Examination of Witnesses (Questions 20-39)
THURSDAY 27 FEBRUARY 2003
RT HON
JACK STRAW
MP, MR EDWARD
OAKDEN AND
MR TIM
DOWSE
20. Can you give us any idea in terms of percentage
how much of that material has currently been destroyed 10 or 11
years later?
(Mr Dowse) I think we will have to write to you.
Rachel Squire
21. Foreign Secretary, can I move on and ask
you about incorporation. In a written answer of 8 July 2002 you
announced new guidelines to be taken into account alongside the
existing consolidated criteria for licensing a very particular
category of export, namely equipment for export to a second country
which was to be incorporated into equipment being built in that
second country for onward export to a third country. Can you tell
the Committee what your motivation was in introducing these new
guidelines on incorporation in July last year?
(Mr Straw) The trigger for this was an application
for the Heads-Up Displays for F16s. British Aerospace have got
a long-term contract for supply of these Heads-up Displays for
F16s exported all over the world and most of the destinations
raise no issues at all, but it was an application for a licence
for the Heads-Up Displays in respect of Israel and it raised questions
about the whole issue of incorporation and whether our policy
in general, and the policy in particular, had taken full account
of the changed nature of the defence industry. It had always been
to a degree an international supply chain and an international
assembly line, but this has become more formalised and much, much
more extensive and it is very rare to find, as far as the UK defence
suppliers are concerned, any single item of finished equipment
that has not got items of import inside it and also a large proportion
of the work of the defence industry is parts which are then assembled
elsewhere. I looked at this and there was a small group of Ministers
which looked at this, and my judgment was rather than try to either
make an exception for the F16s, if we wanted to list it and it
was consistent with the criteria, what we needed to do was to
sit down and say, "We are likely to face a number of these
applications, what are we going to do about it?" then having
decided what we are going to do about it, be completely open about
it. What I did was publish a statement to run alongside the criteria
and then to announce the decision in respect of the F16s at the
same time. People may or may not agree with the decision but what
I hope people may recognise is that I was anxious to bring this
out—I knew it was going to be controversial—and try
and establish some principles on which we should deal with some
very difficult issues, so that is the background.
22. Are you saying, Foreign Secretary, that
the existing consolidated criteria failed then or fail now to
deal adequately with exports of military equipment for incorporation?
(Mr Straw) I looked at whether we should try and change
the consolidated criteria. Let me say this was a similar exercise
I had undertaken in the previous December when in a written answer
to Roger Casale I announced our approach to the application of
the criteria which would relate to terrorism. Because I was very
concerned in post-11 September circumstances that we may not be
taking proper account of the imperative need of States to defend
themselves against terrorism, I said to officials I thought we
ought to change the criteria and announce that. I came to the
view in the end that I did not need to change the criteria but
I did need to make public how I was going to interpret those criteria.
In this case I did not judge it necessary to change the criteria.
Criterion 7, which is on diversion, already deals with the overall
principle, but my judgment was that these cases required a particular
consideration of all the factors listed. I could have simply said,
having judged that other things being equal within the criteria,
we should license this application rather than not and to say
we did it within Criterion 7 and leave it at that, but I thought
it better to be explicit about the principles involved because
that seemed to me to be a new circumstance because of the changing
nature of the defence industry, and therefore required a new statement.
Chairman
23. Foreign Secretary, most of the items in
the Annual Report refer to components, they do not refer to final
products. Heads-Up Displays are a component. I am not clear why
the government does not simply apply the consolidated criteria,
the EU Code, to those components in the same way the government
applies criteria to all the other components that feature in the
Annual Report.
(Mr Straw) We have applied the criteria. With great
respect, Chairman, you could say to me you would be happy with
my answering in each case when you ask the question "why
did you license this?" that we applied the criteria. What
I thought was going to be helpful was to explain why we had applied
the criteria here and had we done so against any principles which
we thought would apply in other respects and whether or not they
are going to be controversial, had we thought this through. A
lot of things of course are components, you are absolutely right
about that, it is about exports to one country for re-export to
another, and where you have got a very large contract, as you
have with the Heads-Up Displays worth some hundreds of millions
of pounds, one is bound to take account, and the criteria allows
one to, that is why I talked in my answer to Paddy Tipping about
the importance of the UK's defence and security relationship with
the incorporating country, the export control policies and the
effectiveness of the export control systems of the incorporating
country, which in this case is the United States, whose system
is a very effective one, and so on. As I say, materiality and
significance of origin are the matters laid out there. You cannot
regard the criteria as hewn in tablets of stone. What, however,
it seems to me it is right that Parliament should absolutely require
is that where we are providing some gloss on the criteria—and
that is the nature of any kind of living law which is quasi law—then
we provide an explanation.
24. Was it a gloss on the criteria or the introduction
of new considerations that would weaken the criteria? Were you
advised for example that this would be in breach of the EU Code?
(Mr Straw) Of course not, because this is not in breach
of the EU Code—because if it were it would be in breach
of the consolidated criteria, which are EU and national. What
we also did was to look at other countries' practices and I may
say it is quite difficult to unearth other countries' practices
because in almost every case they do not publish their criteria,
still less the practice of those criteria. So this is a very unusual
arrangement here—very unusual indeed—but by delving
into it (and I am afraid officials had almost as many questions
from me as they have had from you recently) to go round posts
in Europe to find out how they were operating their systems. In
many number of cases we only got information about how they were
really operating their incorporation procedures and arrangements
on condition of strict confidentiality that I would not identify
the countries. Again, I am satisfied that what we are doing is
on all fours with the best practice in Europe.
(Mr Dowse) Can I add a little on other EU Member States'
practices because we did indeed make a survey of our partners
to see what their approach would be and we found, in fact, there
was no common approach on incorporation cases within the EU. Some
had an approach very similar to the one that we have announced,
that is they take a number of special factors into account alongside
the criteria, which is the road we decided to go down, but we
found at least one example of a partner that to other EU and NATO
members exercises no re-export control at all. So there was no
consistent practice within the EU. Some EU Member States sign
specific memoranda of understanding with partner countries where
they have a defence industrial relationship and they allow exports
under these MOUs. Our announcement, we believe, rather led the
way in bringing some transparency to this area. We set out very
clearly the approach we are going to take and we think this was
done in a way that goes rather further than most other countries.
Rachel Squire
25. Can I test out just what information you
can give about other partner countries by asking you whether there
are circumstances under which the United States would allow for
export to the United Kingdom parts for incorporation prior to
onward export which it would not itself allow to be exported direct
to the country of final destination.
(Mr Dowse) I think this is an issue which is currently
under negotiation with the United States in the context of the
ITAR waiver, the International Traffic in Armaments Regulations.
We do not have a final decision on those negotiations yet so I
think I would rather not get into what is a rather delicate international
negotiation at the moment and the details on that particular issue,
not at this point.
26. We can come back and ask again on that?
(Mr Straw) Yes, any time.
Mr Lansley
27. I quite understand the need for additional
factors to be taken into account over and above the consolidated
criteria. What I am not quite sure about is that in (b) "the
importance of the UK's defence and security relationship with
the incorporating country", what precisely is intended to
be meant by that as distinct from Criterion 5 of the Consolidated
Code and the reference there to the potential effect of the export
on the UK's "defence and security interests". I suppose
my question is whether there is a danger here, having written
the factors around the very particular case to which this gave
rise, in the use of the word "relationship" as opposed
to "interest"? It gives rise to the question whether
in fact the relationship with the US is seen as a distinct and
overriding factor which would not be the case for the Consolidated
Code as a whole, where the Americans would be viewed, quite rightly,
by Criterion 6 and treated according to its behaviour and ability
to satisfy our export regime.
(Mr Straw) There are some criteria which are of higher
authority than others but in terms of these ones no one which
is set out in Criterion 5 or here is paramount over and above
others. What you have to do is weigh up all the criteria against
the application and make the best judgment that you can. Yes,
it is true there is a difference between our defence and security
interests and our defence and security relationship with the incorporating
country, or at least the latter is an explicit part of the former.
Yes, where you are dealing with general issues being raised by
a particular application, there is always a danger that the general
conclusion you come to is coloured by the particular application,
but what I thought I ought to do here (because I knew it was going
to be controversial) and my first thought was that it was extremely
important that since it was going to be controversial, the detail
of any decision one way or the other was made available to Parliament
immediately because openness is paramount here. The next thing
was rather than simply say, as I could have done and we do in
most cases, we are going to do what the criteria require which
is judge people on a case-by-case basis and leave it at that,
I thought I should be explicit about the basis for making the
judgment, and that is what we did. Aside from anything else, if
I had simply announced it and then had the PQ asking what is the
decision in respect of Heads-Up Displays, that I had agreed them
and here is a copy of the criteria, quite legitimately, there
would have been a very large number of PQs asking why had I done
that. I could not possibly have just come along and say that I
agreed the criteria, I would have had to say why. It seems to
me quite sensible to be so explicit.
28. My point is quite narrow really. It is what
is intended to be comprised by reference to our defence and security
relationship with a country that needs to be included in the factors
that are applied to incorporation that are not needed and are
not included in the Consolidated Code?
(Mr Straw) Mr Dowse is saying all these factors are
not new. This is an issue of proportion and it emerged in our
review of how other European countries were operating that they
did distinguish between export of a final product and export of
components, and in one case, I think I am right in saying, Mr
Dowse is speaking to a recollection, that where the value was
less than 20% of final product then they basically bypass the
criteria altogether and give it a tick. In other cases it was
smaller than that. What is the significance of (b) here? Really
what it means is if in the case of our largest defence contractor
BAES they have a huge long-term relationship with defence industries
in the United States, then no sensible government can ignore the
implications for that relationship of decisions on one individual
application. That does not mean that you automatically go along
with the application, but it does mean you need to take account
of it.
29. What you are telling us is this is a factor
you would apply to all components, not solely those for incorporation?
(Mr Straw) It arose more explicitly in respect of
incorporation because of the potential controversial nature of
this particular item which was then going to be re-exported to
Israel. That is why.
(Mr Dowse) You are right in the sense that not all
the items that were listed as factors were new. For example, factor
(a) is already expressed in slightly different words under Criterion
7. What we were trying to do was to bring together the specific
factors we thought were applicable to incorporation in order to
be clear. In respect of the particular reference in Criterion
5, of course Criterion 5 deals with criteria for refusal rather
than approval, so it is not quite on all fours.
30. Do by all means feel free to let us have
a further explanation but my point is a very narrow one; if this
is intended to reflect the importance of the UK's defence and
security interests, that as I understood it would be something
that would be taken into account, I do not see in the Consolidated
Code a reference to the importance of the UK defence and security
relationship with a buyer country or incorporating country as
a specific factor to be taken into account in export licences.
(Mr Straw) This is your point but I want to offer
you a response to this. Criterion (a) talks about the following
will be considered: "the legitimate defence and domestic
security interests of the recipient country, including involvement
with UN and other peace-keeping activity", and elsewhere
there is reference to the importance of the United Kingdom's defence
industries, that is the recipient industry there. If you put those
two together you end up with the importance of the UK's defence
and security relationship. I understand the point you are making,
there is a difference between a relationship and an interest,
but I suggest that relationship is part of interest.
Chairman: We are going to have to move on to
another topic. Ann?
Ann Clwyd
31. Secretary of State, end use has been a very
controversial subject at various times in the past and, as I think
it was Linda Chalker once said, there is no such thing as end
use control. There are various systems in existence in other countries.
I wonder what you thought of the US system of end-use monitoring
through its Blue Lantern programme which is administered by the
Department of State and uses a system of 20 specific criteria
or red flags, for example requested equipment does not match the
known requirement or inventory of the foreign end user. I wondered
if you thought this targeted system in the US was a good system
for us?
(Mr Dowse) I think the problem we have with any system
which tried to impose a rather rigid set of rules is that you
would continually come across cases which did not fit the rules.
If you have 20 criteria for monitoring end use, you might find
a case where the 21st criterion, which you did not have, actually
applied. Our view has always been that the surest way to prevent
UK defence exports ending up in the wrong hands is to look at
the export licence application carefully at the licensing stage
and refuse an export licence if we think there is an unacceptable
risk of diversion or misuse. Inevitably, once items have been
exported the degree of control and monitoring you are going to
have is going to be limited. In very sensitive cases we do our
best, but there are inevitably going to be limits on what we can
do once the equipment has left our shores. That is why we try
to ensure that our controls are applied before we approve the
export licence.
(Mr Straw) I am very happy subject to the issue of
officials' time to get myself further briefed about the State
Department system.
Chairman
32. We are very grateful. Clearly the system
the United States operates is fundamentally different from the
way that we operate end-use control.
(Mr Straw) When I am next in Washington in the State
Department on normal business I will follow that up.
(Mr Oakden) If I may just add one thought, without
cutting across that in any sense—if the EU has got across
the piece a system it would make sense for us to have a system
that is congruent with that.
33. Except we heard earlier, from Mr Dowse,
that there was a problem with consistency across the EU.
(Mr Straw) They all sign up to the consolidated criteria
but, as is often the case, what is in the text and what actually
happens are two different things.
(Mr Dowse) In respect of end-use monitoring, there
is no consistent practice across the EU. I would say that the
approach that we take is as rigorous as any other EU Member State,
but not the same, I accept, as the United States.
Chairman: We can pursue that.
Ann Clwyd
34. You say that you take account of information
provided by non-governmental organisations, but that does not
seem to be backed up by experience. For instance, when non-governmental
organisations were reporting on the use of Hawks by Indonesia,
the use of armoured vehicles by Indonesia, then in my experience
there was very little follow-up on those points.
(Mr Dowse) If I can reply particularly on the specific
case you mention, I think I really would have to challenge that.
In the case of the allegations of the use of Hawk by Indonesia,
there was very, very intensive follow-up that was made, to the
extent that our air attaché " in Jakarta personally
inspected the logbooks of every Hawk aircraft that was being operated
by the Indonesian Air Force. I would say that was an exceptional
level of end-use monitoring.
Chairman
35. What year or years would that have been,
as a matter of interest?
(Mr Dowse) 1999.
(Mr Straw) May I also say that when I was in Indonesia
in January I raised this issue too with the government at every
level, as I recall.
Ann Clwyd
36. Can I put another point to you, the use
of vehicles supplied by the UK to spray demonstrators with dye
so they could be identified subsequently by the Indonesian authorities.
I remember protesting at the time but I do not remember any follow-up.
I do not recall any Embassy staff reporting on such things.
(Mr Straw) Was this a recent one, Mrs Clwyd?
37. No, not recent.
(Mr Straw) The ancien regime?
38. Not under your watch.
(Mr Straw) I will chase it up. I simply do not know
the answer.
Chairman: Let's move on to sustainable development.
Ann Clwyd
39. Could I ask one other point. Under what
circumstances are overseas posts asked to investigate the alleged
misuse of controlled exports from the United Kingdom?
(Mr Straw) When we get information about this. In
some cases, defence attaches and others spot things themselves
which, as I recall, is what happened, correct me if I am wrong,
in respect of the use of those carriers in the Occupied Territories.
It was a very, very assiduous defence attaché " who
spotted, with pretty good forensic skill as well, that these carriers
were built on the chassis of 40-year old British tanks and then
he followed it up terrier-like and discovered they were in breach
of their export licence.
(Mr Dowse) There are specific circumstances. In some
circumstances it is not unknown for a particular condition to
be put onto a licence as to the circumstances in which the item
can be used, and in those circumstances—I know they are
fairly specialised—we do try to do what we can to ensure
that the conditions are met, and the Israel case was a particular
one where we had received certain assurances from the Israeli
government that British equipment would not be used in the Occupied
Territories. We obviously then made an effort to ensure those
assurances were being met and our attaches in Israel, at considerable
personal risk in some cases, did make tours in the Occupied Territories
with this in mind.
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