Defence harmonisation is the key to solving the US-European credibility gap, say industry chiefs

Andrew Doyle/BRUSSELS

Last year's NATO campaign in Kosovo highlighted the marked superiority of the US military forces, particularly in precision bombing, strategic transport and command and control.


The disparity is further exacerbated by the USA not only spending significantly more on defence procurement than its European partners, but also up to four times as much (around $40 billion annually) on defence-related research and development.

On the industrial side, Europe is already taking steps to address the imbalance with rapid consolidation, culminating in the merger between BAe and Marconi Electronic Systems to form BAE Systems, and the pending establishment of the European Aeronautic Defence and Space (EADS), Aerospatiale-Matra, Casa and DaimlerChrysler Aerospace (Dasa),with EADS and Alenia forming a further venture.

Industrialists argue that governments need to take urgent action to harmonise military requirements, research funding and export controls so that companies such as EADS and BAE can extract the necessary efficiency gains to put the continent on an equal footing with the USA. This will not be achieved, they believe, if Europe's new defence champions have to continue dealing with a diverse customer base of 15 national markets.

Defence company executives, meeting at the recent 5th Forum Europe Defence Industries Conference in Brussels on 23 May, discussed how to ensure that the planned establishment of a European Union (EU)common foreign and security policy will serve to strengthen Europe's armed forces and its defence industries.

"First of all we have to improve the military capabilities of most European countries, "NATO Secretary-General Lord Robertson told delegates in his keynote address. Without NATO, and therefore the USA's military might, Europe is "unable to take on even small to medium operations," he says.

Europe must re-prioritise

Late last year, EU leaders committed themselves to setting up by 2003 a 60,000-troop rapid reaction force capable of mobilising with 60 days notice and being sustained for up to a year. "I think the penny is beginning to drop all around Europe as to what they signed up for last December," says Robertson.

Indeed, many in industry believe that the target for implementing the rapid reaction force cannot be met or made affordable without meaningful harmonisation of procurement procedures and the establishment of a common European defence equipment market.

Robertson is now urging governments to "re-prioritise" their defence spending to focus on acquisition of equipment necessary for "modern" conflicts and research and development, while unloading many of the military's non-front-line tasks to the private sector to ensure that the armed forces of the future are structured to provide instantly usable capabilities for any likely contingency operations.

"Governments will have to spend their defence budgets more wisely, take courageous decisions and probably spend more," says Robertson. Opening up the US defence market to European suppliers and vice versa and relaxing controls on transatlantic mergers and acquisitions would do much to ensure that "we go forward in a dynamic fashion", he adds.

Eyeing this long-term goal, Northrop Grumman and Dasa recently signed a memorandum of understanding to study closer co-operation in the fields of surveillance and command, control, communications and intelligence systems. However such initiatives are severely constrained by rules governing technology transfer (particularly from the USA to Europe) and market access.

"I think that we are at the point of crisis in the disparity in doctrine and technical capabilities between the USA and the alliance partners," says Ralph Crosby, Northrop Grumman's president of integrated systems and aerostructures.

"Further, I believe that true bi-directional transatlantic military/industrial linkages are essential and fundamental elements not only in rectifiying the gaps in capability, but also as the key to strengthening the European defence industry," he adds.

Crosby is encouraged by recent, albeit limited, progress in technology transfer reforms led by the Pentagon's acquisitions and technology chief, Jacques Gansler. But he urges Europe to make sure it plays its part in the process.

Echoing the sentiments of many in the industry, he is adamant that creating "fortress Europe and fortress America" would only be counter-productive and "must be avoided". But the most immediate priority is to rationalise Europe's armed forces, underfunded compared with US standards, and, he says, woefully inefficient.

"In a world of tight defence budgets, Europeans ought to be making considerable progress in the pooling and funding of their research and development and defence capabilities at European level," says Thomas Enders, Dasa's director for corporate development and technology, and designated head of the EADS military division.

Harmonising assets

"Starting right from today, Europe could agree on pooling capacities towards a joint airlift force, a joint air refuelling or a joint electronic warfare fleet," Enders adds. He says there are significant near-term opportunities to harmonise joint transatlantic assets and capabilities, one example being the NATO Airborne Ground Surveillance requirement.

The achievements to date on this front, however, are not encouraging. Industry executives are frustrated that a letter of intent on harmonisation signed two years ago by the governments of France, Germany, Italy, Spain, Sweden and the UK has still not been converted into a formal framework agreement. The six nations together are home to 90% of the EU's defence industry, measured by new product development capacity.

If implemented, the agreement - details of which are still being negotiated by the governments - would be the first step towards freeing up international defence trade within Europe.

Enders says the framework agreement is needed urgently so that industry has a "common political view" surrounding harmonisation of export controls, defence-related research and technology and procurement requirements.

He views lack of progress on the framework agreement as a "very appalling situation" since it threatens to prevent the EADS partners from realising the full cost benefits of their merger.

"The European ministries of defence could immediately benefit from the EADS cross-border merger since it provides a unique focus and a roof for joint European programmes," says Enders. The six governments now aim to sign the framework agreement in July before the Farnborough air show.

Also troubling Dasa is Germany's recent unilateral decision to tighten its export controls, which the company believes runs contrary to efforts to consolidate the European aerospace and defence industry.

Few in the industry would disagree that harmonising procurement requirements between countries is vital to boosting European forces' effectiveness, but whether a single European procurement agency is desirable remains open to debate. A pan-European acquisition agency known as OCCAR is to be legally established within the next two months and will probably be used by the nations intending to buy the Airbus A400M transport.

Saab senior executive vice-president Lars Josefsson says: "It is essential that we do not establish a 'fortress Europe' by creating a single acquisition agency and only one international industry in each industrial area. That would merely lead to a planned economy," he adds.

"It is another thing to co-ordinate and harmonise various countries' military requirements in order to become more cost-efficient," says Josefsson. "What we need is a single market where I would welcome as many customers as possible." Looking further ahead he sees a single transatlantic defence market as a "realisable goal" within the next 10 years.

Potentially the most significant obstacle to creating a true transatlantic defence market is technology transfer from the USA to European countries. There is concern in the US Congress about whether European nations can be trusted to prevent cutting-edge US defence technology from falling into the wrong hands. There is also resentment that the USA, which proportionally spends much more on research than the EU countries, should feel obliged to hand over intellectual property that has been developed at great expense.

Credibility problem

"Europe has a credibility problem with the USA," explains Donald Baker, director of the armaments co-operation division at the US mission to NATO. "The US sees Europe's lack of spending as a lack of commitment." He believes that this is hampering progress on implementing the NATO defence capabilities initiative agreed at last year's summit in Washington DC.

"Unless these spending levels come up, the problem is going to persist," he says, adding that the USA has yet to be convinced of the wisdom of releasing sensitive technologies to help prop up Europe's defence capabilities. "We want to share it with our allies but we certainly don't want it to fall into third-party hands," says Baker. "It's a preoccupation in the USA that Europe does not protect its technology as well as it should."

Meanwhile, the European Commission is trying to develop a strategy to boost the European defence industry's competitiveness by encouraging the council of ministers to adopt a common European armaments policy. But to industry's acute disappointment, little progress has been made.

"We were not able to make as much progress as one might have hoped in implementing this strategy," admits Erkki Liikanen, European commissioner for the enterprise and information society. "That is why the time has come to revitalise this process at Commission level to identify the immediate priorities for action to match recent political and industrial progress."

Liikanen says the Commission is considering a follow-up communiqué‚ to accelerate the adoption of key proposals on the creation of a single European defence market, and that "the European defence industry cannot remain competitive on the global stage unless allowed to benefit from the supply-side consolidation which has taken place or is still to come. Without consolidation on the demand side, the Euroindustry cannot succeed in rivalling its major competitors."

Source: Flight International