Arms industry

History

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Painting shells in a shell filling factory during World War I.

During the early modern period, England, France, the Netherlands and some states in Germany became self-sufficient in arms production, with diffusion and migration of skilled workers to more peripheral countries such as Portugal and Russia.

The modern arms industry emerged in the second half of the nineteenth century as a product of the creation and expansion of the first large military–industrial companies. As smaller countries (and even newly industrializing countries like Russia and Japan) could no longer produce cutting-edge military equipment with their indigenous resources and capacity, they increasingly began to contract the manufacture of military equipment, such as battleships, artillery pieces and rifles to foreign firms.

In 1854, the British government awarded a contract to the Elswick Ordnance Company for the supply of his latest breech loading rifled artillery pieces. This galvanized the private sector into weapons production, with the surplus being increasingly exported to foreign countries. Armstrong became one of the first international arms dealers, selling his weapon systems to governments across the world from Brazil to Japan.^[6] In 1884, he opened a shipyard at Elswick to specialize in warship production—at the time, it was the only factory in the world that could build a battleship and arm it completely.^[7] The factory produced warships for many navies, including the Imperial Japanese Navy. Several Armstrong cruisers played an important role in defeating the Russian fleet at the Battle of Tsushima in 1905.

In the American Civil War in 1861 the North had a small but cognizable advantage over the south due to its ability to produce (in relatively small numbers) breech-loading rifles for use against the muzzle-loading rifled muskets the were largely the sole variety of shoulder arm utilized by the south. This began the transition to industrially produced mechanized weapons such as the Gatling gun.^[8]

This industrial innovation in the defense industry was adopted by Prussia in 1866 & 1870–71 in its defeat of Austria and France respectively. By this time the machine gun had begun entering into the militaries. The first example of its effectiveness was in 1899 during the Boer War and in 1905 during the Russo-Japanese War. However, Germany were leaders in innovation of weapons and used this innovation nearly defeating the allies in World War I.

In 1885, France decided to capitalize on this increasingly lucrative form of trade and repealed its ban on weapon exports. The regulatory framework for the period up to the First World War was characterized by a laissez-faire policy that placed little obstruction in the way of weapons exports. Due to the carnage of World War I, arms traders began to be regarded with odium as "merchants of death" and were accused of having instigated and perpetuated the war in order to maximize their profits from arms sales. An inquiry into these allegations in Britain failed to find evidence to support them. However, the sea change in attitude about war more generally meant that governments began to control and regulate the trade themselves.

Stacks of shells in the shell filling factory during World War I.

The volume of the arms trade greatly increased during the 20th century, and it began to be used as a political tool, especially during the Cold War where the United States and the USSR supplied weapons to their proxies across the world, particularly third world countries (see Nixon Doctrine).^[9]

Sectors

The AK series of weapons have been produced in greater numbers than any other firearm and have been used in conflicts all over the world.

Land-based weapon

This category includes everything from light arms to heavy artillery, and the majority of producers are small. Many are located in third world countries. International trade in handguns, machine guns, tanks, armored personnel carriers, and other relatively inexpensive weapons is substantial. There is relatively little regulation at the international level, and as a result, many weapons fall into the hands of organized crime, rebel forces, terrorists, or regimes under sanctions.^[10]

Small arms

The Control Arms Campaign, founded by Amnesty International, Oxfam, and the International Action Network on Small Arms, estimated in 2003 that there are over 639 million small arms in circulation, and that over 1,135 companies based in more than 98 different countries manufacture small arms as well as their various components and ammunition.^[11]

Aerospace systems

British Mark V Tank

Encompassing military aircraft (both land-based and naval aviation), conventional missiles, and military satellites, this is the most technologically advanced sector of the market. It is also the least competitive from an economic standpoint, with a handful of companies dominating the entire market. The top clients and major producers are virtually all located in the western world and Russia, with the United States easily in the first place. Prominent aerospace firms include Rolls Royce, HAL(Hindustan aeronautics limited) BAE Systems, Dassault Aviation, Sukhoi, Mikoyan, EADS, Leonardo, Thales Group, Lockheed Martin, Northrop Grumman and Boeing. There are also several multinational consortia mostly involved in the manufacturing of fighter jets, such as the Eurofighter. The largest military contract in history, signed in October 2001, involved the development of the Joint Strike Fighter.^[10]

Naval systems

Some of the world's great powers maintain substantial naval forces to provide a global presence, with the largest nations possessing aircraft carriers, nuclear submarines and advanced anti-air defense systems. The vast majority of military ships are conventionally powered, but some are nuclear-powered. There is also a large global market in second-hand naval vessels, generally purchased by developing countries from Western governments.^[10]

Cybersecurity industry

The cybersecurity industry is becoming the most important defense industry as cyber attacks are being deemed as one of the greatest risks to defense in the next ten years as cited by the NATO review in 2013.^[12] Therefore, high levels of investment has been placed in the cybersecurity industry to produce new software to protect the ever-growing transition to digitally run hardware. For the military industry it is vital that protections are used for systems used for reconnaissance, surveillance and intelligence gathering.

Nevertheless, cyber attacks and cyber attackers have become more advanced in their field using techniques such as Dynamic Trojan Horse Network (DTHN) Internet Worm, Zero-Day Attack, and Stealth Bot. As a result, the cybersecurity industry has had to improve the defense technologies to remove any vulnerability to cyber attacks using systems such as the Security of Information (SIM), Next-Generation Firewalls (NGFWs) and DDoS techniques.

As the threat to computers grows, the demand for cyber protection will rise, resulting in the growth of the cybersecurity industry. It is expected that the industry will be dominated by the defense and homeland security agencies that will make up 40% of the industry.^[13]

International arms transfers

According to research institute SIPRI, the volume of international transfers of major weapons in 2010–14 was 16 percent higher than in 2005–2009. The five biggest exporters in 2010–2014 were the United States, Russia, China, Germany and France, and the five biggest importers were India, Saudi Arabia, China, the United Arab Emirates and Pakistan. The flow of arms to the Middle East increased by 87 percent between 2009–13 and 2014–18, while there was a decrease in flows to all other regions: Africa, the Americas, Asia and Oceania, and Europe.^[14]

SIPRI has identified 67 countries as exporters of major weapons in 2014–18. The top 5 exporters during the period were responsible for 75 percent of all arms exports. The composition of the five largest exporters of arms changed between 2014–18 remained unchanged compared to 2009–13, although their combined total exports of major arms were 10 percent higher. In 2014–18 there can be seen significant increases in arms exports from the US, France and Germany, while Chinese exports rose marginally and Russian exports decreased.^[14]

In 2014–18, 155 countries (about three-quarters of all countries) imported major weapons. The top 5 recipients accounted for 33 percent of the total arms imports during the period. The top five arms importers - Saudi Arabia, India, Egypt, Australia and Algeria - accounted for 35 percent of total arms imports in 2014–18. Of these, Saudi Arabia and India were among the top five importers in both 2009–13 and 2014–18.

In 2014–18, the volume of major arms international transfers was 7.8 percent higher than in 2009-13 and 23 percent than that in 2004–08. The largest arms importer was Saudi Arabia, importing arms majorly from the United States, United Kingdom and France. Between 2009–13 and 2014–18, the flow of arms to the Middle East increased by 87 percent. Also including India, Egypt, Australia and Algeria, the top five importers received 35 percent of the total arms imports, during 2014–18. Besides, the largest exporters were the United States, Russia, France, Germany and China.^[14]

World's largest arms exporters

Figures are SIPRI Trend Indicator Values (TIVs) expressed in millions. These numbers may not represent real financial flows as prices for the underlying arms can be as low as zero in the case of military aid. The following are estimates from Stockholm International Peace Research Institute.^[15]

2020 Rank	Supplier	Arms Exp (in billion TIV)
1	United States	9,372
2	Russia	3,203
3	France	1,995
4	Spain	1,232
5	Germany	1,201
6	South Korea	827
7	Italy	806
8	China	760
9	Netherlands	488
10	United Kingdom	429

Sgraffito at the Lambert Sevart weapons factory, in Liege (Belgium) (early 20th century).

Overall global arms exports rose of about 6 per-cent in the last 5 years compared to the period 2010-2014 and increased by 20 per-cent since 2005–2009.^[16]

Note that rankings for exporters below a billion dollars are less meaningful, as they can be swayed by single contracts. A much more accurate picture of export volume, free from yearly fluctuations, is presented by 5-year moving averages.

Next to SIPRI there are several other sources that provide data on international transfers of arms. These include national reports by national governments about arms exports, the UN register on conventional arms and an annual publication by the U.S. Congressional Research Service that includes data on arms exports to developing countries as compiled by U.S. intelligence agencies. Due to the different methodologies and definitions used different sources often provide significantly different data.

World’s largest postwar arms exporter

Share of arms sales by country in 2013. Source is provided by SIPRI.^[17]

SIPRI uses the "trend-indicator values" (TIV). These are based on the known unit production costs of weapons and represent the transfer of military resources rather than the financial value of the transfer.^[18][19]

1950–2019 Rank	Supplier	Arms Exp (in billion TIV)
1	United States	692,123
2	Russia	598,375
3	United Kingdom	143,205
4	France	125,932
5	Germany	87,431
6	China	56,160
7	Italy	33,296
8	Czech Republic	31,291
9	Netherlands	24,543
10	Israel	17,643

World's largest arms importers

Units are in Trend Indicator Values expressed as millions of U.S. dollars at 1990s prices. These numbers may not represent real financial flows as prices for the underlying arms can be as low as zero in the case of military aid.^[18]

2020 Rank	Recipient	Arms Imp (in billion TIV)
1	India	2,799
2	Saudi Arabia	2,466
3	Australia	1,658
4	South Korea	1,317
5	Egypt	1,311
6	China	811
7	Qatar	783
8	United Kingdom	764
9	Pakistan	759
10	Japan	724

Arms import rankings fluctuate heavily as countries enter and exit wars. Export data tend to be less volatile as exporters tend to be more technologically advanced and have stable production flows. 5-year moving averages present a much more accurate picture of import volume, free from yearly fluctuations.

List of major weapon manufacturers

This is a list of the world's largest arms manufacturers and other military service companies who profit the most from the War economy, their origin is shown as well. The information is based on a list published by the Stockholm International Peace Research Institute for 2020.^[20] The list provided by the SIPRI The numbers are in billions of US dollars.

Rank	Company name	Defense Revenue (US$ billions)	% of Total Revenue from Defense
1	Lockheed Martin	53.2	89%
2	Boeing	33.5	44%
3	Northrop Grumman	29.2	86%
4	Raytheon Technologies	25.3	87%
5	General Dynamics	24.5	62%
6	Aviation Industry Corporation of China	22.4	34%
7	BAE Systems	22.2	95%
8	China Electronics Technology Group	15.0	46%
9	Norinco	14.5	22%
10	L3Harris Technologies	13.9	77%
11	United Technologies (since April 2020 Raytheon Technologies)	13.1	17%
12	Leonardo S.p.A.	11.1	72%
13	Airbus	11.0	14%
14	Thales Group	9.4	46%
15	Almaz-Antey	9.4	98%

Arms control

Arms control refers to international restrictions upon the development, production, stockpiling, proliferation and usage of small arms, conventional weapons, and weapons of mass destruction.^[21] It is typically exercised through the use of diplomacy, which seeks to persuade governments to accept such limitations through agreements and treaties, although it may also be forced upon non-consenting governments.

Notable international arms control treaties

Global weapons sales from 1950-2006

• Geneva Protocol on chemical and biological weapons, 1925
• Outer Space Treaty, signed and entered into force 1967
• Biological Weapons Convention, signed 1972, entered into force 1975
• Missile Technology Control Regime (MTCR), 1987
• Chemical Weapons Convention, signed 1993, entered into force 1997
• Ottawa Treaty on anti-personnel land mines, signed 1997, entered into force 1999
• New START Treaty, signed by Russia and the United States in April 2010, entered into force in February 2011
• Arms Trade Treaty, concluded in 2013, entered into force on 24 December 2014.^[22]

See also

References

External links

• Amnesty International: Arms Trade
• The British Library – Defence Industry Guide (sources of information)
• FAS's Arms Sales Monitoring Project
• The Guardian's arms trade report
• List of participators of the Defense System and Equipment international conference in London, 2003
• SIPRI arms industry reports and database
• SIPRI list of Top 100 arms-producing companies
• SPADE Defense Index (NYSE: DXS) Defense sector market index
• The True Cost of Global Arms Trade [infographic included]
• UN Office for Disarmament Affairs
• U.S. Arms Sales to the Third World from the Dean Peter Krogh Foreign Affairs Digital Archives
• World Map and Chart of Arms exports per country by Lebanese-economy-forum, World Bank data
• World Security Institute's Center for Defense Information
• Z. Yihdego, Arms Trade and International Law, Hart: OXford, 2007