THE END OF A ‘NATIONAL’ DEFENCE INDUSTRY?: Impacts of globalization on the Swedish defence industry

Abstract

In this article, the author scrutinizes the impacts of globalization on the Swedish national defence industry prompted by the end of the Cold War through the 1990s. Through analysing the data from international, Swedish government and industrial sources, the author establishes that the Swedish defence industry, due to its overreliance on arms exports as a result of post-Cold War globalization, has become increasingly irrelevant to Swedish defence needs. We may see the end of a ‘national’ defence industry in the Swedish case. The author further argues that overreliance on arms exports to extra-European markets leads to the erosion of Swedish national security and Swedish defence readiness. The author concludes that multinational business-interest analysis is needed to generate a closer examination of the export-oriented Swedish defence industry in the context of globalization.

Keywords:

• globalization
• defence industry
• arms export
• military-industrial complex
• Sweden

Acknowledgements

Part of this paper is based on Ikegami-Andersson, ‘Globalization of Defence Industries’. The author thanks the anonymous reviewers for helpful comments to improve the manuscript.

Notes

1. 1 Ikegami-Andersson, The Military-Industrial Complex; Ikegami-Andersson, ‘Japan’ (1998); Ikegami-Andersson, ‘Japan: A Latent but Large Supplier of Dual-use Technology’ (1993).

2. 2 Koistinen, The Military-Industrial Complex; Gleditsch and Njølstad, eds, Arms Races.

3. 3 Swedish military expenditures decreased from US$7,375 million in 1990 (2.6% of GDP) to US$5,886 million (2010 constant) in 2010 (1.3% of GDP). The SIPRI military expenditure database, http://milexdata.sipri.org.

4. 4 SIPRI Yearbook 2001, 238.

5. 5 Ibid.

6. 6 Ibid., 232.

7. 7 Ikegami-Andersson, Military Technology and US-Japan Security Relations; Ikegami-Andersson, ‘Japan’ (1998); Ikegami-Andersson, ‘Globalization of Defence Industries’.

8. 8 In this study, ‘internationalization’ means increasing cross-border transactions among national actors, while ‘globalization’ means more qualitative changes.

9. 9 According to the SIPRI estimates, global military R&D expenditure in the mid-1990s was US$49 billion, of which US$32 billion (in 1990 US$), approximately 65% of the global military R&D expenditure, was spent by the United States (SIPRI Yearbook 1997, 212–3).

10. 10 In the 1980s, the US Department of Defence (DoD) conducted major studies of ‘critical technology’ which is important from the perspective of national security. The studies compared competitiveness and advantage between American and Japanese critical technologies, and identified some Japanese dual-use technologies which would be of significance for improving US weapon systems.

11. 11 Lavallee, ‘Civil-Military Integration’.

12. 12 European Defence Agency, ‘What We Do’.

13. 13 See EADS’ homepage: http://www.eads.com/eads/int/en.html..

14. 14 GobalSecurity.org, ‘Sweden – Defense Industry’.

15. 15 Facts about the Swedish Defence Industry, 2001–2002, 5.

16. 16 Hagelin, ‘Swedish for How Long?’, 126.

17. 17 In Sweden, government military R&D expenditure was high, accounting more than 10% of military expenditure – comparable to major arms-producing countries such as the US, UK and France; the JAS-39 Gripen R&D programme, which began in 1982, accounted for a large part of the budget. However, when the JAS Gripen entered full production, Swedish military R&D expenditure fell by roughly 75% to only 3% of 1998 military expenditure (SIPRI Yearbook 2001, 234). Swedish government military R&D was reduced by 73%, from US$520 million in 1995 to US$140 million in 1998 (at 1998 constant prices and exchange rates: SIPRI Yearbook 2001, 232).

18. 18 Swedish Ministry of Defence, ‘The New Defence’.

19. 19 Hagelin, ‘Swedish for How Long?’, 127.

20. 20 Hagelin, ‘Saab, British Aerospace and the JAS 39 Gripen’, 92. The 1997 order of 64 Gripen aircraft also implies that Saab’s future as producer of military aircraft was in the end given priority; new indigenous civilian aircraft projects, the Saab 340 and Saab 2000, were terminated from 1998. Saab is the prime contractor for development and manufacturer of the Gripen (originally 65% project share), and its main partners are Ericsson Microwave Systems responsible for target tracking systems (16%), the engine-producer Volvo Aero Corp (15%) (Ibid., 93).

21. 21 ‘The defence industry cooperation between EU member states and the Nordic countries is also a necessary step towards combining détente and deterrence with lower defence expenditure … Sweden is contributing to a restructuring of the European defence industry, which will allow continuing transatlantic cooperation on equipment on reasonably equal terms … Now that the security situation allows us to reduce our defence expenditures, we will not be prepared to spend as much of taxpayers’ money on being self-sufficient’ (Sydow, ‘Sweden’s Security’, 17–18).

22. 22 Established through ‘The Military Equipment Act’ (Sverigies Riksdag, ‘Regeringens proposition 1991/92:174’; Sveriges Riksdag, ‘Utrikesutskottet betänkande 1992/93:UU1; see Facts about the Swedish Defence Industry 2001–2002, 23).

23. 23 ‘There is an obvious political interest in strengthening ties particularly between Western European defence industries. Secondly, cooperation has become increasingly necessary in order to share the growing cost of developing advanced weapon systems.’ Facts about the Swedish Defence Industry 2001–2002, 21.

24. 24 Anthony and Wulf, ‘The Economics of the West European Arms Industry’; Brzoska and Lock, Restructuring of Arms Production in Western Europe.

25. 25 In 1993, Celsius Industries bought NobelTech Systems AB and NobelTech Electronics AB from Nobel Industries which was 40% owned by the government, and Celsius Industries came to control half of Sweden’s defence industry (Defence News, 1–7 March 1993, 25). Celsius subsidiary Bofors Underwater Systems acquired SA Marine of Landskrona, which specializes in sea mines and mine sweepers (Military Affairs, No. 13104, 19 October 1994, 5). Kockums AB, the submarine construction arm of the Celsius group, consolidated its military production activities at one site (Karlskoga) in Sweden (Defence News, 9–15 September 1996, 32).

26. 26 Ericsson and SAAB merged their avionics business into a joint venture known as Ericsson Saab Avionics, focusing on EW display and surveillance systems (PricewaterhouseCoopers, ‘The Defence Industry’; European Commission, ‘Case No COMP/M.4288’).

27. 27 Bitzinger, ‘Failed Dreams and Lowered Expectations’.

28. 28 Military Affairs, No. 13838, 30 September 1997, p. 4.

29. 29 Sparaco, ‘Saab, Celsius to Join’.

30. 30 BAe is increasing its alliances in the missile sector to compete with US-based Raytheon (‘Business: The Company File: GEC prepares for defence merger’, BBC News, 23 December 1998; ‘Consolidation in the European defence industry swept into Scandinavia … The move would create the biggest defence company in the Nordic region.’ Financial Times, 17 November 1999. For an overview, see Schmitt, From Cooperation to Integration.

31. 31 ‘A Farewell to Arms Makers’, The Economist, 20 November 1997. http://www.economist.com/node/106455.

32. 32 Sparaco, ‘Saab, Celsius to Join’.

33. 33 ‘Combining Saab and Celsius is a strategically appropriate and important first step in the light of the defence industry’s international development. I see this as a necessary move in order to participate actively in the restructuring process.’ (A. Scharp, Saab’s board of directors; Intervia, December 1999, 45).

34. 34 Foss et al., ‘Scandinavian Industry’; PricewaterhouseCoopers, ‘The Defence Industry’, 7.

35. 35 B. Halse, Saab President, in Aviation Week & Space Technology, 24 July 2000, 142–3.

36. 36 Ibid.

37. 37 Ibid.

38. 38 Morrocco, ‘Saab-Celsius Linkup’.

39. 39 GlobalSecurity.org, ‘Sweden – Defense Industry’; Adams, Cornu and James, Between Cooperation and Competition.

40. 40 Facts about the Swedish Defence Industry, 2001–2002, 5.

41. 41 ‘The Swedish defence industry values the initiatives taken by our Government and Parliament to increase the armament cooperation with other European nations resulting in Swedish participation in WEAG and the six nations LOI group.’ Facts about the Swedish Defence Industry, 2001–2002, 5, 22.

42. 42 Ibid.

43. 43 Ibid., 21.

44. 44 Ibid. An acquisition programme for a Nordic Standard Helicopter began under the terms of a former agreement and has come to the final state of evaluation (Ibid.), although Denmark has withdrawn from the programme (Interview with Mr. Peter Marcks, at the Swedish Defence Materiel Administration (FMV), October 2001).

45. 45 ‘In recognition of Sweden’s importance as a long-term partner and friend and as one of the world’s leading manufacturers of first-class weapon systems and related items, the United States has decided to extend the provisions of the DTSI to Sweden. The U.S. announced this initiative at a May 2000 NATO Ministerial meeting. It was the first major post-Cold War revision to the U.S. export control system’. Office of Press Secretary, The White House, ‘Fact Sheet’.

46. 46 Ibid.

47. 47 DTSI includes the US International Traffic in Arms Regulations (ITAR) exemptions. The original list of potential ITAR-exempted states included NATO members, Australia and Japan, but when the State Department’s discussions with both the UK and Australia got bogged down, DoD began preliminary discussions with the Netherlands as a potential alternative country interested in the ITAR exemption. However, the ITAR was amended instead to extend the exemption to Sweden in July 2001; Else and Cogliani, Defence Trade Security Initiative, 3.

48. 48 ‘The initiative will remove unnecessary impediments to US defense trade. By promoting greater technology sharing with U.S. coalition partners, it will contribute to our enhanced interoperability with NATO and other allied forces … Will help prevent an insular “Fortress Europe” versus “Fortress America” approach … ’. US State Department, Bureau of Political Military Affairs, ‘Defense Trade Security Initiative’.

49. 49 Interview with Commander Magnus Söderholm, at the Swedish Defence Materiel Administration (FMV), August 2001.

50. 50 This was one of the issues when Kockums was acquired by German HDW. Although the companies may have the same owner, they still have information that is considered nationally exclusive and therefore restricted. This means that technology transfer cannot be openly performed between the companies without the prior governmental consent. Consequently, employees from one nation working on site in another nation do not have access to all information of that nation (Interview with Commander Magnus Söderholm, at the FMV, Stockholm, October 2001).

51. 51 Ibid.

52. 52 Swedish arms export 1990–2010 from SIPRI Arms Transfers Database. http://www.sipri.org/databases.

53. 53 GlobalSecurity.org, ‘Sweden – Defense Industry’.

54. 54 For examples, protection systems against IEDs (Improvized Explosive Devices) as well as the infrastructure for data-links, IFF (Identification Friend-or-Foe) systems and for secure radio (Ibid.).

55. 55 Swedish Agency for Non-Proliferation and Export Controls (ISP), ‘ISP Annual Report 2011’.

56. 56 Svenska freds og skiljedomsföreningen, ‘Arms Exports Per Capita in 2011’, http://www.svenskafreds.se/sites/default/files/at-percapita2011-eng.pdf. The Swedish Peace and Arbitration Society criticizes that the largest buyers in 2011 include Thailand, Saudi Arabia, India, Pakistan and the United Arab Emirates, shared about 60% of the total arms exports from Sweden, and some of them have serious human rights violations, cf. International Action Network on Small Arms (IANSA), ‘Sweden: Arms Exports Reach Record Level’, 24 February 2012, http://www.iansa.org/news/2012/02/sweden-arms-exports-reach-record-level ‘Sweden’s Arms-Export Criticised’, Stockholm News, 22 February 2012. http://www.stockholmnews.com/more.aspx?NID=8449.

57. 57 Reportedly the military intelligence created a shell company called SSTI to handle dealings with Saudi Arabia, in order to avoid any direct links to FOI and the government’s scrutiny by the Swedish Agency for Non-Proliferation and Export Controls (ISP). The scandal led to the Swedish Defence Minister Sten Tolgfor’s resignation (‘Saudi Arabia Denies Deal with Sweden for Arms Factory’, Defense News, 14 April 2012; ‘Sweden in Secret Saudi Arms Factory Project – Report’, BBC News Europe, 6 March 2012. http://www.bbc.co.uk/news/world-europe-17271596).

58. 58 The Wassenaar Arrangement began operations in 1996 to promote transparency and exchange of information on transfers of an agreed range of items of conventional arms and dual-use goods and technologies (SIPRI Yearbook 2001, 621).

59. 59 In May 2003, an agreement known as the Declaration of Principles (DoP) was signed between the United States and Sweden for the formation and amendment of current and future agreements involving the industrial, investment, or export sectors of the defence industry, which helps facilitate more co-operation and strengthen partnerships between the US and Swedish defence industries; see GlobalSecurity.org, ‘Sweden – Defense Industry’.

60. 60 Study Group on Enhancing Multilateral Export Controls for US National Security, Final Report. The report points out serious technology-transfer problems caused by different perspectives between the United States and Europe on China and East Asia.

61. 61 Ibid., 14.

62. 62 See FMV, Swedish Defence Materiel Administration, ‘International Cooperation’.

63. 63 Remarks by a Swedish defence industrial expert at the international conference, Defence Industry Globalization, held by the Atlantic Council of the United States, Washington DC, November 2001.

64. 64 Sweden’s Defence Minister, Mikael Odenberg, stated at the January 2007 Folk & Försvar (People and Defence) national conference held in Sälen, Sweden: ‘It is our defence industry we must thank for the fact that our little country has become the high-tech industrial nation it is today, with cutting-edge technologies in a number of important commercial sectors’; see GlobalSecurity.org, ‘Sweden – Defence Industry’.

65. 65 See the agency’s web page, http://fxm.se/en/.

66. 66 Lundmark, Transatlantic Defence Industry Integration.

67. 67 ‘Saudi Arabia’s Hidden Hand in the Mali Crisis’, African Globe, 13 April 2013. http://www.africanglobe.net/africa/saudi-arabias-hidden-hand-mali-crisis. ‘Swedish Defence Minister Tolgfors Quits over Saudi Deal’, BBC News Europe, 29 March 2012. http://www.bbc.co.uk/news/world-europe-17548390.

68. 68 Ben Hayes made a critical analysis of the EU Security Research Programme (ESRP) as the security-industrial complex dominated by profit-driven conglomerates’ ‘market fundamentalism and technological determinism’, which eventually renders national security irrelevant and erodes human security; Hayes, Arming Big Brother.

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Masako Ikegami

Masako Ikegami is Professor of Political Science at the Department of Political Science and previously Director of the Centre for Pacific Asia Studies (CPAS), Stockholm University. She holds two doctoral degrees: Doctor of Sociology, University of Tokyo (1996), and Ph.D. in Peace and Conflict Research, Uppsala University (1998). Currently, she is a guest professor at Tohoku University, School of Law, Sendai, Japan. She was awarded the prestigious Abe Fellowship (2010) granted by the Social Science Research Council (SSRC) in New York and the Japan Foundation Centre for Global Partnership (CGP) in Tokyo, for doing research on nuclear-deterrence strategy. She is a regular member of the Pugwash Conferences on Science and World Affairs (awarded Nobel Peace Prize, 1995) on arms control and disarmament and nuclear non-proliferation, and a standing board member of the Swedish Pugwash Group chaired by Ambassador Rolf Ekéus (formerly director of the United Nations Special Commission on Iraq, 1991–1997). She has published extensively in the area of defence R&D and production, defence policy/decision-making process, arms control and disarmament, nuclear non-proliferation and nuclear deterrence. Her major publications include Military Technology and US-Japan Security Relations (Uppsala University, 1998) and The Military-Industrial Complex: The Cases of Sweden and Japan (Aldershot: Dartmouth, 1992), and book chapters in volumes produced by such influential institutions as the Stockholm International Peace Research Institute (SIPRI), the Atlantic Council of the Unites States, and the East-West Center in Washington D.C. and Honolulu. Address: Department of Political Science, Stockholm University, 106 91 Stockholm, Sweden. [e-mail: [email protected]]