Rome '08 Workshop
Challenges of Transatlantic Defense Industrial Cooperation
Dr. Scott A. Harris
Lockheed Martin Global President
It is my pleasure to appear with my colleagues on this panel on issues concerning the global industrial base. Al Volkman asked us also to comment on the response of industry to declining global defense budgets. He also asked us to be brief, to allow time for comments and questions. Therefore, I will get right to the heart of the matter.
My focus is on transatlantic defense cooperation. While our friends in Asia and in other parts of the world are developing some industrial capabilities, the transatlantic arena is the key arena for the globalizing industrial base.
TECHNOLOGY AND EQUIPMENT REQUIREMENTS
If we are to have a robust and healthy transatlantic industrial base, then companies on both sides of the Atlantic must be able to contribute meaningfully to technology and equipment requirements. This is only possible if levels of investment are adequate and companies are kept lean and efficient through the discipline of an open and competitive marketplace.
In this regard, I see three notable trends:
1. The European Commission and the European Defence Agency are attempting to create greater transparency and competition in the European market. This is good. They are not attempting to foster transatlantic cooperation, leaving that issue to the Member States. There is an undertone in some of the discussion in Brussels that European markets and industries should be protected and strengthened before being subjected to the rigors of international competition. This, in my view, is misguided. Protectionism has never been a substitute for competitive strength, and companies who seek such protection will only grow weaker until they are, quite literally, protected to death.
2. The second trend is toward increased transatlantic cooperation. I will name some of the more prominent programs, many of which are associated with my company: The German-Italian-American MEADS (Medium Extended Air Defense) program; the U.S. VH-71 presidential helicopter; Aegis combat systems on European ships; European components on American ships for littoral combat and the Coast Guard; C-27J and UH-145 aircraft in the United States; and, of course, air refueling tankers, which are still in contention. We also see the formation of international industrial teams to pursue opportunities to support NATO directly, as in command and control or missile defense. And I would single out for special mention the F-35 Joint Strike Fighter, the flagship international cooperation program which is setting new standards for international partnership and technological and industrial cooperation.
These trends are all good from the standpoint of strengthened transatlantic cooperation, but each has a worrisome side. It is difficult to sustain political support for international programs, nations tend to pursue their own goals within the programs, making management complex and costly, and issues such as technology transfer can add immensely to the management challenges. Nevertheless, the fact that the number of these programs is increasing tells us that the industrial base is globalizing as fast and as far as the political environment will permit.
3. An increasing number of European firms are expanding their presence in the American market through investment. As these companies acquire American companies, they become transatlantic in character and further unify the industrial base.
RESOURCE REQUIREMENTS
That is the relatively positive side of the story. What about resources? Here, the picture is not so good.
It is by now well known that the United States outspends Europe by better than 2-1 in procurement and 6-1 in research and development. Most European countries fail to reach the target of 2% of GDP expended on defense. Six countries in Europe provide 80% of Europe’s defense spending. What we must recognize is that these ratios have not changed at all for nearly ten years, and that the cumulative effect of this differential, repeated year after year, is a capabilities gap across the Atlantic that threatens to become unbridgeable.
Without sufficient resources, we will be unable to continue to advance transatlantic defense cooperation. Meaningful collaboration becomes more difficult, emerging technologies are concentrated on one side of the ocean, the workforces do not have comparable skills. Therefore, I would point out the fundamental reality: There is no substitute for real expenditures on tangible programs if the health of European industry is to be preserved and if further transatlantic cooperation is to be possible.
At Lockheed Martin, we are committed to transatlantic cooperation and to the creation of global products for global markets. We will continue to work to enforce the positive trends cited above and to overcome the obstacles to further cooperation. We will continue to invest in technology, work to streamline the regulatory framework through which that technology can appropriately be shared, and seek to provide needed capability to our customers. And we will continue to advocate for an open and integrated transatlantic marketplace.