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Release No: 085-95
February 22, 1995



The Department of Defense today released a study and forecast of international trade in conventional arms over the rest of the decade. The Department undertook the study to assess market participation by U. S. producers and consider possible industrial and economic implications for national security and arms export policies.

"This is the first such forecast of its kind ever made by the Department of Defense. The health of our industrial base continues to be important for our nation's security. This study provides a baseline against which we can measure propspects and policies," said Joshua Gotbaum, Assistant Secretary of Defense for Economic Security.

Annual world-wide international arms deliveries declined sharply over the 1983-93 period, from about $65 billion to about $20 billion, a 69 percent reduction. The decline in world-wide deliveries is due largely to reductions in activity by the former Soviet Union, but is also attributable to reductions in overall demand. Over the same period, annual U. S. deliveries in international arms markets declined about 15 percent from approximately $13 billion to roughly $11 billion (constant 1991 dollars). U. S. deliveries are expected to increase somewhat above this level through the remainder of the decade. The unusually high 1991 and 1993 sales agreements are important contributors to this increase.

As a result, the overall market share held by U. S. producers is now 53 percent, and may increase to as much as 59 percent over the forecast period. The continued strong demand for U. S. products within this smaller market is attributable to the performance of U. S. military systems in actual use, to the desire of other nations for interoperability with U. S. forces, and to the quality of research and development and follow-on support by U. S. firms.

U. S. government decisions concerning the export of conventional arms continue to be made on the basis of national security and foreign policy concerns. The report concludes that while changes in the level of support that the U. S. government provides to arms exporters might have an impact on some transactions, it would only have a limited effect upon overall market shares. However, exports may help the armed services to maintain particular industrial competencies at reduced costs. Producers of tanks and helicopters, for example, have relied significantly on foreign sales to maintain certain production lines and to cover overhead costs that otherwise would have been paid by DoD and the taxpayers.

NOTE: Reporters may obtain copies of the study from the Directorate for Defense Information, Room 2E765, the Pentagon, or by calling (703) 695-0192. Others requesting copies should call (703) 697-5737.

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