July 2004 Defense Horizons 1

Defense

One of the major results of the Prague Summit in November 

2002 was the formal recognition of the military capabilities gap 

between the United States and the other NATO nations. Members 

made a strong commitment to address this gap, especially in strategic transport, UAVs, precision guided munitions, air-to-air refueling, 

maritime counter-mine capabilities, and nuclear, chemical, and 

biological identification and defense capabilities. The Prague Capabilities Commitment is silent on a major long-term issue—funding of 

the defense research and technology needed to reduce the capabilities gap over the long term.

The United States makes the largest annual investment in warfighting capability in the world, exceeding that of the closest NATO 

members by an order of magnitude.1 The disparity is even greater 

when one compares how the NATO nations invest their budgets. 

The United States spends approximately 35 percent of its defense 

budget on personnel, 30 percent on equipment expenditures, and 

the remainder in miscellaneous areas, including infrastructure.2 By 

comparison, Belgium and Italy spend over 70 percent on personnel. France, Germany, Greece, Italy, Poland, and Spain each spend 

approximately 60 percent on personnel. These same nations make 

investments in equipment that range from 5 percent (Belgium) to 20 

percent (France), with most countries investing around10 percent.3

These imbalances have existed for years.

The effect of this mismatch on defense investments is considerable: an overly large force structure in much of NATO that is 

ill equipped (as well as ill trained) to fight modern conflicts, and 

a widening technology gap between the United States and the rest 

of NATO.

In recent years, the United States has undergone its most significant military transformation since World War II as it has aligned 

and equipped itself to meet changing threats. The resulting forces 

are lighter, more mobile, and more lethal than ever before. The 

Overview

A widening technology gap between the United States and 

other NATO members will challenge the ability of NATO to function as a cohesive, multinational force. Over several decades, 

great disparities in the funding of defense research and technology by NATO members has produced a widening technological 

gap that threatens to become a divergence—a condition from 

which the Alliance may not be able to recover. The technology 

gap, in turn, is creating a capabilities gap that undercuts the 

operational effectiveness of NATO forces, including the new 

NATO Response Force.

With only slight modifications (not additions) to current 

total defense expenditures, and using funds that will be available 

as they restructure their forces, European members could not 

only double their current investment but take significant strides 

to ensure that they are not left behind in a world dominated by 

technology.

In addition, and of equal importance, the United States 

must share more of its fundamental basic and applied research 

with NATO partners, take a greater role of leadership in NATO’s 

Research and Technology Organization(RTO), and increase 

participation across all technical areas in the RTO. These primary actions, coupled with other actions by all NATO nations 

and the Allied Command Transformation, offer the potential 

to dramatically improve a situation that very much needs 

immediate attention. It is a relatively straightforward matter 

now. NATO has both a capabilities gap and a technology gap. 

Immediate attention to the latter, with a commitment by every 

NATO nation to invest three percent of its military budget in 

research and technology, may, over time, significantly reduce the 

capability gap.

NATO Technology: from Gap to 

Divergence?

by Donald C. Daniel

A publication of the

Center for Technology and National Security Policy

National Defense University

Number 42

HorizonsJ U L Y 2 0 0 4
2 Defense Horizons July 2004

United States has transformed so rapidly that it has left its traditional allies behind.

Consider air power. The capabilities gap here is unquestionably one of the largest. The United States has the only significant 

strategic transport, refueling, surveillance, and bomber capabilities 

among the NATO nations—at a time when the Alliance has committed itself to out-of-area activities. This mismatch in capabilities may 

be stemmed slightly by the Prague Capabilities Commitment.

The air power gap widens when one considers the fighter and 

attack aircraft, such as the F/A-22 and F-35, that the United States 

will introduce this decade.4 These aircraft will feature such new 

capabilities as all-internal carriage of air-to-air and air-to-ground 

weapons, materials and vehicle shaping to provide low observable characteristics, supersonic cruise without afterburner, and 

vertical/short take off and landing. Unmanned combat air vehicles 

contribute additional capabilities unmatched by other NATO members. The X-45A, for example, which is now undergoing testing in 

the United States, with a possible initial operational capability 

around 2010, features all-internal carriage of weapons and low 

observable characteristics.

The widening NATO capabilities gap is driven by many elements, the most important of which is defense funding. A subset 

of the capabilities gap is driven by the dominant role of technology in nearly every facet of modern society. Again, funding plays a 

key role.

Research and Technology Investments

The United States invests over $12 billion annually in defense 

science and technology (S&T). This includes approximately $1.5 billion in basic research, $4.5 billion in applied research, and $6 billion 

in advanced technology development. To put the magnitude of this 

investment in perspective, the U.S. defense S&T program exceeds 

the total annual defense investments of its NATO allies Belgium, 

Canada, the Czech Republic, Denmark, Greece, Hungary, Luxemburg, the Netherlands, Norway, Poland, Portugal, Spain, and Turkey. 

United States Defense S&T Budget

40

30

20

10

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

 Defense Budgets of European Members Compared to U.S. Defense S&T Budget

1. United Kingdom

2. France

3. Germany

4. Italy

5. Spain

6. Cananda

7. Netherlands

8. Turkey

9. Norway

10. Poland

11. Greece

12. Denmark

13. Belgium

14. Portugal

15 Czech Republic

16. Hungary

17. Luxembourg

18. Iceland

Dr Donald C. Daniel (danield@ndu.edu) is a distinguished research professor 

in the Center for Technology and National Security Policy at the National 

Defense University. 
July 2004 Defense Horizons 3

(See chart.) Only the United Kingdom, France, Germany, and Italy 

invest more in their total defense programs than the United States 

does in defense research and technology alone. The total defense 

research and technology annual investment by all other NATO 

nations combined is estimated to be only $3 billion.

The American investment in defense research and technology 

has increased dramatically during the Bush administration, which 

considers this investment to be a major factor in enhancing the 

quality of U.S. armed forces, with almost all of this increase going to 

advanced technology development. The significance of this increase 

should not be lost on NATO, as it will yield even more advanced 

technology for the U.S. armed forces in the near term.

In addition to the near-term investments already mentioned 

(again using air power examples), the United States is the only 

nation in the world investing significantly in longer-term technologies, such as hypersonics, a technology featured in the Defense 

Department’s National Aerospace Initiative. This initiative features, 

among other things, research in hypersonic scramjet propulsion with 

potential application to air-to-ground missiles, long-range strike 

aircraft, and two-stage-to-orbit space vehicles with an airbreathing 

first stage. None of these capabilities, the latter two of which are 

revolutionary, are even on the longterm planning horizon of any other 

NATO nation.

Unfortunately, additional 

potentially revolutionary technology 

areas can be cited in which the 

United States is making significant 

investments and NATO colleagues 

are doing at best very little. These 

areas include directed energy laser 

and high-power microwave devices, distributed mission training, 

miniaturized conventional weapons technologies, and microsatellites. 

Will the Gap Become Divergent?

The order-of-magnitude differences in defense funding between 

the United States and other NATO members, if sustained, eventually 

will cause such a wide gap in technical capabilities that a divergence 

will occur. The great danger here is that, whereas a gap can be narrowed over time by sufficient investment, a divergence may be unrecoverable. Should this divergence occur, the Alliance is at risk.

Given that, at least in the short term, the United States is 

unlikely to reduce military spending, NATO and, more important, the 

NATO nations, must make this issue a very high priority. The time 

to address the issue is now, and the amount of time to resolve it is 

perhaps a decade. Ten years from now, the United States may have 

so many revolutionary technologies that it is difficult to imagine how 

NATO units so mismatched in technical capability will be able to 

function as a cohesive, allied force.

Other factors also must be considered. Fortunately, technology matures slowly from basic research to completion of advanced 

technology development, and it may be that time is on NATO’s side. 

Another factor to consider is that technologies that offer significant 

promise today may not pan out. Research and technology development are risky undertakings; spending vast resources does not 

guarantee success in solving difficult technical problems. And we 

sometimes see breakthroughs result from limited funding. This latter point is especially significant for NATO nations that have notable 

research and technology establishments and personnel who stay 

well connected to worldwide research projects and the results these 

projects are producing. 

The Way Ahead

Specific actions taken now by NATO and member nations could 

have a dramatic, positive effect on the Alliance. Although many technology areas are important to the Alliance, certain areas, including 

the personnel and infrastructure to support them, are more important in today’s military environment; these areas also are discussed. 

The Alliance is fortunate to have at this time a major Command that 

is charged with transformation and recognizes the need for aggressively transitioning technology to the operational forces. 

Funding 

No discussion of the way ahead for reducing NATO capabilities and technology gaps can avoid funding, and there is, perhaps, a 

glimmer of hope for the future. The 

good news comes from the fact that 

small, but consistently sustained, 

investments in research and technology could make a significant difference in the technology gap. Even 

for a defense program as large as 

that of the United States, research 

and technology investment is only 

about 3 percent of the total defense 

budget. If all NATO nations would invest this same percentage 

amount in defense research and technology programs, we could 

see an effective doubling of the investment by the non-U.S. nations. 

This singular investment in the future, requiring no new funds, 

but rather a reprioritization, would set the stage for the Alliance 

to maintain essential technical connectivity across all nations. 

It can be achieved if members sustain their defense funding at 

current levels and make the funding of research and technology 

a top priority using funds made available by reduction of force 

components. 

The European members of NATO also could benefit by closer 

cooperation and collaboration among themselves in defense research 

and technology investments. There is a sense in some quarters 

that significant, unnecessary duplication persists among member 

nations. This negative effect is further compounded by problems 

with interoperability as technologies enter development phases. 

The United States

NATO is fortunate to have a strong organization that is specifically chartered to share defense research and technology information.5

 It is imperative, however, that the United States take a 

stronger leadership position throughout the RTO than it is currently 

doing. For example, of the seven major technical panels in the 

RTO, the United States chairs only one, the panel on Information 

Systems Technology.6

 These panels form the heart of the organizareprioritization would set 

the stage for the Alliance to 

maintain essential technical 

connectivity across all 

member nations
4 Defense Horizons July 2004

NATO Research and Technology Organization

The Research and Technology Organization (RTO) was formed in 1998 by the merger of two NATO bodies: the 

Advisory Group for Aerospace Research and Development (AGARD) and the Defense Research Group (DRG). The aim of the merger 

was primarily to ensure that NATO’s structure was better adapted to the changing defense environment, in particular by providing a 

common focus for all NATO research and technology activities and developing a research and technology strategy for NATO. The RTO 

has carried out both tasks in the short time that has elapsed since its formation, and has just started to implement the strategy.The 

RTO comprises the Research and Technology Board (RTB) and its subordinate bodies and the Research and Technology Agency.

The Research and Technology Agency is tasked withy providing support to the RTB and with executing those actions 

required to support the development, coordinatinon, and execution of the RTO scientific and technical program. RTA staff 

include about thirty NATO civil servants and a further twenty staff members, both military and civilian, supplied voluntarily 

by the nations for limited periods. Its headquarters and most of the staff are in France, but a small unit is located in NATO 

headquarters in Brussels, Belgium.

The Research and Technology Board is the highest authority within the RTO and serves as the single integrating body 

within NATO for the direction and coordination of defense research and technology and is the policy body. The RTB is tasked 

by the North Atlantic Council through both the Military Committee (MC) and the Conference of National Armaments Directors 

(CNAD). Its membership comprises up to three leaders in the field of defense research and technology from each NATO nation 

capable of speaking with authority on science and technology and their application to military problems. These members may 

come from government, industry, or academia. Ex officio representatives also are appointed by the NATO research and technology 

agencies NATO Consultation, Command and Control Agency (NC3A) and the SACLANT Undersea Research Center (SACLANTCEN) 

and the NATO Strategic Commands. The Chairman is a senior member of the Board, elected by the national members for a 

three-year term. Each nation appoints a national coordinator to oversee its RTO activities. 

The RTB oversees the activities of all subordinate bodies and delegates the responsibility for conducting the technical program 

to six Technical Panels. The technical Panels and the Modeling and Simulation Group each consist of national experts, including 

a number of members at large, who are internationally recognized experts from the NATO nations. The Panels are the heart of 

RTO, because they propose, develop, and steer the various tasks that together make up the technical program of the organization. The 

missions of the six Panels are:

■ Applied Vehicle Technology (AVT): to improve the performance, affordability and safety of vehicle platforms, 

propulsion, and power systems through the advancement of appropriate technologies. The AVT Panel addresses 

technology issues related to vehicle platforms, propulsion,, and power systems operating in all environments 

including land, sea, air, and space, for both new and aging systems.

■ Human Factors and Medicine (HFM): to optimize performance, health, well-being, and safety of the human 

in operational environments with consideration of affordability. This involves understanding and ensuring the physical,

physiological, psychological and cognitive compatibility among military personnel, technological sytems, missions, 

and environments. The HFM Panel covers the fields of human factors, operational medicine, and human protection

in adverse environments.

■ Information Systems Technology (IST): to identify and review areas of research of common interest, to 

recommend the establishment of activities in these areas and to initiate and approve exploratory teams. The IST 

Panel covers the fields of information warfare and assurance, information and knowledge management, communica

tions and networks, and architecture and enabling technologies 

■ Studies, Analysisj and Simulation (SAS): to conduct studies and analyses of an operational and technology 

nature, exchange information on operational (OA) analysis technology, advance the development of OA methods 

and tools, and provide a forum for NATO modeling and simulation oriented toward operational issues. 

■ Systems Concepts and Integration (SCI): to advance knowledge concerning advanced systems, concepts, 

integration, engineering techniques, and technologies across the spectrum of platforms and operating environments 

to ensure cost-effective mission area capabilities, including integrated manned and unmanned air, land, sea, and space defense systems and the 

associated weapon and countermeasure integration. Panel activities focus on NATO and national mid- to long-term, system-level operational 

needs.

■ Sensors and Electronics Technology (SET): to advance technology in electronics and passive/active sensors 

as they pertain to reconnaissance, surveillance, and target acquisition, electronic warfare, communications, 

and navigation, and to enhance sensor capabilities through multi-sensor integration/fusion. This concerns 

the phenomenology related to target signature, propagation, and battlespace environment, EO, RF, acoustic 

and magnetic sensors, antenna, signal and image processing, components, sensor hardening, and 

electromagnetic compatibility.

Source: NATO RTO mission statements available at http://www.rta.nato.int/
July 2004 Defense Horizons 5

tion because they formulate, execute, and report on more than 100 

technical activities that take place annually involving several thousand scientists and engineers.7

 It may be appropriate for the United 

States to set as a goal chairing three panels at any one time, as well 

as making individuals available to serve as vice chairs of others. Furthermore, the individuals made available to serve in these positions 

should be high-ranking leaders (preferably members of the Senior 

Executive Service) who direct significant resources within the U.S. 

defense laboratory structure.

The United States also must take a much more active role 

in sharing basic and applied research with NATO partners. The 

United States participates in most RTO activities, but not at a 

level consistent with its very large investment in defense research 

and technology and not across the full spectrum of RTO activities. Whereas, for example, participation in air platform related 

technologies might sometimes be sufficient, the same cannot be 

said of naval-related or space-related technologies. Failure by the 

United States to address these leadership and participation areas is 

every bit as significant as the funding-related deficiencies of other 

NATO members.

If the United States moves to share more of its basic and 

applied research information, however, the other NATO nations must 

be receptive, particularly where doing so can be done with modest 

infrastructure investments. Failure 

to be receptive may well eliminate 

these nations from access to, or use 

of, such technology in the future, 

simply because it is so unknown to 

them. Also, issues of future equipment procurement must not get in 

the way of research. It is incumbent 

on the total NATO research community to consider, whenever possible, technical approaches that will not result in a single strategy 

for future equipment purchases.

Technology Areas

There are many areas of technology that especially lend themselves to a more aggressive posture by the NATO RTO on sharing. 

Although it is impossible to mention all of these, at least three must 

get special mention: distributed mission training, sensor fusion, 

and information technology. It is also important to note that the 

NATO Response Force (NRF) will be especially dependent on these 

technologies; consequently, they must receive priority consideration 

for funding.

Distributed mission training will be absolutely essential for 

the NRF. The ability to link simulators, actual equipment, and 

personnel from various geographic locations on both sides of the 

Atlantic has been demonstrated to some extent by technologists and 

operational forces. As elements of the NRF, with all of their different equipment, are moved into and out of readiness, there is simply 

no other way to keep them fully prepared to execute their missions. 

The United States and the United Kingdom have made significant 

progress in this area, especially with their air forces. Equal progress 

across broader technology areas and across many more nations 

is essential.

Sensors have become the enabler in the Information Age, and 

the near-real-time fusion of information from a vast array of many 

different types of devices is key to NATO military capability. These 

devices include the full range of sensors on air-, space-, land-, 

and sea-based platforms that cover the complete electromagnetic 

spectrum. This is an area that lends itself to participation by a wide 

variety of large and small nations. Larger nations with larger budgets 

will no doubt pursue a broader range of sensor options, but smaller 

nations with more limited budgets can certainly do research in some 

of the vital areas and, by partnering with other nations, can pursue 

significant activities in sensor fusion. This area also lends itself to 

research at the component level or with almost any combination 

of components and platforms. There also is significant work that 

can be performed in sensor fusion algorithms as well as automatic 

target-recognition algorithms. Again, because of this diversity, large 

or small nations can become involved to whatever level they can 

afford.

Information technology is, of course, the glue that holds today’s 

modern societies together. There are so many elements of this technology area that it is almost impossible to imagine how any nation 

could not find a niche area. One of the more appealing areas for some 

may be fundamental mathematics. This is an area that requires a 

modest infrastructure investment to enter and that lends itself to 

partnering as a nation moves toward 

more applied activities, such as with 

sensors and sensor fusion. The interaction of machine-based information 

technology with human elements is 

another niche of this research area 

that enables numerous contributions 

at various levels of investment and 

with various levels of infrastructure. The overall area of information 

technology is one in which European members of NATO, particularly 

the United Kingdom and France, have invested broadly, and one 

that is perhaps most promising in terms of closing or preventing a 

technology gap.8

The RTO also should seek more involvement with, and participation by defense industries from both sides of the Atlantic. A case 

could perhaps be made that contributions by European defense 

industries contribute significantly to the better balancing of vast 

disparities in military research and technology funding. Also, the 

technical areas mentioned above could especially lend themselves to 

increased industry involvement. To this end, the RTO should request 

the NATO Industrial Advisory Group to investigate this matter, with 

specific emphasis on the magnitude and technical excellence of nongovernment-sponsored, defense-relevant, industrial research.

Infrastructure and Workforce 

Just as the military dimension of NATO is working to modernize and transform itself into an agile force, the technical dimension 

must do the same. This is particularly true with respect to physical 

infrastructure and manpower. The cost associated with maintaining 

infrastructure for technologies that are not part of the modern equation must be eliminated. Just as we no longer need large, immobile 

land armies in NATO, neither do we need antiquated laboratories 

the United States must take 

a much more active role in 

sharing basic and applied 

research with NATO partners
6 Defense Horizons July 2004

and facilities that are not highly relevant to the challenges of current 

and future technologies.

Similarly, the workforce in defense research and technology 

needs to be one that is skilled in science, mathematics, and engineering for the future, not the past. The workforce of the future, 

from both national and NATO perspectives, would also benefit 

significantly from more prolonged exposure to each other. There 

is no better way to share technology than to share the people who 

are experts in it. To this end, one-, two-, and three-year laboratory 

exchange programs, both to learn and to teach, should be pursued 

much more vigorously than is currently done. The United States is 

especially deficient in this area. 

Allied Command Transformation

The formation in 2003 of the NATO Allied Command Transformation created a golden opportunity for sharing technology and 

demonstrating it in multinational forums. ACT must seize this opportunity and, working with the RTO, Main Armament Groups, and 

member nations, among others, provide the framework and leadership to demonstrate emerging technologies across the broadest possible spectrum of NATO nations.9

 This is not a trivial task. Individual 

nations repeatedly struggle with transitioning technology from the 

laboratory to the military user. ACT should, and must, assume this 

role for NATO as a whole. The recent creation of a NATO Technical Advisory Board, with the RTA Director and Deputy Director as 

members, will help facilitate this process, as will emphasis on joint 

experimentation, exercises, and assessment. It also is important to 

note that both activities are led by NATO flag officers. One particularly difficult area, once again, will be funding. To this end, ACT must 

work carefully with NATO as an entity and with individual nations 

(which fund the military research and development) to obtain sufficient funding commitments from all to demonstrate the emerging 

technologies and to enhance their availability for transition. A key 

element of this is for nations to accept the responsibility for funding 

demonstrations of their technologies in a NATO environment.

Conclusion

As perplexing as today’s NATO capabilities gap may be, some 

relatively simple and straightforward actions could prevent a potential divergence driven by technology. Foremost among these actions 

is increased investment in defense research and technology by the 

European members. The good news here is that, with only slight 

modifications (not additions) to current total defense expenditures, 

and using funds that will be available as they restructure their 

forces, these nations could not only double their current investment 

but take significant strides to ensure that they are not left behind in 

a world dominated by technology.

The second important action is an American initiative. The 

United States simply must make sharing more of its fundamental 

basic and applied research with NATO partners a higher priority. 

This requires at least two subset actions: increased leadership in the 

Research and Technology Organization, especially at the panel level, 

and a far greater level of participation across all technical areas in 

the RTO. These two primary actions, coupled with other actions by 

all NATO nations and the Allied Command Transformation proposed 

above, offer the potential to dramatically improve a situation that 

much needs immediate attention. NATO has both a capabilities gap 

and a technology gap. A commitment by every NATO nation to invest 

3 percent of its military budget in research and technology, would go 

far toward reducing both gaps and keeping NATO militarily relevant 

to the new strategic environment.

Notes 

1. The U.S. defense budget for fiscal year 2004 is approximately $400 billion. 

Of the NATO nations, The United Kingdom has the next largest defense budget at 

approximately $40 billion, with France second at approximately $30 billion and Germany third at approximately $25 billion.

2. Equipment expenditures include research and development. 

3. The figures given here are taken from the NATOweb site on “Financial and 

Economic Data Relating to NATO Defence—Defence Expenditures of NATO countries 

(1980-2003),” accedssed at www.nato.int/docu/pr/pr2003.htm#december.

4. The F-35 will also most likely be acquired by other NATO nations, including 

the UK.

5. The NATO Research and Technology Organization is described in detail in 

“NATO Defense Science and Technology,” Defense Horizons 24 (Washington, DC: 

National Defense University Press, March 2003.

6. Technical activities include task groups, symposia, workshops, lecture series, 

cooperative demonstrations of technology, and other activities.

7. For an excellent discussion on C4ISR technology in Europe, see the recent 

work of Gordon Adams at The Elliott School of International Affairs, George Washington University.

8. The main armament groups are the NATO Army Armaments Group, the NATO 

Navy Armaments Group, and the NATO Air Force Armaments Group. They are primarily concerned with development and procurement of equipment.

Defense Horizons is published by the Center for Technology and National Security Policy . This and 

other CTNSP publications are available online at http://www.ndu.edu/inss/press/nduphp.html.

The opinions, conclusions, and recommendations expressed or implied within are those of the 

contributors and do not necessarily reflect the views of the Department of Defense or any other 

department or agency of the Federal Government.

Center for Technology and National Security Policy

 Hans Binnendijk

Director