Select Committee on Foreign Affairs Seventh Report


China and Hong Kong SAR


  40. In our last Report, we stated our intention to report on licensing decisions on the export of arms to China and Hong Kong Special Administrative Region (SAR).[47] We obtained, in confidence, details of Standard Individual Export Licences (SIELs) and Open Individual Export Licences (OIELs) for goods on the Military List granted to China and Hong Kong SAR between 1 January and 31 December 1998. On the basis of the information supplied, we requested further details on a number of individual licences granted, including an assessment of how these licences complied with the EU arms embargo on China. The Foreign Affairs Committee is engaged in an inquiry into relations with China, and has made available a submission made to it from the Campaign Against the Arms Trade ( CAAT).

EU Arms Embargo

  41. The EU imposed an arms embargo on China (excluding the Hong Kong SAR) by a Council Declaration at the Madrid European Council on 26/27 June 1989, shortly after the Tiananmen Square massacres. Subsequent EU embargoes have been interpreted by all member states as covering goods and technology on the Military List. The arms embargo on China, which was imposed before the machinery of Common Positions and Joint Actions of the Common Foreign and Security Policy (CFSP) introduced following the Maastricht Treaty, was left to national interpretation by member states. The embargo on China has been interpreted by the UK as covering:

UK exports

  42. The 1998 Annual Report recorded the grant of 32 SIELs and 6 OIELs covering Military List goods granted to China.[48] A standard EU embargo covers all Military List goods and would therefore have ruled all these out. We noted the export of goods described as "military image intensifier equipment" and "military imaging equipment"and requested further information on these items. We have been assured by the Government that, whilst the equipment could be used for internal repression, each application was carefully assessed against the criteria and a licence would not be issued if there was a clear risk that the proposed export might be used for internal repression. As we noted in our earlier Report, the end-users of this equipment were in some cases the operators of high speed ferries which require it to improve safety at night.[49]

43. We sought further information on the grant of a group of licences covering aviation components and on three specific SIELs and three OIELs covering China. The Government told us that the aviation equipment was " most unlikely" to be used for internal repression, and that it fell outside the scope of national interpretation of the embargo. The most significant piece of equipment licensed in 1998 was an airborne radar system. A licence was granted for one piece of equipment normally used in connection with weapons firing, in this case to be used for testing for a civilian use. An OIEL was granted covering ground training equipment for military aircraft. While there is no suggestion that there has been any case of the export from the UK of lethal military equipment to China since the 1989 EU embargo, the details we procured of the Military List licences granted in 1998 do give some indicatation of the fine line that has to be drawn between lethal and non-lethal equipment in interpreting the scope of the EU embargo.

Interpretation of embargo

  44. We are concerned that differences of interpretation of the EU embargo on China may well lead to misunderstandings between Member States. The Minister was unable to provide us with a comparison of different EU Member States' interpretation of the embargo: "One of the problems is that we do not know exactly what France and Germany or any one else actually sells to China because their reports are not transparent".[50] He did suggest that "we are normally more strict than France" but was unaware of whether or not any of our European partners had breached the spirit of the embargo.[51]

45. This state of blissful ignorance of the policies and practices of our principal European partners is not shared in the USA, as we discovered in the course of our visit in May 2000. In unclassified evidence to the Joint Economic Committee of Congress in April 1998, Harold Johnson of the US General Accounting Office (GAO) stated :

     "[EU] members have interpreted the embargo's scope in different ways. Officials in some EU nations informed us that their nations have embargoed the sale of virtually all military items to China. In contrast, the United Kingdom's interpretation of the embargo does not bar exports of nonlethal military items, such as avionics and radars. European and EU officials told us that EU members tried during the early 1990s to develop a detailed EU-wide interpretation of the embargo's scope. These attempts apparently fell short and resulted only in the members' mutual recognition that they were not selling China lethal weapons".

 Mr. Johnson went on to provide some details of military goods sold to China by EU member states since the embargo was imposed in 1989. He concluded that

     "we found no instances of EU members entering into new agreements to sell China lethal military items after 1989, although some members (including the UK) delivered items in connection with pre-embargo agreements."[52]

46. The lethal equipment delivered was listed as short-range Crotale ship-to-air point defence missiles delivered by France on the basis of agreements entered into before 1989, and Aspide short-range air-to-air missiles delivered by Italy on the basis of an agreement of uncertain date. Both the UK and Italy are recorded in the GAO statement as delivering radar and other avionics for the Chinese F-7M (a variant of the MiG-21), the latter on the basis of a 1993 agreement.

US policy

  47. The US also has an arms embargo on China. It is worth noting that the US embargo differs from the EU embargo in several ways —

The US completed several military equipment programmes already begun before the embargo, and gave licences for commercial satellites to be launched from China, and for associated commercial encryption technology. There has been and continues to be controversy in the US surrounding the licences given for satellites and related technology. In 1999 this led to the transfer of the responsibility for export licensing of satellites from the Department of Commerce to the State Department.


  48. There would evidently be general advantage in converting the present vague reference in the 1989 Declaration on "trade in arms with China" to a detailed Common Position on a par with other EU embargoes. We do not imagine that it will be easy. UK exporters will wish to seek to ensure that it is no more restrictive than the current UK interpretation of the 1989 Declaration, permitting the export of Military List non-lethal equipment. Other states may press for a standard Military List ban. It is our judgement that it would in any event be better to have an embargo explicitly committing all EU partners to the same regime — if necessary no tighter than the loosest national interpretation permits — than to continue longer with the current muddled situation. Countries would of course be free to operate a stricter regime than that required, and to notify refusals under the Code as appropriate. The Minister told us —

The current embargo on the export of arms to China runs the risk of giving misleading messages to exporters and to the Chinese authorities. UK companies are marketing and selling non-lethal Military List goods for export to China, as they are quite entitled to do under present arrangements. Other EU Member States may be pursuing a different policy. In view of the varying opinions on the human rights situation in China and the risk of regional conflict, we recommend that the Government take active steps within the framework of the CFSP to reach a Common Position on the EU embargo on China, and that active consideration be given to introducing a stricter interpretation of the 1989 embargo than that currently operated by the UK.

Hong Kong SAR

  49. We also sought details of Military List licences for export to Hong Kong SAR. It is the policy of the Government not to approve for export for military end use in Hong Kong goods which under the terms of the embargo on China would not be approved for export to the Chinese forces in mainland China. Military List goods for use by the police or other non-military end users are permitted. We understand that a similar arrangement exists in respect of Macao. In 1998 76 SIELs and 17 OIELs were granted for export to Hong Kong of goods on the Military List, covering a wide range of police and potentially para-military equipment.

50. The Minister told us that —

We welcome the Minister's reassurances that exports to Hong Kong are subject to follow-up checks to prevent diversion or re-exportation, and recommend that such checks are maintained. We recommend that similar precautions are taken with respect to Macao.

Various licences

  51. We reported in our first Report in February 2000 that we would be seeking some further details on licences granted in 1998, following up information we received in late January on a range of selected licences recorded in the 1998 Annual Report.

52. We wish to record our satisfaction with the candour and thoroughness of the written responses received. They contain detailed comments on the human rights records of the security forces in a number of countries, some surprisingly favourable, but others critical. We appreciate that it would be potentially damaging to publish them.

53. The responses highlight the extent to which different considerations are applied to different branches of a country's armed services and police forces. Licences for small arms may thus be granted to one element of a country's forces but not another. Naval forces are inherently less likely to be engaged in internal repression, and so may receive licences denied to paramilitary internal security forces. The written evidence in one case stated that there was no evidence to suggest equipment was diverted between branches of the Armed Forces. Efforts are made to ensure that this does not happen, including visits by defence attachés and their staff.[55] Countries with poor human rights records may well have legitimate external defence needs, and indeed be genuinely engaged in anti-narcotic work. In such a case, the operation of the current criteria will mean that a range of weapons may be licensed for export there.

54. We raised in our February Report the apparent anomaly whereby licences can and will be refused where there is a likelihood that the relevant equipment will be used for internal repression or external aggression: but that there are no clear grounds in the UK criteria under which a licence can be refused because of a regime's general human rights record, irrespective of the likely use of the items concerned. In his evidence of 4 May the Minister accepted that this was a "grey area".[56] In its response, the Government noted that the criteria "inevitably circumscribe to some extent" the exercise of powers by Ministers under the 1939 Act but that "they do not prevent Ministers from taking rational decisions for other reasons or declaring different policies".[57] The broad purposes for which export controls can be imposed will be set out in the new legislation expected soon. We shall return to this issue when we have seen the Government's legislative proposals.

55. We have examined further two licences granted for one particular country. One was for non-lethal police equipment which seemed to us to have a potential military use if diverted to armed forces. We have established that police advice in the UK was not sought as to the operational requirement for the equipment in question.[58] From our own informal soundings, we are happy to accept that there is a genuine police requirement for the equipment. We recommend that it should be normal practice for technical advice to be sought from the Home Office on the export of unusual equipment for police use.

56. The other licence was for an appreciable number of personal weapons destined for internal security forces, where it was judged that there was a "very small" or no risk that the equipment would be used for external aggression.[59] The FCO noted that their judgement had so far proved right. We record this as a typical case where a difficult judgement has to be made.

Appeals against refusal

  57. As we had done in relation to the 1997 Report, we contacted those companies which had appealed against refusal of a licence, as recorded in the 1998 Report. There were 15 such appeals, one of which was successful.[60] We received five responses to our invitation to comment.

  • Dince Hill (Holdings) has dealt with export licensing for many years. The Chairman of the company wrote that when an appeal was made "nothing is ever heard of the matter again ... when we appeal we do not know to whom we are appealing, when the appeal may be heard or whether the official who originally made the decision is the same as he who considers the appeal." He suggested that applicants should be present at appeals.[61]
  • Argent Steel had appealed against a refusal of a licence to export a metal to Pakistan. The company felt that it had been misled when originally seeking to discover if the material would require a licence, and forwarded copies of its correspondence. As a result of the refusal, upheld on appeal, the company has material on its hands which it is difficult to dispose of.[62]
  • Goodwin Air Plasma had appealed unsuccessfully against the refusal of a licence to export cutting equipment to Pakistan. Subsequent exports had led to the arrest, and subsequent release without charge, of two of the company's executives. The company stated that other manufacturers in the UK and elsewhere in Europe were freely transferring similar equipment to Pakistan. It also stated that inquiries as to whether equipment required licensing took "many months" before receipt of a notification that no licence was required was received. A detailed log of contacts confirms this pattern.[63]
  • Meccasonics had appealed successfully against the refusal of a licence to export a scanning system to India. The company told us that the item was a replacement for an existing item which had been licensed: and that DTI had told them that "if you want a quick answer it will be no". The original application took six months before rejection. The appeal took a further six months, described by the Managing Director as "a further six months of inactivity". He told us "The activities of the DTI came close to bankrupting a small company."[64]
  • N P Aerospace appealed unsuccessfully against refusal of a licence to export several specialised vehicles to Indonesia. The Managing Director told us that the delay had caused considerable embarrassment and expense: "it is quite unacceptable to have to wait approximately six months for a reply to an appeal!"[65]

58. We are disturbed that this large sample of those companies with recent experience of appeals against refusals of a licence should have had such uniformly bad experiences of the operations of a Government department. The December 1998 Trade and Industry Committee Report noted that, in response to criticisms in the Scott Report, the July 1998 White Paper had proposed a statutorily established formal appeals mechanism. The Committee's recommendation that there should be a time limit for determination of appeals was accepted by the Government, who proposed a target of 30 working days.[66] It also stated that when the target was not met "appellants will be given as full as explanation as possible for this". In 1998 scarcely any appeal seems to have been settled within DTI's proposed 30 working day target. In our February Report we called for publication of summary details of appeals in the Annual Reports.[67] The Government has accepted the basis of this recommendation.[68] We hope that the latest figures will show a significant improvement on performance in handling appeals. Appeals against refusals are taking too long to settle. There is no reason why an improved appeals system cannot be introduced on a non-statutory basis prior to the passage of legislation. We recommend that the appeal procedure which it is proposed to bring on a statutory basis be introduced as soon as possible. Given the relatively small number of appeals against refusal, we also recommend that further consideration be given to ways of ensuring that an appellant company can participate in the appeal procedure, and be given a more detailed account of the reasons for the original refusal and for the eventual decision on an appeal.


  59. In the course of our inquiries, we have pursued two administrative errors or oversight which have come to our attention more or less by chance —

60. The best system is of course susceptible to human error and oversight. We have however become increasingly concerned at the frequency with which our written inquiries, covering only a diminutive part of the ECO's activity, have uncovered minor but potentially significant error. It is not as though licensing activity, at least in the eyes of those on the receiving end, were conducted at breakneck speed. The effects of minor errors and oversights could be grave. We seek some reassurance that efforts are being made to enhance the performance of the Export Control Organisation and that the lessons are learned from the sorts of errors to which we have drawn attention.

47   HC 225, para 10 Back

48  The number was subsequently corrected to 31: HC 225, Ev, p 84 Back

49  HC 225, para 10 Back

50  Q 86 Back

51  Qq 83,87 Back

52  Back

53  Q 91 Back

54   Qq108, 110 Back

55  Q 114 Back

56  Qq 118ff Back

57  Cm 4799, Rec 9 Back

58  Ev, p 19, A 3 (a) Back

59  Ibid, A 3 (b) Back

60  HC 225, para 19 : Ev, p 76 Back

61  Ev, p 25, App 8 Back

62  Ibid, p 26, App 9 Back

63  Ibid, App10 Back

64  Ibid, p29 , App 12 Back

65  Ibid, App 11 Back

66  HC 65, para 66: HC 270, page x Back

67  HC 225, para 20 Back

68  Cm 4799, Rec 31 Back

69  Ev, p 20, A 4 Back

70  Ev, p19, A2 Back

71  Ev, p 22 Back

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