Defense Industry Defense Policy Defense Technologies

Report February 18, 2026

A strategic asset: Leveraging special security agreements for defense innovation

Acknowledgements

Forward Defense is grateful to Airbus Americas, Inc. for its support of this report.

Airbus U.S. Space and Defense, Inc. (a subsidiary of Airbus Americas, Inc.) operates under a Special Security Agreement (SSA)—the subject of this report—with the US government. Other companies mentioned in this report in the context of their SSAs with the US government—American Rheinmetall Defense and Leonardo—are also donors to Forward Defense, but are not supporters of this report.

This report was written and published in accordance with the Atlantic Council’s Intellectual Independence Policy, which requires all donors to agree to the Council maintaining independent control of the content and conclusions of its work. The author is solely responsible for its analysis and recommendations.

The author thanks Abigail Rudolph for her writing and editing support.

About the author

Fellow

Rob Murray

Nonresident Senior Fellow

Forward Defense Scowcroft Center for Strategy and Security

Defense Industry Defense Policy

Executive summary
Introduction: SSAs and the US defense advantage
Problem statement: US defense strategy—the five fault lines
Advantages offered by SSAs
Understanding SSA structures, proxy models, and national interest determinations
SSAs under fire: Risks and critiques
A risk-benefit analysis
The SSA model and the future of defense technology
Policy recommendations to maximize SSA benefits
Streamlining SSA approval processes to encourage more investment
Pathfinder projects for further SSA integration
Conclusion

Executive summary

Special Security Agreements (SSAs) can help sustain a defense advantage for the free world amid rising global competition. These agreements allow foreign-owned, US-based defense companies to engage in sensitive US defense contracts under stringent government oversight, ensuring adherence to national security protocols.

SSAs strategically reconcile the use of foreign expertise with the protection of US interests, bolstering defense self-sufficiency by diversifying supply chains and augmenting domestic production capabilities. These companies can stimulate innovation and fortify the US industrial base. While it is predominantly European defense companies that utilize SSAs, Asian defense companies have long participated in US national security projects under SSAs—Japan, South Korea, and Singapore have maintained such arrangements for more than a decade. South Korea’s Hanwha Aerospace is the latest example, currently undergoing the SSA accreditation process to expand its role in the US defense industrial base.¹

Maintaining engagement with allied defense technology via SSAs can help the United States; it ensures interoperability and alliance resilience even as current geopolitical dynamics require a flexible and pragmatic approach. For Europe, SSAs prevent the division of transatlantic defense cooperation and helps to assure compatibility with NATO systems. Companies operating under an SSA are subject to stringent safeguards, including direct oversight by the US Department of Defense (DOD) via the Defense Counterintelligence and Security Agency (DCSA) and continuous internal monitoring by a Government Security Committee (GSC) composed of cleared US citizens. This dual structure mitigates foreign ownership, control, or influence (FOCI), while enabling the US government to safely access and operationalize allied technologies for critical national security needs.

To optimize the advantages of SSAs, this paper recommends streamlining export approvals for defense systems, utilizing SSA companies to broaden US access to allied defense markets, countering Chinese and Russian arms sales with SSA-backed defense agreements, expediting the SSA approval process, and establishing a dedicated SSA office within the US DOD.

This report also identifies four Pathfinder Projects—in intelligence, surveillance, and reconnaissance (ISR), counter-hypersonics, maritime autonomy, and cyber resilience—that demonstrate how SSA companies can be leveraged as strategic enablers to enhance allied defense integration, while addressing regulatory, operational, and policy barriers to collaboration.

In sum, SSAs are a strategic asset that can enhance US military strength, reinforce alliances, and secure the United States’ ongoing leadership in global defense innovation.

Introduction

The United States has long maintained the world’s most advanced and capable large-scale military, underpinned by technological superiority and a robust defense industrial base. Yet, as global threats evolve, China and Russia are rapidly modernizing their militaries and challenging US dominance. To sustain its edge, Washington must strengthen its defense sector while maintaining control over foreign investment in sensitive industries.

SSAs are a critical, yet often misunderstood, tool in this effort. First introduced in 1984 during the Cold War, these agreements emerged as a response to growing concerns about FOCI in the US defense industry. By the 1970s, policymakers had started formalizing security measures to regulate foreign investments in defense companies. Over time, these mechanisms evolved through the National Industrial Security Program (NISP) and were further strengthened as security concerns deepened after 9/11. Today, SSAs provide a structured framework that allows foreign-owned, US-based defense companies to contribute to national security while operating under strict US government oversight.²

The advantages are clear. SSAs enable the United States to harness foreign technology, investment, and competition while managing national security risks through security controls. They also strengthen transatlantic and broader allied defense cooperation.

The strategic logic behind SSAs is simple: They ensure that foreign companies contribute to US military strength while remaining fully compliant with US regulations. In a world where technological dominance defines military superiority, Washington must use every available tool to stay ahead. Properly managed, SSAs are one such tool, allowing the United States to leverage foreign defense investments for competitive advantage.

Problem statement: US defense strategy—the five fault lines

The US defense industrial base is at a crossroads. While the United States maintains the world’s most advanced large-scale military, its ability to sustain technological dominance is under pressure from several converging trends.

First, industrial capacity constraints have become a national security concern. The war in Ukraine has underscored bottlenecks in US production lines, from ammunition stockpiles to shipbuilding delays. The Pentagon has struggled to ramp up manufacturing at the speed required for sustained military operations.
Second, US defense research and development (R&D) investment is falling behind. Insufficient internal R&D funding has made it difficult for defense primes and mid-tier contractors to drive innovation at the pace of geopolitical relevance. While China rapidly scales military-technological advancements, the US defense sector remains overly reliant on government-funded programs with slow procurement cycles.
Third, the rise of dual-use technology is reshaping military competition. Critical advancements in artificial intelligence (AI), space-based defense, and cybersecurity—among other sectors—are now driven by the commercial sector rather than government labs or traditional defense contractors. The United States must find ways to integrate advanced allied technologies while safeguarding national security interests, protecting classified information, and maintaining appropriate oversight of foreign investment in sensitive sectors.
Fourth, allied interoperability is no longer optional. As NATO and Indo-Pacific alliances grow in strategic importance, the United States must ensure its defense sector remains deeply integrated with allied defense industries. However, driven by geopolitical concerns, European nations are increasingly prioritizing defense-industrial sovereignty, creating risks of fragmentation.
Finally, US defense exports face growing competition from adversaries. China and Russia have expanded their arms sales across the Middle East, Africa, and Asia, offering cheaper alternatives to US defense systems. Without strategic measures to maintain US leadership in global arms markets, the influence of US defense technology could erode.

Given these structural challenges, the United States cannot afford an isolationist approach to defense industrial policy.

Advantages offered by SSAs

SSAs provide a powerful mechanism that can help expand US access to cutting-edge capabilities—enhancing domestic production where appropriate, strengthening R&D investment, integrating dual-use technologies, improving allied interoperability, and maintaining US export competitiveness—all while ensuring that foreign investment is subject to rigorous US government oversight. While SSAs can support the relocation of manufacturing to the United States, they do not require it; rather, their primary function is to permit secure integration of foreign-developed capabilities into the US defense ecosystem under tightly controlled conditions. This section will examine each of these strategic advantages in turn.

Strengthening US defense self-sufficiency by reducing dependence on adversarial supply chains

SSAs play a pivotal role in helping the United States diversify and secure its defense supply chains without retreating into full-scale onshoring. They enable US-based subsidiaries of trusted foreign defense firms to contribute to critical programs. These companies operate within a framework that includes cleared US citizen leadership, firewalls to prevent foreign parent interference, and strict compliance with US defense contracting and export-control regimes.

This structure achieves two objectives simultaneously.

It allows the United States to safely access high-quality components and subsystems from allied supply chains in areas where domestic production might be insufficient or unavailable at scale.
It encourages trusted foreign firms to invest directly in the United States—boosting local manufacturing capacity, injecting competition, and accelerating innovation.

One example of this dynamic can be seen in American Rheinmetall’s expansion into the US armored vehicle sector.³ As the US Army pursues its modernization agenda, Rheinmetall—a global defense prime operating a US subsidiary under an SSA—has invested in domestic production facilities, with vehicle components manufactured onshore and under US security protocols. Another example is Kongsberg Defense & Aerospace, Inc., which announced in September 2024 the opening of a new missile production facility in James City County, Virginia, investing more than $100 million in capital expenditure over the next few years and creating over 180 new jobs.⁴ This approach on-shores defense production with less reliance on potentially vulnerable foreign supply chains while still allowing the DOD to access allied technology.

While SSAs do not address commodity-level vulnerabilities—such as rare earth element (REE) dependencies—they are a critical part of the broader solution. The 2010 incident in which China restricted REE exports to Japan over a diplomatic dispute illustrates how adversaries can weaponize supply chains.⁵ SSAs help mitigate this risk at the system level by insulating the defense industrial base from undue foreign influence and expanding the set of trusted suppliers across allied nations.

Expanding US defense production capacity

Beyond securing supply chains, another key challenge facing the US defense sector is limited production capacity. The ongoing war in Ukraine has exposed severe bottlenecks in US ammunition and missile stockpiles, raising concerns about whether the United States can sustain high-intensity military operations over extended periods.⁶ Similarly, US shipbuilding faces significant delays, with the US Navy struggling to meet its long-term fleet expansion goals.⁷ These industrial constraints highlight the need for increased defense manufacturing capabilities—a challenge that SSA companies can help address.

SSA companies can contribute to US defense self-sufficiency by building and operating US-based manufacturing facilities, expanding domestic production capacity, and reducing strain on other US defense companies. Rather than replacing US companies, SSA companies serve as force multipliers that increase the United States’ ability to manufacture critical defense equipment. For example, Leonardo Electronics, an SSA firm specializing in military electronics and avionics, has established multiple production sites in the United States, providing technology to US military aircraft and battlefield systems while keeping production within US borders.⁸ Similarly, Elbit America has several US production sites. Its facility in Roanoke County, Virginia is set to undergo a $30 million expansion and add 288 new jobs.⁹

The benefits of this approach extend beyond immediate military needs. By increasing manufacturing output, SSA companies create US jobs, attract foreign investment, and strengthen local economies. These investments bolster US industrial capacity, ensuring that critical defense production remains resilient in times of crisis.

Foreign direct investment (FDI) in US transportation equipment manufacturing—the Bureau of Economic Analysis industry category that captures aerospace, land systems, and missiles—rose from $167 billion in 2020 to $229 billion in 2023, a 37-percent jump despite tighter screening rules.¹⁰ Europe drove almost 40 percent of that 2023 increase; German-owned assets alone grew by $58.9 billion.¹¹ By industry, affiliates in manufacturing increased the most, increasing $58.6 billion to a total investment position of $2.22 trillion.

Figure 1: US and foreign direct investment positions 2022-2023¹²

Understanding SSA structures, proxy models, and national interest determination

While SSAs provide a powerful framework for integrating foreign-owned companies into the US defense industrial base, it is important to understand how SSA companies differ from proxy companies, as well as how certain regulatory requirements—particularly NIDs—impact their operational flexibility and ability to deliver capability to the warfighter. While the SSA model successfully allows the United States to leverage allied industrial capabilities under controlled conditions, the NID process introduces an additional layer of regulatory scrutiny. The experience of some SSA companies suggests that the average NID approval time can exceed twelve months for Top Secret programs and Special Access Programs (SAPs), underscoring the schedule risk these requirements introduce. To clarify the operational and regulatory distinctions between these structures, the table below summarizes the key differences between SSA companies, proxy companies, and the role of the NIDs process.

Proxy companies are wholly US-controlled entities established when foreign ownership must be structurally separated from operational control to protect highly sensitive national security interests. While the foreign parent company retains economic ownership, the company is governed by a board of US citizens who exercise exclusive authority over day-to-day management and operations. Although the foreign parent does not have access to classified information or direct operational control, it does not surrender all forms of influence. Notably, in some cases, companies do have some control as to whether they are placed under a proxy agreement or an SSA. Proxy companies are generally allowed to access Top Secret programs, SAPs, and other highly classified activities without requiring additional government approvals beyond their facility clearance.

By contrast, while SSA companies operate under stringent US government oversight—including US citizen management, security controls, and regular audits—they must seek NIDs whenever they require access to classified information above the Confidential level, particularly for Secret, Top Secret, or SAP contracts. A NID is a formal finding by the sponsoring US government agency that granting classified access to an SSA firm for a specific program or contract is in the national security interest of the United States.

Many companies choose the SSA model over a proxy or voting trust because it offers a more practical balance between security and strategic integration. SSAs allow the US government to mitigate foreign influence while still enabling the subsidiary to benefit from the technical expertise, supply chain efficiencies, and innovation capacity of the parent company—provided these are delivered in a strictly advisory capacity. For founder-led businesses or long-term industrial partnerships, the SSA structure provides visibility and continuity that proxy agreements—often perceived as a total separation—do not allow. In this way, SSAs support both security assurance and operational alignment across allied defense ecosystems.

While the SSA model successfully allows the United States to leverage allied industrial capabilities under controlled conditions, the NID process introduces an additional layer of regulatory scrutiny. Delays in obtaining NID approvals—whether due to bureaucratic backlog, shifting security assessments, or political considerations—can slow contract execution, complicate program management timelines, and create uncertainty around an SSA firm’s ability to deliver capability to the warfighter on schedule. In an environment where defense acquisition increasingly emphasizes speed to deployment, any perceived risk of delay can erode customer trust, damage a company’s reputation, and disincentivize program managers from awarding contracts to SSA companies even when they offer technological or cost advantages.

Recognizing these structural realities is critical to refining SSA policy. While the safeguards built into SSA and NID processes are necessary to protect national security, a more predictable, streamlined, and risk-calibrated approach would strengthen SSA companies’ ability to contribute fully to US defense priorities without compromising operational timelines or trust. Properly managing these regulatory mechanisms is essential both for maximizing industrial capacity and ensuring that the strategic advantages of SSAs are realized at the speed required by modern conflict.

SSAs under fire: Risks and critiques

Despite the jobs, dollars, and infrastructure SSAs bring to the United States, their role in the US defense ecosystem is sometimes debated. While proponents argue that SSAs enhance the US industrial base and strengthen transatlantic and broader allied defense collaboration, critics raise concerns about their impact on national security, economic sovereignty, and US jobs. The most vocal opposition stems from two major areas: security risks and economic competitiveness.

National security concerns: Do SSAs expose US defense capabilities?

Critics worry that allowing foreign-owned companies to operate in the US defense sector—even under SSAs—introduces material risks of foreign influence and potential technology transfer.

While SSAs are designed to mitigate these risks through security controls, critics argue that they leave open channels for subtle, but powerful, influence by foreign parent companies. According to a 1990 Government Accountability Office (GAO) report, which remains the office’s most recent comprehensive review of SSAs, many former Defense Department security officials expressed concerns that SSAs “do not negate” FOCI but accept it “as a risk/hazard,” especially in the absence of US-owned alternatives.

Indeed, unlike proxy agreements, which mitigate FOCI by transferring all voting power to cleared US proxies, SSAs explicitly acknowledge the presence of FOCI and manage its risk through a government security committee, independent US directors (though the foreign owner still has a presence on the board), and strict information-access controls. In other words, proxy agreements strongly mitigate FOCI; SSAs accept and mitigate it to a lesser degree. The former DOD officials mentioned above noted that company directors and employees might still feel beholden to foreign owners, thereby rendering them susceptible to undue pressure, even if it is unintentional. The 1990 GAO report also documented cases in which SSAs granted access to highly classified programs—including the stealth bomber and the Strategic Defense Initiative—raising alarm among security professionals who emphasized that such information is often not releasable even to close allied governments.

Furthermore, auditors found systemic weaknesses in how SSAs were implemented. In some instances, foreign owners were granted interim access to classified work for more than a year while formal safeguards were still under negotiation, undermining the DOD’s leverage and oversight. In other cases, National Interest Determinations (NIDs) used to justify SSAs lacked adequate documentation, and there were examples in which foreign companies had ties to adversarial states that were not formally evaluated during the clearance process.

These findings underscore a broader challenge with foreign investment in the defense sector: the security risks that arise when adversaries gain influence over US contractors. Despite oversight from DCSA, safeguards to mitigate foreign influence are historically reactive rather than proactive. Complex corporate structures and scattered information hinder the effectiveness of strategies to mitigate FOCI.¹³ Plus, agencies such as DCSA are facing budget cuts that could add to enforcement challenges.¹⁴

These shortcomings have fueled a perception among critics that SSAs, while administratively convenient, could compromise national security when used too broadly or without stringent enforcement.¹⁵

Understanding SSAs’ impact on American jobs and industry

Another critique of SSAs stems from a broader concern that allowing foreign defense companies to operate in the United States could displace US companies, impact domestic employment, and weaken the country’s industrial sovereignty. Some argue that foreign-owned companies, even if restricted by SSAs, still compete for US defense contracts—potentially squeezing out US suppliers and reducing opportunities for US-based manufacturers.¹⁶

There is also a perception that SSA companies might undermine the goals of “Buy American” policies, which aim to prioritize US workers and suppliers in defense procurement. This perspective has led to political opposition, particularly from factions that view any form of foreign participation in the defense sector as a threat to economic self-sufficiency.¹⁷ As US Senator Patty Murray put it during a 2008 debate over an Air Force contract, “We are hemorrhaging manufacturing jobs to foreign countries already, so I cannot imagine why … our government would decide to take 44,000 American jobs, good jobs, and give them to the Europeans.”¹⁸

A risk-benefit analysis

While concerns about SSAs are valid, they must be weighed against the strategic benefits these agreements provide. A blanket rejection of SSA companies would risk alienating key allies, reducing the competitiveness of US defense exports, and limiting the Pentagon’s access to cutting-edge technology. Instead, the focus should be on refining SSA policies to ensure even greater transparency, security, and alignment with national interests.

The United States must strike a balance between maintaining industrial sovereignty and leveraging allied defense investment. With the right safeguards in place, SSAs remain a strategic tool that strengthens US defense posture while keeping foreign participation firmly under Pentagon oversight regarding what technologies are developed, how they are used, and where they are exported.¹⁹

Ensuring the United States calls the shots

SSAs include rigorous legal and operational safeguards that restrict foreign influence over sensitive defense projects.

US government oversight: SSA companies must comply with DOD regulations and operate under strict security protocols, including security controls to prevent foreign access to classified programs.
US-controlled management structures: SSA companies are required to appoint US citizens to key leadership positions, ensuring that strategic decisions remain in American hands.
Restrictions on FOCI: While the parent company might be foreign, the US subsidiary operates independently, adhering to US industrial security laws and regulations.²⁰

These safeguards are working. In fact, FOCI-mitigated companies receive high ratings in their DCSA security reviews. And that’s one reason why they serve as a model for other areas of the federal government.

In April 2025, DCSA announced that it is set to expand foreign ownership reviews to unclassified defense contracts. New regulations will soon require companies to conduct FOCI assessments before being awarded contracts over five million dollars, representing a significant change from the previous focus primarily on companies seeking or holding security clearances for classified work.²¹ In parallel, the Committee on Foreign Investment in the United States (CFIUS) has demonstrated its effectiveness in preventing acquisitions that could undermine US technological competitiveness and national security. For example, in March 2018, the first Trump administration blocked a proposed takeover of US telecom leader Qualcomm by a Singapore-based company.²² This successful intervention indicates that oversight mechanisms can work and security risks can be mitigated effectively.

More competition, lower costs, faster innovation, and supply chain resilience

Beyond technological access and security safeguards, SSA companies also play a key role in keeping the US defense sector competitive, cost-efficient, and innovative. The US military has long benefited from a defense market driven by competition among suppliers, which encourages efficiency and technological advancement. However, with a shrinking number of major US defense contractors dominating the industry, the risk of monopolistic pricing and slower innovation has increased.²³

SSA companies help counteract this trend by introducing additional competition into the defense procurement process. When SSA companies bid for contracts, they push domestic companies to improve efficiency, reduce costs, and accelerate technological development.

SSA companies can also expand access to cutting-edge technologies and specialized expertise that might not otherwise exist in the domestic industrial base. Such international technology infusion strengthens US warfighting capability and supports an operational advantage on the battlefield.

Additionally, the SSA framework signals a high level of trust and interoperability among allies and partners. It represents more than just diplomatic coordination—it enables industrial integration, linking allied nations through shared production, innovation, and security standards. This deepened collaboration fosters strategic alignment and ensures that the United States and its closest partners remain technologically and operationally synchronized in future conflicts. It also reinforces the resilience and diversity of the defense industrial base by broadening the supplier pool and reducing overreliance on a limited number of domestic contractors.

Strengthening global arms competitiveness

The benefits of SSA companies extend beyond domestic defense needs; these companies also play a crucial role in expanding US defense exports and maintaining US dominance in global arms markets.

When SSA companies operate within the United States, they become part of the US defense ecosystem, aligning their interests with US export strategies. This participation enables the following:

International joint ventures: Whether led by the United States or allies in Europe, Asia, or elsewhere, these can expand arms exports by integrating complementary defense technologies into unified weapons systems, often making them more attractive to third-country buyers.
Greater US influence over global arms deals: SSAs give the US government greater influence over foreign defense companies operating domestically, enabling Washington to shape how their technologies are marketed, integrated, and exported—often favoring US-led configurations and supply chains over those aligned with geopolitical rivals.
Partnerships with US companies on international bids: SSAs can facilitate industrial partnerships that strengthen US companies’ participation in international bids by enabling secure collaboration on joint solutions, co-production, and technology integration that aligns with both US export controls and allied defense priorities.
Help for US companies navigating international procurement regulations: SSA-governed companies can serve as trusted international intermediaries, helping US defense companies navigate foreign procurement dynamics by offering local insight, industrial access, and co-bid pathways aligned with both US compliance standards and foreign political expectations.
The creation of joint defense platforms: These are more attractive to foreign buyers, strengthening US defense export potential.

By allowing foreign companies to participate in the US market under SSAs, Washington ensures that US defense companies remain deeply integrated into allied procurement decisions (increasing US companies’ global competitiveness) and that allied technological advancements primarily complement—rather than compete with—US military exports.

For an administration focused on “America First” policies, SSAs are a strategic asset that enhances US technological superiority while ensuring that foreign investment serves US national security goals.

Countering China and Russia in the global arms export competition

Beyond transatlantic defense markets, the United States faces growing competition from China and Russia in arms exports, particularly in the Middle East, Africa, and Asia. Both Beijing and Moscow have aggressively expanded their defense sales, offering lower-cost alternatives to US weapons and positioning themselves as preferred suppliers to nations that might otherwise purchase US systems.²⁴

China has significantly expanded its arms exports, particularly in the drone and missile sectors, for countries that have struggled to navigate US export restrictions.
Russia remains a leading global supplier of military equipment, leveraging historical defense ties with India and countries in the Middle East and Africa.

The United States cannot afford to cede global market share to its adversaries, particularly in strategically significant regions. SSA companies provide an opportunity to strengthen US arms sales abroad by ensuring that allied defense companies are working in alignment with US strategic goals rather than competing with them.

For example, the United States can leverage SSA companies to position joint US-European defense solutions as the preferred alternative to markets that Russia or China might seek to serve. This approach ensures that Washington remains the dominant supplier of advanced military technology to friendly nations while limiting the ability of China and Russia to expand their defense influence.

SSAs as a tool for strengthening NATO and allied defense capabilities

In addition to securing US defense exports, SSA companies play an important role in strengthening NATO interoperability and allied defense capabilities. One challenge of multinational defense cooperation is ensuring that allied forces can seamlessly integrate their military technologies.²⁵

Europe’s governments are simultaneously doubling defense budgets and signaling that at least 50 percent of those outlays should be spent on equipment “made in Europe” by 2030, according to the European Union’s first-ever European Defence Industrial Strategy (EDIS), unveiled on March 5, 2024.²⁶ For many European primes, establishing or expanding a ring-fenced US SSA subsidiary is therefore the politically low-friction way to stay interoperable with US forces without appearing to export scarce production capacity across the Atlantic—a consideration that has become more salient as capitals debate strategic autonomy.

SSA companies help solve this problem by serving as a bridge between US and European defense platforms, allowing for better compatibility between NATO systems and joint development of interoperable technologies.²⁷

Balancing interoperability gains with political realities

For the United States, strengthening allied interoperability through SSAs is not only advantageous but necessary for future coalition operations and maintaining NATO’s technological edge. However, it is important to recognize that, in the current geopolitical environment, some European allies face domestic pressures to prioritize strategic autonomy and might be cautious about deepening visible industrial collaboration with the United States. Acknowledging these dynamics, Washington should continue to expand SSA-based cooperation in ways that are operationally meaningful but politically sustainable—emphasizing trusted, scalable frameworks that allow interoperability gains without forcing binary political choices. Flexibility and strategic patience will be critical to reinforcing alliance cohesion while ensuring that allied defense industries remain aligned with US strategic objectives.

By leveraging SSA companies as integrators of transatlantic defense capabilities, the United States ensures that its allies remain militarily compatible while also strengthening its own defense export potential.

Why “Buy American” policies should not mean “buy alone”

The idea of promoting domestic defense production through “Buy American” policies is widely supported across the US political spectrum.²⁸ However, any protectionist approach that might exclude SSA companies would be counterproductive. Instead of strengthening the US defense industrial base, such an approach would limit access to advanced technologies, increase procurement costs, and weaken defense ties with allies.

The reality is that the United States does not manufacture everything it needs within its own borders. In today’s global defense landscape, military technology development is inherently international, with key components, subsystems, and research collaborations spanning multiple countries.

For example, missile development, naval shipbuilding, and avionics technology all benefit from transatlantic collaboration.²⁹ If the United States were to shut out SSA companies, it would lose access to advanced allied technologies and risk damaging its alliances with key defense partners. A more effective policy would be to balance national security with strategic openness, ensuring that SSA companies operate under strict conditions but remain part of the US defense ecosystem.

The SSA model and the future of defense technology

While traditional defense primes remain essential to US military power, the character of warfare is shifting toward the integration of AI-driven operations, electronic warfare (EW), space-based defense, and autonomous systems. The emergence of new defense technology companies, many of them global in scope, demands an SSA model that can accommodate nontraditional defense players. Indeed, many of the most cutting-edge dual-use and single-use military technologies—particularly in cybersecurity, AI, and battlefield intelligence—are being developed by non-US companies, many based in Israel and Ukraine. SSAs provide a mechanism for bringing such companies into a US defense context.

Why SSAs are essential for emerging defense technologies

The SSA framework could help facilitate the integration of emerging foreign defense technologies, especially where the United States stands to gain from technologies advanced in the context of active battlefields overseas or through peacetime international defense co-production efforts.

The war in Ukraine has driven extraordinary advancements in drones, battlefield AI, and electronic warfare. Regardless of whether and when it moves toward a ceasefire, Ukraine’s burgeoning defense technology sector will need investment to commercialize and scale its capabilities.³⁰ A streamlined, tailored SSA framework—featuring faster processing, simplified compliance, and strategic prioritization—could provide a pathway for Ukrainian defense startups to integrate into US military development pipelines and ensure that battlefield-proven technologies and talent are retained within the US and NATO defense ecosystem, rather than being lost due to uncertainty, dispersion, or demobilization if the conflict enters a lower-intensity or politically unsettled phase. Indeed, this technology backflow should be seen as an important return on US and allied investment in Ukrainian security.

Additionally, SSAs could play a critical role in strengthening the AUKUS alliance between Australia, the United Kingdom, and the United States, which is central to Indo-Pacific security and deterrence against China.³¹ To advance AUKUS Pillar II cooperation on AI-enabled warfare, quantum technologies, and next-generation naval capabilities, Washington should encourage more UK and Australian defense tech firms to establish US-incorporated subsidiaries operating under SSAs. This would enable trusted collaboration within a US legal and security framework, ensuring that emerging AUKUS technologies are interoperable, export compliant, and developed in coordination with US national security priorities.

Policy recommendations to maximize SSA benefits

By refining SSA policies, streamlining regulations, and strategically leveraging foreign investment, the United States can ensure that SSA companies remain an asset to national security. To that end, the following proposals are recommended.

Coordinate export strategies with SSA-governed firms.
- The State Department and DOD should better align export approvals and timelines for foreign defense companies offering systems with critical technology that are part of broader allied production chains.
- Much of this coordination challenge relates to International Traffic in Arms Regulations (ITAR), which govern the export of US-origin defense technologies. Inconsistent or delayed licensing processes can disadvantage SSA-governed companies in international competitions, even when they operate under strict US oversight.
- By harmonizing these strategies, Washington can ensure that allied defense firms operating under US jurisdiction strengthen—rather than undercut—US arms sales and industrial influence abroad.
Use SSA companies to expand US access to global defense markets.
- For political and regulatory reasons, many foreign nations prefer to buy military equipment from manufacturers in their own country or region rather than US companies.
- SSA companies provide a gateway for US defense companies to enter foreign procurement programs, as they can serve as a bridge between US technology and international market demands through various prime and subcontractor relationships.
- Washington could negotiate preferential procurement agreements with foreign governments, ensuring that SSA companies facilitate greater integration between US and global defense industries.
Counter Chinese and Russian arms sales with SSA-backed defense agreements.
- Both China and Russia are aggressively expanding their arms exports to developing nations, particularly in the Middle East, Africa, and Asia.
- SSA companies could be used as a strategic tool to counter these sales by promoting joint US-European defense solutions in regions where China and Russia seek influence.
- By offering SSA-backed defense agreements to strategic partners and their industry, the United States could reinforce global military alliances while limiting the reach of adversarial arms suppliers.

Streamlining SSA approval processes to encourage more investment

While SSAs provide a strategic advantage, the bureaucratic process for approving them is often slow and complex, discouraging foreign investment in US defense. Washington must balance national security concerns with a regulatory environment that encourages trusted allied companies to invest in the United States.

To fully leverage SSAs for US military, economic, and strategic advantage, policymakers should do the following.

Establish a clearer and faster SSA approval process.
- The current SSA approval process can take years, potentially discouraging allied companies from pursuing US investments. This is particularly relevant for allies and partners in the Indo-Pacific that might seek closer collaboration with the United States and thus use SSAs as a tool to help achieve such collaboration.
- A more efficient approval system, with clear timelines and security benchmarks, would encourage greater FDI in US defense without compromising national security.
Elevate SSA-governed companies within US defense industrial strategy.
- The DOD should establish a formal mechanism to integrate SSA-governed companies into broader defense industrial base planning, export strategy, and capability development frameworks. While the DCSA should continue to lead oversight and security compliance, a dedicated policy coordination function is needed to ensure these firms are recognized not just as compliant entities, but as strategic assets within the allied defense ecosystem.
- SSA companies often possess advanced technologies, global supply chains, and R&D capabilities that are directly relevant to US modernization priorities. However, without a clear point of integration within DOD policy structures, these companies risk being under-leveraged or misunderstood—particularly when navigating export approvals, joint programs, or eligibility for domestic production incentives.
- Establishing a policy focal point inside the DOD could help ensure that SSA-governed companies are factored into key decisions—such as National Technology and Industrial Base (NTIB) planning, trusted capital pathways, or Defense Production Act Title III investments.
- This approach would not impose new compliance burdens but would instead unlock strategic value from firms that are already trusted, cleared, and operating under US law. It would also help align the SSA framework with US goals to expand allied production capacity, improve supply chain resilience, and strengthen transatlantic defense collaboration.
Expand SSAs to include emerging defense tech companies.
- Create a specialized SSA pathway for US-prioritized emerging technologies—such as AI, space, quantum, and counter-hypersonics— ensuring US access to cutting-edge military innovations.
- Create narrowly scoped ITAR exemptions or expedited licensing pathways for SSA-governed US companies engaged in co-development of AI and hypersonic technologies with trusted allies—in which the end users are pre-cleared partner governments and the programs fall within strategic initiatives such as AUKUS Pillar II.
- Establish a transatlantic SSA Innovation Task Force to coordinate technology integration policy, streamline FOCI mitigation practices, and align US and European defense industrial innovation—particularly in areas such as AI, space, and next-generation munitions.
Establish a post-war SSA program for Ukrainian defense startups.
- A streamlined, tailored SSA framework—featuring faster processing, simplified compliance, and strategic prioritization—could allow Ukrainian companies to integrate into US and NATO procurement at the speed of relevance.
Use SSAs to deepen AUKUS defense collaboration.
- Encourage greater participation by UK and Australian defense tech firms in US-based SSA structures by improving standardization, accelerating approval timelines, and clarifying long-term strategic pathways—helping build the trust and predictability needed to deepen transatlantic and Indo-Pacific cooperation in the face of growing strategic competition with China.
Strengthen supply chain risk management for SSA-governed firms.
- SSA companies are already subject to US supply chain security requirements, including restrictions under Section 889 of the fiscal year (FY) 2019 NDAA and the “Drone Act” provisions of the FY2024 National Defense Authorization Act (NDAA).³² The DOD should better integrate SSA firms into its broader supply chain risk management ecosystem—providing access to tools such as the Supply Chain Illumination initiative.³³
- Where critical dependencies persist—such as in rare earths, semiconductors, or specialized components—the Office of Industrial Base Policy should consider targeted support through Defense Production Act (DPA) Title III funding, NTIB co-production, or advance purchase commitments. These instruments can help SSA firms transition to secure allied sources without disrupting program timelines.
- Finally, the GSC structure could be leveraged to include annual supply chain risk mitigation plans, aligned with DOD cyber and export control standards. This would reinforce the GSC’s strategic role while enhancing transparency and resilience across the industrial base.

Pathfinder projects for further SSA integration

To fully capitalize on the SSA model, the United States and its allies must actively integrate SSA companies into priority defense initiatives. This report proposes the following Pathfinder Projects to provide a structured way to demonstrate and expand the role of SSA companies in strengthening US security capabilities, ensuring they are leveraged not just as industrial assets but as strategic enablers of next-generation defense cooperation. These projects will also help address regulatory, operational, and policy constraints that currently limit the full potential of transatlantic defense collaboration.

Each Pathfinder Project outlined below is designed to tackle a critical defense challenge, illustrating how SSA companies can provide a competitive advantage and what specific steps are required to implement them effectively.

1. AI-driven multi-domain ISR: Closing transatlantic intelligence gaps

Strategic priority

The next generation of warfare requires real-time, multi-domain intelligence fusion across space, cyber, air, land, and sea. While US ISR capabilities remain formidable, foreign companies are pioneering AI-enhanced sensor fusion and passive detection technologies that could significantly enhance allied intelligence-sharing and decision-making capabilities.

Why SSA companies?

US ISR remains platform-centric, whereas foreign SSA companies offer advanced AI-driven networked surveillance architectures.
SSA companies can act as controlled integration nodes, ensuring secure and compliant transfer of foreign ISR innovations into US and NATO battle networks.
The SSA model allows NATO-wide standardization of ISR fusion algorithms without exposing classified US ISR systems to foreign influence.

Implementation plan

Establish a DOD ISR Task Force to oversee SSA-led AI sensor fusion standardization.
Integrate SSA companies into US ISR modernization programs to enable dual-use AI for intelligence sharing.
Address ITAR barriers for ISR data sharing, ensuring that SSA companies can legally contribute to AI-driven intelligence collaboration.

2. Counter-hypersonic defense: Aligning US and allied missile interceptors

Strategic priority

Hypersonic missile threats are one of the most urgent challenges facing the United States and its NATO allies. While the United States has invested in kinetic interceptors (THAAD, SM-6, Glide Phase Interceptor), foreign companies have developed complementary countermeasure capabilities, electronic warfare-based tracking, and multi-layered interceptor concepts.

Why SSA companies?

Foreign SSA subsidiaries can integrate their sensor-fusion algorithms into US hypersonic defense architectures, improving target tracking and kill chain efficiency.
SSAs enable secure and controlled software integration, preventing siloed national defense solutions that weaken NATO missile defense coordination.
Without SSA collaboration, allied and partners could independently develop competing missile defense systems, leading to fragmented capabilities.

Implementation plan

Mandate SSA participation in the Pentagon’s Hypersonic Defense Program, ensuring European tracking systems integrate with US missile defense platforms.
Launch a joint US–European Hypersonic Task Force focused on aligning missile defense tracking architectures and addressing shared capability gaps. As trusted foreign firms demonstrate the ability to contribute, US agencies should facilitate SSA participation through a more transparent and predictable process—making it clear that integration into sensitive US defense efforts is both strategically necessary and procedurally achievable.
Refine ITAR implementation guidelines to establish a dedicated, fast-tracked review process for SSA-governed firms contributing to counter-hypersonic technologies—enabling secure transatlantic collaboration while maintaining US export control authority and national security safeguards.

3. AI-enabled maritime security: Unmanned naval defense networks

Strategic priority

US and NATO maritime forces face increasing pressure from near-peer adversaries utilizing swarms of unmanned surface and underwater vehicles (USVs/UUVs) to contest sea lanes. While the US Navy has initiated its Distributed Maritime Operations (DMO) strategy, foreign companies are further ahead in developing operational AI-driven naval swarm technologies.

Why SSA companies?

SSA companies can fast-track integration of European unmanned maritime platforms into NATO naval task forces.
The SSA framework prevents technology transfer barriers, ensuring that European autonomous naval systems are interoperable with US networks.
SSA companies allow controlled software and algorithm sharing, ensuring AI-based unmanned platforms comply with US and NATO cyber standards.

Implementation plan

Designate SSA companies as key partners in the US Navy’s Disruptive Capabilities Office, enabling joint development of autonomous maritime security systems.
The Pentagon should establish a Maritime AI Lab focused on developing and fielding autonomous naval systems, with structured participation from SSA-governed firms—enabling secure integration of allied technologies into US and coalition naval operations.
Streamline ITAR and Committee on Foreign Investment in the United States (CFIUS) approval for unmanned naval technologies, prioritizing SSA companies for expedited integration into US naval programs.

4. AI-driven cyber and electronic warfare resilience

Strategic priority

The battlefield of the future is increasingly digital, with adversaries leveraging AI-enhanced cyberattacks, electronic jamming, and digital deception. SSA companies have pioneered AI-led cyber deception tools, adaptive EW jamming, and quantum-resistant encryption, which could significantly enhance US and NATO cyber resilience.

Why SSA companies?

SSAs allow foreign-owned companies to contribute to NATO-aligned AI-enabled cyber defense solutions, while ensuring compliance with US national security protocols governing access to classified systems and information.
US and European cyber capabilities remain fragmented—SSA companies provide a secure bridge for coordinated cyber-EW collaboration.
SSA companies can be tasked with joint development of AI-driven EW standards, ensuring future-proofed US and NATO digital defenses.

Implementation plan

Create a Cyber and Electronic Warfare Task Force composed of SSA-governed companies, operating under US Cyber Command oversight, to integrate AI-enabled cyber resilience tools in alignment with NATO’s Cyber Defense Policy and in coordination with NATO’s center for cyber expertise.
Expand SSA participation in the DOD’s Joint AI Cyber Operations Initiative, ensuring transatlantic AI cyber defenses remain interoperable.
Update ITAR to address the classification and licensing of AI-driven cyber defense tools—ensuring SSA-governed companies can contribute to secure transatlantic integration without breaching US export control rules or delaying iterative software development cycles.

Conclusion: Reforming SSA policy to enable scalable implementation

In this era, the United States cannot afford to take an isolationist approach to defense procurement. Military technology is increasingly global in scope, and the United States’ ability to maintain its technological edge depends on strategically integrating the best capabilities from trusted allies while maintaining rigorous security controls.

SSAs provide a controlled and secure framework that allows the United States to benefit from foreign investment, increase industrial capacity, and enhance military readiness—without compromising national security. Instead of viewing SSA companies as a threat, Washington should leverage them as a force multiplier for US defense superiority.

A smart “America First” strategy does not mean closing the door on allied defense companies. It means ensuring that every dollar of defense spending strengthens US national security while keeping the United States at the forefront of military innovation. SSAs achieve this goal—enhancing US military strength, reinforcing transatlantic and Pacific alliances, and ensuring that the United States continues to set the global standard for defense excellence.

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Forward Defense is grateful to Airbus Americas, Inc. for its support of this report.

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Forward Defense leads the Atlantic Council’s US and global defense programming, developing actionable recommendations for the United States and its allies and partners to compete, innovate, and navigate the rapidly evolving character of warfare. Through its work on US defense policy and force design, the military applications of advanced technology, space security, strategic deterrence, and defense industrial revitalization, it informs the strategies, policies, and capabilities that the United States will need to deter, and, if necessary, prevail in major-power conflict.

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Image: The commander of NATO Allied Land Command shakes hands with a Hungarian soldier at an air base in Romania. Credit: US Army photo by Spc. Breanna Bradford.

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Acknowledgements

About the author

Rob Murray

Table of contents

Executive summary

Introduction

Problem statement: US defense strategy—the five fault lines

Advantages offered by SSAs

Strengthening US defense self-sufficiency by reducing dependence on adversarial supply chains

Expanding US defense production capacity

Understanding SSA structures, proxy models, and national interest determination

SSAs under fire: Risks and critiques

National security concerns: Do SSAs expose US defense capabilities?

Understanding SSAs’ impact on American jobs and industry

A risk-benefit analysis

Ensuring the United States calls the shots

More competition, lower costs, faster innovation, and supply chain resilience

Strengthening global arms competitiveness

Countering China and Russia in the global arms export competition

SSAs as a tool for strengthening NATO and allied defense capabilities

Balancing interoperability gains with political realities

Why “Buy American” policies should not mean “buy alone”

The SSA model and the future of defense technology

Why SSAs are essential for emerging defense technologies

Policy recommendations to maximize SSA benefits

Streamlining SSA approval processes to encourage more investment

Pathfinder projects for further SSA integration

1. AI-driven multi-domain ISR: Closing transatlantic intelligence gaps

2. Counter-hypersonic defense: Aligning US and allied missile interceptors

3. AI-enabled maritime security: Unmanned naval defense networks

4. AI-driven cyber and electronic warfare resilience

Conclusion: Reforming SSA policy to enable scalable implementation

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