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German Industry Braces For Tighter Export Rules

May. 31, 2014 - 03:45AM   |  
By ALBRECHT MÜLLER   |   Comments
Germany Goes To The Polls In EU Parliamentary Elec
Tighter Controls: German Economics Minister Sigmar Gabriel is pushing to tighten the country's export regulations, a move that has industry on edge. (Sean Gallup/Getty Images)
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BONN — German Economics Minister Sigmar Gabriel wants to implement a more restrictive arms export regime in his country, a move that could sap the nation of jobs and technological know-how, local industry sources say. The head of Airbus, in fact, has threatened to move production lines abroad as a result of the changes.

In a May 18 interview with German tabloid Bild am Sonntag, Gabriel called for a restrictive handling of weapons exports, especially small arms that could be used in civil wars.

Weapons exports, he said, should not be part of the nation’s economic policy and must be weighed against foreign, security and political implications. The government must also consider the situation in the country or region receiving the weapons and how exports may or may not contribute to the upkeep of peace, security and stability there. Gabriel told Bild am Sonntag that weapon exports would not be part of economic policy, but instead are guided by foreign and security political implications for Germany.

According to the ministry, the criteria of the federal government for export decisions are the situation in the region and the country as well as the upkeep of peace, security and stability in the region and the respect of human rights.

No other government official has made a statement on the topic, so it is unclear how much government support Gabriel has.

“The development in Germany toward even more restrictive export regulations in context of arms exports gives reason for concern,” said Georg Wilhelm Adamowitsch, managing director of the Federation of German Security & Defence Industries (BDSV). “In the past, Germany had already created some of the most rigid regulations for the export of weapons of war and other military products, which will now apparently be interpreted even more [rigidly] by the current federal government.”

Christian Mölling, a defense analyst with the German Institute for International and Security Affairs in Berlin, said if industry determines that it can’t market to places like Asia, businesses will react quickly.

The German defense industry creates 70 percent of its profits outside the country with a significant portion outside Europe, Mölling said. Most larger companies also are pursuing an internationalization strategy, either via buyouts or the creation of joint ventures overseas. Alternatively, they could shift into civilian markets.

Mölling’s worst-case scenario sees companies relocating production to other countries, then shutting down their indigenous facilities. He cited Rheinmetall Defence, which has ammunition facilities in Germany and South Africa, as an example.

“As an offset within overseas deals, customer governments [and/or] customers may insist that companies build research and development units on their soil,” he said. “That way new products would be primarily developed and produced overseas ... and therefore not be restricted by any export regime of the country.”

While the major German defense companies did not respond to questions about the future export policy, the head of Europe’s aerospace giant Airbus Group, Thomas Enders, has already threatened industrial consequences.

“This might trigger additional layoffs in Germany beyond our current reduction plans,” he said in an interview with Reuters during last month’s ILA Air Show in Berlin. Airbus Defence and Space already plans to reduce jobs, with more than 2,000 being affected in Germany. “Eventually, we might have to consider closing down entire sites or product lines or moving them outside of Germany.”

According to BDSV, the German defense industry would not be able to ensure its capacity, standards or share of industrial development and capabilities in Germany without its exports, because the demand of the German military and other NATO partners alone would not be sufficient to maintain the status quo. “Without additional orders at home, an even more restrictive arms export licensing practice in the future will endanger the upkeep of key technologies and selected industrial capabilities in Germany,” Adamowitsch said.

Gabriel seems to be determined to implement his plans. On May 24, German magazine Der Spiegel reported that the federal security council has rejected nearly two-thirds of all export license applications. This board consists of the chancellor and seven ministers.

The Economics Ministry supposedly held back one application for the export of target optics for infantry fighting vehicles to Saudi Arabia — worth around €500 million (US $682.2 million) — built by a subsidiary of Airbus Defence and Space. The ministry refused to confirm or comment on the report.

Gabriel’s Social Democratic Party forms the government in a grand coalition with Chancellor Angela Merkel’s Conservative Party.

Before federal elections last fall, the latter was in a coalition with the Liberal Democrats. Back then, arms exports were more of an economic issue, and less about security or foreign policy. Now Gabriel is trying to reverse that.

“I guess, he is serious about it,” Mölling said. “Therefore the real question is, if he will be able to pull it through.” So far, neither Merkel nor any other minister has made a public statement on the issue.

However, the analyst expects conflict within the government and massive industry lobbying. “It will depend in particular on how the chancellor will position herself.” ■

Email: amüller@defensenews.com.

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