Examination of Witnesses (Questions 140
- 159)
WEDNESDAY 21 APRIL 2004
MR DAVID
HAYES, MR
TIM OTTER,
MR DAVID
BALFOUR AND
MRS SUSAN
GRIFFITHS
Q140 Mr George: Do you have any concerns
about the new entrants coming in? Are their standards as lax as
some people might admit? Will it be to your advantage if companies
who fall outside of these controls will now be nominally inside?
Will that be an advantage to British companies?
Mr Hayes: In terms of my own company,
I do not think it will make a huge difference because we have
no direct competitors in the accession countries anyway. In terms
of broader industry, given that military goods are licensable
between EU Member States anyway and there is no freedom of movement,
I do not think the impact will be that material on defence goods.
It will probably have more of an impact in the dual use sector
where there will be freedom of movement to the accession countries.
Q141 Chairman: Are you aware of any
examples where a competitor in the EU has been denied a licence
but the British company has been granted one? We have talked about
undercutting as being a one-way show. Is that the case? Do you
know of any examples?
Mr Otter: I cannot think of one,
there may be some, but generally speaking it takes so long for
us to get a licence once an opportunity like that is identified
that the opportunity is gone.
Mr Hayes: I am not sure we have
any.
Q142 Mr Evans: How long does it take
to get a licence?
Mr Otter: The worst case is two
and a half years.
Q143 Mr Evans: Is there such a thing
as an average?
Mr Otter: About six to eight weeks.
Q144 Mr Evans: Is that longer than
our European Union neighbours?
Mr Otter: Much.
Q145 Mr Evans: What is theirs?
Mr Otter: Typically the Germans
will do one at the turnaround of a phone call.
Q146 Mr Evans: Let us go on to the
easier subject of China! We have heard some of the interpretations
of the European Union. As you know, since June 1989 and with Tiananmen
Square we have had the arms embargo except that they did not define
the scope of it. It may be that we have defined it more broadly
and more strictly than our European Union neighbours. Have you
any examples of where we are not allowed to export certain items
to China but our European Union competitors are?
Mr Otter: Specifically the Chinese
have two big programmes where detection equipment for weapons
of mass destruction is going to be required. The first is the
clean-up of some 1.5 million munitions left behind by the Japanese
at the end of World War II which were filled with a chemical warfare
agent and the Japanese have got to clear that up. The second one
is the Beijing Olympics where the thought of a weapon of mass
destruction being used against a target like that is mind numbing,
but it is a reality now. I gave photographic evidence to the Government
some three or four years ago of French equipment being used by
Chinese researchers and officers, whereas we were refused a licence
to loan equipment for trials.
Q147 Mr Evans: You wanted to export
certain items to the Beijing Olympics to help the detection but
you have been refused.
Mr Otter: That specific example
was to do with the demilitarisation of one and a quarter million
old munitions with a chemical warfare agent fill. The Beijing
Olympics is a subject for discussion at the moment, but at the
moment we cannot get 680s to allow us to go and talk to the Chinese.
Q148 Mr Evans: But you are aware
that other countries are talking to them?
Mr Otter: I know the French and
the Germans are there. I have shown photographic evidence of the
French being there and lending their equipment.
Q149 Mr Evans: When you show them
photographic evidence of this what do they say?
Mr Otter: One of the guys cynically
said, "Could you get us a copy of the invoice?" They
just said "What can we do?".
Q150 Mr Evans: Are there any other
examples, Mr Hayes, which you are aware of?
Mr Hayes: No.
Q151 Mr Evans: Are you being encouraged
to export to China in any way, shape or form?
Mr Otter: On the so-called China
DeMil Programme, we are working very closely with DESO and the
FCO in trying to help the Chinese deal with this situation. The
problem still remains that to export into China we have got to
go through the Japanese organisation that is going to be dealing
with the munitions, so in fact what you have got to do is convince
two governments that that is the equipment that should be used.
It involves trips to Japan and to China rather than just to China.
DESO are helping us a lot. We have got 680 clearances, but whether
we will get the licences is another issue.
Q152 Mr Evans: Is it easier now to
get the 680s?
Mr Otter: It was two years work
to get the 680s through and even then we had to give certain guarantees
that the equipment would be dramatically modified to prevent use
in other circumstances.
Mr Evans: There again it may be useful
if you could write to us with examples of the China differences
because, as you know, the Foreign Secretary gave evidence to us
not so long ago about the constant review that is going on and
the review is going one-way, which is to relax rather than to
restrain.
Q153 Mr Battle: Does the British
Government's approach to the export of components for "incorporation"—and
I think there were additional factors put in by the Foreign Secretary
in July 2002—actually meet British industry's needs?
Mr Hayes: I think the Foreign
Secretary's comments and the published policy on incorporation
clarified the issue and I think there is a certain amount of misinterpretation
occurring in relation to the export of components. By that I mean
there is lots of exporting of components within the manufacturing
process whereby a UK company might export components to a company
overseas and that is simply for a manufacturing process to be
carried out overseas and the components to be returned to the
UK. It is still classed as a permanent export because the material
that is returned is materially different from that which was exported
so it does not show up as a temporary export, it shows up as a
permanent export, but looked at from a pragmatic sense it was
in fact a temporary export in the process of manufacturing a product.
Q154 Mr Evans: I am really trying
to look at it from your angle because there is a lot of concern
about the effects of the UK's ability to control final destinations.
From the restructuring of your industry brought about by developments
and the increasing use of "offset", for example, what
kind of changes in the system would you like to see?
Mr Hayes: From the point of view
of a multi-national company, something which would make life a
lot easier is if we could share goods and technology with companies
within our own supply chain under open licensing systems. We can
do that in the bulk of the defence industry but it seems to be
being ruled out for particular areas such as restricted goods
and NBC defence. So again it is one of those issues which affects
certain sectors of the industry more than others.
Q155 Mr Evans: I may be wrong, but
the advice I received was that perhaps the only recent change
to the export licences system deals specifically with production
overseas by the introduction of a tick box on a licence application
asking if the equipment for export is to be used in production
facilities. Is industry generally content with what the Government
is planning on approaching the issue of licence production overseas
or is it too lax?
Mr Hayes: No, I do not think it
is because licence production overseas necessarily involves the
export of technology which is itself controlled quite separately.
We will need a licence in order to export the technology, to facilitate
the technology overseas. The fact that it was for production overseas
would be considered in the licence application so it is already
captured in the process. I think it is a point worth making and
I know that I will be corrected if I am wrong here, but the issue
of Heckler & Koch weapons was raised earlier. In actual fact
I understand that the commitment with the Turkish company was
entered into by Heckler & Koch prior to that company being
owned by BAE Systems, so it was not British at the time that commitment
was entered into.
Q156 Chairman: When it comes to arms
export control policy end use is all that matters really, it is
about where is this kit going, who is using it, for what purpose,
in a sense that is the ultimate piece of information that really
we need to know before licensing an application and presumably
to check afterwards that the information on the licence application
is correct. Do you have any suggestions about how end-use monitoring
could be made more effective or perhaps equally effective with
fewer burdens? What are your views about that fundamental issue?
End use is all that matters when it comes to the policy presumably.
Mr Hayes: I would agree with the
comments Mr Straw made in the previous session, that the UK Government
does already carry out most of the activities of Blue Lantern,
we just do not apply a label to it. End use varies across the
industry. In some senses it is easier for some companies than
others to determine what is a suspicious order and what is not.
If you only deal with large international companies then you know
your customer base and it is relatively easy to judge what you
are doing. In the aerospace industry you know who operates what
aircraft in what Air Force or what Navy and an order from someone
who did not operate a particular aircraft for a part for that
aircraft would automatically look odd. In other industries it
is not quite so easy.
Q157 Chairman: Would you have any
objection to the Government publishing information about end users
of equipment that has been licensed?
Mr Otter: I think I would and
the reason I would object to it would be a counter-terrorist application,
although I think I would have had a different opinion prior to
the Twin Towers in New York. Since then I think I have changed
my view and I know a lot of my members have. If you are dealing
with counter-terrorism and you are dealing with protection systems
against a weapon of mass destruction what you are actually talking
about is if a target is protected then that place ceases to be
a target. If it has got detection equipment, filtration equipment
then generally speaking you can manage the incident. If it has
not then that place becomes a target. So if you are telling people
where the equipment is and where it is not you are actually doing
the target selection for the terrorist.
Q158 Chairman: So it is not a question
of commercial confidentiality, it is about preventing that information
from terrorists, is that the concern?
Mr Otter: I think it may also
be the fact that there is commercial confidentiality as well.
Q159 Chairman: I thought it might
be.
Mr Otter: From a purely counter-terrorist
point of view that would be the line I would take.
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