Military Expenditure and Arms Trade
Alternative Data Sources

Analysis of the economic impact of military expenditures and arms trade is frequently hampered by the limited amount of transparent, comprehensive data. Country-specific information can be supplemented, however, by data from multicountry statistical sources. This paper describes seven publications which provide multicountry statistics on military expenditure and trade--the information each source conveys, as well as the differences in coverage and definition--to assist the analyst in understanding how to use this data. Comparisons of the data reported by the various sources reveal numerous, significant differences, particularly in data on military expenditures.

Abstract

Analysis of the economic impact of military expenditures and arms trade is frequently hampered by the limited amount of transparent, comprehensive data. Country-specific information can be supplemented, however, by data from multicountry statistical sources. This paper describes seven publications which provide multicountry statistics on military expenditure and trade--the information each source conveys, as well as the differences in coverage and definition--to assist the analyst in understanding how to use this data. Comparisons of the data reported by the various sources reveal numerous, significant differences, particularly in data on military expenditures.

Military Expenditure and Arms Trade: Alternative Data Sources

I. Introduction

With the end of the Cold War, considerable international attention has been focussed on the scope for reductions in military expenditures and the trade in arms. At the same time, there are new concerns about arm suppliers aggressively seeking new markets. However, analysis of military expenditures and arms trade is hampered by the limited amount of transparent, comprehensive data. While some countries 1/ make information publicly available, in many instances information on military expenditures is viewed as confidential. As a result, for many countries it is difficult to accurately assess the levels or trends of military expenditures and arms trade.

The aura of secrecy surrounding military expenditures is, however, changing. Both public opinion and the donor community are calling for open discussions of military expenditures, and greater attention has been focussed on the functional breakdown of government budgets in the context of evaluating the efficiency of government expenditures. The amount and quality of government-provided information on military expenditures is improving, albeit slowly.

Even where information is available directly from governments, gathering data on a variety of countries can be a time consuming process. Moreover, the reported data may be based on definitions tailored to national standards and may not be amenable to direct international comparison. In order to improve the availability of information on military spending and arms trade, several organizations regularly publish data on these activities. Some rely solely on data reported by individual governments, while others supplement this with information from classified materials, industry publications, and/or their own estimates. This paper describes the major publicly available, multicountry statistical sources on military expenditures and arms transfers, concentrating primarily on those that present data useful for economic analysis. 2/

The paper describes the types of information each source conveys and the differences in coverage and definitions among sources. The purpose is to assist the analyst in understanding how to use the data. The paper also presents comparisons of the data reported by the various sources. Although a considerable amount of information is available, including country-specific data, there are frequently large differences in the comparable numbers reported by different sources. In some cases, it is possible to identify the reasons for the differences from a knowledge of the definitions and coverage of each of the data sources; in other cases, the reasons are unclear. Finally, the paper suggests efforts that might lead to improvements in our knowledge of military expenditures and arms transfers.

The paper is organized as follows. Section II summarizes definitional and other differences among the data sources. Sections III and IV compare the data reported by these sources for recent years, and Section V presents conclusions. Expenditure and trade data for recent years, as reported by the various sources, are presented in Appendix I, and the country groupings used are shown in Appendix II. A more detailed description of each data source can be found in Appendix III, including the definition of military expenditure and/or arms transfers, the ultimate sources of the data, and an assessment of its strengths and weaknesses.

II. Alternative Data Sources

Six publicly available multicountry sources of data on military expenditures and on arms trade are reviewed in this paper. Two of these sources contain data on both defense spending and trade in arms (the Stockholm International Peace Research Institute (SIPRI) and the U.S. Arms Control and Disarmament Agency (ACDA)), two cover only defense spending (the International Monetary Fund’s Government Finance Statistics Yearbook (GFSY) and the International Institute of Strategic Studies (IISS)), and two cover only trade in arms (Congressional Research Service (CRS)) and the United Nations (UN) Register of Arms Transfer). Another UN publication on military expenditure, “Reduction of Military Budgets: Military Expenditure in Standardized Form Reported by States,” is not included in the following analysis (although it is described in Appendix III), as its coverage is limited; the most recent report, published in 1993, has data on military expenditure for only 32 countries. 1/

Most of the six publications use one or more of the other publications as a source of some of their information. As a result, they cannot be considered entirely independent. Similarities in data reported by two or more sources could reflect independent confirmation of reported data, or could merely be a result of one or more sources relying heavily on the others.

Despite this cross-referential nature of the data reported by the alternative sources, there are also significant differences in the procedures for gathering and estimating military expenditures and arms transfers. The two international organizations (IMF and UN) rely exclusively on voluntary reporting by member governments. Of the two independent non-governmental organizations (SIPRI and IISS), SIPRI, as a matter of policy, relies entirely on publicly available information, while IISS also uses some confidential government information. The two governmental agencies (ACDA and CRS) use a combination of published information plus access to confidential government records. The comprehensiveness and accuracy of the data are likely to be affected by the information sources used.

In addition, there are significant differences in definitions of military expenditure and of government. The following sections describe some of the important differences and similarities.

1. Military expenditures

There are four sources that report military expenditure data--ACDA, GFSY, IISS, and SIPRI. These sources use different definitions of “military” or “defense” expenditure, with the differences frequently reflecting different purposes for which the statistics are collected or different primary data sources. The most commonly used definitions of defense expenditure are the GFSY definition, based on the UN’s Classification of the Functions of Government (COFOG), and the NATO definition. GFSY relies on COFOG; SIPRI uses the NATO definition as a guideline 1/; ACDA and IISS use the NATO definition for NATO countries but for non-NATO countries they generally use data from each country’s defense budget, which may be based on yet a different set of definitions. 2/ The more important specific differences between the GFSY and NATO definitions are as follows:

  • The cost of pensions for military personnel is included in government expenditure on “social security and welfare” in GFSY, but in NATO it is included in defense expenditure.

  • Operations within the government sector--for example social security contributions paid by one part of the Government to another--are excluded through consolidation in GFSY, but are included in NATO.

  • GFSY includes reserves and auxiliary forces, but puts police, border and coast guards in a separate category, as expenditure on “public order and safety”. NATO includes police and paramilitary forces in defense expenditures if they are trained and equipped for military operations.

  • Civil defense is included in defense spending in GFSY, although it is separately identified in the detailed breakdown of defense into “military defense affairs” and “civil defense affairs”. Civil defense spending is not included in the NATO definition.

  • Military grants-in-kind are included in the defense expenditures of the donor country, but not the recipient country, in both definitions. However, the treatment of cash grants is not the same under the two definitions: GFSY includes military expenditures financed by cash grants in the expenditures of the recipient country, while the NATO definition does not.

The coverage of government also varies, both between sources and across countries within a particular source. Reported military expenditures may include only the budgetary expenditures of the central government, or they may include off-budget expenditures or expenditures of provincial or other governmental levels. Reported “budgetary” defense expenditures may also exclude some budget expenditures due to under-reporting or misreporting. ACDA notes, for example, that “there are indications or reasons to believe that the military expenditures reported by some countries consist mainly of recurring or operating expenditures, and omit all or most capital purchases” (p. 150).

Defense expenditure in some countries may include dual use equipment or infrastructure (e.g., roads, hospitals), dual purpose forces (e.g., military police), and dual purpose industries (e.g., cross-subsidization of military production by civilian output in the same plant). This is particularly the case in some developing countries where the military plays a major role in the economy, and where it is difficult to identify what truly are defense-related expenditures.

Finally, it should be noted that interest on military debt is excluded from defense expenditures under both the GFSY and NATO definitions.

2. Arms transfers

A major problem in identifying trade in military equipment is that the trade classifications used by most countries--the Standard International Trade Classification (SITC) or the Harmonized System (HS)--do not clearly identify military-related trade. For example, no distinction is made between military and civilian imports or exports in the case of dual use equipment such as aircraft. More importantly, for many countries a substantial amount of military trade is not reported by type of product but is lumped together under SITC group 931 “special transactions and commodities not classified according to kind”, and thus cannot be separately identified. In addition, some military trade may be hidden in other SITC groups, as the result of importers submitting false documents. It is also likely that some military trade does not go through customs at all. As a result, for most countries, customs data in their present form cannot be used as a source for information on military trade. Publishers of data on arms trade instead rely primarily on sources such as data compiled by defense ministries or specialized government agencies, confidential government information on third country trade, and trade publications.

The four statistical sources that report arms transfer data (ACDA, CRS, SIPRI and the UN) generally include arms transfers regardless of how financed. Arms transfers data may be more inclusive than the expenditures data because the transfer data includes receipts of grants-in-kind. At the same time, the arms transfers data do not include the military’s total use of imported goods, as they do not include foodstuffs, medical equipment, petroleum products, and other general supplies.

Each of the four statistical sources report on transfers of conventional arms, but the extent of the coverage of merchandise trade varies, and some sources include some services as well. The CRS data have the most inclusive product coverage, covering all categories of both large and small weapons, ammunition, military equipment and other ordnance, construction and other military related services, and military assistance and training programs. The coverage of ACDA is similar, except that ACDA has less extensive coverage of services. The SIPRI arms trade data cover only five categories of major weapons or systems, as “Publicly available information is inadequate to track [smaller] items satisfactorily.” (SIPRI, p. 352). The UN Register covers only major weapons.

ACDA, CRS, and SIPRI to varying degrees report data both in terms of arms transfers agreements (orders) and arms deliveries. Given the long lead time necessary for delivery of the larger, more sophisticated weapons, there can be substantial differences in the two sets of data, with the agreements data more closely reflecting current political developments and the deliveries data corresponding to actual trade flows. The agreements data give an indication of the likely future level of arms transfers on the assumption that most of the agreements are implemented. On the other hand, deliveries are more observable than agreements, particularly when there is an effort to hide the transfer. There can also be systematic differences between countries in the relationship between the agreements and deliveries data. For example, there seems to be a lower utilization rate of agreements for the United States than for other exporting countries, particularly in comparison with estimates for formerly centrally planned countries, where the agreements data tend to be based on delivery estimates. For CRS, the information on transfer agreements is a major focus of the analysis and is presented in the same detail as the data on arms deliveries. In the ACDA reports, the agreements data do not include as much country detail as the deliveries data. In the SIPRI report, the focus is also on deliveries data, with limited information on transfer agreements included in the section on the quantity of arms transfers. The UN reports deliveries data only.

The aim of the CRS report is to provide input to U.S. policy discussions, and the focus is therefore on timely information on trends in arms transfers to the “Third World”, broadly defined. As a result, the CRS data do not cover global arms trade, as they do not include imports by industrial countries, eastern Europe, and the former Soviet Union. CRS also provides only limited data on individual countries. Most CRS data is presented in regional subtotals or for cumulative time periods. ACDA reports information on global arms transfers, and also has the most country detail and the most annual data. As a result, it is the most useful source on trade data for someone undertaking most country-specific analysis. SIPRI and the UN Register fall somewhere between ACDA and CRS in terms of both timeliness and country coverage.

Some of the most politically sensitive arms transfers data are those showing the source of arms for individual importing countries. One of the advantages of the UN Register is that it includes the trading partner for each reported transaction, allowing the data to be cross-checked. ACDA, CRS, and SIPRI each provide some bilateral data on arms transfers, but only for cumulative periods of four or five years.

Statistics on arms transfers have some of the same definitional problems as do military expenditures, including, for example, how to classify dual use equipment which has application in both military and civilian activities, and the distinction between government and non-government buyers. In general, dual use equipment is included in military when its primary mission is identified as military, but this distinction can be difficult to make. In the SIPRI data the criterion is the identity of the buyer, which must be either armed forces, paramilitary forces, intelligence agencies or police force of another country. SIPRI notes that arms supplied to guerrilla forces can pose a definitional problem, and in the SIPRI data these are included in the importing county’s total but with the local recipient noted. In the ACDA data, arms transfers to subnational groups are not included. In the CRS data for United States exports, decisions about dual use exports do not arise because the export data are based strictly on the U.S. Foreign Military Sales (FMS) Program, and do not include data on U.S. commercial military sales, as it is felt that there are no commercial agreements data comparable to the agreements data available for the FMS program. Annual totals for U.S. commercial arms deliveries, based on shippers’ export documents and export licenses, are listed separately in the CRS report but without a country of destination breakdown. The ACDA data include commercial deliveries of items on the U.S. Munitions Control List, a small amount of which may be intended for civilian rather than military use.

For sources that report data in value terms, the approach to valuation can vary. CRS data are based on the estimated purchase price or delivery value of the items, except for data on the U.S. where actual prices are used. ACDA also uses actual or estimated purchase price, as available. The SIPRI values, in contrast, are based on the average production costs of the weapons; in cases where production costs are not available, estimates are made based on technical comparables. SIPRI stresses that its valuation system is not comparable to official economic statistics such as public expenditure and exports and imports. Rather, its arms transfers data were designed “as a trend-measuring device” for the total flow of major weapons and its geographic pattern (SIPRI, p. 354). Because of the valuation issue, and because “much of the international arms trade involves offset or barter arrangements, multiyear loans, discounted prices, third-party payments, and partial debt forgiveness” (ACDA, p. 154), ACDA warns that close comparisons of data on arms trade with other economic variables are not warranted.

The trade data do not present explicit conversion problems (from national currency to a common currency like U.S. dollars) because they are generally reported in U.S. dollars. However, particularly for trade among former Warsaw Pact countries, there are likely to be underlying valuation difficulties that were encountered by the compiler of the data. ACDA notes, for example, that its data on Soviet arms transfers are taken from sources that present the data directly in U.S. dollars and therefore particular caution should be used in comparing this data with other Soviet data.

Differences between sources can also reflect timing differences. Because of the lumpiness of military equipment sales, a difference in the time period covered (notably calendar year versus fiscal year) can result in significant differences in the data reported for the period. In most cases, data are reported by calendar year, the exception being ACDA’s coverage of the arms exports of the United States which are based on fiscal year data. Even when the time period is the same, a difference in the timing of recording of large year-end sales can result in significant differences in data for particular years and complicate the interpretation of trends, particularly for individual countries.

Timing can also be a factor because of differences in reporting lags or the lags between revisions. For example, ACDA (p. 154) notes that the arms transfers estimates for the most recent year, and to a lesser extent for several preceding years, tend to be understated, and can be expected to be revised upward somewhat in succeeding issues. There were in fact substantial upward revisions between the 1990 and the 1991-92 ACDA publications.

III. Comparison of Military Expenditure Data

1. Difficulties in making comparisons

Annual military expenditure, as reported in each of the four sources, is shown in Appendix I, Table 1 for covered countries from 1988 through 1991. In addition to the definitional differences mentioned above, there are two other problems with comparing data across sources.

First, an obvious problem in comparing aggregates across sources is that the set of countries covered in each source is not the same. 1/ Largely due to the differences in country coverage, comparisons of global levels of military expenditure across sources is uninformative. For example, total global military expenditure for 1988 varies by over 100 percent across the four sources, with data for countries reporting to GFSY totalling less than half the global figures reported by ACDA. If such global comparisons were attempted using only countries for which all four sources had data, the resulting comparisons would exclude so many countries as to no longer be “global” in any meaningful sense.

In addition to problems stemming from country coverage, comparison of data across sources is sometimes hampered by the form in which the data is presented. Military expenditure data is sometimes converted to U.S. dollars for publication. Local currency data can be converted to current or constant U.S. dollars in one of three ways--using current exchange rates, using historic exchange rates, or using purchasing power parity (PPP) exchange rates. SIPRI and GFSY data are presented in local currency in current prices. For the purposes of the comparisons below, these have been converted to U.S. dollars at the prevailing period average exchange rate, as reported in the IMF’s International Financial Statistics (IFS). IISS also uses IFS exchange rates for most conversions but uses PPP exchange rates where they feel official exchange rates are unrealistic. 1/ However, IISS also publishes local currency figures, allowing the user to determine the conversion rates used and to apply different conversion rates if so desired. Thus, for these three sources, direct comparisons are possible.

ACDA, however, uses a rather unique methodology--based on “base year” exchange rates--for converting local currency expenditures to the current and constant dollar expenditures: “current-price national currency data for an entire series of years is converted to current U.S. dollars through the use of a single (base year) exchange rate and two price indexes, one national and one U.S.” (ACDA, p. 154). 2/ This methodology, which is carefully explained in ACDA’s statistical notes, presents two problems to a researcher wishing to compare data sources, or to use ACDA data in combination with other data.

First, ACDA does not present either the conversion rates it uses or the local currency figures. Thus, in comparisons of ACDA with other data sources, differences in reported military expenditure data will reflect not only differences in underlying military expenditures, but also differences in exchange rates. Without knowing which conversion rates ACDA used for each country for each year, it is impossible to isolate the two sources of difference. Only ACDA’s base year data--1991 in the most recent publication--are directly comparable to data from other sources. 3/

Second, each new ACDA publication uses a different updated base year exchange rate, with the result that ACDA’s historic data on current dollar military expenditures can change significantly across editions. For example, ACDA’s 1989 edition reported Argentina’s current dollar military expenditures in 1988 at US$1.9 billion, while ACDA’s latest edition reports Argentine current dollar military expenditure in 1988 at US$3.9 billion. Other examples of shifts in data for 1988 due to different conversion rates between the two recent ACDA editions include Egypt (US$5.6 billion to US$2.1 billion), France (US$33.4 billion to US$37.0 billion), and Sweden (US$4.9 billion to US$5.7 billion). These large swings make it difficult to interpret ACDA’s data, and they also make any comparisons with ACDA highly sensitive to the edition of ACDA which is used in the comparisons.

2. Global and regional trends in military expenditure

Against this background, we undertook comparisons of percentage changes in data reported by the various sources. Appendix I, Table 2 shows the year-to-year percentage changes in reported military expenditure based on global and regional aggregates. Aggregation involved summing the current dollar expenditures of the relevant countries shown in Appendix I, Table 1. Because of the problems of missing observations for individual countries, all discussions of year-to-year changes in military expenditure focus on countries for which data are available from a source in both years--e.g., SIPRI’s estimate of a 0.9 percent increase in military expenditures in 1989 refers to those countries for which SIPRI has military expenditure estimates for both 1988 and 1989. There continues to be differences in the list of countries included in the calculations for each source. Where these differences have a large effect on the comparisons, the differences in coverage are noted below.

The four sources present significantly different pictures of movements in global military expenditure from 1988 through 1991, both for individual years and for the entire period. The widest discrepancy--IISS’s very large global increase in 1989--is primarily (almost 90 percent of the total reported increase) accounted for by a one time adjustment in IISS’s reported level of Soviet Union military expenditure. Omitting this source of difference, the percentage change in 1989 is broadly similar across all sources. The same cannot be said for 1990 or 1991, however, and for the period as a whole estimates range from virtually no change (ACDA) to a 4.2 percent average annual increase (GFSY).

Regional subtotals 1/ also show significant differences in trends in military expenditures as reported by the various sources in almost every year, as well as for the period as a whole. In most cases, such differences are largely accounted for by differences--either in coverage or reported military expenditures--of one or two countries.

With regard to Africa, the majority of the differences between SIPRI and ACDA reflect differences in estimates for South Africa in 1989 and Ethiopia in 1990. 1/ For Asia, differences are largely due to IISS estimates for China, SIPRI estimates for Japan, and SIPRI’s lack of data for China and Taiwan, which heavily influence the trend in the other sources. For the Middle East and North Africa, all sources generally report large increases for the period as a whole, although the rate and trend of such increases differs significantly across the sources. 2/ The differences are primarily due to inconsistencies across sources in reported military expenditures of Iran, Iraq, Kuwait, and Saudi Arabia. For the Western Hemisphere, the data are reasonably consistent in 1989 and 1990, but vary significantly in 1991 due to different estimates of United States military expenditure in 1991.

The explanation of differences is not quite as simple for western Europe and eastern Europe and the former Soviet Union. For eastern Europe and the former Soviet Union, there is a high level of uncertainty regarding military expenditures during this period (reflected in very different reported levels and changes). In addition, all sources have data for only a few countries in this region, so slight differences in coverage can make large differences in reported numbers. For western Europe, there are large differences across sources in the level and change in military expenditures for a number of countries--some of the largest are for Belgium, France, Italy, Spain, United Kingdom, and West Germany.

3. Trends in countries classified by level of economic development

In the above analysis, based on expenditures aggregated across countries, countries with the largest military expenditures tend to dominate the outcome and one or two countries can dominate the trend for a region. This section attempts to address that problem by analyzing movements in military expenditure relative to GDP 3/ 4/ for various economic groupings of countries. By using unweighted averages of ratios, each country is given equal weight. The comparisons in this section thus focus on the average of ratios of military expenditures to GDP. As with the previous section, the results reveal important similarities as well as differences across sources.

Military expenditures as a percentage of GDP are shown in Appendix I, Table 3 by country and data source. For some countries or years, the lack of a reported ratio is due to lack of GDP data rather than of military expenditure data. The same data, organized by economic groupings of countries, are shown in Appendix I, Table 4. Looking first at global data, ACDA shows a significant rise over the period in military expenditures relative to GDP, IISS shows a smaller increase, GFSY shows little change, and SIPRI shows some decline. By 1991, estimates of military expenditure as a percent of GDP range from just over three percent (GFSY) to just under 6 percent (ACDA).

Comparing country groupings, ACDA, GFSY and IISS all report lower military expenditures relative to GDP for industrial countries than for developing or east European countries; SIPRI reports east European countries as having the lowest military expenditure/GDP ratios. All sources report little change in industrial country military expenditure/GDP ratios throughout the period. Reflecting the limited availability of information on the level of east European military expenditure, there are wide differences in the reported ratios of this expenditure to GDP.

There is also a great deal of variation in reported movements in military expenditures relative to GDP for developing countries as a group, ranging from significant increases reported by ACDA and, to a lesser extent, IISS, to modest declines reported by GFSY and SIPRI. Within the developing country grouping, all sources agree that the Middle East developing countries have the highest military expenditure relative to GDP, while the Western Hemisphere developing countries have the lowest military expenditure relative to GDP.

Regarding changes, all sources show significant increases over the period in military expenditures relative to GDP for Middle East developing countries and small to moderate increases for developing countries in Asia. In contrast, all sources show northern Africa and Western Hemisphere developing countries decreasing military expenditures relative to GDP. The sources show different pictures regarding movements in sub-Saharan African developing countries’ military expenditures relative to GDP.

4. Differences for individual countries

Similarities across sources in reported global or regional totals or trends may be evidence of an underlying consistency in the data sources, or they may be the result of offsetting differences in the figures reported for individual countries. A comparison of reported expenditures by country shows that, at least for changes in military expenditure and as a percentage of GDP spent on military, similarities at the regional or global level are largely the result of offsetting differences at the country level.

Comparisons of reported military expenditures by country were done in three ways. First, we examined differences in the reported numbers, comparing the highest and lowest level of military expenditure for each country in each year in the four sources. For over 58 percent of the countries examined, the highest and lowest estimate of military expenditures varied by more than 30 percent in at least one year. For over 40 percent of the countries, the maximum difference in reported military expenditures was at least 50 percent. And for almost 23 percent of the countries, the highest estimated military expenditure was at least double the lowest estimated military expenditure in at least one year.

Nevertheless, it is possible that a single source is frequently responsible for the divergence. Therefore, for each country we eliminated the source with the most divergent estimate of military expenditures, and compared the three remaining sources. For 65 percent of the countries, the difference across the remaining sources was less than 20 percent in all years. There was no discernible pattern as to which source was eliminated.

Differences in levels could be do to definitional differences, and would perhaps not be too significant if the sources showed similar growth rates of military expenditure. However, a comparison of percentage changes in reported military expenditures shows even larger discrepancies. For 72 percent of the countries, the highest reported percentage change in military expenditures exceeded the lowest by at least 10 percentage points (e.g., 10 percent growth versus 0 percent growth) in at least one year. For over 57 percent of the countries, the maximum difference was over 20 percentage points, and for 29 percent of the countries the maximum difference was over 50 percentage points (e.g., 50 percent growth versus no change).

At the extreme, for 11 countries--Algeria, Argentina, Botswana, Burma, Colombia, Ethiopia, Hungary, Papua New Guinea, Rwanda, Soviet Union and Venezuela--the maximum difference exceeded 100 percentage points (e.g., 100 percent growth versus no change, or 50 percent growth versus 50 percent reduction) in at least one year. In seven of the eleven cases, it appears the large discrepancy may be the result of a one time jump in the data reported by a source, to a level more consistent with the other sources. In other words, it may reflect more complete information, and not an actual estimated increase. However users of the data have no way of confirming this. In the four remaining cases, analysis of the time trend of the data shows no obvious explanation for the huge discrepancy.

Our third method of comparing reported military expenditures by country was to compute annual pairwise correlation coefficients for the numbers reported for each country by two sources. Correlation coefficients of reported levels of military expenditure were generally quite high--.91 or greater in all but one of the 24 pairwise comparisons. This is not surprising; all sources recognize, for example, that the United States has far higher military expenditures than the United Kingdom, which has far higher military expenditures than Uganda, etc.

Correlation coefficients for reported military expenditure as a percentage of GDP--in the range of .65 to .89 in about half the cases, and .90 to .96 in the other half--are generally lower than the correlation coefficients for levels of military expenditure, but still high enough that the sources are conveying a broadly consistent story. Unfortunately, that is not true of correlation coefficients for percentage change in military expenditures. Of the 18 annual pairwise correlations coefficients of the reported percentage change in military expenditures, ten are below 0.5, with three negative correlations and two more approximately zero. Only five of the 18 are above 0.8, and only three are above 0.9.

For researchers whose primary concern is order-of-magnitude cross-country comparisons of the levels of military expenditures, all four data sources reviewed here will tell a broadly consistent story. This is certainly true for dollar values of military expenditures, and to a lesser extent for military expenditures as a percent of GDP. Also, for researchers concerned about one or more individual countries, for many countries in many years the sources provide similar information. For a number of countries, however, this is not true. Further, if the reason for looking at alternative data sources on military expenditures is, at least in part, to assess trends in military expenditures, the conclusions one comes to will depend greatly on which source is used.

IV. Comparison of Arms Transfer Data

The extent of the differences in coverage between the four sources of data on arms transfers does not allow a great deal of cross-source comparison, although in certain cases comparisons are possible following adjustments to the reported data. The closest comparisons can be made for the aggregate export data as reported by ACDA and CRS, as both sources cover both large and small arms trade, provide both current and constant price statistics, use a similar approach to valuation, and provide supplementary information that allows the reader to make adjustments to the coverage of the statistics. These two sources also use largely the same background sources. The scope for comparing SIPRI with the other sources is more limited, and comparison with the UN reported data is difficult because of the reporting of physical quantities only.

Appendix I, Table 5 shows arms exports as reported by CRS, ACDA, and SIPRI. In the upper part of the table, data reported in current prices by CRS and ACDA are adjusted to make them as nearly comparable in coverage as possible. Thus, in line A1, CRS exports are adjusted to include U.S. commercial military sales, since these are included in the ACDA data. In line B1, the ACDA data are adjusted to the same “Third World” country coverage as CRS and also to include U.S. transfers of construction and other services. In the adjusted data series covering exports to developing countries, the aggregate ACDA and CRS export numbers are very similar. The small remaining differences could be the result of ACDA’s use of fiscal year data for the U.S. while CRS uses calendar year data. For the whole five-year period, the difference in aggregate exports for the two sources is only 0.5 percent.

The lower part of Appendix I, Table 5 compares exports reported by SIPRI, which are available only in constant 1990 prices, with exports reported by ACDA and CRS converted to 1990 prices using deflators provided in their respective publications. Because of SIPRI’s limited reporting of country detail, it is not possible to adjust the SIPRI data in a manner comparable to the above adjustments for ACDA and CRS. However, it is clear that total arms exports reported by SIPRI are significantly lower than those reported by ACDA. This could be expected to be partly due to the fact that SIPRI does not cover small arms trade or military services. The SIPRI and CRS aggregate export data are closer in value, but this reflects the offsetting differences in coverage described earlier.

A comparison of data trends is also relevant, especially in view of SIPRI’s statement that its data should be used primarily as a trend measuring device. All three sources show a sharp downward trend in arms exports between 1987 and 1991. The decline is relatively smaller, in both absolute and percentage terms, for SIPRI than for ACDA and CRS, although a large part of the divergence occurs in 1991 for which data will be subject to the usual revisions and for which SIPRI noted that there were major data problems related to the Persian Gulf War and the political changes in Eastern and Central Europe.

There is only limited scope in the data for comparisons of arms transfers on a country-by-country basis. Appendix I, Table 6 provides annual arms export data in constant prices for seven major suppliers, as reported by SIPRI, ACDA, and CRS, for the period 1987-92. As with the unadjusted aggregate export data, the SIPRI and ACDA data represent total exports for each country, while CRS covers each country’s exports to the third world only. For the Soviet Union, the United Kingdom, and for the United States in 1987-89, ACDA’s estimates are generally significantly higher than those presented by SIPRI, consistent with ACDA’s more comprehensive product coverage. For reasons which are not clear, SIPRI shows higher U.S. exports than ACDA for 1990-91. For the other countries there is no particular pattern. As would be expected, CRS exports by major supplier are generally less than those reported by ACDA, and in some cases also lower than those reported by SIPRI. But a notable exception is China which exports almost entirely to what CRS calls the “Third World”, with the result that CRS and ACDA data are very similar.

Appendix I, Tables 7, 8 and 9 provide arms import data for individual countries as reported by ACDA, CRS, and SIPRI, respectively. All the data are shown as reported, i.e., ACDA and CRS data are in current prices and SIPRI data are in 1990 prices, which tends to somewhat overstate the SIPRI data for 1987-89 and understate it for 1991. While the overlap in annual, country-specific data is limited, the same general point as noted with exports stands out. When cumulative imports over 1987-91 are compared, SIPRI generally shows lower arms imports than ACDA, at least in part reflecting SIPRI’s less comprehensive product coverage. However, for 35 countries, SIPRI reports higher cumulative imports than ACDA; to some extent this reflects SIPRI’s use of constant 1990 prices, but for many of the countries the difference is too large to be due to this factor alone. CRS reports only very limited country-specific import data, most of which is for cumulative time periods which do not coincide with the periods used by ACDA or SIPRI. In cases where comparisons can be made of individual countries for 1991, CRS data are very similar to those reported by ACDA.

All of the sources report some quantity data on arms transfers. Quantity data are reported to the UN on an annual basis, with data available at present only for 1992. The ACDA, CRS, and SIPRI reports also include some information on the number of major weapons delivered, but with less complete coverage than in their main data. ACDA and CRS report physical quantity data only for cumulative amounts over selected time periods (the most recent CRS publication reported cumulative data for 1985-1988 and for 1989-1992 while ACDA reported cumulative data for 1987-91). Most of the SIPRI data is for cumulative time periods which vary according to individual arms contract. Given the varying time periods covered, it is not possible to do a consistency check of the quantity data across any of the four sources.

V. Conclusion

A great deal of data exists in multicountry sources on military expenditures and arms trade. For most countries, more than one published source of information exists, and the data are available for a number of years. As a result, both globally and for most individual countries and groups of countries, the available data provides some basis for analyzing both trends and levels in military expenditure. For a number of countries, however, up-to-date trade data may be available only for cumulative time periods.

In some cases the data are reported directly by governments, but in many cases the data are built up from a number of primary sources. The accuracy and comprehensiveness of the primary data can vary considerably--both by source and by country. However, in all cases, the user of the data is not in a position to verify the quality of the data. In addition, the data may be weakest for exactly those countries where there is the greatest concern about the level and trend of expenditure.

Data sources have different purposes, and the data reported, the method of reporting, and the definitions used by a source reflect this purpose. This is most obviously true with regard to CRS. In addition, given the lumpiness of military equipment sales, significant differences can result from the timing of transactions, and differences can also be due to valuation technique. Finally, there may be significant differences in exchange rates used to convert local currency expenditures into reported dollar expenditures. Users need to be aware of these differences. Even if all sources had access to identical data, they could report different numbers. For some countries, the differences between sources will not be large because the variables that are treated differently are not significant. For other countries the differences can be substantial. Unfortunately, the data--particularly expenditure data--are generally not reported in sufficient detail to allow the user to discern whether a given difference is due to definitional, exchange rate, or informational differences.

Our comparative analysis of published military expenditure data revealed both similarities and differences. All sources convey roughly the same picture with regard to the order of magnitude of the level of military expenditure by country and, to a lesser degree, with regard to military expenditures as a percentage of GDP. However, for individual countries, large differences often exist between sources with regard to the reported level of military expenditure.

More serious are the differences in reported trends in military expenditure. Our analysis of global data revealed significant differences in reported percentage changes in military expenditure over the period 1988 to 1991. Similarly, our regional comparisons revealed large differences between the sources, while our national comparisons revealed highly inconsistent data on percentage change in military expenditure.

With regard to arms transfer data, the extent of the differences between sources limit the amount of meaningful cross-source comparison that can be made. However, the ACDA and CRS reports provide sufficient background detail to permit adjustment of their data for their major differences in coverage and definitions for the period 1987-89. After adjustment, the remaining differences in their aggregate export levels are small.

Several things could be done to improve the usefulness of available data. First and most important, governments should strive to improve the coverage and accuracy of their own published data on military spending and arms trade. No source can provide more comprehensive or accurate information on a country’s military transactions than the country itself. Improved country reporting to the United Nations’ “Military Expenditures in Standardized Form Reported by States”--a source excluded from our above analysis due to the limited number of countries reporting--offers a good opportunity for making this information available internationally.

Users of the data would also be greatly benefitted if the alternative sources included more detail on their methodology--particularly with regard to how military expenditures are estimated and converted to U.S. dollars. Reporting of all military expenditure data in current prices in local currency would remove one factor-causing differences across sources. In addition, given that different sources use different definitions of “military” and “government”, it would be helpful if additional detail were provided on certain components of military spending and trade that are treated differently under different definitions. This would help users to eliminate cross-source discrepancies due to these definitional differences.

Another obvious area for improvement would be to make some of the data available on a more timely basis. This is not simple, however, given the time required for gathering and cross-checking data. In addition, there are trade-offs between reducing the time it takes to produce a report and the extent of coverage of individual countries. Given the security and sensitivity of this type of data, it may also be possible for some sources to publish with a lag more detailed data than could be published on a more current basis. Nevertheless, some progress on the timeliness issue should be possible.