22nd May 2019

European Parliament approves opening of defence market

  • Defence equipment should be purchased more freely and with better coordination among EU member states. (Photo: SHAPE)

The EU moved one step closer to a single market in the area of defence on Tuesday (16 December), with the European Parliament approving a commission proposal aimed at harmonising and simplifying national rules in this area.

"Today's approval brings us a decisive step forward towards setting up a true European defence equipment market," Guenter Verheugen, EU commissioner responsible for enterprise and industry and one of the initiators of this directive said after the vote.

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The current Nice treaty provides that internal market rules are not applied to the defence market, allowing member states to exclude defence contracts from EU procurement rules.

Moreover, 27 national licensing procedures make transfers of defence material between countries difficult, as they differ in terms of requirements. The licensing rules also apply to the export of defence related products such as spare parts or even army boots.

Applying heterogeneous and disproportionate national licensing systems is hampering the security of supply between member states and costs businesses over €400 million a year, a commission statement reads.

The proposal drafted by German green MEP Heide Ruhle and endorsed by the plenum on Tuesday provides a European system of licences which will be uniform and applicable throughout the 27 member states. Licences will nonetheless be granted at the national level, with governments still free to impose sanctions if the contractor fails to respect the licensing conditions.

The parliament also added some extra provisions to guarantee the security of transfers, notably with respect to the final recipients of products or components, in order to ensure that arms do not reach conflict zones.

The market fragmentation was also a problem identified in the recently reviewed EU security strategy, endorsed by heads of states and governments at their 11-12 December meeting.

"Restructuring of the European defence technological and industrial base, in particular around centres of European excellence, avoiding duplication, in order to ensure its soundness and its competitiveness, is a strategic and economic necessity. In this connection, the European Council calls for early finalisation of the Directives on intra-Community transfer of defence goods and on defence procurement," the summit conclusions read.

Strategy for French political reasons

While the directive was a "step in the right direction", it was still "a long way from having an EU market for defence equipment", with national procurement rules still remaining "very defensive", Giles Merritt, head of a Brussels based think tank on security and defence, the Security and Defence Agenda, told EUobserver.

Mr Merritt also pointed out that the reviewed security strategy endorsed by member states was not designed as a "great milestone", but rather to confirm the approach of the last five years.

He called for a "new budgeting mechanism for burden sharing", since at the moment Great Britain and France were not only contributing with most troops to EU missions, but also paying for the costs of the missions.

He was sympathetic to the idea floated by some EU officials that the security strategy could have waited one year longer, after US president Barack Obama was sworn in and the NATO 60 anniversary summit would have taken place in Strasbourg/Kehl.

"Practical politics must have driven them into doing it during the French presidency," Mr Merritt said.

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The European Commission has proposed a package of measures to open up the European defence industry market, designed to increase the efficiency of Europe's defence spending and ultimately to boost military capabilities.

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