Remarks by Nick Witney,
Chief Executive of the European Defence Agency,
At the New Defence Agenda conference
Brussels, Oct. 12, 2005
It is really a pleasure for me to assist at the launch of this important CSIS report. And not only because the report’s authors have been wise enough to propose a ten-fold increase in my Agency’s budget! What matters even more to me, and what I have found immensely heartening, is to discover so many of the themes that I and my collaborators in the EDA have sought to promote being so clearly articulated by such as a prestigious and authoritative group.
You see, we do strongly believe that “stronger European defence capabilities are ultimately good for both sides of the Atlantic”; that both military operational needs and hard budgetary and economic facts necessitate pooling of efforts and resources amongst European countries; that Europeans, no less than their transatlantic partners, must be totally rigorous in spending scarce defence resources on the real requirements of the future, and not the legacies of the past; and that, the most important conclusion of all, there frankly is no viable alternative to Europeans working more closely together.
Another thing we strongly believe within the EDA is that the Agency has been endowed with the right of set of responsibilities. It is right that we should be tasked to pursue, first and foremost, the strengthening of European defence capabilities, but also the agendas associated with armaments, R&T and industry and market matters. All these agendas inevitably intersect and interact. Like it or not, governments and defence industries are roped together in a common endeavour.
That said, governments and industries have distinct roles – and things generally go along better if both parties remember that. The EDA is a creation of governments – so, in addressing the industrial and technological aspects of European defence integration as you have asked me to do, I shall concentrate on some of the challenges that I believe European defence ministries – my shareholders – are faced with.
The first is to place the right requirements on industry. My own view is that there is ultimately no future for defence industries that do not supply what the armed forces of the future will need. So it is not just the armed forces, but the industry as well, which have a crucial interest in governments using the investment funding available to them wisely and well.
Second, governments have an obligation to try to point the way ahead. Industry needs not just the right orders tomorrow, but a perspective of the future – the best assessment governments can give them of what will matter for military operations in ten years time, or twenty. A number of individual European member states do this already, on a national basis. But this has not yet been attempted at the European level, and needs to be. And, indeed, the EDA is tasked to propose just such an exercise, the definition of a long term perspective of ESDP’s future capability needs, during the year ahead.
Third, governments must pool their requirements. This makes obvious operational sense – the future of military operations, for all of us, is multinational, and the best form of interoperability is actually commonality of equipment. Industry needs consolidated demand to achieve the necessary economies of scale – and it is an observable fact that defence industrial restructuring often requires the catalyst of a chunky collaborative order.
Fourth, if consolidation on the demand side can help consolidation on the supply side, then we also need a consolidated market in which demand and supply can meet. And this, as it happens, has been a major preoccupation of the EDA of its first months of existence, working with our Member States on the objective of introducing more genuine cross-border competition into the European defence equipment market. The route chosen is the one most likely to achieve quick results – by means of a voluntary, non-binding intergovernmental regime, based on a Code of Conduct for defence procurement, focussed on that half of all defence procurement in Europe which is currently sheltered from the normal operation of the EU internal market by the famous article 296 of the European Treaties. The 24 Defence Ministers who make up our Agency’s Steering Board must decide by the end of this year whether or not to agree this approach – and we have good hopes that at least a substantial majority of them will take the plunge.
In passing, I should emphasise that this has nothing whatsoever to do with “Fortress Europe”. Our efforts are concerned with how European countries behave towards each other in matters of defence procurement. Market access for others - most significantly, of course, US companies – is simply not part of the debate.
Fifth, though harnessing the power of the market will be helpful, it is not enough. Tanks are not washing machines, and the defence industry, in all our countries, is special. Interestingly defence industrial policy seems to be back on the agenda in Europe. The UK is conducting a review of which aspects of defence industry and technology they believe they need to preserve on-shore – and by implication, which they do not. France is conducting what I think may be a similar reflection, though focussed on the question of ownership of key industries.
Underlying this, I believe, is the implicit recognition that no European member state can any longer afford to sustain an adequately comprehensive defence technological and industrial base on a national basis. Europeans should, and I believe increasingly will, begin to think of the European defence technological and industrial base as an entity in its own right, and not just the sum of 24 parts. This will require rationalisation, the development of specialisation and centres of excellence, and increased mutual dependence. Not an evolution that will take place in a month, or a year – but one which I suspect that our shareholders will increasingly wish to reflect on together.
Sixth, European defence ministries will have to pay increasing attention to the balance between what they spend on personnel – currently more than half their defence budgets – and what they spend on investment – currently about one quarter. Pay bills rise in real terms; European defence budgets, averaged out, currently tend not to. Hard, therefore, to avoid the conclusion that the money available for defence investment will only become further compressed as long as Europeans collectively maintain two million men and women in uniform.
Seventh, and arguably most important, governments face a major challenge in the fields of defence research and technology. Actually, you can broaden that out – Europe faces a major challenge in preserving and developing its technology base across the piece. The Lisbon Agenda, you may remember, called for R&D spending to rise from 1.9% to 3% of GDP by 2010. Yet, the European Commission reported last summer that progress towards the 3% target is not only too slow, but has actually stalled.
Well, back to defence. Generally speaking, I find comparisons between European and American defence expenditure lacking in much meaning. But the fact that the US puts five times as much into defence R&D as the Europeans combined is something that European defence ministries need to think about very seriously. Europeans need a healthy defence technological and industrial base, for all sorts of reasons. And, ultimately, both sides of the Atlantic should benefit from European industries’ ability to compete with the American primes. But we will not get what we want without investing in it.
So I will finish where I began, with the CSIS report’s suggestion of a EUR 200 million R&T budget for the European Defence Agency. Of course, I would love to have a budget on that scale. But who holds the money is arguably a secondary issue.
The key point I suggest, which Europeans need to recognise, and then to act upon, is that if we wish to preserve a globally competitive defence technological and industrial base in Europe, then we must invest in it; we must invest more than we currently do; and we must do more of that investment together.
And – last point – though I have focussed today on the challenges for governments, there is clearly a major challenge in this R&T area for industry, too. (ends)
Click here to read the CSIS report on European defence integration