DISCUSSing Defence Industry

We are in an intense period of Defence Industry Discussion, with the US and Australia both releasing Defence Industrial Strategy policies in recent weeks, designed to move Industry, economic prosperity and global supply chains forwards. As a student of Defence Industry dynamics (with a thesis regarding how we can build stronger supply chains and improve capability delivery underway), I thought it worthy of reviewing these policies and starting some discussion regarding what can we do in this new environment.

To start with our recently released Defence Industry Development Strategy..

Like previous strategic documents: the Defence Policy for Industrial Participation for one; the need for Australia to enhance our defence capabilities and industrial base to address evolving security threats is key to the way ahead. This calls for a shift in programs, including a significant increase in global military spending and the impact of events such as the Russian invasion of Ukraine and the COVID-19 pandemic. The DIDS has some particular importance as it is one of the first strategic policy documents to be issued since the days of COVID-19 (ah.. working from home….) and fortunately: does not over use the word “unprecedented” to the extent that we have become accustomed. ?

A close look at the DIDS, chapter by chapter, offers some instructive points, to determine what has changed, what is new in the face of the mid-20s, this world of AUKUS and receding shadow of COVID ?in shaping our Industry Capability policy. There is more detail to explore in subsequent chapters where the focus is more explicitly upon exports, industrial partnerships and workforce, but to start our deep dive into the DIDS, with some comparative analysis of the US Defense Industrial Strategy and the Ghosts of Policies Past, we shall begin at the beginning and go on from there.

To consider the scene setting Chapter 1 of the DIDS – someone has done their homework and visited the ABS to look at statistics, without really drawing inference, we cover the strategic rationale for establishing a sovereign defence industrial base in Australia, with some emphasis on the complex challenges in the current global environment. One of the key points made in this chapter is that Australia's geographic advantage is diminishing in the face of advancing capabilities and new threats. This suggests that traditional reliance on geographical isolation for security is no longer sufficient, necessitating a more proactive approach to developing defence capabilities. We also note the effects of climate change in amplifying challenges in Australia's region, further emphasising the need for a robust and self-reliant defence industrial base. A corollary to build upon here is that Australia’s geographic circumstances impose a different set of levers upon Global Supply Chains (and if you’re up for the Google: consider Gravity of Trade) and this will be addressed later in the chapters on Supply Chains and Exports.

The concept of a sovereign industrial base is discussed in the context of previous attempts to define how 'Australian' a defence business or capability is, which have been deemed unsuccessful by some, especially when considering the “shopfront” quality of some organisations. ?There is an argument for a more holistic view that goes beyond mere ownership, suggesting that true sovereignty requires a broader consideration of factors such as business acumen, intellectual property, workforce, and capital in the fabric of an “Australian business”. Other definitions we have seen drew upon sovereign as implying that Australia would have “access to or control of” as needed, but there appears to have been some rethinking around this point by the DIDS team.

In terms of policy implications, like the US Defense Industrial Strategy’s four key areas, the Australian Government's approach to building and supporting the sovereign defence industrial base emphasises the need for collaboration between industry and government to meet the dynamic needs of our complex strategic environment. There are commitments ahead – some are recasting of previous undertakings; but at this juncture one of the key points made is that Australian ownership is not always critical to sovereignty, especially in limited circumstances. This suggests a pragmatic approach that prioritises capability and effectiveness over ownership for its own sake. Highlights are also found in the importance of international industrial partnerships in building strategic weight and deterrence, indicating a recognition that complete sovereignty may not always be achievable or desirable. There is a parallel with the US Strategy with their emphasis on economic prosperity and use of the Defense Industrial Base (or the Military Industrial Complex if you prefer) as a deterrent to aggressors.

The DIDs in its entirety will cover the need for exports, supply chains (and I will suggest that the time for resilience is past – we must transcend mere resilience) and domestic production capacity, particularly in light of recent global events that have highlighted the challenges of rapidly scaling to meet urgent needs. Some commentators have denounced the DIDS as being dangerous, and lukewarm however: this is the DIDS that we have and thus: the one we will have to work with.

There are other steps we can take, and we will consider these further as we explore the DIDS’ concepts of a strong sovereign defence industrial base and how we address the complex strategic challenges facing Australia and ensure security and prosperity into the future.