Select Committee on Foreign Affairs Eighth Report


Strategic Exports and their Control

1. The control of the export of military goods and technologies, and of equipment and components which might be used to make weapons, is rightly regarded as a particularly sensitive area of Government activity. It engages vital issues of national security and international stability as well as profound ethical questions about the protection of the innocent and the avoidance of deadly conflict.

2. These considerations are all the more important for the UK given the size and significance of its domestic defence manufacturing industry. The UK is (after the USA) the world's second largest exporter of defence equipment, accounting for 19% of the global total in 1999.[1] It employs around 175,000 people directly and the jobs of around another 170,000 depend on it indirectly. It is reckoned that about 97,000 of these jobs depend on export sales. UK defence exports, made to almost every part of the world, were in 1998 and 1999 worth about £6 billion annually.[2]

3. Judgements about the control of defence-related exports therefore involve a complex balancing of factors—between, for example, doing good by restricting arms sales to those who may misuse them, doing good by enabling others to defend themselves against aggression, and doing good by encouraging industry, prosperity and employment in the UK. As the Foreign Secretary said to us—

    At any one moment these two objectives of trying to create a safer world through an effective international and bilateral system of arms control and the other side having a profitable and viable defence industry can be in conflict, because I am always conscious of the fact that where I refuse a decision that is going to have consequences for the turnover, profitability and the employment of the individual firm at the time. It is in the long term, and even in the relatively short term interests of this country we should make the international community as safe as possible. It is not that you can ever avoid conflict using military weapons, we are not a country which has a pacifist policy as far as international relations are concerned. We recognise the importance of having strong viable defence forces because such is the nature of the world—as we have seen in Afghanistan—that they have sometimes to be used and used effectively. The more we can control the flow of arms and the more we can deal with states which are in turn supporting rogue states and terrorists by their own sale and supply of arms the better it will be for the overall international environment. Then we can come back to the issue of prosperity because what we know for certain is that where countries are riddled by conflict then they quickly slip into poverty and if anybody wants a better example of that they only have to look to Africa, Central and Southern Africa.[3]

4. For these reasons, the full involvement of Parliament in holding the Government to account for its exercise of its control over defence exports is essential. Transparency in the exercise of that function is essential to that accountability. At the same time, we recognise that any system of accountability must acknowledge the need to ensure national security and protect the UK's vital interests (and to a lesser extent protect domestic industry from unfair competition).

The Consolidated Criteria

5. Serious efforts have been made in recent years to improve the transparency of the export control régime, to eliminate the kind of imprecisions and unannounced policy changes that led to the "Arms to Iraq" débâcle in the early 1990s. In particular, in July 1997[4] the Government published a set of national criteria against which decisions on whether to license exports would be made. The Government also committed itself to the development of an EU-wide code of conduct on strategic exports. With effect from 26 October 2000,[5] the Government implemented the so-called "consolidated EU and national arms export licensing criteria" against which decisions on the granting or withholding of licences are made. These brought together the UK's national export licensing criteria[6] with those of the EU Code of Conduct on Arms Exports adopted on 8 June 1998.[7] The EU Code represents minimum standards which all member states have agreed to apply to exports of controlled goods, but the adoption of the Consolidated Criteria did not imply any change in the UK's policy, as they encompass the previously used national criteria.[8] The preamble to the Consolidated Criteria states—

    An export licence will not be issued if the arguments for doing so are outweighed by the need to comply with the UK's international obligations and commitments, by concern that the goods might be used for internal repression, by the risks to regional stability or by other considerations as described in these criteria.[9]

6. These Consolidated Criteria (as spelled out in greater detail in the Annual Report)[10] are, broadly—

One:Respect for the UK's international obligations and commitments (the Government will not issue a licence where this would be incompatible with, in particular, UN and OSCE embargoes, EU common positions and embargoes, and non-proliferation agreements).[11]
Two:Respect for human rights and fundamental freedoms in destination countries (the Government will not issue a licence if there is a clear risk that the equipment will be used for internal repression; and will exercise special caution and vigilance before issuing a licence for relevant types of equipment for use in countries where serious violations of human rights have been established to have occurred) .
Three:The internal situation of destination countries (the Government will not issue a licence for exports which would promote or prolong armed conflicts or aggravate existing tensions or conflicts).
Four:Preservation of regional peace, security and stability (the Government will not issue a licence if there is a clear risk that the intended recipient would use the proposed export aggressively against another country or to assert by force a territorial claim).
Five:The security of the UK and its overseas territories, its European and other allies (the Government will take account of the effect of the proposed export on the defence and security interests of the UK and such other countries described, while such considerations cannot override the application of the first four criteria).
Six:The behaviour of the buyer country with regard to the international community, particularly in relation to terrorism, unsuitable alliances and respect for international commitments and law (the Government, in deciding whether to issue a licence, will take account of the record of the proposed recipient country in relation to such factors).
Seven:The risk of diversion to undesirable destinations (the legitimate defence and security interests of the destination country, its technical capability to use the equipment, and the efficacy of its export controls will be considered before the Government issues a licence, especially in relation to the risk of the export falling into the hands of terrorists).
Eight:The compatibility of the arms exports with the recipient country's technical and economic capacity, taking into account the legitimate needs for security and self-defence (the Government will take into account whether the proposed export would seriously undermine the economy or seriously hamper the sustainable development of the recipient country).

7. As the Foreign Secretary told us,[12] the criteria, and nothing else, are the relevant consideration in making licensing decisions—

    The Government does not apply any unannounced criteria to export licensing decisions.[13]

The Foreign Secretary rejected, for example, the argument that the possibility that another country might supply goods for which the UK had refused a licence could be allowed to affect the application of the criteria.[14] However, the eight criteria do not each carry the same weight and may sometimes conflict with each other. As the preamble makes clear (with a carefully worded exception in relation to human rights violations under Criterion Two), in applying the first four, if the conditions are met, a licence cannot be issued (though there will remain room for doubt over whether the conditions have been met in any particular case). The latter four criteria require only that certain factors will be taken into account or considered when deciding whether or not a licence should be issued.

8. Provision 10 of the EU Code also states, rather oracularly, that member states, where appropriate—

    ... may also take into account the effect of the proposed exports on their economic, social, commercial and industrial interests but that these factors will not affect the application of the ... criteria ...[15]

The Government glosses this by stating that it will, in deciding whether to grant a licence, give full weight to—

    -the potential effect on the UK's economic, financial and commercial interests, including its long term interests in having stable, democratic trading partners;

    -the potential effect on the UK's relations with the recipient country;

    -the potential effect on any collaborative defence procurement; and

    -the protection of the UK's essential strategic industrial base.[16]

The first of these provisos clearly reflects the particular interests of the DTI, the second those of the FCO and the last two those of the MoD. We come on to a discussion of the roles in the licensing process of these three Departments—each of whose Secretaries of State sign the Government's Annual Reports—in the next chapter.

9. The Consolidated Criteria do not, therefore, provide a simple check-list of factors against which licensing decisions can be mechanically measured. The Government insistently repeats that each licence application must be considered on a "case-by-case" basis. The duties to protect the UK's security interests and to honour its international obligations are paramount, and they are in general relatively straightforward to apply and to check in their application. The duty to avoid taking sides in or fomenting regional or internal conflict elsewhere in the world is expressed in clear and binding terms, but in practice is likely to come into conflict with, and to need to be balanced against, the perceived need to bolster the security of friendly nations. The commitments to discourage terrorism and lawlessness are uncontroversial and universally supported, but in practice will sometimes require difficult judgements to be made about the reliability and trustworthiness of the declared end-user of the proposed export, or about the efficacy of another nation's control over potential diversion of goods to illegal destinations. The commitments to promote humanitarian concerns are expressed in distinctly more discretionary terms, and giving effect to these requires a much more debatable exercise of that process of weighing and balancing of different factors and considerations that the Foreign Secretary described to us. And all of these obligations, commitments and aspirations have to be looked at in the context of the right to sustain international trading relationships and promote industry and commerce. That context was thrown into particular prominence by the Government's announcement of 8 July 2002 relating to the export of aircraft components to Israel via the USA. We discuss that announcement in more detail below.

10. There will very often be room for debate about how the criteria have been applied in particular circumstances. Our predecessors on the "Quadripartite Committee" began an exploration of this debate. In this report, we continue it.

History of the "Quadripartite" Committee

11. The Defence and Trade and Industry Committees produced a joint report in July 1998 which, among other matters, considered the arms export control régime. Noting the Government's declared intention to produce an annual report on licences granted for the export of strategic goods and the Government's own suggestion that it was—

the two Committees commented—

    ... we consider that to leave such scrutiny to the individual exertions of each of these committees would risk confusion, and would be likely to result in effective scrutiny being lost in the gaps between committees ... It is for all the committees involved ... to propose any sort of joint mechanism. At this stage we emphasise our joint belief that it would be desirable to have some definite mechanism for effective consideration of these matters by select committees.[18]

12. In December 1998, the Trade and Industry Committee produced its own separate report on strategic export controls, pursuing the Government's undertaking to revise the legislative régime under which they were operated.[19] In that report the Committee commented at some length on the parliamentary scrutiny of licences, and picked up on its own earlier suggestion of the need to devise a system to enable the select committees to act in concert on this topic.[20] It concluded—

    We are confident that such a system can and will be developed.[21]

The Defence, Foreign Affairs, International Development and Trade and Industry Committees subsequently agreed to work together to conduct examinations of the Government's new series of Annual Reports on strategic export controls.

13. The Government's first Annual Report (for 1997) was not published until 25 March 1999. The four Committees met together for the first time on 20 April 1999. The arrangement quickly became known as the "Quadripartite Committee". The Committees took evidence on the first Annual Report and published this as a Special Report (that is without commentary on or analysis of the evidence) in June of that year.[22] The second Annual Report (for 1998) was published in November 1999, and the Committees published their first substantive report on the two Annual Reports in February 2000.[23] The Government's reply was published in July 2000[24] to coincide with the publication of its third Annual Report (for 1999). The Committees took further evidence from the Minister of State at the FCO in May 2000, and in July published a further report, picking up on issues in the 1998 Annual Report and also putting forward proposals for a system of prior parliamentary scrutiny of licence applications.[25] The Government's response, published in December 2000, rejected the Committees' proposed scheme.[26]

14. In January 2001 the Committees took evidence from the Foreign Secretary on the Annual Report for 1999 and on the prior scrutiny issue, and published their next report in March 2001.[27] In that report they set out, amongst other things, further revised proposals for giving the Committees prior access to licensing applications before decisions were made. The Government's response was published to coincide with publication of the next Annual Report, for 2000.[28] The Government again rejected the proposal for parliamentary scrutiny of licence applications before they were approved or refused by Ministers.

15. After their reappointment in the new Parliament, the four participating Committees agreed to continue to co-operate in the scrutiny of Annual Reports on strategic exports and related matters through the medium of the "Quadripartite Committee". This is our first such report of this new Parliament, focussing on the Government's Annual Report for 2000, published in July 2001.

The Annual Reports on Strategic Export Controls


16. The Government's Annual Reports on strategic export controls have now reached their fourth edition.[29] The reports are signed by three Secretaries of State—the Foreign Secretary, the Secretary of State for Defence and the Secretary of State for Trade and Industry. Each of these Departments has a role in the export control régime. The Department for International Development—whose Secretary of State does not sign the reports—also plays a part, which we discuss in some detail below.

17. The FCO is responsible for the overall policy, and of course for the UK's relationships with countries which are potential destinations for exports. It also monitors and promotes human rights overseas.

18. The MoD is the sponsoring department for the defence manufacturing industry. It clearly has a role in ensuring that strategic exports do not threaten the security of the UK. In part, it does this through a process of prior informal consent, or agreement in principle, to the export of certain categories of goods. This process is known as the "F680 procedure" (after the Form 680 which is used as its basis). Mr Dowse, the Head of the FCO's Non-proliferation Department, explained it to us in oral evidence that the procedure—

    ... is essentially an MoD approval which gives an exporter approval to market a system. It is made very clear when an F680 is issued that approval to market does not—absolutely and underlined—mean that a licence will necessarily be forthcoming. It has to make that very clear because, of course, for many defence exports the marketing process and the seeking of a contract can take years ... Circumstances can change in that time. It is entirely possible that an approval to market may not, when the time for contract comes, result in approval of a licence. So it does not carry that implication.[30]

19. Nonetheless, it is unsurprising that some commentators see a conflict of interest between the MoD's role as sponsor of the defence industries and its function as one of their regulators. It spends directly about £20 million a year supporting defence export sales (mainly through the Defence Exports Services Organisation—DESO).[31] It is also, of course, the industry's largest customer, spending something of the order of £6 billion a year on equipment procurement within the UK (or £10 billion if equipment research and development expenditure—most of which is spent with industry—is included).[32] The MoD has a strategic interest in maintaining an independent UK strategic industrial base, but the arguments about the costs and benefits to the UK of support for defence exports is a complex one. In 1999, the Defence Committee commented—

    ... the question of whether continued public support for the defence industry represents a proper use of public money is one that does deserve regular and close re-examination ... The position of the MoD ... in promoting the interests of UK defence manufacturers is an unusual one ... The relationship between the defence industry and the MoD is inevitably open to suspicion—it is therefore all the more important to provide transparency and accountability in this relationship, and to be able to demonstrate that DESO provides an unquestionable benefit to the national interest ... particularly at a time of increased focus on the ethics of defence exports.[33]

This challenge provoked a study sponsored by the MoD, the conclusions of which were published in November 2001.[34] Responding more quickly, two NGOs had produced in July 2001 their own report on the topic,[35] which asserted that the true cost of support to the UK defence manufacturing industry was of the order of £420 million a year. The MoD's study, undertaken jointly with the Centre for Defence Economics at the University of York, argued that the net cost to the economy of a cessation of defence exports would be between £90 million and £200 million a year. Perhaps the most that can be said of the two reports at this stage is that they give considerable scope for further debate.

20. Despite these caveats, there is no doubt that the MoD's role in the licensing process is an essential one—crucially for the protection it offers for national security, but also for saving potential exporters from wasting time and money on hopeless licence applications which would inevitably be refused. However, we believe the Government should give some thought to ways in which the F680 process could be made more transparent—perhaps by involving more Departments than the MoD in the process. We recommend that consideration be given to the Annual Reports indicating where a licence was refused or revoked for equipment which had previously been given F680 approval.

21. The DTI administers the licensing system. This is done by its Export Control Organisation (ECO) which has a budget of around £5¼ million and employs 137 staff, of whom 22 are technical experts.[36] It is organised into three main groups: Licensing; Policy, Communications and Enforcement; and the Technologies Unit. The licensing process has essentially three stages—

    -    Stage1: the ECO is responsible for the initial processing on receipt of an application, checking for example whether a licence is in fact needed, or whether for example there is an embargo on exports to a proposed destination which is clear;

    -    Stage 2: advice is then sought from other Government departments, almost always the MoD and the FCO, sometimes the DfID and the intelligence services, as appropriate;

    -    Stage 3: a final assessment is made by the ECO of the advice from other sources, disagreements are negotiated and resolved, and a recommendation put to DTI Ministers for final approval.

22. Thus in addition to the three departments whose Secretaries of State sign the Annual Reports, the Department for International Development is also regularly consulted on a proportion of licence applications. There is a list (which we were shown in confidence) which specifies the sorts of applications which the DfID will see. In general terms these are applications to export goods over certain value thresholds to developing countries. In its response to our predecessors' report on the 1997 and 1998 Annual Reports on strategic export controls, the Government informed us that the—

    DfID has reviewed its involvement in the export licensing process and intends to focus in the future on licence applications for economically significant exports to poorer countries, and for exports to countries where DfID regional departments can add value to other Departments' assessment of the applications against non-economic criteria. As a result of these changes DfID has now chosen to see less than 5% of export licence applications received by the DTI.[37]

This steep fall in the number and percentage of licence applications seen by DfID over the last five years is shown below.[38]

Export Licence Applications seen by the DfID
OIEL applications circulated to DfID
SIEL applications circulated to DfID
% of all SIEL applications circulated to DfID
§ 8 months data only (2 May to 31 December)

23. The Secretary of State for International Development does not sign off the Annual Report because she apparently feels that the DfID does not play enough of a role in the consideration of licence applications to warrant her public assent to the information it contains (and, implicitly, to the policy choices it reveals). In response to a PQ asking why she is not a signatory, the Secretary of State explained that—

    I made this decision on the basis of the few export licence application[s] my Department advises upon in relation to the number passed by the Department of Trade and Industry to the Foreign and Commonwealth Office and the Ministry of Defence and the fact that no licences have been refused under the sustainable development criterion.[39]

We conclude that the point at issue is not the number of licence applications seen by the DfID, but the weight accorded to its views on the applications it sees. Without the evidence of the number of applications objected to by the DfID and the number of these leading to an application refusal, it is difficult to assess whether the views of the DfID are given any significant weight in the licensing process.

24. We have been unable to discover the number of objections made by DfID in recent years.[40] We sought a fuller explanation of the DfID's role in the licensing process from the Government. The response we received was not revealing.[41] Whilst we heard that no applications have ever been refused on the grounds of sustainable development, the International Development Committee was told in December 1998 that DfID had raised objections to 17 licence applications, and was provided with a list of these licence applications.[42] The Committee congratulated—

    ... the Secretary of State on her openness in providing the Committee with detailed information on those export licence applications queried by the DfID ...

and considered this to be—

    ... an important precedent for Government transparency in arms export policy and practice.[43]

However, in its response to that report, the Government commented—

    [The] DfID's provision of information on export licence applications ... was in the specific context of the Committee's enquiry. This does not establish a precedent. Policy regarding the nature of advice given by advisory departments to the [DTI] on applications for export licences remains as set out in the answer given on 27 March 1998 by the Secretary of State for International Development ...[44]

The answer of 27 March 1998 stated that—

    All relevant individual licence applications are circulated by DTI to other Government departments with an interest, as determined by them in line with their policy responsibilities. These include the Foreign and Commonwealth Office, the Ministry of Defence and the Department for International Development. The advice that is given by these departments to DTI falls into the category of internal discussion and advice, the disclosure of which would harm the frankness and candour of internal discussion and which is being withheld under exemption number 2 of the Code of Practice on Access to Government Information.[45]

25. We do not accept this claim that some modest increase in transparency would be incompatible with the effective working of Government. We recommend that there should be greater openness about Departmental inputs into the decision-making process on licensing applications. Information on the number of applications objected to by individual Departments should be provided to us in confidence, showing in how many cases an application was eventually allowed.


26. The format of the Government's Annual Reports on strategic export controls has evolved over the four editions so far, but has remained broadly the same. In essence, each sets out, for the calendar year in question and for each relevant destination country, the export licences granted for controlled goods to be exported to that country. There are two main categories of licence relevant to the Annual Reports.

27. Open General Export Licences (OGELs) allow the export of specified goods by any exporter providing the destination is eligible and the specified conditions met. They therefore relieve exporters of the need to apply for a SIEL. A list of all those in force during the relevant period is in the report[47] (23 were in force in February of this year). They are published on the ECO website.[48] There are other minor categories of licence permitting transhipment of goods, either general (listed with OGELs in the Annual Report) or individual (11 were issued and none refused in 2000)[49] and providing for temporary export.

28. The goods which are currently subject to control are, broadly—

    -    those listed in Parts I and III of Schedule I to the Export of Goods (Control) Order 1994;

    -    those covered by the European Council regulations governing the dual-use items and technology,[50] given effect for the first part of the reporting period in question by the Dual-use and Related (Export Control) Regulations[51] and replaced with effect from 28 September 2000 by the Dual-Use Items (Export Control) Regulations 2000;[52] these include material covered by three international, non-treaty, agreements—the Nuclear Suppliers Group (covering nuclear materials including enrichment and reprocessing technology and machine tools), the Missile Technology Control Régime (covering rocket systems, propulsion technology, components and fuels), and the Australia Group (covering chemical and biological weapons and their precursors and related technology);

    -    those which the exporter has been told, or suspects or knows, would or might be used in connection with the manufacture or delivery of weapons of mass destruction (the so-called "catch all" provision); and

    -    those which the manufacturer has been told, or suspects or knows, are or may be intended for military use in countries to which a relevant official embargo applies or where they will be used as components of illegally-exported military items.

29. The list which forms Schedule III to the 1994 Control Order is commonly known as the 'Military List'.[53] The items included are agreed through the international Wassenaar Arrangement.[54] The list is reproduced in the Annual Report, and the different categories of goods are given an index reference, known as a "rating".[55] The dual-use items are given a separate categorisation which is, inevitably, rather less informative.[56]

30. For each destination country, the Annual Report also lists refusals and revocations of licences. These are broken down according to the Military List rating, dual-use classification or simply recorded as having been on 'end use' grounds (where they fall within the catch-all provision).

31. The Annual Reports now also give consolidated data on refusals and revocations of SIELs,[57] on appeals against refusals and revocations,[58] on the amount and value of exports,[59] on international commitments relating to arms exports,[60] and on general policy developments in the field.[61]

The Export Control Bill

32. The UK's export control régime is about to undergo a major revision. The legal basis of the present régime dates from September 1939, when export controls were given statutory force by the "emergency" Import, Export and Customs Powers (Defence) Bill. That Act provided that it should continue in force until "such date as His Majesty may by Order in Council declare to be the date on which the emergency that was the occasion of the passing of this Act came to an end, and shall then expire...". No such Order was ever made. For over half a century the emergency wartime powers granted by the Act were used to control strategic exports.

33. After the fall of the Berlin Wall and the rapid reunification of Germany in 1990, concerns began to mount in Government that the Act might be susceptible to legal challenge on the basis that the end of the Cold War meant that there was no continuing "emergency". These concerns became urgent after the Act came into public prominence following the Customs and Excise seizure of the notorious Iraq-bound "Supergun" components at Teesside docks in April 1990 and subsequent legal proceedings. In December of that year the Import and Export Control Act 1990 was passed which removed the subsection which had provided for expiry of the 1939 Act. In effect, it made the 1939 Act permanent. It remains, for the present, the legal basis of the export control régime.

34. Following the collapse on 9 November 1992 of the prosecution for alleged export control offences of senior executives of Matrix Churchill Ltd,[62] the Government set up an independent inquiry by Lord Justice (now Lord) Scott into exports of defence equipment and dual-use goods to Iraq and related prosecutions. In his report, published on 15 February 1996, Lord Scott commented that the existing legislation governing export controls lacked—

    ... the provisions for parliamentary supervision and control that would be expected and are requisite in a modern parliamentary democracy[63]

and recommended, amongst other things—

... new empowering legislation in place of the 1939 Act and ... an export licensing system and export licensing procedures suitable for the peacetime requirements of a trading nation ...[64]

35. Following the Scott report, the Government published a consultative document on strategic export controls in July 1996.[65] After the change of Government in 1997, a White Paper on strategic export controls was published in July 1998.[66] It contained proposals for a new legislative framework for strategic export controls, for new controls on electronic transfers of controlled technology and on provision of technical assistance, and for powers to control trading in controlled goods, and for improvements in licensing procedures. However, despite the urgings of the Trade and Industry Committee,[67] no time was found for legislation in the following two sessions. In February 2000, in our predecessors' first report as the Quadripartite Committee, they expressed their dismay that "the Government should not have afforded greater priority to bringing forward a Bill to implement the recommendations made four years ago in the Scott Report".[68]

36. In March 2001 the Government published its draft Export Control and Non-Proliferation Bill and accompanying texts.[69] Our predecessors conducted a high-speed inquiry into the draft Bill, and published their Report in May 2001, just before the general election was called.[70] Amongst other conclusions and recommendations, they noted—

    -    That the proposed Bill was largely an enabling Bill, and that the meat of the proposals being made will be in the secondary legislation to be made under the Act. They recommended that every effort was made to ensure that a draft consultative version of the relevant secondary legislation was published before the House is asked to give the Bill a Second Reading.[71]

    -    That Orders proposed to be made under the Act should first be exposed in draft and in confidence to the Quadripartite Committee and, if then made and laid, the Government should undertake to use their best endeavours to find time for a debate if the Committee so recommended.[72]

37. Following the 2001 general election, the Government introduced the Export Control Bill in the Commons on 26 June.[73] Its response to our predecessors' report on the draft Bill was not published until some time later.[74] The proposed draft orders were published in "dummy" form, though not until after the second reading of the Bill had taken place on 26 July.[75] Some of the"non-proliferation provisions of the draft Bill, which had disappeared from the Bill as presented, were subsequently introduced separately as Parts 6 and 7 of the Anti-terrorism, Crime and Security Bill, introduced in the Commons on 12 November 2001 and already an Act.

38. The Export Control Bill has been radically rewritten during its passage through Parliament,[76] not always with the consent of the Government. The main areas of contention have been—

    -    the application of the sustainable development criterion;

    -    provision for prior parliamentary scrutiny of licensing decisions;

    -    the extent of the powers to control intangible transfers, especially with regard to constraints on academic freedom; and

    -    the extent of the controls on the extra-territorial activities of persons trading in controlled goods.

39. We do not propose to discuss the Bill, or the Government's response to our predecessors' report, in any detail in this report. However, we note that as it presently stands the Bill will require Ministers to issue guidance (which will reflect, or possibly just reproduce, the Consolidated Criteria) about the matters which will be taken into account when making licensing decisions, including the issue of sustainable development. It will give power to Ministers to make regulations and orders defining the goods which are subject to controls (which will largely reproduce the existing lists) and how the powers to control "intangible" transfers and the provision of technical assistance overseas will be implemented. It will also give power to Ministers to bring trade ("trafficking and brokering") in controlled goods under statutory control—an entirely novel power. There are also powers to make other regulations creating offences and giving authorities the enforcement powers necessary to underpin these controls. As the Foreign Secretary commented,[77] all this will formalise and give statutory basis to the approval process for licence applications, making it more transparent and more "justiciable", both informally and, potentially, in the courts.

40. The detail of the orders and regulations to be made under the Act, and the guidance to be issued, will be crucial components of the new export control régime. Given the slower than expected progress of the Bill, the Government was unable to publish drafts of these for consultation and scrutiny by us before the summer recess. We expect the Government to honour its commitment to giving time for our Committees to consider, and if necessary report on, the proposals for draft subordinate legislation and the draft guidance to be made under the Export Control Act.

41. In the meantime, the Annual Report we currently have under consideration, and those for 2001 and 2002, will be made under the existing control arrangements. We now turn to the Annual Report for 2000.

Licence or Export Type Etc.
( year on year change)
( year on year change)
(- 9%)
(- 7%)
refused or revoked2
(+ 11%)
( + 52%)

Appeals heard2

Appeals upheld2
issued or extended2
(- 21%)
(- 7%)
refused or curtailed2
(+ 100%)
(+ 306%)
Total value of exports of military equipment2
Estimated total defence export deliveries5
£4250 m
Identified total defence export orders5
1 Data relating to licences for 8 months only (2 May to 31 December)
2 Source: Annual Reports on Strategic Export Controls
3 Corrected after Annual Report issued
4 Not published in Annual Report
5 Source: UK Defence Statistics 2001, Table 1.13
6 12 months data
The data on defence export values are difficult to interpret and compare because of the use of different categories of classification of goods and services. There is a detailed discussion of these problems in The Economic Costs and Benefits of UK Defence Exports, Chalmers, Davies, Hartley and Wilkinson, Centre for Defence Economics, University of York, November 2001, paras 13 to 19.

1   The Military Balance 2000-01, International Institute for Strategic Studies, October 2000, p 289 Back

2   UK Defence Statistics 2001, Tables 1.11 and 1.13 and The Economic Costs and Benefits of UK Defence Exports, Chalmers, Davies, Hartley and Wilkinson, Centre for Defence Economics, University of York, November 2001 Back

3   Q 46 Back

4   HC Deb., 28 July 1997, cc 26W to 29W Back

5   HC Deb., 26 October 2000, c 200W Back

6   see Annual Report 1997, pp 3 - 7 Back

7   see Annual Report 1997, pp 7 - 11 Back

8   see Annual Report 2000, pp 3 - 4 Back

9   see Annual Report 2000, p 344 Back

10   ibid, pp 344 to 347 Back

11   The international commitments in force in 2000 are set out in Appendix D of the Annual Report for 2000, pp 326 - 329 Back

12   Q 29 Back

13   Appendix 9, question 13, Ev 47 Back

14   Q22 Back

15   see Annual Report 1997, p 11 Back

16   see Annual Report 2000, p 347 Back

17   Cm 3989, 2.1.7 Back

18   Seventh Report from the Defence Committee and Eighth Report from the Trade & Industry Committee, Session 1997-98, Aspects of Defence Procurement and Industrial Policy, HC 675, para 62 Back

19   See paras 32 to 40 below Back

20   Second Report from the Trade & Industry Committee, Session 1998-99, Strategic Export Controls, HC 65, para 5 and paras 13 to 24 Back

21   op cit, para 24 Back

22   Defence Committee, Fifth Special Report, Foreign Affairs Committee, Third Special Report, International Development Committee, Second Special Report, Trade and Industry Committee, Ninth Special Report, Session 1998-99, HC 540 Back

23   Defence Committee, Third Report, Foreign Affairs Committee, Second Report, International Development Committee, Third Report, Trade and Industry Committee, Fourth Report, Session 1999-2000, Annual Reports for 1997 and 1998 on Strategic Export Controls, HC 225 Back

24   Cm 4799 Back

25   Defence Committee, Eleventh Report, Foreign Affairs Committee, Seventh Report, International Development Committee, Seventh Report, Trade and Industry Committee, Eleventh Report, Session 1999-2000, Strategic Export Controls: Further Report and Prior Parliamentary Scrutiny, HC 467 Back

26   Cm 4872 Back

27   Defence Committee, Third Report, Foreign Affairs Committee, Third Report, International Development Committee, Second Report, Trade and Industry Committee, Seventh Report, Session 2000-01, Strategic Export Controls Annual Report for 1999 and Parliamentary Prior Scrutiny, HC 212 Back

28   Cm 5141 Back

29   1997, 1998, 1999 and 2000 Back

30   Q 33 Back

31   See for example the Second Report from the Defence Committee, Session 1997-98, The Appointment of the new Head of Defence Export Services, HC 147 Back

32   UK Defence Statistics 2001, Table 1.5 Back

33   Defence Committee, op cit, para 12 Back

34   The Economic Costs and Benefits of UK Defence Exports, Chalmers, Davies, Hartley and Wilkinson, Centre for Defence Economics, University of York, November 2001 Back

35   The Subsidy Trap: British Government Financial Support for Arms Exports and the Defence Industry, Ingram and Davis, Oxford Research Group and Saferworld, July 2001 Back

36   Private DTI briefing, 25 February 2002 Back

37   Cm 4799, point 23 Back

38   Source: Response 5c to Appendix 9, Ev 45 Back

39   HC Deb., 12 March 2002, c 896W Back

40   Appendix 9, questions 5 (a), (b) and (d), Ev 44, Ev 45 Back

41   Appendix 9, question 13, Ev 47 Back

42   Sixth Report from the International Development Committee, Session 1998-99, Conflict Prevention and Post-conflict Reconstruction, HC 55, Vol II, p 257 Back

43   ibid, vol I, para 151 Back

44   Sixth Special Report from the International Development Committee, Session 1998-99, Government Response to Sixth Report from the Committee: Conflict Prevention and Post-conflict Reconstruction, HC 840 Back

45   HC Deb., 27 March 1998, c 319W Back

46   Of which there are five sub-categories: Military, Dual-use, Dealer, UK Continental Shelf and Media Back

47   see Annual Report 2000, pp 294 to 296 Back

48   ibid, p 11 Back

49   ibid, p 11 Back

50   1334/2000 Back

51   S.I., 1996, No. 2721 Back

52   S.I., 2000, No. 2620 Back

53   In previous Annual Reports, the military list "rating" (that is the identifying code from the Schedule III list) was shown for each SIEL. In the 2000 report, these are no longer shown, but a fuller summary of goods exported is given for each destination. We return to this change below. Back

54   see Annual Report 2000, p 8 Back

55   ibid, Appendix A Back

56   ibid, Appendix B Back

57   ibid, p 15 Back

58   ibid, pp 15 - 16 Back

59   ibid, pp 299 - 304 and Appendix C Back

60   ibid, Appendix D Back

61   ibid, pp 3 - 10 Back

62   HC (1995-96) 115-III (the Scott Report), Chapter G17 Back

63   ibid, vol V, para K2.1 Back

64   ibid, para K3.6 Back

65   Cm 3349 Back

66   Cm 3989 Back

67   Second report from the Trade and Industry Committee, Session 1998-99, Strategic Export Controls, HC 65 Back

68   Third Report from the Defence Committee, Second Report from the Foreign Affairs Committee, Third Report from the International Development Committee, Fourth Report from the Trade and Industry Committee, Session 1999-2000, Annual Reports for 1997 and 1998 on Strategic Export Controls, HC 225, para 4 Back

69   Cm 5091 Back

70   Seventh Report from the Defence Committee, Seventh Report from the Foreign Affairs Committee, Sixth Report from the International Development Committee, Eleventh Report from the Trade and Industry Committee, Session 2000-2001, Annual Reports for 1997 and 1998 on Strategic Export Controls, HC 445 Back

71   ibid, para 11 Back

72   ibid, para 31 Back

73   Bill 5 Back

74   Cm 5218 Back

75   HC Deb., 26 July 2001, cc 542 to 630 Back

76   Standing Committee B, 17 July 2001 to 18 October 2001 (six sittings); Export Control Bill, as amended in Standing Committee B, 18 October 2001, Bill 32; Report and Third Reading debate, HC Deb., 8 November 2001, cc 382 to 464; Export Control Bill, as introduced to the House of Lords, 9 November 2001, HL Bill 20; Lords Second Reading debate, HL Deb., 8 January 2002, cc 468 to 518; Lords Committee of the whole House, HL Deb., 7 February 2002, cc 758 to 806 and 824 to 874, and 4 March 2002, cc 16 to 101; Bill as amended in Lords Committee, 4 March 2002, HL Bill 60; Report Stage in Lords, HL Deb., 18 April 2002, cc 1096 to 1147 and 1163 to 1198; Bill as amended on Report, HL Bill 75; Third Reading in Lords, HL Deb., 20 May 2002, cc 519 to 562; Commons consideration of Lords Amendments, HC Deb., 24 June 2002, cc 629 to 674 Back

77   Q 22, see also Appendix 9, additional point of clarification, Ev 5, Ev 43 Back

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