Tuesday, 13 January 2009

EU defence industry and market: Is there a future?

A year ago the Commission assessed the prospects of the defence technological and industrial base (DTIB), a prerequisite for the European Security and Defence Policy (ESDP). Little bang for the buck (or euro), was the finding.

While the defence budget of the United States is “only” twice as large as that of the European Union member states combined, the qualitative differences are much greater. Most of the European defence budgets are swallowed by upkeep of national armies. The USA devotes some 35% of its total budget to investment compared to only about 20% in Europe. The US outspends Europe by six to one in defence research and development (R&D).

Moreover, R&D investment in Europe is fragmented along national lines, leading to duplication and waste of scarce resources.

The common European security interests are fulfilled poorly, but in addition fragmented defence industries and markets face a bleak future.


***

European defence industry

Since defence spending and defence industries are largely in the domain of the member states, the Commission in its Defence package chose a cautious approach to improving the situation.


The main findings as well as the reasons for and policy measures for improvement were laid out in the Communication A strategy for a stronger and more competitive European defence industry (Brussels, 5.12.2007 COM(2007) 764 final) and in two accompanying Staff Working Documents, an impact assessment (SEC(2007) 1596) and an impact assessment summary (SEC(2007) 1597).

The documents are available through the Commission’s DG Industry and Enterprise web page Towards an EU Defence Equipment Policy:

http://ec.europa.eu/enterprise/defence/eu_defence_policy.htm

They form the basis for two proposed Directives and a number of issues seen as maturing only in the middle or the long term.

***

Why Europe?

The security and prosperity of EU citizens is the short answer to why we need the European Union (a better EU, for sure). But most people need concrete examples of policies where the nation states are increasingly ill equipped to deliver the public goods on their own and where the European Union can (or could) offer more.

Climate change, energy, financial supervision and the euro have been in the headlines lately. They all show the need for more Europe, not less. Defence and related industries are among the long line of other policy areas, where the needs for improved European policies are compelling.

The Communication on the European defence industry is worth reading, and it will serve as the starting point for a couple of blog posts on the proposed legislative measures, including defence procurement.


Ralf Grahn