war on the rocks

Trump’s Arms Exports Policy: Debunking Key Assumptions

September 28, 2018

The Trump administration recently released its new Conventional Arms Transfer (CAT) policy designed to increase the already well-established U.S. dominance of the global arms market. Increasing arms exports is seen as an important part of the administration’s aim to strengthen America’s economy and security. Traditionally, U.S. arms exports have been used as tools of power and influence, giving it political leverage over clients.

Paradoxically, however, the emphasis placed on the economic utility of arms sales by the Trump administration is increasing the bargaining power of clients, thereby reducing U.S. political sway. The leverage of client states and the U.S. arms industry is leading the administration to release advanced military capabilities earlier than it would have done otherwise and to play down human rights considerations raised by Congress.

Ironically, additional economic and security steps being taken by the Trump administration may be undermining some of the intended benefits of the new CAT policy. The president’s economic protectionist agenda, including the imposition of tariffs on steel and aluminum supposedly because of national security considerations, could undermine U.S. defense sales by driving up prices or by prompting retaliation from affected arms clients.

Political tensions between Washington and some its allies and partners – especially in NATO —  may also be encouraging them to find ways to decrease their dependence on American-made subsystems and to increase defense industrial cooperation between them to the exclusion of the United States. This could potentially reduce future U.S. arms and subsystem sales to these countries and increase competition with them for global markets.

Trump’s Conventional Arms Transfer Policy

The first CAT policy was introduced by President Jimmy Carter on May 19, 1977. Its underlying principle was that arms transfers were to be treated with a strong presumption of denial “as an exceptional foreign policy implement” with “the burden of persuasion … on those who favor a particular sale, rather than those who oppose it.”

To further this policy of self-imposed restraint, Carter instituted a ceiling on the total dollar value of American arms transfers to all but a few traditional allies. He pledged that the United States would not be the first supplier to introduce into Third World areas “newly developed, advanced weapons systems which could create a new or significantly higher combat capability.” In implementing this policy, Carter issued the so-called “leprosy letter,” instructing American diplomats abroad to refrain from assisting the U.S. arms industry in its efforts to secure foreign buyers.

In April, the Trump administration launched the fifth iteration of the CAT policy, designed to increase the exports of U.S. arms as an integral part of its “America First” policy agenda. The present version of the CAT policy prioritizes arms transfers as an important tool of American foreign policy and, in stark contrast to the vision of Carter, is predicated on a strong assumption of approval and the active advocacy of the U.S. government and its diplomats with foreign leaders and governments to buy American-made arms.

The Trump administration presents its new arms policy as a response to the ongoing strategic competition between the great powers. Its argument is that the new CAT policy will enable Washington to preserve international peace by strengthening the military capabilities of its allies and partners, while reducing the need for American boots on the ground; maintaining its influence over the policies and actions of client states in key regions around the world; strengthening the U.S. military by increasing interoperability with allies and partners; supporting the defense industry; promoting new innovation; and maintaining American jobs. The new policy also refers to the need for an assessment of the risks that arms transfers may pose to human rights violations, to technology transfer issues and/or U.S. nonproliferation objectives.

The Nervous U.S. Domination of the Arms Market

The United States dominates the growing global arms market and according to data gathered by the authoritative Stockholm International Peace Research Institute (SIPRI), its lead is expanding. The United States accounted for 34 percent of total arms exports between 2013 and 2017, ranking it significantly higher than its main competitors Russia (22 percent), France (6.7 percent), Germany (5.8 percent), China (5.7 percent), and Britain (4.8 percent). In FY 2018, the value of signed arms deals continued to increase, reaching over $46 billion, exceeding the $41 billion figure of FY 2017.

Undergirding this policy is Trump’s vision that economic security is national security. The defense and aerospace industry is America’s second-largest gross exporter. The industry contributes approximately $1 trillion annually to the U.S. economy and employs around 2,500,000 people. On average, 30 percent of the industry’s annual revenue is through arms exports, which reduces the need for domestic investment, reduces the cost-per-unit for the U.S. military, and enables an increase of investments in innovation, thereby retaining America’s technological lead.

However, a number of trends combine to make Washington nervous about its lead in global arms sales. The first is a growing effort by other technologically innovative arms exporters to compete with the United States for markets. Arms sales by Britain, France, Spain, China, and Russia have reduced America’s potential share of the important markets of the Middle East (49 percent of the U.S. arms exports between 2013 and 2017) and Asia. To a certain extent, the people behind the new CAT policy believe that the strict and rigid regulatory and procedural frameworks that governed the arms exports processes have undermined the U.S. competitiveness in the global arms market and the implementation of the new policy is anticipated to increase sales.

A second trend is the deliberate policy of client states to diversify their arms purchases. The Arab Sunni states, for example, have in the last couple of years spent tens of billions of dollars on European or Russian arms rather than on U.S.-made weapon systems. Even a country like Egypt, which has received nearly $80 billion in military and economic aid over the past 30 years, has tapped from its reserves and loans from Gulf states and from suppliers in order to purchase at least $13 billion worth of arms since 2013 from France, Russia, and Germany rather than from the United States. The new CAT policy aims to encourage allies and partners to buy U.S.-made arms, including by increasing competitiveness by dropping surcharges on products and lowering the costs of transportation.

A third trend is the growing demands of client states for more substantial offsets and localization of production and maintenance, including the transfer of technology. Thus, for example, under its Vision 2030, Saudi Arabia wants to eventually subject foreign military contracts to a 50 percent localization rule, based on a partnership model that includes the sharing of technologies and skills. The Middle East’s growing armored vehicles market, which is expected to reach more than $31 billion by 2021, is an example of a growing demand for the transfer of technical knowledge which is used to strengthen an indigenous defense sector that has already begun to export its own products. Some Western European countries are more forthcoming on this issue than the United States. However, some U.S. companies have begun forming subsidiaries abroad.

Mobilizing the Whole Arms Exports “Ecosystem”

In essence, the new CAT policy is designed to improve the “mechanics” of the administration’s arms exports system. As explained by Deputy Director for the Regional Security and Arms Transfers Laura Cressey:

In sum, what we’re trying to do in this — in this whole-of-government effort looking at the arms transfer process really from soup to nuts is trying to ensure that once we have decided that a transfer of a defense capability to a partner is in the national security interest of the United States, that we are able to effectively compete and efficiently deliver the equipment to our partner as quickly as possible.

This effort is promoted by active leadership advocacy, including by the president himself, and by hands-on marketing efforts by senior officials participating in international arms-shows and by American diplomats around the globe.

Additionally, the administration is actively engaging with the U.S. arms industry, including it in the interagency process of implementing the new CAT policy. The U.S. Chamber of Commerce’s new Defense and Aerospace Export Council submitted, during the planning phase of the new CAT policy, 30 recommendations on how to improve the arms exports decision processes. Congress is also being engaged by the administration and concerns being raised, especially over possible human rights violations of client states, are being addressed at the highest levels of the administration.

Along with the reduction of surcharge and transportation costs, a number of additional steps are being taken in order to increase competitiveness. These include helping allies and partners to identify their critical needs and expediting the transfer of these capabilities. Furthermore, help for smaller allies to finance the purchase of American weapons through payment schemes may be offered. The administration is also engaging with industry to develop a strategy to deal with the issue of offset demands from clients while being able to effectively compete for sales.

Debunking Key Assumptions

Though impressive in ambition, expectation, and design, the new CAT policy is premised on a number of underlying assumptions that need to be examined. First, there are those that believe that the implementation of the new CAT policy should lead to a linear increase in annual arms exports. As Undersecretary of State for Arms Control and International Security Andrea Thompson recently projected about the level of arms exports for 2019, “the CAT policy will have been in place, we’ll have gained those efficiencies and feedback from industry and partners … so I would anticipate that would increase sales, one would think.”

However, the annual worth of arms exports tends to be uneven and dependent on what clients are seeking to buy. The sale of major and expensive weapon systems, such as warplanes, can single-handedly boost the worth of arms exports for any given year. The highest recorded year of arms sales was FY 2012 totaling $69.1 billion, but this included a single $29 billion deal for the sale of 84 F-15s to Saudi Arabia. According to the figures of the Defense Security Cooperation Agency, in FY 2014 arms exports totaled $34.2 billion, FY 2015 totaled $47 billion, FY 2016 totaled $33.6 billion, FY 2017 totaled $41.9 billion, while FY 2018 has so far totaled $46.9 billion.

Large-scale sales of major weapon systems create capacity limits in consecutive years. For example, the surge in the sale of advanced fighter jets to the Gulf countries during the Obama presidency will slow down the future sale of these high-priced items in the years to come, affecting overall totals of annual sales. Principally, the periodic military needs of clients are going to play a far larger role in determining whether the United States is going to increase foreign arms sales in the coming years than the governmental streamlining of organizations and procedures.

Moreover, as noted above, some of Washington’s major clients, such as the Gulf states and India have a deliberate policy of diversifying their arms imports. A streamlined U.S. approach to arms exports makes little difference to deliberate arms diversification strategies adopted by client countries. At its core, a policy of diversification is designed to increase leverage on the United States, to retain freedom of action, and to hedge against possible negative U.S. regional policies and to push up the quality of the capabilities being offered. Therefore, easing U.S. defense export regulations or reducing surcharge rates will not necessarily make much difference to the choices that these countries will make regarding the purchase of American versus non-American-made weapon systems.

A case in point that highlights the potency of self-serving strategic considerations on the negotiation of arms deals is Qatar. Following the severing of diplomatic ties with Bahrain, Egypt, Saudi Arabia, and the United Arab Emirates in June 2017, Qatar negotiated arms deals with multiple exporters in an attempt to overcome its regional isolation and broaden its international support and partnerships. It signed deals with the U.S. for 36 F-15s ($6.2 billion) and precision-guided munitions, with Britain for 24 Eurofighters ($6.7 billion), with Italy for helicopters ($3 billion) and for warships ($5 billion). In addition, it has negotiated deals with its regional partner Turkey ($700 million) as well as with Norway ($1.9 billion). The perception of favorable U.S. long-term regional policies by clients around the world is far more likely to increase arms sales than the enhanced processes incorporated into the new CAT policy.

Additionally, arms sales figures may be affected by other administration policy initiatives outside of CAT, such as President Donald Trump’s tariffs on steel and aluminum imports. Ironically, the imposition of these tariffs supposedly based on national security considerations could undermine U.S. defense sales by driving up prices or from retaliation from affected arms clients.

The administration also uses export rules to improve its commercial competition over other exporters dependent on U.S. components. This is pushing traditional U.S. arms production partners to become increasingly wary of continued cooperation and potentially reducing future profits from the sale of U.S. subsystems to allies and partners. A case in point is the U.S. refusal to authorize the sale of parts for the sale of the French SCALP cruise missile to Egypt. The French government is now seeking to reduce its reliance on U.S.-made components in its weapon systems in order to increase their exportability, potentially increasing future competition and reducing U.S. revenues in the future.

From a European perspective, the uncertainty surrounding Trump’s commitment to NATO’s mutual defense provision, as well as his rebukes over their financial commitments to the alliance are unsettling, especially in light of Russia’s resurgent challenges in Eastern Europe. As the French Armed Forces Minister, Florence Parly, recently said:

Can we always count, in every place and in every circumstance, on American support?…Listen to the statements of the U.S. president, read his tweets: The message sent is clear and without ambiguity…We have to count on ourselves … build a European strategic autonomy.

On the industrial front, this push for more strategic autonomy has already prompted some European countries to increase their independence in major weapon system projects, including the development of a next-generation fighter jet that will compete with the F-35, and a new tank, potentially reducing markets for the U.S. fighter.

This brings us to another set of assumptions to do with leverage: Presently, the global arms market, with the availability of comparable U.S., European, Russian, and Chinese weapon systems, is a “buyers’ market.” The prominence placed by the Trump administration on the economic value of arms sales reduces U.S. leverage over affluent clients. Presently, the administration continues to certify arms exports for Saudi Arabia’s Yemen campaign in spite of opposition from Congress, out of fear that a cutoff of support could jeopardize $2 billion in weapon sales to the U.S.’s Gulf allies.

The United States is not alone in feeling the might of the “buyers’ market.” After nixing a planned delivery of 400 laser-guided bombs to Saudi Arabia because of it’s Yemen campaign, Spain reversed its decision once more. Canceling the delivery might have jeopardized a Saudi order of five Spanish corvettes worth $2 billion, with thousands of jobs at stake. In addition, Germany has approved the delivery of weapon systems to Saudi Arabia and the United Arab Emirates in spite of a coalition deal between Germany’s ruling parties not to sell weapons to any of the sides involved in the fighting in Yemen.

The desire to increase revenues from arms exports in the present “buyers’ market” is leading the Trump administration to consider the release of previously denied advanced capabilities for export. A prime example is the administrations push to redefine the categorization of unmanned aerial aircrafts to increase America’s share of the global market, that is expected to grow in worth from about $6 billion in 2015 to $12 billion in 2025. Easing previous restrictions, the administration has also recently given permission to market armed drones to India as well as to certain countries in Europe and the Asia-Pacific. The Trump administration is also reported to be considering the sale of the F-35 to the Gulf states even though this has been a denied capability given America’s commitment to Israel’s qualitative military edge.

All told, in the booming “buyers’ arms market” the presumption of approval policy is likely to increase the diffusion of progressively more advanced U.S. military technologies and capabilities around the globe. Given the circumstances of reverse leverage, the influence of the U.S. over the use of the arms it exports is unlikely to be substantial. The United States has truly made an about face from the policy of Jimmy Carter.

 

Shimon Arad is a retired colonel of the Israeli Defense Forces. His writings focus on Middle East regional security topics.

Image: U.S. Air Force photo/Staff Sgt. Aaron Allmon