UK considers US-style FMS regime

It was the possibility of a UK FMS like regime, however, that gained particular traction in some quarters of industry. Other European countries are reported

• The introduction of a US-style Foreign Military Sales system has been discussed in UK government and industry

• The idea is not being “actively progressed” though, with costs likely to be a barrier to have looked at similar options.

While UK industry sources have expressed enthusiasm for such a regime, rhe potential initial costs to government at a time of austerity suggest that the scheme will remain on hold for some time.

Sources close to government said: “The UK was receptive to the idea, and it is understandable that industry would like to sec this. They [industry] look to successes such as Project Salaam [the GBP4 billion (USD6.2 billion) government-to-government agreement with Saudi Arabia relating to Eurofightcr Typhoons that was agreed in September 2007]. The question is whether government can do something like this at this time”.

A spokesman for the Defence & Security Organisation of national export support body UK Trade and Investment said: “The UK government wants to do all it can to support legitimate defence exports, but this is not something that is actively being discussed at the moment.”

However, industry has noted that a UK FMS regime would have the potential to bolster the economy and to be self-financing.

The US FMS system is operated at zero cost to the US government: a status mandated by Section 21 of the US Arms Export Control Act and facilitated by a 3.5% surcharge on transactions to cover administrative management expenses.

US FMS agreements were valued at USD16 billion and USD21 billion in 2011 and 2010 respectively. Government-to-government sales (as opposed to direct commercial transactions) typically account for between

30% and 60% of annual US military export agreements.

Despite the surcharge, such government-to-government agreements have proved popular in some commercial markets, given the reduced potential for sharp practices and consequent losses to corruption.

FMS is managed by the US Department of Defense (DoD) through the Defense Security and Cooperation Agency.

The UK sold equipment valued at GBP8.8 billion in 2012: a 63% increase over 2011, made possible by the GBP1.5 billion sale of Hawk AJTs and Eurofighter Typhoons to Oman in December. The UK claimed that the 2012 performance cemented its position as the world number two exporter (behind the United States) over the last five years.

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