Defence Support Division, NATO International Staff, NATO Headquarters, Brussels
BETWEEN COMPETITION AND PARTNERSHIP:
PROSPECTS FOR TRANSATLANTIC COOPERATION
IN THE FIELD OF DEFENCE PRODUCTION
Lecture in Cicero Foundation International Seminar for Experts "European Armaments Industries, ESDP, and Transatlantic Cooperation", PARIS, 29 March 2001
It is always a pleasure to come to Paris, and particularly so when a fine event such as this Conference allows one to touch base once more with many colleagues and friends. Let me thank the organisers both for inviting me to speak today, and for the excellent arrangements they have made to ensure the success of this event.
My theme this morning is transatlantic cooperation - not just in defence "production", development, production and procurement of defence material. NATO is, of course, an intergovernmental organisation, so I will be looking at the picture more from a governmental than an industrial focus, though I see that there are speakers after me well qualified to take the vital defence industrial dimension on - board.
During the years I have been priviliged to work for the Alliance, I cannot remember a time when we have not been worried about the state of our defences, and particularly our conventional defences. It is all too easy to forget, indeed, that NATO's military strategy during most of the Cold War was based ultimately upon nuclear deterrence, itself partly a reflection of perceived imbalances between the conventional force capabilities of the two Alliances. At the height of the Cold War, NATO was being outproduced by the Warsaw Pact across the broad spectrum of conventional defence equipment by between 3:1 to 5:1, so we had real grounds for concern. Our present great challenge, however, is born of asymmetries in our own Alliance capabilities, so let me first turn to the issue of what is often referred to as the "technology gap".
The present lack of balance in transatlantic defence equipment capabilities was there for all to see in our Balkan operations, but in fact major transatlantic asymmetries in this sphere have been a feature of the western defence landscape ever since NATO was established, and arguably even before. The US has been fielding forces capable of trans-oceanic power projection for decades. Throughout the Cold War, most, though not all, European NATO allies were prepared essentially to "fight in place", on, or close, to their own territory. Because the US was deploying forces from the continental US, and even further afield, its defence establishment for many years has routinely built the tools needed for trans-oceanic power projection and expeditionary operations - such as fleets of large transport aircraft, aerial refuelling tankers, carrier battle groups, amphibious ships, and a whole range of other mobility assets.
How great is the imbalance in transatlantic defence equipment capabilities? Generalities are always unwise; in this area, one really does have to look at the situation in each equipment area, but in order to spare you a long recital of figures, one or two points can illustrate the degree of asymmetry we face. The five largest members of the European Union (France, Germany, Italy, Spain and the UK) together account for over 80% of its defence spending. In aerial refuelling aircraft, for example, the US ratio to the "EU five" is over 10:1. For SSBNs and naval surface combatants, the US tonnage vis à vis the five is 3:1, and for operational naval transport and support ships it is 4:1. In fact, the asymmetries run right across the entire defence equipment spectrum. Perhaps the most worrying of all the asymmetries in the entire defence procurement arena is the contrasting R&D effort on the two sides of the atlantic. In Fiscal 99, out of an equipment budget of $70 billion, the US devoted $37 billion to research and development. Out of an equipment budget of $34.5 billion, NATO Europe spent only around 25% of the amount allocated by the US to R&D. These figures certainly provide food for thought, to put it mildly.
Indeed, what is so often described as a "technology gap" between the two sides of the Atlantic, is, in fact, an aggregate of what I prefer to call numerous "capability gaps". What is striking is not so much a gap in technological expertise (Europe possesses technology of great excellence), but rather gaps in investment, spending, and procurement lead times. On this latter point, a key factor exacerbating the gap in capabilities is the time it takes to launch and conduct cooperative armaments programmes as between different Europe countries. Obviously, as a single nation the US has advantages in this field, but I do see some scope for streamlining the process in Europe. For example, the US has adopted three important mechanisms - Advanced Concept Technology Demonstrations, Advanced Technology Demonstrations and Joint Experiments to ensure that innovative concepts and superior technology reach the military forces as quickly as possible, and similar practices adopted - and adapted - by the Europeans, at a European level, could be very beneficial.
NATO's major Defence Capabilities Initiative (DCI) is central to making needed improvements in specific defence capabilities that were identified during the 78 days of Operation Allied Force in the skies over Serbia. The initiative seeks - and I am quoting from the communiqué of the meeting of Defence Ministers of December 2000 - to improve "the defence capabilities of the Alliance to ensure the effectiveness of future multinational operations across the full spectrum of Alliance missions". DCI's purpose is to facilitate the Alliance's movement towards forces that are more interoperable, more mobile, readily deployable and highly capable. The initiative - and here I am again quoting from the communiqué of Defence Ministers - "was launched to ensure that the Alliance's forces can deploy quickly, can be supplied, reinforced and sustained for an extended period away from their home base, and can operate more effectively, with better protection, in the most demanding environments, under effective command and control arrangements". Achieving the goals of DCI will require a sustained effort by the Allies. Such an effort will also strenghten the European pillar of the Alliance, taking into account that the objectives arising from DCI and the EU's Headline Goal are mutually reinforcing.
The good news is that NATO has made progress on DCI. We have made real progress - in the provision of strategic air and sea lift, in plans to develop a more robust aerial refuelling capability, in plans to cooperate in the procurement and stockpiling of precision guided munitions, and steps being taken to improve consultation, command and control capabilities. Secretary General Robertson's strong, assertive leadership in the DCI initiative can be illustrated by the fact that in March last year he wrote to Heads of State and Government and also to Ambassadors, drawing attention to the current state of progress in DCI implementation, and indicating where each specific country could make greater efforts. A second similar letter was sent by him to NATO Ambassadors last December. In other words, he is not afraid to call the shots as he sees them, and he sees very, very well indeed.
The bad news, however, is that much of the heavy lifting remains to be done. The Secretary General has repeatedly made clear his concern that the process made in implementing the DCI had still not gone far enough. He is particularly concerned by the fact that although most of the 58 action items for improving capabilities identified as part of the DCI have now been translated into Military Committee - agreed Force Proposals, something less than half have been currently accepted for full implementation by nations, and a similar number will only be partly implemented over an extented period. He has, therefore, urged the allies to restructure defence programmes, and to exploit the possibilities for multinational, joint and common funding and other forms of cooperation in order to share the burden of providing the required capabilities and improve efficiency.
As we assess the prospects for making greater pogress on DCI in its second year, let's be clear. The DCI does not and cannot guarantee that all NATO equipment shortfalls will be redressed - far from it - but it does provide advocates in government, advocates in ministries, advocates in military services, advocates in our parliaments, advocates in industry and outside experts in the defence policy cummunity who believe these deficiencies must be corrected, an important and useful point of leverage for trying to achieve these results. Sometimes results can only be achieved on the margins. But even marginal gains in military capabilities are better than no gains at all. We must never allow the best to become the enemy of the good.
Let me turn now more specifically to the fundamental issue of defence spending. At the NATO Defence Ministerial meetings in Brussels and Birmingham in 2000, emphasis was placed by the Secretary General and a number of high-level participants - but not by all, I concede - on the necessity for NATO states, or at least the majority of them, to increase their defence spending if the Alliance is to have a reasonable chance of delivering on its Headline Goal.
Let me be clear: I strongly support all efforts to rationalise defence spending, to identify savings and eliminate waste, and to streamline and reorient NATO forces, within acceptable bounds, away from static territorial defence roles to more flexible and rapidly deployable configurations. But if demands on our forces in the new international security environment remain as challenging as they have been these past years - and I believe they will - and if the "well" is now pretty much "dry" in terms of further defence savings and economies, 15 years into a sustained period of "peace dividend" deductions from our respective defence budgets - and I believe it is - then it is necessary that additional allied nations face up to the hard reality that the level of defence resources must be increased, particularly in the areas of R&D and procurement. Secretary General Robertson underlined this point graphically when he said:
"Europe, in particular, has to live up to its stated ambition to play a stronger defence role. You cannot get defence on the cheap, and there can be no real security without resources."
A greater defence investment effort on the part of a number of countries will make an important contribution to ensuring a more even balance between the defence efforts of the two sides of the Atlantic.
To serve as an official in the NATO Armaments Division you must be an optimist. I was about to say "masochist", but decided at the last second that "optimist" is more diplomatic. But I do truly believe there are grounds for optimism and that we now do have the opportunity to achieve a greater balance in our transatlantic armaments programmes. As you know, the UK recently consolidated its participation in the Joint Strike Fighter Programme by signing an MOU with the US for the next phase of the programme - Engineering and Manufacturing Development - a decison that will enable the UK to take part in the selction of the prime contractor for the next phase. The UK has, of course, been a full collaborative partner with the US in the Concept Development phase of the JSF programme since 1996. The two countries have agreed a set of principles that will provide a framework for UK involvement in the project in the longer term. Indeed, the programme is squarely based on the more general Declaration of Principles for Defence Equipment and Industrial Cooperation signed by Minister Hoon and Secretary Cohen last year.
I believe that this programme could well become a model for more balanced and equiptable transatlantic armaments programmes in the future. For many years, NATO officials have been arguing that transatlantic armaments cooperation would be more successful if such cooperation could start much, much earlier in the Weapon System Life Cycle. On too many occasions in the past, cooperation has occured at the eleventh hour - when a producer nation has built a piece of defence equipment that it wants to sell to its allies, in order to make its production lines more viable. This "buy - it - or - leave - it" approach to cooperation is not only unfair, it is also military unwise, because nations who are going to buy and operate defence equipment built by a producer nation ought to have an effective voice in its design and development.
The relationship in the JSF programme between the US, UK and the other collaborative partners is highly innovative. Not only have these partners had an important role to play in the design and development of the programme, but the adoption of a new, evolutionary appoach to the requirements definition process is a significant departure from previous acquisition practices. The use of cost performance trade - off studies early in the weapons system development process, and the provision of each iteration of requirements to industry should allow participants to get a better grip on overall programme affordability. The decision to adopt a "family of aircraft" concept with three different designs with high cost commonality, rather than use one basic design to meet differing Service requirements, is also an interesting departure from previous practice.
The promising situation in the JSF programme is paralleled by the remarkable progress we are making in NATO's Conference of National Armaments in Theatre Missile Defence. Ministers decided back in 1996 that layered defence against Tactical Ballistic Missiles for deployed forces was a needed capability. In april 1998, National Armaments Directors of NATO countries approved a Programme Plan and moved later in the year to set up a Project Group. Remarkably, the Project Group has met all its milestones successfully and contains to work productively and on schedule. Following approval of Feasibility Studies implementation by the Infrastructure Committee last June, the placement of study contracts should take place as planned at the beginning of July this year. Programme options and recommendations on the way ahead will be submitted to the CNAD in 2004. This is proving to be a highly successful programme of transatlantic armaments cooperation. The lesson just has to be....that it can be done!
I hope this "wind of change" will start to sweep away our problems in the area of Alliance Ground Surveillance, where we have had a number of unsuccessful attempts since 1995 to arrive at a single agreed common approach to the acquisition of a NATO-owned and operated core AGS capability. Here again I detect a new and more positive mood. There are at present two main groupings of countries pursuing this capability - the NATAR and SOSTAR groupings. The High Level Steering Group overseeing DCI, which is chaired by the Deputy Secretary General, has been placing pressure on the countries concerned to pool their efforts. I know there are complex, sensitive national interests at stake; as there always are in big cooperative armaments programmes. But the way to move ahead is through open and honest dialogue, based on a willingness to compromise. I really do believe we can have a success story on our hands in AGS if we stick to the task and focus on the need to meet the clear, urgent operational military requirement for this capability.
Ladies and gentlemen, I am aware that I have not really touched on defence industrial issues so far, but I would like to mention the cross border joint venture between Raytheon and Thales, that was announced a week before Christmas 2000, and moves by Northrop Grumman and EADS to create a permanent corporate relationship in the fields of intelligence, surveillance and reconnaissance.
We have recently witnessed the consolidation of European defence industry into two giant platform companies - BAE Systems and the French - German - Spanish European Aeronautical Space and Defence Company. Some commentators are predicting that the foundations are now in place for a confrontation between Fortress America and Fortress Europe. Such a confrontation, were it to take place, would be disastrous. But my main point here is that the Raytheon - Thales and Northrop Grumman moves may well be the sign that in fact the process of defence industry consolidation is now going to take on increasingly a transatlantic dimension. I very much hope so. And there is logic in such a development. BAE Systems, for example, has become, through acquisitions, the sixth biggest domestic US defence contractor, selling more to the Pentagon than to the UK Ministry of Defence.
The intention of Raytheon and Thales is to form a jointly owned electronics - systems company to build and sell air-defence command-and-control radars. There are obvious, potential industrial security problems for both the US and France, particularly if the two partners move to expand this cooperation in the future, but I strongly share the views set down by John Hamre in his recent fine article in the Wall Street Journal, that the risks are worth taking because the potential gains are so great. A "Fortress mentality" on one or both sides of the Atlantic will make coalition interoperability even harder to achieve, and waste precious resources. Joint transatlantic ventures, if handled correctly, will bring synergy, not damage, to our technological and industrial bases. Once again, it is a question of achieving greater balance in efforts and resources across the board, and this requires an honest, open and transparent dialogue between North America and Europe, which NATO is in superb position to actively foster.
A further factor for optimism are the signs that we may be getting to grips at last with the reforms of outmoded export licensing and technology transfer regimes. Great credit is due to the Clinton Administration for pushing through the Defence Trade and Security Initiative. This was not easy in the eighth year of an Administration, especially in the context of the intense polarisation of politics in Washington that had set in by then. I think we should see DTSI as merely a "down payment", pending more fundamental reform by the new Administration. And there are good chances of such reform. I am encouraged by the fact that politicians of the calibre of Senators Gramm and Enzi, and Congressman Henry Hyde, are anxious to make progress in the area, notably by re-writing the Export Administration Act.
At the bottom of every balance sheet one has the famous "bottom line". Ultimately, the raison d`etre for balancing efforts and capabilities across our Alliance in the ways I have described is not simply due to the need to improve the quality of work in our defence laboratories, or render the industrial production line more financially viable. It is to ensure that the men and women of our armed forces who stand in harm's way to defend our democracy and our security are given the best tools and means to do the job.
That is our ultimate challenge.