Select Committee on Defence Minutes of Evidence

Examination of Witnesses (Questions 40-59)


21 NOVEMBER 2007

  Q40  Mr Jones: You are representing UK industry though, Mr Godden, so would you not actually have a situation whereby it would be okay for BAE Systems and others to be part of this but to exclude foreign-owned partners of the likes of Thales and other people?

  Mr Hayes: I think the same situation would exist currently in any event in relation to the handling of classified material in those companies which carried a national caveat. Although the company is foreign owned it is fair to assume that in certain circumstances they will be handling data that is classified "UK eyes only" and they must have the means for handling such data. I can see a logical case for extending similar sorts of arrangements to this kind of data.

  Q41  Mr Jones: Dr McGinn, any observations from the other side?

  Dr McGinn: I think I would echo the comments of David because again we have not been privy to these discussions between the Governments. I think that they are going to handle this in the way they handle the situation now in dealing with UK licences in support of operations where you have got US secret programmes that are released UK eyes only. I think a similar type of arrangement will be established.

  Chairman: Huge proportions of British defence industry like EADS, Thales, Finmeccanica, GD, BAE Systems are not entirely British. This strikes me as being a fundamental issue to which nobody knows the answer and is it not rather crucial to the future of this Treaty?

  Mr Havard: Can I interject.

  Q42  Chairman: Because from GD UK's point of view, you will have a view.

  Dr Wilson: Indeed. I think it is essential that foreign-owned companies get onto the approved list because we cannot imagine working without them in the UK. There is a wider context to this discussion however. There are Anglo-French initiatives on-going and if you wanted to take a view, that will greatly help the transport, if you like, of French technology into the UK. What this Treaty will do is work against the imbalance that exists today on getting US technology into the UK, and sometimes such US technology will be of great value to the UK operationally. I think there is a wide range of pluses for this in that it will eliminate some of the barriers that currently exist. And that might favour US-owned companies if they sit on the approved list, but then again there are other things going on in the country in terms of the Anglo-French thing which would help French companies do it. So there is a whole series of pluses and minuses if the actual Treaty became quite restrictive, which we do not know.

  Q43  Mr Jones: In terms of GD, I would be very surprised if you were not on the approved list.

  Dr Wilson: Indeed.

  Q44  Mr Jones: But it is a bit different, for example, for Thales, Finmeccanica, MBDA and others and it would make this Treaty pretty worthless to UK plc if these companies were not on that approved list.

  Mr Godden: It is absolutely our ambition that they are on there.

  Dr Wilson: I think it becomes quite difficult if they are not on there because GD UK would be working with Thales UK on a variety of programmes.

  Q45  Mr Jones: I am not asking you to write the little paragraph I am trying to write in the report, but what I want to offer you because you are representing UK industry is that you would actually want all UK industry irrespective of where they are owned on the approved list.

  Mr Godden: Yes we would like that but obviously the Governments have to decide whether that is appropriate.

  Q46  Mr Jones: Hang on, fight a bit harder, come on! Let me write in the report that you actually want all these on because, frankly, if I was Thales and I got that response I would not be paying my membership to your organisation.

  Mr Godden: We want it on, and we are absolutely clear.

  Mr Jones: Good, but it took some getting, did it not!

  Q47  Mr Hancock: Have they given you an indication that they will support that view? Is that an issue that you have raised with them?

  Mr Godden: Yes.

  Ms Wood: Yes.

  Q48  Mr Hancock: And what has the Government's response been?

  Mr Godden: They have not promised anything or said anything back; they have listened.

  Q49  Mr Hancock: But they have not said, "We are wholly supportive of that principle"?

  Mr Godden: Not to me. I do not know whether to any of my colleagues.

  Mr Hancock: That is a pretty difficult situation for us to be in then, is it not?

  Mr Jones: That is one we need to ask the Minister.

  Q50  Chairman: We will ask the Minister.

  Mr Godden: I can only tell you what has happened to us.

  Q51  Mr Hancock: Will this lead to a greater dependency on the part of the UK to be forced into a position of buying from the United States? Will this not have a detrimental effect on research and development in the UK?

  Mr Hayes: No, because I think the whole concept is optional. Just because the Treaty exists it does not mandate its use. We are still free to shop in whatever market-places we choose.

  Q52  Mr Hancock: But will it act as a deterrent then against UK/European collaboration?

  Mr Godden: Not that we can see. We have debated that and not that we can see.

  Q53  Mr Hancock: You have debated amongst yourselves and with Government presumably?

  Mr Godden: And we have mentioned that and made the point and we do not think so.

  Q54  Mr Hancock: What was the Government's response to that? Sandy, you wanted to come in, and then maybe we can come back to find out what the Government said to you about it.

  Dr Wilson: I think I would just reiterate a point I made earlier that if you are producing a system in the UK you do have a choice of where you go for the 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 the administrative burden on that and the way that it slows down the through-life evolution of the system—having to go back for TAA reapproval and the like—is very negative. We consciously have made decisions not to actually use US technology coming from the greater GD in certain programmes in the UK. You have to take a pragmatic view of that. 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 I just think 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.

  Dr McGinn: I would like to underscore the importance of looking at this Treaty as very much a two-way street. It very much goes in both directions. I can speak for my company and we do business with a lot of UK companies for some of the systems that we build for the US and UK Governments and UK technology will allow US companies to be more collaborative with UK companies as well. It goes very much in both directions.

  Q55  Mr Hancock: Have you looked at the way in which a bilateral treaty with the US like this would affect EU treaties which the UK has signed up as being in conflict with them?

  Mr Godden: We have not specifically looked at that subject because I think that is a subject of law which certainly the SBAC has not, and I do not think any of the companies have, taken a judgment on how this relates to EU law.

  Q56  Mr Hancock: Nobody has raised that as a potential problem? None of your European partners have raised an issue of you being—

  Mr Godden: No, they have not raised it in any collective forum that I am aware of.

  Q57  Mr Holloway: Would that not be quite an important point to clarify particularly from the point of view of the United States?

  Mr Godden: Yes, but I see that very much as a Government point. I am not trying to duck it; I do not see how a company or our association could actually make judgments except to mention it.

  Chairman: Fair point. Willie Rennie?

  Q58  Willie Rennie: The US spends a much higher percentage of GDP on science and research than the UK does and some parts of the British science base are quite fragile. Is it not logical that with a bigger critical mass of scientists and science organisations and defence organisations in the US that it is going to act as a sucking mechanism where all the best science is going to be done over in the States and therefore this breaking down of the barriers will just mean it is a one-way street and it will all go over there?

  Ms Wood: As we have been thinking about what the Treaty will do to create benefit, that issue has been a debate about how do we make sure that for the whole of the UK industry footprint, in which I would include the universities and the science community, that we manage that going forward to make sure that we actually benefit on a reciprocal basis and that we are able to move the technology and the people and that we put the UK industry, alongside our customer, in the position where we have got more choice. We view the Treaty as being able to have more bilateral co-operation but being able to do it by not losing UK scientists to the US but rather the reverse; having US scientists co-operate with ours and us move technology and research partnerships across. It is not without risk but it is something we believe is managed in the benefit of it. It goes back to the question of it is important to us 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.

  Q59  Willie Rennie: Do you think universities know about this Treaty?

  Ms Wood: I actually do not know the answer to that question.

  Mr Godden: I am not sure either.

  Dr Wilson: Just one comment, I think compared to about 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.

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