Commission to Assess the Ballistic Missile Threat to the United States
Appendix III: Unclassified Working Papers


TOC / Previous / Next

Robbin Laird 1 : "Rethinking the Role of Western States as Supplier Nations" The analysis of the proliferation of ballistic - and cruise missiles and of relevant aerospace technology - has largely focused upon the sale of end products. The control of largely government sponsored and supported military technologies has been seen as the core challenge. Among Western states, notably during the end of the Cold War, and in the early post-Gulf War period, there was a broad consensus upon the need for control of end products. Nonetheless, under the impact of the globalization of the economy and of building a global information economy, the role of Western states is changing in relationship to the proliferation problem. Rather than being a problem of controlling transfers of military systems per se, the challenge is now the role of Western entities - corporate and private - in building a global high technology network. Diffusions of technology are generated by the competition among Western entities positioning themselves to play key roles in the new global economy. As Western states rely more heavily upon commercially generated technology, modern military systems become specialized sub-sets of the redesign of a global manufacturing system. As such, the proliferation problem is turned on its head. The West seeks to build a global network and is generating key change in how high technology industries operate worldwide. This is seen as critical to economic health of Western economies. At the same time, the building of such worldwide networks create the preconditions for the diffusion of technologies critical to the building of missiles and air-breathing systems within states which would not have the indigenous capacity to build such systems. The Networking Dynamic A key change associated with the current phase of the globalization of the economy is the role of networks. Governments are losing control over a considerable part of their economic and security agendas. Non-governmental entities are building relations with one another, nationally and globally, which leads to unprecedented diffusion of power in the modern economy. As such, the networking dynamic creates an entirely different context within which proliferation will occur. National export controls will be less and less efficacious as commercial networks diffuse information and knowledge within the global economy. Economically, the shift of the United States from primary reliance on large-scale organizations to the confluence among networks of organizational entities has led to one of the greatest periods of innovation in American history. This shift would have been impossible without the emergence of the new information society. The economic challenge to Asia and Europe is to shift to an economic networking environment and away from the dominance of industrial mega-firms and bureaucracies. American economic groups have sought partners abroad and have outsourced parts of "American" production. Collaboration is "global" in terms of engaging Western and selected Asian economic entities within the U.S. and "Western" production cycle. But the reciprocal impact is growing as well --high technological jobs get exported and production occurs through partnering abroad and at home within the same production cycle. A key question as we enter the 21st Century will be to identify the challenges of "foreign" influences upon "domestic" U.S. capabilities and agendas. Indeed, the international factors of development shaping U.S. policy have become internal forces reshaping the environment within which the government acts. The old distinction between foreign and domestic policy has been significantly eroded. The key delineator is increasingly the level of participation or interaction of key states, cultures or regions within the "American" communication and economic system. As this new global system of "American" culture emerges it is becoming increasingly melded into a global system of values and institutions as well. Indeed, global reactions against the classic American patterns of influence are reshaping an increasingly "global" American model which encompasses cultures both at home and abroad - for they are both. The New Global Manufacturing Model in High Technology Industries A new manufacturing paradigm is being built around the concept of the agile enterprise. 2 According to the Agile Manufacturing Enterprise Forum, "agility is an enterprise's ability to thrive in a competitive environment of continuous and unanticipated change. To respond quickly to rapidly changing markets driven by customer valuing of products and services." 3 Or as Eric Ross puts it: "As the twenty-first century approaches, pressure on manufacturing in certain industries will most likely be accommodated by those companies willing and able to adopt the agile manufacturing paradigm.... [This paradigm] is the natural revolutionary confluence of three concepts which are follows; flexible manufacturing, integrated product development, and strategic partnering." 4 Three years ago, the U.S. government helped organize and fund the Next-Generation Manufacturing (NGM) Project, an elaborate effort to forecast manufacturing business conditions for the next 10 to 15 years. A blue-ribbon team of nearly 500 experts from industry, government, academia, and trade and professional associations and consortia was assembled to put forth a vision of the manufacturing environment of the future. In January 1997, the NGM Project published the results of its 15-month effort, stating, "Unprecedented, interrelated changes in the global business environment are creating entirely new success factors for industrial competition." The key drivers of change according to the NGM study team were the following: * Ubiquitous availability and distribution of information using greatly improved computer and communications systems. * Accelerating pace of change in technology. For example, rapid engineering and production technology changes will place ever-greater demands on the manufacturing workforce, with some companies currently predicting skills obsolescence of up to 20 percent per year. Due to continued automation, manufacturing labor is projected to decrease by about 1 million jobs over the next decade. * Rapidly expanding technology access. As technological and scientific education spreads worldwide, competitive advantage no longer depends solely on superior technology and expertise. The current large differentials in technical skills among nations are shrinking. One example is the rapid growth of software engineering capabilities in India. * Globalization of markets and business competition. * Global wage and job skills shifts. Many job skills will become "commodities" bringing wage scales for traditional skills in the United States down to the world-market level. * Environmental responsibility and resource limitations. * Increasing customer expectations. 5 In their 1996 book, Cooperate to Compete, Kenneth Preiss, Steven L. Goldman, and Roger N. Nagel, research analysts at the Agility Forum, combine these NGM "drivers" into a single package for innovative change. According to the authors, the worldwide spread of education and technology will lead to intense and increasingly global competition as well as to accelerating rates of marketplace change. Mass markets will continue to fragment into niche markets. Customers will become more demanding because of higher expectations. Production will become a more collaborative endeavor, closely involving the suppliers and customers who comprise the value-adding chain. Societal values, such as increased concern regarding environmental considerations or job creation, will have a growing impact on corporate decision making. 6 According to the NGM study, teaming is the key response to the dilemma posed by increasing expectations in a world of limited resources, and it is at the heart of the NGM enterprise. In the new business world, the report said, no single company can own all the skills and experience necessary to meet all the needs of the "stakeholders"--employees, stockholders, the local community, and so forth. Engineers will be concerned "not only with your customer but your customer's customers, and not only your supplier but your supplier's suppliers," according to Preiss, director of agile enterprise projects at the Agility Forum. "The reason for the emphasis on teaming is the quality, speed, and cost requirements of modern competition. You can't afford to be working in a decoupled way. "This is essentially an extended version of concurrent engineering," Preiss added. "Let's look at the origins of concurrent engineering. It turned out that the interactions of designers and engineers are so complicated that there's no way of writing them down explicitly" So the basic idea behind concurrent engineering "was to throw the designers and engineers together in a team and let them hash things out." What is being predicted regarding the growth of teaming is an enlargement of this concept. "In the future, engineering work is going to extend beyond design, manufacturing, and the R&D function to all functions of the company or enterprise, and to many functions in other enterprises as well," he said. Part of the need to establish these extended enterprises arises from the fact that a company "won't be able to afford to maintain some needed skill sets," McGinnis said. Some enterprise functions that are too costly or difficult to duplicate will be linked to the disparate factories and duplication centers, providing round-the-clock service regardless of location. The new NGM company will be part of a global extended enterprise, which the study defined as "a group of institutions that develop linkages, share knowledge and resources, and collaborate to create a product or service." These organizations, the report said, will function in an environment in which concepts of company and national loyalty have been revised, and in which teaming and knowledge-sharing--while competing--are the natural facts of doing business. This kind of collaboration maximizes combined capabilities and enables each institution to realize its strategic goals by providing integrated solutions to customers' needs, the NGM Project stated. In the face of stiff competition worldwide, the report said, companies will have to be distributed globally, with a network of factories, suppliers, distributors, and service centers across the globe. Small and medium-size companies will become integral parts of a global network, even if their own physical facilities never expand beyond the continental United States. The Impact Upon Defense Industries: The Case of the Space Business In short, globalization of the world economy carries with it a new manufacturing model. The emergence of global enterprises is reshaping the way industry works. In a number of high technology industries, strategic partnering on a global basis has reshaped how industry competes. Globalization has radically reshaped the meaning of commercial practices. The emergence in many high technology industries of a global development and production cycle coupled with greater reliance by the Department of Defense upon commercial practices opens up DoD to greater influence from the globalization process. In two areas - the space launcher and satellite businesses--this is already the case. As has been noted in the about to be enacted Commercial Space Act, Today's high technology enterprises and venture capital markets are globalized, meaning American companies cannot remain at the cutting edge of technology if they do not have networks of contacts with overseas entities and access to foreign-developed expertise. The U.S. government is still working through all of the issues involved in how it regulates technology-center businesses in the new age of globalized technology. Proprietary defense industries increasingly may find themselves on the ropes. Unless decision-makers are willing to sustain large industrial bases through the indefinite future, defense will, of necessity, become a contextual industry--an applied application of high technology, commercial industries. A dramatic illustration of the change in the defense business against the backdrop of the globalization of the economy is the space business. The space business is being remade under the pressure of the new information society and the globalization of the economy. Indeed, the landscape of this business will change significantly over the next decade as the reconfiguration of the key players in the space "system" unfolds. The dramatic growth in the satellite market and its dramatic restructuring in response to new technologies, manufacturing approaches and global partnerships is creating a near term surge in demand for reliable and cost-effective space launch. In its 1997 analysis of the expendable launch market, Forecast International made the following judgment about the intersection of the satellite and space launch markets: * The end of this century and the beginning of the next will see unprecedented growth in the expendable launch vehicle market. The current boom in commercial satellite production, brought on by the emergence of many new fixed and mobile satellite communications systems, is creating strong demand for boosters, both the well-established veterans and new entrants.... * These are extraordinary times for the commercial satellite industry and no matter whose predictions you are willing to believe, the fact remains that many new satellite systems will soon be in operation. To get these constellations in place the industry's rocket manufacturers, both the well-established and entrepreneurial start-ups, will need to supply hundreds of launch vehicles. * Forecast International expects about 860 expendable launch vehicles worth nearly $50 billion will roll off the world's production lines during the next 10 years to help satisfy this nearly insatiable demand. Launch vehicle production during the next 20 years will involve nearly 1,480 units valued at $87.1 billion. 7 In short, the space policy "system" is being redesigned by the dynamic interaction among government, the aerospace industry, the international environment and the enhanced role of the networked economy and associated businesses. The Launcher Business in Transition Increasingly launcher policy is a contextual issue - a means to an end. A shift from being an end in itself - for national security above all - to a means to an end - facilitating economic development and globalization - is a significant force pressuring redesign of U.S. launcher policy. The older launch policy focused upon the requirements for a national policy about launchers to meet government needs dictated by the government as the sole-source client of the U.S. launch industry. As the emergence of a broader commercial market for new satellites began to emerge in the early 1990s, there was a clear effort to revive the U.S. launcher business as a player in the new commercial market. The limitation on the use of foreign launch vehicles was perceived to be necessary to permit the revival of U.S. The use of Russian and Ukrainian engines to assist in the revival of the U.S. industry was seen as the major exception to a quasi-protectionist strategy. Underlying the classic launch policy was a central role for government. The government was the key client for the U.S. space business, but also was deeply engaged in the production and systems integration process. National security requirements were paramount in leading the U.S. to enter the space business in the first place. The global competition with the Soviet Union was a key driver for U.S. space policy. Unable to have direct access to Soviet territory and unable to fly at will using high altitude aircraft, space reconnaissance was a key element for monitoring Soviet activity. The inability to operate effectively within a closed society to monitor the activity of the Soviet state was a key driver for traditional U.S. government space requirements. The private sector simply followed the governmental lead. Industry followed military specifications and government requirements in shaping its approach to the space business. In effect, the private sector was a quasi-public sector, heavily regulated and oriented toward meeting U.S. government-only specs. The priority on national security policy meant that there was a sharp distinction drawn between the U.S. and the outside world. U.S. space assets were a key part of the national security system and as such needed to be protected against foreign intrusion and competition. The industrial practices, around which the business was built, emphasized a key role for the government as the systems integrator and relied upon piecework in building handcrafted sats. The Clinton Administration recognized the need to change U.S. policy in response to the new commercial opportunities and conditions. But the public policy redesign effort, which culminated in the 1994 PPD, was simply a beginning effort. A new policy is emerging de facto, which takes into account the new dynamics of change. Although there is no new comprehensive policy document on the way, over the next few years a new policy will emerge in response to the pressures for change. Above all, space launch policy is contextual in character. The emergence of a global marketplace can provide a much wider range of choice for the government. Indeed, if price is a key consideration across a wide spectrum of activities, the government can be more agnostic about the source of launchers - foreign or domestic. The government will enter the marketplace with special requirements on a case-by-case basis, but will rely on the marketplace for off-the-shelf options in most circumstances. Such an approach will require a radical shift in how the government works. The government still acts like it is calling the shots, but unless it is willing to invest significantly more money than it seems willing to do, it will be difficult to control the marketplace. The government will increasingly leverage, not dominate the marketplace. Indeed, a significant change will come from the impact of the globalization of high technology firms. Over the next decade, core US firm will seek and make strategic partnerships on a worldwide basis. A new production cycle - including in the R and D area - will operate globally. The global car is being followed by the coming of the global ship, the global satellite and by the global launcher. In such a circumstance, the boundaries between domestic and foreign become blurred and the reconsideration of government policy toward choices of launcher will be generated as well. Restating the Problem The challenge for a third world proliferant state shifts from the need to get a military end unit largely controlled through military channels to one of leveraging globally available technology to build specialized military systems. By buying systems integrators - Western, Russian, or others - a Third World state would then be able to assemble an air-breathing strike platform capable of hitting adversaries at great distance. Notably, combining cruise missile systems with naval and air platforms will prove attractive in the years ahead as a weapon program of choice for a Third World state bent on confrontation or deterrence. The space launch business is especially revealing of the dynamics of change affecting the proliferation problem. The dramatic upsurge in the space launcher business generates a variety of global competitors and a distributed infrastructure for the satellites, which will build the new global information society. Competition will drive the networking of enterprises and the diffusion of manufacturing technologies and systems integration know-how. Globalization of the economy and the building a global infrastructure for the new information society will reinvent the proliferation problem - with the United States and its core allies at the core of the system. ------------------------------------------------------------------------ 1. Robbin Laird is President, International Communications and Strategic Assessments, specializing in trans-Atlantic economic, information and security issues. Has extensive experience in the assessment of East-West relations and has published widely in English, French and German on Russian, former Soviet Union and European issues. 2. Joseph C. Montgomery and and Lawrence Levine, eds. The Transition to Agile Manufacturing. 1996, ASQC Quality Press: Milwaukee, Wisconsin. 3. J. Ho, Improving Enterprise Agility. 1997, AT Kearney: Chicago, Illinois. 4. E.M. Ross, Twenty-First Century Enterprise, Agile Manufacturing and Something Called CALS. World Class Design to Manufacture, 1994. 1(No. 3): p. 5-10. 5. Next-Generation Manufacturing Project Report: A Framework for Action (Bethlehem, Pennsylvania, 1997), p.2. 6. Kenneth Preiss, Steven Goldman and Roger Nagel, Cooperate to Compete: Building Agile Business Relationship. 1996, New York, New York: Van Nostrand Reinhold. 7. From the executive summary of The World Market for Expendable Launch Vehicles - 1997-2016 (Forecast International, July 1997).


TOC / Previous / Next