Two
years of all-out war in Ukraine, along with urgent needs in Taiwan and
in other potentially threatened democracies, have laid bare the
inadequacies of defense production on both sides of the Atlantic.
We
still have a peacetime defense industry in an age of war and rising
risk, although governments and Western organizations are at least
recognizing the problem.
The
US Department of Defense and the
European Commission responded this year with their first-ever defense industry strategies, on 12 January and March 5 respectively.
Early
commentary has focused on funding and implementation of these new
industrial policies, which are certainly important. Strategically,
however, success will depend on transatlantic cooperation, and that is
easier said than done.
The US center of gravity is our alliances,
and we should knit them together more tightly in everything we do,
including defense industry strategies.
The US may still be the
arsenal of democracy, in that it is the biggest defense producer, but it
is not capable of outproducing both Russia and China as they rapidly
ramp up defense spending — China raised outlays by 7.2%
on March 5, the latest in a long series of increases, while Russia is rebuilding its defense industrial base and
devotes one-third
of government spending to defense. All of this is a sharp reminder that
war among great powers is ultimately a test of the speed and scale of
defense industrial capacity.
Truly resilient allied supply chains
will require redundancies in the US and Europe. For Europeans nervous
about the US commitment to NATO’s Article 5, buying US defense equipment
binds the US closer, politically and militarily through true
interoperability, training, and exercises.
Just look at Poland’s
huge purchases of
US equipment. It has also signed enormous arms contracts with the
Republic of Korea because that country delivers quickly, a requirement
in today’s wartime environment. It would be good for the US government
and industry to examine exactly how the Koreans achieve this.
Neither
the US nor the European Union (EU) strategy prioritizes transatlantic
defense industry capabilities and how to leverage them so that the whole
is greater than the sum of the parts. Both tilt towards protectionism,
most explicitly in Europe’s proposed targets and incentives for member
states to buy more from European industry, at the expense of American,
non-EU, and UK equipment. (The head of Europe’s main missile company,
MBDA, the UK-European joint venture,
pleaded for a change of approach to include the British on March 13.)
Events
have had some impact in this debate. France, the main proponent of an
EU-only approach, has moderated its stance somewhat in recent weeks and
has contributed to the Czech-led purchase of artillery shells from beyond the bloc.
It
would be quite dangerous for the EU and the US to go their separate
ways on defense industrial policy. This is not the Inflation Reduction
Act (IRA) or the Chips Act, as important as they are to national
security. The defense industry is at the heart of national security,
deterrence, and capability for our warfighters. If new strategies
contribute to a reduction in the US role in European defense, expect
more fragmentation among European countries when Putin ratchets up the
threats (as he will.)
A more robust European defense industry is
in all our interests. It may indeed be time for a more overtly
geopolitical European Commission with a Commissioner for Defense, as EC
President Ursula von der Leyen
proposed at
the Munich Security Conference in February. Whoever gets the job will
need to work for the creation of a Commission role in defense industry
and acquisition, traditionally a jealously guarded purview of national
governments.
Most important will be for the EU to focus on
financing growth in European defense industry capacity. The EU should,
however, know its limits and defer to NATO and member states on the
capabilities they need.
The US and EU should find ways to
incentivize transatlantic defense industry cooperation, where possible,
including on co-production. For its part, the US should do much more to
enable co-production among close allies, seizing this moment of European
attention to defense industry issues.
NATO was tormented by a failure to standardize during the Cold War and will be again if it gets off on the wrong foot this time.
The
US should tell the industry the capabilities it prioritizes for
co-production and commit to pre-approvals or fast-tracked technology
transfer. Industry needs such a positive demand signal from State and
the Department of Defense (DoD) to justify the investment. The
government should also make it easier and quicker for European defense
companies to invest in the US. Such investments should be eligible for
any incentives designed for US companies.
For its part, the EU
should make US and UK co-produced defense equipment eligible for EC
financial incentives; its strategy currently allows that for Ukraine,
but not for NATO allies. Key European governments such as Germany and
Sweden need to update export control laws so that co-produced equipment
can be exported to countries in need, even during wartime.
The EU
should also consider flexibilities so that individual member states who
believe American equipment is essential to their security can continue
to buy it without disincentives, even as the bloc as a whole may direct
more funding into European companies.
This is the moment to
declare that the allied defense industry is transforming to wartime
production, and that the issue must be at the top of the transatlantic
agenda. NATO’s Washington summit in July provides an opportunity to do
so.
NATO’s Defense Industrial Production Board can do the
necessary groundwork beforehand, with concrete commitments to follow at
the summit. Scratchy EU-NATO relations, as well as French calls for
strategic autonomy, have been problems in the past. It could be smoother
this time, given the shared strategic challenge and shared membership.
With
Sweden and Finland’s entry into NATO, EU and NATO memberships now
overwhelmingly overlap, with notable exceptions. European NATO members
not in the EU are now the UK (remarkably overlooked in the EU strategy),
Turkey, North Macedonia, Albania, and Montenegro. EU members not in
NATO are now Austria, Cyprus, Ireland, and Malta. French President
Macron’s
evolution toward supporting more military capability for Ukraine should also help.
We start from a bad place. Russia is now estimated to be out-producing Western artillery ammunition production by a
ratio of 3:1.
Russian guns fire five shells for every one fired by our Ukrainian
allies. Defense production capability is key to overall deterrence and
to defeating Russia in Ukraine. Meanwhile, in Asia, the Taiwanese have
been vocal about
delivery delays of
about $22bn of defense equipment. It’s urgent because supplying an
island in wartime is far harder than supplying Ukraine via Poland.
With
a military standoff in Ukraine likely in the coming months, whichever
country can field more capability for spring offensives in 2025 will
likely prevail. Will the West really allow Russia, with an economy the
size of Italy’s, to outproduce NATO and the EU?
We have in the
past and must again use the tremendous capability of the allied
armaments industry to deter and defeat our adversaries.
It now
needs to become the central feature of EU and US defense industry
strategy. Showing Russia that together, NATO and the EU can outproduce
it, over the long term, with higher-end capabilities, would make long
wars a much less appealing strategy to our adversaries.
In fact,
outproducing should be a key part of our strategy against both Russia
and China, neither of whose economies and technological base could keep
up with the combined resources and capabilities of the West and its
Asian allies.
Ambassador Paul Jones (ret.) is a Distinguished
Fellow at the Center for European Policy Analysis (CEPA) and an
International Affairs Advisor at Squire Patton Boggs global law firm. He
was US Ambassador to Poland (2015-18), US Ambassador to Malaysia
(2010-13), and Principal Deputy Assistant Secretary of State in the
Bureau of European and Eurasian Affairs (2013-15). He was also Vice
President for International Government Relations at Raytheon
Technologies (2020-23).