A question that won't go away for Labour: is it ethical to sell arms to countries at war?

Britain played a lead role in establishing an EU code, but the export of weapons to conflict zones is a missing link in government policy

The Labour Government has found itself at the centre of a storm over arms exports once again. This time to India where the dispute with neighbouring Pakistan over Kashmir region is threatening to turn into a nuclear exchange.

The paradox is that while seeking to employ an ethical foreign policy and enhance the positive role it wants to play in the world, Britain is also keen to promote the sale of arms exports yet reluctant to impose stricter controls on arms sales to dubious regimes and areas of military tension.

This has, in its most recent manifestation, raised concerns over the alleged lobbying roles of cabinet members to convince the Indian government to buy 66 Hawk fighter jets despite the dispute over Kashmir nearing breaking point.

The Hawks will cost £1bn, equal to 10 years of UK bilateral aid to India. The question many are asking is whether Jack Straw – on a peace mission to the region – will be under pressure to close the deal.

To its credit, the Government has taken a lead in establishing arms control measures through the agreement of an EU Code of Conduct on exports, the publication of an annual report on weapons sales and a ban on production and export of landmines and torture equipment.

The Export Control Bill, a response to the 1996 Scott report recommendations for new arms legislation, is going through Parliament. However, new policy initiatives have not been matched by control of the more controversial weapons sales. The most controversial arms exports licensed under the last Conservative government, such as machine guns and water cannon to Indonesia – used to suppress democracy demonstrations – and tanks to Nigeria after the hanging of Ken Saro-Wiwa, have not been repeated. That has been welcomed by campaigners but the Government has faced a number of controversies, which show questionable exports are still being licensed. This all raises serious questions about the implementation of the EU Code of Conduct on arms exports.

The code states exports will not be licensed if there is a risk that weapons could be used for "internal repression". Upon coming to power in 1997, the Government was confronted with the decision of whether to allow the supply of 16 Hawk jets to Indonesia from a sale licensed under the previous administration.

Despite repeated claims that Hawk aircraft had been used to intimidate the civilian population in East Timor, the Government did not revoke the contracts because it claimed it had received legal advice to the effect they could not be cancelled. The legal advice has never been published. The Indonesian government eventually acknowledged the jets were used over East Timor in July 1999.

The code also states licences will not be granted if they could affect the internal situation in the recipient country and "provoke or prolong armed conflicts". In January 1998, Royal Ordnance, now part of BAE Systems, applied for an export licence to refurbish 30 large field guns in Morocco, which has been engaged in a conflict over the disputed territory of Western Sahara since 1975. It was initially turned down because it contravened the EU Code but BAE Systems appealed and, in July 1999, the licence was granted. The field guns are on the front line in the war zone.

The EU code states exports will not be granted if they could be used for external aggression or to assert by force a territorial claim. However, in 2000, the Government licensed components for combat aircraft and helicopters, general machine guns and demolition charges to Israel. There was an assurance from the Israeli government that British weapons would not be used in the occupied territories but they have recently admitted UK-sourced Centurion tanks have been used in attacks.

The impact of arms sales on the sustainable development of the recipient country is a key criterion in the EU code. In December 2001, the Government licensed the sale of a £28m military air traffic control system to Tanzania, despite a report from the International Civil Aviation Organisation that said Tanzania could buy a more appropriate system for a quarter of the price.

So why do these damaging exports persist? The criteria by which UK arms exports are assessed include a section on "other factors" in which the Government states it will "give full weight" when considering export applications to "the potential effect on the UK's economic, financial and commercial interests".

These factors are not meant to affect the application of the other criteria such as human rights, regional stability and sustainable development. But in many borderline cases it is hard to escape the conclusion that these "other factors" are dominant. For example, in the past five years no export licence has ever been refused on the basis that it could undermine sustainable development.

The Government has argued exports are good for the national interest. They create jobs, boost the economy and offset the costs of procurement for our own military.

Yet evidence is mounting those arguments are unfounded. A report in December 2001 by two senior Ministry of Defence economists and two independent academics assessed what the impact would be of a 50 per cent drop in arms exports over two years. It stated: "The economic costs of reducing exports are relatively small and largely one off." Some 49,000 jobs in the defence sector would be lost but would be offset by the creation over a five-year period of 67,000 new jobs in the civilian sector.

Politically, arms sales have a damaging effect on the Government's reputation. They are unpopular with the public – 82 per cent in a recent opinion poll said the Government should do more to control weapons sales to governments that abuse human rights. Tougher controls on weapons sales are a missing link in Labour's foreign policy.

Paul Eavis is director of Saferworld, an independent foreign affairs think-tank. www.saferworld.org.uk