With the most to lose if Washington makes good on threats to retaliate by further restricting access to US defence technologies and markets, UK industry is urging the EU to tighten export controls before lifting the arms embargo on China.

UK firms do more business with the US Department of Defense than the rest of Europe combined, and companies like BAE Systems, Rolls-Royce and Smiths have substantial North American holdings. Any retaliation to the lifting of the EU embargo would set back long-running efforts to relax US export controls on technology transfers to close allies.

Responding to a parliamentary committee report late last month urging the UK government to oppose lifting the embargo unless it receives assurances there will be no transfer of sensitive technologies to China, the Society of British Aerospace Companies (SBAC) says the report demonstrates the need to "fundamentally rethink" export controls on China.

"The EU code of conduct and the China embargo itself are implemented differently across member sates," says the SBAC. "UK industry believes there are major differences in the handling of applications for controlled exports to China in different EU nations." UK laws strictly control the re-export of US technology, and were strengthened last year to further protect against technology leakage, but US Congress is unlikely to discriminate if it chooses to punish Europe.

Inconsistency in the application of existing EU export controls is at the heart of US DoD concerns. A coherent EU approach would give industry more confidence on what opportunities it can explore, the SBAC says, as well as giving the USA "a clearer statement of policy on control of EU exports".

"Export licensing is a government-to-government issue," says BAE, but the transatlantic defence company is "very concerned about the impact of these measures on the long-term US-UK relationship".

EADS suggests the USA and EU should find a solution at a political level, arguing: "This is a governmental issue, not an industrial one." But EADS says privately, as BAE does publicly, that it will do nothing to jeopardise its interests in the USA.



Source: Flight International