FINANCIAL ASPECTS OF THE ARMS EXPORTS CONTROL
David Isenberg
AMNESTY INTERNATIONAL SPAIN - GREENPEACE SPAIN
INTERM=D3N - M=C9DECINS SANS FRONTI=C9RES SPAIN
Centre UNESCO de Catalunya
(August 1996)
**************************************************************
FINANCIAL ASPECTS OF THE ARMS EXPORTS CONTROL=20
=09
The export is the last stage in the cicle of the arms economy, which begins
with the R+D stage, and continues with the production and deployment-use of=
=20
those weapons. What happens with the export is, therefore, closely linked=
to=20
the development of the rest of the cicle.
The international context
Coinciding with the end of the Cold War, the Warsaw Pact dissolved and NATO=
=20
transformed itself, both Western and Eastern countries are carrying out a=
deep=20
transformation of their defence and security policies. The following are=
some=20
of the general and common features in this process:
* Cutback in the number of military personnel
* Reduction of the arms potential
* Drop in the number of bases and military facilities
* Emphasis in the reduction of offensive and provocative weapons
* Drop in the internal demand of weapons
* Reduction in the Defence budgets
* Closer attention to conflict prevention
* Closer cooperation in disarmament
From 1985 to 1994, military expenditure in Eastern Europe has been reduced=
by a=20
third. In Western Europe it is has been reduced by 33% and, globally=
worldwide,=20
by 30%. The overall expenditure in military R+D has also been cut back by=
30%=20
in the aforementioned period and the workforce involved in military tasks=
has=20
diminished by 12% at the international level (25% in Eastern Europe and 20%=
in=20
Western Europe), from 29 to 24 million.
From 1990 to 1995, over a million hectare devoted to military uses have=
been=20
restructured for civilian use. Out of those, 328,000 hectare were=
facilities=20
placed in Germany and 212,000 in the USA. In these two countries, the=
closing=20
down of military bases has involved the loss of 370,000 jobs.
As a logical result of these processes, and especially as a result of the=
=20
reduction in the internal demand of the Armed Forces, arms manufacturing is=
at=20
a stage of decrease and general restructuring in most of the big producer=20
countries, given that the Western market no longer has any possibilities to=
=20
absorb the level of production characteristic of the Cold War.
From 1985 to 1994, the direct and indirect number of jobs generated by the=
=20
defence industryhas diminished by 28% at international level (26.5% in the=
NATO=20
countries and 43% in those of Eastern Europe). Worldwide, this sector=
employed=20
17.5 million people in 1987. In 1994, it employed 11.1 million people, =
which=20
means a loss of 6.4 million jobs and an overall reduction by 37%. In 1985, =
=20
this sector employed 4.5 million people in NATO countries, and in 1994 it=
=20
employed 3.3 million, with a reduction of 1.2 million jobs.
Surely, companies still can keep the same production level by increasing=
their=20
foreign sales, but this is a dangerous and unrealistic possibility, both=
in=20
political and economic terms, because:
* at international level, the export market has been in=20
recession since 1987. Exports in 1994 (US $ 22,000 million) were worth less=
=20
than half those carried out in 1987 (US $ 46,000 million). Therefore, =
there=20
has been a reduction of over 50%.
* there is a certain saturation in the traditional purchasers=20
and many of them have difficulties to fully pay their purchases.
* although there are emerging markets, such as the Asian one,
=20
the maintenance of high levels of exports to those areas will be at the cost=
of=20
their militarization and the ensuing development of a regional re-armament.
Given this general situation, the pattern observed at international level=
is=20
reducing both production and exports, looking for solutions for companies=
that=20
have traditionally worked in this field, by means of support for their=20
productive diversification or the general restructuring of the sector, by=
means=20
of mergers or acquisitions, and in the framework of a general pattern=
towards=20
regional concentration.
This international re-thinking of the defence industry, despite the cost in=
=20
terms of jobs this may entail, is inevitable, necessary and benefitial, =
since=20
it is subjected to a higher political good, i.e., the strenghening of the=
=20
political element of the security policies, and the development of measures=
of=20
political cooperation for the prevention of conflicts.
In any case, so as not to provoke situations of militarization, the scale=
of=20
the arms industry should always be subjected to political criteria, in =
which=20
the maintenance of jobs can never be the prevailing criteria, given that=
this=20
would prevent the necessary development and transformation of the security=
=20
policies.
The scale of the sector in Spain
The Spanish arms industry neither has nor has ever had a scale comparable=
with=20
that of the major worldwide manufacturers of military products. Nowadays it=
is=20
somewhere between the 20th and the 25th position in the world ranking as far=
as=20
staff employed in the sector is concerned, with an overall figure of 40,000=
=20
jobs, taking into account both direct and indirect jobs (BICC, 1996).
On 6th June 1996, the Minister of Defence (MoD) was quoted as saying in=20
Congress that, nowadays, the Spanish defence industry has only 15,000 direct=
=20
jobs. Although the number is likely to be somewhat higher (according to=
some=20
estimates it may be around 25,000 jobs, if we also take into account the=20
private companies), the truth is that its scale is actually quite small, =
close=20
to 1% of the overall number of industrial jobs. This means that any=20
transformation in its structure or scale would not involve any kind of=
setback,=20
collapse or ruin in the overall productive Spanish economy.
If we consider the value of the production of this industry, which could be=
=20
estimated at a maximum of 200,000 millon pesetas (2,000 millon $ US) yearly,=
it=20
means a figure smaller than 1% of the Spanish industrial production. As=
regards=20
exports - which, according to non governmental sources estimate around=
60,000=20
millon yearly (600 millon $ US), nowadays it would mean 0.5% of the overall=
=20
Spanish exports. Therefore, when we talk about the need to monitor the=
Spanish=20
exports of weapons, we are referring to a part of very little importance of=
the=20
trading activity with other countries, and we are referring to a sector=
which=20
is not among the first 20 chapters of exports, comparable to sectors such=
as=20
=ABmeat and remains=BB, =ABsugar=BB, =ABsalt, sulfur and plaster=BB, =
=ABfur and leather=BB,=20
=ABwood=BB, =ABwool=BB, =ABclothes=BB, =ABpearls=BB, =ABcopper=BB or=
=ABtoys=BB, all of them with=20
a 10 times smaller volume of exports than crucial sectors of the Spanish=
economy=20
(fruits, machines and electrical appliances, boilers and mechanical=20
appliances), and about 40 times smaller than the volume of exports in the=
car=20
sector.
Economic meaning of transparency
The demand for transparecny does not automatically involve the end or the=20
reduction of the arms trade. It only and exclusively means putting an end=
to=20
the political and admnistrative policy of concealing basic and essential=20
information about the general features of this trade activity, so far based=
on=20
secrecy and confidentiality. In order to justify this practice, the=
following=20
reasoning has often been used =ABTransparency would provide with information=
=20
competitors from other countries interested in the same projects that we are=
and=20
therefore we could lose many contracts=BB.
This argument hides that the big international contracts are offered in=20
invitations to tenders, where many companies compete publicly. Specialized=
=20
maganizes periodically report about the state of the invitation, the=
companies=20
that are seleted and those which are not.
Defence magazines, the annual reports of the companies themselves, =
financial=20
newspapers and even the general information newspapers often give=
information=20
released by the companies themselves about projects of exports where they=20
compete or could compete with companies of other countries.
For example, we can refer to Bazan=B4s Annual Report. There, it was=
reported, =20
in some detail, that apart from the contracts already signed with some=20
countries, the company was offering military products to South Africa, =20
Thailand, Colombia, Portugal, Chile, Egypt, Malaysia, Bolivia, =
Argentina,=20
Uruguay, Morocco, Iran, Venezuela, Paraguay, India, Peru, the=
Bahamas, =20
Sri Lanka, Turkey and Brunei. Therefore, this could be a case of a=
company=20
that voluntarily practises a kind of information transparency, without it=
=20
apparently involving the loss of contracts.
Via their own press departments, other companies release news about exports=
=20
that are still being negotiated, be it to highlight the quality of certain=
=20
products or to project the image of an able company in foreign markets. =
Thus, =20
in 1994, 1995 and 1996 we have been able to find out about CASA=B4s projects=
to=20
export militay transport aircraft to Argentina, Australia, the UAE, =
Kuwait, =20
Morocco, Mexico, Poland and Thailand, or militar training aircraft for=
South=20
Korea and South Africa, or that Santa B=E1rbara is negotaiting the sale of=
=20
armoured personnel carriers to Belgium and that Indra is trying to sell=
flight=20
simulators to Indonesia and communications material to Morocco and=
Venezuela, =20
or that Astra is negotiating the sale of pistols for the Czech police, to=
give=20
some examples of potential exports released by the companies themselves.
The real reason for secrecy
Therofore, secrecy is only practised every now and then by some companies. =
In=20
other companies, on the contrary, secrecy is the rule. Why?. We can=
think of=20
three hypothesis:
a) Due to the nature of the product exported
b) Because of the country of destination
c) Due to the combination of a) and b)
Some products are specially sensitive to criticism, both by the public=
opinion=20
of the exporting country and by that of the purchasing country. =
Antipersonnel=20
mines, cluster bombs or certain kinds of military, security and police=20
material could be some examples. It is not by chance that the less=
transparent=20
sector is precisely that devoted to manufacturing ammunittion and small=
arms. =20
Its inmediate use in open wars or internal civil conflicts turn this=
activity in=20
the one subject to criticism and denounciation. Still, for the same=
reasons, =20
no another sector is less innocent than the aforementioned one. Small arms=
and=20
other kinds of military, security and police material can be subject to=
misuse=20
by the security forces in the country of final destination, which can=
result in=20
serious human rights violations such as =ABdisappearences=BB, extrajudicial=
=20
executions, torture or ill-treatment and killings of non-combatant=
civilians, =20
all that with materials made in Spain. Thus, it is essential that the=20
Parliament monitors this trade and ensures that the end-user certificates of=
=20
this material forbids its use to carry out human rights violations. The=20
control, thus, this should be higher than that exerted in other products=
of=20
less offensive nature, such as flight simulators, for example. Many=
companies=20
manufacturing these products refuse giving information about their exports, =
so=20
as not to be criticed by different sectors of the public opinion.
A second reason explaining the concealment of data is that of the countries=
of=20
destination of the weapons. If a company exports combat aircraft to a=
Nordic=20
country or patrol boats to a democratic country, it is difficult that it=
will=20
be criticised for this sale. Obviously, the problem lies not in this kind=
of=20
customers, but in the long list of countries that are at war, in a=
situation=20
of tension, with significant internal conflicts, that violate human rights=
and=20
similar situations, all of them clearly defined in the legislation that the=
=20
European Union and the OSCE have agreed upon to regulate arms exports.
Unfortunately, in recent years, Spain has exported important numbers of=
weapons=20
to countries that do not comply with the criteria agreed by the European=
bodies:=20
Morocco, Thailand, Turkey, Indonesia, Angola...a list of suspicious=20
customers as regards the opportunity of selling them weapons. This is a=
good=20
reason for the companies to try to hide their sales, but that does not mean=
=20
they are not violating the existing legislation and the common sense of a=20
foreign policy that does not try and worsen conflict situations.
Obviously, the combination of factors (a pernicious product for a=
suspicious=20
country) makes an exporting company ensure the secrecy of the sale, since=
its=20
being reported could involve a protest and the protests against it would=20
endanger the sale.
Certainly, transparency could involve the loss or abandonment of some=
export=20
projects, but it would precisely be the least justifiable, least legal and=
most=20
damaging in political terms projects. Their cancellation, therefore, is=
=20
desirable, given that it would have a benefitial effect for the populations=
of=20
the countries whose governments negotiated the sale.
=09
EXPORTING AT ANY COST OR UNDER REASONABLE CRITERIA? =09
Given all the aforesaid, the issue with the arms trade is not whether it=
should=20
continue to be protected by silence, secrecy and impunity, which are=
practices=20
that are always to be condenmed in any public activity, even more so in=
those=20
that have direct consequences on populations that are involved in delicate=
and=20
suffering contexts. The issue to be tackled is how to ensure that this=
activity=20
is transformed and normalized, with the least possible impact on jobs, =20
complying with the existing European legislation and making it subject to=
the=20
political imperatives of the democratic activity, where there is no room=
for=20
secrecy and lack of parliamentary scrutiny.
Moving from a practice of concealment to a practice of transparency does not=
=20
have to be an impossible or rejectable task, but a reasonable aim that the=
=20
centres of political decision- making have to make possible in the short=
term, =20
be it via a radical change in the existing administrative procedures or via=
a=20
series of connected measures that, progressively allow for moving from an=
=20
indesirable and negative situation to a much more positive one.
This change should guarantee two basic measures: transparency and=
parliamentary=20
control of the arms exports. The first measure involves periodically=
publishing=20
the basic data of the exports that are intented to be caried out (products, =
=20
number, cost and countries of destination). The second measure would=
involve=20
establishing some kind of control from any of the parliamentary chambers, =
or=20
from both of them, be it via a specialised Committee or from an existing=20
Parliamentary Committe.
In short, we intend to introduce a political debate before some exports are=
=20
carried out, that due to their nature or destination could have clear=20
destabilizing consequences. The sale of aircraft carriers to Thailand, the=
=20
negotiations to do the same with China and India, or the exports of=
material to=20
Turkey, Morocco or Indonesia are some examples of exports that have caused=
=20
important parliamentary and public debates in other countries, and that=
have=20
deserved no attention in Spain.
A transition period to move towards the achievement of these aims could be=
the=20
adoption of the following measures:
1) The committment to strictly comply with the existing legislation, =
especially=20
the 8 Common Criteria agreed by the EU in 1991 and 1992, and the 1993 OSCE=
=20
Regulating Principles.
2) Disclosure of the basic data of the exports in recent years, including=
=20
details of the countries of destination.
3) The government=B4s committment to disclose this information every year.=
=20
4) The committment to introduce transparency in public companies, =
publishing=20
the data of the exports carried out and those being negotiated.
5) Every three months, sending the basic data of the arms exports agreed by=
the=20
Interministerial Board to the Defence and Foreign Affairs Committees of=
Congress=20
and the Senate.=20
6) Accepting that both Committes (Defence and Foreign Affairs) should=
discuss=20
those contracts that, due to their cost, nature or destination, deserve a=
=20
previous political discussion. =20
=09
=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=
=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=
=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D
David Isenberg, Senior Research Analyst
CDI's ONLY genuine former enlisted man
Center for Defense Information
1500 Massachusetts Ave, NW, Washington, D.C. 20005
202/862-0700 (Voice), 202/862-0708 (Fax), dise...@cdi.org (Email)
Arms Trade Data Base Web Site: www.cdi.org/atdb
WAIS Users: wais.cdi.org database atdb
Arms Trade Listserver Archive: mail2.cdi.org/archives/armstrade
Have black belt, will fight
=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=
=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=
=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D