Single Market for EU Defence Equipment Industry

(European Commission - 11 July 2005)

The European defence industry is marked by market fragmentation at national level. This is an important sector which is a catalyst for growth and innovation in other industries ranging from high-tech (e.g. aerospace, IT) to more traditional industries (e.g. steel, shipbuilding).

The absence of a functioning single market constitutes a major obstacle to the consolidation, competitiveness and sustainability of this sector. For these reasons the Commission has made proposals for measures which would encourage industrial restructuring, promote an EU defence equipment market and enhance the competitiveness of the industry.

These proposals were discussed at a Defence Conference organised by the European Commission in cooperation with the European Defence Agency in Brussels today.

Vice-President Günter Verheugen responsible for enterprise and industry policy said: "The dismantling of barriers between industries and markets inside the Union holds the promise of benefits for all operators be they large or small. A dynamic defence sector can boost economic growth and make an important contribution to the Lisbon goals for jobs and growth."

"We have to make better use of the 160 billion euros that Europe spends on defence each year," said Nick Witney, Chief Executive of the European Defence Agency.

The EU defence industry's annual turnover can be estimated at about euro 70 billion and employment amounts to roughly 770.000. It involves sectors such as aeronautics, space, electronics and naval shipbuilding.

Weaknesses
On the supply side, European defence industries have suffered from the absence of an internal market as Member States have maintained national control over defence equipment markets and industry. On the demand side, the State is not simply the only customer for the defence industry, but has a considerable role in the financing of research and strategic orientation. Budgetary restrictions and largely uncoordinated programmes and procurement policies have led to a duplication of programmes at national levels, thus inhibiting the sector from increasing its critical mass on a global market.

Proposals
In this context, the Commission has already launched 4 specific measures, which were debated during the Defence Workshop:Mapping the European defence technological and industrial base: The objective is to increase the knowledge base on defence economic data and thus support the elaboration of appropriate policy options.

- Standardisation: The Commission together with CEN (European Committee for Standardisation) is supporting the preparation of a defence standardisation Handbook for use in defence procurement contracts.
- Intra-EU transfers: simplified licensing schemes are being examined for facilitating transfers of defence products, components and intermediate goods throughout the EU, which is today treated like exports to thirdcountries.
- Harmonised procurement rules: A central issue to address while creating a European Defence Equipment Market is the opening up of defence procurement through an agreed common set of rules.

Complementing these measures, the European Defence Agency (EDA), created in 2004, has started a number of activities to improve Europe's defence performance. The EDA is headed by the High Representative for CFSP Javier Solana. Vice-President Verheugen represents the Commission on the EDA Steering Board.