Three Personal Perspectives on Transatlantic Cooperation
Vice Admiral Norman Ray
President, Raytheon International Europe
When we talk about transatlantic cooperation, which we do so very often and almost glibly, it is probably useful to go back and consider what our strategic objective actually is. It ought to be that we will establish and maintain a viable, independent, and complementary U.S. and European defense-technology-industry foundation. We should aim our cooperative efforts at that because, according to my lights, it will provide the underpinning needed to support the Allied strategic concept on which our nations have all agreed.
THE IMPORTANCE OF MARKET SIZE AND MARKET ACCESS
As we work, we must keep our eyes on two important issues: market size-domestic market size, both European and U.S.-and market access. Size is obviously important because without it you cannot sustain a proper level of research and development; you also cannot sustain the proper level of capital investment or industrial business growth. And if these three things cannot be sustained, I suggest that the independence I feel is important also cannot be sustained.
Europe is in trouble in this regard. The market size in Europe makes it very difficult for the European part of the transatlantic industrial base to sustain itself in a healthy manner as well as grow. Therefore, in my judgment, its independence is at stake.
Ironically, and somewhat perversely, the United States does not have a market size problem, except for the fact that it currently has such a large market that it is distracted from its overseas markets. And, to the extent that it is distracted, it is less engaged with its overseas partners, which is a threat not only to the long-term welfare of the U.S. base but to the European base.
An interesting issue related to market size is also worth mentioning. When you have a big domestic market, you have the luxury of capability winning out over politics most of the time. When you have a small market or a very narrow one, it is much more difficult for capability to conquer politics. So the United States has the luxury of focusing endlessly on capabilities; Europe, at least partly because of its market size, does not have that luxury. My conversations with many European industrialists make me believe that small market size is putting the next generation of European capability at risk.
Market access, I believe, is more interesting as it relates to our two strategic goals: the independent viability of the European industrial base and the independent viability of the U.S. industrial base. U.S. market access, looking across the Atlantic to Europe, is growing. Without it, as U.S. budgets flatten out and decrease, growth will become a problem. But for Europe, looking across the Atlantic to America, market access is actually existential. By that I mean that Europe cannot sustain itself on its current market size. Europe needs to penetrate the U.S. market and compete better in the global market. Access, in other words, is vital.
Protectionist forces on both sides of the Atlantic are making things difficult. On the European side, I think it is fair to say that the European Security Defense Identity and the European Common Foreign and Security Policy have an industrial tail. Although this may not be explicit, it is often discussed among senior European politicians, most recently by the Greeks holding the EU presidency. It certainly suggests that access will be restricted to American industries on the European side of the Atlantic in order to provide strength to the European industrial base.
On the U.S. side, activity in the House of Representatives is working to further restrict European percentages in American systems. These two trends are extremely unhealthy for access, and are going to undermine what I believe are our strategic objectives. They are also going to increase the cost of capabilities on both sides of the Atlantic, because the vendor base is not what it ought to be and because competitive forces are less robust than they ought to be. I think that if we had proper access, we would have a win-win situation: Americans would have the opportunity to grow, and so would Europeans. And they would both be more viable because they would have access to the biggest defense market in the world.
STEPS TO INCREASE MARKET SIZE AND MARKET ACCESS
Without market size and market access, the cohesiveness of the Alliance may itself be threatened. In addition, political support for capability in Europe will be further eroded, and the tendency to act unilaterally rather than multilaterally will increase. The institutions on which we rest our future could be put at some risk.
Let me suggest some concrete things we can do to prevent this:
- First of all, I think we need a strategic agreement that embraces our strategic objective vision. That means we should actually agree and explicitly state that we support two viable, independent defense- technology-industry bases.
- Second, Europe should include in its common market defense industry matters that it now excludes. If it did that, we could bring those matters into the transatlantic business dialogue, where we would have the opportunity to deal with them on a proper business basis. This should help to reduce some of the stresses of which I have already spoken. So I strongly recommend that we find a mechanism to involve these matters in the EU/U.S. transatlantic business dialogue. In support of that, I advocate establishing a transatlantic defense-industrial association for government-supported industries to do the same things for transatlantic strategic security as each of our industrial defense associations does for its own country.
I believe that every encouragement should be given to the United States to follow through in pursuit of NSPD 19 (the review of the Defense Trade Export Policy), ITAR (the International Traffic in Arms Regulations), and export control reforms. This work is vitally important.
It is also vitally important, as the European Union goes forward developing an agency, represented now in its nascent form by OCCAR, that it endeavor to remain untainted by protectionism. Protectionism, through its exclusionary policy, would prevent the United States from having reasonable access to the European market, which would prevent Europeans from developing the kind of access we need in the U.S. for all of this to work.