EU CODE OF CONDUCT ON ARMS EXPORTS: QUESTIONS AND

C O N F I D E N T I A L SECTION 01 OF 04 BRUSSELS 001577

SIPDIS

E.O. 12958: DECL: 04/07/2014
TAGS: PARM PREL PHUM CH EUN USEU BRUSSELS
SUBJECT: EU CODE OF CONDUCT ON ARMS EXPORTS: QUESTIONS AND
ANSWERS

REF: A. BRUSSELS 1510


B. USEU TODAY 04/06/04

C. BRUSSELS 1464

D. STATE 68263 AND PREVIOUS

Classified By: USEU Poloff Van Reidhead for reasons 1.4 (b) and (d)

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Summary
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1. (SBU) This message is intended as a companion to Mission
reporting (refs A, B, C) about the possibility that the EU
may soon lift its arms embargo on China. In place of the
embargo, some EU Member States favor enhancing the EU Code of
Conduct on arms exports, either in general or with specific
regard to China. To inform thinking on this possibility, we
offer below answers to commonly asked questions about the
Code of Conduct. In para 19 we also provide the text of a
non-paper the EU uses to describe the Code. We conclude that
the Code of Conduct, while generally positive, is no
substitute for the China arms embargo.

All documents mentioned here are available at
http://ue.eu.int/pesc/ExportCTRL/en/Index.htm

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What is the Code of Conduct?
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2. (U) Adopted in 1998, the EU Code of Conduct (CoC) on
Conventional Arms Exports has two objectives. The first is
to reaffirm the eight criteria for evaluating export
applications agreed to by EU leaders in 1991 and 1992 at the
Luxemburg and Lisbon Summits. These criteria include the
political commitment of EU member states not to sell military
equipment to countries if doing so would, among other things,
threaten regional stability, contribute to internal
repression, or threaten the interests and security of
European allies.


3. (U) The second objective is to foster the gradual
convergence of national export policies and licensing
procedures by creating a system for consultation and
information sharing. The CoC's twelve operative provisions
require EU member states to report to each other any denials
of applications for export licenses when those denials are
based on CoC criteria. In 2003 EU member states also agreed
to apply the CoC to all applications for arms brokering
licenses. The underlying idea is that through openness and
consultation, EU member states will be able to foster an
EU-wide export norm that upholds European values and reduces
the risk of competitive undercutting, while at the same time
preserves the sole right of European nation-states to
determine their own export policies.

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Does it apply to all countries?
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4. (C) Yes. The CoC is universal and non-discriminatory, and
should be applied when evaluating transactions to all third
countries. (COMMENT: One problem with the idea of creating
an enhanced CoC relevant only to post-embargo China is that
the EU does not want to be discriminatory. Another is that
it would contradict the political signal that the EU would
wish to send by lifting the embargo. We believe that,
strengthened or not, the CoC will remain universal and
non-discriminatory. However, it is possible that the EU will
move toward some kind of new -- unwritten and non-public --
"gentleman's agreement" to restrict certain transactions with
a post-embargo China. END COMMENT).

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What kinds of transactions does it cover?
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5. (U) The CoC applies to all transactions involving items
included in the EU Common Military List. It also applies to
items on the EU Dual-Use List if the purchaser is the
military or internal security forces of the country in
question. Member states are also committed to apply the CoC
to items on their national control lists when those items do
not appear on the common military list.

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What does the EU Common Military List cover?
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6. (U) The Common List was updated in 2003 to mirror the
Wassenaar Munitions List of controlled items. The EU adopted
the Wassenaar list because it was an expedient way to achieve
consensus on an updated EU list. However, the two lists are
not directly linked. Updates to Wassenaar will not
automatically entail updates to the EU list.

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What about dual-use items?
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7. (U) Member States are obligated under a legally binding
Council Regulation adopted in 2000 to regulate the export of
dual-use items identified in a control list annexed to the
regulation. The list compiled from all entries in the
dual-use control lists maintained by the Wassenaar
Arrangement, Missile Technology Control Regime, Australia
Group, Nuclear Suppliers' Group, and Chemical Weapons
Convention. Updates to regime lists are automatically
transcribed into the EU list. The regulation also includes
the "transmission of software or technology by electronic
media, fax or telephone."


8. (U) National experts monitor implementation and exchange
information in a dual-use working group chaired by the
Commission. The general aim of the regulation is to ensure
the free movement of goods and technology within the EU while
providing for a common standard of control for transactions
with parties outside EU borders.


9. (U) Member States are obligated to apply the CoC to items
on the Dual-Use List when the purchaser is identified as the
military or internal security service of a third country.

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What is the CoC Users' Guide?
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10. (U) The Users' Guide was drafted by the COARM working
group in 2003 to describe standard operating procedures for
adhering to the CoC.

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What are Member States obligated to report?
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11. (SBU) Significantly, the CoC only applies when an EU
member state denies an export or brokering application, and
then only if the denial was based on CoC criteria. There is
no/no obligation for EU member states to report when they
grant export licenses. (COMMENT: This means there is no easy
way to evaluate the impact the CoC has had on arms transfers
since 1998. Evidence of how seriously member states take the
CoC must be gleaned inferentially through national export
reports. END COMMENT)


12. (U) EU member states are obligated to inform each other,
through the Council Secretariat in Brussels, when they deny
license applications based on CoC provisions. Denial
notifications, and when applicable the amendment or
revocation of denial notifications, are supposed to be
submitted using a standardized explanation form. Member
states are also supposed to consult the Council Secretariat's
central database of denial notifications each time they
evaluate an export or brokering license. If, after querying
the database, they discover that another member state denied
an "essentially identical" transaction within the past three
years, they are supposed to consult the state that originally
denied the application before making any final adjudication
of the application (Note: The original denying country does
not have a veto over subsequent decisions to grant licenses.)
These are intended as confidential bilateral consultations
that bypass the Council Secretariat.

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What about intangible technology transfers?
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13. (U) The CoC does not address the transfer of intangible
technology that might be used in the production of items on
the common military list. Recognizing this as a loophole,
but as yet unwilling to take it up at the EU level, member
states in 2001 endorsed the importance of establishing
controls and agreed to deliberate further, a process which is
still ongoing. By contrast, the EU's Dual-Use Regulation
mandates controls on technology transfers by electronic
media, fax or telephone (including oral transmission).
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What about end-use certificates?
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14. (U) The CoC does not say anything about end-use
certificates. However, within the context of the CoC's call
for policy convergence, member states have agreed on the
types of information that should be included in end-use
certificates when such certificates are required by national
export regulations. The hope is that member states without
end-use certification requirements will use the agreed
certification format as a basis for creating their own
regulations.

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How is undercutting handled?
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15. (U) The "Compendium" of agreed practices attached to the
annual COARM reports says that Member States agreed in 2001
to share information whenever they decide to undercut each
others' export decisions. As presented, the idea is not to
name and shame but to "highlight different interpretations of
the (CoC) criteria." For that reason, according to the
Compendium, Member States deciding to undercut their partners
"agree to share, to the extent compatible with national
considerations and on a confidential basis, information on
the undercut decision not only with the State responsible for
relevant denial, but in the context of COARM deliberations,
with all Member States."

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How is the CoC monitored?
Is there public oversight?
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16. (SBU) The CoC is largely peer monitored by Member State
experts in the COARM working group. The Council Secretariat
maintains a central database of CoC activity. Every year the
COARM group issues a report on CoC implementation and Member
State progress toward policy convergence. A "Compendium"
attached to the annual report details new or emerging areas
of Member State agreement within the CoC framework. The
report is public and is presented to the European Parliament
for consideration (although the EP has no authority over the
CoC). It is not clear the extent to which national
parliaments or public interest groups monitor EU exports
under the CoC.

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Does peer pressure play a role?
Do member states 'name and shame' for bad behavior?
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17. (C) We are unsure of the extent to which CoC-based peer
pressure plays a role in national export decisions. As a
"gentlemen's agreement," the CoC relies on the likemindedness
and good intentions of national governments, not on fear of
punitive action at the EU level. Rosemary Chabanski and John
Mattiussi, respectively the Council and Commission COARM reps
and leads on the EU Code of Conduct, report that member state
reps are sometimes subjected to "mild chiding" from
colleagues in the monthly COARM meeting when their countries
make questionable licensing decisions (e.g. along the lines
of, "So what did you sell that for?" or, "How are you going
to justify that one?"). Asked if more serious (i.e. naming
and shaming) pressure was ever exerted, Chabanski replied, "A
teeny-weeny bit in one case." Both report being unaware of
any occasion on which these discussions were pushed up to a
political level.

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What about all the talk of strengthening the CoC?
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18. (C) There is some talk of "tweaking" the COC in general,
in order to make it more effective and useful to member
states, but the occasional call to make the CoC legally
binding has to date fallen on deaf ears. The UK and France
-- with the EU's largest defense industries -- are firmly
opposed to the idea. During an April 2 discussion by the
Political and Security Committee, Greece was the only country
to come out in support of a legally binding CoC, a position
that a UK contact described as "provocative" (ref A).

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EU CoC non-paper
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19. (U) The EU describes the CoC with the non-paper below.

BEGIN TEXT OF NON-PAPER:

EU Code of Conduct

The EU Code of Conduct on Arms Exports was adopted by the
Member States, within the framework of the Common Foreign and
Security Policy, in May 1998 (following agreement in 1991 and
1993 on criteria to be applied to arms exports).

It is a politically binding document aimed at creating high
common standards when assessing applications for the export
of military equipment, listed in the agreed Common List of
Military Equipment, to states outside of the European Union.
It establishes eight criteria for judging whether a
particular export should take place.

The operative provisions of the Code of Conduct provide for
the notification of denials and for confidential
consultations among the Member States concerned. These
procedures give Member States a great comprehension of each
other's reasons for refusal to export and hence increase
mutual understanding of Member States' export licensing
policies.

The final decision on whether or not to export remains at the
discretion of the Member State to which an application for a
transaction/export involving arms and weapons systems has
been made. (Conventional arm exports are not an area of
Community competence. Member States have up to now, on the
basis of Article 296 (ex-Article 223) of the EC Treaty
exempted the trade in arms from the scope of application of
treaty rules.)

Member States exchange information annually on their arms
exports and on this basis an annual report is produced. This
provides for a common assessment of the functioning of the
Code.

From 1998 to 2000 the Annual Reports of the Code of Conduct
did not contain figures on the number and value of licences
granted per destination; nor did they indicate numbers of
licences refused. These figures have been included in the
reports from 2001. Thus the fourth and fifth annual reports
contain figures for the number of licences granted by each
Member State, as well as the value of such licences and/or
the value of actual exports for each destination.

Member States are currently considering in the Council Group
dealing with conventional arms transfers (COARM) how they can
improve the EU Code of Conduct.
END TEXT OF NON-PAPER.

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Comment
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20. (C) The CoC is a marginally positive tool for managing EU
arms exports, but it is no substitute for the EU arms embargo
on China. Both are relatively weak political instruments
(the embargo itself is contained in only eight words from a
1989 EU Summit declaration that calls for "an embargo on
trade in arms with China"). EU Member States have sold
considerable amounts of military equipment to China even
under the embargo (as the 2003 COARM Report shows),but after
a certain point, such sales would entail certain political
costs to the selling nation. The same is not true of the
CoC. Under the CoC, Member States would have much more room
for maneuver in deciding whether or not China satisfies the
agreed export criteria. And if the embargo is lifted, Member
States will even be able to point to that event -- the end of
the embargo -- as partial evidence for determining that China
is an acceptable purchaser under the CoC.

Schnabel