Defence Industries in the 21st Century

A Comparative Analysis

Çağlar Kurç, Richard A. Bitzinger, Stephanie G. Neuman, Çağlar Kurç, Richard A. Bitzinger, Stephanie G. Neuman

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000192001
• Edition: 1
• Topic: Historia
• Subtopic: Historia militar y marítima

Defence Industries in the 21st Century explores the transformation in the global defence industrial production through examining the interaction between international and domestic factors.

With the global defence industry and arms market likely continue to expand and mature, the ways in which this progression could influence international politics remain obscure. In practice, as the contents of this book show, the defence industrial bases and arms export policies of emerging states display significant variance. This variance is the result of a unique balance between domestic and international factors that has shaped the defence industrialisation behaviour and policies of the less industrialised states. One of the most important conclusions of the book is that the interplay between domestic and international factors clearly influences the variation in the emerging states' defence industrialisation policies, as well as their success or failure. While international factors create opportunities, they also limit the options available to emerging economies. Domestic factors also play an important role by shaping the policy choices of the states' decision makers.

Exploring the balance between international and domestic factors and the ways in which they influence defence industrialisation in emerging states, Defence Industries in the 21st Century will be of great interest to scholars of Defence Industries, Arms Manufacturing, and Defence, Strategic and Security Studies more generally. The chapters were originally published in Defence Studies, Comparative Strategy and All Azimuth.

Introduction¹

Çağlar Kurç, Richard A. Bitzinger and Stephanie G. Neuman

The Transformation in Global Arms Production

The global arms market experienced significant transformation after the end of the Cold War with the increasing amount of defence industrial cooperation among states as well as defence industry firms. The main driver of the transformation was the rising costs of military research and development, inadequate base markets, limited technological and industrial sources and rapid advances in production technologies, which incentivized defence companies to search for new markets beyond the national borders (Sköns 1993, p. 160, Sjolander 1999, pp. 122–31, Hayward 2000, pp. 116–7, Oudot and Bellais 2019, p. 169). Although operating in foreign markets was a second-best solution for defence companies in the major arms-producing states to maintain competencies, evolution into multinational corporations through mergers and acquisitions becomes the key feature in arms production (Oudot and Bellais 2019, p. 169).

Multinational defence corporations began to establish transnational networks of inter-firm relations that involved co-production/development, partnerships and sub-contacting agreements. As the inter-firm relations grew through establishment of joint-ventures and sub-contracting, “intricate international networks of research, production and information” (Sköns 1993, p. 165) emerged, thus making integration to the global production chains became a viable option (Bitzinger 2003). As the production relations changed, the arms cooperation practices also started to change. Increasingly formal, integrative and permanent systems of arms production between defence companies, largely in the West, slowly replaced inter-governmental ad hoc arms cooperation (Anthony 1993, Bitzinger 1994a, Sköns and Wulf 1994, Adams 2001). In the form of cooperative relations, the transfer of technology, technical data and industrial know-how became the new form of exchange between states and defence companies, thus transforming arms production into a more transnational endeavour (Bitzinger 1994a, p. 181, 1994b, p. 273).

The availability of military technology and production know-how transfer creates an opportunity for less advanced arms producers and non-arms producers to invest in defence industrialization. As the major defence companies sought for larger share in international military market, international competition intensified, thus increasing the market power of emerging countries (Oudot and Bellais 2019, p. 181). Emerging countries began systematically demanding technology transfer, technical data and industrial know-how to improve their defence industrial capabilities. Through the expansion of contractor and sub-contractor relationships, the emerging defence industries find the opportunity to become increasingly integrated into the transnational network of company-to-company exchange and so would be better positioned for shouldering the increased costs of arms production. As a result, the number of arms suppliers in the global arms market increased. Should this transformation of the defence industrial market continue, the ways in which it will influence international politics remain obscure.

One school of thought expected that the transformation of the global arms market would lead to more integrative, liberalized and export-oriented arms production policies due to the increased cost of production and the need for sharing the cost. Other analysts disagree. They believe that domestic factors usually take precedence over international factors in the decision-making calculus of industrializing countries. Primarily concerned with protecting their country’s indigenous industries, the leaders of these states are prompted to reject an export-oriented, integrative defence industrialization policy. Instead, according to these defence analysts, the emerging states choose to pursue self-sufficiency in arms production despite the financial burdens and weaknesses in their production capabilities.

Both sides of the debate actually capture some aspects of the global transformation. On the one hand, a group of emerging states choose to have limited defence industrialization that focuses on the niche markets and integrate to the global arms production networks. On the other hand, others continue to pursue self-sufficiency in arms production with limited international defence industrial cooperation. Thus, the breadth and the depth of integrative defence industrial relations show variation among states. The variation in state policies poses a challenge in understanding the implication of the transformation of global arms production for the international politics and security as the debate in the field did not resolve the issue.

In order to resolve some of the issues raised by these theoretical debates, we initiated an E-Workshop series at Columbia University and the Center for Foreign Policy and Peace Research. First, it is designed, through in-depth single case studies and comparative analysis, to shed empirical light on the defence industrial decision-making process in emerging states and the political, economic and military factors that have shaped it. Our focus is on the inner workings of the process: why certain policies have been adopted, what the production capabilities of selected emerging defence industries are and how they are changing in response to transformations in the global defence industrial system. We also hope to reach a deeper understanding of how these changes impact the national security interests of the arms-producing states and the ways in which they interact in the international political system. A second objective for the workshops is to digitally bring together arms trade analysts scattered all over the world. Through a series of workshops, we hope to create an ongoing, interactive community of defence industry specialists who will regularly interact and communicate with each other.

The Variation: Defence Industrial Policies of Emerging Defence Industries

Globalization of arms production, like globalization in general, is argued to be a process that pushes states to act in a similar fashion. Many analysts believe that less advanced states should follow an export-oriented defence industrialization. This means that states need to liberalize their defence markets and construct a beneficial investment environment for the multinational corporations. This should be done by withdrawing the state investments from arms production which would then prevent the preferential treatment of state enterprises. States should allow competition between private defence firms through dismantling protective laws and encourage local defence firms to form permanent relations with the multinational corporations. Consequently, states should not follow across-the-board military production strategies, but seek to invest in the production areas that they have a comparative advantage in. In the end, many analysts argue that the globalization of arms production would create an overarching production chain with the less advanced defence industries participating through integration. Yet, we observe that there are variances in development strategies, although inter-firm cooperation is increasing and the production is spreading.

Even if the states decide to integrate themselves to global production chains, their defence industry policies differ depending on their economic structures. Marc DeVore contends that although the global defence industrial transformation is limiting the options available to the states, the institutional structures of domestic political economies shape the nature of individual state and firm responses. In liberal market economies, we expect to see defence production centred on the private firms where contracts are distributed by competitive bidding and formal contracting, while state retains arms-length coordination through the market. Consequently, the system rewards companies that pursue radical innovation and fast moving technologies such as UAVs, missiles and defence software and electronics. On the other hand, in coordinated market economies, we expect to see direct state participation in defence production and negotiated contracting. Such systems encourage defence production that is capital intensive and allow only incremental innovations, such as aircraft, armoured vehicles and radar systems (DeVore 2015). Therefore, even if the states choose to integrate their defence industries to global production networks, the path and the development strategies show variance. However, others question the validity of globalization.

These analysts believe that domestic factors usually take precedence over international factors in the decision-making calculus of industrializing countries. Richard Bitzinger questions the validity of the globalization, the integrative drive in the global arms market, through referring the variations in the defence industrial strategies from one country to another. He contends that the integrative effect of globalization has not been reached the expected levels. In the core countries, integration remains limited and the cooperation between the United States and the Europe has not reached the anticipated heights. On the other hand, the emerging countries continue to seek defence industrialization with the goal of self-sufficiency despite the financial penalties and weaknesses in their production capabilities (Bitzinger 2010) because these countries have a different set of motivations for the defence industrialization.

Although it is generally agreed that arms production in all states is motivated by three main factors – the desire for power, wealth and prestige – these analysts argue that the motives for defence industrialization are ranked differently by many emerging states from those of the larger, more established arms producers. They believe that domestic factors usually take precedence over international factors in the decision-making calculus of less industrialized countries. Primarily concerned with protecting their indigenous industries, the leaders of these states are prompted to reject an export-oriented, integrative defence industrialization policy.

Emerging states, these analysts argue, seek to decrease their dependency on supplier states for access to high technology. Dependency on foreign suppliers, in the recipient’s view, enables supplier to control which weapon systems and technologies they can acquire, and thereby gives a foreign state control over their military capabilities (Neuman 1988). Furthermore, from the recipient’s perspective, the supplier state has the ability to shape the recipient’s foreign policy through arms embargoes and restrictions on the usage of imported weapons systems (Kinsella 1998, Boutin 2009, p. 229). In the pursuit of increased power, therefore, emerging states perceive national defence industries as a tool for achieving a guaranteed and independent supply of arms (Evans 1986) and a measure of autonomy, while simultaneously decreasing the influence of supplier states.

Others, who focus on the pursuit of wealth as a policy motive, offer a complementary argument. They claim that because states have different economic capabilities they have different policy options. Emile Benoit, for instance, contends that national defence industries decrease the economic burden of procuring weapons systems from foreign suppliers. In his view, an import substitution policy is a logical choice for emerging states (Benoit 1973). Gansler and Bitzinger move beyond the argument of decreasing the burden on the economy. They assert that national defence industries can serve as a locomotive for the overall economy. National defence industries, they claim, help develop the state’s technological base, modernize the overall economy and enable economic growth (Gansler 1982, p. 25, Bitzinger 2003, p. 73). Neuman, too, concludes that spin-offs from the defence sector foster economic development. Skills gained in military service can be transferred to the civilian sector by personnel rotating out of the military, such as technicians, mechanics, pilots and health-care personnel. Infrastructure such as roads, bridges, electrical lines and communication networks constructed for the military also benefit the civilian economy (Neuman 1978, 1994, p. 98).

These academics and policy analysts hold that emerging states can reap economic benefits, and perhaps some political power, by exporting domestically produced weapons systems (Sanders 1990). They point out that policy-makers in many emerging states apparently agree. The emerging countries, especially in Southeast Asia, co...