How far down the road of competition will Europe dare to let its defence industry go? Is EU-regulation the way ahead? Does it make sense to keep on comparing European defence spending with that of the US? Does the EU get fair access to US defence markets? European Defence Agency chief Nick Witney address the main issues in an exclusive interview with EURACTIV.
Chief Executive of the newly established European Defence Agency EDA, the Briton Nick Witney, started in his new post on 30 July 2004. Even if it is still early days, things have moved rapidly with more and more staff and increasing general interest surrounding the work of the agency.
Witney, who has a distinguished career in the British Foreign Office and the Ministry of Defence behind him, now detects a general willingness among EU member states to move towards a more genuinely common defence market. In the following interview, he debates this and many other issues surrounding the future of European defence procurement.
“There is a broad consensus that we can’t have all procurement programs formulated on a solely national basis anymore. Manufacturing and selling in a national market is no longer sustainable in a globalised world economy. The demand side needs to increasingly come together on a continental scale for the supply side to respond to that demand in a continental scale of market. Despite all the political difficulties there is a strong political will to get there together,” he says stressing that the need to do more on a continental scale is very well understood across member states:
“Of course there is a difference between approving this in principle and then actually making the decision to do it when the time comes. The EDA’s job is to act as a conscience and a provocateur when the time comes. It’s our job to produce good analysis and present the facts to defence ministers, and then make proposals.”
“What we really want is getting better value for the 160 billion euros that they spend collectively each year. The EDA’s success will actually be determined by whether 24 defence ministers [Editor’s note: Denmark has a defence opt-out] spend – at least at the margin – their individual defence budgets in a way which is a bit different from now.”
What could be the actual benchmark for success?
“A benchmark could be the percentage of research and technology (R&T) money which is spent collectively in Europe. At the moment the figure is somewhere between 3 and 5 percent. It may not seem like a very high figure, and I certainly think there will be scope for improving that to all sorts of advantages. By the end of the year EDA should have come up with some ways to measure the performance of the EDA itself and of member states. We would like to set targets to which they might like to commit themselves,” says Witney, who declines to put a percentage figure as to what would be a success:
“All targets should be challenging, but achievable, and I frankly don’t know where you fix that at the moment in this area. But the idea is that we need to hold up a mirror so that member states can see their performance. In the foundation document of EDA we are invited to ‘scrutinise, assess and evaluate’, so we are indeed being asked to do a bit of scorecard- work.”
Witney generally thinks that there is a growing European sense of identity when it comes to security aspects. This in part generated by the 9/11 attacks and later the Madrid bombings:
“After a slightly slow start the European Security and Defence policy, which has just passed its fifth birthday, has become operational, and everybody now sees rather clearly that European member states will be doing things together,” he says, referring to the Bosnia mission that has just been taken over from NATO by the EU and the Artemis-operation in Congo in 2004.
“That makes it all real and tangible, and it provides tremendous encouragement for people to think that it does make sense. Because if we are going be operating together, all the more reason for trying to make our plans together on a rather more collective basis since it will be important what we actually have in our armoury, so to speak.”
The US has long urged the EU to spend more on defence. In your mind, will the 160 billion euro spent annually on defence in Europe be enough, if we go through a successful restructuring of defence procurement, or is more money needed in any case?
“An enormous amount of additional value can be extracted from the expenditure at current levels. At the moment this is just my gut conviction. At the end of the year I may be able to be more bold as to how much more. But it is scarcely for me to have an opinion on whether defence spending should be higher across Europe.”
“I am not sure whether I should have an opinion on that anymore that I should have an opinion on the weather. It is just the environment in which one works. The figures are for democratic governments to decide. But getting better value for what is being spent is vital,” says Witney.
He does gladly want to identify one area though, where the EU should indeed spend more, research and technology:
“Generally a lot is made of the differences in the levels of expenditure on the two sides of the Atlantic. I generally regard that as a bit of an irrelevance. The US is a global hyper-power, and as far as I know EU does not aspire to that role. So why is it worrying with the Americans spending twice as much on defence?”
“However, when it comes to R & T spending there is a real competition. I think what we are talking about here is the basis of a lot of the future economic and industrial foundation in Europe. Here we should be worried that the Americans spend five times as much on defence R & T as Europeans do. If you think it is important to maintain very important defence industries with strategic value, here there are indeed positions of big European defence industries to maintain,” says Witney.
He does not believe a change of the overall situation for European defence procurement can be achieved with ‘dirigiste’ measures from Brussels that members states are not comfortable with.
“Past Commission initiatives have not taken sufficient account of how far member states were prepared to go. It looked at it rather simplistically saying the defence sector should be treated as white goods or motor cars – and it is not like that. But the Commission’s recent green paper is a much more intelligent and better judged approach as to what sort of regulatory regime member states would be prepared and ready to move towards in due course.”
You are being quite cautious?
“It will not be at all quick or easy to arrive at a position where new regulation of defence procurement is adopted. A potential role for the EDA is to try to find ways to move ahead of the speed at which an EU regulation could be delivered. The EDA could play a useful role in promoting a move towards more competition on an essentially intergovernmental basis,” he says, pointing out that the EDA is designed to avoid rivalry and will work towards shared objectives with the Commission “in a spirit of partnership”.
“What we talk about is more finding complementary routes. An alternative to an EU regulation approach could be agreed inter governmentally. However I don’t favour one approach over another, and at the moment we are in a process of consultation with member states.”
What may such an intergovernmental approach consist of?
“Some sort of voluntary code of conduct to agree to certain areas of the defence equipment market where competition would generally be the norm even if not required by the treaty. Member states would commit to generally try and do that. I imagine a sort of central contract bulletin much like the official journal of the EC, so that there was equality of information across EU.”
“We should also cater for exceptions. But if an exception on project x or y was made by a government, they should offer an explanation to a central monitoring point to provide transparency to see who follows and who is not following the code. This is how such a deal might work. Right now we are talking to the members states’ defence ministries and industry about this. But maybe in two weeks we might come back to propose something quite different to the EDA steering board,” Witney says, acknowledging that such an approach would have the advantage of being a less cumbersome process than the legislative, and thus likely to happen sooner.
In certain of the EU big member states like German and France, there is much talk of wanting to support national industrial champions. Will the EDA’s endeavours not clash with this tendency?
“In the creation of any competitive regime, you would have to be careful to handle the role of governments. Such things would have to be thought through quite hard in order to arrive at a workable more competitive regime. But I also think that there is pretty widespread realisation that actually no national defence market in the EU is any longer sufficient to sustain a national champion. Big defence companies simply cannot live of the national defence budgets anymore.”
“The fact is that there is not a single European country that is not in trouble with defence budgets. Whether budgets are increasing or decreasing, they are all faced with the sense that there is not enough money to do what we want to do. The imperative to get greater efficiency is pretty absolute.”
One of the hopes is to arrive at a better synergy between US and EU defence industry. Is there a real exchange happening already?
“The terms of transatlantic trade at the moment are not satisfactory, they are unequal. The Americans enjoy much better access to European defence markets than the Europeans enjoy in the US. The regimes that affect technology transfer are very constrained on the US side. That is an example of inequality, and I don’t say this in any spirit of accusation. US has strengths and Europe does not. US spends a vast amount more than the Europeans at the moment. Partly in consequence, they do have the commercial and technological strengths, and unsurprisingly they exploit that position.”
“We need to be clear that there is not equality across the Atlantic, and to the extent that the Europeans can get their act together and operate from a position of relatively greater equality and strength, this will be good for EU and also for the US. The very protectionist mood that you see running around particularily in the US congress, can’t be good for the Americans in the long run. Ultimately protectionism is self-defeating.”
Is this problem being addressed at European level or as part of an EDA effort that you are part of?
“No, at the moment this sort of thing is very much handled by individual countries. I know that dialogues takes place between Washington and a number of European capitals, usually in the spirit of complaint and request for a rather more reasonable, equitable treatment from Washington. I would not rule out a role for the EDA in a medium term, but we have enough on our plates in terms of more immediate targets to occupy us in the first year or two. But it’s a ‘watch this space,” says Witney, indicating that if there is a clear instruction in this direction from defence ministers later on, the EDA would make it a top priority.
Witney goes on to underline that the EDA is still very much an agency in the making. It was decided that it should be established by the end of 2004 at the EU summit in Thessaloniki only 18 months ago. The immediate priorities are to get it up and running in the next six months, and set up the EDA in its own premises. At this stage it is housed in the Council secretariat of the European Union.
However, a set of working priorities have been decided. Among them are the armoured fighting vehicles sector on armament side, which could be a first test case for the EDA’s work:
“We seem to be at a point where a number of European countries are beginning to consider the next generation of armoured fighting vehicles. If we are not careful we will end up with half a dozen requirements, formulated in half a dozen different defence ministries across Europe with half a dozen different designs and procurement programs by the respective national defence industries. And they will probably not make very much profit on them and certainly they will have difficulty exporting them. It will just be a repeat of the usual business!”
“So we will try to see if we can bring those requirements together, not necessarily the whole programme, but at least some of the technologies and elements,” he says, mentioning as an example that that many countries are interested in incorporating ‘hybrid drive’ technology in future armoured vehicles – automotive technology – that has the special capacity to harvests energy from the vehicle’s braking process.”
It now remains to be seen whether EU governments will put the brakes on the work of the Witney and the EDA to save national defence industries from competition, or if Europe will see a genuine push forward in the next couple of years.
See the briefer news version of this story.