Paris '07 Workshop
The Relationship between Governments and Defense Industries in a Global Industrial Base
Dr. Edgar Buckley
Thales Senior VP Dr. Edgar Buckley (left), with Swedish National Armaments Dir Jan-Olof Lind, EDA Dep CEO Dr. Hilmar Linnenkamp, and U.S. Director of International Cooperation Alfred Volkman (left to right).
"If Europe intends to play a strong security role, it needs a strong European
defense industry supported
by a strong defense technology base. And since the U.S. needs Europe to contribute strongly to
defense and security operations in order to share the burden of maintaining global security and
stability, I believe that the U.S. also needs and should support a strong European DTIB."
My company’s analysis of this subject has been consistent over a number of years: defense companies need to maintain the closest possible, trusting relationship with their government customers, respecting, of course, all relevant security and ethical requirements. Such a relationship needs to exist in order to:
• Help customers develop their concepts and requirements, including through experimentation
• Deliver the necessary capabilities
• Maintain their customers’ sovereignty of action by constituting a modern and competitive defense technology and industrial base
All modern procurement trends—CD&E, spiral development, capability-based procurement, outsourced extended service contracts, public-private financing — depend on this close customer-company relationship. Neither customer nor supplier can manage the process without it.
WHY GOVERNMENTS NEED INDUSTRY
Governments depend on strong and healthy defense industries for satisfying their security needs and, in the case of major states, to maintain their long-term sovereignty of action in defense and security affairs. There is no example I know of of a nation that has a strong defense capability while lacking a strong defense industry.
If Europe intends to play a strong security role, it needs a strong European defense industry supported by a strong defense technology base. And since the U.S. needs Europe to contribute strongly to defense and security operations in order to share the burden of maintaining global security and stability, I believe that the U.S. also needs and should support a strong European DTIB. Not all Americans may agree with that statement, but I am not saying that the European DTIB needs to fully duplicate all areas of America’s defense technology capability. I believe that Europe should maintain strong capabilities in key areas.
HOW TO IMPROVE THE EUROPEAN DEFENCE TECHNOLOGICAL AND INDUSTRIAL BASE (DTIB)
What does improving the European DTIB entail? Fortunately we know the answer: it entails supporting the EDA in its efforts to increase and coordinate R&T spending, harmonizing capability requirements, consolidating the defense industrial base, and establishing a competitive European defense equipment market. Action in all of these areas is already underway through the EDA and with the support of governments and the European Commission. Action is also underway to explore the ability to pool efforts among nations in parallel with increased cooperation at the European level. There is every reason to believe that pooling among countries with similar capabilities is the best way to consolidate capabilities in Europe in the shorter term.
So, we have made a start. But there is one other thing we need to do to secure the future of the European DTIB: we need to improve transatlantic defense industrial cooperation. We need to do this in the interests of both Europe and the United States.
THE EFFECTS OF REGULATION ON INDUSTRY
What stands in the way of improved transatlantic cooperation? The answer is clear: export licensing and technology transfer regulations. I recently discussed these subjects with Al Volkman and his staff in Washington as part of a NIAG team that was asked to report on how things could be improved on both sides of the Atlantic.
Our team found that several efforts are being made in the U.S. to improve the U.S. regulatory process, which is currently creaking under the weight of industry’s needs to cooperate and exchange technology. Yet there is no immediate prospect of fundamental change. The situation in Europe is not much better, with a thoroughly useless and bureaucratic system of licensing for intra-European Union transfers that is resistant to attempts to reform it.
Industry is not to blame for this state of affairs; we have put forward ideas for change and we are ready to internalize and respect all government security and export restrictions. This is a case in which governments and legislatures must improve their performance, and there is every reason to do so because the same industry is increasingly present on both sides of the Atlantic. There is also growing interdependence between the European and the American defense industries.
HOW TO EFFECT EUROPEAN AND U.S. CHANGE
So what do governments and legislatures need to do to make it happen?
First, it would be extremely helpful if governments collectively recognized the need for strong DTIBs on both sides of the Atlantic. I don’t really imagine that anyone doubts the need for a strong U.S. DTIB but, as I said earlier, I am not sure the same goes for the European DTIB. Do Americans accept the need for a strong European DTIB? They should—but if they do accept it they should surely give it a higher priority and put more effort into facilitating transatlantic technology transfer.
Second, governments need to recognize that the nature of defense industries has changed. We are multinational now and need to be treated as such. We want to be treated equally depending on our presence in different countries and we want to be good citizens in each, and be treated accordingly. The U.K. government has set the standard for the treatment of foreign-owned defense companies, and we hope others will follow its example.
To sum up here, I’d like to reiterate my points:
• Governments and defense industries need to work increasingly closer together.
• We need strong DTIBs in both the U.S. and Europe. A single globalized industrial base controlled by the U.S. Congress will not work.
• In Europe we need to push ahead strongly with market convergence and pool our capabilities as much as possible in order to improve efficiency and maintain key technological capabilities
Finally, we need to explain clearly to our American friends that all this does not make a Fortress Europe and take steps together to free up the regulatory processes and support our technology bases on both sides of the Atlantic.