APPENDIX 7
Submission by the Campaign Against Arms
Trade
1. The Campaign Against Arms Trade (CAAT)
is working for the reduction and ultimate abolition of the international
arms trade, together with progressive demilitarisation within
arms-producing countries. As a step towards this, CAAT is seeking
an immediate end to Government assistance for the export of military
equipment.
2. It is against this background that CAAT
makes this submission. CAAT urges the Committee to call on the
UK government to end all export credit cover for goods being purchased
by overseas military or security forces, or armaments-manufacturing
bodies. This would include cover for the construction of military
bases. CAAT would like the UK government to set an example to
its overseas counterparts by taking this action unilaterally.
3. Support for such an idea is not confined
to campaigning groups such as our own. No less a figure that Michael
Camdessus, former Managing Director of the International Monetary
Fund, expressed his support for "abolishing the provision
of export credit for military purposes." (Speech, Washington
DC, 28.9.99)
4. The 1999-2000 Review of the ECGD's Mission
and Status was welcomed by CAAT. However, though many submissions,
including our own, recommended ending export credits for military
exports, the final report did not. The Review also saw the introduction
of the ECGD's new Mission Statement which included, for the first
time, an objective that the ECGD would "ensure its activities
accord with other Government objectives, including those on sustainable
development, human rights, good governance and trade.".
5. CAAT waited to see if this new, non-monetary,
objective would make any difference in practice. After three years,
it would seem that it is, largely, business as usual.
STILL A
SUBSIDY FOR
MILITARY BUSINESS
6. In reports commissioned by the ECGD,
and published in April 2000 and January 2003, the National Economic
Research Associates conclude that the premiums charged by ECGD
do not include all the costs involved. In other words, export
credits are subsidised by the tax-payer. The Trade and Industry
Secretary, Patricia Hewitt MP, accepted this, saying in response
that: "the Government's view remains that any attempt to
eliminate the subsidy should be done only on a multinational basis."
(Hansard, 26.3.03)
7. Before the ECGD Review, the percentage
of export credits supporting military goods was always far greater
than the percentage of visible exports accounted for by them which
is under 3% a year. This has continued to be the case since 2000;
in fact, the percentage covering military exports has risen.
|
| Total ECGD
cover issued
| Total military
ECGD cover
issued
| Military ECGD
cover as
percentage of
total
|
|
| £ million
| £ million | %
|
| 2002-03 | 3,532
| 1,759 | 50
|
| 2001-02 | 3,298
| 1,035 | 31
|
| 2000-01 | 5,662
| 2,735 | 48
|
| 1999-2000 | 5,504
| 1,583 | 29
|
| 1998-99 | 3,725
| 1,700 | 24
|
| 1997-98 | 3,541
| 763 | 22
|
|
| (ECGD Annual Reports) |
8. The high proportion of export credit support given
to military industry means that the arms industry is the prime
beneficiary of this subsidy.
9. According to information in Hansard, 12 June 2000 and
21 June 2002, between 1990-91 and 2000-01 the Premium Earned in
respect of export credits for military goods totalled £251
million; Claims Paid equalled £970 million; and Claims Recovered
£122 million. Since the ECGD as a whole is required to break
even, this would seem to imply that, civil exports are subsidising
military ones.
10. Since 1997, the main recipients for export credits
for military goods have been:
|
| £ million
|
|
| Saudi Arabia | 6,225
|
| South Africa | 1,270
|
| Brunei | 590
|
| Oman | 535
|
| Malaysia | 363
|
| Turkey | 253
|
| Qatar | 178
|
| Romania | 106
|
| South Korea | 82
|
| Greece | 79
|
| Brazil | 74
|
| Indonesia | 67
|
| United States of America | 65
|
| United Arab Emirates | 49
|
| Thailand | 30
|
| Singapore | 19
|
| Egypt | 16
|
| India | 14
|
|
| (Hansard, 7.1.04) |
|
11. Many of these countries are in regions of tension
or conflict or have governments with very poor human rights records.
Some are far from stable: for instance in Saudi Arabia where the
UK taxpayer could be left to pick up an enormous bill for military
equipment supplied if the regime fell.
12. Even where there is no conflict or human rights concerns,
the purchase of military equipment can be a major misuse of scarce
resources. Groups within South Africa are campaigning against
the massive arms deal there, which is supported by export credits,
on the grounds that the money could be much better spent tackling
problems such as HIV/AIDS and the lack of decent housing for all.
ENDING CORRUPTION
13. Military exports are frequently of very high value
financially and always shrouded in secrecy—a combination
of factors which renders exporting such equipment liable to corrupt
practice. It is hardly surprising, therefore, that there have
been recent media reports alleging corruption with respect to
military deals between UK companies and the Czech Republic, Qatar,
Saudi Arabia and South Africa. Many of these involve deals supported
by Export Credit Guarantees.
14. In the light of this, the ECGD's commitment to seeking
to root out corrupt practices is welcome. CAAT was encouraged
to learn that, since the Anti-Terrorism, Crime and Security Act
2001 came into force in February 2002, the ECGD's Head of Internal
Audit and Assurance has dealt with five allegations of corruption
and has referred all of them to the National Criminal Intelligence
Service for further investigation. (Hansard, 16.10.03)
15. CAAT believes, however, that the ECGD could do more
and, in particular:
(a) make companies liable for the actions of their subsidiaries
and agents;
(b) require details of agents and agents' expenses in
all cases;
(c) not underwrite commissions as part of the contracts
covered;
(d) immediately terminate cover for any project if a bribe
has been paid and make the companies reimburse any claim payment
that has been made; and
(e) not give companies making illegal payments in connection
with ECGD backed projects any further export credits or guarantees
for a period of five years.
TRANSPARENCY
16. The ECGD's Annual Review does now list details of
guarantees issued including the exporter, buyer, project and maximum
ECGD liability, unless the exporter requests secrecy. This opens
the ECGD up to greater scrutiny. However, details of insurance
cover provided by the ECGD, which accounts for a rather greater
proportion of its business, are not given. This is regrettable.
17. The ECGD's website is much improved, with considerable
information available on it.
CASE IMPACT
ANALYSIS
18. The Case Impact Analysis Questionnaire only covers
export credits of concern to CAAT where the project is not subject
to Export Licensing. Construction of military bases would be an
example of this. In all other instances, the ECGD believes that
the Export Licensing process is sufficient, even though this does
not include any environmental analysis of the equipment sold.
ADVISORY COUNCIL
19. CAAT is pleased that the membership of the Advisory
Council has been expanded beyond the business community, although
disappointed that, to date, this has had little impact in the
field of cover for military exports.
ASSISTANCE FROM
STAFF
20. Staff at the ECGD—especially from the Business
Principles Unit—have shown a great willingness to meet,
and provide information for, campaigning and other non-governmental
organisations. CAAT appreciates this.
SUBSIDIES, JOBS
AND AN
UNPOPULAR INDUSTRY
21. Export credits are part of a general subsidy for
the arms trade, which also includes research and development expenditure;
a specialist department, the Defence Export Services Organisation,
to promote military sales; and the promotional activities of Government
ministers. Rather than benefiting the UK economy as a whole, arms
exports are subsidised by the taxpayer. The only beneficiaries
are the military companies. CAAT has calculated that this subsidy
amounts to about £750 million a year.
22. The Government sometimes uses the provision of jobs
as the basis on which to justify arms exports. However, a report
for CAAT by Defence and Aerospace Analysts demonstrated that the
number of people employed in producing arms for export is less
than 0.3% of the workforce—far fewer than popularly supposed.
In addition, it shows how most arms export jobs are located in
areas with very low unemployment and hence tight labour markets.
CAAT does not believe that the jobs argument can be used to justify
the subsidy of arms sales by export credits.
23. Furthermore, the arms industry is one to which the
public is increasingly opposed. CAAT commissioned a national opinion
poll on attitudes to the arms trade. In the poll, which was carried
out by BRMB between 1 and 7 May 2003, 1,004 people were questioned
face to face. The questions mirrored almost exactly those asked
in a poll undertaken by the Ministry of Defence five years previously.
24. The results of the survey showed a remarkable rise
in support for ending arms exports. For example 45% of people
questioned said that they agreed that the UK should simply not
sell military equipment to other countries, whilst only 13% said
that sales should be allowed to any country not subject to an
embargo. Even limiting sales to European Union and NATO countries
only gained the support of 38% of those surveyed.
March 2004
| 
