AFJ: Security Through Foreign Military SalesJan 27, 2009 19:05 UTC by Defense Industry Daily staff
Armed Forces Journal’s January 2009 issue has an article entitled “Good business is good policy.” It looks at the US Navy’s growing focus on maritime partnerships, and notes that:
“In terms of volume, more than 90 percent of international spending on U.S. Navy equipment and services is done by just 15 percent of the countries who buy their maritime defense articles from the U.S… As evidenced by the rising prominence of security cooperation programs in U.S. theater engagement efforts, foreign military sales and training are especially well-suited to growing security relationships. They build capacity, improve interoperability and provide a basis for professional relationships which lead to mutual understanding and respect. However, developing security cooperation relationships with nontraditional partners has proved to be challenging. These countries come in two categories: regional powers such as India and Brazil, and strategically significant nations such as Nigeria, Indonesia, Djibouti and Yemen that are limited by resources and equipment.”
“…Judging by the large and growing number of requests for FMS equipment and services, training, and exchange programs from countries aspiring to play a greater role in their own security, the effort to promote global maritime partnerships is making headway. But the process of doing business with the U.S. can be complicated. For nontraditional partners, there is too much red tape, too much bureaucracy and too little consensus between policy and acquisition communities about what we should be doing with our new partners… Although high-priority efforts are often “fast tracked” by senior leadership, international customers still frequently voice concerns about the speed of the U.S. bureaucracy. Streamlining this system will be a major challenge for the next secretaries of state, defense and the Navy if we are to fully realize the value maritime partnerships with nontraditional countries can bring to our security.”
“US Industry Associations Pushing to Reform Export Controls” covered some of the efforts underway to address this problem, and some of the associated policy issues.
These measures, by themselves, will not solve one of the core problems that stands in the way of the AFJ article’s recommendations: the US Navy.
In his best-selling business book “The Innovator’s Dilemma,” Harvard Prof. Clayton Christiensen explains that a firm’s largest customer can become the main barrier to its future success. If listening to them too closely leads to products that are too complex and expensive to address incipient market trends, and a web of relationships that can only deliver products of this type, then “disruptive technologies” that initially deliver less capability but have a faster improvement rate have a tendency to remove the former market leaders from the picture.
The innovators dilemma model may have direct military technology applications in fields like robotics, but the single-buyer monopsony that characterizes home defense market adds a different set of risks as well. When that buyer sets the agenda for an industry, that industry’s export potential will suffer if the buyer takes that industry in a direction that removes it from other markets, and/or places its products out of reach for purchasing nations.
In the naval realm, frigates and corvettes have become the most popular naval exports. But USA hasn’t built any in decades, and has very little market share, because the US Navy invested in large destroyers instead. The frigate-sized Littoral Combat Ship was designed to American requirements, which meant no armament for key roles like fleet defense or combat with other naval ships. The only official export request to date involves a fully armed LCS – Israel ship that’s so heavily modified from the base LCS-1 as to be a separate ship type. LHD amphibious assault ships that can carry troops, helicopters, and even aircraft are rising in global popularity, but American LHDs are 50,000 tons instead of the 25,000 – 30,000 ton ships that others build – and can buy.
The Us Navy’s ship specifications have become a serious problem for the US Navy’s itself, but they also have an effect on export prospects. It’s a vicious cycle. The more this dynamic of high-end, limited-exportablity items takes hold, the greater the main customer’s influence becomes throughout the value chain, and the weaker one’s export prospects get.
To some extent, the USA’s unique political standing after the collapse of the Soviet Union has mitigated these natural trends. As was the case with its civilian industry after World War 2, American defense manufacturers became the dominant game in town with the collapse of its main enemy. The question is whether this status is about to change. There is reason to believe that it might.
One characteristic of these emerging nations like Brazil, China, and India is that all have strong policies built around growing their own defense industries and capabilities. Israel has grown a strong global industry as a component supplier and niche player in markets like missiles and UAVs, but South Korea is entering the global export market as a supplier of complete land, air, and naval weapons systems. Russia is stirring as well, as it works to revivify its own defense industry. The result is an increasingly multi-polar world for weapons buyers, and also a more competitive global defense market. Nigeria’s new arms are heavily Chinese, a growing trend in Africa; Indonesia’s are Russian.
These kinds of shifts can already be glimpsed in areas like budget-priced lightweight fighters, which were once a global competition between America, France, and Russia but seem set to become a future competition involving China (JF-17), India (Tejas LCA), and South Korea (T/F/A-50). Similar trends will also be felt in other areas, as Moore’s Law of increased computing power makes building high-end weapon capabilities thinkable for more and more countries. Pakistan’s recent purchase of radar-killing missiles from Brazil is just one example. There will be others.
An American industry that produces “gold-plated” products at high cost will find it more difficult to sell abroad, and foster some of the business and security relationships Edward Lundquist advocates in AFJ, no matter what is done to improve export rules. Even if – and perhaps precisely because – business remains strong at home.