Raytheon is selling the 5% NATO deal back to Europe and calling it burden-sharing.
I want to walk through this the way I walk a customer through an estimate, because that is the only way I know how to think about a deal. The announcement out of Ankara this week, after the NATO summit, has Raytheon — an RTX company, which is worth keeping in mind because RTX is what used to be Raytheon before the merger — running feasibility studies to qualify European suppliers for components of the AIM-120 AMRAAM missile. The AMRAAM is the air-to-air missile we have fired in such volume over Ukraine and the Middle East that American and allied stockpiles are nearly empty. Michael Duffey, the Pentagon’s undersecretary for acquisition and sustainment, said the expansion is essential to meet the urgent air defense needs of the United States and our allies. Additional NATO nations are expected to join. The announcement is being framed as a rational response to a real supply problem, and at the level the announcement was written, that is what it is. Below that level, it is what defense-procurement arrangements from American primes have been for the entire postwar period, and what the work in my shop teaches me to recognize on sight: a structure in which the prime keeps the design, the integration, the software, the seeker, the warhead, the rocket motor, the intellectual property, and the profit margin, and the secondary suppliers manufacture the parts the prime has specified, in the tolerances the prime has specified, on the schedule the prime has set.
Let me say what that means in the language I use with the woman who brings her Camry in for a timing belt. When a manufacturer owns the design, the manufacturer owns the markup. When the manufacturer owns the spec, the manufacturer owns which suppliers get the work. When the manufacturer owns the integration, the manufacturer owns the timetable. The customer — Europe, in this case, and through Europe, the European publics who will be funding the 5% — pays for parts the manufacturer tells them to buy, at the price the manufacturer tells them to pay, on the manufacturer’s schedule. The customer does not become a manufacturer. The customer becomes a deeper customer. That is what “co-production” means in the language the announcement is using. It means the parts are made on European soil. The missile is not a European missile. The missile will not become a European missile in any sense the European worker, the European taxpayer, or the European soldier who has to fire it would recognize. The missile is an American missile, made under license, on terms the American prime sets, with the high-value work — the design, the integration, the seeker, the warhead, the propulsion — kept on American soil, in American plants, on American ledgers, in congressional districts where the relevant members of Congress have a direct interest in the prime’s revenue line.
Now I want to say who pays, because the announcement in Ankara was not written for them. On this side of the Atlantic, the people who pay are the workers in the plant towns and the workers in the supplier towns, and the people who work at the suppliers of the suppliers. They are the people in the congressional districts that host the plants, whose representatives extract the appropriations that fund the procurement, and whose constituents work the lines that build the components. They are the people in the plant towns that do not host the high-value work, the integration, the design — the places where the fins and the brackets and the body sections get made, the lower-margin work the prime routes out to second-tier suppliers because it does not pencil to keep it in-house. They are the families in those towns who are watching the cost of groceries, the cost of rent, the cost of a doctor’s visit, the cost of a hospital stay without insurance, while the defense budget at the federal level swells past a trillion dollars a year, and the prime’s stock does what the prime’s stock does, and the prime’s executives collect what the prime’s executives collect. They are the school districts that just lost funding. They are the kids whose teachers just got laid off. They are the veterans in my shop’s waiting room who are waiting on a VA claim that has been pending for fourteen months, and the active-duty families who are packing for another rotation because the missile stocks are empty and somebody has to make more missiles. They are paying. They have been paying for a long time. This arrangement is one more bill, with the prime’s name on the front and their name on the back.
Across the Atlantic, the people who pay are the European worker being asked to fund 5% of GDP through a procurement structure that routes most of the value back to an American prime, and the European taxpayer being told that this is what burden-sharing looks like, and the European defense minister who has been told by his own officials, at every European defense-industrial summit he has attended, that Europe needs its own missile, its own integration, its own intellectual property, and that the Europeans are not going to get any of those under this arrangement. The French, the Germans, the Poles have been saying it out loud for years. The arrangement announced in Ankara is the answer that has been written for them, and the answer is: keep paying. The arrangement is “burden-sharing” in the same sense the alliance’s existing procurement structure is burden-sharing: a structure in which European publics are invited to fund the American prime’s revenue line, and the prime’s revenue line is the goal, and the security gain is the marketing. Barbara Tuchman, in The March of Folly, drew up a checklist for governments pursuing policy against their own interest, and the arrangement announced in Ankara meets every line — the policy is contrary to the interest of the publics funding it, the alternative of a genuinely European missile is named at every European summit, the choice is a group choice made by NATO and the contractors and the congressional districts, and the policy persists past the point at which the contrary evidence is on the public record, because the policy is not made in response to evidence but in response to the apparatus.
The arrangement signed this week is the apparatus doing what the apparatus does. It is not a security arrangement. It is a procurement arrangement. The distinction matters because the procurement arrangement produces the revenue the contractors require, and the contractors require the revenue to maintain the political operation that produces the next procurement arrangement, and the cycle is what Eisenhower warned the country about in his farewell address of January 17, 1961, when he said the conjunction of an immense military establishment and a large arms industry is new in the American experience, and that the total influence — economic, political, even spiritual — is felt in every city, every State house, every office of the Federal government. Sixty-five years later the conjunction is no longer new. It is the substrate. The 5% target extracted at The Hague in June was the demand side of the apparatus. The arrangement announced in Ankara is the supply side. The American prime retains the high-value work, and the European partners get the lower-value work, and the workers in the plant towns on both sides of the Atlantic get the work the prime does not want to keep in-house, and the public on both sides gets the bill, and the bill is what burden-sharing means, in the language the announcement is using.
I want to tell you what a real conversation about this would look like, because I have these conversations. A customer comes in and the estimate does not pencil out. I walk it back to the counter. I tell her what the work actually costs. I tell her who makes the parts. I tell her what the markup is and what the markup is for. I tell her what the work will leave her with and what it will not. If the work does not pencil out, I tell her that, and we talk about it, and she decides. A republic that actually wanted the alliance to keep the security it was supposed to keep would treat the Ankara announcement the way a customer in my shop treats an estimate that does not pencil out: walk it back to the counter, ask what the work actually costs, ask who does the work, ask who keeps the value, and decide whether the work is worth doing. The soldiers who served in the alliance were owed that conversation. The European publics being asked to fund the 5% deal are owed it now. The American workers in the plant towns who are funding it on this side are owed it just as much, and they have been owed it for longer than most of them have been alive.