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| by
Elisabeth
Sköns
and Hannes Baumann About the authors |
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* Chapter
summary from the SIPRI Yearbook 2003: A survey of
military expenditure and arms exports data suggests that arms
production has increased in the USA and Russia and declined slightly
in Western Europe. Expenditure on military equipment in the USA
increased by 26% in real terms between 2000 and 2002. Although
US arms exports declined, the net effect is most likely to be
an increase in the level of US arms production during these years.
The combined equipment expenditure of West European NATO member
states declined by 3% in real terms between 2000 and 2002, while
arms exports continued to decline, but only slightly. The spending
gap on military equipment between the USA and NATO Western Europe
reached a ratio of 3 : 1 in 2002, according to NATO data. In
military R&D the gap is greater, exceeding a ratio of 4 :
1 between the USA and the European Union countries in the 1990s,
according to the Organisation for Economic Co-operation and Development.
Russian arms production has been increasing since 1998. The average
annual rate of increase was 28% during the period 1998–2002.
The concentration
of the US arms industry continued in 2002 through a series of
mergers and acquisitions. The largest deal was Northrop Grumman’s
acquisition of TRW. Northrop Grumman aimed to increase its market
share in advanced military technologies such as unmanned air
vehicles, space-based technologies, and ballistic missile defence.
During the 1990s the main purpose of acquisitions was to eliminate
redundant arms production capacities or overheads in R&D
in order to reduce procurement costs. With increasing concentration
a new risk of cost growth emerged because of reduced competition
in many sectors of the US arms industry. For instance, the number
of suppliers of tactical missiles declined from 13 in 1990 to
only 3 in 2000. This may give increased bargaining power to the
few remaining companies when negotiating arms contracts with
governments. The US Department of Defense expects that the ‘transformation’
of warfare will enable many non-traditional defence suppliers
to rise to the ranks of major arms producers and thus ensure
competition in the long run. However, a survey of the production
of unmanned air vehicles suggests that this is unlikely to happen.
In Europe,
the process of industrial restructuring continued with a number
of smaller cross-border transactions, primarily in the aerospace
sectors (aircraft, missiles and space) and to a lesser extent
in the vehicle and shipbuilding sectors. The European Union is
increasing its influence on defence industrial policy through
initiatives, such as its Strategic Aerospace Review for the
21st Century (the STAR 21 Report) and the renewed proposal for
an EU arms procurement agency in the context of the European
Convention. Despite their aim of further integration, European
governments still differ on issues such as procurement policy,
competition policy and foreign ownership of arms production assets.
They also disagree on whether to pursue a ‘buy European’
policy or to strengthen transatlantic industrial links as ways
to overcome the perceived technology gap with the USA. The rapid
development of military technology and the processes of concentration,
internationalization and privatization in the arms production
industry present new challenges regarding affordability and the
control of arms procurement. The emerging structure of arms production
may make it more difficult for governments to control cost, competition
and technology. The increasing cost of advanced military technology
has also made it impossible for countries to avoid at least some
dependence on foreign arms suppliers. Governments have difficulties
keeping pace with the strategies developed by companies regarding
technology, sales and marketing. In particular, it is more difficult
to monitor and control international technology transfers if
they take place within large transnational corporations. There
is therefore a need for greater transparency in these companies,
preferably laid down in international agreements. Appendix
11A contains tables of arms production. |
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