The need for US-led allied nations defence industrial cooperation

The United States has a crucial role to play in fostering defence industrial cooperation among its allied nations, particularly in the Indo-Pacific region. Such collaboration is essential for several reasons, including cost-effectiveness, interoperability, technological advancement, and collective security. But how to achieve this goal?

This challenge was the subject of a groundbreaking report by Dr Jerry McGinn, executive director, and Professor Michael T. Roche, visiting fellow, of the George Mason University School of Business, titled A “Build Allied” Approach to Increase Industrial Base Capacity.

In the report, the authors argue that developing an effective build allied approach will help the US Department of Defense create surge capacity, with both speed and scale, and industrial resilience in support of the National Defense Strategy (NDS) objectives.

The report examines nine case studies on how international industrial collaboration for military acquisition and production can be a mutually beneficial and cost-effective way to increase industrial capacity and resilience, a need starkly highlighted by the war in Ukraine. In this analysis, they assess the enablers – US subsidiaries, reciprocal defence procurement agreements, the National Technology Industrial Base, and the Australia, United Kingdom, and United States (AUKUS) partnership – and obstacles – export controls, technology security and foreign disclosure, aspects of the defence acquisition system, and Buy America – to more robust and effective collaboration.

A shared challenge and vision

The report highlights that Ukraine has “clearly demonstrated the need for greater capacity in our defence industrial base. Increasing US production of defence systems is part of the solution to this capacity deficit, but engaging the industrial capacity of American partners and allies is a critical, mutually beneficial, and cost-effective approach as well”.

It is not only the US government that has reached this conclusion. The same fundamental issues (supply chain security, workforce, testing and evaluation, research and development, etc) are being faced by Australia, Japan, India, the UK, and most other defence forces globally.

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The Australian Minister for Defence, the Hon Richard Marles, noted recently “the Australian Defence Strategic Review makes clear that Australia must invest in the transition to new and innovative technologies for our Defence Force. Central to this will be our ongoing work to operationalise Pillar Two of the AUKUS agreement, which seeks to develop and provide capabilities such as undersea warfare and hypersonics for Australia, the UK, and the US”. Importantly, he recognised that “together, these investments will contribute to Australia’s defence industrial base and build on the already strong cooperation with our international partners”.

Benefits of an allied approach

Cost-effectiveness: Defence procurement and research and development are resource-intensive endeavours. By pooling resources and expertise through international cooperation, allied nations can reduce costs associated with the development, production, and sustainment of defence systems.

Collaborative programs, such as joint research initiatives, co-production, and shared procurement can leverage economies of scale, leading to cost savings for participating countries. Furthermore, defence industrial cooperation allows for burden-sharing, preventing duplication of efforts and promoting efficient allocation of limited resources.

Interoperability: In an era of multinational military operations and joint missions, interoperability between allied nations is vital. Through defence industrial cooperation, countries can align their defence capabilities, standards, and procedures. This alignment facilitates seamless integration and coordination among allied forces, enabling effective joint operations. Common equipment, shared logistics, and standardised training enhance interoperability, allowing allied nations to achieve greater operational effectiveness and reduce operational risks.

Technological advancement: Defence industrial cooperation promotes technological advancement by fostering collaboration in research and development (R&D) activities. Pooling scientific and technological resources enables allied nations to undertake ambitious projects and tackle complex defence challenges that might otherwise be beyond their individual capacities. Collaborative R&D efforts not only yield technological breakthroughs but also create opportunities for knowledge transfer, innovation, and capacity building.

By leveraging the collective expertise of allied nations, defence industrial cooperation paves the way for cutting-edge technologies, enhancing the overall defence capabilities of the participating countries.

Collective security: In an era marked by evolving security threats, collective security has become imperative. By promoting defence industrial cooperation, the US can strengthen alliances and build trust among its partners. Joint defence projects foster mutual dependency, leading to shared strategic interests and the creation of a network of allies capable of responding to common security challenges. Additionally, enhanced cooperation in defence industries can facilitate intelligence sharing, joint training exercises, and coordinated responses to emerging threats, bolstering collective security in an increasingly volatile global landscape.

Economic benefits: Defence industrial cooperation also brings significant economic benefits. Collaborative defence projects stimulate economic growth, job creation, and technological innovation in participating countries. Shared investments in defence industries can lead to the development of domestic capabilities, increased exports, and a competitive advantage in the global defence market. Moreover, defence industrial cooperation can drive technological spin-offs, benefiting civilian sectors such as aerospace, communications, and advanced manufacturing. These economic advantages further strengthen the bonds between allied nations and contribute to long-term strategic partnerships.

An Indo-Pacific ‘DIANA’ model – the DIBX

The Indo-Pacific region is undergoing a period of heightened geostrategic uncertainty, defence posture adjustments and increases, and an increasingly complex latticework of alliances and partnerships.

It is also a region of rapidly emerging technological innovation, including dual-use technology that can have civil and military applications. An allied nation’s defence industrial base accelerator can play a vital role in driving innovation and supporting the development of critical and emerging technologies to enhance stability and security in the region.

The allied nations Defense Industrial Base Accelerator (DIBX) consortium (US, Japan, Australia) has been exploring this challenge for several years now and is about to launch the DIBX.

The DIBX, which has learned lessons from the NATO DIANA model and has reached the same conclusion as McGinn and Roche. Namely, the creation of a larger industrial base to increase speed and scale capabilities through robust international industrial partnerships to build the systems needed for current and future contingencies.

The DIBX has also been designed in the spirit of “a true Build Allied approach ... goes well beyond reforming foreign military sales or expanding the scope of international acquisition programs. To realise NDS objectives, we must accelerate international industrial collaboration to build the industrial base capacity and resilience we need to face the national security challenges of tomorrow”.

The DIBX vice-president, Bernice Kissinger, notes: “Capability collaboration across allied nations has been ignited in response to China and Russia threats. AUKUS, the Quad, and Japan as a defence partner doubling its spending and securing counter-strike capabilities while dismantling its export barriers are all accelerating partnerships.”

Missing – until now – are rapid-acquisition vehicles for allied nations to collaborate on developing and delivering the right solution to the warfighter at the right place and the right time. “OTAs and other rapid procurement tools can deliver much more value to the government than they have in the past, particularly across vetted allied-nation teams not only for prototyping to programs of record, but also for purchasing materials, securing sustainable soft-power benefits, and strengthening the US and allied nations,” Kissinger says.

The DIBX will engage allied nations with a shared strategic interest for a free and open Indo-Pacific. The US–Australia–Japan trilateral strategic relationship is logical first stage to explore, especially around hypersonic and long-range strike capability development, artificial intelligence, quantum computing, cyber, and other critical and emerging technologies.

Guy Boekenstein has 20 years’ experience working in the defence and national security space in the Indo-Pacific and is the Australian Director for DIBX.