Arms industry support as EU economic policy

“Time has come to take ambitious action” writes the European Commission in its July 24 communication named A new deal for European defence. Towards a more comprehensive and efficient defence and security sector. The Commission wants “to strengthen the defence sector by mobilising all relevant EU policies”. To do this, it has developed a strategy and a 8-step action plan, to be discussed at the forthcoming European Council on Defence of 19 December.

For a long time arms trade and the military industry have escaped the free market dogma of the Commission, thanks to article 346 of the Treaty of Lisbon  (and its predecessors), the so-called ‘security exception’. Article 346 allows Member States to exclude the procurement of “arms, munitions or war material” from free market rules if national security is at stake.

With the twofold 2009 Defence Package the Commission started tackling this ‘market distortion’ by reducing trade barriers for arms transfers from one Member State to another, and by limiting the possibility for offset orders – the system where buying countries oblige foreign arms companies to spend some percentage of the deal’s value in that country, preferably through some form of coproduction. The first part of the defence package has been welcomed by industry, which considers the export licence process as unnecessary ‘red tape’ – although peace and human rights organisations cherish it as a way to prevent exports to human rights abusers and conflict areas.

The second part has been received with more mixed reactions, as can be seen for example by the new Italian military industry offset program.  In an attempt to continue protecting their own arms industries, countries are stretching the limits of what Directive 2009/81/EC on Defence and security procurement allows. Notably for smaller EU countries, who use offsets as a tool to embed smaller sub-contractors into big arms projects, limiting offset policies is a threat to their defence sector. As in other industrial sectors, the Commission’s policy is working mostly in favour of big international companies.

In 2012 the Commission established the Defence Industry Task Force, to support Member States to improve the competitiveness of the arms industry and strengthen the internal market. The July Communication is a new step to promote a flourishing European arms industry. It is illustrative that in his foreword Vice-President and Commissioner of Industry and Entrepreneurship, Tajani, only writes about competitiveness, technological innovation and research. For the Commission, the arms industry seems to be just another economic branch. Although the defence industry strategy is introduced with references to European “responsibilities” to “shape the world into a fairer, rules based and human rights’ abiding place”, the major reason for the EU to support this industry seems to be its economic potential and its supposed role in innovation, which is under threat by defence budget cuts. For the industry it is convenient that the Communication appears just before final decisions on the next EU research budget Horizon 2020 will be made, including on whether military research will be funded.

The military industry, according to the Commission, is playing a ‘crucial role in the wider European economy’ with “cutting-edge research [which] has created important indirect effects in other sectors.” However, the vision of the Commission might be somewhat blurred, as the industry itself is their main advisor in this area.  Probably they are completely unfamiliar with research indicating that other economic sectors have much more job-generating potential  and puts into doubt the spin-off effect and the innovative force of the arms industry.

More problematic than a biased economic vision is, that arms production should not be stimulated as part of an economic stimulus programme alone. Arms are not ordinary goods. Arms production and trade have big consequenses for global peace, security and sustainability. Before any arms industry policy is developed, there should be a vision on how Europe wants to contribute to global developments. Such a vision is still largely lacking. Although there is speculation that at the December Council some countries want to progress on CDSP , there is clearly no Europe-wide felt urge for a Brussels-led security initiative. Most member states would rather not commit too much support to transferring military power to Brussels, even when it would be in the interest of Europe’s major arms producers. The December Council might turn out a power struggle between the Commission wanting to push its free market agenda and Member States trying to protect national defence sovereignty.

WdV 16/08/2013