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October 21, 2008

Ari Rusila, Freelancer, Platinum Contributor (402)

From my point of view the article was a bit narrow minded forgetting the context of sc. "defence industry" which I call "military-industrial complex". The best Protectionism for citizens "Both Sides of The Pond" would be to separate the interests of this complex and and interests of average citizen.

When Russia’s invading forces choked roads into Georgia with columns of armoured vehicles and struck targets from the air, it instantly bolstered the case being made by some that the Defence Department isn’t taking the threat from Russia and China seriously enough. It was said that "Christmas Comes Early For the Military Industrial Complex”.

The Military-industrial Complex has been one of the biggest players in US foreign policy since President Eisenhower. Details about Iraq killing Iranians with US-supplied chemical and biological weapons significantly deepens our understanding of the current hypocrisy. It began with "Iraq-gate" -- when US policy makers, financiers, arms-suppliers and makers, made massive profits from sales to Iraq of myriad chemical, biological, conventional weapons, and the equipment to make nuclear weapons. Reporter Russ Baker noted, for example, that, "on July 3, 1991, the Financial Times reported that a Florida company run by an Iraqi national had produced cyanide -- some of which went to Iraq for use in chemical weapons -- and had shipped it via a CIA contractor." This was just the tip of a mountain of scandals.

A PBS Frontline episode, "The Arming of Iraq" (1990) detailed much of the conventional and so-called "dual-use" weapons sold to Iraq. The public learned from other sources that at least since mid-1980s the US was selling chemical and biological material for weapons to Iraq and orchestrating private sales. These sales began soon after current Secretary of State, Donald Rumsfeld travelled to Baghdad in 1985 and met with Saddam Hussein as a private businessman on behalf of the Reagan administration. In the last major battle of the Iran-Iraq war, some 65,000 Iranians were killed, many by gas.Coming back to present days one could easily find out how the US government borrows heavily to cover its off-the-charts defence spending—$587 billion this year. Spending in Iraq and Afghanistan is from 2.9 - 5.0 bn$ per week or 280.000 - 500.000 $ per minute.

The five largest American Defence contractors are Lockheed Martin, Boeing, Northrop Grumman, Raytheon and General Dynamics. They are being followed by Honeywell, Halliburton, BAE Systems and thousands of smaller defence companies and subcontractors. Some, like Lockheed Martin in Bethesda (Maryland) and Raytheon in Waltham (Massachusetts) draw close to 100 percent of their business from defence contracts. Some others, like Honeywell in Morristown (New Jersey), have important consumer goods divisions. All, however, stand to profit when expenditures on weapons procurements increase. In fact, U.S. defence contractors have been enjoying big Pentagon budgets since March 2003, i.e. since the onset of the Iraq war. As a result, they have posted sizable increases in total shareholder returns, ranging from 68 percent (Northrop Grumman) to 164 percent (General Dynamics), from March '03 to September '06.

For war profiteers, soldiers returning maimed or in caskets, and an over $500 billion Pentagon budget paid for by the taxes of ordinary citizens, are externalities -- costs and consequences borne by others.
NATO became even more threatening to Russia because, at the same time, the alliance shifted its mission from defending the soil of member countries to offensive missions outside the treaty area - for example, bombing Bosnia, Kosovo, and Serbia.

The trend toward autocracy in Russia is a little threat to the United States or EU. Even autocracies have legitimate security concerns, and Russia has been invaded several times through Eastern Europe, which is why the Russians are worried about a hostile alliance on its borders. History shows that authoritarian regimes aren't necessarily externally aggressive - for example, the dictators in Burma - and that democracies are no less belligerent than autocracies in their foreign policies. In fact, data show that the most aggressive nation on the planet after World War II has been the United States - not the Soviet Union - with more than 100 military or covert interventions in other countries.

If we make contrast to today’s’ financial turmoil one should remember following. Wall Street analysts concur that "war is good for business" particularly during a period of "economic slowdown". The top five U.S. defence contractors generated almost $129 billion in revenues and $8 billion in profits in 2006, double the revenue and profits in 2000 when George Bush became President. I bet that they want this to continue.

More my views one may find from my Blog http://arirusila.wordpress.com

October 21, 2008

Marek Swierczynski, journalist at TVP, Diamond Contributor (1090)

Let's not be naive. Defence industry and military procurements have never been free from state intervention. Protection of own industry is just one form of that. On the international markets, the US has such a large technological and marketing advantage, it can almost ignore protectionist practices, as there are simply no competitors to some products. Europe is lagging behind, having wasted the "peace dividend" instead of investing it into top technology. And it was the US that seemed to have eased their own protectionism a little bit recently. Europe managed to win the helicopter contract for the US Army but with the air tanker it was probably too much for the US industrial lobby - and also in time when civilian aviation is in decline, so Boeing could not count on compensating the losses in airliners market. The EADS (Airbus manufacturer) is also affected, and the lobbyists are no less active in Brussels and Strassbourg than on the Capitol Hill.

What is a real challenge, more important than a defence free trade that never was, is that Europe will ultimately have to integrate its military industry with the CSDP (Common Security and Defence Policy) . It will be a long road but at the end of it there's something close to "european army", independent of NATO and operated by the EU alone. NATO and EU do not neccesarily share all their views on security or missions worldwide, let alone on where to arm the force. They could buy F-35's but prefer Russian or Ukrainian airlifters. Or Chinese missiles. After all in 20 years Russia and Ukraine could be much closer parters or even within the EU.

October 22, 2008

Alexander Graf Lambsdorff, European Parliament, (5)

The concerns raised by authors of the article are legitimate. Neither the US nor the EU stand to gain from protectionism in an industry sector, where governments are the only customers and prime competitors are few.

The scope of the Global Procurement Agreement (GPA) of the WTO excludes the procurement of sensitive defence goods. Purchases in the security sector can also be excluded (Art. XXIII). Because of this, in principle EU governments can already decide whether or not to invite non-EU bidders. However, closing off the European market to non-EU (particularly US) bidders vis-à-vis a reciprocity clause would send the wrong political signal and would be contrary to the overall aim of the directive of attaining greater cost efficiency and the best possible equipment for the armed forces.

Indeed, the introduction of such a clause might risk a backlash by the next US- administration with repercussions for the access European companies currently have. At present, 14 Member States of the EU hold waivers from the 'Buy American Act' and more are being negotiated - thus we are, albeit admittedly rather slowly, on the way towards mutual market access. It would be very helpful at this stage, if the US made an effort to effectively ensure better EU access to their market, beyond the paltry 2 % market share Europe currently enjoys. This would help to avoid situations like today, in which Portuguese Socialists and German Christian Democrats manage to rally their political groups behind the call for protectionism.

The Internal Market Committee (IMCO) of the European Parliament (as the lead committee for this legislative dossier) has unanimously agreed to a compromise clause that covers all amendments concerning reciprocity. This clause reflects the status quo in light of the GPA and it strives for an improved mutual market access. The amendments of the Foreign Affairs Committee (only functioning as an advisory body in this legislative process) are thus no longer being considered. The consensual vote in the IMCO was a crucial first step towards fending off protectionism in such an important industry sector. It remains to be seen whether the European Parliament also accepts this compromise in its plenary vote. Either way, the struggle for open markets on both sides of the pond seems to be perpetual, which is why this important debate needs to be continued.


The author of this comment is the European Parliament's draftsman for the draft directive on defence procurement and the draftsman for the Liberal Democrats on the draft directive for intra-community transfers. (Both draft directives together form the Defence Package.)

October 24, 2008

Wolfram Hertel und Falk Schöning

Thanks for your comments. We do not argue for a boost of the defense budget or more influence for “war profiteers” on decision makers in Brussels or on the Capitol Hill. We are however of the opinion that EU Member States should utilize their military spending more efficient, e.g. by sharing the burden of research and development of military equipment. Having said this, the Commission was right in its proposal of the Defense Procurement Directive which would enhance efficiency on the European market.

Of course we are not naïve and know about the specific relationship between states and the defense industry. European law respects Member States’ influence in this sector by providing in Article 296 of the EC Treaty that “any Member State may take such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of or trade in arms, munitions and war material (…)”. However, the EU would commit a mistake in foreclosing its defense market to third countries such as the US because this would also impede the aforementioned intra-EU approach for more efficiency. It is true that by now free trade of military equipment is more an idea than reality. But it would aggravate the situation if the European NATO allies endangered the continuance of the inter-ministerial agreements with the Pentagon.

Therefore, we appreciate that Mr. Lambsdorff argues for a compromise that mitigates the concerns arising out of the vote in the Foreign Affairs Committee. As one of the recitals of the draft Directive still requires “mutual market access” for the invitation of bidders from third countries, we consider the debate not to be over whether the EU stands to introduce a “Buy European” policy.