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European Commission

Karel De Gucht

European Commissioner for Trade

Unity in Diversity: finding the right balance between uniformity and fragmentation

2013 Strategic Export Control Conference/ Brussels

26 June 2013

Ladies and gentlemen,

“The only purpose for which power can be rightfully exercised over a member of a civilised community, against his will, is to prevent harm to others.”

Those are not my words. But they are part of the liberal approach to government that I believe in.

The author, a 19th century Englishman by the name of John Stuart Mill, used them to set out his liberty principle, the maxim on which – in his view – all government decisions should be made.

The idea is clear. If we want the best possible society for our people we need to give them freedom.

But if everyone has total freedom then we run into complications. Because some people's actions can do harm to others.

So the happiest society will be the one that finds the right place to draw the line between the conflicting freedoms of its citizens.

That is not a one-off decision. In fact drawing lines between conflicting freedoms is at the heart of almost every public policy question.

And it is certainly at the heart of the one you are here to work on today.

In the debate on export controls we have to weigh up the freedom of individual companies to trade their products against the horror caused by weapons of mass destruction and other threats to our security.

We have to give companies enough freedom to create jobs and economic growth but also avoid that potentially dangerous equipment or technologies fall into the wrong hands.

In today's complex world, that is not an easy balance to strike – which is why we need to keep coming back to our policies to see if they are up to the task.

That is why we are conducting this review of the export control system. And that is why we have asked you – representatives of the private sector and civil society, academia, and national governments - here today.

We need your expertise to help us answer the following questions.

First, what threats to people's security in Europe and around the world are we trying to reduce? And have they changed?

Export controls have long focused on proliferation of weapons of mass destruction to countries we have concerns about. Today that risk is a real as ever. We only have to look at Iran, North Korea or Syria to see that.

But today we also face other risks, like the acquisition of weapons of mass destruction by terrorist groups, which could be even graver in its consequences for European citizens.

And some have also suggested that we also need to look at whole new areas of risk because of shifting foreign policy realities, like telecommunications tracking technology or other information technology tools that can be used to violate human rights.

We will need to have a clear picture of today's threats we face if we want to build the right tools to meet them.

Second, what is it that we have to control? Some parts of our export control system date back to a Cold War that ended more than twenty years ago. But think of the technological change that some of us have seen in that time. There is no denying that this is different world.

Can we control technology transfer in the era of cloud computing and ever-present mobile communication in the same way we control the export of a nuclear reactor? Technological progress makes it harder to tell the difference between uses for civilian, military or proliferation purposes.

Third, what is the economic significance of export controls today? Significant:

  1. Up to 4% of all of the exports of some Member States are directly licensed, and other controls go beyond that to include associated technology and services for example.

  2. What is more, because controlled products are often intertwined with broader product portfolios, the impact on business is wider again.

  3. Export controls also affect a wide range of sectors. That includes industries you would expect to be covered - such as aeronautics, space, nuclear, defence and security. That's a significant economic impact already, given their size: 700 thousand employees, by the sectors' own estimation.

  4. But controls also cover industries that one might think of as purely civilian, like telecommunications, semiconductors, electronics and chemicals to name just a few. For example, up to 10% of the turnover of the chemicals industry – one of Europe's most important sectors – is reported to be affected by export controls.

When you add all of this up, there can be no doubt that export controls have a significant impact on Europe's competitiveness and capacity to innovate.

So what does all of this mean for our approach?

At the level of principles, it brings us right back to the question of balance:

  1. between security and trade,

  2. between the European and national parts of our system,

  3. And between what already works well and what needs to be improved.

Effective export controls must both prevent proliferation and be conducive to legitimate trade. Exporters would not benefit from lighter controls if the result was damage to their reputations, or worse – financial or criminal sanctions. It is in everyone's interest to have robust controls, but we need to target our resources on the most sensitive transactions.

Our system also needs to be consistent across the Single Market...

... allowing national authorities the flexibility to use their judgment in the specific cases they find...

… but also avoiding loopholes in different Member States.

Flexibility can of course be beneficial but loopholes can also be disruptive, creating trade barriers and distortions of competition, and putting security at risk, as proliferators look for the weakest link in the chain. In our recent consultation of stakeholders, this message came out very clearly.

The consultation also made clear that most people who are affected by the regime recognise its strengths and benefits. In particular, it is relatively simple and flexible to use and thus allows trade both in the Single Market and with the rest of the world. We need to bear this in mind as we think about reform.

Here are the principles:

  1. Balance between security and trade,

  2. Balance between European and national parts of the export control system,

  3. And faithfulness to our solid foundations.

What you need to look at today is what these principles mean in practice.

But before you do. Allow me to suggest some of the parameters of your discussion by asking some important questions.

First, definitions. In particular, our definition of dual-use items – which, after all, determines the scope of the whole system. Is it still valid? For example, should we keep the focus on weapons of mass destruction and military end-uses? Or should we expand it to include broader security challenges – like equipment and services that could be used to violate human rights?

Second, the European licensing system. There is general agreement that the current architecture provides a good basis. But should we create some new general authorisations that would adjust the level of control and facilitate the flow of trade? Also, can we also bring more harmonisation to the conditions for using them?

Third, catch-all clauses. Most stakeholders recognise the need for this "emergency brake" to press when unexpected but risky situations arise. But they also complain that these clauses are applied differently by different authorities. This creates distortions of competition and causes legal confusion. How can we improve the catch-all mechanism and make its application more transparent and consistent throughout the EU?

Fourth, the application of brokering and transit controls is reportedly confusing to many operators – and also to some competent authorities. What can we do to clarify these controls and make them more effective?

Fifth, internal controls on transfers within the EU. These have been left unchanged for more than a decade, despite the fact that they represent an exception to the free circulation of goods and technology. They also prevent EU companies from taking full advantage of the Single Market. Is this exceptional measure still justified? How can we reduce to the minimum this barrier to trade?

Sixth, application of the rules. Can we develop a network of authorities to exchange information? This would allow them to work on a common approach to risk assessment and common guidelines and better pool their resources.

Finally, relations with the private sector and academia. We all recognise that companies have a key role to play in the application of controls. In fact, they are the first line of defence.

How can we make sure that they are both well-equipped and motivated? How should we review our outreach programmes in order to engage more closely with the private sector and make controls more transparent? Should we recognise companies' internal compliance programmes' in some way, by providing certification schemes or simplified procedures for example?

For now, I am putting all of these thoughts on the table for you to consider and discuss. You clearly have a lot of work to do!

What are the next steps? Well, this conference, along with the public consultation of stakeholders, forms part of our on-going review of the export control system. The next step is for the Commission and Member States to present a full report to the Council and Parliament. The Commission will then take some time to map out our priorities and start work on a communication detailing our proposed approach. We expect to finalise that by the end of the year.

That means that you have today a unique opportunity to express your views in the ensuing discussion. The Commission is very much in listening mode. We have not taken any decisions yet and we are counting on you to help us.

In the past, it has proven difficult to reform this area. That is understandable when you think of just how sensitive and important these issues are. In the end, lives are at stake.

But we have been able to make incremental progress in recent years. And I am optimistic that we can do even more that that over the coming months.

For that we will need your support, your effort, and your flexibility.

And we will need to remember Mill's rule for limited government. Because it is by finding the right balance between all of our competing objectives that we will be able to move forward.

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