Select Committee on Trade and Industry Minutes of Evidence


Memorandum submitted by the World Development Movement

  The World Development Movement (WDM) campaigns to end poverty. Established nearly 30 years ago, it now has over 20,000 supporters. With all-party support, it campaigns for changes in Britain and Europe's policies towards poor countries on aid, debt, trade (including the activities of multinational companies) and the arms trade.


  WDM's concern about the arms trade developed from a recognition that all too often economic and social development is thwarted by conflicts which are fuelled by arms purchases from countries including Britain, and by the debts accumulated by purchasing arms.

  WDM has researched and campaigned on several aspects of Britain's arms trade with developing countries including: the use of taxpayers' money by the Export Credit Guarantee Department (ECGD) to back weapons sales; the need for stricter UK and Europe-wide controls over arms sales to countries which abuse human rights, have excessive military spending or are in regions of conflict.

  WDM also took a keen interest in the Scott Report and submitted evidence to the July 1996 "Consultation on Strategic Export Controls", "Your Right to Know: Proposals for a Freedom of Information Act" and the White Paper on Strategic Export Controls. This submission focuses on the White Paper and the recently agreed EU Code of Conduct on Arms Exports.


1.1  Overview—The Legacy of the Scott Report

  WDM welcomes the Government's proposal to introduce new legislation to provide for parliamentary scrutiny of arms exports, but believes that the proposals contained in the White Paper need to be strengthened if they are to provide effective scrutiny and the greater accountability and transparency that the White Paper sets out to provide.

  Although world military expenditure has declined by an average of 4.5 per cent per year since 1988, it has increased by 9 per cent in the Middle East and Asia.i Over the last 10 years, those two regions have bought two-thirds of Britain's arms exports. ii The sale of arms to these regions of instability, where many states have poor democratic credentials and human rights records, will provide the test of the effectiveness of the "purposes of strategic export controls" proposed in the White Paper, and the new EU Code.

1.2  Parliamentary Scrutiny

  The Scott Report revealed a widespread determination, especially in the Department of Trade and Industry (DTI) and the Ministry of Defence (MoD) to sell arms to Iraq regardless of Government policy and Britain's international obligations. The White Paper's proposal for legislation will make such actions more difficult. But, WDM is concerned by the White Paper's inadequate proposals for parliamentary scrutiny, which will not satisfy Sir Richard Scott's call for greater accountability, "A denial of information to the public denies the public the ability to make an informed judgment on the Government's record . . . (and) . . . undermines, in my opinion, the democratic process".iii

  Export of Goods Control Orders: WDM welcomes the Government's decision that the new legislation should provide for parliamentary scrutiny of Export of Goods Control Orders (EGCOs). However, the negative procedure proposed in the White Paper may not allow for effective scrutiny as it places undue emphasis on individual MPs' monitoring the Government's actions in this important area and does not guarantee MPs an opportunity to debate orders.

  The White Paper records few EGCO amendments (12 in four years and six Dual-Use amendments since 1996), so the option of providing parliament with an opportunity to approve the continuation of an order after a specified period, should not add significantly to the pressure on parliamentary time especially if, as the White Paper says, "most of these [amendments] are uncontroversial."

  Individual Export Licence Applications: Of much greater concern to WDM is the White Paper's rejection of proposals to allow scrutiny of individual licences. Without the right of parliament (or at least an expert committee of parliament) to scrutinise individual export licences, the new legislation will still not meet Sir Richard Scott's concern that the 1939 Act lacks "the provisions for Parliamentary supervision and control that would be expected and are requisite in a modern Parliamentary democracy".iv

  It is disappointing that the Government proposes to refuse scrutiny of individual export licences on the grounds that business might be lost. This is particularly so when the recently agreed EU Code of Conduct on Arms Sales offers a mechanism for greater co-operation between major exporters.

  Another of the grounds for refusal to allow parliamentary scrutiny is that companies could be identified and their competitive position harmed. There is no need, though, for the name of the potential exporter to be revealed in any documents that might be made public. It must also be remembered that Sweden and the USA, by far the largest exporter, do allow for parliamentary scrutiny.v In the UK that could be achieved by a new inter-departmental parliamentary committee which should be allowed to question Ministers on all aspects of arms export policy and which would have the authority to review, and if necessary veto, all arms sales with a value above a certain threshold, say £5 million, as happens in the USA.

  Annual Report and Debate: The White Paper proposal for an annual report is, therefore, a welcome step forward as is the proposal to "list by country of destination the numbers of export licences issues in each equipment category and give details of the military equipment for which licences have been granted. It will also set out the value of defence exports to reach country." vi That report and the creation of more meaningful equipment categories may be a critical step towards meeting Sir Richard Scott's challenge to the Government's obsession with secrecy, "Is it any longer satisfactory that Parliament and the British public are not entitled to be told to which countries and in what quantities goods such as artillery shells, land mines and cluster bombs have been licensed for export? vii

  But WDM is concerned that it will be retrospective and so will not provide effective parliamentary scrutiny of arms sales. An annual report would not have prevented any of the excesses revealed by the Scott Report and it will not, for example, improve the transparency of the use of export credits to support arms sales, raised in the Scott Report, "I do not, however, accept that information about the size of the defence allocation for Iraq or about ECGD's actual exposure to individual countries needed to be kept secret from the public for any justifiable reasons of commercial confidence".viii

  It is also to be hoped that the new report on strategic export controls does not gloss over uncomfortable information unlike the Foreign and Commonwealth Office's new Human Rights Report. Arms sales to countries abusing human rights and with internal conflicts such as Indonesia and Turkey have continued unabated despite the Government's ethical foreign policy. A few small contracts for the security forces have been refused licenses, but the majority have gone through. So, it was particularly disappointing that even though there is a report on the Foreign Secretary's visit to Indonesia in August 1997 in the Human Rights Report, ix no mention was made of the controversy surrounding arms sales to that country.

  Although the introduction to the White Paper states the Government's intention to increase `the transparency and accountability of decision on export licenses for arms',x its defence of the need to protect the security interests of the purchasing government and commercial confidentiality indicates that the accountability gains will be minimal. The White Paper leans heavily towards maintaining the tradition of withholding information about arms exports. How the proposals affect the Government's willingness to answer parliamentary questions remans to be seen.

1.3  Purposes of Strategic Export Controls

  WDM welcomes the Government's proposal to set out the purposes of strategic export controls in legislation. But, in addition to the eight purposes for strategic export controls proposed, WDM believes that two further purposes should be added:

    1.  Given the evidence provided in the Scott Report of the role of other countries, especially Jordan, in circumventing end-use certificates, xi any identifiable risk that equipment will be diverted within the buyer country or re-exported to countries which are subject to a national or international arms embargo should be made an additional purpose.

    2.  As well as the UK Government's international obligations, the purchasing Government's observations of other international obligations such as adherence to United Nation's Resolutions and the United Nations Register of Conventional Arms should be made an additional purpose.

  Setting out the purposes in legislation clearly marks an important step forward, but the interpretation placed on it will be critical. For example, `avoid seriously undermining the economy of the recipient country', xii requires careful interpretation. One measure that could be applied is the United Nations Development Programme's recommendation that countries should not spend more on defence than they do on social spending and that any military expenditure above four per cent of GNP should be regarded as excessive. xiii Unproductive military expenditure is a major contributor to the debt crisisxiv so this particular purpose requires clear guidelines and the need for policy coherence between government departmens if a measure such as the UNDP recommendation is not set out in the legislation.

1.4  Possible Extensions of Scope of Export Licensing Powers

  The Government's proposal to extend the provisions of The Chemical Weapons Act 1996 and to make them applicable to other weapons of mass destruction (nuclear and biological) appear sound. Any actions that restrict the spread of these weapons and technologies must be welcome. WDM also believes that it is timely for the Government to legislate "to control the transfer of technology, whatever the means of transfer" as the White Paper proposes.

  The Government's intention to extend the right of the UK Government to control trafficking and brokering is also very welcome. This may reduce the frequency of controversies about UK arms exports, such as Rwanda and Sierra Leone, which have arisen because of the activities of UK persons in Britain and abroad trafficking in arms between overseas countries. But the proposal that the UK controls on trafficking and brokering should be more limited than on actual exports from the UK needs reviewing. The controls should be set at the same level regardless of the export control laws of the exporting country as traffickers and brokers are likely to operate from the countries which have the least stringent export controls. It is disappointing that the EU code of Conduct does not contain any proposals to control brokering at a Europena level.

  The Government should also consider extending the scope of its export licensing powers to include the provision of services such as training and personnel, especially the operations of companies that include direct involvement in conflict and the provision of mercenaries.

1.5  Export Licensing Procedures

  Once again, WDM welcomes the Government's proposal to set out the basic elements of the licensing process in primary legislation. The White Paper proposal to require arms exporters to provide information that will enable the UK to meet its international obligations is very welcome.

  The Government's proposal for a formal appeals procedure is also a step in the right direction. The proposal to establish an appeals committee of civil servants from the relevant departments may well enable the Government to respond to any appeal quickly. But, it is not clear that the time-scale would be any greater if the appeal was to be made to an ombudsman or regulator who would be seen to provide greater independence from the departmental pressures so clearly at the heart of the arms to Iraq affair.

  WDM would also urge the Government to think again on the proposal to deny third parties a right to appeal against the licence being granted. Whilst an appeal may extend the time taken to reach a decision, that must be balanced by a right to raise legitimate concerns held by third parties.

1.6  Other Issues

  End Use Monitoring: The Government's commitment to strengthen monitoring of the end-use of arms exports is welcome. But, it is disappointing that there appears to be no intention to act quickly. Given the evidence in the Scott Report of the diversion of arms from Jordan and other countries to Iraq and in other high profile arms enquiries, such as BMARC, the White Paper could be expected to contain more concrete proposals. Earlier in this submission, WDM has proposed that any identifiable risk that equipment will be diverted should be made an additional purpose for strategic export control.

  In the White Paper, the Government commits itself to seeking co-operation to build a common approach on effective monitoring of end-use within the European Union. It can be difficult for the Government to show that the end-use is not legitimate. So, the burden of proof should be placed on the exporter. WDM proposes that nay identifiable risk that equipment will be diverted within the buyer country or re-exported should be made an additional purpose for export control.

  Location of the export licensing authority:   The Government's rejection of Sir Richard Scott's proposal that the MoD should be given a stronger role in export licensing is welcome. xv However, the DTI, which the Government is now proposing retains responsibility, was the Department resonsible for the arms to Iraq and other arms export controversies.

  Those controversies may well arise again as the White Paper, with its promise of support for a strong UK defence industry, does not address the inherent conflict between commercial opportunities for British firms and Britain's foreign policy objectives and obligations. For the legislation to have any effect, the latter imperative must be strengthened, probably at the expense of British exporters, who post-Scott and despite the Government's Ethical Foreign Policy, have continued to sell arms to regimes which should fail on more than one of the proposed purposes of strategic export control. The problems that remain are well documented in Amnesty International's 1998 Human Rights Audit. xvi

  WDM asks for further consideration being given to the recommendation of the Trade and Industry Committee's BMARC report that "the FCO is in some ways the most appropriate department, given its knowledge of other countries . . . and the fact that in the current international climate, the main reasons for rejecting ELAs are likely to be . . . [issues] . . . which are primarily the responsiblity of the FCO." xvii


  The European Code of Conduct on Arms Exports agreed in May 1998, is another measure which, although flawed, brings the prospect of a more ethical and effective arms export policy nearer. WDM strongly supports the Council's determination to "prevent the export of equipment which might be used for internal repression or international aggression or contribute to regional instability, xviii but is concerned that the measure" set out in the Code will require further tightening and co-ordination before that aim can be achieved.

  WDM's concerns about the effectiveness of this new Code are broadly similar to those already outlined for the White Paper: parliamentary scrutiny; annual debate and review; and end-use monitoring. Though there is also particular concern that the Code will still allow sales of equipment to countries which abuse human rights.

 2.1  Human Rights

  The EU Code requires member states "not to issue an export licence if there is a clear risk that the proposed export might be used for internal repression" and to "exercise special caution and vigilance in issuing licences, on a case-by-case basis . . . ".xix Even though, the Code does set out a definition of internal repression, the effectiveness of these criteria in tightening controls will depend on the interpretation of "clear risk" and that, in the words of the Code will remain at the national discretion of each Member State.

  The Code's exhortation to "special caution and vigilance" falls far short of the complete ban on arms sales to countries that should be required against a state which engages in the types of internal repression outlined in the Code "torture, summary or arbitrary executions, disappearances" etc. Caution and vigilance cannot provide assurances that regimes with a past record of repressing their civilians will not use weapons exported by European countries to do so in future.

  There is also widespread concern that the consultation mechanism agreed is also too limited to be truly effective. The Code must be strengthened to ensure that a Member State wishing to take up an export that another has already refused because of concerns about human rights, has to inform all 15 EU states and not just the country that originally refused.

2.2  Annual Review and Report

  The EU Code is intended to "strengthen the exchange of relevant information with a view to achieving greater transparency", but the Code actually provides no mechanism for achieving that welcome aim. The annual national reports will not be published and will not be debated by either national or European Parliaments. Even the Council of Ministers will only receive a consolidated report. xx

  This agreement, which is weaker than the inadequate proposals made in the UK White Paper, will do nothing to satisfy the people of the EU states that there will be effective controls on the export of weapons and torture equipment to states with poor human rights records. Although the stated intention of some EU Governments to use the annual review process to tighten the Code is welcome, the Member States should also agree as quickly as possible to allow publication of the national reports and debate by the national parliaments. The EU consolidated report should be presented to the European Parliament for debate.

  Given that the UK Government is now committed to the publication of an annual report on arms exports, will that report include any information relating to the EU Code? Of particular interest would be release of information concerning export licences refused by the UK, but granted by another Member State or of an export from the UK following refusal by another Member State.

  A number of Member States, including the UK, the Netherlands, Belgium and Sweden appear to be in favour of greater openness and Italy already has an annual debate on arms sales. So, there is some possibility that parliamentary and public scrutiny will be strengthened in forthcoming reviews of the working of the Code.

2.3  Arms Brokering Licensed Production and End-Use Controls

  Arms Brokering is one important area where the Code contains no provision for action. Weapons sales can be arranged from third countries without entering an EU State or requiring an export licence. Controls on arms brokering was one of the demands put forward by the ACP-EU Joint Assembly in April 1998xxi. From a UK perspective this is particularly disappointing as the White Paper does contain proposals to impose some controls on arms brokers. However, given that Germany already has such controls, it is to be hoped that during the German Presidency of the EU next year, this wide loophole in the EU Code will be closed.

  The recent declaration of the countries of Central and Eastern Europe, EFTA countries, Cyprus, Norway and Iceland that the EU Code will guide them in their national export control policiesxxii, does give some grounds for optimism that the activities of arms brokers can be curtailed.

  Licensed production is another area where no proposals have been made. Yet, increasingly this is a route by which companies can arrange for sales of weapons to countries which would otherwise fail the human rights or various aggression criteria contained in the EU Code. The most well known example is that of the British Aerospace subsidiary Heckler and Koch licensing a Turkish company to produce 200,000 H&K combat assault rifles for the Turkish army. This arrangement can only breach the Code's third criteria as it will `aggravate existing tensions or conflicts in the country of final destination'. The Code should be applied to the licensed production of arms to prevent this route being used to circumvent the Code.

  End-use controls will also need to be tightened to ensure that the Code is effective. The ACP-EU Joint Assembly called for efficient end-user control systems, but for this to happen, the EU Member States must agree on a common system of controls and checks. Without that co-ordination there remains a considerable risk that equipment will be diverted within the buyer country or re-exported to evade the controls imposed by the Code. Again, the burden of proof should be placed on the exporter to demonstrate a legitimate end-use for the equipment.

  These three loopholes must be tackled as quickly as possible as they will enable exporting companies, governments and purchasers to undermine the spirit of the EU Code and to evade stricter controls on the arms trade.


3.1  White Paper

  The White Paper has many positive points which will formalise and clarify the UK's procedures for strategic export controls. It does not, though, provide for the degree of parliamentary and public scrutiny that Sir Richard Scott felt was necessary to prevent further scandals. There is widespread concern that the proposed measures will not prove effective in controlling the arms trade to countries with poor human rights records. So, the test of the effectiveness of the proposed legislation will be the interpretation of the broad purposes set out in the White Paper. That is especially so when the purposes for which export controls could be imposed have been frequently overidden by the commercial and foreign policy objectives as the Scott Report showed.

  WDM believes, therefore, that the White Paper proposals will not satisfy public concerns about transparency and the Government's willingness to control the arms trade effectively. xxiii Greater parliamentary scrutiny and public accountability are required and could be achieved by:

    —  Allowing for advance parliamentary scrutiny of individual export licences, particularly where an application for a licence may breach one or more purposes of strategic export control. Effective parliamentary scrutiny could be achieved by establishing a new interdepartmental parliamentary committee which would be notified of all export licences. This Committee should also have the authority to review, and if necessary veto, all arms sales with a value above a certain threshold as in the USA.

    —  Ensuring that the proposed annual report and parliamentary debate includes the value of arms exports by country and region and all military equipment categories. This would include, but go beyond, the submission to the UN Register of Conventional Arms Transfers which provides information on only seven categories of major offensive weapons.

    —  Ensuring that following the legislation, greater weight is given to the purposes of strategic export control than has been the case. In particular, the Government must meet the widespread concern over the use of British weapons to crush non-violent protest and dissent.

    —  Consideration should also be given to placing the export licensing authority within a government department which has no specific mandate for promoting British arms exports, such as Customs and Excise or the Foreign and Commonwealth Office.

3.2  EU Code of Conduct on Arms Exports

  The EU Code of Conduct is an important step forward in the search for a co-ordinated and effective arms control policy. Efforts must now be made to persuade other major arms exporters to agree to similar restrictions and the Code does need to be strengthened in a number of areas, in particular:

    —  Human Rights: the Code must be tightened to require a ban on arms sales to any country engaged in the types of internal repression set out in the Code. The Code must also require any Member State wishing to take up an export which another European state has refused to inform all 15 Member States.

    —  Public and Parliamentary Scrutiny: the Code's acceptance that national reports on the workings of the Code should be produced in confidence and then consolidated for the Council of Ministers is a far from transparent process. As a first step towards greater transparency, national parliaments must be given the right to debate their own country's record. The consolidated report should be presented to the European parliament and made public to provide the necessary reassurance that the Code is indeed being used "to prevent the export of equipment which might be used for internal repression or international aggression, or contribute to regional instability."

      —  The Code contains no controls on arms brokering and licensed production. These two failings, along with the absence of a common system of end-user monitoring will enable buyers and sellers of arms to circumvent the restrictions imposed by the Code.

      The change in Government in the UK has led to many welcome developments which should impose greater controls on arms exporters. The White Paper proposals and the EU Code of Conduct are manifestations of the Government's Ethical Foreign Policy set out by Foreign Secretary Robin Cook in July 1997. Whilst the White Paper proposals and the EU Code are clearly a big step forward, more needs to be done to shift the balance of decision making away from a presumption of allowing exports, except in extreme circumstances. There is a clear mandate from the public for the Government to move further towards an integrated ethical policy at both UK and EU levels.

    19 October 1998


      i  SIPRI Yearbook 1998.

      ii  UK Defence Statistics—various years.

      iii  Scott Report, Para K8.3, p1801.

      iv  Scott Report, Para K2.1, p1759.

      v  For a brief summary of the US system, see L Lumpe in Weapons Decisions: Proposals for an informed Parliament, Oxford Research Group, October 1996, pp37-40.

      vi  Hansard, 14 July 1998, Col. 149.

      vii  Scott Report, Para K8.13, p1805.

      viii  Scott Report, Para D2.119, p257.

      ix  Annual Report on Human Rights, FCO and DfID, April 1998, p13.

      x  White Paper, Strategic Export Controls, 1998, p5.

      xi  Scott Report, Chapter 2, pp819-851.

      xii  Strategic Export Controls, White Paper, Department of Trade and Industry, July 1998, pp10-11.

      xiii  Human Development Report, 1994, United Nations Development Programme, p56.

      xiv  According to the World Bank, as much as one-third of all debt servicing is accounted for by arms purchases. Its former President, Robert McNamara called on developed countries to cut down on arms exports and the finance backing them (Financial Times, 27 September 1989 and Finance and Development, World Bank/IMF, September 1991). More recently, a World Bank/IMF research paper found that high levels of military spending are likely to detract from a country's economic performance (The Peace Dividend—Military Spending Cuts and Economic Growth, Knight, Loayza and Villanueva, February 1996).

      xv  Scott Report, Para K3.3, p1769.

      xvi  The report lists, for example, the approval of export licences to countries which have used arms to commit human rights violations including: Algeria, India, Indonesia, Kenya, Pakistan and Turkey, UK Foreign Policy, Human Rights Audit 1998, Amnesty International, July 1998, p6.

      xvii  Export Licensing and BMARC, Trade and Industry Committee Report, June 1996, pxxxii.

      xviii  Code of Conduct on Arms Export, General Affairs Council, 25 May 1998, European Council Press Release, p16.

      xix  Code of Conduct on Arms Export, General Affairs Council, 25 May 1998, European Council Press Release, p17.

      xx  ACP-EU Joint Assembly resolution on "support for democratization in Africa and conflict prevention through a European code of conduct for arms exports" in April 1998. It urged "European and ACP Member States to ensure transparency and parliamentary scrutiny of all arms exports and imports by providing their parliaments, or parliamentary committees, in advance, with a list of all sensitive export licences applied for;" Official Journal of the European Communities, 2 September 1998, C274, pp37-38.

      xxi  Resolution on the code of conduct on arms exports, anti-personnel mines and the Ottawa process, the ACP-EU Joint Assembly, Official Journal of the European Communities, 2 September 1998, C274, pp31-32.

      xxii  European Council Press Release, 3 August 1998, No. 10754/98.

      xxiii  An opinion poll commissioned from Opinion Research Business by Amnesty International, Saferworld, Oxfam, Christian Aid, Basic and WDM showed, for example that 85 per cent believe that a European Code of Conduct should prevent EU countries selling arms to countries which violate human rights and 77 per cent think that there is too much secrecy around British arms sales. Observer, 24 May 1998.

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