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Submission by the British American Security Information Council (BASIC) to the United Kingdom Defence Select Committee Inquiry into the

"Framework Agreement Concerning Measures to Facilitate the Restructuring and Operation of the European Defence Industry"

December 2000

The British American Security Information Council, BASIC, is an independent research organisation that works to promote public awareness of transatlantic defence, disarmament, military strategy and nuclear politics, and to facilitate the exchange of information and analysis. It has been monitoring UK Arms Export Policy for the past 13 years.

BASIC strongly welcomes the Defence Select Committee's decision to investigate the Framework Agreement. The lack of transparency and parliamentary debate on the Framework Agreement negotiations, contents and implementation has been an issue of concern for BASIC and other European NGOs. In August, BASIC published a short research report on this issue[1]

Background
On July 27^th 2000, as part of the so-called Letter of Intent (LOI) process, the defence ministers of the six leading European arms manufacturing countries (France, Germany, Italy, Spain, Sweden and the United Kingdom) signed a treaty, the "Framework Agreement Concerning Measures to Facilitate the Restructuring and Operation of the European Defence Industry." BASIC believes that the Framework Agreement and the LOI process provide important opportunities for the six states, which account for 90 percent of all EU arms exports, to improve and standardize their export controls.

There have been significant positive advances in recent years on European control measures, such as the EU Code of Conduct on Arms Exports and the publication by several European countries of annual reports providing information on arms consignments and their destinations. It is therefore highly important that the measures for integration of the European defence industry advanced in the Framework Agreement build on these positive steps.

This submission, however, highlights those areas of concern to BASIC in the Framework Agreement-LOI process, which if not addressed now could very well undermine the recent advances in European export controls.

Export destination determination of joint venture products:

Current practice vs. Framework Agreement
Currently, under the so-called Schmidt-Debre Principle of 1972, decisions made on export destinations of joint venture products are the sole responsibility of the country of final assembly. For instance, if France, Germany and Sweden participate in a particular project, but the final assembly is completed in France, it will be left to France's discretion to decide where the product can be exported. This practice can result in a final assembly site being chosen to allow the widest export possibility.

However, once the Framework Agreement has been ratified, this practice will change. Under Article 13.3 of the Agreement "Establishment of permitted export destinations and later additions is the responsibility of the participating Parties in the Co-operative Armament Programme (CAP). Those decisions shall be made by consensus following consultations."

The new Agreement therefore allows for each participating country to have a voice in the decision making process. Proponents of the Agreement argue that this will allow collective pressure to closely examine prospective so-called white list destinations, and give more opportunities for countries with traditionally strong restrictive export controls to have a say. It also will prevent industry from relocating manufacturing capacity to countries with lower export barriers and easier reporting requirements.

Whilst such developments are potentially beneficial to export controls, there is also the counter danger to consider: Namely, that countries with more restrictive export policies, such as Sweden or Germany, will be put under political pressure to accept a more inclusive range of recipient countries in the white list. Thus, such countries may well find themselves politically coerced into supplying components to a CAP for transfer of weapons to countries which they would not normally allow transfer.

Relationship between white list and national export licencing procedures
In a letter to BASIC, a senior Foreign and Commonwealth Office (FCO) official[2] stated, "It is important to note that the white lists themselves will not function as export licences; exporters will still have to apply (for) these from the country from which the export is taking place."

This is an important clarification. Since white lists will normally be drawn up at the start of a CAP process, taking into account the human rights and internal security situation of the recipient state at that time, they will be historical in nature. They cannot be used to judge the human rights and internal security situation of the recipient at the time of proposed export. This requires a fresh export licence determination. Nonetheless, BASIC is concerned that the white list determination will unduly influence the export licence determination, and seeks clarification that this will not be the case.

The FCO letter to BASIC continues: "We believe that there are legitimate reasons for not publishing the white lists: they will in effect represent declarations of interest in potential export opportunities by the companies involved, and as such are commercially sensitive…As far as we are aware, no LOI partner which has a system for giving companies informal advance advice on potential export licence applications publishes such advice."[3]

BASIC believes however, that these white lists are more than just "informal advance advice" on export destinations. Because of their inclusion in the Framework Agreement as "permitted export destinations," they are part of a formal process of export destination determination agreed between the United Kingdom and other LOI countries in a treaty. As such, BASIC believes they will play a crucial role in the decision-making process of the country of final assembly and export. If they do not, then the question is raised - why have them at all?

BASIC further is concerned that the white list process may become a means of de facto fast-track export licensing, virtually guaranteeing that those countries on the list white list receive an export licence. Whilst it is theoretically possible that the licensing authorities in the CAP country of final assembly and export could indeed deny an export licence for CAP goods to a white list country, in practice such a denial would be thought unlikely in view of the earlier, jointly agreed inclusion of that destination on the white list. Such a licence denial to a previously agreed white list country would no doubt generate strong opposition from the military/security manufacturing companies and the other governments participating in the CAP.

White list determination
Article 13.3 (a) states that the establishment of permitted export destinations will be made by consensus, following consultations which "will take into account, inter alia, the Parties national export control policies, the fulfillment of their international commitments, including the EU Code of Conduct criteria, and the protection of the Parties defence interests, including the preservation of a strong and competitive European defence industrial base."

BASIC is concerned that there arises the possibility during these consultations that the demands for "preservation of a strong and competitive European defence industrial base" will undermine adherence to the EU Code of Conduct criteria (which themselves already leave considerable room for subjective interpretation), and the more restrictive export control policies of certain nations such as Sweden and Germany. In fact, no where does the Framework Agreement explain the relative weight of these two possibly contradictory criteria.

BASIC believes that the determination of white list countries (as well as the granting of export licences) must be in accordance with the EU Code and also with the national export guidelines of the most restrictive state in the CAP. If the latter does not occur, BASIC fears that LOI partners with more restrictive export controls will find it difficult to resist weakening their own criteria for determining sensitive destinations.

Although decisions on CAP white lists will be taken by collective agreement of all states participating in the joint venture, BASIC further worries that the 'voice' of the different parties in such decisions will be influenced by their stake in the CAP.

This was acknowledged in the letter to BASIC from the FCO official, which stated: "As for the Framework Agreement's acknowledgement that the size of each country's involvement in the programme will be taken into account when seeking to reach consensus on the white lists, this seems to me to be no more than a reflection of obvious political and commercial realities."

BASIC is concerned that this proportionality of influence in the decision-making process will exacerbate the danger that relatively smaller producers will be pressured into allowing states they deem as sensitive or prescribed onto the white list.

Although the Framework Agreement details the criteria used for white list determination, it gives no detail as to which ministries will make that determination in the United Kingdom or any other partner country. Under existing UK export licencing procedures, the Ministry of Defence, the Department of Trade and Industry, the Department of International Development and the Foreign and Commonwealth Office have a role in licence determination. BASIC recommends that these four Departments be involved in white list determination. Furthermore, BASIC recommends the involvement of equivalent ministries in the determination systems of the five LOI partners.

The removal of a country from a white list
The Framework Agreement does have provision for the removal of countries from CAP white lists. Two important safeguard mechanisms are detailed under Article 13.3 (a). Firstly, whilst a decision is being made about whether to remove a country from the white list, "Any Party involved in the programme may require a moratorium on exports of the product to the permitted destination in question for the duration of the process." Secondly, "At the end of that period, that destination shall be removed from the permitted destinations unless consensus has been reached on its retention." This latter provision gives any member of the CAP the right to demand removal of a country from the white list. However, there are concerns that LOI countries with more restrictive export guidelines will come under pressure to limit to a minimum such removal requests and vetoes. These concerns are exacerbated by analysis of the criteria set for removal of countries from white lists.

Under Article 13.3 (b) of the Framework Agreement: "A permitted export destination may only be removed in the event of significant changes in its internal situation, for example full scale civil war or a serious deterioration of the human rights situation, or if its behavior becomes a threat to regional or international peace, security and stability, for example as a result of aggression or the threat of aggression against other nations."

BASIC is concerned that these criteria set too high a bar for removal and are at variance with the EU Code criteria. If we take, for example, the criteria relating to armed conflict, whilst only a "full scale civil war" would result in a removal from the white list, the EU Code of Conduct states, under criterion three, that "Member States will not allow exports which would provoke or prolong armed conflicts or aggravate existing tensions or conflicts in the country of final destination."

Furthermore the need for "significant changes" in a white list state's internal situation before removal is particularly worrying. BASIC believes the decision on whether to remove a state should not be based on a "significant change," but rather on an objective determination of whether arms sent to that country would facilitate human rights violations, breach the other EU Code criteria or violate national export control guidelines.

Furthermore, certain key criteria of the EU Code, such as development considerations, adherence to international humanitarian law, and the recipient state's record on transparency are not mentioned as possible triggers for removal from the white list.

The disjunction between EU Code and Framework Agreement white list criteria could lead to a situation where a recipient country, which would be disqualified from receiving arms under the EU Code, may still be on a CAP white list. This inconsistency between the two control regimes has the potential to lead to a lowering of standards in licence determination. To ensure that this does not occur, BASIC recommends that, at a minimum, the criteria for removing states from a white list be identical to those in the EU Code of Conduct.

White lists and EU Code denial notification process
BASIC is concerned at the potential for the Framework Agreement white list process to undermine the "denial notification/no undercutting" process of the EU Code. Under this denial notification process, an EU member state that refuses a licence application because the proposed recipient state has failed to meet a Code criterion should notify all the other EU states of this denial and the reasons for making it. Any subsequent EU member state wishing to take up this licence application must first consult with the member state that issued the denial before granting the licence. This process is an attempt to stop undercutting without consultation or undercutting through ignorance.

Under the Framework Agreement, problematic recipients will be excluded from exports at the time of developing the white list. Although this process may fulfill the UK government's obligation to ensure that UK arms or components are not transferred to sensitive or proscribed destinations, the lack of formal notification means that other EU states, not in the Framework Agreement, have no knowledge of those excluded "non-white list" countries and the reasons for their exclusion. Consequently the EU Code's denial notification mechanism may not be triggered and EU states may subsequently undercut the UK government's position (or that of other LOI-Framework states) through ignorance.

BASIC proposes two possible options:

a) the white list process is abandoned and LOI states apply the EU Code criteria, licence determination and denial notification processes to all goods transferred or exported as part of co-operative arms programmes, or

b) all states denied white list status should be treated as having potentially been denied a licence, and therefore trigger EU Code denial notification mechanisms.

Annual reporting of Framework Agreement
In its report analysing the 1998 and 1997 UK Annual Reports, the Quadripartite Select Committee[4] recommended that:

"the 1999 Annual Report covers in full the implications for strategic export controls of detailed agreements reached as a result of the July 1998 Letter of Intent, and ask that it be demonstrated that there is nothing in those detailed agreements which undermines the UK or the EU regime on the control of the export or arms."

In the 1999 Annual Report, the UK government responded to this request, stating "If signature takes place before publication of the next Annual Report, details of the Agreement and its implications will be given in Part 1 of the Report."

Whilst this is a welcome commitment, BASIC believes that a full record of all UK component transfers and all CAP exports incorporating UK components should be recorded in future UK Annual Reports.

Under article 13.4 "…the responsibility for issuing an Export licence for the permitted export destinations lies with the Party within whose jurisdiction the export contract falls." Thus, although all governments involved in a CAP would agree by consensus on the white list recipient countries, only the country of final assembly and export would issue the licence and have a record of this transfer. Therefore, it is possible that UK components could be exported without the knowledge of the UK Parliament or people.

BASIC therefore recommends that the UK Annual Report should contain details of:

a) all Global Project Licences for UK components transferred as part of CAPs

b) all export licences for goods containing UK components - whatever the country of final assembly and export (and hence licence issuance)

c) all CAP applications which were denied licences together with reasons for denial

d) full details of the actual transfers of joint venture products containing UK components, including the type, quantity and specified end-user of materials transferred.

This information should be included as part of the UK national report to the EU Code consolidated report at the time of the EU Code annual review process. This practice should be repeated in each of the LOI partner countries.

BASIC is concerned about the UK government's apparent resistance to making white lists public, as indicated in the letter from the senior FCO official. BASIC contends that the white lists are part of a formal treaty agreement, and thus white lists established for those CAPS where UK companies are involved should be detailed in the UK government's Annual Report.

Again, it would be optimal if this practice were followed by the other LOI-Framework Agreement countries.

If the white lists are not made available to the Framework partners' publics and parliaments, it will not be possible to assess how the Framework Agreement is implemented, how the EU Code of Conduct is interpreted, and to what extent governments follow their national export guidelines and controls. Because of the room for subjective interpretation within the EU Code and differing national export policies in the six signatory states, only transparency of the decision-making process can inform parliaments and the public on the implementation of the EU Code.

BASIC furthermore challenges the notion that publicizing white lists will undermine the competitiveness of UK and/or European industry on the world market. Individual company marketing plans are routinely reported in the trade press. Furthermore, major defense companies already know well - through market analysis and participation at trade shows - where their competitors are pitching their wares. Finally, some countries are very open about prohibited destinations, including the United States, whose defense firms nonetheless continue to be able to dominate major market sectors.

Prior parliamentary scrutiny of white lists, Global Project Licences and CAP export licences
In its second report[5] the Quadripartite Select Committee stated that:

" 90. The four Select Committees that make up the Quadripartite Committee have concluded that strategic exports by their very nature justify the establishment of a system of prior parliamentary scrutiny, and that such a system should be put in place forthwith....Our proposed system poses no threat to either the commercial confidentiality or the competitiveness of British companies. It would introduce no delay of any significance in the granting of export licences. It would not impede in any way the immediate granting of export licences when these are needed in times of crisis or to meet imperative national security requirements. Furthermore, it can be operated by the existing Select Committees making up the Quadripartite Committee, and can be brought into being without either Resolutions of the House or changes to the Standing Orders."

BASIC strongly supports the Committee's call for prior parliamentary scrutiny of licence applications. BASIC believes that such scrutiny should cover all proposed transfers of UK military, security and police equipment, weaponry, technology and expertise. BASIC believes that such prior scrutiny should therefore include licences for all UK weaponry, components, technology and expertise transferred between parties to a CAP (whether as Global Project Licences or otherwise), as well as for all goods containing UK components that are exported to non-parties.

Furthermore, because of the concerns (raised above) that the white lists will act as de facto fast track licencing, BASIC believes that details of these white lists should also be circulated to the Quadripartite Select Committee for scrutiny. After lengthy consultation both within the United Kingdom and with countries that operate prior parliamentary scrutiny, the QSC has developed a system that would overcome the problems of commercial sensitivity.

BASIC recommends that the Defence Select Committee formally request that the Quadripartite Committee investigate and report to Parliament on the implications for prior parliamentary scrutiny of the Framework Agreement before any ratification process is completed. As part of this inquiry, the Quadripartite Committee should examine the feasibility of bringing Global Project Licences, CAP export licence applications and white list determination into the system of prior parliamentary scrutiny proposed in their report.

End Use Monitoring Procedures
NGOs and the Quadripartite Select Committee have highlighted the inadequacies of the existing end-use certification and monitoring procedures in the UK export control system. The European Parliament voiced similar concerns at a European level during its critique of the EU Code of Conduct. There is therefore a recognised need for improved end-use monitoring mechanisms throughout Europe. The Framework Agreement could have been a mechanism to improve and harmonise end-use monitoring amongst the six partners.

Whilst the Framework Agreement does make some limited reference to control of end-use and re-export, these are inadequately developed. Article 13.6, for example, states "Parties shall undertake to obtain end-user assurances for exports of defence articles to permitted destinations, and to exchange views with the relevant Parties if a re-exported request is received. If the envisaged re-export destination is not among permitted export destinations, the procedures defined in paragraph 13.3(a) shall apply to such consultations." However, there is no description of what end-user assurances will be obtained or how they will be enforced. There is no commitment in the Agreement for strengthening or harmonising end-use monitoring. Quite the reverse.

Under article 16.2 "Parties shall minimise the use of governmentally issued end-user certificate and international import certificate requirements on transfers of components in favour of, where possible, company certificates of use." There is a danger that this change from governmentally issued certificates to company certificates may result in less comprehensive governmental record keeping and may allow for increased risk of diversion of components.

In this regard, it is worth noting that while the UK government signed the Agreement without reservation or declaration, the German government made the following declaration:

"In awareness of Article 16, paragraph 2 of the Framework Agreement, the federal government will, when exporting war weapons and other military goods of significance for a war weapon, continue in future to insist upon governmentally issued end-user certificates."

BASIC recommends that the Defence Select Committee call on the UK government to detail the end-use certification and monitoring system that will be employed for arms and components transferred between Parties or exported under a CAP.

BASIC believes that such an end-use monitoring system should, as a minimum, comprise:

(1) Governmentally Issued End-User Certificates:
Although the Agreement aims to make cooperation among the six Parties less complex, BASIC believes that the Parties should still insist on the issuance of governmental end-user certificates for all component and weapons transfers between the six Parties, and for exports to EU members and states outside the European Union. The requirement for such end-use certificates will be even more important if the Agreement is expanded to current or future EU members.

(2) End-use agreements:
End-use agreements, which would have the status of legally binding contracts, should be negotiated between CAP parties and recipient states. Such agreements should include a clause which would result in the breaking of the contract if the goods were found to have been diverted to another end-user or to be used for proscribed purposes such as the violation of human rights. This would mean that a recipient would not be entitled to further deliveries of goods, even under the original terms of the sale; neither would they be permitted any associated equipment or services, such as spare parts, maintenance or training. Any breach of end-use requirements should be reported immediately to all LOI Parties and to EU members in general. Depending on scale and nature of the breach, LOI Parties/EU members should suspend further provision of all military goods and services to the customer.

Lack of transparency/oversight for Framework Agreement

Negotiation of Framework Agreement:
Foreign Secretary Robin Cook has stated that: "An informed public debate is the best guarantee of responsible regulation of the arms trade".

Whilst the UK government has indeed increased transparency in some key areas - such as the publication and parliamentary debate of the Annual Report on Strategic Export Controls - BASIC is concerned that the LOI-Framework Agreement negotiation process has been undertaken virtually in secret, without adequate public or parliamentary oversight or discussion.

BASIC calls on the UK government to provide details of the consultations undertaken by UK officials and ministers during the Framework Agreement negotiation process - for example, were the Defence Select Committee or the Foreign Affairs Select Committee regularly consulted or even informed of the details? Were other parties - such as UK manufacturers or their associations - informed or consulted during the LOI-Framework Agreement process?

Furthermore BASIC recommends that the Defence Select Committee ensure that it is kept fully informed, and where appropriate, consulted, over future development of the LOI-Framework Agreement process. This should include negotiations the establishment of those CAPs involving UK companies. Where appropriate, such as in cases of white list determination, the Quadripartite Select Committee should be consulted.

Ratification of Framework Agreement:
Although the Framework Agreement will have an important effect on the United Kingdom's export control practice, it does not require any changes in UK domestic legislation. Since this is the case, the treaty does not require formal debate by Parliament before ratification, but follows the so-called Ponsonby Rule. This parliamentary convention, which itself has no statutory basis[6], requires that every treaty signed by the United Kingdom subject to ratification should be laid before Parliament for 21 sitting days. At the end of this time period, it will then be automatically ratified.

When initiating this process in 1924, then-Under-Secretary of State for Foreign Affairs Arthur Ponsonby MP, declared:

"Resolutions expressing parliamentary approval of every treaty before ratification would be a very cumbersome form of procedure…The absence of disapproval may be treated as sanction, and publicity and opportunity for discussion and criticism are the really material and valuable elements which henceforth will be introduced."

BASIC is concerned that such an "absence of disapproval" might well have been facilitated by the lack of adequate public reporting of the LOI issue and the high levels of secrecy surrounding the negotiation of the Framework Agreement. BASIC applauds the Defence Select Committee's endeavours to investigate the Framework Agreement and report to Parliament before ratification. Without the Defence Select Committee's intervention, the treaty may well have been ratified without any parliamentary discussion. BASIC is deeply concerned that such an important change to export licence controls - one that while currently applied to a small universe of items may be precedent-setting - may have been agreed without any scrutiny by the legislature whatsoever.

Furthermore, even if an opposition party triggers a debate on the Framework Agreement under the Ponsonby Rule, it appears that Parliament cannot amend the treaty and that ratification will follow this debate.

BASIC notes that the Defence Select Committee itself has previously raised concerns about the (lack of) parliamentary involvement in the ratification process of another treaty - on NATO expansion[7], and that these concerns prompted an inquiry by the Procedure Committee of the House into parliamentary scrutiny of treaties[8].

The Procedure Committee report records that the "[Defence Select] Committee stated its belief that it had a responsibility to examine, on the House's behalf, treaties falling under its remit before they were ratified, and its view that a debate in Parliament on NATO enlargement should be an essential part of the ratification process of the protocols allowing that enlargement; but the Committee noted that any debate could have no actual effect on the process. The [Defence Select Committee] report commented that: "The current situation, in which the level of involvement of the UK Parliament in treaty-making is decided by the government's business managers, is unclear and inadequate."

BASIC notes that the Defence Select Committee report on NATO enlargement highlighted the fact that in most other allied countries the consent of the legislature is required before treaties can be ratified, and that in many cases parliamentary committees make recommendations to the legislature before ratification is debated. This is also the case in most OECD countries. [Such debate and consent is not required in the United Kingdom for all treaties.]

BASIC has been concerned that there was a danger that this UK democratic deficit would again come into play with the ratification of the Framework Agreement treaty, with the parliaments of the other LOI-Framework countries debating the treaty and the UK Parliament not doing so.

BASIC therefore welcomes the government's recent positive response[9] to the Procedure Committee's Second Report of Session 1999-2000, Parliamentary Scrutiny of Treaties:

"The government is happy to undertake normally to provide the opportunity for the debate of any treaty involving major political, military or diplomatic issues, if the relevant select committee and the Liaison Committee so request. It agrees that this will be a useful development of the Ponsonby Rule. The form of the debate will remain a matter for the government, although it will of course take the views of the committee concerned and of the Liaison Committee into account."

BASIC believes that concerns over both the process of negotiation and the content of the Framework Agreement merit that the House debate this treaty before it is ratified. BASIC therefore recommends that the Defence Select Committee call for a debate under the Ponsonby Rule.

However, as such a debate will have no actual effect on such treaty ratification, BASIC believes it important that Parliament, in the form of the select committees, should have an opportunity to comment earlier in the treaty drafting process. BASIC therefore recommends that the Defence Select Committee call on the Procedure Committee to investigate the feasibility of establishing a process by which the relevant select committees are routinely informed of all prospective treaty negotiations falling under their purview. This will allow them to routinely scrutinise those draft treaties deemed of sufficient importance and make recommendations, if appropriate, to the government during the drafting and negotiation stages of such treaties.

EU Oversight of Framework Agreement:
Concern over lack of adequate oversight and accountability is not just restricted to NGOs and parliamentarians in the six LOI-Framework states, but extends to other EU partners. At present there is no provision for wider EU oversight or for the involvement of other EU states in the LOI-Framework Agreement process. This is a growing area of concern, as it potentially may undermine the recent welcome moves to develop greater transparency and information exchange between EU members as part of the EU Code of Conduct.

Furthermore, the development of such a major European armaments policy outside the EU framework raises concerns about ensuring its coherence with other aspects of the nascent common European Security and Defence Policy (ESDP). Although these parallel processes may still result in complementary outcomes, their lack of inter-connection will do little to ensure that the continuing LOI-Framework Agreement process is informed by ESDP.

Parallel process of concern: US Defence Trade Security Initiative (DTSI)
BASIC believes that the possible impact of the LOI-Framework Agreement process on UK and EU arms controls should not be examined in isolation. It occurs at the same time as UK and US officials are undertaking the negotiation of another process for creating common markets for defence transfers. This process is the DTSI - the Defence Trade Security Initiative.

On 24th May 2000, US Secretary of State Madeleine Albright announced the new steps the US government would take to improve efficiency in the export licence approval process, while at the same time maintaining necessary controls to protect US security. Seventeen proposals were agreed upon, including the potential for new arms export licensing exemptions and loosening restrictions on third-party transfers of US equipment in some cases. The initiative, like the Framework Agreement, is designed in large part to reduce the burdens on the defence industry.

The extension of International Traffic in Arms Regulations (ITAR) exemptions to qualified countries (the United Kingdom and Australia are the first candidates) would allow these two countries to obtain some US defence articles license-free, once they have demonstrated that they possess policies congruent to the United States in export controls, industrial security, intelligence and law enforcement.

A recent US General Accounting Office report[10] records that "State Department and UK government officials told us that the United Kingdom's export control system is not compatible with that of the United States in several areas … The US and UK governments have yet to evaluate the compatibility of their export licencing systems and determine how enforcement concerns will be addressed."

The danger is that even if the United Kingdom can raise its security standards to those of the United States, the elimination of a paper trail could reduce the US government's ability to conduct effective end-use monitoring and equipment tracking.

Previous experience of such US licence exemption has not been good. Canada was the only country ever granted such a blanket exemption to the ITAR. However, the United States suspended this exemption in 1999 after it was discovered that Canadian firms transferred sensitive technology to Iran and China.

The US State Department believes the reforms will "increase our mutual security by enhancing defense capabilities, promote interoperability with our coalition partners, and promote trans-Atlantic defence industrial cooperation and competition."[11]

However, if an effective implementation strategy with stringent controls is not devised, the changes in US policy, coupled with the harmonization of European export regimes facilitated by the Framework Agreement, could create a vacuum of control between the world's largest arms export regions.

BASIC recommends that the Defence Select Committee ensure that it is adequately informed and consulted by UK officials on continuing UK-US negotiations on DTSI. BASIC recommends that the Defence Select Committee investigate the possible effects that the DTSI, coupled with the Framework Agreement, may have on UK and EU military and security equipment export controls.

For more information about the Framework Agreement or BASIC's work on this issue, contact: Michael Crowley, Senior Analyst, BASIC London. Email: mcrowley@basicint.org, Tel: 44 (0)20 7407 2977.

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