Select Committee on Defence Third Report

Conclusions and recommendations

1.  While it cannot be taken for granted that the Treaty will be approved by the required two-thirds majority of the US Senate, we are confident that Congressional scrutiny of the Treaty will show that it is as much in the US interest as it is in the interest of the UK. (Paragraph 6)

2.  The US export control system imposes a large administrative burden on defence exports from the US to the UK. While we respect the wish of the US to control its defence exports, we consider that its current system of controls for exports from the US to the UK is unduly burdensome and time-consuming. The US and the UK are very close allies, cooperating closely on defence and security. Our soldiers are fighting side by side in Iraq and Afghanistan. It is vital to the interests of both the US and the UK that the system should not prevent our Forces from getting access to the equipment they need to fight effectively alongside their US allies in current and future operations. (Paragraph 18)

3.  We share the ambition of industry that the Approved Community should be as inclusive as possible. The current List X, the group of establishments that have been cleared by the UK Government as being able to handle classified material, is tried and tested and forms a solid foundation on which to build eligibility for inclusion in the UK Approved Community. In our view a UK Approved Community which was drawn more tightly—by excluding SMEs or major foreign-owned defence companies—would seriously blunt the effectiveness of the Treaty. UK defence companies owned by overseas companies form a significant part of the UK defence industry and have a large footprint in the UK economy: they are in practice regarded by the MoD as UK defence companies. If European-owned UK defence companies were barred from membership of the Approved Community, it would create a two-tier industry and would risk discouraging European collaboration. (Paragraph 26)

4.  We endorse the Government's approach that the list of technologies excluded by the Implementing Arrangements should be as short as possible. Given the reliance that today's Armed Forces place on technology, an extensive list of exclusions emerging from the negotiations on the Implementing Arrangements would undermine the purpose of the Treaty. In our view, the longer the list of exclusions, the less effective the Treaty will be. (Paragraph 27)

5.  We note that the Treaty does not cover multi-national programmes and therefore does not provide the key to ensuring a comprehensive transfer of technology for the Joint Strike Fighter programme. The Treaty has, however, the potential to assist those parts of the JSF programme which are exclusively joint US/UK collaborative projects. We welcome this benefit. We will continue to monitor the JSF programme closely. (Paragraph 29)

6.  The Implementing Arrangements are fundamental to the scope and effectiveness of the Treaty. Until they are agreed, it is hard to judge to what extent the Treaty will reduce the barriers to US/UK defence exports. But the consensus of our industry witnesses was that the outcome was likely to be an improvement on the current arrangements. (Paragraph 30)

7.  We expect the Government to keep us fully informed of the content of the Implementing Arrangements and of the progress of implementation of the Treaty, once it is brought into force. (Paragraph 33)

8.  We recommend that the Government continue to keep industry as informed as it is able within the constraints of the negotiating process on the Treaty, and that, once the Implementing Arrangements are agreed, the Government ensure that industry is fully involved in discussions on the practical implementation of the Treaty. (Paragraph 34)

9.  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. (Paragraph 39)

10.  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. (Paragraph 42)

11.  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. (Paragraph 44)

12.  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. (Paragraph 45)

13.  We note the Government's assurance that the Treaty is compatible with European law. (Paragraph 46)

14.  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. (Paragraph 47)

15.  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. (Paragraph 48)

16.  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. (Paragraph 49)

17.  The US export control system, as currently administered, discourages collaboration between UK and US industry and inhibits the swift supply of urgently needed equipment to our Forces in theatres of operation. Given how closely UK and US Forces cooperate in theatre, this is clearly in the interests of neither the UK nor the US.

We, like many others, considered that an ITAR waiver might be a way of preserving the close relationship between the UK and the US. The Treaty offers an alternative route. We have scrutinised the Treaty and we conclude that the principles it sets out offer the opportunity for the UK and US to strengthen further and deepen their defence relationship and allow greater levels of cooperation and interoperability. Industry on both sides of the Atlantic firmly supports the Treaty and we believe the Treaty accords with the Government's Defence Industrial Strategy.

The extent and nature of the benefits to the Government and the defence industry in the UK will depend on the Implementing Arrangements. In the expectation that the UK and the US will agree satisfactory Implementing Arrangements, we support the UK's ratification of the UK/US Defence Trade Cooperation Treaty. (Paragraphs 50-52)

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Prepared 11 December 2007