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September 15, 2011 |  2 comments |  Print  Your Opinion  

Beyond Pooling and Sharing: Open Europe's Markets

Robert Helbig: Europe should integrate its national defense capabilities not only in training and deploying troops, but also in research, development and procurement. States must open their national defense markets to increase competition, lower equipment prices and make spending more efficient.

Europe's defense spending is unsustainable and undermines its ability to play a major role in international security. Even as many states cut defense spending to balance budgets, they appear reluctant to pool their resources and invest more efficiently in military procurement and training. Giving up sovereignty in military affairs seems to be too much to ask of most European states.

Many argue that pooling and sharing equipment and troops would be the most effective way to save money without decreasing capabilities, but this omits the fact that European states can also get more bang for their buck by pooling research and development (R&D) as well as opening up the defense market across all EU states.

As of today, the initial goals of the European Security and Defense Policy have not been met. EU military capability targets such the Helsinki Headline Goal, targeted for 2003, and the Headline Goal 2010 remain unfulfilled. In the transatlantic realm, NATO's new Strategic Concept does not define a goal for specific defense capabilities, but it provides a guideline for European states to focus on non-traditional areas of security like cyber defense and crisis management. These areas require new capabilities and further R&D. This is where European states should start pooling their expertise.

One example of how a state-based approach in the field of R&D leads to the waste of very limited resources is the development of aircraft. The American Joint Strike Fighter (JSF) was developed at a cost of €31 billion. At the same time, EU states developed the Eurofighter, the Rafale and the Gripen for a collective cost of €29.93 billion. The EU Institute for Security Studies (EUISS) estimates 3,000 orders for the JSF, and only about 1,100 for the European jets, indicating that the EU's modern aircraft projects are about three times as expensive as those of the US.

To avoid duplicating R&D as in the case of fighter jets above, it is crucial to increase integration among European countries in the field of R&D, which includes both military and civil research. To ensure efficiency, integrated R&D would need to be coordinated from a common base such as the European Defense Agency (EDA).

But today, EU states not only avoid joint R&D; they also remain reluctant to de-nationalize defense procurement. In 1998 France, Germany, Italy, Spain, Sweden and the UK signed a letter of intent (LoI) to harmonize their defense markets. Although the prices for defense equipment have risen by about seven percent per year, these states have not used the tools provided by the LoI as extensively as intended to save money by opening their defense markets to their European allies. The countries relied on Article 296 of the EC Treaty, known as the national security clause, to keep their defense markets nationalized.

In 2006, the EDA established a program known as the "Intergovernmental Regime to Increase Competition in the European Defense Equipment" to allow foreign bidders to participate in non-essential defense contracts over €1 million. This approach was a breakthrough, with cross-border awards increasing from 20 percent in 2007 to 28 percent in 2008. As of today, however, the states are still far from awarding defense contracts on a market-oriented basis. Of course this is a political matter, but all sovereignty issues aside, it makes sense to de-nationalize the market within a community partially based on collective security (at least among the European NATO states).

According to the EUISS, "greater cross-border cooperation would allow larger economies of scale, increased industrial competition, and thus lower prices, particularly for more advanced equipment". A York University study estimated that EU states could save twenty percent on defense expenditures, or about €6 billion a year, by allowing cross-border cooperation and increasing competition. This is why the EU needs to ensure fair competition which would in turn lower equipment prices for its member states. In particular, the aforementioned Article 296 should be reviewed since it allows for too broad a range of interpretations on issues of national security concern.

Of course, pooling R&D and opening national defense markets will not solve the fundamental problems that European states face in light of declining defense budgets and increasing global commitments. In the end, moving towards a more integrated European defense community is a political decision. If states are seeking an effective and sustainable way to turn shrinking resources into improved military capabilities, they must stop duplicating their efforts and start coordinating European defense under one umbrella. Only when they overcome this hurdle will European defense policy will be on the right track.

Robert Helbig is a student at American University in Washington D.C. and President of the Young Transatlantic Conservative Alliance.

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Tags: | defense industry | military spending | EU | Germany | France | UK |
Greg Randolph Lawson

September 15, 2011

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I see no reason such pooling should not be done from a theoretical perspective. I still think integration should remain under the NATO banner.
Robert  Helbig

September 16, 2011

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Greg, I agree that NATO must remain the cornerstone of European defense! I just don't see the possibility that the Pentagon would pool R&D of critical defense equipment with the Europeans, both politically and from a national security standpoint.

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