Liberalized technology sharing and globalized supply chains are needed for controlling the cost of defense.
I spent last Wednesday in Warsaw at the Polish Institute of International Affairs (PISM), for a conference on Balancing Strategy and Economic Imperatives: the Future of US-Polish Defense-Industrial Cooperation. My task was moderating a panel discussion on “The Industry’s View,” amongst Marek Dras, director-general of Radiotechnika, Henryk Kruszyński, president of Teldat, and Marek Brudka, R&D director for Filbico. All three firms are designers and builders of military electronics and software. They’re smallish firms, with 20 to 200 staff, but of some history—20 to 70 years. They are primarily Polish companies, but they have global ambitions, and that should be taken as a serious boon to the alliance. For the combination of cost and quality that companies in countries like Poland offer is under-leveraged in the global security business.
These three companies—and others like them—aim not just to soak up some economic offsets by clipping together black boxes shipped from the US, but to participate industrially by taking an active part in developing important subsystems. Their immediate target is the outer tier of the Shield of Poland air defense project, whose competition pits MBDA’s SAMP-T against Raytheon’s Patriot PAC-3. Each firm has a multi-year history of working with Raytheon (which incidentally sponsored the conference, in part to showcase the capabilities of its Polish partners). MBDA has recruited its own local partners, as should be expected for any tender where an actionable industrial participation requirement is part of the bidding.
But this robustness in Polish industry has broader implications. It’s arguably a manifestation of what Joe Katzman in the Wall Street Journal recently deemed “the ‘Hyundaization’ of the global arms industry—the rapid spread of cheaper but good-enough weaponry” from previously unexpected sources. In the 1992 movie version of David Mamet’s Glengarry Glen Ross, Alec Baldwin’s Blake taunts Ed Harris’s Dave for driving a Hyundai. Today, it’s only wryly funny, because Hyundai has come so far. Poland itself knows this trend as a buyer: its new Krab armored mobile howitzers will feature cannons from Nexter and Rheinmetall, encased in Braveheart turrets from BAE Systems, but mounted on K9 chassis from Samsung Techwin. That’s not strictly Hyundai, but the armaments arm of a globally recognized chaebol all the same.
Joe mused that this good-enough emerging-markets trend “poses a serious threat to US military dominance.” Having been to Poland, I’m not so sure. Four reasons tell me that this trend, properly leveraged, can improve the overall security of the US and its allies.
First is the question of who’s on whose side. Poland is one of the United States’ most enthusiastic NATO allies—indeed, the only non-Anglo-Saxon country to come to war initially in Iraq. With another war raging next door in Ukraine, Poles are feeling themselves under the gun these days. So here’s a memo to the US State Department’s slow-motion export licensing people: items sent to Poland obviously won’t be ending up in Russia. Trading technology with Polish firms should bring confidence in one’s supply chain. Fairly, the same can be said of Hyundai and Samsung as well. If South Korea merits receiving F-35s, then sourcing components and even whole systems there should give no pause.
The second is a matter of technical capabilities. For that howitzer project, components are coming from around the world, but Polish firm HSW serves as the system integrator. Back during the Warsaw Pact days, Polish industry became an early leader in a variety of fields (notably including emission security applications), and that kind of original thinking may still be in ample supply. Today, one can hardly walk down the street in the capital without bumping into a graduate of either the Warsaw University of Technology or the Military University of Technology in Warsaw. However much we wring our hands about STEM education in the United States, Poland is a country of engineers.
Third is commercial savvy. The older firms in the east of Europe were previously sheltered monopolistic producers under the Communists. After the Wall fell, their demand evaporated almost overnight. The surviving companies are those that learned how to market products that people actually wanted to buy. In the early 1990s, Radioteknika even changed its named to Radiotechnika Marketing to drive home the point for its staff and customers. And the entire country has, as the commercial attaché at the US Embassy called it in an earlier talk that day, “an Anglo-Saxon approach to business.” (Yes, mes amis, he meant that as a good thing.)
Fourth is cost. Like Hyundais, Polish products are inexpensive. After two decades of weak domestic demand, whole sectors are slack, and overcapacity can sharpen pencils. The potential savings are important as American budgets move sideways. All large American military contractors have global supply chains, but none are fully exploiting the possibilities. According to yet-unpublished research from 2011 by the Manufacturing & Industrial Base Policy office at the Pentagon, the actual volume of overseas content in current programs is quite small. The trend has simply not progressed as far as the anecdotes suggest.
Costs and adversaries are both challenges to security—China may indeed be the world’s low-cost manufacturing floor, but we’ll not be buying our bullets there. But while we fret about Chinese costs and capabilities, it’s worth noting that China has no useful allies. The United States, on the other hand, has lots of close allies with impressive industrial capabilities at reasonable costs. We’ve seen the results in our cars and commercial aircraft; it’s time now to realize the potential in armaments. National defense industries like that in Poland and South Korea are good, cheap, and onside. It’s time to make them full partners.
James Hasík is a senior fellow at the Brent Scowcroft Center on International Security. PISM is the Atlantic Council’s partner in producing the annual Wrocław Global Forum, to be held this year from 11 to 13 June.