British arms firm will spurn China if embargo ends

The Times ^ | Febuary 22, 2005 | Michael Evans, Anthony Browne and Gabriel Rozenberg

[MadIvan]

BRITAIN’S largest defence company, BAE Systems, will not sell arms to China if the European Union lifts its arms embargo, for fear of jeopardising its extensive American interests.

The disclosure to The Times last night added fuel to the longrunning dispute between the United States and EU, which threatens to sour the new mood of unity between the two blocs when President Bush meets European leaders in Brussels today.

Mr Bush conspicuously failed to mention the dispute during his wideranging speech in Brussels yesterday, in which he appealed for a “new era of transatlantic unity”. However, Peter Mandelson, the European Trade Commissioner and a confidant of Tony Blair on foreign policy issues, gave warning to Washington not to pick a fight on the embargo because “it cannot win”.

Richard Lugar, the relatively moderate Republican chairman of the Senate Foreign Relations Committee, hit back in a newspaper interview by saying that he would support curbs on sales of high-tech military equipment to the EU if it lifted the embargo.

The suggestion by BAE Systems that it would prefer to protect its huge US investments rather than pursue new markets in China suggests that the American threats are biting. BAE Systems has greater potential to sell arms to China than any other British company, but senior sources said that there was no question of taking any action that might imperil the company’s relationship with America.

At stake are annual defence sales to the US of more than £3.8 billion and 27,000 BAE jobs in America. “We can’t do America and China, and we want to preserve our business relationship with the US; we’re not going to spoil that for the sake of winning new business in China,” one official said.

Brinley Salzmann, exports director of the Defence Manufacturers’ Association, said that the British defence industry would not benefit from lifting the embargo as it would still be bound by other export rules.

The industry was concerned that if the embargo were lifted, the US would erect retaliatory trade barriers, threatening trade with Britain worth more than £1 billion a year and jeopardising collaborative projects such as the Joint Fighter Jet.

“We have got nothing to gain by lifting the embargo. There won’t be any additional business. But we could potentially have far more to lose by the US reaction,” Mr Salzmann said.

The EU imposed an arms embargo after China’s brutal suppression of the Tiananmen Square democracy protests in 1989, and its plans to lift the embargo will be on the agenda when Mr Bush meets leaders of the Union’s 25 member states this afternoon.

Mr Lugar’s warning underlined American concern that renewed arms sales to China could destabilise the region and aid a country that the US sees as a potential military rival. Washington is anxious to stop sales of high-tech dual-use electronic equipment, which China could use to jam American aircraft carriers deployed to the region to protect Taiwan.

Mr Lugar said in a newspaper interview: “The technology the US shares with European allies could be in jeopardy if allies were sharing that through these commercial sales with the Chinese . . . I really am troubled why at this particular point in our relationship and history Europeans would find an obsession with pushing these sales.”

The EU intends to replace the embargo with a strict code of conduct regulating arms sales that would cause less offence to Beijing. Mr Mandelson said: “I think Europe should do it — and I think the (Bush) Administration would be wrong to pick a fight with Europe over this which it can’t actually win.”

Any attempts by British companies to sell to both China and America could be blocked by Congress.

Other EU members, notably France, whose defence companies do not have a strategically binding relationship with America, are hopeful that scrapping the embargo will lead to some major contracts with China. France is keen to sell Dassault fighters to Beijing.

Despite the dispute over China, Mr Bush is likely to make progress on other contentious transatlantic issues. At a summit with Nato leaders this morning, Gerhard Schröder, the German Chancellor, will propose expanding the role of Nato so that it becomes a political forum for discussing issues such as the China arms embargo and Iran’s nuclear weapons programme.

“We want the role of Nato to be stronger and broader. To this end, we want to enhance the political dialogue,” a German diplomat said.

At the US-EU summit of leaders this afternoon, Mr Blair hopes to gain stronger US backing for European diplomatic attempts to stop Iran developing nuclear weapons.

[MadIvan]

It appears BAE is smarter than the EU trade officials.

Regards, Ivan

[MadIvan]

Ping!

[GeronL]

well! some good news.

[America's Resolve]

The EU imposed an arms embargo after China’s brutal suppression of the Tiananmen Square democracy protests in 1989,

Well, since almost no Chinese remember the democracy movement, all having been murdered, Europe just as well remove the embargo.

Shows how long European memory is.

The EU intends to replace the embargo with a strict code of conduct regulating arms sales

ROFL! 'nuff said. They're almost the same thing anyway, aren't they?