Neal Patrick DUNN (United States) - REPORT
11 October 2025
This report was adopted by the Economics and Security Committee at the 71st Annual Session held in Ljubljana, Slovenia.
Russia’s full-scale invasion of Ukraine in 2022 has tested the resilience and readiness of defense industries across North America and Europe, exposing critical vulnerabilities in supply chains, production capacity, and procurement strategies. The decline in defense budgets after the end of the Cold War left both the United States and Europe with weakened defense industries. The ongoing war in Ukraine has accelerated a fundamental shift in defense policy on both sides of the Atlantic. The effort to support Ukraine’s defense effort has underscored the urgent need to expand military production and address gaps in both American and European arsenals. As both sides of the Atlantic work to increase industrial capacity, it is essential that Allies deepen cooperation to ensure military capabilities remain scalable, effective, and technologically advanced.
The United States has perhaps the most powerful military in the world, but its defense industrial base faces significant challenges in scaling up production to meet rising global threats. Decades of defense budget cuts and industry consolidation have led to fewer but larger defense contractors. But this has decreased competition, increased costs and delays, and introduced long-term procurement challenges. European countries also undertook significant defense budgets cuts after the end of the Cold War, which markedly weakened their defense industrial bases. European countries have since struggled with defense industry fragmentation, underinvestment, and dependence on external suppliers, which has limited their ability to build a resilient defense industrial base.
There is also significant danger in Chinese defense industry capabilities. China is a large, developed economy and is the largest trading partner of more than 120 countries, with development and construction projects in some 150 countries. Beijing is steadily growing a more powerful and technically advanced military, and its defense industrial capacity now far outstrips America’s. In addition, China has the ability to hold the Allies hostage in key supply chain areas such as refined rare earth minerals.
To address these challenges, governments across the Atlantic should work with private companies to incentivize investments in defense production capacity. Administrative and regulatory burdens should be reassessed to reduce costs and enable the development of a more robust defense industrial sector. Additionally, financial institutions, including banks, should reconsider policies that exclude military-industrial financing, given the increasing threats faced by allied democracies.
To ensure long-term deterrence and readiness, NATO countries must not only significantly increase defense spending, but modernize their defense procurement processes, prioritize innovation, and strengthen coordination across their defense industries. The United States needs greater investments in advanced manufacturing to replenish stockpiles and rapidly boost defense capabilities. Europe, in turn, must take greater responsibility for its defense posture by expanding its own industrial capabilities. This will allow European Allies to develop a more balanced defense-industrial partnership with the United States. Enhanced NATO-EU collaboration on standardization and investments will be crucial to overcoming inefficiencies, securing sustainable defense production and strengthening the Alliance’s ability to respond to future threats.
