US Defense Exports Still Dominate Market

This article first appeared in Aviation Week & Space Technology.

DUBAI, UAE -- China, France and Russia are increasingly aggressive in courting customers for their military products, but it is the U.S. that is raking in the big dollars -- and increasingly so.

What’s more, the U.S.’s improving relationship with India could signal that record high levels of military exports are not just an aberration but are sustainable. This prospect would bring relief to U.S. defense companies, which face the possibility of shrinking modernization projects when Washington starts focusing on cutting its massive budget deficit.

A decade ago, the U.S. booked about $10 billion in foreign military sales (FMS). When those contracts reached $28 billion in fiscal 2008, many in the Pentagon thought it was an aberration, especially given the $10 billion jump from the year before. But there has been no sign of a letup. Vice Adm. Jeffrey A. Wieringa, director of the Defense Security Cooperation Agency, says the value of FMS commitments signed during the last fiscal year reached $38.1 billion, and this year’s total could top $50 billion based on estimates of deals in the negotiating pipeline.

Bucking a trend

Is the U.S. bucking a trend? Some defense suppliers, such as Saab, have suggested that sales are suffering because potential buyers are holding off on big-ticket spending decisions; others, such as the Stockholm International Peace Research Institute (Sipri), note that nations such as Thailand or Malaysia are curbing expenditures. But at a broader level, Sipri sees “few signs that the global financial crisis is significantly affecting decision-making” among major arms importers.

Moreover, the amount of money being spent under the so-called Section 1206 authority -- a mechanism created in the fiscal 2006 budget to train and equip foreign military forces -- has risen steadily.

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-- Christian