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5.36 pm
Mr. David Faber (Westbury): I, too, congratulate the hon. and learned Member for North-East Fife (Mr. Campbell) on raising this matter. I hope that he will forgive me if I do not follow him down every avenue, but I shall agree with him later in my speech on loopholes in the European code of conduct.
I shall continue the quotation from which the hon. and learned Member derived one line. The first paragraph of the declaration that forms part of the draft code of conduct states:
Article 51 of the UN charter clearly states the right of all nations to self-defence, and Conservative Members respect the right of other countries, as sovereign states, to protect their independence and exercise their right to self-defence. That is why I believe that a properly regulated arms trade is entirely legitimate. The responsible exporting of defence equipment to our friends and to our allies makes an important contribution to world peace and stability. It deters the expansionist aspirations of unfriendly and aggressive regimes.
As we have heard from the hon. and learned Member for North-East Fife and the Minister, the latest instance of the need for defence equipment was during the recent
United Nations operation, which was reinforced so well by British forces in the Gulf and elsewhere, to secure Saddam Hussein's agreement over weapons inspections in Iraq. Hon. Members saw only a few weeks ago the impressive range of military technologies that is at the disposal of our troops in the Gulf. It is a tribute to them and to the British defence industry that they were and remain so well prepared for military action.
Britain's defence industry is a success story. It is the second largest exporter in the world--second only to the United States. It takes the largest world market share of any British industry, and supports more than 415,000 jobs, 140,000 of which are directly dependent on defence exports.
The industry is the biggest contributor from exports to the Treasury--70 per cent. of defence production is for the export market.
In 1995, against stiff competition, the United Kingdom won export contracts worth some £5 billion, and in 1997 the figure rose to £5.5 billion, a record of which we can be justly proud. The value of our exports means that the cost of equipment for UK forces is reduced, and that the nation's essential technology base is secured. Most of the equipment supplied to Britain's armed forces comes from Britain's defence industry. The Ministry of Defence has estimated that British arms exports save it £300 million a year on what it needs to buy.
That is the constructive view of the Ministry of Defence, but we sometimes wonder whether it is also the view of the Foreign Secretary and the Foreign Office. When the Foreign Secretary came to power, he initially tried to improve his standing in his party by refusing a couple of small export licences to Indonesia: a decision which apparently infuriated the President of the Board of Trade. Other Foreign Office attempts to restrict arms exports to Indonesia have been stopped by the Ministry of Defence. As a result, the Foreign Secretary has understandably directed his efforts towards Europe, and much has been made of his efforts to persuade our European partners to sign up to the code of conduct.
What does the Ministry of Defence make of these machinations at the Foreign Office? I am sorry that the Under-Secretary of State for Defence, the hon. Member for Warley (Mr. Spellar), has had to leave the Chamber, because it would have been interesting to hear from him. Only last month, the MOD issued a press release boasting of a 10 per cent. increase in Britain's arms exports, and published a Green Paper, "Defence Diversification: Getting the most out of defence technology", which contained proposals for a defence diversification agency. Has the Foreign Secretary had a chance to read it? Paragraph 3 states:
Paragraph 10 of the Green Paper states:
What role does the Foreign Secretary envisage his ethical foreign policy will play in helping the Ministry of Defence and the defence industry to meet the growing competitive challenge from abroad? The Green Paper says that one of the roles of the new defence diversification agency will be to encourage
The Green Paper contains six half-page reports describing the success that arms manufacturers and the MOD's Defence Evaluation and Research Agency have had applying military technology to civilian uses. In fact, the entire Green Paper is one big advertisement for Britain's defence industry.
There is, therefore, conclusive proof that the Ministry of Defence has largely ignored the Foreign Secretary's push for a so-called ethical foreign policy, and that he has little influence in the Government and especially in Departments that should be working closely together on Foreign Office-related business. [Interruption.] The Government Whip, the hon. Member for Doncaster, North (Mr. Hughes), tut-tuts, but an article in The Spectator informed us last week that
The Green Paper says that, within the new criteria to be used in considering arms export licence applications,
The Select Committee on Defence heard only yesterday that the industry is gravely concerned that the policy reviews have created a backlog that is resulting in delays of up to nine months in some cases. That could allow foreign competitors to steal business that would otherwise have gone to British companies.
Export licences to export strategic goods are issued by the President of the Board of Trade: the export control organisation in the Department of Trade and Industry is the licensing authority. They are issued under part III of schedule 1 to the Export of Goods (Control) Order, otherwise known as the "military list". The ECO either deals with applications direct or circulates them to other Departments with an interest--most notably, the Foreign Office, the Ministry of Defence or the Department for International Development.
I shall give the House an idea of the number of applications involved. Between 3 May 1997 and 6 March 1998, 6,918 applications were circulated to the Foreign Office, 8,673 to the Ministry of Defence and just 783 to the Department for International Development. That is a great number of potential orders for British manufacturers on which a great number of British jobs depend.
In response to a question from my hon. Friend the Member for Reigate (Mr. Blunt) on 25 March, the Minister for Small Firms, Trade and Industry confirmed that, on 6 February 1998, 1,586 applications were outstanding, some going back to 1 September 1998. The ECO measures its performance against two stated aims: to provide a substantive response to applications that are circulated to other Departments within 20 working days, and to provide a response within 10 working days to those that are dealt with internally by the DTI.
When the Government took office on 1 May, the ECO was successfully hitting those targets. A remarkable 97 per cent. of non-circulated applications were dealt with within the 10-day period, and 69 per cent. of circulated applications were dealt with within 20 days. Since the Government came to power, and particularly since the DTI has had to consider the criteria set out by the Foreign Secretary on 28 July, that record has plummeted. By 6 February--which is the end of the last four-week period for which the DTI has been able to give me figures--the success rate for non-circulated cases had fallen from 97 to 61 per cent., and for circulated applications from 69 to 52 per cent. In the previous month, the latter figure had been as low as 41 per cent.
That is a disgrace. It represents an administrative logjam of scandalous proportions, and is a kick in the teeth for exporters already under pressure from the high level of the pound, as presided over by the Government. That is not the fault of those working in the Departments, but they have been thrown into a state of administrative confusion by the so-called ethical dimension of the Foreign Secretary's new policy.
The greatest irony is that, according to the little evidence we have, there is no noticeable rise in the number of applications that have been turned down in that period. For all the Government's rhetoric, there has been virtually no change in the number of applications being refused since 1 May. It is not surprising that the Government refuse to publish the figures on the number of licences that have been refused. The Minister for Small Firms, Trade and Industry was only too happy to publish figures of licences refused by the previous Government up to 1 May, but from now on, she tells us, rather grandly,
When I asked the Foreign Office, the Ministry of Defence and the Department for International Development how many applications they had recommended for refusal, I received a standard reply from all three, which included the sentence:
Slowly but surely, anecdotal evidence is being replaced by hard facts, as increasing numbers of companies find that they are missing out on legitimate orders. The Minister may recall the case raised recently by my right hon. and learned Friend the shadow Foreign Secretary, involving a British company that lost an order to its competitors in Scandinavia for the supply of blue helmets to UNHCR personnel in Kabul. That firm has received no further approaches for equipment from the UNHCR.
Perhaps the Minister can confirm that a small company was approached to supply four machine guns to a Spanish shipyard, which were in turn to be fitted to four patrol boats and then to be sold to the Colombian navy to fight the drug barons in that country. That involved a thorny ethical decision, to be sure; but did not the Minister refuse the application, only to be overruled by the Foreign Secretary?
How ironic it is that, only last night, the Foreign Secretary made a welcome statement about resources for mine clearance. The money is certainly welcome, but it would appear that United Kingdom companies will not be allowed to participate in the mine clearance campaign. Recently, because of the inordinate time that it took to process its application, one of the leading mine-clearing device producers in the country lost a substantial order for mine-clearing equipment to its principal Scandinavian competitor. More ironically still, its competitors in Sweden and Finland do not even have to apply for such a licence, as the machinery is dealt with under the heading of agricultural machinery. So much for a level playing field throughout Europe.
On the issue of licensing, I am sorry that the Minister was not able to enlighten us about when the promised White Paper--which we hope will lead to primary legislation to reform the 1939 legislation--will be published. There is clearly a will in the DTI to proceed with such legislation as soon as possible, but I believe that the Minister himself recently confirmed that there would be no legislation in the current Session. It would be helpful to have an indication of the timing.
Let me now deal with the proposed EU code of conduct, of which the Minister gave details. It was constantly referred to by the Foreign Secretary when his party was in opposition, and, as we have heard, is now a central plank of the Government's EU presidency. As has been said, we already have eight EU common criteria for arms exports, the first seven of which were agreed at the Luxembourg Council in June 1991; the eighth was added at Lisbon in 1992. The previous Government were instrumental in drawing them up, and always supported them.
Some say that the criteria are too lax. At the risk of delaying the House, let me remind hon. Members of some of their contents. They refer to:
In a written answer on 2 February, and again today, the hon. Gentleman made much of the so-called "no undercut" mechanism. Having read the draft code carefully, however, I must disagree with him, and agree strongly with what was said by the hon. and learned Member for North-East Fife. At the beginning of my speech, I quoted the first paragraph of the declaration by EU member states. Opposition Members heartily support the Government's commitment to a strong defence industry, and to countries' right to self-defence, but many outside the House must be bitterly disappointed, having been given the impression by the Government that the code would sound the death knell of the European defence industry.
The draft code is considerably weaker than the Minister has suggested when it comes to undercutting. The relevant part of paragraph D of the declaration states:
No one doubts the integrity of our partners, but different countries have different priorities for their defence trade and national interests. France's defence industry is heavily state-subsidised, and we should bear in mind the fact that almost universal public condemnation of its decision to carry out nuclear tests did not stop it doing so.
As well as issues of transparency and lack of ambiguity--rightly mentioned by the hon. and learned Member for North-East Fife--the Liberal Democrat motion refers to human rights. As I said earlier, that issue featured strongly both in the last Government's guidelines and in the common criteria agreed in Luxembourg and Lisbon. The draft EU code, however, is ambiguous at best, and at worst weak. Paragraph 2 is full of caveats concerning internal repression. I will not repeat the section already mentioned by the Minister, but a later section states:
"EU member states are committed to the maintenance of a strong defence industry which is a strategic part of their industrial base as well as their defence effort. They recognise that defence exports can contribute to international stability by strengthening bilateral and collective defence relationships in accordance with the inherent right of self defence recognised by the UN Charter."
I endorse those views.
"The Government said in its election manifesto: 'We support a strong UK defence industry, which is a strategic part of our industrial base as well as our defence effort.'"
The Opposition agree with that. The Green Paper also states that the Government
"believes in a strong defence against the new security challenges that face this country and its Allies in the post-Cold War world".
We agree with that, too. It says that whatever changes emerge as a result of the strategic defence review,
"one underlying reality is that a strong defence will continue to require a strong defence industry."
2 Apr 1998 : Column 1448
Paragraph 5 states:
The Minister of State touched on that at the end of his speech. I understand that that is also the view of the recognised organisations within the trade union movement.
"This country derives great benefits from a healthy defence industry--not only from being able to meet most of the equipment requirements of our own armed forces from domestic sources, but also from the wider industrial benefits including the economic and employment advantages that derive from the export of defence equipment."
"However, it is widely recognised that the defence industries of Europe must restructure if they are to meet the fiercely competitive challenge posed by the very large corporations that have already formed as a result of a series of mergers of US defence contractors. The impact of this process on the UK defence industry is yet to be seen, but our defence industry is highly competitive and is in a strong position to play a leading role in the restructuring process."
The Government are right to be concerned. While we have 25 per cent. of the current world market, the United States, with an industry 10 times the size of ours, already has 38 per cent., and that is before it has begun to flex its muscles in the export market, having always relied heavily on its internal market.
"companies active in servicing defence needs . . . to exploit potential new opportunities for their products and technologies in the UK and overseas military and civil markets."
I hope that the Foreign Secretary will do what he can to achieve that aim.
"George Robertson has gone completely native at Defence. He talks about 'his boys', and Robin Cook doesn't have a clue what's going on half the time, because the Foreign Office only knows what the MoD chooses to tell it."
This may be a good moment to mention the £2 billion arms deal that the Government are planning with South Africa, which we read about at the weekend. It is primarily for submarines, but is part of a wider arms deal involving aircraft, frigates, tanks and helicopters. Will the Minister confirm that the Government have agreed to repay the purchase price of the submarines--some £200 million--as "industrial participation"? Is that not a clear example of an arms-for-trade deal such as the Foreign Secretary opposed vociferously when he was in
opposition? Is this the same Foreign Secretary who said that aid or trade should never again become entangled with arms sales?
"the responsible export of defence equipment will continue to bring benefit to the British economy."
In fact, little could be further from the truth. In reality, the Government have failed to process hundreds of export licence applications from British companies that are responding to perfectly legitimate orders from abroad, at a time when the Government's defence export service predicts that international demand will decline by 15 per cent. in the next two years. That is bad news for British business, most notably the defence industry.
"the Government will report annually on the state of strategic export controls and their application since 2 May."--[Official Report, 12 December 1997; Vol. 302, c. 722.]
We can be sure that actual figures will be noticeable by their omission.
"The advice that is given by these departments to DTI falls into the category of internal discussion and advice, the disclosure of which would harm the frankness and candour of internal discussion and which is being withheld under exemption number 2 of the Code of Practice on Access to Government Information."--[Official Report, 27 March 1998; Vol. 309, c. 310-11.]
How very convenient. So much for open government.
"The respect of human rights in the country of final destination.
Those criteria are clear and forceful; the only way in which to improve them is to introduce a means of enforcement. We now have a new United Kingdom code, and we are to have a new European code as well. The Minister recently referred to developing the EU criteria, and today he described the new code as an elaboration of them.
The internal situation in the country of final destination, as a function of the existence of tensions of internal armed conflicts.
The preservation of regional peace, security and stability.
The national security of the member states . . .
The behaviour of the buyer country with regard to the international community, as regards in particular its attitude to terrorism, the nature of its alliances, and respect for international law.
The existence of a risk that the equipment will be diverted within the buyer country or re-exported under undesirable conditions."
"Before any member state grants a licence which has been denied by another member state for an essentially identical transaction within the last three years it will first consult the member State which issued the denial. If following consultations the member State nevertheless decides to grant a licence, it will notify the member State issuing the original denial giving a detailed explanation of its reasoning."
2 Apr 1998 : Column 1452
Although the code is supposed to introduce a common standard in the assessment of whether an arms export order should be processed, there is nothing in it to compel member states not to take up contracts previously turned down by others.
If a member state decides to undercut another, there will be a confidential bilateral meeting between those concerned. If the undercutting state decides to go ahead with the export contract, all it will have to do is confirm to the other state its reasons for so doing. Such a statement would remain confidential between the states concerned. Clearly, once a fellow member state has informed its partners of a decision to refuse a licence, it must then trust to the integrity of its partners. That is in stark contrast to what the Foreign Secretary told my hon. Friend the Member for South-West Devon (Mr. Streeter) on 10 February at Question Time. He said:
"I assure the hon. Gentleman that if any country proposed to take up a contract that we had denied, we would pursue the matter through all 14 member states."--[Official Report, 10 February 1998; Vol. 305, c. 127.]
We might well do that, but there is no provision in the draft EU code for other states in Europe to do likewise. Indeed--ironically--if undercutting becomes commonplace, member states are less likely to turn down arms contracts in the first place.
"In some cases, the use of force by a government within its own borders does not constitute internal repression. The use of such force by governments is legitimate in some cases, e.g. to preserve law and order against terrorists or other criminals. However force may only be used in accordance with international human rights standards."
That is undoubtedly true, but, whether the Minister likes it or not, it is a loophole in what the Government claim they are trying to achieve.
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