21st May 2019

MEPs back opening of market in defence goods

The European Parliament threw its weight on Wednesday (14 January) behind a draft bill aimed at making public procurements for defence goods and services more transparent and open.

The EU's defence market comprises goods and services worth €91 billion a year, but only half this sum was put for tender, with Germany allowing opening competition for only two percent of the public procurements in this field, German liberal MEP Alexander Graf Lambsdorff, author of the parliament's report told the chamber on Tuesday.

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"The single market for defence products doesn't work. Innovation in this high-tech sector can't be achieved. Our forces don't get the best equipment and tax -payers' money is wasted," Mr Lambsdorff pointed out.

His draft bill, which updated and sharpened some of the commission's initial proposals, was broadly approved on Wednesday with 597 votes in favour, 69 against and 33 abstentions.

Part of a broader package aimed at opening the defence market, the directive is unlikely to come into force for another three years. Member states still need to approve it and then take up to 18 months to transpose it into national legislation and another 18 months to begin enforcement.

Internal market commissioner Charlie McCreevy acknowledged that the bill "won't entail a revolution overnight, but is an important step forward in opening the defence market."

Another legislative proposal, aimed at harmonising the various national licensing systems and transfer rules in the field of defence, was adopted in December 2008.

Legal loophole for corruption

Several MEPs noted that the current legal situation allowed national governments very broad interpretation of an exemption from the internal market rules when acquiring military goods and services, but also "sensitive non-military security equipment" used by police and special forces.

"We have these two directives – transfer and public procurements – and they will ensure that there will be no squandering of public monies in this area and that we will put an end to corruption," German Socialist MEP Barbara Weiler told the house on Tuesday.

Daniel Keohane, an expert on defence industry issues with the Paris-based Institute for Security Studies told the EUobserver that the new directive would "place more of an onus on member states to explain if and why a competition is closed."

Although the principle of having more open competitions in the defence market has already been agreed by national governments, who set up a code of conduct for defence procurements three years ago, it appears the best way to enforce transparency and openness was to craft a law in this field, he explained.

EU market open to American companies

Although some MEPs would have preferred a more explicit clause allowing EU companies to be given preference over American ones, Mr Keohane pointed out that such a measure would not be backed by member states, since most of the European countries were consumers of defence goods, not producers.

"The majority of member states would prefer to have open competition, including allowing American firms to compete. The European industry is currently trying to get a foothold in the US and intensifying their relationship with American companies. So it's in their interest to ensure that the Americans have also access to the European market," Mr Keohane explained.

Last week, the American Chamber of Commerce to the EU "strongly urged" the parliament and the council to "resist efforts to create informal or formal barriers to market access."

"Open and competitive markets will encourage the formation of transnational industrial teams and will foster the development of European defence industrial capabilities," the chamber's statement reads.

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