Transatlantic Defense Partnership at Stake?
Geostrategic Changes,
Economic Trends,
and Mutual Defense


Peter Chase

I want to touch briefly on four points, with the main goal of stimulating discussion. The four points are the role of economics in peace and security; the new security threat;
the technology front; and China.

As an economist and a diplomat, I believe economic policy has a huge role in peace and security; although it’s not one that my political officer colleagues in the State Department often saw. Even today I think too many European ministries of foreign affairs are extremely weak in economic policy to the detriment of their ability to conduct diplomacy and achieve the missions that they undertake.

It’s actually really timely to have this discussion in this place for a couple of reasons: First, this happens to be the 70th anniversary of the Marshall Plan. In fact, right now
in Berlin, Chancellor Merkel and Dr. Kissinger are at a GMF event talking about this 70th anniversary. If you don’t want to listen to me, we can probably boot up a computer
and watch a live stream of them instead.

It’s also the 60th anniversary of the Treaty of Rome and the creation of what would become the European Union, which, as I like to remind everyone, was created to end war.

Both of these are economic policy projects. Their purpose is to promote growth and to end war through economic integration. The underlying principle behind both is the belief in the dignity of the individual and the political and economic systems that derive from that: democracy and a marketbased economy.

To me, they’ve been resounding successes. Both of those economic policies have brought peace and security, as the Soviet economy imploded and the Berlin Wall fell.

In the 1990s, the application of these US and European economic policies was expanded to the Warsaw Pact countries, and there were efforts even then to further
expand their application to Russia. Those were the right responses, I think, exemplifying the use of economic policy as an instrument for peace and security.

But this path ended, more or less, in the early years of this century for two main reasons: one, security, and two, economics. On the security front, 9/11, our response to it, the
ensuing wars, and the rifts that developed within Europe and between Europe and the United States, have taken time to patch up.

And then, after the blows our economies took in the wake of the 2008 financial crisis, there has remained a sense of questioning of some of the principles that actually led to
our resounding success. This can be seen in the vote on Brexit and the election of Mr. Trump, which set the stage for today’s
security issues.

What are our current security issues? There’s Russia, China, North Korea. and the nuclear threat; there’s counter-terrorism; there are cyber attacks. All these threats are real and they’re important. But I’d like to propose the possibility that the biggest security threat is us and a weakening belief in ourselves.

The Russians have done a very good job of projecting soft power. But that they should have an impact on our broader political system exposes an insecurity within it. This insecurity feeds policies, and in that way may become a bigger threat. There’s a broad underlying sense that the United States has been taken advantage of over the last 70
years. But if we’ve been “taken advantage of,” it’s because we’ve wanted to be. It was in our interests. It was in our economic interest and our national security interest to be open to the world, to take in imports, to help others grow, to encourage the growth of Europe.

This insecurity stemming from a misunderstanding is leading to economic policy that is more about building walls than opening doors. When the administration uses
national security as the underlying reason to protect our steel industry, this is an owngoal. Like the own-goal of withdrawing our signature from the Trans-Pacific Partnership,
it gives the Chinese and every other country the legitimacy to do precisely the same. This issue is dividing the United States and Europe, including the UK, right now.

Similarly, Mr. Trump’s insistence on each member of NATO contributing 2 percent of GDP also is based in the belief that we’ve been taken advantage of.; that the US has
been spending all this money on our military and our capabilities, and no one else is spending their money, and by God, we’re not going to have this anymore; it’s going to
change. I think that’s a direct quote. Which has led Angela Merkel to question whether or not the United States is going to be a reliable ally. And that, I think, is a tremendous
cost to our security.

Moreover, I would argue, getting to my third point, that it does not take into account the changing nature of what you would call Transatlantic defense and the Transatlantic
defense industries. The Third Offset Strategy, which was announced by Chuck Hegel, then Secretary of Defense, and carried forward by Ash Carter, is based on the idea
that you need to have superior technology in order to overcome the numerical advantages of your opponents. In talking about it, the DoD people understood that this strategy
would change the nature of what they were meant to do. They could no longer just rely on the traditional defense contractors who make the big tanks, anti-tank missiles,
and aircraft carriers. All those are still important; but more important is technology. Understanding the importance of technology, whether it’s Artificial Intelligence, Big
Data analytics, or autonomous guidance, led DoD to understand that it needed to have relations not just with new companies in the United States, technology companies
that they hadn’t really known before at DoD; but also that they had to have a different relationship with our international partners. If you pass a procurement act that says only
buy American technology, you’re not going to get the best technology, and you’re not going to be able to achieve your objective of technological leadership.

That understanding created an opening for more collaboration across the Atlantic with our NATO and European allies. I personally think that this makes sense. I’ve not heard
this administration use the words, but I have a funny feeling that, even as they’re increasing their budget for typical armaments, the importance of technology and the Third Offset Strategy is also accounted for. Whether or not the administration will be able to follow through, in particular in terms of collaboration with the private sector in Europe as well as the private sector in the United States, I don’t know. At the same time I feel that the NATO industry forum and other initiatives designed to foster better collaboration between NATO and industry are too concentrated still on traditional industries. I’m not sure they’re succeeding in building out from there sufficiently.

Additionally, with too much emphasis on 2 percent spending on weapons systems, the Trump administration is distracting people from an analysis of the actual threats we’re
facing and a response to them. The actual threats are more related to cyber security and terrorism than they are to an invasion across the Suwalki Gap [where Russia might
invade Poland]. A lot of the Third Offset Strategy was directed at Russian activities in the Ukraine and the need to have better, shall we say, intelligence and reconnaissance.
Those are more important than some of the other issues. Whether or not the administration will allow money spent on cyber security and cyber defense to be counted toward the 2 percent goal, I don’t know.

This brings me to my last point: China is a significant military defense issue for the United States, for the Japanese, and for our other allies in Asia. People that I know and like, like Chas Freeman, a former ambassador for whom I worked when I was in the State Department, say that we’re overstating the Chinese threat because the Chinese tend to project themselves just so far and not beyond that. However you interpret the Chinese intentions, there’s no question that the Chinese are in fact exercising the Third Offset Strategy in the sense that they are trying to acquire commercially available, private sector technologies, and they’re doing a very good job of it.

A detailed review of Chinese acquisitions of American technologies through stateowned enterprises was commissioned by the previous Secretary of Defense and actually
delivered in March of 2017. The Japanese embassy here in Brussels brought this to my attention, saying, “We are seeing European technologies on PLA [the People’s Liberation Army] ships and on PLA planes, and we’re concerned.” They’re concerned that the Europeans don’t have something like CFIUS [The Committee on Foreign Investment in the United States] to guard against the export of high technologies. There is a big policy debate on the question of whether or not the Europeans, or the United States and Europe working together, need to address the issue of Chinese acquisition of technologies in the private sector.

I’m concerned, too. It is too easy for it to turn into a competitive, reciprocity-based thing that can be directed against foreigners generally, not just against potential threats.
There are a lot of people in Europe who consider GAFA--Google, Apple, Facebook, and Amazon-- a potential threat. The European Commission’s move to adjust the way large US firms, especially tech companies, report their taxes within the EU addresses competitiveness more than security, and I think that’s an issue that needs to be discussed.