West losing defense edge to Asia-Pacific
June 25th, 2013
11:36 AM ET

West losing defense edge to Asia-Pacific

By Guy Anderson, Special to CNN

Editor’s note: Guy Anderson is Chief Industry Analyst (A&D) for IHS Jane’s. This piece is based on data taken from IHS Jane’s latest study, ‘The Balance of Trade.’ The views expressed are the writer’s own.

Defense cuts expected to be announced by the British government on Wednesday will be only the latest example of how the West is sowing the seed of its own decline in global defense markets, as cuts force industry to export more of the blueprints of its expertise.

True, industry doesn’t really have any choice. But the explosion in exports is still leading Western countries to pile into export markets, devouring each other as they fuel the rise of Asia. Indeed, it’s increasingly clear that in the long term, ongoing defense cuts are putting at risk not just the future job prospects and global influence of the United Kingdom, but also those of European defense and the United States, too.

How?

For a start, these cuts will erode the long term technological advantages that Western countries traditionally hold. Export today is about selling the blueprints of expertise rather than just finding buyers for the finished product – the days of simply selling equipment are gone. Traditionally, countries maintain an edge because government investments encourage research and development, something that has declined sharply in Western markets in recent years.

Second, the West will increasingly face competition of its own making. The fact is that the West is equipping emerging markets to sell equipment back to the rest of the world further down the line, meaning the West will become less competitive.

Third, all this will affect jobs. The old “sell defense to preserve jobs” argument is gradually being eroded, and it will be more and more difficult for the West to create jobs from defense exports as its dominance and power declines.

Indeed, the reality is that the West also risks long-term decline in the global military market; as in other commercial domains, emerging producers have the advantage of lower production costs while soaring investment suggests technology gaps will narrow over time.

More from CNN: Forced budget cuts a disaster

The numbers speak for themselves. The Asia-Pacific is now forecast to outspend North America by 2021, and its exports are accelerating faster than in the West. Yes, the U.K. saw exports rise by almost half since the downturn of 2008, and order books through to 2015 suggest a rise of at least a quarter. But exports from China, Singapore, South Korea and elsewhere have doubled, tripled or quadrupled since the downturn. Globally, arms trade has exploded, up by almost 30 percent since 2008, rising from about $57 billion to $74 billion over this period. Indeed, our analysis suggests that it could be as much as a third higher than is generally reported by think tanks and in the press.

The rise of the Asia-Pacific is clear, and Western governments are already buying equipment from Asia, the Middle East, and elsewhere. Interestingly, Israel will be supplying the world with more drones than anyone else by the end of the year, and its order books for drone exports in 2014 are already double those of the United States.

As cash-strapped Western governments are forced to make cuts, Asia and the Middle East will become increasingly sophisticated as they adapt and improve on the expertise they imported from the West. The West is not so much building kit for export as selling expertise and know-how.

The long term geopolitical implications are profound, something Western governments are no doubt fully aware of. They have a delicate balance to strike. But however they deal with the trade-offs of security, budget matters and jobs, one thing should be abundantly clear – the balance of trade has a significant impact on the balance of power.

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Topics: Asia • China • Military • United Kingdom • United States

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soundoff (16 Responses)
  1. rightospeak

    Thanks for telling us that we are going downhill due to sending our jobs, capital and technology to China so they can become rich and yes, spend more money on their military. It does not take a great analyst or a 'journalist" to figure it out and sound the alarm. Our "think tanks" are just "foundations" for war profiteering and Globalism, which as you can see do our country little good or should I say DAMAGE ???
    By the way, we are armed to our armpits , to the last buck so we can fight off the Martians and you want us to spend more? Are you insane or just paid to do a propaganda piece ?

    June 25, 2013 at 12:07 pm | Reply
  2. Jo

    Are you trying to mislead on purpose? Balance of Arms Trade and not Balance of Trade. Your point is that reduction in Military spending necessarily means reduction in Balance of Power? What portion of so called power is military and what portion is economical? The outdated concept of military spending leads to strength was obsolete many many years ago. Unfortunately the military propaganda machine is still live and kicking wasting billions of dollars we don't ave.

    June 25, 2013 at 12:08 pm | Reply
    • Joe M.

      Well said, Jo. How true that is! These ignorant Tea party, pro-military comments do get old as I get sick and tired of seeing the idiots who post them vomit their ignorance over U.S. "security"!

      June 26, 2013 at 10:59 am | Reply
  3. Joseph McCarthy

    If the above is true, it could be very good news indeed! Neither the U.S. nor Great Britain needs to own the Pacific Ocean along with the Indian Ocean. We sorely need some kind of a balance of power in this part of the world and China along with J apan can help to bring that about.

    June 25, 2013 at 2:28 pm | Reply
  4. KM

    The global community do not be deceived by China, and a human being knowing nothing which will push forward aggression hegemony in earnest is after it, and China will take a wound not to be cured to a Chinese from each domestic department from now on not to understand it

    June 25, 2013 at 10:56 pm | Reply
  5. Xander

    The United States spends more on its military than all other major powers combined! You are seriously telling us that we face a decline in military dominance simply by cutting back? God forbid we actually spend that money on, oh I don't know, healthcare or education! We could easily cut our military budget by 35% and STILL maintain global military dominance in relation to all other powers. Zakaria, the crap you are putting on your website is really getting ridiculous. You used to be one of the few mainstream journalist I could turn to for a relatively balanced (for a neo-liberal) analysis. I guess those days are gone with the rise of the Tea Party!

    June 25, 2013 at 10:58 pm | Reply
    • KPAX

      Our military straddles the globe and we act as though it's natural even though there are no external threats commensurate to it. The Cold War ended more than 20 years ago and our military brass go before congress and speak of Chinese assertiveness, aggression and challenge to the US Navy in the S. China Sea (right off their coasts).
      Eisenhower's military industrial complex nightmare is our reality:

      We annually spend on military security more than the net income of all United States corporations. This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence — economic, political, even spiritual — is felt in every city, every State house, every office of the Federal government… Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society. In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes.”
      President Dwight D. Eisenhower in a televised farwell address to the nation Jan. 1961

      June 26, 2013 at 10:38 am | Reply
      • Joe M.

        Great post, KPAX. You said it all.

        June 26, 2013 at 10:55 am |
  6. karthick

    yeah that would be great to have many control centres may be you can help India to counter China in future

    June 25, 2013 at 11:00 pm | Reply
  7. j. von hettlingen

    Compared to the Asia Pacific, Western countries enjoy trust and have good relationship among themselves. They see little risk that they will be attacked by the rest of the world and can afford to cut their military spendings.
    Asia Pacific had shared Confucianism in history. But the economic growth in recent decades had boosted nationalism and self-assertiveness. Both South Korea and Ja pan don't want to be patrionised by China. Besides North Korea is a problem for all in the region. It comes as no surprise that the arms race is on there.

    June 26, 2013 at 10:10 am | Reply
  8. Madman

    This is what happens when 'secrets' are less important than an individual making his sales quota. This happens when the government allows foreign companies are allowed to devour whole sectors of our defense industry (BAE). This is what happens when 'allies' (Israel) give tech away to your enemies (China). This is what happens when, for the sake of his own convenience, a defense employee puts sensitive tech data in an unsecured database.

    Not surprised about our decay at all.

    June 26, 2013 at 12:54 pm | Reply
  9. greenknighttt

    The USA and UK have spent too much on defense and too little on education and infrastructure.

    The US spends as much on defense as the next 13 biggest spenders combined. And most of those 13 biggest spenders are our allies.

    We've squandered money on distant wars we didn't need and we've squandered money on more and better equipment than was needed for home defense. We squandered money in a war on drugs. We've squandered far more money in the war on terrorism than was justified.

    We've impoverished both economies, the USA and UK (and dragged down the economies of numerous trading partners).

    Now we don't have the money to waste any more.
    – Aircraft we build now will be obsolete in 20 years.
    – Troops we train now will be retired to civilian life in 20 years.

    If we keep on like this, industry will become more and more impoverished, the workforce will be less and less educated, and we'll fall further and further behind other countries.

    If we want to be strong in the current age, then we have to focus on what matters in this age:
    – Building industry and economic power at home.
    – Bringing industry home from abroad.
    – Enriching our middle class instead of the "transient international elite".

    A strong world leading nation in this age is a nation with a strong world leading industry.

    The self-styled "World cop" is just that, just a "cop". A cop not the president of the free world. Is that what we want to reduce ourselves to?

    And later, in two decades, if the world declines towards war, then we can be looking at big defense expenditures. At least we'll be able to afford them.

    I'm not saying spend zero on defense. Simply just stop spending money like the USA didn't have any allies that would come to our aid in a time of a justified war against China, Russia or some other meaningful aggressor.

    Diplomacy won't destroy the economy the way massive military spending does.

    June 27, 2013 at 3:17 am | Reply
    • Joseph McCarthy

      Well put, greenknighttt. Thank you.

      June 27, 2013 at 8:12 am | Reply
  10. True Reminder

    Eventually only peace loving People will remain in the World. They will turn military equipment into meaningful stuff, e.g plough shares. Those People will never teach any of their Children warfare.
    So People who believe in peace be strengthened and may your true natural love be immune to the evils of this world.

    June 27, 2013 at 9:35 am | Reply
  11. wen

    remember what bring down the soviet union!! it was not political, but rather economical, the soviet simply can't keep up with the military budget. our defense for this country is $700 billion, this is even without including other stuff. who do you think pay for these, the taxpayer. how long can a country afford to spend trillions on defense each year before bankrupt like soviet or other similar nations.

    June 27, 2013 at 8:08 pm | Reply

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