Readying NATO’s Defense Industrial Base for its 100th Anniversary

Commentary by Audrey AldisertandCynthia Cook

Published July 8, 2024

This series-featuring scholars from the Futures Lab, the International Security Program, and across CSIS-explores emerging challenges and opportunities that NATO is likely to confront after its 75th anniversary.

In the future, NATO's success will hinge on its ability to unify and modernize its defense industrial base, ensuring that allies can swiftly codevelop, coproduce, and maintain the interoperable systems needed to meet emerging threats.

Russia's invasion of Ukraine in 2022 reaffirmed the salience of the NATO alliance-and was NATO's biggest wake-up call in decades. Allies rallied around Ukraine and offered a range of support, including defense materiel. As the war dragged on and the importance of allied support in sustaining Ukraine's resistance became clear, existing industrial base challenges were illuminated. Allies quickly realized that their defense industrial bases were ill-equipped to support Ukraine and simultaneously maintain adequate combat-ready stockpiles. Today, this war of attrition continues to jeopardize NATO's military readiness and deterrence posture. Therefore, improving the resilience of the alliance's collective defense industrial base will be a key topic at the alliance's agenda at its 75th summit.

One challenge for allied support to Ukraine is the nature of the industrial base. NATO member nations have to manage various, and at times diverging, national interests, threat environments, economic goals, and political environments, all of which foster independent defense industrial bases. This has led to an environment where NATO allies have "far too many" weapons systems, munitions, and battle management systems. These divisions create difficulty in achieving economies of scale, interoperability, and NATO-wide modernization efforts.

An expected-and central-question of this year's summit is sure to be how the alliance can undertake new forms of defense industrial base cooperation to better enable codevelopment and coproduction. The 2023 Vilnius Summit proved a good start with the launch of the Defence Production Action Plan (DPAP), which aims to aggregate demand to accelerate joint procurement, tackle defense industrial challenges through increased production capacity, and enhance interoperability. Standard setting, another key feature of DPAP, ensures that systems can interoperate and that certain consumables, such as ammunition, can be used in multiple systems.

NATO also established its first ever Defence Industrial Production Board, which consists of many senior NATO officials from across the alliance. Meeting for the first time in December 2023, the board seeks to boost defense industrial capacity, capabilities, and flexibility, in addition to supporting ongoing efforts to replenish depleted NATO stockpiles that have been sent to Ukraine.

Many NATO nations are also members of the European Union, which this year released its own defense industrial strategy. The European Defense Industrial Strategy (EDIS) lays out several ambitious targets relating to industrial cooperation. For example, by 2030, EU countries should collaboratively purchase at least 40 percent of their defense equipment, allocate at least 50 percent of their defense procurement budget to equipment manufactured in Europe, and trade at least 35 percent of defense goods within the bloc. This would be a notable change and require significant investments in the industrial base. Between February 2022 and June 2023, more than 75 percent of EU member state defense acquisitions were made outside of the bloc, with 63 percent coming from the United States. The European Union will need to continue to prioritize these goals and ensure secured and sustained funding. Another EU initiative is the 2023 EU Capability Development Priorities, which is a set of strategic guidelines that act as the primary reference for national and EU-wide defense planning. These are intended to act in tandem with EDIS to help facilitate the synchronization of efforts between the European Union and NATO. EDIS and the EU Capability Development Priorities, together with NATO's DPAP, have the collective goal of increasing readiness.

While big-picture goals set the stage for cooperation and collaboration, execution hinges on the specific activities supporting investments in interoperable, collaborative, and sophisticated, yet cost-effective, equipment. Some of this is already in progress, with NATO leading investments in multinational defense industrial capacity and capabilities to develop and support High Visibility Projects (HVPs). HVPs seek to optimize economies of scale by decreasing costs while ensuring interoperable equipment and increased commonality in training procedures and doctrine. HVPs are focused on essential domains, including air-to-air refueling, ammunition, uncrewed systems, and command and control. While accounting for a small proportion of total allied investment in capability, the experience with the initial 21 HPV projects can provide a springboard for future collaboration.

NATO resilience in the form of maintenance, repair, and overhaul (MRO) can also serve as a pathway for future defense integration. Centralized MRO facilities and standardized MRO procedures will be enabled by and will also support intertwined defense industrial bases that produce interoperable equipment. These factors are especially important to streamline operational readiness, especially in the event of a conflict, in addition to showcasing NATO's commitment to its robust defense capabilities from the first to final stages of the procurement process.

One of the most ambitious summit deliverables was recently announced by U.S. secretary of state Antony Blinken and NATO secretary general Jens Stoltenberg: NATO will be establishing a command in Wiesbaden, Germany, where the alliance will coordinate training and security assistance to Ukraine and also facilitate the transfer, logistics, repair, and maintenance of equipment. This effort was developed in part to cushion the blow of stoppages in Western funds and arms deliveries to Ukraine and ultimately aims to provide dependable, long-term military training and security assistance.

NATO procurement authorities should capitalize on extant momentum and political will to funnel resources into joint-MRO activities among allies. This security assistance and training for Ukraine will help create a sustained demand signal for MRO processes that could standardize procedures and centralize related facilities. There are examples of cooperation that have begun with joint sustainment, with additional activities building on that foundation until codevelopment and coproduction are feasible.

While NATO allies have made significant strides in enhancing defense procurement processes, developing defense capabilities, and bolstering resilience, these prominent areas may be insufficient when assessing NATO's readiness for war. Barriers related to production acceleration, delays in weapons deliveries, and challenges with coordination between NATO and EU bodies persist in the face of the threat. Moreover, NATO's combat power and mass come up short in relation to the defense spending of alliance members, and various capability gaps remain to be addressed.

New warfighting demands new forms of partnerships, which is especially critical for NATO's European member states, given their outsized reliance on the U.S. defense industrial base. Today, 23 of 32 allies are hitting the 2 percent defense spending threshold, which is a remarkable increase from 6 of 32 prior to Russia's invasion. Sustaining this can translate into necessary investments in the defense industrial bases of NATO nations beyond the United States, and can also contribute to additional stockpiles that the United States could draw from in a time of war. Regarding investments in the industrial base, Dr. William LaPlante, the Pentagon's head of acquisition and sustainment, notes, "production is deterrence."

It takes time and smart investment for defense spending to translate into resilient supply chains, critical infrastructure, and logistics. Building capacity and a workforce that can support heightened demand can also be a slow and painstaking process. Full integration does not happen overnight-nor should it-but learning how to spend together is a critical first step.

Audrey Aldisert is a research assistant in the International Security Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Cynthia R. Cook is the director of the Defense-Industrial Initiatives Group and a senior fellow in the International Security Program at CSIS.

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