Defense offsets and political leverage

Authors

  • Jennifer Spindel University of New Hampshire

DOI:

https://doi.org/10.15355/epsj.19.1.23

Keywords:

arms trade, offsets, military expenditure, network power

Abstract

Why do states agree to offset provisions when they purchase weapons, and what are the consequences of different types of offsets? This article takes a network approach to understanding the causes and consequences of offsets in the arms trade. It argues that offset clauses create network ties that affect a state’s position and power in the global arms production network. This depends on the type of offset it pursues—only a small subset of states with advanced technological manufacturing capabilities can maintain a central and powerful position by leveraging direct offsets. Other states must pursue indirect offsets, which have the opposite effect and keep these states locked into peripheral positions of limited power. Through case studies of offset use in India and Malaysia, this article shows how difficult it is to achieve network interdependence (India), and the difficulties of using indirect offsets to achieve political goals (Malaysia).

References

Abdullah, A. and Safari, Z. 2018. Industry Collaboration Program (Icp): Empowering Technology Development For National Economic Growth. Journal of Advanced Manufacturing Technology 12(1), pp. 159–172.

BAE Systems. 2015. BAE Systems Partners to Bring New Cyber Security Capability to Malaysia. Available at: https://www.baesystems.com/en/article/bae-systems-partners-to-bring-new-cyber-security-capability-to-malaysia. (Accessed 29 March 2023).

Balakrishnan, K. and Matthews, R. 2009. The Role of Offsets in Malaysian Defence Industrialisation. Defence and Peace Economics, 20(4), pp. 341–358. https://doi.org/10.1080/10242690802333117

Behera, L.K. 2015. Defence Offsets: International Best Practices and Lessons for India. New Delhi: Institute for Defence Studies & Analyses.

Bisaccio, D. 2020 ‘Germany Extends Arms Embargo on Saudi Arabia’, Defense Security Monitor. Available at: https://dsm.forecastinternational.com/wordpress/2020/03/24/germany-extends-arms-embargo-on-saudi-arabia/ (Accessed 30 March 2021).

Bitzinger, R. 2004. Offsets and Defense Industrialization in Indonesia and Singapore. In: Brauer, J. and Dunne, J.P., eds. Arms Trade and Economic Development: Theory, Policy, and Cases in Arms Trade Offsets. London: Routledge, pp. 255–70. https://doi.org/10.4324/9780203392300_chapter_17

Brauer, J. 2004. Economic aspects of arms trade offsets. In: Brauer, J. and Dunne, J.P., eds. Arms Trade and Economic Development: Theory, Policy, and Cases in Arms Trade Offsets. London: Routledge, pp. 54–65. https://doi.org/10.4324/9780203392300_chapter_4

Brauer, J., and Dunne, J.P. 2004. Introduction. In: Brauer, J. and Dunne, J.P., eds. Arms Trade and Economic Development: Theory, Policy, and Cases in Arms Trade Offsets. London: Routledge, pp. 1–15. https://doi.org/10.4324/9780203392300

Catrina, C. 1988. Arms transfers and dependence. New York: UNIDIR.

Deutsche Welle. 2019. Germany rebuffs UK over Saudi arms exports. 20 February. Available at: https://www.dw.com/en/germany-rebuffs-uk-call-to-lift-ban-on-arms-exports-to-saudi-arabia/a-47596782 (Accessed 16 November 2023).

Economic Times. 2018. Lockheed Martin to start producing Made-in-India F-16 wings in next 2-3 years. 14 October. Available at: https://economictimes.indiatimes.com/news/defence/lockheed-martin-to-start-producing-made-in-india-f16-wings-in-next-2-3-years/articleshow/66183715.cms?from=mdr (Accessed 29 March 2023).

Erickson, J. 2015. Dangerous Trade: Arms Exports, Human Rights, and International Reputation. New York: Columbia University Press. https://doi.org/10.7312/columbia/9780231170963.001.0001

Farrell, T., and Newman, A. 2019. Weaponized Interdependence: how global economic networks shape state coercion. International Security, 44(1), pp. 42–79. https://doi.org/10.1162/isec_a_00351

Faul, M.V. 2015. Networks and Power: Why Networks are Hierarchical Not Flat and What Can Be Done About It. Global Policy, 7(2), pp. 185-197. https://doi.org/10.1111/1758-5899.12270

Hacaoglu, S. 2015 ‘Turkey to Keep Missile System Outside NATO as China Deal Looms’, Bloomberg, 19 February. Available at: http://www.bloomberg.com/news/articles/2015-02-19/turkey-to-keep-missile-system-outside-nato-as-china-deal-looms (Accessed: 5 June 2015).

Hafner-Burton, E.M. and Montgomery, A.H. 2006. Power Positions International Organizations, Social Networks, and Conflict. Journal of Conflict Resolution, 50(1), pp. 3–27. https://doi.org/10.1177/0022002705281669

Hall, P. and Markowski, S. 1994. On the normality and abnormality of offsets obligations. Defence and Peace Economics 5(3), pp. 173–188. https://doi.org/10.1080/10430719408404791

Hammond, G. 1987. Offsets, Arms, and Innovation. The Washington Quarterly, 10(1), pp. 173-85. https://doi.org/10.1080/01636608709477376

Hammond, G. 1990. Countertrade, Offsets and Barter in International Political Economy. London: Pinter Publishers.

India. Ministry of Defense. 2011. Defense Procurement Policy. Available at: https://cgda.nic.in/ifa/DPP2011.pdf. (Accessed 10 April 2024).

India. Ministry of Defense. 2013. Defense Procurement Procedure. Available at: http://cgda.nic.in/pdf/DPP2013.pdf. (Accessed 13 December 2017).

India. Department of Defense Production 2017. Defense Manufacturing Sector Achievement Report. Available at: https://drive.google.com/file/d/0B-Tv7_upCKANRmtia05TUWsxRms/view. (Accessed 13 December 2017).

India, Ministry of Defence. 2020. Defence Acquisition Procedure 2020. Available at: https://www.ddpmod.gov.in/sites/default/files/DAP%202020%20%2011%20Nov%2021_0.pdf (Accessed 1 November 2023).

Insinna, V. 2016. ‘US Air Force: Tech Transfer Issues Key to F-16 Production Line Move to India,’ Defense News, 8 September 8. Available at: https://www.defensenews.com/air/2016/09/08/us-air-force-tech-transfer-issues-key-to-f-16-production-line-move-to-india/. (Accessed 21 January 2018).

Kapur, V. 2013. US-Indian Defence Technologies for Transfer: Cultural Change. New Delhi: Institute for Defense Studies and Analyses.

Keohane, R. and Nye, J. 2011 Power & Interdependence. Boston: Pearson.

Klare, M. 1996. The arms trade in the 1990s: changing patterns, rising dangers. Third World Quarterly 17(5), pp. 857–874. https://doi.org/10.1080/01436599615155

Lam, D. 2016. ‘Why Lockheed Martin's Bid to Build Lethal F-16 Fighters in India Could be a

Game Changer,’ The National Interest, 12 August. Available at: http://nationalinterest.org/blog/the-buzz/why-lockheed-martins-bid-build-lethal-f-16-fighters-india-17329. (Accessed 29 March 2023).

Mahadzir, D. 2022. ‘DSA 2022: ‘Benefits of Malaysian offset programme remain unclear.’ Shephard Media, 28 March. Available at: https://www.shephardmedia.com/news/defence-notes/dsa-2022-benefits-of-malaysian-offset-programme-ar/ (Accessed 25 September 2023).

Malaysia. Ministry of Finance. 2011. Policy and Guideline on Offset Programmes in Government Procurement. Available at: https://docplayer.net/21884835-Policy-and-guideline-on-offset-programmes-in-government-procurement-ministry-of-finance-malaysia.html (Accessed 10 April 2024). https://doi.org/10.46501/IJMTST1004

Malaysia. Ministry of Finance. 2013. Policy and Guidelines on Industry Collaboration Programme in Government Procurement. Available at: https://web.archive.org/web/20170406065349/http://tda.my/wp-content/uploads/2016/03/ICPpolicyBI.pdf (Accessed 10 April 2024).

Malaysia. Industry-Government Group for High Technology. 2015 Offsets Available at: https://web.archive.org/web/20140624002020/https://might.org.my/en/solutionpages/offset.aspx. (Accessed 10 April 2024).

Malaysia, Prime Minister’s Office. 2019 Malaysia’s National Defence Policy. July. Available at: https://www.pmo.gov.my/wp-content/uploads/2019/07/National-Defence-Policy.pdf. (Accessed 29 March 2023).

Martin, S. 2014. The Economics of Offsets: Defence Procurement and Countertrade. Amsterdam: Harwood Academic Publishers.

Martin, S. 2014. Countertrade and Offsets: An Overview of The Theory and Evidence. In: Martin, S., ed., The Economics of Offsets: Defence Procurement and Countertrade. Amsterdam: Harwood Academic Publishers, pp. 15–48.

Mathew, T. 2009. Essential Elements of India’s Defence Offset Policy - A Critique. Journal of Defence Studies 3(1), pp. 1–17.

Matthews, R. 2004. Defense offsets: policy versus pragmatism. In: Brauer, J. and Dunne, J.P., eds. Arms Trade and Economic Development: Theory, Policy, and Cases in Arms Trade Offsets. London: Routledge, pp. 89–102. https://doi.org/10.4324/9780203392300_chapter_6

Matthews, R. 2014. The UK Offset Model: From Participation to Engagement. London: Whitehall Reports.

Matthews, R. and Al-Saadi, R. 2023. Organisational Complexity of the Eurofighter Typhoon Collaborative Supply Chain. Defence and Peace Economics 34(2), pp. 228–243. https://doi.org/10.1080/10242694.2021.1987022

Matthews, R., and Yip, T. 2013. The Push and Pull of Offset in the Development of Malaysia’s Defense and Security Technology Park. Defense Review Asia, 28 January. Available at: http://www.defencereviewasia.com/articles/203/The-Push-and-Pull-of-Offset-in-the-Development-of-Malaysia-s-Defence-and-Security-Technology-Park. (Accessed 21 January 2018).

Mehta, S. 2015. Knowledge Arbitrage through Defence Offsets. In: Sodhi, M.S. and Bhargava, R. eds., Perspectives on India’s Defence Offset Policy. New Delhi: SAGE Publishing India, pp. 147–152.

Mitra, A. 2009. A Survey of Successful Offset Experiences Worldwide. Journal of Defence Studies, 3(1), pp. 43–62.

Narasimhan, S.L. 2015. ‘India’s needs and defense offsets.’ In: Sodhi, M.S. and Bhargava, R. eds., Perspectives on India’s Defence Offset Policy. New Delhi: SAGE Publishing India, pp. 37–44.

Noack, R. 2018. ‘Germany halts arms deals with Saudi Arabia, encourages allies to do the same.’ Washington Post, 22 October. Available at: https://www.washingtonpost.com/world/2018/10/22/germany-its-allies-well-halt-future-arms-sales-saudi-arabia-until-we-have-clarity-khashoggi-so-should-you/ (accessed 30 March 2021). https://doi.org/10.26715/jbms.1_21022018

Noack, R. 2019. ‘Analysis | Germany halted all arms exports to Saudi Arabia. It worked too well, and now Berlin is looking for a way out.’ Washington Post, 27 March. Available at: https://www.washingtonpost.com/world/2019/03/27/germany-halted-all-arms-exports-saudi-arabia-it-worked-too-well-now-they-are-looking-way-out/ (accessed 8 October 2019).

Oatley, T., Winecoff, W.K., Pennock, A., et al. 2013. The political economy of global finance: A network model. Perspectives on Politics 11(1), pp. 133–153. https://doi.org/10.1017/S1537592712003593

Opall-Rome, B. 2015a. ‘IAI Courts India with Offsets, Tech Transfer,’ Defense News, 16 March, Available at: https://www.defensenews.com/industry/2015/03/16/iai-courts-india-with-offsets-tech-transfer/. (Accessed 24 December 2015)

Opall-Rome, B. 2015b. ‘F-35 Work for Israeli Firms Reaches $770M’, Defense News, 20 December. Available at: http://www.defensenews.com/story/defense/policy-budget/industry/2015/12/20/f-35-work-for-israeli-firms-reaches-770m/77663536/ (Accessed: 24 December 2015).

Petty, F.S. 1999 Defense Offsets: A Strategic Military Perspective. Carlisle: Army War College Press. https://doi.org/10.21236/ADA363929

Podolny, J.M. 2001. Networks as the Pipes and Prisms of the Market. American Journal Of Sociology 107(1), pp. 33–60. https://doi.org/10.1086/323038

Raghuvanshi, V. 2016 ‘Saab To Partner with Tata Power To Manufacture LEDS in India,’ Defense News, 29 March. Available at: http://www.defensenews.com/land/2016/03/29/saab-to-partner-with-tata-power-to-manufacture-leds-in-india/ (Accessed 29 March 2023).

Raytheon. 2016. Annual Report to Investors. Available at: https://web.archive.org/web/20170508043911/http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9Mzc0MTk1fENoaWxkSUQ9LTF8VHlwZT0z&t=1&cb=636276783789225271 (Accessed 10 April 2024).

Reuters. 2023. India says defence production exceeds $12 billion for first time. 19 May. Available at: https://www.reuters.com/world/india/india-says-defence-production-exceeds-12-billion-first-time-2023-05-19/ (accessed 29 November 2023).

Sazak, S. 2016 ‘Why Turkey Chose, and Then Rejected, a Chinese Air-Defense Missile’, Defense One, 3 February. Available at: http://www.defenseone.com/ideas/2016/02/turkey-china-air-defense-missile/125648/. (Accessed 29 November 2023).

Singh, B. 2014. Indian Defence Offset Policy— Does it Help Boost Indigenisation. Available at: https://www.claws.in/static/MP51_Indian-Defence-Offset-Policy-Does-It-Help-Boost-Indigenisation.pdf (Accessed 29 March 2023).

Smith, J., and Werman, A. 2016 ‘Assessing US-India Defense Relations: The Technological Handshake,’ The Diplomat, 6 October. Available at: http://thediplomat.com/2016/10/assessing-us-india-defense-relations-the-technological-handshake/ (Accessed 12 January 2018).

Sodhi, M., and Bhargava, R. 2015. Perspectives on India’s Defence Offset Policy. New Delhi: SAGE Publishing India.

Som, V. 2015 ‘After 4 Crashes, Ecuador Grounds Fleet of Indian Dhruv Choppers, Cancels Contract’, NDTV, 15 October. Available at: https://www.ndtv.com/india-news/after-4-crashes-ecuador-grounds-fleet-of-indian-dhruv-choppers-cancels-contract-1232715. (Accessed 21 January 2018).

Spindel, J. 2019a. ‘The Case for Suspending American Arms Sales to Saudi Arabia’, War on the Rocks.’ Available at: https://warontherocks.com/2019/05/the-case-for-suspending-american-arms-sales-to-saudi-arabia/ (accessed 12 March 2021).

Spindel, J. 2019b ‘What Turkey’s Purchase of a Russian Air Defense System Means for the U.S. And NATO’, The Washington Post Monkey Cage, 23 July. Available at: https://www.washingtonpost.com/politics/2019/07/23/what-turkeys-s-purchase-means-us-nato/. (Accessed 12 March 2021).

Sprenger, S. 2019. ‘Germany to extend Saudi weapons embargo until month’s end’, Defense News, 6 March. Available at: https://www.defensenews.com/global/europe/2019/03/06/germany-to-extend-saudi-weapons-embargo-until-months-end/ (Accessed 16 November 2023).

Taylor, T. 2004. ‘Using procurement offsets as an economic development strategy.’ In: Brauer, J. and Dunne, J.P, eds., Arms Trade and Economic Development: Theory, Policy, and Cases in Arms Trade Offsets. London: Routledge, pp. 30–43. https://doi.org/10.4324/9780203392300_chapter_2

Tellis, A. 2011. Decoding India’s MMRCA Decision. Available at:

https://carnegieendowment.org/files/Decoding_Indias_MMRCA_Decision.pdf. (Accessed 29 March 2023).

Transparency International. 2010. Defence Offsets: Addressing the Risks of Corruption & Raising Transparency. Available at: https://ti-defence.org/wp-content/uploads/2016/03/1004_corruption_risk_offsets.pdf (Accessed 25 September 2023).

Ungaro, A.R. 2013 Trends in the Defence Offsets Market. Available at: http://papers.ssrn.com/abstract=2386528 (Accessed: 14 December 2015). https://doi.org/10.2139/ssrn.2386528

United Kingdom. Ministry of Defense. 2012. National Security Through Technology. Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/27390/cm8278.pdf. (Accessed: 26 March 2023).

United Kingdom. Department for International Trade. 2017. UK Defence & Security Export Statistics for 2016. Available at: https://webarchive.nationalarchives.gov.uk/ukgwa/20190803200724/https://www.gov.uk/government/publications/uk-defence-and-security-export-figures-2016/uk-defence-and-security-export-statistics-for-2016. (Accessed 26 March 2023).

United States. Bureau of Industry and Security. 2023. Offsets in Defense Trade: Twenty-Seventh Study. Available at: https://www.bis.doc.gov/index.php/documents/sies/3269-public-version-27-annual-offsets-report/file. (Accessed 15 October 2023)

United States. Bureau of Industry and Security. 2012. Offsets in Defense Trade: Sixteenth Study. Available at: https://www.bis.doc.gov/index.php/documents/other-areas/strategic-industries-and-economic-security/offsets-in-defense-trade/396-offsets-in-defense-trade-sixteenth-study/file (Accessed: 10 April 2024).

United States. Bureau of Industry and Security. 2005. Offsets in Defense Trade: Tenth Study. Available at: https://www.bis.doc.gov/index.php/documents/sies/127-tenth-report-to-congress-1-06/file (Accessed: 16 August 2017).

United States. Bureau of Industry and Security 2004. Offsets in Defense Trade: Eighth Report. Available at: https://www.bis.doc.gov/index.php/documents/sies/123-eighth-report-to-congress-7-04/file. (Accessed: 10 April 2024).

United States. Government Accountability Office. 2000. Defense Trade: Observations on Issues Concerning Offsets. Available at: http://www.gao.gov/assets/110/108708.pdf(Accessed: 16 August 2017). (Accessed: 16 August 2017).

Verma, S. 2009. Offset Contracts Under Defence Procurement Regulations in India: Evolution, Challenges and Prospects. Journal of Contract Management 7(1), pp. 1–32. https://doi.org/10.2139/ssrn.1464709

Wezeman, P., Kuimova, K., and Wezeman, S. 2022. Trends in International Arms Transfers, 2021. Available at: https://sipri.org/sites/default/files/2022-03/fs_2203_at_2021.pdf (Accessed 29 March 2023). https://doi.org/10.55163/CBZJ9986

Wintour, P. 2019. ‘Jeremy Hunt urges Germany to rethink Saudi arms sales ban’, The Guardian, 20 February. Available at: https://www.theguardian.com/world/2019/feb/20/jeremy-hunt-urges-germany-to-rethink-saudi-arms-sales-ban (Accessed 16 November 2023).

Published

2024-04-19

How to Cite

Spindel, J. (2024). Defense offsets and political leverage. The Economics of Peace and Security Journal, 19(1). https://doi.org/10.15355/epsj.19.1.23

Issue

Section

Articles

Similar Articles

<< < 3 4 5 6 7 8 9 10 11 12 > >> 

You may also start an advanced similarity search for this article.