Memorandum from the Campaign Against Arms
Trade
1. The Campaign Against Arms Trade (CAAT)
is working for the reduction and ultimate abolition of the international
arms trade, together with progressive demilitarisation within
arms-producing countries.
2. More than a decade has now passed since
the Labour government first introduced arms export criteria in
July 1997. These have had negligible effect on the UK's military
exports, leading to the conclusion that export controls allow
Government to create the appearance of restraint whilst drawing
attention away from the dominant policy which is to support the
arms companies in their bid to sell to virtually anyone.
3. This overriding Government policy of
support for the arms trade has led to it continuing to propagate
the myth of economic benefit, the allocation to military exports
of a wholly disproportionate amount of the resources of United
Kingdom Trade & Investment (UKTI) and the Export Credits Guarantee
Department (ECGD), the continuance of sales to Saudi Arabia and
Israel even though these undermine other stated foreign policy
objectives and the failure to be tough on corruption.
4. In addition, this prioritisation of
support for commercial companies can partly explain the failure
of Government to tackle the growing problem of corporate mercenaries,
or, as they are more politely known, private military and security
companies. Whilst the broader issue here might be more appropriately
dealt with elsewhere, developments are rendered even less transparent
by the export licensing process.
"GOOD FOR
ECONOMY" MYTH
REPEATED
5. The four Secretaries of State, in their
Foreword to the 2007 Annual Report, say that: "As highlighted
in the Government's Defence Industrial Strategy, the manufacture
and export of defence equipment … makes an important
contribution to our economy." As CAAT has pointed out to
your Committees in submissions in earlier years, this is not the
case. Military industry is heavily subsidised, especially through
export credits and research and development spending.
6. In fact, the Defence Industrial Strategy,
published in 2005, actually says: "Arguments for supporting
defence exports in terms of wider economic costs and benefits
eg the balance of payments, are sometimes also advanced. A group
of independent and MoD economists (M Chalmers, N Davies, K Hartley
and C Wilkinson—The Economic Costs and Benefits of UK
Defence Exports. York University Centre for Defence Economics,
2001) examined these, by considering the implications of a 50%
reduction in UK defence exports. They concluded that the "economic
costs of reducing defence exports are relatively small and largely
one off…as a consequence the balance of argument about defence
exports should depend mainly on non-economic considerations.'"
7. The desire for exports can also influence
purchases for the UK's armed services, making them more costly.
In 2003 the RAF bought BAE Systems (BAE) Hawk trainer aircraft
without open competition, largely to persuade the Indian government
to buy the Hawks for its air force. The Treasury did not believe
the Hawks offered value for money.
8. The subsidies and preferential treatment
given to arms deals, and the Government mindset which always gives
priority to military-industrial solutions to problems, means that
tackling urgent threats such as climate change receive a lower
priority. If a substantial proportion of the money that is put
into arms were to be invested in alternative technologies, it
would be likely to create more jobs and better long-term employment
prospects. It would also remove those threats to global security
engendered through arms deals as well as improving security through
an increase in the effort towards combating climate change.
9. It is also likely that giving priority
to tackling climate change would encourage more students to study
science and engineering. From conversations with students, it
seems that a good number are put off such subjects since much
of the employment for which their degree would qualify them is
in the destructive military field to which they have ethical objections.
10. Quentin Davies MP, Defence Equipment
Minister, has questioned the idea that producing military equipment
is the way to stimulate the economy. He told the Defence Committee
on 16th December 2008 that: ".. to use your money for
maximum impact you need to spend it on goods and services which
are labour-intensive rather than capital intensive in their manufacture
so that the benefits flow through into pay packets rather than
into rewards for providers of capital—banks and shareholders
and so forth who would inevitably have a very high propensity
to save and a low propensity to consume. Ideally you need these
wages to flow through to people who are relatively low-paid. This
is not the case with defence; defence is capital-intensive rather
than labour-intensive." Another factor was "quite a
high leakage into imports in defence, inevitably, and that is
not the case, for example, if you are repainting schools or putting
new roofs on schools."
11. It is also worth noting that, in some
of the deals most trumpeted by the UK government, the bulk of
the assembly is likely to take place in the buyer country. India
is buying 66 Hawk aircraft. BAE is building 24 of these
in the UK whilst the remaining 42 are being manufactured
under licence in India by Bangalore's Hindustan Aeronautics Limited.
Likewise, of the 72 Eurofighter Typhoons sold by BAE to Saudi
Arabia, the first 24 will be built in Warton, Lancashire,
but the remaining 48 are likely to assembled in Saudi Arabia.
This is good neither for jobs in the UK, nor for countering proliferation.
12. CAAT thinks that, unless it can produce
evidence to the contrary from economists independent of the arms
industry, it is misleading for any member of the Government to
espouse the myth that arms exports are important to the UK economy.
UKTI DEFENCE AND
SECURITY ORGANISATION
13. As the Foreword to the 2007 Annual
Report points out, responsibility for the promotion of military
exports passed from the Ministry of Defence (MoD) to UK Trade
& Investment (UKTI), which is responsible both to the Foreign
and Commonwealth Office (FCO) and the Department for Business,
Enterprise and Regulatory Reform (DBERR).
14. Part of the preferential treatment
given by the Government to arms companies is illustrated by the
disproportionate support UKTI gives to military exports. These
make up about 1.5% of total UK exports with arms export employment
accounting for 0.2% of the UK workforce and just 2% of manufacturing
employment. Yet UKTI DSO has a staff of 170, as against a total
of 129 staff covering all industries in the Sectors Group
which undertakes UKTI's other industry-specific trade promotion.
Even if ethical questions are put to one side, there can be no
justification of such disproportionate support for one industry.
15. One of the tasks UKTI DSO has taken
on from the MoD's former Defence Export Services Organisation
is the organisation of the UK presence at arms fairs where buyers
and sellers of any country can meet and arrange deals. One recent
example of this was the November 2008 International Defence
Exhibition and Seminar in Pakistan which was billed as showcasing
"a wide variety of technology, ranging from equipment used
in third world countries to the most sophisticated systems from
the West." These arms fairs continue give lie to any pretence
that the UK has a responsible arms export policy.
ECGD
16. The Annual Reports of the Export Credits
Guarantee Department (ECGD) show that, yet again, one business
benefits more than any other—the arms business. Even though
arms account for just 1.5% of total UK exports, in 2006-7, 42%
of all export credits were for military goods and, in 2007-8,
the figure was even higher, 57%. This export credit support is
given for very few deals. In the earlier year, the whole 42% was
accounted for by BAE's arms sales to Saudi Arabia. At £750million
this was also by far and away the ECGD's biggest liability in
2007-8, with VT Shipbuilding International's Offshore Patrol Vessels
to Trinidad & Tobago coming second.
17. The 2008 report of the Organisation
for Economic Cooperation and Development (OECD) anti-bribery working
group says that the Serious Fraud Office (SFO) gave the ECGD evidence
regarding allegations involving misrepresentations made by BAE
when the insurance cover was obtained. It expressed serious concern
that nothing was done by the ECGD to follow up this up.
18. Instead, the ECGD provided cover to
BAE Systems (Operations) Ltd with a single contract of indemnity
in respect of all the BAE business with Saudi Arabia. This comprised
the residue of Al Yamamah (now called the Saudi British Defence
Co-operation Programme) and the new Salam Project for the Eurofighter
Typhoon aircraft. The application for cover to include the Salam
Project was made in June 2006, with the contract of cover entered
into on 12th September 2006. The cover with respect to the SBDCP
was terminated on 1st September 2008.
19. As the Government noted in its response
to your Committees' last report, the ECGD is due to report on
its anti-bribery and corruptions procedures in 2009. CAAT hopes
that report will be studied by parliamentarians and any unanswered
questions about the ECGD's support for BAE's Saudi deals pursued.
SAUDI ARABIA
20. The problems that arise when a government
tries to promote arms exports as well as control them are nowhere
more obvious than in the case of BAE's sales to Saudi Arabia.
21. The current situation is that Air Defence
Variant Tornados supplied under the Al Yamamah contracts of the
mid-1980's are being replaced by 72 Eurofighter Typhoon aircraft
under the Project Salam. This was agreed in outline between the
UK and Saudi governments in December 2005 with a more detailed
contract signed in September 2007. The UK MoD complements this
with a contract with its main contractor, BAE.
22. The remaining Saudi Tornados are not
being replaced, but will continue to be upgraded and serviced
under what is now called Saudi British Defence Co-operation Programme
(SBDCP). Whilst the original Al Yamamah purchases were paid for
in oil, both Project Salam and the SBDCP are now being paid for
out of the Saudi Defence Budget.
23. These sales are co-ordinated by the
Ministry of Defence Saudi Armed Forces Project within the MoD.
It has 200 employees in the UK and Saudi Arabia. These are
UK civil servants and military personnel whose salaries are paid
for by the Saudi government—whose human rights record makes
it a "country of concern" for the FCO—to work
on a project which benefits a private company.
24. Your Committees, in the "Scrutiny
of Arms Export Controls (2008)", paragraph 121, recommend
that the Government should consider how it could improve the transparency
of the Salam Project and that the Public Accounts Committee should
think of publishing all the reports to it from the National Audit
Office in respect of it. CAAT was pleased by this recommendation
and disappointed, though hardly surprised, by the Government's
response. It seems that, once again, despite the reiteration of
the commitment to being as transparent as possible made by the
Secretaries of State in the Foreword to the 2007 Annual Report,
the need to appease the Saudi government's desire for secrecy
takes precedence.
25. The unwavering support given to BAE-Saudi
deals and the ending of the SFO inquiry led to a damning report,
about as strong as it could be given the diplomatic language used,
from the OECD Working Group on Bribery. It criticised the lack
of progress on anti-corruption legislation, the failure to consider
alternatives to pulling the investigation and the delay in responding
to the United States' request for Mutual Legal Assistance with
regard to its Department of Justice investigation into Al Yamamah.
26. The backing given by successive UK
governments to BAE, and its predecessor companies, has meant that
succour has been given to the autocratic Saudi regime and global
efforts to eradicate corruption have been undermined. It has brought
into question the integrity of UK business more generally.
ISRAEL
27. The failure of the UK government to
implement a full arms embargo on Israel at a time when that country's
armed forces are again on the offensive, with little or no regard
for human life, is shameful. In recent years the UK has licensed
arms exports to Israel worth between £10million and £25million
a year. The figures available for 2008 show that, only half
way through the year, the sale of arms costing over £24 million
had already been approved (figures for the second two quarters
have not yet been published).
28. In addition, components, including
those for Apache helicopters and F-16 aircraft, have been
supplied to US companies for incorporation into equipment destined
for the Israeli armed forces.
29. On 12th January 2009, the Foreign Secretary,
David Miliband MP, told the House of Commons that export licences
were not granted if there was "a clear risk that armaments
would be used for internal repression or external aggression".
However, once the equipment has been supplied to Israel, it is
just not credible to believe that it is isolated from other equipment
and has not been used in Lebanon, Gaza and the West Bank. The
onus is on UK government to show that UK-supplied equipment has
not been so used. The only way to be sure that UK equipment is
not so used is for the UK government to immediately stop licensing
exports either directly or for incorporation in third countries.
Such an embargo would also convey the message that actions of
the Israeli armed forces are unacceptable.
30. The situation with regards to Israel
is yet further evidence that the UK government puts the commercial
interests of the arms companies before humanitarian concerns.
The UK's own "Consolidated EU and National Arms Export Licensing
Criteria" are supposed to assess the impact on regional peace,
security and stability and the human rights record of the recipient.
31. However, in July 2002, the UK government
approved the export of components for F-16 fighters being
made by the US company Lockheed Martin and sold to Israel. Then
Foreign Secretary Jack Straw justified the sales saying: "The
Government has judged that the UK's security and defence relationship
with the US is fundamental to the UK's national security … Defence
collaboration with the US is also key to maintaining a strong
defence industrial capacity." He went on "Any interruption
to the supply of these components would have serious implications
for the UK's defence relations with the United States." The
commercial relationship between BAE and US companies such as Lockheed
Martin was judged more important than the lives of Palestinians
then, and for the UK government remains so today.
CORRUPTION
32. Although it stopped its investigation
into the BAE Saudi arms deals in December 2006, ostensibly on
the grounds of national security, the SFO continues to investigate
allegations of corruption regarding BAE deals with six other countries.
One of them is the Czech Republic, which in 2001 bought BAE
Saab Gripen fighters for £1.1billion in a deal that was later
cancelled. At the end of October 2008, the SFO interviewed the
Viennese Count Mensdorff-Pouilley and Julian Scopes, a former
Ministry of Defence civil servant, now working for BAE and recently
appointed as head of its Indian operation.
33. Later, in December 2008, the Swiss
authorities gave the SFO, which wanted help over 1million Euro
payments going through companies in the British Virgin Islands
and Panama, access to bank files.
34. At the end of November 2008 a
judge in Pretoria issued search warrants, allowing the South African
police to raid the offices of BAE and two individuals in connection
with allegations regarding the sale of military aircraft to South
Africa in the late 1990's and early 2000's. The warrants said
there was a "reasonable suspicion" that BAE had made
payment to agents "to seek to obtain undue advantage over
its competitors in the bidding process".
35. Despite all these investigations, the
UK government continues its "business as usual" approach
in its support for BAE arms sales overseas. By doing so, it undermines
the credibility its demands on other governments to wipe out corruption.
36. CAAT supports your Committees' recommendation,
made in your last report, that as a first step the Export Control
Organisation require those applying for export licences to provide
an anti-corruption declaration. It is disappointing that the Government
is not immediately implementing this recommendation as it would
complement the other transparency and governance initiatives whilst
not being dependent on them.
LICENSING EXPORTS
TO PRIVATE
MILITARY AND
SECURITY COMPANIES
37. Interpreting information about export
licences remains problematic, especially as it is not possible
to know whether the equipment is going to the armed forces of
the recipient, a media organisation or national park. Of particular
concern to CAAT is that there is no indication when equipment
is being exported to a private military and security company (PMSC).
There does not seem to be any way of monitoring which companies
have been acquiring equipment from the UK, possibly building considerable
stocks.
38. As the number and activities of PMSCs
continues to grow, the Quarterly Reports need to reflect this
by making transfers to such companies transparent. The Reports
should list the licences issued by company, saying in each case
in which country it is to be used.
39. It is CAAT's understanding that if
such a company wants to move UK-supplied equipment from, for instance,
Iraq to Afghanistan, it needs a Trade Control Licence. However,
it currently appears to be impossible for interested parties to
monitor this, further undermining claims to transparency.
16 January 2009
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