A Strategy for the European Defence Technological and Industrial Base
(Source: European Defence Agency; published July 10, 2007)

(© EDA; reproduced by permission)
By Ulf Hammarström, EDA Director, Industry and Market


BRUSSELS --- Europe needs a strong Defence Technological and Industrial Base (DTIB) as a fundamental means of underpinning its Security and Defence Policy. However, as investment in DTIBs across Europe has substantially declined, a fully adequate European DTIB is no longer sustainable by relying on individual national efforts. Europe must therefore press on with developing a truly European DTIB, as something more than the sum of its national parts.

On 14 May, Defence Ministers met at the EDA Steering Board and agreed on a Strategy for the EDTIB, primarily focusing on what governments should do in their role as regulators, customers and investors to bring about the aspired EDTIB.

The strategy builds on the characteristics agreed last September by National Armaments Directors on what a strong future EDTIB should have: it must be capability- driven, competent, and competitive. Such an EDTIB will also need to be more integrated, less duplicative, and more interdependent. It should also depend less on non-European sources for key defence technologies.

This vision was endorsed at a major EDA conference on 1 February, which brought together more than 300 participants from government, industry and other stakeholders. The strategy approved by ministers identifies key steps for governments to take: clarify their priorities concerning their capability needs, the related key technologies, and the relevant industrial capacities. They should also aim to consolidate their demand and increase their investment in defence procurement, notably R&T.

Further key measures include increasing confidence in security of supply and increasing competition and cooperation in defence procurement.

As a landmark step towards increased competition, Member States agreed in 2006 on the Code of Conduct on Defence Procurement, which commits those Member States subscribing to it to open their national defence markets to suppliers based in each others’ countries.

In addition, Member States and industry agreed on a separate Code of Best Practice in the Supply Chain in order to drive the benefits of competition down the supply chain – so that second-tier and third-tier companies, often SMEs, are able to operate at the European level.

Real progress is being made towards achieving an effectively run and competitive European Defence Equipment Market. However, the next stages of the journey will require concerted efforts to tackle some major issues:

- Security of Supply, so that governments can be confident when purchasing from another country.
- Reducing the obstacles to intra-EU transfers of goods, services and skills.
- Analysing the potential effects of offsets, including consideration on how adverse impacts on competition and the DTIB might be mitigated.
- Establishing equity amongst competitors by ensuring no company is improperly advantaged.

However, competition on its own is not a cure-all. Competition is a tool for providing better value for money to the customer, honing the competitiveness of industries, and facilitating the development of the EDTIB we want to see.

Often, however, cooperation could offer an alternative approach albeit to the same ends – provided that governments exercise self-restraint and allow industry to find the most efficient solution to consolidated requirements, and move as rapidly as possible away from the “fair work share” (juste retour) approach.

Governments are also responsible for initiating cooperative efforts with robust and realistic shared requirements. Europe needs to make more systematic efforts to identify such opportunities in the early conceptual stage. This also underlines the importance of a step-change in European defence R&T collaboration as a key to “upstream” convergence of requirements thinking.

This Strategy itself marks a key first step. With it, Member States commit themselves to a continuous review of their collective progress towards the realisation of the aspired EDTIB and in particular to working on the increased transparency, growing mutual confidence and closer convergence of EDTIB policies upon which success will ultimately depend.

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