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More bullets for the buck: Can EU members get better value for their defence efforts?

Article by Dick Leonard

September 15, 2006

EU countries collectively spend almost 180 billion EUR per year on defence; more than half the US total of 330 billion EUR, and have many more men under arms. Yet it became apparent during the Kosovo War – if not long before – that the EU’s actual capacity is a great deal less than half that of the US.

One reason among many is the chaotic state of military procurement within the Union, which is very far from having achieved an open internal market in defence equipment. All too often European governments end up by paying far too much for inferior products, which lack inter-operability, both with their EU and NATO allies, including, of course, the United States.

Two years ago, at a meeting at Le Touquet, British Prime Minister Tony Blair and French President Jacques Chirac proposed the creation of a new EU defence agency which would encourage member states to boost and co-ordinate their military capabilities. At the Thessaloniki summit, in June 2003, the proposal was approved by EU leaders, and on 1 January this year the European Defence Agency (EDA) opened its doors in Brussels, under the leadership of its first director, a former senior British civil servant, Nick Witney.

It is an inter-governmental body, under the aegis of the Council of Ministers rather than the Commission, and its Steering Board, made up of 24 national Ministers of Defence (Denmark does not participate because of its opt-out from the European Security and Defence Policy), is chaired by Javier Solana, or by one of his deputies at more routine meetings when officials rather than ministers attend.

It operates on a fairly modest scale, with a staff of 25, scheduled to increase to 77 during the course of this year, and an initial budget of 20 million EUR, of which only €3m is earmarked for research. Its three main functions have been described in some detail by a useful recent publication of the Centre for European Reform (CER), Europe’s New Defence Agency, by Daniel Keohane. They are defined as “harmonising military requirements, co-ordinating defence research and development, and encouraging the convergence of national procurement procedures”.

Last week Witney was grilled by the Security and Defence Sub-committee of the European Parliament. It became clear, during the course of his cross-examination, that the EDA lacks executive authority and is entirely reliant on its powers of persuasion to get member states to accept its advice. Its initial priority was to present to the Council of Ministers in May a report on the European Capabilities Action Plan (ECAP), which is designed to identify the most significant shortfalls in military capability.

In particular, Witney said, the EDA was looking at the situation concerning armoured fighting vehicles. Some 10,000 of these could be bought by member states over the next few years, but the purchases would be made under more than 20 different national procurement programmes, only one of which was co-operative – the German-Dutch Boxer programme. Another area being closely studied was the market for unmanned air vehicles. Most member states were thinking of going off in their own direction on this, according to Witney.

From what Witney told the parliamentary committee, and from his speech the following day to a conference in Brussels organised by the New Defence Agenda (NDA), it was clear that the agency is already performing a very useful function in shedding light on current deficiencies. But its efforts will be largely wasted if the member states do not act decisively on the reports it presents.

The reason why so little has been achieved in the past, particularly in the field of procurement, is the effective exclusion of defence from the internal market programme of the EU. The basis of this is Article 296 (b) of the European treaties, which states, in part:

Any Member State may take such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of or trade in arms, munitions and war materials…

If member states had sought to use this provision sparingly, restricting the derogation to what could reasonably be interpreted as their ‘essential interests of security’, such as the protection of high tech. information on newly developed electronic systems, the damage would have been less serious. As it is, however, most member states have claimed a blanket exemption for defence supplies, even extending in many cases to the provision of soldiers’ boots and rucksacks.

It is a rarity for the supply of any goods for the military to be put out to open tender, and even when competitive bidding is permitted it is seldom widely publicised on a cross-border basis. The CER pamphlet quotes Professor Keith Hartley, of York University, as estimating “that a more integrated defence market could save European governments up to €6 billion a year, equivalent to 60 per cent of current R&D spending”.

So, what should now be done? Everybody agrees that it would be a political impossibility to get member states to agree to scrap Article 296. Attention is focusing instead on agreeing a non-binding voluntary code of conduct which the EDA would be invited to draw up. Under this, member states would be asked to restrict to a minimum the contracts which they would reserve under the Article, and to submit a written justification each time they wished to apply it.

An alternative, or perhaps complementary, proposal was suggested in a green paper published by the Commission last September, and on which they have invited comments from interested parties. This is that it should draw up a directive defining more closely the exact legal position under 296 and drawing up rules for contracts which clearly did not come within its purview.

Either way, the ball is now clearly in the court of the member states, six of which, Britain, France, Italy, Germany, Spain and Sweden, produce well over 90 per cent of defence supplies within the EU. They all agreed to the establishment of the EDA: it is now their responsibility to see that its efforts will not be in vain.

Dick Leonard is a former Assistant Editor of The Economist. His latest book is A Century of Premiers: Salisbury to Blair.

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