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European Institute Roundtable
Remarks as Delivered by Deputy Secretary of Defense Rudy de Leon , Four Seasons Hotel, Washington, DC , Tuesday, October 17, 2000

Thank you, Theresa [Hitchens, British-American Security Information Council]. Thanks also to my colleagues from our NATO partners for joining us and to Jacqueline [Grapin, President of the European Institute] and the members of the European Institute who have done so much to support the Transatlantic Alliance.

In the past week, we have been witness to tragic scenes of in the Middle East -- the attack on the U.S.S. Cole in Yemen and the spiraling cycle of violence in Israel. First and foremost, the deaths of those 17 sailors remind us of the service and sacrifice of our men and women in uniform. Everyday, they put themselves in harm’s way to protect America’s interests and ideals and we must never forget their noble work on our behalf. Our prayers go out to the injured sailors and their families, and to the families of those who were lost in this terrible attack.

Rather than causing us to pull back from our obligations of leadership around the world, these events remind us of the necessity of America’s global role. They hint at the world as it would exist without American engagement. For nearly a decade, American leadership in that region has meant less violence and greater movement toward peace – often halting, always difficult, but unmistakably forward. Indeed, without our engagement – backed by the presence of American forces – the events of the past two weeks would not have been a shocking aberration, but an everyday occurrence. And only through American leadership will the peace process be revived.

We need only look to the other major headlines in the past weeks for other evidence of the success of American engagement and the indispensable role of the United States Armed Forces. On the Korean Peninsula, a half century of hostility is easing; we see a thaw in that last vestige of the Cold War. The DMZ opens to re-unite families so long divided, leaders meet, and the people of Korea begin, we hope, to write the final chapter in that long conflict.

Half a world away, in Belgrade, Yugoslavia it was just two weeks ago that there were hundreds of thousands of people out on the street, demanding what we take for granted – not only that their voices be heard, but that their votes be counted. And, through that awesome power of a people united in a just cause, the long and bloody reign of the last Communist dictator in Europe is now over.

The common thread between these two hopeful events is the necessity of American leadership and the dedication of America’s armed forces. It is because of Operation Allied Force a year ago and the peacekeeping since that Serbian forces are out of Kosovo, that the vast majority of refugees have returned, that the region is largely stable, and that Milosevic was too weak to hold on to power. And it is because of the steady presence and fortitude of U.S. and allied forces along the DMZ in Korea that the peace has been preserved, allowing the people of Korea to reach across the 38th parallel. We all know that world leadership carries risks, but the benefits for our nation, and the world, are immeasurable.

To maintain our leadership, we must ensure that the forces that prevailed in the Balkans a year ago remain prepared to prevail in the campaigns of the future. Indeed, the lessons from that operation, both for the alliance generally and our nations specifically, have been discussed and debated widely, especially the stark disparity in capabilities across the alliance. We all know the causes. We all know the consequences. As Secretary [of Defense William] Cohen has said, "There was no disparity in courage or will" in Allied Force. "But the disparity in capabilities, if not corrected, could in fact threaten the unity of this Alliance."

Of course, such concerns, known since alliance operations in Bosnia, are why NATO launched the Defense Capabilities Initiative at the Washington Summit. However, a year later, those disparities remain as significant as they are troubling. As Secretary-General Robertson wrote in a recent letter to all the heads of state, "Only half of [the] Force Proposals [designed to improve NATO capabilities] are currently planned for full implementation." So I want to use my time this morning to be as candid as I can on precisely how we can address these shortcomings.

First, we know that America’s allies need to invest more in defense. No one suggests strict parity of spending or equal military capability, but every member nation of the alliance should both use existing resources more wisely and devote more resources to improving the capabilities we agreed upon at the Summit. Together, we should also ensure that our efforts are complimentary so as to maximize our collective capability.

I would simply add that the failure to make such investments will affect more than the alliance’s defense capabilities. It will also affect whether the European Union achieves by 2003 its Headline Goal of deploying, and sustaining for up to a year, a force of 50-60,000. On this topic, I must make our position absolutely clear – the U.S. recognizes that it is right and natural for an increasingly integrated Europe to develop its own Security and Defense Policy, complete with a robust military capability for crisis response operations. We support this goal whole-heartedly.

The rationale for our support is simple. The Defense Capabilities Initiative and the EU’s European Security and Defense Policy (ESDP) are not mutually exclusive. On the contrary, they are mutually reinforcing. It is important to note that the EU draft "catalogue of forces" prepared for the November Capabilities Commitment Conference and reviewed by NATO experts contains requirements that are very similar, if not identical, to those identified within the Defense Capabilities Initiative.

At the recent NATO Informal Defense Ministerial in Birmingham, Secretary Cohen distributed a strong, comprehensive written statement to his Allied counterparts. This statement outlined our dedication to moving forward on the commitments made by Heads of State at the Washington Summit. In particular, the Secretary’s statement made clear that it would be highly ineffective, seriously wasteful of resources, and contradictory to the basic principles of close NATO-EU cooperation if NATO and the EU were to rely on autonomous force planning structures. In addition, we believe the EU should be able to count on NATO’s operational planning capabilities in peacetime, during an emerging crisis, during an EU-led crisis response operation using NATO capabilities and assets, and during an EU-led crisis response operation that does not use NATO capabilities and common assets.

The second way we can address the gap in alliance capabilities is through greater trans-Atlantic defense industrial cooperation. I think everyone in this room knows that if the alliance is going to train and fight together, then we are going to have to build our military capabilities together. Indeed, the collaboration of the trans-Atlantic defense industry is one of the critical pillars upon which the very future cohesion of the Alliance will rest.

An America more open to European business, and a Europe more open to American business, means both more competition and cooperation, which means more innovation, which means more capable and interoperable systems for our men and women in uniform. And because of more competition and potentially larger buys, this means we will get that capability at lower cost.

So as long as they increase efficiencies, as long as they ensure competition, as long as they protect technology, we need more trans-Atlantic links between more firms on both sides of the Atlantic competing in markets on both sides of the Atlantic. The United States has much to learn from, and to share with, Europe. Europe has much to learn from, and to share with, the United States.

Third, and a prerequisite for improving both military capabilities and industrial cooperation, are changes to the American system for sharing technology. For a number of years now, many on my side of the Atlantic have been concerned about an emergence of a "Fortress Europe," only to realize that American export controls in some cases support a "Fortress America" mentality. The United States has long urged our allies to tighten their export controls. But progress has been too slow.

As I mentioned a moment ago, the United States has long pressed our NATO allies to improve their defense capabilities, only to find that our export control system has in some cases contributed to discouraging and making that difficult. For example, even with a Dutch request for expedited review, it still took almost three months to approve the export license for digital maps of Bosnia for use in their Chinook helicopters, which, as a result, were never deployed to Bosnia. During the air war over Kosovo it took more than two months to approve the sale of flares to the Italian Coast Guard for use in the potential rescue of downed Allied pilots, including Americans.

For these and other reasons, the United States unveiled the first major reform to our export control system since the Cold War in May of this year. The Defense Trade Security Initiative is designed to ensure two major goals: increased sharing of technologies with our allies, and enhancing the effectiveness of our export control system and encouraging allies to do the same. With these reforms in place, those problems of digital maps for the Dutch or flares for the Italians would have been avoided.

Our initiative includes a broad package of 17 specific reforms. But I want to spend the remainder of my time discussing several major areas of particular relevance to our discussions today.

Our most significant reform is our proposal to no longer require licenses for trade of unclassified defense items with certain allies. We are proposing to negotiate International Traffic in Arms Regulations (ITAR) exemptions from selected export rules. We will have to negotiate with each country to ensure that their export controls and technology security practices are as effective as those of the United States.

These practices would include: membership in relevant multilateral export control arrangements, such as the Missile Technology Control Regime and the Non-Proliferation Treaty, among others; harmonized control lists; controls comparable in effectiveness to the U.S.; requirements for U.S. government approval of re-transfer or re-export of defense articles and related technical data and defense services of U.S. origin, and; rigorous screening and registration of eligible personnel and entities to participate in defense manufacturing and trade.

In addition, we would look for: documentation and record-keeping for compliance and enforcement; strong criminal and civil penalties for export control violations; provision for cooperative enforcement efforts; regular consultations on export control policies and practices, and finally; a demonstrated track record over time of effective export controls.

Of course, companies in such countries will have to be reliable as well, with their own good records of security. By removing a number of licensing requirements, we hope to share more technology with – and from -- our allies while at the same time strengthening our collective protection of such technology through more effective export controls, including reciprocal, binding agreements regarding exports to third parties.

For example, under current regulations, if an American and foreign firm enter into joint development and production of an unclassified defense product, they typically need to obtain several licenses. Under our proposal, we would complete a government-to-government agreement allowing us to extend a broad exemption from the ITAR. Most unclassified defense projects between two reliable companies would then no longer require a license.

The recent U.S.-U.K Declaration of Principles is a roadmap for this kind of cooperation. We will soon have a similar document with Australia. As a next step, we look forward to concluding agreements with both nations, allowing an exemption from ITAR. We see these two countries as the earliest candidates for such an exemption because of our long history of cooperation, because of our existing and very compatible export controls and because of our significant industrial linkages that could, and should, be allowed to grow. In so doing, we also hope to create a strong incentive for other countries to strengthen their export control systems so we can enter into similar arrangements and share similar benefits.

Our initiative will also remove a whole host of barriers and irritants currently impeding trans-Atlantic cooperation. This includes removing barriers between governments, thereby encouraging research and development. It includes removing barriers between individual companies, thereby making it much easier and more affordable to conduct business with their counterparts in allied nations. We want to make it easier for American and foreign firms to work together in the cooperative development and production of defense articles. So we also are creating several types of umbrella licenses that will enable entire projects – projects that in the past have required dozens of separate licenses – to be covered under single licenses that would be valid for extended periods.

Our initiative also includes specific reforms to expedite procurements related to the Defense Capabilities Initiative. For example, DoD review processes will be shortened from a maximum of 25 days down to 10 days for items specifically identified as supporting the DCI.

Additionally, we are prepared to authorize marketing approval – at the time of the U.S. agreement for a cooperative project – to a list of third country destinations. In other words, we are prepared to authorize a pre-approved sales territory. Although this is part of the ITAR already, it is rarely requested and infrequently used when U.S.-origin products are incorporated into foreign products.

And I should note that these new procedures apply to all our trans-Atlantic efforts, including the development of an alliance ground surveillance capability. Our decision to share key technologies with our partners in this effort reflects our commitment to building a commonly funded NATO-owned and operated ground surveillance system.

Another area of our initiative falls under what we could call "good government," reforms designed to improve how this new system will work day-to-day. At the Defense Department we have already begun to reform our system. We have streamlined processes for review. We have reduced the amount of time it takes us to complete our reviews from 46 days last fall down to 17 days today, with a realistic goal of 10 days in the future. As a result, not only are we expediting our reviews, we are improving the protection of sensitive technology by focusing our finite resources on the most sensitive cases.

Under our initiative, we will take a number of additional steps to streamline our regulatory procedures and speed up our decision-making even further. We are going increase our licensing staff by 50 percent. We are also going to devote more resources and we are going to computerize our processes. This includes some $30 million over three years for a new common computer system to expedite the review process.

In short, the changes I have outlined this morning are designed to, and I believe will, achieve three fundamental goals. They are going to improve the ability of industry on both sides of the Atlantic to share technology and to learn from each other. At the same time, they are going to improve the security of these same technologies. Perhaps most importantly, they are going to improve the ability of NATO forces to operate together in the battles of the future, battles that will be won by militaries that harness the technologies and tools only industry can provide.

There should be no doubt. These reforms are not simply about the export of American products to our allies. They are about ensuring that American and foreign firms can work even more closely together in the future. Indeed, this is not the Defense Export Initiative. This is the Defense Trade Security Initiative, and we recognize that trade is a two-way bridge over the Atlantic.

Put another way, we are committed to closing the "capability gap" with our allies, widening the "technology gap" with our adversaries and helping American and European industry to jump the "trans-Atlantic gap" to form more cooperative ventures.

The fourth imperative is to recognize the interdependence of our infrastructure. A coalition is only as strong as its weakest link. So collectively we have to do everything possible to reduce the risks to future missions. Indeed, the interdependence and information superiority that we consider to be among our greatest strengths also pose one of our greatest security challenges.

The fifth and final way we can increase both alliance military capabilities and industrial cooperation demands something of our partners in both government and industry. I have spoken about what the United States will do. But if this new approach is going to succeed, we need something else. We need something from our allies and from industry. We need their commitment and cooperation.

To date, security practices have largely been strong. In the future, we need them to be even stronger and to keep up with changes in business practices, such as distributed design terms. We need you to commit the human and financial resources to properly administer this system within your nations and your companies. This includes training people better in what is required to obtain a license, especially when a license is necessary in the most expeditious manner possible.

So I want to take this occasion to appeal to you. If we are going to share more of our technologies and strengthen protection of those technologies, we need to work together even more closely and cooperatively in the future.

In closing, let me say that the changes I have mentioned are good for all concerned. They are good for the security of the United States, by strengthening the protection of our most critical technologies. At the same time, they are good for those in industry, by allowing you to respond even more quickly to a rapidly changing international market. They are good for our allies, by increasing access to technologies necessary to transform their forces. Finally, they are good for the alliance, by contributing to a robust, competitive and innovative industrial base and therefore improving the ability of our forces to operate together in the future.

 Indeed, the ability of our forces to operate as coalition partners, in fact, the very lives of our men and women in uniform, remain absolutely and indispensably tied to a cooperative, rational and viable trans-Atlantic defense industrial base. We cannot have a strong alliance if have a weak defense industrial base. Ensuring both, now and into the future, is one of the great challenges we face as an Alliance and the challenge I look forward to discussing with you today.