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The Atlantic Council of the United States

Pivotal Partnerships: The Prospects for International

Defense Cooperation in an Age of Austerity

Welcome and Moderator:
Frederick Kempe,
President and CEO,
The Atlantic Council

Deputy Secretary of Defense Ashton Carter

Location: The Atlantic Council, Washington, D.C.

Date: Wednesday, February 15, 2012

Transcript by
Federal News Service
Washington, D.C.

            FREDERICK KEMPE: Thank you all. I’m Fred Kempe, president and CEO of the Atlantic Council. We are very grateful to have Deputy Secretary Ash Carter here this evening. Thank you very much.

            Senator Hagel will introduce you.

            I will just say at a time when we’re all thinking about the strategic guidance that’s come out, the budget implications, what this means for our partnerships around the globe, to have the person who’s actually been doing the most thinking work on it, has been actually assigned by Secretary Panetta to work this with us, is just a great pleasure and opportunity.

            The Atlantic Council has been working these issues. At the intersection of today’s program, budgetary constraints, new defense environment, key threats and challenges in the near term and the long term and a need for an increasing role for both allies and new global partners.

            And we know that’s both necessary and not the easiest thing to pull off. So we very much look forward to our comments. 

            The Atlantic Council’s Defense in the Age of Austerity Task Force, under the leadership of the director of that — the international security program, Barry Pavel — and you’ll know Barry from the Pentagon and from the White House — is studying how the U.S. can leverage new partnerships in light of austerity with a goal of creating new ways to make the United States and its allies stronger and more cohesive than ever. 

            We’re very thankful to Deputy Secretary Carter, his staff for making time. I realize there isn’t a lot of it in your schedule, and we really appreciate it. 

            But before I introduce the Atlantic Council’s chairman, I do want to thank EADS North America and Sean O’Keefe specifically for their partnership in this initiative and for our strategic advisers group, one of the core efforts of the Atlantic Council. 

            I’ve introduced Senator Hagel on various occasions. I think today it’s right to say that there’s hardly anyone who knows more about how budgets get done, undone, what’s wasted, what’s right. So it’s terrific to have him here tonight. He’s chairman of the Atlantic Council, a distinguished professor at Georgetown University, and he’s currently a member of the secretary of defense’s defense policy board and co-chair of the president’s international advisory board. 

            He served in the United States Senate from 1997 to 2009 representing Nebraska where he was senior member of the Senate Foreign Relations, Banking, Housing and Urban Affairs and Intelligence Committees. 

            Importantly, he’s had a varied and successful career also in the private sector. So he knows the business end of things. And he served in Vietnam where he earned two Purple Hearts. 

            It’s always an honor to have you here, sir. Let me turn the podium to you. (Applause.)

            CHUCK HAGEL: Fred, thank you. 

            And I, too, add my welcome on behalf of the board of directors, and many of those directors are here today, Ash. So thank you for your continued leadership and support of this institution. 

            Ash Carter is one of those rare individuals who comes along and knows a little something about physics and politics and intellectual pursuits. Ph.D.s, master’s degrees. And how in the hell he ends up at the Pentagon is a great mystery. (Laughter.) 

            But nonetheless, he’s there. We have to deal with him. (Laughter.) And he’s the best we have right now. (Laughter.) 

            Ash Carter is really one of those unique Americans who, over his great expanse of accomplishments — and there are many. And many of you in this room have worked with Ash Carter and know him quite well and, certainly, there’s no one in this room that does not know of him and his accomplishments. 

            But to do the things that he’s done for our country at difficult times — the role he did in President Clinton’s Defense Department at a difficult time, he was there as well. 

            He seems to show up at transitional times. This transitional time has probably gone from transition to transformation and great uncertainty. 

            The world is as volatile, uncertain, combustible and dangerous, I suspect, as it has ever been, at least in the lifetime of each of us in this room. Wrong decisions, bad decisions will have severe consequences in this kind of a world. 

            And to have someone like Ash in the job he now resides in is particularly important. It is people who always make the difference. Leaders make the difference. Institutions are important, but it’s the leaders. And it’s the fiber and character of those leaders. And I don’t know, when you blend all of that into one individual how you get someone better than Ash Carter. 

            So, sir, we are grateful. I know these are difficult times, and that means you don’t have a lot of spare time. But thank you for your service to our country. 

            I might add his chief of staff, Wendy Anderson, is here who many of you know and have worked with. I knew Wendy when she was on Capitol Hill and was a very important part of our Homeland Security Committee staff at the time. 

            So, Wendy, thank you. 

            And to Ash, all of your colleagues and your associates, we thank them. 

            So, ladies and gentlemen, the deputy secretary of our Department of Defense, Ash Carter. (Applause.)

            ASHTON CARTER: Thank you. Thanks, Senator Hagel, for that introduction, for your service, your leadership of this country, now the Atlantic Council, all you’ve taught me, sir, over the years. I wish there were exactly a hundred of you — (laughter) — actually. And thank you also for Wendy Anderson. It was Senator Hagel who was one of many people who recommended Wendy to me. And it’s been quite a blessing. I really appreciate it. 

            Fred, thank you also. Likewise, the Atlantic Council, as I understand it, celebrates its 50th year from a position of great strength and vitality. And congratulations to the organization. 

            And even though it’s approaching middle age, it’s behaving more like or performing more like a hot startup. I gather you’ve had 500 percent growth in the last five years. That’s pretty good. I wish we had that. (Laughter.) Really incredible. 

            And this council has adapted and evolved considerably. I’ve watched it over the years from a singular focus on the trans-Atlantic relationship to a wider focus now that encompasses Asia, cyber, other regions and so forth. 

            And like the council, our defense strategy has evolved over the years to keep pace with technological advances and geopolitical shifts, as Senator Hagel has already said. 

            And today, I’d like to speak with you about our new strategic guidance and the defense budget. It’s the week to do it. The president just released it the other day. And I want to offer a few words on what the strategy and budget mean also for our alliances and partnerships which the council does so much to foster and support. 

            Like so many of you who have been in the U.S. government gathered here tonight, I’ve seen the department adapt to many challenges over the course of my career. And Senator Hagel is right; one other period of great flux followed the collapse of the Soviet Union. We all know that. And it became — a couple of things became apparent then which was that the danger of a Soviet — former Soviet Union in chaos presented a — or was as significant as the danger presented by the Soviet Union intact but totally different. 

            That was the time when I was assistant secretary of defense for international security policy, and we tried to be innovative then. And I think we were in forming new security partnerships with the states of the — of Eastern Europe and the former Soviet Union, the Partnership for Peace, the gradual enlargement of NATO. Such innovative programs as the Nunn-Lugar program. Who would have thought that we would be spending defense dollars in that way, but very materially and very directly in the security interests of the United States. 

            So there was a new strategy then and a new use of the defense budget in that way for a new set of purposes. In short, we adapted. We evolved. And that brings us to tonight where we also gather in a time of great consequence for national defense. 

            Two great currents are flowing together in our department today. The first is the current of strategic history. For a decade, our department has been riveted of necessity on two wars in Iraq and Afghanistan. One has ended, and the other, of course, has not and won’t soon but will. 

            So it’s time to look up and look beyond to what the nation and what this world is going to need next in the way of security. And at this moment, too, we have a great opportunity and really the obligation to pivot this department to new challenges that will define our future. 

            While we’ve been fighting, the world has not stood still. Our friends and enemies have not stood still. And technology has not stood still. So now we must meet these changes. And in some ways, in some respects, catch up with some of them. 

            To do this, we need to let go of the old and familiar — forces, weapons systems institutions, habits — and grab hold of the new to build what our chairman of the Joint Chiefs, Marty Dempsey, calls the joint force of 2020; look ahead that far. 

            You know, it’s important to note that we would need — and the reason I’m emphasizing this — we would need to make this strategic self-examination and this strategic pivot at this moment in history even if we had all the budget we wanted. But, of course, we don’t have all the budget we want since a second great current springs from the nation’s need to put its fiscal house in order. 

            So these two things come together. It seems certain that we’re entering a period of subsiding, not ever-increasing defense budgets, the sixth since World War II. And the challenge before us is to manage that along with the first current in a better way than we’ve done in the past. 

            The reductions we’re making in the DOD budget are truly an enormous adjustment to our investment plans, and they’re required by the Budget Control Act, and we’re complying with the Budget Control Act. But just to remind you of the facts and the magnitude of this and the consequence of this, the facts are this. The defense-based budget — and I’m sure you all know this — is not decreasing over the coming years, but neither is it continuing to rise in real terms as it has over the past few years and as we planned before the Budget Control Act. 

            The Budget Control Act compels us to make changes to our plans over the next 10 years totaling $487 billion, almost half a trillion dollars; $259 billion over five years. So this is an adjustment made right now in our plans of about 8 or 9 percent of the total we plan to spend, which is a substantial amount by any measure to make at once. 

            To that large adjustment, in our plan for the base budget, you also have to consider the decrease in the overseas contingency operations, or OCO, part of the budget as a result of the end of our deployment in Iraq and the gradual reduction in spending for Afghanistan. And if you put those two together, you see — which you really should because that is the defense budget — that is defense spending by our country. We never made that distinction in previous wars between OCO and base — you put those two things together, and you see a downturn over a period of four years or so that is comparable to after Vietnam and comparable to after the Cold War in speed and magnitude and, certainly, the most consequential adjustments this department needed to make in more than a decade. 

            So let me try to describe how we have tried to meet this situation put upon us by the Budget Control Act. And the first thing we decided to do was to relook at our strategy first and then build our budget. That’s important. The sequence is important. 


            And that came from, importantly, President Obama’s realization of what I said a moment ago, namely, that we should be doing this anyway even if we didn’t have the budget crisis. But that together with the budget crisis really required a look at our strategy. And this resulted in a process that was mentioned earlier. For about two months also, all of us in the department — the secretary, myself and the chairman and the vice and the chiefs and the service secretaries and the COCOMs and the unders, all of which call themselves the large group in our department — I see Skip over here, a member of it. 

            Many, many meetings — 30, 40 meetings in which we considered the strategy and then the budget consequences of that. A number of meetings with the president. And I have to say that I — my experience, which goes back quite a bit in the department — I’ve never seen a period of time in which a president was as involved in the defense strategy and budget process as was President Obama during these months. And that was incredibly valuable to us because it gave us a compass as we walked into this tidal wave of required adjustment — this $487 billion. It’s very important for us to have a compass, and we had that very clearly. It was published in early January. 

            I mean, to you all, I don’t think there is anything in there that was particularly surprising or anything. It was what you probably would have written as well, when you put your head up out of the foxhole of the last 10 years and said what comes next, you probably would have written it down.       

            But it was important discipline for us to have done that and to act truly as we built the budget in conformity with that strategic guidance. And that’s what we tried to do, and I’ll try to illustrate how we did that in a moment. 

            In addition to that, the secretary of defense had a few pieces of practical guidance for us. The first one was everything on the table — everything on the table. And he really meant it. Things that we hadn’t had to look at for 10 years — you know, when you’ve got money, you don’t — you know, you avoid some of the difficult choices. You don’t look under every rock. And he said look under every rock, even things that you know are uncomfortable for people. You have to go there now. We have to go there because the alternative to going somewhere where we really can take budget reductions without strategic consequences is, of course, to take them where they do have strategic consequences. And to the extent possible, we wanted to avoid that — go everywhere. 

            With one exception, which is be respectful of the integrity of the all-volunteer force and of the people who make it up and who have served so brilliantly and admirably for the last 10 years. And I’ll say more about that shortly. 

            Secondly, it was important to me as my style — but it was — it’s very much Secretary Panetta’s style and Chairman Dempsey and Admiral Winnefeld, the vice — that we — it was an inclusive process. And, you know, in Washington people hear "inclusive," and they think, well, you’re just including me because you want me to support it. I’m talking about something more substantive than that. I’m talking about the fact that you can’t do something this big, make changes this big — and those of you who have run other kind of organizations know this perfectly well — unless the people who have to implement them are involved in making those decisions because that’s the only way to get quality and fidelity in decision-making. 

            That was important for us. That’s why we sat together — I did with the chiefs and the service secretaries day after day after day chunking through item after item after item on the budget because they have to go out and then carry this out. So you need to make sure you get a decision that makes sense. 

            And the third thing is we wanted to be very careful that we didn’t just proceed by subtraction; that we were building towards the force we needed, towards what Marty Dempsey calls the joint force in 2020. It’s important — I always have the image of ice sculptor, you know? Don’t look at the chips. Look at the sculpture that is emerging. Sculpt, don’t just cut. 

            So with that guidance, off we went and the strategy as our compass. And what we presented — the president, this week — but we adumbrated — more than adumbrated — really gave in some detail about two weeks ago was a strategic package. It was a balanced package. It has three parts. 

            The first is our continued discipline about how we spend the taxpayers’ dollars because, of course, that’s where you want us to go first — to places where we’re not spending the taxpayer money wisely. Second, some steps to slow the growth in personnel costs. I’ll say more that about — some steps. And most importantly and of most interest to this audience, adjustments to our investment strategy tuned to the strategy. 

            All together, hundreds of items of consequence in that document alone. Whereas in a normal budget cycle, we may be doing 10 sporty things, we’re more than a hundred this year. 

            So in the last three budget cycles, well, we’ve always known the 10 or so things we were doing of consequence. I think there are now 120 in that category this time — order of magnitude bigger effort. 

            Let me say something about each of those categories and, in particularly, the third category which bears upon alliances and partnerships. 

            More disciplined use of defense dollars — I won’t say too much about this. We’ve been trying to do this. We’ve been focused on this for the last few years as we could see the end of the period coming in which you had ever-rising defense budgets. And we had a generation of managers who were used to being able to reach for more money when they had a problem. And that era was going to be over, and we were going to be able to — need to be able to reach for other managerial tools than that. 

            We needed to get good at that. We called that better buying power. We’ve done a lot in that category and, of course, we would like to find all $487 billion in unnecessary spending, but we couldn’t do that. 

            But we did find about a quarter of what we were looking at in categories that I would broadly — I mean, a category that I would broadly describe as money not being well spent that doesn’t need to be spent — about a quarter of it. 

            Additionally, we’ve asked — and I know this isn’t real popular — but we’ve asked for an additional BRAC round — actually two additional BRAC rounds. And, again, I said that’s not too popular, but how could we do otherwise? How could we do otherwise? 

            If there is, in fact — and this is what the BRAC process is intended to surface — unneeded, unnecessary, excess basing infrastructure, how could we do otherwise at a time like this?          

            And then we made a number of what I’ll call fact-of-life managerial changes to some of our investment programs; ending programs that were not performing well or that priced themselves out of the market like the Global Hawk Block 30. Some of them just had managerial fact-of-life changes — Joint Strike Fighter, the Army’s ground combat vehicle, defense weather satellite system. I’ll say more about some of them later. They fall in the investment account but, in some cases, they were managerial decisions rather than budget decisions. 

            In personnel, we made careful, measured adjustments in personnel costs. They amount to a third of the defense budget is personnel costs. They took about a tenth of the reductions. That gives you some idea — but not zero. So careful, measured but not zero because, as I said, we are very mindful that the all-volunteer force is the core of our military, much more than our technology is what makes us the greatest military in the world and, also, that military life entails really unique challenges to individuals, to families. And so it puts huge demands on people. 

            And so in recognition of both of those things, the changes that we’re proposing are, as I said, careful and measured. But it was important to do something in this category because this cost category has been growing at what is an unsustainable rate for about 10 years. I’ll just give you one set of numbers. 

            Since 2001, personnel costs have grown by a hundred percent in the Department of Defense, about 40 percent real. The force has only grown by 8 percent. 

            For this reason, the senior leadership of the department, which includes especially the uniformed leadership, believes strongly that this category needed to be included in our overall package. If you haven’t seen it, there’s a 32-star, 34-stripe letter from all of them to this effect.  

            Let me give you what the key elements are really for. The first is we protected — protected — that is, they did not encounter any pressure from this budget at all — our wounded warrior programs, our family and transitionally veterans programs. 

            Second, no pay cuts, but we did slow the growth of military pay in the out years. 

            Third, some changes in health care. That is on top of some changes we made last year. In TRICARE for retirees under age 65, enrollment fees, further increases in enrollment fees — these are tiered to income. They exempt the medically retired and survivors, and they’re well below their comparable civilian equivalents. 

            But we didn’t make them. We have proposed them. 

            Likewise, for TRICARE for Life — that is our program for our retirees over 65 — again, an enrollment fee for TRICARE for Life. Once again, tiered well below its comparable civilian equivalents and medically retired exempt as well as survivors. 

            And, finally, in the health care category, some increases in pharmacy co-pays. These can be obviated by a move to — by an individual by a move to more mail order and more generics and away from the pharmacies, but an important managerial change. 

            For military retirement, we proposed no changes at this time. We will ask Congress for a commission — the president has already suggested this — to look at retirement in the context of overall compensation. The reason for that is we have a retirement system which is sui generis for a profession that is sui generis. It’s been in existence for a long time, and you don’t mess with something like that quickly. And so we need to think about that a little bit and want to do that. 

            We have recommended that it be — whatever changes made may be fully grandfathered; that people already serving don’t have a change made that they didn’t understand and didn’t expect when they joined. 

            So those two categories are important. I don’t want to belabor them. 

            Let me go to investment because it’s investment that most reflects the strategy and is probably of most interest to this audience. 

            We, obviously, are going to have a force that is somewhat smaller in some categories, but we wanted to have one that, while smaller, was flexible, agile, technologically advanced, joint, all the things you’d want it to be — capable — I want to be clear about this — of doing more than one thing at a time. This is important. There is no question about one war, two war, three war, four war things. We have to be able to do more than one. We practice against, we measure ourselves again doing more than one thing at a time. It’s not a question of whether, it’s how. 

            First thing that we conclude — one thing that we concluded in the strategy was that we did not need, after Iraq and Afghanistan, to retain in the ground forces the large rotational stabilization force that we had grown for the two large situations of Iraq and Afghanistan. Not because we’re sure we’ll never have to do that kind of thing again, not because we’re abandoning coin or anything like that, but simply because, if with do in the future, once again, need a very large rotational ground force like that, there is, by definition — a long, prolonged stability operation — there is, by definition, the time to, first of all, mobilize the reserves. And we have a number of different and very — it’s an important whole other subject — way of using the reserves as a result of the experience we’ve garnered in the last decade of using the reserve operationally — so an operational reserve. 

            And then to regenerate the force if we need to, and we’re making sure that we’re building down the force in such a way that it can be built up again. But there’s no need to retain, in being, that large a ground force. And it’s expensive to do so, and it would be better to use that money and invest it elsewhere. 

            And so the Army and Marine Corps will reduce their end strength — Army to about 490,000, Marine Corps at about 182,000 — by FY ’17, this done in a gradual way, a humane way and, of course, in a way that leaves plenty of headroom for Afghanistan. 

            And at the end of that, we’ll build towards a fundamentally different ground force shaped by the lessons learn of the last 10 years, retaining the expertise and capability to do counterinsurgency but returning to full spectrum capability. 

            With respect to the naval forces, a lot of attention about the decision — which we did consider — to maintain the carrier fleet at 10 and the carrier air wings — I’m sorry — carrier fleet at 11 and the carrier air wings at 10, maintain the big deck amphib fleet. We are making some entirely new investments in the naval forces, modifying the Virginia-class submarines to be able to carry more cruise missiles, considering the possibility of a prompt strike — not global strike, by the way, a prompt strike, shorter-range thing from the modified Virginia submarines and a forward-staging base. This is kind of an el-cheapo aircraft carrier from which you can take off helicopters and so forth but doesn’t have all the capability of a big-deck amphib or a normal carrier. 

            Overall, the number of ships will not go down and, in fact, increase slightly in the second part of the 10-year period. But we’re not able to afford, in this circumstance, to have it go up in the these five years. 

            We had to pay for all of this somehow. And so we did slow the pace of shipbuilding. And the way we did that, we protected the most flexible classes, the most useful classes of ships. When we did that, we retired some ships that are not as advanced; for example, cruisers that don’t have ballistic missile capability and so forth. So we tried to reshape the naval forces for the strategy but understanding that we did have budget constraints as well. 

            We’re also doing some managerial things with the fleet in terms of forward basing — Rota, Singapore and so forth — so that you get more presence per ship that way and some consolidation of fleet types and other things that we’re doing managerially. 

            In the area of air — tac air mobility, again, protected the key investments that are part of the future — the new bomber. In fact, we kept the bomber fleet, which is a very flexible instrument; considered reductions in the bomber fleet; decided to keep the bomber fleet as is. 

            And to continue to proceed with the next generation aerial refueling tanker which may seem like something mundane, but it is an enabler of everything. 

            Inevitably, once again, we had to take the reductions elsewhere where forces were less needed. One category of that is strategic mobility where we have adequate, with the C-17 fleet and the C-5M fleet. So we are retiring the C-5As, they’re not needed; retiring a number of C-130s that are older and excess to need, and the C-27J who whose mission can be accomplished with the C-130. 

            In the tac air area, once again, we are taking what we regard as the least-risk approach there which is a reduction of 60 tac air wing and one training — I’m sorry — six tac air wings and one training wing.         

            The president wanted us to be sure that, as this tidal wave came to us, we protected new capabilities that are going to differentially be part of our future. So we protected special operations forces. We protected unmanned aerial systems. And, by the way, there’s some confusion about that because we made a number of adjustments in unmanned aerial systems, but there’s a consistent and very strong emphasis. 

            In the MQ1, MQ9 Predator Reaper class, taking steps to crew them on a sustainable basis. The long pole in the tent for the Pred Reaper fleet is not airframe number. So we did cut back on the acquisition rate of airframes because the pacing item was not that. The pacing item in the fleet was air crews, and we’re trying to catch up air crews to airframes. 

            But elsewhere in the maritime area, in some of the advanced UASs, in the great bulk of the Global Hawk fleet — not Global Hawk Block 30, which is one of the variants of Global Hawk that I mentioned earlier — but in BAMS and NATO AGS and in the Air Force’s Block 40 Global Hawk, continuing to go ahead with that. 

            A number of our space initiatives also protected. Science and technology, which is the seed corn of the future, building partnership capacity, something of importance — it doesn’t cost a lot of money. And these are critical investments in having effective, durable security partnerships with others around the world — important not to pull up those. 

            It is a danger in a budget situation like this that you pull up the things that have the shallowest roots. They’re the things you just thought of. They’re probably the most important things you’re doing. Don’t pull them up — building partnership capacity in that category. 

            And, of course, cyber — which not only was protected but was increased. 

            A lot of attention to the line about rebalancing our investments towards the Asia-Pacific region and the Middle East, and a lot of what we protected, invested in and cut reflects that guidance that we got. 

            So we are investing quite a bit to enhance our posture in the — force posture in the Asia-Pacific region and, also, the Middle East region. Restoring a lot of Army and Marine Corps force structure in the Pacific including rotational presence there, also in the Middle East, maintaining a strong presence in the Middle East. This is now after Iraq, after Afghanistan, looking ahead; expanding, as I said, our rotational presence in both regions. 

            In our alliances and partnerships, a number of strengths — steps to strengthen those with Japan, with South Korea, Australia. You see us doing something new with Australia which is a very important addition to our Pacific posture both geographically and functionally with the rotational presence of a Marine Air Ground Task Force in Australia. 

            Continuing to enhance our strategic partnership with India with whom we share a lot of common interests and very much common values. With China, continuing to pursue a positive, cooperative, bilateral relationship, including high-level visits of the kind that we’ve had here this week. 

            Guam, Okinawa, we remain committed to establishing an operational Marine Corps presence in Guam which, by the way — I’ll remind you is added on top of a substantial naval presence at Opera (ph) on Guam and Air Force presence at Anderson Air Force Base, both of which are increasing also. So Guam is becoming really quite a potent hub for us in that region. 

            We’ve begun discussions with the government of Japan to adjust our current posture plans as set forth in the realignment roadmap regarding the adjustment of our footprint in Okinawa. 

            Singapore, we’re going to deploy a Littoral Combat Ship forward in Singapore. That makes a much more efficient use of LCS. It’s good. 

            Also, germane to this region, the new bomber I already mentioned, our tanker, the ship fleet adjustments I mentioned earlier, the investment in the Virginia payload module for the Virginia-class submarine and a host of investments in tac air, ship borne raiders, air-to-air missiles, electronic warfare, communications, anti-submarine warfare, countermine and so forth, all aimed at the Asia-Pacific region and the Middle East and Gulf regions. So a host of investments made in that area. 

            How about Europe? Where is that about Europe? Much has been made of the pivot. And one thing I want to emphasize is that’s not a pivot away from Europe in any way at all or anywhere else, for that matter. The fact is that Europe, in today’s world, is a source of security.  It is a partner in security.    

            The Asia-Pacific region and the Middle East are areas of potential challenge in the security area. Europe, an area of partnership and reinforcement. And that’s the fundamental point about Europe. There’s no need to pivot to Europe. Europe is part of the security vision and architecture of the United States, as it has been for many decades and as it will remain and, certainly, as it is envisioned — was envisioned in NATO in Article V. 

            Europe is going to take some reductions in force structure just like Texas and California and everywhere else. So when you see brigade teams in Germany and some tac air and so forth going out of Europe, it’s going out of everywhere; $487 billion. OK? We can’t keep everything. 

            That does not mean, as I said, in any way, a diminution in our commitments, which are not measured by what’s there in the first place. 

            We will continue, uninterruptedly — we completely protected the European phased adaptive approach for missile defense. So no change there. 

            We’ve established — many you of know — TPY-2 radar in Turkey, stationing standard missiles — the Aegis Ashore in Romania and Poland. And we’ll deploy four BMD-capable ships forward stations in Rota, Spain, which, again, makes the tether shorter and the rotation much more efficient. 

            We protected deliberately — and these are all deliberate decisions because when I tell you Secretary Panetta said look at everything, he said look at everything. Each of these things was discussed and either kept or not kept on its merits. 

            Kept on their merits, the regional centers for strategic study like the Marshall Center in Germany. I just mention that because it’s an example of something that is small but very useful. 

            The allied ground surveillance system which we finally got through, which is one of the variants of Global Hawk, that is protected. 

            And for those who focus on Europe — those of you in the room who focus on Europe, the European militaries will actually be seeing more of us in the coming years because when out of Iraq and out of Afghanistan, we have more bandwidth for joint activities, exercises, training, presence and so forth than we’ve had for the last 10 years. So they will be seeing more of us. 

            Arms cooperation, also, with Europe, a very important thing to mention. Arms cooperation of the government-to-government type is comparatively rare. AGS is a good example of that. I see Peter Flory in the audience. He’s done a lot in that field just as one person. 

            But it’s pervasive in industry. Sean O’Keefe has been — I don’t know if Sean is here or not. There he is. It’s pervasive in industry. And it’s valuable to us and to our partners around the world. It’s a source of better technology for all of us, competition for all of us, interoperability for all of us. And if you’re in the same both, if somebody else is building their capability, that’s good for you too. So it’s a good thing, and we’re looking at every way we can to strengthen that. 

            So we will be continuing to pivot towards Europe and to this great alliance. 

            Globally, last thing I’ll say, we are continuing to invest in all of our partnerships and building partnership capacity. I just want to foot stomp that because that’s something that is relatively inexpensive but terribly important to do. So our 1206 authority is global train and equip. Things like that that are small but so very valuable we did protect them. 

            That’s a lot. I’ve been talking as fast as I can, and I’ve already talked too long. But $487 billion is a hell of a lot of money. (Laughter.) And I could go on and on and on and on and on because I just — that’s the tip of the iceberg. 

            But I — to sum it up, this is a huge and very consequential set of adjustments that we — forced upon us by the Budget Control Act. We understand that. We understand that an aspect of the nation’s security is its fiscal health. We understand that — we are trying to do it in a strategic manner, in a balanced manner, in as thoughtful and honest and straightforward manner as we can. 

            We know it’s painful, but what we owe the country and the best we can do is to do it in the most thoughtful and straightforward manner that we can. That is what we’ve tried to do over the last few months. 

            I hope as you read it and absorb it, you’ll come to that same conclusion. And in the meantime, I thank you all for being here tonight. I thank the council for giving me this opportunity to explain what we’ve done, and I welcome your questions.  

            MR. KEMPE: Secretary Carter, that was just great. It was a comprehensive — putting a lot of this into context and very interesting points. 

            And we’ve got about 15 minutes for discussion. I’m just going to ask one question and then go to the audience.          

            Pivot toward Europe — you know, I’m not sure that will be the headline in all of the newspapers tomorrow, but I wonder if you can drill down on that a little bit more and on arms — you know, in what way in arms cooperation, or do you have some examples, et cetera? 

            And I guess what stands behind that is, as you were going through the budget and the strategy, was the role of coalitions, multilateral defense cooperation, was it front and center as you were thinking this through? Or did it really come afterwards? What kind of a role did it play, and how did you take into account NATO coalition forces more broadly in contribution to missions? 

            MR. CARTER: Well, I say pivot to Europe — I’m not trying to coin a new phrase. This is the Atlantic Council, and it seems fitting just because I want to make sure people understand how attentive we were to Europe, to the military capability of Europe, to the industrial capability of Europe, which was the beginning of your question. 

            This is something we’ve got to work at constantly because there are still barriers in our administrative system to tapping in effectively and efficiently to what really is a pretty capable and certainly, in some sectors, more capable than ours, industrial base in Europe. We know where they were. We would like to work with them. We do work with them. 

            As I said, more of this goes on under the layer of the prime contractor than you might imagine. There is a very substantial trans-Atlantic trade in subsystems, parts and that kind of thing all to the benefit of everyone. 

            Out at the helipad yesterday heading down to Pax River — Pawtuxet River, I saw some Lakotas out there. That’s your European product. We have to be open to that. It’s good for competition. It’s good for technology. And so we continue to try to batter down those barriers and look for those opportunities, and I think the Europeans do the same thing — and others, by the way, other partners around the world. 

            And we are trying to, both for economic competitiveness reasons and to strengthen the capabilities of friends and allies around the world, we are trying to increase our export opportunities for our defense industry. You’re darn right we are.

            MR. KEMPE: And the role of coalitions, multilateral defense cooperation, as you were doing the defense strategy and budget? 

            MR. CARTER: It’s everywhere. I see Skip here. I mean, he was the commander of a combined forces command. You couldn’t imagine that scenario which remains, as it has for decades now, one of the many contingencies we have to be ready for every day. That’s, by its nature, not an American-only operation. 

            Libya, Afghanistan — if you go to Afghanistan — and I’ll be there next week. But you go — any of you who’ve been to Afghanistan recently, you walk in any command center there, and you’re in an international world. Nobody barriers, no walls. It’s a fact of life. It’s something so practiced now that, if you go to Bagram or Kandahar or, you know, anywhere out in the field — I’ll be out with the Poles next week, for example — you’re in an international coalition. 

            So this is something that we still talk about but isn’t really much talked about in the field; they just do it and they’re used to it.

            MR. KEMPE: Thank you.

            Questions? Then I’ll grab one more of mine. I’ve got plenty. 
            Q: Ash, I wonder if I could —

            MR. KEMPE: If you could identify yourself, please? 

            Q: Sure. I’m Steve Grundman. Nice to see you again. 

            I wonder if I could draw you out a little more on better buying power, which I know I think of as a signature initiative of your tenure as the undersecretary for acquisition. 

            You know, in this week, the defense industry is looking a lot at the numbers, but I wonder if the character of the relationship between the Pentagon and industry — which I think you tried to change in that initiative — isn’t more important. And so there’s a leading question to allow you to say a little more about that. 

            MR. CARTER: Steve, I mean, I came into the job I had before this one — which is undersecretary for acquisition, technology and logistics — really stunned compared to my previous times which go back to the ’80s — to actually the Reagan administration in the Department of Defense — my first jobs. 

            The Gulf that had developed between industry and the department — and I was just immediately struck by it. And it’s bad business for both sides. 

            We don’t make anything in the Pentagon. You’ve got to remember we don’t make anything there. So we are totally dependent upon private industry in this country for the thing that, next to our people, makes us the greatest military. 

            So we can’t afford not to have a good relationship. They’re part of the team. And it was adversarial. It was remote. It was mutually uncomprehending. And not all of that has been fixed, but that’s something you’ve got to work at all the time. 

            And you’ve got to work through difficult decisions because it’s just business, but sometimes you’re sparking against each other. It’s just business. It’s a business negotiation. You’re looking for a deal. You’re playing off one guy against another. I mean, that’s what you do. 

            But it can’t be adversarial, and it can’t be like we’re not in the same game. We are in the same game. 

            And at this moment, we owe our partners in industry all of the transparency that we can give them so that they can align their business strategy with our national strategy for the good of both. That’s what they’re trying to do. Where do I go in this environment?  We should try to give them the information to do that. 

            What they owe us — and I say this all the time to my partners in industry — is make it affordable for me to keep having you do what you do because I don’t have the money anymore. You have to make it affordable. If you can’t make it affordable, you’re on the table. You know, poor performers are ipso facto singled out in today’s environment. It just has to be that way. 

            So that’s what we owe one another at this particular moment. But just generally speaking, we owe each other partnership, courtesy and a sense that we’re in it together.  And somehow that had eroded. 

            And, again, I won’t say it’s all back where it should be, but I’m committed to that even though I’m not in that job anymore and my nominated successor is, by the way, I should say also. But I certain am in this job. It’s real important. 

            MR. KEMPE: Please? 

            Q: Thank you. Peter Flory. Nice to see you again, Secretary Carter. 

            One of the challenges, as you well know, to international cooperation is the U.S. export control system which is not guilty of all the since that are ascribed to it, but it’s probably guilty of a lot of them. 

            And it’s even created the marketing tool of being ITAR-free, which is, as you know, various European firms are pursuing as a way to enhance their own sales. 

            The administration has undertaken a quite ambitious — not the first ever but certainly probably the most ambitious — export control reform. And I was curious how do you see the way ahead in that recognizing that it’s not only the executive branch that gets to determine this and, also, that there is a presidential election coming up? 

            MR. CARTER: I administered this jewel of human creation — (laughter) — as assistant secretary of defense, and I know it well. 

            Secretary Gates, now Secretary Panetta, Secretary Clinton, by the way, successive commerce secretaries also, but most importantly, President Obama — (audio break) — when they started this two and a half years ago looked at this and said this is broken and we need to do things differently. 

            Let me just take it now in pieces, Peter. 

            In the Department of Defense, for our part of it, we really have — and Gates started this; Secretary Panetta is keeping it up — made a lot of progress. The thing was getting people to give you a straight answer to the question why not. Is it we just don’t like these people’s looks? Or they might take it apart and build something better and sell it instead of us? Is that it? That’s a perfectly legitimate issue, by the way. (Chuckles.) We need to pay attention to that. Or is it that they’re going to shoot it back at us? Or are they going to shoot it back at a friend of us? I mean, what is exactly the problem? And have you thought about that, have you done analysis of that, or are you only just picking something off a list that was written by God knows who and God knows when? 

            We have done a lot of cleaning up of our act in that regard. And, by the way, any of you have export control issues, particular issues, bring them. Bring them. I always say, see something, say something. We learn from things that we’re screwing up. So it’s very fair to do. 

            So that’s good. I think, within our department, that’s good. 

            Within the executive branch, likewise, because of the president, the consolidation of the functions of the three agencies that deal with this, the consolidation of their functional execution of the export control system, a lot of progress made. 

            Where we’re still challenged is that we still have three statutory sources of authority and restraint in this area. And it’s a lot harder when you get to Capitol Hill to get that part of it done. 

            So we are very focused on all three, but I’ll just tell you the third part is the long pole in the tent. We’ve got to keep whacking away at this. People are going to have to whack away at this for decades and keep whacking because you’ve got to keep thinking. Technology changes. The world changes. It’s a very dynamic thing, and you’ve got to have a system with brains. 

            Q: Forgive a naive question on top of that. 

            You had David Cameron, Sarkozy, Merkel all in Davos calling for a trans-Atlantic free trade area. Why not start with defense? Why not do a trans-Atlantic free defense trade area? 

            MR. CARTER: Well, because — we are. So that takes care of problem number one. There are the other two, Fred. (Laughter.)  

            (Off mike.)

            MR. KEMPE: Questions, please? 

            Q: Colonel Curt Marisa. I’m the president of the foreign area officer’s association, the FAOA Association.

            And I was quite pleased that you mentioned building partnership capacity twice during your remarks and, on the second time, even foot stomped on it. So a question in that regard. 

            What type of emphasis do you see on the foreign area officer, the FAOs, including attaches, security assistance personnel — (inaudible) — type personnel since those type of personnel are the front-line crack troops of building partnership capacity and foreign engagement? 

            MR. CARTER: They are, they always have been, and they’re just about to get a real infusion of people who really get it because everybody who has fought in Iraq or Afghanistan has had the experience of knowing what it’s like to build and depend upon the building of a partners capacity, whether it is the security forces of Iraq and Afghanistan which are — the whole purpose of those two campaigns is to build them so that they can provide for the country’s own security. 

            So the whole enterprise is about that which FAOs have known for a long time, but not everybody in the force did. Now, everybody in the force does. 

            So those folks — and, by the way, all of their special forces subset — are now going to be available for worldwide deployment. So the Army — so General Odierno, for example, who has a very visionary picture of the Army after the coin era — just terrific ideas — looking at aligning brigades with regions so that they retain that expertise. 

            So, you know, when we talk about learn the lessons of 10 years of war — I mean, nobody wants to be at war for 10 years, and there are few good sides of that — but one good side of it is that we learned the importance of this and how to do it. And people don’t want to lose that. 

            MR. KEMPE? : Yeah. We’ve, sadly, run out of time. 

            I wanted to close with one strategic question sense we are the Atlantic Council and since we’re in the middle of a eurozone crisis. 

            How does this affect the way you look at these questions? And having just experienced what we did in Libya, does one see that as a showing of what is possible or a showing of what is not possible and now could become less possible as our allies are facing these budget crises? 

            MR. CARTER: Well, it’s a showing of what’s possible and what could be better. I mean, there were — would we like to have seen more and more various capabilities in our partners? Of course. But it worked pretty well. 

            And, of course, we don’t all have to have everything. And that’s an acknowledged point and really a complete impossibility in Europe and, ultimately, a complete impossibility for all of us. So a little of both. 

            MR. KEMPE: The eurozone crisis in terms of looking out — looking forward with our allies? Does this come into our calculations? 

            MR. CARTER: Oh, yeah. No, it absolutely does. 

            The only thing I’ll say about that, Fred — I don’t have anything wise to say about that, but I — I dare say Marty Dempsey does. 

            And Marty and I have a little team that we get together with every couple of weeks on exactly this theme. This is a big deal in Europe. You know it better than I do. 

            But it does have strategic consequences. I mean, it’s not so much in the hardware in the near term, but it shows up in the mindset and the unity of Europe and the optimism and ability to lean forward and so forth. 

            Let’s hope this passes soon. 

            MR. KEMPE: Thank you very much. We exist to — (applause) — I was about to say I want the audience to all join me in thanking you — (laughter) — but the audience got ahead of me, and I think that’s — that just shows how pleased people were with your frankness, with your openness and with this great presentation. 

            Thank you again. (Applause.)


The Atlantic Council of the United States

Pivotal Partnerships: The Prospects for International

Defense Cooperation in an Age of Austerity

Welcome and Moderator:

Frederick Kempe,

President and CEO,

The Atlantic Council

Deputy Secretary of Defense Ashton Carter

Location: The Atlantic Council, Washington, D.C.

Date: Wednesday, February 15, 2012

Transcript by
Federal News Service
Washington, D.C.

Related Experts: