DTIC ADA531715: Fortresses and Icebergs: The Evolution of the Transatlantic Defense Market and the Implications for U.S. National Security Policy. Volume 1: Study Findings and Recommendations

12.7 MB·English

by  Defense Technical Information Center

Special Foreword by Dr. Jacques Gansler
Fortresses Icebergs
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Jeffrey P. Bialos Christine E. Fisher Stuart L. Koehl
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“The United States needs a new model of “globalized” national security for this
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changing world: we must realign longstanding policies away from go-it-alone
approaches to coalition-building and cooperation in support of shared objectives with s
our allies. … [T]he Transatlantic relationship stands at the center of our approach to s
ensuring our future security. …
e
Now, when we most need to re-examine our Transatlantic security model, this new two
s
volume study by Jeff Bialos and his co-authors … provides key insights and a roadmap

for the United States to leverage Transatlantic security opportunities.”
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-Dr. Jacques Gansler, former Under Secretary of Defense for Acquisition, Technology & Logistics Fortresses
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This pathbreaking study is one of the most objective ever to examine the Transatlantic defense market c
and its implications for U.S. policy. On the demand side of the market, do “Fortresses” exist or are they
developing on either side of the Atlantic? On the supply side, are the defense industries stand alone “Ice-
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bergs” or increasingly integrated?
Icebergs
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This comprehensive two volume study has a rich data set—with nearly 231 Figures and Tables and in
depth chapters on the United States and the seven European markets studied. The study: e
• uses disciplined metrics of determine to what extent defense markets are open and competitive. r
• examines the role of the European Union in the defense market—is an EU preference for buying
European evolving and will it ultimately lead to a protected European market? g The Evolution of the Transatlantic Defense Market
The study makes important findings/recommendations on core issues: s and the Implications for U.S. National Security Policy
• the need for deeper defense relations with the EU—increasingly the focal point in Europe for low
intensity warfare;
• the criticality of export control reforms to the Transatlantic defense market and coalition war fighting
capabilities; and
• the need for market opening measures in defense trade and investment, including curbs on offsets, JJeeffffrreeyy PP.. BBiiaallooss
related industrial practices, and bribery in third country defense markets.
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The Center for Transatlantic Relations is a non-profit Union and U.S-EU relations. ACES has been recognized
research center that engages international scholars, stu- by the European Commission as the EU Center of I SSttuuaarrtt LL.. KKooeehhll
ents, government officials, parliamentarians, journalists, Excellence in Washington, DC. In 2009 the Center was
business executives and other opinion leaders on named by Foreign Policy magazine as one of the “Top
contemporary challenges facing Europe and North 30 Go-To Global Think Tanks.” The Center is an integral
America. The goal of the Center is to strengthen and part of John Hopkins University’s Paul H. Nitze School of
reorient transatlantic relations to the dynamics of a Advanced International Studies (SAIS). Johns Hopkins is
globalizing world. The Center serves as the coordinator one of the nation’s premier research universities, and SAIS
for the American Consortium on European Union Studies is one of America’s leading graduate schools devoted to
(ACES), which is a partnership among five national-capital the study of international relations. C
area universities to improve understanding of the European S h Je
tuart L. K ristine E. ffrey P. B Co-Editor and Co-Contributor

oeh Fish ialo Christer L. Mossberg
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VOLUME I
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Fortresses & Icebergs: The Evolution of the Transatlantic Defense
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Market and the Implications for U.S. National Security Policy
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Fortresses and Icebergs
The Evolution of the Transatlantic Defense Market
and the Implications for U.S. National Security Policy
By
Jeffrey P. Bialos
Christine E. Fisher
Stuart L. Koehl
Co-Editor and Co-Contributor
Christer L. Mossberg
Co-Contributors
Giovanni Gasparini
Andrew D. James
Volume I
Study Findings and Recommendations
Bialos, Jeffrey P., Fortresses and Icebergs — The Evolution of the Transatlantic Defense Market and the
Implications for U.S. National Security Policy, Volume I (Washington, D.C.: Center for Transatlantic
Relations, 2009).
© Center for Transatlantic Relations, The Johns Hopkins University and the U.S. Department of
Defense 2009
Center for Transatlantic Relations
The Paul H. Nitze School of Advanced International Studies
The Johns Hopkins University
1717 Massachusetts Ave., NW, Suite 525
Washington, D.C. 20036
Tel. [phone]
Fax [phone]
Email: [email protected]
http://transatlantic.sais-jhu.edu
ISBN 13: 978-0-9841341-1-3
“Would you tell me, please, which way I ought to go from here?”
“That depends a good deal on where you want to get to,” said the Cat.
“I don’t much care where —” said Alice.
“Then it doesn’t matter which way you go,” said the Cat.
“— so long as I get somewhere,” Alice added as an explanation.
“Oh, you’re sure to do that,” said the Cat, “if you only walk long enough.”
— Alice’s Adventures in Wonderland, Chapter 6
Table of Contents
Volume I
Study Findings and Recommendations
Special Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii
Dr. Jacques Gansler
Foreword and Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
Executive Summary and Detailed Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Chapter 1
The Study Context: The Unique Realities of the Defense Marketplace . . . . . . . 43
Chapter 2
The Study Methodology: A Disciplined Set of Diagnostics . . . . . . . . . . . . . . . . . . 55
Chapter 3
Defense Market Access Realities: Continued Impediments
But Gradually Better and More Open Buying Habits. . . . . . . . . . . . . . . . . . . . . 65
Chapter 4
Defense Market Outcomes:
Measuring Traffi c on the Fabled “Two-Way Street” . . . . . . . . . . . . . . . . . . . . . 121
Chapter 5
The Role of the EU and Other “European” Arrangements
in Defense Markets: Realities, Prospects and Implications . . . . . . . . . . . . . . . . 171
Chapter 6
Policy Implications and Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237
Appendix I
Market Access Metrics and Trade Flow Analysis: A Methodological Note . . . . 265
Appendix II
Interviews Conducted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279
Appendix III
U.S. Footprints of Major European Defense Firms .........................291
Appendix IV
Proposed DoD Globalization Executive ................................. 299
About the Authors ...................................................... 301
Volume II
Country Studies
Chapter 7
France .............................................................. 307
Chapter 8
Germany ............................................................ 355
Chapter 9
Italy ................................................................ 399
Chapter 10
Poland .............................................................. 445
Chapter 11
Romania ............................................................ 487
Chapter 12
Sweden .............................................................. 527
Chapter 13
United Kingdom ..................................................... 561
Chapter 14
United States ........................................................ 627

Special Foreword
The United States today faces epic challenges — in economics, national security, energy
and the environment — that closely link our national and personal security. Globalization
lies at the heart of many of these challenges; this central driving force of change has come
into America’s homes, affects the most fundamental elements of national governance and,
ultimately, will shape both our prosperity and our security.
Globalization offers benefits but carries significant challenges and risks. The challenge
for policy-makers is how to maximize the former while mitigating the latter. Hence, in the
context of the global financial crisis, we are rethinking some of our basic operating mod-
els: redefining the government’s role in regulating an increasingly interconnected global
economy. We also are realigning our defense capabilities to deal with threats — often not
contained within a national boundary or identity — that endanger our national or economic
well-being or even our survival. To better address the globalized threats we face, our gov-
ernment is already reorienting the capabilities of our national security forces to a new bal-
ance between conventional and irregular warfare, while keeping homeland security a cen-
tral focus.
The United States needs a new model of “globalized” national security for this changing
world: we must realign longstanding policies away from go-it-alone approaches to coalition-
building and cooperation in support of shared objectives with our allies. In this context, the
Transatlantic relationship stands at the center of our approach to ensuring our future secu-
rity. Our enduring alliance with our closest allies and friends will be critical to our strategy.
Yet, we face a clear set of challenges in our Transatlantic relationships — the need to
develop shared views of the threat and joint solutions, the need to share technology in sup-
port of these efforts, and the need to maintain strong economic ties at a time when protec-
tionism looms in the midst of a significant recession.
Now, when we most need to re-examine our Transatlantic security model, this new two
volume study by Jeff Bialos and his co-authors — Fortresses and Icebergs: The Evolution of
the Transatlantic Defense Market and the Implications for U.S. National Security Policy — pro-
vides key insights and a roadmap for the United States to leverage Transatlantic security
opportunities. The study offers a deep and fresh understanding of the evolving Transatlan-
tic defense marketplace, the role the U.S. government plays in shaping its future, and the
defense market’s relationship to our national security.
Fresh, Detailed and Insightful Data
This important two volume work is particularly unique with respect to the detailed data
on defense markets it provides. With approximately 231 Figures and Tables and in-depth
chapters on the United States and seven European countries, it provides a rich data set
beyond that seen in other studies. The country-specific assessments will be of great interest
to government officials, industry executives and policy analysts alike.
Equally noteworthy, the authors developed and applied a detailed methodology in order
to bring more objectivity to assessing defense markets. The methodology and extensive data
focus on two specific issue areas:
viii Fortresses and Icebergs
• What is the degree of access U.S. firms can achieve in European defense and secu-
rity markets, and to what degree can European firms access the equivalent U.S.
markets? The study analyzes the range of market barriers, using quantitative mea-
sures where possible. It offers a more rigorous basis for understanding the barri-
ers — beyond myth or perception.
• What are the effects of the European Union, as distinct from separate European
nations, on the defense and security markets at the prime and lower tiers of indus-
try? The study describes the significant changes underway in the European Union,
which is coalescing roles and authorities in defense and security markets – as a regu-
lator, coordinator and, gradually, buyer. This is a major development the United
States cannot afford to ignore. We can no longer cooperate only on a bilateral level
or through NATO; we must deal with the growing role of the European Union.
Why Do These Issues Matter?
Three aspects of market access are vital to the United States and Europe for our mutual
security:
• Coalition operations will be a central construct for future security operations. Strong indus-
trial linkages and pre-existing shared protocols and products encourage integrated,
interoperable performance and offer significant battlefield and cost advantages. We
cannot afford to again go into coalition operations as unprepared to work together
as we were when we initiated Operation Iraqi Freedom.
• Both the United States and Europe can gain from enhanced competition in consolidating
defense markets. More open and accessible acquisition programs on both sides of the
Atlantic would afford opportunities to a wider set of competitors with a broader
range of alternative solutions. We would get not only the cost savings and innova-
tion benefits that competition inherently brings but also some new solutions result-
ing from European research and development spending – dollars we could save.
• Growing protectionist risks, fueled by the ongoing economic crisis, are of great concern as
they can adversely impact national security and economic competitiveness. The
global economic crisis exposes our weakest links; we must resist opting for local,
short-term payoffs that may seriously harm our long-term best interests. Defense
jobs and technology, already prone to protectionism, could become increasingly
isolated if conscious efforts are not made to open these markets.
In short, the market access issues addressed by Fortresses and Icebergs really matter.
Timely to Current Policy Debates
Even as this study is being released, critical public policy decisions relevant to our Euro-
pean allies and the future U.S. security posture are being debated. This new two volume
work tackles head-on a number of the key issues that will shape the future:
• Export control reforms, especially with respect to the International Traffic in Arms
Regulations governing defense trade;
• Buy American and national buying preferences;