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22 Feb 2007 : Column 178WH—continued

However, the Government must not forget that the arms embargo was imposed because of the human rights abuses carried out by the Chinese Government in 1989 and that people still remember the horrific scenes that took place in Tiananmen square. The report we are discussing suggests that there is an erosion of the existing arms embargo on China and that EU countries now interpret the embargo in different ways, so it is losing its impact.

Roger Berry: That is because, apart from the UK, EU countries did not define what the embargo meant; the UK was the only country to define what the embargo covered. In that sense, the embargo is not 100 per cent.—I am not even sure it is 10 per cent. Most countries in the EU are not specific about what it covers, so it is a weak embargo. That is a problem.

Mr. Ellwood: I am grateful for the Chairman’s comments. On page 80 of the report, it is made clear that there are different interpretations of the terms of the embargo and, as the hon. Gentleman said, only Britain went further and provided a solid definition. Perhaps, other EU countries should take a leaf out of our book in that respect.

It is essential that, before trading in weapons with China, we have clear evidence that the Chinese Government are willing to respect human rights. Can the Minister confirm whether it is still the Government's intention to maintain an arms embargo on China and whether he supports the European arms embargo? What recent discussions has the Minister had with his American and European counterparts about
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maintaining an arms embargo on China, and what plans does he have to work with the European Union and the international community to maintain an effective arms embargo? Are we witnessing a process of demise until the embargo is not worth the paper on which it is written?

My final questions relate to pages 57 and 58 of the report, which are about the staffing of Custom’s locations around the UK. There is a worrying citation on page 58 that suggests that of the 50,000 containers checked in Felixstowe, only one was actually opened up. Can the Minister say whether he feels that we have sufficient staffing across the country to ensure that exports are thoroughly scrutinised?

On overseas arms production, on page 95, the report states:

Such involvement could also include building products in other countries. The further away from Britain that production takes place, the more diluted any treaty becomes—as has been said many times. Can the Minister confirm what is being done to ensure that any export treaty, licence or agreement remains sacrosanct no matter how far from UK shores the military hardware is taken?

On page 97 of the report, the international traffic in arms regulations waiver—an agreement with the United States—is discussed. We have spoken a lot about technology getting into the wrong hands, but, on the flip side, it is important to be able to share technology with our friends. We consider the US our best friend. We stand next to the US in the diplomatic corridors, stand shoulder to shoulder with them on the battlefield, and work next to US citizens on the factory floor. It seems strange that there are people in Congress who wish to challenge existing export treaties and established licences and agreements simply because they feel that we are no longer trusted. I hope that the Minister will take those concerns seriously because they have a knock-on impact on our ability to maintain, own and repair the hardware that we need to keep our military up to the standard that we expect. The focus of that issue is the F-35—the joint-strike fighter aircraft—over which there is a huge question mark simply because of our relationship on the hill with the United States. There are those in the US who question whether or not we are trusted to hold on to the necessary technological skills and know-how and not hand them on to other sources.

I welcome the report and congratulate again the hon. Member for Kingswood on his work. However, I add the caveat that there is much work to do. We have an economic and moral duty to provide robust, enforceable, yet fair export controls. Britain is in a pivotal position: it is part of the G8 and has a lead position in the EU and the Commonwealth. We must ensure that we provide the necessary laws and incentives to produce an arms export and control treaty that works. That is the objective of all parties and although we are making progress, there is still much work to do.

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4.59 pm

The Parliamentary Under-Secretary of State for Trade and Industry (Jim Fitzpatrick): I thank the Quadripartite Committee for its report and congratulate it on producing it. I add my appreciation to that expressed by all right hon. and hon. Members for the support that the Committee had in arriving at its conclusions. I also welcome the constructive presentations of views given by colleagues here today. I acknowledge the concerns and questions raised, as well as the positive comments on the Government’s efforts.

I should explain at the beginning that I am responding to the debate on behalf of my hon. Friend the Minister for Science and Innovation, who is overseas on Government business. My hon. Friend the Member for Kingswood (Roger Berry) did me a great service when he promoted me to Minister of State—I am actually an Under-Secretary—but I am grateful to him. He might have a word with our right hon. Friends at No. 10 or, perhaps even better, No. 11 and bring his judgment to the attention of the Chancellor of the Exchequer.

I am pleased to have the opportunity to respond to the Committee’s specific points, to comment further on the Government’s wider export control work and to look forward to the challenges that lie ahead in this vital field. If I may, I will make my prepared contribution first and then respond to the points raised by right hon. and hon. Members.

The Government have worked hard to maintain a high level of export control efficiency and effectiveness. That is reflected in the continuing excellent performance against published targets by the export licence processing teams. In fact, 2006 was the Government’s most successful year ever for export licensing performance. Good work is ongoing with regard to information provision in the annual and quarterly reports; enhancing the IT systems that underpin our work; awareness raising, both domestic and international; and a range of other matters.

The scrutiny applied by the Committee is a very important aid to the export licensing process and to the Government’s wider deliberations on the scope and administration of export controls. I look forward to the Committee playing a full role as the Government’s review of export controls is taken forward in the spring and early summer of this year.

A key aspect of an effective control regime is accountability and transparency—a point made forcefully by many right hon. and hon. Members. UK export controls are among the most transparent in the world. The Government publish detailed information at quarterly and annual intervals, setting out licence applications granted and refused by destination, as well as a range of performance-related data. The reports are scrutinised by the Committee, which seeks evidence both on individual decisions and on more general export control issues.

The Export Control Organisation and the Foreign and Commonwealth Office have worked together to make significant strides in recent years in reporting, including by introducing the quarterly reports and improving both the data in and the presentation of the annual report. The Government continue to keep an open mind about what information we provide and
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how we provide it, and have carefully considered the range of recommendations made by the Committee in that regard.

The Government are happy to provide in the reports information on resources allocated to administering and enforcing export controls, as recommended, but the Committee will of course appreciate that, on certain matters, the Government are limited as to what we can place in the public domain by the need to maintain confidentiality for commercial or security reasons. There is also the underlying question of resources.

Although the Government can consider changing the way in which we report our export control activities, to do more in that respect would risk diverting resources away from the core export control function. Developing a searchable database, as the Committee recommended, might deal with the issue by providing the ability to manipulate data. The Government are considering that proposal and will let the Committee know the outcome in due course.

I come now to the 2007 review of export controls. In addition to running the export licensing machine well, we need from time to time to step back and ask whether it is the sort of machine that we want in the context of the fast moving environment in which it operates. That is why this year’s review is so important. As the Committee will know, the Department of Trade and Industry will this year start a review of the controls introduced in 2004 under the Export Control Act 2002. That review is timed to commence three years after the new export control legislation was implemented, in accordance with Cabinet Office better regulation guidelines.

The ECO will carry out the review, the centrepiece of which will be a full public consultation. That will provide an important opportunity to take stock of existing export controls, evaluate the impact and effectiveness of what we did in 2004 and assess options for changing or enhancing export controls. The ECO is already engaging with other Departments and external stakeholders, including industry and non-governmental organisations, to identify what those change options are and their respective merits. We will continue to do so throughout the coming months in the lead-up to the issue of the public consultation document in May. I believe that that was the subject of one of the questions asked by the hon. Member for Bournemouth, East (Mr. Ellwood). That document will flag up the realistic change options and ask for evidence-based views on their likely impact and effectiveness. The deadline for receipt of contributions will be August 2007, so that in the autumn of this year we can fully evaluate those responses.

The Committee’s review of the operation of the legislation is timed so as to be taken fully into account by the Government’s review. We are working closely with the Committee—as I think my hon. Friend the Member for Kingswood, as its Chairman, will acknowledge—to ensure that it can make a well informed contribution, and we will consider very seriously what it has to say. We aim to complete the
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review process by December 2007 and we will publish a response when we have analysed the outcome of the consultation.

I hope that the Committee will appreciate that I cannot pre-empt that major review by expressing views about what I or any other Minister might think should change in export controls. That will be determined on the basis of the evidence put before us, and we are, I can assure the Committee, genuinely open-minded. However, I should like to take this opportunity to talk about the key themes and some of the difficulties inherent in finding the right answers.

One of the key difficulties that we will face—it has already emerged during the initial workshops that we have had with the industry and NGO representatives—is finding a way to prevent undesirable exports and related activities that is effective and proportionate and does not place unnecessary burdens on legitimate business. The Minister for Science and Innovation flagged that up when he talked to the Committee in March last year, and it remains an area in which there are no easy answers.

The days are gone when the UK defence industry was largely autonomous. Defence manufacturing is now a complex globalised process, with international collaboration firmly to the fore. Technology crosses borders, often electronically, at all stages of the process, and components and equipment will often leave the UK to be turned into the final product elsewhere. That mirrors what is happening in many industries and it happens for perfectly legitimate business reasons, but it inevitably presents additional challenges for export controls.

Our export controls are graduated on a risk basis: the higher the risk and the greater the potential damage from an unwarranted export proceeding, the greater the stringency of control. Thus in some cases—for example, those in which components are going to the Governments of NATO countries and other trusted allies—we can provide more flexible licensing options. For high-risk transactions, however, we need to apply close scrutiny before a decision is given. For those activities that are inherently undesirable, we want to control not only what happens in the UK, but what UK citizens are doing overseas. That relates to the so-called extraterritorial controls.

For example, we quite rightly apply extraterritorial controls in the field of torture equipment and for supplies to embargoed destinations. In doing so, the UK is sending a clear message that it does not want such things to be exported from its territory, and nor does it want its citizens, wherever they may be located, to be involved in arranging for others to supply them or to provide other services in support of those supplies. However, making extraterritorial controls work in practice is always going to be difficult.

Such controls are likely to lead to conflicts of jurisdiction where other countries take a different view from us on individual cases, causing problems with enforcement. It is difficult to ensure that UK citizens overseas are aware of them, and there is clear potential to confuse those who find themselves operating under two separate, perhaps differing, sets of legislation.

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Roger Berry: The Government have dealt with that issue in other legislation. For example, in the Anti-terrorism, Crime and Security Act 2001, the Government legislated on bribery and corruption with full extraterritoriality, knowing full well that, in many jurisdictions, such activity is not criminalised.

Jim Fitzpatrick: My hon. Friend makes a very important point. Clearly, lessons can be learned from other legislation. I will say more about extraterritoriality in a second.

To return to what I was saying, we need to focus our efforts carefully. We need to avoid casting the net of export controls so wide that it catches a wide range of legitimate and innocuous activities, at significant cost to both business and the Government. If I may, I will now deal with a number of the points raised in the course of the discussion.

Roger Berry: I am grateful to the Minister for giving way again; I hope not to intervene too often. Is not the deterrent effect a crucial part of the argument? The chance that innocent people will be caught is an unlikely concern, given the importance of the message that people who are breaking the law will be dealt with if they can be caught and if it can be proved that they are breaking the law. Is not the deterrent argument infinitely more important than the argument about the odd innocent person not knowing that they might conceivably break the law?

Jim Fitzpatrick: I do not disagree with my hon. Friend’s assessment. He has made the point very effectively that we operate the system in respect of other aspects of conduct and that consistency should be welcomed.

Both my hon. Friend and the hon. Member for Mid-Worcestershire (Peter Luff) asked about creating a register of arms brokers. The EU Council common position on the control of arms brokering that was adopted on 23 June 2003 does not call for the registration of arms brokers. Article 4 says that member states “may” establish a register of arms brokers. It also states:

The Government will consider carefully the comments that have been made on this issue and any evidence that is put forward as part of the forthcoming review.

Several Committee members questioned the Government’s policing of the internet to detect export control breaches.

Sir John Stanley: Before the Minister moves on from the registration of brokers in the UK, I ask that the Government reflect on the sense of their justification for refusing the Committee’s recommendation. In their response, they say:

The Minister nods. Will he consider the Government’s child sex offenders register? Would anyone seriously suggest that, by setting up such a register, the Government approve child sex offences?

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Jim Fitzpatrick: I hope that the right hon. Gentleman will forgive me for nodding at him. I was nodding not in assent, but because I assumed that he was quoting accurately from the Government’s response. I hear what he is saying about the interpretation of what a register would convey, but, as I have just said, the Government will consider carefully the comments that have been made on this issue and the evidence that is put forward in the forthcoming review.

The right hon. Gentleman said in his speech that a review is not needed because all the evidence is already out there. The Cabinet Office recommendation is that there should be a three-yearly review of new regulations as part of our better regulation policy. The opportunity is there, and the Committee will want to press for changes in several areas, as has been clearly articulated today. Some right hon. and hon. colleagues may think that the review represents another delay and is unnecessary, but it will provide an opportunity, and it is the way in which the Government intend to proceed. I hope that colleagues will take advantage of the opportunity that it will provide.

I return to the policing of the internet to detect export control breaches. I am pleased to report that the Government recently started a pilot programme of internet monitoring, within a limited subject, to gauge the extent to which the internet is used to promote or facilitate the export or transfer of goods that are subject to UK export controls. The Government hope to report back to the Committee later this year on the outcome of those investigations.

In response to the Committee’s recommendations on changes to the Export Control Organisation’s IT, the Government are due to launch the SPIRE—shared primary information resource environment—IT system in the third quarter of 2007. The system will allow the electronic submission, circulation, processing and issuing of export licences. That will make the whole process even more joined up between Departments and create a more efficient and effective licensing process. Importantly, part of any new system will be dedicated to providing a reporting tool to simplify the production of statistical data for the annual and quarterly reports. I hope that that addresses colleagues’ concerns about the Government’s response being joined up.

In an intervention on my hon. Friend the Member for Kingswood, my hon. Friend the Member for Birmingham, Northfield (Richard Burden) asked about arms exports to Israel. It is, of course, entirely understandable that hon. Members should take a close interest in defence exports to Israel. However, like all other countries, it has a right to arm itself for self-defence, as the hon. Member for Mid-Worcestershire, the Chairman of the Select Committee on Trade and Industry said.

I reiterate that all applications from any destination, including Israel, are rigorously assessed against the consolidated EU and national export licensing criteria on a case-by-case basis. With applications from Israel, the likelihood of an export being used in the occupied territories is a key factor in risk assessment against the consolidated criteria. If a licence is considered to be inconsistent with the criteria, the licence will be refused, as many for Israel have been.

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