Interview transcript:
Eric White What does the landscape look like right now? And I know that’s a big question. So be as succinct as you can, I guess. But internationally speaking, what does the landscapes look like right now for defense industry, looking into other avenues of revenue, when it comes to providing government services?
Daniel Sennott Well, thanks very much. I, you alluded a little bit to the, with the shutdown and the uncertainty. I will say though, that the defense sector has been and continues to be extremely strong within the United States. First, if you look across the 12 appropriations bills in the President’s budget request, there are two that have received substantial increases and projected increases for FY26, and that’s the Department of Veterans Affairs and Department of Defense. Added on to that, you have the reconciliation bill that just passed a few months ago, and that had a defense component to it as well of $150 billion in reconciliation dollars, and that was really designed for those generational investments in the Department of Defense that we’ve been meaning to make for the last several years, but really haven’t had the budget for. So I think that in and of itself is positive for the United States and for the defense industrial base. There’s a lot of money in that reconciliation bill to build up the U.S. defense industrial base. But I think we’re also seeing the recent announcement that many NATO countries have committed to increasing their defense spending to 5% of GDP from 3.5% over the next few years. And that’s caused a lot of excitement with U.S. defense companies and how they can potentially partner with European countries in order to broaden the defense industrial base. There’s a lot of capability in many of those countries that the United States would like to leverage and would like to become partners with those European nations in order to build out the defense industrial base and the technology that they offer.
Eric White Yeah, and part of that is the President campaigned on getting NATO countries to contribute more to NATO defense interests. But I kind of get the feeling that more money would have been spent there regardless of which administration took the rope, so to speak, in the last election. Are there geopolitical factors that are contributing to that, as well as the US policy changes when it comes to NATO relationships?
Daniel Sennott Yeah, well, I think there’s no question that if you look at the war in Ukraine, obviously it’s been decisive in so many different ways, both in terms of the development of defense technology and the rapid iteration of, let’s just take drones as an example, and how importantly drones have, all manner of drones have factored into that war. And then, of course, the war in the Middle East as well. That has, those two wars have really focused, I think, both the world and the defense industrial base on what technology is going to be needed in order to fight the next war. And another thing that it’s done is depleted the world’s stockpiles of many weapons and munitions. And so now, the United States and Europe are in the position of both needing to replenish those stockpiles. And then at the same time, also trying to grow their defense spending capabilities at the same time.
Eric White We’re speaking here with Daniel Sennott. He is a partner at Holland and Knight, also former Republican staff director for the House Armed Services Committee. I’m glad that, well, obviously you were going to bring up Ukraine, I guess I kind of knew that. But the point that you made about it kind of serving as a guinea pig for the technology and defense industry needs for the next war, can you just expand a little bit on that and what you all are seeing as the future needs? I mean, just to name one off the top of my head, Ukraine has virtually stymied the Russian Navy without even having really a Navy itself. That’s something new, right?
Daniel Sennott Yeah, I think that, as we said before, I think autonomous systems, every manner of autonomous systems has figured in quite prominently into the war. And also, as you said, it has served as an incredibly important test bed for the development of that technology. And really it has proven out what I think many people have recognized over the past few years, which is the need is for, in many cases, affordable and attritable and plentiful systems. So drones being an example. Going away from those exquisite, bespoke military drones to needing one-way attack drones, as an example, but not being able to afford a million dollars a pop in order to have a drone. But instead, what are we doing in order scale up rapidly those cheap, attritable drones that we can use in the event of a force-on-force fight like we’re seeing in Ukraine.
Eric White Obviously, the focus of this interview is NATO, but I’m just trying to not show any Western bias here, and I’m not sure of how much you delve into other sectors of the world, but are we also seeing more engagement with the U.S. industrial defense industrial base from other countries in the world? In Asia and the southeast, I’m sure, has come knocking on our door as well, right?
Daniel Sennott Oh, absolutely. And obviously, the Indo-Pacific factors in very prominently into what the United States is focused on right now, and building up the defense industrial base in order to respond to potential aggression there. I think one of the important components you’re seeing, and this is true in Europe and in the Indo-Pacific, is how do we build a resilient and a distributed manufacturing network? Because obviously the tyranny of distance in the Indo-Pacific in particular means that you want to have those manufacturing capabilities a little bit closer to the fight, potentially. And so there is some great innovation, particularly companies with AI-enabled manufacturing and 3D printing. I think Divergent is an example of those companies that are leveraging artificial intelligence in 3D printing in order to democratize manufacturing in order to make sure that we’re able to have a resilient network throughout the world, even in remote locations, in order print the parts and the weapon systems that are needed.
Eric White Yeah, and the defense industry, I’m just curious, it’s one of the U.S.’s main exports, right? I mean, it’s virtually tariff proof, just because of how much the world relies on the defense industry. I was wondering if you could just speak on what percentage or what role that the U.S. defense industry now plays in American exports overall?
Daniel Sennott Well, I think it’s an incredibly important role that they play. So I think there’s no question that the United States is a leader in global arms exports. I think somewhere around in the 60% of arms imports to European NATO nations comes from the United States. And there are so many great companies, great American companies that are producing and continue to cutting-edge technology, and a lot of the excitement and development that we are seeing comes from the commercial sector. Gone are the days where the Department of Defense has the corner on research and development in terms of defense technology. A lot of that now is commercial companies and particularly U.S. companies that are paying for that research and development with private dollars and then selling those products into the Department of Defense and into the global market. And it’s really a great time to see that. The United States has, and the Department Of Defense in particular, has leveraged both Silicon Valley and the rest of the United States in order to help identify, in some cases adapt, commercial technology for military use. It’s really been great to see.
Eric White I’d be remiss not to have somebody with your congressional experience, especially in the House Armed Services Committee, on the effects that shutdowns have on kind of getting the keys to the vault to open up defense spending. Getting away from the politics of it all, how difficult does it make that aspect of things, when you’re talking to commercial defense entities and our international allies about the stability of having to deal with what seems like the regular occurrence of a government shutdown now?
Daniel Sennott Well, it’s incredibly disruptive to the Department of Defense. I will say that the incredibly dedicated service members and civil servants within the Department of Defense continue to do their job and will continue to do their job regardless of the circumstances. But it definitely is, and I mean, it has impacts on government contracts, certainly, and the ability to let those government contracts. And it has impact on the defense companies that I work with. And so, hopeful that there can be a resolution soon on that.
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