Arms industry

The arms industry is a global business that manufactures weapons and military technology and equipment. It consists of commercial industry involved in research, development, production, and the service of military material, equipment, and facilities. Arms producing companies, also referred to as defense contractors or military industry, produce arms mainly for the armed forces of states. Departments of government also operate in the arms industry, buying and selling weapons, munitions and other military items. Products include guns, ammunition, missiles, military aircraft, military vehicles, ships, electronic systems, and more. The arms industry also conducts significant research and development and provides other logistics and operations support.

It is estimated that yearly, over 1.5 trillion United States dollars are spent on military expenditures worldwide (2.7% of World GDP).^[1] This represents a decline from 1990 when military expenditures made up 4% of world GDP. Part of this goes to the procurement of military hardware and services from the military industry. The combined arms sales of the top 100 largest arms producing companies amounted to an estimated $395 billion in 2012 according to Stockholm International Peace Research Institute (SIPRI).^[2] In 2004 over $30 billion were spent in the international arms trade (a figure that excludes domestic sales of arms).^[3] According to SIPRI, the volume of international transfers of major weapons in 2010–14 was 16 per cent higher than in 2005–2009. The five biggest exporters in 2010–14 were the United States, Russia, China, Germany and France, and the five biggest importers were India, Saudi Arabia, China, the United Arab Emirates (UAE) and Pakistan.^[4] The arms trade has also been one of the sectors impacted by the credit crunch, with total deal value in the market halving from US$32.9 billion to US$14.3 billion in 2008.^[5] Many industrialized countries have a domestic arms industry to supply their own military forces. Some countries also have a substantial legal or illegal domestic trade in weapons for use by its citizens. An illegal trade in small arms is prevalent in many countries and regions affected by political instability. The Small Arms Survey estimates 875 million small arms in circulation worldwide, produced by more than 1,000 companies from nearly 100 countries.^[6]

Contracts to supply a given country's military are awarded by the government, making arms contracts of substantial political importance. The link between politics and the arms trade can result in the development of what U.S. President Dwight D. Eisenhower described as a military-industrial complex, where the armed forces, commerce, and politics become closely linked, similarly to the European defence procurement. Various corporations, some publicly held, others private, bid for these contracts, which are often worth many billions of dollars. Sometimes, such as the contract for the new Joint Strike Fighter, a competitive tendering process takes place, where the decision is made on the merits of the design submitted by the companies involved. Other times, no bidding or competition takes place.

History

Trade in arms and technological diffusion is as old as the history of war itself. During the early modern period, France, England, Netherlands and some states in Germany became self-sufficient in arms production, with diffusion and migration of skilled workers to more peripheral countries such as Portugal and Russia.

The modern arms industry emerged in the second half of the nineteenth century as a product of the creation and expansion of the first large military-industrial companies. As smaller countries (and even newly industrializing countries like Russia and Japan) could no longer produce cutting-edge military equipment with their indigenous resources and capacity, they increasingly began to contract the manufacture of military equipment, such as battleships, artillery pieces and rifles to foreign firms.

In 1854, the British government awarded a contract to the Elswick Ordnance Company of industrialist William Armstrong for the supply of his latest breech loading rifled artillery pieces. This galvanised the private sector into weapons production, with the surplus being increasingly exported to foreign countries. Armstrong became one of the first international arms dealers, selling his weapon systems to governments across the world from Brazil to Japan.^[7] In 1884 he opened a shipyard at Elswick to specialise in warship production—at the time, it was the only factory in the world that could build a battleship and arm it completely.^[8] The factory produced warships for many navies, including the Imperial Japanese Navy. Several Armstrong cruisers played an important role in defeating the Russian fleet at the Battle of Tsushima in 1905.

In 1885, France decided to capitalize on this increasingly lucrative form of trade and repealed its ban on weapon exports. The regulatory framework for the period up to the First World War was characterized by a laissez-faire policy that placed little obstruction in the way of weapons exports. Due to the carnage of World War I, arms traders began to be regarded with odium as "merchants of death" and were accused of having instigated and perpetuated the war in order to maximise their profits from arms sales. An inquiry into these allegations in Britain failed to find evidence to support them. However, the sea change in attitude about war more generally meant that governments began to control and regulate the trade themselves.

The volume of the arms trade greatly increased during the 20th century, and it began to be used as a political tool, especially during the Cold War where the United States and the USSR supplied weapons to their proxies across the world, particularly third world countries (see Nixon Doctrine).^[9]

Sectors

Land-based weapons

This category includes everything from light arms and landmines to heavy artillery, and the majority of producers are small. Many are located in third world countries. International trade in handguns, machine guns, tanks, armored personnel carriers, and other relatively inexpensive weapons is substantial. There is relatively little regulation at the international level, and as a result, many weapons fall into the hands of organised crime, rebel forces, terrorists, or regimes under sanctions.^[10]

Small arms

The Control Arms Campaign, founded by Amnesty International, Oxfam, and the International Action Network on Small Arms, estimated in 2003 that there are over 639 million small arms in circulation, and that over 1,135 companies based in more than 98 different countries manufacture small arms as well as their various components and ammunition.^[11]

Aerospace systems

Encompassing military aircraft (both land-based and naval aviation), conventional missiles, and military satellites, this is the most technologically advanced sector of the market. It is also the least competitive from an economic standpoint, with a handful of companies dominating the entire market. The top clients and major producers are virtually all located in the western world and Russia, with the United States easily in first place. Prominent aerospace firms include Dassault Aviation, Sukhoi, Mikoyan, EADS, Finmeccanica, Thales Group, Lockheed Martin, Northrop Grumman, Boeing, and BAE Systems. There are also several multinational consortia mostly involved in the manufacturing of fighter jets, such as the Eurofighter. The largest military contract in history, signed in October 2001, involved the development of the Joint Strike Fighter.^[10]

Naval systems

Some of the world's great powers maintain substantial naval forces to provide a global presence, with the largest nations possessing aircraft carriers, nuclear submarines and advanced anti-air defense systems. The vast majority of military ships are conventionally powered, but some are nuclear-powered. There is also a large global market in second-hand naval vessels, generally purchased by developing countries from Western governments.^[10]

World's largest defense budgets

International arms transfers

According to research institute, SIPRI, the volume of international transfers of major weapons in 2010–14 was 16 per cent higher than in 2005–2009. The five biggest exporters in 2010–14 were the United States, Russia, China, Germany and France, and the five biggest importers were India, Saudi Arabia, China, the United Arab Emirates (UAE) and Pakistan. The flow of arms to Africa, the Americas, Asia and Oceania, and the Middle East increased significantly between 2005–2009 and 2010–14, while there was a notable decrease in the flow to Europe.^[4]

SIPRI has identified 60 countries as exporters of major weapons in 2010–14. The top 5 exporters during the period—the USA, Russia, China, Germany and France—were responsible for almost 74 per cent of all arms exports. The composition of the five largest exporters of arms changed between 2005–2009 and 2010–14: while the USA and Russia remained by far the largest exporters, China narrowly, but notably, replaced Germany as the third largest exporter, and the United Kingdom dropped outside the top 5. The top 5 exported 14 per cent more arms in 2010–14 than the top 5 in 2005–2009.^[4]

In 2010–14, 153 countries (about three-quarters of all countries) imported major weapons. The top 5 recipients—India, Saudi Arabia, China, the UAE and Pakistan—accounted for 33 per cent of the total arms imports during the period (see table 2). India, China and the UAE were among the top 5 importers in both 2005–2009 and 2010–14. Asia and Oceania accounted for nearly half of imports in 2010–14, followed by the Middle East, Europe, the Americas and Africa (see figure 3). SIPRI also identified seven groups of rebel forces as importers of major weapons in 2010–14, but none of them accounted for more than 0.02 per cent of total deliveries.^[4]

World's largest arms exporters

The units in this table are so-called trend indicator values expressed in millions of U.S. dollars at 1990s prices. These values do not represent real financial flows but are a crude instrument to estimate volumes of arms transfers, regardless of the contracted prices, which can be as low as zero in the case of military aid. Ordered by descending 2014 values. The information is from the Stockholm International Peace Research Institute.^[12]

2013 rank	Supplier	Arms exports
1	United States	10194
2	Russia	5971
3	France	1978
4	United Kingdom	1074
5	Germany	1200
6	Spain	1110
7	China	1083
8	Israel	824
9	Italy	786
10	Ukraine	664
11	Netherlands	561
12	Sweden	394
13	Switzerland	350
14	Turkey	274
15	Canada	234

2001–12 Rank	Supplier	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012
1	United States	5908	5229	5698	6866	6700	7453	8003	6288	6658	8641	9984	8760
2	Russia	5896	5705	5236	6178	5134	5095	5426	5953	5575	6039	7874	8003
3	Germany	850	916	1713	1105	2080	2567	3194	2500	2432	2340	1206	1193
4	France	1297	1368	1345	2219	1724	1643	2432	1994	1865	1834	2437	1139
5	China	499	509	665	292	303	597	430	586	1000	1423	1354	1783
6	Ukraine	700	311	442	200	290	553	728	330	320	201	484	1344
7	United Kingdom	1368	1068	741	1316	1039	855	1018	982	1022	1054	1070	863
8	Italy	880	191	526	314	538	432	366	454	383	806	1046	847
9	Spain	7	120	150	56	108	843	590	610	998	513	927	720
10	Israel	203	239	342	209	583	1187	1326	530	545	503	531	533
11	Sweden	216	426	341	212	774	502	684	417	514	806	686	496
12	Canada	129	170	263	265	226	226	334	227	169	258	292	276
13	Switzerland	193	157	181	243	246	285	301	482	255	137	297	210
14	South Korea	165	N/A	100	29	48	94	220	80	163	95	225	183

Next to SIPRI there are several other sources that provide data on international transfers of arms. These include national reports by national governments about arms exports, the UN register on conventional arms and an annual publication by the U.S. Congressional Research Service that includes data on arms exports to developing countries as compiled by U.S. intelligence agencies. A list of such sources can be found at the SIPRI website.^[13] Due to the different methodologies and definitions used different sources often provide significantly different data. For example, according to Statistisk sentralbyrå (Norway state statistics), Norway exports a greater value (in USD) of arms than many of the nations listed above.

Some of the differences are possibly due to deliberate over- or under-reporting by some of the sources. Governments may claim high arms exports as part of their role in marketing efforts of their national arms industry or they may claim low arms exports in order to be perceived as a responsible international actor.

As of 2008, Britain has become the world's leading developer of arms with British company BAE Systems.^[14] Defence group BAE Systems is the first company outside the United States to reach the top position, thanks to a deal with the Pentagon for mine-resistant vehicles to be used in Iraq and Afghanistan. According to the Stockholm International Peace Research Institute, a defence think tank, the former British Aerospace group's arms sales are ahead of American market leaders Lockheed Martin and Boeing. The report reveals BAE's U.S. subsidiary was alone responsible for 61.5% of the group's arms sales and around 58.5% of total group sales. This demonstrates BAE's increasing reliance on orders for conventional weapons as the United States cuts back on its nuclear arsenal. The British figures were also boosted by orders for Eurofighter Typhoon jets from Saudi Arabia.

World's largest arms importers

The units in this table are so-called trend indicator values expressed in millions of U.S. dollars. These values do not represent real financial flows but are a crude instrument to estimate volumes of arms transfers, regardless of the contracted prices, which can be as low as zero in the case of military aid.^[12]

2013 rank	Recipient	Arms imports
1	India	4243[15]
2	Saudi Arabia	2629[15][16]
3	Turkey	1550
4	China	1357[17]
5	Indonesia	1200
6	Vietnam	1058
7	Taiwan	1039
8	United Arab Emirates	1031
9	Australia	842
10	Oman	738
11	Singapore	717
12	Pakistan	659
13	Azerbaijan	640
14	Iraq	627
15	Morocco	594

List of major weapon manufacturers

Private military contractors are private companies that provide logistics, manpower, and other expenditures for a military force.

Major arms industry corporations by nation

Largest arms industry companies

This is a list of the world's largest arms manufacturers and other military service companies who profit the most from the War economy, their origin is shown as well. The information is based on a list published by the Stockholm International Peace Research Institute for 2013.^{[18][19][20][21]} The list provided by the SIPRI excludes companies based in China.

Rank	Company	Country	Arms sales (US$ m.)	Total sales (US$ m.)	Arms sales as a % of total sales	Total profit	Total employment
1	Lockheed Martin	United States	35 490	45 500	78	2 981	115 000
2	Boeing	United States	30 700	86 623	35	4 585	168 400
3	BAE Systems	United Kingdom	26 820	28 406	94	275	84 600
4	Raytheon	United States	21 950	23 706	93	2 013	63 000
5	Northrop Grumman	United States	20 200	24 661	82	1 952	65 300
6	General Dynamics	United States	18 660	31 218	60	2 357	96 000
7	EADS	European Union	15 740	78 693	20	1 959	144 060
8	United Technologies Corporation	United States	11 900	62 626	19	5 721	212 000
9	Finmeccanica	Italy	10 560	21 292	50	98	63 840
10	Thales Group	France	10 370	18 850	55	761	65 190

|11||RAI|| United States||01 050||01 125||15||0 085||40

Institutes participating in weapon research and warfare simulation

• Netherlands Organisation for Applied Scientific Research ^[22]
• Bolt, Beranek and Newman
• QinetiQ
• Defense Advanced Research Projects Agency

Arms control

Arms control refers to international restrictions upon the development, production, stockpiling, proliferation and usage of small arms, conventional weapons, and weapons of mass destruction.^[23] It is typically exercised through the use of diplomacy, which seeks to persuade governments to accept such limitations through agreements and treaties, although it may also be forced upon non-consenting governments.

Oscar Arias Sanchez President of Costa Rica (awarded the Nobel Peace Prize in 1987 for his efforts to end civil wars across Central America through the Esquipulas II Accords) has stated:

“

When a country decides to invest in arms, rather than in education, housing, the environment, and health services for its people, it is depriving a whole generation of its right to prosperity and happiness. We have produced one firearm for every ten inhabitants of this planet, and yet we have not bothered to end hunger when such a feat is well within our reach. Our international regulations allow almost three-quarters of all global arms sales to pour into the developing world with no binding international guidelines whatsoever. Our regulations do not hold countries accountable for what is done with the weapons they sell, even when the probable use of such weapons is obvious.[24]

”

Notable international arms control treaties

• Geneva Protocol on chemical and biological weapons, 1925
• Outer Space Treaty, signed and entered into force 1967
• Biological Weapons Convention, signed 1972, entered into force 1975
• Missile Technology Control Regime (MTCR), 1987
• Chemical Weapons Convention, signed 1993, entered into force 1997
• Ottawa Treaty on anti-personnel land mines, signed 1997, entered into force 1999
• New START Treaty, signed by Russia and the United States in April 2010, entered into force in February 2011
• Arms Trade Treaty, concluded in 2013, entered into force on 24 December 2014.^[25]

The European Council stated to the United Nations General Assembly:

“

We are committed to upholding, implementing and further strengthening the multilateral disarmament and non-proliferation framework in the fight against threats which are tending to escape the control of national sovereignty, the challenges deriving from destabilising accumulation and spread of small arms and light weapons, from illicit or irresponsible arms trade, and from the proliferation of weapons of mass destruction, which are creating new and growing hot-spots of international tension. In this regard, the EU welcomes the growing support in all parts of the world for an International Arms Trade Treaty and is firmly committed to this process.[26]

”

See also

References

External links

Wikimedia Commons has media related to Military industries and wartime industrial production.

• Amnesty International: Arms Trade
• The British Library – Defence Industry Guide (sources of information)
• Campaign Against Arms Trade (UK)
• ControlArms.org
• Defense Industrial Base blog by Jeffrey Peter Bradford
• FAS's Arms Sales Monitoring Project
• The Guardian's arms trade report
• List of participators of the Defense System and Equipment international conference in London, 2003
• SIPRI arms industry reports and database
• SIPRI list of Top 100 arms-producing companies
• SPADE Defense Index (NYSE: DXS) Defense sector market index
• The True Cost of Global Arms Trade [infographic included]
• UN Office for Disarmament Affairs
• U.S. Arms Sales to the Third World from the Dean Peter Krogh Foreign Affairs Digital Archives
• Viktor Bout arms trade case
• World Map and Chart of Arms exports per country by Lebanese-economy-forum, World Bank data
• World Security Institute's Center for Defense Information
• Z. Yihdego, Arms Trade and International Law, Hart: OXford, 2007

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