[A-List] EU integration struggles: arms industry

["Michael Keaney" <michael.keaney@xxxxxx>]

Europe's chance to sharpen its defence
By Philippe Camus
Financial Times: November 21 2002

These are challenging times for European governments confronting rapidly
changing international security and defence threats. Gone is the cold war
threat of a monolithic eastern bloc. In its place are altogether less
tangible enemies in the form of international terrorist groups and
unpredictable pariah states.

These new threats demand radically different military capabilities and
responses from Europe's armed forces and defence industries. The Nato summit
in Prague is the moment to come up with some of the answers.

Recent international campaigns, as in Kosovo and Afghanistan, have
dramatically revealed the strengths and weaknesses in European weapons
systems. These operations have also highlighted America's ability to exploit
its technological resources.

The time has come for a fundamental rethink on defence budgets in Europe and
for a wholesale re-evaluation of defence procurement and industrial
strategy. Europe does not lack technology or knowledge. Its challenge is
finding the political will and vision to allocate adequate resources to
defence technologies and systems in a timely manner.

If Europe really wants to make a serious commitment to defence, like
America, there is much to be done. The US spends twice as much on its
military as the 15 members of the European Union combined. It has recently
approved a further budget increase of $37.5bn. It is unrealistic to expect
such increases in Europe in the short term. With those budget constraints,
Europe must quite simply be more intelligent with its defence spending and
investment at the national and supranational levels.

"Smart" procurement is becoming common parlance in some European defence
ministries but it needs to move from rhetoric to action. By defining well in
advance full programme requirements, such as interoperability and systems
integration, contractors can avoid substantial delays and complications in
development and pass on savings to governments. This is a win-win situation
for all concerned.

Beyond smart procurement, Europe's forces can become substantially more
effective if governments work more closely together on agreeing unified
specifications for larger defence initiatives. The issue of interoperability
will become even more crucial as Nato expands.

Besides enlargement of the alliance, the summit would show tangible signs of
progress if it produced a substantive commitment to the Nato airborne ground
surveillance programme and broke the logjam on the A400M military transport
aircraft. The defence industry is ready to help accomplish these and broader
challenges. While the A400M is a symbol of European industrial co-operation,
the Nato AGS programme is a direct product of a transatlantic industrial
effort to meet the joint needs of Nato customers.

European governments need to take difficult decisions and abandon the dogma
of national protectionism. They need to progress towards a more liberalised,
free-market environment that prospers through competition. Those nations
that do so have nothing to fear - they can become the beneficiaries of new
investment in technology. To use the recent words of Geoff Hoon, the UK
defence secretary, national industrial policies should be "less about
ownership than about where this economic value is generated".

Europe's defence industry needs to become more efficient. That means
avoiding the duplications imposed by protectionism. To succeed, it needs
strong political agreement on these issues from governments.

What defence ministers, officials and industrialists most need as they
converge on the Czech Republic this week is vision with commitment. We
Europeans have a vast array of skills, experience and ingenuity that, when
combined, can produce world-beating products. The impressive rise of
Airbus - from a standing start to parity with its competitor in the highly
commercial aerospace market - shows what can be achieved by European
industry, despite its apparent cultural, linguistic and nationalistic
differences. What has been missing is the unity of purpose in defence
procurement. We need more collaborative programmes, from inception to full
operational service, without the suffocating, stop-start process that has
hampered some of the largest projects over the past three decades.

Europe must do more for its own defence. It should be expected to play a
leading role on the world stage alongside the US. To do so, governments must
match their good intentions with real military might. According to opinion
polls, they have their peoples' support. Without European government
commitment, the only option for Europe's defence contractors will be to look
to the US for profitable programmes and revenues. This would be bad for
Europe industrially and politically. I hope that Prague will be regarded as
a turning-point.

The writer is chief executive of European Aeronautic Defence and Space
Company (EADS)