I beg to move Amendment No. 42, in page 9, line 36, after `effect', insert

``damaging to the interests or security of the United Kingdom''.

I am speaking to my amendment a little earlier than I anticipated. It is self-explanatory. None of us would want anything to happen that would damage the interests or security of the United Kingdom. The point of the amendment is that the export of arms or technology should be prohibited if the interests of the United Kingdom and its allies might be damaged, but that they should not be prohibited if hostile or potentially hostile powers were fuelling regional or local conflicts to the detriment of British interests. The British Government should be free to export arms to parties or countries engaged in such conflicts. That should be possible without the prohibitions that the Government have made it possible to ignore, despite appearing to have embraced them. The amendment focuses on the Government's obligations.

What would happen if the European Union expressed a view contrary to the view that this country wanted to act on? The Minister worried my hon. Friend the Member for Aldershot (Mr. Howarth) earlier, when he referred to the possibility that EU direction could prohibit us from certain courses of action. Could the European Union block the consequences of the relevant provisions of the schedule, regardless of the course that the United Kingdom wanted to take?

On Second Reading, my hon. Friend the Member for Aldershot spoke about the number of jobs in our arms manufacturing business, the skills and expertise involved in it and its importance to the country's exports. I know that a number of hon. Members are concerned about the focus and direction of armaments sold overseas. However, we should have a strong armament business for the country's security.

Is the hon. Gentleman suggesting that other members of the European Community are not friendly states?

I am not saying that at all. In reply to an earlier question, the Minister indicated that actions that this country wanted to take could be either blocked or redirected by the European Union. I was alluding to that. I do not understand how the hon. Gentleman gained the impression that I was suggesting that another EU country might not be friendly. However, in certain circumstances any of them could take a view that we might find unhelpful or not in harmony with the aims of this nation.

I return to the point made by my hon. Friend the Member for Aldershot, who spoke about the importance of our arms manufacturing base, of exports and of jobs. Any Government forget at their peril that their primary task is to ensure the security of the realm. If they do so, they tread on dangerous ground. How the security of the realm might be affected is open to a wider-ranging debate than this. You would pull me up and redirect me, Mr. Benton, if I took that path.

If we have a strong and positive industry, correctly controlled by licensing, we shall correctly supply the type of equipment that may be used. Others, who might not be as ethical and responsible as we are, will be kept out. However, if we allow our manufacturing to become weak and we are unable—for whatever reason—to supply, less responsible and less ethical countries will enter the supply market and the controls will drift away.

The Secretary of State spoke on Second Reading about the horrific events in Africa. We all know the disastrous and undesirable consequences that flow from the fact that the world is awash with Kalashnikovs made by nations that do not have the controls that we have and given to nations without the responsibility that we have. We do not want to see our country so sidelined that the opportunity for such activity to occur is increased.

The Amendment is self-explanatory. I hope that the Minister will agree that it should be incorporated into the Bill, or explain in detail where my points of concern are covered.

The Amendment would limit paragraph B of the table to adverse effects on peace, security or stability in any region of the world or within any country that would also damage the interests or security of the United Kingdom.

We see for the first time a key fault line between the parties. It is not over Europe. The consequences of the treaty of Rome and of the noble Baroness Thatcher's having signed the Single European Act in 1985 are well known to all of us, and we live and abide by them in terms of regulations and the like.

May I place it on the record that my noble Friend was prepared to encourage members of her party at that time to sign up to the Single European Act because she was advised and was under the firm impression that it was designed to give effect to a single market in goods and services? It was then, of course, outrageously abused by our European partners, particularly by the European Court of Justice. However, I reassure the Minister that I voted against our signing that Act.

I think that the whole Committee knows how easily influenced the noble Baroness was, what a weak person she was and how easily the wool was likely to be pulled over her eyes—I don't think.

We believe—it is a distinct difference between us—that, because of possible concerns about peace, stability and security in other countries or regions of the world, it is right to be able to impose export controls, irrespective of whether it would be damaging to the United Kingdom's interests. The ability to impose export and other controls in order to avoid an adverse effect on the UK's national security is already provided for in paragraph A of the table. An Amendment to provide for export controls to be imposed in order to avoid damage to the security of the United Kingdom is therefore not necessary.

The amendment also refers more generally to

``the interests . . . of the United Kingdom''.

We consider that all the interests of the United Kingdom for which it might be necessary or desirable to make orders that impose controls on exports or transfers are already covered in the table—including, in paragraph E, the risk that goods or technology might be used elsewhere in the world to carry out or to facilitate the carrying out of acts of terrorism or serious crime.

The hon. Gentleman may have in mind the reference in the consolidated criteria to the fact that

``the Government will . . . continue when considering export licence applications to give full weight to the UK's national interest'', including the potential effect on the UK's economic, financial and commercial interests, the potential effect on the UK's relations with the recipient country, the potential effect on any collaborative defence production or procurement project with allies or EU partners, and the protection of the UK's essential strategic industrial base. However, those are considerations properly to be taken into account in the licensing decisions, rather than reasons for which export controls should be imposed on particular items of equipment. Therefore it is not appropriate to amend the schedule of purposes for which orders may be made under clauses 1 and 2. I hope that the hon. Gentleman will withdraw the amendment.

I want to be sure that I am under no misapprehension. Paragraph B of the table refers to:

``An adverse effect on peace, security or stability in any region''.

I presume that an analysis of whether the export of technology into a region was ``adverse'' would be entirely a matter for the Government of the day, and that it would not be the subject of an order of the House.

I can help the hon. Gentleman. He is right; of course it would be. That is why we are putting the annual report on a statutory basis; it will list key decisions and the criteria for reaching them, and ensure that they are open to public scrutiny.

I have often wondered about the reasons for the signing of the Single European Act, and I am grateful to my hon. Friend the Member for Aldershot for explaining how it came to pass. I confess that I did not know until now, but at my advanced age life has become a lot clearer.

I thank the Minister for his explanation of the Amendment's effect. As my hon. Friend said, the word ``adverse'' is subject to the interpretation and judgment of the Government, and perhaps that is as it should be. I thank the Minister for his explanation and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move Amendment No. 10, in page 10, line 15, at end insert—

`Sustainable development

F. An adverse effect on:

(a) the economy of any country; or

(b) the sustainable development of the country to which the goods were exported, or the technology was transferred.'.

With this it will be convenient to take Amendment No. 31, in page 10, line 15, at end insert—

`Sustainable development

F. An adverse effect on the sustainable development of the country to which the goods were exported, or the technology was transferred.'.

ÌMr. SavidgeÌ: I warmly welcome the Bill. I am rather surprised at the Opposition's attack on it as being over-hasty. Five years has already elapsed since the publication of the Scott report, and nine years since the Matrix Churchill scandal. It is 10 years since it was pointed out that the law that we were working with was somewhat dodgy and more than 60 years since that law was passed, in 1939. The 1939 Act states that it was enacted because of the ``present emergency''. It was scheduled to expire when that emergency came to an end. I have, at times, had the feeling that Conservative Members live in a sort of time warp, but I am surprised that they are not aware that world war two ended quite a while ago. The Bill, rather than being over-hasty, is more than half a century overdue.

It would be unfortunate if the hon. Gentleman were inadvertently to mislead others about the position of the Conservative party on the Bill. It is not that we consider it hasty in the sense that it was part of the Gracious Speech. It is over-hasty in the sense that the Government are seeking to rush it through in four or five days of sittings in Committee, divided by the parliamentary recess, when the real meat of the Bill—in the words of the hon. Member for Twickenham (Dr. Cable)—is in the orders, which have not been laid before the House.

Order. Before the hon. Member for Aberdeen, North (Mr. Savidge) resumes his speech, I would like to draw his mind back to the Amendment under discussion.

I stand corrected.

In drafting the amendments that I have tabled, I have been influenced by the concerns expressed by various non-governmental organisations although, to pick up on a remark by the hon. Member for Aldershot, I would not claim to fit his description of the hon. Member for Richmond Park (Dr. Tonge): the NGOs' representative on earth. I notice, from reading the NGOs' statements, that they welcome not only the Bill, but the Government's attitude to the matter since 1997. They also welcome the opportunities for consultation that the Government have given.

The Amendment expresses one of several residual concerns. It is largely a probing amendment because, although I believe that sustainable economic development is a vital issue, I am not sure that it sits neatly with the other issues determining the criteria for not accepting exports on the grounds of adverse effect. Those issues are national security; regional stability and internal conflict—the tragedy of the fatalities caused by civil wars; weapons of mass destruction; international law and human rights; and terrorism and crime. Sustainable development is in some ways qualitatively different from some of those issues.

However, sustainable development should be properly considered in dealing with export licences. I seek reassurance on that as a member of the Select Committee on Environmental Audit, and I am deeply conscious of the fact that the Government intend that sustainable development should be the underlying and overarching objective of all Government policy. That is supported by all parties in the House. In many cases third world debt builds up so tragically because of arms sales to countries that could ill afford it.

I will ask the Minister to reassure us that proper provision will be made for sustainable economic development in dealing with exports.

I take the hon. Gentleman's point. However, when he says technology, does he mean information technology? I am interested in a broader brief than merely weapons. I ask him to quantify the sort of goods that he means by sustainable development of a country.

I am sorry, but I do not understand. The hon. Gentleman said that I used the word technology, but I did not. Oh! I used it in the Amendment, which contains the words,

``or when the technology was transferred''.

I apologise; I thought that he was referring to what I said. I used that wording in the amendment because the Bill refers to the range of possible technologies. It refers to transfer via IT and technology of various forms, including military.

The main purpose of the amendment is to raise an issue that is part of Government policy. We want to reduce third world debt and to ensure sustainable development. I want assurances that the Bill and its application will adequately cover that.

I apologise; I shall have to be away by 5 o'clock.

This is probably the most important part of the Bill. Twice today I have been referred to as the NGOs' representative on earth. If we asked the NGOs about that, I suspect that they probably would not agree with that definition of my role. If the hon. Member for Aldershot were in his place, I am sure that he would say that I was about to address the bleeding hearts issues. Those issues affect people in developing countries, and disproportionately affect the women and children.

``Sustainable development'' is a terribly important phrase, and was in the draft Bill. For technical reasons, it has been removed, because some people think that the schedule of purposes now covers sustainable development. If so, why not say so? In the proceedings of the International Development Bill, all the Ministers pushed that phrase hard. Whenever I tried to make an Amendment or talk about tied aid, for instance, I was told that sustainable development encompassed everything and had to be in the legislation. I was told that I need not worry because it was in that Bill. Everything was judged on sustainable development.

Why can the phrase not appear in this Bill? It seems as though the right hand does not know what the left hand is doing. Perhaps this is an example of non-joined-up government. The International Development Bill came from the Department for International Development, but this Bill has come from the Department of Trade and Industry. One of the big problems with the Government is the lack of joined-up government, which they talked about so much and put into practice so little.

Sustainable development means that every export—arms, technology transfer, technology assistance or whatever—must be assessed for the effect that it will have on the people and the economy of the relevant country. That means that one must not, for instance, cumulatively add to exports to a country. I am terribly sorry that we were not in our place at the beginning of the sitting.

The use of arms per se is not a sustainable course of action. If we were to agree to the Amendment, it would limit the use of arms in defending the country to which they were exported.

I agree with the hon. Gentleman. Sustainable development can include the need for arms to defend a country. A good example at the moment is Rwanda, which is one of the poorest countries in the world and is just emerging from genocide and civil war. We condone the fact that it is spending money on arms because it needs to pursue and defend its interests in the Congo and the north of the country. Some poor countries need arms, and one must take that into account.

Cumulative exports to a particular country can affect its sustainable development, and that is why we will retable the amendments on Report. We must examine the debt that a country may get into because of spending on arms. We should examine the export credits that may be given for the export of arms to a country, and how the huge sums of money will be paid off, if they are ever to be. If a country is spending too much on arms, funds are diverted from health and education, which are the only two measures that will improve both the lives of people in the country and the country's economy. As we know, primary education, particularly for girls, is the factor that improves the economic performance of a country over the medium and long term more than any other. Many studies have shown that.

We must address sustainability and sustainable development. It is crucial that those words appear in the Bill and I appeal to the Minister because I cannot see why that should not happen. If the phrase was added, everyone would feel much happier and would feel that the Department of Trade and Industry is interested in development and doing something about the world's poorest countries.

Order. The hon. Member for Aberdeen, North has said that he wants to leave at 5 pm. May I prevail upon the hon. Gentleman to remain until the Amendment has been dealt with?

I shall speak briefly so that I do not compromise the hon. Gentleman's timetable too much.

We support the good, appropriate Amendment, which has two essential points: one is procedural and one about substance. The procedural point is that unless the concept of sustainable development is written in the Bill, it could be lost in future. If the concept is merely in guidance, it would be easy for future Governments and Ministers to lose it. I am sure that the present Government and Minister have no intention of losing it because we have an exceptionally effective Secretary of State for International Development who is respected by all parties. She fights her corner and is strongly committed to overseas development and will not lose any arguments in Whitehall. However, many Secretaries of State for International Development have been invisible and ineffective and, for the future, the Bill should be structured so that the development aspect would be effectively heard in any major arguments in Whitehall about big arms transactions.

My second point is about substance, and the Intervention by the hon. Member for North Durham (Mr. Jones) was valid. My colleagues and I are not arguing from the standpoint that there are no such things as desirable arms exports or arms industries. In the past, many developing countries have been highly militarised and have developed successfully, for example Israel in its early years and South Korea. Developing countries, such as China and India, invest heavily in the arms business. One can argue at length about both countries, but they have substantial economic growth and arguably substantial social progress. There is no fundamental inconsistency between involvement in the arms trade and sustainable development. However, in general there are many reasons for believing that arms exports, especially in large volume, can compromise the development of many countries. As my hon. Friend the Member for Richmond Park said, the argument is not a bleeding hearts argument, but has been argued over the years by the International Monetary Fund, which is highly critical of the way in which developed countries implicitly subsidise and support their arms exports. It makes the point that, for many developing countries, importing arms is associated with the acquisition of debt and not a wealth-generating asset. It says that, of all the forms of trade in which developing countries can engage, the arms trade is the least productive from a development point of view. That is why the development issue should be made explicit in arguments about the relative merits of exports. The hon. Member for Aberdeen, North is right to want the amendment written into the Bill.

The hon. Member for Aberdeen, North has shown us the dangers of coming to a Committee with a set of opening remarks that one does not adjust according to the circumstances. His was a classic case. I say to him and to the Committee—I shall say it time and again—that Conservative Members are not against the Bill. We welcome it. We want it in place. In fact, when we were in government, the Conservative party set up the Scott inquiry. We have already expressed our regret that it has taken so long to reach this stage. We would have preferred the Bill to be debated in sequence, instead of fragmented for two or three months while we all go away with our bucket and spades. I look forward to our return to Committee in October.

I should have been happy to table Amendment No. 10 or amendment No. 31. However, when I went to the Table Office, they had already been tabled. I did not see the point in overegging the pudding, knowing that those who had tabled the amendments would advance their arguments effectively. The NGOs have experienced such matters and their arguments, queries and worries must be properly taken on board. I am asking, how do the Government decide what is a balance between the requirement of security and the defence of the realm, and sustainable development of an economy to ensure that a country is driven forward and does not become an over-militarised state? Who will make that judgment?

We can all produce examples of when countries have suffered because the defence of the realm was not their first requirement and when other border countries had behaved in a wrong and, dare I say it, almost criminal fashion. Because certain countries had not been defended, we have seen their economy and any form of sustainable development put back years, if not decades. I should be interested to know how the Government will handle such matters. The NGOs make important points but, as I say about this country, the defence of the realm must be the premier objective.

I take the amendments seriously. I shall deal with them in detail and, I hope, with clarify and brevity. The effect of the Amendment tabled by the hon. Member for Twickenham would be to make a risk that exports of goods or transfers of technology of a particular description would have an adverse effect on the recipient country's sustainable development. It would make that risk a reason for which an order imposing export or transfer controls could be made.

The amendment tabled by my hon. Friend the Member for Aberdeen, North would have the same effect, but, in addition, it would make a risk that exports of goods or transfers of technology of a particular description would have an adverse effect on the economy of any country, a reason for which an order imposing export or transfer controls could be made. I do not regard arms control as a bleeding heart issue. As my right hon. Friend the Secretary of State said so movingly on Second Reading, we see the matter as a bleeding men, women and children issue.

An important aspect of the consolidated criteria for arms exports is, of course, the obligation under criterion 8 of the United Kingdom legislation, derived from the European Union code of conduct on arms exports, to take into account whether a proposed export would seriously undermine the economy or seriously hamper the sustainable development of the recipient country. We have always made it clear that our national criteria and the EU code of conduct on arms exports, which we played a key role in drafting, accepted in full and consolidated last autumn, would remain the basis for export licensing decisions.

Why, if that EU code of conduct remains the basis, can it not be incorporated into the Bill?

It is a matter of clarity and convenience. Obviously the Bill reflects the codes that we consolidated, but we are treating this code as published guidance under the Bill that the Government must take into account when making licensing decisions.

Surely the EU code of conduct is not legally binding. It is advisory, and the Government can be advised by it, but it is not binding. However, if it were incorporated into the Bill it would be binding.

Even if a future Government tried to withdraw guidance continued under Clause 8(4), the EU criteria would continue to apply until specifically altered by the EU in its common foreign and security policy formation. It would therefore remain a relevant consideration for a Government to take into account. Indeed, if it were ignored, a judicial review of a licence ground refusal could conceivably result.

The Minister must realise that much argument resulted when the Government gave permission for the repair of guns for Morocco, which borders Western Sahara. That contravened Clause 8 of the European code of conduct, and nothing happened as a consequence. The provision is not legally binding.

I shall not refer ex tempore in Committee to a particular case. Under the Bill, the consolidated criteria are to be treated as published guidance that the Government must take into account in making licensing decisions. The Bill confirms and underlines the status of consolidated criteria, all aspects of which are important. Criterion 8 derives from the EU code of conduct on arms exports, and we are firmly committed to it. Hon. Members want to prevent a future Government from withdrawing from consideration of sustainable development as part of the export licensing process. They are ignoring the fact that we signed up to the EU code of conduct. We shall not withdraw from it, and a future Government will have to be bound by Clause 8(4). The EU criteria will still apply unless the provision is altered or withdrawn by the EU, and I see no prospect of that. The Amendment is therefore unnecessary, and I invite my hon. Friend the Member for Aberdeen, North to withdraw it.

I thank my hon. Friend for his assurances on the EU code of conduct, although I ask him to consider whether the Government would make the matter slightly more explicit in the Bill. Given his assurances, I beg to ask leave to withdraw the Amendment.

I seek your advice on procedure, Mr. Benton. The two amendments are similar, and we do not want to withdraw ours.

The two amendments are grouped together. The hon. Member for Aberdeen, North asked leave to withdraw his Amendment, but I am advised that, because I allowed the hon. Lady to speak, I must put the Question on the amendment to the Committee.

Amendment negatived.

I beg to move Amendment No. 32, in page 10, line 15, at end insert—

`Diversion

F. A risk that the equipment will be diverted within the buyer country or re-exported under undesirable conditions.'.

The amendment draws attention to the problem of weapons diversion and would include that in the Bill. The problem is generally acknowledged by those who have examined the arms export trade. In respect of major strategic weapons and Iraq, it is widely recognised that Jordan, probably unwittingly, was used as a destination for illicit Iraqi weapons, and case studies have been conducted by hon. Members into other abuses. For example, the Chairman of the International Development Committee spent some time inspecting the abuses that occurred as a result of the British investment in the Philippines that was used to evade controls and trans-ship weapons to Indonesia. As an example of brokerage, in the past week we have seen Burkina Faso used as a preferred destination for weapons that were subsequently diverted to Liberia and Sierra Leone. The diversion of weapons is a recognised phenomenon that the export control system should take into account. The amendment will help that process.

I would be surprised if the amendment presented a problem. In international trade policy there are many examples of rules of origin being used to track ultimate destinations. There are complex rules of origin in trade policy on imports when Governments, including ours, are in protectionist mode. There are rules about exporting textiles to the European Union, which require the exporting countries to produce certification to demonstrate that the full content of clothes, for example, was produced in the country of origin and has not been trans-shipped. Such schemes are commonly employed in the generalised system of preferences, where exporters must produce certificates that demonstrate that the origin is genuinely in the manufacturing country.

The principle of tracking trans-shipments and using proper certification processes to stop abuse is common on the import side of trade. All we are asking is that the importance of the problem of trans-shipment and abuse of origin, particularly in the case of armaments, should be recognised and taken into account as an important part of the export control process.

The Amendment would insert into the schedule a reference to the risk that equipment will be diverted within the buyer country or re-exported under undesirable conditions. The wording of the amendment reflects criterion 7 of the consolidated national and EU criteria, and the hon. Gentleman may have proposed the amendment to ensure that the risk of diversion remains a key consideration in export licensing decisions.

I hope that I can explain why the amendment is inappropriate and unnecessary. The schedule describes the purposes for which orders imposing export or transfer controls can be made. Under Clause 3(6), licensing decisions must have regard to the possible consequences of exports or transfers of the kind mentioned in the table mentioned in paragraph 4 of the schedule. The function of the schedule is to govern the making of orders that specify classes of goods and technology subject to export controls. No quality inherent in a particular item of equipment or technology can make it likely to be diverted to undesirable end use. That is why it is inappropriate to include a reference to diversion in the schedule to govern the purposes for which particular items of equipment can be brought under control in orders made under clauses 1 and 2.

However, I assure the Committee that the risk of diversion within a buyer country or an undesirable re-export to another country is and will remain a key consideration in our export licensing decisions. We always made it clear that our national criteria and the EU code which we consolidated last autumn would remain the basis for export licensing decisions. Clause 8 makes it clear that the consolidated criteria are to be treated as published guidance under the Bill and that the Government shall have regard to that guidance in reaching licensing decisions.

The Bill confirms and underlines the status of the consolidated criteria, all aspects of which are important. The Bill does not change the status of particular criteria. In the light of that assurance and my explanation why the amendment to the schedule would be inappropriate, I hope that the hon. Member for Twickenham will withdraw it.

I hear the Minister's comments and I acknowledge that the Government are aware of the dangers of trans-shipments and the abuse of export controls. Our aim was merely to strengthen the commitment by inserting it directly into the schedule. I accept the Minister's assurance that the mechanisms in place will meet the objective. I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Question proposed, That this schedule be the schedule to the Bill.

I asked earlier in whose power it lay to define whether a transfer or export would have an adverse effect on peace. Paragraph 4(4) states:

``This paragraph applies to technology of any description if it appears to the Secretary of State when the order is made that there is a risk that transfer of technology of that description might have any of the consequences mentioned in the . . . Table'' set out in paragraph 4(5). Will the Minister tell us whether consideration has been given to the possibility of judicial review? The Secretary of State is rightly left with the power to determine what lies within the national interest and what would have an adverse effect on peace and security in any region. I have no problem whatever with that. However, we live in an increasingly litigious society. Did the Minister's officials advise him about the likelihood of challenges? I would deprecate any challenge, on the grounds that the buck stops with the Government.

The question is pertinent. The Bill may well result in an increase in legal challenges to export licensing decisions. For the first time legislation will make clear the purposes of export controls. Clause 8 provides guidance on how the powers should be used. Inevitably, greater transparency will follow from the introduction of the new systems, as will greater visibility of the Government's policy and decisions. I hope that that clarifies and confirms the hon. Gentleman's point.

Mr. Howarth: I am not sure whether the Minister has confirmed or denied that he received specific advice on the possibility of a challenge under the judicial review procedure.

I explained succinctly to the Committee the detailed advice that is available to me as a Minister.

Question put and agreed to.

Schedule agreed to.

Further consideration adjourned—[Mr. Pearson.]

Adjourned accordingly at twenty minutes past Five o'clock till Thursday 19 July at half-past Nine o'clock.