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In the twentieth century Sweden has formalized its policy of non-participation in alliances in peacetime aiming at neutrality in the event of war. But this neutrality, nearly universally supported by all Swedes, has not come cheap. Compared to her Nordic neighbors as well as other European neutrals, Sweden has a significant defense effort despite a gradual decline in expenditure as a percent of GNP over the past 15 years. The 'Made in Sweden' label on defense equipment is essential for political support, as is illustrated in the decision to maintain the Swedish aircraft industry. The 'Whiskey on the Rocks' incident plus other submarine violations of Swedish waters have served to focus attention on the weakening defense situation. Despite a sophisticated arms industry, if Sweden hopes to maintain its defense capability in the years ahead, it will be forced to look increasingly abroad for technology and components. Thus the U.S. role in Swedish defense is bound to increase.