NEW YORK (24/7 Wall St.) — America is the arms merchant to the world and is likely to sell $50 billion in weapons this year. Business may not be as good in the near term, however.

Military spending among all countries totaled $1.63 trillion last year, but that was up just 1.3% from the year before. Spending includes weapons, soldiers and the cost of maintaining a country’s military infrastructure.

See full story on the cool-down in global military spending.

Marines aboard Sea Stallion helicopter launched from USS Essex transport humanitarian assistance and disaster relief supplies to Miyako, Japan. Reuters

The U.S. defense budget is by far the world’s largest, and that has been the case since World War II. Last year that figure was just below $700 billion, largely because of the wars in Afghanistan and Iraq. The U.S. is the only country that maintains naval, air force and ground troops in nearly every part of the world, from South Korea to Europe to the Persian Gulf.

The worldwide slowdown in military spending is a product of two things: the recession, and the austerity following it, and decisions by big nations such as Germany that they do not need large military presences beyond their borders.

Many countries have not turned their backs on defense spending at all, but they are nations with relatively small overall budgets. According to the Stockholm International Peace Research Institute, which provides the numbers 24/7 Wall St. used for its analysis of global arms spending, military spending in Africa and South America rose nearly 6%. That is barely enough to make up for cuts by larger nations.

24/7 Wall St. looked at military spending in the 10 countries that are the biggest spenders over a period of a decade. China, the world’s second largest nation by GDP and largest by population, had the biggest military-spending increase of any country. Its military spending rose 189% from 2001 to 2010, reaching $119 billion. And many experts believe China underreports this spending, which now represents 2.1% of GDP. The comparable figure is 4.8% in the U.S., so, should China decide to match America’s spending on a percentage basis, its military budget would be closer to $300 billion. That may take on added relevance, since the Obama administration is expected to slash the Pentagon’s budget.

“ Should China decide to match America’s spending on a percentage basis, its military budget would be closer to $300 billion. ”

A review of the numbers leads to three important questions. The first is whether the large industrial nations of Europe and Japan will continue to see high military expenses as unaffordable. The second is whether an arms race between China and the U.S. will emerge — one that compares to the one between the Soviet Union and the U.S. running from the 1950s through the 1980s. And the last question centers on whether military activity in the developing world will expand further. Expenditures in places like the Middle East, North Africa and Pakistan could certainly rise sharply soon.

There is not currently a weapons race among the largest nations. There is, however, enough global unrest for that to change.

10. Italy

2010 spending: $37 billion (estimated)

Change 2001-10: -5.8% (est.)

Share of GDP: 1.8% (est.)

Italy's defence minister, Ignazio La Russa, arrives for parliamentary debate April 5. Reuters

Italy spent the 10th greatest amount on the military in 2010. Its 5.8% decline in military spending since 2001 is the greatest decrease among all the countries on this list. One reason may be that the number of volunteer troops is being cut, according to an Italian nonprofit organization, the Istituto Affari Internazionali. Italy’s defense budget is expected to be cut further this year to reduce the country’s debt.

9. India

2010 spending: $41.3 billion

Change 2001-10: 54.3%

Share of GDP: 2.7%

India spent the fifth largest amount on their military among all the Asian countries and the ninth largest in the world. The country underwent the largest absolute decrease in military spending from 2009 to 2010, spending $1 billion less than it had a year before. This decrease will likely not amount to much in the long run because in February India increased its defense spending by 11.6%. This was undertaken largely in response to the growing military strength of China and Pakistan.

8. Germany

2010 spending: $45.2 billion (est.)

Change 2001-10: -2.7% (est.)

Share of GDP: 1.3% (est.)

Although Germany has one of the world’s largest military budgets, its military spending as a percentage of GDP, at about 1.3%, is not especially high compared with other countries. It is the second-smallest percentage, in fact, among the countries on this list. Spending in 2010 decreased 1.3%, after the country’s Defense Ministry recommended Germany close several army bases and cut the number of troops from 250,000 to 180,000.

7. Saudi Arabia

2010 spending: $45.2 billion

Change 2001-10: 63%

Share of GDP: 10.4%

Saudi Arabia’s level of defense spending is all the more impressive when one considers the size of the country’s economy. The $45.2 billion the country spent in 2010 was 10.4% of the country’s GDP. That percentage is more than double that of any other country on this list. Saudi Arabia also underwent the largest increase in military spending from 2009 to 2010, 4%. It had the largest absolute increase in the Middle East, as well, at $1.6 billion.

6. Japan

2010 spending: $54.5 billion

Change 2001-10: -1.7% (est.)

Share of GDP: 1%

U.S. military aid to Japan

Japan has kept its military expenditures at about 1% of GDP since 1967. As a result, the amount spent on defense turns on the strength of the economy. While military spending in the entire East Asia region has increased by more than 55% over the last decade, Japan’s has decreased by 1.7%, according to the Institute for Policy Studies.

5. Russia

2010 spending: $58.7 billion (est.)

Change 2001-10: 82.4%

Share of GDP: 4% (est.)

Although Russian military spending decreased 1.4% from 2009 to 2010, it increased 82.4% over the entire decade. According to the BBC, Russia has plans to spend $650 billion on defense between now and 2020. According to Russian Finance Minister Alexei Kudrin, this money would be used to modernize the country’s armed forces. It currently relies heavily on a nuclear arsenal built during the Cold War.

Honor guard at February 2010 ceremony at the Great Hall of the People in Beijing. Reuters

4. France

2010 spending: $59.3 billion

Change 2001-10: 3.3%

Share of GDP: 2.3%

While France’s military spending increased 3.3% over the past decade, it decreased a stunning 8.4% from 2009 to 2010. This decrease, which is by far the largest on our list, is mostly the result of the global economic crisis. The crisis was severe in Europe and hit France especially hard. This has caused the government under Nicolas Sarkozy to make large cuts to rein in the deficit.

3. United Kingdom

2010 spending: $59.6 billion

Change 2001-10: 21.9%

Share of GDP: 2.7%

The U.K., home base of defense contractor BAE Systems (BA.), surpassed France in the amount spent on its military in 2010. Despite growth of 21.9% in spending over the decade, military expenditures dropped 0.8% from 2009 to 2010. This amount will most likely decrease more in 2011. In late 2010, Conservative Prime Minister David Cameron announced that the country would be making defense cuts, including cutting 17,000 troops, to help bring down debt. The country will instead focus more on special forces, which includes counterterrorism units.

F/A-18F Super Hornets launch from the aircraft carrier USS Enterprise in the Red Sea on March 17. Reuters

2. China

2010 spending: $119 billion (est.)

Change 2001-10: 189%

Share of GDP: 2.1% (est.)

China spent the second greatest amount on the military in 2010, and that amount is growing quickly. From 2001 to 2010, the country’s military expenditures increased 189%. This is more than double the amount spent by any country on this list. Weak economic performance in 2009 kept the 2009-10 increase to only 3.8%. Spending in 2011 will increase by 12.7%, according to the BBC. It should be noted, however, that many analysts believe China’s defense spending is higher than the country reports.

1. United States

2010 spending: $698 billion

Change 2001-10: 81.3%

Share of GDP: 4.8%