Arms Trade And National Security

As Karl Marx pointed out that, "Conquest, enslavement, pillage, killing, in short, violence played a huge role in the reality of history. But in the moderate political economics, pastoral poems have always been dominating." According to available statistics, over 15,000 wars broke out in the past 5,000 years. With the class and the states coming into being, wars have become crucial to the national security and survival. Sun Tzu once said: "Preparations of a battle include a thousand swift chariots, a thousand heavy chariots, a hundred thousand mailclad soldiers supplied by provisions from as far as a thousand li ". Wars need weapons(also known as arms). From stones, copper, iron, firearms, to morden weapons including tanks, planes, missiles, even laser and space weapons, arms are playing an increasingly important role in wars.Just like wars went through the history of mankind, "the sales of arms between countries and regions also ran through the history." As arms research and development demands high productivity and technology, obviously not every country has the willingness and capacity to develop arms by themselves. Some countries focused the manpower, materials and financial resources on the development of the arms, and then based on their own national security and strategic objectives, will choose to export or support some countries which do not have this ability and technology. Arms trade, national defense, and national security are inseparable and getting more and more crucial for defense capabilities, comprehensive national strength and national security. And world’s multipolar development after the Cold War, the arms race between the USA and the former Soviet Union has ended due to the collapse of the Soviet Union, but various local wars and regional conflicts occurred because of competition for resources and ethnic(religious) conflicts between countries or regions. The threat of international terrorism and organized transnational crime networks are increasingly rampant, many countries have increased defense budgets. The evergrowing defense budget provided ample funds for the expansion of research and development of new weapons and arms trade size. The volumn of global arms trade has been on the rise since the beginning of the 21 st century.Compared with the general merchandise trade, the global arms trade has many features. First, different countries have different arms trading strategies,in other words, some countries have chosen to import arms, some produce by themselves, and some countries produce and export to some specific countries, where there are some rational interests hidden behind. Secondly, the arms trade is closely related to the national income levels and military expenditures. Statistics found that the vast majority of military exports come fromdeveloped countries while developing countries are mostly military importers. Thirdly, arms trade interacts with national security. There is arms trade hidden behind wars and conflicts even international terrorism since the 21 st century. But has arms trade led to insecurity, or are unsafety stimulating international arms trade? Fourthly, the proportion of high-tech arms trade is increasing, and the importers are increasingly chasing for them, thus arms trade is getting more sophisticated and information-based. Fifthly, arms trade is often accompanied by other forms of compensation trade, and coexists with forms including technical development cooperation and military assistance services, the importing country made more demanding arms trading compensation to promote their own military capabilities. Last, the rules for international arms trade have not been established, and arms trade are applicable to WTO exception clause, which is different from the numerous and valid rules for international trade in goods and services. On December 24, 2014, the "Arms Trade Treaty" approved by the UN General Assembly came into force, which established the first global treaty to regulate conventional arms trade, involving weapons exporting, importing, re-exporting,transition,brokering and other trading activities. 130 countries have signed the treaty so far, of which 60 countries have ratified it.China is emerging as a global power, and profoundly shape the structure of the 21 st century. In 2013, China has become the second largest economy in the world, the largest goods trading nation and has the largest foreign exchange reserves. How to deal with the growing power of China is a major global problem. "China has regain the position it occupied for a long time in human history." For contemporary China, national security is a top priority. On January 23, 2015, the first meeting of the Politburo approved the "National Security Strategy Outline", emphasizing that national security is an important cornerstone of peace and stability. What the rest of the world concerns more is whether China can peacefully rise. Behind the complicated international political and economic relations, there must always be some decisive forces which play a huge role. From the global point of view of politics and economy, arms trading may be an important strategic point. However, our military trade research and practices do not match the needs of our national security. On one hand, China is facing serious national security threats and challenges. With the rise of China, the world’s geo-strategic center moves eastward, the United States took frequent actions in the Asia-Pacific region, trying to restore the balance of power, implementing the strategy to return to the Asia-Pacific; Moreover, the situations of the Yellow Sea, East China Sea and South China Sea, are tight at the same time, the strategic competitions are continously rising, so do the frequency and intensity of the conflicts.China, pursuing a "military non-alignment" strategy, needs urgently a global layoutto break the strategic siege. On the other hand, our research and practice of military trade are still lagging behind. Although China has become the largest goods trading nation in 2013, but our military trade scale still goes far behind the United States and Russia, especially arms export structure is also mostly low-end, thus the political influence and strategic significance of arms export are not prominent. Arms trade sees huge potential and urgent demand.A review of previous studies shows the military trade and national security research are still in the bottleneck phase, lackingsystematical economic research and analytic framework to explain the unique phenomenon in the global arms trade. After the outbreak of the Cold War, most scholars focus their research on arms-trading motives, thinking the main cause of the arms trade politically and economically. According to them, during the Cold War, the political motivation is primary. Through arms trading, the suppliers can exert political influence on the recipients. After the Cold War, the economic motives are becoming increasingly important. Namely, arms trading can maintain domestic defense industry, keep economies of scale, save costs in research and development of arms and promote employment in the defense industry, and boost trade balance and so on. These studies are descriptive with more debate in nature, and do not involve systematic research in the theories, experience and policies of arms trading with standardized ecomonics methods.Only a few documents on arms-trading decisions have been reached by the standard theory of economics, and mostly just based on the use of the classical trade theory. There is no real national security melting into the theoretical analysis of the trade among the military, and therefore the interpretation of research for military trade force is very limited. Until the mid-1990 s, Levine’s(Levine, 1994) research laid the foundation and framework of military research of modern trade and national security based on the economic analysis, constructing general equilibrium analysis framework on arms trading decisions, however, this framework is so general that you can not get clear theoretical analysis results. Domestic studies on arms-trade started late, and mainstream economics and international trade have no proper places for arms-trading research. Few scholars issued original theoretical research on arms-trade, less did disciplinary theoretical research combining with national security. Our military and strategic trade theory based on national security needs is still in its infancy, which is seriously lagged behind the needs of development. This situation may be limited by the availability of data or associated with the fact that economists and political researchers tend to ignore each other’s work. In recent years, with the upgrading of China’s international status, increased attention on national security, more involvement in global military trade, media exposure and public attention about the military trade and national security, arms trading means more and more.This thesis analyzes the international arms-trade based on the new theories of international politics economics, building a utility maximazation model for rationalarms importing and exporting countries based on standard economics theory. It reveals the decisive factors of the international arms export and import.By introducing national utility function and national security preference coeffecient, it analyses factors deciding arms import and export demand, and equilibrium problems. It also uses comparative static analysis,to explain interaction between arms trade and national security. In this paper, the most important assumption in the theoretical model is that the military importing countries focus on domestic security. In its utility function, it introduces the national security preference factor, whichmeasures the degree of concerns about national security of an arms importing country, and a higher coefficientindicates the country cares more about its national security, and more utilities are generated via arms importing. On the other hand, the arms exporter has interests inglobal national security, besides domestic security, it also cares about maintaining its global interests, thus international security preference factor is introduced in the utility function of its arms exports.Through simple theoretical derivation, this paper has come to some basic theoretical conclusions:(1) Arms imports depend on national security preference, the level of national income and the price level of arms.(2) Arms exports depend on its income level, international security preference and the relative level between the unit production cost and the international military product prices.(3) The equilibrium price and equilibrium quantity of the World Military Market depend on the military supply and demand balance and security preference of involved countries. This simple theoretical model has some interesting corollaries:(1) Domestic military consumption of supplier may increase with the reduction of international security preference, because there is a substitution effect between arms exports and domestic consumption.(2) One country may not export military productsz to alliances for profits. Arms export countries with higher income can provide more subsidies for military exports, which is more conducive to the armsexports.(3) If only for the purpose of profits, effect of income level to arms exportis uncertain. In this case, above a certain international security preference threshold, a nation’s income level has positive effects on arms exports. The two conclusions can explain the reason why the arms export countries are mostly developed countries with high income. When the international security preferences of one country change, its arms export depends on the production cost and arms prices. This may explain why, from a practical point of view, many developing countries struggle to develop arms on their own no matter how enormous the cost is, after getting rid of colonial rule and winning national independence, and ultimately export the arms.(5) How the military products cost increase affects its export is uncertain, which depends on the country’s safety preference. Even if in the case of exporting to the allies, export volume decreased with the increase of the military product costs, vice versa. This could explain the limitations of high technology weapons exports(including nuclear weapon, strategic missile, stealth jet fighter, A-submarine etc.) while the conventional weapons(such as gun, ammunition etc.) export with lower costs becomes more and more common. These conclusions and inferences provide a possible explanation for many unique phenomena in the global arms trade.This paper also uses the arms trade database of different countries from Sweden Stockholm International Peace Research Institute(SIPRI) to testify the theoretical model given above. The panel data of Military Export Country shows that the military export depends not only on domestic security, but also on the international security situation. Meanwhile, many factors like the military alliance, the arms race, military R & D, production cost, the level of technology, the quality of arms, terrorism and conflicts, wars, foreign policy etc. have significant impact on arms trade. The empirical time series data of USA, Russia and China further verify the basic theory above.In addition, this paper conducts case analysis focusing on comparing the military trade and national security of USA, Russia(former Soviet Union) and China. The characteristics of America and Russia’s(former Soviet Union) arms trade are very obvious:(1) America takes the military trade as an important part of its national security strategy, the cornerstone of its alliance and the leverage to achieve its goal of diplomacy.(2) America continues to strike a balance between security and economic interests.(3) Trade compensation methods are widely used.(4) Constant adjustment of arms exports license policies.(5) Proportion of America’s high-tech weapons exports is growing. These characteristics, from the historical point of view, have important significance of reference for China’s national security efforts and arms trade.China’s arms trade has a long history. The modern military imports reflect the reality of weakening national strength. You can find the weapons of America, Japan, and the former Soviet everywhere in the long history of wars in the 20 th century. After the founding of PRC, China imported a large number of military equipments. Regarding the exports, with the reform and opening up and the modernization of national defense from 1978, Chinese formally launched the arms trade. As of 2013, its arms trade volume has jumped to the 5th of the world. In the 21 st century, China’s arms trade increased year by year, with the stable rise of arms exports. China has transformed into an arms export power from a major import country.. Its military trading development provides a vivid case that how countries could grow into big players for military supply in the international arms trade history. At present, the international arms demand is still strong, which provides a good external environment for China to boost the trade. China’s comprehensive national strength continued to increase, with international status rising, diplomatic relations improving, national defense technology improving, which has laid a good foundation for the further development of arms trade. However, China still lacks the understanding of the importance of military trade to the national security and interests. Arms trade still cannot play full-fledged role in politics, economy and diplomacy. Therefore, this paper proposes policy suggestions on the development of arms trading strategy based on the interests of national security, It proposes using arms trade as the means to achieve national strategy and diplomatic goals, promote national defense technology improve international status and influence, to maximize the national political, security and economic interests, and maintain world peace and stability.The innovative points of this paper lie in:(1) Innovation in topic selection. As the author knows, this article is the first in the country to analyze arms trade problem with systematic economic analytical method.(2) Innovation in theories. The paper studies the interaction mechanism of the military trade and national security, which is unprecedented in related fields domestically.(3) Innovation in methods. Regarding to the analytical method, the paper uses the new international political economics standards analysis framework, takingcountries of anarchic international system as individual economic unit, analyze the topic with the national security interests maximizing model, and stands on good micro basis.(4) Innovation in conclusion. The conclusion of this paper is of great practical significance, especially for optimizing China’s national security decision-making mechanism, breaking through the western strategic encirclement led by America, and strengthening arms trade.The limitations of this article are:(1) The basic theory model of this paper still needs further improvment, in order to study the key issues of arms trade and national security in a systemic way, for example taking national security factors into the standard model analysis to better explain the relation between conflicts, wars and terrorism. This needs the author to have deeper research in the theories, which is an important direction in the future.(2) Because of the availability of the arms trade data, many conclusions of this paper need more empirical tests. Drawing increasing attention from the government agencies, and research institutions, as well as fast data accumulation. I believe that more high-quality theories and empirical research findings on arms trade will emerge.