Select Committee on Trade and Industry Minutes of Evidence




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 White Paper.

  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 procedure—where an instrument came into force immediately but only remained in force after a specified period unless approved by Parliament—would 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 optimistic assessments.

  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 be forthcoming.


  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

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