NATO PA SECRETARY GENERAL, DAVID HOBBS, CALLS ON CHICAGO SUMMIT TO OVERCOME PAST OBSTACLES TO CLOSER DEFENCE COOPERATION

Let me begin with a definition.

What is “Smart Defence”?

According to NATO, Smart Defence “means pooling and sharing capabilities, setting priorities and coordinating efforts better.”  According to me, there is a simpler definition: Smart Defence means getting the best value for money.

There is no doubt that this is a good idea.  But doesn’t NATO do that already? And if not, why not?
 
So why don’t we already have “Smart Defence”?

It’s a new label, but it certainly isn’t a new idea.  The concept of pooling and sharing the capabilities of Alliance members is as old as the Alliance itself.  But the Alliance isn’t a supranational organization.  It can’t tell its members what to do.  It can only encourage them, provide advice, and make suggestions.

NATO does have defence planning processes which enable NATO nations to see what their collective capabilities look like and – crucially – what they really should look like.

NATO also has procedures enabling member nations to identify common equipment requirements and timescales so that they can develop and produce equipment jointly.

In addition, NATO produces standards – technical and operational – to enable Allies to function collectively.

But it is the Alliance which is driven by the nations, not the Alliance which drives the nations.  So when concerns arise about capabilities – as they often do – the remedies take the form of new goals, targets and aspirations.

Let me mention a few.  The most obvious is the aspiration to spend a certain proportion of GDP on defence.  Various targets have been set over the years; the current one – a guideline – is 2 per cent.

But a spending target isn’t actually a very useful yardstick.  It doesn’t distinguish between spending upon equipment and spending on military pensions.  What actually matters, of course, are capabilities.  And here there have been many initiatives. The Conventional Defence Initiative in 1985; the Defence Capabilities Initiative in 1999; the Prague Capabilities Commitments in 2002; the usability targets in 2004; and the Lisbon Capabilities Package of 2011.

These have all been intended to improve collective Alliance capabilities, and they have notched up some notable successes.  Even so, the bulk of Alliance efforts have remained stubbornly national rather than joint, collective, cooperative, pooled or shared – call it what you will.

As a result, the United States is the only Alliance member which has been able to sustain the full spectrum of capabilities including, for instance; a triad of nuclear forces; comprehensive surveillance, reconnaissance, and targeting; global communications; strategic heavy lift; strategic air power; and global power projection.

As we all know, although several Alliance nations can contribute to some of these functions, their capacities are dwarfed by those of the United States, and certain types of operation can only take place if American “enablers” are available.

So why has this happened?

One obvious reason is that in 2011, the United States accounted for about 70 per cent of Alliance defence spending.  In 1990, it accounted for about 60 per cent.

Another reason is a problem which is older than the Alliance itself: the rising costs of defence equipment. The 20th century saw a series of military revolutions brought about by advances in technology.  The weaponry of the Second World War was very different from that of the First World War, and the weapons systems continue to evolve ever more rapidly.  And as capabilities and complexity have grown, so have costs.

In the 21st century, the pace of change continues to accelerate.  It isn’t so long ago that a fighter aircraft was equipped with only a radio, a radar, and a machine gun suite.  Nowadays, the avionics suite includes several radars, the capacity to integrate data from external sensors, electronic counter-measures, sophisticated communications systems, and a fire control system to manage several types of air-to-air missile.  Similarly, aircraft propulsion systems and structures incorporate advances in design and technology that provide remarkable performance improvements.

But all this comes at a price.  A front-line combat aircraft of the Second World War would cost around $50,000.  In the mid 1980s, the cost would be several tens of millions of dollars, and today’s fighters cost between one and two hundred million dollars.

Not surprisingly, over the years all our armies, air forces and navies buy fewer and fewer platforms.

In the 1980s, this phenomenon was labelled “structural disarmament”.  One of the analysts at the time was Norman Augustine who in 1983 showed that this trend could not go on for ever by pointing out the obvious and absurd conclusion:

“In the year 2054, the entire defence budget will purchase just one aircraft. This aircraft will have to be shared by the Air Force and Navy 3½ days each per week except for leap year, when it will be made available to the Marines for the extra day.”

As if this wasn’t bad enough, procurement costs are made worse by a fragmented defence market and some basic economic principles.

Modern weapons systems involve a lot of research and development.  In fact, hundreds of millions of dollars can be spent before one system is actually produced, and the cost of that R&D is not greatly affected whether the goal is to produce 100 aircraft or 1000, 5 destroyers or 15.

In terms of overall costs, if three nations decide to build their own fighters, they pay for three separate R&D programmes and three production lines when in practice one production line could meet their demand.  In other words, the investment in two of those three R&D programmes and two of those three production lines does not buy any weapons or capabilities.

Furthermore, it is notoriously difficult to predict the costs of high-technology weapons systems, and they never turn out to be cheaper than expected.  Often then, the solution is to buy fewer systems than originally planned or to stretch production over a longer period of time.  This often known as moving a “programme to the right”, a reference to how it looks on a planning chart.

But while cutting production or slowing it down might solve a short-term budget problem, it usually increases the unit costs.

Factories and production lines have certain fixed costs.  It costs money just to keep them open, and if production is cut or stretched out for longer, production is less efficient and overall programme costs go up.  Factory overheads just aren’t very scalable.  The factory has to be maintained, heated, lit and administered, in largely the same way whether it is operating at its optimum efficiency or just ticking over.

To provide a specific example, in 2010, Britain’s National Audit Office calculated that slowing down the production of Britain’s two new aircraft carriers would cut costs by ₤450 million over the first four years of the programme, but would add ₤1.1 billion overall.

So why has it been so difficult to solve these problems?

The most obvious reason is that defence production means jobs and no-one wants to close their national industries.  Furthermore, this might not be as short-sighted or insular as it sounds.  There might be good reasons for maintaining a broad defence industrial base.  In the defence sector, it is obviously important to know who you depend upon and how much you depend upon them.

This applies both for weapons acquisition and for capabilities.  National defence is, after all, a key governmental responsibility so sacrificing capabilities is not something that would be lightly undertaken.  And anyone would be naturally cautious about relying on someone else to provide an essential capability.

But, things are changing.  The Alliance and its concept of security have been transformed since the end of the Cold War.  Collective defence remains at the Alliance’s core, but the Alliance must now address a much more diverse array of threats, challenges, and responsibilities.

At the same time, while resources have always seemed stretched, today’s financial and economic difficulties are placing more pressure than ever on public spending, and defence is not going to be an exception.

Indeed, most Alliance nations are either making cuts or at the very least reducing their growth expectations.

Defence cuts usually take the form of “salami slicing” – trimming numbers across the board to retain capabilities but at a reduced level.  However, there is a limit to this approach, and sometimes solutions have to be more radical.

Over the last two years, budget cuts have already caused some NATO nations to abandon certain capabilities.  The Netherlands no longer conducts maritime reconnaissance, and has scrapped all its Leopard 2 tanks.  Denmark no longer operates any submarines.   The United Kingdom has scrapped its fixed-wing naval aviation, albeit with the intention of reviving it in the future.

All our nations are caught in the same awkward position between rising defence costs and fewer available resources.

So can the NATO nations really grasp the nettle firmly and thoroughly?  I believe they can.  The past has not been all doom and gloom, and it has produced some encouraging examples of collective solutions.

One landmark programme is the NATO Airborne Early Warning and Control Force (NAEW&CF).  Flight operations began as early as 1982, and this is still the Alliance’s largest collaborative project, involving a fleet of AWACS aircraft owned and operated by 18 NATO nations.

More recently, after a twenty-year gestation period, NATO is now moving ahead with its Alliance Ground Surveillance System, a programme which will be operated jointly by 13 NATO countries.

Another excellent example of pooling and sharing is the Strategic Airlift Capability whereby a consortium of twelve countries is purchasing and operating three C-17 long-range transport aircraft.  This initiative is doubly noteworthy because it also involves NATO partners – ten members of the consortium are NATO nations and the other two are partners (Finland and Sweden).

Air policing missions also spring to mind.  The simple fact is that air defence assets are expensive to run, and it makes no sense to acquire and operate a handful of advanced fighter aircraft on a strictly national basis.  Consequently, NATO Air Policing Missions take place in the Baltic States, Albania, Slovenia, and Iceland.

This enables those Alliance members to allocate their defence resources to other tasks.  (Iceland, of course, is a special case in having no armed forces of its own.)

There are also many examples of shared assets and capabilities among NATO nations.  The Baltic states share a staff college, Germany and the Netherlands share an operational headquarters, Belgium and the Netherlands have an integrated maritime command structure.  France and the United Kingdom intend to develop a joint expeditionary force, and develop an integrated carrier strike group.  And only last week, Belgium, the Netherlands and Luxembourg signed a far-reaching agreement on cooperation in logistics, training, and equipment acquisition, while France, Germany and the Netherlands agreed to develop a sharing and pooling arrangement for air-to-air refuelling.

Both NATO and the European Union are looking at ways to promote further such initiatives, and there clearly is enormous scope for regional initiatives, which is why this conference is so important.

It is hoped that the Chicago Summit will deliver a defence package of about 25 such initiatives.

I am optimistic that this will be just the beginning and that the NATO nations will look not just at pooling and sharing capabilities, but also at the longer-term benefits they can realize through better cooperation in defence procurement.

The reason for my optimism is that the current situation is not sustainable.  One analysis suggests that while in 2009 the United States had about 30 ongoing major defence procurement projects, the European NATO nations had about 90.  Yet they are spending less on them and only about 20 per cent of European defence procurement takes place jointly.

So it is not surprising that Europe is often cited as mustering only about ten per cent of America’s defence capability, even though it spends about 40 per cent as much on defence.

So let me conclude with a few observations about Smart Defence.

Firstly, if “Smart Defence” is what we want in future, what do we have now?

I’m afraid the answer really is “Dumb Defence”.  That is not to say that the many national decisions made over the last decades have been wrong.  They make sense at the national level and when looked at in isolation.  But when they are all put together as a collective whole, the picture is far less rosy.  It amounts to wasted resources, duplicated effort, and poor value for money.

Second, is the concept of “Smart Defence” new?

No it isn’t.  Value for money is an age-old concept, and NATO has had any number of initiatives intended to bolster its capabilities and promote greater cooperation among its members.  Smart Defence really is a case of old wine in new bottles.

But there is nothing wrong with the wine.  On the contrary, it is now perfectly ready for drinking.