DEFENCE AND SECURITY 170 DSCTC 05 E Original: English NAT O   Pa rl i a me n t a ry  As s e mb l y SUB-COMMITTEE ON TRANSATLANTIC DEFENCE AND SECURITY CO-OPERATION PROGRESS ON THE PRAGUE CAPABILITIES COMMITMENT DRAFT REPORT JOHN SHIMKUS (UNITED STATES) RAPPORTEUR* International Secretariat 28 September 2005 * Until   this   document   has   been   approved   by   the   Defence   and   Security   Committee,   it represents only the views of the Rapporteur. Assembly documents are available on its website, http://www.nato-pa.int

170 DSCTC 05 E i TABLE OF CONTENTS I. INTRODUCTION .......................................................................................................1 II. THE PCC IN HISTORICAL CONTEXT....................................................................22 III. THE PRAGUE CAPABILITIES COMMITMENT.......................................................33 A. Deployability and Mobility............................................................................................ 33 B. Sustainability and Logistics......................................................................................... 55 C. Survivability ................................................................................................................ 66 D. Effective engagement................................................................................................. 77 E. Consultation, Command and Control.......................................................................... 99 IV. NICHE CAPABILITIES.........................................................................................1010 V. DEFENCE BUDGETS .........................................................................................1111 VI. USABILITY GOALS .............................................................................................1414 VII. CONCLUSION ........................................................................................................ 14

170 DSCTC 05 E 1 I. INTRODUCTION 1. At the Prague Summit in November 2002, the Allies committed themselves to developing the military capabilities necessary to allow the Alliance to take on a wide range of missions outside of Europe.  The Prague Capabilities Commitment (PCC) is an important step forward for the Alliance as  it  seeks  to  maintain  its  relevance  in  the  current  security  environment.    Those  capabilities  in strategic  lift,  precision  strike,  command  and  control,  and  protection  against  weapons  of  mass destruction  will  enable  NATO  to  act  in  a  wide  range  of  circumstances  and  be  a  guarantor  of security beyond Europe.  They are also critical to the development of the NATO Response Force. 2. Failing  to  fulfil  the  PCC,  however,  would  be  a  serious  blow  to  the  Alliance.    First,  it  would send  a  political  signal  that  the  Allies  are  not  serious  about  meeting  their  commitments,  which would weaken the credibility of the Alliance.  Second, it would compromise the ability of NATO to act as a military alliance.  Perhaps capabilities development could be seen as an abstract issue 10 years ago when NATO’s range of operations extended no further than the Balkans.  But it is no longer  a  hypothetical  issue  now  that  NATO  is  involved  in  operations  in  Afghanistan.    At  a  very basic level, either we have the ability to function as an Alliance in out-of-area operations, or NATO begins to lose its position as a major player in international security issues. Thus, progress on the PCC is critical from both a political and a military operational perspective. 3. Although  the  PCC  are  often  broken  down  into  specific  items,  we  should  not  view  each capability  area  as  independent  of  the  others.    To  a  large  extent,  they  are  highly  interdependent and  success  in  one  capability  area  may  be  negated  by  a  lack  of  progress  in  another.    For example,  a  large  inventory  of  Precision  Guided  Munitions  (PGMs)  is  not  very  useful  unless  the Alliance  has  the  intelligence  resources  to  know  what  to  target.    A  rapidly  deployable  chemical, biological, radiological and nuclear (CBRN) protection unit is useless unless the Alliance has the airlift assets to bring that unit when and where it is needed. 4. This report will evaluate progress on the PCC and is a direct follow-on to the 2004 report of the  Subcommittee.    In  doing  so  your  Rapporteur  hopes  that  this  report  will  generate  consistent focus  on  the  development  of  critical  capabilities  as  well  as  providing  the  Defence  and  Security Committee with the means to evaluate the progress that has taken place since the previous report.   The  pursuit of military capabilities is an ongoing process and this survey can only be seen as a progress  report  on  where  we  stand  at  the  moment.  This  report  is  also  not  intended  to  be  a comprehensive survey of all the elements of the PCC of which there are more than 400.  Rather it is a survey that touches on some of the most critical aspects of the PCC.  Some of those aspects are  large  and  obvious  programmes  such  as  airlift.    Others  are  subtler  such  as  the  many information technology systems that allow major improvements in what is commonly referred to as C4ISR    (Command,    Control,    Communications,    Computers,    Intelligence,    Surveillance    and Reconnaissance). 5. It  is  not  a  simple  matter  to  compile  a  complete  picture  of  progress  on  the  PCC  because neither NATO nor most national ministries of defence provide much transparency into either force goals or how national plans have or have not changed to reflect the priorities set forth in Prague.   However,  it  is  encouraging  to  note  that  the  many  PCC  goals  appear  to  have  been  incorporated into national force goals. The reports that do exist on force goals are classified and this report, as all  NATO  Parliamentary  Assembly  reports,  relies  exclusively  on  unclassified  information.  As legislators, it is both our right and our responsibility to scrutinize what our governments are doing – or not doing – to fulfil the PCC.  Your Rapporteur hopes that this report will give each of us some information that can be used to inform our oversight and encourage greater transparency across the Alliance.   6. This report begins with a brief description of the PCC and its significance.  It then examines the  progress  made  in  some  of  the  more  critical  areas  that  will  allow  NATO  forces  to  be  more

170 DSCTC 05 E 2 deployable   and   sustainable   in   the   field.   We   pay   particular   attention   to   the   multinational programmes  that  could  produce  economies  of  scale  and  reduce  the  overall  cost  of  developing certain capabilities, particularly in strategic lift and air-to-air refuelling. 7. This report also briefly examines defence budget trends across the Alliance. Although not a specific  part  of  the  PCC,  the  total  amount  spent  on  defence  and  the  breakdown  of  the  amount spent  on  personnel,  operations,  research,  investment  and  procurement  are  a  clear  indicator  of where  we  stand  on  developing  the  needed  capabilities.    Recent  deployments  and  the  tempo  of operations are posing budgetary challenges across NATO making it all the more difficult to shift funding to procurement.  We may hope that the operations tempo will decrease at some point, but as  SACEUR  General  James  Jones  has  said  repeatedly,  we  must  hold  the  line  on  defence spending  and  prevent  further  decreases  if  we  hope  to  fulfil  the  capabilities  goals  that  we  have established  for  the  Alliance.  Your  Rapporteur  recognizes  that  we  are  unlikely  to  see  increases across  the  board  in  defence  spending,  but  emphasizes  that  how  we  spend  those  existing resources is of the highest importance.  We must as individual members of an Alliance strive to push funding from “legacy” systems towards more network enabled systems that allow our armed forces to operate more effectively together. II. THE PCC IN HISTORICAL CONTEXT 8. Much of the concern over the PCC is driven by the gap in capabilities between the United States and the other members of the Alliance. This capabilities gap has been detailed in several studies, but the basic point is that the United States has a much greater ability to project power and   remain   in   the   field   than   its   Allies.   As   the   United   States   pushes   forward   on   defence transformation, some are concerned that this gap will widen to the point where it will be difficult for NATO to function as a military alliance. 9. In part the gap in capabilities is a function of the different role that militaries have played in the  United  States  and  in  Europe  over  the  past  60 years.  With the exception of France and the United  Kingdom,  most  European  Allies  were  primarily  focused  on  territorial  defence  in  the  half- century  after  World  War  II.    The  United  States,  however,  has  been  focused  on  expeditionary warfare since the beginning of the last century and spent the length of the Cold War developing its ability to fight different types of operations on a global basis.  In the post-Cold War era, all NATO militaries are attempting to adapt to the changed environment and missions, but most European militaries  have  to  make  much  more  fundamental  transitions  than  the  US  military  to  become expeditionary and capable of a wide spectrum of operations. 10. This is not a new issue in NATO.  The defence capabilities gap has existed for a long time and the Allies have periodically sought to reduce it by encouraging the development of additional capabilities  in  European militaries.  In 1999, NATO introduced the Defence Capabilities Initiative (DCI)  that  was  designed  to  boost  capabilities  in  the  same  areas  as  the  PCC.    Before  the  DCI, there was the Conventional Defence Initiative (CDI).  Neither of those initiatives succeeded, which is why the PCC came into existence.  A sceptic could be forgiven for asking, what is different now that makes the PCC any more likely to succeed where similar initiatives have failed? 11. Several factors set the PCC apart from those previous attempts.  First, the PCC are much more focused than the DCI or CDI and give a very clear idea of precisely what needs to be done.   Second, there is a considerable amount of political pressure behind the PCC.  It was conceived at a  NATO  summit  and  carries  the  weight  of  a  summit  declaration,  something  that  the  previous attempts lacked.  This indicates a level of “buy-in” at the top political levels and gives the PCC a higher profile.  Third, the PCC is benefiting from a high level of co-operation between groups of individual Allies who are organising themselves to share assets and development costs and make

170 DSCTC 05 E 3 obtaining   the   necessary   assets   much   more   affordable   than   previous   attempts   at   defence capabilities improvement. 12. Despite  ongoing  concern  about  the  capabilities  gap,  some  recent  studies  show  that  it actually   may   be   much   less   than   is   commonly   supposed   in   key   areas   related   to   defence transformation.    In  particular,  European  militaries  are  procuring  and  integrating  sophisticated information systems, reconnaissance systems and unmanned aerial vehicles into their inventories. If managed properly and sufficiently funded, this could shrink the gap in many areas 13. There  is  also  another  important  point  to  keep  in  mind:  European  forces  do  not  need  to “compete” with the United States or necessarily develop all of the same capabilities.  The United States  has  a  global  strategic  vision  and  interests,  and  is  committed  to  an  idea  of  completely networked operations.  European forces are designed around a more limited vision for the most part.  Their geographic reach is not necessarily global, neither is it necessary to pursue the goal of completely networked operations.  What is important is that forces are interoperable, and that the systems  we  invest  in  are  modular  and  can  be  updated.  This  is  what  will  enable  the  Alliance  to continue to work together well into the future.  NATO needs to be able to operate anywhere in the world, as the current mission in Afghanistan demonstrates, and it is clear that such missions will involve both European and North American forces. III. THE PRAGUE CAPABILITIES COMMITMENT 14. The PCC is built around 5 broad areas of capabilities: Deployability and mobility – getting forces into an area of operations and moving them in that area as needed. Sustainability and logistics – supporting forces in the field. Survivability   –   protecting   deployed   forces   against   conventional   or   non-conventional weapons. Effective engagement  –  improving the ability of deployed forces to strike targets efficiently with minimal collateral damage. Consultation,  command  and  control  –  improving  the  ability  of  forces  to  communicate  with one another and be aware of movements of friendly, hostile, and non-combatant elements. 15. Within   those   general   categories,   the   Allies   committed   themselves   to   improving   their capabilities  in:  chemical,  biological,  radiological,  and  nuclear  defence;  intelligence,  surveillance, and target acquisition; air-to-ground surveillance; command, control and communications; PGMs, and  suppression  of  enemy  air  defences;  strategic  air  and  sea  lift;  air-to-air  refuelling;  and deployable  combat  support  and  combat  service  support  units.      All  of  those  areas  represent serious holes in the capability of the Alliance, and will affect how the Alliance works together in the future. A. DEPLOYABILITY AND MOBILITY 16. Clearly, the first issue to tackle is getting NATO member forces to where they are needed.   The critical elements in the PCC that relate to this area are strategic airlift and sealift.  Although airlift  often  receives  the  most  attention,  sealift  is  also  extremely  important.    In  most  military operations, the bulk of the equipment and supplies is transported by sea.

170 DSCTC 05 E 4 17. Strategic sealift is definitely a point for optimism about the success of the PCC. Norway is the lead country in this effort, convening several meetings to discuss various proposals including arrangements with national shipping companies.  The outlook is good, not the least because of the oversupply  of  commercial  shipping  capacity  in  the  global  market  and  the  willingness  of  the commercial sector to enter into contracts to supply sealift to the military.  Nine countries (Canada, Denmark, France, Greece, Italy, the Netherlands, Norway, Portugal, and Spain) are participating in  a  strategic  sealift  group,  and  the  goal  is  to  have  10  ships  (mainly  roll-on/roll-off)  available  for NATO operations on a mix of assured access and full-time charter contracts.  At the moment, the sealift  group  has  arranged  assured  access  to  three  ships,  including  one  Norwegian  and  two Danish roll-on/roll-off ships, and the residual capacity is four of the UK’s roll-on/roll-off ships. Both assured  access  and  charter  contracts  involve  using  large  ships  owned  by  private  companies. Assured  access  allows  the  military  to  use  those  ships  for  set  periods  of  time.  Full-time  charters allow the military to have continual use of those ships although the ships are owned and operated by private companies.   18. This  is  closely  tied  to  the  better  co-ordination  of  sealift  through  the  Sealift  Co-ordination Centre  at  Eindhoven,  the  Netherlands,  which  has  already  become  a  cost  effective  operations centre. The Centre costs about 100,000 euros per year to operate, but NATO sources say it saved an aggregate 3.5 million euros last year.  It does so by arranging for ships, that would otherwise be travelling empty or only partially loaded on return trips, to carry the material of other allies.  For example, an empty UK vessel returning from the Persian Gulf was used to carry Dutch air defence equipment, saving both countries about 500,000 euros each. 19. Those savings of a few million euros per year are only a tiny fraction of the approximately 150 billion euros that the European Allies spend annually on defence, but the sealift co-ordination programme has only just become operational and may show larger savings in the years to come.   More importantly, it represents a commitment by the European Allies to do more to rationalize their defence expenditures and avoid unnecessary duplication. 20. Some progress is also being made on the acquisition of strategic airlift.  This has been one of the long-standing shortfalls in European capabilities.  Most hopes are pinned on the success of the Airbus A400M. Germany, France, Spain, United Kingdom, Turkey, Belgium and Luxembourg are committed to acquiring a total of 180 of those aircraft. The A400M is unlikely to enter service before 2010; therefore, much of Europe is involved in the effort to find an interim solution until the A400M is ready.   21. Fifteen NATO countries are involved in upgrading the Alliance’s airlift capabilities. Following the  Statement  of  Intent  signed  at  the  Prague  Summit,  Germany  is  leading  the  group  of  Allies (Canada,   the   Czech   Republic,   Denmark,   France,   Germany,   Hungary,   Luxembourg,   the Netherlands,  Norway,  Poland,  Portugal,  Slovakia,  Slovenia,  Spain  and  Turkey)  in  a  multilateral effort  to  reduce  the  strategic  lift  shortfall.    After  lengthy  consideration  of  various  options,  the participating nations have decided to move forward with an assured access charter arrangement for six Antonov 124-100 aircraft from Ukraine.  The participating nations expected to have access to the aircraft, beginning in 2005.  This should help fill the need for strategic airlift in the near-term. This interim solution is slated to cost 70 million Euros per year for the next 8 to 10 years. 22. Another   airlift   project   that   is   achieving   some   initial   success   is   the   European   Airlift Co-ordination  Centre  in  Eindhoven,  the  Netherlands.    This  centre  co-ordinates  the  airlift  and refuelling  assets  of  Germany,  Belgium,  Italy,  the  United  Kingdom,  France  and  the  Netherlands.   Although  it  was  only  set  up  in  2002,  it  has  already  demonstrated  its  value.    The  centre  costs approximately 200,000 euros per year, but has saved participating nations more than that already by consolidating cargo and preventing many empty return flights.  Because of its initial success, some in NATO are predicting that it could take on a progressively larger role and possibly lead to a

170 DSCTC 05 E 5 combined   air   and   sealift   operations   centre   that   would   maximize   the   utility   of   all   strategic transportation equipment.   23. Another critical capability is air-to-air refuelling.  There is a serious lack of this capability in European air forces and nine countries (Belgium, Denmark, Hungary, Italy, Luxembourg, Norway, Poland,  Portugal  and  Spain)  agreed  at  Prague  to  work  together  to  find  a  way  to  remedy  this capability  shortfall.    The  Spanish-led  effort  aims  to  build  a  jointly  owned  and  operated  fleet  of approximately  10  multi-role  aircraft  that  can  perform  air-to-air  refuelling  operations.    This  same shortfall  was  recognized  by  the  European  Union;  and  the  NATO  working  group  on  air-to-air refuelling  and  the  EU  working  group,  formed  under  the  European  Capabilities  Action  Plan,  are working together to find cost-effective ways to increase the number of refuelling aircraft available to European militaries.  The EU working group is headed by Spain and Italy. 24. Separate from this project, Germany and Canada have co-operated to improve their air-to- air refuelling capability.  Germany and Canada took delivery of their first Airbus A310 Multi-Role Transport  Tanker  aircraft  in  early  2005.    The  aircraft  are  capable  of  air-to-air  refuelling,  but  can also be used for cargo and passenger transport.  Both the Canadian and German Air Forces have been flying the A310 for a number of years, but the new modifications add an important air-to-air refuelling  capability.    Over  the  next  few  years,  Canada  will  take  delivery  of  one  more  A310  and Germany  will  take  delivery  of  three  additional  aircraft.  Essentially,  Canada  adopted  an  existing German  programme  for  acquiring  air-to-air  refuelling,  but  by  doing  so  it  cut  an  estimated  three years from the acquisition time and saved approximately $50 million Canadian dollars.   B. SUSTAINABILITY AND LOGISTICS 25. Deployable  combat  support  and  combat  service  support  is  of  critical  importance  to  the success  of  any  mission.    Combat  support  and combat service support provides the food, water, ammunition, maintenance, and communications which enable combat units to function.  If they are unavailable or not interoperable, then the effectiveness of the entire mission can be compromised. 26. Much  of  what  needs  to  be  done  in  the  area  of  deployable  combat  service  and  combat service   support   is   co-ordinating   existing   resources   and   ensuring   interoperability.      This   is particularly important in the case of the NATO Reaction Force (NRF) as it is a multinational force. One  concern  is  that  the  NRF  be  able  to  function  in  environments  where  host  nation  support  is absent  or  minimal.    Thus,  the  NRF  is  designed  to  be  self-sustaining  with  embedded  support capabilities that can keep it in the field without host nation support.   27. A considerable amount has already been done to build a multinational, deployable combat service  and  combat  service  support  capability  into  the  NRF  structure.    France  is  providing  an artillery battle group for fire support and defence of deployed units with forward observers and fire support  personnel  embedded  in  NRF  units.    Germany  is  providing  an  airborne  supply  company that  will  perform  maintenance,  transport and medical services.  But the Netherlands is providing the bulk of the combat support and combat service support to the NRF.  The Netherlands created a  new  battalion  to  provide  communications  and  information  systems  support  to  deployed  land units,  a  maintenance  company  and  a  supply  company.    The  Netherlands  is  also  providing  an armoured  engineers  battalion  that  will  provide  a  variety  of  combat  support  functions  including explosive ordnance disposal.   28. Combat support and combat service support is also being addressed at the force planning level.    The  Logistics  Force  Planning  Advisory  Committee  at  NATO  is  working  on  clarifying  the needs, existing capabilities and shortfalls within the Alliance.  By doing so the Secretary General hopes  that  it  will  encourage  the  development  of  more  balanced  force  structures  in  the  member countries’ armed services.

170 DSCTC 05 E 6 29. Allied  Command  Transformation  (ACT)  plays  an  important  role  in  facilitating  capabilities improvements across the range of the PCC, including combat service and combat service support.   Exercises are an important part of ensuring logistical interoperability, but ACT is also involved in experimenting with new technology that could improve NATO’s ability to support deployed forces.   One example is water purification.  Providing clean water is always a challenge for forces deployed to areas where the local water supply is unsanitary or insufficient.  Water is heavy and difficult to transport  in  the  quantities  needed  for  a  deployed  force.    Therefore,  ACT  is  experimenting  with different ways of generating clean water.  In addition to conventional water purification methods, ACT is looking into a process that extracts water vapour from the atmosphere and condenses it into potable water in sufficient quantities.   30. These trends taken together are a cause for some optimism in the area of sustainability and logistics.      The   Allies   are   working   together   to   co-ordinate   their   resources   and   ensure interoperability,  at  least  for  the  NRF.    This  initial  progress,  however,  should  be  deepened  and broadened across the full range of combat support and combat service support functions. C. SURVIVABILITY 31. The  Alliance  is  also  making  progress  in  its  ability  to  protect  troops  from  attacks.    NATO made  protection  against  CBRN  attacks  a  priority  at  the  Prague  summit,  and  so  far  the  effort  is showing  some  promising  results.   In December 2003, the CBRN battalion was set up under the leadership  of  the  Czech  Republic.    It  reached  full  operational  capability  in  June  2004  and  is composed   of   specialists   from   13   countries   who   work   together   in   force   protection   against unconventional  weapons.    The  United  Kingdom  for  example,  is  providing  biological  detection assets and Portugal is providing an explosive ordnance disposal team.  The battalion became part of the third rotation of the NATO Response Force in the summer of 2004.   32. The  remaining  challenges  for  the  CBRN  unit  are  in  communications  and  deployment.   Because  the  battalion’s  components  are  situated  in  different  locations,  strategic  airlift  to  get  the unit  into  the  field  quickly  is  a  priority.    Given  the  lack  of  airlift  in  Europe,  the  CBRN  battalion  is looking to the United States or chartered aircraft for its deployments. Once again, this illustrates the  interconnected  nature  of  the  PCC.    It  is  difficult  to  make  meaningful  progress  in  one  area unless progress is made in all capabilities.   33. Another  aspect  of  protecting  deployed  forces  is  theatre  missile  defence.    One of the main programmes  in  this  area  is  the  MEADS  programme,  a  joint  venture  of  Germany,  Italy  and  the United States.  Based on the Patriot PAC-3 system, it is being designed to provide protection for deployed troops from ballistic and cruise missiles as well as manned and unmanned aircraft.  The plan is to reach full operational capability by 2012.  It is a unique system in that it will be compact enough  to  be  transported  by  tactical  aircraft and set up quickly to defend troops on the ground. The  United  States  is  providing  58  percent  of  the  financing,  Germany  25  percent  and  Italy  17 percent.   34. Although   the   United   States   and   Italy   approved   moving   forward   to   the   design   and development   phase   of   the   programme   in   September   2004,   MEADS   proved   to   be   more controversial  in  the  German  Parliament.    The  main  argument  against  MEADS  is  that  it  is  not needed for foreseeable deployments of German troops and that the funds could be better spent on  other  projects.  After  considerable  debate,  the  German  Parliament  approved  funding  for  the design and development phase in April 2005. 35. Another  main  programme  in  this  area  is  Active  Layered  Theatre  Ballistic  Missile  Defence (ALTBMD), which will protect deployed soldiers against the threat of ballistic missiles.  ALTBMD was launched in March 2005 to counter theatre-range ballistic missiles, which can be used to carry chemical, nuclear or biological warheads.   It should be operational by 2010.  

170 DSCTC 05 E 7 D. EFFECTIVE ENGAGEMENT 36. Another challenge is to give deployed forces the ability to strike targets with great precision while  at  the  same  time  protecting  those  forces  from  attack.    NATO  is  increasingly  likely  to  face adversaries  that  hide  among  civilians,  and  it  is  morally  and  politically  impossible  to  cause unnecessary civilian casualties when the technology exists to prevent it. 37. Alliance Ground Surveillance (AGS) is a critical part of effective engagement.  AGS will give Allied commanders a real-time, highly detailed and accurate picture of what is happening on the ground  in  a  given  area.    It  is  a  system  that  will  take  advantage  of  advances  in  distributed information  systems,  Unmanned  Aerial  Vehicles  (UAVs)  and  manned  aerial  systems  to  give commanders  –  both  at  a  headquarters  and  in  the  field  –  the  information  they  need  to  make informed decisions.   38. There   were   two   competing   consortia   of   companies   with   different   platforms   for   the programme:   the   Transatlantic   Industrial   Proposed   Solution   (TIPS)   and   the   Cooperative Transatlantic AGS System (CTAS).  Both consortia were composed of the major aerospace and defence companies on both sides of the Atlantic and both proposed to use the same basic radar system.  The major difference was the type of airborne platform that the two groups of companies proposed to use.  TIPS is looking to a combination of the Airbus A321 and the Global Hawk UAV.   CTAS  planned  to  use  a  combination  of  smaller  Bombardier  business  jets  combined  with  the Predator UAV.  There were various advantages and disadvantages to both proposals, the CTAS version would have had lower acquisition costs for the aircraft than the TIPS proposal, but would have had twice as many ground stations, 49 as opposed to 24 for the TIPS system. 39. The  Conference  of  National  Armaments  Directors  (CNAD)  decided  to  go  forward  with  the TIPS  proposal  and  that  decision  was  endorsed  at  the  Istanbul  Summit  meeting.  This  opens  the door for a 350 million euros two-year design and development phase, and acquisition beginning in 2006 if all goes according to schedule. 40. The  AGS  programme  will  be  a NATO owned and operated system, similar to the AWACS programme in that regard.  One advantage to the selected system is its greater ability to process data aboard the manned aircraft.  The TIPS system based on the Airbus A321 will have space for 14 consoles, while the CTAS system would have had only 5 or 6 and relied on the ground stations to  transmit  data  across  the  network.    The  selected  TIPS  system  will  also  use  the  Global  Hawk UAV, which can fly higher and spend longer on target that the Predator UAV that was to be part of CTAS   system.   Both   the   manned   and   the   unmanned   platforms   will   carry   the   Transatlantic Co-operative AGS Radar (TCAR), which will be able to identify and track individual vehicles on the ground. 41. The  AGS  system  is  a  significant  step  for  the  Alliance  both  in  terms  of  technology  and capabilities,  and  in  terms  of  transatlantic  defence  co-operation.    The  technology  will  allow commanders to have a complete picture of activity on the ground as it changes in real time.  This will  enable  highly  effective  engagement  against  targets  and  increase  the  accuracy  of  strikes  in complex environments.  It is also a capability that is in high demand and national assets such as the  US  JSTARS  and  UK  ASTOR  systems  that  provide  similar  capabilities  are  often  stretched during operations.  NATO operations in Kosovo in 1999, for example, required the deployment of half of the available JSTARS.   42. The AGS system is also a major collaborative transatlantic programme.  It is jointly funded and  it  has  the  potential  to  improve  technology-sharing  between  the  members  of  the  Alliance.   Instead of attempting to engineer connections between different national systems, AGS is a jointly developed European-American project that is designed to leverage off technological strengths on

170 DSCTC 05 E 8 both  sides  of  the  Atlantic.    The  consortium  developing  it  features  companies  based  in  France, Germany, Italy, the Netherlands, Spain and the United States. 43. Another  important  factor  in  effective  engagement  is  Precision  Guided  Munitions  (PGMs).   There  is  substantial  progress  across  the  Alliance  in  procuring  PGMs.    Only  six  years  ago  US forces  conducted  the  vast  majority  of  air  operations  over  Kosovo  and  Serbia  because  most European  air  forces  lacked  the  ability  to  carry  and  use  PGMs.    There  has  been  a  tremendous increase  in  the  precision  strike  capability  of  European  air  forces  since  then,  with  the  United Kingdom, France, Germany, the Netherlands and Denmark in the lead. 44. The United Kingdom selected the Raytheon Paveway IV missile over the Joint Direct Attack Munition (JDAM).  This all-weather PGM can use both laser guidance and GPS guidance, giving it the  ability  to  “see”  targets  through  cloud  cover  or  other  obstacles.  It  is  being  fitted  to  the  UK’s Tornado, Harrier and Eurofighter aircraft, and is expected to enter service in 2007.  This will give UK strike aircraft the ability to attack targets from a distance of 150 km. The United Kingdom plans to purchase more than 2,000 of the Paveway IV missiles. 45. The  United  Kingdom  has  already  integrated  PGMs  into  its  combat  forces.    Eighty  four percent  of  the  Royal  Air  Force’s  air-launched  weapons  during  the  2003  operation  in  Iraq  were precision  guided  including  the  Paveway,  the  US-made  Maverick  and  the  European-produced Storm Shadow.  In fact, as a percentage of air launched weapons used, UK forces used a slightly higher percentage of PGMs than did US forces.   46. Several Allies are looking into joint or modular munitions that can be used across all of the military services.  France and Sweden are discussing a possible pooling of data on multi-service missiles  and  the  United  Kingdom  has  recently  been  involved  in  those  discussions.    This  sort  of activity  could  lead  to  economies  of  scale  on  two  levels  by  procuring  the  same  munitions  for  the naval, ground and air services, and by pooling national requirements. 47. Technology  transfer  and  encryption  issues,  however,  have  slowed  the  development  of European PGM capabilities.  The most cost effective means of  acquiring PGMs is for European militaries to buy part of the production runs of US-made Joint Direct Attack Munitions (JDAM) kits, which  essentially  bolt  a  guidance  package  onto  a  conventional  bomb.    The  problem  is  that although the larger bombs extend past the wing of the aircraft and can link directly to the satellite that  guides  them  to their target, the smaller bombs fit completely under the wing and are linked through the aircraft to the satellite.  This requires upgrading and installing certain technology and encryption  codes  in  European  aircraft,  and  the  US  government  has  not  yet  resolved  how  this should happen.   48. Unfortunately, these technology transfer issues remain thorny and are unlikely to be solved soon.  This has led to considerable frustration on both sides of the Atlantic.  On the US side, many are  reluctant  to  allow  a  relaxation  in  export  controls  that  could  potentially  lead  to  sensitive technology getting into the wrong hands through third parties.  But at the same time, collaborative projects that embody the idea of defence transformation such as the AGS system can be stymied by  stringent  export  controls.    Further  complicating  the  issue  is  the  current  direction  of  the European Union on arms sales to the People’s Republic of China.  Although some in Europe can argue that removing the ban on arms exports to China will not have a negative effect on regional security, it has so far failed to be a persuasive argument for many in the US Congress.   This can only  strengthen  the  hand  of  those  who  push  for  more  stringent  export  controls  and  reduced transatlantic defence industry co-operation.

170 DSCTC 05 E 9 E. CONSULTATION, COMMAND AND CONTROL 49. It is critical that allied militaries be able to talk to one another securely, know the position of allied forces and have a common picture of the area of operations.  In a rough sense, this is the essence  of  what  is  commonly  referred  to  as  Command,  Control,  Communications,  Computers, Intelligence, Surveillance and Reconnaissance (C4ISR). 50. In the 1991 Gulf War and again in the Balkans, NATO militaries were shown to be lacking in their  ability  to  communicate  securely  and  maintain  a  common  information  picture  of  the  area  of operations.  This problem only increased through the 1990s as the United States embarked on an ever-accelerating process of transformation with an emphasis on network centric warfare.  Some analysts  have  predicted  that  the  technological  gap  will  continue  to  grow  and  will  render  allied operations increasingly difficult.   51. Those concerns are still very real, but are tempered by developments in C4ISR in Europe.   Those  European  countries  that  make  up  the  vast  majority  of  Europe’s  military  spending  and capability  (France,  Germany,  Italy,  the  Netherlands,  Spain  and  the United Kingdom) are making advances  in  important  areas.    All  of  those  countries  are  procuring  and  deploying  command and control  systems  that  cut  across  branches  of  the  military,  integrating  unmanned  or  space  based systems  in  their  ISR  capability  and  deploying  digital  communications  systems.    These  systems often leverage commercial technological advances and can work with existing platforms.  The end result is that capabilities and inter-operability can be improved at an affordable cost.  In general, there  is  a  widespread  commitment  across  Europe  to  improve  command,  control  and  digital communications systems. 52. There  is  also  notable  interest  across  Europe  in  Unmanned  Aerial  Vehicles  (UAVs).  One indication of the increasing interest in UAVs is the number of co-operative ventures being formed between   European   aerospace   companies   to   produce   UAVs   and   technology   demonstration projects.  EADS, Dassault and Saab are working together to produce a combat UAV expected to be demonstrated in 2009.  Dassault, EADS and Thales are also pooling their expertise to build a strategic UAV for France.  Alenia, the Italian aerospace company, is also building a combat UAV demonstration  project  that  began  test  flights  in  2005.    This  aircraft  will  integrate  a  number  of stealth  technologies  to  improve  its  survivability  in  hostile  conditions.      European  aerospace companies are also working on components to make small, sophisticated UAVs that could be used for  tactical  reconnaissance  for  brigades  or  even  smaller  military  units.    EADS,  for  example,  is already producing the world’s smallest Synthetic Aperture Radar (SAR), which will fit on the small (4 meter long) German-made Luna UAV.  When finished, this project will give its users battlefield surveillance over an 80-kilometer area.   53. Finally,  we  should  not  ignore  the  important  role  of  space  systems  as  part  of  the  overall C4ISR  capability.    France  is  the  leader  in  many  ways  in  space-based  capabilities,  but  several European  countries  are  partnering  with  France  to  develop  satellite  reconnaissance  capabilities.   The most significant recent development in this area is the December 2004 launch of the Helios 2 satellite that augments the existing Helios 1 satellite system.  Helios 2, however, has an infrared capability that allows it to detect night time movements.  It can also transmit more than 100 images per day – more than twice the capability of the Helios 1 satellite.  Spain and Belgium have access to Helios 2 and each bought into the system by acquiring a 2.5 percent stake in the 2 billion Euro project.  In 2007, a German and an Italian satellite are planned for launch.  Those satellites will be tied into the Helios system and will extend the reconnaissance capabilities to include all-weather surveillance.  

170 DSCTC 05 E 10 IV. NICHE CAPABILITIES 54. Not  all  members  need  to  have  the  same  capabilities.    As  part  of  a  larger  alliance,  it  is possible,  and  in fact preferable, that smaller Allies concentrate on particular capabilities that are often in high demand.  This makes both fiscal and strategic sense.  The smaller Allies cannot be expected  to  develop  large  expeditionary  forces,  but  they  should  be  encouraged  to  develop deployable units in particular high-demand areas. The same amount of money, for example, could be  used  to  purchase  a  few  fighter  aircraft  or  maintain  a  state-of-the-art  brigade  specializing  in chemical  and  biological  protection  or  emergency  medical  care.    But  it  is  clear  that  in  today’s strategic environment a specialized brigade will be far more useful in the Alliance’s missions than a few additional fighters.   55. The Czech CBRN Battalion has been the most high-profile example of niche capabilities in action.    The  battalion  has  been  on  operational  standby  as  part  of  the  NATO  Response  Force (NRF)  since  the  summer  of  2004.    It  arose  directly  in  response  to  the  PCC-identified  need  for improved CBRN capabilities.    56. The Czech Republic sent its Nuclear, Biological and Chemical (NBC) unit of 250 troops to Kuwait and maintained a field hospital of 30 doctors with 120 support staff at Bagram air base in Afghanistan. This is a good example of the development of niche capabilities in the Alliance.  The Czech military is using its expertise in CBRN protection to contribute a numerically small but highly useful specialized unit in this area.   57. The Czech NBC capability during the Cold War made it an obvious lead nation.  Based on the  knowledge  that  any  East-West  exchange  of  such  weapons  would  likely  have  occurred  over Czechoslovakia, NBC brigades were established to operate alongside each Army Corps.  Although there are eleven other contributing nations, the Czechs have framework nation status and are the largest contributor of equipment and personnel.  The core functions of the battalion are to conduct CBRN reconnaissance, detection, identification, surveillance and decontamination.  On the same theme, the Czechs are also developing an epidemiological centre in Techonin to provide treatment and research on exposure to biological weapons. 58. The Baltic countries are also engaging in some specialization.  Lithuania, Latvia, and Estonia have focused on several niche capability areas: Mine-Clearing Measures, (MCM), military medics, Explosive  Ordnance  Disposal  (EOD)  and  Special  Operation  Forces  (SOF).    By  the  end  of  2005 one Lithuanian EOD platoon at 30-day readiness should be operational.  Lithuania is also currently conducting a deployment of SOF in support of combat operations in Afghanistan (in addition to its lead  role  in  one  of  the  Provincial  Reconstruction  Teams  in  Western  Afghanistan).    Additionally, Lithuania, together with Latvia and Estonia, is planning joint Baltic specialisation areas in: diving capabilities,  military  medicine,  and  EOD.    Estonia  and  Latvia  have  both  developed  explosive ordinance disposal expertise and deployed those forces to assist in Afghanistan and elsewhere. 59. Poland  has  more diverse capabilities as one of the larger new Allies, but it has developed deployable special forces that have been employed in Afghanistan and Iraq.  Other countries have concentrated  on  medical  services,  decontamination,  combat  engineering,  explosive  ordnance disposal and intelligence.   60. Recently,   the   issue   of   common   funding   of   some   NATO   operations   has   come   under discussion.  The issue is particularly significant in the context of the contributions of smaller Allies to the broader effort. Your Rapporteur fully endorses this idea that common funding of operations should  be  seriously  considered  by  the  NATO  Parliamentary  Assembly  and  the  North  Atlantic Council,  and  urges  the  reader  to  consider  the  ideas  presented  in  the  General  Report  of  the Committee  on  this subject. The principle that only countries participating in an operation pay for the  costs  is  not  a  viable  model  for  the  future.  The  NATO  Response  Force  (NRF)  will  feature

170 DSCTC 05 E 11 elements from various Allies on a rotating basis, but the decision to use the NRF will be taken by all 26 Allies. This would mean that the whole Alliance would take decisions to act in the interest of all  of  the  members,  yet  only  those  currently  supplying  forces  to the NRF would pay. A common funding of operations could eliminate this problem and encourage greater participation in the NRF. V. DEFENCE BUDGETS 61. To a large extent, the success of the PCC will depend on the ability of NATO members to alter   their   defence   spending,   reducing   the   amount   spent   on   large   standing   forces   and infrastructure  while increasing the amount spent on modern equipment.  In general, most of the NATO Allies have halted the downward trend on defence spending as a percentage of GDP since the  end  of  the  Cold  War  and  several  are  increasing  their  spending.    Many  analysts  and  NATO officials cite 2% of gross domestic product (GDP) as the target level of spending in the Alliance.   About half of the Allies spend that or more including France, Greece, Turkey, the United Kingdom and the United States.  But many Allies fall well below that mark (See Table 1). 62. GDP is a gross measure and a look at the actual amounts spent on defence shows some negative  and  some  positive indicators.  Although there is too little data to assume a trend since 2002, only 8 of the 18 Allies with defence budgets (Iceland is excluded from this analysis because it does not have a defence budget) spent more on defence in 2004 than in 2002 in real terms.  On average,  the  Allies  spent  2.5  percent  less  in  2004  compared  to  2002  in  constant  dollars  (or  3.9 percent  less  excluding  the  United  States  –  see  Table  2).   This is not encouraging, although the balance  of  expenditures  between  personnel,  equipment  and  operations  is  more  positive.    The Allies also spent 0.7% more of their defence budgets on equipment in 2004 compared to 2002.   In percentage terms, the share of the defence budget devoted to equipment rose by an average of 8.6 percent (or 9.7 percent excluding the United States – see Table 3). 63. At the moment however, Europe continues to spend a disproportionate amount on personnel and infrastructure.  The average percentage of the defence budget spent on personnel across the European  Allies  is  54%  with  some  members  spending  70%  or  more  leaving  little  room  for increases in R&D or procurement (see Table 4).  The United States by comparison spends about 33% on personnel, but invests nearly four times as much per soldier.  US defence spending is not only greater in the absolute, it is increasingly directed at research, development and procurement of the items that will enable US forces to tackle the challenges of the twenty-first century.  It is thus imperative that Europe increases its efforts to narrow the capabilities gap.   64. Although those broad measures can be an indication of the political will to fund the military at the level needed to meet current needs, it is important to focus within the broad budget categories. As noted earlier in this report, many Allies are attempting to develop their capabilities in network- centric warfare, albeit at a lower cost than the United States is paying for the transformation of its armed  forces.    Some  European  ministries  of  defence,  particularly  in  France  and  the  United Kingdom, are spending more on advanced information systems and other items that will allow their militaries to operate in networked environments.  Across Europe, there is increasing investment in projects that fall into the broad category of C4ISR.  A comprehensive study by several scholars at the   George   Washington   University   (Bridging   the   Gap:   European   C4ISR   Capabilities   and Transatlantic Interoperability) explores this issue in depth and finds that many European militaries are increasingly committed to deploying interoperable digital communications, as well as manned and  unmanned  reconnaissance  platforms.    Because  European  C4ISR  developments  are  too numerous  to  explore  in  detail  for  the  purposes  of  this  report,  your  Rapporteur  refers  you  to  the above cited report for a detailed listing.

170 DSCTC 05 E 12 Country Percentage  of GDP Belgium 1.26 Bulgaria 2.43 Canada 1.19 Czech Republic 1.88 Denmark 1.41 Estonia 1.64 France 2.60 Germany 1.41 Greece 2.89 Hungary 1.73 Italy 1.47 Latvia 1.75 Lithuania 1.37 Luxembourg   .84 Netherlands 1.65 Norway 2.07 Poland 1.96 Portugal 2.16 Romania 2.26 Slovak Republic 1.83 Slovenia 1.62 Spain 1.29 Turkey 3.20 United Kingdom 2.30 United States 3.70 Source: NATO Force Planning Directorate Country 2002 2003 2004 Difference 2002- 2004 Percentage Change Belgium 2974 3010 3038 64 2.2 Canada (Can $) 12099 12293 32785 -50 -0.2 Czech Rep. (Cz.Crowns) 32835 34811 12740 641,4 5.3 Denmark (Dan. Crowns) 17651 17777 17079 -572 -3.2 France 35448 36137 37135 1687 4.8 Germany 29336 28870 28291 -1045 -3.6 Greece 4413 4439 3225 -1188 -26.9 Hungary (Forints) 139961 145652 120437 -19524 -13.9 Italy 17687 16186 15520 -2167 -12.3 Luxembourg 170 177 168 -2 -1.2 Netherlands 5905 5811 6082 177 3.0 Norway (Nor. Crowns) 27841 25778 24924 -2917 -10.5 Poland (Zlotys) 7671 8276 8679 1008 13.1 Portugal 2138 2084 1697 -441 -20.6 Spain 6711 6776 7525 814 12.1 Turkey (1000 Tur. Pounds) 351860 363740 290253 -61607 -17.5 United Kingdom (£) 20626 21077 21221 595 2.9 United States (US $) 306302 323414 371007 64705,1 21.1 Average -2.5 Average excluding US -3.9 Source: NATO Force Planning Directorate

170 DSCTC 05 E 13 Country 2002 2003 2004 Difference 2002-2004 Percentage change Belgium 7.1 5.2 5.4 -1.7   -23.8 Canada 13.9 16.0 16.7 2.8   20.1 Czech Republic 17.5 21.0 15.4 -2.1   -11.9 Denmark 13.5 18.0 19.1 5.6 41.6 France 19.1 20.6 21.4 2.3   11.9 Germany 14.1 14.0 14.8 0.7   5.3 Greece 13.1 12.7 7.6 -5.5   -41.9 Hungary 11.1 10.2 11.9 0.8   7.0 Italy 12.4 12.7 11 -1.4   -11.2 Luxembourg 19.7 17.1 11.1 -8.6   -43.6 Netherlands 15.9 17.1 16.4 0.5   3.3 Norway 23.7 21.8 24.2 0.5   2.1 Poland 11.1 14.4 14.6 3.5   31.3 Portugal 4.1 7.3 7.6 3.5   84.5 Spain 12.8 11.8 22.8 10.0   78.0 Turkey 31.5 32.9 36.3 4.8   15.2 United Kingdom 23.6 23.5 22.8 -0.8   -3.3 United States 27.4 27.6 24.9 -2.5   -9.2 Average 0.7   8.6 Average excluding US 0.9   9.7 Source: NATO Force Planning Directorate Country 2004 Belgium 73.8 Bulgaria 59.9 Canada 41.9 Czech Republic 51.1 Denmark 51.4 Estonia 34.5 France 57.5 Germany 59.3 Greece 77.4 Hungary 49.4 Italy 75.7 Latvia 46.7 Lithuania 50.5 Luxembourg 75.0 Netherlands 49.8 Norway 40.3 Poland 60.6 Portugal 74.2 Romania 51.7 Slovak Republic 49.7 Slovenia 58.7 Spain 53.9 Turkey 47.4 United Kingdom 39.4 United States 34.8 Average 52.4 Source: NATO Force Planning Directorate

170 DSCTC 05 E 14 VI. USABILITY GOALS 65. There  is  no  shortage  of  military  personnel  in  NATO  member  countries.    With  millions  of military personnel in both Europe and North America it is theoretically possible to supply sufficient forces for several simultaneous operations.  It is no secret, however, that many militaries struggle to  find  sufficient  deployable  personnel.    This  is  because  too  much  of  the  force  structure  is  still oriented around territorial defence rather than focused on external security threats. 66. This  situation  led to the Secretary General’s call for usability goals.  Briefly stated, he and others  have  set  a  goal  of  40  percent  deployable  and  8  percent  deployed,  meaning  that  each member of the Alliance should strive to make 40 percent of its forces capable of deploying and be able to maintain 8 percent of its forces in a theatre of operations. 67. Although on the face of it this might appear to be a simple accounting exercise, it is in fact complex and controversial.  There are different views among the members of the Alliance about the purpose of the exercise.  Many members see it as a way both to have a means of comparison across  members  and  to  measure  progress  within  members  over  time.  The  Netherlands  and Denmark have been the leaders of this group.  Some members – Belgium, Greece, and Germany in  particular  –  see  the  usability  goals  mostly  as  a  guide  for  internal  reform  and  argue  that comparisons between countries are not very useful because of the differences in force structure. 68. A number of members tried to exclude some types of forces, especially conscripts, as a way of  lowering  their  total  force  size  and  improving  the  relative  amount  of  their  forces  that  can  be considered to be deployable.  This led to months of discussions just to define the parameters of what was to be measured.  In the end, some members were able to exclude certain forces but the international staff at NATO now believe that they have a roughly comparable set of numbers on land  forces.    As  it  stands  now,  fourteen  countries  have  submitted  fully  comparable  numbers  on ground forces but twelve have not.  Some of those are minor exclusions but some are excluding conscripts, which considerably skews the bottom line.   69. Reaching  this  state,  however,  took  nearly  two  years  of  sometimes-contentious  discussion.   Given the difficulty in collecting data on ground forces, national representatives and international staff  involved  in  the  process  say  that  they  are  unlikely  to  begin  collecting  data  on  naval  or  air forces in the near future. 70. Despite the problems, those involved in the process at NATO believe that it has had some influence in the capitals and forced ministries of defence to gather and analyze data. It also allows new members to track progress and make the usability goals part of their national strategy.   71. Nevertheless, your Rapporteur is very concerned about this process and what it says about the Alliance.  We should be able to be honest with one another about what are capable of actually doing  as  individual  members.    Not  having  a  clear  picture  of  the  deployability  of  our  forces complicates planning and could fuel a perception that the Alliance lacks the strength to carry out its commitments. VII.    CONCLUSION 72. It is tempting to assign a grade to our collective progress on the PCC, but this is problematic because much of the information needed to make a complete assessment of progress on the PCC is classified and NATO Parliamentary Assembly reports cannot incorporate classified information.    Rather than focus on progress on individual programmes, it is perhaps better to focus on progress on the overarching goal: more deployable and usable forces.   73. The best way to determine in a broad way if the Alliance is more capable of deploying for sustained  operations  is  to  look  closely  at  current  deployments,  in  particular  the  NATO  role  in

170 DSCTC 05 E 15 Afghanistan.  Once again, your Rapporteur refers you to the general report of the Committee for more  details,  but  the  NATO  operation  there  tells  us  quite  a  bit  about  deployability  and  usability.   On the positive side, ISAF operations clearly show that the European members of the Alliance and Canada  are  generally  more  capable  of  deploying  and  sustaining  their  forces  in  a  difficult  and distant location than they were in the previous decade. ISAF is mainly composed of European and Canadian forces operating with their national logistics, communications, and transportation assets.    The United States contributes to ISAF but in a relatively minor way compared to previous NATO missions  in  Bosnia  or  Kosovo.    This  would  have  been  inconceivable  in  the  1990s  when  many NATO militaries were stretched to deploy to the Persian Gulf in 1991 or to Bosnia in 1995. 74. On the negative side, ISAF commanders have consistently told visiting delegations from the NATO  Parliamentary  Assembly  that  they  lack  sufficient  capability  in  critical  areas  such  as  air transport, especially helicopters.  This is not for a lack of helicopters, however, as there are plenty available in the air forces of the members.  It is a lack of political will, or an unwillingness to incur the expense  of sending them to where they are needed to provide critical assistance to the NATO mission in Afghanistan.  This leads to a larger issue which is perhaps outside the boundaries of this report but one that we cannot ignore:  it does not matter what progress we make on acquiring the assets needed to fulfil the PCC if we lack the political will to deploy them as needed. 75. A  number  of  other  preliminary  conclusions  can  be  drawn  from  the  progress  thus  far  on improving capabilities across the Alliance.  Most importantly, it is clear that the way forward will be through  increased  co-operation  on  a  variety  of  levels.    This  includes  co-operation  between European Allies, between the United States and its Canadian and European partners, as well as between the public and private sector. 76. Co-operation  between  the  public  and  private  sector  is  an  important  aspect  of  improving defence capabilities.  Both in strategic sealift and strategic airlift, co-operative arrangements with the  private  sector  are  tapping  residual  capacity  in  the  commercial  sector.    Those  arrangements have  a  number  of  benefits.    Most  notably,  they  are  available  immediately  and  do  not  require  a lengthy acquisition process. 77. The co-operative programmes between the European Allies are part of a long-standing effort to  achieve  economies  of  scale.  Cooperative  programmes  such  as  the  airlift  and  sealift  co- ordination centres are already showing results. It should be emphasised that it is not critical if such initiatives  are  taken  under  a  NATO  or  an  EU  banner.    The  same  capabilities  will  serve  either institution and at this point the two organizations are working closely on a variety of levels.  Rather than focus on a supposed EU-NATO rivalry we should focus on capabilities development and use that as the benchmark for progress. 78. Co-operation   between   the   United   States   and   its   Allies   is   also   critical   to   capabilities improvement.    Transatlantic  defence  industrial  collaboration  such  as  the  Joint  Strike  Fighter  are programmes that can leverage technological innovations on both sides of the Atlantic, reduce unit costs, and provide a common, interoperable product. But we must be honest about the problems to transatlantic co-operation in the current environment.  Part of the problem is no doubt the US export  control  process  that  often  frustrates  close  partners.    At  the  same  time,  policy  decisions taken at the EU level such as the proposed end to the arms embargo on the People’s Republic of China  spark  strong  reactions  in  the  United  States  and  place  proponents  of  reducing  export controls in a difficult position.  It is your Rapporteur’s hope that the NATO Parliamentary Assembly can  be  a  forum  to  address  this  issue  and  reach  consensus.  One  potential  solution  is  a  binding transatlantic code of conduct on arms transfers.  Members from both sides of the Atlantic should work  together  to  draft  a  set  of  binding  principles  governing  arms  sales.    As  this  issue  will  likely involve legislative action, the NATO Parliamentary Assembly is a good forum for us to begin this important dialogue. Otherwise, the current disagreements over arms sales could have far-reaching consequences for current and future collaborative programmes.