Pyser-Sgi LTD. (Export Licence)

– in the House of Commons at 4:56 pm on 3rd February 2005.

Alert me about debates like this

Motion made, and Question put, That this House do now adjourn.—[Mr. Ainger.]

Photo of John Stanley John Stanley Conservative, Tonbridge and Malling 4:57 pm, 3rd February 2005

The company Pyser-SGI Ltd., which is in my constituency, is a truly remarkable success story. Although it employs fewer than 100 people in Edenbridge and Tonbridge, it is not only the last remaining UK manufacturer of night vision equipment for police forces, but a world beater. It sold its night vision monocular not only to UK police forces but to forces around the world, including, most conspicuously, the Athens police force for their protection of last year's Olympic games. That was a very significant export achievement for a small British company.

Not surprisingly, and commendably, Pyser-SGI, following its sales success during the Athens Olympics, wisely decided to see whether it could make its way into the market in China, in advance of the Beijing Olympics in 2008. In order to do so, the company decided to exhibit its night vision equipment in the China police exhibition that was held in Beijing in June last year. For that purpose, it needed an export licence; it applied to the Department of Trade and Industry and received one.

At the exhibition in Beijing last year, the company received a number of orders, including one from the Shanghai police, who wanted to trial the night vision equipment with a view to placing a much larger follow-on order. That trial and order also required an export licence from the DTI for exactly the same piece of equipment that had been exhibited in the Beijing police exhibition in June last year. The company applied for an export licence, but was astounded to find that it was refused.

The grounds for the refusal were that the night vision monocular fell within the EU arms embargo on China and that it might—I stress the word "might"—be used for internal repression. I shall come on later to whether the grounds for refusal were indeed valid. For the moment, I want to make two important, wider points that relate to the particular case.

First, the company was meted out pretty poor treatment by the DTI when it granted export licences for equipment to be shown at an exhibition, without at the same time disclosing to the company that, if orders were obtained from buyers in the country where the exhibition was held, there was no possibility of a subsequent export licence being granted. That puts a British company in a false trading position. Pyser-SGI clearly feels—I think reasonably—that it was led up the garden path by the DTI. It expended a substantial sum by exhibiting at the Beijing police exhibition last year and now that it has secured orders in China for the very equipment that it exhibited, it has found that the export licence has been refused. At no previous point was that possibility disclosed by the DTI.

Photo of John Stanley John Stanley Conservative, Tonbridge and Malling

I will give way to the Minister in a moment. I believe that the DTI should seriously reconsider its policy because the present procedure is neither reasonable nor fair to British companies, particularly the smaller ones such as Pyser-SGI.

Photo of Nigel Griffiths Nigel Griffiths Parliamentary Under-Secretary, Department of Trade and Industry

This particular company was not misled. In common with many other companies, it is perfectly well aware that the export of products in their safe hands for demonstration purposes and their return to Britain does not guarantee that those products can be released subsequently elsewhere. That has been made perfectly clear to the industry. In my time as Minister, I have received no representations from the Defence Manufacturers Association about this particular issue, so there has been no doubt about the policy.

Photo of John Stanley John Stanley Conservative, Tonbridge and Malling

I am well aware of those points. I wholly accept that the DTI protects itself by saying that, just because it provides a licence for an exhibition, it does not mean that a further export licence will automatically follow. However, my point—I hope that the Minister will, on reflection, consider it—is that when the particular piece of equipment exhibited is equipment that his officials know perfectly well is unlikely to receive an export licence if orders are obtained, the Department has some responsibility at least to issue a warning of that likelihood to the company concerned. I hope that the Minister will reflect further on that important point.

Secondly, I hope that the EU will not enter into arms embargoes that are defined as seriously inadequately as is the present embargo on China. I appreciate entirely that the present Government did not enter into that embargo. The previous Conservative Government did, along with EU member states, in the immediate aftermath of Tiananmen square. The embargo was declared at the Madrid European Council meeting of June 1989, and its wording is as follows:

"In present circumstances, the European Council thinks it necessary to adopt the following measures".

Six measures are listed, of which the relevant one states:

"Interruption by the member states of the Community of military cooperation and an embargo on trade in arms with China".

That is all that the embargo says. It contains no definition of what constitutes "arms". That interpretation was left entirely up to individual member states. Not surprisingly, that created a very unsatisfactory—I would call it extremely unfair—situation in the EU.

Individual EU Governments apply wholly different interpretations of what constitutes arms in terms of the EU's arms embargo on China. At one end of the scale, the French Government—predictably—interpret the embargo in a way that is extremely generous to French arms exporting companies. At the other end of the scale, the British Government interpret the embargo in a way that is extremely restrictive for our arms exporting companies. The result, of course, is that British firms lose out. As a general point, I hope that, in the future, the EU will not declare an arms embargo in terms that are so deeply unsatisfactory and highly generalised, and therefore open to widely varying national interpretations.

I turn now to the particular case of the Pyser-SGI monocular equipment, export approval for which was refused on the grounds that it might be used for internal repression. I want to make clear where I stand on human rights and China. I regard that country as a highly repressive state, and a serious violator of human rights. It still persecutes people who offer political criticism or any form or political opposition, and those who are fighting to establish free trade unions there. It also persecutes people who have non-political beliefs, such as members of the Falun Gong.

Both in this and the previous Parliament, I have strongly criticised this Government's policy, which I consider to be far too soft, in respect of China's human rights record. That remains my position, but in this case we are dealing not with that general issue but with the very specific question of whether it is sensible and reasonable to think that the Pyser-SGI night vision monocular equipment might be used by the Shanghai police as a major instrument of internal repression. I shall turn my attention to that in the next section of my speech.

To provide some perspective on the refusal decision, if we use some sadistic imagination, it is not, I am afraid, impossible to think of a huge number of items manufactured in the UK that could conceivably be used as instruments of internal repression. I could go round my constituency—I am sure the Minister could do the same in his constituency—and visit Homebase, B&Q and builders' merchants in Tonbridge to buy nails, screws, hacksaws, power drills, chains and other goods that, in the wrong hands, could be used for internal repression. Such items are not covered by any form of export licensing procedure. Turning to the night vision monocular itself, I have brought one with me, and if the Minister is interested, I will give him a brief demonstration after our debate. He can see that it is an inoffensive piece of optical equipment. There are four key questions that the Government should ask before making a final decision about whether to grant an export licence to Pyser-SGI so that it can export it to China.

First, is the piece of equipment meant for military use, and is it constructed to a military specification? The answer is no, it is not a military piece of equipment, and is not on the common military list of the European Union, which lists all the equipment covered by the European code of conduct on arms exports. The monocular is deemed to be of dual use, which is why it is caught up in the export licensing system. I stress, however, that it is not a military list item.

Secondly, the Government should ask whether the end user certificate provided by the Shanghai police on the purposes for which the night vision monocular is to be used is satisfactory. I have brought with me a copy of the end user certificate, signed by the chief inspector of the Shanghai police and the chief of the equipment department. The certificate asks:

"Please set out the specific purposes for which the goods are to be used".

The chief inspector replied:

"The goods are used in criminal investigation department of Shanghai public security bureau. They are in charge of drug enforcement and anti-terrorist operation. They are member of Interpol. They provide security support for Shanghai World Expo 2010."

We in Britain, including, I am sure, the British Government, are as much in favour of drug enforcement, for which the equipment is to be used, as the Shanghai police. We in Britain conduct our own anti-terrorist operations, and have taken the most far-reaching powers for centuries to deal with terrorists, including imprisonment without trial and now, under the Government's proposals, a new system of house arrest.

The police of this country, like the Shanghai police, are members of Interpol. We in this country, again like the Shanghai police, are very much in favour of there being proper security at Shanghai World Expo in 2010. I put it to the Minister that the purposes for which the equipment is to be used seem fully in line with Government policy.

My third question is: should the licence be refused simply because the piece of equipment is going to a Chinese police force? If the British Government's position was that Chinese police forces, wherever located in China, were, in human rights terms, wholly unacceptable organisations—if they were some sort of latter-day Gestapo—it would be perfectly reasonable to refuse them an export licence for any equipment. However, that is not the British Government's position. Indeed, their position is quite the reverse.

I have been advised by Pyser-SGI that the Metropolitan police are engaged in training, in Britain, police officers from China in drug enforcement. That training obviously has the approval of the British Government, including Foreign Office approval. It is funded by British taxpayers, and as I have already made clear, drug enforcement is one of the very purposes for which Pyser-SGI is seeking an export licence for equipment for the Shanghai police. It seems extraordinarily perverse that, here in the UK, the Metropolitan police are training Chinese police in drug enforcement while the British Government are refusing a British company an export licence for equipment that would assist the Shanghai police in China in dealing with drug enforcement. Even more ironic is the fact that the Metropolitan police certainly include in their training some form of night training for the Chinese police in dealing with drug traffickers, and that will involve the use of night vision equipment—possibly the very equipment for which the DTI is refusing Pyser-SGI an export licence for the Shanghai police. There are no grounds to say that the export licence should be refused simply because the equipment is going to the Chinese police.

My fourth and final question is the clincher. Is the UK, in refusing the export licence, following the same policy as other European Union member states on that item of equipment? If the British Government were following the same refusal policy as other EU member countries, I would have no difficulty in accepting that that was EU policy and that Britain should go along with it—but that is not the case. In fact, the position is the reverse. If the UK was following the same policy on the equipment as that of other EU member states, the British Government should have given Pyser-SGI an export licence on the nod, because companies in other EU member states have no difficulty whatever in obtaining approval for export licences for such equipment from their respective Governments.

I now want to come to the detail of that key point. Three EU member states manufacture such night vision equipment for police forces: Britain, the Netherlands and France. Let me turn, then, to what is the practice in the Netherlands and France. The Dutch company involved is called Delft Electronic Products, and the key piece of equipment is called the image intensifier, which is fitted in the middle of the night vision monocular and is the key engine that drives the equipment. Delft Electronic Products has had no problem at all in getting export licences from the Dutch Government to export that item to China. Indeed, the Dutch company has gone even further than making simple, direct exports to China: it has entered into the joint licensed production of the image intensifier with a Chinese company—North Night Vision Technology Co. Ltd. in Beijing. That company is now manufacturing under licence from the Dutch the image intensifiers for which the British Government are refusing to grant an export licence to Pyser-SGI.

The situation is even more extraordinary in France, where Pyser-SGI has two competitor companies, the first of which is called Photonis. Like Delft Electronic Products in the Netherlands, Photonis had no difficulty in getting export licences for its image intensifiers from the French Government. Even more extraordinary is the position of the second French company, Thales Angenieux. Again, with the approval of the French Government, that company has entered into another licensed production agreement with North Night Vision Technology Co. Ltd. in Beijing that involves an even more sophisticated piece of equipment—a night vision goggle, called LUCIE—than that for which Pyser-SGI has been seeking export licence approval from the DTI.

Most significantly, that French item, which is now under joint production with the Chinese in Beijing, is specifically stated to be for not only civilian but military use. Indeed, I have with me a copy of the sales particulars issued by North Night Vision Technology Co. Ltd.—they are partly in Chinese, but happily for me, partly in English as well—and the relevant couple of sentences read:

"This new concept of multi-purposes night vision goggles LUCIE-NVT has been developed by THALES ANGENIEUX, assembled and exclusively sales in China by North Night Vision Technology Co. Ltd (NVT) . . . LUCIE-NVT offers, at the lowest price, 3 magnifications (1x, 4x and 6x) and is fully in accordance with military & civilian specifications."

I stress to the Minister that our EU partners are following a totally different interpretation of the EU arms embargo on China and are selling competitive products with the full approval of their respective Governments.

May I say to the Minister that although I am sure that he has on his knee a nice speech that has been dutifully drafted by his officials to justify the refusal decision that has been taken, I hope, having listened to my remarks, that he will on reflection put his prepared speech on hold, consider the points that I have made and perhaps discuss the matter with his colleagues in the Foreign and Commonwealth Office?

The facts are these. First, if the decision stands, the UK's only manufacturer of night vision monoculars for police forces will be put out of business in the major export market of China, and perhaps other markets as well. Secondly, I must put it to the Minister that it will make not one jot or tittle of difference to internal repression in China if the Pyser-SGI monocular is sold, because if it is not sold by Pyser-SGI, the Shanghai police will have no difficultly whatever buying it elsewhere. The third inescapable commercial reality is that if the British Government continue their present policy, Pyser-SGI's Dutch and French competitors will simply be laughing all the way to the bank at the expense of a British company.

This export licence decision is political correctness gone absolutely mad. It defies common sense and practicality on the ground, and it is directly contrary to British economic and employment interests. I am in no doubt that the refusal decision should be reversed, and I trust that the Minister will consider the case that I have made for that reversal and achieve just that.

Photo of Nigel Griffiths Nigel Griffiths Parliamentary Under-Secretary, Department of Trade and Industry 5:26 pm, 3rd February 2005

I congratulate Sir John Stanley on securing the debate on my refusal to grant a licence for Pyser-SGI to export a night vision monocular and a night intensification module to China. I have a reputation for putting prepared speeches on hold, so let me thank him for giving me the opportunity to explain to the House the steps that I have taken to ensure that we have one of the most robust export licence regimes anywhere in the world.

Our export licensing commitments are clear. We assess each export licence application on a case-by-case basis against the consolidated EU export licensing criteria and our own national arms export licensing criteria. We take fully into consideration the circumstances prevailing at the time. In addition, we reserve the right to impose our own stricter criteria in line with Government policy. If it is judged that an export is inconsistent with any of the criteria, the application is refused.

We take the criteria very seriously. The case was refused under criterion 1, which covers international embargos and, on appeal, also under criterion 2, which refers to the possibility of internal repression. There is an EU embargo on arms to China, which we in the UK interpret as including the export of any goods that might be used for internal repression.

The manufacturer made the following statement in its letter of 13 September:

"we . . . are wholly and totally unable to fathom how it might be in any way conceivable, practical or technically possible to make use of either of these items of equipment for 'internal repression' purposes".

Let me explain why that is, in fact, possible. The night vision monocular can be strapped to a helmet to free hands for other tasks, and the night intensification module can be fitted to a camera to provide night vision capabilities. Of course, as the right hon. Member said, the items can be used legitimately, but they can also be used to enhance significantly the capabilities of internal security forces to conduct repressive night raids on civilians. It is frankly disingenuous for anyone in the business to claim otherwise.

I am pleased that the world-class reputation of our police services ensures that they are training other police forces and achieving improvements in other countries. However, providing night vision equipment along with that is not the same as providing shirts, uniforms and boots. Let me be clear: although the case was refused initially only under criterion 1, had the embargo not been in place the clear risk that the goods would be used for internal repression would have led me to refuse the export under criterion 2 of the consolidated criteria, which also relates to internal repression.

I shall set out why the goods were refused an export licence, even though an export licence was given for the temporary export of a limited sample of the goods to accompany the exporter to an exhibition in China for demonstration purposes. The terms of a temporary export licence are strict: they usually require the goods to remain in the possession of the exporter at all times, and usually seek guarantees of their return to the UK For those reasons, temporary licences do not raise the same issues as permanent ones—and exporters know that. We make it clear at all stages to all exporters, including the right hon. Member's constituents, that the granting of an export licence so that they can demonstrate their goods never guarantees that a permanent export licence will be granted. The exhibition in question was open to non-Chinese customers, so there was no reason to deny a licence to exhibit.

Last year, the DTI's export control organisation held 14 regional workshops and four seminars to raise exporters' awareness of our controls. With permanent exports, as the goods will remain in the destination country unsupervised, the end use and end user of the goods must be carefully considered, together with the nature and capability of the goods and other relevant factors. Our foremost commitment is to ensure that exports are managed responsibly and in line with the UK's national and international commitments. I know that the right hon. Member shares that commitment and does not wish to advocate that trade interests should override matters of human rights and proliferation. The Government's serious concerns about the human rights situation in China have been made clear. When my right hon. Friend the Foreign Secretary briefed Parliament's Quadripartite Committee on 12 January, he stated that although the human rights situation in China has certainly eased, we are in no way satisfied that it is now fully acceptable.

To assist exporters in assessing whether they should devote resources to securing overseas contracts, the Government openly provide as much information as possible to help them to undertake risk assessment on where to target their resources. The FCO website contains extensive detail on current policy restrictions and country-specific concerns, including the fact that the goods in question are contained on the EU list of dual-use equipment, which might be used for internal repression. The right hon. Member's constituents can have been in no doubt about the matter. I have ensured that the export control organisation's website now contains breakdowns of refusal rates and processing times by destination.

The right hon. Member has raised the case directly with my right hon. Friends the Secretary of State for Trade and Industry and the Foreign Secretary. He asks the valid question whether our regime is more strict than that of other countries. Let me tell the House that every EU member state is committed to considering export licence applications against the binding EU code of conduct on arms exports or against any EU or UN embargoes. To ensure that no country grants a licence without realising that such a licence might have been refused by another member state, we have an EU-wide denial notification system, which ensures that refusal in one state is noted in every state. If the right hon. Member has further evidence about specific identical equipment having been supplied to the end user in China—I understand that he might have more details—that can be investigated.

Photo of John Stanley John Stanley Conservative, Tonbridge and Malling

During my speech, I quoted from the sales literature that referred directly to sales of LUCIE-NVT night vision binoculars carried out with the approval of the French Government. I quoted the documentary evidence.

Photo of Nigel Griffiths Nigel Griffiths Parliamentary Under-Secretary, Department of Trade and Industry

The right hon. Member is right. He quoted the evidence. I asked whether we can have it, and I am sure he will supply it to us.

Photo of John Stanley John Stanley Conservative, Tonbridge and Malling

The evidence from which I quoted has already been supplied to the Minister's Department and was in the appeal documentation submitted to his Department by Pyser-SGI.

Photo of Nigel Griffiths Nigel Griffiths Parliamentary Under-Secretary, Department of Trade and Industry

I am grateful to the right hon. Member for mentioning that. The evidence was therefore taken fully into consideration. His letter to my right hon. Friend the Foreign Secretary of 11 January has helped to inform this debate. I have, however, made it clear where we stand. Our refusal must be noted by other states. If they have chosen to take a different course of action, they must answer for that, as I must answer to the House for our actions to date.

Since 1997, we have refused 58 standard individual export licences to China. That figure does not include many more export requests that never reached the licensing stage because the advice would have been given that they would certainly be refused. The case raised by the right hon. Member is an important example that highlights the effectiveness of the UK's export licensing system. We are working with our EU partners to make the system even more effective because we see the code of conduct as a key element in controlling defence exports.

The right hon. Member told my right hon. Friend the Foreign Secretary in the letter that I mentioned a moment ago:

"I have been critical in the House of both the British Government and the EU generally on not being sufficiently robust towards the Chinese on human rights".

The Government do not entirely accept that judgment, and I make no apology for taking appropriate measures to prevent the supply of equipment which we judge may be used for human rights abuses. I hope that the right hon. Member shares my view.

Question put and agreed to.

Adjourned accordingly at twenty-four minutes to Six o'clock.