The end of the Cold War changed the way in which each country manages their defense production. In the United States, especially, the defense budget faced deep cut and a changed pattern of defense procurement has forced defense contractors to redesign its production pattern, restructure ownership, and reconstitute industry's relationship with a government. As a result, a number of prime contractors have declined to four or five, and consolidation and civil conversion of defense industry took place. At the same time, the sophistication in civilian technologies has drew companies that possess dual-use technologies, but with little experience on defense production into the business.
This situation has put U.S. into a serious problem. At one point, although the U.S. became a sole superpower in the post-Cold War international relations, the U.S. was confronting the fact that it was not sole producer of advanced technologies that is crucial for modern weaponry. It was not a menu of choice, but a menu of necessity for the U.S. government to seek for the most advanced weapons for their security policy. The U.S. had to rely on the external supply through purchase, joint production, R&D, and procurement. At another, a global decline of defense fund left U.S. market as most gigantic defense market in both relative and absolute terms, and subsequently allured foreign infiltration of the U.S. defense industrial market, especially the European defense conglomerates. Thus, affected by the political and economical effect of globalization on defense industry, the U.S. inevitably moved forward to promote international procurement, consolidation, and partnership.
In terms of security policy, this effect of globalization was long equated with foreign dependence. Therefore, a policymaker may risk dependency on crucial technology to foreign supply once indigenous and home-owned defense industry should merged or become subsidiaries to/of foreign companies. On the other hand, in order to reach out for the most advanced technologies, the U.S. is obliged to adapt to the manner of globalized defense production and trade, especially with regard to dual-use technologies. Therefore, it was about how to strike a balance between risks of dependency and merits of integration into globalized economy.
The measures in which to subscribe the globalization of defense industry has been outlined in the late 1990's by the Defense Science Board and other think tanks in Washington D.C., and have been exercised by both Clinton and Bush administration. Among the measures, the U.S. has relaxed export controls on certain product for specific destination, while tightening nonproliferation efforts through international regimes as well as domestic measures, such as introducing security clearance system and reinforcing deemed and intangible export controls. Currently, however, a promotion of globalized defense industry is facing strong opposition domestically, since there have been a notion that it is a source of a problem which causes a drainage of U.S. jobs to foreign affiliated company and losing market share. Indeed, this opposition is a typical reaction to the political economy of globalization, but cannot ignore because of its local political influence.
Japan, too, may not be immune from globalization of defense industry, and may have to react to the situation in the near future.
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