Gambling on US morality

antigua-wto-uncle-samI spoke this week at a fringe meeting of the World Trade Organisation’s (WTO) annual forum in Geneva. The Democracy Institute, a public policy think-tank based in Washington DC and London, launched a report titled “Do as I say, not as I do” into a 14-year old dispute between the United States and the tiny Caribbean nation of Antigua & Barbuda. I was invited to attend as a panel member to explain why free trade and the integrity of the WTO is so important, and why the current US position regarding compliance with WTO rulings puts at risk the entire international order of trade arbitration. You can see the discussion here.

The issue revolves around America’s suggestion that Antigua’s sizeable online gambling industry threatens the morals of US citizens.  I have never been to Las Vegas, but I believe they have a bit of a thing for casinos there, so I was intrigued at their stance.

In 2003 online gambling overtook tourism as the main revenue driver for Antigua. For a nation of barely 70,000 people that is a big deal. Added to which, half the world’s online gamblers, in an industry worth US$10 billion, are American. The Cato Institute, a libertarian think-tank, believes US authorities have tried to snuff out the industry in Antigua more from a desire to protect the domestic market than from a concern about morality.

The US had relied on the 1961 Wire Wager Act, designed to stop gambling money won by bets placed over the telephone, crossing state or international lines. But the world has moved on since then and the internet, as if jockeyed by Frankie Dettori, has ridden a coach and horses through that piece of legislation. It is no longer relevant, but is a convenient ace up the sleeve for US authorities.

So in 2003 Antigua took the case to the arbitration panel of the WTO. No sooner had Antigua won the case when the US, employing the bureaucratic equivalent of a croupier’s chummy shuffle, appealed and threw up a myriad reasons why it need not change policy. The WTO looked at it again in 2007 and found in Antigua’s favour for a second time. Once more, the US continued to do nothing. Antigua, recently devastated by Hurricane Irma, is still out of pocket by, at the government’s estimate, US$3.44 billion (against a GDP of US$1 billion).

The broader concern is what the case says about America’s attitude towards the WTO. Antigua’s beef started under President George W Bush and extended through Barack Obama’s tenure, so this is not party political. In some respects Donald Trump’s administration has actually sought to resolve aspects of the case in ways his predecessors never did. But by so obviously flouting WTO judgements – whilst seeking redress through the same systems for alleged bad behaviour by China, for example – the actions by the United States serve only to undermine the credibility of the organisation as a whole.

Added to which is the US policy towards the WTO’s court of appeal. It is supposed to have seven judges but currently has only five, and by the end of the year could be down to four. A further three are due to retire by 2019. The US refuses to engage with the process of electing new judges, hoping to cajole the WTO into adopting a more US-friendly attitude. With any judgement needing three panel members it is a distinct possibility the WTO’s remit of international arbitration will be simply impossible to carry out in the very near future. That is unlikely to be allowed to happen, but America’s action is widely seen as attempting to hold the WTO to ransom; hardly an endearing quality in the world’s economic superpower.

The WTO consists of 164 nations, but without the moral and political backbone of the United States, what reason is there for other members to abide by any rules they don’t like? This case has global ramifications. Little old hurricane-smashed Antigua is still fighting to highlight US hypocrisy and seek redress. Even when the chips are down.

 

 

 

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Recruiting for jihad

hussain_imageWhat’s more surprising: that a narcissistic if charismatic recruiter for Islamic State (IS), known to the security authorities, was allowed to operate freely, to the point a young convert was killed in Syria, or that he allowed himself to be filmed by a journalist for years, seemingly untroubled that he was gifting material to his eventual prosecutors?

Based in Norway, the film in question, Recruiting for jihad by producer and director Ulrik Rolfsen (that I had the great privilege of helping out on), has just been released. It made its international debut at the HotDocs documentary festival in Toronto on April 30th and has been well received. For three years Mr Rolfsen and fellow journalist Adel Farooq followed jihadist missionary and Norwegian citizen Ubaydullah Hussain, who was jailed on April 4th for nine years for supporting IS and grooming recruits.

The film shows Mr Hussain arranging for a number of Norwegian men to travel to Syria and Iraq for what he describes as humanitarian work. He consistently denied he was an IS recruiter but clearly delighted in the group’s existence and purpose. “No country, apart from IS, is ruled by the laws of Allah,” he says, “I’m happy that we finally have a country where we can practice Islam and live by the laws of Allah.”

We see him travelling to Denmark to pray over the grave of the 22-year old gunman killed by police in Copenhagen after he shot into a café that was hosting a meeting on free speech. He murdered one person and injured three more. “What do you think about what he did?” a Swedish journalist asks Hussain’s associate at the graveside. “Well what do you think about what is going on in Israel?” comes the reply.

The film is full of such obfuscations and contradictions. But underneath is the steady drumbeat of hatred and division. “It’s very important to have a community where you belong,” he explains at one point, to a potential recruit, “you’ll never feel at home in this country or this society.” Five weeks after being filmed handing out leaflets in Oslo, Norwegian convert Thom Alexander Karlssen was killed in Syria fighting for IS in March 2015. Hussain had bought his ticket out from Oslo.

The film shows that in 2014 Hussain visited Britain and met with Anjem Choudary and a number of associates. Among them was Brunsthom Ziamani (convicted shortly afterwards of planning the beheading of a British soldier), Siddhartha Dhar, also known as Abu Rumaysah and Mohammed Reza Haque, known as The Giant. Dhar and Haque subsequently went to fight for IS in Syria and have featured in images posted online of prisoner executions (they have both, at various times, been dubbed ‘Jihadi John 2’).

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In a bizarre twist, Mr Rolfsen’s home was raided by Norwegian security officials as he filmed Hussain and his material was seized. Benedicte Bjørnland, Head of Police Security Service in Norway, said they had compelling reasons to believe Mr Rolfsen’s material included proof of the intention of an 18-year old we meet as ‘Peter’ to travel to Syria to join IS (as well as other material).

However, as Frithjof Jacobsen, a security commentator countered, “if the police don’t have evidence to imprison this 18-year old without confiscating material from people who make documentaries, then they have a problem”.

After a number of legal challenges the Norwegian Supreme Court ruled that Mr Rolfsen did not have to reveal his sources to the authorities. The presiding judge said that Mr Rolfsen’s film was “the essence of investigative journalism [and] addresses a central and urgent problem of society where the general public and authorities need to have knowledge and insight”. He said the protection of sources was “crucial to be able to make this film”.

Mr Rolfsen saw the verdict as having wider importance. “It is very significant,” he said, “it means that we can work to uncover things in society. We have different roles. The police have their role. It’s their job to prosecute and I respect that. Our job is to expose things and enlighten the public.”

The privacy debate is a live one right now, and in the UK the new Investigatory Powers Act, dubbed the Snoopers Charter, has been controversial. Mr Rolfsen’s film highlights the fine line police, prosecutors and journalists have to tread in this area: at what point does a journalists responsibility to society overrule that to his subject?

We hear a lot about extremist recruiting these days. For anyone interested in understanding quite what that looks like I commend this film. As for why Hussain never travelled to Syria himself? “I’ve been exempted from carrying out jihad,” he says just before his arrest. “I have a chronic illness and in my state of health I can’t go on long trips.”

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‘Peter’ was arrested by Swedish police trying to board a plane in Gothenburg bound for Turkey. He was convicted of trying to join a terrorist organisation and sentenced to two years and ten months.

Missing the (Hinkley) point

gatwick-gusher-020816“If a country doesn’t produce its own energy it deserves to have the lights turned off and be invaded.” So says the reliably straight-talking David Lenigas, entrepreneur and energy-investor. The green light to build the Hinkley Point C nuclear power station in Somerset, to be financed by France and China, was a decision based primarily on politics; energy security was little more than an afterthought.

Announcing the decision today in parliament (ironically 16 years to the day after the fuel protests of 2000 ended) the Right Honourable Greg Clark, Secretary of State for Business, Energy and Industrial Strategy, warned that the 19% of UK electricity currently provided by nuclear power will drop to 2% by 2030 if the plants are not renewed. 64% of the value of all contracts in the supply chain supporting the build will be spent in the UK, he claimed, and he was delighted to say it would be constructed at no risk to the UK taxpayer. (Such bonhomie was not universally shared around the chamber and Barry Gardiner, Shadow Secretary of State, grumbled that he had been given only 13 minutes advance notice of the statement.)

But after many years of dithering over energy strategy (by successive governments since the 1990’s), such that the total capacity of energy production in the UK today is only 60% what it was in 2012, the options available to the government were so narrow as to make the decision virtually inevitable. Dr Paul Dorfman Senior Research Fellow of the Energy Institute at University College London, said that Tony Blair consistently failed to make a decision on nuclear energy.

Add to that the minor matters of Brexit and the migrant crisis and the need to shore up Britain’s somewhat bruised relationship with France meant a spat over a contract worth £12billion to Électricité de France (EDF), the state-owned firm, was unwelcome. And China’s proposed £6billion stake (plus investment in HS2 and a possible future post-Brexit free-trade deal) would be a welcome jolt to a British economy that, if not still on life-support after the financial crisis, was only just sitting up in bed complaining the room smelt funny.

Which is why Theresa May’s pause in the approval process, announced in July, shortly after she took over from David Cameron as Prime Minister, was so odd. At the time it looked like a bold new broom had entered Downing Street. Never mind the jitters, here was a premier willing to risk the geopolitical consequences of sticking up for Britain.

So to climb down so rapidly, with vague references to a renegotiation that means the government will have a greater say over “the ownership and control of critical infrastructure”, looks a bit woolly. The US has recently accused China of stealing US nuclear technology and Australia likewise has had concerns.

But China General Nuclear Power, the state-owned company planning to invest in Hinkley, said it was “now able to move forward and deliver much-needed nuclear capacity at Hinkley Point, Sizewell and Bradwell”, despite the government announcement saying nothing of the latter two plants.

Sovereign control over energy supplies is a controversial issue. Fears of Chinese hackers holding the UK to energy-ransom abound. How big a stake should one country allow another to hold in such a vital sector? Mr Dorfman warns that Britain runs the risk of depending on Russia for gas and China for nuclear energy.

Mr Lenigas (pictured above, riding his ‘gusher’ in southern England) has a refreshingly no-nonsense attitude to this kind of thing. “It would be like me popping round to my neighbour’s house every time I wanted to boil the kettle,” he told me. He has taken great delight recently in championing the unlikely-sounding oil find under the South Downs around Gatwick. Confounding critics and baffling experts, it seems the Horse Hill site may actually be a viable UK-owned addition to Britain’s energy sector. If only all of Britain’s energy solutions were so straightforward.

As a comment on The Independent’s website pointed out, the ideal solution to modern energy production is a methodology that is cheap, reliable and low carbon, and with modern technology you get to pick two. At £92.50 per megawatt hour Hinkley Point C won’t be cheap. Hopefully though it’s bought time for other renewable solutions to come on line. By all sensible economic reckoning it’s a rubbish deal: expensive, inflexible and reliant on unproven technology. It has been widely criticised as such. But in terms of international political positioning at a time when Britain needs friends, despite sovereignty concerns, it was a no-brainer.

Cosy chats and posturing

sousse-imageCould the Foreign and Commonwealth Office (FCO) have done more to prevent the murders of 30 Britons in Tunisia last year?

In June 2015 the Britons and eight other foreign nationals were murdered when Seifeddine Rezgui attacked a beachfront hotel in Sousse, Tunisia. The attack, later claimed by Daesh, came just three months after 22 people, mostly European tourists, were killed by gunmen in the Bardo National Museum, in Tunisia’s capital, Tunis.

At the pre-inquest hearing in the High Court today, the counsel for the families, Andrew Ritchie QC said “there is a line of thinking within some of the families that the FCO may have failed in their responsibilities to the 60,000 British citizens that went out per month to Tunisia between Bardo and Sousse”. Bearing in mind the main inquest is not due to start until January 2017 and today was meant just to run a procedural finger over the administration, it was an unexpectedly strong opening salvo.

Three weeks ago Judge Akremi, the Tunisian investigator, released his report into the Sousse attack of 26 June. His Honour Judge Loraine-Smith, chair of the Inquiry, said he had seen early parts of the translation and it was “illuminating [and] there’s the possibility of damage to national security by full release on what little I’ve seen”.  Andrew O’Connor QC, counsel for the Government explained: “The detailed consideration of security measures in Tunisia, including the shortcomings of some of those measures, would undoubtedly assist those planning further attacks.”

Mr Ritchie hadn’t finished with the Foreign Office. He said there was concern over the FCO’s “practice of cosy chats with the travel companies” who were more interested in their ability “to run a profitable business”, regardless of FCO advice that there was “a high risk of terrorist activity, including in tourist areas”.

In an inflammatory passage he hinted that the FCO had acted to protect tour operators like Thomas Cook and Thompson. The no-refund policy whereby bookings can only be cancelled and refunded if the FCO has recommended a travel ban to the destination was central to it all, he suggested. He noted that after the March attack there was no evidence of existing bookings being cancelled, perhaps due to the no-refund policy. Instead of recommending a travel embargo after the Bardo attack in March, Mr Ritchie said the FCO had “had discussions with local authorities who said, ‘This will be catastrophic to us if you embargo’, and [holiday companies] said, ‘Don’t do it. We will increase security’”. Unsurprisingly all such suggestions were dismissed by Andrew O’Connor for the government.

A lot of this was posturing for the main inquest. The counsel for the families wants the Inquiry to determine whether or not the British Government breached Article 2 of the Human Rights Act – the right to life – through the advice, or lack of it, from the FCO. He wants to introduce evidence from a security expert who works in an “anti-terrorist Western organisation” who might criticise the FCO by concluding “they mucked it up”.

The next pre-inquest hearing is set for December 1st and will specifically address whether the issue of Article 2 of the Human Rights Act is within the scope of the Inquiry. If the Chairman determines it is, and if he later decides the Government was culpable through the FCO’s advice (or lack of it), the compensation claims will run into many millions.

Westland – 30 years of lessons

  • Heseltine image“Westland needs more Government interference in its affairs like it needs a hole in the head.” Paddy Ashdown never minced his words, as this example from a letter he sent to the then Prime Minister Margaret Thatcher on January 3rd 1985 attests. It was the start of the Westland affair of 1985-86 and Government documents recently released under the 30-year rule and available in the national archives have shone a fascinating light on the crisis, which still echoes today.

The rumpus concerned the future of Britain’s last remaining helicopter manufacturer, which was in deep financial trouble and subject to takeover bids by two consortia: one American, the other European-led. It eventually claimed the scalps of two Cabinet Ministers and Mrs Thatcher genuinely feared for her premiership at the time.

In reality the affair was a smokescreen for the first serious challenge to her premiership. Michael Heseltine (pictured), the then Defence Secretary, had picked the fight but eventually resigned after storming out of a Cabinet meeting on January 9th 1986. He favoured a European bail-out of the company, fearing an American partnership would “mean the transfer of technological secrets and research capability to the US, leaving Westland as a mere metal basher”.

The problem for Heseltine though, was that the American bid by Sikorsky was “much more attractive than the rickety, non-cohesive European consortium of loss-makers” as an article in The Times on Saturday January 4th 1986 put it (under the provocative headline ‘Bovver boy’s hover ploy’).

The central issue, which has dogged military and political bigwigs since the second world war (and continues to do so today) was neatly summed up in a parliamentary question by Austin Mitchell, MP for Great Grimsby, to Mrs Thatcher on January 13th  1986: “What is the policy of Her Majesty’s Government towards dependence on supplies of arms and war material from the United States? Replace ‘the United States’ with ‘any country outside the UK’ and you get the nub of the problem.

The thorny question of defence sovereignty is a hardy perennial that has entangled many a politician. What value should a nation place on strategic independence? Should a country aim for self-sufficiency, so that it is not dependent on fair relations with international partners in the event of war? It’s a poor strategy to build fighter planes if the wings come from a potential adversary. But is it prohibitively expensive to maintain a domestic defence industry, especially if you want the most advanced equipment? (And, believe me, it’s no fun stepping into the two-way rifle range with kit made by the lowest bidder.)

A COTS strategy (Commercial Off The Shelf) may be cheaper, as you can just browse a military version of the Argos catalogue and not have to invest in all the pesky and expensive research and development costs. But it is unlikely a country offering a COTS option will be selling the top-notch stuff, which they will keep for themselves (you wouldn’t give potential enemies such an easy ride). So, you buy in the sure knowledge that even the eye-wateringly expensive kit you have just bought is second-rate.

And what of the political considerations of the wider industrial and employment factors? Jobs equals votes; so a national defence industry is attractive to politicians, even if the military top brass don’t get the best available kit on the international market. The political tempo focuses on the short-term with elections every five years (which leans towards supporting local businesses), whereas the defence procurement tempo is generally long-term (which needs investment over many years; an unappetising prospect for the Treasury). But, as Ron Smith, Professor of Applied Economics at Birkbeck University of London, says, once the defence budget falls below 5% of GDP there is unlikely to be a macro economic effect for the country anyway.

At one extreme is the position Jeremy Corbyn recently espoused for the replacement of Trident, Britain’s fleet of four nuclear-armed submarines. He suggested we should build the subs but not arm them. This would effectively turn that slice of the defence budget into a form of welfare: pointless subs but lots of jobs in Barrow-in-Furness, a sort of Keynesian approach to defence procurement. (I visited Barrow-in-Furness once to see the construction of the next generation of hunter-killer subs by one of the last great domestic defence manufacturers the UK has. I took the lift to the fourth floor in the construction hangar and when the doors opened I was still only level with the base of HMS Ambush’s conning tower – these things are BIG!)

When it comes to defence procurement then, it’s difficult unequivocally to identify the national self-interest. In 1986 Westland found itself in the middle of these competing issues. “Ministers {Heseltine and Brittan} should be put back in the Cabinet and the lid firmly shut,” thundered Paddy Ashdown, “instead of winding [Westland’s] arms half way up their backs with threats.”

Ron Smith warns against the ‘Winner’s Curse’, whereby a company wins a contract with a low bid but then has to deliver the goods on budget, and the ‘conspiracy of optimism’ whereby the government really wants to believe they can. One way to avoid it is to remain close, very close, to an ally that will give you preferential access to state of the art kit.

And that seems to be what the UK has done with the US. On the first day of the 2016 Farnborough International Air Show on July 11th, the government signed two key deals with the US worth about $6 billion. Nine P-8 Poseidon anti-submarine warfare aircraft and 50 AH-64E Apache helicopters will be bought direct from the US manufacturer Boeing. Westland – now, through various take-overs, called Leonardo – won’t see a penny. It is effectively a COTS purchase, but for the top-notch stuff rather than just a good deal on last year’s ski gear.

A former military helicopter pilot who was intimately involved in the programme to buy the first Apaches for the UK – the AH-64D model ten years ago – is glad Westland/Leonardo didn’t get the upgrade contract. He told me Westland was never good value for money and their service poor. He regularly had to speak directly to Boeing or Lockheed Martin over issues with weapons and radar and felt Westland concentrated mainly on their relationship with the UK government, rather than actually making the thing work.

Lewis Page was equally scathing. In his book Lions, Donkeys and Dinosaurs he railed against the value to Britain of allowing Westland to have the AH-64D contract. He took the 34,000 man-years of work delivered to the British population and assumed a human working life of 45 years. By that calculation he reckons 755 people were saved from the dole. “We could have bought the helos direct from Boeing,” he says, “then simply given 755 jobless people a million pounds each…and still saved ourselves a billion.” So, not a fan then.

The P-8 anti-submarine warfare aircraft were bought to fill the capability gap created when the MoD scrapped the Nimrod MRA4 programme after the 2010 Strategic Defence and Security Review. This was judged a bold decision at the time and suggested a more realistic, breath-of-fresh-air attitude to military procurement could be expected from David Cameron’s government.

Put simplistically, anti-submarine warfare involves being able to see stuff under the water. It was the perfect capability to use in the search for the missing Malaysian aircraft MH370 that disappeared in the Southern Ocean in 2014 (and brilliantly reported by an underpaid hack at The Economist here). I’m told Mr Cameron was outraged that the press footage of the airfield in Perth, Western Australia, where the international search effort was being coordinated, showed no aircraft with a union flag on the tail. He apparently had a sudden change of heart about how necessary such planes were and quite how ‘bold’ military procurement decisions should be in the future.

Things have moved on a bit since Paddy Ashdown warned Westland was being treated like a “political football”. Even if we set aside the idea that the whole spat was a leadership challenge from Michael Heseltine (who, like Boris Johnson and Michael Gove, never believed the political maxim that he who wields the knife never wears the crown) the days of the UK affording a sovereign defence industry had already passed. Westland accepted the rescue bid from Sikorsky, briefly returned to profitability and was then sold to the Italian firm Agusta, later renamed Leonardo. It has survived and still picks up a bit of helicopter-related work, but the days of manufacturing, even under licence, seem over. A pyrrhic victory for Mr Heseltine perhaps?

By going direct to Boeing for the new Apaches and the P-8s, perhaps the government has signaled that it has learned different lessons from these tales of defence procurement: that the UK is never going to be a big defence industrial player any more and the MoD budget is an expensive way to shore up jobs in the industry. Maybe the boldest decision is to accept that and just pay the price the market demands for the stuff, whilst staying very close to your allies for preferential access to the best kit. But has the UK compromised too much in recent years to stay close to the US? Now that’s another subject…