The Ties That Bind

Introduction

U.S. policymakers have made the revitalization of the U.S. defense industrial base (DIB) a top national security priority and are directing considerable resources and attention to that end. U.S. allies in NATO and the Indo-Pacific are doing the same. As they do so, they would be wise to seek out opportunities to pool resources and combine efforts across a shared DIB. There are numerous practical reasons for countries to take a collaborative approach, not least the fact that no one country can entirely meet its defense and supply chain needs on its own, and certainly not at sufficient speed or scale.

Beyond this common-sense imperative, however, there is a more strategic reason for the United States and its allies and partners to seek greater DIB integration. Industry partnerships and integrated defense supply chains can serve as a ballast to alliance relations at a time when U.S. reliability is in doubt. Coproduction arrangements and supply chain linkages last for years. The more the United States and its allies and partners reinforce and increase defense industrial connectivity, the more they not only reassure themselves of their mutual commitment to one another’s defense but also signal that commitment to would-be adversaries. A robust, combined defense industrial base capable of production at scale is a powerful deterrent.

Key Takeaways

• The United States and its allies have made strides in recent years to revitalize their defense industrial bases, though they have done so in a largely uncoordinated manner.
• This stovepiped approach is inefficient, particularly for smaller countries, though even the United States could stand to gain from a more coordinated approach to allied industrial base development.
• Additional planning, such as shared demand forecasting and combined investment in critical industrial capabilities, would allow all allies to get more out of their collective industrial capacity than they could by focusing solely on domestic production.

Friends with Benefits

The collective defense spending and industrial capacity of the United States and its allies and like-minded partners exceeds that of potential adversaries. Since Russia’s full-scale invasion of Ukraine in 2022, European NATO partners have almost doubled the amount spent on procurement contracts, while U.S. allies in the Indo-Pacific have also made dramatic increases in spending on defense research and development and procurement.

If the United States and its allies and partners pursue a collaborative approach to planning industrial base investments—in forecasting production and supply chain demand, as well as coordinating supply chain management of critical inputs—they can maximize the impact of their investments. In addition to achieving economies of scale and cost savings, they can minimize supply chain risks and single points of failure while also building production capacity and the ability to scale. Coordinated partner arrangements can provide a secure and reliable supply of critical items not readily available domestically. Partnering with allied and partner industries also provides access to a wider pool of innovative technologies and contributes to force interoperability. There is also operational benefit to a networked DIB—geographic disbursal of critical production lines could shorten logistics resupply times during crisis or conflict.

Most countries have understandably prioritized investments in domestic industrial capacity. Yet this is an inefficient use of resources—particularly for smaller states—that will not help generate the needed military capability. European states, in particular, must overcome persistent defense industry fragmentation to jointly invest in viable production lines. Even the United States, which has articulated an America First approach to its DIB policy, seeking to leverage increased arms exports to fund increased production capacity, nevertheless acknowledges through official statements and policies a role for allied and partner contributions. As it presses European allies to assume primary responsibility for conventional defense of Europe or pushes the Republic of Korea to take a greater role in its self-defense, the United States recognizes that these countries cannot rely solely on U.S. arms exports to meet the task. Allies’ abilities to significantly bolster their conventional military capabilities—itself a U.S. national security priority—will depend upon their collective ability to expand defense industrial capacity, preferably in a coordinated fashion.

Positive Momentum & Persistent Barriers

Since 2022, there has been some progress. A shared sense of urgency to deter further Russian and possible Chinese military aggression has ushered in a wave of new joint ventures and industrial collaboration between U.S., European, and Asian firms, as well as some supply chain coordination between governments. U.S. defense primes have teamed up with European partners to build high-demand air defense interceptors in Europe, while Korean firms have formed joint ventures in eastern Europe to assemble tanks and artillery systems that European and American production lines could not produce fast enough. Governments are engaging in bilateral and multilateral efforts to reduce reliance on China for rare-earth elements. Even so, international collaboration is still more the exception than the norm. This is due in large part to persistent legal and regulatory barriers, but politics plays a role as well. High profile joint ventures can take years of careful negotiation at the highest political levels to overcome country-specific standards, export controls, and licensing restrictions. Political localization preferences in Europe often treat foreign-owned subsidiaries as foreign firms in competitions for tenders or European Union grants.

In the United States, new policies introduced in the past year demonstrate some progress on making the necessary changes to work with foreign partners in revitalizing the DIB as well as the overall acquisition process. Success will depend on the U.S. bureaucracy’s ability to implement these reforms while undertaking a number of other changes in the acquisition space. It will also depend upon the willingness of partners and allies—many of whom are worried about overreliance on the U.S. defense industry—to agree to collaborate with the United States in a sustained, meaningful way. Collaborative arrangements will be more palatable to domestic audiences if economic benefits can be divided across stakeholders.

Recommendations

The following actions would facilitate greater DIB integration:

• Allied defense establishments should routinely factor in partner demand signals at the outset of planning production line investments for items that will predictably have wide appeal (for example: munitions, integrated air and missile defense systems, and autonomous systems) to help the United States and its partners align on production capacity targets for end products and supply chain items.
• Similarly, U.S. allies and partners should aim to build a shared forecast of critical defense supply chain demands, send accurate signals to suppliers, and proactively mitigate against supply chain bottlenecks.
• Allied and partner governments should create government-to-government mechanisms to easily pool investments to diversify providers and sources of critical supply chain elements.
• The United States and its allies and partners should consider removing or waiving export control requirements for allies and key partners for items that are a national security priority. Relatedly, they should relax localization requirements for critical technologies not produced in-country.

Conclusion

The United States and its partners have a shared imperative to revitalize their respective defense industrial bases. They need resilient supply chains secure from malign influence and the capacity to scale production with speed in times of war or crisis. To maximize their chances of success, they should pool resources and engage in coordinated planning. Increased defense industrial base cooperation between the United States and its allies might not seem an obvious choice right now, given questions of U.S. reliability, particularly in the transatlantic context. Despite these political headwinds, the undeniable fact is that no one country—not even the United States—can succeed in building the capability and capacity needed for deterrence on its own. And deeper industrial ties will help carry these long-standing, vital relationships through a difficult period.

About the Author

The Honorable Cara Abercrombie is an adjunct senior fellow with the Center for a New American Security’s Defense Program and a senior advisor with The Cohen Group. She served in senior Pentagon and White House positions over a two-decade civil service career, including as acting deputy under secretary of defense for policy, assistant secretary of defense for acquisition, and deputy assistant to the president and National Security Council coordinator for defense policy and arms control.

About the New American Industrial Base Series

This essay series, The New American Industrial Base, features expert practitioners with experience in government, industry, and finance writing on the most pressing challenges in defense acquisition today. For more in this series, click here.

About the Center for a New American Security

As a research and policy institution committed to the highest standards of organizational, intellectual, and personal integrity, CNAS maintains strict intellectual independence and sole editorial direction and control over its ideas, projects, publications, events, and other research activities. CNAS does not take institutional positions on policy issues, and the content of CNAS publications reflects the views of their authors alone. In keeping with its mission and values, CNAS does not engage in lobbying activity and complies fully with all applicable federal, state, and local laws. CNAS will not engage in any representational activities or advocacy on behalf of any entities or interests and, to the extent that the Center accepts funding from non-U.S. sources, its activities will be limited to bona fide scholastic, academic, and research-related activities, consistent with applicable federal law. The Center publicly acknowledges on its website annually all donors who contribute.