Monday, January 29, 2007

A message to anti-arms trade MPs - how to phase out UK industry's arms-trade-dependence

Another timely piece from Paul Reynolds in the light of the BAe debacle:-

The benefits to the UK of these large defence contracts need to be assessed in as neutral a way as possible - neither to prove the pro or anti argument. A proper assessment of ALL the costs and benefits is needed if the government's public interest argument is to be considered (including subsidy, hidden and otherwise, costs of civil service staff, and opportunity costs in the medium-term monopolisation of limited UK engineering expertise). It is not enough just to rely on treaty obligations in objecting, since the general public and the political community will always be equivocal if the 'UK jobs' argument is used as a policy trump card. As long as the government claims it has the legal power to abandon prosecutions on public interest grounds, it is useful to understand the extent of the public interest involved. I suspect however that the private benefits are positive but the public benefits marginally negative.

It is good to be FOR something as well as AGAINST something. The defence industry is the most (perhaps the only, alongside oil sectors) concrete industrial policy pursued by HMG. There is large government apparatus involved in this, ranging from the old DESO to UK military attaches and staff in countries where there are no defence policy interests, and 'planning' departments in the MoD, DTI and the FCO. Almost certainly there are significant resources deployed in the intelligence services and there are an unknown number of semi-formal defence procurement officers in khaki, too. By comparison, the quality of HMG's effort (and quality of people) in effectively helping develop other UK sectors is very poor indeed. Subsidies are out, of course, but the sophistication of UK non-subsidy support for important old & new sectors pales into insignificance when compared to that of Japan, S Korea, Germany and both Federal and state-level activities in the USA. In addition, the effort put in to preventing unfair subsidies from our competitors (especially in the EU) in all sorts of sectors is very limp indeed.

The other issue I think is important is the attachment that the UK has to subsidised military production for its domestic armed forces. In practice it is much cheaper and more contractually astute to buy arms and military kit from other countries - and let the citizens of the exporting countries pour subsidies into their own bottomless pit. In addition, if there are problems and delays in the goods being delivered, you can act like a proper customer and demand compensation or rectification with vigour.

You cannot act in the same way if the supplier is a 'favoured' national champion (and this in effect a monopoly supplier) in receipt of subsidies, and given the contract to protect jobs in Lower Broughton-on-the-Water or some other Labour constituency. Just ask the UK armed forces. They are the ones who get killed because the bloomon' latest widget is 5 years behind schedule and the old widgets are decrepit ! This is an important point, since many of the in-government arguments for arms export support relate to the need to help mantain a domestic arms industry in support of UK armed forces capability.

The UK has the highest % of GDP represented by arms production of any large economy. A combination of objectively challenging the economic public interest argument, plus making criticisms of the UK industrial policy effort, helps win the argument hands down. We can always win on the moral argument of objecting to the UK contributing to the killing of others. The general public don't usually buy the 'if we don't sell them, somebody else will' argument. The reality of the UK government-driven arms industry is a far cry from the rhetoric.

Professor Paul E M Reynolds

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