Select Committee on European Scrutiny Fifteenth Report



COMMUNITY CONTROL OF DUAL-USE GOODS

(21118)
Presidency text of draft Council Regulation setting up a Community régime for the control of exports of dual-use items and technology.
Legal base: Article 133; qualified majority voting
Department: Trade and Industry
Basis of consideration: EM of 12 April 2000
Previous Committee Report: None; but see (19625) 8888/98: HC 34-viii (1998-99), paragraph 1 (3 February 1999) and HC 34-xx (1998-99), paragraph 3 (19 May 1999)
To be discussed in Council: 19 April COREPER; 2 May Telecoms Council as an 'A'point
Committee's assessment: Politically important
Committee's decision: Cleared on the basis of information supplied by the Government, but further information requested

Background

  10.1  The term 'dual-use goods' covers goods and technologies which are primarily intended for civil applications, but which may be used for military purposes, or which could significantly enhance the military capacities of the countries acquiring them. Before 1995, Member States controlled the exports of these goods under national legislation, taking into account both national policy considerations and international agreements. In 1995, a new system was put in place under a Council Regulation on licensing and administrative co-operation and a Council Decision containing lists of controlled products and an indicative list of countries for which simplified licensing procedures may be applied by Member States. It was agreed that the régime would be reviewed after two years.

  10.2  In May 1998 the Commission concluded, having carried out the review, that the régime was too complex and cumbersome. It proposed a new draft Regulation designed to simplify and strengthen the system, so as to facilitate legitimate trade, while respecting the international commitments and responsibility of Member States and the Community. We considered it on 3 February 1999[26], after the Government submitted a very belated Explanatory Memorandum on it at our request, and again on 19 May 1999[26], when we cleared it. At that time, the Parliamentary Under-Secretary of State for Competition and Consumer Affairs at the Department of Trade and Industry (Dr Howells) predicted that the proposal was unlikely to be adopted until the end of 1999.

The Presidency text

  10.3  In an Explanatory Memorandum of 12 April, the Minister now tells us that on 27 March "in an unexpected development", the Portuguese Presidency tabled a revised version of the draft Regulation, a copy of which he has forwarded to us, for adoption. He recalls that the Commission's proposal has been the subject of detailed discussion among the Member States and with the Commission over the last two years. We understand that it was the timing of the proposal that was unexpected and that it resulted from intensive negotiating outside the Council Working Group. The Presidency's proposal, he says:

    "...reflects ... extensive discussions between officials of EU Member States which took account of their own commitments and obligations under the various international non-proliferation and arms control régimes, such as the Missile Technology Control Régime (MTCR), Nuclear Suppliers Group (NSG), Australia Group (AG) and the Wassenaar arrangement. In deciding their response to the Commission's proposal, Member States have also taken account of their own individual foreign and security policy concerns."

  10.4  The Minister's Explanatory Memorandum provides a clear picture of the policy implications of the new text. He says:

    "There were six key elements of the Commission's proposals with policy implications. This is still the case in the Presidency proposal. They are

    • changing the legal structure from a Community Regulation supplemented by a CFSP Decision to a single pillar Regulation under Article 133 (formerly Article 113);

    • creating a Community General Export Authorisation;

    • introducing a military end-use control;

    • bringing under control certain transfers of technology by electronic means;

    • reducing licensing requirements for intra-Community trade; and

    • reinforcing administrative co-operation."

  10.5  The Minister provides background to the proposal and its implications and an explanation of how the new text has been arrived at, in relation to each of the key elements. The main points he makes are:

Changing the legal structure to a single pillar regulation under Article 133

  10.6  Some Member States, including the UK, were concerned that moving to a single pillar regulation under Article 133 and, therefore, from unanimity to qualified majority voting on the lists of controlled goods, could affect their ability to fulfil their international commitments and obligations. After discussion, representatives of the Commission and Council have agreed on a Minutes Statement in respect of three Annexes. This, the Minister says, gives them "a measure of assurance" that changes to these annexes will be consistent with their obligations and policy concerns, as well as with their public security interests. The three Annexes concerned are:

  • Annex I which lists goods subject to the Regulation;

  • Annex II on the coverage of the Community General Export Authorisation; and

  • Annex III on the items whose transfer within the Community will continue to be subject to control.

Creation of a Community General Export Authorisation (CGEA)

  10.7  This authorisation will be equivalent to the system of open general export licences issued under UK law and would allow any exporter in the EU to export controlled goods, other than certain categories of such goods, to a specified small group of destinations. While the UK has been broadly content with the substance of the Commission's proposal, replicated in the Presidency's text, the need to preserve the possibility of raising objections to any proposals to amend the coverage of this authorisation in the future was one of the principal factors in the UK's calling successfully for the Council and Commission to make the Minutes Statement referred to above, the Minister says.

Introducing a military end-use control

  10.8  In our previous Reports we noted and concurred with industry concern at the lack of clarity in the Commission's proposal on the scope of this Article. The UK Government, too, had concerns and successfully argued for changes to the text. It includes a definition of military end-use, in Article 4(2), and specifies categories of destination to which the control applies. These are countries subject to a binding UN arms embargo, or to an arms embargo imposed by a Common Position or Joint Action adopted by the Council or a decision of the OSCE.

Bringing under control certain transfers of technology by electronic means

  10.9  The new controls proposed would close a loophole in the current Regulation where it provides for technology sent by mail, in a "tangible" form, but not if the same technology is sent by fax or e-mail, that is by "intangible" means. The UK successfully argued that the new control should apply to transmission of software or technology by electronic media, fax or telephone. However, he says:

    "... in respect of oral transmission of technology by telephone, the new control should only apply where the technology is contained in a document, the relevant part of which is read out over the telephone, or is described over the telephone in such a way as to achieve the same result. As a result, the proposed control — as set out in the Presidency's text — is now brought more closely into line with the proposals set out in the 1998 White Paper [on Strategic Export Controls][27]."

Reducing licensing requirements for intra-Community trade

  10.10  The Commission proposed that nearly all existing licensing requirements for intra-Community transfers of items in Annexes IV and V to the present CFSP Decision[28] should be abolished. However, recognising the sensitivity of certain items listed in the current Annex IV, the Commission proposed a notification procedure for their transfer. Although a reduction in the scope of the current controls was generally welcomed, the UK and other Member States were unable to accept the Commission's proposal for a notification procedure as, in practice, this would amount to a licensing process by another name. The Commission accepted this criticism. In the negotiations that followed, different Member States, including the UK, argued for some items to remain subject to control. The net result is that there will be a significant reduction in the volume of transfers amongst Member States for which a licence will be required. The Government is satisfied with this result.

Reinforcing administrative co-operation

  10.11  All the Member States, including the United Kingdom, were able to support the thrust of the Commission's proposal that there was a need to create a continuous exchange of views to reduce differences in perception and knowledge of security concerns and allow for more consistent application of export controls throughout the Community. Several Articles have been strengthened accordingly.

Conclusion

  10.12  The Minister tells us that the Presidency text reflects extensive discussions and we see that in many respects it is an improvement on the Commission's earlier text, which we cleared last May. In clearing that proposal, we accepted, in principle, the move to a single pillar regulation. We now note the agreement reached to cater for the concerns of the UK and others that their ability to fulfil their international commitments and obligations could be affected by the move to a single pillar regulation, under which the lists of controlled goods would be agreed by qualified majority voting rather than unanimity. The Minister says that this gives the Member States "a measure of assurance". We hope and expect that the Statement will be respected in any future difference of views on the list.

  10.13  The proposed Article 4(2) provides a definition of military end-use which is clearly an improvement on the earlier text. We ask the Government whether it is intended that the controls should apply to the People's Republic of China.

  10.14  We now clear the document but ask the Minister to respond to our question in the preceding paragraph.


26  (19625) 8888/98; see headnotes to this paragraph. Back
27  Cm 3989. Back
28  Council Decision 94/942/CFSP (OJ No. L 367, 31.12.94, p.8), as last amended by Council Decision 98/232/CFSP (OJ No. L 92, 25.3.98, p.1). Back

 
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