House of Commons - Defence

Select Committee on Defence Third Report

3 The wider effects of the Treaty

35. The Government's primary aim for the Treaty is "to further strengthen and deepen the UK and US defence relationship, allowing greater levels of cooperation and interoperability that will help support our Armed Forces operating side by side around the world".[57] We asked ourselves two questions:

Will the Treaty lead to greater interoperability and collaboration?
Is there a risk that the Treaty might cause greater dependence on US technology, a loss of UK operational sovereignty and the movement of research and development from the UK to the US?

36. In welcoming the Treaty, UK industry considered that it would contribute to "enhanced interoperability on the battlefield, now and in the future".[58] Dr Wilson described how the defence market currently worked in the UK and how it might change after implementation of the Treaty:

if you are producing a system in the UK you do have a choice of where you go for that technology. It might be indigenous to the UK, it might be from Europe, it might be from the US. Currently there are many advantages to not using US technology because [of] the administrative burden […] We consciously have made decisions not to […] use US technology coming from the greater GD in certain programmes in the UK. […] Sometimes the US has fantastically good technology and it would be very useful and beneficial to the UK to have that here, and it would still be fought for in the competitive market-place that is UK defence but […] it is a sensible way of getting rid of a barrier that has prevented us from offering some things into the UK because it is such a difficult process.[59]

37. On collaboration, Alison Wood, Group Strategic Development Director, BAE Systems, explained that one of the reasons that industry considered it was important that:

when the UK procures weapons systems and military platforms from the US we need to make sure that we have the industrial capability, whether it be in BAE Systems, Lockheed Martin UK, Northrop [Grumman] UK or GD [General Dynamics] UK, to actually do the through-life support of those aircraft and weapons in this country, and to do that you need to have transferred the technology so that the skills and the individuals and the resources are here to then support the Armed Services. That requires a different way of trying to tackle the technology transfer regime.[60]

38. The AIA strongly supported the Treaty.[61] Dr McGinn said that the Treaty "will allow US companies to work with our UK branches to do collaborative research and development for both US and UK forces and likewise for UK companies and their US subsidiaries, so the collaboration potentials from this are really substantial".[62]

39. Defence industry on both sides of the Atlantic sees the Treaty as providing potential for greater UK/US cooperation and collaboration. As defence industry becomes more global and multinational and armaments become increasingly hi-tech, the UK defence industry will need to work more closely with its allies to develop new systems collaboratively for the UK's and its allies' Armed Forces. We fully support the Government's objective of greater levels of cooperation and interoperability between the US and UK that will assist our Armed Forces. Industry welcomed the Government's approach. We conclude that the faster and less restrictive flow of goods and technologies between the US and the UK is likely to foster greater cooperation between our industries and that, in turn, should facilitate interoperability between our Armed Forces.

RESEARCH AND DEVELOPMENT

40. We asked whether the Treaty risked creating an incentive for the defence industry to move research and development facilities from the UK to the US. Ms Wood thought that the Treaty would lead to more bilateral cooperation and that, rather than losing UK scientists to the US, it would encourage US scientists to cooperate with those in the UK and help move technology and research partnerships to the UK.[63] Ms Wood recognised that this approach was "not without risk": here again it was important "that the whole of the UK defence industrial footprint is able to participate in this Treaty because that is the way we will be able to preserve critical mass".[64] Whether this will happen will depend on the outcome of the negotiations on the Implementing Arrangements, particularly on the membership of he Approved Community.

41. The Government saw the Treaty as offering opportunity for the UK defence industry. It pointed out that the US was the largest foreign investor in the UK and in the defence industry, and that the US exploited British technology on both sides of the Atlantic. The Government expected "that there would be some expertise and knowledge which comes here too".[65]

42. The Treaty has the potential to enhance defence research and development in both the UK and the US. We share industry's concern that a narrowly-drawn Approved Community would allow only a few to take advantage of the Treaty's provisions and share in the benefits of greater cooperation and collaboration. If, instead, the Approved Community in the UK is large, it will build the critical mass to sustain collaborative projects across the Atlantic.

UK OPERATIONAL SOVEREIGNTY

43. Most of the evidence we received was favourable to the Treaty. There were, however, some critical voices. The British American Security Information Council (BASIC) and Saferworld suggested that, as the UK would inevitably be the junior partner in joint UK/US procurement projects, "the Treaty may well have the consequence of eroding UK operational sovereignty".[66] In other words, the Treaty would give the US a veto on the UK's use of goods supplied from the US and on UK-produced equipment that used US technology. Industry did not share this view. It considered that the framework set by Government's Defence Industrial Strategy with its focus on through-life sovereign control of technology and capability gave us a framework for managing that control. Dr Wilson pointed out that, compared to three or four years ago:

we are in a much stronger position because the Defence Industrial Strategy, with its focus on through-life sovereign control of technology and capability and the link of that to the Defence Technology Strategy, gives us a framework for managing it. It is now firmly in everybody's minds that having the R&D and the management of capability in-country is the right thing to have. I think that is a good framework.[67]

44. The current US export control arrangements, with their tightly drawn licences and consents, work against UK sovereign control. Any change that allows a less prescriptive transfer of technology can only assist the UK. We do not believe that the Treaty will erode operational sovereignty.

45. The Minister considered that the tests—whether interoperability was improved and whether British companies secured advantage—had to be judged in the longer term.[68] It will take several years before it is possible to assess whether the Treaty has achieved its objectives of greater levels of cooperation and interoperability. As a Committee we will return to this issue once the Treaty has been implemented.

EU and international aspects of the Treaty

46. We asked whether the Treaty was in accordance with European law. The Government replied that it had been careful in all its negotiations to make sure that it did not discriminate against any commitments the UK had with the European Union (EU), and "the Treaty itself says that we will maintain our international obligations and commitments to any international body".[69] The Treaty will not apply to dual-use goods, that is, goods that could be used for both a civilian and military use. The UK Government was not able to enter into negotiations on these goods as they form an EU competence and therefore not a matter that the UK can negotiate on its own.[70] We note the Government's assurance that the Treaty is compatible with European law.

47. We wondered whether the Treaty—by facilitating defence collaboration with the US—might have the effect of discouraging European collaboration. Mr Hayes, the Chairman of EGAD, told us that industry had discussed this possibility and did not think that it would happen: industry would still be "free to shop in whatever market-places we choose".[71] If European-owned UK defence companies are included in the UK Approved Community, we can see no reason why the Treaty should discourage European defence collaboration; but this will need to be monitored closely.

Effect on the UK's export control system

48. The Government has presented the Treaty as a two-way system, covering UK exports to the US, as well as US exports to the UK.[72] Saferworld and BASIC suggested that the Treaty was asymmetrical in that, in a number of areas, the Treaty restricted UK freedom of action more than that of the US, and appeared to privilege US interests over those of the UK. They argued that the US would have discretion over which items were covered by the Treaty, and that the US would be permitted to monitor the end-use of weapons developed under the Treaty whereas the UK would not.[73] The Government's Explanatory Memorandum states that the provisions of the Treaty in relation to transfers from the US to the UK mirror the effect of current practice for authorising UK defence exports to the US, the vast majority of which are covered by UK open licensing arrangements.[74] In its evidence the Government said that the Treaty created for the "US system something […] very akin to our open general export licensing system".[75] While the Treaty appears to be asymmetrical in giving the US more control over UK exports than vice versa, the practical effect of the Treaty will be to bring US and UK exporting arrangements closer together.

49. BASIC and Saferworld expressed concern that the US is more likely than the UK to export arms to Colombia and Israel.[76] We consider that to safeguard UK export control policy there should be limitations on the ability of the US Government to re-export goods and technology that has come from the UK to the US. In order to ensure that the Treaty is in accordance with UK export control policy, the UK Government should restrict any open or general licences it issues, to meet the requirements of the Treaty, to exclude the re-export or transfer from the US of UK goods and technology to third countries other than to US or UK forces.

57 Ev 27, para 1 Back

58 Ev 30 (Defence Industries Council) Back

59 Q 54 (Dr Wilson) Back

60 Q 2 (Ms Wood) Back

61 Ev 43 (Aerospace Industries Association); see also Ev 40-42 (Northrop Grumman UK). Back

62 Q 10 (Dr McGinn) Back

63 Q 58 Back

64 Ibid. Back

65 Q 137 (Mr Lincoln) Back

66 Ev 32; Ev 35, para 4.1 Back

67 Q 59 (Dr Wilson) Back

68 Q 140 Back