Article: Conventional Arms Transfers and US Economic Security

Author: Eugene Gholz

This article explains the economic and practical considerations in various approaches to implementing President Trump’s recent direction on con-ventional arms transfers (CAT) that decisions should consider economic security. CAT will require decisions about what to include in an eco-nomic security analysis, how to conduct the analysis, and who should conduct the analysis. Specifically, the analysis could focus on jobs and general economic effects or manufacturing and innovation concerns about the specific defense systems involved in the potential arms trans-fer. It could be based on detailed data collection specific to the proposed arms transfer or on the application of an economic model that would yield a faster but less precise result. Additionally, the analysis could be conducted by any of five plausible candidate organizations within the US government. While all options involve trade-offs, using an economic model would likely offer greater insight into the macroeconomic effects of a potential arms transfer, notably its effect on US employment. How-ever, a targeted effort to collect and analyze transaction-specific data would offer greater insight into the effects on US defense industrial ca-pability and the potential ability of the sale to save money in the US defense acquisition budget.

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