Research Paper Reconciles Globalization Risks, Opportunities For U.S. Defense Industry

UNIVERSITY PARK, PA (May 30, 2007) – In a monograph written for the Strategic Studies Institute of the U.S. Army War College, a professor at Penn State's Smeal College of Business offers ten policy recommendations that will allow the U.S defense industry to flourish in a global market without compromising national security.

Globalization is causing change in nearly every industry in the U.S. economy, but for the defense industrial base, the potential for international growth must be tempered with the need to protect critical defense technologies and U.S. national and economic security.

In "Globalization and Its Implications for the Defense Industrial Base," Terrence Guay, clinical assistant professor of international business at Smeal, explores how globalization has changed defense industries around the world and offers a recommended path that will capitalize on international economic opportunities and also mitigate security risks.

"Globalization, in many ways, has strengthened the hand of defense companies at the expense of national governments," Guay writes. "With more opportunities to expand their international presence, governments, at times, are being required to make concessions that would have been unheard of even a decade ago.

"However, given the scope of globalization and the multiple actors and dimensions that underpin it, it is beyond the ability of the U.S. Army or even the Department of Defense to shape its direction, even as globalization relates to the U.S. defense industrial base," he concludes.

Thus, Guay's recommendations span all levels of government, the private sector, and academia.

First, he suggests that the Defense Department "monitor international production patterns of leading U.S. defense industrial companies" to determine if the international activities of the defense industry have the potential to threaten national security.

"DoD officials should consider stipulating that the 30 largest defense contractors must submit an annual report describing the extent of their international production and R&D, including their leading suppliers," he writes.

Guay’s nine other recommendations follow:

        • The executive and legislative branches of government should make the approval process for foreign                     acquisitions more transparent.

        • The Defense Department should take a proactive stance in terms of investment in the United States by                 foreign defense companies.

        • The DoD should give preference to foreign companies with U.S.-based production when awarding                         contracts.

        • The DoD should be judicious in restricting technology transfer.

        • U.S defense companies should diversify into nondefense sectors.

        • Federal, state, and local governments should improve math and science education.

        • The federal government and U.S. universities should rebalance security concerns with economic                         competitiveness in areas of scientific research.

        • The federal government and defense companies should ease restrictions on foreign high-skilled workers.

        • The federal government and defense companies should work with global institutions to harness the                     benefits of globalization.

"Globalization and Its Implications for the Defense Industrial Base" is available online at www.strategicstudiesinstitute.army.mil/pdffiles/PUB756.pdf.

About Terrence Guay
Guay is the author of At Arm’s Length: The European Union and Europe’s Defence Industry (Macmillan and St. Martin’s Presses, 1998), The United States and the European Union: The Political Economy of a Relationship (Sheffield Academic Press, 1999), and several academic journal articles and book chapters on transatlantic relations, political economy, business-government relations, and security.

He holds a bachelor’s degree from Clarkson University, an M.B.A. from The Ohio State University, and M.A. and Ph.D. degrees from Syracuse University. Previously, he was a faculty member in the Maxwell School of Syracuse University and the School of International Service at American University.

About The Strategic Studies Institute of the U.S. Army War College
The Strategic Studies Institute is the U.S. Army’s institute for geostrategic and national security research and analysis. The Strategic Studies Institute conducts strategic research and analysis to support the U.S. Army War College curricula, provides direct analysis for Army and Department of Defense leadership, and serves as a bridge to the wider strategic community.