By: Danielle McClellan
A recent study was published in the book “Fortresses & Icebergs: The Evolution of the Transatlantic Defense Market and the Implications for U.S. National Security Policy” outlining the decline of US defense firms market position in Europe. The study was funded by the Department of Defense and Johns Hopkins in order to get a feel for the transatlantic defense market. The US, UK, France, Germany, Italy, Poland, Romania and Sweden were all examined for market obstacles and restrictions, especially the ITAR in the US.
The book, written by Bialos, Christine Fisher and Stuart Koehl dives into the current state of the defense market and takes the reader through the present and future of the international industry and explains what the US needs to do to keep from drowning. “Fortresses & Icebergs” describes the negative trend that US firms are facing in Europe, increased cooperative buying among European nations and an ITAR backlash are turning the market upside down. In the past European nations bought nearly all of their defense article from the US but the recent study shows that more and more international companies are purchasing their defense articles outside the US. The study also confirmed that the number US firms buying from European firms is growing. This may be because of the Obama Administrations’ need to procure defense articles based on affordability and competition with the dwindling defense budget, a very positive sign for European companies wanting to compete in the US market.
The authors traveled to the 8 countries that were studied and interviewed 200 people to get an understanding of why so many European nations were shying away from the US and finally beginning to buy amongst themselves. Almost all 200 people had the same answer…they didn’t want to deal with the delays and risks that come with dealing with the ITAR.
Bialos explains that the “ITAR is a significant barrier to transatlantic defense trade,” and that “Everybody tells us that ITAR slows the speed of obtaining licenses, limits the release of technology, creates the business uncertainty and makes the process very difficult. European countries are very concerned about their operational autonomy being limited by not having access to technology, by having a ‘black box’ and not being able to change it during exigency.” As a result of the ITAR hardships, many European governments are looking to procure goods not restricted by the ITAR.
So where’s this leave the ITAR inhabited US, former Undersecretary of Defense for Acquisition, Jacques Gansler believes that a more open transatlantic defense trade will “help the US by offering more effective weapons systems, more interoperability with allies as all future engagements for the US will likely be multinational and lower costs.” Getting defense articles from international competition will get the US higher performance at a lower cost, but I have to wonder what will happen to the US firms if the US starts buying mostly foreign…will the US defense industry slowly succumb to its international competition, similar to that of the US auto industry.
In case you were wondering what Icebergs and fortresses have to do with the international defense market the authors gave the following:
“The iceberg” of the book’s title is a concept that says whereas the United States and European countries may have different platforms (icebergs), moving down the supply chain reveals more sharing of suppliers (the icebergs are connected beneath the waterline). The fortress refers to the demand side of the market and protectionist tendencies on either side of the Atlantic.
More information available at http://www.defensenews.com/story.php?i=4352691&c=EUR&s=TOP