The EU and defence procurement By Ian Bond
This article was submitted as evidence by the Centre for European Reform for the review of the balance of competences between the United Kingdom and the European Union (free movement of services) Against a background of falling European defence budgets, the European Commission has sought to increase the efficiency of the European defence market by reducing barriers to intra-EU defence trade and by encouraging competition. In principle the UK supports open competition in the defence sphere, but it has been reluctant to accept that the Commission should have a greater role in policing a single market in defence and promoting co-operative procurement programmes.
The advantages and disadvantages of EU action in defence procurement? The defence budgets of EU member-states have fallen since the start of the economic crisis in 2008 from around €200 million to around €170 million. At the same time, the cost of defence equipment has continued to rise. Defence spending in Europe, though still significant, delivers less than it should because of inefficiencies. Defence companies are often monopolies or oligopolies at the national level, but fragmented and unable to exploit economies of scale at the European level.
constrained, it would make sense for the UK to pay more attention to value for money when procuring defence items from allies and partners, and to worry less about theoretical risks to security of supply. In the late Cold War, Czechoslovakia supplied some NATO members with explosives for use in ammunition, despite the fact that they were notionally “the enemy”; so the UK should be able to rely on other EU member-states – some of which have been its allies since 1949.
Member-states have resisted consolidation and the creation of an effective single market in defence for a variety of reasons. First, despite the fact that most EU member-states are also NATO allies, there is a lack of trust between them: nations continue to procure nationally because they are concerned about security of supply in a crisis. The UK is typical in this: the MOD stated in evidence to the House of Commons Select Committee on Defence in May 2012 that “We must be able to operate, maintain and refresh certain capabilities effectively, without being dependent on others”. In some cases this may be necessary, but in most cases, as the government has recognised in its national security strategy of 2010, if Britain is involved in military operations it will be working with allies and partners and relying more on “sharing of military capabilities, technologies and partners”. When resources are
Second, governments are often keen to protect jobs in their national defence industries, both to preserve skills and to avoid increasing unemployment in areas where other heavy industry, for example shipbuilding, may already have closed. As the European Commission has noted, defence-related industries largely operate outside the single market, and more than 80 per cent of investment in defence equipment is spent nationally. On security of supply, EU action could help to reassure the UK and others that foreign suppliers will continue to deliver defence goods and services, even in a crisis. The European Commission has started a consultation process with a view to getting a political commitment from member-states to assure the supply of defence goods, materials or services within the EU.
The EU and Defence Procurement January 2014
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