McNair Paper 36, Explaining and Influencing Chinese Arms Transfers, February 1995

When states debate the acquisition of arms from abroad, they address: 1) security requirements; 2) demands from their armed forces and defense industries for increased domestic prestige and resources; and 3) economic costs. These factors often are interconnected and difficult to consider in isolation. Yet, by examining them separately in very general terms, it is possible to better understand global supplier-recipient arms transfer relationships.

Although nations seek self-sufficiency in the production of military equipment for their armed forces, the growing complexity of warfare and sophistication of weaponry, along with inadequate domestic markets, have denied this possibility to all except the major global powers. (Note 58) States dependent on arms imports are vulnerable to supplier conditionality and the interdiction of the lines of communications to their sources. Hence, in descending order of preference, acquisition strategies are: autonomous production, codevelopment, coproduction, and importing. Greater technological and financial resources make autonomy a more attainable objective; conversely, fewer assets limit alternatives, and lead to imports. (Note 59) But given a certain mix of capabilities that delimits the range of options available to a state on the autonomy-import continuum, specific choices will be strongly influenced by the perceived strength and reliability of potential suppliers. For example, during the Cold War era, nations such as Japan and Korea, both confident of and dependent on America's security guarantees, were willing to equip their armed forces with U.S. equipment. (Note 60) However, relationships of this nature are by no means the most common. Lacking a credible and capable guardian, a state may elect to pursue autonomy despite exorbitant costs (South Africa, Taiwan, and Israel). The more pressing the professed need for an independent weapons production capability, the more a country will pursue offset and coproduction arrangements. A nation may also try to expand its sources of supply. Diversification might be aimed at enhancing security by increasing the number of potential allies (Kuwaiti acquisition of U.S., U.K., and French equipment) (Note 61), or hedging against conditionality and supply embargoes (Iraq, Libya, and often those Latin American countries that buy European versus U.S. equipment). (Note 62) Another determining factor in state arms purchases is the urgency of the threat. Herein can lie a point of contention between military leaders seeking to equip their forces with the best equipment possible, and civil officials and defense industrialists who may opt for second-rate material with the long-term objective of acquiring an independent production capacity.

Given these acquisition strategy tradeoffs, a state will make particular purchases based upon the needs of its armed forces and military strategy. Among some of the more important relevant factors are: 1) enemy capabilities and vulnerabilities; 2) geography; 3) human and logistic resources (can the equipment be operated and maintained?); 4) the anticipated life span of equipment and the potential for subsequent upgrades; 5) the degree to which the weapons system is interoperable with and complements the equipment of allies, as well that of the state's own military services and service branches; and 6) doctrine (defensive, offensive, or deterrence). For example, from the 1950's through the 1980's, Japan actively supported America's strategy of deterrence and defense against the Soviet Union in the Northeast Asia theater. Consequently, it opted for relatively sophisticated U.S. weapons and systems to deny the Soviet Navy and Air Force unchallenged access to the Seas of Japan and Okhotsk. (Note 63) Israel, on the other hand, has built powerful combined air and ground forces capable of executing swift and decisive offensive operations against its enemies. In contrast to these technologically competent militaries, the less sophisticated may see utility in a very different combination of weapons. For instance, the persistent efforts of certain Middle East and South Asian states to acquire tactical ballistic missiles (TBMs) reflect their inabilities to field and sustain advanced strike aircraft units, as well as their expectations that such weapons can help deter their opponents.

Beyond the complex calculations of how the acquisition of a certain weapon may strengthen national security, some states carefully weigh the explicit or implicit demands of their militaries for status and resources. Regardless of external threats, leaders may seek to ensure the loyalty of their armed forces by increasing their prestige through the procurement of sophisticated equipment (Iran under the Shah, and Jordan). At the same time, rulers, especially in less developed countries, will sometimes attend to the quality of their militaries with the aim of discouraging internal challenges to their authority.

Lastly, nations must consider the fiscal price of potential weapons imports. Yet, since it is difficult to assess the worth of the expected benefits, exact cost comparisons of alternative arms deals are rarely meaningful exercises. For example, the contribution of offsets to a state's security by increasing defense industry autonomy, could theoretically be described in economic terms by developing a crude utility function, but the results would hardly be of any practical value. Nevertheless, cost-benefit analyses are conducted by prospective buyers, and prices do matter, especially in a competitive environment. The intense struggle waged by General Dynamics against Northrop, Dassault, and Saab, before closing the sale of the F-16 fighter in 1975 to the United States, Norway, Netherlands, Denmark, and Belgium, illustrates this point. (Note 64) However, even after discounting those states whose acquisition decisions are driven by alliance considerations (Taiwan, until the recognition of the PRC by the U.S), and those subjected to arms embargoes or blockades (Libya and Iraq), generalizations about the role of market forces in arms procurement are hazardous. The number of states producing major weapons systems (aircraft, armored vehicles, missiles, and naval vessels) has grown steadily since 1950, increasing purchaser options, at least within the Third World. (Note 65) But despite this trend, the United States, Soviet Union, U.K., France, and China together consistently accounted for between 80% and 90% of global arms deliveries from the mid-1960's through the early-1990's (with the combined share of the superpowers alone fluctuating around 70%), indicating something less than the emergence of a classic "buyer's market" in the international arms bazaar. (Note 66) Even so, the success many countries have had negotiating favorable offset and countertrade agreements with the major arms exporters since the early-1970's is evidence that purchasers both have, and exercise, bargaining power in order to get the best financial deal. (Note 67)

In concluding, it is worthwhile to highlight several points that are germane to our examination of Chinese weapons transfers. First, reliability is a crucial determinant in customer decision-making. A state, unsure of the commitment of suppliers, will hedge against uncertainty by expanding its network of sources, even if this entails purchasing qualitatively inferior material. Second, nations attempt to increase their independence within the international order by developing autarkic defense industries. The priority a country places on this objective will be greatly affected by the scope of its resources, as well as its assessment of the possibility of conflict, likelihood of outside intervention on its behalf, and long-term access to key weapons systems and repair parts from abroad. Third, a nation's military doctrine does play an important role in influencing the types of weapons it acquires. Finally, while buyers obviously reflect on prices when shopping for arms, the failure of the smaller arms producers to encroach on the market share of the Big Five demonstrates the premium placed on quality and dependability, particularly for more complex systems, such as fighter aircraft. (Note 68)