Europe’s defence equipment industry, March 2003

On 11 March 2003 the European Commission adopted a Communication on the development of a competitive European defence equipment industry. The Communication 'encourages the Member States to consider a European defence equipment policy as one of the logical next steps in the development of [the European Security and Defence Policy].'

According to Commissioner Chris Patten, responsible for External Relations: 'Member States are committed to the development of a strong and credible European Security and Defence Policy. It is difficult to envisage this happening without the support of a strong and competitive defence industry, transparent market conditions and a healthy climate for investments in Research and Development. I hope the Communication adopted today will help contribute to this end.'

The Communication follows a request from the European Parliament, which in April 2002 adopted a Resolution on European defence industries, in which it supported an Action Plan for Europe's defence industries proposed by the Commission in 1997, but which failed to gain support from the Member States. In 2002, MEPs therefore asked the Commission 'to develop an updated version to consider matters such as the extent to which the EU's common commercial policy and the discipline of the Single Market should be applied to the defence industries, how European research in the defence field can be better pooled and coordinated and what further measures are needed to promote the emergence of transnational defence companies.'

In its Communication, the Commission identifies a number of important considerations for defining an EU defence equipment policy:

• cost efficiency of defence spending

• the maintenance of a competitive defence and technological industrial base

• better access for EU manufactured goods to third country markets

• ethics and fairness in the arms trade

• security of supply

• the need to respect Member States' prerogatives in a sensitive area

The Communication proposes EU action to help establish a European defence equipment market, notably by improving the legislative framework regulating the treatment of armaments. Amongst the measures proposed by the Commission are:

• providing the necessary financial resources to ensure that the European defence equipment Standardisation Handbook is ready by 2004 and then propose appropriate complementary measures for updating and using it

• launching a study in 2003 to assess the impact of existing rules and different proposals, and, depending on its findings, start elaborating at the end of 2004 an appropriate legal instrument to facilitate intra-Community transfer of defence equipment

• continuing reflection on the application of competition rules in the defence sector taking due account of the specificities of this field and the provisions of article 296 ECT

• initiating a reflection on how to optimise defence procurement at national and EU levels. In view of important Court judgments in recent years, especially in helping to define the scope of Article 296, the Commission will issue an Interpretative Communication by the end of 2003 on the implications of these judgments. In parallel, it will work on a Green Paper, which might be issued in 2004 as a basis for discussion with stakeholders

• raising, in the relevant Council working bodies, the issue of the Commission's involvement in export control regimes

• inviting Member States, industry and the scientific community to help identify common needs in the area of research linked to global security. The Commission intends to launch a preparatory action to coordinate such research at the EU level, focusing on a limited number of concrete technologies linked to the Petersberg tasks

• pursuing work on a possible EU Defence Equipment Framework, overseen by an agency (or agencies), in order to pull together, develop and widen national initiatives - especially in collaborative programmes, Research and Development, and off-the-shelf procurement - making use, where appropriate, of Community mechanisms and instruments.

The European Parliament's 2002 Resolution also underlined 'the importance of procurement policy, rationalisation and standardisation to improve Europe's return on its defence expenditure'.

The theme of value for money was picked up by European Commissioner for Enterprise, Erkki Liikanen, speaking about the new Communication: 'Tax payers should get the most out of the investment they make in security. There is ample evidence that this is not the case at present and that a European defence equipment market would bring significant economic efficiencies. It is crucial for both civil and defence sectors of the economy that we create an environment in which European companies can give better value for money.'

'By placing the issues clearly in the context of industrial competitiveness', Commissioner Liikanen added, 'the European Commission is signaling the importance it attaches to developing policies which will give European companies in the defence industries, whether prime contractors or part of the tens of thousands of SMEs in subcontracting roles, the opportunity to remain at the leading edge of advanced technologies and to compete on a the basis of fair competition.'

Links:

European Commission:
	11.03.03:	Towards an EU defence equipment policy: Commission proposals [IP/03/355]
	DG Enterprise: Defence

Eric Davies
Researcher
Compiled: Thursday, 13 March 2003

On 11 March 2003 the European Commission adopted a Communication on the development of a competitive European defence equipment industry.