Arkansas arms sales jump nearly 500% in 2018, Saudi Arabia near the top of state export marketplace

by Wesley Brown ([email protected]) 1,223 views 

Civilian aircraft parts, ammunitions and rice were the top Arkansas exports purchased by U.S. trade partners in 2018, representing more than 25% of the $6.5 billion in homemade goods shipped from the Natural State to other countries, according to new data compiled by the U.S. Census Bureau on foreign trade.

At the same time, oil- and cash-rich Saudi Arabia leapfrogged reliable U.S. trading partners in Europe and Asia such as France, China, Japan, Germany and the United Kingdom to land among the top three purchasers of Arkansas-made goods. In 2018, the Middle Eastern country bought $397 million of Arkansas commodities, which represents 6.1% of the state’s global export market.

The stark increase in exports to Saudi Arabia is directly attributed to the Middle Eastern nation’s long-term relationship with U.S. defense giant Lockheed Martin. In 2017, Saudi Arabia expressed its intent to procure more than $28 billion in integrated air and missile defense, combat ships, tactical aircraft and rotary wing technologies and programs with the Bethesda, Md.-based defense contractor.

Part of that deal includes the U.S. Army’s $1.1 billion foreign military sales contract to deliver Patriot, or PAC-3 missiles, interceptors, launcher modification kits, associated equipment and spares to the Kingdom, South Korea and Qatar. Not only is Lockheed’s sprawling industrial site in south Arkansas responsible for final assembly of the high-velocity interceptors, but fellow Camden-based defense contractor Aeroject Rockeydyne also manufactures the rocket propulsion systems that allow the PAC-3 to shoot down enemy missiles.

Lockheed’s Camden facility will also benefit from a $110 billion joint arms deal signed by President Donald Trump and King Salman Bin Abdulaziz Al-Saud exactly two years ago during a state visit to Saudi Arabia. That agreement led to the Pentagon awarding a $1 billion contract to U.S. defense giant Lockheed Martin to provide Terminal High Altitude Area Defense, or THAAD, for Saudi Arabia’s fledgling missile defense program, Talk Business & Politics reported in March.

Final details of the contract award show that work for the project is now being performed at Lockheed’s manufacturing locations in Camden, Dallas and Lufkin, Texas; Huntsville, Troy and Anniston, Ala.; and Sunnyvale, Calif., over a seven and a half-year period from Feb. 28 to Oct. 31, 2026.

American Rheinmetall Munitions Inc., the U.S. operating subsidiary of European defense giant Rheinmetall Waffe Munition GmbH in Düsseldorf, Germany, also has a manufacturing facility in Camden that supplies grenades, bombs, and other combat and artillery ammunition for all U.S. military forces and allies, including Saudi Arabia.

According to the Census Bureau export data on Arkansas, sales of bombs, mines and munitions jumped an astronomical 487% in 2018, largely due to the Lockheed Martin-Saudi arms deal and other related activity at the growing military industrial complex in Calhoun County.

Although arms sales only represented a 1.3% share of total Arkansas exports in 2017, that total jumped to 7.2% in 2019. In total dollars, sales of Arkansas-made bombs and other military-grade munitions jumped 486% from $79 million in 2017 to $463 million in 2018.

The extraordinary ammunitions sales to the Middle Eastern country could be a one-time, extraordinary event or the beginning of a trend that could last for years, sources say. London-based GlobalData, one of the world’s leading data and analytics firms, said in a recent research report that Saudi Arabia has one of the largest defense budgets globally and plans to boost spending for the Kingdom’s homeland security to $38.1 billion by 2024. Between 2014 and 2018, defense imports from the U.S. accounted for 68% of the country’s total defense spending.

“Over the forecast period, the import share of the U.S. is expected to grow, due to the multiple agreements between the two countries,” Nicolas Jouan, a defense analyst with the European data collector, told Talk Business & Politics.

As a part of its Vision 2030 plan, Saudi Arabia plans to develop its own defense industries by localizing its indigenous defense capabilities, the GlobalData report states. Although the Kingdom is one of the world’s biggest military spenders, only 2% of that total stays in the country.

Jouan also highlighted President Trump’s veto last month of a bill which aimed at halting military assistance to Saudi Arabia’s war in Yemen. He said that veto has secured upcoming deliveries of American-made weapons and related services to Riyadh despite its involvement in the Yemeni conflict.

“President Trump might have seen an opportunity for the American defense industry as European suppliers, most notably Germany, are increasingly wary of dealing with the Saudi governments, fearing an opinion backlash over breaches of humanitarian law on the Yemeni front,” said the global defense analyst.

Besides the unusual spike in ammunition and defense spending in 2018, Arkansas’ aviation sector saw total export sales of $995 million in 2018. Although year-over-year aviation and aircraft part exports were down 33.8% from $1.5 billion in 2017, that sector still ranked as Arkansas’ top exporter and shipped a 15.4% share of total commodities to U.S. trading partners between 2017 and 2018.

After the aviation and defense industry, Arkansas rice sales to U.S. trading partners jumped 3% year-over-year to $229 million, representing 2.5% of the state’s total export market. Bleached paper products and chemical wood pulp from Arkansas’ reliable forestry industry were the other top five exports with a total share of 3.5% and 3.3%, respectively. Total sales for those same commodities in 2018 were separately $212 million and $198 million.

Other top Arkansas stables such as eggs, chicken products and cotton were also in the top 10, but fell below 3% of total Arkansas goods exported to other countries in 2018. By commodity, chicken sales fell by 10.4% in 2018, pushing it down from the 4th to 7th spot among Arkansas goods exported outside the U.S.

Arkansas cotton sales, which have been depressed for several years, jumped 82.4% from $63 million to $115 million in 2018. Altogether the state’s top 25 commodities represented 57% of the Arkansas goods exported overseas or to U.S. allies and trading partners in the Western Hemisphere.

Among those 25 countries, Canada and Mexico remain atop Arkansas’ export market at 18.7% and 13.4%, respectively, although the U.S.-Mexico-Canada agreement (USMCA) still has not been ratified. Overall, Canada’s purchases of Arkansas-made goods fell slightly by 3.9% to nearly $1.21 billion in 2018 from $1.25 billion in the previous year.

As noted, Saudi Arabia’s stake in Arkansas’ exports rose from 1.2% in 2017 to 6.1% in 2018. France and China, which were respectively the third- and fourth-largest export market for Arkansas goods in 2017, each tumbled one spot below Saudi Arabia. France was the biggest decliner in the Arkansas export market, sliding from an 11.7% share in 2017 to only 5% in 2018. By dollar amount, that represented a decrease of 55.3% in export sales to $326 million in 2018, compared to $728 million in 2017.

China’s share of Arkansas-made exports also declined to 4.9% in 2018 amid the Trump administration’s ongoing trade war with the Far East economic powerhouse. In Arkansas, that cut purchases of Arkansas goods by China to only $315 million in 2018, down 14.5% when compared to $368 million in the previous year.

The other five countries listed as Arkansas top export markets included South Korea, the United Kingdom, Belgium, Hong Kong and Japan, which all purchased less than 3.7% of the $6.5 billion of Arkansas commodities that were sold in the global marketplace. Among Arkansas’ top 25 exporting partners, Belgium, the British Virgin Islands and Austria were the biggest advancers, while Brazil, the Netherlands and Bermuda were the biggest decliners.

Compared to total imports of $10.95 billion and exports of $6.6 billion, Arkansas now has a state trade deficit of nearly $5.6 billion. China is by far the largest importer of foreign goods to Arkansas, representing nearly half of the total. In the past four years, Chinese imports to Arkansas have jumped from 32.6% to 44.8% in 2018. In dollar value, that total has jumped 101%, or 25% annually, from $2.57 billion in 2015 to $5.16 billion at the end of December.

France is the second-leading importer of foreign goods into Arkansas at 11.4%, while Mexico and Canada are tied at 7.8%. Germany is fifth on the list at 2.8%, while the other top 20 countries ship less than 19% of their homemade products to the Natural State. Airplanes, bicycles, electronics, footwear tractors are among the top 10 products imported and sold to Arkansans by U.S. trading partners.