Developing a Strong Technological and Industrial Base in Europe

Dr. Hilmar Linnenkamp Deputy Chief Executive European Defence Agency

It is my pleasure to be here as a representative of an intergovernmental organization supporting European Security and Defense Policy capabilities as well as the development of a strong European defense technology and industrial base. Our goal is twofold: 1) to get the capability dimension of the European Security and Defense Policy on a better footing, and 2) in order to make that happen, to help Europe get its act together on the defense technology, and industrial side.

I would like to make four points regarding these goals. The first is about the importance of the research and technology agenda we at the agency are currently working on. Second, I will analyze the current situation in Europe. Then I will say a few words about the transatlantic dimension in all of this, and, last, I will talk about policy challenges as we see them.

JOINT RESEARCH AND TECHNOLOGY ISSUES

The year 2006 is a year of research and technology at the agency. Some of you may remember that in 2005, our first year of operation, the biggest success we could muster was the design of a code of conduct for defense procurement that would allow more competition in the European defense market. This code of conduct went into operation on July 1, 2006, and only two of the 24 member-states, Spain and Hungary, opted out of agreeing to the code, though even they made it very clear that it may well be in their longer-term interest to become a partner in this endeavor. So 22 member-states have committed to opening their defense markets more than ever before. While following the code is not a legally binding commitment, it is a political commitment, and the agency will monitor its use and report on how it is operating. But in 2006, following the task assigned it by the defense ministers, we are concentrating on research and technology.

I must say that we have been given major support from the defense industry all along, for which we are grateful. The defense industry has been very outspoken in asking the agency and the governments to support our agenda and made it very clear that it has very high expectations for the agency having the freedom to act and the freedom to maneuver. Industry has floated quite a number of proposals regarding how much money the agency should be able to spend on common research and technology—member-states go up to 200 million euros a year—and we have been very strongly supported by a very effective and very well-written CSIS study done in 2005 that quoted this number again. It is not likely that we will end up with a 200-million-euro operational budget, but we are currently working on an instrument to make it possible for European Union member-states to do common research on a basis not restricted to ad hoc negotiations and ad hoc schemes, which suffer from all kinds of uncertainties and frictions. For example, as soon as you have four member-states working together on a certain project, three of the finance ministers say, We don’t have money next year, we only have it the year after, so the whole thing collapses for a year. So we are trying to establish a way, with the help and the support of member-states, to obtain some kind of pre-commitment for common research and technology work. Member-states will decide soon to what extent they would like to use this instrument.

THE CURRENT SITUATION IN EUROPE

One of the criteria that are used to measure the degree of commitment to the technological agenda is the percentage of research and technology spending in relation to the defense budget. I think you will not be surprised to hear that this is not a very impressive figure. In 2005, for example, only 2.3 billion euros were spent on European research and technology, which is roughly between 1.3% and 1.4% of European Union member states’ defense spending. Of course, there are big differences among the member-states: There are those who spend considerably more in absolute terms and in percentage, but on the whole European Union member-states’ investment in research and technology is not what we want to see.

We have also studied how much of European research and technology spending was spent on collaborative projects. While there has been a “chiffre” in some circles that said that this was not more than 5% of the amounts spent, we found, to our surprise, that it is roughly double that, or 10%—again with large differences among member-states. This, however, is again not much, and we would like to see, and have been given the authority by the defense ministers to work toward, more collaborative spending on research and technology. Our idea is that the percentage should at least double over a number of years, and though the defense ministers have not agreed on precise numbers or objectives, perhaps wary because of previous experiences with projects that had precise targets, they have generally been very supportive.

It is interesting to compare the 1.3% figure with the percentages of spending on research and development, which of course is different from research and technology, in the aerospace industry. In the aerospace industry, these numbers are between 12% and 15% of total turnover, which is the most likely comparative measure, over the last 10 years. In land systems, it is only 6% and in the naval area it is about 10%. The realities do not satisfy the agency nor do they satisfy the defense ministers when they act as a collective body, so we need to work further to improve this situation.

THE TRANSLATLANTIC DIMENSION

The European defense technological and industrial base, of course, is not an island, and it needs partnership with the United States and with other parts of the world. We would very much like to see the competitive drive that we work for in the European context be enhanced as well in the transatlantic context. More and more transnational companies go to the American market. Therefore, we expect a stronger competitive position from Europe in the future. The basic hypothesis for this happening, which has been expressed several times by defense ministers in their collective wisdom, is that having a stronger European defense technological and industrial base is the right way to move forward. The transatlantic dimension is very much in our minds as we work to strengthen the European defense technological and industrial base, not only for Europe but for many areas beyond its borders.

CURRENT POLICY CHALLENGES

When you get right down to it, the defense industry debate in Europe is a debate about autonomy. However, I do not mean autonomy in terms of achieving complete independence and separating markets. Some people, including some in the United States, are concerned that this agency in reality is promoting a “Fortress Europe” regarding industry and technology. It is not. It is, however, very clearly about finding a way to achieve a relatively less dependent and more autonomous technological and industrial base—not a black and white one but a gray one—in order to harvest the fruits of competition. This is what we have in mind when we talk about developing a strong European base, and we do not plan to give up this area of defense. This agency is about strengthening the industrial base in Europe. As I said at the beginning of my presentation, it is also a place where capabilities and cooperative efforts come together in the interests of all the member-states.