Examination of Witnesses (Questions 60
TUESDAY 10 NOVEMBER 1998
A SHARMAN, MR
B SALZMANN, MR
D EVANS, MR
N PREST AND
MR D GARLAND
60. You state clearly that you understand the
reasoning and objectives behind the proposal to control intangibles
but have doubts about the proposals in detail and call for delay
as you do over brokering and trafficking. Is it not a bit of a
cop-out on your side?
(Mr Prest) This is a difficult area. It should be
recognised that until not very long ago the export of intangibles
of any sort, if we disregard weapons of mass destruction and one
or two specific areas for the moment, in the general field of
defence equipment, export of intangibles was not controlled at
all untilI cannot quote you the exact dateonly in
the last ten years. It used to be physical goods only. Drawings
and data and supporting documentation were not controlled. The
provision was then introduced to control intangibles in physical
formif that is the correct expressionbeing documents
and computer disks of data which physically have to pass through
the ports which could be licensed. What the White Paper is now
saying is that other intangibles, e-mail and fax, could relay
the same information and are not licensed. It says that this is
obviously inconsistent and we should do something about it. I
think this is an area where the White Paper is thin and a lot
more thought needs to be put in to what they are trying to control
and how it should be controlled because the potential is almost
endless. We are a multi-national business. In Alvis we have manufacturing
operations outside the UK in Singapore, United States, Germany,
Norway, Sweden and perhaps one or two others. We are regularly
transferring technical data of one sort or another. This is not
classified but it is company technical data by e-mail, by fax,
between engineering departments because one company is acting
as a sub-contractor to another company in our group. The process
of opening out export control to transfer of that data is not
a small undertaking. The White Paper talks about one extra person
in the licensing authority at £25,000 a year. I sniggered
when I saw that. I do not see what basis they have to estimate
that on. Potentially this is a very big subject which has not
been properly thought through in terms of the limits which should
be applied. They are obviously planning to draw it quite broadly.
To make it workable they then have to introduce some very large
exceptions in open general licences to the way that reputable
multi-national companies transfer information between sites in
countries say in the western alliances which are all politically
favourable to the UK interest. They would have to introduce some
very large exceptions for data transfer of that sort, which is
not mentioned in the White Paper. This is a large subject and
they need to think a bit more about what the objects of control
are because classified information is legally controlled anyway.
To some extent there is duplication here: somebody who transferred
classified information to a non-authorised recipient would be
breaking the law anyway. A fair amount of technical data is caught
by that. Technical data in other vital areas, weapons of mass
destruction and so on, needs to be very tightly controlled obviously
in many forms. I wonder whether the practical objects of controlling
other data are really that important, taking into account also
the role of the Official Secrets Act. I think it needs to be viewed
a good deal more. The assumption that somebody can actually do
something useful with data without more input, build an equipment
with no components ... A piece of defence equipment is a complicated
sub-assembly drawing components from many sources which would
themselves then have to be licensed. You cannot simply get into
production of something because you have sent a set of blueprints
over an e-mail. It needs a lot more thought as to what the true
objects of this are and then to try to frame legislation around
them and have a control mechanism which is non-burdensome to industry,
of which there is no sign in the White Paper at the moment. Theoretically
it could be extremely burdensome.
61. You are saying nobody could just go and
produce super guns because they have the plans and the drawings.
(Mr Prest) That is a very good example. They had to
order a forging from Sheffield.
(Major General Sharman) We understand and have no
difficulty with the principle behind what we believe the drafters
intended. When we first saw it we were not that concerned other
than for the sort of reasons that Mr Prest has described. Interestingly
it was when we learned of other completely non-defence organisations
who began to express concern that we started to think about it
seriously and the implications for ourselves, but also the great
concern that suddenly there would be all sorts of people who were
not involved in defence exports, doctors, scientists, and so on,
who might flood the licensing system to the detriment of our business
because with only one extra person in the DTI the whole system
might grind to a halt. It was not a cop-out. The situation on
trafficking and brokering to which you also referred is similar.
Again we fully understand and sympathise with the idea of catching
the cowboys. That is absolutely fine. What we want is to ensure
that the wording which emerges in the legislation finally does
not damage legitimate business, given the way in which the global
nature of business is now conducted with most companies having
representatives in their overseas countries and so on. By all
means catch the cowboys but do not damage legitimate business.
62. There is just the problem of who the cowboys
(Major General Sharman) They are not members of the
63. In terms of the delays in getting licences
which you complained about at some length, is it a very recent
phenomenon in general? In general terms are you seeing some improvement
in the speed of the process?
(Mr Evans) Personally, no.
64. You are not seeing any improvement in the
speed of the process.
(Mr Evans) No. The statistics I provided are over
the immediate last 12 months. I have not gone any further back.
(Mr Prest) Delays are not actually a new phenomenon.
The system has been cumbersome for many years. There was a marked
slowdown in 1997 under the new Government but quite understandable.
Evidence is that the rate of turnround in licences has increased
substantially in 1998 compared with 1997. Our view is that it
is still too slow.
65. You have said in your evidence, "We
believe that Industry cannot be made more responsible for end-use
control than it currently is". Do you not believe that there
is some responsibility upon the industry to provide more information?
For example, if you are looking at component suppliers, individual
firms putting together an assembled whole product, is there not
some responsibility for you to provide better information about
end-user purpose instead of just relying upon the end-user essentially?
(Mr Prest) I am not sure I fully understand the question.
66. You have said that you do not believe you
can be made more responsible for the end-use control than currently
applies. I am asking whether you do not feel that there is responsibility
upon the industry to provide greater information, particularly
when you have a number of components coming together into one
whole vehicle for example or one whole piece of equipment. Do
you not think there should be some more responsibility upon the
industry to provide that information rather than just saying OK,
end-use certificate, that is the certificate we have?
(Mr Prest) The first responsibility of industry should
be to comply with the law. Secondly, from the DMA point of view,
we would encourage our members to comply with the spirit of the
law, that is to say if they had some specific
67. I was not necessarily talking about the
spirit of the law. I was asking whether you do not believe that
there is perhaps some moral responsibility in one aspect and also
in terms of providing more detailed information to assist monitoring
(Mr Prest) There is a system of end-use certificates
presently which industry complies with when requested to do so
by the DTI. Your question is whether industry should do more than
68. No, I am asking you whether you think industry
should do more in terms of providing greater details and not just
be reliant upon end-user certificates and the veracity of them.
(Major General Sharman) That surely is what the licence
system is there to do. Industry is encouraged strongly to export
by the Government, so it must accept, assuming it is not dealing
in an illegal way, that this is legitimate trade, that it has
been helped and encouraged and assisted to by Government. Sometimes
the Government's foreign policy may be wishing industry very strongly
to do it. Any company of course is perfectly entitled to make
its own moral judgements about what it does. I do not think it
is in any way immoral for a company, having got its end-user certificate,
then to apply for a licence and assume reasonably that if the
licence is granted all the issues have been considered. It is
not qualified to judge the national interests, the stability of
a region, otherwise you would be asking companies to make judgements
which they are simply not qualified to make ...
69. If there were the imposition of greater
end-use controls, what aspect do you think would be acceptable
to you? What would be acceptable to your association if there
were to be greater controls on end-use certificates?
(Major General Sharman) I do not quite know what you
70. A strengthening.
(Major General Sharman) At the end of the day all
we can do is to ask more questions of the customer really. It
certainly would not be appropriate for industry to start spying
or looking at military installations or whatever to find out.
All it could do is to ask more questions of the customer and I
do not believe the difficulty then of making judgements as to
what that country may subsequently do in terms of passing those
on to other countries subsequently is a reasonable thing to expect
industry to do.
71. That is the job of Government.
(Major General Sharman) That is the job of Government.
It is particularly interesting if you look. I am always struck
by the fact, that one of our major competitors now in the world
market is South Africa. South Africa developed an indigenous arms
industry because it had sanctions imposed against it and it created
a defence industry. Now under Nelson Mandela and as a democracy
it is a burgeoning exporter and interestingly now a supplier to
the UK Ministry of Defence. Industry could not have made any judgements
about when it was right to stop and start and so on. It was quite
right that industry complied with the law and the rules and the
embargoes which applied and sought licences as it continues to
do. It is a thorny area.
Chairman: Thank you very much gentlemen; it
is very helpful to get your concerns. If there is anything you
would like to send us in addition to what you have already provided
then we should be more than happy to receive it and look at it.
Thank you very much for this morning.