Towards a European Union Defence Equipment Policy

The Commission is developing the prospects for strengthening the industrial and market position of European defence companies. It aims to improve the EU's ability to develop a European Security and Defence Policy that is capable of strengthening Europe's position on the international stage.

ACT

Communication from the Commission of 11 March 2003: Towards a European Union Defence Equipment Policy [COM(2003) 113 final - Not published in the Official Journal].

SUMMARY

Background

The countries of the European Union devote a combined total of 160 billion euros per year to military spending whereas the annual figure for the US is some $390 billion. This means that the EU Member States combined spend less than half as much as the United States on defence. In addition, the "real military capability" of the EU is estimated to be just 10% of that of the USA. This Communication seeks to improve the effectiveness and value for money of public spending on armaments.

A proper defence industrial base could not just help redress the EU's position in relation to the USA, but could also improve collective security within NATO. All the more so in that the efficiency of multinational European corps such as Eurocorps, Eurofor, Euromarfor and the future Rapid Reaction Force, requires greater interoperability between national armaments, or even the use of similar equipment.

The European Councils of Cologne and Helsinki (1999) led to progress in the move towards a European Security and Defence Policy (ESDP). New structures have thus been created, such as a Political and Security Committee and a Military Committee and Military Staff. Closer cooperation with NATO was also formalised at the beginning of 2003 by the "Berlin +" agreements, so that the EU can have access to NATO capacity for operations initiated under the ESDP.

To make the European Union the most competitive and prosperous knowledge-based economy in the world, as advocated at the Lisbon Council in March 2000, all policies must lend a hand. The dynamism of industry, and thus also of the defence industry, is vital in this respect. The defence industry does, however, require the development of "effective accompanying policies" such as those on trade, the internal market, research and competition.

This should be done in compliance with Article 296 of the EC Treaty. This Article restricts the opening of the market in defence equipment and trade by giving the Member States the right to protect their essential interests in security-related areas. A clearer distinction between the rules which fall under the Community pillar or under the common foreign and security policy pillar would make it easier to frame a common set of rules on defence equipment.

Gradual implementation of a European armaments policy

The gradual implementation of a European armaments policy alongside corresponding national policies requires Europeanisation in four fields:

• Defence equipment demand: military needs and other security-related requirements need to be harmonised in order to harmonise the planning and procurement of military equipment;
• Defence equipment supply: the industrial consolidation process (primarily the responsibility of industries themselves) needs to be completed. Supportive policies and actions by the Commission and Member States are also needed to create and maintain a competitive industrial structure in Europe;
• Defence equipment market: there is a need firstly for an appropriate regulatory framework addressing internal and external aspects; secondly to establish rules for more cost-efficient procurement of goods and services both by the different Member States' defence procurement agencies and by any future European agency or agencies, and for economically effective export controls;
• Research: intra-European cooperation must be encouraged. There is only the Western European Armaments Organisation (WEAO) to manage European research programmes, and its budget accounts for only 2.5% of European investment in the field of defence. Also, technology transfers between the civilian sector and the defence sector remain minimal. To remedy this, there is a need to improve the coordination and coherence of security-related research at European level through the exploitation of civil-military synergies.

The communication proposes carrying out this process of Europeanisation through the following actions:

• compiling a standardisation handbook: in order to improve the interoperability of national armaments, it would help if the same standards were used on a European scale. A "Defence Standardisation Handbook" would be an appropriate tool to meet this objective. The Commission is currently working together with the ministries of defence and the industry within the CEN on such a handbook, a first operational version of which is scheduled for 2004;
• monitoring the activity of defence-related companies: in order to measure the performance of European companies in the area of defence and to supply producers with better information on market conditions, the European Commission should be able to regularly review the situation in all sectors of the industry. The Commission will utilise the data available from Eurostat and the European statistical system, as well as information collected from defence industry associations, in order to conduct an examination of their situation;
• simplification of intra-Community transfer procedures: given the desire of Member States to control the final destination of exports of defence equipment, intra-Community transfers of defence products can involve a lot of red tape and a large number of national procedures, such as the issue of individual licences. The Commission, together with the Member States, is currently trying to work on simplifying these procedures. It would be useful therefore to launch an impact study on the effects of simpler legislation in this field. The Commission plans to draw up a proposal by 2005;
• definition of a competition policy tuned to the specific needs of the military sector: competition policy in the military sector should focus on safeguarding innovation by avoiding potentially damaging vertical mergers. Given the specific characteristics of the defence sector, the Member States' prerogatives with regard to State aid are beyond dispute, provided that the competitive conditions in the common market for goods which do not have a specific military purpose are not altered;
• rationalisation of the award of contracts in the defence sector: there is a need for greater competition in defence equipment procurement at Community level. Above all, there is a need to develop a single set of rules for defence equipment procurement in Europe, taking into account the role of the future European Defence Agency;
• export control of dual-use goods and technologies: a Community Regulation from 2000, based on Article 133 of the EC Treaty concerning external trade, establishes legally binding principles for the export of dual-use goods set out in a precise list. However, care should be taken in future to ensure that these controls do not hamper the competitiveness of the EU defence industries;
• coherent advanced research: the EU and the Member States would derive greater benefits from their research programmes if they were better coordinated. The Commission will therefore ask representatives of national administrations, the industry and research institutions to identify, by the end of 2003, a European agenda for security-related research. To this end, the Commission intends to launch a preparatory project that it will implement with the Member States and industry.

In a wider context, the EU and its Member States are asked to consider other themes for reflection, such as the EU Defence Equipment Agency proposals, the question of the security of supply and other defence trade issues.

With regard to the EU Defence Equipment Agency proposals, the Convention's defence working group included among its recommendations the creation of an agency for cooperation in strategic research in the field of armaments. Even though this agency would operate on an intergovernmental basis, the Member States would probably increase the Community's role when the Community framework seemed more appropriate (market mechanisms, experience with civil research framework programmes, etc.).

Furthermore, since the development of the European defence industry sector will involve greater mutual dependency in the supply of defence goods and equipment, it will be necessary to envisage procuring supplies not just nationally, but under programmes developed either within the EU or abroad.

Finally, with regard to defence trade issues, the EU should also take action to gain fairer access to armaments markets outside Europe, and particularly in the USA, since European companies are at a disadvantage in that European markets remain open to non-European products whereas the US market remains closed.

RELATED ACTS

Commission Green Paper of 23 September 2004 on defence procurement [COM (2004) 608 final - Not published in the Official Journal]

Communication, of 4 December 1997: Implementing the European Union strategy on defence-related industries [COM (97) 583 final - Not published in the Official Journal]

The Commission aims to facilitate the restructuring of the defence sector. It urges the Council to adopt a joint position so as to open a debate on the main issues concerning the development of a European armaments policy. It proposes the creation of a simplified system for intra-EU transfers and rules and mechanisms for transparency and non-discrimination in procurement. The Commission has put together an action plan for industries in the defence sector. This plan proposes the adoption of standards for defence procurement, customs duties, arms exports and industry standards in this sector.

Communication, of 24 January 1996: The challenges facing the European defence-related industry - A contribution for action at European level [COM (96) 10 - Not published in the Official Journal] The Commission emphasises the need to rationalise the defence sector. It proposes to apply EU rules on public procurement to military equipment, whilst reserving the possibility for Member States to benefit from derogations that allow them to protect their national interests, to facilitate intra-Community exchanges in the arms trade, to progressively harmonise the control of exports of military equipment, to apply the rules on competition policy to the defence industries and to develop an EU mechanism to support the restructuring of industries of this type.

Last updated: 12.01.2006