Introduction

At the 2014 Wales Summit, NATO Allies adopted the Defence Investment Pledge.¹ This pledge declared the importance of defence spending in the modern era, specifically emphasizing the allocation of at least 20% of defence expenditures towards investments in new equipment, including mandating essential research and development (R&D) to propel these advancements. The new 20% equipment benchmark was established to prevent equipment from becoming obsolete, specifically aimed to reduce capability and interoperability gaps amongst Allies and bolster the defence industrial and technological base (DTIB). The DTIB is crucial for strengthening the Alliance’s deterrence and defence capabilities and maintaining resilience.

The Defence Investment Pledge and the NATO Defence Planning Process (NDPP) ensure a unified approach to defence procurement and production across the nations. This alignment helps streamline efforts and avoid duplication of resources. To ensure flexible mechanisms for aggregating demand, specific steps should be taken, such as establishing joint procurement programs and developing standardized contracts that are adjustable to accommodate other nations joining in at a later stage. These initiatives allow NATO members to pool resources and negotiate better terms with the DTIB, enhancing the overall efficiency of defence procurement and, in response to evolving global security challenges, create clear, predictable requirements for the DTIB. By consolidating procurement orders across member states, NATO aims to reduce costs and increase efficiency in the production and delivery of military equipment. This approach not only helps mitigate the systemic issue of delayed delivery times, but also ensures that industry can plan and allocate resources more effectively and maintain NATO’s technological edge via better investment.

However, achieving these objectives requires a delicate balance between national political and industrial interests. National defence industries are often driven by domestic priorities, which can conflict with the broader goals of NATO and other member states. The NDPP must, therefore, include mechanisms ensuring that national interests are respected, simultaneously promoting interoperability and collective defence capabilities. This panel will discuss and explore the potential options member nations and their DTIB could foster to improve NATO’s ability to innovate ahead of our adversaries and deter future aggression via sustainment of our military efforts.

The Strategic Importance of Defence Investment

Meeting the 20% guideline for defence investment is more than a fiscal target; it is a strategic imperative. Failure to adhere to these standards risks military equipment becoming obsolete and widening technological and interoperability gaps amongst NATO members. These gaps could undermine the collective security framework that NATO represents. Continuous investment in research and development, as well as a robust and flexible defence industry, is pivotal for addressing evolving needs and preserving a technological edge, ensuring the Alliance can effectively respond to contemporary and future threats.

According to the 2022 NATO Strategic Concept, investment in defence technology is a key factor in maintaining strategic superiority.² The concept highlights that technological advancements are essential to counter emerging threats and sustaining a balance of power. Therefore, the 20% investment pledge is crucial for ensuring that NATO remains a formidable force on the global stage.

Expanding Production Capacity

The defence industry, along with national governments and defence agencies, all play a vital role in maintaining NATO’s industrial production capabilities. Industry’s involvement spans peacetime, crisis management, and conflict scenarios where it can have a positive influence on deterrence outcomes or provide the bare minimum per contract.

In 2023, NATO initiated the Defence Industrial Production Board as part of the Defence Production Action Plan agreed to at the Vilnius summit.³ This new board will play a critical role in measuring the success of the Vilnius plan. Metrics such as delivery times, cost savings, and the level of interoperability achieved amongst member nations will be key indicators of the plan’s effectiveness. Regular reviews and adjustments will be necessary to ensure that the plan remains relevant and responsive to changing needs.

During peacetime, the defence industry must ensure that production capacities are not only maintained but also adaptable to rapid scaling in response to crises or conflicts. The war in Ukraine exposed shortfalls in current military stockpiles and in the DTIB in terms of production capacity and responsiveness. Addressing these issues will require increased cooperation among NATO members, as well as a steady flow of investment in R&D, infrastructure, and human resources. The defence industry’s ability to pivot from peacetime production levels to heightened operational demands during a crisis is essential for maintaining readiness and resilience. However, a strategic approach from nations’ political leadership is equally crucial. They need to provide transparency and predictability in planned military investments to enable the defence industry’s readiness and resilience.

Recent NATO Defence Planning Capability Reviews emphasized the importance of maintaining, and even expanding,⁴ the strong transatlantic industrial base capable of supporting the Alliance’s needs. These reviews identified gaps in current production capacities and called for increased collaboration between member states and the defence industry to address these shortcomings.

Focusing on national DTIBs can sometimes hinder NATO cooperation in defence production and procurement. Finding ways to balance national interests with the potential benefits of a more unified DTIB will be crucial for future defence cooperation efforts. Nations and large defence companies can drive NATO initiatives by leading innovation and production efforts. Their involvement will be essential in scaling up production and integrating new technologies into NATO’s defence arsenal.

Technological Innovation and Warfare

Innovation in defence technology is a continuous process driven by the ever-evolving nature of warfare. The defence industry is crucial in developing emerging technologies that can outpace our adversaries’ advancements. These Emerging Disruptive Technologies (EDTs) include advancements in cyber warfare, artificial intelligence (AI), autonomous systems, and other fields.⁵ Industry’s inputs are crucial for ensuring that NATO’s technological edge is not only maintained but also expanded.

Regular assessments and strategic foresight will help NATO adapt to future challenges. NATO’s ability to maintain its technological edge in the face of EDTs will depend on its investment in new equipment and maintaining existing stockpiles. Balancing these priorities will require a strategic approach that considers both immediate and long-term defence needs.

Enhancing NATO-Industry Cooperation

To foster innovation and maintain technological superiority, NATO and the defence industry must engage in a synergistic relationship.⁶ This relationship could involve:

1. Collaborative R&D Initiatives: Joint research projects that leverage both military insights and industrial expertise can accelerate the development of innovative technologies. NATO could establish specific innovation hubs similar to, such as the Defence Innovation Accelerator for the North Atlantic (DIANA), which uses NATO COEs or national equivalents, such as the C-UAS Joint Nucleus within the Dutch Ministry of Defence,⁷ where industry experts and military strategists collaborate on future-ready solutions to solve particular problem sets we see today. In contrast, DIANA identifies dual-use emerging research that may be used within NATO in the distant future.
2. Flexible Procurement Processes: Traditional procurement processes often lack the rapid pace of technological advancements. Adopting more agile procurement strategies can help integrate advanced technologies into the defence infrastructure more efficiently.
3. Investment in Dual-Use Technologies: Countries can leverage commercially developed technologies for economic and strategic advantages. Encouraging the development of technologies with both civilian and military applications can enhance innovation and accelerate the deployment of new capabilities while providing broader economic benefits. Dual-use technologies often lead to cost savings and increased scalability. However, they also present risks, such as dependence on specific companies or technologies, which must be managed carefully.
4. Strengthening Cybersecurity: As cyber threats become increasingly sophisticated, the defence industry must prioritize cybersecurity in its technological advancements. In cybersecurity, three components must be preserved: the confidentiality of the data, the integrity of data and systems, and the availability of data and systems. This is commonly referred to as the CIA Triad.⁸ NATO and industry partners need to work together to develop robust cyber defence mechanisms that protect both military and industrial assets.
5. Educational Partnerships: Investing in education and training programs that focus on emerging technologies can build a skilled workforce capable of driving innovation. Partnerships with academic institutions can facilitate the exchange of knowledge and the development of new capabilities.
6. Consortiums: Collaborative consortiums are crucial for leveraging collective expertise and resources to address complex security challenges. For example, the Joint Strike Fighter (JSF) program or the Multinational Multi-Role Tanker Transport (MRTT) Fleet program. Another example is the Multinational Capability Development Campaign (MCDC), which brings together military and industry experts from multiple NATO member countries to develop and refine capabilities collaboratively. These consortiums enable a unified approach to innovation, ensuring that technological advancements align with NATO’s strategic objectives.

According to the NATO Science & Technology Trends 2023-2043 report, such collaborations are essential for maintaining technological superiority.⁹ The report outlines the importance of partnerships between the military, industry, and academia in fostering innovation and developing new capabilities that can address future security challenges.

The Industry’s Perspective on Maintaining the Technological Edge

From the industry’s viewpoint, maintaining NATO’s technological superiority involves a blend of innovation, strategic investment, and collaborative efforts.¹⁰ Ensuring that industry perspectives are fully considered throughout the process is instrumental to its success. Regular consultations with defence contractors, industry associations, and other stakeholders will help align industry capabilities with NATO’s requirements as well as refine future defence procurement. This collaborative approach will also foster innovation and enhance the quality of defence products. The following strategies can contribute:

• Continuous Innovation: Staying ahead of potential adversaries requires an unwavering commitment to innovation. This means not only developing new technologies but also rethinking existing processes and capabilities.
• Strategic Alliances: Forming strategic alliances with other industries, academia, and international partners can enhance technological development and operational readiness. These alliances can provide access to a wider range of expertise and resources.
• Scalability and Flexibility: The ability to quickly scale production and adapt to changing requirements quickly is crucial. The defence industry must develop flexible manufacturing processes that can respond to sudden increases in demand or shifts in technological priorities.¹¹ Nations’ multi-year investment plans will ensure long-term commitment by industry.¹²
• Sustainable Practices: Integrating sustainability into defence manufacturing can lead to long-term benefits. Sustainable practices reduce costs, minimize environmental impact, and improve the industry’s overall resilience. Sustainability is much more than an environmental issue, and must also be viewed more holistically, including reusability and reductions in the lifecycle cost of equipment.
• Adoption of Advanced Manufacturing: Technologies such as 3D printing, advanced materials, and automation can revolutionize defence manufacturing. These technologies can reduce production times, lower costs, and improve the quality and reliability of defence equipment.

The Path Forward: Recommendations for NATO and the Defence Industry

To ensure the effective implementation of these strategies and foster a more robust NATO-industry relationship, several recommendations can be drawn from existing NATO publications and reports:

1. Enhance Communication and Transparency: Clear and consistent communication between NATO and the defence industry is essential for aligning goals and expectations. Regular updates and consultations can ensure that both parties are on the same page and can address any emerging issues promptly.
2. Promote Interoperability: As highlighted in the NATO Communications and Information Agency’s (NCI Agency) Strategic Plan 2022-2026,¹³ promoting interoperability among member states and their respective defence industries is crucial. This can be achieved through standardized protocols, joint exercises, and shared platforms. Furthermore, one could offer that sustainable promotion of interoperability starts with advice from senior military leadership on developing and reviewing national policies to achieve aspired levels of standardization and interoperability.
3. Invest in Human Capital: The NATO Science & Technology Organization (STO)¹⁴ has emphasized the importance of investing in human capital to drive innovation. This includes training programs, scholarships, and research grants aimed at developing the next generation of defence technologists and engineers.
4. Reducing dependence on US support: NATO member countries can reduce their dependence on US support for defence equipment by diversifying their suppliers and investing in domestic production capabilities. This strategy, supported by the NATO Industrial Capacity Expansion Pledge, will enhance NATO’s overall resilience and self-sufficiency.¹⁵
5. Leverage Public-Private Partnerships: Public-private partnerships can provide a framework for effective collaboration between NATO, member states, and the defence industry. These partnerships can facilitate the pooling of resources, sharing of risks, and co-development of new technologies.
6. Ensuring Access to Critical Capabilities: NATO must ensure it has access to critical capabilities quickly enough, even if it requires cooperation with non-NATO partners. This approach will help bridge capability gaps and enhance collective defence readiness.
7. Adopt a Long-Term Perspective: The NATO 2030 initiative and agenda¹⁶ underscore the need for a long-term perspective in defence planning and investment. By adopting a strategic outlook that considers future threats and technological trends, NATO and the defence industry can better prepare for the challenges ahead.
8. Encourage Cross-Domain Synergies: Modern warfare is increasingly multi-domain, involving land, air, sea, cyber, and space. Encouraging synergies across these domains can lead to more integrated and effective defence capabilities. NATO’s Joint Air Power (JAP) Strategy¹⁷ provides a blueprint for such cross-domain integration.

Conclusion

The upcoming panel discussion offers an excellent opportunity to explore how the defence industry can enhance NATO’s commitment to sustaining production capacity and developing advanced technologies. By fostering a closer relationship between NATO and the defence industry, the Alliance can ensure that it remains at the forefront of technological innovation, ready to meet the challenges of future warfare environments.

Engaging in this dialogue is crucial for understanding the mutual benefits of collaboration and the strategic investments required. The insights and recommendations from this panel will help shape policies and initiatives that strengthen NATO’s defence posture and technological edge.

The path forward involves continuous innovation, strategic partnerships, and a commitment to maintaining interoperability and readiness. By working together, NATO and the defence industry can create a robust, agile, and technologically advanced defence ecosystem capable of responding to the complex security challenges of the 21st century.

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