The ANNALS of the American Academy of Political and Social Science

This article examines the impact of the changing structure of the international system on various aspects of the arms trade. The passing of the Cold War allows for comparative analysis of three distinct international systems: the interwar, the postwar or Cold War, and the emerging post-Cold War period. This involves gauging the impact of changing system structure (bipolarity, multipolarity), the degree of ideological conflict at the big-power level, alliance patterns, rates of military technological change, and so forth on such aspects of the arms trade as supplier markets, patterns of supplier-recipient relations, transfer modes, and levels of arms dependency by recipients. The emerging post-Cold War period already appears to evidence some trends in arms transfer patterns reminiscent of the interwar period, specifically those involving the depoliticization and denationalization of that trade. The impact of the Military Technical Revolution in an era of contracting global arms transfers is viewed as crucial to the emerging arms trade.

More attention has focused on the issue of arms transfers since Iraq, with an inventory based exclusively on foreign military technology, invaded Kuwait. Political and academic analysts of the issue are handicapped by the absence of an agreed set of data with which to work. Given that different analytical tasks require different data sets, this article reviews the types of data that could be of value. Using the aggregate data that are available, the article tries to identify trends in the trade in major conventional weapons and assess which of these trends are transient—an interim adjustment to the end of the Cold War—and which might be more long-lived. Finally, the article offers a projection of macrotrends over the medium term.

In the current environment of excess capacity in the arms industry in combination with a continuing trend of rising research and development costs in this sector, companies have become increasingly active in attempting to apply strategies of internationalization to arms-producing activities. At the same time, the end of the Cold War has led to a relaxation in government attitudes toward military technology transfers within a broad group of industrialized countries. This article discusses three basic forms of internationalization: exports, foreign direct investment, and international cooperation arrangements. Cross-border merger and acquisition activities are mainly concentrated in Western Europe, in particular in the aerospace and electronics sectors, but there are also examples of international restructuring outside these areas. International cooperation projects with the Russian arms industry have been limited in number and scope, due to their uncertain future prospects.

Likely trends in the supply side of the arms trade are examined, considering the opportunities and motives available to key actors and the changing international system that constrains their options. Among suppliers, the United States remains predominant, if somewhat more commercially than hegemonically oriented than in the past. Despite reassertive efforts and lower prices in the arms field, Russian export prospects are questionable, given uncertainties over budgetary investments, lagging technology, and potentially unreliable parts production or supply. West European sales are likely to remain confined to niches, since there still are no single unified European Union production and marketing mechanisms. China, the least predictable supplier, remains on an economic arms sales push. The depressed market for third-tier suppliers seems likely to persist. The global move to restructure defense industries is likely to lead to a shift from overproduction of finished arms, with many dual-use products emerging instead.

Arms transfers to the Middle East have been high on the international agenda since the Gulf war and the end of the Cold War. But the precise nature of recent developments, and the underlying motivations and forces that have produced the current pattern of weapons proliferation in the region, are poorly understood. A close examination of the data suggests that arms transfers to the Middle East have actually declined in the 1990s, following similar patterns manifest around the world. In addition, by shifting the focus away from arms transfers, toward overall changes in weapons arsenals and the relationship between weapons and armed forces, one can gain some insight into the underlying motives that drive regional arms acquisitions. These motives can be regional, systemic, or internal, and they interact in such a way as to enormously complicate the process of security building in the Middle East.

More than thirty years of research on the positive or negative consequences of various military activities for the civilian sector has failed to yield strong and unambiguous evidence one way or the other. This article briefly describes the history of this gunsversus-butter controversy, noting the close relationship between U.S. policy needs and the response of the research community. The article then focuses on the debate over the role that arms transfers, military assistance, and defense industries play in Third World economic growth and development. Finally, it assesses the relevance of the debate for today's post-Cold War world.

When a government acquires a product from foreign sources, some financial transaction must occur. Countries may pay cash, borrow funds to pay for the goods over time, provide other goods in return, or receive the goods on a grant basis. With respect to commercial goods, such as aircraft, power generation equipment, and telecommunications products, methods of financing are well known, and an international framework disciplining such practices has gradually been established. Financing involving the defense trade is much more opaque, however, and there are no international agreements governing such transactions. With the end of the Cold War, and the sharp decline in military assistance formally available from the superpowers, the issue of how arms sales are financed will become more important for purchasers and vendors. This article will review the means by which arms sales have been and are financed and will discuss the possibility of increasing information and international discipline on financing practices.

The end of the Cold War has forced the world's military-industrial complex to concentrate on technological niches rather than broad technological thrusts. The decline in defense budgets and the cutbacks in defense production will erode military capabilities in the developed world, allowing the Third World to catch up in key niches.

Defense conversion has not succeeded to date, and is unlikely to succeed on anything like the scale of the previous military production or to absorb significant numbers of unemployed defense workers. The military-industrial complex should be allowed to consolidate and contract while new business formation among former defense workers, researchers, and engineers should be encouraged. In the long run, entrepreneurship will likely prove more beneficial and productive than trying to keep alive the kinds of enterprises that served the needs of the Cold War.

Interest in restraining the conventional arms trade has intensified in the aftermath of the collapse of the Soviet Union and the Persian Gulf war as well as in the face of continuing hostilities in Bosnia, Somalia, and elsewhere. Analysts differ considerably, however, over whether the new features of the post-Cold War security landscape create an environment more conducive or more hostile to future arms trade restraint. Developed and developing countries must cooperate on technology transfer and other aspects of the conventional arms trade problem to devise new approaches to replace traditional efforts focused on constraining supply that are virtually doomed to failure in the future. The need for nontraditional approaches is especially strong in the face of the difficulties for both suppliers and recipients in balancing the competing and complex political, economic, and security interests at work in arms transfer decisions. New approaches should be built on the foundations of the initiation of supplier-recipient dialogues, intensified regional arms control efforts, and heightened transparency and confidence building in arms trade transactions.

Arms transfers between sovereign states have become a key and controversial ingredient of international relations. Many historians would argue that American military supplies were instrumental in winning the three critical wars of this century: World War I, World War II, and the Cold War. Critics have advocated increased limits on arms sales on the grounds that they are a cause of war and have led to disastrous, entangling confrontations, including the Vietnam war. The end of the Cold War has witnessed a return to nationalism, not a new world order based on internationalism. The economic pressures to export arms are growing while demand is increasing in the new conflict regions. But many would-be purchasers of advanced arms cannot afford the high costs of modern weaponry. Most regional conflicts today, however, do not use the high-tech wizardry displayed during Desert Storm but rather rely on the traditional instruments of twentieth-century slaughter: small arms, mines, mortars, and artillery.

With the end of the Cold War and superpower rivalry, policymakers will want to know more about more common types of conflict and the transfers of conventional arms needed to fight them. Unfortunately, as interest in arms transfer intelligence increases, the relative amount of money available to track and analyze this trade is likely to remain stable or decline. Improvements in arms trade intelligence are possible, however, if intelligence agencies are willing to risk prioritizing and, arguably, narrowing their focus to those aspects of the trade that have not yet received the attention they deserve. Here key opportunities include defining arms trade intelligence to exclude the proliferation of strategic weapons or the arming of terrorist organizations; substituting unclassified academic analysis for current, less critical classified tasks; and experimenting with market mechanisms to discipline how policymakers task the arms transfer intelligence community.

Revolutionary changes now taking place in the technology of war may have a significant impact on the character of the international trade in arms. Some analysts argue that a Military Technical Revolution is now under way, as military organizations begin exploiting a wide variety of new technologies through organizational adaptation and doctrinal innovation. The result will be fundamental change in the ways wars are fought, just as the blitzkrieg and the aircraft carrier revolutionized warfare following World War I. Among the significant new technologies often identified are information systems, including advanced sensors, communications, and data processing, long-range precision guided weapons, and advanced simulation techniques. If these views are correct, the international trade in arms will undergo a fundamental transformation. While specialized defense hardware will remain, dual-use equipment will become increasingly central to the performance of advanced military forces. As a result, it will become more difficult to track the implications of trade in defense-related hardware simply by monitoring transfers of major weapons systems.

Since the mid 1980s, the black and gray arms markets have emerged as major forces in the arms trade. Though they are much smaller than the orthodox trade, covert transfers are of great importance, providing the weapons most likely to actually be used in conflict. The totally illegal black market arises in reaction to embargoes. It is antipolicy, the mirror image of official intentions. The state-sponsored gray market, although it receives less attention, is much larger and more destabilizing. The gray market represents policy in flux as governments experiment with new and risky diplomatic relationships. There is much that can be done to bring the covert arms trade under control, especially through more aggressive law enforcement and radical extension of the United Nations Arms Register. Only collective security mechanisms, though, offer any hope of eradicating the covert arms trade.

Research in arms transfers over the past decades has greatly increased our knowledge, but in a somewhat uneven fashion. With the end of the Cold War, arms transfers take place in a new international system. It appears that the most useful research at this stage—and given the limitations on the quantitative information available—should involve factual description of the different stages of arms transfers, the parties, their interests, the legal aspects, and the mechanics of arms transfers; harder information on the economic aspects of arms transfers, including the effects of offsets, of transfer of technology, and of joint development and production; identification of general trends and of characteristics relevant to more general concepts; and elaboration of ways and means to bring arms transfers under better national and international control. Perhaps most important, researchers should show detachment, devoting their efforts more to establishing facts than to presenting opinions.