Ladies and gentlemen, it's a pleasure to be with you today. This is a very important and very timely conference.
It is important because national security now and in the future will rely more on cooperation between friends and allies. It is timely because of the U.S. commitment, particularly with regard to Dr. [Secretary of Defense William J.] Perry, Dr. [Deputy Secretary of Defense John M.] Deutch and me, to a renaissance in cooperation on armaments programs of mutual interest. We also meet at a time of rapid change in the world -- one in which the U.S.-European security relationship remains vitally important to the welfare of people on both sides of the Atlantic.
Let me say a few words about our collective national security environment and about our objectives in seeking deeper and more productive defense equipment cooperation. In the post- Cold War world we no longer face a single galvanizing threat such as the former Soviet Union. Instead there is increased likelihood of our forces being committed to limited regional military actions -- coalition operations -- in which allies are important partners.
I would sum this all up in statistical terms by saying that the mean value of our single greatest threat is considerably reduced. But the irony of the situation is that the variance of the collective threat that we deal with, plan for and must counter is up.
This gives us some pause in trying to plan intelligently. In response to reduced mean value of the threat the United States has cut end strength by about a third from 1985 levels. But at the same time the increase in variance has caused deployments of U.S. forces to go up by a third. During this adjustment phase we have brought the total defense budget down while maintaining the high state of readiness needed to support increased operational tempos.
We have done this by reducing our procurement at a pace that is twice the rate of the overall downturn in total obligation authority. This response is consistent with historical norms. Procurement has been the most volatile component of the budget in a drawdown because it is not necessary to purchase new equipment for a smaller force structure. This approach also defers long-term modernization and future readiness. I view this as a temporary condition as we complete our drawdown, which is just about over. Our current level of investment -- it is a little over $39 billion in procurement and $34 billion in research, development, test and evaluation in the FY [fiscal year] 96 budget -- will not sustain the Bottom-up Review force over the long term. The drawdown is nearly complete with the FY 96 budget, and so from FY 97 on we will have to increase our spending to sustain modernization of the force.
Investment outlays -- research, development, test and evaluation and procurement accounts -- have gone from a peak of a little over $160 billion in constant FY 95 dollars to about $105 billion. However, our full-funding policy will not allow the procurement outlay flow to bottom out for another three years. The implication is that industry is still working off of dollars appropriated for FY 93 and will need to deal with a further contraction on the order of 20 percent over the next three years. Defense-related employment has tracked outlays -- from a high of 3.7 million jobs to about 2.4 million jobs. Dollars/employee, a measure of productivity, has been constant through this period. My sense is that a similar set of trends exists on the other side of the Atlantic as well. It is clear to me that we will have to leverage the industrial base of all our nations to modernize the equipment of our defense forces at an affordable cost. To us that means
increased emphasis on cooperation with our allies in acquisition of defense equipment. It also means leveraging the full industrial base through exploiting dual-use technologies and production strategies. The United States seeks cooperation with its allies for three reasons:
- The first reason is political: These programs help strengthen the connective tissue -- the military and industrial relationships -- that bind our nations in a strong security relationship.
- The second reason is military: There is an increased likelihood of operating in a coalition environment where we need to deploy forces with interoperable equipment and rationalized logistics.
- And the third is economic: Our defense budgets and those of our allies are shrinking. What we cannot afford individually may be affordable with a common effort.
The history of international cooperation on armaments has not been good. As I look at the record I see that many programs were started, but few have been completed or continued very long. Two programs that fit in this category are the Mark XV IFF [identification, friend or foe] air-to-air identification system and the family of short range air-to-air missiles where the ASRAAM [advanced short-range air-to-air missile] was born.
The AV-8B Harrier II Plus is a fine example of a recent success. Three countries -- Spain, Italy and the U.S. -- agreed to codevelop a night-attack capability for their fleets of V/STOL [vertical/short take-off and landing] fighters. Primarily for budgetary reasons, none of the countries would have developed the system alone. But the program has been an excellent example of economies of scale and affordability resulting from pooling of national resources. The jury is still out on the ultimate success of the Multifunctional Information Distribution System. I am deeply committed to the success of this program. The five nations participating in the development -- France, Germany, Italy, Spain and the U.S. -- are deeply committed to the program as well. I believe there is a great opportunity for multilateral improvements to system cost, schedule and performance.
In general, most of the problems in armaments cooperation revolved around conflicts between narrow national interests being at odds with broader cooperative interests. As my good friend Henri Conze has said, we have "converging needs but diverging interests." There are many narrow national interests. Some of the more obvious are:
- National industrial sector issues (jobs, trade, economics);
- National political interests (global/regional power and resource constraints);
- "Not-invented-here" syndrome;
- Differing national requirements;
- Technology release problems ( black box release with no transfer of internal software or operating algorithms; sensitive space vibration/cooling/stabilization systems); and
- Perceptions of the U.S. leading a program using U.S. technology and a U.S. prime contractor with the European participation being relegated essentially to subcontractor status.
Other problems include the increased difficulty of managing with two or more sovereign parties (the benefits of cooperation aren't viewed as being worth the additional headaches) and slower acquisition cycle times, which allow other national solutions to come along that may be cheaper and work better.
We see additional problems developing in the area of increasing European defense cooperation. The concept is not objectionable. In fact, it is welcomed -- so long as it doesn't come at the expense of the trans-Atlantic link. Taken to an extreme this could have drastic results. Among the possible negative outcomes are:
- Closing out U.S. technologies and expertise from European developments and markets;
- Development of noninteroperable systems;
- Greater cost to our European allies with less security to show for it;
- Reinvention of existing technologies when R&D [research and development] budgets are declining; and
- Political divisiveness between long-term friends.
The Clinton administration is prepared to be an eager partner in armaments cooperation. Our objectives include increased emphasis on cooperative solutions; systems-level cooperation vs. cooperation only on parts and individual technologies; and use of the best technologies, wherever developed, in our weapon systems.
The last point is important. In a global market, everyone -- including our adversaries -- has access to the same commercial technology base. The military advantage will go to the nations who have the best cycle time to capture what is available commercially, get it incorporated in weapon systems and get it fielded. We must be more agile and willing to look at creative programs and management schemes to reduce acquisition cycle time. A triad of initiatives under the aegis of NATO s Conference of National Armaments Directors -- the CNAD -- are examples of large cooperative efforts that are breaking new ground on innovative management approaches. These initiatives are in alliance ground surveillance, theater missile defense and combat identification.
In alliance ground surveillance, for example, analyses to date have pointed to the fact that NATO needs to agree very soon on an option for a NATO-owned, jointly operated, complete AGS capability. We now have a full-time "embryonic project office." It is time to move forward with the effort. In theater missile defense the U.S. has offered to share regional electronic warfare information to establish a foundation for a battle management command, control and communications -- BMC3 -- architecture. The U.S., Germany, France and Italy have signed recently a statement of intent for a Medium Extended Air Defense System. The four countries, on a 50/20/20/10 work- and cost-share ratio, will develop and field a vital air defense system to counter ballistic and air-breathing missile threats. Unique management and industrial arrangements are being examined which could be the model for all future trans-Atlantic cooperation programs.
Finally, in combat identification the U.S. is prepared to address the air-to-air element of combat ID in the upcoming April 1995 CNAD. We have a working plan for a cooperative approach on the air-to-ground and ground-to-ground elements as well. The many challenges before us on these large initiatives are not easily solved, but the potential payoffs are immense. Below this tier we also must build closer cooperation on upgrades, rationalized logistics and Continuous Acquisition and Life-Cycle Support.
We, both governments and industries, must work together to develop ways to overcome the many impediments to cooperation. Such a dialogue is not easy. It must deal with uncertainties, and it is not devoid of risk. Partners on both sides of the Atlantic will have to make compromises. I believe it can be done, and that we can be successful in bringing to bear the best that the industries of the U.S. and the European nations can contribute -- with equitable returns to the taxpayers and the industries of all of our countries.
Published for internal information use by the American Forces Information Service, a field activity of the Office of the Assistant to the Secretary of Defense (Public Affairs), Washington, D.C. Parenthetical entries are speaker/author notes; bracketed entries are editorial notes. This material is in the public domain and may be reprinted without permission.