Sunday, February 27, 2005

Decision time gets closer

Confirmation of our view that selling arms to China does not make economic sense comes in the form of an article in today’s Sunday Times business section, headed: "BAE demands immunity on US sanctions".

Written by Dominic O'Connell, the story records how BAE Systems, Britain's biggest defence group, is pushing the British government to split with Europe and negotiate a special exemption to spare the UK from American sanctions over arms sales to China.

BAE executives and defence officials, we are told, fear Congress will stop the transfer of vital defence know-how if Europe lifts its embargo on arms exports to China – something which is definitely on the cards.

As we have suggested before on this Blog, the running in Washington is being made by Congress, and the ST story identifies "four top legislators" - senators John McCain, Joe Biden, Richard Lugar and Joe Lieberman – who are ready to ban all technology transfers.

The problem for BAE Systems is that it has a huge stake in the US defence industry – the company is America’s sixth-largest defence contractor, with a US turnover of nearly £3 billion. Any freeze on technology transfers would be highly damaging.

Therefore, Mike Turner, BAE's chief executive, is looking for a "carve-out" for his company, a deal that would exempt Britain from any US action. In return, BAE would undertake not export any important UK technology if the EU embargo on arms exports to China was scrapped.

Turner has a few cards in his hand on this, as BAE systems is a partner in the US Joint Strike Fighter (JSF) project, in which the British government has already invested £2 billion. "If we don't get there (the transfer of the required intellectual property) I think Geoff Hoon (the defence secretary) will have to think about our involvement in this programme," Turner says.

All this must be rather awkward for the advocates of EU defence integration in the MoD and elsewhere, as the idea of integrating European defence industries lies at the heart of the heart of defence integration (see here and here.

Not least, Britain is a founder member of the European Defence Agency, while the EU constitution is set to bind Britain into a fully-fledged military alliance.

Britain could now find itself in a position where, politically, it is moving towards greater European integration while its largest arms supplier is moving in exactly the opposite direction. Once more the incoherence of the British position is being shown up, pointing to the need once and for all to make a decision as to which side of the Atlantic our best interests lie.

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