HAWKINS: A secure defense industry?

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On July 9, Defense Secretary Robert Gates announced the $39 billion competition for a new fleet of U.S. Air Force refueling tankers would be reopened. The General Accountability Office (GAO) had upheld a protest by Boeing against the award last February of the contract for 179 tankers to a consortium headed by Northrup-Grumman, but using the Airbus A330 airliner built by European Aeronautic Defense and Space Company (EADS). Boeing has built every previous Air Force tanker. GAO auditors found the competition had been "anything but fair and open."

But is "fair and open" the real issue in the contest between rival industrial policies in the international arena? On June 19, the day after the GAO made its report public, France released a defense white paper that included its advocacy of a stronger European industrial base to compete against the United States. EADS is mainly a French-German corporation and is Europe's largest defense firm.

The white paper notes that due to the massive cuts in defense spending and force levels across Europe since the end of the Cold War, "Individual European countries can no longer master every technology and capability at the national level. France must retain its areas of sovereignty, concentrated on the capability necessary for the maintenance of the strategic and political autonomy of the nation: nuclear deterrence; ballistic missiles; SSNs [nuclear submarines]; and cyber-security are amongst the priorities. As regards the other technologies and capacities that it may wish to acquire, France believes that the European framework must be privileged: combat aircraft, drones, cruise missiles, satellites, electronic components etc., although procurement policy must include acquisitions on the world market."

The throwaway line about "acquisitions on the world market" should not detract from the key term "privileged." It means a bias to "Buy European" in defense contracting. If European firms are to be "privileged" within the European Union, shouldn't American firms be privileged within the United States? Of course they should.

The Airbus A330 has components built in Britain, Germany, France and Spain, the result of "work sharing" negotiations between the governments. This is not very efficient, but Airbus has received heavy government subsidizes from its inception. The U.S. is still pursuing action at the World Trade Organization against EADS for its use of illegal export subsidies. This WTO case should have disqualified EADS from the Air Force bidding, but it did not.

The French white paper's defense industry section is in the chapter titled "European Ambition." There is also a chapter on "Industrial and Technological Priorities to 2025," with each section ending with "France will support the emergence of an integrated European industrial capability for ... [fill in the blank]," or similar wording. French President Nicolas Sarkozy has recently said, "We must not be afraid of this word: protection," when it comes to shielding Europe from the adverse effects of globalization.

It makes perfect sense on both sides of the Atlantic to limit any vulnerability that comes from being dependent on foreign sources for the means of national security. The problem for the Europeans is whether they can maintain a first-class defense industrial base when their force levels and equipment needs are so low.

The white paper envisions a future EU expeditionary force of 60,000. The 27-member countries of the EU have 500 million people and an aggregate economy larger than the U.S. Yet, its goal is only to be able to deploy an army overseas that is less than half the size of what the U.S. has had deployed in Iraq for the last five years. This is not a serious goal.

The deterioration of the defense industrial base makes it very difficult to reconstitute military forces quickly. Ake Svensson, president of both Saab and the Aerospace and Defense Industries Association of Europe, said in a Defense News interview published July 3, that the decline of European industry is destroying future job opportunities for skilled workers. He said, "Once lost, these jobs and the know-how that goes with them are unlikely to return." Mr. Svensson is concerned that European manufacturing companies are responding to currency volatility by building new production facilities in North America and Asia.

The United States, with global ambitions far more serious than Europe's, needs to ensure that its defense industrial base, which includes a wide variety of high-tech fields and dual-use commercial components, remains strong. The nation needs the capacity to expand rapidly in the face of new challenges. It should not be sacrificed to the ambitions of overseas rivals who may not have what it takes to support the American war-fighter in the long run.

The new tanker competition is being kicked upstairs from the Air Force to the Pentagon's defense undersecretary for acquisition, technology and logistics where, these wider issues will hopefully be taken into account.

William Hawkins is senior fellow for national security studies at the U.S. Business and Industry Council.