The Poison Pill: EU Defence On US Terms?
(Source: Institute for Strategic Studies; issued June 14, 2019)
By Daniel Fiott
It took two letters. One, sent to Brussels on 1 May 2019 by two US undersecretaries, accused the EU of damaging transatlantic cooperation and hindering US access to Europe’s defence market through the rules it plans to set for the participation of third states in the European Defence Fund (EDF) and Permanent Structured Cooperation (PESCO). The other, sent to Washington on 16 May 2019 by senior EU officials of equal standing, refuted these claims by showing the objective and transparent way in which the EU had established the EDF and PESCO.

Unlike the letter from Washington, which was laced with robust language and questionable accusations, the EU response argued that, even with the introduction of the two initiatives, the European defence market would remain more open than that of the US.

The EU institutions also stated that by creating the EDF and PESCO, the Union was showing its collective determination to reduce European capability duplication and enhance interoperability, while also ensuring the competitiveness of Europe’s defence industry. In essence, the EU pointed out that its security and defence initiatives are designed to contribute to transatlantic burden sharing – something the US has been requesting from European allies for some time.

While the US welcomes that the Fund allows for the participation of third states, it objects to the fact that recipients and subcontractors supported by the EDF will not be permitted to transfer sensitive information and/or Intellectual Property Rights (IPRs) outside of the EU.1

Additionally, the US fears that the unanimity principle governing PESCO could ensure that any future US participation in the initiative could be vetoed by a single EU member state. At the core of Washington’s fears is the idea that EDF and PESCO could lock US firms out of the European market.

However, the EU has made it clear that the EDF and PESCO will not alter EU defence procurement rules, lead to EU-owned defence capabilities, affect bilateral defence agreements between the US and individual member states and/or harm NATO defence planning targets and processes. Furthermore, given the US’ own long-standing and legitimate protection of its core defence industrial interests, there is a certain irony to its accusations of the EU because the Union has equally legitimate security interests.

Following the exchange of letters between the partners, a number of questions have surfaced.

First, despite a sustained campaign of influencing the EU to adopt favourable conditions for the US,2 why has Washington raised tensions with the Union now?

Second, given that €13 billion has been earmarked under the EDF, and its own defence budget stood at $650 billion in 2018, why is the US so concerned?

With a view to answering these questions, this Brief begins with an analysis of US government data that shows the asymmetry between US and EU defence markets. It then moves on to a discussion about a web of regulations and laws which effectively provides the US government with the discretionary power to control its defence market and technologies.

The Brief ends with some reflections on why the US has decided to formally raise objections about the EDF and PESCO now and the deeper reasons underlying American concerns.

Click here for the full report (8 PDF pages) on the ISS website.


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