July 17, 2017

Could Australia be Pyne's major weapons exporter? Unlikely.

ARTICLES

The Guardian (Australian edition) July 17, 2017 and The Canberra Times, July 15, 2017 have reported that:

Australia's Defence Industry Minister, Christopher Pyne, has voiced enthusiasm about Australia becoming a major weapons exporter - perhaps on the scale of UK, French and German exports (see Table below). As Pyne mainly promotes shipbuilding from South Australia this is likely what he is talking about.

COMMENT

Major impediments to Pyne Vision are: 

-  Australia does not have an industrial base or equipment research sector large enough to develop 
   major weapon systems

-  put another way Australia does not enjoy the economies of scale to sell a high volume of weapons
   to the Australian domestic market that would make unit prices competitive or lower for foreign
   customers

-  Australia does not have the necessary labour efficiencies or productivity to compete against
   existing major arms exporters (think South Korea and Spain for surface ships). Also Singapore is
   highly efficient in labour productivity making it unlikely to buy from Australia.

-  Australia does not have the major advantage of being an established weapons supplier with an
   established sales structure in other countries. This is unlike all the exporters listed in the Table
   below (US, Russia, Germany, China, France etc)

-  Australia does not have the corporate financial depth to sell weapons at below market prices in
   order to secure contracts - then recoup revenue over the long term (eg. by charging higher for
   maintenance and spare parts, etc)

-  Australia is constrained by licences and intellectual property being held by major exporters to
   Australia (eg. US, Spain, UK and for the future submarine France.

-  Australia is not geographically positioned well to sell weapons to paying regional allies (except for 
   New Zealand). NOT to impoverished Pacific Islands, PNG, East Timor etc.

So what is Pyne really talking about?

New Zealand. It is the only country Australia has built major weapons system for, and sold those weapons to. But New Zealand is still a very small customer. The largest orders to NZ over the last 3 decades have been 2 Anzac-class frigates in the 1990s and 2 Protector-class OPVs in the 2000s. 

Offsets. Australia is partly justifying the large amounts of taxpayer money it is spending on F-35As by claiming that the much smaller scale Australian content and "sales" of some F-35 components will be a victory for Australian industry  

Pyne appears to focus most of his attention to ship and submarine building in Adelaide. It is highly unlikely that Australia could build and export Future Frigates, Futures Submarines or OPVs, to foreign countries. This is mainly because those countries that designed and hold the intellectual property rights to those weapons system would not want to lose business to artificially created Australian reselling or competition. 

Pyne's claims of a potential export benefits of Australian built weapons can mainly be seen as ways to divert criticism of the high prices Australia will be spending on F-35s, ships and submarines over the next 20 years. Pyne wants to maintain Australia's major policy direction - that is spending on the weapons sector should not be questioned in the way spending on the less deserving health, education, welfare, infrastructure and energy sectors is being questioned.

Pyne's words do not yecertify that he is out of touch with the realities of weapons exports.



Australia has long been geared to be a major weapons importer making it difficult for Australia to become a major weapons developer and exporter. Source is the Stockholm International Peace Research Institute (SIPRI) database via The Canberra Times


Pete

2 comments:

Anonymous said...

I wonder if Australia can manufacture military products too.
When car maufacture is transfered to overseas production it should have been considered as 'the loss of a strategic resource'. The removal of equipment and technology further degrades Australian potential to manufacture.
I'm not confident we can maintain and fight a war footing for more than a week or two.
I'm not sure our allies will quicly jump to our aid. They have to cross some pretty good motes to get here.
DZA

Peter Coates said...

Hi DZA

Australia builds military vehicles, mainly armoured cars, in Bendigo, Victoria. This is under licence from local-foreign firms, mainly Thales Australia. I don't class such vehicles as major weapon systems.

- The Bushmaster https://en.wikipedia.org/wiki/Bushmaster_Protected_Mobility_Vehicle has been sold to the Netherlands and UK.

- The Hawkei is another Thales Australia https://en.wikipedia.org/wiki/Hawkei product.

Australia did build and sell the Nomad light transport aircraft in the 1970s. But I think this was a very developmentally expensive experience that ultimately caused grief, due to high fatal crash rate https://en.wikipedia.org/wiki/GAF_Nomad#Design_and_development

Regards

Pete