Opinion of the European Economic and Social Committee on the "Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions — European Defence — Industrial and Market Issues — Towards an EU Defence Equipment Policy" (COM(2003) 113 final)
Date: 2003-09-24
Institutions: European Economic and Social Committee
Subjects: European arms policy, European security, arms industry, common security and defence policy, military equipment, military research

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(Preparatory Acts)

ECONOMIC AND SOCIAL COMMITTEE

402nd PLENARY SESSION ON 24 AND 25 SEPTEMBER 2003

Opinion of the European Economic and Social Committee on the ‘Communication from the
Commission to the Council, the European Parliament, the European Economic and Social
Committee and the Committee of the Regions — European Defence — Industrial and Market
Issues — Towards an EU Defence Equipment Policy’

(COM(2003) 113 final)

(2004/C 10/01)

On 12 March 2003, the Commission decided to consult the European Economic and Social Committee,
under Article 262 of the Treaty establishing the European Community, on the above-mentioned
communication.

The Section for the Single Market, Production and Consumption, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 3 September 2003. The rapporteur was
Mr Wilkinson.

At its 402nd plenary session on 24 and 25 September 2003 (meeting of 24 September), the European
Economic and Social Committee adopted the following opinion by 117 votes to 3, with 5 abstentions.

1.

Introduction

the context of the developing Common Security and Foreign
Policy (CSFP), but are not dependent on these policies.

In its Communication (1) the Commission suggests that
1.1.
the time is now right to start building a more coordinated
policy for defence equipment to complement national policies
in the area. This Communication follows on from two
earlier Communications on defence related industries (2), which
resulted in a very limited number of actions.

The Commission believes that it can make a key
1.2.
contribution by improving the quality of the EU regulatory
framework governing the treatment of armaments in Europe
thus helping to safeguard the survival of a viable EU defence
industrial base.

1.3.
Their comments and proposals are made on the basis
of the European Security and Defence Policy (ESDP) and within

The proposed measures are intended to encourage
1.4.
industrial restructuring and consolidation, to promote the
establishment of a European defence equipment market and
to enhance competitiveness of the European industry. This is
an important challenge in the development of ESDP. They are
also intended to achieve broader socio-economic objectives.

The Communication recognises that action is most
1.5.
likely to add value in the areas of the defence equipment
market and of defence related research.

(1) COM(2003) 113 final.
(2) COM(96) 10 final and COM(97) 583 final.

1.6.
The General Affairs and External Relations Council, at
its meeting in Luxembourg on 16 June, supported some of the
activities included in the Communication.

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2. General comments

2.1.
The Committee welcomes the Communication as
timely and can agree with most of the actions proposed in it.
The key objective of any changes agreed must be the more
efficient and cost effective delivery of the defence capabilities
that Member States need within the resources made available.

2.2.
Defence is a highly political matter and one where not
all Member States are agreed on the EU’s role. These proposals
must be examined in this political context. However there is
agreement that EU defence capabilities are not yet sufficient
for all the tasks that are envisaged at present (the Petersberg
tasks), let alone the tasks that could be agreed in the future.
Clearly the EU must have available military capabilities to
match the needs of its agreed external and defence policies if
these are to have credibility. While there is as yet no general
agreement among Member States on the need for the EU to
develop its military capabilities, the Committee welcomes
actions to this end as a key part of future viable ESDP.

Defence is also a very complex area; the range of
2.3.
possible tasks (national, NATO, EU, UN and other) and
equipments for these, as well as the existing arrangements for
them, which often overlap and can duplicate each other, make
it impossible to rationalise fully. However, it would clearly be
useful to reduce these differences.

2.4.
To this end the EU must make the most of the
resources already given to these capabilities. It is telling that
while the combined EU spending on defence is about 40 % of
that of the United States, the operational capabilities produced
are only about 10 %. It is clear that EU countries are getting
less value for money for the resources involved than they
could.

2.5. Without real improvements in the development of the
new technologies relevant
to defence, EU industries will
continue to lose ground in the production of operational
capabilities; this is contrary to the Lisbon strategy and bad for
employment prospects. The open method of coordination
could play a useful role in the interaction of national industrial
policies at EU level in this respect; further, the consultations,
evaluation and benchmarking at EU level that this would
allow could help towards the rationalisation of the industries
involved.

It

is always right

to make the most of available
2.6.
resources, but there is limited value in doing this alone. The
political will must exist to pay for what is needed to meet
existing and expected tasks (paragraph 2.3 above). Moreover,
in the most demanding tasks military forces that do not have
equipment that is technologically advanced have no hope of
success.

2.7.
The Committee notes that little has been said about
access to, and transfer of, technology and information between
Member States in the defence sector. The Committee notes its
importance for the most technologically advanced equipment.

2.8.
The majority of current Member States and a significant
number of Accession States are members of NATO. Further,
the EU has negotiated assured access to some NATO assets for
some EU operations. It is clearly therefore necessary to develop
any EU systems and standards taking full account of existing
NATO equivalents. Equally, for equipment,
interoperability
between EU and NATO forces will remain crucial and will
continue to be more important than standardisation (although
this should continue to be encouraged where possible).

importantly, since the current situations on
2.9. Most
defence industries and equipment (1) are so different in the
various Member States, it must be accepted that a multi speed
and flexible approach is essential; the Committee therefore
‘when and where possible’
welcomes
approach and notes that overall progress, and the benefits
coming from this, will be far slower than desirable. It also
hopes that as changes are introduced, the disparities in defence
equipment performance between larger and smaller Member
States will be progressively reduced.

the Commission’s

2.10.
EU level procedures established to harmonise defence
equipment policies could lead progressively, for those Member
States wishing to participate, to more efficiency, better results,
lower costs and a positive effect on RTD expenditure.

Turning to the proposals in the Communication, the
2.11.
Committee supports them except where indicated in the
paragraphs that follow.

(1) The European Capability Action Plan (ECAP) has identified EU
capability shortfalls which must be corrected if agreed EU tasks
are to be undertaken.

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3. EU defence industry

The Committee strongly endorses the need to maintain
3.1.
a viable defence industrial base in the EU that is able of
competing in the global market. Without this Member States
would have to rely on third countries (notably on the United
States) for much of their defence related equipment. It is
important to develop an ‘EU defence market’ to encourage
more purchases from EU sources.

3.2.
There has already been much consolidation in the EU’s
defence industries and, indeed, in defence industries worldwide.
Because it is a worldwide market, most major EU companies
already have connections (ownership, partnership, contractual
or other) with non-EU companies to enable them to operate
in the global market effectively. It is also a limited market, a
fact that has led companies to rationalise and to cooperate in
order to be able to continue to compete successfully. This
trend continues and will be important in some of the Accession
Countries, which have so far made little progress in this area.

3.3.
As the Communication notes, a major contribution to
security and defence systems now comes from companies
developing their products and services also for civil appli-
cations. This trend is likely to increase.

3.4.
State involvement in defence industries is unavoidable
since States are the only legitimate customers for many of their
products; but State ownership of such industries must be
limited as much as possible if competition is to be meaningful.
It is recognised that the State will remain involved in some
fields of special sensitivity (for example, nuclear and crypto-
graphic) and that State support for RTD is often necessary to
keep armed forcers at
technological
advance.

the leading edge of

The Committee agrees that restructuring must be
3.5.
primarily a matter for the industries concerned, taking account
of market realities. It also notes that there are particular
challenges facing many of the Accession Countries in the
restructuring of their defence industries (1) which make it vital
that they are fully involved in the whole of this subject as soon
as possible.

(1) Many of these had armed forces and defence industries which
were part of a system that did not match that of current Member
States.

Restructuring will inevitably mean accepting that Mem-
3.6.
ber States will lose some domestic defence industrial capabili-
ties so that they can concentrate on others, a process that has
already started. The aim should be to ensure that between
them the EU Member States have a full range of industrial
capabilities to match EU defence needs.

4. The market and its regulation

The Committee welcomes the review of the regulatory
4.1.
framework for the EU defence industry. However, it wishes to
comment on three aspects of the proposals in this area.

4.2. Monitoring. The Communication suggests that there is
a need to establish an then to monitor the economic situation
in the EU defence industrial base including the ability to
support the supply requirements for ESDP, levels of competi-
tiveness and design expertise, R&D investment etc. In the
Committee’s opinion this level of monitoring is unrealistic (for
example, because of the factors outlined in paragraphs 3.2 and
3.3 above) and unnecessary. Moreover, intellectual property
rights and commercial confidentiality would be major prob-
lems in some cases. Member States should be asked to give
relevant details as necessary, and should include an estimate of
the numbers employed related to their skills.

there could be merit

Defence procurement. The Communication suggests that
4.3.
the EU should itself be directly involved in procuring defence
equipment. While agreeing that
in
centralising some aspects of the procurement of defence
equipment, the Committee would like to see the added value
that such a role for the EU would bring before it could agree
this proposal. The Committee agrees that so far as possible a
single set of rules for defence procurement should be the long
term aim; but
it will take a long time to achieve such
uniformity, given the very different rules now used by Member
States, and allowance will always have to be made for
procurement from third countries, which will have different
procedures and rules. It is expected that the future Agency (see
paragraph 6.1 below) will have a major role in formulating
these rules.

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Competition policy. The Committee fully supports the
4.4.
Commission’s general position, but notes that limiting the
scope of Article 296 must not be allowed to reduce the ability
of Member States to safeguard their national security interests.
It also repeats that because of the involvement and the interests
of States as the sole legitimate customers for much defence
equipment, competition will continue to be harder to ensure
than for other products.

6. Themes for further reflection

6.1.
EU Defence Equipment Agency. In the past there have
been many calls for the establishment of some sort of Agency;
the Commission Communication refers to it as a defence
equipment agency, in the EP report on security and defence
architectures it is called an armaments and research agency
and in a recent draft of the Convention on the Future of
Europe,
the European Armaments, Research and Military
Capabilities Agency. The suggested roles for an Agency vary,
more or less in accordance with the suggested names. However,
a political decision was taken at the General Affairs and
External Relations Council meeting on 16 June 2003 that an
Agency in the field of defence capabilities should be set up.
The details of its exact role are under discussion.

6.2.
The Committee welcomes the Commission’s under-
standing that any Agency must reflect the political choice of
Member States that much RTD and procurement should be
conducted outside the current EC Treaty and their wish to use
existing agreements (3) as a basis for Agency work. Since not
all Member States will necessarily take part in the Agency’s
work, there must be an agreed basis for contributions to
financing it which will take into account the participation and
contributions of those who do take part. The Committee looks
forward to commenting in detail once it is clear exactly what
the Agency’s role will be and how it will add value.

Security of supply. Few, if any, Member States will restrict
6.3.
their procurement of defence equipment
to the internal
market, so there will continue to be bilateral arrangements
both for supply and for security of supply. The Committee
considers that the responsibility for security of supply in these
circumstances must remain with Member States, who may
then choose to use any EU arrangements (such as the proposed
Agency) or to make their own arrangements bilaterally or
multilaterally.

5. A more coherent EU advanced security research

effort

5.1.
There is currently massive under investment in defence
related research, technology and development (RTD) and the
organisation charged with managing cooperative defence
related research programmes (WEAO (1)) handles only 2,5 %
of EU investment in the area. Where possible, it makes sense
and adds value to coordinate appropriate national research
activities at EU level, as shown by the results of the European
Research Area. RTD will be a key area if the EU is to meet the
desired objectives of the EU defence equipment policy.

There is a need to define ‘EU strategic technologies’ (2)
5.2.
as a precursor to Member State agreement on the EU agenda
for advanced research. Projects chosen must have the potential
to impact directly on improved security capabilities in relevant
areas. It will also be necessary to agree on how to find the
necessary funding and how to apportion the resultant benefits,
but it is clear that there is a need to raise defence expenditure
in most Member States to achieve a meaningful improvement
in RTD. The proposed Agency could be most useful as a centre
for consultation, for holding and sharing information and,
where appropriate,
for promoting common projects and
production.

5.3. More generally, it is necessary to identify and agree
common requirements to the greatest extent possible. This
would allow industry to recommend the most cost effective
development and production (or procurement) routes, would
aid interoperability and would lead to viable production
runs. It will also be necessary to understand national RTD
requirements and to coordinate better the evolution of tech-
nologies and the necessary funding.

(1) Western Europe Armament Organisation
(2) This is defined here as technologies vital to the capabilities

identified as necessary for the agreed EU tasks.

(3) Such as OCCAR (Organisme Conjoint de Coopération en matière
d’Armement), and the Europa MoU (Memorandum of Understand-
ing, within the WEAO framework)

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Trade issues. The Committee will comment on this
6.4.
important aspect when detailed proposals are put forward by
the Commission, but agrees that it would now be helpful to
monitor existing practices for dual use exports with the aim of
ensuring fair competition.

7. Conclusions

The EESC welcomes the start of

the process of
7.1.
establishing a better coordinated policy for defence equipment
in the EU as a key part of a viable European Security
and Defence Policy (ESDP), concentrating on achieving the
capabilities needed to meet agreed EU requirements in the
ESDP, within the context of the Common Security and Foreign
Policy (CSFP). Agreed EU level procedures could lead to more
efficiency and lower costs for participating Member States.

It recognises that the key element in this will be the
increased

7.2.
necessary political will, notably in the area of
funding.

It is in both the political and the economic interests of
7.3.
the EU to have a defence industry that is capable of competing

Brussels, 24 September 2003.

globally and the Committee notes that restructuring is already
happening largely because of market pressures.

7.4.
Establishing and monitoring relevant data on the
industries will best be done by Member States; the data should
include employment figures related to skills.

The EESC doubts the added value of the EU’s proposed

7.5.
direct role in procuring defence equipment.

7.6.
A coherent EU advanced security research effort is vital
to future progress, and defining the ‘EU strategic technologies’
required for closing the capabilities gap is a key element in
this.

7.7.
The Committee looks forward to commenting in detail
on the EU Agency in the field of defence capabilities once its
role and other details have been agreed.

7.8.
Security of supply must remain the responsibility of
Member States for the foreseeable future, although the Agency
could play a useful role.

The President

of the European Economic and Social Committee

Roger BRIESCH