welcome to "this week in defense news." from the farm bureau international air show southwest of london. what's next for defense corporation between france and britain now that there's a new leader in paris? the defense policy chief explains for britain. plus how they plan to help defense expossibilities, but first a new initiative to help it grow despite deep spending cuts. the move would shift the government's policy on supporting the defense industry and mirrors the commercial aerospace growth program. prime minister david cameron announced the partnership and opened the dialogue with industry on a similar defense partnership on opening the 48th farm bureau international air show at the legendary airfield in afternoon shire where the commercial aerospace

and defense industry meets every two years. joining us is peter luff. britain's ministers of defense for support and technology. mr. luff, thank you for joining us. >> my pleasure. >> coming into office the government was very clear that whenever possible, britain was going to buy defense equipment that was off the shelf that was going to have minimal development entanglements and costs associated with it. the r and d budget was a flat level and there were those in british industry who criticized that approach. against developing new -- new programs if new technologies. as undermining british interests over the long-term. the prime minister has made this announcement. what does that mean and does this mark a shift fundamentally in the government's strategy? >> for example putting a floor in the s&p budget is already a positive thing to do. years of decline has ended. we're putting basic commercial disciplines in the defense market, that's fine to me as well too. it's worked very well for example in terms of land

vehicles operational for afghanistan. the real value of bringing in the world's products from america and singapore and elsewhere from the backyard into the uk. i think they haven't understood the importance of the action. it also means you will buy british what you have to do to protect the sovereign requirements. what we think now is actually we recognize that defense operates in a bigger environment as well. the wholeg. has an interest. tons of thousands of jobs and export orders to the uk. there are many things we can do. for example the defense pratt shortage of -- desperate shortage of skills engineering skills in the uk. not enough graduates. the prime minister announced a 500 place m. a. placement to boost the skills. it's that kind of thing we can do to make sure british defense industry and specifically today the aerospace industry flourishes in the future. >> let me take you to one of the most controversial decisions that the sdsr that was completed in 2010. it was to convert -- britain's

joint strength fighter order from the short takeoff and verticallanding variant to the carrier variant and then convert the two aircraft carriers in production to operate that naval variant of the jet. that was a major u-turn. what drove it and what are the cost implications of done so? >> it's -- we looked at it very carefully and we committed to make the change. we said we're doing an assessment phase. we realized it would cost more to convert the carriers than we hoped. many more compartments for the actual ships has to be altered. so the cost went up very significant and because that happened it went unaffordable. we were relegated to the f 35 b which is a really fine aircraft and gives you what we need. -- us what we need. it was driven by change of fact and change of costs. >> roughly the cost implications was about 100 million pounds? >> we estimate to be in the

order of 100 million pounds for the changes needed to make the design and the contract costs being incurred. that kind of cost, yes. >> does this open the doors for open oh versables -- other reversibles that was supposed to go out of service but proved critical in libya? >> currently. we have -- i think 2015 for that aircraft and obviously look at options for keeping it going. we have some head room in the budget now to reprioritize capabilities we haven't gotten present on in the core program. we'll look at that and be flexible if we have so and what's in the core program is in the core program and won't be cut. the defense interests of the uk. the level of certainty and confidence in the defense program we've never had before. >> let's -- go to afghanistan. i mean almost -- you've done an enormous amount of procuring for the defense in the field both in iraq and afghanistan. with the final phase of the campaign, what are the critical bits you're trying to buy to support the pullout? >> you're right. i mean the urgent operation

process, there are great things for afghanistan for the troops there. and very important capabilities. some of them we bring into core. for example the foxhound like protected control vehicles a great success. probably my single highest equipment priority for afghanistan. they'll begin operations very soon but actually down to the smaller i think smaller issues now. there'll be urgent operational requirements still over the next two years in afghanistan and combat capabilities but they will be the smaller types of acquisition. the focus is on which of those we bring back into the program. >> they have been trying for some time to agree on putting in a more advanced radar on to the aircraft. integrating the meteor missile air to air missile aborted as well as improve the air to ground capabilities and yet that's not moved as quickly as some would like and some suggest the reason your fighter lost in india was because the cape -b89s weren't integrated

on to the airplane. a new proposal soon on. that what's it gain to say and what's going to happen to all t get all the partner nations on the same page? >> the prime minister signaled his determination that we should move to meet our own requirements and for our export customers. the four partner nations signed a new letter of intense to achief that objective. it's compelling proposals to enable us to do that. it's a really good determination. >> the other high priority program which is the joint strike fighter. we have seen cost increases and schedule delays on the program. are you confident you know how much the plane the going to cost to buy and operate and will it drive any changes to the final number of aircraft that you buy? i mean are you going to buy fewer aircraft and how many fewer if the price keeps going up? >> we have a series of decisions to take as you know. it's an incremental decision to make. at any particular time. our main decision will be next year on numbers and of course the lower the prices, it's

inevitable we can at least afford to buy. i hope that lockheed martin are bearing down heavily on the prices and the change in other nationings won't have too much influence on the acquisition price. we will however deliver the ioc on the carriers requester 2020. >> no final number at this point? >> no. >> let me and you quickly about -- ask you quickly about the -- the budget gap. on coming to office, you guys said there was tens of billions of pounds gut pap between what the budget would support and the planned programs that were going to be bought but it was never specific as to what the number was for specifically how it was bridged and closed which the defense sec say trade was closed this area -- secretary was loaded this year. >> that's the best estimate you think give of -- you can give of the level of the gap given the assumptions of the time. i think the real gap was around 60 billion pounds. the capabilities have gone and budgets have been trimmed and

we're there now with the balance spent budget. >> sir, thank you very much. we really appreciate it. coming up britain and france and the future of defense corporation in europe. stay tuned. you're watching "this week in defense news" from the farm bureau international air show outside london.

after concluding europe's two leading defense powers should share a closer relationship, britain and france two years ago struck an agreement to foster deeper cooperation between the two countries on everything from nuclear weapons to developing future systems to even someday sharing aircraft carriers.

they were supposed to have signed a uav cooperation deal at this air show but that's been postponed. and france also is negotiated a separate self-defense cooperation deal with -- defense cooperation deal with germany. what's the future? we have as the next guest the man who can answer that, gerald howarth. who is the ministry of defense's international security strategy chief. sir, thank you for joining us. >> quite pleasure to be with you vago as always and welcome to my constituency. >> yes indeed. sir, it's been two years since britain and france signed the deal. we were looking forward to seeing the uav agreement here. we've seen the german agreement and some people say that's delude. the anglo french alliance. what's the outlook --what are the delays and what are some only the is you're deal -- of the issues you're dealing with this? >> people need to understand this was a pretty ambitious and ground breaking exercise in which britain and france embarked two years ago. it did recognize that the united kingdom and france are the two principal defense players in europe but didn't suggest there

were not other players as well. and we are seeking together as you have described on quite a broad range of areas. and we continue to explore and develop those. the fact is of course something has changed if france in the last couple of -- in france in the last couple of months and there's been a change in government and any understanding here is that the -- my understanding here is that the prime minister here has had very fruitful discussions with the president of france who has agreed that he thinks it's important to maintain the momentum. that's what we're doing. >> do you think that this defense cooperative future for europe is going to get steadily brighter given that everybody is looking at the same sorts of financial challenges? >> that's one of the things that's underpinning the financial considerations is how we produce. the defense capability we need under diminish budgets and united states will understand

only too well because they are embarked on precisely the same kind of undertaking with the potential prospect of et next january. you know minds are being concentrated in washington as well. so all of us are trying to deliver that capability in a very uncertain and unpredictable world and therefore it behoovestous get together wherever we can. obviously the united kingdom has very strong transatlantic ties but also merit in the united kingdom and france working together. and the marriage of that in particular is that it is not over ambitious. it is ambitious but not overambitious. as we've seen on collaborative programs the more people get involved the more difficult it is to manage. the united states recognizes that on the joint strike fighter program. >> right. let me -- you mentioned strong transatlantic cooperation. you were always one of the strong advocates of the u.s. and uk defense trade treaty that's been inaccomplishmented yet nobody is really using the

treaty the way it's been intended yet. what it is going to take and what do you want to see from both sides of the atlantic to really get that cross nation trade it was intended to froster? >> i took a long time to get that treaty through the senate. and we're -- very pleased that it did go through. a couple of years ago. what suicide happened in the -- has happened in the intervening time is that the regulations have had to be agreed. they have now been agreed and in the pentagon two weeks ago we had a specific discussion about and how we might implement the new arrangements and so the message to industry is very clear from both sides of the atlantic. the -- the treaty is now open for business. the regulations decided please now test this. that's what we would like everybody to do. so that we can make sure that we can exchanges information as freely as possible because that's what we need to do if we are going to maintain our capability in the increasingly difficult world. >> but there are some guys who are really afraid of doing that aren't they because they know

that under the regulations as they current limiest. they are very safe. they can have a conversation or or transfer technology. is it going take risk on peoples' parts to really get the benefit out of it? >> i don't think so. i think that people are not actually aware that the door is now open. that's been the difficulty i think. the door is open. >> hopefully everyone out there is listening that the door and open. >> and listening and watching and the door is open. that's the message from both sides of the atlantic. >> the two nations -- do share a lot in common, very many big perhaps cooperation across the world but on one element there's been a little bit of a hangup. the -- united kingdom of course sold the saudi arabia 72 fighter jets and that's being delivered and going into service but that was to equip the aircraft with -- pave the way for precision weapons but we understand that for the last 20 or so months or nearly two years washington hasn't jet

given the approval. you have an instance with one very close ally that's asking for a system -- all three of those are close allies. you were just reel in washington, what's the holdup? >> i don't want to comment on particular parts of business. all i would say is that i think the united kingdom -- the united states do have not only very close ties but common interests. and i think we're also both very clear that the kingdom of saudi arabia is a very important ally in a very strategically important region of the world at the moment. and if there are any difficulties i'm sure that both sides of the atlantic, those of serious will and any difficult issue will be resolved. >> in the minute or so we have left you've been a very big advocate of the global combat ship that britain is developing. you've traveled around the world to elicit partnership on that. talk to us about the state of

play on the type 26 right now. >> we are proceeding to pace on the type 26 global combat ship which is our new frigate for which we have a requirement of 13. it's very important that this continues at pace and we're talking to number of other countries around the world who have a similar interest. a similar requirement. and i'm very encouraged by the way those discussions are going. i think one has to accept that in this type of defense cooperation anxiousment, there is -- arrangement. there's always going to be difficulty in coming to precise agreements but i'm very encouraged by the discussions we've had and all i can say is that we look very much look forward to taking those further and proximate cool outcomes -- practical outcomes. >> thank you for joining us. >> my pleasure. up next how britain is supporting the export contractors on

they were coming. we knew it. there's only so much you can do to prepare for an all-out assault like that. we hunkered down, we braced ourselves... we just didn't have the numbers on the ground. what did we do? we used our navy federal cashrewards card to fly in reinforcements. nana. hoooaah! alright nana! 4 million members. 4 million stories. navy federal credit union.

each year britain ranks among the top handful of defense exporters in the world. that includes america, france, israel and russia. last year britain posted a banner year with exports that topped 5.4 billion pounds or about $8.1 billion. a key player in that growth is our next guest, richard paniguian the head of the defense support organization. richard, welcome to the show. >> great to be here vago. >> and thank you very much for taking time out of your schedule to meet with you. everybody is racing for the export markets around the world as their domestic budgets shrink. what are the british products you think will be most attractive on the markets? >> you're right vago. last year with a 5.4 billion- pound defense export record, this was a terrific year. it matches the previous year's figure almost pound for pound. and places us as the second

largest defense export in the world. so at a time when markets are becoming ever more competitive. great results with the uk. in terms of markets for the future, well, we're going to be looking at digging in deeper to markets where we already have a substantial position. so the united states, the middle east, far eastern austral asia but there are also markets where we have been ab sent for quite a while and we would like to find the opportunity to reestablish ourselves. south america comes to mind. as an obvious one. >> and you guys are also -- have a rather large piece of security business also that gets added to that doesn't it? >> we do. last year we posted -- security exports of 2.6 billion pounds. we are extremely active in fiber technologies and fiber security opportunities.

and we expect security in future years to occupy an increasing proportion of our defense and security exports. >> all right, but out there when you get out there it's a very crowded market. you have americans and extramaid januaries, brazilians, you name it out there in the market. why british? why should your customers go british? >> well, first of all let me say a crowded and competitive market is the place to be. that's when people really give us their best. when the markets are less competitive, and more administered if i can put it that way, people get complacent. so from the customers' point of view, a crowded competitive market is great news. and actually for the nations which build and develop the products, it's great news too because everybody has to try that much harder. so why britain? for a number of reasons 679 i mean the -- reasons. i mean the united kingdom has been in the business of defense and i'm not talking just about

the development of great equipment. but in the operations of defense in many parts of the world. for decades. and we continue to be one of the most operationally experienced defense nations. so when people look to purchase equipment, develop their own capabilities, it's not surprising that they go first and foremost to nations which actually have the experience of living through operational requirements. that's the uk. >> how specifically do you guys work with british companies and help them to be able to excess? >> we work -- success? >> we work extremely closely with them. that's one of the principle reasons for the defense and security organization. we understand the industry deeply. our relationship with industry is necessarily very close. of course we are a government department.

so we have to observe the regulation and governments of operating in the sphere of the public service. i'll add to that of course our great relationships with customer countries. we often stand in the position of being the customers' friend. an existing or prospective customer for british equipment or british services expects our organization to ensure that they're getting the best possible deal from the uk industry. so we are not so close to the uk's industry as to be simply the sales branch of the uk's industry. certainly not. we are actually acting as the customers' adviser and friend as well as obviously a supporter of uk industry. >> richard, thank you very much for joining us. >> it's been great. thank you. coming up my notebook, you're watch

[ male announcer ] olympic tennis players bob and mike bryan

are always on the move. so they can't get to the bank to deposit a check. instead, they use citibank mobile check deposit. it's easy. they just snap a pic... ♪ hit send... and their checks are deposited right to their account. well almost all of their checks. stand back. seriously? [ male announcer ] citibank mobile check deposit. easier banking. every step of the way.

last week, david cameron became the first british prime minister in three decades to inaugurate the farm bureau international air show to demonstrate his government's support for the country's aerospace and defense industry. due to security concerns, cameron spoke to a small group of executivessable officials and dignitaries. still it was encouraging. he formally launched an initiative to bolster the commercial industry by improving work force capabilities and asked executives for yesterdays and his ministers were out in force to show the government support for industries key to job and well-being and national security. it appears to be a welcome shift in policy since taking the office the government said whenever possible it will buy available equipment to quickly

and economically meet military needs rather than development unique equipment of its own at greater cost. that stance has british contractors worried if their own government won't invest in uk technologies they will finds it increasingly difficult to remain successful as they are today. losing good paying and highly skilled jobs in the process. cameron must convert his rhetoric to reality. his government must make hard choices in what to outsource and buy from home and support an industry critical to britain's security and economy. thank you for joining us from the farm bureau international air show southwest of london. a very special thanks to ads the trade association of uk aerospace and defense industries which are the organizers of this great air show in the countryside. you can watch this program online at defensenewstv.com or you can e-mail me at -- vag o@defensenewstv.com. i'