Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - A strategy for a stronger and more competitive european defence industry {SEC(2007) 1596} {SEC(2007) 1597}
Date: 2007-12-05
Institutions: European Commission
Subjects: EU industrial policy, European defence policy, defence budget, domestic market, foreign market

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 5.12.2007 
COM(2007) 764 final 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

A STRATEGY FOR A STRONGER AND MORE COMPETITIVE EUROPEAN 
DEFENCE INDUSTRY 

{SEC(2007) 1596} 
{SEC(2007) 1597} 

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COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

A STRATEGY FOR A STRONGER AND MORE COMPETITIVE EUROPEAN 
DEFENCE INDUSTRY 

1. 

INTRODUCTION 

Europe's defence industry has an annual turnover of over € 55 billion. It accounts for around 
30%  of  world  production  and  has  more  than  300  000  employees.  Twenty  years  ago,  real 
turnover and employment were almost twice as high. Since the end of the Cold War, defence 
strategies  have  been  reviewed,  European  armed  forces  have  been  remodelled  and  defence 
expenditure reduced. 

A strong defence technological and industrial base (DTIB) in Europe remains a fundamental 
underpinning of the European Security and Defence Policy (ESDP). The ESDP is designed to 
provide the EU with the capacity for autonomous action in order to respond to international 
crises, without prejudice to actions by NATO. The DTIB produces the capabilities needed not 
only to meet global defence, but emerging security, challenges. Only a competitive DTIB can 
provide Europe with autonomy, affordability and the ability to cooperate internationally in the 
development and production of defence equipment. 

Europe  has  several  companies  that  are  competitive  at  both  the  EU  and  global  level  and 
provide  world-leading  capabilities  in  many  market  segments.  Its  industry  also  has  the 
potential to produce all the capabilities needed to meet global challenges and provide forces 
acting on the EU's behalf around the world with the high performance equipment and systems 
they need. A key task is to clearly define the capabilities that Europe's armed forces need to 
meet  these  challenges  and  in  co-operation  with  the  EU  Military  Committee,  the  European 
Defence Agency (EDA) is developing a Capability Development Plan to identify priorities for 
capability needs and development. 

The  defence  sector  is  a  technology-intensive  sector  whose  cutting-edge  research  and 
development  creates  a  spill-over  in  other  areas.  Defence  is  interlinked  with  electronics, 
information and communications technologies, transport, biotechnology and nanotechnology. 
Together, these industries constitute a source of opportunity, innovation and know-how which 
spurs development and growth throughout the economy. 

Moreover,  many  new  technologies  developed  for  defence  have  also  turned  into  drivers  for 
growth  in  civil  sectors  such  as  global  positioning,  the  internet  and  earth  observation. 
Increasingly this is becoming a two-way process as civil sectors contribute to the defence (e.g. 
development  of  software).  This  growing  cross-fertilisation  is  important  for  Europe's  Lisbon 
Strategy for Growth and Jobs. 

Furthermore,  the  sector  is  becoming  more  difficult  to  define  as  the  boundaries  between 
defence, security and civil technologies (e.g. electronics, telecommunications) are becoming 
less fixed. Peacekeeping/making missions and the impact of terrorism, have led to a blurring 

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of  lines  between  internal  and  external  security  and  to  a  need  for  better  policy  co-ordination 
between both. 

However,  there  are  clear  signs  that  Europe's  defence  industry  is  being  held  back  by  an 
inadequate  policy  and  legal  framework.  A  recent  European  Parliament  publication1 
demonstrated  the  high  cost  of  'non-Europe'  with  different  national  regulations,  licensing 
procedures,  export  control  lists,  lack  of  information  sharing,  etc.  This  creates  red  tape, 
duplication, hampers innovation, increases prices and is detrimental to competitiveness.  

This  Communication  presents  a  "Strategy  for  a  stronger  and  more  competitive  European 
Defence  Industry".  It  recognises  the  special  character  of  the  industry  and  its  unique 
relationship with governments but argues that much can be done to unleash its full potential to 
ensure that it provides value for money to Member States and delivers the capabilities needed 
in an efficient and effective manner for the ESDP. 

2. 

DEVELOPMENTS IN THE DEFENCE INDUSTRY MARKET  

Governments  dominate  the  sector  through  a  variety  of  roles  such  as  regulators,  owners, 
controlling shareholders, funders of R&D and as principal customers. However, many other 
parties are involved in setting the policy and regulatory framework within which the industry 
must  operate.  Defence  and  security  policies  are  determined  by  the  European  Union,  NATO 
and individual Member States. The regulatory framework is shaped by Treaty requirements, 
Community  policies  and  Member  States.  The  EDA,  in  which  the  Member  States  and  the 
Commission work together, aims to support the Council and Member States in their effort to 
improve European defence capabilities, and to foster the European DTIB. 

2.1. 

Financial conditions  

National  defence  budgets  are  the  main  determinant  affecting  the  prospects  of  the  defence 
industry.  These  budgets  reflect  national  policies  and  priorities  and,  over  the  last  20  years 
following the end of the Cold War (as a 'peace dividend'), they have halved (from 3.5 % of 
GDP  in  the  1980s  to  a  current  average  of  1.75%)  leading  to  a  reduction  in  turnover  and 
employment. According to the EDA2, overall defence spending in Europe appears unlikely 
to increase. Investment in research and technology, development and procurement occupies a 
much smaller proportion of the total defence budget in Europe than in the United States. At 
the  same  time,  costs  for  military  equipment  have  risen  and  armed  forces  have  been 
restructured making the drive to improve competitiveness and achieve value for money 
even more important.  

While  in  the  past  a  few  Member  States  could  afford  to  maintain  a  comprehensive  defence 
technological and industrial base, national defence budgets in isolation can no longer finance 
the development of a full range of top quality products and new national defence programmes 
have become less frequent. 

The  decrease  in  defence  expenditure  in  Europe  also  has  had  an  effect  on  investment  in 
research and technology. While the US defence budget is about twice as large as that of all 
European defence budgets  combined,  it devotes some 35% of its total budget to  investment 

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“The Cost of Non-Europe in the Area of Security and Defence”. 
Long-term vision – A perspective on industry, endorsed by the EDA Steering Board in September 2006. 

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compared  to  only  about  20%  in  Europe  and  it  outspends  Europe  by  six  to  one  in  defence 
R&D. Moreover, R&D investment in Europe is fragmented, leading to duplication and waste 
of scarce resources. 

2.2. 

Fragmentation of the market 

Although defence production is concentrated in six Member States (Germany, Spain, France, 
Italy,  Sweden  and  the  United  Kingdom),  companies  producing  ancillary  equipment  and 
systems  can  be  found  all  over  Europe.  However,  on  average,  Member  States  spend  almost 
85% of their equipment budget domestically. 

European  governments  have  a  clear  preference  for  their  own  national  defence  industries 
not  only  to  protect  jobs  and  boost  investment  but  also  to  ensure  security  of  supply  and  of 
information.  Member  States  are  reluctant  to  accept  mutual  dependence.  As  a  consequence, 
producers  from  other  Member  States  have  only  limited,  or  no,  access  to  domestic  defence 
markets.  This  results  in  a  lot  of  duplication  which  can  be  seen  in  the  total  of  89  different 
weapon programmes in the EU compared to only 27 in the US. 

Furthermore, Article 296 allows Member States to be exempt from internal market rules for 
national security reasons. In particular, Member States are not obliged to supply information 
the  disclosure  of  which  they  consider  contrary  to  their  essential  security  interests,  and  they 
may take measures related to "the production of or trade in arms, munitions and war material" 
which  are  necessary  for  the  protection  of  the  essential  interests  of  their  security.  However 
such measures may not "adversely affect the conditions of competition in the common market 
regarding products which are not intended for specifically military purposes". 

Domestic markets for defence industry goods are fragmented in Europe through:  

•  Member  States  making  extensive  use  of  Article  296  to  exempt  defence  contracts  from 
EU  procurement  rules  even  though  the  Court  of  Justice  has  stated  that  the  use  of  the 
exemption  should  be  limited  to  exceptional,  clearly  defined  and  individually  justified 
cases.  

•  National systems to control transfers of defence equipment inside the EU which do not 
distinguish between exports to third countries and transfers between Member States. This 
results in unnecessary red tape costing business over € 400 million a year. Such high costs 
further  limit  market  opportunities  for  competitive  SME  subcontractors  in  other  Member 
States.  

•  Legislation  on  control  of  strategic  defence  assets,  which  some  Member  States  have 
refined in recent years (e.g. UK in 2002; DE in 2004 and FR in 2005) and which often does 
not take account of the European dimension.  

•  Infrequent  and  ad  hoc  cooperation  and  coordination  among  Member  States  on  the 
definition of requirements, R&D or common production programmes. The result of setting 
defence  requirements  from  a  national  perspective  is  further  exacerbated  by  using  non-
harmonised standards which hamper cooperation in R&D and production programmes. 

•  The distortion created by offset requirements (compensation orders) which many Member 
States still impose in connection with defence procurement. Although they are often said to 
help  sustain  defence  spending,  and  to  some  extent  reflect  weaknesses  in  the  present 

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structure of the European defence industry and markets, there is a danger that buying states 
are less concerned about the competitiveness of the product than the attractiveness of the 
proposed offsets.  

2.3. 

External markets 

European governments are not restricted in their choice of trading partners for defence. This 
means  that,  despite  the  clear  domestic  preference,  a  significant  part  of  Europe’s  defence 
equipment is imported, especially from the US. While most European markets are open to US 
manufacturers,  European  producers  often  find  a  closed  door  when  trying  to  export  their 
defence  goods  to  the  US.  This  makes  it  more  difficult  for  European  defence  industries  to 
spread costs and maintain and develop their design expertise.  

2.4. 

Conclusion 

Improving  long-term  competitiveness  is  crucial  for  the  European  defence  industry  and  for 
Europe’s security and defence ambitions. Further industrial adaptation should aim at greater 
specialisation leading to a more integrated supply chain and competitive European DTIB.  

So far defence industry adaptation has mainly taken place on a national basis. Although 
there  have  been  some  successful  cross-border  mergers  within  the  EU,  most  European 
cooperation has tended to take the form of joint programmes or ventures which have a limited 
impact  on  improving  competitiveness.  This  has  slowed  consolidation,  specialisation, 
modernisation  and  restructuring  in  Europe's  defence  industry  and  limited  the  freeing  up  of 
capital to be used more productively elsewhere in the economy.  

As  industry  continues  to  adapt  to  infrequent  new  defence  programmes  and  relatively  low 
research  and  investment  expenditures,  it  will  become  more  costly  to  maintain  production 
capacity  and,  strategically  more  importantly,  R&D  facilities  in  Europe.  Capital  is  already 
migrating in search of better returns on investments in the US and elsewhere. 

This  approach  is  no  longer  sustainable  if  Europe  wishes  to  retain  a  vibrant  and 
substantial  DTIB.  With  unchanged  policies  the  European  industry  risks  becoming  a 
niche  player,  supplying  mostly  non-European  prime  contractors,  thereby  jeopardising 
the industrial capacities to autonomously develop the capabilities needed for the ESDP. 

A  dynamic  strategy  is  needed  to  improve  Europe's  existing  disjointed  approach  to  the 
defence  industry.  A  strategy  that  increases  the  competitiveness  of  the  defence  industry, 
prepares it for future challenges, promotes its capacity for innovation, preserves and creates 
more high quality jobs and further develops its current strengths. 

3. 

POLICY MEASURES TO STRENGTHEN EUROPE'S DEFENCE INDUSTRY MARKET 

In this chapter a broad range of policy measures is presented on which the Commission will 
continue to work closely and effectively with its partners, and particularly the EDA, to ensure 
the  best  outcome.  These  measures  are  designed  to  improve  overall  coordination,  strengthen 
the  internal  market  for  defence  goods,  and  help  the  adjustment  and  modernisation  process 
necessary in Europe.  

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3.1. 

Policies to improve the functioning of the internal market for defence products 

3.1.1.  New legislation 

For the Commission, improving the functioning of the internal market for defence products is 
a  priority.  This  Communication  is  therefore  accompanied  by  a  proposal  for  a  directive  on 
intra-EU  transfers  of  defence  products  and  for  a  directive  on  defence  procurement.  The 
purpose  of  both  these  proposals  is  to  contribute  to  the  progressive  establishment  of  a 
European Defence Equipment  Market  (EDEM); where suppliers established in one Member 
State can serve, without restrictions, all Member States. These proposals provide an essential 
framework  for  the  establishment  of  a  more  competitive  and  stronger  defence  industry  and 
should be implemented as soon as possible. 

The  proposal  for  a  directive  on  intra-EU  transfers  of  defence  products  will  facilitate 
transfers  by  eliminating  unnecessary  paperwork.  EU  Governments  procuring  from  suppliers 
established  in  another  Member  State  will  see  their  security  of  supply  improved.  By 
significantly  reducing  licence  application  costs,  and  by  allowing  system  integrators  to  open 
their supply chains in more predictable conditions, the new rules will increase opportunities 
for  competitive  Small  and  Medium-sized  Enterprises  (SMEs)  to  supply  components  or  sub-
systems thereby contributing to making the European market more dynamic.  

The proposed directive on defence procurement will enhance openness and competitiveness 
of defence markets in the EU taking into account specific features, such as security of supply 
and  security  of  information.  It  will  reduce  the  regulatory  patchwork  in  this  field.  It  will 
increase competition and transparency and so aid SMEs to find, and bid for, sub-contracts. By 
providing new rules applicable to the procurement of arms, munitions and war material and to 
certain  sensitive  non-military  security  items,  this  initiative  should  further  limit  the  use  of 
Article 296 to exceptional cases as stipulated by the Court of Justice and build upon earlier 
steps  taken  by  the  Commission3  and  the  EDA  to  encourage  greater  openness  of  defence 
markets. 

3.1.2.  Other measures 

The  functioning  of  the  EDEM  can  be  further  improved  by  minimising  other  obstacles  to 
defence industry market integration.  

The Commission will promote the use of common standards to facilitate the opening up of 
defence  markets.  The  Commission  brought  together  stakeholders  to  develop  a  “Defence 
Standardisation  Handbook”  and  is  working  with  the  EDA  to  encourage  its  use.  It  calls  on 
Member States to make full use of the Handbook in their defence procurement. 

The  effectiveness  of  the  new  directive  on  intra-EU  transfers,  and  the  defence  procurement 
directive  would  be  enhanced  by  greater  mutual  confidence  among  Member  States.  For 
this, a common regime of appropriate guarantees, backed up by verification possibilities, both 
in  terms  of  technology  financing  and  in  terms  of  delivery  is  necessary.  Such  a  regime  for 
stable  security  of  supply  and  industrial  information  may  have  to  be  built  progressively, 
beginning with those Member States who are already prepared to accept mutual dependence, 
but  working  towards  a  scheme  eventually  covering  all  Member  States.  Starting  in  2008  the 
Commission will investigate, in close cooperation with Member States, possibilities for an 

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EU system on security of information that would allow exchange of sensitive information 
between  Member  States  and  European  companies.  This  exercise  will  consider  the  potential 
scope, contents and form of such a system. 

The  current  patchwork  of  national  legislation  on  control  of  strategic  defence  assets 
prevents  consolidation,  the  removal  of  duplication  and  the  development  of  more  efficient 
industries. It could also prove ill-suited in the future in securing the control of assets in a more 
European  supply  chain.  Clearly,  it  is  necessary  to  strike  a  balance  between  freedom  of 
investment and protection of security interests regarding control of material and other assets 
that are considered essential. The Commission will start, in 2008, with a study defining how 
control  of  assets  might  be  undertaken  in  the  future  to  ensure  competitive  supply  at  the 
European  level.  This  will  consider  the  range  of  options  available  to  Europe  to  sustain  its 
essential defence and security interests. 

The Commission will continue to use, as necessary, the relevant Treaty provisions and legal 
instruments at its disposal to ensure fair competition for defence industry goods and to avoid 
distortions of competition on non military markets.  

•  From  an  economic  perspective,  all  offsets  can  distort  the  functioning  of  markets  and 
hamper  the  integration  of  Europe's  defence  markets.  Therefore,  the  ultimate  aim  is  to 
create the market conditions, and the European DTIB structure, in which the practice will 
no  longer  be  needed,  taking  care  that  the  competitive  position  of  European  enterprises 
compared to third country suppliers is not impaired.  

•  A  progressive  opening  of  the  market  with  improved  security  of  supply  between  Member 
States  and  suitable  procurement  rules  applicable  throughout  the  EU  will  increase 
transparency  and  should  reduce  the  need  to  use  Article  296.  However,  in  the  context  of 
establishing open markets, it becomes even more important that a level playing field is 
ensured.  Therefore,  aids  to  defence  industries  should  be  made  fully  transparent  if  the 
necessary mutual confidence is to be established. 

3.2. 

Policies to improve overall coordination 

Member States must shoulder their responsibilities to collectively provide the ESDP with the 
industrial and technological tools it needs. While military capability is a matter for Member 
States,  they  could  seek  the  best  level  of  performance  through  sharing  and  pooling  the 
resources  of  European  civil  and  military  programmes,  drawing  on  multiple  use  technology 
and common standards, to allow for more cost-effective solutions. 

3.2.1.  Pooling of demand 

A permanent exchange of ideas on defence planning and investment is therefore required. 
This  implies  that  Member  States  be  more  transparent  with  each  other,  and  are  willing  to 
concentrate on fewer activities than today by focusing on centres of excellence which should 
emerge from a primarily market-driven process. Given the long timescales for R&D, product 
life  and  in-service  upgrades  in  defence,  alignment  of  procurement  timing  by  Member 
States is a necessary first step to coordinate demand. The EDA is currently working on ways 
to address this issue. Additionally, providing mutual transparency among Member States on 
their  medium  to  long-term  defence  planning,  would  allow  opportunities  to  be  identified  for 
joint investment projects, pooled acquisitions and coherent role specialisation. The EDA has 
already  started  collecting  information  on  Member  States'  defence  expenditure  to  create 

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more possibilities for coordination of investment and pooling of demand. This evolution 
could also lead to the definition of European co-operation programmes such as those presently 
implemented by the 'Organisme Conjoint de Coopération en matière d'Armement' (OCCAR). 

3.2.2.  Pooling of R&D investment 

Europe is currently spending less than 5% of its government defence budgets on R&D4. An 
increase  in  the  proportion  of  defence  spending  devoted  to  R&D  would  improve 
competitiveness  by  spurring  the  innovative  capacity  of  Europe's  defence  industry.  At  the 
same time, it makes sense to find ways to pool research and network resources at all levels 
- political, industrial and scientific - in the defence area. This is particularly important given 
the impact of collaborative research on later convergence in markets.  

Researchers  in  defence  are  developing  technologies  that  are  often  similar  to  their  civil 
counterparts  in  the  stages  prior  to  the  development  of  specific  applications.  To  avoid 
unnecessary  duplication,  and  taking  account  of  requirements  and  policy  priorities  for  civil 
security and defence which may differ, it would be useful to systematically identify synergies 
between  research  and  development  programmes,  for  example,  between  the  security 
research  programme  of  FP7  and  the  defence-related  research  activities  envisaged,  or 
coordinated, by the EDA. 

Additionally,  a  European  Security  Research  and  Innovation  Forum  (ESRIF)  was 
launched  in  September  2007.  It  will  present  in  2009  a  Joint  Security  Research  Agenda 
providing  guidance  for  security  research  programming  on  European  and  national  levels. 
ESRIF  will  also  enhance  the  public-private  channels  of  communication  in  the  field  of 
European  security  research  and  increase  transparency  and  coordination  between  the  various 
ongoing programmes and initiatives.  

3.2.3. 

Strengthen the position of SMEs 

The  actions  outlined  in  3.1.1  will  themselves  strengthen  the  position  of  SMEs.  Specific 
provisions  have  also  been  introduced  to  encourage  SME  participation  in  the  7th  Framework 
Programme for Research in the security thematic research area and through the 'Research for 
the benefit of SMEs' initiative including, raising the maximum reimbursement rate for SMEs 
from 50% to 75% and introducing simplified participation rules. To assist SMEs to find and 
exploit  market  opportunities,  the  EDA  developed  a  Code  of  Best  Practice  in  the  supply 
chain  (CoBPSC)  and  an  “e-portal”  as  a  complement  to  the  Code  of  Conduct  on  defence 
procurement5. The Commission will closely follow implementation of the EDA CoBPSC and, 
once adopted, of the Directive on Defence Procurement. 

3.3. 

Accompanying policies 

The measures presented above will contribute to Europe's defence industry's competitiveness, 
resulting in more cooperation, specialisation and innovation. More competitive markets will 
lead to the emergence of stronger companies, creating new high quality jobs. 

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€ 9 bn out of a total budget of € 193 bn in 2005 for EU-24. 
http://www.eda.europa.eu/ebbweb/ 

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3.3.1.  Opening up foreign markets 

A  strong,  competitive  European  defence  industry  should  also  benefit  from  economic 
opportunities outside the EU. While noting the possible impact of different national export 
policies,  bigger  sales  in  third  markets  would  increase  profitability  and  the  return  on 
investments  in R&D, production facilities  and  human capital. At the moment, the European 
defence  industry  is  effectively  excluded  from  supplying  the  US  market  except  through  US-
based  facilities  as  a  result  of  regulations  to  safeguard  national  security,  "Buy  American" 
defence provisions and other measures. Thus the European defence industry finds it hard 
to benefit from economic opportunities in the US while on the other hand, US companies 
have easier access to European markets. 

For Europe to improve its market access in the US, it is important to ensure the European 
defence industry can match its competitors in the US in terms of innovation and quality. 
A  more  European  approach  to  cooperation  at  home  is  the  first  step  in  reducing  European 
technological  dependency.  In  particular,  joint  action  to  identify  and  develop  key 
technologies and industrial capabilities and secure them for the EU would greatly enhance 
credibility  and  reduce  the  burden  of  ITAR  (International  Traffic  in  Arms  Regulations) 
restrictions. 

The  importance  of  the  US  market  should  not  divert  attention  from  the  potential  new 
challenges  and  opportunities  stemming  from  the  rapidly  emerging  economies  and  the 
potential  re-emergence  of  other  major  competitors.  To  ensure  that  European  companies 
benefit  from  these  economic  opportunities,  acting  within  the  framework  of  the  EU  Code  of 
Conduct for Arms Exports, the Commission recently presented a renewed market access 
strategy in emerging economies6. Under this initiative, the Commission will address the key 
barriers to Defence markets abroad identified in the Market Access Database. 

3.3.2.  Managing change 

Anticipation  and  management  of  change  and  restructuring  are  integral  to  industrial  policy. 
While an industry that succeeds in addressing market challenges will create new opportunities 
and  benefits,  there  could  still  be  some  adjustment  costs,  including  job  losses,  in  specific 
regions and/or categories of workers. 

The potential economic and social consequences of further market integration in the defence 
sector  should  be  addressed  by  an  active  Social  Dialogue  facilitating  the  management  of 
change  and  restructuring.  Several  of  the  reforms  adopted  under  the  2005  State  Aid  Action 
Plan concerning, among other things, regional and training aid, can also assist in anticipating 
and addressing structural change as can the structural funds and the European Social Fund in 
particular. 

3.3.3.  Improving European defence industry market governance 

The creation of the EDA confirmed Europe's intention to offer an effective framework for the 
promotion  and  enhancement  of  armaments  cooperation  and  the  development  of  defence 
capabilities.  

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The  Commission’s  membership  of  the  EDA  Steering  Board  recognises  its  role  in  this 
sensitive  domain  and  provides  a  solid  base  for  coordination  arrangements  between  various 
actions. Moreover, the EDA and the Commission share a common diagnosis: the EU needs a 
competitive defence industry which in turn needs a European market. 

The  full  potential  of  the  EU  can  only  be  exploited  if  there  is  effective  co-operation 
between all interested parties. The solution lies in a structured dialogue with the competent 
bodies of the Member States, within the EU Second Pillar and the EDA, within the framework 
of the existing attribution of competences, to optimise synergies between all aspects of policy 
affecting the defence industry's competitiveness. 

In  this  regard,  the  EU  should  have  at  its  disposal  an  appropriate  mechanism  available 
ensuring,  at  a  European  level,  a  reflection  on  challenges  and  key  issues  in  security  and 
defence  including  industrial  competitiveness,  taking  into  account  existing  national 
expertise, e.g. think tanks. The Commission will explore the best means to achieve this 
with all interested parties. 

4. 

CONCLUSION 

The  time  has  come  to  take  vigorous  action  to  enhance  the  competitiveness  of  Europe’s 
defence  industries.  Simply  put,  if  we  remain  on  the  current  path,  European  citizens  will 
continue  to  pay  too  much  and  receive  too  little  in  terms  of  their  defence  and  security  and 
Europe’s defence industry will lose its competitive edge. 

The  strategy  presented  in  this  Communication  will  create  better  conditions  for  Europe's 
defence industry to prepare for future challenges by increasing its competitiveness, promoting 
innovation,  and  building  upon  existing  strengths,  creating  a  fairer  market  place,  and 
preserving  and  creating  high  quality  jobs.  This  strategy  is  designed  to  ensure  that  Europe's 
defence industry can deliver the best capabilities for the ESDP. 

Member States, EDA and the Commission must take the necessary actions, both individually 
and  collectively,  to  promote  coordination  of  an  overall  policy  to  strengthen  the  internal 
market  for  the  European  defence  industry.  This  Communication  outlines  the  Commission's 
contribution to this shared objective. 

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