LEAK: European Commission readies ‘single market’ scheme for defence

The European Commission’s proposal for an EU defence industry strategy is likely to include setting up and securing bloc-wide supply chains of defence products with mapping, monitoring, prioritisation of orders and facilitated intra-EU exports, according to a document seen by Euractiv.

“Any Member State’s security of supply strategy should increasingly integrate the EU dimension and better leverage one of the major strengths of the Union – the Single Market,” the document reads.

The EU executive’s fourth and fifth memos complete the series of five consultation papers sent to the defence industry and EU countries, reported last week.

They are expected to shape the bloc’s future European Defence Industry Strategy (EDIS), which aims to increase defence cooperation and make the industry more flexible.

After an attempt to propose a strategy earlier this autumn, a US-style Defence Production Act, Internal Market Commissioner Thierry Breton postponed the proposal to next year and announced consultations with stakeholders.

The idea to map and secure supply chains took momentum following the mask crisis during the COVID-19 pandemic. Likemedical equipment, defence capability production is based on European and international supply chains, and therefore subject to hazards out of the final producers’ control.

“These risks for member states can be mitigated with a European level of governance,” the Commission proposes.

The idea comes as the goal to “achieve an effective Single Market for defence” figures in the draft conclusions of the leader’s summit of next week seen by Euractiv.

Therefore, in times of crises, “the functioning of the international markets generally deteriorates (stricter export control, higher demand, transport problems, instrumentalisation of dependencies, etc) and supplies for defence production, including delivery of defence products and services, can be significantly affected, or even disrupted.”

Securing the chain

In its questionnaire, the EU executive suggests ideas to map bottlenecks, make intra-EU transfers of defence equipment easier, and force industries to prioritise urgent state orders over commercial ones.

These regulatory proposals were all rejected by member states when urgently negotiating the Act in Support of Ammunition Production (ASAP) for Ukraine’s and the countries’ needs in the spring.

The EU proposal aims at “a detailed understanding of the composition, capacity, and operation of supply chains is necessary at both national and European level” and mentions the need for a “more efficient mapping and monitoring of critical supply chains” and of “potential bottlenecks”.

European Council President Charles Michel last week emphasised the need to secure much-needed graphite, which China produces.

Commission chief: EU's defence strategy 'incomplete' without Ukraine

The EU should take Ukraine’s military needs into account as it designs Europe’s future defence industry strategy, European Commission President Ursula von der Leyen said on Thursday (30 November).

The EU currently does not have the means to requisite defence orders or production, nor does it have priority-rated order mechanisms.

Compared with the US-Defence Production Act, the Commission points out that “tensions can arise on specific components or raw materials and defence orders are not necessarily prioritised due to competition with the civil sector”, which “can be a significant disadvantage”.

Defence companies are, amongst others, asked whether “a prioritisation mechanism of defence supply chains over civilian ones in times of crisis” would bring a significant advantage to the robustness of defence supply chains.

Many benefits would come from “a Europeanisation of supply chains”, according to the Commission, including “multiple business opportunities”, economies of scale, generating highly skilled jobs and a technological edge, it writes.

“A more integrated and competitive European defence equipment market would allow the European defence technological and industrial base to capitalise on economies of scale, enhancing the efficiency of its industrial organisations”.

On the world stage, “an EU-wide security of supply regime can be a key competitive advantage” and could boost EU-based purchases.

Simplifying intra-EU transfers is another main idea of the paper since the Defence Transfers Directive of 2009 “did not fully deliver its expected benefits”.

Other examples include stockpiles of maintenance and repair equipment, critical spare parts, ammunition, reserves, flexible manufacturing capacities, and pooling and sharing of specific industrial capacities. Including security of supply as a requirement for European Defence Fund (EDF)-sponsored projects is also listed, as well as VAT exemption for joint procurement of maintenance and repair services.

The Nordic Defence Cooperation (NORDEFCO) initiatives and the RescEU’s stockpiles in the context of civil protection are cited as examples of cooperation.

The fifth memo, seen by Euractiv, focuses on “mainstreaming defence industrial readiness culture throughout all policy areas”. It asks questions on how to make the defence industry look better to attract staff and investments.

[Edited by Alexandra Brzozowski/Alice Taylor]

Read more with Euractiv

Zelenskyy to plead for US aid as reserves dry out

Ukraine President Volodomyr Zelenskyy and top aides to US President Joe Biden will make their case to US senators on Tuesday (5 December) about why a fresh infusion of military assistance is needed to help Ukraine repel Russian invaders.