Arms ’embargo’ fuels trade row

As India tests another missile, the machine tool industry accuses UK government of ‘export sanctions.’

Machine tool manufacturers have accused the government of imposing an unofficial embargo on trade with Pakistan and India.

Exporters believe applications for permission to sell basic equipment are deliberately being stalled by departments wary of embarrassing the government over the so-called ‘ethical dimension’ to its foreign policy.

Tension between the two countries has increased since India resumed nuclear testingin 1997. Following a series of tests conducted by both India and Pakistan in 1998 the government prohibited sales of any equipment to the region which might contribute to nuclear proliferation.

Even this week India successfully tested a long-range missile ‘capable of delivering a one-ton warhead’.

Simon McVicar, public affairs manager of the Machine Tool Technologies Association said however there is evidence to suggest export rules are being applied too stringently, and UK businesses are losing out to other European firms as a result.

He said increasing numbers of companies are making contracts with businesses in India and Pakistan, only to find that their applications to the Department of Trade and Industry for a licence to export are delayed for sometimes as long as 20 months.

India and Pakistan represent huge potential markets for UK businesses. Although similar rules on exports to the region apply across Europe, Germany and France are eagerly snapping up contracts.

Losing ground

‘It is a market that we always believed the UK government wanted us to develop, and UK business has always got a good welcome out there. But this is really bad news for us, because countries like Germany are ready to step in,’ said McVicar.Although the DTI has discretion to grant permission to export, it circulates the licences for vetting to the Foreign Office, Ministry of Defence and the Department for International Development.

It is thought the Foreign Office, keen to stick to the much publicised ‘ethical dimension’ of the government’s foreign policy, is simply delaying requests rather than imposing a blanket ban that would damage diplomatic relations.

Simon Croskell, export divisional manager for the Cheshire machine tool firm Ajax, said at a meeting last week between the DTI and 10 machine tool firms, nine of them reported difficulties gaining licences to export to Pakistan and India. ‘It is too politically sensitive for the DTI to say there is an embargo, because there would undoubtedly be a backlash. Instead they are deliberately delaying applications.’

After six months spent chasing his own application, Croskell said it was rejected last week. Although he was awaiting official confirmation, he expected the DTI to cite fears that the equipment could be used to further nuclear proliferation and the development of chemical weapons.

‘I could appeal this decision, but it would be a complete waste of time. The equipment we were to sell was not high-tech.’

His views were endorsed by Robin Mowday, company secretary of Bridgeport Machines, who waited 20 months before an application for business worth £60,000 was finally rejected.

He said that while the equipment his company wanted to export did not technically require a licence according to the DTI, it was the FCO’s concern about their customer’s activities which caused the delay.

He said the confusion between government departments was responsible for leading many firms on an expensive wild goose chase.

While the DTI was organising trade missions to India and Pakistan, subsequent applications for licences to trade with companies in the regions which are not mentioned on security lists provided to UK industry, were being denied.

Mowday said India was an important emerging market for all UK machine tool makers, a strategic industry worth approximately £500m a year, which he said was now in decline.

Mowday claimed his company had evidence that a German firm was now supplying the same goods to Pakistan for which Bridgeport had been denied permission. ‘We are net importers of machine tools and that situation is being exacerbated by the problems we are now facing in this region.’

Embargo denial

A spokesperson for the DTI denied the suggestion of a blanket embargo, but admitted that in the light of continued regional tensions there was a need to take ‘special care’ in relation to the two countries. This might lead to delays in processing applications, the target for which is 20 days.

‘We do recognise the problems that any delay can cause the exporter concerned. However, some applications can be more difficult to assess than others, especially if circumstances in the intended destination are uncertain,’ she said.

In a statement made to the House of Commons in July last year, foreign office minister Peter Hain said the government would not allow the export of any equipment that could contribute to the Indian and Pakistani nuclear programmes.

Since 1999, some 26 standard individual licences had been refused. He said, however, that 20 standard individual licences for a narrow range of equipment such as naval spares, bomb disposal tools and goods for civilian end-users had been approved.

Delaying tactics

Here’s what happened when four machine tool companies applied for licences to export to India and Pakistan

Ajax: An application to trade with Pakistan was rejected after a six-month delay.

Bridgeport Machines: An application to export to Pakistan was rejected after 20 months and another for India was rejected after seven months. After securing a contract to export a technically non-licensable machine to Egypt the DTI said it would not be allowed to export.

LK: An application to export to India and Pakistan was rejected after an eight-month delay.

Cross Hüller:One application out of three to export to India and Pakistan was accepted after delays of up to 11 months.

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