Arms Trade and Economic Development: Theory and Policy in Offsets (Studies in Defence Economics)

334 Pages·2004·2.43 MB·English

by  Jurgen Brauer

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.
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
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
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

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
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
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
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 72

demand
Figure 5.2 Diagonalized relations in international arms supply and 73

demand
Figure 5.3 US offset transactions by type, 1993–1997 76
Figure 6.1 Spectrum of offset policy possibilities 95
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
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