Commentary No. 33

The Contemporary Armaments Trade

Mr. Ron Purver

July 1993
Unclassified

Editors Note: In this issue of Commentary, Mr. Ron Purver, formerly a Senior Research Fellow at the Canadian Institute for International Peace and Security, provides an overview of the worldwide trade in arms and the pros and cons of arms transfers. Against this background, he concludes with a discussion of Canada's role, and some future predictions.

Disclaimer: Publication of an article in the Commentary series does not imply CSIS authentication of the information nor CSIS endorsement of the author's views.

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Seldom has so much worldwide attention focused on the international trade in arms as at present. Yet all standard sources of statistics on this trade agree that recent years have seen a marked decrease in its overall volume, in terms of both numbers of weapons and their value. Why, then, the concern? What has led governments throughout the world to pursue a wide variety of efforts in the past few years to stem the trade? The answer lies less in the total volume of the trade than in the type of weapons traded and the states to which transfers are being made.

After growing steadily between 1965 and 1984, from about $20 billion per year to $74 billion, the value of international arms transfers as a whole dropped to $52 billion in 1989. This decline is usually attributed to a number of factors, including growing Third World indebtedness, falling oil prices, the global recession and the end of the Iran-Iraq War. Other, more recent estimates indicate that the trend is continuing. Thus, for example, the exports of major conventional weapons declined steadily in value from $45.9 billion in 1987 to $22.1 billion in 1991. The decline in those shipped to the Third World is even more dramatic: from $32.2 billion in 1987 to just $12.3 billion in 1991. Although the value of new agreements significantly increased in 1990 as the result of the Gulf War, it reverted to the pattern of overall decline in 1991.

The Middle East has remained by far the prime recipient of arms transfers. Its share of global arms imports roughly doubled between 1965 and 1972; doubled again in 1973, at the time of the Yom Kippur War; and remained relatively stable—while increasing in value—during the 1980s. Four of the top five importers of military goods and services between 1965 and 1989 (Iraq, Saudi Arabia, Syria, and Libya) were from the Middle East.

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Suppliers

The international arms market is highly concentrated in terms of both suppliers and recipients. Among suppliers, the share of total world arms exports accounted for by the two superpowers alone ranged as high as 70.8% in 1979. In recent years, approximately 86% of the global total was accounted for by the top five suppliers (adding France, the UK, and China), and no less than 92% by the top eight!

Supplier states traditionally have been grouped into three "tiers." The first tier was composed exclusively of the superpowers, considered the only states with sufficient domestic demand to create economies of scale for the full range of most advanced weapons, and also the only ones using arms transfers at favourable rates as a foreign policy tool of the Cold War. The USSR consistently led the USA in arms exports worldwide, and particularly in those to the Third World, from 1979-1989. This situation changed dramatically in 1990, however, with the impending dissolution of the USSR. The total value of Soviet exports of major conventional weapons fell from $14.9 billion (38.9% of the world total) in 1989 to just $3.9 billion (17.8%) in 1991. US exports over the same period declined slightly, but its share of the world total increased from 31.3% in 1989 to 50.6% in 1991!

The second tier of suppliers—usually identified as France, the UK, and China—is also capable of supplying the most advance weapons on a continuing basis. However, due to their comparatively small domestic markets, they are much more dependent on exports than the superpowers, and their exports are said to be based almost entirely on commercial considerations.

Finally, there is a third tier of arms suppliers, smaller European countries and those of the developing world, characterized as marginal and sporadic participants. However, as one author warns: "Some of them...are capable of having an impact on potential conflicts within Third World regions because of their willingness to supply weapons based almost exclusively on commercial considerations, including types of weapons that other suppliers would refuse to provide" (Grimmett 1992: 7).

Recipients

As in the case of suppliers, the market among arms recipients is also highly concentrated. For the period 1965-1989, Iraq was by far the top importer of military goods and services at $93 billion, followed by Saudi Arabia ($62 billion), Iran ($51 billion), and Vietnam, Libya, and Syria ($46 billion each). In 1989, Saudi Arabia replaced Iraq as the leading arms importer. In 1991, the value of Saudi agreements with the USA alone exceeded the value of all Soviet agreements with the Third World.

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Pros and Cons of Arms Transfers

Efforts to control the international trade in arms undoubtedly continue to derive at least partly from the old perception of the "merchants of death" being responsible for the outbreak of WW I and other past conflicts. Certainly, strong elements of public opinion in the West appear to be opposed to the export of arms in principle, on ethical grounds. However, most governments throughout the world have long considered arms transfers to be a perfectly legitimate instrument of their foreign policy, at once beneficial to both supplier and recipient. From the latter's point of view, of course, it is the inalienable, sovereign right of any state to provide by whatever means for its own defence.

Considerations of national sovereignty also drive many of the supplier states, who consider the maintenance of a healthy defence industrial base as absolutely necessary to their security, if not their very survival. Once established, defence industries may come to play an important role in national economies, providing employment, promoting high technology, and (in Canada, at least) helping to reduce regional disparities.

In terms of foreign policy goals, arms exports have traditionally been used for geopolitical purposes to bind clients to patrons, whether in general or to gain access to specific military facilities—and not only by the superpowers. Suppliers find it easy to argue on the grounds of principle that arms transfers can help relatively stable and non-aggressive states provide for their own defence, while minimizing foreign military presence; stabilize regional balances of power, thereby deterring acts of aggression; and even provide policy leverage over a recipient's actions, to counter any future aggressive or expansionist tendencies on its part. In the past, a continued reliable supply of conventional arms has sometimes been considered necessary to dissuade regional states from acquiring weapons of mass destruction.

In the current climate, however, it is difficult to avoid the conclusion that most arms suppliers are driven most of the time by purely economic motives. In regard to the recently announced sale of 72 F-15 fighter aircraft to Saudi Arabia, for example, one American industry official noted that it "would rapidly inject $5 billion into the economy, reduce the US deficit, and sustain 40,000 US aerospace jobs and a corresponding number of jobs in the non-aerospace sector of the economy, all at no cost to the taxpayer" (Thompson 1992, quoted in Lamb and Moher 1992: 16). Such arguments carry even greater weight in the absence of any co-ordinated international action to limit prospective arms sales, in which any attempt at self-restraint may only be met by the eagerness of other suppliers to fill the gap.

Arms transfers in some circumstances may genuinely serve to stabilize regional balances of power and thus dampen or avert local conflicts. However, it appears obvious that they may in other cases serve to exacerbate such conflicts, increasing their length and/or destructiveness; or introduce a situation of arms-race instability in a region, promoting wasteful expenditures by prospective rivals and even, in extreme cases, precipitating the very hostilities they were ostensibly designed to prevent. Further, they are widely seen as obstacles to economic and social development, with arms suppliers frequently being blamed for the situation in which almost a fifth of the world's developing countries spend more on their militaries than on education and health programmes combined.

Two widely cited cases of states where internal conflict has been greatly exacerbated by large-scale supplies of arms from outside their borders are Somalia and Angola. In the former, the Soviet Union and the USA took turns as the major supplier of arms, the Soviets during the 1970s and the Americans during the following decade. Even after the imposition of an international arms embargo on Somalia in 1991, large quantities of small arms were purchased from Ethiopian black market dealers.

This latter observation illustrates two points: (1) the increasing prominence of black-market arms sales, and (2) the relative inattention paid to the trade in small arms, ammunition, explosives, and so on. Hardly a day goes by when some new scandal about the clandestine and/or illegal transfer of weapons or military technology is not revealed. Recently, for example, Russia has been accused of selling large quantities of arms to Serbia in violation of the international embargo against the former Yugoslavia; Germany's military intelligence service was found to have illegally shipped 82 different types of Soviet-origin arms and equipment to Israel; and Israel was believed to have provided Patriot anti-tactical ballistic missile (ATBM) technology to China in return for information on ballistic missiles that the latter had sold to Middle Eastern countries. The absolute scale of black-market activity is not great (one source estimates it at up to $10 billion over the annual, officially sanctioned trade of about $50 billion). However, it can still be highly significant in terms of transferring especially-sensitive technologies or supplying countries under embargo, as well as providing a substantial fraction of the small arms with which most combatants (and their civilian victims) in "low-intensity" regional conflicts are actually killed.

A major impetus among leading Western states to control the international arms trade has been the increasing sophistication of weapons transferred to third world states. This poses problems both for future military intervention by supplier states in the regions concerned, and potential threats (in the case of long-range missiles or aircraft) to their own homelands. While arms transfers may be justified as a means of reducing the need for one's own forces to intervene abroad, they may also increase the costs of such intervention when it nevertheless occurs, as Western forces face better-equipped adversaries in Third World contingencies. Whereas in 1960 only one Third World country had supersonic aircraft, six had missile technology, and 32 had tanks, by the mid-1980s these numbers had changed to 55, 71, and 60, respectively.

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"Problem" Weapons and "Problem" Countries

Much of the concern about the proliferation of advanced weaponry in recent years has centred on ballistic missile technology, to the point where ballistic missiles themselves have come to be identified as "weapons of mass destruction," although in reality they are only delivery systems for such weapons, and can—and have, so far exclusively—been used for the delivery of conventional explosives. Between 14 and 18 third world nations now possess ballistic missiles, and by the turn of the century the number could grow to 25 or more. Only a few developing countries are currently capable of producing relatively sophisticated missiles. However, by one estimate, six or more of these countries will likely have ballistic missiles with a range of between 3,000 and 5,500 km by the year 2000. Some analysts believe that the growing ballistic missile threat to American allies in Europe and Asia has the potential to deter these states from participating in operations of the Gulf War type. Other types of weapons whose proliferation is considered particularly threatening include advanced strike aircraft, cruise missiles, modern submarines, "integrated air defence systems" and "enhanced lethality munitions" such as fuel-air explosives.

Most of the concern about arms transfers in recent years has focused on a relatively small number of countries deemed irresponsible in either the receipt or export of weapons. In the first category have traditionally fallen states like Iraq, Libya, Syria, North Korea, or Iran, who have been accused of fomenting international terrorism and posing a threat to their neighbours. Much current concern focuses on the regional ambitions of a radical Iran. According to one report, Iran has ordered $6 billion in arms from the USSR or Russia since 1988, including tanks, aircraft, and—especially worrisome to Western navies—three Kilo-class diesel attack submarines.

In terms of renegade or potentially renegade suppliers, most attention has focused on the states of the former USSR, China, and North Korea. The dissolution of the USSR has brought with it new fears relating to the lack of export controls among the new states and/or doubts about their ability to implement and enforce whatever controls do exist or are created. There have been numerous reports, for example, of renegade groups of military officers and former Communist Party officials conducting unsanctioned sales of military equipment; individual arms factories have taken advantage of unprecedented degrees of autonomy to market their own products; and three Russian cities heavily dependent on the defence industry have been granted the right to conclude their own agreements.

Moreover, the leaders of the former Soviet states have enthusiastically embraced the notion of using arms sales to earn precious hard currency and maintain the basis of a defence industry while helping to finance the conversion of the remainder to civilian purposes. Some Russian officials are said to hope that the level of their arms exports will eventually reach $15-30 billion per year. Similar sentiments have been echoed by the leaders of Ukraine, Belarus, and Kazakhstan, all of which possess substantial defence industries. One of the most worrisome aspects of the renewed Russian interest in arms transfers has been its willingness to market the most sophisticated weapons in its arsenal. Nevertheless, there is considerable skepticism that the Russians and other former Soviet states will be able to achieve the ambitious arms sales targets they have set for themselves, since they have lost some of their key former clients (Iraq, due to the embargo, and others, due to their lack of financial resources), while disavowing the widespread grants and credits used to support their earlier exports.

Other "problem" countries at the moment include China and North Korea. Both have long been regarded as irresponsible arms exporters, willing to sell anything to almost any recipient, no matter how reprehensible its régime, and violating whatever international commitments or assurances to which they may have subscribed. China has been particularly notable in recent years for selling a wide variety of missile systems to Third World countries, including intermediate-range ballistic missiles (IRBMs) to Saudi Arabia, Pakistan, and perhaps Syria. Ballistic missiles have also been the principal concern with regard to North Korea, which has exported two types of Scud missiles to such clients as Iran and Syria.

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Recent Attempts at Control

The Gulf War provided a great stimulus to international efforts to control the trade in conventional arms. At a meeting in London in October 1991, the five Permanent Members of the UN Security Council (the so-called P-5) agreed to a set of "Guidelines for Conventional Arms Transfers" pledging that they would avoid transfers likely to, among other thing, "prolong or aggravate an existing armed conflict," "introduce destabilizing military capabilities in a region," or "be used other than for the legitimate defence and security needs of the recipient State."

The "guidelines," wholly voluntary in nature, were almost immediately criticized as being "vague and unenforceable." For example, no attempt had been made to define what constituted a "destabilizing" weapon. While information on past arms sales has been exchanged, successive meetings of the P-5 have failed to agree on providing advance notice of new arms transfers. Although China is usually described as the chief obstacle to this element of the initial American proposal, other participants reportedly have encountered difficulties with it as well, two claiming a requirement for new legislation and two or three the need to first renegotiate a "long list of bilateral secrecy agreements."

At a February 1992 meeting in Washington, China was the only participant to propose actual limits on conventional arms transfers—a move resisted, in particular, by the US. Washington has also been criticized for having negotiated no less than $19.3 billion in new arms sales to eight Middle Eastern countries since the Bush proposals of May 1991. The verdict of arms control analysts on the P-5 initiative has been generally quite negative; in the words of one study: "It is unlikely that even a single weapon sale has been cancelled or postponed" as a result (Lamb and Moher 1992: v).

Commentators have been somewhat more positive in their evaluation of the UN Arms Register, established by the General Assembly in December 1991. Under the resolution, states were "called upon" to provide data on the number of major weapons systems imported or exported each year. The Register may be expanded (e.g., to require the inclusion of information on military holdings and domestic procurement, as well as additional categories of equipment) by the General Assembly in 1994.

The limitations of the Register are obvious: it does not actually limit arms transfers, but only makes them more "transparent"; at present, it does not include "those areas of the arms trade about which least is known—deliveries of small arms, components, sub-systems and arms-production technologies and dual-use items" (SIPRI 1992: 300); the Register is voluntary, with no legal obligation to report; and there exists considerable skepticism about how many states will participate, given the record of other recent attempts to encourage governments to divulge information about their weapons programmes. Nevertheless, the Arms Register has been welcomed by advocates of arms transfer controls. The very act of agreeing to such disclosure constitutes a kind of confidence-building measure, according to supporters, while the fear of adverse publicity, it is hoped, may inhibit states from making some transfers.

One concrete initiative to control the proliferation of advanced conventional weapons that predates the Gulf War is the Missile Technology Control Regime (MTCR), established by the G-7 in 1987. Now numbering 23 members, it applies to ballistic and cruise missiles capable of delivering a 500 kg payload over a distance of at least 300 km, their components, and items used in their manufacture. The MTCR has been credited with the demise of Argentina's Condor II ballistic missile programme and with having slowed similar programmes by India and Brazil. Its coverage is in the process of being expanded to include systems and components capable of delivering chemical and biological weapons, and it continues to attract new adherents. However, it has been criticized for allowing conflicting interpretations and lacking a means of enforcement. Its shortcomings were well illustrated in the recent case of the sale of cryogenic rocket engines to India by Russia, which denied that they violated the guidelines (although the USA invoked sanctions in response).

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Canada's Role

Although Canada is not considered a major player in the international arms trade, its role is customarily described as "significant," or at least "not negligible". It placed tenth among exporters o major conventional weapons to the industrialized world for the period 1987-1991, but did not rank in the top 15 exporters to the world at large. However, this understates Canada's role to a considerable extent, since a very high proportion of its military sales is in the form of components and support equipment rather than finished weapons systems. Overall, Canada's defence industry is the eighth largest in the world (producing about $3 billion worth of military goods per year), and heavily dependent on exports (accounting for approximately half of this total), especially to the USA. In 1991, total exports amounted to $915.2 million, with $726 million going to the US, $131.5 million to other NATO/OECD countries, and $57.7 million to the Third World.

Canada is almost universally acknowledged to have one of the strictest export control systems in existence. Four criteria are used to "determine countries to which exports of Canadian military goods must be closely controlled": (1) those posing a threat to the security of Canada and its allies; (2) those involved in or under imminent threat of hostilities; (3) those under UN Security Council sanctions; and (4) those "whose governments have a persistent record of serious violations of the human rights of their citizens, unless it can be demonstrated that there is no reasonable risk that goods might be used against the civilian population."

Critics of Canada's arms transfers policy have long complained that the guidelines are not always adhered to, particularly those relating to countries in conflict and human rights abusers. As a mitigating factor, government officials have argued that such exports represent only a small proportion of Canada's total, and that little if any of it could be characterized as "offensive" in nature. Nevertheless, a Sub-Committee on Arms Export of the House of Commons Standing Committee on External Affairs and International Trade in October 1992 called for a tightening of Canadian export controls in these areas.

Canada has taken the lead in promoting arms transfer controls in such diverse international forums as the G-7, the Conference on Security and Cooperation in Europe (CSCE), NATO, and the Organization of American States (OAS). In February 1991 Canada unilaterally began issuing annual reports to the UN on its arms exports, urging other nations to follow suit. However, the report does not include statistics on sales to the USA (estimated to account for a large share of the total), since the Canadian government does not require permits for such exports.

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Future Prospects

There remains considerable uncertainty about future trends in the overall volume of the contemporary arms trade. With Iraq having dropped out of the market, at least temporarily, and the states of the former USSR scrambling to recover from a deep decline in their traditional exports, it is possible that the overall level of international arms transfers will continue the decline it has experienced over the past several years. Whether this will occur as the result of deliberate and concerted government action to limit arms transfers, however, is more doubtful. Few observers are optimistic that the very tentative and indirect steps taken towards international limitations by means of the P-5 consultations and UN Arms Register will have much of an impact anytime soon.

A number of other relatively safe predictions can be made about the nature of the trade in future: that the US will remain the pre-eminent world supplier (at least in terms of value) for some time to come; that the market will be increasingly competitive, as the defence industries of the developed world seek to compensate for the loss of domestic demand attendant on the end of the Cold War, thus reducing whatever leverage suppliers were believed to have had over recipients in the past; that future arms transfers will have less to do with foreign policy and more to do with purely commercial considerations; that future trade will be increasingly composed of dual-use technology and components, rather than finished weapons systems, making controls more difficult; that the level of technological sophistication of recipients will be raised, posing a higher potential threat to the West, especially to its foreign expeditionary forces; and that arms transfers—particularly to conflict-ridden Third World regions—will continue to be viewed by significant elements of Western publics as a distasteful and disreputable practice deserving of international condemnation and reinvigorated attempts at control.

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Date modified: 2005-11-14

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