Examination of Witnesses (Quesitons 100-119)
RT HON
BARONESS TAYLOR
OF BOLTON,
MR STEPHEN
FRENCH, MR
TONY PAWSON,
MS GLORIA
CRAIG AND
MR PAUL
LINCOLN
21 NOVEMBER 2007
Q100 Mr Hancock: That is not an answer,
is it, to the question?
Mr Lincoln: I am sorry. There
was one question in particular, which you spoke about earlier
with industry, relating, for example, to a list of exclusions
which would apply, which is clearly a key issue to both government
and industry, which is one of the outstanding areas we need to
discuss with the US. Our intention, as was the position when the
Treaty was signed, was that that list of exclusions would be as
small as possible, such that the benefits which can be derived
from both governments' Armed Forces on operations and industry,
both on the UK and US side, can be maximised as far as possible.
We will have continuing discussions with the US on that.
Q101 Chairman: Minister, you said
you could not see any reason why the implementation agreement
should not come back to this Committee before ratification, but
you would take advice on that.
Baroness Taylor of Bolton: Yes.
Q102 Chairman: One issue that you
will need to be aware of is that the Leader of the House has told
us that she is happy to extend the period of ratification of this
Treaty to allow our Committee to conduct an inquiry, but that
she wants any report from this Committee to be received by 12
December. Now, that would mean, if you were to come back with
the implementation arrangements, that it would need to be very
quick, or it would mean that the ratification of the Treaty would
need to be delayed, which might not matter if the ratification
of the Treaty in the United States was also likely to be significantly
later than that. I would ask you to consider that with your officials
when considering whether to bring the implementation agreement
back.
Baroness Taylor of Bolton: Yes.
I do not think that there is any opportunity for ratification
in the United States this side of Christmas. So in terms of getting
out of line, I do not think a marginal delay would cause difficulties,
but I would not wish to pre-empt the right of the Leader of the
House to make recommendations on the timing of Government business,
and therefore I will look at that. I do not think that that will
cause a problem.
Chairman: Indeed not. However, what you
have just said about the ratification in the United States will
be a disappointment to us, but we will come back to that. Moving
on to the British approved community.
Q103 Mr Holloway: One of the criteria
for getting into that is this business about foreign ownership.
At what level of foreign ownership will a company in the UK be
ineligible within the British approved community?
Baroness Taylor of Bolton: As
I understand it, it is not simply a question of the percentage
of ownership or control, it is far more complex than that, and
because I want to be very precise I am going to ask Paul to answer
because we do already have that provision within this system that
we operate, and it is that similar system with additional requirements
which will operate under this Treaty. It is not just a simple
issue of the percentage of foreign control.
Mr Lincoln: We have discussed
with industry before that the baseline standard for becoming part
of the approved community would be the current arrangements for
the List X communities and facilities, which are currently operated
by the MoD's Industrial Security Service, and the arrangements
which fall underneath that. Those already take account of a level
of foreign ownership, control and influence within companies,
including the percentage of UK nationals at board levels overseeing
the security-cleared facilities. That will be our baseline point
for departure for discussions on a case-by-case basis with any
company.
Q104 Mr Holloway: Have the US put
in any sort of nationality restrictions in terms of the people
who work on these programmes here? For example, people with a
joint registered Iranian or Chinese past?
Mr Lincoln: Again, our baseline
standard, which we have discussed with the US, is that they must
have the appropriate UK security clearance and need to know, which
is the current method, of course, of reserving access to security-controlled
material within our existing arrangements. However, it would be
wrong to say there are still some issues to be worked through
on access to third-party nationals where the UK has a difference
in approach for its risk management at the individual level compared
with that for the US, which tends to do that in a more blanket
level of denying access. Rather than, perhaps, rehearsing the
arguments here, that is one of the outstanding issues which we
want to come to close with the US next week.
Q105 Mr Holloway: Again, if there
was, perhaps, something that could only be handled by UK citizens,
could that put us up against EU law?
Mr Lincoln: We have been very
careful in all our negotiations to make sure that we do not discriminate
against any commitments we have with the EU, and the Treaty itself
says that we will maintain our international obligations and commitments
to any international body. Similarly, the Americans have other
international commitments which they will not be in a position
of breaking either.
Q106 Mr Holloway: Finally, would
university research departments, or whatever, be approved communities?
Mr Lincoln: There is a potential
for that to be the case. There are currently some existing university
facilities (I think we need to be careful to say "there are
facilities within universities" rather than "universities"
as a whole) who currently carry out defence work, who are cleared
through the appropriate security regime in order to meet the List
X status, and subject to them applying and meeting the criteria
we are prepared to put that case forward.
Q107 Mr Havard: If I could ask you
about what is involved and what is not involved. We are being
told in a memo from the Ministry of Defence that: "Some of
the most sensitive technologies are expected to be excluded from
the Treaty as well as technologies specifically controlled under
existing international arrangements". What are these "sensitive
technologies"? What is this exception process? What is not
in the Treaty as far as sensitive technologies are concerned?
Baroness Taylor of Bolton: The
things that are covered by national treaties anyway are not going
to be altered at all in terms of the excluded list. That is one
of the issues still under discussion. Do you want to update on
that again?
Mr Lincoln: Certainly. From the
outset we realised that there are some defence articles which
the US for sensitive reasons would not be prepared to transfer
without a licence. Our expectation is that they fall into a small
number of categories, which would include stealth and sensitive
communications technology. That is not to say that they cannot
still be transferred without a licence to the UK, as they are
done currently. Similarly, both countries have international obligations
under things such as the Missile Technology Control regime, which
limit our ability to transfer goods without a licence, and then
there are the EU treaty regulations which, of course, exclude
certain goods for the UK, and we would not be able to enter into
a negotiation of those because that comes under European competence.
Q108 Mr Havard: It also references
something called the US Foreign Military Sales Programme, which
I am afraid I am not familiar with, but apparently does not apply.
Perhaps you could enlighten me about that? How significant is
that, if at all?
Mr French: It is a mechanism whereby
the UK when buying equipment that is used by the US forces buys
direct from the US Government, who have an arrangement with the
commercial companies. Therefore, there are a number of things
that we buy through FMS, as it is called, at the moment. They
come through on a route which effectively bypasses the licensing
system and would continue like that. So it is a direct sale from
the US Government to the UK Government.
Q109 Mr Havard: Thank you very much.
There are press reports that, however, there are going to be another
set of qualifications, which is that equipment worth more than
$25 million and spare parts and services worth more than $100
million would be outside the scope of the Treaty and still require
Congressional approval. Is that the case—that there is this
monetary qualification?
Baroness Taylor of Bolton: That
is not because of this Treaty; that is existing US law, and that
will stay the same.
Q110 Mr Havard: I will ask you some
questions in a moment about Joint Strike Fighter in relation to
this. I think it is getting clearer in my head, but what is involved
in the Treaty and what is not involved in the Treaty is becoming
quite a complex thing for people to understand, I think. That
is why I ask the question about whether there are these exceptions.
Can I just ask you about Joint Strike Fighter, because quite clearly
from the Committee's point of view and others, we have asked questions
in the past about the significance of technology transfer, and
it has been vested in this debate about ITAR waiver and, also,
now the Treaty. However, we appreciate it is more complicated
than that. This seems to be only part of the thing that deals
with the problem that we are really concerned about, which is
having operational sovereignty over the fleet of JSF aircraft
if we are going to have them. This is an issue that the previous
Minister dealt with, and said that they had come to a Memorandum
of Understanding. So what I want to be clear about is which technologies,
in relation to the F35 Joint Strike Fighter, are now going to
be vested in this Treaty process, or is this Treaty process actually
irrelevant as far as that is concerned? Are all those issues covered
by the Memorandum of Understanding that was specifically struck
about the F35?
Baroness Taylor of Bolton: The
Joint Strike Fighter is a multinational programme and, therefore,
as such, as a whole, it is not covered by this Treaty. However,
aspects of the Joint Strike Fighter are actually where we have
bilateral projects with the Americans. If it is a UK/US aspect
of the Joint Strike Fighter programme, in terms of any development,
then it can come in with this Treaty—it does not have to
but there is potential for that—but it is not, as a multilateral
project, one that automatically all comes within this Treaty.
Q111 Mr Havard: Do we think that
the US Government will seek to exclude the Joint Strike Fighter
from the provisions of this Treaty?
Baroness Taylor of Bolton: If
you are talking about all these aspects, because it is a multilateral
programme involving a number of other countries, then the project
per se is not in total covered by the Treaty. However, some aspects
of the development could be, if the companies involved choose
it. Do you want to elaborate?
Mr French: The JSF project itself,
being multilateral, is not covered under the Treaty. There may
be some bilateral UK/US projects within that which would come
under the Treaty, but on your major point, all the details of
securing operational sovereignty were done through that separate
MoU that we agreed before, and those are unaffected. So the Treaty
has the potential to add more benefits to a subset of the Joint
Strike Fighter project but because it is a multilateral project
it is not covered under the basic criteria of the Treaty which
is a joint US/UK collaborative project.
Q112 Mr Havard: Is there a list of
defence equipment covered by the Treaty and a list that is not,
then?
Mr Lincoln: There is a two-stage
argument to that. The list within the Treaty states the type of
programme and projects which must be covered in order to fall
within the scope—so those are things which are for joint
operational use, those which are collaborative US/UK programmes,
mutually agreed HMG only and those which fall for US-only end
use. Those are the four areas which are covered by the scope of
the Treaty. Within that you then have to look at what would be
the exclusions in terms of the list which we have just discussed,
which would then be a subset of that area, in terms of defence
material which could be transferred between the two countries.
Q113 Mr Havard: As I understand it,
parts of this were covered by something called the Global Projects
Licence, as far as JSF is concerned. There is a whole architecture
of different things here that relate to one another, of which
the Treaty is quite clearly only part. There has certainly been
confusion in my mind. I have been trying to sort of list this
structure of agreements and what is in them and what is not in
them, and it is quite a difficult exercise to do. If I am having
difficulty with it then Joe Public is having difficulty with it
in understanding where we are on this question about JSF, in relation
to all these things. That is why I asked the question, and I asked
the question about the Memorandum of Understanding because you
talked about a Memorandum of Understanding, Mr Lincoln, earlier
on, in relation to the Treaty as well. So there is a Memorandum
of Understanding about the F35 and we have a different and separate
Memorandum of Understanding about the Treaty, as I understand
it. Is that correct?
Baroness Taylor of Bolton: That
is correct.
Mr Havard: Then, underneath that, there
is a highly classified supplement to the Memorandum of Understanding
about the F35 which actual deals with the issues of operational
sovereignty. Is that right? Thank you.
Q114 Mr Jones: Can I ask, in terms
of a component that goes into JSF programmes, if I say to you
a UK component, call it "widget X', goes into the programme
under this Treaty, once it is actually part of the JSF programme
what happens to the ability of the company in the UK that produces
widget X to export that outside of the JSF? Is it confined to
what it can actually do or does it get authorisation for what
it has to do with it from the US?
Baroness Taylor of Bolton: As
I understand it, it is still subject to export controls were it
to be exported to another third party.
Q115 Mr Jones: That is not the answer
then.
Mr Lincoln: I am sorry—you
are talking about a UK widget?
Q116 Mr Jones: It goes into JSF,
and if it comes to be part of, obviously, JSF, it is done under
this Treaty. Does it then put any restrictions on the UK company
being able to export that widget to another third country?
Baroness Taylor of Bolton: That
is not American technology that you are talking about; you are
talking about a British widget?
Mr Lincoln: The difference here,
Mr Jones, is that if it is a British widget it is not something
which is coming under this Treaty, because it relates to material
which must have been exported from the US originally into the
UK.
Mr Jones: No, no, no.
Q117 Chairman: Can you expand on
that? So this Treaty applies only to material which is exported
from the US into the UK?
Baroness Taylor of Bolton: Technology.
Mr Lincoln: A material technology.
The terms there are that the material technology must have come
from the US into the UK and we have then done something with that,
but if it is just a pure UK widget that has been developed in
the UK without US technology then this would not apply to any
restrictions on UK technology in that respect.
Q118 Mr Jones: What happens if it
becomes part of a bigger widget? Let us say you have widget A
and widget B, and widget A is British and widget B is US, and
it comes together under this Treaty into a vital piece of JSF.
Does that then restrict what the manufacturer in the UK can do
with widget A?
Baroness Taylor of Bolton: I do
not think it restricts widget A but it might restrict widget B.
Mr Lincoln: It might restrict
widget B. We can give you some quite detailed examples—
Chairman: Before we disappear up extraordinary
places, Willie Rennie.
Q119 Willie Rennie: Just returning
to the Congressional approval for the $25 million or $100 million
on parts—technology and so on—on sales of goods out
of the US, what limitation is that going to place on this Treaty?
How many goods come under that kind of value? Is it going to prolong
the process?
Baroness Taylor of Bolton: This
is not a new limit, remember; this is what the present—
Mr French: This is the current
Congressional notification and agreement under the ITAR. A number
of these notifications happen each year, but it is a handful.
We envisage that most of the technology that will be covered will
not get that high. The $25 million is almost for a single item.
It is the $100 million which is the broader material. So it is
a high threshold which might cover that.
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