This record is a partial extract of the original cable. The full text of the original cable is not available.

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) 
 
------- 
Summary 
------- 
 
¶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 
 
---------------------------- 
What is the Code of Conduct? 
---------------------------- 
 
¶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. 
 
------------------------------- 
Does it apply to all countries? 
------------------------------- 
 
¶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). 
 
----------------------------------------- 
What kinds of transactions does it cover? 
----------------------------------------- 
 
¶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. 
 
-------------------------------------------- 
What does the EU Common Military List cover? 
-------------------------------------------- 
 
¶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. 
 
-------------------------- 
What about dual-use items? 
-------------------------- 
 
¶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. 
 
----------------------------- 
What is the CoC Users' Guide? 
----------------------------- 
 
¶10. (U) The Users' Guide was drafted by the COARM working 
group in 2003 to describe standard operating procedures for 
adhering to the CoC. 
 
------------------------------------------- 
What are Member States obligated to report? 
------------------------------------------- 
 
¶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. 
 
------------------------------------------- 
What about intangible technology transfers? 
------------------------------------------- 
 
¶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). 
-------------------------------- 
What about end-use certificates? 
-------------------------------- 
 
¶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. 
 
---------------------------- 
How is undercutting handled? 
---------------------------- 
¶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." 
 
-------------------------- 
How is the CoC monitored? 
Is there public oversight? 
-------------------------- 
 
¶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. 
 
--------------------------------------------- ------ 
Does peer pressure play a role? 
Do member states 'name and shame' for bad behavior? 
--------------------------------------------- ------ 
 
¶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. 
 
--------------------------------------------- ---- 
What about all the talk of strengthening the CoC? 
--------------------------------------------- ---- 
 
¶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). 
 
---------------- 
EU CoC non-paper 
---------------- 
 
¶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. 
 
------- 
Comment 
------- 
 
¶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