adaptability of the French armaments industry in an era of globalization, The

Industry and Innovation, Aug 2001 by Serfati, Claude

In 1998, France's arms turnover was 15.7 billion euro (103 billion francs), with a domestic turnover of 9.4 billion euro (62 billion francs) and exports of 6.3 billion euro (41 billion francs). Over the last two decades, three main periods can be observed (Figure 1). During the first period, from the early 1980s to 1990, the arms industry enjoyed a steady growth, mainly due to a strong increase in procurement, coupled with exports doubling in the early 1980s, then leveling off at over 4.5 billion euro (30 billion francs). The second period ran from 1991 to 1995. Over the first two years of this period, the fall in turnover was limited by an increase in procurement which compensated the French industry for the nose-diving of its exports. Then, the combined negative effects of the cuts in procurement and free fall of arms exports resulted in a steep decrease in arms turnover. The 1993-95 period was critical for the French industry, which was confronted by both the superiority of the US arms industry further strengthened after the Gulf War and cuts in domestic procurement needed for France to comply with the Maastricht treaty's financial requirements. From 1996 on, an energetic action to stimulate arms exports was undertaken first by governments from the Right (Balladur and Juppe), then from the Left (Jospin). The year 1996 marked the beginning of a third period, with exports bouncing, allowing the arms industry turnover to stabilize at about 15 billion euro, after having bottomed out at 13.5 billion euro in 1995.

It should be noted that the data available for export sales are based on official figures. Several studies have documented the cost incurred by taxpayers to fund arms exports, making the real surplus in the arms trade much less important than claimed by governmental figures. French governments were keen to provide massive public subsidies channeled to customer countries through preferential interest rate loans or public payments to exporting companies whenever countries were unable or unwilling to foot the bill (Hebert 1988; Fontanel and Ward 1990; Chesnais and Serfati 1992). These analyses, long rejected by Ministry of Defense representatives, found some support from the strong words used by a 1998 parliamentary report. This report found that the naval frigates contract between Saudi Arabia and France's DCN (Direction des Chantiers Navals) [Naval Shipyards Directorate] resulted in huge losses estimated to be as high as 38 percent of the arms sales contract price. A 1999 parliamentary report added that all but one of France's export naval contracts would incur huge losses-the exception being sales to Taiwan (Boucheron 1999). So far as GIAT's ground weapon exports are concerned, the report estimates that the loss incurred by the Leclerc tank would amount to 1.17 billion euro (7.7 billion francs), or a loss of 3.6 million euro for each tank delivered (idem: 191).

In 1999, the workforce employed in the arms industry accounted for 4.5 percent of the total workforce employed in manufacturing industries. Not surprisingly, during the 1990s, the decline in workforce payrolls was more significant than the reduction in the turnover (Figure 2). Sales per employee ratio increased by 150 percent (constant FRF).