tag:theconversation.com,2011:/id/topics/bae-3959/articlesBAE – The Conversation2014-02-13T14:46:18Ztag:theconversation.com,2011:article/231502014-02-13T14:46:18Z2014-02-13T14:46:18ZKiller robot drones are like drugs: regulate, but resist the urge to ban them<figure><img src="https://images.theconversation.com/files/41384/original/v4phdrhd-1392216988.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Taranis in flight.</span> <span class="attribution"><span class="source">BAE Systems</span></span></figcaption></figure><p>BAE Systems has revealed that it has <a href="http://www.baesystems.com/enhancedarticle/BAES_157659/taranis-unmanned?_afrLoop=49001152028000&_afrWindowMode=2&_afrWindowId=null">successfully test-flown</a> Taranis, its prototype Unmanned Aerial Vehicle. </p>
<p>The test has some people understandably hot under the collar. But while there is much to debate on the detail, the answer to the biggest question of all, whether or not we should ban drones, is unequivocal. We should not. Like effective but dangerous drugs, the answer is not to ban them. It’s to subject their development to rigorous testing and regulation.</p>
<p>BAE’s video footage shows a sleek boomerang-shaped blade cruising sedately over the Australian outback. Taranis is a stealth aircraft, designed to evade radar. It is pilotless, meaning it can manoeuvre in ways that would cause a human to black out if they were on board. And crucially, it’s a step on the way to drones that can make autonomous targeting decisions. More bluntly, it’s a step towards killer robots taking to the sky. </p>
<p>It’s not difficult to see why the idea of killer robots causes alarm. Some worry that these machines won’t be able to distinguish reliably between soldiers and civilians and will end up killing innocents. Others imagine Terminator-style wars between robots and people.</p>
<p><a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1468-5930.2007.00346.x/abstract">Philosophers</a> get in on the act too, arguing that enabling machines to decide who to kill is a fundamental breach of the conditions of just war. For it is unclear who should be held responsible when things go wrong and a drone kills the wrong targets. It can’t be the dumb robot. Nor can it be the soldier who sends it to battle, because he or she only decides whether to use it, not what it’s going to do. It can’t be the designers, because the whole point is that they have created a system able to make autonomous choices about what to target.</p>
<p>This is all smoke and mirrors. The <a href="https://theconversation.com/better-to-know-your-enemy-when-taking-on-a-killer-robot-20330">anti-killer-robot campaigners</a> are right when they say now is the time to debate whether this technology is forbidden fruit, better for all if left untouched. They are also right to worry whether killer robots will observe the laws of war. There is no question that killer robots should not be deployed unless they observe those laws with at least the same (sadly inconsistent) reliability as soldiers. But there is no mystery as to how we will achieve that reliability and with it resolve how to ascribe moral responsibility.</p>
<p>There is an analogy here with medicines. Their effects are generally predictable, but a risk of unpleasant side-effects remains. So we cautiously test new drugs during development and only then license them for prescription. When prescribed in accordance with the guidelines, we don’t hold doctors, drug companies, or the drugs to account for any bad side-effects that might occur. Rather, the body which approves the medicine is responsible for ensuring overall beneficial outcomes.</p>
<p>So too with killer robots. What we need is a thorough regulatory process. This will test their capabilities and allow them to be deployed only when they reliably observe the laws of war.</p><img src="https://counter.theconversation.com/content/23150/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tom Simpson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>BAE Systems has revealed that it has successfully test-flown Taranis, its prototype Unmanned Aerial Vehicle. The test has some people understandably hot under the collar. But while there is much to debate…Tom Simpson, Associate Professor of Philosophy and Public Policy, University of OxfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/200022013-11-13T06:12:46Z2013-11-13T06:12:46ZCostly to keep afloat: Britain’s waning warship industry<figure><img src="https://images.theconversation.com/files/34797/original/9x5n25pv-1383920423.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Made in the UK: nuclear submarine HMS Vanguard and Type 45 frigate HMS Dragon</span> <span class="attribution"><span class="source">MOD/Tam McDonald</span></span></figcaption></figure><p>The controversy over the BAE Systems <a href="http://www.bbc.co.uk/news/uk-scotland-glasgow-west-24831779">decision on warship building</a> has been dominated by myth, emotion and pleading. Arguments are raging about English versus Scottish jobs, about shipbuilding as a key component of the UK defence industry, and about the loss of “essential” skills. Economists can help improve the debate by critically evaluating the arguments and identifying some of the basic economics of the BAE decision.</p>
<p>The UK warship industry comprises both surface warships and submarines. BAE is the UK monopoly supplier of both, but the current announcement only refers to surface warships, and to the yards at Portsmouth and on the Clyde where these are built. </p>
<p>Submarines, meanwhile, are made at the BAE yard at Barrow-in-Furness. This is a unique facility in that it builds nuclear-powered submarines in small numbers for a single customer, the Royal Navy. There is sufficient submarine work ahead to maintain Barrow to around 2025 – and beyond, if a new submarine deterrent system is ordered.</p>
<p>But even with Barrow’s future relatively assured, the UK warship industry cannot ignore the defence economics problem: falling defence budgets, costly equipment and rising unit costs.</p>
<h2>Not cheap</h2>
<p>Modern surface warships are not cheap. Type 45 destroyers cost almost <a href="http://www.defenseindustrydaily.com/ddg-type-45-britains-shrinking-air-defense-fleet-04941/">£1 billion</a> per ship; aircraft carriers cost at least <a href="http://www.bbc.co.uk/news/uk-24833555">£3 billion</a> per vessel; and Astute submarines each cost over <a href="http://www.telegraph.co.uk/finance/newsbysector/industry/defence/8079977/HMS-Astute-Royal-Navys-world-beating-1.2bn-nuclear-submarine.html">£1 billion</a>. </p>
<p>Meanwhile, unit costs are rising in real terms; for example, while the current Type 45 costs £1 billion per unit, the Type 23 frigate, had a unit cost in 1989 of just <a href="http://www.dasa.mod.uk/publications/finance-and-economics/defence-economic-papers/intergenerational-equipment-cost-escalation/2012-12-18/18_december_2012.pdf">£183 million</a> (or just under three times as much in today’s prices).</p>
<p>These higher unit costs, along with falling defence budgets, mean fewer warships are being bought by the Royal Navy. Quite simply, the UK therefore needs fewer shipbuilding yards. In 1980, the Navy <a href="http://www.parliament.uk/briefing-papers/RP00-99">operated</a> 66 destroyers and frigates; by 2012, this number had fallen to <a href="http://www.dasa.mod.uk/publications/UK-defence-statistics-compendium/2012/chapter-4-formations-vessels-aircraft-and-vehicles/2012-chapter-4-formations-vessels-aircraft-and-vehicles.pdf">18 vessels</a>, and the future requirement for the Type 26 is <a href="http://www.royalnavy.mod.uk/News-and-Events/Latest-News/2013/September/11/130911-Type-26">13 ships</a>.</p>
<p>The defence economics problem means that difficult choices about the UK warship industry and the defence industrial base cannot be avoided. Something has to go – the only question is what.</p>
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<img alt="" src="https://images.theconversation.com/files/34800/original/znnmr6w4-1383923488.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/34800/original/znnmr6w4-1383923488.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=481&fit=crop&dpr=1 600w, https://images.theconversation.com/files/34800/original/znnmr6w4-1383923488.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=481&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/34800/original/znnmr6w4-1383923488.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=481&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/34800/original/znnmr6w4-1383923488.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=604&fit=crop&dpr=1 754w, https://images.theconversation.com/files/34800/original/znnmr6w4-1383923488.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=604&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/34800/original/znnmr6w4-1383923488.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=604&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Billion-pound baby: the new Type 45 frigate HMS Daring.</span>
<span class="attribution"><span class="source">LA(Phot) Keith Morgan/MoD</span></span>
</figcaption>
</figure>
<h2>How the industry can survive</h2>
<p>Retaining a British warship industry is not costless. Its resources have potential alternative uses in other sectors; it might be more efficient to re-allocate resources to other higher value activities elsewhere in the economy. Much depends on society’s willingness to pay for such an industrial capability.</p>
<p>There are also other ways of retaining the industry. Some of the facilities could be mothballed and re-opened at some future date. This would require skilled labour for any future re-generation, and recruiting and training such labour will incur costs and take time; still, the costs of such an option need to be explored, and some skilled labour is generally available within the broader UK economy. While more specialised design skills for surface warships might be more difficult to obtain, they are usually only required in small numbers, and could be retained at reasonable cost by working on prototype designs.</p>
<p>Most importantly, preserving the industry’s current yards and industrial structure is not the only way to retain it. On the contrary, the introduction of supplier competition could play a major role. For instance, competition for the new Type 26 combat ships will lead to new designs, lower prices and novel forms of industrial organisation. </p>
<p>While a truly competitive industry would allow foreign firms to submit designs, a requirement that warships be built in the UK could still be imposed. A new manufacturer could act as systems integrator, and sub-contract the warship assembly to a UK yard. There are a number of yards owned by BAE, Babcock and others, including yards building oil platforms, which are potentially suitable for sub-contracted warship assembly.</p>
<h2>The politics of warship building</h2>
<p>Critics of the BAE decision have criticised it for being politically motivated. This should not be surprising. All defence procurement decisions are political, because they are ultimately made by governments. As the warship industry’s major buyer (for some ships, the only buyer), government necessarily determines the industry’s size, structure, performance and ownership.</p>
<p>Traditionally, UK Governments have required all Royal Navy warships to be built in the UK, mainly to guarantee security of supply. This is a unique commitment which does not apply to any other sectors of the UK’s defence industrial base, even highly sensitive ones: for example, the missiles for the British nuclear deterrent are imported from the USA. </p>
<p>Nor does commitment to domestic production and buying reflect the international competitiveness of the UK’s warship industry, which has not been particularly successful in export markets (unlike our aerospace industry, for instance). Nor is the warship industry a major employer in the grand scheme of the economy. If the case for retaining it is based on jobs, there are other industrial sectors that could offer more employment opportunities when given the same Government attention and support.</p>
<p>In short, to make informed decisions about the future of the domestic warship industry, we must answer a number of often ignored but vital questions. What, exactly, are the aims of our current policy, and what are the alternatives? Is the price of buying British warships a smaller and weaker Royal Navy? And could we buy our warships at a lower overall cost from foreign sources of supply?</p><img src="https://counter.theconversation.com/content/20002/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Prof Keith Hartley has receives funding from
European Defence Agency (past funding)
DSTL. (past funding)</span></em></p>The controversy over the BAE Systems decision on warship building has been dominated by myth, emotion and pleading. Arguments are raging about English versus Scottish jobs, about shipbuilding as a key…Keith Hartley, Emeritus Professor of Economics, University of YorkLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/200002013-11-07T14:56:53Z2013-11-07T14:56:53ZAs BAE cuts jobs, is a strong defence sector really needed?<figure><img src="https://images.theconversation.com/files/34692/original/jdpzwz3b-1383828006.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Rule Britannia, Britannia rules the arms trade.</span> <span class="attribution"><span class="source">Andrew Milligan/PA</span></span></figcaption></figure><p>The announcement that defence company <a href="http://www.bbc.co.uk/news/uk-scotland-glasgow-west-24831779">BAE Systems is to cut 1,775 jobs</a> at its naval warship yards in Portsmouth and in Scotland will come as a huge blow to those workers, their families and their local communities. </p>
<p>It also prompts questions about the nature of the defence industry in the United Kingdom. Does the UK need a strong defence industry? Does the sector deserve special treatment?</p>
<p>The defence industry divides opinion. To some, it is a manufacturing success story, supporting thousands of engineering jobs and contributing to much needed high tech exports. To others, it is the immoral playground of “the merchants of death”, manufacturing the means of war and making profit out of bloodshed.</p>
<p>Certainly, the UK has long stood out from many other developed economies because of the scale and scope of its defence industry. The industry <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/237314/bis-13-1154-defence-growth-partnership.pdf">directly employs 155,000 people</a> in the UK with a turnover of more than £20 billion and is the number one exporter of defence equipment and services in Europe, second only to the US worldwide.</p>
<h2>Monopsony money</h2>
<p>The market for complex weapon systems such as warships, fighter aircraft and their like is peculiar. This is a rare example of a “<a href="http://www.investopedia.com/terms/m/monopsony.asp">monopsonistic market</a>”, a market with a single national customer: the Ministry of Defence (MoD).</p>
<p>Consequently, what the MoD decides to buy or not to buy sets demand in the national market, determines the structure of the defence industry and the character of the products (weapons) that it produces. Ultimately, the reason why BAE Systems announced job losses this week is that there is insufficient demand from its main customer, the MoD.</p>
<p>At the same time, the MoD’s design decisions (as well as the export licenses it is willing to issue) determine the exportability of UK weapons. Indeed, some argue that designing specifically to the requirements of the Royal Navy has made it difficult, almost impossible, for BAE Systems to export many of its naval warships; the designs are simply too sophisticated, too UK-centric and too expensive for the needs of many foreign navies.</p>
<p>In many sectors of the defence market, the MoD as a monopsonist (single buyer) faces a monopoly supplier. This applies in the case of naval warships as well as many types of military aircraft and armoured vehicles and effective monopolies also exist in sectors such as helicopters and guided missiles. </p>
<p>The existence of monopoly suppliers is a conscious decision of the MoD: the economics of the defence industry have led to the conclusion that the UK cannot sustain more than one supplier in these sectors.</p>
<h2>War - what is it good for?</h2>
<p>Why sustain a UK defence industry at all? The core argument is that UK security requires an assured supply of weapons in times of war. It is argued that depending on suppliers located overseas –- even when they are a close ally -– leaves the UK vulnerable to outside influences on where and when it can deploy force. </p>
<p>There are some areas –- the nuclear deterrent being the most striking –- where the UK has long been dependent on foreign supply (from the US). In others, like military aircraft and guided weapons, the UK has entered into European or transatlantic industrial alliances. Much of the UK defence industry is now owned by French, Italian or American defence industry multinationals, just as BAE Systems is now one of the biggest defence contractors in the US. </p>
<p>However, although the industry is now more international in ownership and organisation, “security of supply” considerations mean the MoD insists that key work –- and key workers –- are located in the UK.</p>
<p>Another argument used by industry and the government to sustain the defence sector is its contribution to UK manufacturing exports. The coalition’s efforts at “rebalancing” the UK economy back towards manufacturing have seen renewed efforts to sell British arms abroad and a recently-established “<a href="https://www.gov.uk/government/news/prime-minister-backs-the-joint-defence-growth-partnership">Defence Growth Partnership</a>”, that’s strap line is “Government and industry working together: a fresh and ambitious approach to build a strong future for the UK defence sector”. </p>
<p>The morality of selling weapons to countries with questionable political credentials has long been a subject of debate. The costs and benefits of defence exports have also been questioned by economists. One <a href="http://www.caat.org.uk/issues/MoD-York-report-Nov01.pdf">well-known study</a> suggested that the costs of reduced exports would be relatively small, and that arguments in support of defence exports should focus on non-economic considerations (such as their contribution to UK influence and sustaining defence technological capabilities). </p>
<p>A further argument that has traditionally been deployed in support of the UK defence industry is that spending on defence science and technology acts as a stimulus to the wider economy. Again, the extent to which defence procurement stimulates innovation in the wider economy is a highly contested – yet surprisingly under-researched – issue. The <a href="http://www.csbsju.edu/Documents/Clemens%20Lecture/HistoricallySpeaking-Issues%20merged%201%2016%2007_2_.pdf">experience of the United States during the Cold War</a> does not necessarily translate to impacts on the UK today. </p>
<p>Certainly, the UK defence industry has significant capabilities in certain technologies and is an important source of skilled labour, but the “spin-offs” from defence spending appear to be increasingly limited. These days the defence industry is more concerned about accessing technology from other more dynamic (civilian) sectors.</p>
<p>There are significant challenges ahead for the government and the defence industry. Austerity and the withdrawal from Afghanistan means that defence budgets in Europe and the US are being squeezed, and there are few new large defence programmes on the horizon. </p>
<p>Export markets are becoming even more competitive as arms suppliers from Europe and the US turn abroad to sustain themselves. At the same time, new threats and new technologies – not least in cyberspace – are making traditional defence industrial capabilities redundant, and may open up the market to a new breed of security companies.</p>
<p>Ultimately, for so long as the UK has armed forces they will require reliable and high quality equipment. The UK defence sector may shrink and may shift its emphasis towards a broader concept of security but it won’t go away - and that is likely to mean more difficult decisions for government and industry in the years ahead.</p><img src="https://counter.theconversation.com/content/20000/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew James has received funding from the ESRC, European Commission and European Defence Agency and has undertaken consultancy for a number of companies in the aerospace sector. </span></em></p>The announcement that defence company BAE Systems is to cut 1,775 jobs at its naval warship yards in Portsmouth and in Scotland will come as a huge blow to those workers, their families and their local…Andrew James, Senior Lecturer in Science and Technology Policy and Management, University of ManchesterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/99062012-10-02T03:58:32Z2012-10-02T03:58:32ZArms deals: making sense of the EADS-BAE super merger<figure><img src="https://images.theconversation.com/files/16040/original/trsvt6sf-1349065082.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">It might seem like a natural corporate fit, but will politics get in the way of the merger between defence behemoths BAE Systems and EADS?</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>It would be the world’s largest aerospace and defence contractor. Bigger than Lockheed Martin. Bigger than Northrop Grumman. And even bigger than the current global No. 1 defence corporation, Boeing.</p>
<p>The prospect of a £29 billion ($AUD45 billion) merger between BAE Systems (BAE) and Franco-German-controlled EADS (European Aeronautic Defence and Space Company) has created a serious buzz in both defence and financial circles.</p>
<p>Pundits are already labelling the anticipated conglomerate “BEADS”. Among global defence firms, EADS currently ranks second by revenues, while BAE holds fifth place. <a href="http://theconversation.com/the-most-powerful-companies-youve-never-heard-of-eads-3192">EADS</a> owns Airbus Industries and, via a subsidiary, builds the Eurofighter Typhoon with BAE.</p>
<p>While EADS’ military arm is focused predominantly upon European defence procurement, BAE plays a major role in the technology development and manufacturing for the US market, including the F35 fighter aircraft for Lockheed Martin, and the Type 45 destroyer for the Royal Navy.</p>
<p>BAE and EADS are a natural corporate fit. The two companies already collaborate on a large number of projects, while BAE was a major shareholder in Airbus until 2006, a position it inherited from one of its predecessors, British Aerospace. But BAE also suffered an 11% fall in revenue in 2011, losing its No. 2 position in the global defence firm rankings, due partly to UK defence expenditure cuts. By contrast, <a href="http://www.pwc.com/en_US/us/industrial-products/assets/pwc-aerospace-defense-review-and-forecast.pdf">EADS saw a year-on-year 13% revenue increase</a> for 2011, finishing a hair’s breadth behind No. 1-ranked Boeing.</p>
<p>But this prospective merger is also causing furrowed brows in the Pentagon and on Capitol Hill. Why? Because BAE is a major player in the highly-sensitive and ultra-secretive US defence industry.</p>
<p><strong>A privileged partner</strong></p>
<p>Britain not only has a “special relationship” with the US, but it is also a privileged partner. The UK is a “full collaborative partner” on the F35 Joint Strike Fighter (JSF) project (Australia is mere “Level 3” partner), with billions of dollars invested in development. BAE also happens to manufacture a significant number of the major components for the F35 platform.</p>
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<img alt="" src="https://images.theconversation.com/files/16045/original/xpjpy2b2-1349067318.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/16045/original/xpjpy2b2-1349067318.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=436&fit=crop&dpr=1 600w, https://images.theconversation.com/files/16045/original/xpjpy2b2-1349067318.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=436&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/16045/original/xpjpy2b2-1349067318.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=436&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/16045/original/xpjpy2b2-1349067318.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=548&fit=crop&dpr=1 754w, https://images.theconversation.com/files/16045/original/xpjpy2b2-1349067318.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=548&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/16045/original/xpjpy2b2-1349067318.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=548&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The US and Britain have one of the closest defence relationships in the world.</span>
<span class="attribution"><span class="source">AAP</span></span>
</figcaption>
</figure>
<p>In 1994, the Lockheed Martin-designed Trident nuclear submarine entered service; Prime Minister Tony Blair renewed the UK’s £20 billion Trident contract in 2006. Given its close defence ties with the US, going back to Polaris in the 1950s, the UK is afforded a level of access to US defence technologies without parallel — although certain Canadian firms are significant collaborators and contractors within the US defence industry.</p>
<p>Perhaps even more importantly, the UK gains high-level intelligence from Washington, of particular benefit in combating terrorism; London also supplies Washington with its own high-quality human and signals intelligence. UK-US intelligence cooperation is exceptionally close: for example, a CIA representative sits on the Cabinet Joint Intelligence Committee (JIC).</p>
<p>BAE has spent big in America, acquiring or gaining contracts with myriad US defence contractors, including United Defence Industries, Tracor, Lockheed Martin Control Systems, Mevatec, Boeing Commercial Electronics, Alphatec, and DigitalNet Holdings. The US market now accounts for more than half of BAE’s revenues.</p>
<p>Consequently, with projects like the JSF, BAE has access to much privileged information – so much so that Chinese cyber spies reportedly <a href="http://www.theaustralian.com.au/news/world/security-experts-admit-china-stole-secret-fighter-jet-plans/story-fnb64oi6-1226296400154">hacked into BAE’s servers</a> to gain information about the JSF’s design, particularly its radar system.</p>
<p>For decades, British governments and defence firms attempted to obtain an <a href="http://www.pmddtc.state.gov/faqs/documents/FAQS_Treaties.pdf">ITAR exemption</a> (International Traffic in Arms Regulations). Successive US presidents, from Clinton to Obama, promised to issue what is known as an “ITAR waiver”. But none of them could ever get an ITAR waiver past Congress, which takes its role as protector of US defence technology very seriously indeed.</p>
<p>Until now. In May this year, the US finally conceded to an ITAR exemption, significantly enhancing defence cooperation with the UK. Now, this exemption does not mean any British defence contractor can do business with, or gain access to, highly-sensitive US defence technologies. Instead, it creates an “approved community” of UK firms that are permitted a given level of access to certain technologies.</p>
<p>There are multiple hoops through which British firms are forced to jump in order to achieve this level of access to the US market. All firms are vetted thoroughly. They are all forbidden expressly from sharing any information or technologies with third parties. Which is where the problems start.</p>
<p><strong>Enter left, EADS</strong></p>
<p>The US’s special relationship with the UK does not extend to continental Europe. Washington does not share sensitive defence technologies or, indeed, the highest-level intelligence with its European allies, despite the fact that most European countries are members of the US-led North Atlantic Treaty Organisation (NATO). For example, Echelon, an intelligence-sharing program operated jointly by the US, UK, Canada, Australia and New Zealand, is employed by Washington to assist its corporations in commercial competition with EU firms to gain Third World contracts. Neither the US nor Britain share any Echelon material with EU states, as it remains intelligence to which the ‘Anglosphere’ only is privy.</p>
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<img alt="" src="https://images.theconversation.com/files/16043/original/qdxn42hq-1349066249.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/16043/original/qdxn42hq-1349066249.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=374&fit=crop&dpr=1 600w, https://images.theconversation.com/files/16043/original/qdxn42hq-1349066249.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=374&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/16043/original/qdxn42hq-1349066249.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=374&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/16043/original/qdxn42hq-1349066249.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=470&fit=crop&dpr=1 754w, https://images.theconversation.com/files/16043/original/qdxn42hq-1349066249.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=470&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/16043/original/qdxn42hq-1349066249.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=470&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">EADS CEO Tom Enders prepares to address the economic affairs committee of the German Bundestag on the proposed merger with British BAE.</span>
<span class="attribution"><span class="source">AAP</span></span>
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<p>For Washington, EU defence firms, including EADS and Finmeccanica (Italy) are merely competitors. But EADS has long been the biggest target of US opprobrium. For two decades, Boeing and EADS’ Airbus subsidiary have fought a bitter conflict in the World Trade Organisation (WTO), as each accused the other of massive industry subsidies (both are guilty parties). </p>
<p>For this fight, which commenced in 1994, and paused only briefly with a WTO ruling in 2011, both sides mobilised their big guns: the EU’s Trade Directorate-General and the US Trade Representative’s (USTR) office. But only last week, EADS renewed the transatlantic air wars with a EU request to the WTO to <a href="http://gulfnews.com/business/aviation/eu-seeks-12bn-from-us-over-boeing-aid-1.1082816">levy $US12 billion in punitive duties</a> on US exports in retaliation for alleged illegal subsidies to Boeing.</p>
<p>Back in 2004, the EU established the European Defence Agency (EDA), a seemingly innocuous central planning office, with a brief to streamline and harmonise EU defence procurement. The fragmented EU defence materiel market was inefficient, wracked with product duplication, and exceptionally costly. The lack of EU defence materiel integration meant that Europe imported 50% of its military equipment from the US. The EDA sought to change all that by “Europeanising” defence procurement.</p>
<p>But “European champions”, like the EADS conglomerate, made it possible for EU aerospace and defence industries to challenge virtual monopolies like Boeing in both the civil and military aviation markets. Platforms like the Airbus A320 were instant successes; the super-jumbo A380-800 is in direct competition with the Boeing 787 Dreamliner; the wide-body, carbon-fibre A350 is scheduled to take off in 2014; and the EU’s dependence upon the Boeing C-17 Globemaster III long-range, heavy-transport aircraft will come to an end once the Airbus A400M, its own long-range military transporter (and <a href="http://blogs.wsj.com/source/2012/07/11/groundhog-day-for-airbuss-a400m/">financial black hole</a>) goes into service.</p>
<p><strong>A delicate balance</strong></p>
<p>Politics will affect any potential BAE-EADS merger profoundly. </p>
<p>The cultures of the two firms are entirely different. BAE is the quintessential transatlantic corporation, while EADS, although nominally “European” with its headquarters in Leiden, the Netherlands, is very much a Franco-Germany firm that is really run by the French and German governments – the latter via its proxy, Daimler (yes, the lovely people who make your Mercedes-Benz).</p>
<p>The problem is that Daimler has long wanted out of this cosy arrangement, as does France’s Lagardère. But Berlin wants an equal share of EADS to ensure that the traditional balance of power between Paris and Berlin is maintained by each retaining equal stakes in the firm. On September 30, France and Germany reportedly reached an <a href="http://www.reuters.com/article/2012/09/30/eads-government-idUSL6E8KU1K620120930">agreement to take 9% each</a> in a merged BEADS.</p>
<p>The French and German governments will need to bargain to ensure the delicate ownership power balance of EADS is maintained, even as Lagardère and Daimler seek to liquidate their shareholdings in the company. Meanwhile, a tussle has broken out: France and Germany reportedly want the BEADS merger ratio to be 65:35 in EADS’ favour, while BAE management want 60:40. </p>
<p>Cross-Channel rivalry reared its head on 1 October; the UK government reportedly <a href="http://www.reuters.com/article/2012/10/01/us-bae-eads-idUSBRE8900RC20121001">does not want a BEADS dominated by Franco-German shareholdings,</a> which would amount to Paris and Berlin running BEADS as a state-controlled firm. British may veto the merger if it doesn’t get the deal its wants. Moreover, BAE’s labour head count is more than double that of EADS, with most of the jobs located in the UK. Cameron is likely to want assurances from EADS that BAE jobs will not be off-shored to the continent.</p>
<p>In the interim, shareholders are getting out. Both EADS and BAE shares have fallen sharply in recent weeks, with <a href="http://www.valuewalk.com/2012/09/bae-systems-merger-with-eads-is-making-many-people-unhappy/">Deutsche Bank advising clients to hold EADS</a> rather than buy, while Investec has changed its recommendation on EADS to “sell”.</p>
<p><strong>Allies, not friends</strong></p>
<p>The EADS-Boeing war represents only one facet of the multidimensional trade and strategic conflicts between Washington and Brussels. </p>
<p>In Washington, a merged BEADS would give long-time Franco-German rivals access to lucrative and sensitive Pentagon defence contracts and technologies. And, given renewed Chinese pressure on Brussels to <a href="http://www.aljazeera.com/news/asia-pacific/2012/09/2012920151716621141.html">abolish the EU arms embargo on China</a> that has been in place since 1989, Congressional fears of technology leaks or transfers to Beijing are not entirely unfounded. </p>
<p>A repeat of the <a href="http://www.spiegel.de/international/europe/expensive-autonomy-europe-s-overpriced-navi-system-heads-for-space-a-793035.html">Galileo fiasco</a>, which would have seen the EU grant Beijing access to its dual-use GPS at a bargain-basement price, could be in the offing with the prospect of a BEADS merger. This would serve to empower the forceful and persuasive US defence industry lobby, which regards EADS as quite powerful enough already.</p>
<p>But in a US election year dominated by the politics of recession, don’t expect either Congress or the White House to be in a generous mood towards Europeans. Particularly ones who hit them with $US12 billion trade lawsuits.</p><img src="https://counter.theconversation.com/content/9906/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Remy Davison's Chair is funded by the EU Commission.</span></em></p>It would be the world’s largest aerospace and defence contractor. Bigger than Lockheed Martin. Bigger than Northrop Grumman. And even bigger than the current global No. 1 defence corporation, Boeing. The…Remy Davison, Jean Monnet Chair in Politics and Economics, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.