ABSTRACT
A number of policy guidelines can be formulated for improving the performance of North Atlantic Treaty Organisation (NATO) weapons markets. There are considerable opportunities for introducing competition into NATO weapons markets. The creation of a competitive free trade area in weapons and civil goods would lead to gains from international exchange based on specialisation and comparative advantage. A competitive solution requires radical changes which are unlikely to be implemented in the foreseeable future. Policy makers might concentrate on limited changes consistent with a long term movement towards the competitive model. NATO nations seeking to economise on defence spending cannot ignore the costs of maintaining independent weapons industries. The armed forces need to recognise that costly domestic weapons mean that the defence budget buys less of the latest products, so that they have to rely increasingly on obsolete equipment.
