| 1. | Much has been achieved in the area of strategic export control, but there is a great deal more to do. We believe that our sustained scrutiny has resulted in a focus on this area which has enabled real progress to be made, in the context of a high level of constructive debate among policy makers, NGOs, industry and legislators. We recommend that the Defence, Foreign Affairs, International Development and Trade and Industry Committees should continue the Quadripartite Committee arrangement in the new Parliament. (Paragraph 6)
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| 2. | We have a unique scrutiny function. Our work includes looking at high-level policies and the issues arising from them. But the end product of the system is thousands of individual licensing decisions, each of which is crucially important. We test only a very small fraction of those decisions, and digging into this detail is an essential part of our job; if we did not do this, we would be unable to test how the Government is carrying out its policies in practice. We appreciate that our work adds to that of the Government, but effective scrutiny cannot be cost-neutral. We conclude that this dual-track approach to scrutiny of strategic export licensing should continue. (Paragraph 10)
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| 3. | We recommend that those devising new Government information systems for strategic export controls should be given an objective of ensuring that data can be supplied much more simply and quickly to the Committees on, for example, end use, open licences (OIELs) involving incorporation, refusals and appeals. (Paragraph 12)
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| 4. | We are disappointed that, yet again, the Government has missed an agreed deadline for the provision of information to the Committees. The fact that these questions are directed to multiple departments is no excuse for agreeing to provide information by a certain date and then failing to do so. This second-class service has been obstructive to effective scrutiny of Government policy. (Paragraph 15)
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| 5. | The inability of the Foreign Secretary and his officials to answer our questions about the Export Control Organisation is a disappointing sign of the limitations of 'joined-up government'. We are surprised that the Foreign Secretary was not accompanied by government officials able to respond to our lines of inquiry on a key topic. It would be a poor use of time—both ours and the Government's—if the Committees in future were to have to hold multiple evidence sessions with government representatives on a single policy area because the subjects under discussion fell under the responsibility of different Departments. (Paragraph 18)
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| 6. | While any decision on working patterns will be a matter for our successor Committees in the next Parliament, we would suggest that in future the Committees hold oral evidence sessions at least every six months, as well as submitting written questions to the Government on a quarterly basis. (Paragraph 19)
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| 7. | We will ensure that a website dedicated to our joint work on strategic export controls goes live on the Parliament site as soon as possible, with an entry for the Committee in the main alphabetical Committee List. The site will include the text of our previous reports, press notices, future programme and transcripts of oral evidence sessions, as well as those of our predecessor Committees in the last Parliament. (Paragraph 20)
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| 8. | We believe that a prior scrutiny model for certain sensitive arms export decisions could be developed, which would allay the Government's fears of delay and the need for additional resources. We are disappointed with the Government's resolute opposition to any form of prior parliamentary scrutiny, and believe that the reasoning for its position is flawed. We intend to press vigorously for this change to be made in the next Parliament. (Paragraph 23)
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| 9. | We are pleased to note that information on incorporation SIELs and gifts of military equipment is now available in the Government's Annual Report, and commend the effort made by the Government to produce SIEL incorporation data for the whole of 2003. (Paragraph 24)
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| 10. | We recommend that the Government sets out in its response to this Report the progress that has been made on publication of information about Global Project Licences across the Framework Agreement States. (Paragraph 25)
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| 11. | Taking these developments in reporting as a package, we give praise where praise is due. The UK is now one of the most timely publishers of information on arms exports in the EU. Furthermore, its work on incorporation licences and the publication of country of origin and destination for 'trafficking and brokering licences' is precedent-setting. We congratulate the Government on this work. (Paragraph 29)
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| 12. | We recommend that the Government expedite work on resolving the practical and policy barriers to publishing information on categories of end user. We hope that the practical problems can be overcome during the next software upgrade. We look forward to learning of the progress of this project; we recommend that the Government considers inviting the Committees in the next Parliament to assist with reviewing or commenting on the specifications for new information systems. (Paragraph 37)
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| 13. | We infer from the Government's response to our last Report that fuller information on SITCLs and OITCLs will be provided in the 2004 Annual Report than in Quarterly Reports. The Committees look to the Government to confirm that this is still its intention and invite it to indicate whether it would consider providing this greater level of detail on a quarterly basis. (Paragraph 41)
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| 14. | The lack of information about incorporation OIELs is worrying, as it means we only have a partial picture of how British components and technology are being used abroad. We hope that the software upgrade currently underway can be configured so that this information can be made available to us on a confidential basis. (Paragraph 43)
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| 15. | We recommend that the Government should keep open the possibility of asking industry to gather data on actual exports. While this would impose an extra burden on companies it would enable further and more accurate information to be made available. (Paragraph 45)
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| 16. | The fact that the number of SITCL licences issued is much lower than predicted in the revised RIA is not necessarily a matter of concern, and it is too early to tell what the reasons for it might be. However, the evidence we have received shows the importance of the ECO's outreach work, and the need to remain vigilant for arms dealers relocating abroad to avoid the new controls. (Paragraph 55)
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| 17. | On the basis of the evidence we have received from the Department for Trade and Industry, and the statistics from the Government, it appears that there is now an active drive for open licensing. We are dismayed that this is happening in the context of resource cuts at the Export Control Organisation, and uncertainty about its future, which we discuss later in this Report. As we have noted in the past, single licences are inherently more transparent and a stricter form of regulation. We recommend that the Government should conduct an immediate review of the scope of open licensing, and that our successor Committees should examine the results of this as soon as possible. (Paragraph 62)
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| 18. | The fact that there are so many uncertainties about the WMD export control provisions is a matter of concern and we urge industry and the Government to resolve these issues as soon as possible. (Paragraph 68)
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| 19. | The Government concluded in response to written questions that "It is too soon to draw any firm conclusions but so far the new controls appear to be working as intended and at the same time do not appear to have caused any major difficulties for either industry or government". On the basis of the evidence we have received this seems to be a reasonable, although slightly rose-tinted, assessment. We note that much has been done by the ECO to ensure that the new controls are operating well, and recommend that our successor Committees conduct a full assessment of the new export control system once more information is available. (Paragraph 69)
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| 20. | It is unfortunate that the export control system, which has only just been subject to a major efficiency exercise, and has important additional responsibilities arising from the Export Control Act 2002, is suffering cutbacks. We are concerned that ECO work that is seen as more peripheral, such as seminars for industry, outreach to other countries to improve their export control systems and, dare we say it, provision of information to us, may suffer. This would be very short-sighted. It seems to us that there is also a possibility that the current encouragement for open licensing is resource-driven. There is a very fine line between optimal efficiency and needless risk and the Government must not cross it. (Paragraph 77)
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| 21. | We welcome the Secretary of State's undertaking to keep us closely informed about plans to involve the private sector in parts of the Export Control Organisation's work. We trust that no changes will occur until our successor Committees in the next Parliament have had an opportunity to take evidence on the proposals. (Paragraph 78)
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| 22. | We await publication of the revised European Union Code of Conduct on Arms Exports, and welcome the Foreign Secretary's comments that provisions relating to licensed production overseas, arms brokering and intangible technology transfers will be included. We wait to see what impact the revision of the Code will have in practice on strategic export controls across the EU. (Paragraph 86)
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| 23. | We wait to see how the new version of the Users' Guide, and the final revisions to the Code of Conduct, will affect transparency and the exchange of information between EU member states. We agree with the Foreign Secretary that sharing information in this way is a key tool to develop a convergent approach across the EU (Paragraph 90)
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| 24. | We hope that the final stages of the negotiation of the Code of Conduct will include provisions to increase the quality of reporting on arms exports across all member states. (Paragraph 92)
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| 25. | The future level of undercuts and denial notifications will be an important indicator of how the revisions to the EU Code of Conduct improve consistency of the Code's application across member states. We recommend that our successor Committees return to this issue as soon as possible. (Paragraph 95)
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| 26. | We note that the legal status of the EU Code of Conduct on Arms Exports is to be reviewed shortly. We look forward to learning the outcome of this review. (Paragraph 97)
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| 27. | We recommend that our successor Committees keep under review the application of the Code of Conduct across the EU, with particular reference to any differences in interpretation by member states. (Paragraph 98)
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| 28. | We look forward to learning of the results of the review of Criterion 8 of the Code of Conduct, and recommend that our successor Committees monitor how the new guidelines for its application affect the issuing of licences across the EU, particularly in the UK. (Paragraph 101)
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| 29. | We recommend that the Government uses its Presidency of the EU to initiate a review of Criterion 2 of the EU Code of Conduct on Arms Exports, along similar lines to that conducted of Criterion 8 of the Code. (Paragraph 103)
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| 30. | We urge the UK Government to use its Presidency of the EU to ensure that there is a focus on the importance of sharing best practice on enforcement of the EU Code of Conduct on Arms Exports, and export control more broadly, across all member and accession states, and potential future members. It is important that older EU member states continue to give newer states assistance to build robust systems if the integrity of EU export controls is to be maintained. (Paragraph 109)
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| 31. | We welcome the development of an EU-wide system to manage the transition for states coming out of arms embargo controls. (Paragraph 111)
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| 32. | The European Council has stated that if the EU arms embargo to China is lifted, this should not result in either a qualitative or quantitative increase in arms exports to China. Close attention will have to be paid to this test, which is highly complex and subjective. We therefore recommend that before the embargo is lifted the Council should spell out how the assessment will be made. We would welcome in particular clarification on whether this means that there should be no increase in arms exports to China at all or no increase as a result of the lifting of the embargo, as these are very different tests. (Paragraph 127)
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| 33. | Although we believe that the embargo is an imperfect tool, there are risks associated with its removal. It is possible that there could be major EU-US trade repercussions from an EU arms 'export drive' to China, or that EU member states enhance China's military capability in a worrying way, or that the Chinese Government uses arms exported from the EU for internal repression. The prospect of the UK securing the ITAR waiver might be severely jeopardised. Those risks must be mitigated by member states taking the Council's 'no qualitative or quantitative increase' pledge extremely seriously. As we have already observed, however, this pledge is in itself imperfect. In view of the importance of this issue for future transatlantic relations we recommend that absolute assurances are given by the European Union and each member state, that there will be no qualitative or quantitative increase in arms exports to China as a result of lifting the arms embargo and that sensitive technologies will not be transferred to China as a result of this change of policy. If such assurances cannot be obtained we recommend that the Government opposes lifting the arms embargo and any other change of EU policy with regard to arms sales to China. (Paragraph 139)
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| 34. | Whether or not the embargo is lifted we expect our successor Committees to monitor the UK's arms exports to China carefully. In order to do this, they will require full information on refusals, appeals, incorporation SIELs and OIELs and type of end user for licences granted, on a quarterly basis. We also recommend that the Government puts pressure on the Chinese Government during the negotiations to pledge its support for the proposed International Arms Trade Treaty. (Paragraph 140)
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| 35. | We strongly endorse the UK Government's position that the controls of the proposed EU Regulation on trade in equipment related to torture and capital punishment should not be weaker than those currently applied by the UK. We still have concerns about the export of oversized handcuffs and recommend that our successor Committees return to this issue in the next Parliament. (Paragraph 146)
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| 36. | The Committees recommended last year that "the Government should reconsider which types of trafficking and brokering activity it subjects to extra-territorial control to identify more accurately those which are of most pressing and genuine concern—in particular those weapons most likely to be used by terrorists or in civil wars. We recommend that trade in such weapons, including MANPADS, rocket-propelled grenades and automatic light weapons, should be subject to extra-territorial control where they are intended for end use by anyone other than a national government or its agent, and where the country from which the trade is being conducted or from which the export will take place does not itself have adequate trade or export controls consistent with the British Government's policy on arms exports." We make the same recommendation in this Report. We also recommend that the Government should conduct a review of extra-territorial controls along the lines suggested in our last report once the Export Control Act 2002 has been fully in force for a year. Furthermore, we recommend that the conclusions of that review should be published before the end of the year. (Paragraph 156)
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| 37. | While we cannot realistically expect an International Arms Trade Treaty to happen immediately, the UK's language and action must keep the pressure on other nations to add their weight to this initiative. This is the start of a long road, and the UK will need to be a vital driving force if the endeavour is to be successful. We urge the UK Government to use its influence as President of the G8 in 2005 to lobby other countries, particularly fellow G8 members, to support the proposed International Arms Trade Treaty. (Paragraph 161)
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| 38. | We conclude that it is extremely disappointing that the US Congress has for a second time deleted provisions that would enact an ITAR waiver for the UK. (Paragraph 167)
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| 39. | Effective enforcement of the export control regime is needed if all the checks and balances of the export control licensing system are to be of any purpose at all. We hope that the reorganisation of Customs and the Inland Revenue will ensure that the export control system becomes more effective. (Paragraph 169)
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| 40. | We repeat our recommendation that the secondary legislation regulating licensed production facilities should be reviewed by May 2006. (Paragraph 171)
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| 41. | We believe that the UK's export control system has improved substantially in this Parliament. As a result of the legislation passed in 2002, subsequent delegated legislation, changes in reporting practice and the JEWEL review, we now have generally efficient and reliable export controls. Exchanges between the Government and the Committees, while sometimes candid, are founded on a shared commitment to continuous improvements in this process. (Paragraph 172)
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| 42. | We take the view that there are considerable opportunities at present both in high level world policy—as the UK holds the Presidencies of the G8 and the EU, and as support for an Arms Trade Treaty becomes widespread—and for more detailed licensing scrutiny, as information systems within Government are improved. We hope that our successor Committees in the next Parliament continue to play their part in encouraging the Government to take advantage of these opportunities. (Paragraph 173)
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