Export Control Bill

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Vera Baird: The hon. Member for Twickenham has provoked discussion of this issue. My interest comes about because Redcar, which I represent, contains the port at which the Iraqi supergun was stopped. Many of my constituents are actively engaged in campaigns because of their great concern about the arms trade. Licensed production is the issue that has prompted the most substantial contribution to my postbag since I was elected. I shall, therefore, listen to the Minister's explanation with a genuine desire to report back to the many anxious and interested people in my constituency.

Mr. Key: The Quadripartite report to which the hon. Member for Twickenham referred was not quite as decisive as he suggests. In its recommendation at paragraph 106, after the comma at which he stopped, it said:

    ``to be used only if a non-statutory regime is shown to have failed.''

It also quoted Lord Scott, who observed:

    ``I do not believe we will be seeing in this country any claims for damages for breach of undertaking in this sort of area.''

That referred to contractual terms to control re-export that would be readily capable of enforcement. However, the Quadripartite Committee suggested that we need a system in which

    ``the Government knows when a licensed production facility is being set up, and which ensures that the goods produced are not exported to countries or end-users where the UK would not licence them.''

The Committee acknowledged that it was a difficult area, not only in knowing what was going on and whether anything could be done, but in knowing whether a non-statutory regime was working. Given that the Secretary of State for Trade and Industry can revoke licences if the end user is not as specified, or if new evidence comes to light that the Government has been misled in some way, it would be a foolish company that established production facilities in another country knowing that that might cost it its home base--that possibility would always hang over it. The practicality is important—I am not sure how the Government could possibly enforce that overseas.

I take on board what the hon. Member for Twickenham said and, having read the Quadripartite report, I am sympathetic. I understand why the Committee could not be conclusive. I am inclined to support the Government, because we have not had many cases where the system has broken down, but I shall be interested to hear what the Minister says.

Nigel Griffiths: In short, the Government consider the amendment unnecessary because the Bill already gives us effective powers. It provides for significant control over the practical means by which licensed production arrangements are established and maintained. Such arrangements typically depend on the company in the UK that licenses the manufacture of its products supplying component parts or production technologies to the overseas producer. Where the product is manufactured under licence and has a potential military end use, an export licence will, in most cases, be required before the equipment and technology necessary for the establishment and further operation of the licensed production facility can be supplied.

The Bill provides a new power to control technology transfers, whatever the means involved. That will close a loophole in the export control regime, whereby a licence would not be required to transfer military technology if the transfer took place by fax or e-mail.

Where, in the case of potential military end use, essential components are needed to ensure that licensed production overseas can be maintained, a licence will be required for updating, for building the facility and for supplying the components. We have made it clear in discussions on licensed production overseas that a licence will not be granted for the supply of controlled goods or technologies that are needed for an overseas manufacturing facility where there is a clear risk that the finished products could be used for internal repression or external aggression or where there is an unacceptable risk of diversion to an end user.

The Bill will strengthen and make more comprehensive the UK's capacity to control the supply lines on which licensed production arrangements depend. The important issue is that we are introducing measures to effectively and practically control licensed production overseas. We are likely to be able to hamstring it effectively by refusing licences if there have been substantiated reports of previous diversion or illegal use. I therefore urge the Committee to reject the new clause.

Dr. Cable: Much of the argument rests on whether the American system, which applies to about half of all arms exports and overseas production, is better than our own. Perhaps the Minister can explain something. The Government have examined the American model for overseas production and, for whatever reason, have found it lacking. Many of us are trying to respond to constituents' letters on the issue, and there have been exchanges with the Campaign Against Arms Trade. The Minister has helpfully written to me about how he wants to deal with them. He says that the CAAT briefing document contains a number of misleading statements. I am not sure what is misleading and what is wrong. Rather than continuing with an opaque exchange of letters, perhaps the Minister can explain what he thinks is misleading and what is wrong with the argument that has been advanced.

My second question tracks our discussion about end use. Would it be worth the Government's putting a bit of extra effort into ensuring that their regulations were enforced? I am suggesting not that there should be an overbearing bureaucracy, but that the Government should have the powers to check matters. Overseas production is difficult to monitor. I am not arguing that companies that might be innocently involved in the misuse of overseas production should be dragged through the courts in an expensive and elaborate process. All that is required is that the Government have the power to terminate a contract where abuse occurs. The Minister seems satisfied that he can pick up anything inadvertently as a result of knowing something about a company's past records. We are suggesting a mechanism whereby, if something goes wrong—possibly quite innocently—the Government have the power to step in and to stop the licence proceeding any further, after having checked that there is a diversion of use within an overseas production facility. It is difficult to understand why the Government should not want those powers. What is it that the Minister regards as deficient in the American system and on which issue does he want to correct the campaigners?

Nigel Griffiths: A number of points have been raised, and I am just referring to the evidence that Lord Scott gave to the Quadripartite Committee, and some of the key questions that he raised on this issue. He asked what the remedy would be for a breach in the case of an overseas company that had broken its undertakings. That company could not be prosecuted effectively in this country, particularly if the Government of another country had been responsible for the breach. We carefully considered Lord Scott's evidence and reached a firm conclusion.

We completely reject the assertions made by the Campaign Against Arms Trade about the gaping hole in the UK export control regime with regard to licensed production. NGOs have given me examples that are not current but go back a long way. Many of us would not disagree with those examples. That is why we believe that the framework will tackle abuses that have been raised with us and that have been substantiated. Other abuses have not been substantiated, which is another matter.

We are attempting to build into the Bill an effective way of controlling licensed production. As the Campaign Against Arms Trade acknowledges, the licensed production arrangements typically depend on the supply of component parts and design of production technology to overseas productions by the UK company that is responsible for manufacturing its products. We therefore have a direct influence on that, because it is highly likely that any transfer of parts or technology comes under the Bill and requires a licence. If evidence of the type produced by the hon. Member for Twickenham were substantiated, the Bill's provisions would allow the Minister to take action and reject that licence, because of the potential military end and diversion of use under discussion.

The Bill has adequate powers, and we should not be required to go further. That is the best way to curb the abuses. I use the word ``curb'' advisedly, because there will always be a battle to eliminate abuses, as other countries with lauded regimes claim. It is therefore important that we have the most practical, effective and tough rules to clamp down on the abuses as far as we can.

Mr. Gerald Howarth (Aldershot): The hon. Gentleman is most courteous for giving way, given that I have not been at the proceedings until now, for which I apologise. My hon. Friend the Member for Salisbury knows why I could not be here.

The Minister referred to curbing the abuses. He is giving the public the message that the measure tackles the abuse of defence exporting by British companies and individuals. Before the summer recess, I challenged him to give us some examples of where such abuse was taking place. It is not sufficient to give the impression that abuses are taking place without specifying where that is happening.

11.15 am

Nigel Griffiths: I am glad that the hon. Member for Aldershot has come in and made that point. There are abuses. For example, if we receive evidence of diversion, which is an abuse, I and—thanks to the Bill—future Ministers, will be able to exercise powers. The question of who is responsible for that diversion is another matter. It is our job to stop the abuse and illegal diversion of goods so that licensed production overseas is in order. It is those abuses that we act to stamp out, and we make no apology for that. The purpose of the Bill is to ensure that there is a regulated and legal trade in arms and arms technology as approved by the United Nations and to enforce effectively embargoes from the UN, the EU or the UK. There is a lot of merit in what the hon. Member for Aldershot says and he has grasped the key point of the Bill.

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