points made by the CBI. The
CBI also made known its views in response to the previous Government's
July 1996 consultative document on strategic export controls and
is glad that the Government has confirmed that it has taken such
responses into account in the proposals contained within the present
2. The CBI welcomes the publication of the
Government's White Paper on Strategic Export Controls and notes
that its proposals for a new legislative framework and improvements
to export licensing procedures represent its response to the Scott
Report recommendation that the Government should thoroughly review
these areas. It notes that the Government accepts Sir Richard
Scott's criticism of the lack of provision for Parliamentary accountability
for export control legislation and insufficient transparency.
It had also noted the Labour Party's manifesto commitments designed
to address the issues pinpointed by the Scott Report, the Government's
July 1997 announcement of new criteria to be used in considering
licences for the export of conventional arms, the Code of Conduct
governing arms sales within the EU agreed in June 1998 and the
proposed new EU Council Regulation on setting up a Community regime
for the control of exports of dual-use goods and technology. It
appreciates that the Government must review how best to continue
to operate controls on heritage items, personal firearms and bovine
offal and import controls which are not within the scope of the
White Paper if (as it believes necessary) the Import, Export and
Customs Powers (Defence) Act 1939 is replaced.
3. The CBI favours Parliamentary scrutiny
of the Export of Goods Control Orders but not of individual applications.
If therefore welcomes the White paper proposals which, whilst
allowing scrutiny, would at the same time avoid the dangers inherent
in examination of individual cases. This could have led to breaches
of essential confidentiality and cause the serious and damaging
consequences to which the White Paper refers. Scrutiny of individual
applications before licence decisions were taken could well slow
down the whole process to the detriment of British exports. Some
businesses feel that the approach of Sir Richard Scott to favour
an affirmative procedurewhere an instrument came into force
immediately but only remained in force after a specified period
unless approved by Parliamentwould be preferable. However,
the CBI would support the proposed negative resolution procedure
subject to the DTI consulting industry before notification to
Parliament. This would ensure the essential views of industry
could be taken into account when changes to international obligations
were under consideration.
4. The CBI agrees with the Government that
the purposes of strategic export controls should be set out in
legislation. It also agrees here with the proposed affirmative
resolution procedure. As the White Paper states, the purposes
it lists are consistent with the criteria announced by the Foreign
Secretary in July 1997, with the EU Code of Conduct and with guidelines
and governing principles in the UN Security Council and OSCE.
As such they cause the CBI no difficulty. However, it appreciates
the argument that the White Paper may be in some respects less
satisfactory in defining the criteria for considering licence
applications than the FCO's existing criteria and in those circumstances
the latter should continue to define the purposes for which certain
export controls exist, particularly if there is reasonsable doubt
about what is the UK's "strategic concern".
5. The CBI supports the Government's proposals
to counter the threat posed by proliferation of weapons of mass
destruction where the Government has informed someone that it
feels certain action poses a risk: it is not reasonable to expect
industry to arrive at such suspicions in the absence of Government
advice and guidance. However, if the Government feels there are
reasonable grounds for suspecting that a particular course of
action might assist such a programme, it should advise accordingly
so that any "grounds for suspecting" are immediately
translated into a clear statement that certain action poses a
risk. Such arrangements should cover the production of means of
delivery of such weapons including ballistic and cruise missiles.
The CBI also supports the proposals regarding chemical weapons.
6. The CBI considers that it is right that
such transfers, which increasingly reflect the reality of modern
international business, should be addressed in the way proposed
by the White Paper, even though Sir Richard Scott did not address
this issue. However, it should be recognised that large international
business is increasingly conducted on the basis of collaboration
between partners in different countries. In certain limited cases
it could be desirable that there be provision for self-regulation.
There are a number of valid concerns which need to be taken into
account in intangible transfers, notably with regard to the importance
of securing agreement with the UK's Wassenaar partners on this
proposed extension of the scope of export control, as well as
in respect of such factors as practicality and cost (see our remarks
in paragraphs 8, 9 and 20 below).
7. The CBI broadly welcomes the proposals
on traficking and brokering. The intention must be to free companies
to practise reasonable standards of behaviour to the maximum possible
extent so that any less responsible practices may be identified.
8. The CBI agrees that new legislation should
give HM Customs & Excise powers to require the production
of records on intangible transfers and on trafficking and brokering
and other information. However, whilst clearly a matter for the
Government itself, the CBI feels that "the slightly increased
number of Standard Individual Export Licence Applications (SIELAs)
which could lead to extra resources required within the Export
Control Organisation equivalent to one new member of staff at
the licence processing level at a total cost of £25,000"
and "other Government departments involved in the licensing
process either a similar or lower level than this" seem rather
9. In the same way, the CBI notes that "additional
resources, estimated as likely to be in the region of £500,000
per annum" would be needed to cover HM Customs & Excise
costs in dealing with the proposals on intangible transfers and
on trafficking and brokering. Discussion with members leads the
CBI also to question the basis of this calculation and to reflect
on whether the assessment is realistic.
10. The CBI favours the Government's proposals
to set out the basic elements of the licensing process in primary
legislation but not detailed procedures which should be dealt
with as proposed.
11. The CBI welcomes the proposal that where
no licence is required (NLR decisions) a written response to that
effect, subject to the qualifications mentioned, would allow the
recipient of the NLR decision or a third party to rely on it in
civil proceedings and also make "licence required" decisions
subject to judicial review.
12. Recognising the UK`s international reporting
obligations under the UN Conventional Arms Register and the Wassenaar
Arrangement, the CBI finds the proposal to allow a statutory requirement
for exporters to provide information acceptable but there should
also be a right of appeal against disclosing the information elsewhere
if a company felt its interests could be jeopardised. Any freedom
to pass on information secured by the Government should also be
conditional on any additional burdens placed upon industry being
kept to the absolute minimum. the CBI notes that the White Paper
does not distinguish between different export destinations when
the UK`s strategic objectives must inevitably do so.
13. The CBI remains deeply concerned at
the delays experienced in processing licence applications and
there is concern felt by business at the amount of material which
needs to be produced. In this situation, many favour a fast track
system or "self-assessment". Modern global business
demands an altogether more speedy licensing procedure than may
have been acceptable in the past. The CBI therefore regrets the
White Paper's conclusions that licensing by default should not
be adopted despite Sir Richard Scott's recommendation (and industry's
support for it) that applications should be deemed granted unless
refused within a prescribed period. In view of the small number
of licences refused, the risk of licenses being granted in this
way contrary to the UK's international obligations or Government
policy, would be minimal. But the Scott approach would set a welcome
discipline upon the Government. The CBI notes and is glad that
the White Paper recognises the importance of applications for
licences being dealt with promptly and welcomes the proposed comprehensive
review of procedures and the introduction of an electronic version
of Form A. It suggests that its own Export Controls Working Group,
which includes trade bodies from all the major business sectors,
should participate on an ongoing basis "in partnership"
with the Government departments involved to identify and resolve
problems more speedily and do all possible to seek ways in which
the whole procedure may be expedited.
14. The CBI is conscious that the Export
Control Organisations already gives reasons for refusing licenses
in accordance with the Code of Practice on Access to Government
Information and that the Freedom of Information White Paper also
proposes a requirement to enshrine in legislation reasons for
administrative decision (subject to national security or other
considerations). Nontheless, it feels strongly that the greatest
possible openness compatible with such considerations should always
15. The CBI endorses the view that some
formalisation of the appeals process is necessary. It also accepts
the proposals on the time limits for appeal, including the right
to appeal in primary legislation against a refusal to grant a
licence, and in secondary legislation to the general nature of
the process, together with the remaining right to judicial review
of export licensing decisions.
16. Whilst industry would wish to see the
scope of coverage of such orders more clearly defined or categorised,
it welcomes the proposal to define terms such as "speciallay
designed" and "specially designed for military use".
The CBI would merely state now that it is impracticable to determine
on a component-by-component basis whether an item has been "specially
designed" for military use and welcomes further consultations
on this issue. It has noted the position of the EU on military
end use or "catch all" and questions whether in the
light of this any different or further steps could be necessary
by the British Government. The EU's proposals are linked to UN
embargoes and the EU's own embargoes should also be reflected.
17. The CBI supports the white Paper's proposals
on end-use monitoring and will await further details on the Government's
current review of options before responding. At this point it
would merely underline the advantages of there being international
agreement in this area.
18. The proposal to retain one central co-ordinating
authority for all licence applications is supported by the CBI,
despite Sir Richard Scott's recommendation. The CBI also supports
the retention of the DTI as the licensing authority.
19. The CBI welcomes the decision not to
charge for strategic export licences.
20. The CBI notes the appraisal. It retains
some fears that the compliance costs for many businesses of introducing
controls on intangible technology transfer may have been seriously
under-estimated eg particularly the case in the information technology
sector, unless and until controls on commercial encryption are
relaxed. Paragraphs 8 and 9 above comment on doubts about the
accuracy of additional resource costs.
21. Subject to the points made above, the
CBI accepts that the White Paper offers a broadly acceptable and
welcome signposting of the way forward in the important work of
export control. It looks forward to continuing to work with all
the relevant departments of Government to assist that process.
29 September 1998