Arms Trade and Economic Development: Theory, Policy, and Cases in Arms Trade Offsets

Downloaded by [University of Defence] at 20:12 09 May 2016 ARMS TRADE AND ECONOMIC DEVELOPMENT: THEORY, POLICY, AND CASES IN ARMS TRADE OFFSETS Countries that spend scarce resources to import arms from abroad often require arms sellers to “reinvest” part of all of the proceeds back into the arms-importing country. These so-called arms trade offsets are therefore thought to enhance domestic economic development. But does this process actually succeed? This book examines the theory and policy applications of arms trade offsets and looks at more than a dozen case studies drawn from across Europe, Africa, Asia, and the Americas. The chapters, based on original research and published here for the first time, are all written by top notch experts. That an impressive, lucid, and cohesive volume such as this will interest defence economists can be taken almost for granted. The book will also be a useful and enlightening read for those interested in international development economics, military studies, and policymakers across the globe. Jurgen Brauer is Professor of Economics, College of Business Administration, Augusta State University, Augusta, Georgia, USA and is vice-chair of Economists Allied for Arms Reduction, New York, USA. J.Paul Dunne is Professor of Economics at the University of the West of England, Bristol, UK, and chairs the UK affiliate of Economists Allied for Arms Reduction. Downloaded by [University of Defence] at 20:12 09 May 2016 Studies in defence economics Edited by Keith Hartley University of York and Jurgen Brauer Augusta State University Volume 1 European armaments collaboration: Policy, problems and prospects R.Matthews Volume 2 Military production and innovation in Spain J.Molas-Gallart Volume 3 Defence science and technology: Adjusting to change R.Coopey, M.Uttley and G.Spiniardi Volume 4 The economics of offsets: Defence procurement and countertrade S.Martin Downloaded by [University of Defence] at 20:12 09 May 2016 Volume 5 Arms trade, security and conflict P.Levine and R.Smith Volume 6 Economic theories of peace and war F.Coulomb Volume 7 From defence to development? International perspectives on realizing the peace dividend A.Markusen, S.DiGiovanna and M.Leary Volume 8 Arms trade and economic development: Theory, policy, and cases in arms trade offsets J.Brauer and J.Paul Dunne Downloaded by [University of Defence] at 20:12 09 May 2016 ARMS TRADE AND ECONOMIC DEVELOPMENT THEORY, POLICY, AND CASES IN ARMS TRADE OFFSETS by JURGEN BRAUER Professor of Economics Augusta State University Augusta, Georgia, USA and J.PAUL DUNNE Professor of Economics University of the West of England Bristol, UK Downloaded by [University of Defence] at 20:12 09 May 2016 LONDON AND NEW YORK First published 2004 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 Routledge is an imprint of the Taylor & Francis Group This edition published in the Taylor & Francis e-Library, 2005. “ To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to http://www.ebookstore.tandf.co.uk/.” © 2004 Editorial matter, selection, and introduction Jurgen Brauer & J.Paul Dunne; individual chapters, the contributors All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publisher. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloguing in Publication Data A catalogue record for this book has been requested ISBN 0-203-39230-2 Master e-book ISBN ISBN 0-203-68471-0 (Adobe eReader Format) ISBN 0-415-33106-4 (Print Edition) With appreciation and affection to our activist and professional friends and colleagues working to create a peaceful, equitable, and successful South Africa Downloaded by [University of Defence] at 20:12 09 May 2016 Contents Figures and tables viii Contributors xii Preface xvi Introduction 1 20 Part I Theory and Policy 1 Do offsets mitigate or magnify the military burden? 21 by Lloyd J.Dumas 2 Using procurement offsets as an economic development strategy 34 by Travis Taylor 3 Mandatory defense offsets—conceptual foundations 48 by Stefan Markowski and Peter Hall 4 Economic aspects of arms trade offsets 58 by Jurgen Brauer 5 Arms trade as illiberal trade 69 by Ann Markusen Downloaded by [University of Defence] at 20:12 09 May 2016 6 Defense offsets: policy versus pragmatism 92 by Ron Matthews 105 Part II Cases 7 Comparing British and German offset strategies 106 by Jocelyn Mawdsley and Michael Brzoska 8 Offsets and the Joint Strike Fighter in the UK and the Netherlands 118 by Keith Hartley 9 Nordic offset policies: changes and challenges 137 by Björn Hagelin 10 Evaluating defense offsets: the experience in Finland and Sweden 149 by Elisabeth Sköns 11 Offsets in Belgium: between Scylla and Charybdis? 163 by Wally Struys 12 The defense industry in Poland: an offsets-based revival? 171 by Stefan Markowski and Peter Hall 13 Offsets and the development of the Brazilian arms industry 185 by Sam Perlo-Freeman 14 The Argentine defense industry: an evaluation 201 by Thomas Scheetz 15 The role of offsets in Indian defense procurement policy 212 by Angathevar Baskaran 16 Offset policies and trends in Japan, South Korea, and Taiwan 228 by Michael W.Chinworth 17 Offsets and defense industrialization in Indonesia and Singapore 249 by Richard A.Bitzinger 18 Defense offsets in Australia and New Zealand 264 by Stefan Markowski and Peter Hall 19 Defense industrial participation: The South African experience 276 by J.Paul Dunne and Guy Lamb 20 Defense offsets and regional development in South Africa 289 by Richard J.Haines Index 309 Downloaded by [University of Defence] at 20:12 09 May 2016 Figures and tables Figures Figure 2.1 Procurement policy matrix 38 Figure 3.1 Countertrade 51 Figure 3.2 Local content 53 Figure 3.3 Bundling 55 Figure 5.1 Horizontal relations in international arms supply and 7 2 demand Figure 5.2 Diagonalized relations in international arms supply and 7 3 demand Figure 5.3 US offset transactions by type, 1993–1997 76 Figure 6.1 Spectrum of offset policy possibilities 95 Downloaded by [University of Defence] at 20:12 09 May 2016 Figure 6.2 Offset strategy matrix 96 Figure 6.3 Development through offset technology 99 Figure 178 Illustrative offset transaction 12.1 Figure Brazilian exports of major conventional weapons, 1974- 187 13.1 2001 Figure 253 The arms production ladder 17.1 Tables Table Industry ranking according to technology-intensity of 40 2.1 production Table 41 Turnkey contracts in procurement 2.2 Table 77 Military expenditure 1985, 1990, 1994, 1998 5.1 Table 70 Arms exports, Britain, France, US 1989, 1996, 1999 5.2 Table 75 Direct and indirect offsets in the US, 1993-1997 5.3 Table 85 Top-10 arms producing countries, 1998 5.4 Table 122 UK defense equipment imports 8.1 Downloaded by [University of Defence] at 20:12 09 May 2016 Table 125 Overall evaluation: a UK perspective, 2000 8.2 Table 133 Overall evaluation: a Netherlands perspective, 2001 8.3 Table 138 Year of published offset policies, guidelines, and revisions 9.1 Table 139 Limits for demanding 100 percent offsets 9.2 Table 179 F-16 master offset agreement 12.1 Table 192 Embraer aircraft production, 1980-1999 13.1 Table 196 Assessment of Brazil’s arms industry 13.2 Table 209 Argentina, military-run industry at moment of privatization 14.1 Table Foreign exchange requirements of Indian defense forces and 217 15.1 industry between 1950 and 1972 (US$ million-1972) Table Estimated foreign exchange requirements for direct military 218 15.2 imports in India between 1950 and 1972 (US$ million-1972) Table 222 Indian weapon imports and offset arrangements 15.3 Table 230 Top-15 offset recipients 16.1 Table 231 Export and offset agreement values by country, 1999 16.2 Table 232 Japan’s defense budget, JFY 1998–2002 Downloaded by [University of Defence] at 20:12 09 May 2016 16.3 Table 237 F-15K offset package: estimated values 16.4 Table Singapore Technology Engineering’s (STE) international 258 17.1 business activities Table South Africa’s arms acquisition program 278 19 1 19.1 Table Gross Geographic Product (GGP), and GGP per person (by 291 20.1 province, 2001) Table 291 Economically active population by province, 2002 20.2 Downloaded by [University of Defence] at 20:12 09 May 2016 Contributors Angathevar Baskaran is Lecturer at Middlesex University Business School, London. His research is on export control of dual-use technologies, non-proliferation and arms control, and economic implications of strategic technology programs. He is the author of “Export Control Regimes and India’s Space and Missile Programmes,” India Quarterly, Vol. LVIII, Nos. 3/4 (2002) and of “The Impact of Export Controls on Indigenous Technology Development in India’s Space Programme,” International Studies, Vol. 38, No. 2 (2001). He can be reached at [email protected]. Richard A.Bitzinger is a Senior Research Fellow with the Asia-Pacific Center for Security Studies, in Honolulu, Hawaii. He has held research positions with the RAND Corporation, the Defense Budget Project, and the US government. He is the author of several monographs, articles, and book chapters, including Towards a Brave New Arms Industry? (Oxford University Press, 2003), “Going Places or Running in Place? China’s Efforts to Leverage Advanced Technologies for Military Use” (in The PLA After Next, SSI Press, 2000), and “Globalization in the’ Post-Cold War Defense Industry: Challenges and Opportunities” (in Arming the Future, Council on Foreign Relations Press, 1999).

Load more