Slowing the Proliferation of Major Conventional Weapons with Jonathan D. Caverley

JOHN KRZYZANIAK: Hello, and welcome to the Ethics & International Affairs author interview series, sponsored by the Carnegie Council. I am John Krzyzaniak, and I am assistant editor here at the Journal.

I am joined on the telephone today by Jonathan Caverley, who is associate professor of strategy at the U.S. Naval War College and a research scientist in political science and security studies at the Massachusetts Institute of Technology. Jonathan has written a fascinating essay for Ethics & International Affairs, which appears in the Winter 2017 issue, on the topic of the proliferation of major conventional weapons, and that is the subject of our conversation today.

Welcome to the program, Jonathan. Thanks for joining us.

JONATHAN CAVERLEY: It is great to be here.

JOHN KRZYZANIAK: What exactly do we mean when we talk about "major conventional weapons"? What are they and what are they not?

JONATHAN CAVERLEY: I find it helpful to think of weapons in three different categories based on how hard they are to make or how expensive they are to buy and how much destruction they can cause. So if you think about nuclear weapons or maybe other weapons of mass destruction like potentially biological weapons, these are incredibly destructive, and they are relatively hard to make, whereas small arms like automatic rifles, even rocket-propelled grenades are individually not very destructive, although collectively they account for the lion's share of combat fatalities, and they are easy to make. So anyone can make them. They are basically a commodity.

Because of these qualities, the ways one might control, say, small arms or nuclear weapons and their spread are pretty distinctive. And somewhere in the middle are these things called "major conventional weapons," which are the things we think about when we think about state militaries. They are the large platforms and associated systems that countries use to advance their interests militarily, and these would be tanks, aircraft, ships, satellites, missiles, and the munitions and support infrastructure that makes these things operate.

They have high destructive potential, obviously not nearly as much as a nuclear weapon, and they are relatively hard to make. Something like the F-35 joint strike fighter or an advanced submarine is actually much harder to produce than a nuclear weapon. And I argue that you have to take these sort of economic characteristics into account when you are trying to consider how to control their spread.

JOHN KRZYZANIAK: Interesting. You talk about the destructive power of these different weapons. Obviously, we hear a lot in the news about the proliferation of nuclear weapons. That seems to be a perpetually hot topic, especially recently in the context of Iran and North Korea, and even many scholars of international relations really have dedicated their entire careers to studying the proliferation of nuclear weapons.

By comparison, we hear very little about conventional weapons proliferation. Why are major conventional weapons so important, and why do we need to restrict the supply of those weapons?

JONATHAN CAVERLEY: One of the really strange things is that over the past hundred years the spread of major conventional weapons has actually been an obsession of people in my business as well as the policy world. It just has sort of died down in recent times, and I think that is based on the politics of unipolarity and the fact that the United States was really the major player in this market.

If you think about after World War I, a great deal of the blame for World War I, rightly or wrongly, was placed on the "merchants of death." There were congressional hearings on controlling the spread of weapons. The League of Nations and also the United Nations were largely set up as an effort to bring about gradual disarmament, not just in nuclear weapons, which were very nascent in the 1940s and early 1950s, but conventional weapons at the same time.

Indeed, there has been a conventional arms trade treaty that is a moderate success that has been a recent development at the UN level. So there is definitely policy interest still in it, and I think there is growing interest in it as great-power politics becomes more visible. But you really cannot understand a conflict like Syria without talking about the operation of major conventional weapons, such as artillery, missile defense, and aircraft.

JOHN KRZYZANIAK: Which countries are the major suppliers in the international market, and who are the demanders? Who are the big purchasers?

JONATHAN CAVERLEY: The United States is far and away the most successful exporter of weapons. It covers about a third of the market. That is probably understating the dominance that the United States has because a lot of the things that are associated with modern weapons—service contracts, spare parts, munitions, etc.—are less visible and do not necessarily factor into these large transfers that we find in the data set.

Russia is a distant second, about 20-23 percent, depending on who you ask. After that, China, Germany, France, and the United Kingdom all hover around 5 percent.

One of the more interesting things about the market that listeners might not maybe intuitively agree with is that the vast majority of weapons transfers—about two-thirds—come from rich democracies, most of them allies of the United States. That is the selling side.

On the purchasing side, it is much less concentrated. In terms of recent deliveries, India is the biggest buyer at about 13 percent, Saudi Arabia is about 8 percent, the United Arab Emirates (UAE) is 4 percent, China is 4 percent.

If you look at agreements—contracts that have been signed, but the weapons have not been delivered—there is a lot that can go wrong before those weapons get delivered. But if you want to be more future-looking, it seems pretty clear that the market is shifting more toward the Gulf States. Saudi Arabia over the past four years is responsible for about 13 percent of all arms import agreements, Qatar and Egypt are each about 7 percent, so this is a big switch.

The other thing I wanted to point out about markets is that the United States has a giant market at home, and that is really important when you talk about how countries can use their market power to advance their political goals. In 2014, which is probably the lowest point in the U.S. Defense budget in terms of sequestration, United States procurement—that is the money we spent on buying weapons—was about $100 billion. That is about 15 percent larger than the entire Russian military budget at that time. So we have a huge internal market. Although we supply 33 percent of the world's arms exports, that is also pretty small compared to our own consumption of weapons at home.

JOHN KRZYZANIAK: As you write in your essay, you said that the United States "has a position in the conventional weapons market that Saudi Arabia could never dream of enjoying with oil." That is a pretty striking assertion, and it alludes to this idea of a cartel, which is what you talk about in the essay, so I want to ask you a few questions about that.

You advocate for the United States to create a sort of cartel to slow the proliferation of major conventional weapons. As you envision it, would this be more sort of an informal thing or a formal thing?

JONATHAN CAVERLEY: I think before we can get to the cartel you need to really talk about the United States as an individual actor. The reason why I think a cartel is feasible—and we can get back to how it is different from the Organization of Petroleum Exporting Countries (OPEC) maybe further on down the line—is because the United States has such a singularly dominant position in the arms trade.

When you think about a product—let's say heroin or weapons—with a high demand, fairly inelastic, and relatively high profit margins if you can get into the business, the way that you can reduce the supply is through a cartel, through market power. When you have market power, then you can charge what economists call "rent." So if you are a monopolist, you can charge more than what a competitive market would provide, and you collect that stuff—usually if it is a company, it is usually money that you return to your shareholders or the owners—as rent.

What I argue is that the United States has this very privileged position in that it is so effective at making weapons and the demand is so high that it has a similar position in the global arms market that let's say Facebook or Microsoft Office has in their various spaces. But instead of charging massive amounts of money for its weapons—although it does do very well, it does charge quite a bit—it collects rent in the form of political gains. So it returns some of the surplus to buyers, and in exchange it gets this asymmetric relationship. That is the core logic of the article.

There is the possibility that you can get smaller countries to sign on if you shift enough of this surplus, this rent, toward them. If you think about it, between the United Kingdom, Germany, and France, if you add that on to the United States, that is 50 percent of the market right there. So it would not take many countries really to have a pretty dominant position in the market. It would also be at all levels of the product, kind of the product space.

The United States specializes in F-35s, which are these amazingly expensive, exquisite weapons. They are kind of known for not being very effective and overpriced. One critic called them "the jet that ate the Pentagon," but abroad they have never lost an international competition. There are at least 11 countries that are going to buy these things. In Germany, the Bundeswehr there is hoping to buy them; the UAE is asking to buy them. Even though they are super-expensive, they are really the only game in town. But at the lower levels, say the F-16, there is much more competition from Sweden, from France, and Russia.

Then other things like diesel submarines, which the United States does not bother to make because it does not need them, that is a much more competitive space, and that is where you get the cartel, at the lower end of the quality spectrum with countries that share American interests like Sweden, Israel, Germany, etc.

JOHN KRZYZANIAK: The United States is already doing quite a lot of things in terms of counter-proliferation of major conventional weapons. They refuse to transfer technology a lot of times, and they closely monitor end-use of these weapons. So what would they do differently to sort of push this in the right direction?

JONATHAN CAVERLEY: That is a good question. A lot of it would be recognizing what other arms-exporting states need and want and deciding which countries are worth supporting and which countries are frankly worth crushing. France is completely dedicated to having some sort of quasi-autonomous ability to build and export weapons, both for matters of security but probably more for matters of industrial policy and jobs at home, as well as this kind of very longstanding idea of French grandeur, French honor.

You should understand that as an American policymaker and realize that France—I'd rather have India buy Rafale weapons from France than buy Sukhois and MiGs from Russia because there is more of an alignment. France is an ally.

One of the things that I think we need to recognize as American policymakers is we are constantly badgering Europe to spend 2 percent of its economy on defense spending, but we have really done a very systematic job of crushing its ability to build its own weapons, so recognizing that a slightly more robust European defense industry might be in both those countries' and the United States' interest.

Another thing that the United States should really consider doing is liberalizing its own market. It is very hard to sell weapons to the United States if they are not actually made in the United States. Norway has a quite excellent weapon called the Joint Strike Missile that it is hoping to sell to the United States, and if the United States buys that and puts them on its F-35s, for example, then the United States becomes almost the sole purchaser of these weapons. It is sort of that old joke about if you owe the bank a million dollars, the bank owns you; if you owe the bank a billion dollars, you own the bank. It is sort of the same thing. Norway might be making this weapon, but if the United States is buying 80 percent of them, Norway is basically working for the United States. So this kind of liberalization to create this network is what I am advocating for the United States.

JOHN KRZYZANIAK: But couldn't a cartel backfire in some ways? If the United States and other like-minded suppliers stop selling to some particularly reprehensible countries, then wouldn't you have less scrupulous suppliers like Russia and China rushing in to fill the gap, and that would help them sort of gain market power?

JONATHAN CAVERLEY: Yes. That is absolutely the case. Empirically that has happened, especially in the Middle East.

The Obama administration was a very enthusiastic seller of weapons. Arms exports increased quite consistently over time during the Obama administration, but it did have some discretion when it came to countries like Saudi Arabia and especially Egypt after repression in the post-Mubarak age increased.

The amount of agreements to the Middle East dropped by 37 percent over the past, say, five years, and export agreements by France, Germany, Italy, and the United Kingdom tripled. Russia quadrupled. So there are definitely going to be other countries willing to sell when the United States is not willing to do so. Amnesty International has this really blistering report on the kind of hypocrisy of European exports to a place like Egypt.

What you are saying is really prescient, and the United States is very aware of that, and that is why the United States often swings back, and now it is willing to sell more weapons to Egypt and Saudi Arabia. Thailand is another example.

Having said that, there are two points I want to make. There are actually very few states that can make a huge difference for major exporters like Russia or China. India is incredibly important to the Russian export market, somewhere around 40 percent, depending on what year it is. So Russia depends almost entirely on India for most of its arms exports, and that is a country that I think it is quite legitimate for the United States to do business with. Vietnam is another example. Vietnam buys a lot of Russian weapons, and the United States and Vietnam are cooperating further and further.

But the sticking point is the Gulf States. The Gulf States are the ones that buy tremendous amounts of weapons. They can buy other countries' weapons besides the United States, and the United States has to manage that relationship very carefully.

Having said that, even when the United States does sell weapons to unattractive regimes, there are a great number of strings attached to those sales that no other country has the ability to do. One example is the Foreign Military Sales (FMS) program. Most weapons that are sold to other countries by the United States are done through what is called the FMS program, which basically means that the United States Defense Department manages the contract, and what the importing state agrees to do is buy the same weapon that the United States military buys for the same price plus an administrative fee.

What that does is it takes a great deal of the corruption out of the transaction. One thing that you have to understand about the global arms market is that it is incredibly corrupt. Andrew Feinstein, who writes a lot about this, estimates that maybe 40 percent of global corruption is associated with defense spending and defense acquisition. [Editor's note: Check out Feinstein's 2011 Carnegie talk on the global arms trade.] Just by that one program alone, the United States actually exerts a tremendously benign effect, a kind of deadweight loss, of corruption in terms of kickbacks and paying agent fees and that sort of thing.

The United States reserves the right to inspect other sovereign states to make sure its weapons are being used appropriately and to make sure they are not being transferred to third parties. No other country really has the ability to pull that off. So even when the United States does sell to unattractive regimes, it is probably the lesser evil compared to, say, Russia or even France doing it.

JOHN KRZYZANIAK: I am having a little bit of trouble following the logic of whether the United States should be staying away from supplying more corrupt regimes or whether they should indeed supply them because it is the best option.

JONATHAN CAVERLEY: I think the way to think about it is the same way we think about foreign policy more broadly, in the sense that there are some really important countries with awful human rights track records and that are highly corrupt—Saudi Arabia is probably a very good example—that you sort of have to deal with because it is a really big and important country.

But just as important is that I think the United States can show a great deal of discretion for smaller countries that cannot really shape the global arms market. They are not market makers. Places like Thailand or Nigeria, these countries are not going to drive the global arms market, so you can exert more pressure via your arms sales and the conditions you attach to it or your refusal to sell and have a useful effect on, say, defense corruption. Avoiding arms races in regions that are currently undergoing some kind of crisis, slowing down the transfer of technology, you can exert these kinds of benign effects purely for American self-interest and ultimately not sell weapons to them even though you know that other countries might because it is just not that big a deal.

So there are big markets and small markets. Just like any business transaction, a bigger company is harder to deal with than a smaller company. You can push around a smaller country more than you can push around a bigger country.

JOHN KRZYZANIAK: What do you say to someone who questions whether the United States can really be part of the solution at all? Are there more ethical or better solutions out there that we should be thinking about?

JONATHAN CAVERLEY: Let me not mince words and be really upfront: I spend a lot of time thinking about the United States defense industry. It is a collection of rent-seeking and fear-mongering influenced by war-profiteering sociopaths, except when you compare it to nearly any other country's defense industry—when I say "any other country," I mean places like Sweden or Germany or the United Kingdom, countries that are "nice" countries—because it is just very hard to have a viable defense industry in your country when you are a small state and not have relatively lax export regulations. You have this incentive to sell just to keep your industry alive, and the United States does not have that incentive.

Again, it is not because the United States has more benign goals than a country like Sweden, or Canada, for that matter; quite the opposite in fact, I would say. But it just can afford to attach these strings; it can afford to be discreet in who it sells to in a way that the Swedish defense industry cannot.

I am not saying there is a perfect system. In fact, empirically the United States is probably getting in the way of something else more truly international and institutional. But we tried arms control before, and the results have been less than promising. So there might be other options that seem more ethical, but they are just not feasible, and in that case I would probably side with the more pragmatic approach.

JOHN KRZYZANIAK: So the Trump administration seems less concerned than previous administrations about human rights and anti-corruption efforts abroad, and perhaps also less concerned about arms control as well. Just by way of example, the U.S. just decided that it is not going to phase out cluster munitions after all, and the Pentagon will resume purchasing them. So does your argument still work under these conditions? How does it hold up?

JONATHAN CAVERLEY: There is no question that like all other aspects of United States foreign policy the Trump administration has taken a turn in a different direction, especially when it comes to things like human rights. It seems very clear that the Trump administration is dedicated toward increased sales of American weapons abroad. This meets a lot of the Trump administration's stated goals, both for domestic political and economic reasons as well as for international reasons. I think that the Trump administration, by relaxing restrictions on Nigeria and Saudi Arabia, is really missing an opportunity to play a small but important role in advancing human rights through its arms sale policy.

But at the end of the day, I fall back on the economic argument that even if the United States has zero interest in anti-corruption, avoiding arms races in other parts of the world, advancing the spread of human rights through its foreign policy, even if the United States is out of that business, which I think would be a shame, just acting like a pure monopolist, recognizing your market power and charging the highest possible price you can while preventing the entry of competitors, that is, acting like a monopolist, will still make the global arms market [less] competitive, and ultimately that is what this essay is all about.

A competitive market in weapons around the world is probably bad because as we all know when you have competition, prices go down and quality goes up, and cheap and more sophisticated weapons spread around the world seems like a bad idea to me. So I may not approve of how the Trump administration is using arms sales to advance American interests, but I am still fairly confident that the aggressive use of American market power will have a benign effect on this particular market.

JOHN KRZYZANIAK: Thank you very much, Jonathan. As much as I would like to continue this conversation, unfortunately our time is up.

Once again, I am John Krzyzaniak, and I have been speaking with Jonathan Caverley, author of an essay entitled "Slowing the Proliferation of Major Conventional Weapons: The Virtues of an Uncompetitive Market." That essay and much more is available online at www.eiajournal.org.

We also invite you to follow us on Twitter @eiajournal. Thank you to everyone for listening, and a sincere thanks to you, Jonathan, for this engaging discussion. It has been a pleasure.

JONATHAN CAVERLEY: It was a real pleasure.