Published on Portside (https://portside.org)
There’s No
Business Like the U.S. Global Arms Business
July 30, 2016
William D. Hartung
Tuesday, July 26, 2016
TomDispatch
When
American firms dominate a global market worth more than $70
billion a year [1], you’d expect to hear about
it. Not so with the global arms trade. It’s good for one or
two stories [2] a year in the
mainstream media, usually when the annual statistics on the state of the
business come out.
It’s not
that no one writes about aspects of the arms trade. There are occasional pieces
that, for example, take note of the impact of U.S. weapons transfers [3],
including cluster bombs [4], to Saudi
Arabia, or of the disastrous [5] dispensation
of weaponry to U.S. allies in Syria [6], or of
foreign sales of the costly, controversial F-35 combat aircraft [7]. And
once in a while, if a foreign leader meets with the president, U.S. arms sales
to his or her country might generate an article [8] or two. But the sheer
size of the American arms trade, the politics that drive it, the companies that
profit from it, and its devastating global impacts are rarely discussed, much
less analyzed in any depth.
So here’s a
question that’s puzzled me for years (and I’m something of an arms wonk): Why
do other major U.S. exports -- from Hollywood movies [9] to Midwestern grain shipments [10] to Boeing airliners [11] --
garner regular coverage while trends in weapons exports remain in relative
obscurity? Are we ashamed of standing essentially alone as the world’s
number one arms dealer, or is our Weapons “R” Us role such a commonplace that
we take it for granted, like death or taxes?
The numbers
should stagger anyone. According to the latest figures available from the
Congressional Research Service, the United States was credited with more
than half [1] the value of all global arms transfer agreements in 2014,
the most recent year for which full statistics are available. At 14%, the
world’s second largest supplier, Russia, lagged far behind. Washington’s
“leadership” in this field has never truly been challenged. The U.S.
share has fluctuated between one-third and one-half of the global market for
the past two decades, peaking at an almost monopolistic 70% of all weapons sold
in 2011. And the gold rush continues. Vice Admiral Joe Rixey, who heads
the Pentagon’s arms sales agency, euphemistically known as the Defense Security
Cooperation Agency, estimates [12] that
arms deals facilitated by the Pentagon topped $46 billion in 2015, and are on
track to hit $40 billion in 2016.
To be completely
accurate, there is one group of people who pay remarkably close attention to
these trends -- executives of the defense contractors that are cashing in on
this growth market. With the Pentagon and related agencies taking in
“only” about$600 billion a year [13] --
high by historical standards but tens of billions of dollars less than hoped
for by the defense industry -- companies like Lockheed Martin, Raytheon, and
General Dynamics have been looking to global markets as their major source of
new revenue.
In a
January 2015 investor call, for example, Lockheed Martin CEO Marillyn Hewson
was asked whether the Iran nuclear deal brokered by the Obama administration
and five other powers might reduce tensions in the Middle East, undermining the
company’s strategy of increasing its arms exports to the region.
She responded [14] that
continuing “volatility” in both the Middle East and Asia would make them
“growth areas” for the foreseeable future. In other words, no
worries. As long as the world stays at war or on the verge of it,
Lockheed Martin’s profits won’t suffer -- and, of course, its products will
help ensure that any such “volatility” will prove lethal indeed.
Under
Hewson, Lockheed has set a goal of getting at least 25% [15] of
its revenues from weapons exports, and Boeing has done that company one
better. It’s seeking to make overseas arms sales 30% [16] of its business.
Good News
From the Middle East (If You’re an Arms Maker)
Arms deals
are a way of life in Washington. From the president on down, significant
parts of the government are intent on ensuring that American arms will flood
the global market and companies like Lockheed and Boeing will live the good
life. From the president on his trips abroad to visit allied world
leaders to the secretaries of state and defense to the staffs of U.S.
embassies, American officials regularly act as salespeople for the arms
firms. And the Pentagon is their enabler. From brokering,
facilitating, and literally banking the money from arms deals to transferring
weapons to favored allies on the taxpayers' dime, it is in essence the world’s
largest arms dealer.
In a
typical sale, the U.S. government is involved [17] every
step of the way. The Pentagon often does assessments of an allied nation’s
armed forces in order to tell them what they “need” -- and of course what they
always need is billions of dollars in new U.S.-supplied equipment. Then
the Pentagon helps negotiate the terms of the deal, notifies
Congress [18] of its details, and collects the funds from the foreign
buyer, which it then gives to the U.S. supplier in the form of a defense
contract. In most deals, the Pentagon is also the point of contact for
maintenance and spare parts for any U.S.-supplied system. The bureaucracy that
helps make all of this happen, the Defense Security Cooperation Agency, is
funded from a 3.5% surcharge on the deals it negotiates. This gives it all the
more incentive to sell, sell, sell.
And the
pressure for yet more of the same is always intense, in part because the
weapons makers are careful to spread their production facilities to as many
states and localities as possible. In this way, they ensure that endless
support for government promotion of major arms sales becomes part and parcel of
domestic politics.
General
Dynamics, for instance, has managed to keep its tank plants in Ohio and
Michigan running through a combination ofadd-ons [19] to the Army budget --
funds inserted into that budget by Congress even though the Pentagon didn’t
request them -- and exports to Saudi Arabia [20].
Boeing is banking on a proposed deal to sell 40 F-18s to Kuwait [21] to
keep its St. Louis production line open, and is currently jousting with the
Obama administration to get it to move more quickly on the deal. Not
surprisingly, members of Congress and local business leaders in such states
become strong supporters of weapons exports.
Though
seldom thought of this way, the U.S. political system is also a global arms
distribution system of the first order. In this context, the Obama
administration has proven itself a good friend to arms exporting firms.
During President Obama’s first six years in office, Washington entered into
agreements to sell more than $190 billion [22] in
weaponry worldwide -- more, that is, than any U.S. administration since World
War II. In addition, Team Obama has loosened restrictions [23] on
arms exports, making it possible to send abroad a whole new range of weapons
and weapons components -- including Black Hawk and Huey helicopters and engines
for C-17 transport planes -- with far less scrutiny than was previously
required.
This has
been good news for the industry, which had been pressing for such changes for
decades with little success. But the weaker regulations also make it
potentially easier for arms smugglers and human rights abusers to get their
hands on U.S. arms. For example, 36 U.S. allies -- from Argentina and Bulgaria
to Romania and Turkey -- will no longer need licenses from the State Department
to import weapons and weapons parts from the United States. This will
make it far easier for smuggling networks to set up front companies in such
countries and get U.S. arms and arms components that they can then pass on to
third parties like Iran or China. Already a common practice, it will only
increase under the new regulations.
The degree
to which the Obama administration has been willing to bend over backward to
help weapons exporters was underscored at a 2013 hearing on those
administration export “reforms.” Tom Kelly, then the deputy assistant
secretary of the State Department's Bureau of Political-Military Affairs,
caught the spirit of the era when asked whether the administration was doing
enough to promote American arms exports. He responded [24]:
“[We are]
advocating on behalf of our companies and doing everything we can to make sure
that these sales go through... and that is something we are doing every day,
basically [on] every continent in the world... and we’re constantly thinking of
how we can do better.”
One place
where, with a helping hand from the Obama administration and the Pentagon, the
arms industry has been doing a lot better of late is the Middle East.
Washington has brokered deals for more than $50 billion [22] in
weapons sales to Saudi Arabia alone for everything from F-15 fighter aircraft
and Apache attack helicopters to combat ships and missile defense systems.
The most
damaging deals, if not the most lucrative, have been the sales of bombs and
missiles to the Saudis for their brutal war in Yemen [25], where
thousands of civilians have been killed and millions of people are going
hungry. Members of Congress like Michigan Representative John Conyers and
Connecticut Senator Chris Murphy have pressed for legislation [26] that
would at least stem the flow of the most deadly of the weaponry being sent for
use there, but they have yet to overcome the considerable clout of the Saudis
in Washington (and, of course, that of the arms industry as well).
When it
comes to the arms business, however, there’s no end to the good news from the
Middle East. Take the administration’s proposed new 10-year aid deal [27] with
Israel. If enacted as currently planned, it would boost U.S. military
assistance to that country by up to 25% -- to roughly $4 billion per year. At
the same time, it would phase out a provision that had allowed Israel to spend
one-quarter of Washington’s aid developing its own defense industry. In
other words, all that money, the full $4 billion in taxpayer dollars, will now
flow directly into the coffers of companies like Lockheed Martin, which is in
the midst of completing amulti-billion-dollar deal [28] to
sell the Israelis F-35s.
“Volatility”
in Asia and Europe
As Lockheed
Martin’s Marillyn Hewson noted, however, the Middle East is hardly the only
growth area for that firm or others like it. The dispute between China
and its neighbors over the control of the South China Sea (which is in many
ways an incipient conflict over whether that country or the United States will
control that part of the Pacific Ocean) has opened up new vistas when it comes
to the sale of American warships and other military equipment to Washington’s
East Asian allies. The recent Hague court decision [29] rejecting
Chinese claims to those waters (and the Chinese rejection [30] of
it) is only likely to increase the pace of arms buying in the region.
At the same
time, in the good-news-never-ends department, growing fears of North Korea’s
nuclear program have stoked a demand for U.S.-supplied missile defense
systems. The South Koreans have, in fact, just agreed to deploy Lockheed
Martin’s THAAD anti-missile system. In addition, the Obama
administration’s decision to end the longstanding embargo [31] on U.S. arms sales to
Vietnam is likely to open yet another significant market for U.S. firms. In the
past two years alone, the U.S. has offered more than
$15 billion [18] worth of weaponry to allies
in East Asia, with Taiwan, Japan, and South Korea accounting for the bulk of
the sales.
In
addition, the Obama administration has gone to great lengths to build a defense
relationship with India, a development guaranteed to benefit U.S. arms
exporters. Last year, Washington and New Delhi signed a 10-year
defense agreement [32] that
included pledges of future joint work on aircraft engines and aircraft carrier
designs. In these years, the U.S. has made significant inroads into the
Indian arms market, which had traditionally been dominated by the Soviet Union
and then Russia. Recent deals include a $5.8 billion sale of Boeing C-17
transport aircraft and a $1.4 billion agreement to provide support services
related to a planned purchase of Apache attack helicopters.
And don’t
forget “volatile” Europe. Great Britain’s recent Brexit vote introduced
an uncertainty factor into American arms exports to that country. The United
Kingdom has been by far the biggest purchaser [33] of U.S. weapons in
Europe of late, with more than $6 billion in deals struck over the past two
years alone -- more, that is, than the U.S. has sold to all other European
countries combined.
The British
defense behemoth BAE is Lockheed Martin’s principal foreign partner [34] on
the F-35 combat aircraft, which at a projected cost of $1.4 trillion over its
lifetime already qualifies as the most expensive weapons program in history.
If Brexit-driven austerity were to lead to a delay in, or the cancellation of,
the F-35 deal (or any other major weapons shipments), it would be a blow to
American arms makers. But count on one thing: were there to be even a
hint that this might happen to the F-35, lobbyists for BAE will mobilize to get
the deal privileged status, whatever other budget cuts may be in the works.
On the
bright side (if you happen to be a weapons maker), any British reductions will
certainly be more than offset by opportunities in Eastern and Central Europe,
where a new Cold War [35] seems
to be gaining traction. Between 2014 and 2015, according to the Stockholm
International Peace Research Institute, military spending increased by 13% [36] in
the region in response to the Russian intervention in Ukraine. The rise in
Poland’s outlays, at 22%, was particularly steep.
Under the
circumstances, it should be obvious that trends in the global arms trade are a
major news story and should be dealt with as such in the country most
responsible for putting more weapons of a more powerful nature into the hands
of those living in “volatile” regions. It’s a monster business (in every
sense of the word) and certainly has far more dangerous consequences than
licensing a Hollywood blockbuster or selling another Boeing airliner.
Historically,
there have been rare occasions of public protest against unbridled arms
trafficking, as with the backlash against “the merchants of death” after World
War I, or the controversy over who armed Saddam Hussein that followed the 1991
Persian Gulf War. Even now, small numbers of congressional
representatives, including John Conyers, Chris Murphy, and Kentucky Senator
Rand Paul, continue to try to halt the sale of cluster munitions, bombs, and
missiles to Saudi Arabia.
There is,
however, unlikely to be a genuine public debate about the value of the arms
business and Washington’s place in it if it isn’t even considered a subject
worthy of more than an occasional media story. In the meantime, the
United States continues to hold onto the number one role in the global arms
trade, the White House does its part, the Pentagon greases the wheels, and the
dollars roll in to profit-hungry U.S. weapons contractors.
William D.
Hartung, a TomDispatch [37] regular,
is the director of the Arms and Security Project at the Center for
International Policy and a senior advisor to the Security Assistance Monitor.
He is the author of Prophets of War: Lockheed Martin and the Making of the
Military-Industrial Complex [38]. Copyright
2016 William D. Hartung. Reprinted with permission. May not be reprinted
without permission from TomDispatch. Portside thanks TomDispatch for send
this article to us.
Links:
[1] http://fas.org/sgp/crs/weapons/R44320.pdf
[2] http://www.nytimes.com/2015/12/26/world/middleeast/us-foreign-arms-deals-increased-nearly-10-billion-in-2014.html?_r=0
[3] http://www.npr.org/sections/parallels/2015/12/08/458959437/human-rights-groups-criticize-u-s-arms-sale-to-saudi-arabia
[4] http://www.nytimes.com/2016/04/20/opinion/obama-saudi-arabia-trade-cluster-bombs.html
[5] http://www.usnews.com/news/articles/2015/10/09/us-ends-failed-syrian-training-program-starts-arming-rebels-directly
[6] http://www.nytimes.com/2016/06/27/world/middleeast/cia-arms-for-syrian-rebels-supplied-black-market-officials-say.html
[7] https://www.washingtonpost.com/news/checkpoint/wp/2016/02/04/pentagons-top-weapons-tester-airs-major-list-of-grievances-against-f-35-program/
[8] http://www.nytimes.com/2015/09/04/us/politics/iran-deal-will-top-agenda-when-saudi-king-visits-white-house.html
[9] http://www.latimes.com/entertainment/envelope/cotown/la-et-ct-global-box-office-20151231-story.html
[10] http://www.bloomberg.com/news/articles/2016-07-12/u-s-corn-supply-estimate-raised-less-than-forecast-on-exports
[11] https://www.washingtonpost.com/business/economy/boeing-near-agreement-to-sell-airliners-to-iran/2016/06/14/9d4afb70-325a-11e6-95c0-2a6873031302_story.html
[12] http://www.reuters.com/article/us-airshow-britain-usa-arms-idUSKCN0ZT0ZH
[13] http://armscontrolcenter.org/fy-2016-defense-budget-request-briefing-book/
[14] https://theintercept.com/2015/03/20/asked-iran-deal-potentially-slowing-military-sales-lockheed-martin-ceo-says-volatility-brings-growth/
[15] http://foreignpolicy.com/2015/05/14/obama-arms-fair-camp-david-weapons-sales-gcc/
[16] http://www.reuters.com/article/us-aero-arms-summit-boeing-idUSTRE7867Q720110907
[17] http://www.dsca.mil/2014-foreign-customer-guide/security-cooperation-overview
[18] http://www.dsca.mil/major-arms-sales
[19] http://www.military.com/daily-news/2016/02/11/ohio-wins-again-in-armys-budget-for-more-m1-abrams-tanks.html
[20] http://www.defense-aerospace.com/articles-view/release/3/71875/saudi-arabia-to-rebuild,-upgrade-m1a2-tank-fleet-for-$2.9-bn.html
[21] http://www.defensenews.com/story/defense/air-space/2016/01/22/senators-begin-push-jet-sales-kuwait-qatar/79109014/
[22] http://www.dsca.mil/sites/default/files/historical_facts_book_30_september_2014_web.pdf
[23] https://www.propublica.org/article/in-big-win-for-defense-industry-obama-rolls-back-limits-on-arms-export
[24] http://www.ciponline.org/research/entry/risk-and-returns-the-economic-illogic-of-the-obama-administrations-arms-exp
[25] http://www.npr.org/sections/thetwo-way/2016/03/29/472296092/the-deadly-consequences-to-children-of-yemens-war
[26] http://www.defensenews.com/story/defense/2016/04/12/bill-would-limit-us-bomb-sales-saudi-arabia/82942344/
[27] http://www.reuters.com/article/us-usa-israel-defence-exclusive-idUSKCN0XU1UQ
[28] http://www.lockheedmartin.com/us/news/press-releases/2016/june/lockheed-martin-and-israel-celebrate-rollout-of-israels-first-f-35-adir.html
[29] http://www.nytimes.com/2016/07/13/world/asia/south-china-sea-hague-ruling-philippines.html
[30] http://www.npr.org/sections/parallels/2016/07/13/485753054/will-hague-tribunals-south-china-sea-ruling-inflame-u-s-china-tensions
[31] http://www.npr.org/2016/05/24/479274241/u-s-defense-contractors-may-be-slow-to-profit-from-lifting-of-arms-embargo-again
[32] http://theconversation.com/whats-behind-the-new-us-india-defense-pact-42944
[33] http://www.dsca.mil/search/node/United%20Kingdom
[34] http://www.lockheedmartin.com/uk/10000-Ways/Supporting-Our-Supply-Chain/BAE-Systems.html
[35] http://www.cnn.com/2016/02/13/europe/russia-medvedev-new-cold-war/
[36] https://www.sipri.org/sites/default/files/EMBARGO%20FS1604%20Milex%202015.pdf
[37] http://www.tomdispatch.com/blog/176144/tomgram%3A_william_hartung,_how_to_disappear_money,_pentagon-style/
[38] https://www.amazon.com/Prophets-War-Lockheed-Military-Industrial-Complex/dp/1568586973?ie=UTF8&ref_=nosim&tag=tomdispatch-20
[2] http://www.nytimes.com/2015/12/26/world/middleeast/us-foreign-arms-deals-increased-nearly-10-billion-in-2014.html?_r=0
[3] http://www.npr.org/sections/parallels/2015/12/08/458959437/human-rights-groups-criticize-u-s-arms-sale-to-saudi-arabia
[4] http://www.nytimes.com/2016/04/20/opinion/obama-saudi-arabia-trade-cluster-bombs.html
[5] http://www.usnews.com/news/articles/2015/10/09/us-ends-failed-syrian-training-program-starts-arming-rebels-directly
[6] http://www.nytimes.com/2016/06/27/world/middleeast/cia-arms-for-syrian-rebels-supplied-black-market-officials-say.html
[7] https://www.washingtonpost.com/news/checkpoint/wp/2016/02/04/pentagons-top-weapons-tester-airs-major-list-of-grievances-against-f-35-program/
[8] http://www.nytimes.com/2015/09/04/us/politics/iran-deal-will-top-agenda-when-saudi-king-visits-white-house.html
[9] http://www.latimes.com/entertainment/envelope/cotown/la-et-ct-global-box-office-20151231-story.html
[10] http://www.bloomberg.com/news/articles/2016-07-12/u-s-corn-supply-estimate-raised-less-than-forecast-on-exports
[11] https://www.washingtonpost.com/business/economy/boeing-near-agreement-to-sell-airliners-to-iran/2016/06/14/9d4afb70-325a-11e6-95c0-2a6873031302_story.html
[12] http://www.reuters.com/article/us-airshow-britain-usa-arms-idUSKCN0ZT0ZH
[13] http://armscontrolcenter.org/fy-2016-defense-budget-request-briefing-book/
[14] https://theintercept.com/2015/03/20/asked-iran-deal-potentially-slowing-military-sales-lockheed-martin-ceo-says-volatility-brings-growth/
[15] http://foreignpolicy.com/2015/05/14/obama-arms-fair-camp-david-weapons-sales-gcc/
[16] http://www.reuters.com/article/us-aero-arms-summit-boeing-idUSTRE7867Q720110907
[17] http://www.dsca.mil/2014-foreign-customer-guide/security-cooperation-overview
[18] http://www.dsca.mil/major-arms-sales
[19] http://www.military.com/daily-news/2016/02/11/ohio-wins-again-in-armys-budget-for-more-m1-abrams-tanks.html
[20] http://www.defense-aerospace.com/articles-view/release/3/71875/saudi-arabia-to-rebuild,-upgrade-m1a2-tank-fleet-for-$2.9-bn.html
[21] http://www.defensenews.com/story/defense/air-space/2016/01/22/senators-begin-push-jet-sales-kuwait-qatar/79109014/
[22] http://www.dsca.mil/sites/default/files/historical_facts_book_30_september_2014_web.pdf
[23] https://www.propublica.org/article/in-big-win-for-defense-industry-obama-rolls-back-limits-on-arms-export
[24] http://www.ciponline.org/research/entry/risk-and-returns-the-economic-illogic-of-the-obama-administrations-arms-exp
[25] http://www.npr.org/sections/thetwo-way/2016/03/29/472296092/the-deadly-consequences-to-children-of-yemens-war
[26] http://www.defensenews.com/story/defense/2016/04/12/bill-would-limit-us-bomb-sales-saudi-arabia/82942344/
[27] http://www.reuters.com/article/us-usa-israel-defence-exclusive-idUSKCN0XU1UQ
[28] http://www.lockheedmartin.com/us/news/press-releases/2016/june/lockheed-martin-and-israel-celebrate-rollout-of-israels-first-f-35-adir.html
[29] http://www.nytimes.com/2016/07/13/world/asia/south-china-sea-hague-ruling-philippines.html
[30] http://www.npr.org/sections/parallels/2016/07/13/485753054/will-hague-tribunals-south-china-sea-ruling-inflame-u-s-china-tensions
[31] http://www.npr.org/2016/05/24/479274241/u-s-defense-contractors-may-be-slow-to-profit-from-lifting-of-arms-embargo-again
[32] http://theconversation.com/whats-behind-the-new-us-india-defense-pact-42944
[33] http://www.dsca.mil/search/node/United%20Kingdom
[34] http://www.lockheedmartin.com/uk/10000-Ways/Supporting-Our-Supply-Chain/BAE-Systems.html
[35] http://www.cnn.com/2016/02/13/europe/russia-medvedev-new-cold-war/
[36] https://www.sipri.org/sites/default/files/EMBARGO%20FS1604%20Milex%202015.pdf
[37] http://www.tomdispatch.com/blog/176144/tomgram%3A_william_hartung,_how_to_disappear_money,_pentagon-style/
[38] https://www.amazon.com/Prophets-War-Lockheed-Military-Industrial-Complex/dp/1568586973?ie=UTF8&ref_=nosim&tag=tomdispatch-20
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