NATO in the 1990's: Conflict and Competition over the Defence Industrial Base--The Case of the European Fighter Aircraft

Abstract

<p>The central argument of this paper is that efforts to rationalise the European defence industrial base are both pre-requisite to and incompatible with the broader goal of Alliance wide specialisation and rationalisation, at least withiin NATO as it is presently configured. Broadly, the contention is that rising weapons costs in the context of stable or shrinking defence budgets are moving the NATO alliance toward structural disarmament. In response to this trend, the Alliance has been forced to consider means of reforming the highly wasteful defence industrial effort so that the price of military preparedness can be kept within reasonable limits. From a simple economic perspective, the creation of a NATO-wide free-trade regime in defence goods wold seem to be the optimal approach to this program. Free trade, however, is fraught with political hazards that make it largely unacceptable to most Alliance governments.</p> <p>An apparently attainable alternative to free trade in this connexion is "managed specialisation." Managed specialisation, however, also has its limitations. Put simply, in order to rationalise the Allied development and production effort, Europe must first of all "get itself together" and begin producing competitive equipment at competitive prices. In order to achieve this, however, Europe must reform its own domestic market in order to realise US-scale production economies and capitalisation rates. The crux of the problem is that this necessarily requires greater European collaboration and protectionism, and ultimately suggests that Europe will begin to offer the US more global competition. As this is unlikely to sit well with the Americans, it would seem that--contrary to the original intent--European rationalisation seems destined to result in more, not less, fracture within the Alliance defence industrial base. Although the verdict is not yet final, the Eurofighter programme would seem to confirm this hypothesis.</p>