Smart Defense and the Future of NATO:

Can the Alliance Meet the

Challenges of the Twenty-First Century?

March 28-30, 2012

Chicago, Illinois
Conference Report and Expert Papers
Dr. Lisa Aronsson and Dr. Molly O’Donnell
Conference Report Coauthors
Presented by The Chicago Council on Global Affairs

This conference and publication were generously supported by:

NATO Public Diplomacy
Finmeccanica UK Ltd
Robert Bosch Stiftung
Consulate General of Canada in Chicago
Saab
Cooper Family Foundation
Konrad-Adenauer-Stiftung
DePaul University
 Smart Defense
Camille Grand
Director,
Fondation pour la Recherche Stratégique (FRS)

Abstract: Austerity measures spurred by the global financial crisis have led to decreases in defense spending
in almost all allied countries, especially in Europe. Indeed, these cuts are the most visible marker of the chal-
lenges to Western leadership in international security affairs. As former U.S. Secretary of Defense Robert Gates
cautioned in his famous farewell speech in Brussels, there is serious risk of the “demilitarization” of Europe as
more and more nations are unable to provide militarily relevant forces to NATO (or EU) operations. In this
context, NATO Secretary General Anders Fogh Rasmussen launched the “Smart Defense” concept in February
2010, which aims to transform the approach to defense acquisition in order to deliver capabilities in a more
efficient and cost-effective manner. A multifaceted concept, Smart Defense promotes new ideas and manage-
ment, facilitates better coordination within NATO, and provides strategic responses to capability shortfalls. It
will require significant political will and cooperation among allied countries, but is critical in combatting the
current challenges of the defense sector.

Facing the budget and capability abandoning support for critical capabilities. The

challenge largest European NATO countries are no exception,

with deep cuts in Germany and Italy (10 percent),
plans for severe reductions in the UK (at least 7.5
In the context of the global financial crisis, fiscal
percent over the next four years), and expectations
austerity has been leading to severe cuts in defense
of further cuts in France after an already significant
spending in almost all allied countries in the last few
slowdown. Altogether, twenty out of twenty-eight
years, primarily in Europe but also in North America.
allies reduced their defense budgets last year. The
The eurozone crisis has led to sharp declines in
vast majority of NATO countries already dipped
defense spending in the short term (often up to 10 below the threshold of 2 percent of GDP for defense
percent over a single year, with some extreme cases spending years ago and are heading for 1 percent.
of cuts up to 28 percent) and plans for further reduc- The decline in European defense spending
tions in the future. In Europe many countries are contrasts sharply with developments in the rest of
under extreme budgetary constraints as they try to the world. Globally, defense spending increased
address the economic and fiscal challenges associ- 50 percent in the last decade. From 2001 to 2010,
ated with massive public debts. according to data from the Stockholm International
In this context many “small” European allies Peace Research Institute (SIPRI), defense spending
refuse to contribute even modestly to operations. in Europe only increased by a meager 4.1 percent.
Other traditionally important contributors to NATO Most of the increase came from Britain and France,
engagements—such as the Netherlands—are while spending in most other European countries

2 th e ch icago cou nci l on global affai rs

was decreasing or stagnating. During the same ity development and defense planning no longer
period, China increased its budget by 189 percent, suffices to address the organization’s challenges.
Russia by 82 percent, the United States by 81 per- In February 2010 the secretary general of NATO
cent, India by 54 percent, and Saudi Arabia by 63 launched the “Smart Defense” concept at the secu-
percent.1 In 2011, for the first time, Asia spent more rity conference in Munich. The concept aims to
than Europe on defense. transform the approach to defense acquisition to
Even if NATO still accounts for two-thirds of deliver capabilities in a more efficient and cost-
world military expenditures, this rapid decline in effective manner.
relative terms—which could be amplified by the While the plan for Smart Defense is a major
announced U.S. cuts—is the most visible marker “deliverable” for the 2012 Chicago NATO sum-
of the challenge to Western leadership in interna- mit, the substance of the initiative still needs to
tional security affairs. In Europe it is all the more be more accurately defined in the longer term.
worrying because the money spent is often not mil- Concrete projects need to be developed and
itarily effective. Many European armies continue to endorsed by all allies. In recent months, work
sustain large conscription forces mostly unemploy- conducted jointly under the leadership of the
able for crisis management outside their respective Supreme Allied Commander for Transformation
territories. In addition, procurement policies are (SACT) and the deputy secretary general of the
not harmonized, and many competing programs alliance defined both a conceptual framework and
continue to be developed at the expense of a more a first set of projects. This first step was critical to
integrated and cost-efficient acquisition policy. getting beyond the political slogan and develop-
As former U.S. Defense Secretary Gates pointed ing a shared vision of Smart Defense to be submit-
out in his famous farewell speech in Brussels, there ted in Chicago.
is a serious risk of “demilitarization” in Europe as
more and more nations are simply no longer able A multifaceted concept
to provide militarily relevant forces to NATO (or EU)
operations. This trend is undermining the credibil- At this stage, several key policy objectives underlie
ity of the alliance in the mid-to-long term and could the Smart Defense initiative:
weaken the transatlantic relationship if Americans
are no longer willing or able to compensate for • Organizing and mitigating the effects of the
European shortfalls. These shortfalls were clearly announced reduction in defense budgets of
identified during the recent Libyan operation. The NATO countries by making better use of the
U.S. decision to “lead from behind” left only a hand- available resources;
ful of European allies able and willing to conduct the
bulk of combat operations, with the United States • Reviving the old theme of “burden sharing”
providing indispensible enablers such as most of the between Americans and Europeans by highlight-
intelligence, surveillance, and reconnaissance (ISR) ing the need for closer coordination of defense
systems, including unmanned aerial vehicles (UAVs) policies of the allies in a context of fiscal auster-
and air-to-air refueling. ity in Europe and cuts in U.S. spending in the
Confronted with this combination of growing decade to come;
capability shortfalls and declining defense budgets,
many experts and leaders have come to acknowl- • Providing responses to the capability shortfalls
edge that “business as usual” is no longer possible identified during the engagements in Afghanistan
and that the traditional NATO approach to capabil- and Libya;

• Promoting new ideas and management methods

 1.  All data extracted from SIPRI Military Expenditure
such as coordinated acquisitions and integrated
Database 2011, http://milexdata.sipri.org. management of common capabilities;

S m a r t D e f e n s e a n d t h e F u t u r e o f NATO 3
• Coordinating better NATO capability initiatives would specialize in specific assigned roles in
with the recent efforts of the European Union future alliance missions at the expense of their
through the European Defense Agency and sovereignty in matters of defense and their ability
European projects under the “pooling and shar- to act without the Americans.
ing” label that pursue similar objectives;
• Ending up as another bumper sticker for a sum-
• Finding innovative ways to cooperate on some mit—Without a radical change in mind-set,
flagship projects such as alliance Ground Smart Defense risks being a simple rebranding
Surveillance (AGS) or missile defense, identified of existing projects without responding to the
as major “deliverables” for the Chicago summit. necessities of the coming decade or addressing
the capabilities shortfalls.
The secretary general intends to achieve the adop-
tion of a Smart Defense “package” at the Chicago
Some elements for a successful
summit, responding to the three pillars already
identified by Allied Command Transformation
Smart Defense
(ACT)—cooperation, prioritization, and specializa-
In the light of past successful cooperation in
tion—and combining the launch of new initiatives
labeled Smart Defense and the funding of projects defense matters, several lessons can be drawn:
already identified.
1. Successful cooperation combines strong politi-
Faced with this ambitious agenda, nations
cal will, a clear vision of job sharing, and signifi-
have adopted a supportive but prudent approach.
cant financial or industrial gains.
If they acknowledge that “business as usual” is not
an option in the current budgetary context, they
2. Cooperation between a limited number of simi-
also emphasize the cost of past and ongoing multi-
lar countries (e.g., France/UK, Visegrad coun-
national projects (the A400M military transport air-
tries, Nordic countries) tends to be generally
craft, the NH90 helicopter, and the JSF/F35 fighter)
more successful and efficient than vast mul-
and express legitimate concerns about the impact
tinational projects run by NATO involving too
of Smart Defense on their sovereignty, their indus-
many partners.
try, and their budgets. Some of them fear that Smart
Defense will be reduced to the multiplication of
3. The pooling of capabilities becomes more com-
common funding, leading nations that maintain a
plicated as combat approaches. It is easier to
reasonable defense effort to also pay for those who
share maintenance facilities, training facilities,
behave as free riders.
and strategic enablers than to create dependen-
In order to better understand the potential of
cies on critical capabilities required for combat
Smart Defense and submit for consideration proj-
operations. Many remember that recent NATO
ects that could fall under this initiative, it is neces-
engagements were marked by caveats or by the
sary to identify the risks beforehand.
abstention of allies refusing to take part in a par-
• The lack of accountability—An initial paradoxi- ticular mission.
cal pitfall would be to increase the disempow-
erment of Europeans who would be tempted to If Smart Defense is only used to disguise cuts, the
fulfill their role in the alliance by getting involved support and ownership of the ministries of defense
in a couple of flagship projects without maintain- is unlikely. It thus appears desirable that savings
ing a minimum defense capability. generated by Smart Defense should be reinvested
in capability development.
• The limits of the niche approach—Many are Finally, from a European perspective, estab-
likely to resist the logic under which Europeans lishing transparency with ongoing projects within

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the EU is essential, including the efforts of the whose use would be conditioned on the authori-
European Defense Agency and the various initia- zation of one partner of a particular project would
tives under pooling and sharing. A true first goal for be counterproductive and almost absurd. The
Smart Defense would be to better coordinate the difficult experience of Libya and the difficulties
work of the alliance with the modest but real role involving collective capabilities (AWACS planes),
of the EU, while respecting the independence and when nations not involved in Operation Unified
respective roles of the two organizations. Protector did not authorize their crews to fly the
Indeed, behind the displayed role of clearing mission, set a worrying precedent. Clear rules
house, NATO plans to use this project to mobilize establishing the availability at all times of capabili-
allies around priority capabilities today with little ties procured jointly need to be set and endorsed
or no additional funding. Such an approach has the by all participants.
merit of helping fill capability gaps and of providing
a partial solution to the low investment in defense The reality of the financial gains needs to be dem-
of the vast majority of the allies. NATO should also onstrated on a case-by-case basis. Cooperation
take into account the views of the European allies sometimes has a high cost, and NATO does not
who seek to preserve a coherent defense capability have the best track record for managing multina-
and a technological and industrial base. tional programs. The NH90 program is often cited
as a negative example both in industry and in the
Conclusion: Some final policy armed forces due to its length, cost overruns, and
recommendations bureaucratic management. With regard to indus-
trial cooperation, a project can hardly be described
Smart Defense cannot be a substitute or an alibi as “smart” if it falls victim to all the usual problems
to justify future budget cuts and capability. While of past multinational cooperation (e.g., ensuring
many of the European armies have already reached fair industrial returns for all partners and accumu-
or are about to reach critical thresholds of military lation of national specifications). Smart Defense
readiness that affect their ability to fulfill missions, must be accompanied by the acceleration of reform
whether the defense of their territory or the abil- of alliance agencies.
ity to contribute to militarily significant operations
of the alliance, it is necessary to recall that Smart Dialogue with the defense industry should not
Defense must preserve and strengthen the over- be neglected. NATO should establish a dialogue/
all defense posture of the alliance and not simply partnership with the defense industry of all allies
mask cuts or facilitate the behavior of free-riders. in order to be able to meet the two objectives of
responding to capability requirements and reduc-
The priority given to the reduction of capability ing costs and acquisition times. It is particularly
gaps must be affirmed. Smart Defense is not a tool necessary to better organize the debate with
of industrial policy, but must focus on building capa- European industry, which faces fiscal austerity, but
bilities that Europeans are not all able to acquire could become a major player in Smart Defense if it
only through national budgets. Particular emphasis fits into ambitious projects.
should be given to critical enablers to prevent the
undermining of NATO’s ability to act. Amongst the The choice of flagship projects will be an interest-
projects that deserve to be given priority, ISR capa- ing marker. In his public statements the secretary
bilities and air-to-air refueling stand out. general often associates Smart Defense and con-
solidation of large projects such as AGS or missile
The availability of capabilities developed jointly defense without explaining the link further. An
as part of Smart Defense through a multinational emerging consensus exists on the major projects
project is a critical principle. Pooled capabilities that could be endorsed at the Chicago summit: a

S m a r t D e f e n s e a n d t h e F u t u r e o f NATO 5
broader ISR initiative going beyond AGS, air-to-air Closer coordination with the EU should be an
refueling planes, missile defense, and precision- integral part of the Smart Defense package. If the
guided munitions (PGMs). Europeans (or the EU as such) were able to put for-
ward joint capability initiatives, such an approach
The role of NATO still needs to be fully defined. should be labeled Smart Defense and should be
Is this role as a useful facilitator promoting coop- hailed as such in Chicago, even if NATO is not
eration among nations and offering a forum to involved in the development of a project. A truly
enable pooling and specialization fully in line European approach requires close coordination
with the defense-planning process, or is it a more with the pooling and sharing of the EU through
global and more questionable ambition under the development of proper European projects. It
which NATO would define and manage a multi- should be clear that ownership by European gov-
tude of projects labeled Smart Defense without ernments will be increased by projects involving
clear added value? Debates have already taken European industry. The fact that these projects
were originally developed and launched under
place and a number of points stand out on the
the European Defense Agency project or pooling
possible role of NATO in regard to the three pillars
and sharing could also promote opportunities for
(cooperation, prioritzation, and specialization)
European industry. The fact that such projects are
identified by ACT.
endorsed by NATO under the Smart Defense label
1. Regarding cooperation, if the ambition goes is not a risk but an opportunity to see them succeed
and bring together more partners. A good example
beyond the role of clearing house, it is neces-
is the case for any initiative around the acquisition
sary to consider Smart Defense within the NATO
of in-flight refueling capabilities (MRTT).
Defense Planning Process (NDPP). But NATO
A failure of Smart Defense in Chicago is
recognizes it will essentially be the facilitator of
unlikely from the strict view of the political dynam-
cooperation by allowing the partners to identify
ics of the summit itself. (Who would support
joint projects.
“dumb defense?”) The summit is likely to ensure
both the adoption of the initiative by the alliance
2. Prioritization is not new to NATO, as previ-
and endorsement of a handful of visible proj-
ous capability initiatives (e.g., Prague, Lisbon)
ects. The real issue remains the ability of the ini-
remind us. However, as the identification of pri-
tiative to develop over time and to produce the
orities has not yielded the expected results of
required change in mind-set. In this regard, the
delivering enhanced capabilities, the question
ACT approach that sees Smart Defense as a project
is how NATO can articulate common, realistic
developed “with nations, by nations, for nations”
priorities consistent with the mission and level
is probably the way to secure an appropriate level
of ambition of the alliance. The main difficulty
of allied endorsement and a commitment to go
is the relationship between the priorities of each
beyond a good slogan for the summit.
ally and the priorities of the alliance, which do
not always overlap (to put it mildly).

3. Specialization is the most difficult because

the smallest allies are sometimes reluctant to
position themselves in niches and the “big”
Europeans have not given up maintaining
a coherent defense apparatus. What is most
important for NATO is to promote specializa-
tion by design rather than see the specialization
by default.

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