House of Commons - Defence - Written Evidence

Select Committee on Defence Written Evidence

Memorandum from British American Secutiry Information Council and Saferworld

This submission was jointly written by Dr Ian Davis and Jessica Smith (BASIC), and Helen Close and Roy Isbister (Saferworld). It also benefited greatly from advice and contributions from two colleagues in Washington DC: Matt Schroeder (Federation of American Scientists) and Rachel Stohl (Center for Defence Information).

THE BRITISH AMERICAN SECURITY INFORMATION COUNCIL (BASIC)

BASIC is an independent research and advocacy organisation that analyses government policies and promotes public awareness of defence, disarmament, military strategy and nuclear policies in order to foster informed debate. BASIC has offices in London and in Washington and its governing Council includes former US ambassadors, academics and politicians. Further information is available on our website: http://www.basicint.org.

SAFERWORLD

Saferworld is an independent non-governmental organisation that works to prevent armed violence and create safer communities in which people can lead peaceful and rewarding lives. Further information is available on our website: http://www.saferworld.org.uk. Registered charity no 104843. A company limited by guarantee no 3015948.

EXECUTIVE SUMMARY

The UK-US Defence Trade Cooperation Treaty is the latest in a series of attempts by the UK and US administrations and defence industries to bypass some of the requirements related to country licensing exemptions legislated by the US Congress. Unfortunately, negotiations for the Treaty have been conducted behind closed doors, without consultation with key Congressional or Parliamentary representatives or officials, and the current draft is effectively being presented to the UK Parliament and the US Senate as a fait accompli.

This submission considers the possible wider implications of the Treaty, with a particular focus on the quality of arms transfers control in the UK. The analysis raises a number of concerns.

Under the Treaty, the UK and US governments will establish "Approved Communities" of facilities, entities and personnel (from government and from industry). Members of the US Approved Community will then be able to "Export" articles, services and related technical data on the US Munitions List (other than certain as-yet-unspecified items that may be exempted) to members of the UK Approved Community free of export licence procedures, if destined for:

— an end-use by the US Government;

— specified UK-US collaborative military and counter-terrorism activities;

— specified UK Government end-uses; and

— specified UK-US cooperative projects.

UK exports which have no origin within the terms of this Treaty (ie that do not contain any goods or technology first "Exported" without licence by the US under the Treaty) will continue to be controlled according to the existing UK export licensing regime.

Asymmetries within the Treaty

In a number of areas the Treaty restricts UK freedom of action more than that of the US, and appears to privilege US interests over those of the UK. For example, the US will have effective discretion over which items are covered by the Treaty, and the US will be permitted to monitor the end-use of weapons developed under the Treaty whereas the UK will not. Serious consideration should be given to whether such an uneven arrangement should be set in the stone of a bilateral Treaty.

Impact on UK independent procurement, export and deployment decisions

The Treaty is intended inter alia to encourage more joint UK-US procurement projects and greater interoperability. Given that the UK is inevitably the junior partner in this context, the Treaty may well have the consequence of eroding UK operational sovereignty. It may also be the case that reducing the bureaucratic burden on US companies exporting to the UK may disadvantage the UK defence industrial base relative to the US.

Impact on UK arms transfer controls

There are substantive differences between US and UK arms transfer controls, both at the level of bureaucracy and in terms of policy on arms transfers to specific destinations. The UK is committed to privileging concerns about human rights and regional peace and security over any other considerations; the US has more freedom of action to prioritise national security and foreign policy interests. And there are occasions where a markedly different policy operates at the level of recipient country. For example, the US appears far more likely to award licences for transfers to Colombia and Israel than does the UK. Conversely, the UK operates a more liberal policy regarding strategic exports to China and Iran than does the US.

Given the asymmetrical nature of the Treaty and the power imbalance that exists between the two countries (referred to above), the prospect exists that over time and in those cases where the Treaty is relevant, UK arms transfer control principles and objectives may be subordinated to those of the US.

Transparency and accountability

It seems that the impact of the Treaty on public and legislative oversight of arms transfers in both the UK and the US is likely to be negative. Any reverse in recent gains in transparency and accountability in this area would be most unfortunate, especially coming from two of the world's leaders in transparency and in arms transfer control outreach.

The principle of case-by-case licensing

The principle that national governments are responsible for authorising all transfers of strategic goods from their territory on a case-by-case basis underpins the arms transfer control regimes in the UK and US, and both countries have successfully promoted this with other states. But at the same time, both countries have introduced or are considering, unilaterally or with other states, exceptions to these approaches. This Treaty is one example of such an exception. The UK and US need to be careful that they do not through their actions undermine the progress that has been made internationally.

The UK's relationship with the EU

It is not yet clear what implications this Treaty might have for the UK's relations in this area with the EU and its Member States. The EU Code of Conduct on Arms Exports can be seen as the start point for the UK's international obligations on arms transfers, however the UK is demonstrating a reluctance to deal with its EU partners on a par with its potential obligations under this Treaty. The UK has responded to proposals by the European Commission to remove licensing requirements for intra-Community transfers of defence products by suggesting instead that the EU "concentrate efforts on improving the present approach to export control".[1]

INTRODUCTION

1.1 The UK-US Defence Trade Cooperation Treaty is the latest in a series of attempts by the UK and US administrations and defence industries to bypass some of the requirements related to country licensing exemptions legislated by the US Congress (see Section 38(j) of the US Arms Export Control Act). The two governments are keen to allow controlled goods and technology to move more freely between the two countries and facilitate collaboration on joint defence projects, despite previous proposals being stymied by the US Congress.

1.2 It is important to note that this Treaty is aimed primarily at liberalising the US regime for certain exports to the UK. Licensing procedures for UK exports to the US would in large part be a continuation of current practice, whereby many of the transfers of the controlled goods and technology to the US are already authorised under open or general licences.[2]

1.3 The Defence Committee, which has previously made clear its support for the US streamlining its process for exporting strategic items to the UK[3], has set itself the task of considering "whether the Treaty will be effective in removing barriers to defence trade and technology transfer, and in improving cooperation between the US and UK Armed Forces".[4] However it is critical that all the implications of the Treaty are explored, not least its possible impact on the efficacy of arms transfer control in both countries. This enquiry by the Defence Committee represents the first opportunity to examine these implications. Negotiations for the Treaty have been conducted behind closed doors, without consultation with key Congressional or Parliamentary representatives or officials, and is being presented to the UK Parliament and the US Senate as a fait accompli.

1.4 Unfortunately, analysis of the Treaty is made more difficult due to the absence to date of any information regarding the Implementing Arrangements, which will be critical to its operation. Nevertheless, this submission does consider the possible wider implications of the Treaty, with a particular focus on the quality of arms transfers control in the UK. The analysis herein raises concerns that the Treaty:

— may establish UK interests as subordinate to those of the US;

— may place asymmetrical limitations on the UK's freedom of action;

— could undermine the ability of the UK Government to make independent procurement, export and deployment decisions;

— risks weakening UK arms transfer control policy to certain countries;

— may undermine transparency and accountability (in both the UK and the US), thus complicating detection of misuse and diversion and hindering compliance and law enforcement efforts; and

— appears to be consistent with several other initiatives and developments that, if contributing to an ongoing trend, have the potential to compromise the valuable principles of national decision-making and case-by-case licensing in the UK, the US and elsewhere.

BACKGROUND AND SCOPE OF THE TREATY

2.1 The US export control system, through its International Traffic in Arms Regulations (ITAR), includes bureaucratic obligations that defence companies have long claimed are unduly onerous. As one way of reducing this burden, industry and successive administrations have looked at exempting close allies from the ITAR. Such exemptions have had a difficult history. The longstanding exemption applied to Canada has been highly controversial, and has also led industry to press for its extension to other close allies. In 2002, the US Government Accountability Office reported that countries prohibited from receiving US defence articles had acquired them via Canada, and that, as a result, the State Department had shortened the list of items that could be shipped licence-free.[5]

2.2 Nonetheless, licence-free exports to "governments of treaty allies and qualified companies within those countries that have export controls comparable in scope and effectiveness to those of the US" had already been endorsed by the Clinton administration's Defence Trade Security Initiative of 2000, from which began several years of negotiations with the UK and Australia to secure exemptions akin to the Canadian model.

2.3 Despite the failure of the UK and Australia to meet all the criteria in US law, the Bush administration sought "legislative relief" from the remaining requirements with the support of the Senate Foreign Affairs Committee. However, the House Foreign Relations and Armed Services Committee blocked this compromise. At least partially in response to Congressional opposition, the Bush administration abandoned the executive agreements and repackaged the exemptions in the form of a treaty. As a treaty needs only Senate—and not House of Representatives—approval, this approach can be seen as an innovative way of avoiding that part of the legislature which is most stalwart in its defence of export controls and easing this Treaty's path to ratification. Its negotiation and signing took place without consultation with legislative committees or key senators.

2.4 Under the Treaty, both governments will establish "Approved Communities" of facilities, entities and personnel (from government and from industry). Members of the US Approved Community will then be able to "Export" articles, services and related technical data on the US Munitions List (USML) (other than certain as-yet-unspecified items that may be exempted) to members of the UK Approved Community free of export licence procedures, if destined for:

(a) an end-use by the US government;

(b) specified UK-US collaborative military and counter-terrorism activities;

(d) specified UK-US cooperative projects.

2.5 Articles covered by the Treaty may be "Transferred" within the approved communities of both countries without prior authorisation. Note that as yet no details have been published as to the process for determining who or what shall be admitted into the Approved Communities. Neither has any concrete indication been given as to the size of these Approved Communities, however, the US Assistant Secretary of State John Rood predicted that for the US it would be of a sufficient size to eliminate "a vast majority" of the 13,000 export licences issued for US exports to the UK in 2005-06.[6] Any re-export to a third country would require permission of the original exporting country. Any unauthorised transfer outside the Approved Community would be subject to prosecution. Goods exported through the US Foreign Military Sales Program and that can have a civilian or military purpose ("dual-use" goods) and are not mentioned in the USML are not covered by this Treaty and would still require an export licence.

2.6 Meanwhile, UK exports which have no origin within the terms of this Treaty (ie that do not contain any goods or technology first "Exported" without licence by the US under the Treaty) continue to be controlled according to the existing UK export licensing regime.

2.7 As listed above, the Treaty specifies in general terms how the weapons developed under the Treaty can be deployed, though this will apparently be further developed in the Implementing Arrangements. Note that while the Treaty places no restrictions on US end-use, the US would have veto rights over UK end-use of goods subject to the Treaty (for more on this see next section).

ASYMMETRIES WITHIN THE TREATY

3.1 While this new arrangement would certainly go some way toward simplifying the licensing requirements between the UK and the US, there would still exist marked differences, with the UK's freedom of action considerably more limited than that of the United US. Codifying these differences by Treaty would have the unfortunate consequence of institutionalising them.

3.2 There are several instances in the Treaty that require the UK to consult the US on UK matters but do not require the US to reciprocate. These include:

and the US

— the UK is to consult the US if it wants to export outside the Community; and

— the UK must consult the US before any UK-only deployment of weapons developed under the Treaty.

3.3 In addition:

— the US is permitted to monitor the end-use of weapons developed under the Treaty whereas the UK is not;

— as it is based on the USML, the US decides which goods are to be covered by the Treaty and has the power to amend this list; and

— reference is made to the application of the UK Official Secrets Act, whereas there is no corresponding reference with regard to the US.

3.4 The clear implication of all these asymmetries is that UK interests are subordinate to those of the US. Serious consideration should be given to whether such an uneven arrangement should be set in the stone of a bilateral Treaty.

POSSIBLE IMPACT ON UK INDEPENDENT PROCUREMENT, EXPORT AND DEPLOYMENT DECISIONS

4.1 Recent UK procurement decisions such as the two new aircraft carriers and the renewal of the Trident nuclear weapons system, are reflective of an ongoing trend in UK defence policy towards global power projection.[8] Concurrently, UK armed forces are operating side-by-side with the US in Iraq and Afghanistan, and the need for greater interoperability with US forces has become apparent. As this Treaty is intended to encourage more joint UK-US procurement projects and greater interoperability, UK operational sovereignty may well be eroded. No safeguards against this risk are presented in the Treaty.

4.2 UK defence exports have been highly subsidised by the taxpayer through the Defence Export Services Organisation (DESO), Export Credit Guarantees and other governmental promotional activities. The distorting effect of government-sponsored exports on UK defence procurement is well documented.[9] However, the proposed closure of DESO may dilute this form of defence industry influence over government policy, in which case this Treaty has the potential to establish an even greater dependency of British defence firms on the preferential procurement of the UK and US governments.

4.3 Paradoxically, perhaps, the Treaty may even place some British defence companies at a competitive disadvantage. Current arrangements whereby the UK can export to the US licence-free, but imports are subject to ITAR, actually favours British defence companies. While it may be beneficial for UK industry that the US market is opened up, this benefit will be massively offset by the hugely increased competitiveness of US defence firms in the UK. Without government guarantees, the UK defence industrial base may find itself severely disadvantaged by this agreement.

4.4 The US government is also likely to demand increased access to information about UK arms transfers. Some reports reveal that the US will create an enhanced Blue Lantern end-use monitoring program just for UK exports and will spot-check a percentage of weapons transfers to make sure they are where they are intended and being used according to the stated purpose. If the Treaty is ratified in the United States, such enhanced end-use monitoring will be critical to detecting and preventing diversions.

4.5 In addition, the ongoing US Department of Justice investigation into alleged bribery payments made by BAE Systems to a member of the Saudi royal family is indicative of the level of scrutiny that may be demanded.

IMPACT ON UK ARMS TRANSFER CONTROLS

5.1 There are substantive differences between UK and US arms transfer controls, both at the level of the system bureaucracy and in terms of policy on arms transfers to specific destinations. The UK is committed through the Consolidated EU and National Arms Export Licensing Criteria to apply to all its licensing decisions a set of universally standards.[10] These include factors such as human rights, the internal situation in the recipient country, regional peace and security and sustainable development. While these criteria do provide for the UK Government to "take into account the potential effect of the proposed export on the UK's defence and security interests"[11], it is explicitly stated that "this factor cannot affect consideration of the criteria on respect of human rights and on regional peace, security and stability."[12] Furthermore, there is also explicit reference to the priority of all the criteria over consideration of national interests such as "economic, financial and commercial interests . . . potential effect[s] on any collaborative defence production or procurement project . . . [or] the protection of the UK's essential strategic industrial base."[13]

5.2 The US, too, has a range of criteria which it applies in the licensing decision process, and there is some similarity between these and the criteria used by the UK. Factors to be taken into account include counter-proliferation, human rights, counter-terrorism. However these essentially restrictive-type criteria are not formally prioritised over more permissive rationale for arms transfers such as supporting foreign policy, national security and the US defence industrial balance.

5.3 This stronger focus in the US on foreign policy and national interest (as rationale for both approving and refusing transfers) appears to be reflected in the general US policy with regard to exports authorised to allies in the "war on terror". In a number of instances there appears to have been a shift in policy post-9/11, whereby some strategic transfers that might previously have been regarded as inappropriate due to for example human rights or anti-proliferation concerns related to the recipient state are now viewed differently. A prominent example is Pakistan, which was prohibited from receiving most US security assistance prior to the 9/11 attacks. Now it is one of the largest recipients of US military aid, including arms transfers.

5.4 In addition to this philosophical difference between the arms transfer control regimes in the two countries, it would seem that there are occasions where a markedly different policy operates at the level of recipient country. For example, the US appears far more likely to award licences for transfers to Colombia and Israel than does the UK. Conversely, the UK operates a more liberal policy regarding strategic exports to China and Iran than does the US.

5.5 It is anticipated that the Treaty would have little initial impact on UK arms transfer policy or practice. Nevertheless, given the clearly asymmetrical nature of the Treaty and the extra limitations it places on the UK's freedom of action, the prospect exists that over time and in those cases where the Treaty is relevant, UK arms transfer control principles and objectives may be subordinated to those of the US. This should be resisted, and safeguards should be put in place to ensure it does not happen.

TRANSPARENCY AND ACCOUNTABILITY

6.1 There is a serious risk that the Treaty will have a negative impact on the transparency and accountability in the US. The State Department currently publishes reports on controlled items licensed for commercial export to the UK. These reports are often the only source of data on such exports for Congress and the public. It is unclear if items exported under the exemptions would be included in the current annual reports and, if not, whether the State Department is planning a similar report for the exempt items. While this potential reduction in US transparency may not be of immediate concern to the UK Defence Committee, it is significant given that the UK Government has championed greater transparency in its negotiation of multilateral arms transfer controls (eg in the EU Code of Conduct and the Arms Trade Treaty).

6.2 With regard, however, to the current level of transparency regarding UK arms transfers to the US, this is poor, as most of these are authorised under open licences. The nature of open and especially general licences is such that very little meaningful information is currently provided (they typically permit multiple deliveries of a wide range of items to listed recipient countries, without limits on quantities, values or end-users). However transparency will suffer even further for those items "Re-exported" or "Re-transferred" licence-free to the US under the Treaty. Moreover, given that at the same time the UK Government has been urged by the Quadripartite Committee to improve the level of reporting provided in connection with open licences, this move to further reduce publicly-available information is unhelpful.[14] The UK, like the US, is widely regarded as being among the leaders in terms of promoting a more transparent trade, further underlining the unwelcome message this Treaty sends to other states.

6.3 In summary it would seem that the impact of the Treaty on public and legislative oversight of arms transfers is likely to be negative, more so in the US than in the UK. In recent years progress has been made in legitimising the right in this area of the electorate to know what the Government is doing in its name, and levels of transparency have increased. Any moves in the opposite direction are most unfortunate, especially when they come from two of the world's leaders in transparency and in arms transfer control outreach.

THE PRINCIPLE OF CASE-BY-CASE LICENSING

7.1 The principle that national governments are responsible for authorising all transfers of strategic goods from their territory on a case-by-case basis is now well established, with the UK and US both promoting this approach internationally. At the same time, states, including the UK and the US, have been devising strategies intended to minimise the licensing workload without compromising the quality of decision-making, or in other terms to concentrate effort on those prospective transfers that are most in need of investigation, eg by using a single licence to cover multiple transfers (providing certain conditions are met). The UK's open licensing system has been devised for this purpose, and other EU member states, eg Germany, are looking at introducing their own version of open licensing.

7.2 The US has, as previously mentioned, for a long time granted Canada an ITAR waiver, and has more recently introduced, through Global Project Authorisations, streamlined licensing arrangements for foreign contractors involved in the Joint Strike Fighter programme.

7.3 Other licensing practices or recent developments that have involved or propose a shift from either the principle of national control or of case-by-case licensing include:

— At the EU level, the Community General Export Authorisation, which allows for multiple transfers of specified dual-use items and technology to listed destinations outside the EU by any exporter providing certain conditions are met.

7.4 The proposed Treaty is another example of this type of arrangement. While any single example may not give concern regarding the abovementioned principles of national responsibility and case-by-case licensing, should this trend continue, we may reach the point where these could be seen as coming under some level of threat. Indeed, it would be unwelcome if certain other states took this lead from the UK, the US and the EU and began to develop similar procedures. Any such moves must therefore be very carefully thought through.

THE UK'S RELATIONSHIP WITH THE EU

8.1 One of the implications for the proposed Treaty that should also be taken into consideration is the possible repercussions for the UK's relationship with its EU partners. Recent developments within the EU indicate new trends towards an easing of the current licensing requirements between the Member States and greater development of European defence capabilities and joint projects.

8.2 Proposals by the EU Commission to remove licensing requirements for intra-Community transfers for strategic products and technologies, alongside the work of the European Defence Agency to encourage greater EU competition for the defence procurement market and through joint research and technology programmes all indicate an easing of the boundaries between Member States. However the UK has voiced its concerns over relaxing licensing requirements for Member States stating "in the view of the UK it would be better to concentrate efforts on improving the present approach to export control".[18] This is in marked contrast to the UK's decision to favour the US with more relaxed licensing controls.

CONCLUSIONS AND RECOMMENDATIONS

9.1 BASIC and Saferworld support the idea of improving arms transfer procedures in order to maximise the efficiency of the process. However, we question whether the system proposed in this Treaty, ie the introduction of exemptions, is most appropriate way to achieve this efficiency. Export controls should not be bypassed to simply reduce the workload of government; rather resources should be spent on ensuring that the export control system works as efficiently as possible to maximise its benefits for UK and US collective security. Improving State Department and BERR licensing processes and increasing resources, including licensing personnel, may be a better way to address licensing delays and other inefficiencies.

9.2 We also have doubts about the implications of entering into such a bilateral Treaty with the US where there exists such an unequal relationship in terms of defence and defence equipment supply issues. The specific provisions of the Treaty privilege US interests and power over that of the UK, and there must be questions about the impact this will have on the UK's ability to maintain an independent course on some aspects of arms production, procurement and transfer policy and practice. The Treaty may also complicate the relationship between the UK and its European partners and the implementation of the EU Code of Conduct on Arms Exports.

9.3 The Treaty is also likely to have a negative impact on transparency, oversight and accountability, unless specific steps are taken to ensure that information flows—which are a useful side-effect of licensing processes—are maintained, and then communicated to the elected representatives and electorates in both states. Both the UK and US Governments are formally committed to promote transparency and democratic oversight with respect to arms transfers. We urge the two governments to address this in the as-yet-unpublished Implementing Arrangements to the Treaty.

9.4 Finally, the Treaty is but one of several current initiatives to move away from making decisions about arms transfers on a case-by-case basis by the relevant national authority. It would be unfortunate if this Treaty should one day come to be seen as a step on the road to undermining this valuable, internationally-accepted principle.

9.5 If the Committee approves in principle the removal to some of the national barriers to UK-US trade in strategic items, then the Implementing Agreements to the Treaty must be sufficiently robust to meet that goal without compromising global security and undermining arms export controls and international transparency measures. Thus, the Implementing Agreements will need to be strict, specific, and subject to approval and further revision only with Senate/Parliamentary approval.

15 November 2007

http://www.parliament.uk/parliamentary_committees/defence_committee/def051124_no_09.cfm).

http://www.defensenews.com/story.php?F=2851478&C=america.

http://www.basicint.org/nuclear/beyondtrident/cost.pdf.

http://www.saferworld.org.uk/publications.php?id=201.

http://www.saferworld.org.uk/publications.php?id=285.

1 "United Kingdom: Response to the consultation paper on the intracommunity circulation of products for the defence of member states", http://ec.europa.eu/enterprise/regulation/inst_sp/docs/consult_transfer/doc_uk.pdf. Back

2 Open Individual Export Licences (OIELs) allow a specified exporter to make multiple shipments of specified items to specified destinations and/or consignees and are usually valid for five years. Open General Export Licences (OGELs), provided the shipment and destinations are eligible and the conditions are met, allow the export or trade of unlimited quantities and values of specified goods by any company and remain in force until revoked. Back

3 The failure to secure an ITAR waiver for UK-bound technology transfers led the UK Defence Committee to warn that there was a "real risk that the close relationship between the UK and the US could be harmed" (ITAR Waiver Defence Committee Comment, Defence Committee, 24 November 2005, Back

4 Defence Committee Press Release, 15 October 2007, http://www.fas.org/asmp/campaigns/control.html. Back

5 "Defense trade: lessons to be learned from the country export exemption", Report to the subcommittee on readiness and management support, committee on armed services, US Senate, Government Accountability Office, GAO-02-63, March 2002, http://fas.org/asmp/resources/govern/gao02-63.pdf. The report documented 19 criminal investigations and seizure cases regarding unlawful re-export of US goods transferred to Canada under the exemptions. This included the diversion of controlled goods to China, Iran and Pakistan. For example, a US company transferred communication equipment from the US to its Canadian facility under the exemption and then re-exported the equipment to Pakistan without US Government approval. Back

6 U.S., Britain Draft Defense Trade Treaty, DefenceNews.com, 21 June 2007, Back