NATO Review: Future-proofing NATO’s industrial capacity: how decisions at the NATO Summit in The Hague will strengthen the Allied defence industry

NATO Review

Following Russia's invasion of Ukraine, NATO is undergoing a fundamental shift in its strategic posture to address a degraded security envir

Key takeaways

• NATO allies are moving toward a 5% GDP defense spending target, with up to 1.5% dedicated to defense-related investments.
• The US defense industry has consolidated from 51 companies at the end of the Cold War into the 'Big Five' including Lockheed Martin and Northrop Grumman.
• European defense capacity is increasingly driven by multinational primes such as MBDA and Airbus.
• NATO is utilizing the Defence Industrial Production Board (DIPB) to exchange best practices and address supply chain vulnerabilities.
• A key strategy involves aggregating demand through joint procurement to provide predictable signals to the industry.

Main topics

• NATO Hague Summit decisions
• Defense Industrial Base revitalization
• US and European defense industry structure

Notable quotes

The Euro-Atlantic area is not at war, it is not at peace either.

Conclusion

The revitalization of the Allied defense industry through coordinated

Transcript preview

Speaker 1 (0:00) Future-proofing NATO's industrial capacity. How decisions at the NATO summit in The Hague will strengthen the Allied defence industry. By Kodja Karlsson, Andreas Paraskevopoulos, and Adam Dudas. The security environment in Europe changed drastically on 24 February 2022 with Russia's full-scale and brutal invasion of Ukraine. This led NATO to reassess its deterrence and defence posture. In July of the same year, Allied heads of state and government adopted a new strategic concept at the 2022 Madrid summit. NATO's strategic concepts are critical documents. informing NATO's strategic direction and policies, historically they are published once every 10 years. The 2022 Strategic Concept set out NATO's main threat vectors and agreed that although the Euro-Atlantic area is not at war, it is not at peace either. Summary NATO heads of state and government have agreed new and ambitious capability targets. and a new defense investment pledge of 5 % of gross domestic product GDP in June 2025. The new capability targets agreed by NATO defense ministers will create a long-term increase in demand for defense industrial production. The alliance needs a robust defense industrial base, supported by the exchange of best practices between allies, identifying options for financial risk-sharing. reducing barriers to cooperation, expanding multinational procurement, improving standardization and interoperability, and expanding cooperation with partners, including Ukraine, the Indo-Pacific partners, and the European Union . At the NATO summit in The Hague, NATO leaders recognized that in order to deter any future military conflict, allies will have to pledge to spending 5 % of their GDP to defense. of which up to 1.5 % may be spent on defence-related investments. This has created the conditions for Allies to channel robust funding into governmental contracts with the defence industry in order to meet the new capability targets that are assigned for each Ally to generate collective effect. To meet these targets and acquire capabilities at pace, NATO now has to greatly increase and optimise the capacity of its defence industrial base. The updated Defense Production Action Plan, publicly released at the summit in The Hague presents a concrete program to optimize and strengthen the allied defense industry, maximize its outcomes and increase allies' return on investment. The current state of the defense industrial base. Decades of perceived low threat levels diverted NATO allies' resources away from core defense expenditures. Yet as the world becomes more dangerous and unpredictable, they have now dramatically increased their defense spending, breaking with 60 years of progressive decline in graphic one. But they must now account for an undersized industrial base, the result of decades of underinvestment. At the end of the Cold War, many allies reoriented their economies from defense spending to other areas, such as social welfare, resulting in only three allies, Greece. the United Kingdom, and the United States, spending 2 % or more of their GDP on defense in 2014. This so-called peace