In 2017 European defence cooperation has been given a boost by the launching of Permanent Structured Cooperation, the Coordinated Annual Review on Defence and the European Defence Fund. In particular the latter aims at stimulating European collaborative research and development projects while at the same time its purpose is to strengthen the European Defence Technological and Industrial Base. This Policy Brief provides an assessment of the potential impact of the 2017 initiatives on the EDTIB, paying particular attention to Small- and Medium-sized Enterprises.
Authors Margriet Drent and Dick Zandee offer the following conclusions and recommendations for the future of the European defence industry, the policies of EU member states and the options for the Netherlands:
- European defence companies continue to face serious challenges, of which staying on the technological edge is the most daunting.
- The absence of a European defence industrial level playing field is a fact of life, which will prevent the creation of an open European Defence Equipment Market in the foreseeable future;
- Small and Medium-sized Enterprises bear the negative impact of the lack of a level playing field as they have the greatest difficulties in entering cross-border defence markets due to limited staff and other disproportionate burdens.
- National export control regimes can also limit the options for cross-border defence sales if importing countries have more liberal defence export rules.
- The Coordinated Annual Review on Defence (CARD) and Permanent Structured Cooperation (PESCO) offer the potential for a better harmonisation of demand in multilateral capability projects. Continued high-level political involvement will be needed.
- Outside the EU context, member states are already establishing new bilateral or multinational programmes, In most cases political and industrial initiatives are running in parallel, a prerequisite for success.
- The European Defence Fund (EDF) offers financial incentives for collaborative defence research and defence industrial development, with substantial amounts of money being proposed for the period 2021-2027. However, the Commission’s conditions are complex and it seems that member states are waiting for implementation before they will be willing to bind larger projects to the Fund’s set of conditions;
- It is essential that CARD, PESCO and EDF are treated as complementary by member states in order to generate the best results in connecting the capability-driven demand to defence technological and industrial output.
- Existing clusters of deepening defence cooperation offer the best potential for planning common procurement programmes. Defence industrial cooperation should be part of that process from the start.
- The Netherlands should opt for joining the German-Norwegian programme for a next generation conventional submarine instead of pursuing a national solution.