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The politics of defence co-production : the MRCA - Tornado Edgar, Alistair David 1985

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THE POLITICS OF DEFENCE CO-PRODUCTION THE MRCA - TORNADO By A l i s t a i r David Edgar B.A. Hons., Cambridge U n i v e r s i t y , 1983. A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS i n THE FACULTY OF GRADUATE STUDIES Department of P o l i t i c a l S c i e n c e U n i v e r s i t y of B r i t i s h Columbia We accept t h i s t h e s i s as conforming to the r e q u i r e d standard THE UNIVERSITY OF BRITISH COLUMBIA October 1985 © A l i s t a i r David Edgar, 1985 In presenting t h i s thesis i n p a r t i a l f u l f i l m e n t of the requirements fo r an advanced degree at the University of B r i t i s h Columbia, I agree that the Library s h a l l make i t f r e e l y available for reference and study. I further agree that permission for extensive copying of t h i s thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. I t i s understood that copying or publication of t h i s thesis for f i n a n c i a l gain s h a l l not be allowed without my written permission. of /Zf'fficg/ fete* Department  ('glintd' J C(cZwUL The University of B r i t i s h Columbia 1956 Main Mall Vancouver, Canada V6T 1Y3 Date TNT? C / n / O -I \ Abstract. The t h e s i s begins with a review of the l i t e r a t u r e d e a l i n g with the i n c e n t i v e s and d i s i n c e n t i v e s f o r pursuing defence co-production p o l i c i e s i n Western Europe. P o l i t i c a l , economic and m i l i t a r y aspects are each dealt with i n turn, and thei r r e l a t i v e importance assessed. Following t h i s section i s a case study of the Panavia Multi-Role Combat A i r c r a f t - the xTornado* - now i n s e r v i c e with the a i r f o r c e s of West Germany, B r i t a i n and I t a l y . The study t r a c e s the progress of the MRCA programme from i t s i n i t i a l conception through to production. The main theme of the case study i s how the concerns of m i l i t a r y - o p e r a t i o n a l performance, c o s t - s a v i n g b e n e f i t s , and programme e f f i c i e n c y were a l l secondary to government pursuit of wider p o l i t i c a l o b j e c t i v e s . While the general l i t e r a t u r e was found to focuss upon cost-savings i n co l l a b o r a t i v e procurement, such savings are seen to be c o n s t r a i n e d or even determined by the outcome of f r e q u e n t l y u n r e l a t e d p o l i t i c a l d e c i s i o n s . Although set within the broad framework of national economic performance and the demands of s o c i a l needs upon l i m i t e d public expenditure budgets, these d e c i s i o n s are based upon government p r e f e r e n c e s rather than i n d u s t r i a l or other lobby-group pressures. A cursory e v a l u a t i o n of the MRCA programme and the a i r c r a f t i t s e l f i s included i n the conclusion. The project i s seen to have achieved mixed success, but with s i g n i f i c a n t problems. page i i . . TABLE OF CONTENTS Abstract. . . . . . . . . . . . . i Table of Contents . . . . . . . . . . i i i L i s t of Tables . . . . . . . . . . . iv L i s t of Figures . . . . . . . . . . . v Section 1 - Introduction. . . . . . . . . 1 Se c t i o n 2 - L i t e r a t u r e Review . . . . . . . 6 i ) P o l i t i c a l Implications of Co-production . . 10 i i ) Economic Implications of Co-production . . 17 i i i ) M i l i t a r y Implications of Co-production . . 32 Section 3 - Case Study of the MRCA-Tornado . . . . 42 i ) International Bargaining i n the MRCA Programme 43 i i ) National Bargaining i n the MRCA Programme . 55 i i i ) MRCA Work-sharing Agreemente. . . . . 77 Section 4 - Conclusion i ) A Br i e f Evaluation of the MRCA. Programme. . 84 i i ) The Li t e r a t u r e and the Case Study . . . 92 Footnotes . . . . . . . . . . . . 96 Bibliography 99 S t a t i s t i c a l Appendix. . . . . . . . . . 103 LIST OF TABLES Section 1 i . Roles of the MRCA-Tornado. . . . . . . . 5 S t a t i s t i c a l Appendix I. U.K. Defence Expenditure for Selected Years, 1955-74. 103 I I . Comparison of Public Expenditure. . . . . . 104 I I I . D i v i s i o n of M i l i t a r y Expenditure by Main Categories . 105 IV. NATO Aerospace Industries i n 1970 - sales and prod-u c t i v i t y . . . . . . . . . . . . 106 V. Major Aerospace Companies i n NATO, 1980 . . . . 107 Via) West German Aerospace Companies involved in MRCA production . . . . . . . . . . . 108 VIb) Selected I t a l i a n Companies involved i n MRCA producton VII) Cost Control.on Joint Ventures: selected data . . 109 page iV LIST OF FIGURES S t a t i s t i c a l Appendix 1. Combat Wing Loading vs. T/W Ratio. . . . . . HQ 2. Combat span loading vs. T/W Ratio. . . . . . 3. Organisational Framework of the MRCA-Tornado Programme 111 page V Acknowledgement. I would l i k e to express my g r a t i t u d e to P r o f e s s o r s Mark Zacher and Douglas Ross, who acted as my thesis advisors, and the Department of P o l i t i c a l Science which t o l e r a t e d some unusual p r o c e d u r a l changes i n order to speed up my progress. Thanks should also go to Daniel Savas' Stanley Cup Group, the P o l i t i c a l Science S o f t b a l l Team and the A r t s F a c u l t y Ice-Hockey Team, without whose invaluable d i s t r a c t i o n s t h i s work might have been accomplished much e a r l i e r . Together they made the year pass by f a r too soon, and they w i l l a l l be s o r e l y missed. F i n a l l y , my thanks to O.J. Fergusson, who has acted as an i n s p i r a t i o n to us a l l . page VI The P o l i t i c s of Defence Co-production j_ the MRCA Tornado Section 1_ j_ Introduction European c o l l a b o r a t i o n i n the procurement of major new weapon systems has become a central feature of defence planning in NATO. Such c o l l a b o r a t i o n may take the form of co-production with or without co-o p e r a t i o n i n research and development; licensed production; or planned i n t e r o p e r a b i l i t y of systems. The l a t t e r p o l i c y i n v o l v e s the l e a s t amount of e f f o r t i n in t e r n a t i o n a l agreements, but assumes eithe r national production or the purchase of a system from another source. Within western Europe, f u l l defence co-production has emerged as the most common method of c o l l a b o r a t i o n i n procurement, p a r t i c u l a r l y s i n c e the l a t e r 1960s. The p o s s i b l e reasons f o r t h i s p r e f e r e n c e are the subject of the l i t e r a t u r e survey presented i n Section 2 below. The most p r e s s i n g problem f a c i n g the European defence planners i s one of l i m i t e d budgets. Economic c o n s t r a i n t s take two general forms, the f i r s t of which i s the demands placed upon t i g h t l y - c o n t r o l l e d p u b l i c expenditure budgets by other s e c t o r s such as s o c i a l welfare and education. Whilst defence budgets have r i s e n s l o w l y , the p r o p o r t i o n of GDP spent on defence i n Europe has declined s t e a d i l y since the decade a f t e r the Korean War. The emphasis has s h i f t e d away from defence as the immediate threat of c o n f l i c t has receded. Secondly, the r i s i n g r e a l cost of m i l i t a r y weapons systems - estimated at 6 to 10 per cent, per annum on the c a p i t a l production costs of major equipments a f t e r allowing for page 1 i n f l a t i o n - has reduced the purchasing power of those funds which are a l l o t t e d to the defence budget. ( B a y l i s , ed. 1980, p.41). There i s proportionately less money for defence, and less defence av a i l a b l e for the money. A further development has added urgency to the debate within NATO over p o s s i b l e s o l u t i o n s to the defence budget "squeeze" . The t r a d i t i o n a l technological and q u a l i t a t i v e advantage possessed by NATO forces over the Warsaw Pact forces has been been s t e a d i l y eroded by improvements in the l a t t e r ' s equipment. The previous r e l i a n c e on s m a l l e r numbers of s u p e r i o r weapons systems i s perceived as becoming both dangerous and d i f f i c u l t to maintain. The r e s u l t of the debate has been the adoption of the NATO policy-goal of increased standardisation of equipment within and between the A l l i e d f o r c e s as a means of i m p r o v i n g t h e i r f l e x i b i l i t y and e f f e c t i v e n e s s . Within the West European n a t i o n s , c o - p r o d u c t i o n programmes are c l a i m e d by t h e i r p a r t i c i p a n t s to provide one method of a c h i e v i n g t h i s i d e a l of complete s t a n d a r d i s a t i o n . The r e a l i t y of these c l a i m s w i l l be discussed l a t e r in t h i s paper. European governments c o n s i d e r i n g c o l l a b o r a t i o n i n defence procurement must do so in the l i g h t of a number of policy-choice questions. There are strong pressures both within and outside of governments to maintain or to i n c r e a s e domestic l e v e l s of employment. While debate continues as to the value of c i v i l i a n s p i n - offs from m i l i t a r y research programmes, many large defence-producing i n d u s t r i e s or companies have c o n s i d e r a b l e c i v i l i a n page 2 s e c t o r s . Within B r i t a i n , Rolls-Royce and the B r i t i s h A i r c r a f t C o r p o r a t i o n are two of the most o b v i o u s examples of such companies. S p e c i f i c n a t i o n a l motives f o r c o l l a b o r a t i o n have v a r i e d from p r o j e c t to p r o j e c t . In a l l cases, however, they appear to have been as much the product of economic and i n d u s t r i a l c o n s i d e r a t i o n s as of s t r a t e g i c and m i l i t a r y o b j e c t i v e s . (Leebaert, ed. 1981. p.81). The p o l i t i c s of the national defense a q u i s i t i o n s process are in t h i s sense i m p o r t a n t to any u n d e r s t a n d i n g of European co l l a b o r a t i v e ventures. The aim of the p r e s e n t paper i s to add to the s p a r s e l i t e r a t u r e which e x i s t s on c o - p r o d u c t i o n p o l i c i e s i n NATO. Although much has been written i n the debate on r a t i o n a l i s a t i o n , standardisation and i n t e r o p e r a b i l i t y , there are comparatively few s t u d i e s of the p a r t i c u l a r type of c o l l a b o r a t i o n most favoured within Europe. Those which have appeared are often marked by an obvious b i a s e i t h e r f o r or a g a i n s t such c o l l a b o r a t i o n , as the authors are w r i t i n g within the confines of the continuing debate over costs and benefits. Case studies of the Multi-Role Combat A i r c r a f t (the MRCA) e s p e c i a l l y are hindered by t h i s d i f f i c u l t y , due to the i n t e n s e p u b l i c i t y surrounding the p r o j e c t as one of the ambitious undertakings of i t s kind. The l i t e r a t u r e review i s intended to provide both a summary and an evaluation of the various arguments presented by authors concerning the incentives and di s i n c e n t i v e s for co-production in Western Europe. National and i n t e r n a t i o n a l p o l i t i c a l objectives, national economic p o l i c i e s , programme cost-savings, and m i l i t a r y page 3 requirements are a l l considered i n t u r n , and some i n d i c a t i o n g i v e n of t h e i r r e l a t i v e i m p o r t a n c e as m o t i v e s i n s e e k i n g c o l l a b o r a t i v e ventures. The c e n t r a l theme of the case study i s the p r o p o s i t i o n that the p o l i t i c a l objectives of national governments may be seen to have overridden other c o n s i d e r a t i o n s more d i r e c t l y r e l e v a n t to a c h i e v i n g the most e f f i c i e n t or optimum r e s u l t s i n terms of e i t h e r c o s t - s a v i n g s or m i l i t a r y o p e r a t i o n a l c a p a b i l i t i e s . In such a s i t u a t i o n , the question for NATO i s whether c o l l a b o r a t i o n helps or hinders i n the goal of achieving equipment commonality and in maintaining the p o l i t i c a l cohesion of the A l l i a n c e . A second q u e s t i o n i m p l i e d i n the case study i s whether the concept of a m u l t i - r o l e weapon serves as a convenient "hedge against uncertainty" for European defence planners, or whether i t c r e a t e s a d d i t i o n a l u n c e r t a i n t i e s . In the face of concern over possible American disengagement from Western Europe, production of a m u l t i - r o l e weapon may be a means to ensure maintenance of European technological c a p a b i l i t i e s . However, by f o r c i n g design teams a g a i n s t t e c h n i c a l b a r r i e r s and the need to i n c o r p o r a t e compromises based more on p o l i t i c a l agreements than operational neds, co-production may also create problems of cost escalation, uncertain operational performance, and delays i n development and d e l i v e r y . Before p r e s e n t i n g the main body of the t h e s i s , a b r i e f h i s t o r i c a l d e s c r i p t i o n of the MRCA programme should serve to give the reader an i n d i c a t i o n of the d i f f e r i n g operational demands of page 4 the three n a t i o n s i n v o l v e d , and perhaps suggest some of the problems which they faced. It may also provide a more s o l i d base against which may be placed the arguments to be considered in the l i t e r a t u r e r e v i e w . A c u r s o r y e v a l u a t i o n of the MRCA's performance c h a r a c t e r i s t i c s , and the main programme-goals of the Panavia consortium, i s presented i n the c o n c l u s i o n . Although thi s i s not the main concern of the thesis, the strongly coloured views of e a r l i e r a r t i c l e s on the MRCA has been such that i t was f e l t a more o b j e c t i v e assessment might be u s e f u l now that the a i r c r a f t has reached operational service. The Tornado was intended to provide a s i n g l e a i r c r a f t to replace several e x i s t i n g types i n service with the three nations i n v o l v e d i n co - p r o d u c t i o n : the U.S. F-4s, F-86s and F-lOAs of West Germany and I t a l y ; and the B r i t i s h L i g h t n i n g , Vulcan, Buccaneer and Canberra a i r c r a f t . The t a b l e below se t s out the various missions required of the new system. a t t a c k i n g enemy a i r f i e l d s , r a i l w a y s and y a r d s , c o m m u n i c a t i o n c e n t r e s , to h i n d e r movement and a c t i v i t y . secondary r o l e s only. role to be met by Air Defense Version. (Smi th, 1980, p.l 33). Long-range s t r i k e / i n t e r d i c t i o n 3 Land-based s t r i k e at maritime targets Close s u p p o r t / b a t t l e f i e l d i n t e r d i c t i o n Air s u p e r i o r i t y / a i r combat Air Defense I n t e r c e p t i o n 0 Recconaissance Training - GB, FRG. - GB, FRG. - I t a l y , GB.b - I t a l y , FRG.b - GB. - GB. - GB, FRG, I t a l y . page 5 Each of these roles desired by the p a r t i c i p a t i n g nations required d i s t i n c t operational performance c h a r a c t e r i s t i c s which were not always rea d i l y compatible. The r e s u l t , discussed i n more d e t a i l i n the c o n c l u s i o n , was a mixed success i n terms of performance and the achievement of programme goals, but a l s o an a i r c r a f t which took twelve years to produce. T h i s l a s t d i f f i c u l t y has almost c e r t a i n l y cut sharply i n t o the o p e r a t i o n a l l i f e - s p a n of the Tornado a i r c r a f t type, and may be one of the main problems facing any attempts to co-produce advanced a i r c r a f t in Europe. Section 2. L i t e r a t u r e Review. In his analysis of NATO co-operation in defence procurement p o l i c i e s , K e i t h H a r t l e y s t a t e s : Aerospace markets are more appropriately analysed as p o l i t i c a l markets i n which the r e l e v a n t economic agents are governments, b u r e a u c r a c i e s and c o n t r a c t o r s . ( H a r t l e y , 1983, p.105). Non-military goals may have a profound impact upon defence policy decisions. Trevor Taylor equally believes that simple analysis i s perhaps unhelpful "...because whether a p a r t i c u l a r consequence i s viewed as p o s i t i v e or negative depends upon an i n d i v i d u a l ' s p o l i t i c a l values." ( T a y l o r , 1978, p.121). The d i v e r s i t y of possible i m p l i c a t i o n s , and differences i n the values placed upon these i m p l i c a t i o n s between n a t i o n s , makes a n a l y s i s a complex task. pag e 6 There are very few s t u d i e s extant on the t o p i c of defence c o - p r o d u c t i o n as a s p e c i f i c type of c o l l a b o r a t i o n other than c a s e - s t u d i e s of present or previous p r o j e c t s . In order to present an assessment of the possible advantages offered by such a policy, i t has therefore proven necessary to take the concepts applied i n the RSI debate and to i n t e r p r e t t h e i r relevence to co-production. The various arguments are divided into three broad c a t e g o r i e s f o r the sake of c l a r i t y : p o l i t i c a l , economic, and m i l i t a r y implications are each considered i n turn. The existence of c l o s e connections between many of these i n f l u e n c e s i s , however, recognised and these l i n k a g e s are i n d i c a t e d where necessary. W h i l s t emphasis has been placed upon examples relevent to the aerospace industry, the arguments may be equally v a l i d to procurement of other major new equipment. To assess the p o l i t i c a l i n c e n t i v e s or i m p l i c a t i o n s of co-production, a b r i e f presentation of the perceived disadvantages of a l t e r n a t i v e procurement p o l i c i e s w i l l serve to indicate or to highlight advantages which advocates of co-production claim to e x i s t . The three main a l t e r n a t i v e a c q u i s i t i o n p o l i c i e s other than c o l l a b o r a t i o n are " o f f - t h e - s h e l f " purchases of e x i s t i n g weapons systems; licensed production; and independent national development and production. For the major West European nations, purchasing of a complete weapon system o f t e n presents the cheapest but a l s o the l e a s t p o l i t i c a l l y acceptable a l t e r n a t i v e policy. Long-term reliance on such a p o l i c y i s regarded as l i k e l y to c r e a t e dependence on U.S. page 7 industry and sources of supply. Complete dependence on another country has, i n some cases, proven to c a r r y with i t a high r i s k . . . i t i s becoming c l e a r that a na t i o n w i t h o u t an i n d e p e n d e n t i n d u s t r i a l base act u a l l y has no assured m i l i t a r y force. Such a r e s u l t i s p o l i t i c a l l y unacceptable to the n a t i o n a l governments i n Europe, e s p e c i a l l y i n the face of U.S. debates on possible disengagement from the defence of Western Europe unless i t s European par t n e r s shoulder a % f a i r share' of the f i n a n c i a l burden involved. Domestic p o l i t i c a l and s o c i a l pressures serve f u r t h e r to reduce the a c c e p t a b i l i t y of d i r e c t purchasing of major m i l i t a r y equipment i n the l a r g e r European n a t i o n s . Thomas Callaghan, a central figure i n the advocacy of increased NATO co-operation and standardisation, indicates these pressures c l e a r l y : Europe's defense i n d u s t r i e s are now expected; f i r s t , to provide employment; second, to redr e s s the balance of payments; t h i r d , to a m o r t i z e r e s e a r c h and development c o s t s t h r o u g h e x p o r t s ; and f o u r t h , i f not inconsistent with the f i r s t three, to provide for...defence. (Callaghan,1978,p.26). Purchasing equipment from abroad - mainly the U.S. - would f a i l to o f f e r the prospect of increasing or even maintaining domestic l e v e l s of employment i n d e f e n c e - r e l a t e d i n d u s t r i e s , or of s i g n i f i c a n t improvements i n n a t i o n a l i n d u s t r i a l c a p a b i l i t i e s . The second a l t e r n a t i v e to co-production, licensed production of a f o r e i g n system, does o f f e r some of the p o t e n t i a l b e n e f i t s which the previous policy lacked. Off-set agreements allow the na t i o n o b t a i n i n g the equipment to seek expansion of domestic page 8 p r o d u c t i o n c a p a c i t y and employment, whilst technology-transfer agreements may o f f e r f u r t h e r i n d u s t r i a l s i d e - b e n e f i t s . The I t a l i a n and West German aerospace i n d u s t r i e s emerging i n the 1950s were su s t a i n e d by l i c e n s e d p r o d u c t i o n of the U.S. F-104 S t a r f i g h t e r , and the "arms deal of the century" i n the 1970s saw Belgium, the Netherlands, Norway and Denmark o b t a i n i n g o f f - s e t agreements for licensed production of the American F-16. The o p i n i o n of the major European aerospace producing n a t i o n s , however, i s l e s s s y m p a t h e t i c towards l i c e n s e d production. Taylor mentions that t h i s policy does not o f f e r the licencee an opportunity to obain experience in system-management and design, and a l s o e l i m i n a t e s most d i r e c t involvement i n research and development. " Production of American equipment ", T a y l o r argues, "represents a r a p i d road to dependence on the U.S." (Taylor,1982 , p. 1 55 ). Burrows and Edwards r e p o r t a comment by an u n i d e n t i f i e d U.K. i n d u s t r i a l i s t to the e f f e c t that We i n the U.K. do not regard the production of F-16s i n Europe as an outstanding example of p r o j e c t - s h a r i n g . . . This p a r t i c u l a r programme appears to be too much a b e n e f i t match f o r the U.S. i n d u s t r y and economy w i t h o u t e q u a l t e c h n o l o g i c a l reward f o r Europe or NATO. (Burrows and Edwards, 1982,p.67). Amongst the larger and more advanced of the West European defense producers, the f e a r appears to be that e i t h e r d i r e c t purchasing of e x i s t i n g systems or licensed production would be solutions to the problem of a l t e r n a t i v e defence procurement p o l i c i e s which would "...transform European advanced weapons ind u s t r i e s into the step c h i l d of U.S. technology." (Dean,1979,p.97). page 9 The t h i r d main a l t e r n a t i v e to j o i n t c o l l a b o r a t i v e development of a major new weapon system i s the p u r s u i t of an independent national programme. This option i s c e r t a i n l y a t t r a c t i v e i n that i t o f f e r s to the n a t i o n a l government and the domestic i n d u s t r y the opportunity to maintain or to expand i n d u s t r i a l employment l e v e l s , to obtain greater experience i n design, development and p r o d u c t i o n of an advanced-technology system, and at l e a s t some p o t e n t i a l b e n e f i t to the n a t i o n a l balance of payments through e x p o r t s a l e s . D e s p i t e t h i s a p p a r e n t advantage, n a t i o n a l p r o d u c t i o n of high-technology weapon systems i s not favoured. The d e c i s i o n s by the B r i t i s h government and the West German government to cancel t h e i r TSR-2 and NKF a i r c r a f t programmes are two of the better-known cases where independent n a t i o n a l development schemes were scrapped due to the p r o h i b i t i v e l y high c o s t s i n v o l v e d i n such work. In the case of purely n a t i o n a l development schemes, c r i t e r i a of cost therefore outweighed a l l other considerations. The d i s c u s s i o n presented above has i n t r o d u c e d some of the c o n s i d e r a t i o n s which are presented i n the l i t e r a t u r e review below. I t i s now p o s s i b l e to examine'in d e t a i l the i n c e n t i v e s and d i s i n c e n t i v e s f o r co-production as they are given by the various authors in t h i s f i e l d . P o l i t i c a l Implications of Co-production. There are both n a t i o n a l and i n t e r n a t i o n a l p o l i t i c a l i m p l i c a t i o n s of co-production which are claimed to provide page 10 i n c e n t i v e s to pursue t h i s a l t e r n a t i v e . R e p r e s e n t a t i v e s of the European members of NATO have a l l accepted the n e c e s s i t y f o r greater s t a n d a r d i s a t i o n of t h e i r f o r c e s , and t h i s p o l i c y has become i n s t i t u t i o n a l i s e d i n the NATO a d m i n i s t r a t i o n through groups such as the NATO Long-Term Defence Programme, the M i l i t a r y Agency f o r S t a n d a r d i s a t i o n , and the Conference of N a t i o n a l 2 Armaments D i r e c t o r s . However, the question that t h i s apparent acceptence i n v i t e s i s whether the governments themselves believe such a p o l i c y to be worth the p o l i t i c a l c o ncessions and the i n d u s t r i a l r e o r g a n i s a t i o n which i t would be l i k e l y to e n t a i l . Trevor Taylor expresses the opinion that t h i s i s not the case; ...while the European NATO states may come to have a c c e p t e d t h a t autonomy i n d e f e n c e production i s not f e a s i b l e , and that any major p r o j e c t w i l l r e q u i r e at l e a s t one partner, there i s but l i m i t e d evidence that they desire the kind of integration which standardisation would require. (Taylor,1978,p.121). The author makes the point that standardisation would necessitate the emergence of NATO as the p e r t i n e n t decision-making body i n a l l defence questions, as n a t i o n a l o p e r a t i o n a l and s t r a t e g i c d o c t r i n e s would become i r r e l e v a n t . Though regarded as being m i l i t a r i l y d e s i r a b l e , s t a n d a r d i s a t i o n could a l s o imply l o s s of sovereignty over defence p o l i c y . Advocates of co-production c o n t r a s t t h i s s c e n a r i o with the more l i m i t e d c o n s t r a i n t s of c o l l a b o r a t i v e agreements. I t has been a s s e r t e d that " . . . c o l l a b o r a t i o n could be d e f i n e d as the p u r s u i t of n a t i o n a l g o a l s t h r o u g h i n t e r n a t i o n a l means." (Dean,1979,p.80). Co-production may even provide governments with page 11 a useful instrument for pursuing wider foreign policy objectives. The n a t i o n a l technology p o l i c i e s of B r i t a i n , France and West Germany in the defense sector transcend economic motives of national p r o f i t and employment... Their competition for power and i n f l u e n c e w i t h i n Europe, as w e l l as n a t i o n a l p o l i t i c a l and economic ambitions which extend beyon Europe, are also important determinants. (Dean, 1979,p.82). Deans' argument i s supported by other analysts, including Walter Schutze who b e l i e v e s that the p o l i t i c a l d i v i d e n d s of European defence c o - o p e r a t i o n are e s s e n t i a l to European r e l a t i o n s . Such agreements could be used either to cement p o l i t i c a l t i e s between nations or to coax another government i n t o g i v i n g support to a p a r t i c u l a r foreign policy goal.(Schutze,1969,p.154). A more c y n i c a l view of pote n t i a l p o l i t i c a l advantages of co-poduction i s concerned with the r e s u l t of governmental i n t e r e s t i n c o n t i n u i n g a programme i n which i t has wider concerns at stake. D i f f i c u l t y of c a n c e l l a t i o n of a programme i n which there are present the i n t e r e s t s of one or more national governments i s c i t e d by authors as d i v e r s e as Kaldor and Smith, H a r t l e y , Hageri and T r e v o r T a y l o r . A c c o r d i n g to t h i s more c y n i c a l i n t e r p r e t a t i o n , the other 'incentives' argued for co-production provide an ex post r a t i o n a l i s a t i o n and j u s t i f i c a t i o n for the re a l p o l i t i c a l reason that once begun, such programmes are less l i k e l y to be abandoned by governments facing f i n a n c i a l shortages. T h i s argument may i n d e e d have some v a l i d i t y , i n t h a t c o l l a b o r a t i v e programmes are l i k e l y to prove d i f f i c u l t and costly to c a n c e l . However, i n t h i s case one would e x p e c t t h a t i n d u s t r i e s would also be interested i n pressing for collaboration page 12 as a means of ensuring continued defence contract work, yet t h i s does not appear to be the a t t i t u d e of i n d u s t r i a l l e a d e r s when l e f t to decide t h e i r own a f f a i r s . The a t t i t u d e of aerospace l e a d e r s i n the MRCA partner nations w i l l be d i s c u s s e d l a t e r i n t h i s paper; even as e a r l y as 1969, a d i f f e r e n c e of o p i n i o n over col l a b o r a t i o n was c l e a r l y apparent. At t h i s time, a pattern i s emerging i n which the n a t i o n a l i s e d companies, or those which depend l a r g e l y on government backing, are pushing consortiums, while f i r m l y - e s t a b l i s h e d companies i n the p r i v a t e s e c t o r are a v o i d i n g t h i s type of arrangement. If n o n - c a n c e l l a t i o n i s valued as a b e n e f i t of c o - p r o d u c t i o n or c o l l a b o r a t i o n g e n e r a l l y , i t i s held as such by governments and c l o s e l y connected i n d u s t r i a l l e a d e r s , but not by the p r i v a t e s e c t o r . In some cases, then, economic b e n e f i t s or company p r o f i t s may be valued higher than a l e s s - t h a n - e f f i c i e n t but hard to c a n c e l p r o j e c t ; s u b j e c t i v e v a l u a t i o n of t h i s aspect of co-production renders any conclusive assessment d i f f i c u l t . One p o l i t i c a l i m p l i c a t i o n which may r e s u l t from co-production i s f r e q u e n t l y c i t e d as a p o t e n t i a l problem f o r the NATO o r g a n i s a t i o n , and i s the other s i d e of the c o i n to a b e n e f i t d i s c u s s e d p r e v i o u s l y . The NATO a d m i n i s t r a t i o n has no i n t e r n a t i o n a l p o l i t i c a l a u t h o r i t y of i t s own, and t h e r e f o r e depends upon the w i l l of the nations involved. At worst, i t i s a "...mere t o o l of these governments and a l l i t s a c t i v i t i e s are subject to national c o n t r o l . " (Ruhl,1975,p.217). The European impulse towards c o l l a b o r a t i o n and c o - o p e r a t i o n . . . ( i s ) not n e c e s s a r i l y page 13 c o n g r u e n t w i t h A l l i a n c e i rapu1sestowards r a t i o n a l i s a t i o n and s t a n d a r d i s a t i o n i f these p r o c e e d on the b a s i s of U n i t e d S t a t e s equipment and planning.Indeed the two... are corapetetive and opposed. (Dillon,1977,p.224). Co-production o f f e r s governments the chance to c l a i m to be p u r s u i n g s t a n d a r d i s a t i o n w h i l s t a c t u a l l y s e e k i n g o t h e r o b j e c t i v e s . The r e s u l t of t h i s could be d e t r i m e n t a l to NATO effec t i v e n e s s . Collaboration or co-production are claimed to a s s i s t NATO by requiring harmonization of replacement schedules and other forms of longer-term c o - o p e r a t i v e planning. These c l a i m s w i l l be analysed l a t e r i n t h i s section. Once again, however, the obverse of t h i s benefit may hamper the progress of NATO towards i t s own goals, as national objectives become confused or contradictory. Gardiner Tucker d i s c u s s e s three p o l i c y o p t i o n s which may be involved i n European co l l a b o r a t i o n in major weapons-systems development p r o j e c t s . The f i r s t o p t i o n i s that of c r e a t i n g an independent and c o m p e t i t i v e European defence s e c t o r as an insurance a g a i n s t d e c r e a s i n g U.S. commitment to Europe, and to all o w g r e a t e r c o m p e t i t i o n i n equipment s a l e s . The second a l t e r n a t i v e objective of co-production might be to develop a more equal partnership i n defense production between the two sides of the A t l a n t i c through greater scale of production and market size and through r a t i o n a l i s a t i o n of European i n d u s t r i a l resources. F i n a l l y , as Tucker notes, i t i s important to r e a l i s e that neither the a d v e r s a r i a l nor the c o - o p e r a t i v e i n t e r p r e t a t i o n s o f f e r e d above are the same as the NATO o b j e c t i v e of s t a n d a r d i s a t i o n , as page 14 t h e i r r e s u l t s could be markedly d i f f e r e n t (Tucker,1976,p.48). There i s a p o s s i b i l i t y that c o n f u s i o n over the r e a l goals being sought i n co- p r o d u c t i o n programmes may exacerbate problems of p o l i t i c a l disunity and destandardisation i n NATO, the opposite of what might be expected. The necessity to make long-term planning which i s a feature of c o l l a b o r a t i o n i n procurement c r e a t e s i t s own p o t e n t i a l d i f f i c u l t i e s for the governments involved in such a programme. I t must be s t r e s s e d t h a t c o - o p e r a t i o n r e g a r d i n g d e f e n c e e quipment has...wide implications reaching well beyond the f i e l d of se c u r i t y . . . c o - o p e r a t i o n on defence equipment requires governments to make long-term binding commitments to o t h e r s on e x p e n d i t u r e . (Taylor,1982,p.7). This i s why col l a b o r a t i o n i s often very d i f f i c u l t or impossible to a r r a n g e . European governments are w e l l aware of the r e s t r i c t i o n s which a long-term commitment to expenditure on a l l such p r o j e c t s may place upon t h e i r freedom of cho i c e i n determining national defence p r i o r i t i e s ; Co-operation i n fact concentrates on s p e c i f i c projects which governments treat as i n d i v i d u a l and s e p a r a t e c a s e s . Thus commitment to p r i n c i p l e s i s avoided. ( T a y l o r , i b i d ) . Under such c i r c u m s t a n c e s , t h e r e may be a tendency f o r c o l l a b o r a t i o n to remain ad hoc i n nature, d e t r a c t i n g from the p o s s i b l e b e n e f i t s of r e p l a c e m e n t s c h e d u l e h a r m o n i s a t i o n . Collaboration may paradoxically r e s u l t i n the reinforcement of governmental awareness of possible encroachments upon national sovereignty. The next p o t e n t i a l disadvantage of co- p r o d u c t i o n which i s page 15 d i s c u s s e d i n the l i t e r a t u r e i s the v u l n e r a b i l i t y of these p r o j e c t s to the v a g a r i e s of n a t i o n a l p o l i t i c a l o p i n i o n or s t a b i l i t y w i t h i n the members. P o l i t i c a l i n s t a b i l i t y can cause u n c e r t a i n t y at home and abroad, thus d e l a y i n g the progress of a c h i e v i n g agreements on p r o j e c t d e f i n i t i o n , funding, or work-sharing . Domestic influences such as opposition party pressures and t u r n o v e r of governments, even i f they do not r e s u l t i n ca n c e l l a t i o n of a programme, may oblige a government to seek to reduce the immediate f i n a n c i a l burden of that programme by s t r e t c h i n g out the d e l i v e r y schedule. Such a d e c i s i o n i s a purely short-term expedient; I n d u s t r i a l i s t s s t r e s s t h a t c o s t s are minimised when prod u c t i o n r a t e s are planned and not changed; either speeding up or slowing d o w n p r o d u c t i o n c o s t s m o n e y . (Taylor,1982.p.52). In h i s examination of the production of the F-14, T a y l o r c i t e s the c l a i m by Grumman that c u t t i n g the pro d u c t i o n r a t e from 3 to 2 per month would i n c r e a s e the u n i t cost from $23.9 m i l l i o n to $28.9 m i l l i o n . It i s worth mentioning here that modern a i r c r a f t have an expected u s e f u l l i f e - c y c l e of ten to f i f t e e n years. Hence i f pro d u c t i o n schedules are drawn out, the system may be approaching the end of i t s l i f e - s p a n by the time i t i s i n f u l l operational a v a i l a b i l i t y . P o l i t i c a l advantages and disadvantages present an awkward area of analysis in considering European co-production. Just as the goals sought may a l t e r from p r o j e c t to p r o j e c t and page 16 between nations, so may the value placed upon p a r t i c u l a r o b j e c t i v e s . What does emerge from the d i s c u s s i o n of the p o l i t i c a l i m p l i c a t i o n s of c o - p r o d u c t i o n i n Europe i s the continued primacy of national p o l i t i c a l and economic i n t e r e s t s (as perceived by the governments) over purely m i l i t a r y or NATO-policy concerns and p o l i c i e s . The poten t i a l p o l i t i c a l advantages of co-production are mainly those which seem to maximize the opportunity of the national governments to use co l l a b o r a t i o n as an i n s t r u m e n t of t h e i r own i n a c h i e v i n g g o a l s f r e q u e n t l y unrelated to the immediate context of the project. The pot e n t i a l p o l i t i c a l c o s t s , or e l s e the a c t i o n s which are taken by governments to avoid these c o s t s , are o f t e n at the expense of obtaining either the most e f f e c t i v e programme or proclaimed NATO objectives. Economic Implications of Co-production. Although the i n f l u e n c e of p o l i t i c a l c o n s i d e r a t i o n s i n undertaking c o - p r o d u c t i o n appears to be a c e n t r a l , or even the central feature of contemporary co-production programmes, the d i f f i c u l t y of providing empirical analysis of t h i s influence has meant that the l i t e r a t u r e c o n c e n t r a t e s f a r more on the po t e n t i a l economic advantages or costs. As w i l l become apparent, however, t h i s has not r e s u l t e d i n general agreement as to the nature or the extent of these economic i m p l i c a t i o n s . Most authors tend to argue that c o - p r o d u c t i o n does o f f e r p o t e n t i a l cost-savings for the p a r t i c i p a t i n g states, but a vocal minority page 17 b e l i e v e s that c o l l a b o r a t i o n i s no more than an i n e f f i c i e n t and expensive mistake. Two g e n e r a l c a t e g o r i e s of economic i n c e n t i v e s can be i d e n t i f i e d as e x i s t i n g : the f i r s t category deals with c o s t -savings a s s o c i a t e d with a c o - p r o d u c t i o n programme, such as economies of scale; the second involves government po l i c y , and the use of co-production to pursue wider n a t i o n a l economic p o l i c i e s . An analysis of each of these areas i s presented below. E s t i m a t e s of the amount of money wasted each year by i n e f f i c i e n c i e s i n the NATO equipment procurement 'system' range as high as the Senate Armed S e r v i c e s Committees'figure of $15 b i l l i o n , or Thomas C a l l a g h a n ' s t o t a l of $11.2 b i l l i o n (Hagen, 1980,p.45). These authors' figures are very rough and are i n c r e a s i n g l y questioned. Even the s t r o n g e s t advocates of co-production, however, would not claim pot e n t i a l savings of such a magnitude f o r t h i s type of c o l l a b o r a t i o n . N e v e r t h e l e s s , i n the procurement of high-technology, high-cost weapons systems such as advanced combat a i r c r a f t , supporters of co-production claim that the r e s u l t of t h e i r p o l i c y i s (or would be) c o n s i d e r a b l e c o s t -savings for the governments concerned. Analysis of p o t e n t i a l cost-savings at t r i b u t e d to t h i s p o licy c e n t r e on three s p e c i f i c stages i n the procurement of a new weapon-system. These stages c o n s i s t of the workinvolved i n r e s e a r c h and development (R&D), pro d u c t i o n , and i n l o g i s t i c support once the system has been deployed. Planned R&D i n a c o - p r o d u c t i o n programme would, i d e a l l y , page 18 reduce or e l i m i n a t e d u p l i c a t i v e e f f o r t s amongst the partner n a t i o n s ' defence i n d u s t r i e s . T h i s r e p r e s e n t s the optimum c o n d i t i o n a c c o r d i n g to the advocates of t h i s p o l i c y . However, t h i s i d e a l i s u n l i k e l y to be achieved f o r at l e a s t two reasons. F i r s t l y , Nations w i l l demand t h e i r * f a i r ' share of each s e c t o r of advanced technology and p r o d u c t i o n work. Consequently, development...will tend to be a l l o c a t e d on e q u i t y , r a t h e r than e f f i c i e n c y , c r i t e r i a . (Hartley,1983,p.148). Governments seeking to maintain or to expand i n d u s t r i a l capacity w i l l not accept s p e c i a l i s a t i o n of tasks amongst the partners i f that means f a i l i n g to obtain an equitable work-sharing agreement. Opponents of c o l l a b o r a t i v e p o l i c i e s argue that i n s t e a d of reducing the R&D burden, part n e r s i n c o - p r o d u c t i o n programmes continue to employ f u l l - s i z e d research teams and that these teams are then employed f o r a longer p e r i o d than on a n a t i o n a l scheme (Hartley,1983,p.155). The second c o m p l i c a t i o n to the most e f f i c i e n t use of R&D f a c i l i t i e s i s that on j o i n t l y - p r o d u c e d weapons systems, each n a t i o n would r e q u i r e some m o d i f i c a t i o n s to make the weapon s u i t a b l e f o r i t s own s p e c i f i c o p e r a t i o n a l requirements. T h i s would then serve to i n c r e a s e R&D c o s t s and p o s s i b l y reduce the a b i l i t y to o b t a i n economies of s c a l e i n p r o d u c t i o n . Other p o s s i b l e s o u r c e s of i n c r e a s e d R&D c o s t s r e s u l t i n g from c o l l a b o r a t i o n might i n c l u d e the c r e a t i o n of d u p l i c a t e organisations for administration of the development phase i n each of the partner n a t i o n s , and delays due to the need to harmonize page 19 d i f f e r i n g national i n d u s t r i a l standards of measurement. F i n a l l y , i n the case of a i r c r a f t design, the n e c e s s i t y to meet d i f f e r e n t operational requirements may cause designs to be pushed against t e c h n o l o g i c a l b a r r i e r s . I f t h i s r e s u l t s i n schedule delays during the design phase, then a d d i t i o n a l costs c l e a r l y w i l l be incurred. Taylor quotes from a Vertex Corporation Report^ which e s e n t i a l l y rejected any p o s s i b i l i t y of obtaining meaningful R&D savings on the grounds that nations would never agree to give up t h e i r e x i s t i n g research c a p a b i l i t i e s : Those who imagine that n a t i o n a l R&D e f f o r t s are 'negotiable' within broader transnational procurement s t r a t e g i e s delude themselves... (Taylor,1982,p.49). This conclusion does appear to have some degree of v a l i d i t y given the e a r l i e r d i s c u s s i o n of government concern with m a i n t a i n i n g independence in policy decisions. There are some arguments which may reduce the absoluteness of the Vertex C o r p o r a t i o n Reports' r e j e c t i o n of p o t e n t i a l R&D savings, and these are a l s o pointed put by T a y l o r . F i r s t l y , n a t i o n s can m a i n t a i n t h e i r m i l i t a r y - i n d u s t r i a l r e s e a r c h c a p a b i l i t i e s through methods other than the actual production of s p e c i f i c weapon systems. The Anglo-French V a r i a b l e Geometry p r o j e c t and the UKVG work which f o l l o w e d the c a n c e l l a t i o n of r e s e a r c h on the AFVG were a t t e m p t s to p r o v i d e f o r the continuation of B r i t i s h i n d u s t r i a l c a p a b i l i t i e s without incurring other programme c o s t s u n t i l a b e t t e r c o l l a b o r a t i v e programme page 20 could be e s t a b l i s h e d . Secondly, the p r o v i s i o n of technology t r a n s f e r arrangements would allow n a t i o n a l maintenance of development knowledge even i f some s p e c i a l i s a t i o n were to take place on the grounds of i n c r e a s e d e f f i c i e n c y . F i n a l l y , T a y l o r points out that European governments have given up national R&D e f f o r t s i n areas where c o s t s have become p r o h i b i t i v e - f o r example, B r i t i s h abandonment of work on s t r a t e g i c m i s s i l e s and c o n s i d e r a b l e l i m i t a t i o n of work on t a c t i c a l ground-to-ground. m i s s i l e s . (Taylor,1982,pp.49-52). The second stage i n the procurement of a new weapon system which i s seen to o f f e r p o t e n t i a l cost-saving benefits i s that of assembly and production. Here, the advocates claim that savings can be made through obtaining economies of scale and through the e f f e c t s of the ^learning curve'. Thomas Callaghan, i n advocating the i n t e g r a t i o n of European aerospace i n d u s t r i e s , argues that The i n d i v i d u a l n a t i o n s t a t e s of Europe provide markets too s m a l l f o r an adequate d i v i s i o n of labour - too s m a l l to s u s t a i n healthy defence i n d u s t r i e s . . . (and) too s m a l l f o r m i l i t a r y trade and c o - o p e r a t i o n with the United S t a t e s ; the defence i n d u s t r i e s of Europe are too s m a l l to produce weapons to a t r a n s a t l a n t i c s cale. (Callaghan,1976,p.26). Co-production, by merging the markets of the p a r t i c i p a t i n g n a t i o n s , could c r e a t e a s o l u t i o n to t h i s problem, i d e n t i f i e d as e a r l y as the 1965 Plowden Report commissioned by the B r i t i s h government to assess the c o n d i t i o n and f u t u r e of the aerospace i n d u s t r y i n that n a t i o n and throughout Europe.^ I t would a l s o o f f e r p o t e n t i a l l y greater export opportunities by adding together page 21 the t r a d i t i o n a l markets overseas of the nations involved. A l l of the c o n s i d e r a t i o n s d i s c u s s e d above would have the e f f e c t of i n c r e a s i n g the t o t a l number of orders placed f o r the weapon system and hence a l l o w i n g f o r a p o t e n t i a l l y longer production run. T a y l o r g i v e s some e s t i m a t i o n of the s c a l e of savings t h i s could produce on major weapon systems: In the case of a i r c r a f t , normally produced i n the hundreds, i t i s widely b e l i e v e d that a doubling of production should have the e f f e c t of reducing p r o d u c t i o n c o s t s by up to 20%. In other words, i f the 100th a i r c r a f t c ost (UK) 10 m i l l i o n pounds to produce, the 200th should cost 8 m i l l i o n pounds, the 400th 6.4 m i l l i o n p o u n d s , a n d so o n . (Taylor,1982,p.52). At the same time, longer p r o d u c t i o n runs would a l l o w both management and workers to progress f u r t h e r down the ' l e a r n i n g curve'and increasing t h e i r e f f i c i e n c y , as well as permitting the i n s t a l l a t i o n of the most advanced automated (and other) plant i n the f a c t o r i e s where pr o d u c t i o n i s to take place. A l l of these i n f l u e n c e s would r e s u l t i n g r e a t e r production e f f i c i e n c y , and possibly increased production economies. Both T a y l o r and Hagen d i s c u s s the concept of 'minimum e f f i c i e n t s c a l e ' of p r o d u c t i o n (MES), or the l e v e l of output at which average c o s t s reach t h e i r p e r c e p t i b l e minimum. The i n d i v i d u a l l y s m a l l European i n d u s t r i e s operate w e l l below the MES, whereas the U.S. i n d u s t r i e s - with much l a r g e r domestic markets - are able to operate at t h i s optimum l e v e l . Production of the Tornado t o t a l l e d 809 units; of the Jaguar, 583 units; the Mirage F l , 649 u n i t s ; and the Alpha J e t , 486 u n i t s . In c o n t r a s t page 22 to these figures, the U.S. F86 programme produced 9502 units; the F4, 5195 units; the F104, 1958 units; the F16 1949 units; and the F1 8 , 1500 u n i t s . (Har11ey, 1983,p. 11 3 ) . T a y l o r provides an estimate that r a i s i n g European production to the MES through co-p r o d u c t i o n programmes could y i e l d savings of between 10% and 25%^.Hagen c i t e s a f i g u r e of between 5% and 15%, "...with 10% being the most l i k e l y f i g u r e . " (Hagen,1980,p.115). H a r t l e y supports the view that two nations combining t h e i r orders could obtain production cost-savings of up to 1 0 % . ° Although these authors generally agree that co-production or c o l l a b o r a t i o n o f f e r p o t e n t i a l savings to the p a r t i c i p a n t s , Hagen a l s o p o i n t s out that these e s t i m a t e s r e s t upon a s e r i e s of assumptions which a f f e c t the accuracy of the c l a i m s . I t i s assumed that p r i c e responds ^ i d e a l l y ' to output and l e a r n i n g conditions, but t h i s ignores the possible influence of government r e g u l a t i o n s , r e s t r i c t e d c o m p e t i t i o n , or o r g a n i z a t i o n a l i n e f f i c i e n c y . The p o s s i b l e t r a d e - o f f between s c a l e and competition among suppliers, both domestic and i n t e r n a t i o n a l , i s s i m i l a r l y overlooked. T h i r d l y , p o s s i b l e diseconomies of s c a l e are ignored: c o s t s of t r a n s p o r t a t i o n , support and d i s t r i b u t i o n are not accounted for, although they would c e r t a i n l y be increased in a j o i n t i n t e r n a t i o n a l programme (Hagen,1980,pp.116-118). In g i v i n g h i s e s t i m a t e s of p o t e n t i a l savings from longer p r o d u c t i o n runs, T a y l o r assumed a s i n g l e production l i n e . However, t h i s may not be the case i n r e a l i t y , as c o - p r o d u c t i o n agreements o f t e n s t i p u l a t e that each n a t i o n i n the programme page 23 should obtain a share of production work, often for reasons other than achieving optimum e f f i c i e n c y . W.B. Walker argues that such p r o l i f e r a t i o n of assembly l i n e s i s i n e v i t a b l e in any c o l l a b o r a t i v e programme, and serves to i n c r e a s e c o s t s and reduce p o s s i b l e savings. The v a l i d i t y and'accuracy of t h i s counter-argument a g a i n s t c o l l a b o r a t i o n i s , however, not as c o n c l u s i v e as i t s proponents would suggest. T a y l o r p o i n t s out that f i n a l assembly a c t u a l l y accounts f o r only some 10% of t o t a l p r o d u c t i o n c o s t s and that the d e t r i m e n t a l impact of s e v e r a l assembly l i n e s may t h e r e f o r e be reduced I While m u l t i p l e p r o d u c t i o n l i n e s and other i n e f f i c i e n t modes of production can e a s i l y mean t h e l o s s of s a v i n g s , t h e use of 'assembly' l i n e s and a maximum of one prod u c t i o n l i n e (per nation)... could produce an i n t e r m e d i a t e but n e v e r t h e l e s s improved p o s i t i o n . (Taylor,1982,p.54). H a r t l e y concludes h i s e v a l u a t i o n of p o t e n t i a l cost savings i n j o i n t projects by estimating that, compared to a s i m i l a r national venture, a co- p r o d u c t i o n programme could i n v o l v e R&D cost increases of up to 30%, and production i n e f f i c i e n c i e s of between 1-10 % f o r a given output. Despite these i n c r e a s e s , however, savings may s t i l l be obtained, s i n c e by combining t h e i r orders two equal p a r t n e r s " . . . w i l l save at l e a s t 35 per cent, (each) on R&D and up to 10 per cent, on pro d u c t i o n c o s t s . " ( H a r t l e y , 1983,p.161). In a l l the debate over p o t e n t i a l savings to be achieved i n R&D and production, many of the authors have touched only b r i e f l y page 24 or not at a l l on the area of l o g i s t i c support. T h i s may be due to skepticism over the p o s s i b i l i t y of common l o g i s t i c s systems ever being established,as t h i s area i s t r a d i t i o n a l l y regarded as a n a t i o n a l concern. N e v e r t h e l e s s , the importance of l o g i s t i c s expenditure and possible waste has long been recognised: Year i n , year out, support costs are incurred i n m a i n t a i n i n g and o p e r a t i n g non-standard weapons and equipment, and munitions of every c a l i b r e . T h i s means a p r o l i f e r a t i o n of sub-assembly and component repair parts; of repair f a c i l i t i e s ; (and) o p e r a t o n a l and maintenance f a c i l i t i e s . (Taylor,1982,p.115). The general ' r u l e of thumb' f o r e s t i m a t i n g system c o s t s f o r an advanced combat a i r c r a f t i s that i t w i l l r e q u i r e between i t s o r i g i n a l a c q u i s i t i o n cost and twice t h i s amount f o r l o g i s t i c support and maintenance. The system cost for an a i r c r a f t of unit p r i c e $10 m i l l i o n would t h e r e f o r e t o t a l between $20 and $30 m i l l i o n . Thomas Callaghan estimated that $5.65 b i l l i o n d o l l a r s i s wasted a n n u a l l y i n the area of weapons-support, and that the creation of an alliance-wide l o g i s t i c s system would reduce most of t h i s w a s t e d T a y l o r responds to t h i s i dea by arguingthatthe supposedly i n t e g r a t e d U.S. f o r c e s "...have never been able to make the resupply of spare p a r t s work e f f e c t i v e l y d e s p i t e many herculean e f f o r t s . " (Tay1or,1982, p. 118). W i t h i n Europe, the concept of a European Army or Defence Force was d i s c u s s e d but never advanced beyond that stage. Hagen again i n d i c a t e s h i s b e l i e f t hat Callaghans' assumption that complete l o g i s t i c s i n t e g r a t i o n i s p o l i t i c a l l y f e a s i b l e , or even o r g a n i z a t i o n a l l y page 25 possible, i s at best doubtful. (Hagen,1980,p.110). Where complete l o g i s t i c s i n t e g r a t i o n i s u n l i k e l y , co-production may o f f e r the European governments a p o l i t i c a l l y acceptable solution to the need to create some improved support organization, though only of a l i m i t e d or project-bound nature. Despite his skepticism of Callaghans 1 views, Taylor argues that there i s scope for l o g i s t i c s cost-savings; The most meaningful s p e c i f i c f i g u r e s are those p e r t a i n i n g to p a r t i c u l a r weapons. The s a l i e n t general statement i s that the greater the commonality of equipment and subsystems in the A l l i a n c e , the g r e a t e r the scope f o r co-o p e r a t i v e , l a r g e - s c a l e purchasing of p a r t s . (Taylor,1982,p.56). In i t s place, co-production may thus off e r a more modest but also a more r e a l i s t i c p o s s i b i l i t y of a c h i e v i n g cheaper l o g i s t i c s support arrangements. These more modest p o s s i b i l i t i e s are s t i l l questioned by some commentators. David Greenwood argues that such c l a i m s are dubious because c o - p r o d u c t i o n does not s o l v e the problem of l o g i s t i c support for e x i s t i n g non-standardised weapon systems. U n t i l t h i s d i f f i c u l t y i s overcome, "...nations may have to bear part of the c o s t s of j o i n t f a c i l i t i e s without a commensurate r e d u c t i o n i n the expense of t h e i r e x i s t i n g support apparatus." (Greenwood,1980,p.328). Greenwood f a i l s to take into account two p o i n t s : f i r s t , that one assumes that the co-produced system i s replacing an e x i s t i n g system whose support costs w i l l then cease; and secondly, i n t e r n a t i o n a l l o g i s t i c s arrangements f o r the new system should be judged i n comparison with the a l t e r n a t i v e s which page 26 would otherwise have been pursued. In these circumstances, co-production may well off e r a cheaper support option. The second main type of economic arguments concerning co-p r o d u c t i o n are those which deal with the use of t h i s p o l i c y to achieve wider n a t i o n a l economic o b j e c t i v e s . The p e r c e p t i o n by governments of the need to o b t a i n such goals i s recognised by most authors i n the defence l i t e r a t u r e . The economic w e l l - b e i n g of the i n d i v i d u a l member-nations - based on t e c h n o l o g i c a l competence and competetiveness - i s d i r e c t l y r e l e v a n t to t h e i r sense of s e c u r i t y . So too are p o l i t i c a l and s o c i a l s t a b i l i t y , which economic weakness can put at r i s k . (Greenwood, 1980,p.330). For t h i s r e a s o n , Greenwood a r g u e s , i t i s r e a s o n a b l e f o r governments to judge any c o - o p e r a t i v e procurement p o l i c i e s i n terms of the possible repercussions on national defence industry c a p a b i l i t i e s , employment l e v e l s , or other domestic economic problems. Table 1) i n the S t a t i s t i c a l Appendix i l l u s t r a t e s the r e -o r i e n t a t i o n i n p u b l i c expenditure budgets i n B r i t a i n away from defence and towards s e c t o r s of s o c i a l w e l f a r e requirements. Under these c i r c u m s t a n c e s , as i n d i c a t e d by Thomas Callaghan's quotation e a r l i e r (page 6), there are broader expectations from c o - p r o d u c t i o n or from any defence procurement programme as "...taxpayers expect defence expenditures to produce not only defense material but also jobs." (Walsh,1975,p.11). In the Economist I n t e l l i g e n c e Unit r e p o r t of 1963,it was page 27 estimated that defence work constituted 70% of B r i t i s h aerospace p r o d u c t i o n , f i n a n c e d 80% of a i r c r a f t i n d u s t r y R&D work, and d i r e c t l y involved some 45% of aerospace workers. Of the l a t t e r t o t a l , more than h a l f were employed i n r e g i o n s badly h i t by Q unemployment, e s p e c i a l l y i n the north-west and south-west. By 1970, t o t a l aerospace employment in B r i t a i n was estimated at some 230,000, with a substantial proportion of these workers depending upon defence c o n t r a c t s . Under such c i r c u m s t a n c e s , employment o p p o r t u n i t i e s p r o v i d e d by c o - p r o d u c t i o n are c i t e d by i t s advocates as a major incentive for pursuing t h i s a l t e r n a t i v e . Strong government awareness of the pressure to preserve employment l e v e l s i n industry i s i l l u s t r a t e d i n t h i s extract from an a r t i c l e by the B r i t i s h S e c r e t a r y of S t a t e f o r Defence i n the early 1970s, Mr. Roy Mason: ...we have to r e c o g n i z e , i f we are to be r e a l i s t i c , that i t i s jobs that move the man i n the s t r e e t , the unions, conveners, shop s t e w a r d s , and even P a r l i a m e n t , when the s u b j e c t of defence i s debated. (Mason,1975, p.225). Whereas ' o f f - t h e - s h e l f ' purchases give no o p p o r t u n i t y of increasing or even maintaining employment, and other a l t e r n a t i v e s are. p o l i t i c a l l y unwelcome or f i n a n c i a l l y p r o h i b i t i v e , co-production o f f e r s governments a viable means of achieving t h e i r goals. Apart from the p o l i t i c a l advantages of an independent defence i n d u s t r i a l capacity discussed previously, co-production i s also argued as a useful instrument by which governments can pursue an page 28 i n d u s t r i a l policy designed to a s s i s t domestic competetiveness or to address problems of surplus production capacity. The c l o s e l i n k between defence and c i v i l i a n i n d u s t r y , e s p e c i a l l y inareas of high technology, i s mentioned by a number of authors. B e l l i n i and P a t t i e d i s c u s s the connection i n the e l e c t r o n i c s i n d u s t r y i n Europe; i n France,for i n s t a n c e , 45% of the French n a t i o n a l output i n that s e c t o r was u n d e r w r i t t e n by Q defence c o n t r a c t s 7 . Burrows and Edwards argue that not only i s there a c l o s e connection i n t h i s sense, but manufacturers a l s o have frequently financed c i v i l i a n projects through t h e i r earnings from m i l i t a r y c o n t r a c t s . ^ While the nature and extent of c i v i l i a n b e n e f i t s from i n d u s t r i a l or r e s e a r c h s p i n - o f f s i s uncertain, by allowing governments to pursue advanced-technology programmes whichotherwise might be beyond n a t i o n a l c a p a b i l i t i e s f o r f i n a n c i a l or other reasons, c o - p r o d u c t i o n opens up the-p o s s i b i l i t y of o b t a i n i n g progress i n s e c t o r s which would otherwise lose an important stimulus. Connected to the concern f o r progress i n high-technology industries i s the p o s s i b i l i t y of d i r e c t advantages being obtained from the considerable technology-transfer between nations which i s a necessary aspect of co-production programmes. Both r e c e i v i n g and t r a n s f e r r i n g c o u n t r i e s recognise that know-how currently used i n the manufacture of m i l i t a r y equipment... i s usable in (the) production of internationalij-traded, t e c h n o l o g i c a l l y - i n t e n s i v e c i v i l i a n products. (Greenwood,1980,p.330). S e l e c t i v e use of c o - p r o d u c t i o n programmes can thus provide page 29 n a t i o n a l i n d u s t r i e s with v a l u a b l e t e c h n o l o g i c a l progress and (Greenwood i m p l i e s ) provide balance-of-payments advantages through creating new export p o t e n t i a l . As with the discussion of potential p o l i t i c a l advantages from co-production, the l i t e r a t u r e which deals with possible economic benefits tends to avoid these more subjective aspects of debate and to concentrate i n s t e a d on the q u a n t i t a t i v e study of c o s t -savings. However, two authors i n p a r t i c u l a r have sought to address the question of government involvement i n or d i r e c t i o n of defence procurement p o l i c i e s , and t h e i r views are at least worth examination as i l l u s t r a t i n g the disadvantages accruing from such manipulation. Both Mary Kaldor and Dan Smith, outspoken Labour Party c r i t i c s of government defence p o l i c i e s i n B r i t a i n , d i s c u s s the merits and problems of European co l l a b o r a t i o n i n the context of a ' c r i s i s of surplus capacity' i n the B r i t i s h defence industry; Management of B r i t i s h defence p o l i c y i s a constant compromise between the a v a i l a b i l i t y of resources f o r e v e r inadequate to provide d e s i r e d c a p a b i l i t i e s , and t h e s u p e r -a v a i l a b i l i t y of m i l i t a r y i n d u s t r i a l resources able to produce what the budget cannot afford. (Smith,1980,p.120). The authors represent the l e f t - w i n g of the Labour Party, and while l e s s c r i t i c a l of that party's defence p o l i c i e s , they continue to c r i t i c i s e the d i v e r s i o n of i n d u s t r i a l c a p a c i t y to defence p r o d u c t i o n and away from other types of commercial and c i v i l i a n uses. They are a l s o a u s e f u l i l l u s t r a t i o n of some of the domestic opposition faced by the B r i t i s h governments. page 30 Smith views c o l l a b o r a t i o n as part of t h i s wider government concern with o v e r - c a p a c i t y i n i n d u s t r y , and c o n s i d e r s that the m i l i t a r y product of such p o l i c i e s i s frequently i r r e l e v e n t . The author argues that i t i s not i n "...the u n i t cost of f i n i s h e d products that the advantage i s f e l t (to e x i s t ) , but i n the o v e r a l l cost of s u s t a i n i n g c a p a c i t y . " (Smith,1980,p.165). Mary Kaldor c l e a r l y agrees with t h i s analysis, and also with the view that c o l l a b o r a t i o n i s no more than a temporary s o l u t i o n which does not address the r e a l problem of surplus capacity. International c o l l a b o r a t i o n does not provide a solution to i n d u s t r i a l problems, nor can i t be said to have contributed to standardisation in NATO. (Kaldor,1982,p.203). Whilst co-production p o l i c i e s are unable to provide goverments with an adequate solution to th e i r domestic defence-industrial d i f f i c u l t i e s , Kaldor a l s o b e l i e v e s that i t o f f e r s l i t t l e hopeof progress towards the o f f i c i a l NATO objective of standardisation. According to these authors, t h e r e f o r e , c o - p r o d u c t i o n and c o l l a b o r a t i v e procurement p o l i c i e s generally f a i l to o f f e r any genuine p o l i t i c a l advantages to governments seeking to address 'fundamental'domestic i n d u s t r i a l problems. At the same time, such p o l i t i c a l d i r e c t i o n not only hampers m i l i t a r y and i n d u s t r i a l e f f i c i e n c y , but r e n d e r s such c r i t e r i a l a r g e l y i r r e l e v a n t . Some comments need to be made concerning t h i s i n t e r p r e t a t i o n of c o l l a b o r a t i o n . F i r s t l y , t h e authors' s t u d i e s concentrate on the p o l i c i e s of B r i t i s h governments, and t h e i r c o n c l u s i o n s are page 31 not always r e l e v e n t to other n a t i o n s . West Germany and I t a l y , f o r example, could not have been s a i d to have faced a c r i s i s of s u r p l u s c a p a c i t y i n t h e i r defence i n d u s t r i e s . In these cases, c o l l a b o r a t i v e programmes may have o f f e r e d p o t e n t i a l b e n e f i t s t h r o u g h a l l o w i n g planned e x p a n s i o n of u n d e r d e v e l o p e d or underexploited i n d u s t r i a l p o t e n t i a l . Secondly, while Smiths' case study of the Tornado provides u s e f u l c r i t i c i s m s , both h i s and Kaldor's assessments of the u s e f u l n e s s of c o l l a b o r a t i o n as a p o l i t i c a l t o o l are marked by predetermined b i a s e s . N e i t h e r author makes any p r e t e n s i o n towards p r e s e n t i n g an o b j e c t i v e analysis, and instead are concerned with arguing the case either f o r r e a l l o c a t i o n of l i m i t e d r e s o urces to c i v i l i a n uses or e l s e f o r B r i t i s h disarmament and the t u r n o v e r of a l l d e f e n c e i n d u s t r i a l c a p a c i t y to other modes of p r o d u c t i o n . However, the work of both Kaldor and Smith does help to i n d i c a t e some of the p o s s i b l e d i s a d v a n t a g e s which may r e s u l t from p o l i t i c a l manipulation of procurement p o l i c i e s and contract a l l o c a t i o n . At the same time, they are u s e f u l as i l l u s t r a t i n g the nature and views of at l e a s t a part of the domestic lobby-groups which governments must deal with i n f o r m u l a t i n g or defending t h e i r p o l i c i e s . M i l i t a r y Implications of Co-production The f i n a l area of p o t e n t i a l benefits from co-production which requires consideration i s that of the m i l i t a r y c a p a b i l i t i e s and page 32 e f f e c t i v e n e s s of European NATO m i l i t a r y f o r c e s . Once again, o p i n i o n i n the l i t e r a t u r e i s g e n e r a l l y s u p p o r t i v e of the view that commonality of equipment would be a valuable asset to NATO, but neither the precise type of policy required (standardisation, or i n t e r o p e r a b i l i t y of f u e l s , munitions etc.), or the extent of the p o t e n t i a l gains to be made, are unanimously agreed upon. The most obvious pote n t i a l benefit of co-production which i s touted by i t s supporters i s that by creating greater commonality of equipment among NATO f o r c e s , i t w i l l i n c r e a s e t h e i r l e v e l o f f l e x i b i l i t y and e f f i c i e n c y . T h i s c l a i m r e s t s on two presumed e f f e c t s , the f i r s t of which i s that use of common equipment w i l l s i m p l i f y the task of co-ordinating operations by adjacent forces. Secondly, by reducing d i f f i c u l t i e s of support and maintenance, commonality permits s w i f t e r redeployment of f o r c e s and major weapon systems such as a i r c r a f t . T a y l o r supports the need f o r commonality on the grounds that NATO f o r c e s c o u l d f i g h t much more e f f e c t i v e l y . T h e i r deployment would be more f l e x i b l e , they would e a s i l y be a b l e to r e i n f o r c e and resupply each other and j o i n t operations would be immeasurably easier. They would be well-suited to f i g h t a c o a l i t i o n war. (Talor,1982,p.ll7). Co-production i s thus seen as a possible method to overcome the d e s t a n d a r d i s a t i o n which - i n the words of General Johannes Steinhoff - has given NATO the appearance of "...an army museum." (Tucker,1976,p.6). Aside from these ideas, promoters of co-production argue that i n c r e a s e d commonality w i l l enable NATO to improve i t s poor page 33 P v t o o t h - t o - t a i l 1 r a t i o (that i s , t h e r a t i o of combat-to-support troops and equipment); With regard to the admittedly s p e c i a l case of the ACE Mobile Force ( A l l i e d Command Europe), i t has been s u g g e s t e d t h a t i t s f i g h t i n g c a p a b i l i t i e s could be i n c r e a s e d by 50 per cent, i f i t used common equipment. ( T a y l o r , 1978,p.117). Callaghan has estimated that NATO requires twice as many support troops as the Warsaw Pact. Thus despite s i m i l a r t o t a l manpower f i g u r e s , the WPO i s able to f i e l d a l a r g e r number of combat f o r c e s . 1 1 The t h i r d p o t e n t i a l m i l i t a r y benefit of co-production stems from the c o s t - s a v i n g s which are claimed to r e s u l t from t h i s p o l i c y . The suggestion has been made that t h i s may i n f a c t be the m i l i t a r y argument of most appeal to m i l i t a r y planners whose budgets are under pressure from r i s i n g c o s t s , as the resources 'saved' i n t h i s manner can be redeployed elsewhere in the defence s e c t o r . Development p r o j e c t s p r e v i o u s l y neglected could be undertaken, or g r e a t e r numbers of a p a r t i c u l a r e x i s t i n g system 12 procured. Before moving on to consider the counter-arguments presented in the l i t e r a t u r e against some of the claims discussed above, two further possible m i l i t a r y advantages require mention. F i r s t , co-p r o d u c t i o n may a l s o be the only e c o n o m i c a l l y f e a s i b l e means by which European NATO forces can obtain advanced, high-cost weapons systems without t u r n i n g to the U.S. As was mentioned e a r l i e r , dependence on f o r e i g n sources of supply might be considered p o t e n t i a l l y dangerous or r e s t r i c t i v e as national forces are t i e d page 34 to another nations' foreign policy decisions. While independent sov e r e i g n s t a t e s continue to e x i s t , n a t i o n a l m i l i t a r y f o r c e s w i l l be considered an e s s e n t i a l part of national security. The f i n a l m i l i t a r y benefit from co-production which appears i n the l i t e r a t u r e c o n c e r n s the avowed NATO o b j e c t i v e of s t a n d a r d i s a t i o n of f o r c e s . The p o l i t i c a l a c c e p t a b i l i t y of s t a n d a r d i s a t i o n i s questioned by many i f not a l l authors, f o r reasons given e a r l i e r . Co-production, an acceptable a l t e r n a t i v e policy, not only can r e s u l t i n commonality of equipment, but also planned commonality of t r a i n i n g programmes and the establishment of i n t e r n a t i o n a l l o g i s t i c s arrangements; ...commonality as an i d e a l does not i n v o l v e o n l y a s i n g l e w eapon t y p e i n a l l circumstances. Several sorts may be deployed i f there are m i l i t a r y advantages i n terms of making the enemy's job harder or having a more a p p r o p r i a t e system f o r the environment.The  c r u c i a l factor i s to plan duplication of type  rather than leave i t to chance. (Taylor, 1982, p.37).. Planned du p l i c a t i o n i s s i m i l a r l y advocated by Gardiner Tucker as a means of c o u n t e r i n g the problems of d e s t a n d a r d i s a t i o n and 1 -3 d i s s i p a t i o n of res o u r c e s . By r e q u i r i n g s e v e r a l n a t i o n s to harmonize t h e i r replacement schedules and to agree upon common o p e r a t i o n a l requirements, co-production may be a p a r t i a l step towards such planned duplication of types. There are two forms of m i l i t a r y arguments presented i n the defence procurement l i t e r a t u r e which a t t e m p t to i n d i c a t e the p o t e n t i a l disadvantages of co-production. The f i r s t argument deals s p e c i f i c a l l y with the m i l i t a r y c o s t s or i n e f f i c i e n c i e s page 35 which might r e s u l t from j o i n t development programmes. The second area of o p p o s i t i o n concerns an a l t e r n a t i v e view of the a c t u a l necessity of the r e s u l t s that the advocates proclaim. One of the s p e c i f i c arguments against equipment commonality i s that i t would make an opponent's task of c r e a t i n g e f f e c t i v e counter-measures far easier. D i v e r s i f i c a t i o n of weapon systems i s thus seen as m i l i t a r i l y advantageous, and co-production as endangering t h i s advantage. The s u p e r f i c i a l i t y of t h i s view i s neatly indicated by Hagen's remark that T h i s has a r a t h e r odd r i n g about i t ; i t i s hard to f i n d a NATO commander r e j o i c i n g over equipment s t a n d a r d i s a t i o n w i t h i n the Warsaw Pact. (Hagen,1980,p.38). Although p r o l i f e r a t i o n i n areas such as r a d a r s , e l e c t r o n i c warfare, or armour may be d e s i r a b l e , the planned p r o l i f e r a t i o n d i s c u s s e d p r e v i o u s l y i s an e n t i r e l y d i f f e r e n t c o n d i t i o n to the unco-ordinated duplication which has existed up to the 1970s and even into the 1980s. The c l a i m that cost savings obtained through c o - p r o d u c t i o n could be used by n a t i o n a l defence planners to procure e x t r a or a l t e r n a t i v e weapon systems makes an assumption which may be incorrect. With the pressures i n West European states to improve s o c i a l welfare and l i v i n g conditions, "... there i s no guarantee that governments who save on defence w i l l be w i l l i n g to put funds back i n t o the defense se c t o r . " (Taylor,1978,p.116). P r i o r i t y might i n s t e a d go to education, h e a l t h care, or other types of public expenditure which are more popular with voters. page 36 Co-production does e n t a i l the need for nations to harmonize t h e i r equipment replacement schedules and to make compromises r e g a r d i n g o p e r a t i o n a l or m i s s i o n r e q u i r e m e n t s . T h i s i s e s p e c i a l l y t r u e i f they are to seek economies i n R&D and production, or i n support services. However, co-production may not always r e s u l t i n a greater degree of equipment commonality. Kaldor argues that commonality i s s e v e r e l y hampered due to d i f f e r e n c e s amongst n a t i o n a l p r o d u c t i o n standards, i n c l u d i n g machine to o l s , measurement systems, and qu a l i t y standards. The author c i t e s the case of the U.S. and European Hawk a i r c r a f t , which are not i n fact interchangeable although t h i s was supposed to be one of t h e i r main f e a t u r e s . 1 ^ While the c r i t i c i s m presented above c e r t a i n l y does create problems i n any co-production programme, these d i f f i c u l t i e s can be overcome by agreeing to use s p e c i f i c measurement standards throughout the p r o j e c t , and by t r a n s l a t i n g or c o n v e r t i n g d i f f e r i n g n a t i o n a l standards to these new s p e c i f i c a t i o n s . However, t h i s i n v o l v e s t i m e - d e l a y s i n the p r o j e c t d e f i n i t i o n phase, adding to delays which might r e s u l t from problems i n reaching acceptable compromises on operational requirements or work-sharing agreements. These delays a l l serve to increase the f i n a l unit cost of the equipment being produced. Apart from the arguments presented by authors a g a i n s t the advantages claimed to r e s u l t from co-production, there are also a number of authors and other a n a l y s t s who , r a t h e r more broadly, question the actual need for the complete standardisation sought page 37 by NATO or even the equipment commonality proposed by those pushing c o l l a b o r a t i v e procurement. Kaldor c i t e s the view of General James Polk, commander-in-chief of the U.S. Army i n Europe in the l a t e r 1960s, who remarked that ...the whole e f f o r t of s t a n d a r d i s a t i o n or i n t e r o p e r a b i l i t y . . . should be concentrated e x c l u s i v e l y i n the area of petroleum products and ammunition... The r e s t i s j u s t window d r e s s i n g . I t i s not worth the time, t r o u b l e and money required. (Kaldor,1982,p.204). This expression i s representative of those authors who argue that what i s r e a l l y necessary i s c o n c e n t r a t i o n not on equipment standardisation but upon the 'essential expendables' indicated by Polk. Although there i s some v a l i d i t y i n t h i s concern, these authors overlook a point of c o n s i d e r a b l e importance: that much depends upon the nature of the war or c o n f l i c t being envisaged. I f the e x p e c t a t i o n i s of a s w i f t c o n f l i c t , then t h i s l i m i t e d i n t e r o p e r a b i l i t y would be adequate. However, as Hagen p o i n t s out, t h i s may not be the case i f the c o n f l i c t were to be a p r o t r a c t e d one. In t h i s s i t u a t i o n , there would remain f o r i n s t a n c e " . . . l i t t l e a i r c r a f t i n t e r o p e r a b i l i t y at the l e v e l of r e p a i r c a p a b i l i t y , armament, and e l e c t r i c a l power s u p p l y systems." (Hagen,1980,p.36). Thus, the a v a i l a b i l i t y of f u e l and ammunition at a f r i e n d l y base means that... a f t e r several m i s s i o n s flown, an a i r c r a f t w i l l probably be able to return to combat, i f at a l l , only with a reduced c a p a b i l i t y . (Taylor,1982,p.43). For/advanced combat a i r c r a f t , f u e l , ammunition, and other predictable 'essentials' such as oxygen or lubricants are page 38 i n s u f f i c i e n t to f u l l y s e r v i c e the system.Instead, p e r i o d i c l a r g e - s c a l e maintenance i s required,the nature of which cannot always be foreseen. Under these c i r c m s t a n c e s , the common tr a i n i n g of ground support s t a f f and crewmen, and in t e r n a t i o n a l l o g i s t i c s o r g a n i s a t i o n s , which are o f f e r e d by co-production programmes would provide much greater opportunities for adequate maintenance. The arguments concerning the m i l i t a r y value and implications of c o - p r o d u c t i o n c l e a r l y are not e n t i r e l y c o n c l u s i v e e i t h e r i n favour of, or a g a i n s t , such a p o l i c y . However, the weight of op i n i o n i n the l i t e r a t u r e on a l t e r n a t i v e defence a c q u i s i t i o n p o l i c i e s does l i e with those who argue the case f o r e i t h e r s t a n d a r d i s a t i o n or c o m m o n a l i t y . Those who argue a g a i n s t c o l l a b o r a t i o n have few i f any viable suggestions of other courses of a c t i o n to improve NATO f o r c e s i n the face of s t r i c t economic r e s t r a i n t s and t h e i n e v i t a b l e p o l i t i c a l i n t e r e s t s of n a t i o n a l governments i n any major defence budget item. A n a l y s i s of the p o l i t i c a l i m p l i c a t i o n s of defence co-produ c t i o n i n the r e l e v a n t l i t e r a t u r e showed that most authors p r e f e r r e d to a v o i d a t t e m p t i n g any d e t a i l e d t h e o r e t i c a l consideration of pot e n t i a l advantages or problems. While c e r t a i n p o i n t s may be g e n e r a l i s e d - such as use of w o r k - s h a r i n g agreements to provide another government with i n c e n t i v e s to support a p a r t i c u l a r policy - the differences i n objectives and v a l u e s p l a c e d upon s i m i l a r g o a l s or r e s u l t s i s such t h a t page 39 c o n c l u s i v e answers to ' c o s t - b e n e f i t ' questions are i m p o s s i b l e . One can o n l y say t h a t i n the absence of w i der p o l i t i c a l incentives either to i n i t i a t e programmes, agree on compromises, or to continue projects underway, the l i k e l i h o o d of c a n c e l l a t i o n would increase dramatically. In t h i s sense, those who state that one r e s u l t of government involvement i n co-production i s to make such programmes far harder to dissolve are correct. Whether one sees t h i s as good or bad depends on what c o m b i n a t i o n of p o l i t i c a l , m i l i t a r y and economic r e s u l t s one i s examining, and upon the analysts' own p o l i t i c a l perspective. Whereas p o l i t i c a l i n t e r p r e t a t i o n s of co-production p o l i c i e s are few and o f t e n v a l u e - l a d e n , c o n s i d e r a t i o n of c o s t - s a v i n g s p o t e n t i a l dominates the l i t e r a t u r e on defence procurement. Despite t h i s concentration, there i s no r e a l agreement i n the l i t e r a t u r e on either the nature or extent of p o t e n t i a l benefits to be obtained. However, when compared to i n d i v i d u a l n a t i o n a l programmes to produce s i m i l a r weapon systems, o p i n i o n i s s t r o n g e s t on the s i d e of n a t i o n a l economic b e n e f i t s through r e l a t i v e cost-savings. In considering domestic economic benefits other than immediate cost-savings, conclusions as to the 'value' of c o - p r o d u c t i o n again depend upon the author's p o l i t i c a l perspective. One can state that co-production o f f e r s governments a p o t e n t i a l l y u s e f u l a d d i t i o n a l instrument f o r i n f l u e n c i n g economic p o l i c i e s ; one cannot assess the worth of the s p e c i f i c p o l i c i e s other than by i n d i v i d u a l case-study. A problem which pertains to much of the l i t e r a t u r e reviewed page 40 i n t h i s paper i s that which Greenwood describes as the tendency to step into the ' e f f i c i e n c y trap': ...that i s , the tendency to ask "what i s r e q u i r e d of a system without i n c l u d i n g the p o l i t i c a l parameter that may demand a second-best or third-best s o l u t i o n . " (Greenwood,1980, p.320) . Co-production programmes may be marked by a n e c e s s i t y f o r compromises on national m i l i t a r y - o p e r a t i o n a l requirements. The most e f f i c i e n t R&D or p r o d u c t i o n a r r a n g e m e n t s may not be obtained. These r e s u l t s , i f they occur, should not be accepted as i n e v i t a b l e . N e v e r t h e l e s s , i t may not be h e l p f u l to have "...what i s r e a l l y testimony to the r e l e v e n c e of values and i n t e r e s t s o t h e r than e f f i c i e n c y c a s t i g a t e d as o b s t a c l e s . " (Greenwood,1980,p.323). Despite the tendency i n the l i t e r a t u r e to suggest, almost i m p l i c i t l y , that c o s t - s a v i n g s are the most important incentive for governments considering co-production, i t i s the view of the present author that Greenwood's warning should be remembered. P o l i t i c a l o b j e c t i v e s , d i s c u s s e d o n l y s u p e r f i c i a l l y i n the general l i t e r a t u r e on defence procurement, are o f t e n c e n t r a l i n f l u e n c e s on the agreements reached i n such programmes and s i m u l t a n e o u s l y set out the general background against which the agreements are eventually made. page 41 Section 3. Case Study of the MRCA-Tornado. In determining the i n d u s t r i a l and m i l i t a r y sector which might best provide opportunities for case study material concerned with European c o l l a b o r a t i v e procurement, aerospace p o l i c i e s appeared to o f f e r s e v e r a l advantages. F i r s t , and most obvious, was the fact that high-cost, high-technology a i r c r a f t have a pronounced impact on l i m i t e d national defence budgets. It therefore seemed l i k e l y that government i n t e r e s t i n c o n t r o l l i n g or i n f l u e n c i n g projects i n t h i s sector would be considerable. Secondly, the high u n i t p r i c e of advanced combat a i r c r a f t would give the g r e a t e s t opportunity to assess p o t e n t i a l cost savings i n R&D, production, and l o g i s t i c s . T h i r d , i t was hoped that the high cost and p r e s t i g e value of aerospace programmes, and the n e c e s s i t y to e s t a b l i s h w o r k - s h a r i n g a r r a n g e m e n t s between n a t i o n s and indu s t r i e s , would would provide a good example of the c o n f l i c t i n c o l l a b o r a t i v e programmes between p o l i t i c a l and economic ' n a t i o n a l i s m ' and the d e s i r e f o r cheapest-source purchases. F i n a l l y , the M u l t i - R o l e Combat A i r c r a f t or 'Tornado' has c e r t a i n l y been the largest, most co s t l y , and ambitious attempt at European c o l l a b o r a t i o n i n the development of a major new weapon system f o r use i n NATO. A l l of these c o n s i d e r a t i o n s w i l l t h e r e f o r e lend to the present work a higher degree of p o l i c y relevence i n assessing the current condition of NATO and European defence procurement and the problems which must be faced i n the page 42 f u t u r e . Case s t u d i e s of co-production programmes i n NATO are r e l a t i v e l y few, and attempts at objective assessment fewer s t i l l . It i s hoped that t h i s paper w i l l provide a step i n the d i r e c t i o n of remedying t h i s deficiency in the l i t e r a t u r e . i ) . I n t e r n a t i o n a l Bargaining i n the MRCA Programme The f i r s t major hurdle f a c i n g a co- p r o d u c t i o n programme i s p r o j e c t d e f i n i t i o n phase. D i f f e r i n g n a t i o n a l o p e r a t i o n a l requirements and m i l i t a r y d o c t r i n e s must be r e c o n c i l e d and equipment replacement schedules harmonised, without r e s u l t i n g i n a product which i s p r o h i b i t i v e l y expensive. The early h i s t o r y of the MRCA, or the MRA-75 (Multi-Role A i r c r a f t for 1975) as i t was then known 1, gives a c l e a r i l l u s t r a t i o n of the problems which multi-national programmes must face, and the e f f e c t s that these d i f f i c u l t i e s can have on the size and shape of the project. The MRCA programme be;gan i n mid-1968 with the s i g n i n g of a Memorandum of Understanding (MOU) between the governments of West Germany, B r i t a i n , I t a l y , the Netherlands, Belgium and Canada. A l l signatories had indicated t h e i r i n t e r e s t i n a c o l l a b o r a t i v e venture to design and produce a combat a i r c r a f t to replace t h e i r current inventories i n the mid-1970s. During the twelve months that followed the signing of the MOU, however, the governments of Canada, Belgium and the Netherlands withdrew from the proposed programme before any commitments to long-term p a r t i c i p a t i o n were made. The reasons for these governments' withdrawals were based page 43 on p o l i t i c a l , economic and m i l i t a r y considerations. The d e c i s i o n of the Canadian goverment not to continue further with the MRCA project .coincided with the re-o r i e n t a t i o n of Canadian defence p o l i c y away from NATO Europe and towards n a t i o n a l borders. While shortage of funds was the o r i g i n a l reason c i t e d for the withdrawal, the major government review of defence p o l i c y was recognised as one of the main i n f l u e n c e s i n making the d e c i s i o n . In a speech i n Ottawa l e s s than a year a f t e r the withdrawal, the Canadian Defense M i n i s t e r e x p l a i n e d that the a i r element of the Canadian f o r c e s i n Europe was to be reduced to three squadrons of the ageing F-104s to be used f o r conventionally-armed ground support roles . It i s notable that whereas B r i t i s h or West German p o l i t i c a l attention was focussed on Europe, Canadian i n t e r e s t s were centered on the defence of national boundaries i n co-operation with the U.S. The r e s u l t for Canada was th a t there was no o v e r r i d i n g or important p o l i t i c a l i n c e n t i v e to become part of the co-production programme, but rather the opposite. Without p o l i t i c a l support for the project i n Canada, either m i l i t a r y or economic and i n d u s t r i a l advantages might not have been s u f f i c i e n t i n c e n t i v e s to continue. However, f u r t h e r a n a l y s i s i n d i c a t e s that the MRCA did not even appear to o f f e r any pote n t i a l benefits i n these areas. ...we withdrew because i t looked as i f we would not get s u f f i c i e n t attention paid to the C a n a d i a n ( a s o p p o s e d t o E u r o p e a n ) requirements, because there appeared to be v e r y l i t t l e o p p o r t u n i t y f o r C a n a d i a n manufacturing content, and because i t showed page 44 signs of being very expensive. While the primary Canadian operational requirement was for an a i r s u p e r i o r i t y f i g h t e r , i t was apparent that the MRCA would not be i d e a l l y suited t o t h i s r o l e . A comparison of the thrust-to-weight (T/W) r a t i o of the F-104 and Tornado a i r c r a f t reveals that t h i s concern was c o r r e c t , as there i s l i t t l e d i f f e r e n c e between the two - 0.7 2JE o r/t h e former, and 0.82 f o r the l a t t e r " * . European d e t e r m i n a t i o n to o b t a i n work on the a i r c r a f t - which w i l l be examined below - a l s o s e v e r e l y l i m i t e d the chance f o r Canadian industry to obtain valuable work-sharing agreements. After the Canadian announcement of i t s withdrawal, the second nation to leave the proposed MRCA programme was Belgium. For the European n a t i o n , with a very l i m i t e d s c a l e budget, o f f - s e t o p p o r t u n i t i e s were an e s s e n t i a l part of any major weapons p u r c h a s e . W h i l s t Anglo-German d i s a g r e e m e n t s over p r o j e c t l e a d e r s h i p continued f o r s e v e r a l months i n 1968-1969, France offered Belgium excellent o f f - s e t terms to purchase the Dassault M i r a g e S, an a i r c r a f t s u i t e d to the B e l g i a n o p e r a t i o n a l requirement of a i r s u p e r i o r i t y . 0 The r e s u l t was the decision of the Belgian government to opt out of the MRCA project i n 1969. Co-production did not o f f e r Belgium the kind of i n c e n t i v e s the government sought f o r c o m m i t i n g i t s f u t u r e d e f e n s e expenditure to a programme which would produce an a i r c r a f t not i d e a l l y s u i t e d to B e l g i a n m i l i t a r y needs. Instead, l i c e n s e d production of a system designed elsewhere combined with adequate cost o f f - s e t s were more d i r e c t l y relevent to the smaller nation. page 45 P o l i t i c a l advantages of co-production appear not to have had any importance i n t h i s case. The p a r t i c i p a t i o n of Belgium i n the European/U.S. F-16 programme reveals the cen t r a l concern of the Belgian government Belgian government and industry o f f i c i a l s are more than s a t i s f i e d with... the amount of F-16 work placed i n that country... the value of the o f f - s e t c o n t r a c t s p l a c e d i n B e l g i u m exceeds the procurement c o s t of the 116 a i r c r a f t i t has o r d e r e d by about $400 m i l l i o n . While the Canadian and Belgian governments withdrew from the MRCA programme before the project d e f i n i t i o n phase was underway, the Netherlands remained as a member u n t i l J u l y 1969, by which time e f f o r t s had begun to o b t a i n agreements on a i r c r a f t s p e c i f i c a t i o n s and work-sharing. The l o s s of the Dutch partner was to be the l a s t withdrawal s u f f e r e d by the co - p r o d u c t i o n e f f o r t , and the reasons f o r the Dutch a c t i o n again r e v e a l uncertainties over the m i l i t a r y , i n d u s t r i a l and economic r e s u l t s of the venture. The Netherlands government's- disenchantment with the progress of the MRCA programme originated with the compromise agreements made by the B r i t i s h and West German pa r t n e r s over o p e r a t i o n a l requirements, without consulting the I t a l i a n or Dutch members. B a s i c a l l y , the Dutch believe the MRCA w i l l be optimized for the B r i t i s h and the Germans, and that technical compromises w i l l be made at the expense of the o t h e r c o u n t r i e s i n the consortium. The Dutch a i r force had o r i g i n a l l y s p e c i f i e d a need for a s i n g l e -engine, highly-manoeuvrable f i g h t e r a i r c r a f t with a Mach 1.8 page 46 maximum speed. However, i n March 1969 the B r i t i s h and Germans agreed to a twin-engined c o n f i g u r a t i o n which they j u s t i f i e d as necessary i n order f o r the a i r c r a f t to be capable of f u l f i l l i n g the long-range s t r i k e / i n t e r d i c t i o n r o l e demanded by the RAF. Instead of the " . . . f a i r l y simple f i g h t e r plane with outstanding manoeuvrability..." envisaged by Dutch Defence Minister de Toom^, the MRCA was beginning to appear as a more complex a i r c r a f t with a minimum weight of 40,000 pounds.1*"* In operational terras, the m i l i t a r y and p o l i t i c a l compromises requiredtomake the MRCA programme acceptable to the two major pa r t n e r s were such that "...the MRCA was regarded as too complicated and as t e c h n i c a l l y unsuitable for the requirements of the (Netherlands') A i r F o r c e . " 1 1 The A i r Force had determined that l a r g e r numbers of r e l a t i v e l y i nexpensive a i r c r a f t were preferable to a few complex and expensive systems i n f u l f i l l i n g t h e i r NATO commitment, but the r e s u l t of the Anglo-German compromise was to raise the estimated unit price of the MRCA from $2.5 m i l l i o n to $4.8 m i l l i o n . L i e u t e n a n t G e n e r a l W o l f f , commander-in-chief of the Dutch Air Force and himself an advocate of European c o l l a b o r a t i o n , expressed the view that We can get a l i m i t e d c a p a b i l i t y (using the twin-engine design) for our needs, bat we are paying for a l l the other compromises. The m u l t i - r o l e c a p a b i l i t y of the MRCA, required i n order to meet the d i f f e r i n g o p e r a t i o n a l requirements of the main p a r t n e r s i n the p r o j e c t , thus meant to the Dutch government t h a t an unacceptably high price would be paid for a system which was not page 47 optimised for use by thei r own a i r force. The concerns discussed above were not the only problems which were seen to exist i n the MRCA programme and to bode i l l for i t s future. Netherlands o f f i c i a l s p r i v a t e l y expressed t h e i r anger at the way i n which the a d m i n i s t r a t i v e c o s t s of the P a n a v i a organization established to oversee the venture rose from 2.5 per c e n t , to 5 per ce n t , of t o t a l programme c o s t s . - 1 The agreement on a twin-engine configuration, aside from increasing the c o s t of the programme, a l s o caused postponement of the intended delivery date of the a i r c r a f t from the o r i g i n a l goal of 1975-76 to a new date i n 1977-78. 1 4 The Dutch A i r Force, however, was seeking a replacement a i r c r a f t which would be a v a i l a b l e by the middle of the decade. F i n a l l y , the defence budget i n the Netherlands, estimated and accepted on an annual basis, l e f t l i t t l e room for long-term commitment to a programme whose costs were already seen as escalating against the wishes of the government. Faced with pressing demands from other sectors of p u b l i c expenditure and with a l i m i t e d budget, the MRCA programme appeared as a poor m i l i t a r y and f i n a n c i a l r i s k without any commensurate p o l i t i c a l b e nefits. The examination of the i n i t i a l membership of the MRCA programme i l l u s t r a t e s the d i f f i c u l t y of r e c o n c i l i n g v a r y i n g national operational requirements and p o l i t i c a l or economic goals when membership i n a co-production e f f o r t i s higher than two or three states. When clashes of i n t e r e s t occur, as they i n e v i t a b l y w i l l , and a government sees that i t s own objectives are not being page 48 met, then i n the absence of wider i n c e n t i v e s to c o n t i n u e p a r t i c i p a t i o n the r e s u l t i s the withdrawal of that government. In the present case study, the MRCA was viewed as f a i l i n g to s a t i s f y the operational requirements of Canada, Belgium and the Netherlands, and to do so at an acc e p t a b l e f i n a n c i a l c o s t . A l l three governments were s c e p t i c a l of the compromises made by the B r i t i s h and German partners, which they believed were being made at t h e i r expense. Thus in achieving the common requirements and acceptable s p e c i f i c a t i o n s necessary before a formal agreement to co-produce the M u l t i Role Combat A i r c r a f t was p o s s i b l e , the p r o j e c t l o s t three of i t s o r i g i n a l members and t h e i r p o t e n t i a l orders. The fact that B r i t a i n , West Germany and - a f t e r some doubts -I t a l y remained i n the MRCA programme might be taken as i n d i c a t i n g that at l e a s t these three n a t i o n s possessed common o p e r a t i o n a l requirements for the a i r c r a f t to be b u i l t . In r e a l i t y , t h i s was not the case as the three nations sought to build an a i r c r a f t to replace a variety of predecessors with a wide range of missions. The Royal A i r Force requirements c a l l e d f o r a twin-engine a i r c r a f t with a range of at l e a s t 800 m i l e s , advanced a v i o n i c s systems for long-range, all-weather low-level f l i g h t c a p a b i l i t y , and a two man crew consisting of a p i l o t and a systems operator. The L u f t w a f f e and the I t a l i a n A i r Force both sought a s i n g l e -engine a i r c r a f t with a 200 mile range, advanced a v i o n i c s f o r Short Take-Off and Landing (STOL) c a p a b i l i t y , and a s i n g l e crew member. Missions varied from long-range s t r i k e / i n t e r d i c t i o n to page 49 c l o s e ground support, and high speed i n t e r c e p t o r / f i g h t e r . The pe r f o r m a n c e c h a r a c t e r i s t i c s , as o u t l i n e d above, v a r i e d c o n s i d e r a b l y between these m i s s i o n s and i n some cases were r a d i c a l l y d i f f e r e n t . Given these v a r y i n g requirements, i t i s perhaps more su r p r i s i n g that the MRCA programme continued than had i t been discontinued altogether. The West German i n d u s t r i a l combine Entwicklungsring Sud (EWR) continued to develop i t s advanced NKF a i r c r a f t even as i t was inv e s t i g a t i n g the MRCA s p e c i f i c a t i o n s , i n case the l a t t e r project u l t i m a t e l y f e l l through. The NKF was viewed as being t a i l o r e d s p e c i f i c a l l y to the Luftwaffe requirements (as above) whereas the MRCA was l a b e l l e d as "...a compromise a i r c r a f t to meet the requirements o f a l l c o n s o r t i u m members."^ The agreement on a common design, reached i n March 1969, was the r e s u l t of an important concession on the part of the German government: Despite the increase i n unit cost - which ul t i m a t e l y led to Dutch withdrawal - the German government deemed the MRCA p r o j e c t s u f f i c i e n t l y important for other reasons that they were w i l l i n g to continue development with the B r i t i s h , even i f the I t a l i a n government also decided that cost escalation had become too great to continue the project. The twin engine design and emphasis on the long-range mission were concessions on the part of West Germany. However, the B r i t i s h a l s o had to accept a s i t u a t i o n which was f a r from the page 50 i d e a l of the RAF. W.B. Walker s t r e s s e s that B r i t a i n had to agree ...to b u i l d a m u l t i - r o l e a i r c r a f t , one that would to some e x t e n t o v e r l a p w i t h the o p e r a t i o n a l a b i l i t i e s of the Jaguar, while they o n l y needed a s i n g l e - r o l e a i r c r a f t (Strike/Recconnaissance) They agreed to build an a i r c r a f t that was, for them, unnecessarily c o m p l i c a t e d i n o r d e r t o s e c u r e t h e col l a b o r a t i v e agreement. (Walker,1974,p.285). Neither the West German nor the B r i t i s h governments obtained t h e i r ' i d e a l ' a i r c r a f t i n the d e f i n i t i o n phase, w h i l s t the I t a l i a n government d i d c o n s i d e r j o i n i n g the Dutch i n the development of a cheaper a i r c r a f t more s u i t e d to i t s own requirements. Despite these problems, a l l three nations remained as p a r t n e r s . Deeper p o l i t i c a l and economic i n c e n t i v e s were by this time c l o s e l y associated with the continuation and completion of the MRCA programme. One of the most widely acknowledged p o l i t i c a l motives f o r B r i t i s h p a r t i c i p a t i o n and German willingness to compromise i n the Tornado project centered on the former nations' a p p l i c a t i o n for membership of the European Economic Community. B r i t i s h Prime M i n i s t e r Harold Wilson faced s t r o n g o p p o s i t i o n from the French government which was blocking the a p p l i c a t i o n . ...the MRCA was used by the Labour government i n the l a t e 1960s to d e m o n s t r a t e to the Germans and the I t a l i a n s the s t r e n g t h of the B r i t i s h resolve to j o i n the Common Market; i t was believed... that the road to the Common Market passed t h r o u g h Bonn, not P a r i s . (Walker,p.286). T h i s sentiment was a l s o expressed by West German and I t a l i a n page 51 government and industry o f f i c i a l s . The strong German support for the R o l l s Royce engi n e ( d i s c u s s e d below) e x i s t e d m a i n l y "...because the p r o j e c t i s becoming deeply rooted i n Germany's sponsorship of B r i t a i n ' s entry i n t o the Common Market."^ The I t a l i a n concern f o r m a i n t a i n i n g good r e l a t i o n s with B r i t a i n for reasons connected with the p o l i t i c a l balance i n the EEC was s t a t e d e x p l i c i t l y by the former I t a l i a n ambassodor i n Paris, Pietro Quaroni; ...the French have never given up the hope of transforming the Common Market into a French sphere of i n f l u e n c e . . . I f my c o u n t r y and others strongly desire Britain's membership of the Common Market, i t i s because we b e l i e v e t h a t , i n t h i s way, the i n t e r n a l ba1anc e of power in Europe would be more assured. 1 Research has not reve a l e d the kind of d i r e c t l i n k between t h i s d e s i r e and the MRCA p r o j e c t which has been seen i n the German case, but given t h i s l a t t e r example and the I t a l i a n government's willingness to accept the changes i n the programme made without c o n s u l t a t i o n between i t s e l f and the two major p a r t n e r s , i t appears l i k e l y that such c o n s i d e r a t i o n s were extant. Prime Minister Wilson's v i s i t s to Rome and Bonn i n January and February 1967 to d i s c u s s t e c h n o l o g i c a l c o - o p e r a t i o n between those c o u n t r i e s , and B r i t a i n ' s entry i n t o the EEC, c o i n c i d e d with the i n i t i a l expressions of i n t e r e s t i n the co-production of the new European combat a i r c r a f t . ^ European p o l i t i c a l manoeuvres were a major influence i n the establishment and continuation of co-operation between the three members of the Tornado organization. However, other p o l i t i c a l or page 52 economic concerns also existed, and these appear to have impacted on the programme to varying degrees. A member of the West German Parliamentary defense committee stated that I f we do not pay f o r research and development, we w i l l be bl a c k s m i t h s . The m a j o r i t y (of committee members) wants to keep the advanced par t of the ind u s t r y a l i v e , even i f i t c o s t s us a l o t more. Either the U.S. McDonnell Douglas F-4E International Phantom or a modified G2 version of the French Dassault Mirage Gl might have been cheaper, more immediately a v a i l a b l e , and more e x a c t l y d e s i g n e d to L u f t w a f f e s p e c i f i c a t i o n s . However, l i c e n s e d production of either system would not of f e r any opportunity for the German aerospace industry to obtain either systems-management or basic design experience, both e s s e n t i a l to the development of a more e f f i c i e n t and competetive i n d u s t r y . The West German government was therefore w i l l i n g to pay the extra costs of a co-p r o d u c t i o n programme i f t h i s might mean a c h i e v i n g t h e s e 2 1 domestic economic objectives. Although the example presented above deals with German government incentives, s i m i l a r concerns may be i d e n t i f i e d i n the remaining partner n a t i o n s , and these w i l l become clear i n Section 3 part i i ) . dealing with government d i r e c t i o n and lobby-group pressures in the MRCA programme. The b e l i e f that there existed the p o s s i b i l i t y of considerable c o s t - s a v i n g s through c o - p r o d u c t i o n does appear to have been prevalent i n government thinking during the early stages of the programme. In a House of Commons debate concerning the decision to pursue the MRCA p r o j e c t , B r i t i s h Defence M i n i s t e r Healey page 53 j u s t i f i e d the venture on the grounds of c o s t - and technology-benefits: By allowing a large section of the European aerospace industry to operate on a European r a t h e r than a n a t i o n a l s c a l e , or a s e r i e s of n a t i o n a l s c a l e s , Healey argued that i t would be p o s s i b l e to obtain savings through economies of scale. The Defence Minister a l s o expressed the hope that the i n c r e a s e d c o l l e c t i v e domestic market which co-production would create, and the previous e f f o r t s of the members, would a l l o w the consortium to export f u r t h e r numbers of the a i r c r a f t to t h i r d c o u n t r i e s "...even i n competition with anything the United States can produce." The p o t e n t i a l for an increased market and exports was valued by the I t a l i a n i n d u s t r y as w e l l as by the B r i t i s h government. U n t i l the l a t e 1960s, the I t a l i a n aerospace industry depended on government contracts for Air Force work for some 70 per cent, of i t s a i r c r a f t s a l e s . Only 10 per cent, went to the domestic c i v i l i a n a i r c r a f t market, and the remainder was exported. The MRCA programme was therefore seen as a means of breaking out of t h i s c y c l e of dependence and g i v i n g the i n d u s t r y the chance to obtain technological exertise and production c a p a b i l i t i e s which the f i n a n c i a l l y - s t r a p p e d and p o l i t i c a l l y unstable n a t i o n a l governments had so far been unable to provide. page 54 The three remaining members of the consortium co-producing the MRCA were a l l c o n c e r n e d w i t h p o l i t i c a l and economic objectives wider than the programme i t s e l f , but with which i t was clo s e l y connected. The B r i t i s h government was seeking entry into the EEC, while the West German and I t a l i a n governments were supporting her ap p l i c a t i o n despite French opposition. The MRCA programme offered each government an opportunity to display t h e i r commitment to co - o p e r a t i o n and s o l i d a r i t y through another channel. This p o l i t i c a l m o t i v a t i o n appears as the main common thread i n the continuing partnership of these nations even after the departure of Canada, Belgium and the Netherlands. Other p o s s i b l e i n c e n t i v e s did e x i s t : cost-savings/and i n d u s t r i a l development were d i s c u s s e d by both government and i n d u s t r y . However, where extra costs had to be paid i n order to secure the broader p o l i t i c a l or industrial/economic, a l l three governments appear to have been w i l l i n g to do so. Maximum c o s t - s a v i n g b e n e f i t s were not the primary purpose of the co-p r o d u c t i o n e f f o r t . National Bargaining i n the MRCA programme. Having examined the influences on the membership of the MRCA consortium as i t emerged i n la t e 1969, i t i s necessary to assess the r e l a t i v e influence of domestic pressures and the e f f e c t which t h e s e p r e s s u r e s had on the the p r o g r e s s and shape of the programme. The domestic p o l i t i c a l and economic goals of the page 55 n a t i o n a l governments, and how c o - p r o d u c t i o n f i t t e d t hese o b j e c t i v e s , w i l l be compared to the aims and prefe r e n c e s of i n d u s t r i a l and p o l i t i c a l lobby groups. This w i l l then provide the broader background a g a i n s t which may be cons i d e r e d the more detailed aspects of the MRCA work-sharing agreements (presented i n part i i i ) . below). A c r u c i a l problem which faced a l l B r i t i s h governments throughout the 1960s and 1970s i n e s t a b l i s h i n g t h e i r defence p r i o r i t i e s was the combination of r e l a t i v e s t a g n a t i o n of the economy, increasing demands from sectors of public expenditure other than the m i l i t a r y , and the rapidly r i s i n g cost of replacing obsolete weapon systems as technology continued to improve. It i s not only government decisions which set the l e v e l of r e s o u r c e s a v a i l a b l e ( f o r defence); i t i s the outcome of economic performance as a whole and the way i n which demands for shares of the national wealth are met as a r e s u l t of the balance... between s o c i a l and p o l i t i c a l f o r c e s . (Smith,1980, p.119). An a n a l y s i s of the B r i t i s h defence budget during the p e r i o d encompassed by the MRCA programme, and the decade p r i o r to the p r o j e c t , r e v e a l s how t h i s balance a l t e r e d and the impact which t h i s had on defence procurement p o l i c i e s . Table I) i n the S t a t i s t i c a l Appendix f o r the case study i l l u s t r a t e s the r e l a t i v e s t a b i l i t y of the defence budget over several years when measured i n constant terms. As a percentage of Gross Domestic Product (GDP) defence expenditure s t a b i l i z e d at around 5 per cent, a f t e r d e c l i n i n g from the a r t i f i c i a l l y page 56 higher l e v e l caused by the Korean War. This appears to indicate that the defence e f f o r t has remained stable. However, Table II) p l a c e s t h i s s t a b i l i t y i n t o a d i f f e r e n t p e r s p e c t i v e . As a percentage of t o t a l p u b l i c expenditure, the defence budget has d e c l i n e d c o n s i d e r a b l y , from about 19 per cent, to some 11 per cent., whilst s o c i a l welfare spending has increased i n a l l major areas such as s o c i a l s e c u r i t y b e n e f i t s , education, and h e a l t h s e r v i c e s . Defence no l o n g e r r e c e i v e d p r i o r i t y i n budget a l l o c a t i o n s . Secretary of State for Defence Roy Mason argued i n his 1974 Defence Budget that T h i s i s an age which p l a c e s a very hogh premium on economic w e l l - b e i n g , economic improvement, and the r e g u l a r r a i s i n g of standards i n education, h e a l t h , and s o c i a l s e c u r i t y . . . the b a l a n c e between ( s o c i a l w e l f a r e and defence) has had to be s t r u c k i n the main by p o l i t i c a l judgement. 5 In making i t s d e c i s i o n s on budget p r i o r i t i e s , the government c o n s i s t e n t l y f a v o u r e d the. demands of the v o t e r s over the requirements of the m i l i t a r y . Under such circumstances, s t a b i l i t y i n defence spending was perhaps the best which could be hoped for by m i l i t a r y planners. As Table I I I ) i n d i c a t e s , the s t r a i n placed on the defence budget i n c r e a s e d over time. Equipment c o s t s rose from 35 per cent, to 41 per cent, of t o t a l m i l i t a r y expenditure i n a f i v e year period. Research and development, and the production of new equipment, accounted f o r 74 per cent, of these r a p i d l y - r i s i n g costs. S t a b i l i t y i n the defence budget meant that while manpower page 57 spending a l s o d e c l i n e d from 47 per cent, to 42 per cent, of expenditure, s t r a i n s arose as manpower t o t a l s did not s i m i l a r l y decline. Under these circumstances, defence planners were faced with the urgent need to i d e n t i f y a cheaper a l t e r n a t i v e method of procuring new major equipment. Co-production offered i t s e l f as one of these a l t e r n a t i v e s . The Labour government's Defence Review of 1964 gave notice of future government policy on defence procurement. Along with the planned f i f t h P o l a r i s submarine and new attack c a r r i e r s for the Navy, three national aerospace projects suffered c a n c e l l a t i o n -the a l r e a d y advanced, 750 m i l l i o n pounds ( s t e r l i n g ) TSR-2; and two r e s e a r c h p r o j e c t s , the P-1154 and HS-681.^ In 1967, plans to p u r c h a s e the U.S. F - l l l k a i r c r a f t " o f f - t h e - s h e l f " were s i m i l a r l y scrapped. To r e p l a c e a l l of these p r o j e c t s , i t was intended to seek a j o i n t European p r o j e c t , i n i t i a l l y with the French, since "...the United Kingdom would not i n f u t u r e f e e l bound to compete comprehensively and independently at the h i g h e s t l e v e l s of arms technology or i n o p e r a t i n g some of the most c o m p l e x and c o s t l y weapons s y s t e m s . " (Greenwood,1977,p.200). Denis Healey's s t a t e m e n t here might be taken as a c l e a r recognition of the i n a b i l i t y of the B r i t i s h - or other European governments - to continue national development programmes. Given t h i s d e c i s i o n , the choice l a y between purchase of U.S. systems, licensed production, or some form of c o l l a b o r a t i o n . In addition to the possible desire for cost-saving benefits, page 58 another problem faced by government and industry o f f i c i a l s a l i k e was the excess production c a p a c i t y of the B r i t i s h aerospace i n d u s t r y . During the l a t e r 1960s, the government undertook a study of the aerospace i n d u s t r y to evaluate i t s needs. The p o t e n t i a l impact of t h i s concern upon the MRCA programme was recognised as early as 1969: Another factor that has emerged i n the engine c o m p e t i t i o n i s the queston of where the B r i t i s h industry sees i t s most urgent need for work. I f the assessment i n d i c a t e s that the airframe sector has more excess capacity than the engine i n d u s t r y , B r i t a i n could r e l a x i t s strong push f o r the R o l l s engine i n exchange fo r a l a r g e r share of the a i r f r a m e Q_r even a combination of airframe and avi o n i c s . At i t s peak, the Tornado programme was estimated to i n v o l v e a t o t a l of 36,000 jobs f o r the B r i t i s h aerospace i n d u s t r y . The continued strong support of the Rolls Royce engine may therefore i n d i c a t e that excess c a p a c i t y was seen to be most p r e s s i n g i n t h i s part of the industry. A notable s i g n of a p o l i c y aimed at m a i n t a i n i n g e x i s t i n g employment l e v e l s , even though those l e v e l s were a r t i f i c i a l l y high, i s the r e l a t i v e l y poor p r o d u c t i v i t y of the aerospace i n d u s t r y compared to the r e s t of Europe. Tables IV) and V) i n the case study Appendix g i v e an i n d i c a t i o n of a e r o s p a c e prod u c t i v i t y i n Europe by nation and by major company. B r i t a i n appears as the l e a s t p r o d u c t i v e of the l a r g e r i n d u s t r i a l i z e d n a t i o n s , w h i l e o n l y the A e r i t a l i a company shows a l o w e r p r o d u c t i v i t y than B r i t i s h Aerospace. R o l l s Royce i s one of the three or four l e a s t p r o d u c t i v e companies a f t e r these two. An page 59 assessment of the B r i t i s h aerospace engine company, nationalised i n 1971 f o l l o w i n g bankruptcy, was c r i t i c a l of t h i s aspect of government p o l i c y : As a nationalised compamy under tjie control of the government-owned N a t i o n a l E n t e r p r i s e Board, and with the strong union pressures common i n the United Kingdom, Rolls-Royce i s c l e a r l y a jobs-oriented rather than a p r o f i t -oriented company. With a r a t i o of employees to revenues higher than most major European a i r c r a f t engine manufacturers, the pressure to o b t a i n the MRCA powerplant c o n t r a c t f o r R o l l s Royce c l e a r l y r e f l e c t e d government concern with the problem of maintaining employment in an industry marked by surplus capacity. West German c o l l a b o r a t i o n i n the MRCA consortium held some s i m i l a r i t i e s and some s t r i k i n g d i f f e r e n c e s to the motives or goals of the B r i t i s h government. Pot e n t i a l cost-savings was one common concern, as the MRCA was favoured over the n a t i o n a l NKF project of EWR, "...mainly because an opportunity would exi s t to s p l i t develpment c o s t s , estimated at $250 m i l l i o n to $500 m i l l i o n for each a i r c r a f t . " Whether or not such savings existed i n r e a l i t y was less important than the b e l i e f that they could be obtained. The Brandt government i n West Germany (1969-74) viewed the aerospace i n d u s t r y as a growth leader i n the economy and as a p o t e n t i a l source of v a l u a b l e t e c h n o l o g i c a l i n n o v a t i o n . Dr. Schomerus of the Economics M i n i s t r y e x p l a i n e d the wider implications of t h i s view: "The general f e e l i n g i s that aerospace i s part page 60 of the i n f r a s t r u c t u r e of any i n d u s t r i a l r e g i o n . Europe should be i n a p o s i t i o n to produce th i s i n f r a s t r u c t u r e i t s e l f . " Hence\the government was w i l l i n g to accept the costs of the MRCA programme on the basis of the idea that co-production would help to improve technology in a general sense. The s e l e c t i o n of the R o l l s Royce RB.199 engine over i t s U.S. competitors s t i l l offered the German engine-manufacturing combine of Motoren und T u r b i n e n Union (MTU) the o p p o r t u n i t y of considerable expansion. Possessing an i n i t i a l capacity for only 15 per cent, of the engine work i n 1969, MTU obtained from Rolls 31 Royce an o f f e r of 52 per cent. As a r e s u l t , investment i n new tooling was required by MAN Turbo and Daimler-Benz, j o i n t owners of MTU. A selected l i s t of German component and equipment companies i n v o l v e d i n the MRCA co- p r o d u c t i o n work appears as Table VI) i n the Appendix. An analysis of the West German aerospace industry i n 1980 came to the c o n c l u s i o n that the t r i n a t i o n a l Panavia Tornado programme "...contributed s i g n i f i c a n t l y to West Germany's components and equipment industry..." and that With about 40% of the equipment of the Tornado manufactured in Germany... the demands of the t r i n a t i o n a l program led to a major infusion of h i g h t e c JIJI o l o g y i n the German a e r o s p a c e industry. Along with the Franco-German Alpha J e t , the MRCA programme was expected to provide 40 per cent, of West German arospace industry work by the la t e 1970s. The West German government sought to expand i t s aerospace industry capacity in order to become a valuable partner i n future page 61 c o l l a b o r a t i v e ventures. In the sense that the MRCA was viewed as an important part of t h i s policy of i n d u s t r i a l development, the German government was pursuing goals s i m i l a r though not i d e n t i c a l to t h o s e of B r i t a i n . However, i n a n o t h e r sense the two governments' p o l i c i e s d i f f e r e d considerably. The German economy at t h i s time was undergoing c o n s i s t e n t growth, and overly rapid expansion i n any i n d u s t r i a l sector was a c t i v l y discouraged by the government i n order to guard against the p o s s i b i l i t y of labour or employment problems i n a f u t u r e recession. In d i r e c t contrast to the s i t u a t i o n i n B r i t a i n , There has never been a push f o r make-work i n the (German) aerospace sector. U n t i l recently, employment was l e s s than 1% and, i n a German economy that was by f a r the s t r o n g e s t i n Europe, the aerospace i n d u s t r y was a minor influence. Despite t h i s c a u t i o u s l y r e s t r i c t i v e p o l i c y , employment i n aerospace-related i n d u s t r i e s rose from 16,000 i n 1960 to a peak of almost 50,000 by 1970, although the r e q u i r e d t o t a l f o r the l a t e 1970s was estimated to be 40,000. The MRCA programme was seen both as a means of a s s i s s t i n g i n the planned growth of the aerospace sector, and as a means of assuring future work l e v e l s . T h i s p o l i c y was q u i t e d i f f e r e n t to t h a t of the B r i t i s h government, but both bodies nevertheless saw co-production of the MRCA as the means to achieve th e i r objectives. A f i n a l economic i n c e n t i v e and problem f o r the West German government was of a p a r t i a l l y d o m e s t i c and p a r t i a l l y i n t e r n a t i o n a l character. West Germany was seeking some means of page 62 disentangling i t s domestic industry from the r e s t r i c t i o n s imposed through o f f s e t o b l i g a t i o n s with her a l l i e s f o r the l a t t e r ' s s t a t i o n i n g of troops i n that country s i n c e 1945. In February 1967, C h a n c e l l o r K i e s i n g e r agreed to the purchase of B r i t i s h defense equipment consisting of 22 Westland SH-3 helicopters as a means of meeting s i m i l a r o f f s e t o b l i g a t i o n s to that n a t i o n . A f t e r 1968, however, these payments were to be s e t t l e d through the MRCA programme, as the s e l e c t i o n of the RB.199 engine was p r e d i c t e d to "...solve Germany's o f f s e t o b l i g a t i o n s to Great B r i t a i n for the next ten years."^^ Although th i s s t i l l l e f t open the question of s e t t l i n g o f f s e t s with the U.S., the new Anglo-German agreement o f f e r e d the l a t t e r n a t i o n a means of opening up i n d u s t r i a l l i n k s within Europe and gaining a greater degree of freedom from r e l i a n c e on U.S. sources of supply f o r important defence equipment or materials. The t h i r d n a t i o n i n the t r i n a t i o n a l Panavia consortium heading the MRCA programme was a smaller i n d u s t r i a l or aerospace power than the two main p a r t n e r s . Since the postwar p e r i o d , growth of the aerospace i n d u s t r y i n I t a l y had been slow due i n l a r g e part to unstable governmants and a la c k of government policy to foster growth in that sector. The workforce engaged i n a e r o s p a c e - r e 1 a t e d employment was the s m a l l e s t of any i n d u s t r i a l i s e d n a t i o n i n r e l a t i o n to the t o t a l n a t i o n a l population - 18 to 20,000 f u l l t i m e workers i n a population of 55 m i l l i o n , with only 7 per cent, of that f i g u r e working i n R&D compared to the norm elsewhere of 15 to 20 per cent. Using page 63 such a s m a l l development s e c t o r , and with l i t t l e management experience i n advanced systems, the i n d u s t r y had undergone few advances and very l i t t l e growth u n t i l the 1960s. The d e c i s i o n taken by the I t a l i a n government i n 1969 to create A e r i t a l i a , an amalgamation of the Fi a t airframe d i v i s i o n and the aerospace sector of Finmeccanica (a group of state-owned companies), was the f i r s t attempt by the government to provide more s t a b l e p o l i t i c a l and f i n a n c i a l support to the aerospace i n d u s t r y . Government i n t e r e s t s were p r o t e c t e d , and d i r e c t i o n e x e r c i s e d , by the g o v e r n m e n t - s p o n s o r e d I n s t i t u t o per l a R i c o s t r u z i o n e I n d u s t r i a l e (IRI), a body s i m i l a r to the B r i t i s h NEB established i n the early 1970s. Under the IRI, A e r i t a l i a was to be c l o s e l y "...tied to (the government's) p o l i c y of s h i f t i n g i n d u s t r y to under-developed regions i n the southern part of the country. Faced with severe domestic economic d i f f i c u l t i e s and high umemployment r a t e s , expansion of the aerospace i n d u s t r y under government guidence was hoped to be a means of p r o v i d i n g more jobs i n the most depressed areas and of c r e a t i n g an impetus to economic development. The s i m i l a r i t y of these 'make-work' p o l i c i e s to those being pursued i n . B r i t a i n with R o l l s Royce and BAC i s further highlighted by comparing the figures for productivity in the two nations' aerospace sectors. As Tables IV) and V) indicate (see Appendix), only A e r i t a l i a with n e a r l y 30 per cent, of the I t a l i a n aerospace workforce, has productivity l e v e l s lower than the two n a t i o n a l i s e d B r i t i s h companies. Comparison of the page 64 f i g u r e s f o r A e r i t a l i a with those of the privately-owned Agusta company s i m i l a r l y indicate that the government was more concerned with employment than with productivity and profit-making, as the l a t t e r company obtained twice the output in sales per worker than did A e r i t a l i a . The I t a l i a n A i r Force i n i t i a l l y entered the MRCA programme with some reluctance due to fears over the cost of the scheme and the apparently c a v a l i e r attitude of her partners towards I t a l i a n requirements. By 1971, however, i t was reported that Now the s i t u a t i o n has changed, since the MRCA i s l o o k e d on f i r s t as a means to d e v e l o p aerospace technology, and second as a piece of m i l i t a r y hardware. The primary concern with n o n - m i l i t a r y b e n e f i t s from the MRCA programme was a l s o recognised by l e a d i n g I t a l i a n p o l i t i c i a n s . The s m a l l s i z e of the aerospace i n d u s t r y i n that country meant that every major I t a l i a n aerospace-producing company was involved in the co-production work. Table VI) also gives a selected l i s t of the main I t a l i a n companies involved in the MRCA project. The MRCA scheme therefore provided new jobs for the I t a l i a n industry, and helped to assure continued steady work l e v e l s f o r numerous i n d i v i d u a l companies. I t a l i a n i n d u s t r i a l p a r t i c i p a t i o n i n the co-production programme can also be seen to have served the further purpose of providing the industry with a r e l a t i v e l y easy means of obtaining valuable technological and management experience. Although the nation's share of MRCA development and production work was page 65 l i m i t e d to 15 per cent of the t o t a l programme work, i t s t i l l had access to a l l economic and technological aspects and a f u l l share i n p r o j e c t management. The a e r o s p a c e i n d u s t r y was thus "...getting a maximum of know-how at a minimum c o s t . " ^ Up to t h i s point i n the examination of the MRCA programme, emphasis has been placed upon the problems, incentives and goals of the national governments. However, i t i s important to assess the impact of other, non-governmental influences on the decision to undertake a c o l l a b o r a t i v e development e f f o r t , and on the eventual shape taken by the MRCA programme. The atti t u d e of the aerospace i n d u s t r i e s i n each n a t i o n towards c o l l a b o r a t i o n g e n e r a l l y and co-p r o d u c t i o n of the MRCA i n p a r t i c u l a r , and the p o s s i b l e i n f l u e n c e of other pressures such as p a r t y - p o l i t i c a l d i s p u t e s , are a l l aspects of the n a t i o n a l defense a q u i s i t i o n s process which must be evaluated before the case study can be completed. Despite the reluctant recognition by the Society of B r i t i s h Aerospace Companies (SBAC) that B r i t a i n "...was being driven more and more into c o l l a b o r a t i o n , whether we l i k e i t or not..." as the development c o s t s of advanced a i r c r a f t i n c r e a s e d "...beyond the f i n a n c i a l c a p a b i l i t i e s of any one country4*"*, there s t i l l remained throughout the B r i t i s h i n d u s t r y i n the 1960s and e a r l y 1970s a strong opposition to the concept of j o i n t European col l a b o r a t i o n . Such opposition may have been p a r t i a l l y a r e f l e c t i o n of national i n d u s t r i a l egotism and a b e l i e f that B r i t a i n should continue to page 66 'go i t alone' in a i r c r a f t development, but i t was also the re s u l t of other more relevent concerns. The SBAC Report of 1972 expressed c r i t i c i s m s of the MRCA. agreements arranged by the three n a t i o n a l governments. The Society viewed with concern In the same year, the B r i t i s h E l e c t r o n i c s Engineering Association voiced c r i t i c i s m s openly d i r e c t e d at the MRCA programme, deploring the . . . g o v e r n m e n t - i n s p i r e d t r e n d i n t h e programme, i n which the B r i t i s h have come into l i n e with German and I t a l i a n government policy to b u i l d up an e l e c t r o n i c s i n d u s t r y that one day w i 11 be a c o m m e r c i a l and t e c h n i c a l The B r i t i s h i n d u s t r y saw i t s e l f as l o s i n g ground to p o t e n t i a l f u t u r e c o m p e t i t o r s , and the f a c t that design l e a d e r s h i p of the MRCA programme was ceded to the less experienced German industry appeared to be another sign of t h i s l o s s . The major B r i t i s h aerospace i n d u s t r y l e a d e r s and groups appear to have been i n i t i a l l y e i t h e r s k e p t i c a l of, or h o s t i l e towards, the idea of co l l a b o r a t i v e development programmes. The MRCA project p a r t i c u l a r l y received a generally c r i t i c a l response, as f o r e i g n i n d u s t r i e s were viewed to be making advances at the expense of the B r i t i s h . Those who opposed involvement in the co-production scheme nevertheless seem to have been unable to cause any change i n government p o l i c i e s . The importance of government ...the present c o l l a b o r a t i v e arrangements set up by the government and then presented to i n d u s t r i a l f i r m s on what they c o n s i d e r non-commercial terms... force. page 67 defence contracts to the industry l e f t them with l i t t l e choice; It has worked out to getting 2% of something or 100% of nothing, and we have gone f o r the 2% because we have no other choice i f we are to stay i n the (MRCA) game. 3 Although t h i s may have been the case, i t i s a l s o true that the government i n turn was at least p a r t i a l l y responding to the need for continued employment i n the aerospace sector. Research has f a i l e d to indicate any di r e c t pressure exerted by s p e c i f i c groups ( f o r i n s t a n c e labour or union bodies) f o r 'make-work' e f f o r t s , but the government cannot be s a i d to have been a c t i n g without some c o n s t r a i n t s or pressures. Economic d i f f i c u l t i e s and high unemployment r a t e s e x e r c i s e d a c o n s i d e r a b l e i n f l u e n c e on government choices of the detailed agreements, i f not the general p o l i c y c h o i c e s , i n d e c i d i n g the nature of defence a q u i s i t i o n programmes such as the MRCA. A second major issue i n the B r i t i s h aerospace industry during t h i s period serves to further reveal the a b i l i t y or otherwise of the aerospace leaders to influence government p o l i c i e s with which they disagreed. This issue was the proposed n a t i o n a l i s a t i o n of the main aerospace companies i n the early 1970s. Industry S e c r e t a r y Anthony Benn argued that the d i f f i c u l t y for i n d i v i d u a l companies to fund long-term development projects -the RB.211 had d r i v e n R o l l s Royce to bankruptcy - was such that p u b l i c ownership was e s s e n t i a l to guarantee f i r m e r f i n a n c i a l support and to ensure that jobs were not put at r i s k . ^ The idea of government ownership was not received with broad approval: a leading aerospace journal expressed i t s concern that page 68 In c o n t r a s t ( t o F r a n c e ) , t h e B r i t i s h government has l o s t i t s nerve at almost every c r u c i a l milestone of advanced technology and not only squandered i t s r e s e a r c h investment but f o r e c l o s e d i t s f u t u r e f o r another market cy c l e . I t was b e l i e v e d , c o r r e c t l y , that government ownership meant an emphasis on jobs r a t h e r than competetiveness and p r o f i t s . As with the choice to turn towards co l l a b o r a t i o n , however, there was l i t t l e was achieved i n the attempt to oppose government p o l i c i e s . Where industry's views clashed with those of the government, the former gave way.^^ A c l e a r c o n t r a s t e x i s t e d between B r i t i s h and West German aerospace industry leaders' attitudes towards c o l l a b o r a t i o n and co-production. R e b u i l d i n g a f t e r the Second World War, the new German aerospace sector was faced with r a p i d l y - e s c a l a t i n g costs of R&D and p r o d u c t i o n f o r advanced combat a i r c r a f t . The e f f e c t on industry attitudes was c l e a r ; ...from i t s postwar beginning the German i n d u s t r y o r g a n i s e d as a p a r t i c i p a n t i n i n t e r n a t i o n a l programs f i r s t with the United States, l a r g e l y as a r e s u l t of o f f s e t payment problems, and second within European b i l a t e r a l and multi-national programs. The s i t u a t i o n was s i m i l a r i n I t a l y , where the r e l a t i v e l y new, and s m a l l , aerospace i n d u s t r y did not possess the c a p a c i t y to undertake independent n a t i o n a l development of an advanced-technology combat a i r c r a f t . A u s e f u l study of West German government and i n d u s t r y a t t i t u d e s towards co- p r o d u c t i o n of the MRCA i s presented by A l f r e d Mechtescheimer.^ The author argues that industry leaders page 69 sought to co-operate c l o s e l y with the government i n col l a b o r a t i v e p r o j e c t s , as s t r i c t export r e s t r i c t i o n s on the i n d u s t r y l e f t i t heavily dependent on government contracts and state-sponsored R&D work. Aerospace l e a d e r s wanted c o n t r a c t s to be planned and c a r e f u l l y spread out to ensure a steady workload and to avoid A Q heavy redundency payments to workers. The fragmented German aerospace companies had acceded r e a d i l y i n t h e 1960s to government pressures f o r mergers i n order to cr e a t e a more competetive i n d u s t r y . When Messerschmidt and Boelkow merged i n November 1968, i t was done i n a n t i c i p a t i o n that "...this company, with 12,300 employees as the l a r g e s t i n the country, would be awarded the prime advanced f i g h t e r c o n t r a c t . " ^ This b e l i e f was not to be disappointed; following the ad d i t i o n a l merger with Hamburger Flugzeugbau, owned by the Blohm group, the new MBB combine became the prime German contractor for the MRCA programme. MBB remained the l a r g e s t West German aerospace i n d u s t r y company involved i n the MRCA programme, but i t was not the only major company i n v o l v e d i n the work. Out of the ten l a r g e s t aerospace c o n t r a c t o r s i n the Fe d e r a l Republic, Mechtescheimer l i s t s s i x as tak i n g part i n the co-production e f f o r t : MBB, Siemens, VFW-Fokker, AEG-Telefunken, MTU, and In d u s t r i e w e r k e -Karlsruhe. Together these six accounted for some 60-65 per cent, of a l l domestic aerospace production (Mechtescheimer,1977, p.166). W h i l s t the domination of the aerospace s e c t o r could have given these companies considerable influence i n determining page 70 f u t u r e p o l i c i e s , t h i s i s d i f f i c u l t to estimate s i n c e i n d u s t r y and government p o l i c y p r e f e r e n c e s were s i m i l a r i n supporting i n t e r n a t i o n a l c o n s o r t i a for the production of a i r c r a f t . The a b i l i t y of the aerospace i n d u s t r y e f f e c t i v e l y to lobby the German government was also weakened by sharp d i v i s i o n s within the Bundesverband der Deutschen L u f t - und R a u m f a h r t i n d u s t r i e (BDLI), the l a r g e s t aerospace lobby group c o n s i s t i n g of some 80 companies. Disagreements arose between the larger e l e c t r o n i c s and micro-chip companies and smaller high-technology producers, e s p e c i a l l y over the allotment of supply contracts for MRCA work by the MBB combine. Under these circumstances the BDLI could not claim to be representing the general i n t e r e s t s of i t s members. Defence Minister Schmidt expressed his governments' a t t i t u d e towards i n d u s t r i a l l o b b y i s t s , s t a t i n g in 1970 that The defence m i n i s t e r w i l l not premit being pressured by any i n d u s t r i a l i s t . I t i s not the function of the Bundeswehr to nourish c e r t a i n i n d u s t r i e s i n Germany. (Mechtescheimer,p.163). This should not be taken simply HP face value,but as a statement of o f f i c i a l government p o l i c y i t i s a f u r t h e r i n d i c a t i o n that i n d u s t r i a l lobbying appears not to have been of great influence in deciding the type of defence a q u i s i t i o n programmes undertaken by the government. A l i s t of aerospace industry i n t e r e s t s which were ignored by the government i n c l u d e s c a n c e l l a t i o n of the independent research work on STOL a i r c r a f t ; purchasing U.S. F-4s as i n t e r i m a i r c r a f t f o r the 1970s, thus reducing the amount of money a v a i l a b l e to i n d u s t r y i n the MRCA p r o j e c t ; and the page 71 c o n t i n u e d e n f o r c e m e n t of the t i g h t e s t m i l i t a r y e x p o r t r e s t r i c t i o n s amongst Western European NATO n a t i o n s . Mechtescheiraer concludes that West German i n d u s t r i a l i n t e r e s t s were i n f a c t b e t t e r represented i n the MRCA programme by the w i l l i n g n e s s of the B r i t i s h government, the RAF, and B r i t i s h Aerospace to make concessions i n work-sharing agreements than by the domestic i n d u s t r y i t s e l f . In most cases, i n d u s t r y and government i n t e r e s t s coincided c l o s e l y enough to minimise areas of disagreement; otherwise, i n d u s t r y does not appear to have d i r e c t l y affected national procurement p o l i c i e s where i t d i f f e r e d from government preferences.^^ The I t a l i a n aerospace i n d u s t r y possessed l i t t l e i n f l u e n c e over the government i n that nation; approximately 70 per cent. of aerospace contracts came from the government. Its main c l i e n t was the I t a l i a n A i r F o r c e , which was i t s e l f p o l i t i c a l l y u n i n f l u e n t i a l . However, as was the s i t u a t i o n i n Germany, i n d u s t r y and government views on defence p r o d u c t i o n p o l i c i e s generally converged; Close a i r support i s the only area i n which we can c o n s i d e r a n a t i o n a l programme. In other areas, such as a i r s u p e r i o r i t y and interceptor a i r c r a f t , the problems are such that we have to look toward i n t e r n a t i o n a l c o l l a b o r a t i o n to meet our requirements. A e r i t a l i a , d i r e c t l y c o n t r o l l e d by the government, was both the largest aerospace employer in the nation and the prime contractor for I t a l i a n MRCA work; f r i c t i o n between government and industry was thus minimised. Whereas government-industry r e l a t i o n s i n B r i t a i n were often page 72 marked by dispute over the necessity and value of coll a b o r a t i o n as a means of a i r c r a f t development, Germany and I t a l y displayed much gr e a t e r c o - o p e r a t i o n between these two bodies. The main B r i t i s h p a r t i c i p a n t s i n the MRCA programme were the nationalised companies of R o l l s Royce and BAC; and although the MBB and A e r i t a l i a combines were not nationalised i n thi s sense, they were both s u b j e c t to government c o n t r o l , e s p e c i a l l y A e r i t a l i a . Despite the d i f f e r e n c e s i n d i c a t e d above, the l a r g e s t aerospace companies i n each nation were subject to government d i r e c t i o n and were channelled towards co-production. A second pote n t i a l domestic influence on the MRCA programme and on procurement decisions generally was the pressure exerted by p o l i t i c a l opposition groups. In B r i t a i n since the 1960s, both main p o l i t i c a l p a r t i e s were o b l i g e d by f i n a n c i a l r e s t r a i n t s to pursue s i m i l a r p o l i c i e s of reducing defence commitments and seeking cheaper a l t e r n a t i v e s to national development programmes f o r h i g h - c o s t weapon s y s t e m s . P o l i t i c a l o p p o s i t i o n to c o l l a b o r a t i o n came mainly from the Labour l e f t - w i n g groups represented i n the l i t e r a t u r e by Mary Kaldor, Dan Smith, and the Labour Party Defence Study Group. It i s d i f f i c u l t to assess the impact of t h i s group upon the Labour Party but given the continued p a r a l l e l s between Labour and Conservative Party policy choices, i t appears to have had l i t t l e recognisable e f f e c t . In West Germany, defence policy was t r a d i t i o n a l l y bipartisan, and the decision to undertake co-production of the MRCA was made " d u r i n g the p e r i o d of the 'Great C o a l i t i o n ' or a l l - p a r t y page 73 government. An outcry by the l e f t wing of the SPD - c o n s i s t i n g of 7 MPs - in February 1973 was concerned s p e c i f i c a l l y with the f a i l u r e of the government to r e l e a s e c o s t d e t a i l s of the programme as i t had promised to do i n 1970. A s e c r e t party b a l l o t i n October 1974 resulted in 86 per cent, of SPD MPs voting i n favour of continuing German p a r t i c i p a t i o n i n the consortium. C r i t i c i s m from t h i s party l a r g e l y ceased a f t e r t h i s date. The a n t i - n u c l e a r stance of the FDP i n Germany l e d to i t s c r i t i c i s m of the long-range bombing c a p a b i l i t y of the Tornado. The fact that the party had been a member of the Great C o a l i t i o n i n 1967 and had a s s i s t e d i n e s t a b l i s h i n g the p r o j e c t , coupled with i t s t r a d i t i o n a l l y p r o - i n d u s t r y l e a n i n g s , again served to s t i f l e any e f f e c t i v e opposition. C r i t i c s m from the CDU/CSU was also minimal for s i m i l a r reasons. J The Parliamentary c r i t i q u e of the MRCA programme ...was o v e r a l l a l l i r r e l e v e n t and served mainly the p a r t i e s ' m i l i t a r y experts' P.R. opportunity. (Mechterscheimer, p.183). The d e c i s i o n of the I t a l i a n government to support the development of the aerospace industry, e s p e c i a l l y i n the poorer southern r e g i o n s , was accepted by most elements of the party p o l i t i c a l groupings. General governmental i n s t a b i l i t y r a t h e r than s p e c i f i c opposition to co l l a b o r a t i o n was the main obstacle to a consistent approach to defence p o l i c y ; . . . s o c i a l unrest f o r c e s the government to d i r e c t t e c h n o l o g i c a l funds to p o l i t i c a l l y a c c e p table but short-term w e l f a r e programs. These f a c t o r s d i l u t e both the impetus and prestige of the aerospace industry. page 74 Premier Aldo Moro, head of the C h r i s t i a n Democrat/Republican Party government i n 1974 argued that I t a l i a n economic recovery and i n d u s t r i a l expansion could only occur i n the context of i n t e r n a t i o n a l c o l l a b o r a t i o n , but that other nations would only accept I t a l i a n p a r t n e r s h i p i f that country "...showed i t s e l f capable of reducing i t s own bureaucratic p a r a l y s i s . " ^ ^ Where debate over the MRCA programme did occur i n the three partner nations, i t usually came as the r e s u l t of cost escalation p r o b l e m s , or what were argued to be such p r o b l e m s by i t s opponents. C r i t i c i s m i n the U.K. developed from the Labour group mentioned e a r l i e r and others who b e l i e v e d that s o c i a l w e l f a r e needs were s t i l l being neglected; If we made the great s o - c a l l e d s a c r i f i c e of fo r e g o i n g a l l of (the MRCAs), most of our h o u s i n g , p e n s i o n s , e d u c a t i o n and h e a l t h s e r v i c e d i f f i c u l t i e s would be g r e a t l y eased... In West Germany, Defence M i n i s t e r Leber was f o r c e d i n February 1973 to defend h i s governments' expenditure f o r the MRCA on n a t i o n a l t e l e v i s i o n . The debate did not, however, a r i s e from party d i v i s i o n s . Instead, i t arose due to acrimony between the defence and budget m i n i s t r i e s over further, long-term f i n a n c i a l commitments to the development phase of the programme. The MRCA u n i t p r i c e had doubled from $3.0 to $6.5 m i l l i o n s i n c e 1969, and together with the other main co-production programme - the Alpha J e t - i t was estimated that some 40 per cent of the nat i o n s ' t o t a l defence budget would be consumed by development and prod u c t i o n of these a i r c r a f t f o r an extended page 75 period of time. Leber defended the programme with the argument that theTornado would be no more expensive to Germany than the purchase of a comparable U.S. a i r c r a f t , whilst i t also provided a unique opportunity to upgrade the domestic airframe and avionics industry and lessened dependence on outside sources of supply for defence equipment.^ Debate over funding i n I t a l y was lessened by the f a c t that the government did not have to make expenditure commitments early i n the programme, and i t s share of t o t a l development c o s t s was r e l a t i v e l y small - approximately $140 m i l l i o n . Nevertheless, as mentioned e a r l i e r , public pressures for increased s o c i a l welfare spending meant that the government was cautious not to p u b l i c l y discuss i t s p a r t i c i p a t i o n i n the programme. Relations between government and industry i n B r i t a i n over the idea of European c o l l a b o r a t i o n tended to be more c o n f l i c t u a l than was the case i n e i t h e r I t a l y or West Germany, where the newer aerospace i n d u s t r i e s were organised from the postwar p e r i o d to become involved i n such c o l l a b o r a t i v e ventures. Where views and i n t e r e s t s c l a s h e d i n B r i t a i n , the government appears to have prevailed. The heavy dependence of the industry upon government c o n t r a c t s , and n a t i o n a l i s a t i o n of the two main a i r f r a m e and engine companies, f u r t h e r reduced t h i s p o s s i b l e source of o p p o s i t i o n which tended to be v o c a l r a t h e r than e f f e c t i v e . The g e n e r a l congruence of views between the governments and i n d u s t r i e s i n the other two nations makes a n a l y s i s of p o s s i b l e page 76 i n d u s t r i a l influence d i f f i c u l t , but at least i n West Germany the government appears to have exercised the dominant influence. When debate occurred over either the wisdom of c o l l a b o r a t i v e p o l i c i e s or the question of c o s t - e s c a l a t i o n , i t tended to be i n e f f e c t i v e i n causing any changes i n p o l i c y with which the government did not agree. The d e s i r e to maintain or to expand i n d u s t r i a l c a p a c i t y and to preserve e x i s t i n g , or c r e a t e higher, l e v e l s of employment c e r t a i n l y acted as strong influences on the shape and d e t a i l e d nature of the MRCA programme i n i t s work-sharing agreements. Without government acceptance, however, i n d u s t r y appears to have had r e l a t i v e l y l i t t l e d i r e c t influence upon the co-production programme. i i i ) . The MRCA-Tornado work-sharing agreements. Two themes u n d e r l i e the examination of the work-sharing agreements r e a c h e d by the t h r e e members of the P a n a v i a consortium. F i r s t l y , to what extent were c o n t r a c t s awarded on the grounds e i t h e r of e q u i t y or e f f i c i e n c y ? In other words, what was the r e a l i m p o r t a n c e of c o s t - s a v i n g c r i t e r i a i n comparison with p o l i t i c a l c o n s i d e r a t i o n s ? Secondly, to what extent was the programme an example of European development ? A s t a t e d goal of the B r i t i s h government was the e x c l u s i o n of U.S. companies and equipment from the programme. The answers to both of these questions can then be evaluated i n the f i n a l section of the case study, which assesses the programmes' achievements and page 77 then attempts to r e l a t e the case study i t s e l f to the questions and problems l e f t unanswered i n the l i t e r a t u r e review. The i n i t i a l dispute between B r i t a i n and Germany over project l e a d e r s h i p i n the MRCA programme was never f u l l y r e s o l v e d i n favour of either nation. Instead, the Panavia organisation was created with each nation awarded voting r i g h t s . In arguing t h e i r case, the German government pointed out that i t s expected order was the l a r g e s t of the three at some 600 a i r c r a f t (subsequently reduced to 300) and that by taking delivery ofthe a i r c r a f t f i r s t CO i t was a l s o t a k i n g the l a r g e s t r i s k . In i t s f i n a l form, the voting arrangements l e f t Germany with 50%, B r i t a i n with 30%, and It a l y with 20%. The B r i t i s h argument had been that while the German industry had no p r i o r managemant experience i n such p r o j e c t s , B r i t i s h aerospace had been working on the TSR-2, Anglo-French V a r i a b l e Geometry and U.K.V.G. programmes which had d i r e c t l y preceded the MRCA. However, one of the tac i t l y - r e c o g n i s e d goals of the MRCA programme was to provide the German industry with precisely t h i s experience. The f i n a l agreement, i n favour of the German aims though not completely so, was based at l e a s t i n part upon the d e s i r e of the B r i t i s h government to ob t a i n good r e l a t i o n s with Germany for European p o l i t i c a l reasons - the ap p l i c a t i o n to the EEC. The three main areas of work-sharing r e q u i r i n g agreements betwen the partner nations were the engine, a i r f r a m e , and page 78 avionics. Based upon the f i n a n c i a l burden born by each nation, a g e n e r a l r a t i o of 42.5/42.5/15 per c e n t , of t o t a l work was accepted by Germany, B r i t a i n and I t a l y r e s p e c t i v e l y . However, t h i s did not s e t t l e the d e t a i l s of the main c o n t r a c t s and sub-contracts, and considerable 'horse-trading' occurred between each nation. The i n i t i a l competitors for the MRCA main powerplant were the U.S.-designed General E l e c t r i c GE-1 and P r a t t & Whitney JTF16 engines, and the B r i t i s h R o l l s Royce RB.199. The GE-1 was withdrawn from the competition i n early 1969, ostensibly due to the short time-span given f o r submission of d e t a i l e d bids (60 days) and a f e a r that p r o p r i e t a r y data could be l o s t i f R o l l s 5 9 Royce obtained the engine d e t a i s . However, there may have been another reason for the decision. The second major aerospace engine c o n t r a c t under tender at t h i s time was that f o r the proposed A-300B A i r b u s ; p r i o r to s e l e c t i o n of e i t h e r engine industry commentators speculated on a possible compromise between the U.S. and B r i t a i n . There i s widespread b e l i e f that a gentleman's agreement has been reached that one a i r c r a f t w i l l have a B r i t i s h engine and the other an American powerplant. At the time, the General E l e c t r i c CF-6 was the favoured entry in the A-300B b i d d i n g , and the RB.199 i n the c o m p e t i t i o n f o r the MRCA c o n t r a c t . No c l e a r evidence of such a compromise has been l o c a t e d , but t h i s does not render such a t r a d e - o f f i m p l a u s i b l e . More detailed research into i n d u s t r i a l sources would be required page 79 to provide a d e f i n i t e answer to thi s question. While the U.S. government declined to press the case for the JTF16 engine due to B r i t i s h d e t e r m i n a t i o n to keep the MRCA a European venture, the l a t t e r government continued to support the R o l l s Royce contender. On t h i s o c c a s i o n , the RB.199 became the fo c a l point of wider p o l i t i c a l manoeuvring, as was indicated by one West German government o f f i c i a l involved i n defence p o l i c y ; Our concern f o r the R o l l s Royce engine... i s purely p o l i t i c a l . The Common Market w i l l dry out unl e s s the B r i t i s h come i n . We are now forced to work with the B r i t i s h i n f i e l d s not covered by the Common Market, and advanced technology i s one of them. Combined with c o n s i d e r a t i o n s of Anglo-German o f f s e t payment advantages, t h i s proved s u f f i c i e n t f or the German government to add i t s weight to the Rolls Royce bid. In c o n t r a s t to the concerns of the governments, the German MBB combine f a v o u r e d the remainng U.S. a l t e r n a t i v e . The estimated p r i c e of the RB.199 engine i n 1969 was $450,000 compared to the more costly JTF16 at $750,000 per unit. However, develoment time for the Pratt & Whitney engine was estimated to be at l e a s t one year l e s s than the B r i t i s h contender, and i n c o n t r a s t to the experi m e n t a l nature of the RB.199 the U.S. a i r force could c e r t i f y the technological c a p a b i l i t y of P&W to design 6 2 and produce an engine matched to MRCA s p e c i f i c a t i o n s . Despite these advantages, the JTF16 was set a s i d e and i n September 1969 the engine contract went to Rolls Royce. S e l e c t i o n of the RB.199 d i d o f f e r Germany's MTU e x c e l l e n t work-sharing proposals: 52% for MTU compared with 32% for Rolls page 80 Royce and 16% f o r F i a t . Despite t h i s , i t i s evident that the se l e c t i o n process was determined by the desires of the national governments based on p o l i t i c a l goals or domestic economic concerns, r a t h e r than by c r i t e r i a of e f f i c i e n c y or p o t e n t i a l development c o s t s . The RB.199 was a European engine, but i t was also marked by technological uncertainties and the pot e n t i a l for cos t l y delays i n development time. The d i v i s i o n of r e s p o n s i b i l i t y for development and production of the a i r f r a m e f o r the MRCA was co m p a r a t i v e l y f r e e from c o n t r o v e r s y of t h i s nature. Only one development c o n t r a c t c r e a t e d r e a l debate, but i t i s of importance i n answering the question of motivations behind work-sharing agreements. When t h e West German i n d u s t r y was a l l o c a t e d t h e r e s p o n s i b i l i t y f o r developing the wing p i v o t f o r the v a r i a b l e -geometry MRCA, previous B r i t i s h research experience on two such variable-geometry a i r c r a f t (AFVG and UKVG) and actual design work on the TSR-2 was ignored i n favour of providing German industry with the chance to o b t a i n new R&D c a p a b i l i t i e s . In the event, MBB turned to the U.S. which had faced i t s own problems i n developing the F - l l l and F-14 a i r c r a f t . E x p e r t i s e i n complex ft "\ electron beam-weldirig was purchased from the Grumman company. One of the most complex airframe design problems was thus solved not i n Europe, but through importing U.S. patented technology. The t h i r d main area of work-sharing agreements concernedthe complex avionics systems required to meet the mul t i - r o l e demands of the Tornado. With over 50 subsystems required for tasks such page 81 as f l i g h t c o n t r o l , n a v i g a t i o n , weapons d e l i v e r y and def e n s i v e aids, and STOL c a p a b i l i t y , the avionics package was estimated to make up over 40% of the t o t a l MRCA u n i t p r i c e . Concern with cost and e f f i c i e n c y i s thus a question of considerable importance. D e c i s i o n s r e g a r d i n g the awarding of a v i o n i c s c o n t r a c t s i n v o l v e d a process of acceptence almost as complex as the avionics i t s e l f . Each bidder was required to submit a two-part pr o p o s a l , with one part c o v e r i n g t e c h n i c a l data and the second dealing with price, delivery and management d e t a i l s . Both sets of proposals had to be submitted to the three main contractors -MBB, BAC and A e r i t a 1 i a / F i a t - and to the a v i o n i c s group e s t a b l i s h e d to oversee t h i s s e c t i o n of the p r o j e c t , A v i o n i c a Systems Engineering GmbH. The l a t t e r group then d i s t r i b u t e d the proposals to i t s three national partners; EASAMS of B r i t a i n , ESG of West Germany and SIA of I t a l y . F i n a l l y , the t e c h n i c a l p r o p o s a l s were a l s o to be submitted to the n a t i o n a l defense m i n i s t r i e s receiving the a i r c r a f t . 0 ^ This administrative tangle, necessitated by the t r i n a t i o n a l membership of the programme, was f u r t h e r c o m p l i c a t e d by the requirement that work should be shared approximately i n the agreed r a t i o of 42.5/42.5/15. In a d d i t i o n , the companies o f f e r i n g bids were asked to submit not only proposals matched to MRCA s p e c i f i c a t i o n s , but also a l t e r n a t i v e non-compliant equipment which might prove more a t t r a c t i v e f o r other reasons, such as lower price or better performance. Combined with the d i f f i c u l t y of matching the va r y i n g n a t i o n a l requirements, the s e l e c t i o n page 82 process was thus a protracted, and i n i t s e l f expensive, exercise. A f t e r i t s e x c l u s i o n from the MRCA engine work, the U.S. was exerting greater pressure for some part of the avionics package. On t h i s o c c a s i o n , B r i t i s h and German views c l a s h e d , as B r i t a i n continued to i n s i s t on exc l u s i v e l y European p a r t i c i p a t i o n ; The West German defence m i n i s t r y s t r o n g l y favours a c l o s e r e l a t i o n s h i p with the U.S. i n MRCA a v i o n i c s and argues t h a t , with such an a s s o c i a t i o n , the newest technology would be incorporated i n the f i g h t e r . There would also be competetive p r i c i n g and German i n d u s t r y would gain a manufacturing competence i t does not now have. The l a t t e r goal was shared by the German a v i o n i c s combine ESG, which a l s o sought to a v o i d h a v i n g the a v i o n i c s c o n t r a c t s dominated by B r i t i s h companies.^ The r e s u l t of these c o n s i d e r a t i o n s and d i s p u t e s was heated controversy over the s e l e c t i o n of various subsystems. Problems which arose over the choice of the ground-mapping and t e r r a i n -following radars are s u f f i c i e n t to i l l u s t r a t e t h i s controversy, and i t s outcome. The apparent subject of debate was the optimum o p e r a t i n g frequency of the radars . The L u f t w a f f e sought a Ku-band for both subsystems, basing i t s requirements on the General E l e c t r i c mapping radar and the Texas Instruments t e r r a i n -following radar , both of which were i n s t a l l e d i n the F - l l l . The RAF, however, s p e c i f i e d a Ka-band mapping radar and an X-band system for t e r r a i n - f o l l o w i n g . By a not-so-strange c o i n c i d e n c e , B r i t a i n ' s E l l i o t t Automation had e a r l i e r developed a Ka-band mapping radar while B r i t a i n ' s F e r r a n t i Ltd. had an X-band t e r r a i n - f o l l o w i n g radar. page 83 This made the E l l i o t t / F e r a n t i equipments the only contenders f o r the (RAF's) A i r Defence Version of the MRCA.67 I t a l y , which o r i g i n a l l y s p e c i f i e d a t h i r d set of pr e f e r e n c e s , agreed to accept the West German requirements as the need to hold down r i s i n g a v i o n i c s c o s t s pushed the consortium towards purchasing a l r e a d y - e x i s t i n g systems r a t h e r than developing new ones. The f i n a l c h oice of systems i s d i s c u s s e d i n the e v a l u a t i o n and c o n c l u s i o n f o l l o w i n g the present s e c t i o n of the case study. However, i t appears cl e a r from the ideas and examples presented above that c r i t e r i a other than i n d u s t r i a l or techn i c a l e f f i c i e n c y and cost were used by both B r i t a i n and Germany i n p r e s e n t i n g t h e i r avionics requirements. The complex bidding process and the disputes over the type and source of supply of several avionics subsystems resulted i n a 5-month delay in the programme, adding further to development costs, while the i n a b i l i t y of the Avionica group to solve these problems led to i t being abandoned i n 1972. Section IV). Conclusion i ) . A, Br i e f Evaluation of the MRCA programme. Although i t i s not the purpose of the present paper to give a d e t a i l e d a n a l y s i s of e i t h e r the performance c h a r a c t e r i s t i c s of the Tornado a i r c r a f t or the success of the consortium and the programme which produced i t , such an assessment may s t i l l u s e f u l l y f u l f i l two f u n c t i o n s . F i r s t , such an e v a l u a t i o n may page 84 help to indicate the ef f e c t s which p o l i t i c a l or other influences have upon the e f f i c i e n c y of co-production programmes i n terms of the end r e s u l t or product. Second, i t may a l s o help the reade.r i n forming an o p i n i o n as to the v i a b i l i t y of such programmes as a possible means of at least p a r t i a l l y meeting the NATO policy goal of equipment standardisation. B.O. Heath, a BAC d i r e c t o r c l o s e l y l i n k e d to the Tornado programme, presented h i s own e v a l u a t i o n of the a i r c r a f t which appears to be a model of achievement. The MRCA e i t h e r met or exceeded i t s t e s t requirements i n s e v e r a l areas, i n c l u d i n g maximum g. at super- and subsonic speed; s t r u c t u r a l s t r e n g t h ; alignment time; take-off mass and distance; maximum speed at sea l e v e l ; and high- and low-altitude handling. Service c e i l i n g and maximum speed at high a l t i t u d e were also 'closely a p p r o a c h e d ^ T h i s l i s t of achievements demonstrates that many of the agreed programme goals for a i r c r a f t performance were su c c e s s f u l l y met. However, i t does not t e l l us whether these goals were such that the MRCA could f u l f i l l the r o l e s sought by the three a i r f o r c e s and the German navy. On t h i s p o i n t , Smith argues against the a b i l i t i e s of the a i r c r a f t ; There i s one problem with multi-role a i r c r a f t , indeed, with any multi-purpose machine: they tend to do each task l e s s e f f i c i e n t l y than a i r c r a f t s p e c i a l i s e d f o r that task. (Smith, 1980,p.133) Whether the a i r c r a f t i s able e f f e c t i v e l y to meet the demands of the v a r i o u s m i s s i o n s r e q u i r e d of i t i s i n m i l i t a r y terms the relevent question, not whether i t achieved the compromise l e v e l s page 85 worked out by the national governments. Heath provides an a n a l y s i s of the MRCA t h r u s t - t o - w e i g h t r a t i o (T/W), one of the cen t r a l c h a r a c t e r i s t i c s i n assessing the a b i l i t y of the a i r c r a f t to perform as an a i r combat f i g h t e r . F i g u r e s 1) and 2) i n the case study appendix i l l u s t r a t e the authors' findings. Heath describes the T/W r a t i o as 'adequate', arguing in i t s defense that ...were the T/W of a s p e c i a l i s t f i g h t e r to h a v e b e e n c o m b i n e d w i t h t h o s e lc e_ jr c h a r a c t e r i s t i c s r e a l l y needed f o r MRCA-Tornado, a 70,0001b aeroplane - too cos t l y to have even started - was indicated. (emphasis added) (Heath,1979,p.332) I m p l i c i t i n t h i s statement i s the admission that the MRCA i n fact does not meet the requirements of an a i r combat a i r c r a f t when compared to s p e c i a l i s e d a i r c r a f t such as i t might be expected to face i n a re a l c o n f l i c t . As Heath's findings i n d i c a t e , the MRCA lacks manoeuvrability compared to other NATO a i r c r a f t such as the F-15 and F-18, or even the F-4 Phantom. Smith argues that the p a r t i c i p a t i n g governments may have recognised the u n s u i t a b i l i t y of the MRCA for the a i r combat mission as early as 1970,°^ and Heaths' statement seems to support t h i s view. The German government's acceptence of a twin-engine, two-man crew a i r c r a f t was i n i t i a l l y taken to indicate that i t s o r i g i n a l requirement for a close support a i r c r a f t was being compromised to s a t i s f y the B r i t i s h long-range s t r i k e m i s s i o n . However, the development of streuwaffen, or area bombs, for use against tank a t t a c k meant that the hea v i e r long-range a i r c r a f t r o l e could s t i l l be used f o r c l o s e support and a l s o now had a gr e a t e r page 86 payload c a p a c i t y . T h i s circumvents much of the c r i t i c i s m against the MRCA's a b i l i t y to perform t h i s task, but s t i l l leaves out of consideration one problem; ...close support a i r c r a f t must operate i n the face of dense opposition from su r f a c e - t o - a i r m i s s i l e s , a n t i - a i r c r a f t guns and enemy f i g h t e r s ; the p r e f e r a b l e a i r c r a f t would be both cheaper and more rugged than the Tornado. (Smith,1980,p.134) There may thus be some reluctance to commit the MRCA to the role of close support, although i t i s capable of f u l f i l l i n g the German requirement. The r o l e f o r which the MRCA appears to be o p t i m i s e d (as the Netherlands' government suspected) i s the long-range s t r i k e / i n t e r d i c t i o n requirement of the RAF. These seem to have been the 'key c h a r a c t e r i s t i c s ' r e f e r r e d to by Heath and mentioned e a r l i e r . What the RAF has got, what i t has wanted and been f i g h t i n g for ever since the 1957 defense White Paper threatened the f u t u r e of manned bombers, i s a modern, s o p h i s t i c a t e d , h i g h -speed low low-level bomber. It w i l l be noted that the Federal German a i r force has got the same thing; for the FRG Tornado i s a back-door entry to the long-range bombing mission... (Smith,1980,p.p.134) Regarding the common MRCA variant, t h i s appears to be the mission f o r which the MRCA i s best s u i t e d i n terms of performance c h a r a c t e r i s t i c s and cose* Smith i s again c r i t i c a l of the ADV Tornado developed s o l e l y f o r the RAF. The B r i t i s h M i n i s t r y of Defense, Smith c l a i m s , argued that although as an a i r c r a f t the Tornado ADV would be page 87 l i t t l e b e t t e r than the e x i s t i n g F-4 Phantoms then i n s e r v i c e , " *the weapon system i s a complete step ahead' ..." (Smith,p.134). According to th i s view, improvements were not i n the a i r c r a f t i t s e l f , but i n the radar, m i s s i l e s , and main computer. However, Hartley also discusses a B r i t i s h government e v a l u a t i o n of the U.S. F-14, F-15 and F-16 a i r c r a f t as al t e r n a t i v e s to the MRCA; At the time, the e v a l u a t i o n showed that the F-14 was the closest substitute but that i t was a c o s t l y a i r c r a f t , probably 50 per cent, more expensive than the Tornado. (Hartley,1983, p.172) Neither the F-15 nor the F-16 were f e l t to be able to meet the long-range, a l l - w e a t h e r c a p a b i l i t y or the complex U.K. a i r defence tasks r e q u i r e d of the Tornado ADV, although the l a t t e r a i r c r a f t was cheaper. 7 1 Although the common Int e r d i c t o r Strike (IDS) variant of the MRCA seems to s a t i s f y the RAF operational requirements and could also - though perhaps expensively - meet the close support role sought by the Luftwaffe, the I t a l i a n a i r force does not appear to have obtained the system best able to f i l l the r o l e of a i r combat f i g h t e r . T h i s i s the area of l e a s t s a t i s f a c t o r y performance. The RAF Air Defence MRCA, whilst not i d e a l , may be better suited to i t s r o l e than the a l t e r n a t i v e U.S. a i r c r a f t . T h i s author b e l i e v e s that while the performance of the MRCA f a i l s under closer examination to meet the high praise of Heath's work, i t i s a better system than either Smith or Walker have concluded. For the I t a l i a n a i r f o r c e , however, one must conclude that i n page 88 operational terms the MRCA may well be inadequate. In considering the general success of the MRCA co-production programme, the r e l e v e n t c r i t e r i a f o r e v a l u a t i o n are those of cost-savings and control of cost escalation, the achievement of estimated delivery dates, and the avowed i n t e n t i o n to keep the p r o j e c t an e x c l u s i v e l y European e f f o r t . N a t i o n a l p o l i t i c a l or economicgoals are l e s s r e l e v a n t , other than i n t h e i r e f f e c t on the c r i t e r i a mentioned above, as evaluation of these goals w i l l d i f f e r between nations and even between groups within a nation. In his analysis of j o i n t aerospace projects, Hartley mentions a d i f f i c u l t y of assessing cost-savings from such ventures; ...there i s a danger that n i r v a n a or i d e a l , but never achieved, U.K. cos t l e v e l s w i l l be compared with actual costs for j o i n t projects, i g n o r i n g the r e a l i s e d c o s t s on B r i t i s h programmes. (Hartley,1980,p.159) As was seen i n the e a r l i e r p a r t s of the case study, the U.K. aerospace i n d u s t r y - f o r example - cannot be assumed to be ' e f f i c i e n t ' i n t h i s manner, as government i n t e r v e n t i o n f o r employment purposes, non-competetive b i d d i n g , and support f o r domestic i n d u s t r y a g a i n s t cheaper f o r e i g n s u p p l i e r s a l l reduce the e f f i c i e n c y of an industry already operating below the MES i n production. Assuming a 'collaborative premium' or cost increase of 40 per cent, on R&D and 10 per cent, on pro d u c t i o n , H a r t l e y e s t i m a t e s that co-production of the Tornado s t i l l offered B r i t a i n a cost s a v i n g of 360 m i l l i o n pounds s t e r l i n g compared to the p o s s i b l e c o s t s of a comparable n a t i o n a l p r o j e c t . The only s i m i l a r page 89 national development e f f o r t , on the TSR-2, was cancelled because the B r i t i s h government could not afford to meet future progamme co s t s . On the b a s i s of the three nation's share i n the p r o j e c t , H a r t l e y places t o t a l programme c o s t - s a v i n g s at between 850 7 9 m i l l i o n and 1.9 b i l l i o n pounds s t e r l i n g ( i n 1976 p r i c e s ) , Trevor T a y l o r p r o vides a b r i e f assessment of the l o g i s t i c s system e s t a b l i s h e d f o r the MRCA programme. The common procedures, t r a i n i n g programmes for suppliers, and t r i n a t i o n a l p o o l i n g of orders f o r spare p a r t s i n t r o d u c e d and su p e r v i s e d by the Panavia Product Support Directorate has su c c e s s f u l l y reduced the cost of l o g i s t i c support. Compared again with a s i m i l a r national provisioning scheme, Taylor estimates these savings to have been between 40 and 50 per c e n t , per member i n the 7 "3 consortium. J These figures, the authors admit, are best seen to seen to represent orders of magnitude rather than exact amounts. Despite t h i s , they s t i l l i n d i c a t e the e x i s t e n c e of s u b s t a n t i a l c o s t - s a v i n g s which a re a t t r i b u t a b l e to the c o - p r o d u c t i o n programme. Ha r t l e y a l s o provides a comparison of c o s t - c o n t r o l or cos t e s c a l a t i o n on s e v e r a l j o i n t ventures, i n c l u d i n g the MRCA, compared to independent national projects i n B r i t a i n and the U.S. The main p o i n t s of h i s a n a l y s i s are reproduced as Table IX) i n the case study S t a t i s t i c a l Appendix. H a r t l e y found that while c o s t c o n t r o l on the Anglo-French Jaguar p r o j e c t was the most s u c c e s s f u l of the ventures, Tornado compares w e l l with other j o i n t p r o j e c t s and i s a l s o b e t t e r than i t s c a n c e l l e d B r i t i s h page 90 predecessor TSR-2 or the U.S. F - l l l . ' * D espite the r e l a t i v e success of cost c o n t r o l on the MRCA programme, the time taken to develop and produce the f i r s t operational a i r c r a f t i s c l e a r l y a handicap i n co-production and the choice of a mu l t i - r o l e weapon. Compared to s i m i l a r national p r o j e c t s i n the U.S., Tornado took over twice as long to develop than the F - l l l or the F-15; and compared to the average development time for a U.K. a i r c r a f t , an ad d i t i o n a l 3 years and 8 months was r e q u i r e d . ^ The technical complexities of the mu l t i -r o l e concept r e q u i r e d to f i t the Tornado to d i v e r s e n a t i o n a l requirements, added to delays i n reaching contractual agreements over w o r k - s h a r i n g , d e l a y s i n RB.199 en g i n e t e s t i n g , and schedule s t r e t c h - o u t s by the n a t i o n a l governments extended the t o t a l development time of the MRCA to 12 years (1968-1980). Such a delay must have cut i n t o the o p e r a t i o n a l l i f e - s p a n of the Tornado once i t reached service, e s p e c i a l l y given the rapid advances being made i n a i r c r a f t technology and a n t i - a i r c r a f t d e f e n c e s . As mentioned e a r l i e r , t h i s a s p e c t of the MRCA programme p r o b a l y i n d i c a t e s one of the most i m p o r t a n t disadvantages of co - p r o d u c t i o n e f f o r t s i n advanced-technology systems. The f i n a l avowed goal of the MRCA consortium, or at least of the B r i t i s h governmant, was to maintain the exclusively European nature of the programme. Whatever the motivation of the B r i t i s h government i n seeking t h i s objective, the attempt was a f a i l u r e . The purchase of U.S. technology by MBB of West Germany f o r page 91 development of the variable-geometry wing box has alread y been mentioned. E a r l y i n the p r o j e c t development phase, i t a l s o became clear that the cost of designing an e n t i r e l y new avionics package f o r the a i r c r a f t would r e s u l t i n unacceptable c o s t e s c a l a t i o n . I t was thus necessary to seek ' o f f - t h e - s h e l f systems. The bid by B r i t a i n ' s E l l i o t t Automation and F e r r a n t i companies f o r the ground-mapping and t e r r a i n - f o l l o w i n g radars, discussed e a r l i e r , came to twice the cost of comparable systems offered by Texas Instruments and Rockwell Corporation - both U.S. companies. At German i n s i s t e n c e , and d e s p i t e s t r o n g B r i t i s h 7 ft opposition, Texas Instrumants won the radar contracts. Within the next year, other a v i o n i c s c o n t r a c t s went out to L i t t o n I n d u s t r i e s , H o n e y w e l l , and the A s t r o n a u t i c s c o r p o r a t i o n r e s p e c t i v e l y f o r the A t t i t u d e Heading, A i r Data, and Bearing computers. European i n d u s t r i e s were unable to match U.S. co s t s for advanced avionics systems. i i ) . The l i t e r a t u r e and the MRCA-Tornado case study. One of the most important c o n c l u s i o n s concerning the ideas expressed i n the l i t e r a t u r e review and the analysis of the MRCA co- p r o d u c t i o n programme i s that i n determining the nature of c o l l a b o r a t i v e or c o - p r o d u c t i o n e f f o r t s i n Europe, c r i t e r i a of s p e c i f i c o p e r a t i o n a l requirements, i n d u s t r i a l e f f i c i e n c y , and c o s t - s a v i n g s appear to be s e c o n d a r y to those of n a t i o n a l governments' p o l i t i c a l and/or economic p o l i c i e s . Greenwood's warning that too many attempts to assess the advantages and page 92 problems of col l a b o r a t i o n ignore the " p o l i t i c a l parameters" which may demand s e c o n d - or t h i r d - b e s t s o l u t i o n s to programme e f f i c i e n c y thus seems to be correct. S p e c i f i c concerns, such as s u r p l u s c a p a c i t y i n R o l l s Royce, were c e r t a i n l y addressed by government d e c i s i o n s and the broad background of i n d u s t r i a l demands provided a number of incentives for seeking co-production, yet the d i r e c t influence of i n d i v i d u a l pressure group i n t e r e s t s on government p o l i c i e s appears to have been of secondary importance. The types of demands and the domestic economic s i t u a t i o n s varied between nations i n the MRCA p r o j e c t , as d i d the a t t i t u d e of aerospace i n d u s t r i e s towards c o l l a b o r a t i o n . D i f f i c u l t y of c a n c e l l a t i o n i s a f e a t u r e of co - p r o d u c t i o n which i n d u s t r i e s may see as an advantage, but t h i s does not seem to have been consistently sought by the companies involved i n the MRCA work. A number of industry groups and spokesmen i n B r i t a i n , where the e x i s t e n c e of s u r p l u s c a p a c i t y might have l e d to non-can c e l l a t i o n being a prized objective, were instead seen to have a c t i v e l y and v o c a l l y opposed c o l l a b o r a t i o n . By c o n t r a s t , i n d u s t r y o f f i c i a l s i n I t a l y hoped that government involvement would help to secure the future of such projects. Much of the l i t e r a t u r e r e f e r s to the need for p o l i t i c a l w i l l before s t a n d a r d i s a t i o n can be undertaken; the same can be s a i d for co-production. Without the wider p o l i t i c a l incentives which motivated the B r i t i s h , German and I t a l i a n governments to continue to pursue the j o i n t venture, i t i s u n l i k e l y that c o n s i d e r a t i o n s page 93 of p r o j e c t c o s t - s a v i n g s or p o t e n t i a l m i l i t a r y b e n e f i t s from commonality of equipment would have been s u f f i c i e n t f o r the consortium to maintain i t s momentum. The case study i n d i c a t e d that those authors who c l a i m that co-production and col l a b o r a t i o n lead to increased programme costs are c o r r e c t . N a t i o n a l i n t e r e s t s outweigh concerns with l e a s t -cost s u p p l i e r s ; d i f f e r i n g o p e r a t i o n a l reqirements can c r e a t e technological d i f f i c u l t i e s and higher R&D costs; programme delays are l i k e l y ; and a d m i n i s t r a t i v e c o s t s tend to r i s e . However, compared to a n a t i o n a l programme to develop a s i m i l a r advanced a i r c r a f t , the MRCA programme o f f e r e d i t s members the chance to d i v i d e these c o s t s and to spread them over a l a r g e r number of u n i t s . Assuming that a comparable n a t i o n a l p r o j e c t would be required and that i t would not be cancelled partway through, the MRCA resulted i n valuable savings for each nation i n system-cost and programme-cost. T h i s occurred d e s p i t e the f a i l u r e of the group to secure a d d i t i o n a l production through exports outside of the consortium. 7 0 Did the m u l t i - r o l e concept of the MRCA serve as a 'hedge a g a i n s t u n c e r t a i n t y * f o r defence planners, or d i d i t cr e a t e a d d i t i o n a l u n c e r t a i n t i e s ? I f one c o n s i d e r s the d e s i r e of the European governments to maintain or to develop national defence-i n d u s t r i a l capacity and c a p a b i l i t i e s as an insurance against the p o s s i b i l i t y - however remote - of U.S. disengagement of f o r c e s from Western Europe or NATO, then the MRCA programme provided valuable work for the three national i n d u s t r i e s involved i n the page 94 scheme. From th i s point of view, the cost of the programme might be seen as the p r i c e r e q u i r e d to o b t a i n a prudent measure of security i n defence production. In the opinion of the present author, the multi-rol e concept appears to have been d i c t a t e d by the need to r e c o n c i l e s e v e r a l d i f f e r e n t operational requirements as the only means of obtaining the c o - p r o d u c t i o n agreement. Against t h i s , i t should a l s o be s t a t e d that the need to design a m u l t i - r o l e system pushed the programme against technological b a r r i e r s and created d i f f i c u l t i e s in meeting the s p e c i a l i s e d performance standards required for the s e v e r a l r o l e s o f f i c i a l l y performed by the a i r c r a f t . I t thus created some uncertainty over the a b i l i t y of the a i r c r a f t to meet the f u l l range of operational demands placed upon i t . page 95 Notes Section 2 1. "The 1970s: Challenge i n the Marketplace." Aviation Week and Space Technology, June 2nd, 1969, p.86. 2. T a y l o r , T. Defence, T e c h n o l o g y and I n t e r n a t i o n a l Integration. (London, Frances Pinter, 1982) p.17. 3. AW&ST. op. c i t . , p.86. 4. "Methodology to Quant i f y the P o t e n t i a l Net Economic Consequences of Increased Nato Commonality, Standardis-a t i o n and S p e c i a l i s a t i o n . " see T a y l o r , op. c i t . , p.65. 5. Callaghan, T. " S t a n d a r d i s a t i o n : Le D e f i Americain a l'Europe." NATO Review No.5. 1978, p.26. 6. H a r t l e y , K. NATO Arms Co-operation. (London, George Allen & Unwin, 1983) p.161. 7. T a y l o r , T. " S t a n d a r d i s a t i o n : the Dimensions and I m p l i c -a t i o n s of a P o l i c y Issue", J o u r n a l of I n t e r n a t i o n a l  Studies Autumn 1978, p.118. 8. The Economist I n t e l l i g e n c e Unit, The Economic E f f e c t s of Disarmament. (London, Whitefriars Press, 1963.) 9. B e l l i n i , J., P a t t i e , G. " B r i t i s h Defence Options: A G a u l l i s t Perspective." i n S u r v i v a l . No.5, 1977, p.221. 10. Burrows, B., Edwards, E. The Defense of Western Europe." (London, Butterworth, 1982.) p.59. 11. Taylor, 1982, op. c i t . , p.37. 12. Taylor, 1978, op. c i t . , p.116. 13. Tucker, G."TowardsRationalizingAl1iedWeapons Prod-uction." The A t l a n t i c Papers (Paris, A t l a n t i c I n s t i t u t e , 1976.) vol.1, p.10. 14. Kaldor, M. The Baroque A r s e n a l . (London, Andre-Deutsch, 1982) p.203. Section 3. 1. Gunston, W. "New Developments i n a i r c r a f t a n d m i s s i l e s . " Brassey's Annual (New York, Praeger, 1969) p.183. 2. AW&ST. November 4th, 1968, p.22. 3. Speech by Canadian Defense M i n i s t e r Cadieux, Keesing's Contemporary Archives January 3-10th 1970, p.23753. 4. Lindsey, G.R. L e t t e r from G.R. Lindsey, C h i e f , Operat-i o n a l Research and Analysis Establishment, Ottawa. July 16th, 1985. 5. Heath, B. "MRCA Tornado: achievement by i n t e r n a t i o n a l c o l l a b o r a t i o n . " Aeronautical Journal Sept. 1979 p.332. 6. AW&ST. June 2nd 1969, p.160. 7. AW&ST. May 2nd, 1977, p.59. 8. AW&ST. May 27th, 1969, p.27. page 96 9. Dutch Defense Minister Hendrikus J . de Toora, Keesings, August 2-9th, 1969, p.23492. 10. Heath, op. cit.,p.331. 11. Keesings, o p . c i t . 12. AW&ST, June 2nd, 1969, p.160. 13. i b i d , May 5th, 1969, p.27. 14. i b i d , August 11th, 1969, p.116. 15. i b i d , November 4th, 1968, p.22. 16. i b i d , A p r i l 7th, 1969, p.23. 17. AW&ST, op. c i t . 18. Quaroni, P. "European I n t e g r a t i o n " , S u r v i v a l , No. 12, December 1970, p.402. 19. Keesings. August 19-26th, 1967, pp.22205-22206. 20. Anonymous source, AW&ST. A p r i l 7th, 1969, p.23. 21. General Johannes Steinhoff, c - i - c of the Luftwaffe at the time, stated that "The competence of the West German i n d u s t r y i s a d e f i n i t e a s s e t , and i t i s important that the i n d u s t r y e x p l o i t i t s p o t e n t i a l as a developer as well as a producer of a i r c r a f t . " AW&ST. June 2nd, 1969, pp. 196-197. 22. Keesings. June 14-21st, 1969, p.23406. 23. i b i d . 24. AW&ST. June 5th, 1972, p.31. 25. Mason, R. "Setting B r i t i s h Defence P r i o r i t i e s " , S u r v i val, No 5, September 1975, p.219. 26. i b i d , p.224. 27. AW&ST. June 9th, 1969, p.32. 28. i b i d , September 6th, 1976, p.63. 29. Unnamed sources; Kolkum, E. AW&ST, November 4th, 1968, p.22. 30. AW&ST, A p r i l 24th, 1972, p.39. 31. i b i d , September 8th, 1969, p.20. 32. i b i d , September 1st, 1980, p.117. 33. i b i d , A p r i l 24th, 1972, p.34. 34. Keesings. March 30th- A p r i l 6th, 1968, p.22618. 35. AW&ST. September 8th, 1969, p.19. 36. i b i d , June 5th, 1972, p.32. 37. i b i d , op. c i t . 38. i b i d , March 8th, 1971, p.29. 39. i b i d , A p r i l 28th, 1975, p.26. 40. Smeeton, S i r Richard. D i r e c t o r of the SBAC. AW&ST, September 7th, 1970, p.14. 41. AW&ST. January 10th, 1972, p.19. 42. i b i d , op. c i t . 43. Edwards, S i r George., Director of BAC. AW&ST. September 7th, 1970, p.14. 44. i b i d , November 11th, 1974, p.23. 45. Hotz, R. " E d i t o r i a l Comment", AW&ST. September 2nd, 1974, p.11. 46. However, see ref. footnote 3 i n Section 2 concerning the differences i n p o l i c i e s between private and government-page 97 directed companies. 47. AW&ST. A p r i l 24th, 1972, p.8. 48. Mechtescheimer, A. MRCA Tornado: Rustung und P o l i t i c i n  der Bundesrepublik. (Saarbruck, (FRG), Osang Ver l a g , 1977). 49. Mechtescheimer, p.164. 50. AW&ST. September 23rd, 1968, p.17. 51. Mechtescheimer, pp.167-8. 52. Unnamed o f f i c i a l from A e r i t a l i a ' s Combat A i r c r a f t D i v i s i o n . AW&ST. January 23rd, 1978, p.60. 53. Mechtescheimer, pp.182-185. 54. AW&ST. June 5th, 1972, p.9. 55. ' Keesings. February 10-16th, 1975, p.26959. 56. AW&ST. July 14th, 1969, p.56. 57. i b i d , February 26th, 1973, pp.21-22. 58. i b i d , September 23rd, 1968, p.17. 59. i b i d , May 19th, 1969, p.25. 60. i b i d , September 1st, 1969, p.23. 61. Kolkum, E. Unnamed West German government o f f i c i a l . AW&ST. A p r i l 7th, 1969, p.23. 62. i b i d , September 8th, 1969, p.19. 63. Taylor, T., Defense. Technology.... 1982, p.179. 64. Klass, P.J., AW&ST. A p r i l 26th, 1971, p.55. 65. Kolkum, E., AW&ST. September 29th, 1969, p.20. 66. AW&ST. September 7th, 1970. p.78. 67. Klass, P.J. op. cit.,p.57. 68. Heath, B., op. c i t . , p.332. 69. S m i t h , D., The Defense of the Realm i n the 1980s. (London, Croom Helm, 1980.), p.134. 70. AW&ST. September 7th, 1970, p.38. 71. Hartley's own estimates give a unit cost for the F-14 of 13.1 m i l l i o n pounds s t e r l i n g ; for the F-15, 8.2 m i l l i o n pounds; for the F-16, 3.1 m i l l i o n pounds; and for the ADV Tornado, 8.5 m i l l i o n pounds. ( A l l figures quoted i n 1976 pr i c e s . Hartley, K., op. c i t . , pp.172-73. 72. Hartley, op. c i t . , p.161. 73. Taylor, op. c i t . , p.162. 74. Hartley, p.170. 75. i b i d , pp.166-169. 76. AW&ST. August 16th, 1971, p.64. Section 4. 1. The f i r s t export sale of the Tornado ADV was made to the Sult a n a t e of Oman i n mid-August, 1985. 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"Standardisation: The Dimensions and Implications of a P o l i c y Issue", J o u r n a l of I n t e r n a t i o n a l  Studies, vol.7, No.2, Autumn 1978. pp.111-123. "The MRCA: a Case Study i n European Collaboration" Research Policy vol.2, January 1974, pp.280-305. " I n i t i a t i v e s i n Standardisation/Interoperability", NATO Review, XXVI, October 1978, pp.8-11. Other P e r i o d i c a l s Aviation Week and Space Technology - no authors l i s t e d . Manchester Guardian Weekly. page 102 Mason, R. Quaroni, P. Taylor, T. Walker, W.B. Walsh, J.B. Table I ) . U.K. Defence Expenditure for Selected Years. 1955-1974. Year Defense Expenditure Defense Expenditure Defense (1977 prices) (1970 prices) Expenditure Index No. Index No. (as % GDP) £ m. 1960=100 $m. 1960=100 1955 1567 94.6 6379 108.2 8.2 1960 1657 100.0 5893 100.0 6.5 1965 2091 126.2 6256 106.2 5.9 1970 2444 147.5 5850 99.3 4.9 1971 2815 169.8 6159 104.5 5.1 1972 3258 196.6 6654 112.9 5.3 1973 3505 211.5 6554 111.2 5.4 (est.) 1974 4148 250.3 6686 113.4 5.4 (est.) (Greenwood,1977,p.191.) As Table I), above indicates, defence expenditure i n the U.K. underwent a slow but steady i n c r e a s e i f measured i n c u r r e n t p r i c e s , and a somewhat slower r i s e when measured i n constant (1970) p r i c e s . However, as a p e r c e n t a g e of GDP, d e f e n s e expenditure s u f f e r e d a drop - even i g n o r i n g the 1955 measure a f t e r the Korean War - from 6.5% to a l e v e l of around 5% i n the early 1970s. Governments were increasingly u n w i l l i n g to commit more than this to defense, and instead looked to use the funds i n other sectors. Table I I ) . Comparison of Public Expenditure (1977 market p r i c e s ) . Selected Sectors 1958 1963 1968 1973 Only. £ m. / m. £ m. % % % ^ m. % M i l i t a r y Defense 1543 18.6 1892 16.2 2443 12.8 3097 11 .4 Social Security 1345 16.2 1988 17.0 3340 17.5 5119 18 .9 Benefits Education 785 9.4 1282 11.0 2182 11.4 3508 12 .9 NHS 728 8.8 1035 8.9 1688 8.8 2644 9 .7 Industry and 543 6.5 791 6.8 2016 10.5 2322 8 .5 trade (Greenwood,1977,p.194.) Table I I ) . again i l l u s t r a t e s the point that although the defense budget increased steadily throughout the 1960s and into the 1970s, as a percentageof t o t a l public expenditure i t f e l l throughout the period, from 18.6% to 11.4%. In i t s place, s o c i a l s e c u r i t y b e n e f i t s , education and NHS expenditure a l l r o s e . There wasa fundamental s h i f t i n government p r i o r i t i e s away from defense expenditure and towards s o c i a l welfare in the U.K. Table I I I ) . D i v i s i o n of M i l i t a r y Expenditure by Main Categories, 1975-79. 1975 1976-7 1977-8 1978-9 1979-80 Average Manpower 47% 45% 45% 43% 42% 44% Equipment t o t a l 35% 36% 37% 40% 41% 38% a) production 42% a of new equip. n.a. 38% 42% 44% 44% b) production of spares. n.a. 31% 27% 27% 26% 28% a c) R&D costs n.a. 31% 31% 29% 30% 30% Other b • 18% 19% 18% 17% 17% 18% (Smith,1980,p.112) - averages here for 1976-7 and 1979-80 only. - buildings, stores, and miscellaneous equipment. Table III) c l e a r l y indicates the impact of r i s i n g equipment production c o s t s on the U.K. defence budget. While manpower cuts have been made, they do not match the declining proportion of the defense budget allocated to t h i s use. Table IV). NATO aerospace industries i n 1970 ^_ sales and pr o d u c t i v i t y . Country U.K. FRG Ital y France USA Sales' 2216 1291 317 2131 24,896 Total Employment 235,100 56,206 29,500 103,364 1,116,000 Productivity 1* 9426 22,969 10,746 20,616 22,308 Concentration Ratios % c 35.9 40.2 29.9 31.8 8.9 (Hartley,1983,p.29) ® - mi l l i o n s ECU, 1975 prices. - sales per man, ECU, 1975 prices. c - largest firm's employment in each nation as a % of the industry's t o t a l employment. Table IV). i l l u s t r a t e s the low productivity of the U.K. aerospace industry, and that of I t a l y , i n d i c a t i n g that i n these nations government 'make-work' p o l i c i e s may be prevalent. The contrast between concentration r a t i o s i n Europe and the USA i s a l s o notable. The European aerospace i n d u s t r y has o b l i g e d to turn towards mergers of the largest national companies to enable each nation to compete more e f f e c t i v e l y . These companies are often either d i r e c t l y c ontrolled by the governments, or else dependent upon government defence contracts. Table V). Major Aerospace companies in NATO, 1980 Company USA Boeing McDonnel Douglas Pratt & Whitney General E l e c t r i c Europe B r i t i s h Aerospace Rolls Royce Aerospatiale MBB MTU (engines) Dornier Agusta A e r i t a l i a (m. Sales ECU, 1983 prices.) 6772 4358 3874 1800 2378 2102 2244 1309 276 401 378 233 Employment 106,300 82,550 70,000 24,000 77,500 58,800 34,422 26,287 6,594 8,454 9,358 11,500 Productivity (sales per man, ECU, 1983.) 63,707 52,792 55,343 75,000 30,684 35,748 65,191 49,797 41,856 47,433 40,350 20,261 (Hartley,1983,p.108) Table V). especially shows the low productivity l e v e l s of the B r i t i s h and I t a l i a n companies, where creation of employment has been a government p r i o r i t y in i n d u s t r i a l p o l i c y . Table VI). a). West German aerospace companies involved i n MRCA production. Messerschmidt-Boelkow-Blohm Siemens Motoren und Turbinen Union T e l d i x Bodenseewerk Geratetechnik Abex Apparatebau Gauting Nord-Micro Otto Fuchs Metallwerke Al f r e d Teves L i t e f Frankejura Industrie Rohde and Schwartz Other general contractors VFW-Fokker AEG-Telefunken Industriewerke-Karlsruhe prime contractor, laser range fin d e r s , radar and I.D. a i r s u r v e i l l a n c e , prime engine contractor. N a v i g a t i o n systems and head-up display. c o n t r o l and s t a b i l i t y system. hydraulic pumps, fu e l pumps. engine components, f l i g h t c o n t r o l s . metals and a l l o y s , wheels and brakes, onboard computer, b a l l bearings, r o l l ends, d i r e c t i o n f i n d e r s , t e s t -sets for a v i o n i c s . (AW&ST, Sept 1st, 1980.) b). Selected I t a l i a n companies involved i n MRCA production. A e r i t a l i a prime I t a l i a n contractor. Macchi - weapon and f u e l pylons. Piaggio - leading-edge s l a t s . SACA - flaps and pylon housing. S i a i - s t r u c t u r a l components. F i a t A v i a z i o n e - prime I t a l i a n engine contractor. Others Aeronavali — airframe. Microtechnica - ) General equipment Selenia - } and Magnaghi - } avion i c s . Autovox - a v i o n i c s . Marconi I t a l i a n a — a v i o n i c s . A l f a Romeo. — engine. (AW&ST, June 5th, 1980.) page -108 Table VII). Coat control on joint ventures; selected data. Project. Total cost Cost ( m.) escalation, J o i n t projects. 1) . Concorde (UK-France) Total cost increase 1962-73 895 Development cost e s c a l a t i o n : a) Current prices 1962-73 6.27 b) Constant prices 1962-73 2.23 c) Current prices 1962-80 6.67 2) . Jaguar (UK-France) 1.10 3) . Lynx helicopter (UK-France) Escalation i n R&D costs, 1967-73, constant p r i c e s . a) Airframe 2.06 b) Engine 2.80 4) . Tornado (UK, FRG, I t a l y ) a) Unit production cost 1973 2.90 b) Unit production cost 1981 11.40 c) Escalation i n unit production costs, current prices 3.93 unit production costs, constant prices 1.27 R&D costs to 1976, constant prices 1.40 Comparative data; national pro jects 5) . TSR-2 (UK, 1959-62) R&D cost e s c a l a t i o n , constant prices 2.80 6) . F - l l l (USA) 1.98 (Hartley, 1983, p.170) page -109 Figure 1).  Combat wing loading vs. T/W r a t i o . SCO Cc.-rtbal" •100 •loo •SCO -kt>o •?00 •200 'WO •Tomaclo •Fill pio^. «Tsax __ • * Harrier JAauar • pjj. F S f • PI FMc ^ * *FIS 2AM —> ' « « 1 i 1 1 i « . . i o . i OJ. 0 . 5 6.1* e.s e .6 on o . 8 o . q w u u i , ^ Figure 2). Combat span loading vs. T/W r a t i o . Fio^. * 20O p £*k .Harrier OS o't *-7 oi» oJ«* l-o l ! l — i ' . l , l-'i t.V 3» (Heath, 1979, p.332.) page E-lio Figure 3. Organisational framework of the MRCA-Tornado programme, U.K. Ministry of Defence (385 MRCAs) West Germany Ministry of — Defence (324 MRCAs) NAMMO It a l y •Ministry of Defence (100 MRCAs) NAMMA I contracts PANAVIA (Airframe and avionics) BAC - MBB - A e r i t a l i a Avlonica Systems Engineering { EASAMSESG - SIA. } { (UK) (FRG) ( I t a l y ) } (Engines)- Turbo-Union Rol l s Royce - MTU - Fia t 1 Dissolved i n 1972: avionics management then led by EASAMS KEY NAMMO NAMMA BAC MBB MTU EASAMS -ESG SIA NATO MRCA Management Organisation. NATO MRCA Managemant Agency. B r i t i s h A i r c r a f t Corporation. Messerschmidt-Boelkow-Blohm. Motoren und Turbinen Union. Elliott-Automation, Space and Advanced M i l i t a r y Systems, Elektronik-System G.m.b.H. Societa I t a l i a n a per l'Av i o n i c a . page i l l 

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