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This paper explores the rationale of arms trade between two rival agents. We propose a ``guns versus butter'' framework in which guns produced are disentangled form guns used. By doing so, we are able to embrace arms trade. We design a three-stage game in which two agents first decide to trade arms (or not); then simultaneously choose their level of guns expenditure; last the prize at stake is shared with respect to a Contest Success Function. Our findings challenge the commonplace according which it would never be rational to trade arms with an enemy. Indeed, arms trade may be mutually beneficial even if agents are (potential) enemies. In particular, when agents have large initial resources we find that arms trade is neutral on both the intensity and on the balance of power. Consequently, it could be a subgame perfect equilibrium of the game if the seller has an advantage both in term of a military and non-military technology. In such a condition, the greatest share of the surplus generated by arms trade is always captured by the seller. Our framework allows to understand historical events like the arms trade between Germany and Britain on the eve of the World War I. We also discuss on the cases of Roman Empire's arms trade policy, and the (aborted) sale of Mistral between France and Russia through our theoretical framework.
