International defence industry cooperation in a time of wars

International defence industry cooperation can reduce defence equipment development costs, achieve economies of scale in the production phase, share the risks involved, gain export opportunities, access other’s leading-edge technology, and strengthen diplomatic and political ties between countries.

However, the cooperation model was designed for a very different geostrategic context. After the end of the Cold War, there was no likelihood of hostile interference with manufacturing facilities or supply chains, few time imperatives and production demands could be planned years in advance.

Times have changed

First, the real and imagined wars are major wars. In such conflicts, manufacturing facilities and supply chains are likely to be deliberately targeted, directly or indirectly. For example, Ukrainian defence industrial plants have been attacked using cruise missiles, long-range drones and cyber intrusions. On the other side, Russia’s defence industry has been significantly impacted by sanctions that have cut established supply chains. Outside of wars, future international defence industry cooperation will almost certainly be impacted by hostile cyber attacks.

Second, there are important time imperatives. In a war, whether real or imagined, industry must deliver on time, or better yet early. Schedule now becomes the major driver. Cost becomes less significant. Delivering the required capability will remain important but not if it is so late it cannot meet pressing operational needs. Good enough will be tolerated. To support quicker defence acquisitions, Australia has begun shifting to accepting “minimum viable capabilities”.

Lastly, away from supply factors, the demand factor also changes. As the real or imagined wars evolve, there may be sudden decisions taken by governments to reduce or increase defence orders. The Ukraine War has caused a massive increase in demand for ammunition and guided weapons.

A reduction is more easily handled but may be made to allow a quick diversion into manufacturing another product. Flexibility is becoming a key defence industrial requirement. On the other hand, an increase has big implications across the supply chain. Demand changes raise real concerns about the scalability of an international defence industrial enterprise.

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Implications

Possible physical interference, sanctions, and cyber attacks stress building in resilience. A resilient international defence industrial enterprise would be able to both absorb anticipate shocks and then recover. Recovery can range from the defence industrial enterprise surviving a shock in some reduced form; to continuing its operation in the presence of a shock; to recovering from a shock to its original form; to absorbing a shock and evolving in response.

Such an idea implies moving to an international defence industrial enterprise differently structured to now. Today’s are generally complicated systems that may be conceptualised as centralised networks involving a central node connecting directly to many peripheral nodes.

The lead country is at the centre, firmly controlling the overall process, producing the majority of the components, and undertaking final assembly. The other nations on the periphery supply minor components to the lead country when and as directed. Such a system has limited resilience. The loss of outputs from one peripheral nation, or an attack on the final assembly core, can crash the whole system.

An alternative approach

A different model could be a decentralised network that comprises multiple smaller centralised networks that are connected. Each of the smaller networks has a central node that undertakes some assembly before passing this onto another network. With this structure, the international defence industrial enterprises could function as a restricted complexity system featuring semi-openness, multiple causality, and dispersed authority.

Semi-openness means being able to draw on resources outside the system to compensate for disruptions, unlike in today’s closed systems. In a bizarre example, Russia is apparently buying dishwashers and refrigerators from foreign countries to obtain the semi-conductors needed to build some military equipment and so overcome supply chain sanctions. Having a design in capability to access external sources would not just improve resilience but potentially also allow rapid scaling up of production.

Multiple causality means the loss of one element of the international defence industrial enterprise network can be compensated by using supplies from other parts and by implication through multiple pathways. Such a dual-supplier arrangement would enhance resilience while allowing rapid production scale up. Importantly, some parts of the international defence industrial enterprise network could be designed to have final assembly capabilities so that additional production capacity could be bought into service if needed.

Dispersed authority means there would be no single directing authority. Instead, the parts of the network would communicate and coordinate among themselves to ensure inputs were received when needed and outputs were pushed into the supply chain when requested. Being self-coordinating improves resilience by not having a single point of failure while enhancing timeliness of production by streamlining management processes through making them more direct.

Such an approach has some strengths but also limitations. First, such a network of dispersed facilities probably requires those involved to use fourth industrial revolution techniques. Not all international companies will have adequate capabilities or trained people.

Second, this dispersed network approach might be best suited for the emerging military autonomous systems described as “small, smart, cheap, and many.” An example is Australia’s request for multi-role, low-cost drone systems that can be produced at much greater scale than currently possible and without the security limitations and supply chain vulnerability of current commercial suppliers. Such an idea could be realised using a dispersed regional or global network using restricted complexity system principles.

Third, this means there may still be a place for the traditional international defence industrial enterprise building large, costly platforms. An example of this might be the F-35 production network. This is spread across the globe but is a closed system, tightly controlled, unable to quickly ramp up production and perhaps somewhat fragile in terms of vulnerability to physical attack, supply chain disruption or cyber interference. Such characteristics are unsurprising given the program began some two decades in a very different geostrategic environment.

Thinking about future international defence industry cooperation needs to take into account the real and imagined wars of our time. The old models of international defence industry cooperation will need adjusting even if this incurs extra costs compared to earlier programs. A decentralised network that is semi-open, features multiple causality, and uses dispersed authority may be one possible solution that meets today’s geostrategic needs.

This post is an edited version of a paper presented at the 2023 Hongneung Defense Forum held in Seoul by the Korea Institute for Defense Analyses.

Dr Peter Layton is a visiting fellow at the Griffith Asia Institute, an associate fellow at the Royal United Services Institute and the author of Grand Strategy.