By Sam Brothers & Joshua Archer

In 2012, Asian states spent more on defense than European states for the first time in modern history, with both arms sales to Asia and Asian defense budgets rising substantially. What role do arms imports play in Asian military modernization relative to domestic defense production?

Editor’s Note: This post first appeared here as a Current Issues article prepared by the CSIS National Security Program on Industry & Resources.

This post focuses on the role arms imports play in the procurement budgets of several strategically significant East Asian states—China, Taiwan, South Korea, and Japan—between 2000 and 2012. This analysis uses trend-indicator value units (TIVs) as a metric for arms imports. TIV is a unit of measurement created by the Stockholm International Peace Research Institute’s (SIPRI) Arms Transfer program. SIPRI produces TIVs by tracking deliveries of major conventional weapons and components and assigning each weapon or component a value based on its military capabilities. This analysis utilizes the procurement budgets of various Asian states as reported in documents publicly issued by the government of each state.

Figure 1: Northeast Asian Procurement Budgets. (In constant 2013 billions USD, three year right-leaning rolling average)

To examine the importance of arms imports relative to a country’s total military procurement, this analysis divides arms imports (represented by TIVs) by a state’s total military procurement spending in constant 2013 USD to create the ratio of TIVs over procurement — hereafter referred to as the import-to-procurement ratio. This value serves as a proxy indicator for the dependency of a country’s procurement on arms imports, and can track how it fluctuates over time.

It is important to stress that in and of itself, the import-to-procurement value only serves as a relative representation when viewed in the context of other import-to-procurement values. However, particularly in the context of a multiyear, multistate examination, this metric is a useful indicator of broad trends and patterns. It is also important to note that due to governmental regulations and contract issues, governments may allocate money in one year for systems that will reach them in a future year (or possibly over several future years). To minimize the effect of lags between the allocation of funds for foreign arms and the actual delivery of said arms, this analysis took the three year right-leaning rolling average of the TIVs and put each value over the three year right-leaning rolling average of each country’s reported procurement budget. Figure 2 illustrates the results.

Figure 2: Import to Procurement Ratio in Northeast Asia. (TIVs over procurement spending, three year right-leaning rolling average.)

Figure 2 reveals that both South Korea’s and Japan’s annual dependencies on defense imports have remained relatively stable throughout the last decade. For Japan, this is likely due to the self-imposed cap limiting the state’s defense budget to one percent of GDP, combined with a tendency to favor the indigenous production of many systems it could import. Similarly, the overall trend in the case of South Korea, despite a notable 2008 spike caused in part by a major delivery of F-15K aircraft costing $3.6 billion, is one of broad stability. China presents a starkly different trend. China’s reliance on defense imports steadily declined, reaching a comparatively low level in 2009. While China has dramatically increased its overall procurement spending over the last decade, China has simultaneously lessened its number of major defense imports. The role defense imports play in China’s military modernization process has sharply declined, reflecting the robust defense industry that China has gradually developed over the last decade.

Taiwan, unlike the other states examined by this study, features a large degree of volatility in its foreign arms dependency. Peak years coincide with the delivery of major U.S. weapons systems, like the 2006 deliveries of four Kidd-class destroyers costing approximately $740 million and a major radar system costing approximately $752 million. These peak years contrast sharply with trough years such as 2009, when no major U.S. weapons systems were delivered to Taiwan.

The defense import dependencies of these states each hold significant implications for international security. China will likely continue to reduce its overall dependence on defense imports, forcing former suppliers such as Russia to increasingly look to new clients such as India to fill the void. South Korea and Japan have been relatively stable in their dependence on foreign arms, although future Developments — such as major changes to Japan’s security policy (including Article 9 revisions or export control reforms), or the procurement of major weapons systems by either state — might upset this balance. Taiwan’s heavy reliance on the United States for arms purchases makes Taiwanese arms imports extremely vulnerable to disruption, which can occur due to either Taiwanese or U.S. domestic politics or international pressure. This presents a significant obstacle to long-term Taiwanese defense planning. Overall, rising Asian defense spending does not represent unambiguous opportunity for defense exporters — rather, export potential differs based on national context.

Mr. Sam Brothers is researcher with National Security Program on Industry & Resources at CSIS. Mr. Joshua Archer is a Research Associate with the program. To learn more on this topic subscribe to the NSPIR’s publications, where this piece first appeared.