In the past 20 years, the United States used the undeniable competitive advantage in manufacturing and exporting of everyday modern weapons. Disintegration of the USSR and the Warsaw contract led to a sharp reduction in military spending and reduce RF arms deliveries Moscow regional allies. At the same time, globalization has contributed to the welfare of the larger companies, allowing South American defense contractors to profit thanks to their capacity and huge orders from the armed forces of various countries. The formula was is ordinary: producing different kinds available, but modern weapons, the Pentagon and its contractors could outshine any competitor though. At stake predominance in world trade instrument and related economic and geopolitical benefits that the U.S. does not want to lose.
But the advantage is lost evenly. In the 1990s. The United States controlled 60% of the world market in this field. Now — only about 30%. Focusing on the development of advanced and developing incredibly expensive defense systems, Washington gave foreign competitors the opportunity to enter the market with a convenient offer at an affordable cost. Because of this, our homeland uniformly returned their positions, and several other countries, including China, Israel and South Korea, are converted into the principal suppliers.
In any program there was no such errors threatening the U.S. defense industry, both in the draft Strike Fighter F-35, which is recognized at the moment even his most optimistic supporters, was a disaster for Procurement. At the end of the war cool experts talked about the F-35 as the plane that will change the world market. It was intended to substitute 3-American fighters, and it was planned a long time to create a home. This, in turn, would sell the F-35 abroad at relatively low cost, as the development costs would be amortized over a long period of production. As stated then, the only thing that would remain foreign producers — is the creation of plans to throw their own weapons, and to hold re-become part of the global supply chain F-35.
Australian Defence Minister Stephen Smith (Stephen Smith, left) in the airframe F-35A, which will be handed Air Force (August 2012). Source: theage.com.au
But after September 11, 2001 military spending restrictions were lifted, and the price of the F-35 has jumped sharply, and he turned into one of the sad recognized «gold» of American weapons systems. Different military units U.S. insisted on additional technical properties of F-35, which became the monetary «black hole». Defense procurement process is so complex that to assess the prices are very hard, but even the most optimistic calculations, the F-35 will cost 75% more expensive than anticipated in 2001. Now program from 38% of the procurement budget of the Pentagon, including all of today’s weapons systems. Shock of prices led many buyers, including key allies — Australia, Italy and England — postpone or reduce orders.
Fighters F-35B at the Naval Station Patuxent River (Maryland, USA). Source: www.defensenews.com
F-35 — not a unique case. According to Head U.S. Government Accountability Office, half of the programs of material equipment is beyond the scope of the Pentagon’s own budget. Lost by the United States position in world trade instrument — not just another blow to an already weakened domestic economy (in the aerospace industry of the country occupied by more than 600 thousand people). In the past the ability to arm allies enable Washington to strengthen the power of his friends and for all that receive funds. Having lost its leading position in the global arms market, the United States lost a fundamental tool of foreign policy.
Curse of the monopolist
After the Gulf War (1991) to consumers in the world was saying that the South American instrument — the best on the market. And taking into account that the U.S. squandered on military research and development more than the rest of the world, it is logical that the South American companies can boast such powers as the development of «stealth», which could offer no other.
But as the South American military budget was inflated after 2001, when Washington began a «war against terrorism», defense companies and the Pentagon did not pay attention to the cost of armaments. Congress opened the purse, the domestic demand for increased high-tech weaponry and monetary restrictions on the purchase of new products withdrawn. Possessing a large amount of funds, the industry was looking forward to the golden age of sales. Kerf and investors. After September 11, the shares of large defense contractors rose sharply in value.
Now mundane weapons such as aircraft and missiles, require the use of the latest achievements of engineering. Since development costs are rising to astronomical values, the unit price may be reduced only by increasing production. Because exports are important principle — any additional sale of weapons reduces the unit price. The volume of orders Pentagon vastly superior procurement of the Defence Ministry or European countries, South American and so have enough weapons programs from long life, even if only buyer remain its own armed forces. Already due to this factor the unit price of the South American guns should be relatively lower.
But in the last 10 years, the United States, I am confident that buyers simply no other alternatives are a victim of the «curse of monopoly.» Since Washington gave carte blanche to the Pentagon, which had fought in Afghanistan and Iraq, representatives of military structures did not occur to him that most of the states can not do without improved fighter «stealth» and the newest warships. Typically, the least pretty fully scaled technologies. So Makar, rising prices for South American products to foreign consumers forced to turn to other suppliers. In January 2011, for example, instead of the order at the American companies Lockheed Martin and Boeing India decided had spent 11 billion dollars on the Rafale fighter jet of the French company Dassault Aviation. This was the first sale of Rafale over the limit, and thanks to a deal the aircraft suddenly acquired competitiveness in the world.
Obviously, some buyers as before to pay for first-class South American instrument. Gulf countries retain their orders due to the highest oil prices and instability in the region. For example, in 2010 the U.S. Congress approved a 10-year 60-billion deal with Saudi Arabia, which includes the acquisition of the most advanced fighter in the world. But even the Saudis seek to diversify its own suppliers, purchasing Eurofighter fighter in England and going to buy helicopters from Russia. It should be noted that these buyers, as in the Gulf, and the smallness of their sample becomes less significant because Washington’s strategic focus shifts towards Asia.
Brand new arms race
If the reduction of the American market was bit of a purely economic problem, could not pay special attention to this, believing that the defense branch, which has an obligation to its shareholders, at some point, will be required to reform the business strategy and cut costs. But unlike other sectors, trade instrument has geopolitical component, especially taking into account the export boom in Asia amid the general economic growth.
If Washington concludes the sale of weapons, the partner country is unlikely to use it against the interests of the United States, as this would put at risk itself access to these weapons. So Makar, the more guns implements Washington, so basically he is in control of security solutions adopted abroad. In other words, using their power in the market, Americans can achieve fundamental foreign policy goals. So, in 2005, Washington has stopped access to the Israeli F-35 program there, to force him to finish the sale of devices for the drones to China. The U.S. has used a similar strategy to prevent the delivery of Brazilian and Spanish planes to Venezuela.
Offset Washington’s interests towards Asia implementation tools gave him the opportunity to equip their own Pacific allies and immediately hold in isolation Beijing. This can be done directly, for example, when the United States use their own access to the domestic market weapons to force EU countries to adhere to the embargo on weapons to China, introduced in 1989, after the Tiananmen Square massacre. But there are also indirect methods. Leveraging its competitive advantage to reduce the export market of the Russian Federation, the United States is able to do the main supplier of weapons to China less cute.
In recent years, Our homeland also achieved significant success in Asia. Companies such as «dry», a large Russian aircraft manufacturer, understand that they can not exist, relying only on domestic orders. In the past 10 years, the company successfully sold relatively cheap fighters Indonesia and Malaysia. Activated and European manufacturers. Since 1990, European companies have developed very little two new fighter in addition to the French Rafale. Sweden has set its own single-engine Gripen Hungary and Thailand; Fighter Eurofighter, which is collected by 4 assembly lines in Europe, which is very inefficient, yet was sold to Austria and Saudi Arabia.
Meanwhile, signs that the United States is losing ground in the field of armaments, became dark, and in Asia. Naikrupneyshim weapons supplier to Pakistan is now China, Singapore buys French ships, and the Philippines for the first time in the history of non-US merchants seek out aircraft. These countries do not need very latest high-tech weaponry, they are interested in the average level of weapon that they can afford for themselves. Washington obviously does not realize gun China or Russia, and India makes only limited purchases. South Korea, a U.S. ally davneshny, made its rapidly growing military industry and produces, for example, diesel submarines, which are exported to Indonesia. If Washington wants to retain a leadership role in Asia, need to regain lost ground in the arms market.
All these configurations can have a destabilizing effect. While the United States risks losing the role of the main supplier of weapons in the region, the number of manufacturers will only grow, since small countries entering the market, there is no other choice except as export-oriented in order to survive and uniformly expand business. They need to create as much as possible. South American companies, by contrast, can allow themselves to be more selective in its approach to the export volumes due to tremendous domestic market. Washington may limit supply by reducing the amount of new weapons in the world. From the standpoint of security and stability is bezproigryshno.
Easy, but better
But there is a great announcement: many competitive advantages of U.S. defense industry — the scale of the economy, development budgets, which as before costs exceed the rest of the world, and proven quality products — will continue into the foreseeable future. Washington can and should use these properties to dominate the global network of military products, with all this, Europe and other countries the average level should be included in this system, Russian exports to throw outside, and defense ability of China — to control.
Any administration urges reform Pentagon procurement process, but the result does not justify the hopes. Instead of fighting for the complete transformation of politicians should aim to make their own configuration with the highest rate of return. Pure white house (with the support of Congress) is to force the Ministry of Defence and its suppliers do what they were not inclined to do in the past: under strict civilian control work on more conventional and profitable tool for the global market instead of the development and production of sophisticated weaponry superfluous for home use.
Increased military spending does not help. Terms of serial production of weapons in the U.S. has long been superior to a competitive period, and the experience of the last decade allows to imagine that any merit efficiency associated with large purchases, only converted into the highest income and defense companies increasingly prodigious tool for the Pentagon. The secret is not to had spent more money and to them had spent more appropriate.
Paradoxically, but in order to increment zabugornogo market share, Washington should be ready to buy a certain number of weapons abroad. The threat of foreign competitors to import products would force American manufacturers to keep costs under control and would increase their competitiveness in the world. Fundamentally recognize that the United States decides to take the gun abroad order size guarantees that Washington will immediately become an important client. To provide South American impact gun does not have to be a South American production. In addition, other countries are more likely to borrow from Washington, knowing that their own products has the ability to get to the large U.S. market.
Take the tender for the procurement of aircraft for helical nevysokotehnologichnyh counterterrorism operations Afghan Air Force, recently conducted by the Pentagon. Latin American Air Force refused to purchase the initial solution A-29 Super Tucano Brazilian company Embraer — plane tested in combat and the Air Force has used six of which had to actually collect one hundred percent in America — after protests in Arkansas based company Hawker Beechcraft, the same plane which is still under development. Possible result would be higher costs, delays, disproportionate rates of product and its mission, an increased chance of «Taliban» to win and cooling of relations with Brazil, one of the fastest growing global powers and a large importer of ordinary weapons.
Light attack aircraft A-29 Super Tucano.
During the transition from expensive weapons systems South American defense industry should not forget that the usual — does not mean primitive. Instrument should be readily available at a cost effective and attractive to the world market. In addition to increased exports, more regular production has another advantage: it is easier to create. Less possibility of delivery delays due to unavailability of technology or the need to revise the rules of maintenance. But most importantly — applets poordinarnee reduce informational advantage of the defense industry and the Pentagon and civilian control will be more productive.
As a result, specifically civilian leaders, not members of the armed forces and defense industry must determine which instrument will be developed, and be responsible for it, since such decisions can have dire strategic consequences. The current approach — the creation of a small amount of a superweapon, which has no analogues that wish to have only a few countries, and that undermines the country’s military budget — it’s not a great strategy, it is a policy devoid of strategy in general. At the moment, America develops advanced weaponry so that it might be frightening enemy, not allowing to apply their own gun in a fit of anger. Instead you need to focus on how to prevent the creation of a significant part of foreign guns.
About the creators
Jonathan Coverly — Associate Northwest Institute.
Ethan Kepshteyn — Doctor in Austin Texas Institute, a visiting doctor at Georgetown Institute and a senior fellow at the Center modern American security.