CIAO DATE: 06/02

Problems and Prospects Facing Second-Tier Arms-Producing States in the Post-Cold War Era: A Comparative Assessment ^*

Richard Bitzinger

Council on Foreign Relations
Study Group on the Arms Trade and the Transnationalization of the Defense Industry: Economic versus Security Drivers

November 2000

Note: The analyses and opinions expressed in this paper are strictly those of the author and should not be interpreted as representing those of any organization, institution, or agency, public or private.

The past decade has not been kind to the global arms industry. The end of the Cold War has resulted in a new international dynamic—military, political, and economic—which in turn has forced a severe retrenchment of defense industrial bases among the major arms-producing countries. Despite the persistence of regional conflicts around the world—many of them involving the great powers—tensions in other parts of the globe have abated considerably, and with them have gone much of the need for large defense budgets and large armed forces. As much of the world has disarmed and demilitarized, so too have the demands—and the budgets—for new weapon systems also declined. To put it bluntly, the end of the Cold War has left the world with considerably more capacity and capability to develop and produce arms than it either needs or can afford.

The impact on the global arms industry has been undeniable. Amongst the most advanced and large-scale arms-producing countries—e.g., the United States, Britain, and France—hundreds of thousands of defense workers have been made redundant and untold numbers of communities have been adversely affected as military factories have cut back production or even closed down. However much the larger arms-producing states have been pummeled by these developments, the long-term viability of these countries" defense industries has never been in doubt. These firms may contract, merge, or globalize, and governments may be compelled to internationalize their arms procurement activities, but the large arms producers are unlikely to lose their across-the-board arms production capabilities, even on a national scale. The same cannot be said for the smaller, "second-tier" arms-producing countries, however. For them, the issue is not simply one of dealing with reduced demand and excess defense industrial capacity—increasingly, it is a matter of sheer survival. In other words, can these lesser arms-producing states persevere in an increasingly competitive and globalized arms marketplace, and if so, how?

While it has long been accepted that the global arms industry is hierarchical, ¹ there is no generally agreed-upon definition of what constitutes a "second-tier" arms-producing country. ² For the purposes of this study, the first-tier of arms-producing states comprise United States, the United Kingdom, France, Germany, and Italy. Third-tier states are defined as those possessing very limited and generally low-tech arms-production capabilities; countries in this group would include Egypt, Mexico, and Nigeria. The second-tier arms producers comprise a diverse group of countries falling between these two categories. This tier includes industrialized countries possessing small and/or bounded but often quite sophisticated defense industries, such as Australia, Japan, and Sweden. It also contains a number of developing or newly industrialized countries containing modest military-industrial complexes, such as Brazil, Iran, Singapore, South Africa, South Korea, Taiwan, and Turkey. Finally, the second-tier includes China and India—states with large, broadbased defense industries but still lacking the independent R&D and industrial capacities to develop and produce highly sophisticated conventional arms. ³

Despite being a rather catholic group, second-tier countries in all these categories share a number of growing challenges to their arms industries, which are only exacerbated by the brutal realities of the post-Cold War era. Arms production in these countries is already or increasingly overcapacitized, inefficient, and cost-ineffective. At the same time, the technological and resource demands of advanced weapon systems—and advanced armaments production—have grown at a rate beyond the abilities of most of these states to keep pace. Finally, the growing availability of relatively cheap, advanced weapon systems in a saturated, post-Cold War "buyer's market" for arms has undermined much of the rationale for continuing to produce arms indigenously. As the political-military arguments for homegrown defense industries weaken and as the economic and technological barriers to domestic arms production rise, the second-tier producers find themselves increasingly at a crossroads when it comes to the future of their indigenous defense industries. ⁴

The Myths of Indigenous Arms Production

Second-tier arms producers build weapons for many reasons: to possess an indigenous and therefore secure source of armaments; to promote industrial and technological development; to save or to make money; and for reasons of pride and prestige. To a large degree, these countries succeeded in creating sizable, often impressive domestic arms industries (Table 1). Ultimately, however, the second-tier states have failed to realize their most important goals for indigenous arms production. In particular, they have not been able to achieve either autarky—that is, self-reliance in weapons design and technology—or efficiency—that is, making arms manufacturing cost-effective or deriving much in the way of economic benefits. More important, advanced arms production among second-tier arms-producing states has become increasingly unsustainable in the post-Cold War era. As the input demands of indigenous arms manufacturing—both in terms of financial resources and technology—continue to escalate, these states find themselves more and more hard-pressed to maintain even their current capacities and capabilities for armaments production.

The Myth of Self-Sufficiency

Among the second-tier arms-producing states, true self-sufficiency in arms production has largely been a misconstruction. While these countries have certainly developed a capacity to produce finished weapon systems, they have been unable to eliminate or even substantially reduce their subordination to foreign suppliers. Local arms production continues to rely heavily upon foreign inputs for weapons design, engineering and development assistance, critical components and subsystems, machine tools, and production know-how.

Defense industrialization has failed to help most second-tier arms producers attain an advanced level of independent military-technological innovation and development. Most of these countries typically possess limited or underdeveloped defense R&D bases. They tend to suffer from shortages of skilled personnel and lack the sufficient scientific and technical infrastructures to pursue breakthroughs and applied research in many critical defense technologies. ⁵ Consequently they are often deficient when it comes to indigenous capacities for weapons design, engineering, and manufacture. These deficiencies include arcane military technologies, militarily critical supporting technologies, and advanced manufacturing. ⁶

With the possible exception of a few advanced industrialized countries such as Sweden and Japan, there still exists a sizable and fixed "technology lag" between the first- and second-tier states. ⁷ Few second-tier arms producers can lay claim to significant military-technology breakthroughs. Rather, innovation remains "firmly anchored in the industrialized countries," who continue to dominate the frontiers of armaments development, further eroding the efforts of second-tier states to stay technologically competitive. ⁸ Moreover, there are few "latecomer" advantages to being an arms producer, and compared to other industrial sectors, the barriers to entry into arms manufacturing are quite high.

As a result, these countries" defense industries remain highly exposed to global forces controlling the diffusion of military technology, and for most second-tier states the goal of autarky in arms production—or even a greater degree of self-sufficiency than at present—is a rapidly receding dream. In sum, self-sufficiency has been largely reduced to a shibboleth—that is, a catchphrase to mask the fact that second-tier arms-producing states have simply replaced one form of dependency (finished weapon systems) with another (critical military technologies and subsystems).

The Myth of Economic Benefits

Arms production also brings few macroeconomic benefits. First of all, weapons manufacturing is often an "enclave industrial activity," making little overall contribution of a country's national economic progress. Anticipated spin-off or economic multiplier benefits—such as expanded resource utilization, commercially useful spin-off technologies, and workforce education and training—usually do not manifest themselves in large enough quantities as to be worthwhile. ⁹ Rather, there are continuing opportunity costs to arms production, as countries must constantly invest and innovate in order to remain globally competitive in military technology. Overall, therefore, there are few permanent industrial-developmental advantages accruing to indigenous arms production.

Moreover, second-tier arms manufacturing is rarely cost-effective. Arms production in these countries is typically geared toward meeting domestic requirements, which in turn usually means small, inefficient production runs and high unit costs. ¹⁰ In fact, in many second-tier states it is increasingly difficult to justify arms production from a profit-oriented approach. As a result, most defense-industrial sectors—particularly aerospace—depend heavily upon subsidies and protection provided by the central government, which often runs these as "prestige" industries. ¹¹

Excess production capacity has further eroded cost-effective arms production. Beginning the early 1980s, many second-tier states greatly expanded their arms-manufacturing capacities in response to existing or projected needs, only to find themselves saddled with too many workers and underutilized, high-overhead facilities. In some cases, overlapping investments and excess competition have exacerbated this overcapacity and poor economies of scale.

At the same time, it has become more economical in the post-Cold War era to purchase foreign weapons that it is to develop and produce arms indigenously. Given global overcapacities in armaments production and an international arms market that is only one-third as large as in the late 1980s, the subsequent "buyer's market" for arms has undermined some of the strongest arguments for indigenous arms production. As a result, buyers can often acquire foreign weapons that are both superior and less expensive than domestically sourced ones.

Second-Tier Arms Producers: Facing Up To the Learning Curve

Arms production is a "capital- and technology-intensive industry" requiring significant investments in equipment and personnel. ¹² Increasingly, second-tier arms-producing states lack both the financial resources and the technology—which can be regarded as a subset of wealth—to advance indigenous defense industrialization.

When countries—and especially second-tier arms producers—decide to enter into indigenous arms manufacturing, they have tended to follow a process that usually entails a series of gradual and progressive steps leading to greater sophistication and self-sufficiency in the design, development, and manufacturing of weapon systems. As such, it has often been described as the "ladder of production" (see Figure 1). According to the ladder of production, indigenous arms production is a process of transitioning from extremely high to very low levels of foreign dependency for weapons and production technologies. Initial armaments production tends to rely heavily on imported technical assistance from countries possessing already well-advanced defense industries. Most second-tier arms-producing countries start out by assembling weapon systems from imported parts and components ("knock-down kits"). The next step usually consists of the licensed production of foreign weapon systems, with some (and, in many cases, eventually nearly all) of the actual manufacturing of components and subsystems performed indigenously. This is usually followed by limited indigenous development and production of relatively simple, "low-tech" armaments—such as small arms, ordnance, or small patrol boats—along with the codevelopment of more sophisticated armaments in partnership with more advanced foreign arms producers. Particularly at these later stages in the ladder of production model, basic arms-manufacturing capabilities are increasingly supplemented by incremental improvements in the country's independent military R&D base. Accordingly, a country may attempt to indigenously produce more complex (i.e., "mid-tech") weapon systems, such as light armored vehicles or trainer aircraft. Lastly, a country may attempt to design and develop its own advanced weapon systems—such as fighter aircraft, missiles, submarines, large surface combatants, or military electronics—either across-the-board or by carving out certain niches or specialties.

Most of second-tier countries—especially those in the developing world—have largely leveled off at an intermediate stage of technology, both when it comes to the types of weapon systems they can produce indigenously and to their capacities for production (i.e., independent design and development). ¹³ Despite national security imperatives and political-military inducements pressing them onwards, these countries find themselves stuck in the middle of the ladder of production and increasingly hard-pressed to move further up. ¹⁴ As Keith Krause has put it, most second-tier producer-countries have ended up stranded on a "technology plateau," where they are either "unable to ascend to higher levels of production" or even find themselves "regress[ing] to lower rungs on the ladder" of production. ¹⁵

Ultimately, there are several flaws in the incrementalist/evolutionary ladder-of-production model of defense industrialization. First, it is too often overly deterministic, which can lead to an expectation of inevitable linear progress. Second, it is often assumed that there is a "learning curve" built into this model. In real-world situations, there tend to be quite significant start-up costs to arms production, as laboratories and research facilities must be established, factories must be built, machinery purchased, and scientists, technicians, and workers trained. Nevertheless, nations entering into arms production may do so with the assumption that they can build upon initial infrastructure investments, learning, and experiences in order to achieve cost-efficiencies later on in the arms-production process. Therefore, a country may expect the autarky-versus-efficiency (efficiency expressed in terms of resource outlays) ratio to actually improve as its defense industry progresses up the ladder of production. As Figure 2 demonstrates, while there are higher costs for each output of autarky at the lower rungs of the ladder of production (curve AB), it is conceivable that these costs would flatten out after a while (curve BCD). There is a logic to this argument: certain capital outlays, such as factory construction and the purchase of machine tools, can be paid off, and workforce skills and expertise should mature and improve. Moreover, as a country's defense R&D base advances, one might expect to see synergies and homegrown technological breakthroughs. Indeed, such a learning curve does appears to exist at the middle levels of arms manufacturing, such as moving from kit assembly to component production to fully licensed production, and when progressing to the indigenous production of simpler types of armaments (for example, small arms or trainer aircraft).

Usually, however, there is a point in the process of defense industrialization when arms production appears to become more, rather than less demanding as one attempts to move further up the ladder to production—particularly to such levels as the independent R&D and production of sophisticated weapon systems. As Figure 3 demonstrates, a country may consequently encounter a totally new—and largely unexpected—learning curve in the ladder of production model. Curve AB reflects the usual start-up costs, while the flatter part of the curve (curve BC) represents the "mature" leveling-off of resource inputs at the stage of licensed production and the indigenous development and production of simple weapon systems. The troubles begin, however, when a country attempts to advance to the higher stages of autarky in advanced weapon systems (curve CD) and it encounters a new set of nonrecurring production costs (e.g., design, development, testing and evaluation, etc.). ¹⁶

As it often turns out, the demands of indigenously developing more ambitious state-of-the-art defense technologies tend to become correspondingly more expensive—not only in absolute terms, ¹⁷ but in particular relative to most second-tiers countries" resource and technological capacities. Advanced weapon systems involving major original development efforts can require considerable inputs of additional—and generally expensive—resources in the form of scientists, engineers, technicians, equipment, and production technology. At the same time, such technology is highly perishable and must be constantly replenished, demanding still more inputs. ¹⁸

As many second-tier arms producers have attempted to move into ever more demanding technology areas, they have often discovered too late that their reach has exceeded their grasp. ¹⁹ In this regard, technonationalism—that is, the desire to demonstrate or acquire the status of being technologically advanced countries—has frequently compounded the falling into this trap. Technonationalism can often lead to hubris, and hubris usually leads to overreaching and subsequent setbacks. This has arguably been the case with many second-tier arms-producing states, particularly Brazil, South Korea, and even Japan, who all saw their ambitious plans for indigenizing arms production collide with the harsh realities of the ladder of production's learning curve. ²⁰

Post-Cold War Defense Industry Transition and Readjustment within the Second-Tier

Second-tier arms-producing states around the world face a challenging—and in some cases, grim—future. The growing economic and technological demands of advanced arms manufacturing in the post-Cold War era make it unlikely that the second tier of defense industries will expand much over the next ten to 15 years, either quantitatively or qualitatively. Particularly for developing countries, enduring deficiencies at nearly all levels of the defense industrial base—i.e., the national science and technology infrastructure, defense R&D capabilities, and advanced manufacturing and production—remain high barriers to developing, absorbing, and exploiting advanced technologies for military uses. At the same time, cost-inefficiencies in armaments production—i.e., overcapacity, and small, delayed, and drawn-out production runs—are increasing for nearly all second-tier arms producers. The increasing resource requirements of acquiring sufficient technological capabilities to move forward in armaments production almost guarantee the continued plateauing—or even the regression—of these countries" defense industrial bases on the ladder of production.

In light of these pressures and constraints, second-tier arms producers have pursued a wide variety of defense industrial readjustment strategies over the past decade (these are also summarized in Table 2):

• Brazil has largely exited the defense business, permitting much of its once-impressive arms production capabilities to dissipate. On the other hand, through a combination of calculated government support and tough corporate medicine, the country's aerospace industry has successfully carved out a lucrative niche for itself in the regional commercial jet sector.

• Chinese defense industry readjustment activities have been most successful in the areas of defense conversion and arms export promotion. On the other hand, Beijing has only half-heartedly pursued efforts to "corporatize" and "marketize" the domestic arms industry; consequently, reforms to date have largely failed to tackle the structural, organizational, and bureaucratic impediments that continue to thwart Chinese efforts to develop and produce advanced conventional weapon systems.

• South Africa has instituted a radical rationalization of its defense industry, including a significant downsizing of its workforce, exit from certain areas of arms manufacturing, and a concentration on niche production. More important, the South African defense industry has increasingly embraced globalization, and in particular it is attempting to leverage current offset programs—negotiated as part of the country's massive foreign arms purchase package—into permanent international collaborative arms arrangements.

• South Korean defense industry readjustment efforts have witnessed some consolidation—in particular, the amalgamation of three local aircraft producers into the new Korea Aerospace Industries—and even some globalization, for the first time opening up its arms industry to foreign direct investment (FDI). Otherwise, however, both industry and government have done little to eliminate excess capacity and redundancy in local arms production. Rather, there still predominates the expectation that South Korea can find new markets for its defense and aerospace products and therefore grow out of its current problems.

• Sweden has pursued the broadest and most aggressive approach toward defense industry reform and restructuring, especially focusing on consolidation, rationalization, and concentration on core competencies. In particular, however, Sweden has enthusiastically embraced the concept of defense industry globalization and is largely reorienting its defense business—through teaming arrangements, joint ventures, and FDI (both flowing in and out of the country)—to become a crucial niche player in a globalized arms industry.

• Taiwan appears to be experiencing the most frustrations with post-Cold War defense industry readjustment. It is either unwilling or unable, mainly for political and economic reasons, to abandon certain types of armaments production or to implement meaningful workforce layoffs and plant closures. At the same time, efforts at arms exports and defense conversion (particularly in the aviation sector) have proven disappointing, while local defense firms have largely failed to attract foreign investors.

Based on the experiences of these six countries, one may make some general observations regarding current defense industry readjustment efforts on the part of the second-tier states. First, except for a few partial cases (e.g., Brazil and armored vehicles, South Africa and fighter aircraft), exiting the defense business does not appear to be a widely pursued strategy. Despite growing technological hurdles, program delays, and cost overruns, other factors—particularly perceived national security imperatives, sunk investment costs, and national pride—continue to be very strong impulses acting on most second-tier arms-producing states. Therefore, apart from a handful of exceptions—e.g., Argentina and Indonesia ²¹ —current second-tier arms producers are unlikely to abandon armaments production altogether. India, for example, remains committed to its Light Combat Aircraft program, despite it being at least seven years behind schedule, as well as to its indigenous Arjun tank, which is still not operational after more than a quarter-century of development. ²²

At the same time, however, most second-tier arms producers understand that they cannot simply "stay the course" but must deal directly and purposefully with the problems of excess manufacturing capacity, preserving defense jobs, and finding new sources of revenue. In light of this predicament, therefore, every second-tier state addressed in this study has aggressively pursued arms exports as a crucial readjustment strategy. This approach has had its limitations, however. It has especially been difficult for small, newcomer arms producers to greatly expand their overseas arms sales in an already saturated global arms market that is dominated by the first-tier arms-producing states—countries who are often much more market-savvy and can frequently offer superior items at lower prices or with innovative purchase arrangements (such as offsets). Of all the cases studied here, in fact, only Sweden has experienced consistent success in exporting arms, due mainly to its already extensive experience in overseas sales and its recent partnerships with first-tiers arms producers to market its weapon systems for it (such as BAE Systems, which is promoting the Gripen on the world's arms market).

With the possible exception of South Africa, all of these six countries have also attempted to diversify into nonmilitary production. In this regard, over the past decade Brazil, China, South Korea, Sweden, and even Taiwan have scored some noteworthy successes in partly converting their aircraft industries over to commercial production, particularly in area of subcontracting to Western aerospace companies for components manufacturing. In addition, Brazil has emerged as a world-class producer of regional jets, China's missile industry has branched out into the space launch business, and both Chinese and Taiwanese shipbuilders have greatly expanded the commercial side of their businesses.

Nevertheless, diversifying into nonmilitary production has tended to more challenging than might be imagined, and in general defense conversion remains a risky business with a high potential for failure. ²³ Except for Embraer, most of the aerospace industries examined here have found it difficult to break into civil aviation manufacturing, at least at the level of systems integrator or as a major partner in collaborative aircraft programs. Sweden's Saab suffered a particularly severe setback in building commercial aircraft. Meanwhile, Brazil's space-launch business has so far been a dud. And while China has converted much of its military-industrial complex—at least in terms of industrial output—over to commercial production, many of these factories are still losing money.

Even when successful, defense diversification and increased arms exports have failed to compensate fully for contracting domestic arms markets, overcapacity, and corporate red ink. Consequently, all the second-tier arms-producing states studied here have come under increasing pressure to consolidate and rationalize their operations in the form of defense industry privatization, mergers and acquisitions, workforce layoffs, and focusing on core competencies in weapons production. And while all six have generally acknowledged the need to downsize their defense industries—particularly when it comes to shedding excess workers and closing down underutilized production lines—some countries (i.e., Brazil, South Africa, and Sweden) have made considerably more progress in this regard than others, i.e., China, South Korea, and Taiwan (and Japan as well). At the same time, many second-tier states—again, Brazil, South Africa, and Sweden, along with Israel and Singapore ²⁴ —appear to have adopted a core competencies/niche production approach to their defense industries. As a result, these countries are increasingly concentrating arms manufacturing in those areas where they have particular key strengths (and also greater export potential), while exiting other areas of production. However painful these actions may be, these countries are, over the long run, positioning themselves to be more viable and effective players in the global defense business. Overall, success as a second-tier arms producer will likely require continued downsizing and an even stronger focus on niche production.

The second-tier arms-producing states appear to be increasingly swept up in the same globalization process that is dramatically transforming the rest of the world's defense industry. The escalating resource demands of state-of-the-art arms production are driving even the first-tier producers to internationalize, in order to leverage technology breakthroughs, rationalize military R&D and production, increase efficiencies and economies of scale in arms production, and penetrate foreign markets. Since the end of the Cold War, therefore, the major defense firms in the United States and Western Europe have greatly expanded their transnational operations, in terms of teaming arrangements, strategic alliances, joint venture companies, and even mergers and acquisitions. It is important to note, too, that this globalization process has been mainly industry-led; particularly during the 1990s, it has been industry, rather than the state, that has taken the initiative in crafting an international defense industry. ²⁵

Arms production among the first-tier states has become increasingly globalized. Britain's BAE Systems, for example, is nearly as large a player in the U.S. arms market as it is in the United Kingdom or in Europe. Particularly in Western Europe, nearly all armaments production is now collaborative, and this process is increasingly rooted in joint-equity enterprises such as Eurocopter (a Franco-German helicopter producer), Matra-BAe Dynamics (an Anglo-French missile company), and Astrium (a British-French-German-Italian satellite firm). Defense industry globalization in Western Europe reached a climax in late 1999, with the announced merger of DASA of Germany, France's Aerospatiale Matra, and CASA of Spain into the new European Aeronautic, Defense, and Space Corporation (EADS).

Only in the last few years has this globalization process begun to include the second-tier states. This phenomenon does, however, appear to be accelerating, especially as second-tier arms producers increasingly see few viable, autarkic alternatives to expanding their foreign partnering, such as subcontracting, teaming, and joint ventures. In addition, nearly every second-tier producer addressed in this study either already has or else is attempting to secure some type of foreign strategic equity shareholding arrangements regarding some component of their domestic arms industries; this trend has been particularly apparent within the aerospace sector. In fact, some countries—such as Sweden—have essentially abandoned the idea of autarkic arms industries altogether and thrown open their defense sector to the global marketplace.

Finally, leveraging dual-use technologies for defense production is a strategy that has received considerable attention; surprisingly, however, it has so far witnessed little actual implementation. If some second-tier arms producers have indeed embraced the "spin-on paradigm," it is not readily apparent that they are actively engaged in "civilianizing" the process of arms production by developing and incorporating dual-use technologies. ²⁶ For one thing, despite the promise of the information technologies-based revolution in military affairs (RMA) and the potential impact of dual-use technologies on achieving this RMA, it is still highly uncertain whether many second-tier arms producers will be able to exploit this avenue of emerging military capabilities. While some second-tier states, like Sweden (and Japan and probably Israel), possess strong information technology (IT) infrastructures, the IT sectors in most other second-tier arms producers—even South Korea and Taiwan, with their sizable semiconductor and consumer electronics industries—remain spotty in terms of their indigenous R&D capabilities and therefore still heavily dependent on imported technology.

Moreover, with very few exceptions (such as Sweden ²⁷ ), linkages between dual-use IT sectors and defense industries in most second-tier countries remain weak, limiting commercial-to-military spin-on. Overall, it is unclear how these countries perceive of their local IT industries as fitting into their military-industrial complexes or how good their systems integration skills are for adapting commercial technologies to military uses—especially when it comes to building "systems-of-systems." Particularly in China, South Korea, and Taiwan (and even Japan), the indigenous defense industrial base is still heavily oriented toward "bending metal"—and with a heavy emphasis on building "prestige" platforms, such as aircraft, submarines, and tanks—rather than on developing military-technical capabilities in such areas as information processing, command and control, and communications. ²⁸ Although the dual-use/spin-on option has considerable promise, this approach is so novel that it is too premature to tell whether it will constitute a successful second-tier readjustment strategy.

Toward a Brave New Global Arms Industry?

Based on the experiences and activities of our case studies, it appears that most second-tier arms producers will ultimately be unable to escape either rationalization or globalization. In general, therefore, the global arms industry over the next ten to 15 years is likely to be:

• Smaller, as worldwide armaments production continues to decline and manufacturing capacity contracts, and as most second- and even some first-tier states abandon certain types of indigenous arms production;

• More concentrated, as armaments production is consolidated in the hands of fewer and bigger companies and countries (both in the first- and second-tier arms-producing states); and

• More integrated, as the globalization process continues to gain momentum and as more armaments production is carried out transnationally—dominated and controlled by first-tier states.

Such a smaller, more consolidated, and more intricately interconnected global arms industry has many implications for second-tier producers. First, the recent experiences of the second-tier arms-producing states stand as a cautionary tale for other nations attempting to establish their own indigenous arms industries. One should expect that aspiring arms producers like Iran and North Korea will likely encounter similar difficulties and setbacks in their efforts. As such, one should not be surprised to see these countries experiencing severe technical problems and program delays, cost escalations, and, in many cases, less-than-impressive indigenous weapon systems being produced.

Secondly, we are beginning to see indicators of an emerging international division of labor within the global arms industry involving both the first- and second-tier producer states. As noted in the introduction to this study, the global armaments industry has long been recognized as stratified and hierarchical, according to the technological capabilities and capacities of national defense industries. Increasingly, however, this structure is becoming permanently interconnected and integrated through two-way production linkages, as globalization involves making second-tier arms industries subsidiaries of or junior partners to first-tier defense companies. Second-tier defense firms are increasingly and formally subordinating themselves to first-tier companies, through subcontracting relationships, joint venture partnerships, and foreign equity ownership. Just as important, plans for self-sufficient arms production within the second-tier are being increasingly supplanted by a return to greater degrees of dependency upon foreign armaments and technologies, either through off-the-shelf arms imports, licensed production, or codevelopment programs. In particular, such an approach is not limited to second-tier producers in the developing world—even Japan has apparently reinterpreted its "kokusanka" defense industrial strategy to emphasize more bilateral arms development with the United States. ²⁹

As a result, we could be witnessing the emergence of a truly globalized arms industry. Structurally, such a system could resemble a huge "hub and spoke" model: A few large first-tier firms operating at the center while lines of outsourced production extending out to second-tier states on the periphery. First-tier players would provide the process of armaments production with its critical design, development, and systems integration inputs, along with the production of more advanced subsystems, such as engines, wings, sensors, information systems, and other electronics. Second-tier arms-producers would mainly be responsible for supplying niche systems or low-tech items, such as structural components. Final assembly could take place in either country, depending on who the end-user is. Such cooperative arrangements could be highly formalized, i.e., involving a second-tier firm working for only one first-tier producer, presumably as a wholly or partially owned subsidiary. More likely, however, this process would entail second-tier enterprises being engaged in subcontracts or joint venture partnerships with several first-tier firms at the same time. As such, future armaments production could more closely resemble the modern concept of the "virtual corporation"—independent firms coming together on an as-needed basis in order to design and/or develop and/or manufacture a product, only on a global scale.

Within such a process of globalized armaments production, second-tier states would basically leverage their main comparative advantages in armaments production: (1) niche strengths, (2) manpower, (3) money, and (4) markets. Regarding the first point, it is already apparent that many second-tier arms producers are increasingly using the core competencies strategy to emphasize the unique contributions they can make to international joint weapons programs. South Africa, for example, stresses its systems engineering and integration capabilities when it comes to upgrading and customizing foreign weapon systems for third-party markets. For its part, the Swedish defense industry is pressing the notion that international arms collaboration should move away from "workshare-based" toward an "earned-share" cooperation, meaning that countries would collaborate on the basis of key talents and technologies, rather than the size of their investments. ³⁰

Regarding the second point, many second-tier arms producers—particularly those in the developing and newly industrialized economies—have a considerable advantage in being able to offer a relatively high-quality/low-cost workforce. Cheap labor has particularly worked to the advantage of countries such as China, South Korea, and Taiwan when it came to securing subcontracting work from Western aerospace firms. As the costs of weapon systems continue to escalate, first-tier arms manufacturers may increasingly look to "offshore" certain (particularly low-tech) pieces of production to low-cost second-tier states.

Many second-tier states are also prepared to make considerable investments in international arms programs in order to secure a possible part in production. Taiwan's government, for example, is establishing a multi-million dollar fund to help local aerospace firms invest in foreign projects. ³¹ In addition, several second-tier countries, including Canada, Singapore, and Turkey, have paid up to $10 million apiece in order to have "observer status" in the U.S. Joint Strike Fighter program, while Japan is contemplating buying its way in on U.S. theater missile defense. Finally, second-tier countries could exploit their ability to restrict access to domestic arms markets in order to pressure first-tier firms to give them a better deal in subcontracting and offset arrangements.

For the second-tier arms producers, repositioning oneself to play a subordinate role in such a globalized division of labor may make considerable economic and technological sense. It is perhaps the most cost-effective way to preserve and maintain national defense industries—and especially those jobs within these industries. It also permits many second-tier arms industries to make maximum use of their few competitive advantages in the global arms market—particularly lower labor costs and market access. Moreover, it keeps these arms industries open to cross-fertilization from foreign technologies—indeed, one of the greatest drawbacks to autarky is the risk of inadvertently isolating one's defense industrial base from innovative foreign technologies, foreign capital, and global markets.

Obviously, such subordination represents a major departure from the concept of self-sufficiency, which has long been the second-tier countries" primary goal for establishing indigenous arms industries in the first place. Even if autarky was ultimately an illusion (and an unaffordable one, at that), consciously abandoning this goal is still a difficult and perhaps even traumatic move for many second-tier arms producers. In particular, it means that a second-tier state must give up most of its intentions for original weapons design and development and concede a formal, pervasive, and maybe even irreversible dependency on foreign defense industries and defense technologies. Furthermore, globalization entails a crucial shift away from insulating one's arms industries toward opening these industries up and exposing them to the oft-times harsh economic realities of the global arms marketplace, which could result in additional downsizing and retrenchment.

Consequently, many second-tier producer-states will probably strive to preserve at least some capacity for autarkic arms production. Some countries, for example, may use indigenous arms production as a bargaining chip—that is, as a way to extract arms exports or other technical-industrial concessions (such as technology transfers or production offsets) from first-tier suppliers.

In addition, while most second-tier states may abandon the "middle ground" of autarky in conventional arms production—such as combat aircraft, tactical missile systems, main battle tanks, warships, and submarines—they are likely to be remain heavily engaged in indigenous defense manufacturing at either technological extreme, i.e., small arms and munitions, and weapons of mass destruction (WMD). With regard to the former, the technologies surrounding the development and manufacture of items such as assault rifles, artillery, mortars, mines, and ammunition are relatively mature, well-diffused, and easier to absorb. Moreover, there generally exists a constant domestic market for these products, providing a reliable core customer, while the export market for such items also tends to be more open (i.e., less monopolized by a few big countries) and often quite lucrative. At the other end of the spectrum, some second-tier countries may decide to concentrate their scarce defense dollars where they can literally get more bang for the buck. Instead of pouring billions of dollars down a technological rathole to develop an indigenous fighter with less capability than a foreign system that can be easily acquired on the international market, a second-tier producer might choose instead to invest in developing a nuclear, chemical, or biological weapons capability and a companion missile delivery system. Further incentivizing this tendency to "do-it-yourself" in this area of defense industrialization is the fact that weapons of mass destruction (and their attendant technologies) are tightly controlled and are therefore more difficult to acquire via foreign purchase. In fact, Iran, North Korea, and Pakistan are all showing indications of preferring "WMD solution" to their indigenous arms production dilemmas. In addition, one should be concerned that countries such as India and Taiwan—faced with continuing setbacks in their conventional arms industries as well as immediate challenges to their national security—might also decide to emphasize WMD development and production over other types of indigenous armaments.

Finally, there will always be some second-tier countries that will remain committed to preserving a high degree of autarky and will therefore be prepared to pay the price in order to maintain an across-the-board capacity for indigenous arms production. This is certainly evident in the case of China, for example. Despite continuing technological setbacks and increasing economic difficulties, the Chinese continue to stress the need for self-sufficiency in arms production as a strategic necessity. Moreover, the notion of reducing defense industrial operations to a few core competencies or opening up indigenous arms production to the globalization process remains an alien concept to them. Consequently, most recent readjustment efforts are geared toward conserving the local arms industry and not making the tough decisions as to which defense sectors show the most promise and should therefore receive priority, and which should be reduced, abandoned, or even subordinated to foreign interests. The same approach can be reasonably said of India, Russia, and perhaps even South Korea (which continues to nurture the goal of becoming a world-class aerospace producer).

As a result, some second-tier states could decide to opt out of the hub-and-spoke model and retain considerable indigenous and panoramic arms-manufacturing capabilities. Some of these countries may even serve as significant sources of defense systems and technologies to other second-tier arms producers, competing as alternative hubs with the first-tier states. Russia, in fact, is already a major supplier of licensed-produced weaponry, defense technology and production know-how, and critical subsystems to the Chinese, Indian, and Iranian military-industrial complexes. China, meanwhile, has exported some of its homegrown defense technologies (particularly missile systems) to "pariah" countries, such as Pakistan and Iran. Israel constitutes a "mini-hub" of its own, offering its services as a designer and systems integrator on such systems as command and control, surveillance, and stand-off precision-guided attack

The dilemma for these "outlier" countries is whether they can continue to afford a go-it-alone strategy and, even then, whether these results will be worthwhile technologically. Experience has demonstrated that such autarkic and introverted second-tier arms industries will almost invariably continue to lag far behind the first-tier industrialized states with regard to technological innovation and implementation. As Raymond Vernon and Ethan Kapstein noted nearly a decade ago:

Any nation that is determined to rely upon its own products, its own technologies, and its own enterprises to fulfill its defense needs will pay a far higher premium for such a policy than in years past, costs that will be expressed not only in terms of money but also in a sacrifice in the quality of its military equipment. ³²

In fact, most of these outlier states possess only isolated "pockets of excellence" in defense technologies upon which they can trade, and many of these are increasingly up against competition from the more dynamic defense industrial bases in the first-tier. In Russia, for example, military R&D has largely come to a standstill, given the country's ongoing economic crisis, and most defense establishments are largely selling off their existing core capabilities; this provides them with little to trade in the future. Increasingly, therefore, the only choices for most second-tier arms producers could be globalization or marginalization.

Overall, the global arms industry today may, on a superficial level, appear relatively unchanged from the Cold War past. The total number of second-tier arms-producing states has remained roughly constant, and many of these countries may actually be involved in the production of an increasing array of sophisticated weapon systems. Upon closer inspection, however, the global arms industry is undergoing a dramatic evolution. Second-tier states appear to be more dependent than ever on the first-tier arms producers for critical technologies, components, capital, and jobs. And as the arms market has contracted and industry has rationalized operations, the bulk of armaments production has become more of a global, integrated, and especially more hierarchical affair. Over the next ten to 15 years, one should expect to see this trend accelerating and deepening, along the lines of the aforementioned hub-and-spoke model.

The emergence of such an intertwined and stratified global arms industry—and one increasingly oriented around an international division-of-labor—has many implications. Obviously, the globalization of the arms industry presents many potential challenges for international security and especially for arms control. For one thing, globalization—as opposed to highly visible, off-the-shelf arms exports—often entails the spread of arms production capabilities (i.e., weapons technologies and production know-how), along with the relatively low-visibility trade in subsystems and components. Thus, it often constitutes an indiscernible form of proliferation to second-tier arms-producers in the developing world. ³³

Second, many first-tier/second-tier collaborative arms projects explicitly anticipate joint production for export to third-party countries. For example, Saab is cooperating with BAE Systems to build Gripens for export to South Africa, and Denel is working with both Saab and BAE Systems to produce components for Gripens that might be sold to still other countries. KAI and Lockheed Martin, meanwhile, plan to build the KTX-2 fighter not only for the South Korean air force but hope to produce hundreds more for export to other countries. The fact that third-party sales are crucial to these new globalized producer regimes could greatly complicate efforts to control the proliferation of advanced conventional arms, therefore.

Finally, as firms become more transnational, their domestic identities and loyalties could tend to blur. At the same time, government controls to prevent these companies from engaging in activities threatening to national interests could weaken. ³⁴

On the other hand, the emerging hub-and-spoke model of globalized armaments production offers some innovative solutions. The globalization process has certainly caused more sophisticated bits and pieces of arms production to diffuse to many developing and newly industrialized countries. At the same time, however, armaments production in these countries is increasingly under the dominion of first-tier arms-producers. Paradoxically, therefore, the global diffusion of military technologies and the proliferation of many kinds of arms-manufacturing capabilities could mean that certain kinds of weapons and military technologies will become more controllable. For one thing, as the arms industry globalizes and second-tier states increasingly subordinate their defense industries to first-tier producers, the capabilities of second-tier producer-states to independently exploit many kinds of advanced military technologies could actually be retreating. In some second-tier states, these capabilities could even disappear altogether, as these countries regress back down the ladder of production. Consequently, fears that globalization could lead to the emergence of "new centers of armaments production" and proliferation are almost certainly overstated. ³⁵

Second, in keeping with liberal theories of international cooperation, a growing interdependency in arms production may actually make a positive contribution to international security. The international division of labor in arms production would mean that both first- and second-tier states would be mutually beholden to each other for critical military systems and subsystems. In particular, first-tier states would find themselves more dependent upon defense subcontractors and vendors beyond their borders. As such, the arms industry could become more like other forms of international trade and business, creating another mechanism for cooperation.

Finally, it is probably premature to assert that globalization will mean the end of governmental authority over national arms industries and armaments production. While industry is certainly in the driver's seat when it comes to globalization, the state has not totally abandoned its right to regulate and ultimately decide how this process will play out. As Keith Hayward argues:

As long as international politics remain centered largely, although not exclusively, on the sovereign nation-state, national governments...are unlikely to disengage entirely from the business of defense production. ³⁶

Consequently, the governments will remain as a "gatekeepers, controlling access and determining defense industrial structures." ³⁷

While the prospects for an unconditionally market-oriented global arms industry remain low, the fact remains that, for most second-tier arms-producing states, there are few practical alternatives to the further rationalization and globalization of their national defense industries. The growing technological and economic demands of advanced conventional arms manufacturing are increasingly impelling these states to such a difficult but inevitable conclusion. The challenge for many second-tier countries will be accepting this reality and readjusting their arms industries—structurally, operationally, and psychologically—to more limited and subordinate circumstances within the global defense-industrial system.

Table 1

Indigenous Arms Production Capabilities Of Selected Second-Tier Producers

System	Brazil	China	Sweden	South Africa	South Korea	Taiwan
Fixed Wing Aircraft	I,C	L,I	I	L*,C*	L,I,C	I*
Helicopters	L	L		I*	L	L*
AAMs	I*	L,I	C	I		I
SAMs		L,I	I	I	L,I	I
SSMs	I*	I			I*	I*
PGMs/AGMs	L*	L,I	I	I
ASCMs	I*	I	I			I
Surface Combatants	L	I	I	L*	I	L*,I
Submarines	L	L,I	I		L
MBTs	I*	L,I	L,I*	I*	C	L*
OAVs	I*	L,I	I	I	I	I
Artillery		I	I	I	I	L
Small Arms	I	I	I	I	I	I
Electronics		I	I	I

I = indigenous design and production
L= licensed-production
C = codeveloped design
* = currently inactive

AAMs: air-to-air missiles
SAMs: surface-to-air missiles
SSMs: surface-to-surface missiles
PGMs/AGMs: precision-guided munitions/air-to-ground missiles
ASCMs: antiship cruise missiles
MBTs: main battle tanks
OAVs: other armored vehicles

Table 2

Defense Industry Readjustment Efforts

Strategy	Brazil	China	Sweden	South Africa	South Korea	Taiwan
Rationalization (layoffs, plants closures, etc.)	H	L	M	H	L	L
Consolidation (industry mergers, reduction of competitors)	L	L	H	M	M	L
Exit from Arms Production	H	L	L	M	L	L
Niche Promotion	H	L	M	H	L	L
Diversification/ Conversion	H	H	M	M	L	L
Increased Export Promotion	H	H	H	H	M	M
Globalization	M	L	H	H	M	L

H = high level of effort
M = medium level of effort
L = low level of effort

Notes

Note *: This paper is based on the author's forthcoming book, False Promises, Failed Dreams, and Lowered Expectations: The Second-Tier Arms-Producing Countries in the 21st Century. Please do not cite or quote without the author's permission.  Back

Note 1: See Stephanie G. Neuman, "Industrial Stratification and Third World Military Industries," International Organization, Winter 1984, pp. 191-197.  Back

Note 2: Keith Krause defines the first tier of arms suppliers as the "critical innovators" at the technological frontier of arms production, and he confines this group to the United States and the former Soviet Union. He places most of Western Europe into a second tier of "adapters and modifiers" of advanced military technologies. Finally, all remaining arms-producing countries he puts into a third-tier of "copiers" and "reproducers" of existing defense technologies. Andrew Ross accepts Krause's definition of the first tier (i.e., the United States and the USSR), but he places China, along with the major arms producers in the industrialized world (specifically France, Germany, Italy, Japan, Sweden, and the United Kingdom) into his category of second-tier producer-states. Ross then puts most other arms-producing countries—i.e., the developing, newly industrialized, and smaller industrialized nations—into a category of "third-tier" producers (e.g., Brazil, Israel, India, South Korea, and Taiwan). Finally, he also has "fourth tier" of countries with only very limited capabilities for arms production (e.g., Mexico and Nigeria). Keith Krause, Arms and The State: Patterns of Military Production and Trade (Cambridge: Cambridge University Press, 1992), pp. 26-33; Andrew L. Ross, "Full Circle: Conventional Proliferation, the International Arms Trade and Third World Arms Exports," in Kwang-il Baek, Ronald. D. McLaurin, and Chung-in Moon, eds., The Dilemma of Third World Defense Industries (Boulder, CO: Westview Press, 1989), pp. 1-31.  Back

Note 3: Barry Busan, "The Diffusion of Military Technology: Looking Backward, Looking Forward?" paper delivered to the conference on "Transformation in Global Defense Markets and Industries," London, November 4-5, 2000, p. 11.  Back

Note 4: Russia, of course, is a special case falling outside the purview of this paper. The former Soviet Union clearly qualified as a "first-tier" arms producer, and Russia inherited most of the USSR's sizable military-industrial complex. At the same time, the breakup of the Union and the ensuing economic chaos gripping Russia has devastated the defense industry, genuinely threatening its existence. How Russia deals with the crisis in its arms industry and whether it will succeed is certainly worth studying, but not in the context of addressing the dilemma of the second-tier producers.  Back

Note 5: Nolan, Military Industry in Taiwan and South Korea, pp. 51-53; Cheng and Chinworth, "The Teeth of the Little Tigers," p. 258, 271-272; Masako Ikegami-Andersson, "Japan," in Ravinder Pal Singh, ed., Arms Procurement Decision Making, Volume I: China, India, Israel, Japan, South Korea and Thailand (Oxford: Oxford University Press, 1998), pp. 155-157; Paul H.B. Godwin and Bernard D. Cole, "Advanced Military Technology and the PLA: Priorities and Capabilities for the 21st Century," in Larry M. Wortzel, ed., The Chinese Armed Forces in the 21st Century (Carlisle Barracks, PA: Strategic Studies Institute, 1999), pp. 159-215.  Back

Note 6: Godwin and Cole, "Advanced Military Technology and the PLA," pp. 159-215; ADD.  Back

Note 7: Willett, "East Asia's Changing Defense Industry," p. 118.  Back

Note 8: Krause, Arms and the State, pp. 173-174.  Back

Note 9: Krause, Arms and the State, pp. 163-168.  Back

Note 10: Ikegami-Andersson, "Japan," pp. 155-157.  Back

Note 11: Green, Arming Japan, pp. 17-20; Elliot and Bonsignore, "Asia's 'New' Aerospace Industry: At the Turning Point?" pp. 24, 31-32.  Back

Note 12: Ian Anthony, "The 'Third Tier' Countries: Production of Major Weapons," in Herbert Wulf, ed., Arms Industry Limited (Oxford: Oxford University Press, 1993), p. 365; Baek and Moon, "Technological Dependence, Supplier Control and Strategies for Recipient Autonomy: The Case of South Korea," p. 157; ROK Ministry of National Defense, Defense White Paper 1998: Republic of Korea (Seoul: Korea Institute for Defense Analyses, 1998), p. 160.  Back

Note 13: Neuman, "International Stratification and Third World Military Industries," pp. 180-181.  Back

Note 14: Krause, Arms and the State, pp. 172-174; Neuman, "International Stratification and Third World Military Industries," pp. 180-181, Herbert Wulf, "Developing Countries," in Nicole Ball and Milton Leitenberg, eds., The Structure of the Defense Industry (London: St. Martin's Press, 1983), p. 330.  Back

Note 15: Krause, Arms and the State, p. 172.  Back

Note 16: Elliot and Bonsignore, "Asia's 'New' Aerospace Industry: At the Turning Point?" p. 31.  Back

Note 17: It has been long established that, even among the first-tier arms-producing countries, most major weapon systems are exponentially more expensive than the system they replace; of course, successor generations of weaponry tend to be exponentially more capable as well. See Edward A. Kolodziej, Making and Marketing Arms: The French Experience and Its Implications for the International System (Princeton, NJ: Princeton University Press, 1987), pp. 140-143. At the same time, the first-tier states are better situated to deal with these rising opportunity costs, due to their higher levels of defense spending and innate strengths in defense R&D, as well as their growing predilection for joint development and production of advanced weapon systems.  Back

Note 18: Neuman, "International Stratification and Third World Military Industries," p. 189; Michael Brzoska and Thomas Ohlson, "Conclusions," in Michael Brzoska and Thomas Ohlson, eds., Arms Production in the Third World 1971-1985 (Oxford: Oxford University Press, 1987), p. 283.  Back

Note 19: Franko- Jones, The Brazilian Defense Industry, pp. 190, 195-198.  Back

Note 20: Franko- Jones, The Brazilian Defense Industry, pp. 195-198.  Back

Note 21: By the mid-1990s, Argentina had cancelled nearly all of its military production programs and had even sold its state-owned aerospace company to Lockheed Martin, a U.S. company. The 1997-98 Asian financial crisis, meanwhile, forced Jakarta to scale back ambitious plans to create a world-class defense and aerospace sector (which included the development of commercial airliners) and instead greatly downsize its arms industry. Ian Anthony, "The 'Third Tier' Countries: Production of Major Weapons," in Herbert Wulf, ed., Arms Industry Limited (Oxford: Oxford University Press, 1993), pp. 373-374; Tim Huxley and Susan Willett, Arming East Asia (Oxford: Oxford University Press, July 1999), pp. 50, 53-54; Susan Willett, "Globalization and the East Asian Defense Market," paper presented to paper delivered to the conference on "Transformation in Global Defense Markets and Industries," London, November 4-5, 2000, p. 15.  Back

Note 22: Vivek Raghuvanshi, "India's Light Fighter Effort Faces More Delays," Defense News, May 8, 2000, p. 20; Vivek Raghuvanshi, "India Panel Raps Indigenous Effort," Defense News, May 8, 2000, p. 28; Chris Smith, India's Ad Hoc Arsenal: Direction or Drift in Defense Policy? (Oxford: Oxford University Press, 1994), pp. 144-178.  Back

Note 23: U.S. Congress, Office of Technology Assessment (OTA), After the Cold War: Living With Lower Defense Spending (Washington, DC: Government Printing Office, 1992), pp.204-217.  Back

Note 24: Israel has carved out particular strengths in the area of unmanned aerial vehicles, air-to-air missiles, reconnaissance and surveillance systems, and electro-optics, while Singapore has developed a strong niche in aircraft upgrade packages.  Back

Note 25: Richard A. Bitzinger, "Globalization in the Post-Cold War Defense Industry: Challenges and Opportunities," in Ann R. Markusen and Sean S. Costigan, eds., Arming the Future: A Defense Industry for the 21st Century (New York: Council on Foreign Relations, 1999), pp. 305-333.  Back

Note 26: Willett, "Globalization and the East Asian Defense Market," pp. 17-18.  Back

Note 27: One of Sweden's biggest defense contractors is Ericsson, which is also one of the world's largest electronics and telecommunications companies; as stated in Chapter 5, one of the company's subsidiaries, Ericsson Microwave, has successfully adapted commercial solutions in sensors, microwave communications, and data-networking to military uses for the Swedish military, as well as for export.  Back

Note 28: Richard A. Bitzinger and Steven M. Kosiak, Windows of Opportunity: The Potential Military Application of Japanese Advanced Commercial Technology Transfers to East Asia (Washington, DC: Defense Budget Project, September 1995), pp. 33-43; Michael J. Green, Arming Japan: Defense Production, Alliance Politics, and the Postwar Search for Security (New York: Columbia University Press, 1995), pp. 125-152  Back

Note 29: Green, Arming Japan, pp. 156-158.  Back

Note 30: Author's interviews in South Africa and Sweden, May 2000.  Back

Note 31: "In Brief," AA2000 Today, February 24, 2000, p. 15.  Back

Note 32: Raymond Vernon and Ethan B. Kapstein, "National Needs, Global Resources," Daedalus, Fall 1991, p. 19.  Back

Note 33: Bitzinger, "Globalization in the Post-Cold War Defense Industry," pp. 325-327; Keith Hayward, "Globalization, the Revolution in Military Affairs, and the Future of the World Defense Industrial System," paper presented to paper delivered to the conference on "Transformation in Global Defense Markets and Industries," London, November 4-5, 2000, pp. 6-8.  Back

Note 34: Ann Markusen, "The Rise of World Weapons," Foreign Affairs, Spring 1999.  Back

Note 35: Paul Dibb, "The Future Military Capabilities of Asia's Great Powers," Jane's Intelligence Review, Vol. 7, No. 5, p. 229.  Back

Note 36: Hayward, "Globalization, the Revolution in Military Affairs, and the Future of the World Defense Industrial System," p. 20.  Back

Note 37: Ibid.  Back