ISSUE AREAS:

BASIC NOTES

OCCASIONAL PAPERS ON INTERNATIONAL SECURITY POLICY

17 September 2004

U.S. Congressional Report Shows U.S. and U.K. Dominate Arms Deliveries to the Developing World

By Chris Lindborg and Emma Mayhew

Key Points

• The United States, the United Kingdom and Russia dominated the global arms market in 2003 according to an annual study released recently by the U.S. Congressional Research Service (CRS).
  
  
• In 2003, the value of all conventional arms transfer agreements globally was more than $25.6 billion - the third straight year that the value of worldwide arms deals declined (down from $41 billion in 2000). The value of deliveries also declined to $28.7 billion in 2003, a decrease of about 31 percent from 2002.
  
  
• The United States ($13.7 billion) and the United Kingdom ($4.7 billion) accounted for almost two-thirds of the value of global arms delivered in 2003.
  
  
• Between 1996 and 2003, the five permanent members of the U.N. Security Council were also the top five suppliers of conventional weapons (by value of agreements) to developing countries. The United States, Russia, France, China and the United Kingdom were responsible for a total of $118.1 billion worth of arms transfer agreements to developing countries from 1996 to 2003.
  
  
• Taken together, the United States and the United Kingdom were responsible for 61 percent of the value of all arms deliveries made to developing countries in 2003.
  
  
• In the post Cold War arms industry, so often talked about as a "buyer's market," all the indications point to an increasingly favorable environment for recipients, undermining the utility of arms transfers as a tool of political influence.

INTRODUCTION

The United States, United Kingdom and Russia dominated the global arms market in 2003. According to an annual study released recently by the Library of Congress' Congressional Research Service (CRS), the total value of arms transfers worldwide fell for a third consecutive year. National Defense Specialist Richard F. Grimmett authors this annual unclassified report titled, "Conventional Arms Transfers to Developing Nations," which is one of the more authoritative analyses on global arms transfers.[1] This BASIC Note highlights some of the key findings of the 87-page study, and then provides a brief analysis.

OVERVIEW OF THE CRS REPORT'S METHODOLOGY

The CRS report presents extensive statistical data and analysis on the value of conventional arms agreements and deliveries from major suppliers to developing states for the period 1996 to 2003. The report breaks the past eight years into two time periods: 1996 to 1999 and 2000 to 2003; groups countries into two main categories: developed and developing; and runs a series of analyses using those main categories to produce trends in the value of conventional arms transfers. The report also makes regional comparisons and highlights countries that stand out in arms transfer agreements and deliveries. The CRS report terms "developing nations," as all countries except Australia, Canada, Japan, New Zealand, Russia, the United States and those in Europe.[2] According to the report, "developing nations" remain the focus of the global arms market.

Agreements and deliveries - an explanation

The CRS report analyzes both arms agreements and deliveries. Conventional arms transfer agreements represent orders for future delivery. Arms deliveries, on the other hand, have supposedly finished the transfer process. Sometimes, arms agreements do not result in actual arms deliveries. Also, agreements such as those made several years ago in the aftermath of the Gulf War manifest themselves in higher values of actual deliveries made more recently. In other words, there can be a lag time of years before agreements are actualized as deliveries.

Russia, while ranking second behind the United States in arms agreements with developing countries in 2003, ranked third in actual deliveries, behind the United States and the United Kingdom respectively. Therefore, countries may rank differently depending on whether agreements or deliveries are being analyzed for any given year.

Comparison to other sources

The CRS' annual study is one of three key sources of statistical information on major conventional arms transfers alongside the World Military Expenditures and Arms Transfers (WMEAT) series published by the U.S. Department of State until 1999 and those available from the Stockholm International Peace Research Institute (SIPRI).[3]

The figures produced in both the CRS study and the WMEAT series are in many ways incomparable to those produced by SIPRI. The latter uses a much more exclusive definition of what constitutes an "arms transfer," excluding small arms and military services for instance, and shows only a "trend indicator value," not the actual monetary value of major conventional weapons transfers.

Yet the major indicators identified in the CRS report - the dominant position of the five largest suppliers of weapons and the decline in the value of arms transfer deliveries - are also reflected in WMEAT's 1989-1999 figures (when compared to the CRS' 1996-2003 figures) and those published annually by SIPRI. These ongoing trends have major industrial and political implications, which will be discussed briefly at the end of this BASIC Note.[4]

KEY TRENDS

Global arms sales down

In 2003, the value of all conventional arms transfer agreements globally was more than $25.6 billion.[5] This is the third straight year that the value of worldwide arms deals declined, down from $41 billion in 2000.[6]

The value of deliveries also declined. In 2003, the value of all conventional arms transfer deliveries was $28.7 billion,[7] a decrease of about 31 percent from 2002. It was also the lowest total of the eight years covered by the report.[8]

Major suppliers continue to dominate the market

The United States far outpaced any other country in global conventional arms agreements and deliveries. The United States ranked first with 57 percent of global arms transfer agreements worth more than $14.5 billion, outstripping Russia, which came in second place with 17 percent of the total. Germany was the third largest merchant in the global arms market for 2003, signing deals worth $1.4 billion.[9]

In terms of global deliveries, the United States reached $13.65 billion, with the United Kingdom in the second spot with $4.7 billion worth of arms deliveries in 2003. This means that the United States and the United Kingdom accounted for almost two-thirds of the value of global arms delivered last year. Russia came in third with $3.4 billion.[10]

Between 1996 and 2003, the United States, the United Kingdom, Russia, France and Germany have dominated international supplies of conventional weapons (by value of deliveries), responsible collectively for 84 percent of global arms transfer deliveries.11]

In the same period, the five permanent members of the U.N. Security Council were also the top five suppliers of conventional weapons (by value of agreements) to developing countries. The United States, Russia, France, China and the United Kingdom were responsible for a total of $118.1 billion worth of arms transfer agreements to developing countries from 1996 to 2003.[12]

Transfers to developing nations: down but not out

Reflecting the trend in global transfers, the value of conventional arms transfers to developing nations dropped in 2003.[13] This is the lowest total, in real terms, for at least the past eight years. Nevertheless, developing countries remain the focus of arms exporters.

Developing countries accounted for 59 percent of all international arms deliveries and 54 percent of agreements in 2003. The former were worth $17 billion and the latter $13.7 billion (a large decrease from a total of $17.4 billion in 2002).[14]

In terms of arms deliveries to developing nations only, the 'special relationship' allies took the number one and two spots. The United States was responsible for $6.3 billion, or 37 percent of arms deliveries to developing countries while the United Kingdom was responsible for a 24 percent share, worth $4.0 billion.[15] Taken together, the United States and the United Kingdom were responsible for 61 percent of the value of all arms deliveries made to developing countries. Russia accounted for 13 percent of such deliveries.[16]

In terms of arms transfer agreements to developing countries in 2003, the United States signed deals for more than $6.2 billion,[17] or about 45 percent, while Russia signed for nearly $3.9 billion,[18] or 23 percent of the agreements in 2003.

ANALYSIS

The United States stands apart from the rest of the world

The matrix constructed below shows how the United States compared to the rest of the world in forging arms transfer agreements with developing countries in 2003. The United States is different compared to the rest of the world in that it made a majority of its transfer agreements with the developed world. Fifty-seven percent of all U.S. agreements were made with countries in the developed world whereas for the rest of the world, developed country agreements comprised only 32 percent of its total agreements (by value).

Data source: Grimmett, Richard F., "Conventional Arms Transfers to Developing Nations, 1996-2003," CRS Report, 2004.

Two reasons help explain the U.S. proportions. First, "developed" countries would be expected to have more income to make more advanced technology purchases that the United States can offer. Second, the CRS' categorization of "developed" countries overlaps with major U.S. allies (i.e. Europe, Japan, and Australia). To be sure, arms transfers are not always arms sales. Moreover, developed countries can choose to make the acquisition of arms a much lower priority, which could result in lower armaments transfer values than for developing countries that choose to place a higher priority on arms acquisitions.

Trying to explain the proportion in the United States compared to the rest of the world is more difficult. One among many reasons could include the United States itself pushing other countries out of the developed market into the developing market. In other words, there simply is not enough room for other countries to transfer their wares to developed countries because the United States is dominating that sector. The United States is more likely to find able buyers of high-tech weapons in developed countries. Of course, Saudi Arabia and the United Arab Emirates are only a couple of examples of "developing" countries that have been making high- priced purchases of advanced technology weapons.

The U.S. targeting of "developed" countries for arms sales is also reflected in the CRS report's own chart that shows a significant increase in the United States' "Direct Commercial Sales (DCS)" (commercial deliveries). These sales are made directly between military contractors and customers with the approval of the U.S. State Department. In 2003, DCS were worth $2.39 billion to developed countries, while they were worth $342 million for developing countries. This produces a ratio of 6.9. In 2002 that ratio was much lower, at 1.6, meaning that sales to developed and developing countries were closer, with developed countries spending slightly more. Despite the United States' relative lower concentration on the developing sector, the matrix reveals how the United States, as only a single country, dominates the world in arms transfers to both developed and developing countries.

U.S. Allies as a factor

The CRS report also notes the importance of military consolidation and the focus on allies in NATO, none of which are grouped in the "developing" countries category. While the newer NATO countries overall are smaller markets and have less purchasing power compared to Western European allies, co-production, co-financing, and offsets are enabling the new allies to make large purchases. The report cites the 2003 agreement between Poland (which joined NATO in 1999) and the United States for 48 F-16 C/D Block 52M fighter aircraft, worth $3.5 billion.

When looking at DCS authorizations for 2003 in detail (as taken from the U.S. State Department's report, not the CRS report that displays the chart mentioned above on commercial deliveries), it is apparent that long-term allies of the United States, including Japan, the United Kingdom, Australia, and South Korea, still make up the majority of DCS authorizations, with the new NATO countries lagging far behind.[19] However, given more competitive military markets and the struggling global economy, U.S. arms producers will surely be looking to arrange more military deals with Eastern European countries during the next few years, and using the promotion of interoperability among NATO allies to help seal these deals.

The United Kingdom, which is considered the United States' closest ally and has been its most active partner in Iraq, holds its own in arms deliveries as discussed above. Not only did the United Kingdom rank second after the United States in 2003 for arms deliveries to developing countries, but these countries held the same number one and two spots for the entire period that the report analyzed, from 1996 through 2003.[20]

This might be interpreted as evidence that the United Kingdom produces better equipment at a better price than other exporting states but is, in fact, evidence that U.K. export figures have been kept unsustainably high because of the effects of the two huge Al Yamamah deals.[21] Military exports to Saudi Arabia accounted for 62 percent of all U.K. military exports from 1997-1999.[22] This is a reduction from the 73 percent they accounted for from 1987-1991, but these figures still illustrate the United Kingdom's reliance on two contracts. These were contracts secured only after a congressional block on the original U.S.-Saudi deal, after personal lobbying by Prime Minister Thatcher and President Reagan in support of a U.K. bid, after high levels of secrecy and commissions were guaranteed and after a favourable offset package to accompany the deal was negotiated.[23]

These kinds of features have allegedly accompanied some of the largest deals in prospect from the mid-1990s onward, including those between U.K.-based arms-producing companies and India, Qatar, South Africa and the Czech Republic. The United Kingdom retains this significant share of the world market not necessarily because it offers world class equipment but because it offers world-beating commissions, offsets deals and secrecy to its recipient states, often when others will not supply.[24]

Economic downturn as explanation for decreased arms transfers

Despite the U.S. emphasis on developed countries, the majority of the global arms market is made up of developing countries. The author of the CRS report notes that some of the decrease in transfers to developing countries is likely the product of the downturn in the global economy. Countries are spending less on arms transfers simply because they do not have as much money as in years past.

While it may not be true across the board, developing countries are probably more likely to be mired in either active conflicts or at least in heated threat perception stand-offs, which would stimulate the demand for weapons. One possibility is that the decrease in arms spending is related to the reduction in armed conflict in 2003. According to the Stockholm International Peace Research Institute (SIPRI), there were 19 major armed conflicts in 18 locations in 2003, which is the "lowest number for the post-cold war period with the exception of 1997, when 18 such conflicts were registered."[25] SIPRI found that four of the 19 conflicts were in Africa and eight were in Asia.[26]

Unfortunately, it probably is not the decrease in violent conflicts that is causing the decrease in demand for conventional weapons. The CRS report points out that countries are still choosing to upgrade their current weapons systems, which is less expensive but still reveals the attention they pay to maintaining their arsenals. Moreover, "transfers" do not account for indigenous production. Therefore, it is not possible to make conclusions based upon only this data.

Arms transfer patterns in the developing nations

The major fluctuations in overall percentages of arms agreements and deliveries to the developing countries are concentrated in the area that the report labels the "Near East" and Asia. Oil wealth in the Near East has provided the income that made more expensive weapons acquisitions possible and such purchases were commonplace during the post-Gulf War period of the 1990s when Saddam Hussein was still considered to be a regional threat.[27] The report goes on to say that sales in the region have been declining, which could be due to global economic problems and/or countries had reached a point of obtaining the weapons they thought that they needed to meet steady or declining intrastate threats in the region. A newspaper article recently raised the possibility that Iran could be the next regional threat that motivates a rebound in arms transfers to the Near East.[28]

Only Asia experienced an increase in the value of conventional arms agreements for the 2000-2003 period when compared to the 1996-1999 period. All of the other developing regions experienced a decline in the total value of agreements when the two time periods were compared to each other.[29] Between 2000 and 2003, China signed arms deals to acquire $9.3 billion in weapons.[30] After China, the nations that signed the highest-value weapons deals during that period all fell in the East Asia or Near East categories. Listed in order, they were: the United Arab Emirates, Egypt, India, Israel, South Korea, Saudi Arabia, Malaysia, Singapore and Kuwait.[31]

Africa (sub-Saharan) ranks last, behind Latin America, the Near East and East Asia in the value of arms transfers received. Even with active violent conflicts, Africa has lacked the purchasing power of many Near East and East Asian countries. Africa does have a serious problem with an excess flow of small arms and light weapons, which do not boost Africa's ranking in the value of weapons transfers, but these weapons continue to have a large and negative impact on Africa's conflicts.[32]

The political implications of the decline in the world arms market: Taking the United Kingdom as an example

The global decline in the value of arms transfer deliveries identified in this and other reports has significant political implications for those states who justify their ongoing financial and political support of arms exporting companies by referring to the benefits accrued from involvement in the international arms market. The United States, the United Kingdom, and other major arms suppliers have made this argument.

As an example, the British government has traditionally made reference to the maintenance of jobs, the benefits to the balance of payments and the use of exports as a tool of political influence. Given that the military export sector is now widely accepted to have been declining for some time, even by the U.K. Ministry of Defence,[33] it is doubtful whether even the 65,000 arms export related jobs, representing just 0.22 percent of total U.K. employment, could be sustained.[34] An increasingly competitive market encourages the use of offset agreements that can include the transfer of production to the recipient state or accepting goods in kind for exported equipment so that the full value of the equipment exported is often not realised. In the post Cold War arms industry, so often talked about as a "buyer's market," all the indications point to a more and more favorable environment for recipients, undermining the utility of arms transfers as a tool of political influence.

The reality is that U.K. involvement in the arms market has added to the need for successive U.K. governments to become public apologists for some of the worst abusers of human rights. This apologist agenda is particularly relevant for the Labour government which, during the first two years of power, included amongs its top 15 arms customers persistent human rights abusers including Saudi Arabia, Qatar, Malaysia, Kuwait, Brazil, Oman, South Korea, Turkey, China, and Indonesia.

In identifying the decline in the value of arms transfer agreements and deliveries, the CRS report contributes toward undermining some of the most important rationales on which the British, U.S., and other governments depend to justify continued arms export support.

Endnotes

[1] Grimmett, Richard F., "Conventional Arms Transfers to Developing Nations, 1996-2003," Congressional Research Service, 2004, The Federation of American Scientists has posted the CRS report on its Web site at the following address: URL http://www.fas.org/man/crs/RL32547.pdf.

[2] CRS, 2004, p. 2.

[3] U.S. Department of State, World Military Expenditures and Arms Transfers (WMEAT), 1999-2000; SIPRI Yearbook 2003, Armaments, Disarmament and International Security (Oxford: Oxford University Press, 2003).

[4] While the value of arms transfers may have dropped in both agreements and deliveries according to the CRS report, the recently released SIPRI study finds that "World military spending in 2003 increased by about 11 per cent in real terms." (Web summary of Chapter 10 of SIPRI Yearbook 2004, http://editors.sipri.se/pubs/yb04/ch10.html, version current on September 3, 2004.) Of course, as noted above, these statistics may not be comparable.

[5] CRS, 2004, p. 3.

[6] CRS, 2004, p. 76.

[7] CRS, 2004, p. 3.

[8] CRS, 2004, p. 3.

[9] CRS, 2004, p. 3.

[10] CRS, 2004, p. 3.

[11] CRS, 2004, p. 80.

[12] CRS, 2004, p. 28.

[13] CRS, 2003, p. 3.

[14] CRS, 2004, p. 3-5.

[15] CRS, 2004, p. 53.

[16] CRS, 2004, p. 53.

[17] CRS, 2004, p. 6.

[18] CRS, 2004, p. 7.

[19] Report by the Department of State, Direct Commercial Sales Authorizations for Fiscal Year 2003.

[20] CRS, 2004, p. 38.

[21] Neil Cooper, British Arms Exports: a vicious circle of disadvantage? Plymouth International Papers, March 1995, pp. 7-15.

[22] US Department of State, World Military Expenditures and Arms Transfers, 1999-2000, table III.

[23] Cooper, British Arms Exports, p. 12.

[24] CRS, 2004, p. 43.

[25] SIPRI, Web summary of Chapter 3 in the SIPRI Yearbook 2004, http://editors.sipri.se/pubs/yb04/ch03.html.

[26] SIPRI, Web summary of Chapter 3 in the SIPRI Yearbook 2004, http://editors.sipri.se/pubs/yb04/ch03.html.

[27] CRS, 2004, p. 11.

[28] "Study: Russia, U.S. Dominate Arms Trade; Overall Total Down," The New York Times via the Arizona Daily Star, August 30, 2004, http://www.dailystar.com/dailystar/news/36514.php.

[29] CRS, 2004, p. 11.

[30] CRS, 2004, p. 12.

[31] CRS, 2004, p. 51.

[32] For example, see Hall, James, "Small Arms Flood Southern Africa," Inter Press Service News Agency, January 18, 2004, http://www.ipsnews.net/interna.asp?idnews=15249.

[33] For example, House of Commons Defence Select Committee, Second Report: The Appointment of the New Head of Defence Export Services, 31st March 1999, HC 147, 'Memorandum submitted to the Defence Committee from the Ministry of Defence on the Defence Export Services Organisation', http://www.parliament.the-stationery-office.co.uk.

[34] DASA, UK Defence Statistics 2003, table 1.9, http://www.dasa.mod.uk/natstats/ukds/2003/chap1frame.html; The Office of National Statistics Labour Force Helpline report that in June 2001 there were 29,516 000 jobs in the United Kingdom.