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U.S. arms sales to the Middle East and North Africa (MENA) have long been justified by the belief that they provide substantial numbers of jobs to American citizens—a line that was famously repeated, and exaggerated, by former president Donald Trump’s administration. Yet lobbying efforts by domestic arms manufacturers and shrewd purchasing practices by Middle Eastern government have obscured whether these arms sales actually benefit American employment.1

A careful review of the data shows that U.S. arms sales to MENA countries have less of an impact on employment than domestic arms purchases or even arms exports elsewhere. Nonetheless, the perception remains that MENA states enjoy a stranglehold on Congress and the White House due to the jobs created by their weapons buys. As MENA states change their buying habits to meet evolving needs, U.S. policymakers and politicians must do more to understand, anticipate, and address the effects that selling—or suspending the sale of—these weapons will have on domestic employment.

Historically, MENA states have often purchased expensive U.S.-made weapons to keep American assembly lines from drying up. These big-ticket items generally went unused. But as newly emboldened countries like Saudi Arabia and the United Arab Emirates deploy their militaries, they’re demanding cutting-edge planes and relatively simple bombs that create few American jobs.

Changes in MENA weapons purchases will drive U.S. job creation rates down for three reasons. First, MENA states now spend most of their money on planes and sophisticated missiles rather than ammunition and armored vehicles. Second, they’re increasingly demanding more support for their own indigenous defense industries. Finally, they favor advanced weapons whose production is nascent and munitions that can be easily outsourced. Buying F-35s or gravity bombs with guidance kits will not have the same political impact as purchasing expensive weapons that are late in their life cycle.

How Much Does that Defense Job Cost?

In July 2020, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) found that $15.5 billion in defense export sales contracts “would create or sustain 127,328 employment opportunities”—a rate of 8,215 jobs per billion dollars of exports. This topline number is a useful start, but BIS provides two other key figures. The first is a broad assessment of the effects of offsets—contracted obligations that offer additional incentives. Second, the report leverages data from the Bureau of Economic Analysis and the census to estimate job creation in the manufacturing sector. These values offer a more accurate depiction of potential jobs sustained or created by MENA arms deals.

Jonathan D. Caverley
Jonathan D. Caverley is a professor of strategy in the Strategic and Operational Research Department at the U.S. Naval War College.

Table 1 shows the BIS estimates for job creation rates, before offsets, for various defense manufacturing sectors. These rates vary widely; building an airplane creates fewer jobs than producing ammunition. This is partly because a worker is likely paid more money to build a plane than to build a bomb, because they are generating more value. But one can safely assume that most politicians would prefer to claim 10,000 well-paying manufacturing jobs than 7,000 somewhat-better-paying manufacturing jobs.

From 2016 to 2018, aircraft-related manufacturing accounted for 36 percent of worldwide U.S. defense export contracts. Missiles and ammunition made up 37 percent, while military vehicles only constituted 7 percent. MENA nations, in particular, spent substantially more on planes and sophisticated missiles than on ammunition and armored vehicles. The balance between these two sectors will determine how many jobs are created. Where in the supply chain an industry is located also matters; making aircraft components creates many more jobs than assembling the aircraft itself.

Clients Increasingly Rely on Offsets

BIS data shows that offsets clearly steer money away from domestic jobs to the client state. In 2018, the BIS estimates the three-year moving average for offsets as a percentage of contract value at 39.4 percent. Once offsets are factored in, even the best-performing sectors of the defense industry in Table 1 created jobs at a rate far below that of the broader commercial export market.

Sophisticated weapons buyers like the Gulf states increasingly demand that a considerable amount of their purchases be reinvested in their own country, leaving less money for job creation in the United States. Offset percentages for MENA states are likely to climb even higher over time. Both Saudi Arabia and the UAE are attempting to build indigenous defense industries, largely through offset demands. It isn’t yet clear that such efforts will actually succeed, but these states will surely continue to funnel money into their domestic industries. The UAE—whose defense conglomerate Edge is now the twenty-second-largest defense contractor in the world—recently revised its offset guidance, requiring firms to invest 60 percent of a contract’s value into the emirates. Much of these offsets will likely take the form of licensed production and technology transfer, which will directly cut into American defense jobs.

If a state cannot realistically contribute to the production of its desired weapon, it may require offsets in other important sectors instead. From 2016 to 2018, 34 percent of the value of U.S. export contracts were missile-related, but only 6 percent of offset values were spent in this sector—because very few importers have a developed missile industry. Instead, 48 percent of offset transactions were spent on aircraft-related manufacturing, which accounted for 36 percent of defense export contracts. This means that although selling missiles abroad will not come at the cost of American jobs in that sector, the aircraft-manufacturing sector could be hit instead. According to the BIS, offsets in the aircraft-manufacturing sector shifted 2,790 more jobs overseas than were created by exports. Not coincidentally, in 2019 the UAE produced its first combat aircraft.

Closing (or threatening to close) a factory is more politically salient than the promise of future jobs. MENA states have a reputation for saving production lines by buying weapons the United States no longer wants. Egyptian, Saudi, and Iraqi purchases famously kept the Abrams tank assembly line in Ohio open for many years. Kuwaiti and Qatari purchases of Boeing’s F-18 and F-15 jets helped keep Missouri assembly lines hot. Emirati purchases helped save the Patriot plant in Massachusetts. But the cutting-edge weapons that Gulf states now seek are in high demand—those factory lines aren’t about to go cold. The F-35 order book, for example, stretches across decades. It is highly unlikely that these high-paying jobs are going away anytime soon.

Buying weapons toward the end of their manufacturing life may temporarily save jobs, but even these transactions should be examined closely. Earlier-generation technology is both less central to U.S. national security and more easily absorbed by states seeking to climb the production ladder—thus, it’s more easily outsourced. Lockheed Martin, for example, proposed shifting its entire F-16 production line to India in exchange for a large order of the earlier-generation fighter jets. Already, it has shifted production of all F-16 wings to India. Similarly, as part of a recent Paveway bomb deal with Saudi Arabia, Trump allowed the assembly of an unprecedented portion of the munitions’ electronic systems in the kingdom.

There is, therefore, a relatively fleeting window of opportunity to maximize the number of jobs saved by arms exports. It only opens when the weapon desired by a foreign customer is neither too early nor too late in its product cycle.

Case Study: The 2020 U.S.-UAE Arms Deal

In late 2020, the Trump administration announced a $23.4 billion arms deal to the UAE—which is currently under review by President Joe Biden’s administration. The specifics of the sale can illustrate how the above insights can shape analysis. Going through each item of sale with only slightly more detail, the BIS data allows policymakers to numerically estimate job creation. Policymakers can then qualitatively analyze this number, considering the weapon’s point in the product cycle as well as sectoral-specific offsets. Using the BIS’s topline job creation value, these deals would result in an impressive 192,000 jobs. But after applying the above insights, the improved estimate looks to be, at best, about 55,000 jobs.2

Using the data from Table 1, the largest Emirati order, $10.4 billion for F-35 Joint Strike Fighters and related equipment, will create about 24,000 jobs. But this number is likely to be a significant overestimate for several reasons. As explained above, aviation manufacturing is a relatively inefficient job creator. Moreover, the F-35 is not even in full-rate production yet—Lockheed Martin failed to actually build the planes it had committed to producing last year. With several thousand units planned, fifty F-35 fighters are a fraction of any likely production run. At the maximum annual production rate of 180 planes, any jobs it could create are likely far in the future.

Given BIS data on offset sectors, the offsets associated with these deals will likely further cannibalize U.S. aircraft industry jobs. Indeed, a large percentage of the program is already sourced from outside of the United States. Every F-35’s aft fuselage and vertical and horizontal tails are built by BAE Systems in either the United Kingdom or Australia.

The combination of 14,000 missiles and bombs in the UAE’s $10 billion order for Munitions, Sustainment, and Support will create roughly 25,000 jobs—a few more than the F-35 deal. This figure is based on assigning half a billion dollars of the contract to bombs, given unit prices. These munitions will likely be delivered in the medium term.

The vast majority of the deal’s value covers sophisticated missiles with missions like air-to-air combat and suppression of enemy air defenses. $1 billion of exports in missile-related sectors creates a relatively high number of domestic jobs, few of which are lost to offsets. While they may have some application in the UAE’s adventures in Libya and elsewhere, these weapons are not generally used in Yemen. On the other hand, forbidding the sale of gravity bombs and their guidance kits would forego less than 2,000 jobs.

The U.S. military, concerned about a shortage of its higher-end missiles, is ramping up its purchases. To keep up with domestic demand, the U.S. Congress is funding the creation of an additional Joint Air-to-Surface Standoff Missile production facility. Over the next five years, the United States plans to purchase over 74,000 of the same Joint Direct Attack Munitions that the UAE seeks to buy. That means that job creation associated with the UAE arms deal is likely to be overestimated, as production lines are likely to hum for the indefinite future.

Finally, the $2.97 billion included for MQ-9B Remotely Piloted Aircraft and related equipment will create about 7,000 jobs. Of the three proposed sales to the UAE, this is the most reliable estimate. The U.S. Air Force is moving away from this platform, so this sale will likely save a politically relevant number of jobs at places like General Atomics’ assembly line in Poway, California. These also appear to be configured for maritime missions such as anti-submarine warfare, which is more in line with U.S. national interests.

Cushioning the Blow to Employment

Given that munitions might be the most effective way to steer short-term behavior of client states—and are relatively more efficient producers of jobs—Congress should pay special attention to the domestic orders. A more stable domestic procurement cycle for these weapons, which are in high demand by the U.S. military, would provide a level of certainty that most firms would prefer over splashy international orders that may never materialize. Defense lobbyists likely care less about the customer than the size and predictability of the order.

With modest additional math, analysts can more precisely estimate the employment effects of targeted restrictions on arms transfers. This will allow policymakers to weigh job losses against controlling the use of specific weapon types. Advanced missiles used for air defense are probably more efficient job creators relative to aircraft and especially the precision-guided bombs currently suspended by the Biden administration.

In addition to these calculations, understanding the product cycle for each weapon will aid policy decisions. The advanced weapons demanded by MENA clients are politically easier to withhold due to the large demand at home and abroad. Lower-end weapons nearing the end of their production runs make up a smaller part of the MENA export market, but they more directly contribute to the conflict in Yemen. At either end, these are useful ways to put political pressure on clients without risking many jobs.

The views presented here do not represent those of the U.S. Naval War College, Department of the Navy, or Department of Defense. The author would like to thank Bill Hartung for valuable feedback.

Notes

1 Though the defense industry employs many agents to advance its interests, their effect should not be overstated. The Center for Responsive Politics estimates that, in 2019, defense lobbyists spent $113 million—a relatively small portion of the entire lobbying industry’s reported $3.5 billion in spending. In the 2020 campaign cycle, donors associated with defense firms contributed $32 million to political campaigns—only 0.03 percent of the $14 billion campaign cycle. Little of this likely went toward pushing MENA sales, which remain a much smaller stream of revenue than the domestic market. MENA states also spend a great deal of money to influence the United States, but it is not clear that this efforts’ focus is on emphasizing jobs.

2 To calculate the jobs created by an arms sale, I attempted to estimate the balance for various subsectors for a given sale of weapons. For example, for F-35 and MQ-9, I summed the jobs created from each aviation sector from 2016 to 2018, and divided by the total value of contract sales (all from Table 1 and the BIS Offset report). I then multiplied by 0.4 to account for offsets, and then multiplied by the arms transfer value.