Further evidence from the Campaign Against
Arms Trade (CAAT)
1. The Campaign Against Arms Trade (CAAT) in
the UK works to end the international arms trade. Around 80% of
CAAT's funding comes from individual supporters. CAAT is responding
to your Committee's welcome inquiry into Government assistance
to industry, focussing on UK Trade & Investment (UKTI) and
the Export Credits Guarantee Department (ECGD).
2. In this submission, CAAT will draw attention
to the problems engendered by the arms trade; point out that its
promotion by the Government is controversial, not apolitical;
say why the supposed economic and employment benefits to the UK
are not proven; and suggest that the support given to the arms
companies be redirected to newer industries tackling climate change,
with benefits to both the economy and security.
NOT ALL
TRADE IS
WELCOME
3. Not all trade is beneficial, either to the
people of the UK or beyond, so before your Committee looks at
the effectiveness of Government trade assistance programmes, CAAT
would urge it to examine what kinds of trade or projects are appropriate
to receive such support.
4. Although CAAT's focus is on military trade,
and this is what we examine below, Government support for specific
projects has also been questioned by environmentalists, human
rights campaigners and development charities. A common feature
of all these concerns is that the Government has supported commercial
companies without due regard for the consequences of doing so.
5. Addressing specifically the support for military
exports, this can have an adverse impact on human rights, conflict
and development, as well as on the struggle to end corruption.
HUMAN RIGHTS
6. Military equipment can be used to carry out
human rights abuses directly. The indirect consequences can, however,
be just as devastating as the receipt of UK arms increases general
military capacity and conveys a message of international acceptance
and approval. Criticism of governments of countries such as Saudi
Arabia, identified by the Foreign and Commonwealth Office as a
country of major human rights concern, is muted as senior UK government
figures court the abusers to promote arms.
7. The denial of human rights to women in Saudi
Arabia, to its overseas workers and to dissidents continues because,
for successive UK governments, these people have seemingly been
of less importance than the desire to sell military equipment.
The UK's priorities need to change.
CONFLICT
8. Arms exports increase tension and fuel conflict
around the world. Equipment produced in the UK has been used in
action in numerous conflicts.
9. It has been used by the Indonesian military
in East Timor, Aceh and West Papua, by Zimbabwe in the Democratic
Republic of Congo, by Argentina (against UK armed forces) in the
Falklands war, and by both sides in the Iran-Iraq war. UK arms
sold to Israel have been used in Lebanon and the Occupied Territories,
and the sales continue despite widespread condemnation of Israel's
actions. The UK supplied arms to Sri Lanka throughout its bitter
civil war. The tension between India and Pakistan makes South
Asia one of the most volatile regions of the world, yet the UK
supplies arms to both countries.
10. The suffering consequent on these conflicts
is obvious. It is not sufficient to say that much of it would
have happened even if the UK had not supplied military equipment.
Doing wrong because others also are is no excuse. The UK should
refuse to be complicit in conflict by proxy.
DEVELOPMENT
11. The
arms trade affects development through the money wasted on arms
purchases as well as through the conflict it fuels. In 1998, as
part of a massive European deal heavily promoted by Government,
BAE Systems sold military aircraft to the South African government,
even though millions of South Africans were unable to afford anti-retroviral
medication for HIV and AIDS.
12. Sometimes these sales rebound. In the mid-1990's
British Aerospace Hawk aircraft, as well as tanks and armoured
personnel carriers, were sold to President
Suharto's Indonesia.
Despite committing crimes against humanity
in East Timor, prosecuting brutal wars in the provinces of Aceh
and West Papua, and using UK equipment against civilians, the
Indonesian Army continued to receive a steady supply of weapons
from the UK, until it was unable to pay for them.
13. In
1998, Indonesia became one of the victims of the Asian financial
crisis and subsequently defaulted on its payments. It had built
up very large debts as a result of its arms purchases from the
UK over the previous 20 years. In February 2007, Indonesia still
owed £757 million, of which three-quarters related to military
equipment.
CORRUPTION
14. Military deals are often large and complex,
are shrouded in officially sanctioned secrecy and a small group
of people make the decision to buy. This environment is perfect
for corruption. Bribery doesn't just mean that bidders are shuffled
with no impact on the buying country and population. Corruption
is likely to inflate the cost of procurement, and also provides
an incentive for decision-makers to purchase weapons that they
might not otherwise have bought.
15. Corruption at its worst can undermine government
accountability and democracy. In the aftermath of the 1998 South
African arms deals, investigations into corruption allegations
against senior African National Congress leaders led the party
and Government to undermine the country's new parliamentary institutions.
The Indonesian deal mentioned above, as well as sales to Saudi
Arabia, were also tainted by corruption.
ACCOUNTABILITY
16. Despite the examples above, there is still
a prevalent idea that all trade is good and warrants support from
Government and funding from taxpayers. This acceptance of trade
as apolitical has extended to the accountability of trade ministers.
In recent years, they had predominantly been industrialists or
financiers, brought into Government and given a seat in the House
of Lords. The Trade ministers with responsibility for the UKTI
and the ECGD were Lord Digby Jones from 2007 to October 2008 and
Lord Davies of Abersoch from January 2009 to May 2010. These junior
ministers reported to the Secretary of State, Lord Mandelson.
17. CAAT was pleased that this trend was broken
when Mark Prisk MP and Ed Davey MP assumed responsibility for
UKTI and ECGD respectively in the Coalition government, and extremely
disappointed to learn that HSBC's Stephen Green is likely to take
over from them when he becomes Trade Minister towards the end
of 2010.
18. Leaving aside the policy content and the
individual personalities involved, CAAT feels this presents a
major problem with accountability. These brought-in ministers
responsible for, and making decisions about, trade cannot respond
to debates in the House of Commons, nor can they answer parliamentary
questions in their own right. They are not exposed to constituents
who might question the morality of some UK exports, or to local
political parties or human rights or development groups which
might raise the issue in debate.
PROMOTION
19. Notwithstanding the negative consequences
of arms exports, effective lobbying by military manufacturers
has made successive governments into arms sellers, promoting the
wares of the military manufacturers. While governments talk of
strict export controls, the policy and practice has been to promote
arms sales with little or no regard for the damage they might
cause or the wider implications of supplying military goods.
20. UK
Trade & Investment
The UK government's arms sales unit is now located
within UKTI. There are about 160 staff in UKTI's Defence and Security
Organisation (UKTI DSO) dedicated to promoting military exports,
more than those providing specific support to all other sectors
of industry put together. This is despite arms being only 1.5%
of total UK exports, and the fact that even then, 40% of their
components are imported.
21. UKTI DSO liaises with the companies they
are selling the arms for, builds relationships with overseas governments
and military officials, arranges political assistance for arms
deals, ensure that members of the UK armed forces are on hand
to help the companies' sales efforts, and assists with arms fairs.
22. UKTI
DSO is not discriminating about the records of Governments to
which it promotes arms. Its priority markets for 2010-11 include
Algeria, with a poor human rights record; regional rivals India
and Pakistan; unstable Iraq; recent "pariah" Libya;
and repressive Saudi Arabia. (Hansard, 28.6.10 Col 418/9W)
The only criteria for inclusion on this list appears to be
the willingness and ability to pay for the equipment.
23. Export Credits Guarantee Department
For many years support for arms sales accounted for
between a third and a half of all government export insurance
through the ECGD.
24. A massive drop in this proportion, to just
1%, occurred in 2008 when BAE stopped the cover on its arms deals
with Saudi Arabia, cover which documents obtained from the National
Archive and through Freedom of Information (FoI) requests show
the Treasury, the ECGD itself and the Bank of England all had
reservations about. This drop, however, could prove to be temporary
unless the conditions for ECGD support change.
25. The direct cost of UKTI DSO, £14.6million
in 2008-09 (Hansard, 10.6.10, Col 232W), is a relatively
minor component of what many studies have revealed to be a considerable
subsidy afforded to arms exports. Export credits, when this facility
is used, are a more important factor, as is unrecouped research
and development spending and the distortion of procurement choices.
Other costs include those associated with the use of military
attachés and official visits. While the studies, which
include Stephen Martin's "The subsidy saving from reducing
UK arms exports", Journal of Economic Studies, 26:1
(1999) and the Oxford Research Group and Saferworld's The Subsidy
Trap: British Government Financial Support for Arms Exports and
the Defence Industry (July 2001), were undertaken a few years
ago, it is unlikely the general picture of assistance has changed.
26. Even the
MoD has accepted that the economic picture is not as traditionally
portrayed. In its Defence Industrial Strategy (December 2005)
it 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."
27. Despite this, it is still claimed that arms
sales are good for the economy. No independent study seems to
have been undertaken which supports this. Freedom of Information
(FoI) requests by CAAT to the MoD and the then Department of Trade
and Industry revealed that neither conducted any studies into
the economic impact of Al Yamamah 1 or 2. A parliamentary answer
(Hansard, 26.10.09, Col 117/8W) referred to the Department
for Business, Innovation and Skills' (BIS) "analysis"
of the number of jobs sustained in the UK by Eurofighters ordered
by the MoD. Follow-up FoI requests, however, revealed that the
figures given had been arrived at by asking three companies the
number of jobs they and their supply chains would lose if the
order was cancelled. No independent analysis had been undertaken
by BIS or independent researchers.
28. Jobs figures for military projects are also
frequently hailed without any consideration of the costs of the
relevant equipment to the taxpayer or the opportunities forgone
because that money was not spent elsewhere.
A GLOBAL ARMS
INDUSTRY
29. Today, military industry is internationalised
with most equipment containing components and sub-systems from
a variety of companies. The companies may have their headquarters
in one country, but have subsidiaries in several others.
30. BAE Systems (BAE) provides an illustration
of this. It sells more to the US Department of Defense than it
does to the UK Ministry of Defence (MoD), most of its shares are
held outside the UK and only around 40% of its employees are in
the UK. It would already be a US company had it been able to persuade
one of the massive US companies to buy it. BAE and the other major
arms companies exist to maximise profits for their international
shareholders and have little, or no, commitment to the UK and
UK "defence".
31. The global nature of the arms industry has
not prevented recent UK governments from using taxpayers' money
to support it. Alan Garwood was Head of the previous government
arms export promotion unit, the Defence Export Services Organisation
(DESO), between 2002 and 2007. In a letter dated 9 September 2005
he told CAAT: "The broad test for assessing DESO support
to a UK-based defence exporter is not company ownership, but the
added value that the export would bring to the UK defence industrial
base." This is a somewhat vague and unspecific concept.
32. There are, however, signs that even this
may be watered down. On 16 April 2008, now working for BAE as
Marketing/Business Development Director, Alan Garwood met with
the acting Head of UKTI DSO. According to notes of the meeting
received by CAAT as a result of an FoI request, Alan Garwood asked
about UKTI DSO's stance towards supporting a BAE project manufactured
out of the US. He was reminded that his own DESO stance still
applied, but was told that "... these things evolve and it
was worth discussing when a specific opportunity arose."
33. The ECGD had also addressed the level of
UK government support for a multi-national commercial enterprise.
In June 2007 it accepted that it would support projects with a
foreign content of up to 80%.
EMPLOYMENT
34. Turning to employment, as Alan Beattie, World
Trade Editor of the Financial Times, pointed out: "You
can have as many arms export jobs as you are prepared to waste
public money subsidising." In 2007-08, the latest year for
which Defence Analytical Services
and Advice employment statistics are available, the
65,000 jobs supported by arms exports accounted for 0.2% of
the UK workforce and 2.24% of manufacturing employment. A further
150,000 workers were employed producing equipment for the UK armed
forces, but even the military industry total of 215,000 jobs makes
up less than 0.68% of the UK workforce and 7.41% of manufacturing
jobs.
35. Since the beginning of the 1980's, at the
height of the Cold War, numbers of employees in the sector have
dropped rapidly, levelling out over the past few years. There
is little reason to suppose that the decline will be reversed,
owing to the capital-intensive nature of the industry and outsourcing
to countries with lower production costs.
36. The
arms companies and journalists sympathetic to them are, not unnaturally,
prone to exaggerate the number of jobs sustained by the arms industry.
In the run-up to the decision to stop the Serious Fraud Office
inquiry into BAE Systems' arms deals with Saudi Arabia, figures
of up to 50,000 Eurofighter jobs under threat were appearing in
the press. However, a June 2006 report commissioned by the Eurofighter
PR and Communications Office stated that the Saudi Eurofighter
deal would secure around 11,000 jobs throughout the whole of Europe.
Fewer than 5,000 of these jobs would be located in the UK.
37. The sale of Eurofighters to Saudi Arabia
also illustrates another trend in which the buying country insists
that an assembly line is set up in that country. Of the 72 Eurofighters
sold under the 2007 agreement, 48 are to be assembled in Saudi
Arabia, leading to the reported creation of thousands of skilled
jobs there. Similarly, the £700 million deal signed during
Prime Minister David Cameron's visit to India in July 2010 will
see 57 Hawk aircraft manufactured under licence there by Hindustan
Aeronautics Limited. The logical extension of this is that HAL
will produce Hawks for the global market. The number of UK jobs
said to be supported by the Hawk deal is just 200.
38. A common misconception is that UK arms industry
jobs are primarily in areas of high unemployment, whereas the
largest number of military industry jobs are in the low-unemployment
South West and South East regions. It is only after these that
we come to the North West, where there is a significant amount
of BAE employment. There are only a handful of areas that could
be described as having a residual dependency on arms employment.
Of these, only three sites—BAE Warton in Lancashire, BAE
Brough in East Yorkshire and AgustaWestland (owned by Finmeccanica
of Italy) in Yeovil—have significant export contracts. BAE
Brough already faces an uncertain future. There were 450 redundancies
in 2008 and another 212 announced in September 2010.
39. Government support for arms exports cannot,
therefore, be seen an efficient way of boosting employment in
the UK.
NEW OPPORTUNITIES
40. UK governments have chosen to allocate taxpayers'
money to support arms exports and production. Ending the support
for military exports and the spending on prestige procurement
projects would free up resources to help other sectors that might
be more efficient and innovative and be likely to grow rather
than decline. It is not within CAAT's competence to explore these
in detail.
41. An obvious example, however, is the response
to climate change. A key factor in addressing the threat is the
rapid expansion of renewable energy research and development and
production, and this requires public investment and skilled engineers.
In 2008 UK government-funded research and development (R&D)
for renewables was around £66 million, compared to over £2,500
million for arms.
42. Arms industry workers have skills that are
needed to meet these new challenges. BAE likes to portray itself
as a major provider of high-tech jobs, but these jobs are dependent
on R&D funding from the tax-payer; if the money changed sector
it is likely the jobs would follow. Resources could be targeted
at those locations which might be disproportionately affected
during the changes, as clearly these areas would have workers
with good skills to undertake alternative engineering projects.
43. This was acknowledged by Dr Sandy Wilson,
President and Managing Director, General Dynamics UK, and VP-Defence,
ADS Group Ltd, when he gave evidence to the Defence Committee
on 8 September 2010: "A point that I have made to this Committee
previously is that the skills that might be divested of a reducing
defence industry do not just sit there waiting to come back. They
will be mopped up by other industries that need such skills. We
are talking about high-level systems engineering skills, which
are often described as hen's teeth. It is an area in which the
country generally needs to invest more. You can think of the upsurge
in nuclear and alternative energy as being two areas that would
mop up those people almost immediately. Then the question would
be not of choice, but of them just not being there."
PROPOSALS
44. CAAT has made many of the above points to
the Treasury for consideration as part of its Comprehensive Spending
Review. The proposals that follow are also included in CAAT's
submission to the CSR.
45. Currently, a disproportionate amount of UK
government political and financial support goes to an industry
whose products are not only controversial in their nature, but
also a drain on the UK economy. CAAT believes the arms companies
have persuaded governments to give them this support because of
the strong links they have enjoyed over decades and not because
any analysis has shown that military spending and exports are
vital for the economy or employment. The recession presents an
opportunity for a rethink about the emphasis of government support
for manufacturing. Ending the support for military industry would
free up resources which might not only help the UK out of recession,
but could build a more sustainable economy for the future.
46. The promotion of military exports has frequently
undermined other policy objectives such as support for human rights
or ending conflict, as well as leaving the UK open to accusations
of hypocrisy over issues of corruption. Ending the support for
military exports could lead to more consistent Government policies
and increase security.
47. The UK, one of the major players, could take
the lead in withdrawing from the destructive international arms
trade. As a first step, UKTI DSO should be shut, without transferring
its functions elsewhere, and export credit support withdrawn.
48. Resources should be transferred from supporting
the arms companies to addressing what is widely acknowledged as
the biggest threat to human security. Before the products are
available to export, they must be developed. A rapid expansion
of renewable energy R&D and production is necessary, and this
requires public investment that will, in turn, draw in skilled
engineers.
49. Tackling climate change rather than producing
arms would win almost universal support and leave the UK and the
world a more secure place for future generations. At the same
time significant economic benefits will accrue from scaling down
a stagnant industry dependent on Government support, and ramping
up new sectors where demand is increasing rapidly.
24 September 2010
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