HALIFAX, Nova Scotia (Nov. 18, 2011) -- Partnerships and modernization hold the key to meeting the challenges facing the United States and its allies as they near a turning point after a decade of war and adapt to new challenges and priorities, Defense Secretary Leon E. Panetta said here today.

In a speech at the Halifax International Security Forum, the secretary said the alliance system remains the bedrock of the U.S. approach to world security and is "an enduring advantage and force multiplier that no rival possesses."

"As we in the United States confront the fiscal realities of limited resources, we believe that we have the opportunity to establish a force for the future that, while smaller, is agile, flexible, deployable and technologically equipped to confront the threats of the future," he said. "It must be complemented by a full range of America's national security capabilities: strong intelligence, strong diplomacy, a strong economy, strong technology, developments in cyber capabilities -- using that great experience we gained from 10 years of war to be innovative, to be creative about the kind of force that we need for the future."

"But it must also be complemented by strong alliances, partnerships [and] regional efforts at cooperation -- all have to be part of the answer," he added.

The U.S. military alone, Panetta said, cannot be all things to all nations.

"We will maintain our excellence. We will maintain our leadership," he said. "But in the effort to maintain our excellence and our leadership, we also have to meet our security commitments around the world. And in doing that, we must -- and we will -- sharpen the application of our resources, better deploy our forces in the world, and share our burdens more and more effectively with our partners. And frankly, all of our allies need to do the same."

Terrorism, nuclear proliferation, cyber attacks and other threats facing the world do not recognize national boundaries and can't be addressed effectively by any one nation alone, Panetta said.

"Such transnational threats demand a shared response," he said. "That's why I have made it a priority to build and maintain partnerships across the globe. It's a theme I reiterated extensively during the international travel that I made last month in Europe, in Asia and in the Middle East. It has thus loomed large in our strategic review of the Department of Defense. This review is an effort not only to grapple with new budgetary realities, but also to adapt the force to better confront current and future security challenges."

No global alliance has been more successful than NATO, the secretary said, crediting that success to decades of investment in capabilities and joint training and the determination of leaders in the trans-Atlantic community. Revitalizing NATO, he added, is a centerpiece of President Barack Obama's administration's efforts to build stronger alliances and partnerships.

He noted that NATO has expanded from being an alliance geared toward collective territorial defense to take on expeditionary operations outside its area.

"We have seen the payoff in Afghanistan," he said, "where 49 countries have come together largely under a NATO umbrella, expending both blood and treasure to prevent al-Qaida from ever again being able to use Afghanistan as a safe haven. To all our [International Security Assistance Force] partners, we are profoundly grateful for your sacrifice and for your steadfast partnership."

Panetta praised Canada in particular for its decade of contributions in Afghanistan, noting that Canadian soldiers fought in the Taliban heartland of Kandahar province, and he also praised Canada for its leadership in NATO's recent success in Libya.

As it works to help in forging a stronger NATO, the United States will continue to play a decisive role in safeguarding its partners' shared interests, Panetta said. Part of doing so, he added, is enabling allies and partners to contribute their share to the common defense.

"To do that, however, the alliance needs to develop new capabilities to keep pace with emerging threats -- even in an era of fiscal austerity," the secretary said. "As I said [at a NATO defense ministers conference] in Brussels last month, these challenging economic times cannot be an excuse for walking away from our security responsibilities. I refuse to believe that we have to choose between fiscal responsibility and national defense. Instead, we must commit to ensuring NATO addresses key shortfalls in areas such as intelligence, surveillance and reconnaissance; precision strike munitions; and aerial refueling and lift capabilities."

NATO Secretary General Anders Fogh Rasmussen's "Smart Defense" initiative provides a framework for allied nations to pool their declining defense funds more efficiently and effectively, Panetta said, adding that the alliance plans to make more progress in that regard at its upcoming summit in Chicago.

Modernizing NATO also means ensuring that investments focus on the most likely future threats, particularly those posed by countries like Iran that are developing intermediate-range missiles capable of targeting Europe. The United States has been leading the way in NATO's missile defense efforts, most recently by announcing it will deploy four Aegis ships to the Mediterranean Sea, the secretary said. Missile defense, he added, also presents an opportunity for NATO and Russia to cooperate in dealing with threats emanating from the Middle East.

But while missile defense is a tangible sign of NATO modernization efforts, the alliance also must constantly assess the forms of engagement that are most appropriate for the alliance's capabilities and the threats it faces. These, he said, are the kinds of discussions taking place in the Defense Department's strategy and global posture review, as officials try to be disciplined in setting priorities to maintain the U.S. global leadership role while meeting the department's fiscal responsibility to the nation's taxpayers.

Addressing concerns about the effect those discussions may have on the future of the U.S. military presence in Europe, Panetta offered assurances.

"Let me be clear at the outset that the United States will always ensure that we maintain the right mix of forces and capabilities, including those stationed in Europe, prepared to meet the full range of security challenges acting in concert with our allies -- including instability on its periphery and unforeseen developments," he said. "At the same time, we must build on our success with the trans-Atlantic alliance and further enhance our collective security by building enduring and capable 21st-century security architecture in other critical regions of the globe, beginning right here in this part of the world."

The United States has worked with Canada to encourage new partnerships in the Pacific and in the Western Hemisphere, Panetta said, "recognizing that regional challenges -- from transnational criminal organizations to natural disasters -- require stronger regional institutions that can deliver regional solutions."

Two regions of the world stand out as posing particularly vexing challenges, the secretary said.

"It is apparent to all that the Asia-Pacific region is going to be a principal force behind world economic growth, with lines of commerce and trade that are constantly expanding and security challenges that are growing in complexity," he said. "In the Middle East -- another region crucial to the global economy and U.S. interests -- we've seen dramatic changes as a result of the Arab Spring. We see continuing violence. We see continuing extremism. We see continuing instability. And the threat from Iran continues to pose challenges.

"So as the United States draws down its forces in Iraq and begins to draw down its surge forces in Afghanistan," he continued, "we will also have to maintain a strong presence in the Middle East and work closely with our allies and partners to bolster multilateral cooperation in countering threats emanating from al-Qaida, from Iran, and elsewhere."

The global nature of security challenges and the interests at stake require building multilateral structures that enable all allies and partners to improve cooperation in countering common threats, Panetta said. "That includes encouraging Canada and our European allies to join us in meeting common challenges -- whether it's in Asia-Pacific, the Middle East or throughout the Western Hemisphere, and enabling them to do so through NATO when appropriate," he added.

The United States can and will do more than one thing at a time, the secretary said.

"U.S. security commitments are not zero-sum," he added. "And even as we enhance our presence in the Pacific, we will not surrender our status as a global power and a global leader. As a country with global interests and responsibilities, and with a military with unique global strength and reach, America will remain committed to global security."

American and Canadian leadership have built a system of alliances and partnerships that have safeguarded and advanced liberty, prosperity and security for decades, Panetta said.

"And as we move forward -- as we make the tough decisions needed to ensure a better life for our children and our grandchildren -- we will not back away from these alliances and partnerships. Indeed, they are a key to our ability to provide that strong defense for the future. We will strengthen them, and in so doing, we will strengthen our two great nations so that we know even greater prosperity and even greater security in the century that lies ahead."