IAN BRZEZINSKI AND DAMON WILSON When NATO leaders convene in Lisbon in November to adopt a new Strategic Concept, the alliances blueprint for the future, they will find that trans-Atlantic security has entered an age of austerity. Burdened by weakened economies, allied governments are cutting their defence budgets, some significantly. However, retrenchment and reduced ambitions are not NATOs only options. Resource constraints are a double-edged sword. They can halt multinational cooperation, undermine capabilities and generate division, but they can also drive strategic prioritisation, innovation and collaboration. How NATO navigates these dynamics will have a profound impact on its unity, capabilities and, ultimately, its relevance. Allies already are finding it more difficult to meet their financial commitments. After a decade of growth in operational demands, NATOs leaders lack the capacity to take on new missions without dropping others, a problem given likely new cyber and missile defence requirements. Budget cuts have forced some allies to withdraw from multinational programmes, including NATOs UAV programme and the Joint Strike Fighter. Pressure to withdraw or reduce forces in Afghanistan will increasingly reflect the financial costs of global operations. All allies are cutting or flat-lining defence spending. Italy reduced its budget by 10 percent. Germany may reduce the Bundeswehr from 250,000 soldiers to 163,000. The UK defence review could generate budget cuts of up to 15 percent. Denmark is considering $500 million in savings by 2014 out of an annual budget of just under $4 billion. Central European allies are contemplating cuts of similar magnitude, and growth of the Pentagon budget will be surpassed by inflation. These trends are likely to be enduring. North American and European defence firms, facing declining procurement budgets, have decided to compete more aggressively outside their home markets. British Defence Secretary Liam Fox recently reassured UK firms that London would support their export efforts. Increased competition is a healthy dynamic. What is new is that it has become a matter of survival and jobs. If not properly managed, this competition could strain trans-Atlantic relations. Frustrations over policies that limit opportunities for American arms sales to Europe and vice versa are longstanding. France and the UK are already discussing closer defence industrial collaboration. The pooling of allied efforts and resources will become more imperative, but it would be counterproductive if European industrial cooperation comes at the cost of trans-Atlantic defence collaboration. Hard economic times are prompting some European defence firms and governments to close deals that are not in the alliances best interests. Frances efforts, led by President Nicolas Sarkozy, to sell its versatile Mistral-class helicopter carrier to Russia could well be the first case. A Europe facing job losses could seek to open new defence markets, including those in Russia and China. If Europe is viewed as less able and willing to stand with the US in confronting global challenges - or even undercutting US security by selling potential adversaries defence equipment - scepticism in the American polity toward the trans-Atlantic security relationship will grow. This perception could catalyse protectionist instincts on Capitol Hill, torpedoing the Obama administrations efforts to reform export control laws, a key step toward a more modern, integrated trans-Atlantic defence market. NATO is historys most successful multinational defence cooperation, but there is a compelling need for deeper, more effective integration and cooperation; this should be a central theme of the Lisbon summit. Defence budget cuts need to be coordinated to minimise their negative effects on alliance capability. They should be leveraged to pool resources, with more modularity among platforms and systems and national capability specialisation. A new strategic concept will be meaningless if the alliance allows its financial strains to undercut cooperation, cripple capabilities and undermine solidarity with international arms sales. The summits success will be determined by how NATO leaders harness budgetary austerity to reinforce unity, drive forward collaboration and deliver military effectiveness. Only then will NATOs new concept have real strategic substance. Atlantic Council