Arms industry

Workers assemble Browning-Inglis Hi-Power pistols at the John Inglis munitions plant, Canada, April 1944

The arms industry is a global business that manufactures weapons and military technology and equipment. It consists of commercial industry involved in research and development, engineering, 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 provides other logistical and operational 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.

Unimog truck at IDEF in 2007.

History

Painting shells in a shell filling factory during World War I.

Trade in arms and technological diffusion is as old as the history of war itself. During the early modern period, France, United Kingdom, 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 the American Civil War in 1861 the north had a distinct advantage over the south as it relied on using the breech-loading rifle against the muskets of the south. This began the transition to industrially produced mechanised weapons such as the Gatling gun.[9]

This industrial innovation in the defence industry was adopted by Prussia in 1866 & 1870-71 in its defeat of Austria and France respectively. By this time the machine gun had begun entering into the militaries. The first example of its effectiveness was in 1899 during the Boer War and in 1905 during the Russo-Japanese War. However, Germany were leaders in innovation of weapons and used this innovation nearly defeating the allies in World War I.

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.

Stacks of shells in the shell filling factory at Chilwell during World War I.

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).[10]

Sectors

The AK series of weapons have been produced in greater numbers than any other firearm and have been used in conflicts all over the world.

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.[11]

Small arms

Main article: Small arms trade

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.[12]

Aerospace systems

A T-45 Goshawk on the assembly line at McDonnell Douglas.

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 Rolls Royce, BAE, Dassault Aviation, Sukhoi, Mikoyan, EADS, Finmeccanica, Thales Group, Lockheed Martin, Northrop Grumman and Boeing. 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.[11]

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.[11]

Cyber Security Industry

The cyber security industry is becoming the most important defence industry as cyber attacks are being deemed as one of the greatest risk to defence in the next ten years as cited by the NATO review in 2013.[13] Therefore, high levels of investment has been placed in the cyber security industry to produce new software to protect the ever growing transition to digitally run hardware. For the military industry it is vital that protections are used for systems used for reconnaissance, surveillance and intelligence gathering. However, to protect the cyber world from attacks there are advanced cyber protection strategies used such as content, cloud and wireless security. These can be intertwined to form several secure layers.

Nevertheless, cyber attacks and cyber attackers have become more advanced in their field using techniques such as Dynamic Trojan Horse Network (DTHN) Internet Worm, Zero-Day Attack, and Stealth Bot. As a result, the cyber security industry has had to improved the defence technologies to remove any vulnerability to cyber attacks using systems such as the Security of Information (SIM), Next-Generation Firewalls (NGFWs) and DDoS techniques.

As the threat to Cyber Security grows the demand for cyber protection will rise resulting in the growth of the cyber defence industry. It is expected that the Cyber Security Industry will be dominated by the defence and homeland security agencies that will make up 40% of the industry.[14]

Cyber Security Investment

As the threat to Cyber Security Industry increases governments have begun to invest and allocate funds to the cyber industry. The US government has allocated $14 billion for cyber security in 2016.[14] Moreover, the UK Government has allocated £860 million for their National Cyber Security Program.[14]

Cyber Industry Players

As the investment increases the demand from organisations to improve their cyber security systems for these markets increases as well. The major organisations involved in cyber defence are:[15]

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 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 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.[16]

2014 rank Supplier Arms exports
1 United States10194
2 Russia5971
3 China1978
4 France1200
5 Germany1110
6 United Kingdom1083
7 Israel1074
8 Spain824
9 Italy786
10 Ukraine664
11 Netherlands561
12 Sweden394
13  Switzerland350
14 Turkey274
15 Canada234
2001–12 Rank Supplier 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
1 United States59085229Decrease5698Increase6866Increase6700Decrease7453Increase8003Increase6288Decrease6658Increase8641Increase9984Increase8760Decrease
2 Russia58965705Decrease5236Decrease6178Increase5134Decrease5095Decrease5426Increase5953Increase5575Decrease6039Increase7874Increase8003Increase
3 China850916Increase1713Increase1105Decrease2080Increase2567Increase3194Increase2500Decrease2432Decrease2340Decrease1206Decrease1193Decrease
4 France12971368Increase1345Decrease2219Increase1724Decrease1643Decrease2432Increase1994Decrease1865Decrease1834Decrease2437Increase1139Decrease
5 Germany499509Increase665Increase292Decrease303Increase597Increase430Decrease586Increase1000Increase1423Increase1354Increase1783Increase
6 United Kingdom700311Decrease442Increase200Decrease290Increase553Increase728Increase330Decrease320Decrease201Decrease484Increase1344Increase
7 Ukraine13681068Decrease741Decrease1316Increase1039Decrease855Decrease1018Increase982Decrease1022Increase1054Increase1070Increase863Decrease
8 Italy880191Decrease526Increase314Decrease538Increase432Decrease366Decrease454Increase383Decrease8061046Increase847Decrease
9 Spain7120Increase150Increase56Decrease108Decrease843Increase590Decrease610Increase998Increase513Decrease927Increase720Decrease
10 Israel203239Increase342Increase209Decrease583Increase1187Increase1326Increase530Decrease545Increase503Decrease531Increase533Increase
11 Sweden216426Increase341Decrease212Decrease774Increase502Decrease684Increase417Decrease514Increase806Decrease686Decrease496Decrease
12 Canada129170Increase263Increase265Increase226Decrease226Steady334Increase227Increase169Decrease258Increase292Increase276Decrease
13  Switzerland193Increase157Increase181Increase243Increase246Increase285Increase301Increase482Increase255Decrease137Decrease297Increase210Decrease
14 South Korea165N/A10029Decrease48Increase94Increase220Increase80Decrease163Increase95Decrease225Increase183Decrease
Sgraffito at the Lambert Sevart weapons factory, in Liege (Belgium) (early 20th Century).

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.[17] 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.[18] 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.[16]

2014 rank Recipient Arms imp
1 Saudi Arabia2629[19][20]
2 India1550
3 China1357[21]
4 Indonesia1200
5 Vietnam1058
6 Taiwan1039
7 United Arab Emirates1031
8 Australia842
9 Oman738
10 Singapore717
11 Pakistan659
12 Azerbaijan640
13 Iraq627
14 Morocco594

List of major weapon manufacturers

For a complete list, see List of modern armament manufacturers.
For a Top-Ten list, see List of defense contractors.

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

Major arms industry corporations by nation

Largest defense industry companies

Share of arms sales by country. Source is provided by SIPRI.[22]
Further information: Companies by arms sales

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.[22][23][24][25] The list provided by the SIPRI excludes companies based in China.

RankCompanyCountryArms sales (US$ m.)Total sales (US$ m.)Arms sales as a % of total salesTotal profitTotal employment
1Lockheed Martin United States35 49045 500782 981115 000
2Boeing United States30 70086 623354 585168 400
3BAE Systems United Kingdom26 82028 4069427584 600
4Raytheon United States21 95023 706932 01363 000
5Northrop Grumman United States20 20024 661821 95265 300
6General Dynamics United States18 66031 218602 35796 000
7EADS European Union15 74078 693201 959144 060
8United Technologies Corporation United States11 90062 626195 721212 000
9Finmeccanica Italy10 56021 292509863 840
10Thales Group France10 37018 8505576165 190

Institutes participating in weapon research and warfare simulation

Arms control

Main article: 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.[27] 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 Accord) 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.[28] ”

Notable international arms control treaties

Global weapons sales from 1950-2006

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.[30] ”

See also

References

    1. ↑ World Military Spending. www.globalissues.org. Retrieved on 2012-05-09.
    2. ↑ Stockholm International Peace Research Institute. Sipri.org. Retrieved on 2012-05-09.
    3. ↑ Arms trade key statistics. BBC News (2005-09-15). Retrieved on 2012-05-09.
    4. 1 2 3 4 "Trends in International Arms Transfer, 2014". www.sipri.org. Stockholm International Peace Research Institute. Retrieved 18 March 2015.
    5. ↑ Defence sector deal-making is finding itself in a war zone, warns report. 12 March 2009. BriskFox. Briskfox.com. Retrieved on 2012-05-09.
    6. ↑ "Small Arms Survey — Weapons and Markets- 875m small arms worldwide, value of authorized trade is more than $8.5b". 8 December 2014. Retrieved 26 March 2015.
    7. ↑ "William George Armstrong (1810–1900)".
    8. ↑ Dougan, David (1970). The Great Gun-Maker: The Story of Lord Armstrong. Sandhill Press Ltd. ISBN 0-946098-23-9.
    9. ↑ "Defense Industries - Military History - Oxford Bibliographies - obo". www.oxfordbibliographies.com. Retrieved 2015-11-03.
    10. ↑ Stohl, Rachel; Grillot, Suzette (2013). The International Arms Trade. Wiley Press. Retrieved 2013-02-07.
    11. 1 2 3 International Defense Industry at the Wayback Machine (archived July 26, 2011). www.fpa.org
    12. ↑ Debbie Hillier, Brian Wood (2003). "Shattered Lives – the case for tough international arms control" (PDF). Control Arms Campaign. p. 19. Retrieved 2009-03-28.
    13. ↑ "NATO review".
    14. 1 2 3 "CYBER SECURITY FOR THE DEFENCE INDUSTRY | Cyber Security Review". www.cybersecurity-review.com. Retrieved 2015-11-02.
    15. ↑ "Top 20 Cyber Security Companies 2014". MarketWatch. Retrieved 2015-11-03.
    16. 1 2 Top List TIV Tables-SIPRI. Armstrade.sipri.org. Retrieved on 2012-05-09.
    17. ↑ armstrad — www.sipri.org. Sipri.org. Retrieved on 2012-05-09.
    18. ↑ The SIPRI Top 100 arms-producing companies, 2008 — www.sipri.org. Sipri.org. Retrieved on 2012-05-09.
    19. ↑ "Saudi Arabia outpaces India to become top defence importer: IHS". The Times of India. Retrieved 26 March 2015.
    20. ↑ "Saudi Arabia outpaces India to become top defence importer - IHS". Retrieved 26 March 2015.
    21. ↑ "Saudi Arabia becomes world's biggest arms importer". the Guardian. Retrieved 26 March 2015.
    22. 1 2 http://www.sipri.org/research/armaments/production/recent-trends-in-arms-industry
    23. ↑ http://www.sipri.org/research/armaments/production/recent-trends-in-arms-industry/Fact%20Sheet%20Top100%202013.pdf
    24. ↑ "EUROPE ONLINE". europeonline-magazine.eu. Retrieved 30 November 2015.
    25. ↑ "SIPRI Releases Top 100 Defense Company Data". Defense News. Retrieved 26 March 2015.
    26. ↑ TNO Defence, Security and Safety at the Wayback Machine (archived September 23, 2006). tno.nl
    27. ↑ Barry Kolodkin. "What Is Arms Control?" (Article). About.com, US Foreign Policy. The New York Times Company. Retrieved 13 May 2012.
    28. ↑ Anonymous. The Global Arms Trade: Strengthening International Regulations. Interview with Oscar Arias Sanchez. Harvard International Review Date: Tuesday, July 1, 2008 http://www.allbusiness.com/government/government-bodies-offices/11664335-1.html accessed 10 Feb 2010
    29. ↑ Delgado,Andrea. Explainer: What is the Arms Trade Treaty, 23, Feb, 2015, https://theconversation.com/explainer-what-is-the-arms-trade-treaty-37673
    30. ↑ EU@UN – EU Presidency Statement – United Nations 62nd General Assembly: General Debate. Europa-eu-un.org. Retrieved on 2012-05-09.

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