Center for Strategic Decision Research

Paris '07 Workshop


Dr. Robert Trice, Lockheed Martin
Dr. Robert Trice
Lockheed Martin
Senior Vice President
for Business Development
Dr. Robert Trice, Lockheed Martin Senior Vice President for Business Development.

"...we are more and more a software- and IT-driven industry in both the defense and homeland security
realms of our industrial markets...IT is inherently already globalized and is the leader among an
increasingly globalizing set of relevant technologies

Two basic trends regarding the relationship between governments and defense industries in a global industrial base need to be kept in mind. The first is that the imbalance in defense spending between the United States and its European allies continues, and we see very little prospect that the Europeans will increase spending significantly in the near term. Even if spending in the U.S. slows or decreases slightly, the gap is going to remain large, especially on the Research and Development side.

The R&D spending gap between the U.S. and all the rest of NATO is at least seven to one annually, which has the same effect as compound interest. Every year—and we have been saying this for ten years—that capability gap gets wider. As members of this workshop heard from our NATO military colleagues and from Jan-Olof Lind, the operational pressures on NATO forces in Afghanistan and other places are adding to the increased strain on member-states’ budgets, making it even harder to increase the investment accounts.

The second trend, which is a new one, I think, is that we are more and more a software- and IT-driven industry in both the defense and homeland security realms of our industrial markets. And I argue that IT is inherently already globalized and is the leader among an increasingly globalizing set of relevant technologies.


I believe we can identify at least two results of these trends. The first is that the entire aerospace and defense industry is globalizing. The combination of reliance on software and IT and budget pressures cause industry to search globally for the best and most affordable solutions, just the way every other industry does—we just do it a bit slower in an area that is a little more complicated politically and is governed by more export controls. Nevertheless, it is happening, and, particularly at the subsystems and components level, a considerable global supply chain exists.

The second result is that European industry is aggressively seeking access to the U.S. market to compensate for the lack of growth in its home markets. I think a good case could be made that many industries have already moved beyond the objectives of the European Defense Agency for Europeanization. Industries are doing what they need to do in order to survive and grow in two ways. The first is that European companies are increasing their footprint in the United States—they are gaining market share the old-fashioned way, by buying it. Forty percent of BAE Systems’ total sales now come from the United States; the company has more American workers than British workers. BAE Systems, Thales, Smiths, Rolls-Royce, Finmeccanica, EADS—they are all coming into the U.S. and buying market share.

The second way is through transatlantic defense cooperation. In terms of specific programs, Giovanni Bertolone is going to tell us about the C-27J joint cargo aircraft. We have an Italian-British helicopter that is going to be flying the U.S. president, we have Europeans competing for tankers, we have the CN-235 for the U. S. Coast Guard’s Deepwater program, and we have European helicopters for the U. S. Army and the Coast Guard.


You would expect that all this transatlantic defense cooperation would be encouraged by governments, and there are some examples: the NATO ACCS, the Air-to-Ground Surveillance system, the Medium Extended Air Defense System (MEADS), and of course the F-35 Joint Strike Fighter. But what is surprising is that there are not more good examples of government-sponsored transatlantic defense cooperation. Basically, what has happened is that our governments have set requirements, but then turned the work over to industry. American and European industries are successfully working together despite all the constraints Edgar Buckley relayed. There is also a continued focus on maintaining a European defense technology and industrial base, but it appears that local industries continue only to be protected from American competition, rather than more European-wide governmental investment taking place. Without investment, there will be no growth. There simply is no magic. Policies must be backed with actual programs, and programs will only be developed with political will and money.

I would argue that this cannot happen in Europe in isolation. Just as European industry is looking to the U.S. for opportunities to invest, collaborate and sell, so should European governments be looking to access the American industrial capabilities created by U.S. defense spending and make sure they are available to Europe. The best way to do that is to have greater transatlantic cooperation and more programs created at the initiative of governments, not just by the drive of industries to survive and thrive.


The last point I’d like to make, and here I agree with Mr. Lind, is that there is a mutual threat to the western defense industrial base and that is the difficulty in attracting talent. Lockheed Martin hires 5% of all the undergraduate scientists and engineers produced in the United States every year, some 4,500 people. That is both good news and bad news. It is certainly good for Lockheed Martin in that we are constantly reinvigorating our intellectual capital. But the bad news is that a nation of three hundred million people is producing fewer than 90,000 young scientists and engineers a year, compared with 500,000 in China and 300,000 in India. I believe that the challenge is true for all western nations and is transatlantic in scope, and something we all need to tackle if we are to retain our competitiveness in the 21st century.

Paris, June 2007

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