Select Committee on Trade and Industry Minutes of Evidence


Memorandum submitted by The Defence Manufacturers' Association (DMA)

EXECUTIVE SUMMARY

INTRODUCTION

  The DMA welcomes the publication of the DTI's White Paper on "Strategic Export Controls", which it regards, in general, as being a well thought-out appraisal of possible proposals for the introduction of more modern and effective legislation on the matter. However, we have major concerns over the suggested controlling of intangible transfers and trafficking & brokering, and would strongly urge that these are temporarily put to one side, for the time being, to allow for greater detailed consideration, whilst the rest of the legislation is proceeded with as expeditiously as possible. It must also be pointed out that Industry is far more concerned with the actual practicalities of the rationalisation of the procedures associated with the export licensing system, rather than the overall legislation on Strategic Export Controls.

PARLIAMENTARY SCRUTINY

  We believe that the White Paper sets out proposals for exactly the right balance of openness and Parliamentary scrutiny, without impinging upon potential commercial confidentiality concerns, allowing greater transparency with regard to the statutory elements of legislation, but not of individual cases. We are not convinced that Industry's major concern with licensing, the issue of speed of processing, would be improved if Parliamentary scrutiny of individual applications was allowed.

PURPOSES OF STRATEGIC EXPORT CONTROLS

  We believe that the release, on 28 July 1997, of the Statement by the Secretary of State for Foreign & Commonwealth Affairs on the "Criteria Used in Considering Conventional Arms Export Licence Applications" has obviated the need for the purposes of strategic export control having to be set out by the DTI in secondary legislation.

WEAPONS OF MASS DESTRUCTION

  We fully support the Government's proposals to try to introduce effective controls to counter the threat of proliferation of weapons of mass destruction. However, again, some clarification is required. We believe that controls on NBC protective material need to be eased.

TRANSFER OF TECHNOLOGY BY INTANGIBLE MEANS, TRAFFICKING AND BROKERING, AND ENFORCEMENT

  Whilst we support the principle that some form of control should be introduced on the transfer of technology by intangible means, and on trafficking and brokering, we strongly advise caution and very careful consideration as to how best this should be done. We seriously query the DTI's estimate of the workload which will result due to the introduction of such controls, and the resources that will be needed to cope with this. We strongly urge that this aspect of the legislation be delayed for detailed discussion and debate, as laws have to be enforceable and practicable to be effective, and we have considerable concerns over the proposals as they appear in the White Paper.

PRESCRIBING EXPORT LICENSING PROCEDURES IN LEGISLATION AND RATINGS ADVICE

  We support the proposal to prescribe export licensing procedures in legislation, and we welcome the proposals with regard to the Ratings advice service. We believe that the Ratings service must be speeded up.

 POWER TO REQUIRE INFORMATION FROM COMPANIES WHERE THIS IS NEEDED TO MEET THE UK'S INTERNATIONAL OBLIGATIONS

  We would ask that any measures to try to require information from companies where this would be needed to compile data in order to meet the UK's international obligations be introduced in such a way as to impose the very least possible additional administrative burden on British companies. We would query why this is necessary—for licensable goods, the DTI is given full detailed information anyway!

TIME LIMITS FOR PROCESSING LICENCE APPLICATIONS

  We are deeply disappointed at the rejection of the Green Paper's proposal for the establishment of formal time limits, the lack of which causes serious problems for many companies. We still believe that an open-ended system is archaic and prone to abuse by officials, and would argue that some form of time limit is necessary. However, in the interim, whilst that campaign still oes on, we support the Government's efforts to try to make the existing system as efficient as possible, and will provide whatever assistance we can to bring Industry's knowledge and experience to the discussions on how this can best be achieved.

GIVING REASONS FOR REFUSING EXPORT LICENCES

  We still believe that more fulsome reasons for refusal should be able to be given to companies than is currently the case in many instances.

APPEALS

  We welcome the Government's proposals for the establishment of a formal appeals procedure. We would have prefered the establishment of a fully independent system. It is essential that whatever system that is introduced is fast in operation.

COVERAGE OF CONTROLS IN EXPORT OF GOODS CONTROLS ORDERS

  We will believe that the scope of coverage of the controls in the Export of Goods Controls Orders should, and must, be reduced. The rules should be targeted on countering the activities of unscrupulous miscreants, and avoid unnecessarily burdening the overwhelming majority of companies, whose activities are quite responsible.

END-USE MONITORING

  We believe that Industry cannot be made more responsible for end-use control than it currently is. We welcome the Government's attempts to seek a common approach on end-use control with the EU and signatories of the Wassenaar Arrangement, and hope that this will result in the adoption of a common, standard format for end-user statements.

LOCATION OF EXPORT LICENSING AUTHORITY AND CHARGING FOR EXPORT LICENCES

  We welcome the fact that the DTI is to retain its responsibility as the central coordinating authority on export licensing. We welcome the rejection of the proposal that charging be introduced for export licences. We would strongly urge the enhancement of the resources tasked with licence processing.

CONCLUSION

  We believe that Industry has an urgent need for new legislation to be introduced at the earliest possible opportunity. However, we wish to reiterate that we strongly urge that the proposals on intangible transfer and trafficking and brokering are put to one side for the time being, for further detailed consideration, whilst the rest of the legislation is enacted separately as soon as possible. The Government must endeavour to avoid rushing in hastily thought-out and ill-defined legislation on this. British exporters must not be allowed to be put at a commercial competitive disadvantage by the UK's own Government, as this could prove to be counter-productive.

THE RESPONSE TO THE PROPOSALS CONTAINED IN THE DEPARTMENT OF TRADE & INDUSTRY'S WHITE PAPER ON "STRATEGIC EXPORT CONTROLS", PUBLISHED ON WEDNESDAY 1ST JULY 1998

INTRODUCTION

  The Defence Manufacturers Association (DMA) welcomes the release by the Department of Trade and Industry (DTI) of its White Paper on "Strategic Export Controls", pursuant to the July 1996 Green Paper on the same subject. The DMA also welcomes many, although not all, of the proposals that the White Paper contains. We fully recognise the realities of the current export controls situation, and agree with the summary contained in the "Risk Assessment" section on page 24 of the White Paper.

  We are grateful for the statement right at the start of the White Paper (at 1.1.1) that the Labour Government wishes to re-state:

    ". . . our support for a strong UK defence industry."

  which re-iterated previous similar statements from Government officials, including, amongst others, that of the Secretary of State for Foreign & Commonwealth Affairs, in the preamble to the 28 July 1997 announcement on the "Criteria Used in Considering Conventional Arms Export Licence Applications", in which it was stated that:

    "The Government is committed to the maintenance of a strong defence industry which is a strategic part of our industrial base, as well as our defence effort."

  Whilst we were pleased to read in the White Paper's Foreword by the former President of the Board of Trade, that:

    ". . . the Government is aware that exporters need export licensing procedures that are both clear and consistent. . ."

  we would also strongly argue that another vital element is missing from this statement, and that, as we stated in our response to the Green Paper (see Annex G):

    "Speed of response is essential"

  and:

    "The key words, from Industry's view, in the quote (at 2.4.1) from the Scott Report are that ". . . export licences will be dealt with expeditiously and with fairness to exporters"."

  We note that the Government also recognises the significance of these words from the Scott Report, which are quoted in the White Paper (at 4.1.1).

  All responsible defence companies accept the vital necessity of the underlining policy of export controls. It is the mechanics of the system, and how it operates, which causes concern for Industry, especially with regard to the timescales involved in the processing of export licence applications, rather than any serious questioning of the need for an export control system. Industry recognises the difficulty of the task confronting Government agencies in trying to protect the UK's strategic interests whilst at the same time assisting exporters, although this can result in what we have previously described as "Governmental schizophrenia", or "the British Government speaking with forked tongue". However, we still feel that more must, and can, be done to improve the functioning of the system.

  One general observation that we would like to make is that the White Paper actually appears to have little obvious linkage to the "Report of the Inquiry into the Export of Defence Equipment and Dual-Use Goods to Iraq and Related Prosecutions" (the Scott Report), many of whose recommendations appear to have been ignored. [Note: A copy of a DMA Notice summarising some of the recommendations of the Scott Report on export controls matters is attached at Annex A, for reference] [20]

  We warmly welcome the fact that the Government is intending (as stated in 1.3) to introduce new primary legislation on Strategic Export Controls. We fully supported this proposal from the Green Paper, stating in our response that:

    "The present situation, in which the legislation dates back to 1939, is extremely unsatisfactory and unhelpful for British Industry, and we believe that new legislation is required. To maintain the 1939 legislation and resulting "Cold War" regulations would be ridiculous, for all of the well thought out and rational reasons contained within the Scott Report (Paragraphs K2.1 to K2.20)."

  We believe that this proposed new legislation has been long overdue, and welcome the fact that the Labour Government and the officials at the DTI have been prepared to take on this task. We hope that, despite the tight restrictions on Parliamentary time which the Government faces, such new primary legislation will be able to be introduced at the earliest possible opportunity, after detailed and considered reflection has taken place, given the urgent need with which Industry regards the whole matter of export controls and licensing. However, as we stated in our response to the Green Paper:

    ". . . Industry is more concerned with the practical aspects of the mechanics of the system, rather than with policy matters. The key issues for Industry are:

        (1)   How should the system be rationalised?

        (2)   How would a new, replacement system work?"

  We are still convinced that this is the case, and welcome the comments (at 4.4.2) about the efforts that the Government is taking:

    ".  .  .  to improve the turnaround of licence applications . . . "

  We stand ready, in collaboration with other Industrial organisations (such as the Confederation of British Industry and other Trade Associations), to assit the Government, and its officials in the Departments involved, in any way with the:

    ". . . comprehensive review of the procedures by which the ECO processes licence applications, the main aim of which is to establish how the ECO could process export licence applications more efficiently."

as referred to at 4.4.2 in the White Paper. We believe that we could bring the knowledge, expertise and experience of Industry to the debate as to how the licensing system can be made more efficient. We hope that, in such a collaborative partnership between Government and Industry, involving constructive discussions intended to make the system work more efficiently, we should be able to devise a "smart licensing" system, better able to cope with the modern commercial needs of Industry, and ready to face the challenges of the Twenty-First Century, without undermining the effectiveness of the UK's strategic export controls system, and the Government's ability to control and prohibit undesirable exports. It must be recognised that British Industry is highly responsible, as demonstrated by the negligible number of licences that are refused each year. It is essential to avoid the situation in which UK firms are tempted to decide to apply for just one more licence—one to ship their whole manufacturing plant and infrastucture overseas to a nation whose export control system is less burdensome! We can assure the Government that Industry wants to be as helpful as it possibly can in this matter, and to be as constructive and positive in assisting in framing an export control system that achieves the necessary measure of control and counter to proliferation.

PARLIAMENTARY SCRUTINY

  We believe that the intended adoption of a negative resolution procedure for the introduction of Parliamentary scrutiny of the Export of Goods Control Orders is a pragmatic and realistic practical solution to this issue, whilst imposing the minimal possible burden on scarce Parliamentary time. It will enable the Government to continue to achieve the essential ability to respond rapidly to fast-developing situations around the World.

  We are delighted that the HMG has rejected (at 2.1.7) the proposal that:

    ". . . there should be parliamentary scrutiny of individual applications either before or after the decision on whether to grant a licence has been taken."

  This whole suggestion (described at 2.1.6), which we are sure has had very strong support from some Non-Governmental Organisations (NGOs) in their responses to the 1996 Green Paper, and for which there has been much political lobbying, was one which caused considerable concern for Industry, for all of the practical and sensible reasons quite cogently argued in the remainder of 2.1.7. We argued in our response to the Green Paper that:

    ". . . Industry would not want Parliamentary scrutiny of individual export licences, and believes that there must be sensible safeguards on political and commercial confidentiality in individual cases. Greater Parliamentary scrutiny on export control matters and increased public accountability must not create opportunities for unrepresentative pressure groups unduly to influence policy or decisions. It is important to maintain a pragmatic, realistic and rational approach to defence exports and to avoid being swept along by the idealistic and emotive arguments of a vocal minority."

  Before this the DMA has expressed its concerns on a similar matter, in response to a request for views from the MoD(UK) of 26 March 1996, on the subject of the disclosure of information on defence exports, in a letter of 8 May (a copy of which is to be found at Annex B).

  We are grateful that the Labour Government has taken these serious concerns on board and had the political courage to make what is a vitally important policy decision on this issue, in recognition of the potentially very damaging effects for British Industry if Parliamentary scrutiny of individual export licence applications has been introduced.

  We are not convinced by the arguments for allowing greater scrutiny of individual export licence applications by Parliament, or its practicability. As far as we are aware only the USA and Sweden have such Parliamentary scrutiny, which is restricted to exports over a certain threshold value. The introduction of such scrutiny in the UK would tie up already scarce Parliamentary time, with an average of some 50 individual export licence applications having to be considered each working day (or some 370 each working day if shipments currently covered by the open licensing system were also to be scrutinised, as some would wish), and the necessity for Parliament or a special Parliamentary Committee having to sit to assess and consider export licence applications all year round, with no respite for any of the traditional Parliamentary recesses being allowed. We also wonder what additionality MPs could bring to the process of considering and assessing export licence applications that is not available from the knowledge base of Government officials within the DTI, MoD(UK) and FCO, that would compensate for the inevitable slowing down of licence processing that would be bound to result, as well as the potential compromising of confidentiality.

  We support the Government's commitment to greater transparency (at 1.1.1) in the field of strategic exports and welcome the plan to publish an annual report on the state of strategic export controls and their application, and other measures which have been introduced (described at 1.2.1 and 2.1.8). We particularly welcomed the release, on 28 July 1997, of the Statement by the Secretary of State for Foreign & Commonwealth Affairs on the "Criteria Used in Considering Conventional Arms Export Licence Applications" (copy at Annex C)[21], which clearly demonstrated the Government's commitment to enhanced transparency. Our response to the Green Paper argued that greater transparency was essential, and we are pleased to be able to support the Government in these endeavours.

  However, we recognise the potential implications of the Freedom of Information Act (also referred to at 2.1.8), and the ways in which this could result in attempts being made to create a greater degree of openness and discussion on individual export licence applications and export contracts than the companies and/or customers involved may feel to be desirable. We addressed these concerns in our response to the December 1997 consultative White Paper on the Freedom of Information Act (copy at Annex D), and will endeavour to do so again when details of the actual resulting legislation are released. We feel that it should be pointed out that the USA's legislation on Freedom of Information, which is constantly alluded to by those demanding greater openness and held up to be a consummate example of such a system, specifically excludes export licensing related information, on commercial confidentiality grounds.

 PURPOSES OF STRATEGIC EXPORT CONTROLS

  In our response to the Green Paper, we stated that:

  "It would be desirable to see the Purposes laid down in some form. If the legislation is to be clarified, then the Purposes behind the policy should also be made clear. Also, if Industrialists are to be open to prosecution for non-compliance, they ought to be entitled to know the criteria against which the judgement has been made. However, there are arguments against the stated Purposes being given the force of legislation due to the need for a more flexible system, recognising fluid changes in World affairs. Therefore, we believe that the Purposes should be set down as guidelines contained in an annex to legislation, rather than in actual legislation itself."

  We are still convinced that this is the case, and are reassured that HMG has agreed with this practical observation, stating (at 2.2.2) that it will:

    ". . . propose that new primary legislation should make provision for the purposes of strategic export control to be set out in secondary legislation."

  We believe that the proposed affirmative resolution procedure for Parliamentary scrutiny of the Purposes of Export Control is the most effective way for this to be undertaken.

  We notice that the list of stated purposes (at 2.2.3) shows some differences from that contained in the Green Paper and to the Scott Report's list of Purposes (on page 1765, paragraph K2.18), which can be compared thus:

Scott Report Green PaperWhite Paper
complying with international treaty obligations to adhere to the UK's international obligations and commitments, eg international arms embargoes To adhere to the UK's international obligations and commitments, including international arms embargoes and international control regimes
to prevent the proliferation of weapons of mass destruction and of missiles and unmanned air vehicles capable of delivering weapons of mass destruction To prevent the proliferation of weapons of mass destruction and of missiles and unmanned air vehicles capable of delivering such weapons
protecting the UK's Armed Forcesto ensure the security of the UK, its dependencies and its armed forces abroad, and of allied countries To safeguard the UK's security interests and those of allies and EU partners
to avoid contributing to internal repression and instability within the country of destination of the licensed goods To avoid contributing to internal repression
Scott ReportGreen Paper White Paper
to take into account the economic and technical capability of the recipient country, and to achieve the least diversion for armaments of human and economic resources To avoid seriously undermining the economy of the recipient country
avoiding the assistance of foreign human rights abuses to avoid contributing to human rights abuse
avoiding the assistance of aggression by foreign countries to avoid contributing to the prolongation or aggravation of existing armed conflicts between states To avoid contributing to international aggression
to preserve international and regional stability To avoid damaging regional stability
avoiding the assistance of serious crime in foreign countries to avoid contributing to terrorism and serious crime To avoid contributing to terrorism and crime
to avoid re-export or diversion of goods, likely to prejudice purposes (a) to (i)
preventing terrorism

  From this comparison it can be noted that Scott only recognised some of the White Paper's Purposes as being legitimate.

  We stated in our response to the Green Paper that:

  "We believe that the definitions of the Purposes are too vague and imprecise, and would be very susceptible to arbitrary and negative interpretation by officials. It is undesirable for there to be any ambiguities which allow decisions to be made without sufficient justification. It is not just the nature of the rules which is important, but equally important is the question of how they will be interpreted by officials—Industry wants predictability in export controls, so that companies always know exactly where they stand. What is needed is the establishment of unambiguous, qualified objectives governing the export of very specific and narrowly defined goods which are of key strategic importance and concern. Such tighter definitions will, by their very nature, make licence processing simpler and quicker for all concerned."

  We believe that the FCO's existing "Criteria Used in Considering Conventional Arms Export Licence Applications", being a far more detailed listing, is more in line with Industry's needs than the new list provided of Purposes by the DTI, which continues to be vague and imprecise. For instance, the White Paper's statements "To avoid damaging regional stability" and "To avoid contributing to terrorism and crime" require the much tighter and detailed definition than the FCO's list of Criteria provides, and we would recommend that the latter are used instead. Apart from the bureaucratic inefficiency involved in maintaining two separate lists, there is also the danger that some confusion could be engendered as a result, despite being consistent with both the Criteria and the EUs Code of Conduct (as stated at 2.2.4).

  This does not mean that the FCO's Criteria is a document with which we have no quibbles—it is broadly in line with the Green Paper's list of Purposes, and an examination of the DMA's response to that section of the Green Paper (see Annex G) [22]will illustrate some of the concerns that we had about both that, and, by implication, the FCO's Criteria. The FCO's Criteria is not perfect, in our view, but it represents an important and valuable development in the drive towards greater transparency.

  Another reason why we are happier with the FCO's Criteria than with the DTI's list of Purposes of Strategic Export Controls is an intellectual one: such a list should, by definition, be restricted to strategic concerns alone, and some of those included in the White Paper's list do not, strictly speaking, really represent strategic matters, which should purely concern the protection of the UK's strategic interests. For instance, as we stated in our response to the Green Paper:

  "Whilst all of the Purposes listed may be very laudable in themselves, it has to be seriously questioned whether some of them (Purposes (d), (e), (f), (g), and (i) especially) are really strategic concerns, in the strict meaning of the word, and, therefore, belong in a list of `Purposes of Strategic Export Control'. Are these Purposes a proper subject for strategic export control legislation, or should this be concerned purely with those national interests outlined in Purposes (a), (c), and (j)? This does not mean that we favour the export of goods which would be used for these purposes, but merely that we do not believe that the UK's strategic export controls system is a legitimate/appropriate means to control their trade."

  These Purposes are important considerations, but are not strategic concerns. We do not want goods which will be used for internal repression and torture, for instance, to be exported from the UK, or support this taking place, but this does not represent, strictly speaking, a strategic concern for the UK. Therefore, the deletion of this from the, now unnecessary, list of Purposes of Strategic Export Control, but its continued retention in the FCO's Criteria, so that, de facto, Government officials do take this into account when assessing export licence applications, would appear to deal with this satisfactorily on a working level.

  We are happy that some of our observations about the Green Paper's list of Purposes appear to have been accepted: for instance our observation that Purpose (d) "to avoid contributing to internal repression and instability within the country of destination of the licensed goods" and Purpose (f) "to avoid contributing to human rights abuse" were an unnecessary duplication, has been recognised by the dropping of Purpose (f) from the White Paper's list. Nevertheless, we would still query the continued inclusion of some of the other Purposes.

  For instance, in our response to the Green Paper we pointed out that:

    " . . . we believe that Purpose (b) is superfluous, as the UK's commitment to countering the threat of proliferation of weapons of mass destruction is already fully enshrined in our international treaty obligations (eg the Nuclear Non-Proliferation Treaty, The Nuclear Suppliers Group, The Chemical Weapons Convention, The Biological and Toxin Weapons Convention. The Australia Group and the Missile Technology Control Regime), as already covered by Purpose (a)."

  We still believe that this is the case, and would welcome clarification from HMG as to why this purpose is necessary.

  We are a little surprised at the dropping of the Green Paper's Purpose (j), dealing with the threat of re-export or diversion, as this was one Purpose with which we cannot perceive that anyone responsible can have any objections, and is an increasingly important subject of concern for Governments around the World, eg the BMARC (Project "LISI") affair. This is clearly demonstrated by the inclusion of this purpose under Criterion Seven of the "EU Code of Conduct on Arms Exports" [see Annex F], signed on 8 June 1998. Therefore, this Purpose's omission from the White Paper's list of Purposes is confusing, to say the least.

  In our response to the Green Paper's inclusion of Purpose (e) we stated that:

    "We note that Purpose (e) could be used contrary to the Scott Report's conclusion (at K2.20) that the maintenance of a technology gap between the UK and other nations is not a legitimate purpose of export control. Concerns based on the control of technology should, in our view, be a matter for the owner of any intellectual property rights. With regard to Purpose (e) it could also be argued that it is not the place of the UK to try to decide, on either economic or technical grounds, what other countries should be allowed to purchase. We also question the practicalities of how and by whom such a judgement could be made."

  Whilst we welcome the exclusion from the White Paper of the technical aspects of Purpose (e), we do continue to have some concerns over the stated Purpose: "To avoid seriously undermining the economy of the recipient country" in the White Paper, whilst fully recognising and supporting the principle involved and the importance of the underlying policy upon which it is based.

  Given the scale of business needed for this to be applicable, there are only a handful of larger contracts (and British companies) which could be affected by this Purpose. Such large contracts would have considerable political and economic importance and it is difficult to envisage a Government refusal of a licence, given that the contracts involved will only have been secured with considerable Government support, both from DESO, the British Embassies or High Commissions involved, and quite possibly from appropriate Government Ministers. Also we feel that, in general, such contracts would almost certainly involve the companies seeking financial support from the Export Credits Guarantee Department (ECGD) to cover the sales—by the time it gets to this stage HMG should really have made such decisions about the possible undermining of the economy of the customer, and not at the later stage when an export licence application has been submitted.

  We query whether it is really the place of HMG to take it upon itself to decide what it believes that other countries can afford to purchase, and also what the end result of such a decision would be (ie would the customer simply go to another supplier, elsewhere?). We stated in our response to the Green Paper that the letters of refusal from the DTI, when export licence applications had been rejected, should:

    " . . . contain a statement that our Western allies will similarly be prepared to abstain from supplying the goods in question. If HMG cannot do this, it should have to demonstrate why a refusal is still appropriate. Export controls are only an effective instrument if the goods in question cannot be obtained from elsewhere. We believe that one of the criteria used in processing licence applications should be consideration of whether any foreign competitors (which companies could list on the licence application forms) would be likely to take advantage of a refusal from HMG and supply the goods sought."

  We still believe that this should be the case, and that it would be especially necessary in circumstances in which a licence has been refused on economic grounds.

WEAPONS OF MASS DESTRUCTION

  British Industry fully recognises and supports HMG's attempts to try to control the proliferation of weapons of mass destruction Worldwide, in appreciation of the extreme threat that these activities generate for all. We stated in our response to the Green Paper that:

    "...there may be some applicability of the Chemical Weapons Convention to the Nuclear and Biological spheres...

      and are pleased that this observation has been accepted in the White Paper (at 3.1.3), and that moves will be made along these lines for the introduction of equivalent prohibitions and controls on the nuclear and biological weapons sectors. Such is the seriousness of the whole subject of the threat of proliferation of such weapons, and their technologies, that HMG will have the full support of all responsible companies in its efforts to try to curb this threat.

  We fully support the proposals outlined at 3.1.2 for it to be made an offence for:

    ...anyone in the UK or a UK person abroad to aid, abet, counsel or procure a foreigner overeseas to develop, produce or use a chemical weapon."

      and for similar controls to be introduced on assisting in military preparations for the intended use of chemical weapons.

  We have noted the statement (at 3.1.3) that:

    "In the case of nuclear weapons, we propose that the leiglsation should exempt involvement in the official nuclear weapons programmes of countries that are members of NATO."

  It has occurred to us that this could be constrained further, in an effort to be seen to be countering proliferation, to "...members of NATO who are existing nuclear weapons powers", unless, of course, HMG wishes to be able to assist non-nuclear NATO members to be able to devleop the capability. Also, we question whether the above definition ("….members of NATO. ") is deemed to include France, whose status, as a member of NATO, has been a matter for debate since 1996, when it withdrew from NATO's integrated military organisation. We beleive that clarification on this matter is required. As one of NATO's only three nuclear powers, France's exclusion as a possible market for British companies on a minor technicality resulting from its exact relationship with NATO would, naturally, be unwelcome. Therefore, the removal of any posssible ambiguities in this matter would be welcome, and it occurs to us that this could be achieved by the stating, in an annex to scondary legislation, specifically which countries are permissible.

  We would argue that one related aspect that needs to be reassessed in the question of liberalising controls on the export of NBC protective materiel, which we feel strongly needs to be looked at carefully. In our response to the Green Paper, we stated that:

    "There is also the "grey area" of civil defence equipment, for the protection of civilian populations (eg Nuclear, Biological and Chemical (NBC) protective materiel), and it has to be questioned whether such purely defensive protection equipment should be controlled as rigorously as it is. The availability of such defensive materiel is unlikely to exacerbate proliferation tensions. The Aum Sect's activities in Japan have clearly demonstrated the ease with which simple chemical weapons technology can be obtained (including from the Internet) and produced, and efforts to try to control the supply of equipment designed purely to protect against such weapons need to be re-examined. "

  We would like to take this opportunity to reiterate that it can be argued that the supply of such materiel can help to counter and deter NBC weapon proliferation, rather than, as British Governments have traditionally seemed to believe, encourage it.

  We must state our continued opposition to the use of the highly ambiguous words:

    ".. grounds for suspecting .."

    in section 3.1.4 of the White Paper, as is used in the current end-use (or "catch-all") clause, which we believe to be too vague. We have no arguments when companies have knowledge or have been told by Government officials, but do have concerns about the use of the above term and the fact that companies can be put in jeopardy of legal prosecution as a result. A failure to suspect may be naive, on occasion, when seen with the benefit of 20 : 20 hindsight, but should not be a potential criminal offence, liable to result in the threat of prosecution. The proposed extension of the controls to cover intangible transfer makes this issue even more contentious in our view.

  We would question why it says on page 23 of the White Paper that:

      "The new legislation would provide for similar provisions [prohibitions on the involvement in developing, producing or using weapons of mass destruction] in relation to most nuclear weapons…."

and would suggest that clarification would be essential as to what nuclear weapons were included and what were excluded in the provisions of the new legislation.

TRANSFER OF TECHNOLOGY BY INTANGIBLE MEANS

  We believe that Industry fully understands the reasons why HMG is seeking to try to bring under some sort of control the whole issue of intangible transfer of technology, one aspect that was totally missing from the Scott Report. In the DMA's response to the Green Paper we stated, on this issue, that:

      "These concerns are easy to state, but impractical to enforce due to the complexity of the issue. Multinational companies have plants and divisions all over the World, which are increasingly being linked on the "Information Super Highway". Whilst there may be scope to make some of these activities illegal, this would be very difficult to enforce, and the wording of any legislation would have to be very clearly defined. Introducing such legislation might signal to the International Community that the UK is taking steps to try to control such activities, but in a very real sense such measures would be impractical. It would be impossible to train all of the personnel involved on "The Web" adequately on export controls and how they apply to their activities. We also wish to point out that, if HMG wanted companies to keep lists of what they transferred, this would be quite onerous."

  We feel that these arguments about the practicability of enforcing the controls are still true, but accept that efforts should be able to be seen to be being made to try to control these activities. Trying to monitor intangible traffic of information (by e-mail, fax or orally) from companies could prove to be almost impossible for the firms themselves, let alone HMG. We welcome the fact that the Government apparently recognises (at 3.2.1, last sentence) the potentially significant enforcement difficulties that may result, and so has decided to introduce narrowly-focused controls, which may have a greater chance of practicability. We fully support the need to have a limited scope for these controls, if they are to be enforceable, and that this focus must, of necessity, be on the areas of greatest concern and threat (eg weapons of mass destruction, etc). The new controls should endeavour simply to close any loopholes that are perceived in the existing legislative instruments (The Chemical Weapons Act 1996 and the Official Secrets Act).

  It does have to be stated that it is seemingly illogical that, at present, you need a licence to post or hand carry hard or computer disc copy of such technical documentation overseas, but do not require it for e-mailing or faxing exactly the same information to exactly the same recipient. Either technical documentation/information needs to be controlled or it does not, and if it does, then the controls must be seen to apply to all methods of potential transmission, in all forms. Therefore, we fully support the proposed objective, as outlined in (2c) on page 23 of the White Paper, which neatly summarises the situation, and the proposals contained at 3.2.2, in relation to dual-use goods.

  We also support the proposals contained at 3.2.3 with regard to electronic networks, such as the World Wide Web—again, either such technical information is worth controlling or it is not, and if it is, then all formats for its dissemination should be controlled. It does have to be pointed out in this particular sphere that the main potential threat comes not from companies, but, rather, from individuals, as firms would have nothing to gain from putting technical information "on the Web". The potential threat posed by these activities was made quite clear from an edition of the BBC's "Panorama" programme at the end of July 1998 on biological weapons which featured an American individual who was uploading on to the Internet precise details on how to prepare simple biological weapons from readily available materials.

  As we stated in our response to the Green Paper:

    "It would be impossible to train all of the personnel involved on "The Web" adequately on export controls and how they apply to their activities."

  It would seemingly be even more difficult to try to educate private individuals in this regard, and to police their activities, but efforts should be undertaken to try to do so.

  However, whilst Industry accepts the spirit of the proposals, we have a number of major concerns about them. Any resulting legislation would have to be extremely carefully worded in order to avoid a potential nightmare, not just for Industry, but also for HMG, and other sectors that could be affected by the legislation (such as Academia). So much on-going activity will, potentially, be affected. The post-sale servicing and maintenance of software, providing updates and support of on-line instruction manuals, providing training for overseas personnel are just some of the many areas that will be affected, and which are regarded by the Defence Export Services Organisation as essential integral parts of the necessary "package" to supply and support high tech exports required for UK Industry to remain competitive.

  The modern defence industrial World is one in which there is, and will continue to be, increasing emphasis on European Industrial rationalisation, collaborative joint ventures, multinational teaming arrangements, collaborative research and development, global electronic commerce and local production to satisfy offset obligations. Such activities cannot function effectively, or, possibly, even viably, with constant bureaucratic interference and delays caused by attempts to try to control exchanges of information. The practicalities of the modern business environment must be recognised and not impeded.

  We trust that HMG will undertake to study closely the system in force in the USA on intangible transfer, to assess how this system works and glean any lessons that may be learnt from it and the practical lessons that the US Government and the companies affected by these regulations have gained from their experiences in operating with the system, whilst framing the UK's own controls. Whilst we recognise that the USA has controls on intangible transfer, we feel that we should point out that it also has set timescales for licence processing and the granting of licences by default—aspects that HMG appears to be strongly opposed to introducing over here, but which can help officials by easing the potential workload arising from such widely-cast controls.

  We would strongly urge that any such controls are only introduced after multinational agreement on the implementation of such measures across the EU (and elsewhere), and are not just imposed on the UK.

  It will be essential to ensure that such regulations as are introduced are very carefully worded, and that full account is taken of their potential implications for spheres such as Academia. In our response to the Green Paper we stated that:

    "The reference to possible Government attempts `. . . to control students being admitted to a course of study. . . ' is somewhat concerning as we believe that export controls are a matter for Government and Industry and not for Academia."

  We still believe that this is the case, and are concerned that the proposals could have an impact on the UK's high-tech academic institutions, whose activities and training are essential for the UK's future technological development, but are frequently heavily dependent for their viability on overseas students (and their fees). Any ill thought-out legislation that was introduced and hand an impact on such institutions' continued survival and activities, would inevitably affect the UK's technology base for the future.

  We feel that the introduction of such controls should be delayed, to allow for detailed consideration and consultation as to how such measures can be effective, policed, but as unobtrusive as possible. We are concerned that this period for consideration could delay the new legislation on strategic export controls, and so would argue strongly that this aspect of the White Paper's proposals be put to one side, to allow for the rest of the legislative proposals to be proceeded with as expeditiously as possible. When such controls are introduced, we feel that the only remotely effective means for this will be by the creation of new Open General Export Licence (OGEL), but stand ready to assist in any way with the proposed further consultations.

TRAFFICKING AND BROKERING

  As with the issue of intangible transfer of technology, we believe, as we stated in our response to the Green Paper, that:

      "It is also seemingly impossible to control the activities of `brokers'."

  However, we fully recognise that some attempt to do so must be undertaken. This became particularly clear in late-1996, when the activities of the Isle of Man-based company Mil-Tech Corporation in Rwanda came to light, and, thus, brought the whole issue of brokering sharply into focus. Following this, the DMA submitted an unsolicited short paper to the DTI in which we stated that:

      "This has been a matter of concern to the DTI and HMC&E for some time, and was raised in the DTI's Consultative Document on `Strategic Export Controls', when suggestions were sought as to how this might be controlled. The recent revelations concerning the activities of `Mil-Tec Corporation' have brought these problems into an even sharper focus, and are likely to result in greater efforts being made to control similar brokering activities. It has been suggested that brokering should be brought into the scope of the UK's Export Licensing System, or even that attempts should be made to put a complete stop to the activities of brokers . . . Introducing legislation on this matter, the wording of which would have to be very clearly defined, would signal to the International Community that the UK is taking steps to try to control such activities, but we are concerned that HMG may be rushed into introducing some hastily and ill-thought out legislation.

      "It must be recognised that there are responsible brokers and there are irresponsible ones, and to try to put a complete stop to these activities would be an over-reaction, which could have an adverse effect on the British economy, as not all brokered deals involve purely foreign-sourced equipment, but can frequently involve a mixed package of British and foreign material (eg the Al Yamamah programme with Saudi Arabia involved an undertaking from British Aerospace to supply Pilatus PC-9 basic training aircraft from Switzerland as part of the overall package). What is needed is some way in which to control brokering activities, rather than prohibiting them, whilst recognising that controls would be largely impractical to enforce. HMC&E has responsibility for enforcing/policing the UK's export controls system, but its resources are such that it is only able to make random spot checks at the UK's ports of departure. How exactly HMC&E could effectively police shipments going through third nations is not quite clear. Controls which are unenforceable will not be effective in deterring companies like Mil-Tec Corp.

      "The introduction of some kind of controls is necessary. We believe that what is needed is some means that enables HMG to prosecute transgressors if (in the very unlikely event that they are) such brokers, activities come to light. We do not believe that requiring such activities to be licensed through the DTI is practicable."

  Despite our observations about the practicability of enforcing and policing such controls, we support the Government's efforts to try to do something about this issue, and to be clearly seen to be doing so. We are pleased that the Government has avoided the impetus to prohibit brokering altogether, but is simply seeking to try to bring it under some sort of control. Therefore, we support the proposals contained at 3.3.2, but would merely reinforce the necessity, as identified in this paragraph of the White Paper, for the goods to be covered by these controls to be very clearly defined. This will be essential for all concerned: for instance, it says on page 24 (section 2d), in reiteration of comments at 3.3.2, that:

      "The new powers would be used to impose similar controls on trafficking and brokering of: . . . certain types of equipment for which there is clear evidence of their use in torture."

  As an examination of reports from Amnesty International clearly reveals, there are a great many means used by repressive regimes around the World, to torture victims, some of which involve the use of extremely mundane items. Therefore, clear definition of exactly what items are to be covered by these controls/prohibitions will be essential.

  We fully support the proposals outlined at 3.3.3, which appear to us to be the logical way in which to proceed, and are happy that the Government perceives the problems that could result, thus not imposing controls on all goods that are subject to UK export controls, but endeavouring to focus on what needs to be controlled as a matter of priority.

  We would, however, advise caution in the introduction of such controls, as they could easily affect the vital appointment and use of agents and local representatives by British companies (for instance in the NBC protective material sphere), thus putting them at a competitive disadvantage to their overseas rivals.

  As with the issue of Intangible Transfer of Technology, we feel that the introduction of such controls should be delayed, to allow for separate detailed consideration and consultation as to how such measures can be framed and introduced, whilst not delaying the rest of the legislative proposals.

ENFORCEMENT

  We fully agree with the proposal outlined at 3.4.1 for HM Customs and Excise to be given the powers to enable it to police the proposed controls on intangible transfers and trafficking/brokering, as well as for the requiring of access to information.

  In our view such laws will be impractical to enforce, in many ways. Effective laws are ones that can be policed and, thus, deter potential wrong doers—ones which cannot be effectively policed will be ignored by potential miscreants whilst imposing a burden on law abiding, responsible firms.

  We realise that HMG has acknowledged the potential difficulties that will result from trying to enforce controls on intangible transfer, trafficking and brokering, etc. However, we are not quite convinced that HMG fully realises the potential scale of the difficulties and workload that may result, and have serious concerns at the potential impact on HMG's licensing resources. On page 26 of the White Paper the DTI gives (under "Other costs") its estimate of the potential impact of enforcing the new, proposed legislation. These are estimated to be, for the DTI ". . . equivalent to one new member of staff at the licence processing level at a total cost of £25,000 per annum.", and for other Government Departments ". . . involved in the licensing process . . . either a similar or lower level than this.", whilst, specifically to cope with the proposals on intangible transfers, trafficking and brokering would entail HM Customs and Excise requiring ". . . additional resources, estimated as likely to be in the region of £500,000 per annum." (We would question how much of a "guestimate" this latter figure represents).

  We are concerned that this may well prove to be a significant underestimate of the resource costs required, and we fear that the new controls on intangible transfer, trafficking and brokering, etc alone could result in a considerable upsurge of enquiries and an avalanche of additional export licence applications from companies and others (such as Academia) who may perceive themselves to be potentially affected by the new regulations, unsure as to exactly what the new regulations were and seeking to "play safe". If this were to happen, it would, naturally, have a potentially serious impact on the export licensing system as a whole. Even if some kind of Open Licensing (especially an OGEL, which would be essential) was introduced to try to alleviate the potential problem, we are still convinced that a much greater burden is going to result than the White Paper implies.

  With regard to the potential costs of the new controls for Industry, and the White Paper's request for inputs from companies on this (at 1.5.1, and on pages 25-26), we have strongly encouraged our Members to submit their best estimates to the DTI on this matter, and hope that this elicites sufficient response for a meaningful assessment to be able to be made. However, we believe that it is inevitable that an increase in the complexity and scope of the licensing regime will, by its very nature, increase the costs of compliance for companies.

  Whilst we know that the proposals with regard to intangible transfers are in line with US regulations, we are deeply concerned that HMG is not fully aware of the potential for problems and the scale of the workload that will result. The potential for the increased flow of applications could have severe and damaging resource implications for HMG departments, as well as slowing down the system, to the detriment of both HMG and Industry.

  We believe that it should be the responsibility of the companies themselves to try to control the flow of such information—in many ways they should be seeking to so so in any case, in order to protect their own commercial interests. We believe that, in the long-term, it will be essential, and is inevitable, that the onus of responsibility will be passed on to Industry. As we stated in our response to the Green Paper:

      "Anyone who wants to can easily beat a system which relies overwhelmingly on companies' honesty. A more effective system will involve HMG resources being redeployed to undertake the proactive seeking out of the dishonest with more effective policing of the system. We have formulated a proposal for a `Self-Assessment' scheme as a possible export controls mechanism, which would merely be a logical extension of the OIEL system. This would involve companies at the start of each year submitting details of proposed exports in the 12 months ahead, at the end of which time senior company representatives would sign self-assessment forms stating what goods had been shipped, with prior notification to DTI, to which `safe' customers. These executives could then be held personally and legally accoucntable for any deceit that was uncovered."

  We believe that our proposal for the "Self-Assessment" scheme (copied at Annex E) should be re-visited and considered as a way in which the Open Licensing system can be further expanded, in an effective and efficient way.

  We would be happy to try to assist HMG to try to identify alternative potential solutions, aimed at assisting HMG to achieve its aims, without (unnecessarily) adversely affecting Industry's interests and activities.

PRESCRIBING EXPORT LICENSING PROCEDURES IN LEGISLATION

  We stated in our response to the Green Paper that:

      "There is a need for a clearly written and transparent procedure to be published explaining how the system works, but there could be provision in primary legislation for HMG to issue secondary regulations to cover this. There would be concerns over what would be included in the legislation, as subsequent amendments would be very difficult to introduce under Parliamentary legislative procedures. We would not want anything whose nature is inflexible."

  Therefore, we fully support the White Paper's conclusion (at 4.1.1) that:

      "The Government considers that there could be merit in setting out the basic elements of the licensing process in primary legislation but not detailed procedures. The latter are, in the Government's view, best included either in secondary legislation, or in guidance material as at present, or a mixture of the two."

RATINGS ADVICE

  We are delighted that the White Paper proposes (at 4.2.1) that:

      ". . . there may be a case for decisions given in writing in response to an export licence application that no licence is required (NLR decisions), being made legally binding . . . [thus, meaning that] . . . a recipient of an NLR decision or a third party would be able to rely upon it in civil proceedings . . ."

  We believe that this will be most strongly welcomed by Industry. Also to be strongly welcomed by Industry is the possibility, as outlined at 4.2.1, that:

      "It would also have the effect of making `licence required' decisions subject to judicial review."

  There are many smaller sub-contractors involved in the supply of components, etc, who would welcome any system that enables them to appeal against a decision that their goods are licensable, when there is some element of doubt in their own minds on the matter.

  One other aspect of the Ratings system which also needs to be addressed, in our view, is the question of the speed of response—at present in many cases it is actually quicker for companies to go through the full process of applying for an export licence than it is to get a ratings decision. Therefore, many companies find it quicker (and safer) to apply for a licence when they are in any doubt as to their goods' licensability—this is inefficient, unnecessary, burdensome and only succeeds in slowing down the whole licensing system due to the need to deal with and process such nugatory applications. A faster decision making system for Ratings is clearly required.

POWER TO REQUIRE INFORMATION FROM COMPANIES WHERE THIS IS NEEDED TO MEET THE UK'S INTERNATIONAL OBLIGATIONS

  We agree that the proposal (at 4.3.2, and on page 24 at (2e)) that information should be sought from companies is necessary, and are merely concerned that the system itself (as outlined at 4.3.3) should not transfer a burden on to Industry. We accept that Government will need to require information from companies to enable it to meet its international obligations, and would merely ask that the system adopted for this should impose the minimal possible burden on Industry, as promised on page 24 at (2e). We would, however, ask what possible additional information it is that could be required that is not already included in the export licence application itself.

  However, we seriously question the necessity for applicants to have to reveal the details of contract values on export licence applications, at least below a threshold that could be relevant to the issue of undermining the economy of a recipient country. The need to try to protect such highly sensitive commercial information, in an era when Freedom of Information is coming to the fore, will be of paramount importance for companies. Efforts must be made to ensure commercial confidentiality in this regard, and the removal of the unnecessary requirement upon companies to provide such pricing information from the export licence application form would assist in this.

TIME LIMITS FOR PROCESSING LICENCE APPLICATIONS

  Whilst we warmly welcome the White Paper's statement (at 4.4.2) that:

      "We . . . recognise the importance to industry of licence applications being dealt with promptly . . . "

  We are extremely disappointed that the White Paper has rejected (at 4.4.1) the proposal contained in the Green Paper (at 2.4.10) for the adoption of formal time limits, which we had most enthusiastically endorsed in our response. All responsible companies accept that the vital principles behind export controls are sensible and sound—it is the processing (and, especially, the time that this takes) that exasperates firms. We argued in our response to the Green Paper that:

      "HMG should have 20 working days in which to review an individual export licence application, after which the licence is automatically granted if no objection has been raised. This timescale (of 20 days) has been the DTI's own stated target turnaround timescale for some time now . . . . There should also be a time limit for further detailed examination of a `problematical' application, which we would suggest should be an additional period of 20 working days . . . . Further, we would like to see timescales laid down for the various stages of the processing procedure . . . . We recognise that HMG officials would not welcome being subjected to a system that incorporates a deadline, but Industry, by the very nature of its business activities, has to deal with deadlines that are imposed by customers and, therefore, any Government functions that have a direct bearing on companies' ability to meet these deadlines, as export licensing does, should reflect these commercial realities and, similarly, be subject to deadlines. Commercial deadlines confronting companies are far more complex than those faced by HMG's export licensing officials, in that they have to balance information on timescales on a whole range of matters, including: delivery, production, material procurement, shipping, letters of credit, etc, as well as possible delays in the processing of export licence applications. Due to delays in the current open-ended system, companies are increasingly having to take considerable commercial risks in the ordering of materials and components and the commencement of production runs in advance of export licences being approved if they think that they are likely to be granted, in order to try to keep delivery times as short as possible. We are convinced that a 20-day turnaround timescale is not unrealistic, and that having such a deadline would have the benefits of helping to concentrate officials' minds wonderfully on the task in hand and imbuing them with a greater appreciation of Industry's sense of urgency."

  The rejection is probably one of the biggest disappointments to be found in the White Paper for British Industry, which, given the increasingly competitive nature of the World market, very strongly wants and needs, tight timescales to be set, rather than for there to be a continuation of the current archaic, nebulous open-ended system, which appears to prompt the attitude "the decision is going to take as long as it takes". We feel that it must be pointed out that the UK's two major defence exporting rivals, the USA and France, have both now in place systems for the granting of licences by default, and we feel that HMG should endeavour to examine carefully these nations' experiences with their systems, before dismissing the concept out of hand.

  We understand the concerns of Government that a system in which licences are granted by default after a set timescale could result in unwelcome exports "slipping through the net", yet would like to point out that this would only be due to bureaucratic incompetence and inefficiency, in that such an application ended up at the bottom of some civil servant's in-tray and was not actioned, and query why it is necessary to make Industry suffer from this. Surely the Government should be endeavouring to try to erradicate such bureaucratic inefficiency and, thus, remove this concern from consideration. The current system allows companies to have to be the victims of the repercussions and effects of bureaucratic inefficiencies, leading to delays in processing licences and, in some cases, lost orders (and jobs) as a result. This is symptomatic of a negative licensing system, in which a "yes" decision can put the Government officials involved in peril of censure and losing their jobs, if the benefit of hindsight (with which so many critics are blessed) shows that this decision was questionable, whilst a "no" decision will not do so (although it may jeopardise the jobs of workers in the companies involved), no matter how "safe" the proposed export would have been.

  There is a genuine need by Industry for very fast turn around of licence applications. If the British Defence Industry is to continue to be competitive in the highly lucrative World market, it cannot continue to function effectively whilst hampered by an archaic open-ended export licensing system, in the modern commercial World. We believe that the risk of unwelcome exports "slipping through the net" in the granting by default system is greatly outweighed by the potential risk of loss of orders (and jobs) resulting from bureaucratic inefficiency. The truth that no-one has ever dared to state is that no full-proof export control system, which makes it impossible for there to be unwelcome "slippages", has ever been devised by anyone, and almost certainly never can be. We are not convinced that a system of granting by default is, if operated properly and efficiently, any more prone to "slippages" than the current open-ended one that is being operated at present—and it would appear that the US and French Governments agree with this observation. We refuse to believe that our Government officials who deal with export licensing are less capable than those of our major trading rivals.

  We are convinced that it must be possible to introduce an efficient administrative system for assessing export licence applications which would considerably, if not totally, undermine the validity of the concern about the accidental granting of undesirable licences by default. The introduction of some kind of "triage" control upon initial receipt of applications could achieve this. It is quite clear that the overwhelmingly vast majority of export licence applications received are completely non-contentious, due to the nature of the goods involved and the fact that the customer is considered to be "safe" (despite HMG's refusal to admit that it is possible to identify "good guys" and "bad guys"), and, therefore, that they require minimal scrutiny. In these cases the time taken is purely for the administrative processing of paperwork. The introduction of some kind of triage control on initial receipt would allow such non-contentious licences to be granted by default and enable the DTI and its advisers in MoD(UK) and FCO to concentrate on the more contentious applications, which do need careful assessment and consideration.

  If the introduction of formal time limits is now regarded as being no longer a viable option by HMG, as appear to be the case, it will be essential to ensure that the existing open-ended system is made as efficient as possible, and to examine how this can best be achieved. To this end we welcome the Government's efforts (as outlined at 4.4.2) to increase the speed of the system, although this does little to address the fundamental problems of timescales, and would strongly encourage the opportunity for discussions between Government Departments and Industry on how this can best be done further. We firmly believe that for this comprehensive review to have any success, Industry should have an input to the discussions. Certainly the US Presidential Advisory Board on Arms Proliferation Policy (as quoted in our response to the Green Paper) has recognised the invaluable contribution that Industry has to play in framing new export control regimes.

  We question whether the DTI's long-standing 20 working day turn around timescale for "circulated" licence applications still retains any legitimacy in the modern, highly competitive business World, and in the face of developments in modern communication technology, and are convinced that shorter timescales should be achieveable. We know that both the MoD and FCO have stated in the past that their own target turn around timescale are "10 working days", and are convinced that, even if these cannot be reduced further, as they run concurrently, it should be possible to reduce the remaining 10 working days to meet the DTI's overall target timescale, during which its own officials administer the system, without adversely affecting the system and producing overly hurried decisions. With the proper introduction of more modern technology (eg greater use of e-mail), we are sure that an export control system fit for the 21st Century can be created.

  It has to be pointed out that the modern global commercial world can frequently require extremely rapid turn-around times, especially with regard to the provision of spares for the repair of unserviceable equipment. For instance, in the aviation sphere, customers can frequently demand a 24-hour turn-around time for vital spares to repair an aircraft. Companies need firm, predictable, guaranteed, rapid delivery timescales, especially for the post-sales support of equipment. If British suppliers gain a reputation that they cannot achieve such levels of efficient customer service support due to the UK's export licensing requirements, this will fatally undermine their future export sales efforts, to the detriment of the national economy. The MoD(UK)'s Defence Export Services Organisation (DESO) has recognised the vital importance of the provision of adequate post-sales spares and logistic support, and has been pushing this theme to Industry for a number of years now. If this is to be achieved, then an export licensing system which can permit this must be an essential component. British companies must be able to offer customers a quick and reliable response time to meet the latters' needs, if they are to be allowed to compete successfully in the highly competitive modern commercial world, in which the market-driven demands of "faster, cheaper, better" predominate.

  We recognise that pushing for faster turnaround timescales could result in more refusals being given, as officials have always stated that the quickest and easiest answer is always going to be "no". What is needed is a means to try to improve and shorten the timeframe without increasing the rate of refusals. We would be happy to discuss ways in which this could be achieved, without alarming the Government or undermining the effectiveness of the export control system. We have a number of possible suggestions, taking into account the Government's opposition to granting by default. For instance, could it not be possible to establish a time limit (we would suggest the DTI's target 20 working days) beyond which a company has a right to demand to know exactly what specific reasons there are for the application being delayed, rather than the current situation in which the DTI desk officer involved simply "fobs" the company off with a meaningless and uninformative statement that "the application is with our advisers" and/or to demand to know specifically with whom the application is "sitting", so that they can contact the official involved direct to discuss the matter? The introduction of such measures would greatly increase the transparency of the system.

GIVING REASONS FOR REFUSING EXPORT LICENCES

  Whilst we accept, as stated in the White Paper (at 4.5.1), that:

    "it is already standard practice for the ECO to give in all cases reasons for refusal which are as full as possible . . ."

we believe that many companies have had actual experience of receiving extremely uninformative letters of refusal from DTI, which go into little, or no, detail as to the grounds on which a refusal was deemed to be appropriate. We feel that we must reiterate our comments in our response to the Green Paper that:

    "Even in the most sensitive cases, it should be possible to provide formal explanations for refusal indicating which aspect of the application led to its refusal, without compromising any intelligence sources. Companies do not want or need to know the details of the sources of any intelligence, but would find it invaluable to receive any information on dubious customers (eg if the proposed consignee is merely a front organisation for "undesirables"). Also, it is palpably absurd that defence companies, very many of whom will be "X-Listed", with named security control officers (and most of whose senior executives will have security clearance and be signatories of the Official Secrets Act) and are, thus, approved to receive, handle and store classified material, cannot, apparently, be trusted with any information that might even hint at the existence of an intelligence source."

      We would still strongly argue, as stated in our response to the Green Paper, that it should, at the very least, always be possible to identify the specific DRI Purpose(s) of Strategic Export Control and/or FCO Criteria Used in Considering Conventional Arms Export Licence Applications that the proposed sale would infringe to the company involved. We recognise that HMG must endeavour to try to safegard its intelligence sources, but are convinced that more fulsome reasons can be given to companies without revealing the details of the source of any information.

      On this matter, we are sure that Industry will hope that the proposed, forthcoming Freedom of Information Act will result in a greater degree of openness and transparency than many are currently experiencing.

      However, we feel that we should point out that, such is the negligible number of refusals given per year, that this issue is, in many ways, of far less overall importance than that of delays in the export licensing system, which afflicts a very much larger number of licence applications, and creates much greater problems for Industry.

    APPEALS

      We are delighted that the Government has accepted (at 4.6.2) that:

    ". . . some formalisation of the appeals process is necessary . . ."

  Whilst, as we argued in our response to the Green Paper, Industry would have prefered:

    ". . . an administrative appeals process, which should be completely independent of the original decision makers . . . "

and we argued for the appointment of an independent Export Control Ombudsman. We regret that the proposed system is not fully independent, but are not implacably opposed to the creation of the suggested inter-departmental appeals committee, which may be able to perform the necessary task and which the Scott Report recommended, and we will be keen to evaluate, on the basis of practical experience, how this committee performs in practice.

  We are happy that the Government has accepted our observation that:

    ". . . there would be grave concerns over whether such officials would overturn a decision made by their . . . Secretary of State/Minister."

and states in the White Paper (at 4.6.2) that:

    "Where an export licensing decision had been taken by a minister, the appeal should also be considered at ministerial level."

  Short of a fully independent appeals procedure, this would appear to be the only practical way in which such decisions can be appealed against by companies, with any chance of success.

  We agree with the statement (at 4.6.4) that reference should be made in primary legislation to the right to launch an appeal, and also concur (at 4.6.4) that the details of the appeal procedure should be set out in secondary legislation, as this will aid in the perceived transparency of the system. we are grateful that the Government should be apparently endeavouring to formalise the existing appeals procedure before the introduction of new primary legislation, in recognition of the need for the appeal system to be introduced, as described, as soon as possible.

  We are grateful that the White Paper accepts (at 4.6.2) the need for speedy decisions in any appeals procedure, and agree that the system as outlined should, probably, be able to achieve this better than some other possible systems might have been able to do. We are also pleased to see (at 4.6.1) that the committee would exclude those officials who had been involved in handling and assessing the original application, and the commitment (at 4.6.2) that full reasons for a decision to uphold a refusal would be provided in writing to the appellant.

  We would be extremely surprised if companies needed to take as long as the suggested (at 4.6.3) 28 days timescale in which to lodge an appeal, although we are grateful that Government has decided to give companies such a long period in which to consider whether to appeal or not. We regard this timescale as being not only "reasonable", but actually quite generous (and probably unnecessarily so)! Given the great importance with which companies regard the issue of licences being processed as fast as possible, we believe that a shorter timescale for companies to make the simple decision as to whether to appeal or not is probably appropriate.

  We feel that it should be pointed out that during the period in which a company is contemplating whether to appeal or not there should be a moratium on any announcement being made by anyone about the refusal. The last thing that companies want is a repeat of the situation in September 1997 when statements by the Secretary of State for Foreign & Commonwealth Affairs about a number of very recent export licence refusals (including one for armoured Land Rovers for Indonesia) fatally undermined the chances of success of any possible appeals that the companies involved might have been considering raising.

  We are grateful that the Government has rejected (at 4.6.3) the suggestion for the granting to:

    ". . . third parties the right to appeal against a licence being granted."

and also that the Government has rejected (at 4.6.3) the possibility of charging appellants for raising an appeal.

  On one other important point, as we stated in our response to the Green Paper:

    "Companies should have the right of appeal, not only for refusals but also on the grounds of unreasonable delays . . . "

  If the suggested introduction of formal time limits has, as is apparently the case, been firmly rejected, we believe that this element will be even more important, and strongly commend its most earnest consideration. The ability to appeal against excessive delays would be welcomed by Industry.

COVERAGE OF CONTROLS IN EXPORT OF GOODS CONTROLS ORDERS

  We are extremely disappointed that there is no intimation in the White Paper (especially at 5.1) of any efforts being made to try to reduce the scope of coverage of the Export of Goods Control Orders, or to introduce clearer categorisations of the goods covered. In our response to the Green Paper we argued forcefully for the scope to be reduced, stating that:

    "The question of the scope of the controls really goes back to the very heart of the philosophical debate on the "Purposes of Strategic Export Controls". The trend over the last five decades, as successive Governments have become confused between licensing criteria and genuine defence and security considerations, has clearly been towards a more all-embracing export control regime, covering increasing numbers of goods to all destinations, and this trend must be reversed. The UK's export controls system should only really concern itself with sensitive goods and key critical technologies going to a few sensitive destinations, thus focusing on exports that it is essential to control. We would like to see a system introduced whereby only applications for sensitive, strategic goods to questionable/diversion-prone destinations have to go through the full processing procedures. Better "targeting" of the system is essential, and the DTI's efforts of late to remove a number of areas where individual export licences were required have been warmly welcomed by Industry.

    ". . . It clearly should be possible to reduce the scope of current controls by a very large proportion through more efficient targeting. Industry fully appreciates the need for careful scrutiny of applications of a genuinely sensitive nature, but the current system is too wide ranging for the available bureaucratic resources to cope efficiently. Resources must be redeployed for concentration on applications which do require a high degree of scrutiny and it is essential to avoid the considerable nugatory effort, both for HMG and Industry, in implementing full licensing procedures for sales which are non-contentious and, thus, are going to be approved anyway."

  The problem is a very simple one—the existing HMG resources tasked with assessing and processing export licence applications are insufficient to cope with the current scale of workload involved in a consistently efficient manner. Therefore, for the system to achieve the level of efficiency required, HMG should increase the resources that it deploys in export licence processing or reduce the level of the workload involved, either by reducing the scope of the controls or by reducing the level of scrutiny to which applications are subjected. We are not convinced that HMG will fund additional resources or be prepared to contemplate reducing the level of scrutiny with which it examines licence applications. Therefore, the scope of current controls should be reduced, to create a more focused system which will be more efficient and less unnecessarily burdensome, both on Industry and on HMG.

  We have a number of recommendations as to how this could be achieved, most of which were refered to in our response to the Green Paper (see Annex G).

  The need to apply for export licences in order to return goods to an original overseas supplier is seemingly ludicrous—it achieves nothing in the way of preventing proliferation or controlling technology falling into the "wrong" hands, but adds considerably to the burden both on Industry and HMG. An Open General Export Licence (OGEL) covering the export of goods for repair or replacement to the original supplier would make sense, in our view.

  Also, having to go through the full licensing system for the temporary export of small numbers of goods for overseas demonstrations or for exhibitions, makes little practical sense in our view, and we are convinced that an OGEL covering this would also be advisable.

  We are happy with the recommendations (at 5.1.1) to try to define in clearer and tighter terms phrases such as "specially designed" contained within the EG(C)O and welcome the suggestion that this may result in these definitions being adopted internationally. We would like to extend an offer from Industry to assist in any way with this definition process. We believe that clear definitions are always essential, as it is vital to try to avoid a situation in which ill-defined wording allows implementation to be open to interpretation by minor officials.

  With regard to the proposed military end-use (or "catch-all") control (at 5.1.2), we would like to state that, in our view, the European Commission has already gone just about as far as it is sensible to do so along these lines, and we would not welcome efforts by HMG to go further than this. We are very wary of the potential introduction of such a military end-use control and would strongly urge Government to allow Industry to be brought into the consultative discussions on this proposal.

END-USE MONITORING

  Industry fully supports the need to counter the threat of diversion, which aids the activities of proliferators. As part of the Government's ongoing review of end-use controls, and in line with the stated (at 5.2.1) aim to:

    ". . . seek co-operation to build a common approach on effective monitoring of end-use within the European Union and under the Wassenaar Arrangement."

we hope that they will be considering our suggestion, in our response to the Green Paper, that:

    "It would assist Industry if there was a standard format for end-user statements, and we suggest that there could be scope for the Western European Union (WEU) to consider introducing such a harmonised format. At present the USA and France do have (very similar) stated formats, and that of the French could easily be used as the model for a proper, WEU-wide, harmonised end-user certificate, thus putting into common use a system which is already accepted and familiar Worldwide. If it was not possible for the WEU to introduce such a system. HMG should consider introducing its own version, closely based on the French and US models."

  Such an initiative would be in line with the Government's stated aims, and would be of considerable benefit to Industry.

  With regard to end-use control, we would re-state, as we said in our response to the Green Paper, that:

    "We wish to re-emphasise that Companies cannot be made more responsible for end-use control than they already are."

  Better monitoring of end-use can only really be done effectively by Government, utilising the resources that it has at its disposal. It is also important that the Government avoids introducing any measures that would simply serve to alienate very important overseas customers.

  One other aspect of end-use control which causes us some concern is the way in which the current requirements for end-user undertakings can severely hamper British sub-contractors seeking to supply goods to overseas prime contractors for equipment which may be being produced speculatively, and, thus, with no exact firm knowledge as to who the final end-user is going to be, or for instances in which the prime contractor involved may, for confidentiality reasons, be loath to let a UK sub-contractor know who the customer is going to be. Any means of end-use control must be introduced by some non-burdensome means, and must not hamper Industry, being multi-lateral in nature so as not to put the UK at any kind of disadvantage, in recognition of the practical commercial realities of the modern business world.

LOCATION OF EXPORT LICENSING AUTHORITY

  We are delighted that the Government has accepted (at 5.3.3) the arguments, which we, for one, put forward in our response to the Green Paper, and at variance to the recommendations of the Scott Report (as summarised at 5.3.1), that:

    "We believe that there should continue to be one central coordinating authority for all licence applications, and that this authority should continue to be the DTI (the department responsible for the promotion of UK exports) . . ."

  We fully concur with the comments (at 5.3.2) about the undesirability of having a number of Government departments being responsible for export licensing, without one central, coordinating authority.

  However, we would still continue to argue, as we stated in our response to the Green Paper, that:

    ". . . we believe that the DTI's resources within the ECO should be enhanced . . ."

  At present Government officials' lack of understanding of Industry's needs and problems, as well as their frequent lack of technical knowledge, is a major cause of the delays in processing applications. There is a clear lack of resources, especially evident during periods of heavy workload of in holiday seasons, which desperately needs to be addressed.

  One way to help to remedy this lack of technical knowledge is to allow, and encourage, direct communications between the DTI's advisers in MoD(UK) and FCO, who assess and process the applications, and the companies concerned. There are great frustrations caused by the current lack of direct communication when problems or queries arise. Direct, informal contact, which we are sure in an era of "Open Government" should be being encouraged, would help both sides enormously over issues where simple clarification is needed. Many in industry fail to understand the great reluctance of Government officials to be exposed to the companies involved directly—(most) Industrialists do not bite (often). Officials must fully understand what it is that they are being asked to assess in order to make correct decisions, and, naturally, the greatest reserve of such expert knowledge to assist in this lies with the companies themselves.

  It is essential that the staff in the Government departments concerned are of as high a calibre as possible. In recognition of the vital importance of the role that they are performing. We would query whether it is the quantity of staff that is lacking, rather than their variable quality which needs to be addressed—we are convinced that the same, or, even, a smaller, number of staff, of uniformly high calibre, and with the necessary greater technical knowledge, could make the system function more effectively and efficiently. We would suggest that "pools" of technical knowledge be established within the DTI, with staff being allocated either to look after specific companies or technologies or countries.

  We also wish to restate our comments from our response to the Green Paper with regard to the need for a programme of education for HMG officials on Industry's needs, so that they have a much greater understanding and appreciation of what these are and why companies regard the speed of licence processing as being so important. We would be happy to co-operate in such a process in any way.

CHARGING FOR EXPORT LICENCES

  Naturally, we are delighted that the Government has rejected (at 5.4.1) the proposal contained in the Green Paper (at 2.4.16) for the possible introduction of charges for exporting licences. Industry warmly welcomes this decision and congratulates the Government for avoiding the temptation to introduce such a system.

MISCELLANEOUS COMMENTS

  We would question whether the list of two potential Options (on page 24) for dealing with the situation is really exhaustive, or whether other options might not be able to be perceived and formulated. We seriously doubt whether the proposals put forward in the White Paper are really the only option to doing nothing, and letting the current unwelcome situation drag on, as is.

  We welcome the fact that the Government states (at 3.3.3) that it seems to have some faith in the export control laws of other countries, whilst it rejects the suggestion of introducing "licence-free" zones encompassing "safe" countries in whose export licensing procedures HMG has confidence, which we put forward in our response to the Green Paper, due to the potential threat of diversion and re-export.

  As previously stated, one aspect of the current licensing system which Industry firmly believes should be actioned is the question of companies' access to the DTI's "advisers", in MoD(UK) and FCO. At present when companies attempt to enquire about hold-ups with licence applications, all that the DTI desk officer will (or can) tell them is that the application is "with our advisers". This lack of transparency is wholly unsatisfactory, especially in an era of "Open Government", and we feel strongly that there would be considerable benefit for both sides if the advisers could be encouraged to allow this traditional barrier of annonymity to be breached to allow more direct access to the companies involved, especially when they have queries about a licence application and need clarification or more information.

  We would again like to reiterate our query on the necessity for pricing information to be included on the export licence application form. Such information, which is highly commercially sensitive, is completely irrelevent for the assessment of all expect for the very largest value applications, which are extremely few in number. It has to be pointed out that there are no similar controls on the export of civil goods to the same destinations. The requirement for the inclusion of nominal pricing information can (and does) only create administrative problems for companies (especially with HM Customs and Excise officers if there are discrepancies caused by exchange rate fluctuations, etc in the period between the submission of the licence application and the actual shipment), without adding any value to HMG's deliberations in consideration of the applications, which should only be concerned with the technology, nature and quantity of the goods involved. This could well be exacerbated following the introduction of the Freedom of Information Act, when companies will be concerned that this commercially sensitive information may be able to be brought out into the public domain, and, thus, into the hands of competitors.

CONCLUSION

  It is essential that HMG looks carefully at the export control systems operated by other countries, and the reviews that these nations have been, and are, undertaking into their systems to see what lessons can be learnt.

  We would argue that not just legislation with regard to weapons of mass destruction, but also in most, if not all, other areas of export control, efforts should be made to ensure that (as described on page 23, paragraph 2b)) there is minimal, if any:

    " . . . impact on reputable businesses or individuals."

  We believe that there is a need to ensure that there is a clear distinction drawn between responsible, legitimate defence companies, and unscrupulous traffickers.

  We are convinced that, working in partnership, Government and Industry should be able to frame an export control system which is simplified and more transparent, and which meets the essential needs of both without undermining the vital interests of either.


20   Not printed Back


21   Not printed Back


22   Not printed: copies of all responses to 1996 Green Paper are in the Library of the House of Commons Back


 
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