US set to lose top-gun status in global arms trade
A new study says Asia-Pacific nations are ramping up their defense industries and will outspend America and Europe by the end of the decade.
So much for beating swords into plowshares and spears into pruning hooks.
IHS (IHS) Jane's, the defense and security analysts, says global arms trade is entering a new phase of explosive growth. And it expects Asia-Pacific nations to outspend the U.S. and Europe over the next several years.
In a new study, Jane's reports that despite the worldwide economic downturn, exports and imports of arms among countries increased by 30% between 2008 and 2012 to $73.5 billion. If the current rate of spending continues, global defense trade will reach about $100 billion by 2018.
"Two things are happening: Budgets are shifting East, and global arms trade is increasing competition," said Paul Burton, a senior manager at IHS Jane's. "This is the biggest explosion in trade the world has ever seen."
The firm looked at 34,000 defense acquisition programs. Among its other findings:
Defense budgets in the Asia-Pacific region should outstrip those in the U.S. and Canada by 2021, rising 35% from current levels to $501 billion. Overall defense budgets around the world are also forecast to rise, reaching $1.65 trillion by 2021.
Israel should become the world's largest exporter of drones by year-end and is expected to sell twice as many drones as the U.S. in 2014.
Western Europe's share of the global arms and defense technology market declined from 34.5% in 2008 to 27.5% last year.
Arms and defense technology exports are up in the Asia-Pacific, with the region's global market rising to 5.4% last year, and many Asian nations doubling their exports.
China has gone from the 10th largest defense exporter in 2008 to No. 8 this year.
"China is decreasing imports as it improves its own industrial capabilities," noted Burton. "And while Beijing’s exports have doubled since 2008, South Korea's are up 688% putting it into the global top 20 with $753 million."
As for the U.S., the study says budget cuts and the military withdrawals from Iraq and Afghanistan may mean the end of U.S. dominance of the lucrative global arms market.
Reuters says U.S. defense companies like Boeing (BA) and Lockheed Martin (LMT) are approaching Japan, India and South Korea with offers "to make up for reduced spending in their Western home markets, but such deals tend to require investment in the buyers' defense industries."
"The big Western defense companies have no option -- export or shrink -- but this could be sowing the seed of their own demise," says Guy Anderson, IHS Jane's senior principal analyst. He also noted that even the U.S. is now importing "significant" amounts of foreign arms.
Gross domestic product grew at only a 1.8% rate, the Commerce Department says in its final estimate. Growth was previously reported to have risen at a 2.4% pace after stalling in the fourth quarter
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