For decades, Europe has been a loyal and strategic customer of U.S. defense systems. American jets patrol NATO skies, American missiles guard European borders, and American logistics software tracks supply chains from the Arctic to the Aegean. This reliance, formalized through decades of Foreign Military Sales (FMS) and security cooperation, has reinforced the U.S.’s role as the globe’s preeminent arms supplier.
But that era is ending — not because America has lost its technological edge, but because the world has changed. And America hasn’t changed with it.
Across Europe, nations are investing billions to reconstitute their own defense industrial capacity. From new munitions plants in Poland to domestic missile production in Germany and shared R&D initiatives across the EU, there’s a growing understanding that the future of European security cannot rely solely on American arsenals. The war in Ukraine has laid bare the fragility of global supply chains, and nations are responding with long-term industrial strategies rather than short-term procurement fixes.
This shift should not be seen as a threat to U.S. interests — it should be a clarion call to rethink them.
We’ve been here before. In the lead-up to and during World War II, America’s industrial base underwent a radical transformation. William S. Knudsen — the auto executive-turned-general for whom our Institute is named — galvanized American manufacturing into an unstoppable wartime force by mobilizing small and medium-sized manufacturers (SMMs) and integrating commercial production capabilities into the defense sector.
This model wasn’t just effective — it was essential. The success of the Arsenal of Democracy came not from monolithic control but from layered resilience, public-private coordination, and a shared sense of purpose. The U.S. built not just weapons, but a system that could scale, flex, and respond to the chaos of war.
Today, we face new forms of chaos: cyberwarfare, contested logistics, supply bottlenecks, and regional instabilities from the Pacific Rim to Eastern Europe. And yet, our defense industrial strategy remains tethered to old assumptions — chief among them, that we can outbuild our adversaries and outpace our allies.
That assumption no longer holds.
As Europe retools its own industrial base, the United States continues to view its allies largely as customers. Our FMS process, for all its diplomatic weight, reinforces this outdated framework. It treats defense as a one-way transaction: we build, they buy.
This transactional mindset is both strategically risky and economically short-sighted. It undermines the very partnerships we claim to value and blinds us to the potential of deeper industrial collaboration. Defense cooperation in the 21st century must go beyond licensing agreements and offset deals. It must be built on co-development, shared production lines, joint innovation, and yes — mutual dependence.
That kind of interdependence isn’t a weakness. It’s the foundation of a truly resilient global defense posture.
If America wants to lead in this new era, it must also broaden its definition of who participates in defense manufacturing. The Knudsen Institute has long championed the integration of SMMs into national security supply chains. These firms — agile, innovative, and embedded in communities across the country — represent untapped reservoirs of capability.
But their potential doesn’t stop at the water’s edge.
American SMMs should be encouraged and empowered to explore partnerships abroad. Whether through co-production agreements with European allies, participation in multinational R&D consortia, or providing critical subcomponents to foreign prime integrators, there is an emerging opportunity to globalize our industrial base without sacrificing security or sovereignty.
This vision is not about outsourcing. It’s about networking. It’s about transforming today’s fragmented industrial environment into a mesh of interoperable, scalable, and surge-ready capacities — in the U.S., in Europe, and with Indo-Pacific allies as well.
To achieve this, the U.S. government must modernize how it thinks about industrial security. Export controls, ITAR restrictions, and procurement rules — many of which were designed for a different era — need to be updated to reflect the reality that our allies are not just customers. They are co-equal partners in a shared geopolitical struggle.
Likewise, industrial policies must shift from a posture of dominance to one of enablement. Funding mechanisms, loan guarantees, and collaborative R&D programs should be structured to encourage transatlantic and transpacific industrial integration, not just domestic primacy. We must invest in the connective tissue of global defense manufacturing, not just the muscle.
We are entering a multipolar industrial age. The United States can no longer afford to see itself as the singular Arsenal of Democracy. Instead, we must become the anchor of a wider industrial alliance — one built on redundancy, agility, and mutual investment.
If we do this, we will not only be more prepared for future conflicts — we will have forged a new kind of deterrence: one rooted in shared capacity, not just shared values.
History has shown what we can achieve when our industrial strategy aligns with our strategic purpose. The moment has come to do it again — not alone, but together.