The Transatlantic Defense Industrial Base: Restructuring Scenarios and Their Implications

Opportunities for the construction of a transatlantic defense sector are tangible, but significant obstacles may accelerate the formation of a bipolar industrial base. While market forces played a key role in the transformation and consolidation of these sectors in recent years, political considerations are largely responsible for a restructuring process that has been almost entirely among U.S. firms in the United States and among European Union companies in Europe. In this monograph, Dr. Terrence Guay examines the forces that have shaped the restructuring of the U.S. and European defense industries since the end of the Cold War, and presents factors that will influence further restructuring and consolidation in the short- and medium-terms. He contends that a transatlantic defense industrial base is preferable to a bipolar one, and recommends that the U.S. Government open its defense equipment market to more European firms, and that European governments reciprocate. Additionally, military forces should put greater effort into coordinating procurement requirements and needs, and firms should explore expanding transatlantic links.https://press.armywarcollege.edu/monographs/1749/thumbnail.jp

Comparing International EU Competition Cases: What Can Business and Politics Learn?

The European Union’s (EU) involvement in high-profile and controversial competition disputes has raised questions about the Union’s decision-making in the regulation of international business activity. Why does the EU decide to pursue such cases that hold the potential to destabilise bilateral and multilateral trading relations? This paper investigates the role of international and domestic factors that influence the EU’s competition decisions as applied to foreign corporations. To explain the EU’s decisions in external competition policy, the paper considers the causal influence of economic internationalization as well as the domestic pressures exerted by firms and politicians during the merger review process. Empirically, the paper analyses two merger disputes between the EU and the United States of America (US)—the 1997 Boeing-McDonnell Douglas merger and the 2001 GE-Honeywell merger—that provide useful insights and lessons for practitioners and academics alike. The paper finds that, despite its destabilising potential, the EU decides to pursue a vigorous external competition policy primarily as the result of international economic pressures and domestic political dynamics. While the preferences and strategies of individual firms play only a limited role in the EU’s decision-making in external competition policy, they seem to play a more significant role in US politicians’ decisions to intervene in transatlantic merger review cases

"Europe, the United States, and their Defense Industries: Prospects for Transatlantic Cooperation"

This paper compares the post-Cold War restructuring of the defense industries in the United States (US) and Europe with the aim of understanding the implications for the transatlantic industrial base. We argue that different processes of industrial restructuring and consolidation present obstacles to transatlantic initiatives, and that government policies and conflicting political visions at both the national and European Union (EU) levels exacerbate the opportunities for collaboration between the US and Europe. We assess the extent to which the restructuring of the US and European defense industrial bases has uprooted national champions and, assisted by global competition, provided an industrial foundation for more extensive transatlantic cooperation. We conclude that a ‘bipolar’ defense market, consisting of relatively strong firms in the US and Europe, is the most likely scenario in the near term

The European Union and integration theories: The case of Europe\u27s defense industry

The European Union (EU) has come to play an increasingly influential role in Europe\u27s defense industry in recent years. This is puzzling because the 1957 Treaty of Rome, which created the predecessor of the EU, stated that issues relating to armaments production and trade should remain with national governments. Today, however, the European Commission oversees policies covering the trade of dual-use goods, approval of corporate mergers and acquisitions, research and development programs, the industrial conversion of regions dependent upon armaments production, and the procurement policies of defense ministries. The European Parliament has been an active proponent of a European defense industrial policy. The 1991 Maastricht Treaty seeks closer cooperation between the EU and the Western European Union, a defense organization seeking to construct a joint European armaments procurement agency. How and why the EU has obtained influence over defense industry issues is important because, assuming that a state\u27s ability to influence its domestic defense industrial base is at least a partial measure of national security, it may provide us with an understanding of the extent to which states may be willing to yield sovereignty to supranational institutions. This, in turn, will have implications for theories of regional integration. However, the European integration literature has not tried to explain how or why the EU has become more involved in defense industry matters. The following research suggests that none of the integration theories, ranging from state-centered realist approaches to neofunctionalist explanations emphasizing interest groups and suprastate institutions, can, by themselves, adequately explain this phenomenon. The theoretical interpretation that best helps us to understand why the EU has assumed more influence in this sector combines an emphasis on the international environment with the concept of spillover. Changes in international politics and economics are forcing Europe\u27s defense industry, the EU, and member states to choose restructuring at the regional level as the best option to ensure the competitiveness and survivability of this sector. The conclusions of this research have implications for several other International Relations research fields, including international political economy, international security, foreign policy-making, international organizations, and the relationships between domestic and foreign policy

"Interest groups and European Union policymaking: The influence of defense industry interests"

The nation state has traditionally been responsible for developing and implementing defense industrial policies. However, as this paper illustrates, interest groups with a stake in defense industry matters are increasingly calling for European-level solutions to the problems affecting this economic sector. After collating the interests of major defense firms, as well as several labor and other groups, we find that almost all substate actors would like national governments to cooperate more on armaments policies, and that many groups would like the European Union to become more involved in defense industry matters

"Subnational meets supranational: The influence of local government on U.S.-EU relations"

Studies of relations between the U.S. and the EU tend to take U.S. foreign policy as a given, and proceed to examine those areas in which the U.S. and EU have found common ground or are in disagreement. However, the inputs to these U.S. foreign policy outcomes have received relatively little attention. This paper focuses on one foreign policy input in the U.S. side of the US.-EU relations: the role of state and local governments in shaping U.S. foreign policies in areas that are of concern to the EU ... Which aspects of US-EU relations have an important local government dimension? How do local governments try to influence US.-EU relations? In which policy areas do key local govern¬ments share views that are more closely aligned with an EU position than with U.S. foreign policy? The results will provide insight into two broad international relations themes: the extent to which non-state actors (like subnational governments and international organizations) are eroding the sovereignty of nation-states, and ... add[ing] the U.S.-EU case to the growing body of literature on the influence of state and local governments in U.S. foreign affairs

“Sovereignty in Transition: The European Commission’s Influence on U.S. Policy”

Scholars have long questioned the international political stature of the European Union (EU), portraying the organization as an economic giant but a political pygmy. Three recent case studies provide evidence to the contrary, showing that the European Commission can transform the EU’s economic capabilities into the political capital necessary to influence policy in the United States. The cases (and policy areas) are: Boeing-McDonnell Douglas merger (aerospace/defense policy); Helms-Burton Act (foreign policy); and the EU Directive on Data Protection (privacy/Internet policy). After describing the EU’s influence in these cases, the paper suggests three explanations for the assertiveness of the European Commission

"Globalization, integration, and Europe's defense industry"

This paper explains how Europe's defense industry has evolved from the end of the Cold War by transforming itself from a collection of nationally oriented firms to one domination by two giants. We argue that both globalization and integration are responsible for this development. After describing the evolution of this sector during the 1990s, we present four factors that played key roles. They are: developments within the United States defense industry; the impact of technology and defense economics; general economic restructuring within the European Union (EU) coupled with a nascent defense industrial policy; and progress toward the creation of a European Security and Defense Policy. One of the main implications of this paper is that the EU plays a key and under-appreciated economic and political role in the changes that take place within Europe's defense industry