Arming Allies And Partners

Introduction

As the United States and its allies and partners face a more dangerous and uncertain world, the strategic imperative for cooperation has intensified. One of the greatest strengths of the United States has always been the nation’s connections with allies and partners. This is underpinned by robust defense industrial cooperation that strengthens partnerships, increases interoperability, and fills gaps in U.S. industrial capacity and capability. Working with allies offers an opportunity to surge production and contributes to deterrence. Yet despite the benefits, there are challenges that limit cooperation. Allies and partners can run into a wide range of regulatory hurdles and other barriers when buying from the United States and working with U.S. industry on codevelopment and coproduction. While certain military capabilities such as intelligence sharing may be achieved with a relatively narrow set of nations, defense industrial cooperation offers a way of building connections to a broader range of allies.

This report takes a fresh look at the challenges of defense industrial cooperation through a direct survey of some of the United States’ closest industrial partners—those with a Reciprocal Defense Procurement Memorandum of Understanding (RDP MOU). These agreements relax provisions in the Buy American Act and allow foreign vendors to be considered domestic sources, granting the U.S. Department of Defense (DOD) greater and easier access to ally and partner technologies and supply chains. The survey presented a range of questions on the reasons for and challenges to cooperation.

Survey respondents confirmed that building domestic capacity, deterring threats, ensuring interoperability, and building regional capacity were all important goals, with building domestic capacity being their main interest. The Technology Security and Foreign Disclosure (TSFD) and International Traffic in Arms Regulations (ITAR) were noted as particularly challenging processes when doing business with the United States, whether importing arms, codeveloping or coproducing defense goods, or transferring technologies. However, respondents also recognized that their home country processes added friction.

Document markings like Controlled Unclassified Information (CUI) and Not Releasable to Foreign Nationals (NOFORN) were highlighted as challenges, with additional discussions revealing that the lack of clarity about how to dispute these markings was a source of frustration. RDP MOUs are widely acknowledged as being key facilitators for doing business with the United States, yet the exemptions they grant to participating countries are often not recognized by—or are even opposed by—U.S. program offices, U.S. congressional members, and the executive branch.

While none of these findings are particularly surprising, the survey’s sampling of respondents beyond just the United States’ largest and closest industrial partners confirmed that challenges are pervasive. It also offers an initial baseline against which the impact of future changes in policy can be measured. As the United States navigates a more precarious global order in which near-peer competitors are investing in and expanding the capacity of their own industrial bases, working with allies offers an effective way to strengthen partnerships and enhance deterrence.

Background

Defense Industrial Cooperation

Defense industrial cooperation offers participating nations many benefits. As a subset of broader security cooperation efforts, defense industrial cooperation strengthens alliances and partnerships by building the relationships integral to working together on research and development (R&D) and production; it also enhances military interoperability by encouraging the use of common platforms. A recent Defense Innovation Board report indicated that cooperation is increasingly important due to technological shifts: “The United States is no longer the leading source of progress across critical areas of defense-related technology innovation, such as 5G, hypersonics, and electronic warfare, while our allies and partners increasingly lead in other areas, including semiconductors, directed energy, and quantum science.” Cooperation is urgently required to ensure access to advanced technology.

Cooperation can improve supply chain resilience through the development of additional suppliers and can also grow domestic defense industries as they participate in joint efforts that may have the potential for additional customers. In a 2023 report, Jerry McGinn and Michael T. Roche connect a “build allied” approach to the realization of National Defense Strategy objectives, linking industrial cooperation with the strengthening of industrial base capacity and resilience. Working with the United States also offers opportunities to strengthen ties and benefit from advanced technology.

However, any cooperation between nations with different priorities, political systems, funding cycles, and laws and regulations can be challenging to successfully accomplish. The desirability of working with the United States has led many nations to highlight the challenges of doing so. Some contractors have successfully solved the puzzle of U.S. bureaucracy, but red tape continues to create high barriers to entry for domestic as well as foreign industry. A few notable barriers include ITAR, TSFD, and Foreign Military Sales (FMS). These and other structural barriers are highlighted in this research.

▲ TABLE 1: Frameworks for Defense Industrial Cooepration

▲ TABLE 2: U.S. Regulations and Processes for Defense Cooperation

Given the breadth of the subject, it is useful to start by defining frameworks for cooperation as well as regulations that create challenges. Table 1 summarizes the frameworks.

These frameworks and supporting processes facilitate cooperation, but there are also a number of regulations and controls that make working together challenging. Table 2 lists the U.S. export and arms sales regulations used to manage technology transfer and safeguard U.S. technology. Table 2 also includes the processes that cover the delivery of defense products to partner nations, along with the markings that delineate limitations on allowing partners to access information relevant to cooperation. Several other processes are also described in more detail below.

Value of Improving Arms Sales

Streamlining the arms sales process is critical to advancing the goals of defense industrial cooperation. Reducing bureaucratic inefficiencies and accelerating delivery timelines ensures that partners receive the capabilities they need at the earliest opportunity. This strengthens alliances by reinforcing the United States’ standing as a reliable and responsible security partner. Efficient arms sales processes not only facilitate the fielding of U.S. platforms, weapons systems, and technologies to partner nations, but also ensure that the United States is reaping the benefits of technologies developed by partner states. This improves interoperability and reduces friction during multinational operations, enhancing coordination and force effectiveness in complex operating environments.

Cooperation through arms sales also bolsters supply chain resilience by integrating additional suppliers and production lines across allied and partner nations. Supply chain diversification reduces dependency on single-source suppliers, decreases risks associated with domestic supply chain bottlenecks, and ensures continuity during crises. Overcoming barriers to cooperation and improving the structure and execution of arms sales will enhance collective security.

Notable U.S. Regulations

International Traffic and Arms Regulations: ITAR governs defense items and services to ensure that sophisticated military technology—such as items on the U.S. Munitions List (USML)—do not fall into the hands of U.S. adversaries or hostile actors. ITAR serves as the implementing framework for the Arms Export Control Act (22 U.SC. 2778), which is overseen by the State Department’s Bureau of Political-Military Affairs. ITAR is fundamental to safeguarding U.S. technologies and weapons systems, but may also create risks to U.S. and coalition military readiness. ITAR regulations have contributed to a risk-averse culture, engendering hesitancy in technology sharing even with close allies and partners. It prevents the United States from quickly proliferating advanced technologies to its friends and can impede U.S. warfighters from gaining access to advanced allied capabilities, as foreign companies sometimes desire to avoid ITAR processes.

Technology Security and Foreign Disclosure: TSFD, similar in purpose to ITAR, manages the trade-offs between building allied capabilities and safeguarding national security. TSFD policies aim to balance the risks associated with sharing sensitive and highly classified U.S. technology and information with the benefits of international cooperation. Navigating TSFD processes, or “pipes,” is challenging yet necessary for engagement with friendly nations. U.S. industry is typically required to acquire TSFD approval prior to requesting export approval—a hurdle that strains program management offices and U.S. industry actors as they pursue international cooperation efforts.

Foreign Military Sales: FMS is a process through which eligible foreign governments may purchase defense equipment and services from the U.S. government. FMS is a government-to-government process, whereas Direct Commercial Sales (DCS) is a commercial-to-government process. FMS is the largest U.S. security assistance program, aimed to help protect the economic health and security of allies and partners. The Department of State determines which countries are eligible for FMS, while DOD executes the programs.

In an FMS program, the foreign government is responsible for all costs associated with the sale. Purchased items can either come from DOD stockpiles or from new procurement, wherein DOD enters a contract with a U.S. defense contractor to produce the items purchased. A single FMS case can contain hundreds of individual line items, span multiple commands and military departments, and take years or decades to fully deliver. FMS utilizes both Title 22 and Title 10 funds, each with its own set of rules. Some complex FMS programs require congressional review and approval, which can significantly delay the process. The threshold amount for a sale to require congressional oversight has not been adjusted in the last two decades, resulting in more cases undergoing congressional review than originally intended by the Arms Control Export Act (ACEA) established in 1976.

Tools to Overcome Challenges: The United States has a variety of specific agreements with allies and partners to enhance defense industrial cooperation. The National Technology and Industrial Base (NTIB) framework is aimed at enhancing collaboration in defense production, innovation, and supply chains with Canada, the United Kingdom, Australia, and New Zealand. Security of Supply Arrangements (SOSA) are bilateral agreements allowing the United States and partner ministries of defense to request prioritized performance of contracts from one another.

RDP MOUs are designed to promote rationalization, standardization, and interoperability with ally and partner nations. They relax provisions from the Buy American Act of 1933 that direct the U.S. government to purchase supplies and finished goods domestically, requiring a waiver to buy internationally. RDP MOUs permit foreign industry to be considered domestic sources. They grant the United States and allied countries reciprocal access to their respective defense markets and streamline procurement processes to enhance effective defense cooperation and establish transparency and openness to competition. RDP MOUs generally contain similar provisions, such as increasing access to the other nation’s defense procurement system, “removing barriers to trade, providing reciprocal treatment to industrial enterprises of the other country, or waiving ‘buy national’ laws.”

Assessing the Challenges of Cooperation

Research on defense cooperation very often focuses on a narrow set of allies involved in substantial defense trade with the United States. To get a broader perspective, CSIS drew on RDP MOU-holding nations using a survey that sought to identify the challenges and enablers countries experience when doing business with the United States. Topics included selling arms to and receiving arms from the United States, U.S. export control policies, country-specific security and defense industrial goals, processes enabling technology transfer and weapons sales, and the utility of defense cooperation agreements and programs.

The survey was completed by representatives from member states of the Defense Memoranda of Understanding Military Attachés Group (DMAG), with the support of DMAG leadership. The DMAG is a group comprised of defense officials and attachés from countries who have RDP MOUs or equivalent agreements with the United States. As of 2025, 28 countries have RDP MOUs with the United States: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Egypt, Estonia, Finland, France, Germany, Greece, Israel, Italy, Japan, Latvia, Lithuania, Luxembourg, the Netherlands, Norway, Poland, Portugal, Slovenia, Spain, Sweden, Switzerland, Turkey, and the United Kingdom. Of these, 23 are members of NATO. Brazil, India, and South Korea are in ongoing RDP MOU negotiations with the United States. Given its DMAG “observer” status, South Korea was part of CSIS’s sample population. Brazil and India were not.

Thirteen nations provided responses to the questions, and many offered additional optional comments. While survey responses were limited to one per country, that does not mean that each response was answered by only one country representative. In many cases, entire acquisition teams contributed to ensure the response reflected their country’s broader approach rather than individual perspectives. However, variability inevitably exists due to differences in participants’ experiences, expertise, and roles. As a result, while responses may represent national viewpoints, they should not be interpreted as official country positions.

There have been calls from experts in recent years to increase available data on the realized benefits and challenges that procurement agreements bring to U.S. allies and partners. This survey seeks to help fill this gap in quantitative information by offering a dataset on U.S. bureaucratic processes that facilitate—or hinder—defense industrial cooperation. The results also offer a baseline against which future policy changes can be assessed.

Allied Country Defense Industrial Priorities

Survey recipients were asked to rate four key defense industrial cooperation goals on a scale of one to five—one being not important and five being extremely important. The goals listed were building domestic industry capacity, deterring the threat, ensuring interoperability, and developing regional capabilities.

All four goals were rated as at least important by all respondents; no participant rated any of the goals as either not important or somewhat important. Building domestic industry capacity, deterring the threat, and ensuring interoperability were rated as extremely important by most respondents, with nearly half rating developing regional capabilities as extremely important.

Defense industrial cooperation priorities are directly linked to operational requirements, meaning that countries must ensure they can produce and sustain critical defense systems to meet their strategic needs. In some cases, this necessity leads countries to indigenize sovereign defense capabilities, even if this comes at the expense of international collaboration. As a result, respondents noted that investments may pivot away from cooperative efforts and toward developing domestic industries and capacity that can independently support long-term defense readiness.

Respondents from countries whose neighbors pose a direct threat to national security noted defense collaboration with allies as essential to extended deterrence. A strong and integrated defense industrial base strengthens deterrence posture.

▲ FIGURE 1: Goals for Defense Industrial Cooperation

A country’s size, natural resources, geographic location, and topography influence defense needs. Certain weapons systems or defense services are better suited to specific terrains—a landlocked country has less need to heavily invest in naval capabilities, for instance, and smaller countries with long coastlines may invest in advanced undersea capabilities and specialty systems. This creates a strong yet niche defense industrial base in specific domains, leading to strong dependencies on larger allies like the United States for key military platforms (such as fighter jets). Despite continued investment in domestic capabilities, allies with limited resources and specific geographies view regional and U.S. cooperation as a key supplement to defense industrial areas of national strategic importance. These allies may thus view the development of regional capabilities as more important than others that have more independent defense industrial bases.

Legislative offsets were also noted as a priority among discussions with the DMAG and other defense acquisition stakeholders. Legislative offsets refer to the benefits—economic, industrial, or technological—that purchasing countries obtain by acquiring defense systems from the United States. These conditions of purchase pertain to both government-to-government sales and commercial sales of defense articles or services. There are multiple forms of potential compensation including “mandatory co-production, licensed production, subcontractor production, technology transfer, and foreign investment.” Certain U.S. allies and partners legally mandate offsets to ensure economic and industrial benefits when purchasing defense systems from abroad.

U.S. Export Control Challenges and Enablers

U.S. export control processes have long been cited by allies and partners as complex, slow-moving, and opaque. These challenges can create uncertainty for foreign buyers, complicate defense cooperation procedures, and, in some extreme cases, incentivize partners to seek alternative suppliers.

Survey respondents were asked to rate seven key U.S. export control processes on a scale of one to five—one being not challenging and five being very challenging. The seven processes listed were ITAR, Export Administration Regulations (EAR), Foreign Military Sales (FMS), Direct Commercial Sales (DCS), Excess Defense Articles (EDA), Technology Security and Foreign Disclosure (TSFD), and Cybersecurity Maturity Model Certification (CMMC).

▲ FIGURE 2: Persepectives on the Difficulty of U.S. Processes

As shown in Figure 2, respondents deemed TSFD and ITAR to be among the most challenging hurdles to international procurement from the United States. No respondent rated any of these processes as not challenging.

ITAR is a complex export control system marked by bureaucratic red tape, over which U.S. allies and partners continuously express frustration. ITAR processes are often perceived as too stringent and out of step with the current era of geopolitical competition, where delays in sharing equipment will limit the capabilities of allies. DMAG respondents recognized the purpose and importance behind ITAR but simultaneously critiqued its rigidity and prolonged lead times.

Because ITAR is such an expansive bureaucratic process, respondents noted that guidance from various U.S. authorities may be different or even conflicting. These barriers impede defense industrial cooperation and ultimately jeopardize U.S. and allied defense posture and readiness.

While ITAR does pose a significant challenge to international defense cooperation, it is part of a broader framework for partnerships. The Directorate of Defense Trade Controls (DDTC), responsible for administering ITAR, plays a role in facilitating collaboration by reviewing, and then subsequently approving, export licenses. Through this process, the DDTC ensures that defense technologies are transferred in a controlled and responsible manner while simultaneously supporting codevelopment and coproduction efforts with international partners. ITAR helps balance national security concerns with opportunities for technological innovation and collaboration with partner nations.

Some respondents offered additional nuance to their answers on TSFD and ITAR. TSFD can be relatively opaque—with a lack of clarity around which authorities do what and the pipeline of approval—but it is not always a very challenging process. The survey respondents felt that ITAR, by contrast, suffers from the opposite problem: It is a challenging process despite there being a considerable amount of information available on the steps required for compliance.

▲ FIGURE 3: Knowledge of ITAR Processes

Respondents noted that even though key U.S. export control and technology transfer processes are viewed as at least somewhat challenging, that does not mean that they are wrong or misguided. There is an understanding among ally and partner nations that these regulations, though complex, exist for a reason. Allied nations have their own complex export control regimes that share the same objective as U.S. protection policies: to prevent sensitive technology and information from falling into the hands of unfriendly nations. There was no call by survey respondents to eliminate U.S. processes, but rather for a more transparent, streamlined system that, with predictable lead times, could enhance cooperation and benefits for both nations.

Given the difficulty of ITAR procedures and the various stakeholders involved, CSIS asked the DMAG how well they understand ITAR processes.

Most—but not all—respondents understand ITAR processes moderately well. The DMAG respondents—defense cooperation attachés and defense officials—are familiar and relatively well versed in export control procedures by nature of their profession, so it may be of strategic concern for the United States that only four respondents reported a confident understanding of its requirements.

The United States often is reluctant to let allies gain some of the benefits from arms cooperation. Specifically, foreign companies will set up production and development hubs in the United States both to manage output and not appear foreign to contracting officers who are partial to selecting domestic firms. As one of the survey respondents noted, “every product will be improved over time and new functions might be added. In this scenario the knowledge created in the U.S. subsidiary will not flow back to the mother company due to ITAR. This is not a problem for the company. But [it] reduces interoperability and interchangeability.” In these scenarios, ITAR restrictions prevent the knowledge, including technological upgrades or new capabilities at the U.S. subsidiary, from flowing back to the parent foreign company. While some companies prefer this practice to avoid “ITAR contamination,” it nevertheless can harm interoperability and interchangeability, as well as stifle the flow of innovation to allies’ defense industries.

▲ FIGURE 4: Knowledge of FMS Processes

All respondents reported understanding FMS processes, in contrast to ITAR. Although FMS is not directly linked to international cooperation, as it primarily involves one nation’s government purchasing defense systems from the U.S. government, it serves an important role in helping nations achieve their domestic defense industrial goals. FMS enhances interoperability by allowing partner forces to operate using the same systems, and it can improve regional capabilities by equipping partner nations with advanced technologies that bolster their defense readiness. This serves to enhance deterrence posture, as partner nations are better equipped to defend against emerging threats.

The FMS process can be complex and cumbersome, which is why the Defense Security Cooperation University offers foundational FMS courses that explore the essential components of military sales and transfers between the United States and partner nations. Students learn how to “plan, execute, and sustain the many complex and interrelated aspects of sales and transfers under the FMS program.”21 One survey respondent noted that certain FMS courses are no longer available for individuals in their office, meaning a growing number of foreign FMS officers lack a basic understanding of FMS processes in defense cooperation offices.

When foreign defense attachés lack an adequate understanding of the FMS acquisition process, this knowledge gap not only impedes their home country’s ability to acquire U.S. defense systems efficiently but also negatively impacts the United States. Delays in the acquisition process, or even reduced purchases of U.S. defense systems, result in the United States exporting fewer defense products and providing fewer services, which reduces industry sales and hampers the ability of the United States to interoperate with its allies and partners.

FMS is a complex process, and the literature on the topic indicates a variety of specific challenges. The survey included a question asking respondents to rate the challenges of a variety of FMS processes.

Most respondents rated the lack of clarity and transparency as the most challenging aspect of the FMS system, closely followed by lengthy approval times and the multitude of U.S. stakeholders involved. Maintenance, repair, and overhaul delays are predominately viewed as moderately and extremely challenging. Most respondents rated equipment delays, regulatory compliance, and costs as moderately challenging. The costs associated with FMS were identified as the least challenging factor overall, despite the majority of respondents rating it as moderately challenging.

▲ FIGURE 5: FMS Process Challenges

In the optional written section, respondents noted a few other challenges that were not listed. First, long periods of time are required for case closure despite service completion. FMS case closure occurs when “all material has been delivered, services have been performed, other requirements of the [Letter of Offer and Acceptance] have been satisfied, known financial transactions (including collections) have been completed, and the purchaser receives a final statement of account.” Prompt case closure minimizes the amount of administrative effort required for an unnecessary open case, which diverts resources from other priorities. Prolonged case closure, a common frustration among primary FMS customers, delays the release of excess purchaser funds. This practice may erode the long-term willingness of partner nations to engage in the U.S. arms sales process, especially if certain materiel or systems can be purchased elsewhere. Secondly, survey respondents noted that a lack of workforce capacity within the defense industry can lead to increased costs for the production and delivery of defense systems. A workforce that does not meet demand may force partner nations to face higher prices and acquisition delays.

Challenges with coordination were also noted, particularly a fragmented approach to working with allies. While the NATO Support and Procurement Agency (NSPA) helps deliver integrated capabilities for the alliance, coordinating procurements between NATO members remains a perennial challenge. An acquisition approach that prioritizes national industry over greater NATO strategic priorities—coupled with the fact that the United States reviews FMS requests on a case-by-case basis—limits opportunities to optimize FMS outcomes for the broader defense goals of the alliance. Exploring whether there are groups of countries for which FMS cases can be reviewed together could streamline the process for the United States and speed acquisition by allies.

One respondent noted that borderline cases on occasion tended to linger as they were being reviewed, which the respondents felt was because of U.S. government hesitation to rapidly decline case requests, opting instead for extensive deliberations to provide alternatives. They suggested that sometimes a faster decision—even if it was negative—would be preferred because it would reduce uncertainty.

▲ FIGURE 6: The Challenege of NOFORN and CUI

Feedback from participants also raised the consideration that current thresholds for congressional notifications often hinder the efficiency of the export process. When the U.S. government plans to sell defense equipment, services, or technology to a foreign country, it must submit a notification to Congress if the sale exceeds a certain value, allowing lawmakers a designated period to review the proposed sale. However, a recent FMS task force discovered congressional notification thresholds have not been updated since FY 2003 despite a DOD inflation rate of 69 percent since then. This means routine and standardized exports to friendly nations—often NATO partners—are often stuck waiting for Congressional approval, creating unnecessary delays and administrative burdens. Had thresholds been adjusted for inflation, 14 out of 123 sales, or 11 percent, in 2023 alone would not have required a waiting period. The task force recommended Congressional notification thresholds be updated to reflect inflation to avoid more sales being subject to congressional review than originally intended. Otherwise, sales that are neither sophisticated nor strategically sensitive can become backlogged, slowing down the acquisition process without significantly enhancing oversight or national security.

The challenge of U.S. categorization of information as Not Releasable to Foreign Nationals (NOFORN) or controlled unclassified information (CUI) was consistently mentioned as a barrier throughout the duration of the study in both discussions and survey responses. These categorizations can create barriers to foreign partners’ access to information and can hinder procurement and coproduction processes. These restrictions can lead to delays in equipment delivery and licensing processes and may negatively impact interoperability between allied forces.

Respondents noted that NOFORN and CUI limit the ability of foreign contractors to compete for opportunities. In some cases, information marked CUI or NOFORN is not made available to foreign bidders in time for them to properly develop a bid. While this may increase U.S.-made technology, it may also result in the DOD not accessing best-in-class technical solutions. Reforming protectionist policies demands not only regulatory change, but cultural change to support systematic alteration in the way the DOD approaches classification markings. While the use of NOFORN to obstruct competition is illegal, respondents felt that the classification remained overused and thus impeded cooperative defense industrial efforts.

Respondents also noted that Master Information Exchange Agreements (MIEAs) and subordinate Information Exchange Annexes (IEAs) are extremely useful. MIEAs establish a reciprocal, balanced exchange of R&D between participating parties and authorize specified IEAs. IEAs enables the exchange of R&D data pertaining to specific technology or weapons development areas.

Ally and Partner Nation Export Control Challenges and Enablers

The challenge that regulations represent is not unique to the United States. Every nation has its own individual export control and technology transfer difficulties. Figure 7 reports that most respondents believe working with the United States is no different or harder than working with other nations.

The United States is also the sole supplier of a number of advanced capabilities. This makes cooperation with the United States—and an understanding of its export control processes—mandatory for those who wish to acquire certain U.S.-designed and -produced weapons systems. And it means that U.S. regulations have an outsized impact on partners.

U.S. allies and partners have their own set of export control and technology transfer processes that can hinder—but also enable—information sharing and arms sales. Survey respondents had varying perceptions of their home countries’ export control processes, but they provided useful feedback on what mechanisms could help their own international procurement processes.

Figure 8 provides an illustration of respondents’ view of their own countries’ export control regimes. Most respondents were neutral or in agreement with the statement that their home country export control and technology transfer policies enable procurement processes.

▲ FIGURE 7: Comparing the United States to Other Partners

▲ FIGURE 8: Assessment of Home Country Export Control Enablers

Figure 9 shows respondents were reasonably mixed on whether their own export controls pose a significant challenge to doing business with the United States, but only three agreed that the challenge was also on their side.

To gain further insight into respondents’ perspectives on their home countries’ export controls, CSIS also asked whether their domestic export controls generate “friction”—something less than a “significant challenge”—for their procurement and cooperation processes.

Figure 10 shows that most respondents were likely to agree that their export control and technology transfer policies add friction to procurement and cooperation processes.

▲ FIGURES 9 & 10: Assessment of Home Country Export Control Challenges

CSIS asked respondents to rate certain processes and agreements based on how beneficial they would be to facilitating defense trade with the United States, with the results reported in Figure 11. The survey asked about the Defense Production Act (DPA), the trilateral security partnership between Australia, the United Kingdom, and the United States (AUKUS), reclassifying items from the USML to the Commerce Control List (CCL), and the National Technology and Industrial Base (NTIB). There was agreement among respondents that most of these initiatives would be useful.

▲ FIGURE 11: What Could Make Trade Easier?

Defense Production Act

Being considered a domestic source under the DPA was rated among the most beneficial options by respondents. The DPA, passed in 1950, grants the president the authority to influence domestic industry and expand and expedite certain materiel required for national defense during emergency mobilizations. Domestic industry may be called upon to expand the production and supply of materiel critical to national security or emergencies. In 2020, President Trump utilized the DPA to order General Motors to produce more ventilators during the Covid-19 pandemic, and during his second term, he is using it to ramp up domestic critical minerals production to reduce foreign dependencies on China.

Title III of the DPA, the Expansion of Productive Capacity and Supply, authorizes “incentives to include loans, loan guarantees, direct purchases and purchase commitments, and the authority to procure and install equipment in private industrial facilities.” Canada has been considered a domestic source since 1992, and the FY 2024 National Defense Authorization Act designated the United Kingdom and Australia also as domestic sources eligible for DPA funds. This means Australia, Canada, and the United Kingdom enjoy U.S. government benefits when they are able to provide essential defense materials and goods under certain conditions.

Though the DPA includes Australia, Canada, and the United Kingdom as domestic sources, the degree to which the U.S. government can direct a foreign firm to produce under the DPA is more nuanced than it is with a purely domestic firm. Title I of the DPA authorizes the government to prioritize federal contracts that support certain national defense and energy programs. The Department of Commerce administers this authority through the Defense Priorities and Allocations System (DPAS) regulation. DPAS applies to all entities physically in the United States, regardless of foreign or domestic ownership. However, foreign companies and foreign subsidiaries of U.S. companies that are not physically located in the United States fall outside DPAS jurisdiction. Thus, while foreign firms considered domestic sources are eligible to receive financial incentives from the U.S. government to surge production, the United States also needs to work through diplomatic channels to encourage a reliable supply of critical goods during a crisis.

Moreover, there is a distinction between being considered a domestic source under the DPA and having an RDP MOU with the United States. The latter ensures allied and partner industries are considered domestic sources, waiving obstacles associated with the Buy American Act and facilitating smoother access to U.S. defense contracts. Domestic sources under the DPA, by contrast, are utilized during times of national crisis, as firms are incentivized—and ordered—to produce a certain amount of goods or materiel necessary for national security or during emergencies. This serves as a mechanism to rapidly mobilize the defense industrial base to ensure the United States has access to vital resources when traditional free-market forces are not sufficient.

An Agreement Similar to AUKUS

AUKUS is a trilateral security partnership initiated in 2021 between Australia, the United Kingdom, and the United States. It is designed to promote information sharing and technology transfer, as well as to better integrate and diversify security-related supply chains and industrial bases. AUKUS has two pillars, the first supporting the Royal Australian Navy’s acquisition of nuclear-powered submarines. The second pillar is focused on cooperation in advanced technologies, including cyber, artificial intelligence, quantum, and undersea capabilities.

To implement these two pillars, harmonized procurement strategies between AUKUS member nations were required. Once Australia’s and the United Kingdom’s defense information protection systems were aligned with that of the United States—a process that involved strengthening cybersecurity measures and harmonizing classification standards—information sharing and technology transfer were simplified. This was reflected in the revisions made in the EAR and ITAR.

In April 2024, the Bureau of Industry and Security (BIS) amended the EAR to facilitate license-free trade with Australia and the United Kingdom in furtherance of AUKUS objectives. It removed certain “license requirements, expanded the availability of license exemptions, and reduced the scope of end-use and end-user-based license requirements for exports, reexports, and transfers (in-country) to or within Australia and the United Kingdom.” The BIS estimates that $7.5 billion annually in trade with Australia and the United Kingdom will no longer be subject to these previous license regulations.

The Directorate of Defense Trade Controls (DDTC) made similar changes to ITAR that enable the license-free transfer of commercial defense trade for Australia and the United Kingdom. With certain limitations, authorized users within AUKUS member states require no license or other approval for “export, reexport, retransfer, or temporary import of defense articles, the performance of defense services, or engaging in brokering activities.” This rule also allows for an expedited export licensing process for defense articles or services to Australia, the United Kingdom, and Canada.

One DMAG participant likened AUKUS membership to having a “fast pass” or “carpool lane” through ITAR that streamlines defense cooperation with the United States. However, for other nations seeking privileges comparable to those enjoyed by Australia, Canada, and the United Kingdom, reform is necessary not only within the U.S. system but also within those countries’ domestic frameworks. Certain nations expressed a desire to be a part of AUKUS’s second pillar, even with only specific technologies like hypersonic, missile, or undersea capabilities.

Moving Items from the U.S. Munitions List to the Commerce Control List

ITAR governs the USML, which details defense-related articles, services, and technologies designated as critical to U.S. national security. The DDTC, within the U.S. Department of State, is responsible for administering ITAR. The DDTC must approve export licenses for items on the USML to prevent U.S. adversaries from obtaining advanced technologies critical to U.S. military advantage.

The CCL is a list of dual-use items that have military but also commercial applications. The EAR, enforced by the BIS within the U.S. Department of Commerce, governs the CCL. Items on the CCL are typically less restricted than their counterparts on the USML and only sometimes require a license (unlike items on the USML list, which always do). CCL items requiring licenses include sensitive technologies such as semiconductors and aerospace components. Moving items from the USML to the CCL was offered as an underrated solution to the complexity of U.S. procurement procedures.

National Technology Industrial Base

The NTIB is an agreement between Australia, Canada, New Zealand, the United Kingdom, and the United States that establishes joint national security and dual-use R&D initiatives as well as production- and maintenance-related activities. While some survey respondents offered that the NTIB has the potential to be extremely beneficial, they noted that it has done little more than enable limited information exchange. The NTIB lacks funding and does not change standing policy, which limits the ability to improve defense industrial cooperation processes. It does not address the regulatory complexities baked into various export control regimes—such as ITAR, EAR, FMS, the Canadian ITAR waiver for unclassified goods control, and the Australia-UK Defense Trade Treaties—to which foreign companies are subject. Ensuring compliance with these various regulations requires “an army of lawyers and clerks, burning up a significant amount of resources.”

▲ FIGURE 12: Uplifting Allied Domestic Industry

Benefits of Cooperation

One reason nations seek to engage in defense industrial cooperation with the United States is to “uplift” their domestic industries. Selling to the United States was viewed as extremely important to home country industry by all but one of CSIS’s survey respondents, as shown in Figure 12.

These findings are unsurprising given that the United States has the largest arms market in the world, making it a critical enabler of partner nation industrial development strategy. Beyond the sheer size of the U.S. market, there are other advantages as well. Selling to the United States serves as a forcing function for nations to align their modular standards to those of the United States, making the latter more likely to be a steady customer for domestically produced defense products and services. If partner nations build using operating systems that are compatible with those of the United States, the option to export these products to the United States will always be available. This allows partner nations to deploy systems that are interoperable with U.S. ones, strengthening coalition and joint operation efforts. Additionally, the United States acts in good faith to honor agreements and reciprocally provides high-quality, dependable, and compatible defense products and services to partner nations.

Other factors, however, make the United States a less valued customer. Survey respondents noted that they could feel compelled to purchase from elsewhere if newly developed capabilities were made available by European Union member states or other allied nations, especially if those countries’ export and technology transfer policies were easier to navigate. During the discussion roundtable, participants mentioned that a drastic shift in U.S. trade policy with punitive tariff measures could lead them to consider other sources when acquiring defense capabilities. Countries also face pressure to spend domestically, as investing in internal capabilities and capacity leads to a more independent and indigenized industrial base. These incentives may include the desire to foster local innovation, reduce reliance on foreign suppliers, decrease unemployment rates by boosting job opportunities, and develop and maintain technologies critical for safeguarding national security. Other respondents noted the importance of speed—an oft-cited shortcoming of allied procurement of U.S. systems.

Defense Cooperation Agreements and Programs

There are a variety of defense cooperation agreements and programs that serve to enhance defense industrial cooperation and more easily facilitate arms sales and technology transfer. These include RDP MOUs, NATO membership, SOSAs, Foreign Comparative Testing (FCT), Reciprocal Government Quality Assurance (QA) Agreements, Major Non-NATO Ally Status, and Defense Exportability Features (DEF).

▲ FIGURE 13: Value of Different Kinds of Agreements

Respondents were asked to rate defense cooperation agreements and programs by the degree to which each benefits their home country’s ability to do business with the United States. RDP MOUs were most favored, with nine respondents rating them as extremely beneficial and the other four rating them as moderately beneficial. It should be noted that this may be a case of selection bias, since potential respondents were identified because they are part of an organization comprised of countries that hold RDP MOUs, and thus the sample that chose to respond to the survey may be more invested in such agreements.

Second to RDP MOUs, the defense cooperation aspects of NATO were positively viewed by all survey respondents. NATO has a set of programs enabling nations to work together on acquisition. Several joint acquisition programs exist, including NATO Alliance Ground Surveillance, NATO Sea Sparrow Consortium, and NATO Multinational Multi Role Tanker and Transport Fleet. In 2021, NATO established the Defence Innovation Accelerator for the North Atlantic (DIANA) to integrate and deliver new technologies to NATO forces. DIANA primarily focuses on “big data, artificial intelligence (AI), autonomy, quantum, biotechnologies and human enhancement, energy and propulsion, novel materials and advanced manufacturing and aerospace.”

The NATO Defence Planning Process (NDPP) allows allies to harmonize their force and capability planning activities. The NDPP facilitates the interoperability of allied forces and ensures that they are properly equipped and supported to undertake missions without compromising the readiness of national militaries. Additionally, the NDPP is responsible for identifying requirements for NATO forces and supports capability development and acquisition. The NATO Support and Procurement Agency (NSPA) delivers capabilities, logistics support, and procurement frameworks to member nations and supports weapons system life-cycle management. Despite the cited benefits that accompany NATO membership, survey participants still widely cited joint procurement challenges. One respondent noted that internationally acquiring weapons independently is not so difficult, but rather “the challenge is to coordinate procurements between allies to make NATO as strong as possible in our region.”

SOSAs, which allow the United States and participating nations to request priority supply of defense goods and services, were viewed by the survey respondents as generally beneficial. For instance, the United States can request foreign industry to prioritize delivery under DOD contracts, subcontracts, or orders. And vice versa: They ensure partner nations are prioritized when supply shortages or geopolitical tensions arise. SOSAs allow for streamlined procurement processes, and foreign vendors located in countries with an established SOSA may be viewed more favorably by U.S. program offices. However, SOSAs are voluntary or “best effort” frameworks, and their main purpose is confidence building. They are not binding international agreements that obligate signatories to invoke the terms of the agreement.

The FCT program allows the United States to satisfy its defense needs more quickly and cost efficiently by testing the technologies developed by allies and partners with high technology readiness levels, thus better equipping U.S. forces and satisfying U.S. defense needs. This accelerates U.S. government acquisition from foreign industry, circumventing traditional acquisition pathways that typically include domestic capability development and lengthy and costly R&D investments. Through FCT, the United States can test partner nation technologies, capabilities, and weapon systems prior to procuring their systems, following a “try before you buy” model. This approach allows roughly a third of foreign vendors to either directly partner with U.S. industry or, at the very least, establish a U.S. presence. As of January 2024, 1,297 technologies from partner nations were assessed, and U.S. forces acquired 307 of them.

The United States has QA agreements with six countries: the Czech Republic, Finland, Poland, Romania, Slovakia, and South Korea. QA agreements ensure defense products and services meet U.S. military specifications through a set of standardized procedures for testing, inspection, and certification. This reduces the risk of defective parts in critical defense systems; it also streamlines defense procurement processes, as products certified under nations who have a QA are more readily accepted by the United States and its partners who share interoperability standards.

DEF is the practice of encouraging DOD program management to design and develop exportability features early in a program’s life cycle. This can facilitate exports by incorporating technology protection earlier in the design process to avoid expensive retrofits as well as costly and time-consuming redesigns to meet export control and partner-specific requirements. DEF facilitates business with the United States by making U.S. defense systems more export-friendly, reducing costs for foreign buyers, and improving interoperability with allies and partners. DEF also simplifies FMS processes by pre-engineering exportable versions of systems, reducing delays caused by technology transfer restrictions.

▲ FIGURES 14 & 15: Perspectives on Program Offices

Challenges of RDP MOUs

While the intent of RDP MOUs may be to facilitate defense trade, many of the survey respondents expressed that U.S. government stakeholders were less supportive of RDP MOUs’ function. Most respondents did not find the “Buy American” exemptions to be well recognized within program offices, as shown in Figure 14. Furthermore, Figure 15 shows that about half of the respondents found acquisition program offices to be leery of the Buy American exemptions they offer.

Figure 14 shows that the overwhelming majority of respondents agree or strongly agree that the exemption of Buy American provisions is not well recognized in some U.S. program offices. Two are neutral, while none reported disagreement or strong disagreement. Figure 15 shows that survey respondents are either neutral, agree, or strongly agree that U.S. program offices are cautious regarding exemptions granted in RDP MOUs. Once again, no one disagreed or strongly disagreed. There are a variety of potential reasons for this. There may be misconceptions among acquisition contracting officers as to what exactly RDP MOUs are. Respondents suspected that program offices find it easier to default to purchasing U.S. goods and services. As one interviewee noted, “no one gets fired for buying American.”

The 2023 National Defense Industrial Strategy fails to mention RDP MOUs, demonstrating a lack of awareness and understanding of the benefits RDP MOUs provide to the United States. However, there have been welcome changes made in the Defense Federal Acquisition Regulation Supplement (DFARS), which is responsible for implementing RDP MOU exemptions. In recent years, DFARS has become more inclusive of RDP MOU provisions and has more systematically integrated these agreements into the broader defense acquisition framework.

▲ FIGURE 16: How Partners Think Congress and the Executive Branch View RDP MOUs

According to Figure 16, participants generally were neutral or in agreement that Congress and the executive branch are opposed to the exemptions granted in RDP MOUs. Congressional debates are frequently centered on protecting U.S. industry, without recognizing that these international agreements consider signatory country defense industrial bases as complementary to, rather than competitive with, U.S. defense manufacturing. This may lead legislators to undermine the cooperative defense industrial relationships that enhance mutual security capabilities.

Insights and Recommendations

As the survey demonstrates, there is room for improvement in defense industrial cooperation and communication between the United States and RDP MOU nations. Arms sales and technology transfer play a large role in ensuring the United States and its allies are properly equipped to build competitive advantage. Easing restraints on both sides, that is, both U.S. and allied processes, will serve to bolster deterrence in the face of a growing alliance between adversarial nations.

There is a compelling business case to be made for deeper U.S. defense industrial base integration with allies and partners. Integration extends beyond traditional arms sales and technology transfers to include codevelopment and coproduction. While these collaborative ventures can be complex and often require higher up-front investment, they offer long-term financial benefits by creating economies of scale and ultimately reducing per-unit costs. Additionally, deeper defense industrial collaboration positions the United States to profit from arms sales to partner nations.

CSIS’s survey found that countries with an RDP MOU with the United States are hopeful that the agreement will help uplift their own industrial bases through increased cooperation and sales. However, a lack of consistency across administrations was identified as a limit; one survey respondent noted that “As the government changes every four years, new policies such as the National Defense Industrial Strategy . . . often momentum. Therefore, a defense industry cooperation policy that can be sustainably kept is needed.” There is a persistent tension in the United States between Buy American regulations and industrial cooperation. This tension has only grown with the Trump administration’s focus on tariffs as an instrument of economic policy. Every U.S. administration should remember the benefits of cooperation—which can include increased sales, closer ties, and enhanced interoperability—in the face of pressure to onshore.

The following set of recommendations will serve to ease arms sales and technology transfer between the United States and partner nations, help allies achieve their domestic defense industrial priorities, enhance interoperability to strengthen coalition operations, and bolster production diplomacy to counteract the defense industrial capabilities of U.S. adversaries.

1. Combine review of weapons requests from allies.

   Export controls should not be eliminated, but rather reengineered. President Trump’s April 9, 2025, Executive Order on Foreign Military Sales highlights the goal of the reduction of barriers to export weapons to allies, and there are a number of alternatives. For instance, every bilateral arrangement requires a separate review, even if two close allies are buying the same equipment. Throughout the Congressional Notification process, past approvals don’t seem to hold merit when reviewing FMS requests. While Australia, Israel, the United Kingdom, and Ukraine receive preferential treatment in various aspects of U.S. defense sales, there is no further FMS distinction between a NATO ally or a country with a minimal defense relationship with the United States.

   Allies working as a group to procure U.S. systems, or the United States combining reviews, could be structural solutions to speed the process. Creating a joint structure for FMS reviews is another option. While extensive deliberation between Congress and the executive branch would be required to create “bins” for allies, countries that hold an RDP MOU would be a good place to start. A smaller trial subset could be Canada and AUKUS participants. Note that addressing export control friction would not only enhance arms exports, but also enable the codevelopment and coproduction that would underpin the expansion of partner industrial bases, helping strengthen forward deterrence and opportunities for surge.

2. Periodically review export controls and classification markings.

   Periodic reviews of export control and classification marking policies would be useful to ensure that they are appropriately limiting technology proliferation without causing undue delays and complications. Export controls, while critical to safeguard U.S. technologies, are not prepared to meet the challenges of the current geopolitical moment. Institutionalized, systematic reviews of export control regimes, such as ITAR, TSFD, and EAR, along with sales mechanisms, like FMS and DCS, can help ensure the United States can get weapons and technologies to its friends at speed and scale. These reviews should include a close review of technologies on the USML to see if any are eligible to be placed on the CCL, which is governed by a less restrictive process. Similarly, document markings, such as CUI and NOFORN, should be carefully managed to ensure that they do not needlessly limit cooperation, along with allied industry insight into DOD tenders. Reviews should also take care to ensure CUI and NOFORN labels are intentional and justified, rather than automatic, default practices.

3. Close the ally and partner knowledge gap of U.S. processes.

   Allies and partners have an incomplete understanding of U.S. government regulations—including DMAG participants. Given these individuals play an important role in enhancing bilateral defense cooperation, this knowledge gap may lead to unnecessary delays in international arms acquisitions. Formal training offered by the United States is a low-cost solution to help facilitate arms sales, technology transfer, and defense industrial cooperation. Additionally, a coherent understanding of U.S. processes in foreign program offices does not singularly benefit U.S. allies, but engaging with a well-informed partner workforce helps speed acquisitions and lower bureaucratic inefficiencies. This means the United States can sell systems, components, and services faster, and thus provide a more stable demand signal to U.S. industry.

4. Offer RDP MOU training to U.S. program offices.

   Survey respondents were consistent in their feedback that RDP MOUs are not particularly well understood in U.S. program offices. This limits the DOD’s ability to draw on the expertise of allies. A recent Defense Innovation Board report addressed this directly, suggesting that “all DOD program managers should be trained on the RDP MOU and additional Buy American waivers and exemptions. In addition, the office that negotiates these waivers must be empowered to inform and educate the DOD contracting and acquisition workforce on the proper use of these existing authorities.” Continual education for relevant parties and government organizations as part of required acquisition certifications would address this challenge.

5. Design for exportability to facilitate defense trade.

   As mentioned above, Defense Exportability Features (DEF) is the practice of encouraging DOD program management to design and develop exportability features early in a program’s life cycle. A key facilitator of DEF is Modular Open Systems Approaches (MOSA). MOSA is a strategy for designing an adaptable system that employs interfaces that any authorized vendor, including a foreign vendor, can use to integrate and operate together. This standardization enables U.S. allies and partners to “plug-and-play” by incorporating technology from a variety of sources into one loosely coupled but standardized system. MOSA allows for the easy removal of modules that contain classified technology or the replacement of U.S.-specific modules with those that directly address allied needs. This eases the export control process by circumventing expensive retrofits and time-consuming redesigns to safeguard sensitive technology. Additionally, MOSA serves to enforce standards setting, which facilitates interoperability and alleviates challenges inherent to coalition operations.

6. Develop and support institutional frameworks to enhance exports and encourage cooperation.

   To enhance defense industrial cooperation, the United States should develop and expand institutional mechanisms that facilitate export exemptions and industrial collaboration. Expanding these types of arrangements benefits not only allies but also the United States given the reduced pressure on domestic manufacturing during crises and improved access to foreign-produced defense goods in peacetime and when urgently needed.

   While Australia, Canada, and the United Kingdom highlight that ITAR and EAR waivers remain limited in scope and difficult to obtain, they still serve as a valuable benchmark for other allies to work toward. The United States should pursue efforts to review whether allied nations qualify for ITAR exemptions and domestic source designation under the DPA. Moreover, while RDP MOUs carry certain risks for signatory nations, like potential market saturation by U.S. firms, the benefits—such as reciprocal access to each other’s defense markets—can outweigh the drawbacks. The United States should continue to engage allies and partners to increase the number of RDP MOUs and SOSAs.

The Way Forward

A more precarious global order in which near-peer competitors are investing in and expanding the capacity of their own industrial bases will necessitate working with allies to effectively strengthen partnerships and increase deterrence. To enhance defense industrial cooperation, allies and partners—including the United States—should increase information sharing about their domestic defense industrial priorities. Allies and partners must take a close inventory of their own defense industrial bases and evaluate what they seek to buy off-the-shelf from the United States and/or coproduce and codevelop with the United States. Without this information, the United States will be less able to conduct long-term defense industrial planning and be less responsive to ally and partner needs.

Limited defense industrial cooperation between the United States and its allies contributes to vulnerabilities that adversaries can exploit to wield their influence across the global strategic landscape. The United States alone is not prepared to ramp up production to meet current demand in the near term, and some capabilities may take a decade or longer to build. Without an integrated defense industrial base, the United States and its allies will be less effective in the development, production, and sustainment of critical military capabilities—and will ultimately struggle to fight together.

Audrey Aldisert is a research associate in the Center for the Industrial Base at the Center for Strategic and International Studies (CSIS). Her analytical focus includes the defense industrial base, soft power initiatives, and the relationship between security and development.

Cynthia R. Cook is a senior fellow in the Defense and Security Department at CSIS. She is widely published on defense acquisition policy and organization, the defense industrial base, new technology development, and weapon systems production and sustainment. Dr. Cook is a member of the editorial board for the Defense Acquisition Research Journal and is an adjunct professor at the Pardee RAND Graduate School.