Uncertain Outlook for German Arms Industry

By on Thursday, August 21st, 2014

German tanks, submarines and weapons are in high demand. They’re exported to Israel despite the war in Gaza, and Kurdish fighters would also welcome a shipment. Yet the defense industry is worried about its future.

When trade unions look to politicians for help, they’re generally hoping for backing in the fight against managers planning job cuts. But when workers’ representatives from the German arms industry met at the Ministry for Economic Affairs on Tuesday, it was for a very different cause.

In this case, it’s the minister of economic affairs himself, Sigmar Gabriel, who is putting their jobs at risk by approving fewer and fewer German arms shipments to worldwide customers. In a letter sent to Gabriel in July, the unionists said that the minister’s decisions were threatening the very existence of a number of corporations in the security and defense industry.

Ernst-August Kiel, an employee representative with ThyssenKrupp Marine Systems, said after the meeting with Gabriel that they’d debated some “dicey deals,” involving thinner order books and fewer follow-up orders.

Gabriel has been responsible for Germany’s economic portfolio, and therefore Germany’s arms exports, since December. It’s a task he takes very seriously, and he has made no secret of his disapproval of the previous government’s approval process when it came to weapons exports.

According to a report on arms exports in 2013, Germany approved deals for so-called third countries – those outside NATO and the EU – in the amount of 3.6 billion euros ($4.8 billion). Three years ago, that figure was only 1.4 billion euros.

Trade union leaders are worried about the loss of jobs
Germany’s political principles governing the export of armaments and other military equipment, established in 2000, state that weapons are not to be supplied to crisis areas, with few exceptions. If a German company plans to sell arms to a third country, then it must first seek permission from the Ministry for Economic Affairs.

But ever since Gabriel took office, permission has only been granted in exceptional cases. Every special request crosses his desk – and many seem to end up staying there for quite some time, with hundreds of unprocessed export applications apparently waiting for review.

The defense industry is not happy with the delays, as it makes its money with deliveries to foreign defense contractors. If they fail to provide their components, the German companies risk being discredited.

“Gabriel’s current line means that Germany is no longer seen as a reliable partner, and that the German armaments industry is losing its core competence,” said Joachim Pfeiffer, the Christian Democrats’ (CDU) spokesman on economic policy.

Swords to plows?
Gabriel has said he understands the criticism, but does not intend to change course. “I am convinced that arms exports can only be an instrument of security policy, and not one of economic policy,” said Gabriel in his response to unionists. An “innovative, efficient and competitive national security and defense industry” was “in the national interest,” but included the challenges of “entrepreneurial consolidation in the industry and the promotion of diversification strategies in the civilian sector.”

In response, the defense industry asked mockingly how such rapid change could possibly be implemented. After all, representatives pointed out, companies that build tanks could hardly shift their entire production lines overnight and make cars, for example.

Unionists have said that 100,000 jobs may be at risk, though as it turns out the German defense industry plays a rather small part in the overall economy. Although Germany ranks as one of the world’s top three arms exporters, the share of the military industry in the country’s gross domestic product is just 1 percent.

In 2011, around 98,000 people were directly employed by one of the 40 companies belonging to the Federation of German Security & Defense Industries. Added to that are the 220,000 jobs among suppliers and various service providers.

But Gabriel wants to avoid tainting the discussion of a new arms export policy with negativity. In a letter to the heads of Germany’s weapons manufacturers on August 11, the minister said that an about-face was out of the question.

Germany debates arming Kurdish fighters
Instead, he invited the company leaders to a meeting at his ministry in Berlin on September 5, in order to discuss “the future of the German defense industry.” He wants to explain his thoughts on the basic strategy, said Gabriel, in addition to the “preservation of strategic competencies” and the “safeguarding of skilled jobs.”

Other German politicians have also been taking on the issue, with Volker Kauder, the parliamentary caucus leader of Chancellor Angela Merkel’s CDU, arguing for a common European defense industry.

“In this context, then, the export regulations for military equipment must be harmonized at the European level,” he said, while adding that the core areas of military technology would need to remain in Germany.

Kauder pointed out that orders from the German army, the Bundeswehr, weren’t enough to keep the industry afloat. “Therefore, we need to develop more and more European defense companies, especially Franco-German partnerships,” he told the German weekly “Welt am Sonntag.”

German standards
Cem Özdemir, leader of the Green Party, has also called for harmonization in the EU “of the requirements and limits” of defense equipment exports. “If we want to strengthen European foreign and security policy, we must at the same time also improve military cooperation,” he told “Die Welt” newspaper on Monday.

Gabriel has also indicated a willingness to support international cooperation, but only under certain conditions. A harmonization of arms export controls should only be implemented while maintaining “our high restrictive standards,” with a ministry spokesman stressing that Germany would not give up its own strict standards. Should European defense firms find a way to cooperate while maintaining these principles, then the government would support it.

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