NATO and 1992

Defense Acquisition and Free Markets

by Simon Webb

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Since the mid-1970s, members of NATO have doubled annual spending in real terms on new equipment for their armed forces. Throughout this period, there have been calls for greater rationalization, standardization, and interoperability among the Allies. Countries have also changed the way they acquire equipment. This report tracks the changes in patterns of acquisition since the 1960s. It also assesses the main forms of cooperation in more detail. It reviews the growth in transatlantic trade following initiatives in the 1970s, the emergence of collaborative development programs, the role of licensed and co-production schemes, and trade in components and other subcontract items. It examines the results of these policies on frontline forces in Europe and the North Atlantic, and reviews the theoretical benefits expected from the free markets, and the potential for securing similar gains in defense acquisition. The author discusses defense, and other, reasons that countries may prefer to buy equipment from domestic industries. He compares the evolving institutional frameworks of NATO and the European Economic Community for public sector purchasing. He then discusses the broader implications for NATO of the free trade blocks, and particularly how these might affect relationships between the United States and Europe. Finally, he considers possible ways in which free market principles might be reconciled in practice with key concerns of defense policy.

This report is part of the RAND Corporation Report series. The report was a product of the RAND Corporation from 1948 to 1993 that represented the principal publication documenting and transmitting RAND's major research findings and final research.

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