Transfers and Exports
11. The Agreement sets out measures intended to facilitate
collaborative equipment procurement, and the creation of transnational
companies. These include the simplification of arrangements for
the cross-border movement of military goods and technologies.
These provisions apply both to 'transfers' of items between the
parties for approved joint development and production programmes,
and the subsequent 'exports' of the resulting military goods to
jointly agreed destinations.
12. Transfers between participating partners
and their industries will be simplified by the introduction of
'Global Project Licences'. The MoD is confident that these new
arrangements will benefit industry considerably, both in terms
of assurance of supply and reduced bureaucracy. Industry representatives
saw benefits in such simplified procedures.
As Global Project Licences will govern transfers between parties,
companies will not require separate licences for individual transfers
associated with approved collaborative programmes.
The Agreement also commits the parties to undertake further work
to simplify transfers of sub-systems and components that fall
outside approved joint programmes. It also aspires to streamline
national licensing procedures for transfers of nationally produced
items to other signatory nations.
13. The details of the scope and requirements of
Global Project Licences, and how consultation on proposed export
destinations will be implemented, are areas still under discussion.
The MoD told us, however, that
... the conditions for granting
and withdrawing such Licences will remain the national responsibility
of the participants in a joint programme ... Transfer of nationally
produced defence goods and technology to other parties (whether
for their own use or re-export to a third party country) will
remain subject to national export procedures.
14. For exports to third-party countries,
the Framework Agreement envisages that the signatories whose firms
are involved in manufacturing component parts of a particular
piece of assembled equipment will agree beforehand a list of prospective
a so-called "white list." There would be a different
list for each multinational programme. The MoD highlighted the
benefits to defence exporters of being able to agree in advance
destinations for onward export, therefore providing them with
a firmer planning basis.
15. The issue of export controls was the area of
the Framework Agreement that prompted most comment from the groups
concerned with arms control which submitted evidence to our inquiry.
One of their main concerns was that the use of Global Export Licences
would mean that only the national export licensing controls of
the final exporting country would have to be satisfied.
They sensed this could create an incentive to funnel exports through
the country with the least restrictive criteria.
As a result, best practice on export scrutiny and standards for
end-user certificates might be by-passed.
The MoD told us that the provisions on exports reflect the parties'
'understanding' that permitted destinations for jointly developed
and produced military goods will be agreed by all the participants
in the programme, and not solely by the final exporting partner.
These arrangements, the MoD witnesses believed, will not dilute
existing national export controls
because each country will have to approve the common export lists,
which, since all six nations are EU members, will continue to
be determined within the ambit of the EU Code of Conduct on Arms
But national export policies will also apply.
It might be argued therefore that controls will represent the
highest common factor, rather than the lowest common denominator,
of export control standards. Indeed, in giving evidence recently
on the 1999 Annual Report on Strategic Export Controls the Foreign
Secretary assured a joint meeting of four select committees that
... in framing the Framework
Agreement, we did take great care ... that it was entirely consistent
with the current regime on arms exportsboth our own national
criteria and the EU Code of Conduct.
Individual countries, furthermore, will retain their
rights to refuse to transfer components destined for exports to
which they object.
The MoD also believed that the new system's approach of consensus
decision making would be more visible than present arrangements
(to the parties at least) at the early stages of equipment programmes.
Where a particular country had reservations at the outset of a
programme about a potential export destination, it would be able
to decline to be part of the Framework Agreement's provisions
for that particular programme without jeopardising its stake in
other collaborative ventures.
16. The Framework Agreement stipulates that destination
countries may be removed from 'white lists' by consensus (if there
were significant changes in the internal security of a potential
recipient), or by the objection of just one party.
But a concern of some groups was that, once transnational firms
had compiled agreed export lists (before embarking on a project),
their governments would find it politically very difficult subsequently
to refuse export licence applications. As a result, white lists
might in effect become a fast-track licensing system which would
make proper scrutiny more difficult.
This may or may not prove to be the caseit is for individual
governments to justify their own actions (or inactions) in allowing
exports. The Foreign Secretary believed, however, that as far
as the UK was concerned, it would be unlikely to be on its own
in seeking the removal of a country from an existing list because
Sweden and Germany had particularly 'rigorous' export criteria.
In any event, the lists will be relatively short and will include
only those countries envisaged as realistic markets by the supplying
17. The MoD assured us that once they determined
to oppose an export, individual countries would be able to bar
export destinations from white lists
If there is no agreement
to take a country off the list, the default condition is that
the country is taken off the list, the export is stopped.
This raises a separate question, however, about the
criteria by which a country will be regarded as a participant
in a programme and thereby able to veto particular export destinations.
The benefits for industry sought by the Framework Agreement would
be undermined if individual partner countries were able to wield
disproportionate influence over exports of equipment for which
their industry had produced only minor components. When we put
this to the MoD witnesses, they argued that the value and importance
attached by the parties to the Agreement, and the political commitment
that goes with that, would prevent such abuse. Minor partners,
for example, will recognise that if they want to use disproportionate
... they are unlikely to
be a partner of choice in future collaborations. They will also
have, because of the visibility of these structures under the
Framework Agreement, to take into account what will happen in
relation to bilateral relations with the countries concerned,
as well as the industrial coalitions ... The fact that the licences
are being considered earlier also provides an opportunity for
industrial consortia to see whether they want to make alternative
arrangements ...If one country had an objection, and it was making
a small component, you are in a better situation than you would
be if you had not got the collaboration, understanding and mechanisms
in place that this Framework Agreement will bring.
18. Concern was also expressed in evidence to us
about the implications for accountability for exports under the
new arrangements; in particular that export destination lists
and Global Export Licences might not have to be recorded in the
UK's Annual Report on Strategic Exports.
MoD witnesses told us that licences for transfers and exports
from the UK would be covered in the Annual Report. However,
discussions were continuing on the appropriate level of transparency
to be given to export destination lists.
The MoD envisages that for the United Kingdom at least the process
would be the same as before, and that the Framework Agreement
would not reduce transparency.
The Foreign Secretary gave a similar assurance when he gave evidence
to the quadripartite committee examining strategic export controls.