Select Committee on Defence Minutes of Evidence

Examination of Witnesses (Questions 100 - 119)



  100. Exactly.
  (Mr Gould) We cannot afford to behave like that any more, I think, is the main constraint. If you like, there is competition on the demand side as well. There are things which people want. We cannot afford to do everything we want to do all in one go and that implies a discipline on the demand side as much as on the supply side.

Mr Viggers

  101. Can I ask a general question. Defence procurement is only part of defence. We are in the business of producing or trying to promote a safer and more secure world.
  (Mr Gould) Yes.

  102. Looking at this from the point of view of Russia and Ukraine, bearing in mind the former Soviet Union had the defence industrial combines as a very important part of its industrial structure and looking at this from the point of view of Russia where it sees NATO expanding currently with three countries being admitted into NATO—and part of the procedure of joining NATO is the countries will modernise their armed forces which effectively means having armed forces compatible with Western armed forces—Russia not only sees that it is losing its military industrial combines, it is losing its customers as well and it can see that it has outstandingly good arms manufacturers—the Antonov is a leader in its field and has a transport vehicle, the Sukoi is probably the most aerially dextrous aircraft there is—what is in this for Russia and the former Soviet Union? Can we offer any hopes at all or do they just see this as a Western closed shop which really is making life difficult for them?
  (Mr Gould) I had not really thought about that, it is a fascinating question. What was the old Soviet defence industry of course fragmented with the fragmentation of the old Soviet Union so that, as you have quite rightly pointed out, large parts of the aircraft industry ended up in Ukraine, which is a sovereign country of its own at the moment. They are also having tremendous difficulty, although they have still very good research and technology and can develop very spectacular prototypes for the SU27 and improved versions of it and so forth, they have quite a lot of difficulty actually productionising that now and turning it into saleable commodities. I do not think the Framework Treaty and the letter of intent really addresses, or was intended to address, that particular point. In terms of the development of a European industry, we have not excluded, as a matter of principle, participation by non EU countries in projects. The possibility is there. It obviously is very difficult for companies like Antonov in the Ukraine and they have found it very difficult to bid into European competitions. They have certainly shown an interest and they have certainly tried. As a general rule I would say they have a lot more industrial restructuring and improvement of their own to do before the companies are of a quality to bid into European programmes. I think that is what it boils down to. I think the short answer to your question is not much, I do not think it changes much I think that was the situation anyway.

  103. I will keep asking the question in different fora.
  (Mr Gould) No, indeed, please do, it is a fascinating one.


  104. We are coming to the end. Could you elaborate on Article 48, part 2. This looks a little vague. It looks like a classic compromise. After hours of negotiations the smart civil servants came up with this: "The parties shall seek the ways and means to task and fund an organisation with legal personality to manage programmes and proceed to common equipment programmes".
  (Mr Gould) Yes.

  105. This seems as though "we could not work anything out so we will put this in as an aspiration". It that a bit unfair?
  (Mr Gould) Perhaps you should call my predecessor back to ask him more about the negotiating history. It sounds to me rather like somebody did not want to say OCCAR.

  106. Yes.
  (Mr Gould) If you read this "legal personality to manage programmes and proceed with common equipment", that is OCCAR.

  107. Sure.
  (Mr Gould) Obviously we do not have commonality between the OCCAR nations and the six nations here which is probably why it has got that rather Civil Service type drafting in there.

  108. If you have any thoughts on it.
  (Mr Gould) OCCAR is really the only act in town at the moment that meets that definition. There has been talk about the European Armaments Agency but not much more than that, quite frankly.

  109. My last question, before Peter Viggers asks the last question, could you have a look through your files to find if there are any really good up-to-date articles on what has happened by way of restructuring?
  (Mr Gould) Sure.

  110. We know the big picture. There may be some market analysis which would be really helpful.
  (Mr Gould) There is. I can find you something.

  111. Thank you. Lastly, Mr Viggers.
  (Mr Gould) If not we will write it ourselves.

Mr Viggers

  112. This is a very grand inception, there are lots of fuzzy edges but of course nearly a year ago the United Kingdom signed a Declaration of Principles with the United States which in many ways covers similar ground to the Framework Agreement we are considering today.
  (Mr Gould) Yes.

  113. In what areas does the Declaration of Principles with the United States differ from the Framework Agreement? Is there a strategic difference in approach or are they very similar?
  (Mr Gould) They do, as you have noticed, cover very, very similar categories. That is actually deliberate. That is what it is intended to do. The Declaration of Principles is more like the 1998 Declaration of the six nations that we have talked about than a Framework Agreement. If I characterise it, the Declaration of Principles work is running behind the Framework Agreement, it is not nearly as mature as what you have seen here. I would say that the difference, obviously, is first of all it is bilateral not multilateral. I do not think that is the result of anything in the United States other than the fact of the history of co-operation with the UK. If they are going to start doing this kind of thing they thought they had better start with us because historically they might find it easier. They see it as being a more broadly based approach, ultimately. The real difference is in the area of technology transfer, export control. The DoP addresses both of those things but, of course, the US has an awful lot more technology to transfer, quite a lot of it, quite rightly, it wants to protect which means that the nature of the negotiations on those sorts of subjects is, I think, materially different from what we have done here in the Framework Agreement.

  114. Are the two concepts completely compatible?
  (Mr Gould) No, they are not. They cannot be because one is multilateral and the other is bilateral so they cannot be compatible, there are bound to be some differences.

  115. By compatible, if they were not compatible we could not enter into both.
  (Mr Pawson) They both seek to improve the co-operative framework within which to enhance defence industrial co-operation so in that strategic sense they are compatible. Mr Gould has said that the similarities are not coincidental. They are compatible because there are the same problems in globalising industry.

  116. Did the United States have reservations about us entering into the Framework Agreement?
  (Mr Gould) No.

  117. What about the European allies, do they have reservations about our special relationship with the United States?
  (Mr Gould) No. They do not. They ask us how the DoP is going and the US ask us how the Framework Treaty is going and we are quite happy to share that information with both of them.

  118. I imagine the United States is most likely to be sensitive in this area. Has either side expressed concerns about sharing information?
  (Mr Gould) No, they have not, because it is quite clear in the Framework Agreement and quite clear in our work with the US that we will not share US information which they have given us under those terms. The European nations do not expect us to do that either. We have made that quite clear.

  119. Do you envisage that there will be a wider agreement which evolves from both of these agreements?
  (Mr Gould) It may not be a single agreement but I do envisage the agenda getting broader, yes, I do. As I said, the United States on the DoP have made a start with us. We know they have talked to other countries about the similar approach as well so I do see the agenda broadening, yes.

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