Egypt: Aid and outsourcing

It's big business: US dominance in global arms sales

A bit more on the Egypt aid-and-repression quandary. Shana Marshall in Foreign Policy explains one reason the junta seems so confident that their anti-nonprofit antics wouldn’t result in a serious cutback in US assistance.  The aid isn’t just a feeding trough for the generals; it’s one for US weapons manufacturers too, since through it, the US government  effectively subsidizes Egypt to buy from them. Moreover, companies are using Egyptian cheap labor to make their weaponry. Why break such a profitable relationship?

In the United States, the aid program provides a large and predictable source of demand for weapons exporters, while in Cairo, collaborative military production with U.S. firms help subsidize the army’s commercial economic ventures.

Although domestic interest groups are rarely invoked in the debate over military aid to Egypt, the $1.3 billion in annual assistance represents a significant subsidy to U.S. weapons manufacturers. For instance, the General Dynamics manufacturing facility in Lima, Ohio where the M1A1 Abrams tank is built will not have more work orders from the U.S. Army until 2017 when the current M1 tank fleet is up for refurbishing. Egypt’s latest $1.3 billion order of 125 M1A1s (Cairo’s 11th order since the late 1980s) will keep those production lines open until 2014 building knock down kits that are then shipped and assembled in Egypt. Although shipping fully assembled tanks to Egypt would employ more U.S. workers, without the contract the Lima plant (in a crucial electoral swing state) would shutter its doors and General Dynamics’s bottom line would take a serious hit. Looming reductions in the U.S. defense budget have made General Dynamics and other defense producers even more concerned with keeping such funding channels open.

Egypt’s current Minister of Military Production Ali Sabri now boasts that over 95 percent of the M1A1 assembly takes place in Egypt’s military factories. While it’s true that most of the actual assembly takes place in Cairo (rather than Lima, Ohio), in the contemporary era of outsourcing the precise location of production is relatively unimportant from the defense firms’ perspective. The increasing indigenization of production in Egypt may imply the loss of U.S. jobs — but it is shareholder value (not work-hours for blue collar Americans) that dictates General Dynamics’s corporate planning. Transferring more work to Cairo likewise ensures that the Egyptian Army remains heavily invested in the project and continues to dedicate its aid dollars to procuring more tank kits. In fact, weapons manufacturers prefer contracts with such outsourcing components because they increase the per-unit price of equipment, and therefore also the firms’ revenue.

Let’s remember the international configurations of the security state, as well. The US transfers low-paying jobs to Egypt. It also transfers the means to control and repress workers, the unemployed, and the discontented. Those tear-gas canisters fired at demonstrators in Mohamed Mahmoud Street this autumn came from the US. Amnesty International found that, between 2005 and 2010, the US sold Egypt $1,658,994 in small arms, $4,131,033 in ammunition, and $2,446,683 in tear gas and riot control equipment. It was Egypt’s major supplier of the latter.

Tear gas in Cairo: (L) protesters point to "Made in USA" label on a canister, November 2011 (AFP/Khaled Desouki): (R): tear gas canister with 1990 expiration date, found by Mary Danial in protest area in Cairo (@bigpharoah)

(Hat tip: Issandr el-Amrani)

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