New rivals ending Western defense market dominance.

• Author: Berenson, Doug
• Position: Analysis

Among airborne icons in the global defense market, it is hard to top the F-16 in representing the long history of U.S. export dominance. Some 40 years since its first flight during the Cold War's tumultuous 1970s, the F-16 remains one of the most popular fighters in the world with more than 2,500 aircraft in service with the United States and its allies.

During that time, Western suppliers came to dominate the international defense marketplace. In 2015, they accounted for 59 percent of all sales to accessible markets, divided between U.S. sales at 45 percent and Europe with 14 percent. Yet that position is under threat. Since 2010, the supply of Western-built defense systems has actually been on the decline, according to data from Avascent Analytics, down from just over 62 percent five years ago. If current trends accelerate, the world's most popular aircraft four decades from now--or even much sooner --may not be American or European at all.

Between now and the mid-2020s, Western defense suppliers face unprecedented competition in international markets that they once considered virtually their private hunting grounds. One factor is China's growing technological competence and political clout. In 2013, NATO member Turkey courted Chinese defense suppliers to supply the HQ-9 air and missile defense systems for its T-LORAMIDS program; Ankara has also acquired drones made by Chinese firms. Saudi Arabia, one of America's largest customers of high-end military hardware, also reportedly purchased Chinese Caihong drones built by Chengdu Aircraft Design and Research Institute--including an armed variant.

Other buyers include Iraq, United Arab Emirates and Egypt. Another factor is the desire among many longstanding defense customers in the Middle East and Asia to go it alone rather than depend on occasionally touchy Western governments.

Some of this shift is also Washington's own doing, due to overwrought and complicated export controls that constrain U.S. suppliers. As an example, U.S. officials refused to offer America's cutting-edge systems like the F-35 to any Gulf allies, a policy that also safeguards Israeli military superiority.

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The larger technological, political and strategic forces reshaping the global defense market, however, are now beyond any one nation's control. An increasing number of customer nations are now able to satisfy defense requirements "internally" from domestic industries, aided by years of...