Arguments against a more rigorous enforcement of present restrictions on arms sales are based on bogus reasoning.

In July 1997 the British Foreign Secretary Robin Cook stated that the new Labour Government "will not permit the sale of arms to regimes that might use them for internal repression." It fair to say that the Blair Government has followed these words with action. It has moreover taken the lead in pressing for a European Union Code of Conduct on Arms Control which was agreed in June 1998. Numerous other international obligations such as the "Australia Group" of 30 countries aiming to discourage the proliferation of chemical and biological weapons.

In March 1999 the first ever annual British Report on Strategic Controls was published, which Amnesty International described as "the most detailed of any European country." This report covered the calendar year 1997. A second report last November brought the story up to the end of 1998. But the first report is particularly useful as it contains a summary of UK and international controls on such exports.

It is equally fair to say that there is still a long way to go. A recent Commons Committee echoed the words of the 1996 Scott Report on the Export of Defence Equipment to Iraq on the "apparently unresolved conflict of interest between the Department of Trade and Industry which is working to promote exports and the Foreign and Commonwealth Office" which is working to police them. Amnesty's view is that the DTI "is not meeting its responsibility to promote trade in a manner which is not harmful to human rights." It is also worried that this same department is responsible both for the licensing of arms sales and for their promotion.

The total value of military equipment exported from the UK in 1998 amounted to £1.968bn according to official figures. This is a drop of over 40 per cent compared with 1997. Not all the drop necessarily reflects stricter control by the British Government or by the European Union. There are long lags involved and some of the arms exported in 1998 as well as 1997 reflect licences granted by the Major government. In addition, because of the completion or start up of lumpy contracts, there are large year to year fluctuations which do not necessarily reflect policy changes.

Some 41 per cent of all UK military exports by value went in 1988 to Saudi Arabia. In the previous year the proportion was even higher, namely 47 per cent. This was due to one major defence contract, the Al Yamamah deal government arms-for-oil deal originally struck in 1986. The next largest recipients were France and Germany which accounted for 12 and 9 per cent respectively.

The official figures have been scrutinised in reports by two non-governmental organisations, Amnesty International (Human Rights Audit, 1999) and Saferworld (The second UK Annual Report on Strategic Export Controls). They express similar reservations.

One reservation relates to delays. A decision taken six months ago may be valid for up to three years during which the country in question may have changed its regime. Moreover although the number of export licences granted and refused is listed, no details are given of the amount of weapons and equipment actually transferred.

Above all, end use scrutiny is badly flawed. A Foreign Office Minister has admitted that no formal mechanisms exist at present for systematically monitoring the use that has been made of British defence equipment once it has been exported. Several countries have acted as Trans-shipment points for small arms to unknown other states.

Jordan and Singapore received a large number of military export licenses despite having in the past been transit routes to Iraq and Iran. This seems to go against the official policy of not granting export licences where there is a risk of the arms being re-exported or diverted to an undesirable end use.

Saferworld remarks "that it is particularly important that UK licensing policy takes note of the arms race implications of sales of strategic items to the Middle East." The last official report was dominated not by major weapons systems but by licences for small arms and ammunition, which made up about a fifth of the total, components and equipment which made up two fifths; and dual use goods - which could be used for military or civilian purposes - made up the remainder.

Both NGOs are concerned with the licenses of small arms to sensitive destinations which might well be used for torture or suppression, but about which it is difficult to pronounce because of the absence of details about quantities and end user purpose. For instance Open Individual Export Licences have been issued for the Gulf States, Colombia, India, Kenya, Lebanon, Pakistan, Sri Lanka, Turkey and Zimbabwe - countries with poor human rights records.

Another worrying example has been the export of anti-riot shields, CS grenades, crowd control ammunition and water cannons to Tanzania. These are judged to be legitimate when the end use is supposed to be the protection of members of the security force from violence.

It is still difficult to identify the types of equipment licensed under a specific category. There are also conveniently ambiguous categorisations such as "handcuffs", which do not require an export licence, but which in fact have covered equipment likely to be used for cruel, inhuman or degrading treatment.

Amnesty is worried that tear gas manufactured by UK companies was used by Kenyan paramilitary police when they stormed the All Saints Anglican Cathedral in Nairobi, throwing tear gas canisters against pro-reform advocates - which is extremely dangerous within confined spaces for which people cannot easily leave. Yet a DTI minister confirmed that licences were issued for export to the Kenyan police of rubber batons and CS gas grenades. One problem is that tear gas containers can be recorded under 11 other separate category codes.

Saferworld also reports that the UK remained a key supplier of military equipment to Indonesia in 1998, although these would have been licensed by the previous government. Saferworld remarks: "Searching questions should be asked to confirm that none of these components were for Hawk aircraft and that none of the military equipment licensed to Indonesia was used in East Timor." It is also suspicious that licenses have been granted for potentially repressive equipment to Hong Kong, which is still distinguished from China, even though the territory is indisputably under Chinese administration.

A further problem concerns the adequacy of restrictions on the brokering of UK firms of sales of arms from other countries and the omission from export controls of licences to manufacture arms in a second country. There are reports of shipment of licensed small arms from Turkey to the Indonesian police.

The Scott Report recommended a new legislative framework for strategic export controls that are still being operated under refurbished wartime emergency legislation. The government has accepted the proposal, but has no suggestions for legislation in the foreseeable future.

Unfortunately, ranged against those who want the Government to tighten up on arms exports is the conventional "realist" view that it has already gone too far. According to this view we live in a hard competitive world where governments cannot afford to be squeamish either about where the arms go or the methods used to sell them. The supposedly clinching argument is that if the UK does not sell arms to odious dictatorships, the orders would instead go to other countries which will take the jobs destroyed by sentimental domestic public opinion.

Such arguments are bogus economics, to which genuine economics should provide an antidote. The great myth is that there is a lump of labour engaged in making specific products. Then, it is supposed, if orders or output are lost in one area, they cannot be regained elsewhere. The labour and other resources are supposed to be wasted forever.

This disregards the fact that jobs are constantly changing. Well over 3m people leave the unemployment register each year, well over half for new jobs or training. for new jobs. Arms exports employ about 80,000 workers. The arms exporting industry is a small part of an economy which is itself a modest part of world trade. Even if arms provide the best marginal return, the resources involved can still be shifted to other industries and other exports.

Nor does this need a vast "alternative strategy" as the Labour Left assumes. It involves merely leaving businesses to find the next best use of resources. Non-arms industries can always sell a little more on world markets. The worst that could happen is slightly worse terms of trade.

British arms sales of £2bn p.a. may be compared with total exports of goods and services, which amounted in 1998 to £224bn. If all arms exports had been stopped and it had been necessary to replace them with either exports or import substitutes, what would have been the consequences? Many international trade studies assume an export elasticity of demand of two. This means that the UK would have had to shift nearly £4bn of extra resources into civilian exports or import substitutes. Some £2bn of these could have come from workers and equipment previously devoted to arm sales; but another è2bn of net exports would have been required to offset the deterioration in the terms of trade. This £2bn represents less than ' per cent of gross domestic product.

The estimate is probably a big exaggeration, as a large proportion of arms go to NATO or EU allies or Australia and can be justified on grounds of division of labour. Even a once-for-all loss of 1/8th of a per cent of GDP does matter. But it is still a small price to pay for stopping the sale of limb-destroying mines or long-range guns to odious dictatorships.

So-called realists will say that workers and machines cannot be moved from military to civilian work overnight. But we have arrived at our present moral mess through gradual stages; and there is no realistic way of escaping it except gradually.

Indeed there are two aspects to moving out of the unedifying parts of the arms trade. The first would be for the government to stop encouraging it, whether by covert subsidies, twisting the law or the soft soap of royal and ministerial visits. The second would be much tighter controls on such sales.

Is a strengthening of present understandings among "Western" nations to support such a tightening up so impossible? How about Russia and China? Compliance should be made a condition of aid from he International Monetary Fund and other multilateral bodies. But stricter embargoes, even excluding these countries, would still be worth having.

The implications of the argument extend well beyond arms sales. Take the Pergau Dam in Malaysia where the last Government wrongly thought that it had to secure orders for UK suppliers almost at all costs. It is by stripping the pretences from such arguments that economics could regain its reputation as a humane and social study, shedding light in many shady areas.