China’s no-rules approach to armed drone exports has Beijing positioned to dominate the rapidly growing multibillion-dollar market, frustrating American companies while presenting real national security dangers for the Trump administration.
Behind the scenes, industry watchers say, the Trump administration is scrambling to fashion a coherent policy toward military unmanned aerial systems (UAS) sales that allows American firms to tap the huge international demand for drones while ensuring that state-of-the-art weapons don’t fall into the wrong hands.
By contrast, China has shown itself willing to sell to just about anyone, including customers in terrorist hotbeds such as Pakistan, threatening to render America’s policy scruples obsolete.
“It’s kind of the wild, wild West when it comes to selling things to other countries. [The Chinese] have no problems going in and selling to people we won’t sell to,” said Michael Blades, research director for aerospace and defense at the leading international market research and growth consulting firm Frost & Sullivan.
Although China’s goal is simple — to make money and control a cutting-edge, high-technology, high-value market — the U.S. approach is murky at best. Decisions on which countries are allowed to buy American drones are made on a case-by-case basis, with no firm list on which nations can purchase them at any given time, and a lack of basic data on how many UAS are sold each year and to whom.
“If there was a certain policy that was in place and we could count on it, there might be some momentum … but there doesn’t seem to be any hard-and-fast rules for what the policies are going to be,” Mr. Blades said. “It’s very difficult to gauge what may or may not happen with regard to these kinds of sales when you’re not certain from day to day.”
The global military drone market is expected to explode dramatically in the coming years, underscoring the economic stakes for the U.S. and its competitors, led by China but also including other nations such as Israel. Over the next decade, military UAV production is expected to total over $80 billion, according to data from the Teal Group, a top defense and aerospace consulting firm.
By taking steps such as building a drone factory in Saudi Arabia to tap into the global market, China appears poised to lead the global race.
Trump administration officials say each time another nation wants to buy an American-made military drone such as the Reaper or Predator models that have become synonymous with the U.S. armed forces, that request is evaluated individually. There is no list of pre-approved countries. Most U.S. exports have flowed to close allies in Europe or Asia, though there is no full available accounting of which countries bought drones in a given year, or how many, or how much they paid for them.
The White House earlier this year said it streamlined its process of approving drone sales to allies, casting UAS technology as part of its broader effort to encourage other nations to “buy American.”
The Trump administration’s updated approach built on the 2015 drone export policy put into place by President Obama. White House officials said that policy was too stringent, making it too difficult and time-consuming for trusted allies in Asia, Europe and elsewhere to buy American products.
“For too long, we have made it too hard to provide our allies and partners with the defense capabilities they require and that are in America’s interests,” White House trade adviser Peter Navarro wrote in an April op-ed in The Washington Times. “Providing our allies and partners with greater access to U.S.-produced arms will also reduce their reliance on not just Chinese knockoffs but also on Russian systems. … Whether there are internal barriers, like unnecessary red tape, or external barriers, such as unfair offset requirements, this administration will be ready to tackle them.”
The export of all UAS, including armed craft, is overseen by the State Department, which says all approved sales must follow four principles:
Recipients must use adhere to international law.
Armed UAS must be used only when there is a lawful basis for force.
Purchasers must not use the craft for unlawful surveillance.
Recipients must provide UAS operators with all necessary training to avoid unintended injury.
Officials say there are other considerations when deciding which countries can buy armed American-made UAS. In the case of selling to Middle East nations, for example, the administration weighs the request against its broader geopolitical objective of ensuring Israeli military superiority in the region.
Neither the administration nor private-sector groups such as the Aerospace Industries Association or the Association for Unmanned Vehicle Systems International would provide a detailed list of the number of armed drones sold over the past several years. Some industry analysts have estimated the annual sales of U.S. drones abroad at $300 million to $1 billion.
Mr. Trump gave federal agencies two months to consult with private companies and drone-makers on a more liberal export policy, but no firm plan has been made public. Among the items under discussion: changes in the interpretation of the Missile Technology Control Regime to ease military restrictions on drone exports, and permitting more direct UAS sales to foreign customers by manufacturers that would not be regulated as “foreign military sales.”
Although U.S. policy has many unanswered questions, analysts say the federal government does a good job of keeping track of how the systems are used.
Other nations “have to provide end-use analysis. They have to report back: What happened when you used this thing?” Mr. Blades said.
China moves in
It’s difficult to find complete data on either U.S. or Chinese drone sales, but figures that are available show China poised to tap into markets that the U.S. has avoided.
As of the end of last year, 25 percent of Chinese drone sales went to Pakistan, according to figures compiled by the Center for Strategic and International Studies. Another 23 percent went to Egypt, and 13 percent to Myanmar — all countries that the U.S. has been reluctant to sell to.
Jordan also reportedly tried on several occasions over the past few years to buy American drones and been rebuffed. The Jordanians then took their business to China, which has shifted its policy away from selling drones specializing in surveillance, a niche that the U.S. still controls, and toward armed craft.
“Beijing rarely exports its smaller surveillance systems. Instead, China has positioned itself to specialize in exporting strike-capable” drones, CSIS said in a recent study of Chinese UAS technology.
Chinese drones are often dramatically cheaper than their U.S. counterparts. CSIS estimated that the Chinese CH-5 drone costs about $8 million, less than half the cost of the comparable U.S.-made Reaper. Those cost estimates can fluctuate with ground control stations and other associated pieces.
The combination of lower prices and a willingness to do business with virtually any country has given China the inside track on the market, and Beijing has shown itself to be fully capable of taking advantage.
China exported double the number of military drones as the U.S. last year, according to figures compiled by the Stockholm International Peace Research Institute.
China’s huge edge last year has catapulted the country ahead of the U.S. for the past decade. Since 2008, China sold at least 68 of its Caihong and Wing Loong series drones, CSIS said, compared with at least 62 Reaper or Predator models sold by the U.S.
During the same time, Israel sold 56 of its own Hermes or Heron TP drones.
For obvious security reasons, Israel steers clear of selling to Middle Eastern nations. Israeli armed drones typically are sold in Latin America, Europe and other markets, including Russia.
For the Chinese, one of the most appealing markets has been countries considered U.S. allies, such as Jordan, that are off limits to American manufacturers.
“They’re willing to sell to a wider variety of countries. They tap into … close American allies like the [United Arab Emirates], Saudi Arabia, Egypt. These are countries that are U.S. allies, but the U.S. has been reluctant to sell [drone] technology to them,” said Phil Finnegan, the Teal Group’s director of corporate analysis. “These are growing markets. … They have large military budgets, and they have an appetite for this new technology.”
Even Iraq’s defense ministry reportedly has opted for the cheaper Chinese drones rather than the American competitors.
China also has set up drone factories across the region, including one in Pakistan. Last year, Chinese officials announced a plan to build another facility in Saudi Arabia, giving Beijing another home base from which to sell its UAS to countries throughout the region.
While U.S. companies are urging the federal government to adjust its policies and take a more competitive stance, some analysts say it may simply be too late.
In the case of Jordan, for example, the money has already been spent.
“Are they going to buy it if they’ve already got Chinese drones?” Mr. Blades said. “I don’t see a huge opportunity for the U.S., at least not on the armed side, unless there’s some kind of wide-ranging approval of selling armed drones to pretty much anybody who asks for them. But that’s not going to happen.”