Defense Reform Shows Potential For Strong EU Military
Over the last month, I have highlighted several problems with European defense, from under-investment to a fragmented political vision of the European Union’s role in military matters. However, when it comes to the EU and defense, it is not all doom and gloom.
In fact, new arms transfer laws and the “pooling and sharing” (P&S) of military equipment indicate that the EU is now increasingly providing impetus for reform. By increasing the efficiency of the defense sector and encouraging military cooperation, the EU stands ready to gradually build up its military capabilities from its current lows, to the benefit of both European security and transatlantic cooperation with the U.S.
It is important to not exaggerate the EU’s role in global defense and security. Beyond the EU’s own strict inability to legislate directly on national defense matters, the NATO alliance clearly has the lead role when it comes to advising nations on the technical aspects of military reform.
However, where the EU has both jurisdiction and experience is trade reform, and it has now taken this experience to the source of many of Europe’s budgetary inefficiencies — the defense industry.
The mechanism at work is a new set of trade laws: the “Defense Package.” This package is an attempt to overcome the fragmentation and inefficiency of European defense spending. These laws have now removed many inter-EU arms trade tariffs, which previously cost the sector 400 million euros in administrative fees a year. This will have clear implications for cost and profit margins on European procurement contracts.
Yet more directly, these laws have attempted to pull the defense sector into the EU free market. Specifically, it has more tightly defined industry and government’s ability to shield themselves from open EU trade competition.
Previously, governments often exempted defense contract bids from the EU’s strict open-market laws by declaring a contract to be a “national security interest” (the Article 296 exemption). This has previously meant that a single state “champion” would pick up all contracts ordered by their government, encouraging that state-protected industry to stagnate into inefficiency.
Now, the defense package should mean that a contract for, say, ammunition or body armor must be made available for bids from all 27 EU member states. As more contracts will be open to competition, there will be huge potential to increase cost efficiencies for European defense spending as a whole.
Elsewhere, the EU is also taking a proactive role in the P&S of European military equipment through the Ghent Framework. The framework began initially as a German-led bilateral agreement with Sweden to share air assets and was widened and taken under the EU’s wing in 2010.
Since then, informal defense ministerial meetings have led to the development of a shortlist of potential projects for P&S — ranging from aircraft to logistics structures. While some healthy skepticism should be shown about the ability of sluggish defense structures to reform, this is nonetheless encouraging. It could even presage a serious move towards sharing military resources in Europe — a development that could lead to increased overall capabilities.
These two projects — one focused on industry, the other on equipment sharing — will not fundamentally change the European defense situation overnight. However, a more efficient industry and greater sharing of resources could, for example, have reduced the European reliance on U.S. resources to prosecute the recent Libya campaign.
These savings thus have transatlantic ramifications and illustrate a clear role for the EU in defense reform. Export tariffs, contract law, and procurement sharing deals may not be diplomatically “sexy” — but they could save European nations billions and lead to more defense resources in the future.
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