FACT: Military spending was 2.3% of world GDP last year.

THE NUMBERS: World exports, 2022*-

All goods     $24,000 billion
Clothes            $315 billion
Fish                  $151 billion
Arms transfers   $32 billion

*Sources: WTO for all goods and apparel; UN Food and Agricultural Organization for fish; Stockholm International Peace Research Institute (SIPRI) for arms sales. SIPRI data covers known transfers of “major conventional weapons.”

WHAT THEY MEAN:

What place does the military hold in the world economy?  Statistical snapshots from 2022 on world military spending and arms trade, and then three cautions about the data:

World defense spending at modern-history lows: A widely-used calculation by the Stockholm International Peace Research Institute (SIPRI) finds world military spending — procurement, pay, military construction, and so on — at about $2.24 trillion in 2022.  According to the International Monetary Fund, world GDP was $100.15 trillion that year. So SIPRI’s figure suggests that about 2.2% of world income went to military budgets, and a World Bank table for the same year yields a very close 2.3% of world GDP.

This figure captures the policies governments set down in 2021, just before the Russian invasion of Ukraine, and by historical standards, it is very low. Tallies from earlier decades report military spending rates above 6% of world GDP in the 1960s; in a range from 3.8% to 4.5% in the 1970s and 1980s; and varying since 2000 in a narrow band between 2.2% and 2.6%.  As two points of comparison: (a) about 11% of world GDP goes to health (or 6% of world GDP if one counts only public spending), and 4.2% to education; and (b) in labor terms, the CIA’s World Factbook estimates that about 20 million men and women are in uniform around the world which would be  0.5% of the world’s 3.5 billion workers. To look more specifically at the U.S., American military spending was about 3.5% of GDP in 2022 (by the World Bank’s table), which is above the worldwide average but far below the 11% the U.S. Defense Department reports for the Korean War years in the early 1950s and the 5% levels of the later Cold War.

Arms trade small relative to civilian trade:  SIPRI’s parallel “arms transfer” count reports about $32 billion worth of arms deliveries in 2022. Their count covers deliveries of “major conventional weapons” — tanks, planes, missiles, submarines, artillery, etc. — and includes sales of both new and used kits, licensed production, and deliveries of significant components as well as complete systems. Like the world’s combined military budget as a share of GDP, the arms transfer total is a lot of money but small when measured against civilian trade. The WTO’s most recent annual trade statistics report puts “goods trade” in general at $24 trillion in 2022, which would make SIPRI’s $32 billion in arms transfers about 0.1% of the total. Or, to look at particular products, the WTO’s places clothing exports at $313 billion — ten times SIPRI’s arms transfer figure — and automotive trade at a much larger $1.37 trillion, while the U.N. Food and Agricultural Organization’s estimate of fish and seafood exports was $151 billion.

Nor does military trade look very large for individual countries. By country, SIPRI’s top exporters in 2022 were the U.S. at $14.5 billion, France at $3.0 billion, Russia at $2.8 billion, and China at $2.0 billion. This would be about 1% of the U.S.’ $2.1 trillion in goods exports, 0.5% of French and Russian exports (though a higher 3% of Russian manufacturing trade), and 0.1% of Chinese exports. On the import side, military shares of trade can be quite high for the largest purchasers — Qatar, the largest buyer on the SIPRI list, spent $3.3 billion on weapons or 15% of its overall $28 billion in imports, and military goods accounted for 2% and 7% of imports for fourth place Saudi Arabia and fifth place Kuwait — but outside the Persian Gulf is rarely a very large part of national import bills.

Tentative Conclusion: The public data and estimates, then, suggest that as of 2022 the world’s military economy was a relatively small part of the larger global economy; military spending a modest though not tiny part of national budgets; and military trade a very small part of international trade. Three cautions, though:

Caution (1): Secrecy: In many countries, some sections of national defense budgets and arms sales aren’t thought suitable for publishing, and are thus missing from the totals.  So figures for military spending and trade, strictly defined, are reasonable “lowest-case estimates” rather than very firm data.

Caution (2): Definitions: The military economy is not separate from the civilian economy, but merges with it along the edges. Definitions of what is “military” and what is “civilian” are thus a bit arbitrary.  In military trade, for example, is the right approach SIPRI’s decision to count weapons only? Would it be better to add “dual-capable” trucks, chips, fuel, rifles, and satellites too? Repair, training, software updates, replacement parts, and maintenance?  Or should everything a military service buys be considered “arms trade”?

As an important example, the U.S. Defense Department’s 2023 policy paper observes that for both of these reasons, China’s “actual military-related spending could be 1.1 to 2 times higher than stated in its official [$209 billion] budget.” This would suggest a figure approaching $400 billion and somewhere between 2% and 3.2% of Chinese GDP, in contrast to the World Bank table’s 1.6%. (And some private estimates go higher.) Or to choose a case close to home, the State Department’s Political-Military Affairs branch, which oversees official U.S. arms sales policy, uses a broader definition than SIPRI’s to report “new sales” of U.S. weapons at about $55 billion a year, which would imply considerably higher global as well as American arms sales.

Caution (3): Changing times: The defense budgets and arms transfers of 2022 are those decided upon in 2021, just before Russia’s attack on Ukraine. Whatever the definitions one chooses, and however much they publish, governments are making this year’s budgets and sales in a world grown more dangerous, and their numbers will presumably be larger.

                 

FURTHER READING

SIPRI’s arms trade totals by country.

And their military spending database.

U.S. policy:

Secretary of Defense Lloyd Austin, presenting an $842 billion request for next year’s defense budget to the Armed Services Committees, notes (a) a “pacing challenge” from rising military spending and capability in China; (b) an “acute threat” to Europe and global security posed by Russia’s invasion of Ukraine; and (c) structural programs including pay raises for enlisted personnel, research and development, and more.

The Commerce Department’s Bureau of Industry and Security oversees export controls.

And the State Department’s Arms Sales and Defense page.

Spending: 

A World Bank table of military spending/GDP makes Latin America and the Pacific Islands the regions with the least ambitious military budgets, at an average of 1.0% for each region. The Arab states’ spending level is highest at 5.0%. The sample below drops two outliers at the very top — Eritrea’s 20.5% of GDP as of 2003, and Libya’s 15.5% as of 2014 — along with embattled Ukraine’s 33.5%. (Also note, the Bank doesn’t venture a guess for North Korea.) Apart from these anomalies, military spending/GDP ratios around the world in 2022 topped out at Saudi Arabia’s 7.4% and Qatar’s 7.0%, and drift downward to the 0.2% levels for Laos, Mauritius, and Ireland, and Haiti’s lowest-in-the-world 0.1%. Here’s a sample list indicating the range.

Saudi Arabia	7.4%
Qatar	7.0%
Oman	5.2%
Israel	4.5%
Russia	4.1%
U.S.	3.5%
Cuba	2.9%
Singapore	2.8%
South Korea	2.7%
Pakistan	2.6%
Lithuania	2.5%
WORLD	2.3%
Vietnam	2.3%
United Kingdom	2.2%
France	1.9%
China*	1.6%
Norway	1.6%
Spain	1.5%
New Zealand	1.2%
Thailand	1.2%
Brazil	1.1%
Switzerland	0.8%
Indonesia	0.7%
South Africa	0.7%
Argentina	0.4%
Ireland	0.2%
Haiti	0.1%

* Official published Chinese budget.  At the high end of DoD’s range, the Chinese military share of GDP share would be 3.2%, about the same as that of the United States.

And some perspectives on China’s military spending: 

SIPRI’s $240 billion in 2019.

DoD’s view (p. 142) has 1.1 to 2.0 times higher than the public budget, for a range between $220 billion and $420 billion.

And the American Enterprise Institute, citing Alaska Sen. Dan Sullivan, guesses $700 billion.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

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FACT: 13 of the 54 World Series players this year are “international.”

THE NUMBERS:

MLB rosters by birthplace –

All players	969
U.S.*	719
Dominican Republic	104
Venezuela	62
Cuba	21
Mexico	15
Canada	10
Japan	8
Colombia	7
11 other countries	23

* Includes 15 Puerto Rican players, whom MLB for some reason counts as “international.” 

WHAT THEY MEAN:

Cuban-born Adolis Garcia’s 11th-inning walk-off won Game 1 for the Rangers on Friday night; Venezuelan catcher Gabriel Moreno’s 2nd-inning home run started the Diamondbacks’ 9-1 rout on Sunday’s Game 2. The two teams together feature 12 international players: six Dominicans, three Venezuelans, and three Cubans as the Series began; still seven as they prepare for Game 5 but now seven, three, and two respectively given Garcia’s Game 3 injury and replacement last night by Dominican shortstop Ezequiel Duran. Altogether, they make up 24% of the Series rosters. This figure:

(a)  Pretty closely matches the 26.5% international share of MLB’s full Opening Day rosters, and likewise faithfully reflects the roles of the Dominican Republic, Venezuela, and Cuba as the top three contributors;

(b)  Is also quite close to the 25% international-player share of the roughly 4200 pro athletes playing this year in the six big North American pro leagues (MLB, NBA, WNBA, NFL, MLS, and NHL); and

(c)  Is a bit above the 18% overall international share of the American workforce, but typical of top-tier elite working life.  Some context for this last point:

The Bureau of Labor Statistics’ Labor Characteristics of the Foreign-Born Workforce  release comes out each May.  Its most recent edition reports 158.3 million people working in the U.S. last year, of whom 28.7 million or 18% were born abroad. The foreign-born workforce is growing relatively faster than the native-born on net — the BLS release finds total U.S. employment up 5.7 million from 2021 to 2022, with foreign-born labor up 2.3 million workers and U.S.-born by 3.4 million. This “net growth” figure, though, conceals the fact that most of the 3.6 million workers who retire each year are locally born, so the actual “gross” count of new jobs for native-born Americans was probably more like 6 million.

Looking past these top-line figures to specific industries, the foreign-born labor shares represent a sort of classic “smile curve,” with immigrant contributions highest in the best-paying and lowest-paying sections of the economy, and lower in the middle. At the very top, MLB’s 250 international players join 60% of this year’s 20 Oscar acting nominees and 50% of the six U.S.-based 2023 Nobel Prize laureates in science and economics. At the lower-paying end, USDA’s Economic Research Service reports that about 60% of crop-pickers on American farms as of 2022 are immigrants, and BLS finds foreign-born employment shares between 20% and 30% in construction, groundskeeping, domestic and personal care services, and food preparation. An illustrative table with immigrant labor shares, using 2023 when possible and otherwise picking the most recent year available:

 

Crop-picking farmworkers	60%
Computer science doctorates	60%
2023 Oscar nominees	60%
All farmworkers	44%
Doctoral-level science & tech workers	40%
Construction workers	34%
Major-league athletes	25%
Food service	23%
Personal care & services	20%
All science & tech workers	19%
All U.S. workers	18%
Management jobs	14%
Education & training	12%
Health care practitioners	10%
Lawyers & paralegals	6%
Security services	6%

Sources: Bureau of Labor Statistics for all workers, National Science Foundation for engineering and science workers; MLB, NBA, WNBA, MLS plus outside writers on hockey and football for athletes.

 

Turning back to the Series, though, the nationalities of Garcia, Moreno, their MLB teammates and rivals, and by extension, the nationalities of U.S. workers generally, are interesting both as background for fans watching the game and as illustrations of the evolution of the economy and working life. But what they’re actually doing is the main thing. The manager’s perspective: Don’t overthink it. Play ball.

FURTHER READING

The Bureau of Labor Statistics’ most recent Labor Characteristics of the Foreign-Born Workforce brief, out May 2022.

More on sports: 

MLB: The 2023 Opening Day baseball rosters featured 250 foreign-born players or 26.5% of the 969 players variously out on the grass (or the “artificial turf” used in the Rangers’ Globe Field and the Diamondbacks’ Chase Stadium), riding the bench, or on the DL. Of these, 104 were Dominican, 62 Venezuelan, 21 Cuban, 15 Mexican, 10 Canadian, 8 Japanese,* 7 Colombians, and the remaining 23 are divided among eleven countries.

NBA: If MLB scouts spend most of their time on the Caribbean littoral, with frequent side trips to Japan and Taiwan, the NBA’s talent-spotters have to span the globe. The league’s opening tipoffs last week featured 125 international players among 450 players, or 28% of the total including as a sample 26 Canadians, 14 French, 9 Australians, six Nigerians, five Turks, three from Cameroon, three Lithuanians, one Georgian and one from South Sudan, three from the Democratic Republic of the Congo, two Bahamians, two Japanese, two Ukrainians, six Germans and so on across 40 countries.

WNBA: The NBA’s sister league is slightly less “international,” though not dramatically so, with 30 international players among the 164 women on all 12 teams combined. Australia led with 7, Canada 4, Hungary, France, and China two each; this year’s champion Las Vegas Aces was unusual in having just one international player, Australian center Cayla George.

MLS: U.S. pro soccer is majority international, with 350 Americans and 440 international players. The league fudges the data a bit by declaring Canadians “domestic,” so as to get a North American 50.1% majority player share. The next biggest countries are Argentina with 40 players on North American pitches, Brazil with 34, and Colombia with 25.

NFL: Least “international” of the big U.S. pro leagues, the NFL is also distinctly less analyst-friendly since it doesn’t appear to provide a distinct count of international players. Wikipedia reports 106 of them (counting American Samoa), while NBC’s Chicago affiliate argues for 82. Given 1,676 total players, we can compromise on roughly 6%.

NHL: The “nation” in “National Hockey League”, finally, is not the United States but Canada, home to 295 of this year’s 506 skaters. The rest split equally between the U.S. and Europe — 205 Americans, 206 Europeans — with the top European contingents including 64 Swedes, 41 Russians, 36 Finns, and 23 Czechs.

A look back: 

Some historical data on U.S. immigrant labor from the Migration Policy Institute.

International perspective: 

The International Labor Organization counts 169 million “international migrant” workers as of 2019. This meshes imperfectly with the BLS’ count of the American workforce, as the ILO uses “all foreign-born workers” for countries that record these figures, but only “migrant” [i.e. non-citizen] workers for some other countries. This noted, the ILO report finds 32% of the world’s migrant workers in Europe, 22% in Canada and the U.S., 15% in the Middle East, and 14% in Asia and the Pacific. ILO on migrant workers.

Or, taking a global view, the World Bank’s figures for immigrant shares of the population (rather than workforce participation) place the U.S.’ 14.5% immigrant share of the population a) far below the majority-immigrant populations of the Persian Gulf, which run as high as 88% for the United Arab Emirates; (b) well above the mostly local East Asian workforces, with those of China and Vietnam the world’s lowest at 0.1% and (c) in the middle of the 8%-25% range of other large, wealthy western countries such as Canada, Italy, the U.K., Germany, France, or Australia.

And for comparison:

Hollywood’s 2023 Oscar nominees, tracing birth to Malaysia, Ireland, Vietnam, U.K., Australia, and more

The 2023 Nobel Prizes; Weissman, Goldin, and Brus are Massachusetts, New York, and Cleveland; Katariko, Bawendi, and Yekimov respectively born in Hungary, France, and Russia.

USDA’s look at America’s 1.18 million hired farmworkers.

And the National Science Foundation on the American sci/tech workforce; 19% international overall, with India the top source followed by China and the Philippines.

 

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007).  He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

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FACT: Americans are buying fewer Chinese-made smartphones, laptops, TVs, and toys this year.

THE NUMBERS: Chinese share of U.S. laptop computers –

Jan. to Aug. 2023        82%
2022:                            91.5%
2021:                             93%
2017:                             93%

WHAT THEY MEAN:

The Census’ monthly trade figures, now complete through August 2023, show imports down by about $136 billion or 6% as compared the first eight months of 2022. (Last year: $2.21 trillion; this year: $2.08 trillion.) Nearly two-thirds of this decline is in specifically Chinese-made goods, so the worldwide 6% drop combines a remarkable 24% fall in imports from China with a modest 2% decline from the rest of the world. The figures are:

Imports:                                   -$136.3 billion =  -6%
From China:                             -$89.6 billion =  -24%
From all other countries:          -$46.7 billion =   -2%

Some thoughts on possible explanations below, but first a set of mini-case studies covering four consumer goods: laptops, smartphones, TV sets, and toys. Together these account for $19.5 billion of the $89.6 billion drop in imports from China, and about a seventh of the worldwide drop.

1. Laptops: Laptop computers accounted for $48 billion of America’s $526 billion in imports from China in 2022. This Chinese-made $48 billion in turn made up about 92% of a worldwide $52 billion.  Counting individual devices, Americans bought 111.5 million laptops last year from three main sources: 102.7 million from China, 5.4 million from Vietnam, and 2.5 million from Taiwan. Comparing Census’ Jan.-August figures for 2022 with those for 2023, the total laptop-import count is down from 76.4 million to 65.8 million, with Chinese-assembled laptops specifically off from 71.1 million to 56.4 million. By contrast, Vietnam’s laptop shipments, have more than doubled from 3.3 million in Jan.-Aug. 2022 to 7.2 million so far in 2023.  Taiwan’s have stayed the same at 1.4 million. So here, the drop in imports is not worldwide, but wholly Chinese..

2. Smartphones: The phone pattern is similar — overall U.S. buying down; buying from China especially down; one rival (though not the same one) rising fast. Specifically, 2022’s 173 million smartphone arrivals included 134.9 million from China, 30.4 million from Vietnam, 4.0 million from India, and another 4.0 million divided among Hong Kong, Korea, and Japan. So far this year (again comparing Jan.-August. data), phone imports are down from 115.8 million to 94.3 million, with Chinese-assembled phones accounting for 12.2 million of the total 21.5-million drop. In contrast to laptops, next-door Vietnam is even further off its 2022 pace — from 24 million phones to 11.5 million, or more than half. India is the fast-growing rival here, up from 2.5 million phones to 6.8 million.

3. TV sets: TV-set data again repeat the pattern — total imports down, China down especially fast, and a competitor rising. TV imports from China are down by 40.7% in dollars — from $7 billion to $4.4 billion — and 35% in set-count, from 43 million to 27.9 million. Meanwhile, imports of TVs from Vietnam have jumped from 3.8 million in 2022 to 5.7 million in 2023. Imports from Mexico are up too (though not dramatically) from 19.1 million to 19.6 million.

4. Toys: Finally, a less chip-and-solid-state-electronics-heavy example  Overall, U.S. toy imports have dropped by about a third, from $13.8 billion in Jan.-Aug. 2022 to $9.1 billion in Jan.-Aug. 2023. Almost all the decline is in Chinese-made toys, down from $11.0 billion in Jan.-August 2022 to $6.9 billion in 2023. Here, though, while China’s “share” of U.S. toy imports has drifted down (from 83% in 2021 to 80% in 2022 and 76% so far in 2023) no single competitor seems to be rising in China’s place. Vietnamese toy shipments are down by 34%, Indonesia’s by 22%, and the non-China world overall by 20%. Mexican toy exports are a modest exception, up 8% in percentage terms, but in dollars, this is only about $40 million.

What to make of this? Four possible explanations:

1. Tapped-out American shoppers: One contributing factor is purely American. After two years of post-Covid shopping, Americans have restocked their wardrobes, replaced their phones, and TVs, and don’t need more just now.

This is plausible at least in part: With China the principal source of these things, any drop will naturally show up mainly in trade with China. But this doesn’t seem like the whole story — the simultaneous jumps in laptop and TV imports from Vietnam, and in phone imports from India, suggest buyers finding alternative if smaller Asian sourcing sites. So analysts while not discounting explanation 1 should also be thinking about explanations 2, 3, and 4.

2. Structural change reflecting geopolitics and trade conflict: After holding up through 2018-2022, despite tariffs, retaliations, spikes in diplomatic tension, and export controls, U.S.-China trade finally began to buckle this year.

3. Structural change reflecting Chinese domestic policies: After three years of chronic zero-COVID factory closures and intensified political pressure on foreign firms, China’s competitiveness has badly eroded and buyers are looking elsewhere.

4. Alternative structural change reflecting intra-Asian integration: Or, finally, China’s competitiveness maybe hasn’t eroded per se, but electronics supply chains are becoming more elaborate and specialized. In this hypothesis, final consumer-goods assembly (having shifted to China in the 2000s) now moves to neighboring countries as China takes up a new role as a components and engineering skills supplier, using the newly implemented Regional Comprehensive Economic Partnership agreement to cut costs.

 

FURTHER READING

Data:

Census’ monthly figures.

… and country-by-country data.

U.S. policy:

Treasury Secretary Janet Yellen on de-risking, friend-shoring, non-“decoupling,” and the future U.S-China economic relationship.

And some perspectives:

WTO economists wonder whether trade flows are beginning to illuminate the early stages of “geopolitical blocks,” in which some countries trade more with China, and others more with the United States.

PIIE’s Adam Posen sees the end of the Chinese economic miracle.

Former World Bank director for China and current Singapore-based academic Bert Hofman, writing for the Asia Society Policy Institute, looks to domestic economic mistakes.

 

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007).  He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

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