Arms Markets and Armament Policy : The Changing Structure of Naval Industries in Western Europe

Now that this book is being published as part of Hartinus Nljho££' s 'Studies in Industrial Organization'. I should like to point out two fac­ tors which strongly influenced the study. There would have been no project on this scale if the Peace Research coamittee of the Free University, Amsterdam, had not coamissioned a major empirical investigation into Western Europe'an defence industries and pro­ vided the funds and facUities needed to carry it out. I am grateful for this, for the committee's confidence and its patience, and for the unfail­ ing support of the secretaries at the Department of International Relations. The study was also submitted and approved as a doctoral dissertation at the Free University. I am deeply endebted to my supervisors, H.W. de Jong (University of Amsterdam). A.J. Vermaat (Free University), and G. Junne (University of Amsterdam). who gave me all the guidance and the encourage­ ment I needed. to H. Coppens and G. Faber. who were a constant source of advice and support. and to N. Brown (Birmingham University), F. Barnaby. and Th. van den Hoogen (Groningen University). who offered their comments on several occasions.

1 Introduction.- 1.1 Background.- 1.2 Why Warships?.- 1.3 How Do You Get Your Information?.- 1.4 The Structure of the Study.- Notes.- 2 Changing Navies and Naval Technology.- 2.1 Order of Battle, 1960 and 1980.- 2.1.1 Missions and Ship Types.- 2.1.2 Large and Small Navies.- 2.1.3 Mode of Procurement.- 2.1.4 Age.- 2.1.5 Ship Size.- 2.1.6 Escorts — a Closer Look.- 2.2 “The Navy Always Travels First Class”.- 2.2.1 Cost Reduction Policies.- 2.2.2 The Learning Curve in Naval Manufacturing.- 2.2.3 Breakdown of Warship Cost.- 2.3 Conclusions.- Notes.- 3 The Internationalisation of the Warship-Building Industry.- 3.1 Introduction.- 3.2 The International Market for Warships.- 3.2.1 The Outside Market.- 3.2.2 Political Factors.- 3.2.3 Relevant Products.- 3.2.4 Second-Hand Warships.- 3.2.5 Domestic Construction.- 3.2.6 Product Markets.- 3.2.7 Market Shares.- 3.2.8 Volume Versus Value.- 3.3 International Transfers of Warship Technology.- 3.3.1 West Germany: The Leading Exporter.- 3.3.2 Functions of Warship Technology Transfers.- 3.4 Internationalisation in the Construction of Warships.- 3.4.1 The Emergence of New Warship Builders.- 3.4.2 The Changing Industry.- Notes.- 4 The Internationalisation of Warship Equipment Industries.- 4.1 Introduction.- 4.1.1 Terms of Reference.- 4.1.2 Definitions and Methodology.- 4.1.3 Equipment Markets: General Remarks.- 4.2 Geographic Markets.- 4.2.1 The Internationalisation of Sales.- 4.2.2 The Internationalisation of Procurement.- 4.2.3 The Changing Home Market.- 4.2.4 NATO Europe.- 4.2.4.1 Exports to European NATO States.- 4.2.4.2 Growing Imports.- 4.2.4.3 Market Shares.- 4.2.5 The Outside Market.- 4.2.5.1 The Decline of British Sales.- 4.2.5.2 Market Shares.- 4.2.5.3 The Leading Export Market.- 4.2.5.4 Exports to Foreign Shipbuilders.- 4.2.5.5 Greater Competitiveness.- 4.3 Product Markets.- 4.3.1 Different Products for Different Markets?.- 4.3.2 Growth.- 4.3.3 Duplication and Complementarity in NATO Europe.- 4.3.4 Market Shares.- 4.3.4.1 Medium Guns.- 4.3.4.2 Surface-to-Air Missiles for Point Defence.- 4.3.4.3 Surface-to-Surface Missiles.- 4.3.4.4 Anti-submarine Warfare (A.S.W.) Weapons.- 4.3.4.4.1 Mortars and Rocket Launchers.- 4.3.4.4.2 Chain Reactions in Technological Innovation — A.S.W. Aboard Surface Warships.- 4.3.4.4.3 Embarked A.S.W. Helicopters.- 4.3.4.5 Surveillance and Fire-Control Radar.- 4.3.4.6 Sonar for Warships and A.S.W. Helicopters.- 4.3.4.7 Diesel Engines for Warship Propulsion.- 4.3.4.8 Steam and Gas Turbines.- 4.4 The Internationalisation of Production.- 4.5 Conelusions.- Notes.- 5 Concentration and Specialisation in Naval Industries.- 5.1 General Concentration and Déconcentration.- 5.1.1 Levels of Concentration.- 5.1.2 Concentration and Deconcentration as a Process.- 5.2 Warship Markets.- 5.2.1 Conventional Submarines.- 5.2.2 Destroyers, Frigates, and Corvettes.- 5.2.3 Fast Attack Craft.- 5.3 Concentration and Specialisation in Western European Warship Building.- 5.3.1 Bureaucratic and Commercial Construction.- 5.3.1.1 Bureaucratic Armaments Production in France.- 5.3.1.2 The Commercialisatiôh of Armaments Production.- 5.3.2 Concentration in Warship Building.- 5.3.3 Specialisation in Warship Building.- 5.3.3.1 Britain.- 5.3.3.2 Federal Republic of Germany.- 5.3.3.3 The Netherlands.- 5.4 Concentration and Specialisation in Western European Warship Equipment Industries.- 5.4.1 Naval Aircraft and Missiles.- 5.4.1.1 Concentration.- 5.4.1.2 Product Markets.- 5.4.1.3 Deconcentration.- 5.4.2 Naval Guns.- 5.4.2.1 Obsolescence.- 5.4.2.2 Industry.- 5.4.3 Radar and Sonar: The Leading Industry.- 5.4.3.1 Product Markets.- 5.4.3.2 Military Electronics in France.- 5.4.3.3 The British Military Electronics Industry.- 5.4.4 Propulsion Engines.- 5.4.4.1 Product Markets.- 5.4.4.2 The United Kingdom.- 5.4.4.3 France.- 5.4.4.4 The Federal Republic of Germany.- 5.5 Conclusions.- Notes.- 6 Rationalisation in European Nato Armaments — Political and Industrial Preconditions.- 6.1 The World Market for Armaments as a Constituent Element of Defence Industries and Defence Procurement.- 6.1.1 The Emergence of a World Market for Armaments.- 6.1.2 Market Expansion and the Growing Significance of the Third World.- 6.1.3 Increased Competition for Export Markets.- 6.1.4 The Commercialisation of Arms Production and Procurement.- 6.2 National Defence Industries and Government Policy.- 6.2.1 Concentration and Specialisation of Arms Industries at the National Level.- 6.2.2 Limited Internationalisation.- 6.2.2.1 Transnational Armamaments Networks.- 6.2.2.2 A Case Study: The Military Division at Philips.- 6.3 Technology and The Dynamics of Vertical Competition.- 6.4 The Need for Rationalisation.- 6.4.1 Potential Vicious Circles.- 6.4.2 Rationalisation in the Alliance.- 6.4.2.1 Alternative Models for Rationalisation in NATO Europe.- 6.4.2.1.1 The Competitive Approach.- 6.4.2.1.2 The Co-operative Approach.- 6.4.2.1.3 Rationalisation by Control.- 6.4.2.1.4 The Role of Demand.- 6.4.2.2 Policy Requirements for Rationalisation.- 6.4.2.2.1 Geographic Division of Labour.- 6.4.2.2.2 Functional Division of Labour.- 6.4.2.2.3 The Quest for Military Specialisation: Dutch Experiences.- 6.4.2.2.4 Summing Up.- 6.4.2.3 Industrial Requirements for Rationalisation.- 6.4.3 Rationalisation at the National Level.- Notes.- Note on Sources and Methods.- References.- Statistical Appendix.