Transatlantic Cooperation: An American Industrical View
Dr. Robert Trice
Senior Vice President, Business Development,
Lockheed Martin Corporation
Let me begin, on behalf of American industry, by thanking Secretary de Leon, Secretary Gansler, and Secretary Oliver for the leadership they have shown in trying to clean up a major impediment to transatlantic cooperation by proposing a very clear, mutually understood, and accepted set of export controls and a technology transfer regime. We have a long way to go, but we have certainly made good progress.
THE RESULTS OF TRANSATLANTIC COOPERATION
My view is that transatlantic cooperation has been and will continue to be a major focus of all the companies represented here. It is simply too late to create a Fortress Europe or a Fortress America, even if we wanted to. Certainly in the case of Lockheed Martin, our heritage companies understood more than 25 years ago that trying to sell off-the-shelf material from the United States to any market, particularly this one, was a non-starter. The result, of course, is that we have had many partnerships with European companies. Forty percent of every F-16 is now European made. Today, our friends from BAe find themselves on both Boeing and Lockheed Martin teams for the Joint Strike Fighter. We have major relations on the guided MLRS with Diehl and with over 60 U.K. companies on the C130J; a relationship on the C-27J with our friends from Finmeccanica; a very important relationship with the Italians and the Germans on the MEADS; with Bazan on Spanish and Norwegian frigates; and so on. We even have relationships with our Russian friends: In late May we successfully launched an Atlas 3A vehicle whose RD-180 engine was from Russia, a major sign, we think, of the kind of cooperation that can occur under the auspices of efficiently administered regulatory regimes.
MANAGING SOLUTION CHOICES
I do believe it is important to distinguish cooperation between suppliers and so-called national champions. We need to understand that there will still be areas in which we cannot buck the traditional tendency for nations to feel the need to protect key elements of their defense-industrial base. I ask you: Can anyone think of an instance in which a major weapon system offered by a foreign government was selected over an indigenously developed one? I certainly cannot. Even when a local solution is not readily available, when a national champion (a prime contractor) decides to fight procurement of a foreign system, I would still bet on the home team. Remember back when McDonnell Douglas was proposing an F-18 for the French navy, and Dassault countered it would produce a navalized Rafale? Twelve years later it is still not deployed.
But a major question remains: Will the NATO/EU countries feel compelled to choose between U.S. and European defense solutions at the major system level for predominantly political and macro-economic reasons, rather than for military and cost-effectiveness reasons and for their interoperability with U.S. forces? Despite the elegant discussion we have heard here, I believe there is at least the potential for conflict between NATOs Defense Capabilities Initiative and the European Security andDefense Policy. Shortcomings have been noted coming out of Kosovo, from IFF to airlift to precision-guided munitions to C4I SR. However, recent decisions from the parochial industrial perspective make it appear that some European governments are quite prepared to spend billions and six to ten years of time to develop and procure systems that are (or may be) similar in capability with new or already existing U.S. systems. At the end of the day, our governments must sort out the central issue of how best to manage and distribute insufficient R&D and procurement resources within NATO to achieve the objectives that have been outlined.
While the debate continues about transatlantic mergers, the fact is that Europeans have been gaining market share in the U.S. the old-fashioned way: by buying it. Smiths, GKN, BAE Systems (which got a great deal on our Control Systems, I might add) and Thomson CSF, all have a major presence in the United States today. Sitting right on this podium are representatives of the sixth largest defense company in the United States of America, BAE Systems.
But why are Europeans going to the United States? The answer is very simple, and there is consensus among the industrialists on it. First, despite all the whining that Secretary de Leon and Secretary Oliver hear from us in American industry, the fact is that the United States defense market is the largest and most stable market in the world, and will continue to be so. And it is an addressable market today of about $120 billion when you include the operations and maintenance. It is also a fact that American taxpayers are spending twice as much as their NATO compatriots on procurement, and three times as much on R&D. So it is obvious to us why our friends from Europe want to come to our market. The second irrefutable fact is that European companies cannot rely on their traditional markets or their home markets for growth; those companies have nowhere to go.
The question for the United States is, what is attractive about the European market? Are there, in fact, opportunities? My friend, Gordon England, just tried to buy the Santa Barbara tank plant in Spain and Raytheon has also made some initial forays into the market, but we have to decide what a capitalist-industrialist in the United States would find attractive about the European landscape.
It is my strongly held view that there are three keys to promoting successful transatlantic cooperation at the prime-contractor level. The first and most important one, and one in which NATO must play a very active role, is harmonizing the military requirements. If we can harmonize military requirements and turn them over to the industrialists, we will have instant transatlantic teams. Second, we need clear, consistent and mutually understandable and accepted guidelines for defense exports and for technology transfer on both sides of the Atlantic. And third, we must have sufficient resources reflecting continued NATO support for priority programs, DCI, and interoperability.
One final point: If we are all going to be global equals and have access to each others markets over the long haul, it is past time for our European friends to look at the whole issue of offsets. These are trade distorting. We do it in order to be competitive, but if, in fact, we are going to have mutual access to each others markets, we ought to re-examine the idea of requiring and giving offsets.