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This study evaluates the health of the U.S.-Canadian defense industrial relationship, which is critically important as the U.S. Department of Defense expands the national technology and industrial base. The CSIS study team gathered and analyzed a wide range of quantitative data and conducted interviews with government and industry officials involved with bilateral cooperation on both sides of the border. In addition to looking at top-level history, legislation, policy, and trends, the study team undertook five sectoral case studies highlighting different aspects of the benefits from and challenges facing bilateral cooperation. The study finds that the benefits to both partners exceed what either could obtain solely by relying only on its own national resources. While the overall U.S.-Canadian defense industrial relationship remains sound, the study team identifies a range of recommendations to enhance its value to both partners.
In light of Section 881 of the National Defense Authorization Act for Fiscal Year 2017, which expanded the legal definition of the National Technology and Industrial Base (NTIB) to include the United Kingdom and Australia, this report informs NTIB partners on barriers and opportunities for effective integration. The expansion of the NTIB is based on the principle that defense trade between the United States and its closest allies enables a host of benefits, including increased access to innovation, economies of scale, and interoperability. In order to reap the greatest benefits of a new era of NTIB, this report uses the lessons learned from study of the present state of integration to identify areas of opportunity for policy reforms and greater cooperation.
The United States’ National Technology and Industrial Base (NTIB) is a congressionally-mandated policy framework that is intended to foster a defence free-trade area among the defence-related research and development sectors of the United States, Canada, Australia and the United Kingdom. To date, however, the NTIB has only managed to facilitate limited bilateral cooperation between some members, falling well short of its goal. The US defence export control regime is one of the biggest barriers to NTIB integration. Specifically, bureaucratic fragmentation, its failure to treat trusted allies differently from other partners and its leaders’ reluctance to attempt politically costly reform are significant barriers to progress. Canberra’s ability to maintain its own competitive military advantage and to serve as an effective ally of the United States in the Indo-Pacific is threatened by real and growing opportunity costs in an age of rapid strategic and technological change that Australia and Australian industry face as a result of slow NTIB implementation. Australian leaders should elevate NTIB progress to the political level and accelerate efforts to make a strategic case in Washington as to why extensive and ambitious implementation of NTIB’s original vision is urgently needed.
The United States is facing multiple challenges to sustaining its military-technological edge in the Indo-Pacific: The proliferation of advanced missiles, submarines, satellites and other technology has raised the costs and risks for the United States in a regional conflict. Access to advanced technology and innovation has spread, raising the importance of the private sector in maintaining military superiority but also generating new centres of technological progress.The United States’ current defence strategy and capabilities are increasingly economically unsustainable, and its defence budget is stagnating due to political polarisation in Congress. The Third Offset is a set of strategies that aims to bolster US conventional military power by mobilising innovation, new technologies and institutional reform: The United States is placing ‘bets’ on a series of new technologies, from artificial intelligence to hypersonic weapons, that will allow its military to project force in contested environments. Some of these technologies will, in theory, allow for more economically sustainable military operations and capabilities. Reforming US defence institutions to prioritise innovation, and seeking ways to take advantage of new technologies in the private sector, are attempts to embed and sustain US military advantage. The direction of the Third Offset, and its success or failure, should inform Australia’s strategic outlook. Canberra should seek to expand engagement with the Third Offset, particularly through the following institutional aspects: A United States-Australia Defence Technology Workshop should be established to generate new ideas around Indo-Pacific technological trends, investment and new military concepts. Canberra should explore the possibility of hosting, or jointly funding, an international Defence Innovation Unit Experimental Office, providing strategic coordination on technological developments, resourcing and opportunities for Australian defence firms. Australia needs to expand its engagement with the United States on the testing, exercises and simulations that will form new Third Offset military concepts.