The Spanish Presidency of the European Union: Towards a European Armaments Policy

por GEES, 30 de abril de 2002

One of the main objectives of the Spanish Presidency of the European Union in the first half of the year 2002 as regards defence and security policy is to boost cooperation in the field of armaments. This is part of the so called institutional objectives -actions linking the European Defence and Security Policy with other institutions-, and the formulation of a European armaments policy ranks second among the priorities of the Spanish Presidency in this field.
 
The Spanish Presidency is thus heir to the mandate arisen out of previous European Councils, which had already highlighted the need to enhance cooperation in the field of armaments. The Cologne European Council set four basic objectives: strengthening the industrial and technical basis of defence, promoting the restructuring of the European defence industries, developing a closer and more efficient cooperation in the armaments industry, and achieving a greater harmony as regards both the definition of military requirements and the planning and procurement of weapons.
 
The Helsinki Council also stresses this idea, as it points out that the foundations for a European armaments policy will be laid. The Laeken Council has more recently renewed the mandate to enhance cooperation in the field of armaments to the extent considered appropriate by Member States.
 
The Spanish Presidency will therefore try to further carry out these mandates, overcoming a certain feeling of frustration among the partners because, although the objectives were clearly stated, two and a half years have passed after the Helsinki Council and little progress has been made towards the formulation of a common armaments policy within the European Union.
 
 The Spanish view on the common armaments policy is based on the principle that a real European defence and security policy cannot exist if it does not comprise a clearly defined armaments and equipment policy. To quote the Spanish Defence Minister 'defence companies and industries work for defence, and so they must, never the other way round'. Cooperation in the field of armaments is therefore considered a priority by the Spanish Presidency within the development of the 2nd Pillar of the European Union.
 
New instruments for industrial cooperation
 
The nature of the defence industry, especially linked to national sovereignty and independence, has left this sector to a great extent out of the historical process of European integration. Thus, the founding Treaty of the European Economic Community itself confirms the 'exceptional nature' of the defece industry, excluding it from the implementation of the guidelines for a sigle market. Forty years later, Art. 296 of the Treaty of Amsterdam maintains the same reservation with slight variations.
 
However, this special nature of the defence sector within the Community context has not prevented, but has triggered several initiatives pursuing a greater coperation in this sector. Thus, numerous attempts have been made and numerous instruments have been established in the last years to try to promote a greater European integration also in the defence industry field.
 
In 1992 the WEAG (Werstern European Armaments Group) was created within the Western European Union with the aim of jointly defining operational requirements, promoting cooperation in R&D, laying down the principles for the opening up of national markets and drawing up a plan for the creation of an Armaments Agency. The Western European Armaments Group was definitely established in November 1996 with the mission of further increasing industrial cooperation, strengthening the European technological basis, and establishing a single European arms market. The Thales, Euclid and Socrates Memoranda of Understanding were part of these cooperation instruments, as well as the Eurolongterm group.
 
As regards the European Union, COARM was established in 1991 with the aim to achieve a greater harmony in the field of arms exports. This initiative led to the drawing up of the European Union Code of Conduct on Arms Exports. In 1995 the European Union established the POLARM, whose main objective is to apply Community criteria to the defence sector. In the last years the European Union has launched other initiatives as reinforced cooperation within a small group of Member States, and so we find EDIG (European Defence Inlodustried Group), OCCAR (Organization for Joint Cooperation in Armaments) and the LoI/FA (Letter of Intent/Framework Agreement).
 
The 1999 Cologne Council was crucial to the move towards a common defence policy, as the Fifteen expressed their will to equip themselves with the capabilities required for efficient conflict prevention and crisis management. In accordance with this ambitious political objective the European Council also pointed out the need 'for making a sustained effort to strengthen the industrial and technical basis of defence', showing a collective will 'to promote the restructuring of European defence industries in the countries concerned'
The will of the Council resulted in two instruments that were vital to achieve the much needed integration of the European defece industry: the Framework Agreement for the restructring of the defense industry and the boost to the Organization for Joint Cooperation in Armaments (OCCAR)
 
LoI / FA
 
The Letter of Intent was signed by the Defence Ministers of France, Germany, Italy, Spain, Sweden and the United Kingdom on 6 July 1998. The Letter of Intent is a consequence of the Joint Declaration issued in April 1998 by the first five countries mentioned, where they expressed their belief in a strong defence industry as the key element of a real security and defence policy in the European Union.
 
The LoI is based on two fundamental principles: to achieve a competetive defence industry and a greater harmonization of operational standards and requirements on the part of governments. This initiative intends to establish a framework for a more integrated future development of the defence sector in Europe.

In July 2001 the initial LoI was transformed into a Framework Agreement with the status of an International Treaty, thus giving legal entity to the will embodied in the Letter of Intent. Five basic courses of action are considered:
 
1. Security of supply
The Agreement seeks to guarantee security of supply in the event that the constitution of a Transnational Defence Company should lead to the concentration of production in a country, to the detriment of another. This commitment should be fully valid both in peace-time and in times of crisis or war.
 
2. Transfers and exports
The Agreement regulates the freedom of a country to export, even if the sub-components of the system are manufactured in another member country. A difference is made between the sales among the Participants, regarded as transfers, and the sales to third parties, regarded as exports.

3. Research and development
The LoI intended to optimize the resources allocated for investigation and technology by means of a greater coordination of efforts and by launching joint programmes in order to avoid duplications.
 
4. Security of information
Adequate security provisions shouldbe ensured for the exchange of information among the participants. Thus, common procedures and security clearences are established for the transmission of classified information.

5. Harmonization of operational requirements
This last objective, which was not included in the initial Joint Dtatement but has gained prominence in the final Framework Agreement, is essential both to achieve a single defence market and to ensure the appropriate interoperability among European armed forces. Thus, the Agreement establishes a procedure to jointly identify military requierements, to define the weapons systems required, to plan investments and to jointly interact with the sector at European level.
 
Finally, it should be pointed out how rapidly the Framework Agreement has come into force. In spite of its status as International Treaty, the entry into force of the Agreement between two of the signatory states has been enough for the Letter to be fully applicable to both. As for Spain, the Agreement signed on 27 July 2001 came into force on 11 August that same year.
 
OCCAR
 
The Organization for Joint Cooperation in Armaments (OCCAR) has its origin in a French-German initiative, as a result of which a structure for the management of joint programmes was created in 1993. Three years later Italy and the United Kingdom joined this initiative, which gained its own legal personality in 1998. Spain and the Netherlands have subsequently joined the organization, although some questions are still to be settled, such as the number of votes each one will have, and, as regard Spain, the programe its participation will begin with. In short, OCCAR can be defined as the main instrument for industrial cooperation in the field of defence existing nowadays in Europe.
 
This Organization has two important advantages over its forerunners. Firstly, as it has its own legal entity, it manages and defines its own procurement policy more effectively. Secondly, it has turned out to be a more efficiet tool than its forerunners at harmonizing procurement policies among its members and at coordinating their research and development programmes.
 
The main reason for the creation of OCCAR was the will to bring together in a single permanent office the management of the different cooperation projects in the field of arms manufacturing and systems development. An organization like OCCAR, of a more stable and permanent nature, would allow a cut in programme administration costs. On the other hand, it was a question of making more flexible the juste retour (fair return) principle, so that the traditional balance between investment and returns in each programme could be replaced by an overall calculation of the entire programme structure in the long term. This greater flexibility in the development and management of the programmes should substantially reduce costs and therefore favour a greater competitiveness.
 
However, it must be pointed out that instruments like OCCAR only provide technical support. They are intended to facilitate cooperation, but they lack political relevance when it comes to decision-making. This means that the final decision on whether to join or to remain in the programme will fall on each of the participating states, depending on the real potetial of their industrial sector. Therefore, OCCAR's harmonization capacity will depend on whether all members agree to equip themselves with a certain system, within a fixed period and with common operational requirements. Without the three requisites it will be impossible for the Organization to set a programme in motion.
Therefore, OCCAR fully safeguards the states' decision-making ability, even to the detriment of its management efficiency. Thus, the initial decision to impose economic sactions on the states that fail to meet their contractual obligations in a bilateral programme was eventually rejected. Not even on a small scale (nowadays only six European countries are OCCAR members: France, Germany, Italy, Netherlands, Spain and the United Kingdom) can it be spoken of the existence of an actual armaments policy at European level. The four founding memebers of the Organization (France, Germany, Italy and the United Kingdom) keep to themselves the power of veto over any decision to be made within it.
 
Community initiatives
 
The European Union has a series of programmes and instruments that contribute to achieve the objective of building a more integrated defence market and to enhance industrial cooperation between the partners. Programmes like POLARM and COARM, which share the same core objectives as OCCAR and the LoI, will be very useful to boost cooperation among EU Member States in the field of the defence industry.
 
The final objectives of these initiatives are the simplification of armaments procurement procedures within the EU, the establishment of a more open internal market, the extension of normal procurement systems to the sector and the harmonization of regulations on arms exports. In this sense, it should be pointed out that in the future the European Union can play a far more active role in the regulation of public acquisitions in the defence sector.
Joint research and development programmes are crucial for an enhaced European cooperation in the field of armaments. The European Union plays here an essential role.
 
Thus, the WEAG is preparing a new memorandum of understanding known as Europa that seeks to improve and to give more flexibility to the current EUCLID. What is more, if this new Framework Agreement adapts to the principles established by the LoI, it could make it unnecessary fot OCCAR to become a redundant manager of R&D programmes.
 
Moreover, common research and development programmes are crucial for an enhanced cooperative framework in the field of armaments. Thus, WEAG is preparing a new MOU known as EUROPA that seeks to improve and to give more flexibility to the EUCLID. Insofar as EUROPA adapts to the principles established by the LoI, this new programme could persuade the new OCCAR members not to turn this agency into a R&D programmes manager, as seems to be the case at present. In spite of its rationality, it will not be easy to launch a common R&D policy in the field of defence within the EU, given that there is a considerable clash of interests between large and small countries. Thus, those countries with a weaker defence sector are more reluctant to accept the principles of a more general fair return or the restrictions on certain projects, whereas the major countries consider them essential for this policy to be really efficient.
 
The Spanish Presidency
 
The Spanish Presidency of the European Union in the first half of 2002 intends to boost a European armaments policy, starting from an already existing situation. This aim starts from a threefold premise: the impossibility of formulating a European defence policy without simultaneously adopting an armaments policy as an integral part of it, the common will for defence companies and industries to work more efficiently for European defence, and finally the need to introduce some rationality into the complex network of initiatives that have been built around European cooperation in the field of armaments.
 
This is neither an easy nor a short-term objective. From the point of view of the Spanish Presidency, in spite of the repeated Council mandates, from Cologne to Laeken, to implement a real European arms policy, the results in the last two and a half years have been scarce. However, the difficulties underlying the process do not undermine the belief that a European armamentes policy is not only necessary, but more urgent than ever in the present situation.
 
In the opinion of the Spanish Presidency, the definition of the European armaments policy, although it arises mistrust among other EU Member States, shows no intention to intervene in the sector, but it seeks to define a common framework that does not predetermine the subsequent development imposed by the market on the European armamaments industry.
Furthermore, the aim of the Spanish Presidency is a relatively modest one. To quote the Spanish Secretary of State for Defence '[the Spanish Presidency] does not intend to clearly define a European armaments policy', but only to provide some bases, some general criteria and a framework for action. In his opinion, 'the most important thing is that we are able to agree on the inspirational criteria, on the programme, on the measures that should be part of a European Armaments Policy'.
 
With these methodological premises in mind, the bases initially proposed by the Spanish Presidency in bilateral meetings with EU Defence Ministers could be summarized in the following nine points:
 
1. The European armaments policy as part of the security policy
 
It is the most reiterated principle by the Spanish Presidency, particularly in a time when the industrial interests of each country seem to take priority over defence policies themselves. An armaments policy is essential for the formulation of an autonomous EU defence and security policy. However, on no account should the contrary be allowed to happen, i.e. that national and European security policies serve purely industrial interests.
 
2. The principle of voluntary compliance
 
The Spanish Presidency is cleary aware that, so far as security and defence are concerned, an integral part of them being the armaments policy, it is moving in an intergovernmental environment where the compliance of each state is indispensable in order to make progress.
 
3. Transparency
 
The necessary formulation of a common armaments policy should never be taken for interventionism. On the contrary, the sector should always be subject to market regulation, to competition and to the pursuit of competitiveness. The main aim of a greater integration of the sector is to achieve greater international competitiveness.
 
4. European and transatlantic coperation
 
The principle of cooperation has been repeatedly sanctioned within the European Union by the aforementioned Councils. However, the Spanish Presidency considers that the possibility of transnational cooperation in the field of armaments should never be ignored, a dimension countries like Sweden or Italy have been quite insistent on. On the other hand, the growing presence of Northamerican companies in European industries stresses the need to duly cooperate with the United States.

5. To make up shortfalls
 
The Capabilities Conferences held with the aim to define the European Reaction Force have also revealed deficits or shortfalls in our armed forces when it comes to achieving that aim. In order to make up those deficits, it is necessary to draw up a methodology, on which Armaments Directors are already working, and to which the Spanish Presidency intends to contribute.
 
6. Common requirements
 
An essential component of the European armaments policy should be the joint definition of certain weapons systems. This is a complex process, but it is essential not only in order to rationalize and integrate our European defence industry, but also to guarantee the appropriate interoperativity of the forces in the future.
 
7. Funding
 
The defence departments of every EU Member State are going through financial difficulties as they have to deal with the maintenance of relatively numerous armed forces, which at the sametime must be adapted to new technological and strategic requirements. Growing budgetarian difficulties have led many of these countries to devise innovative systems for private funding or for a longer-term shift of expenditure. The Spanish Presidency opts for a joint discussion in order to analyze the possibilities at hand and to find common solutions.
There is also an intention to modify the statistic criteria of Eurostat, which classifies weapons systems as 'intermediate consumer products'. This classification means that the total cost of the system is computed in the financial year in which it is received, regardless of the previous years of programme development or of the years of useful life of the system. This criterion has a very negative effect as regards the deficit, particularly in a time when all EU Member States are facing excessive public expenditure. Therefore, the aim is to reach an agreement so that Eurostat modifies this criterion and weapons systems can be regarded as other public or private equipment, and their impact on national accounts alleviated in the long term.
 
8. Research and development
 
The aim of this point is to achieve a closer coordination of research, development and innovation efforts in the field of defence in order to improve the efficiency of expenditure and to avoid unnecessary duplications..
 
9. Single agenda
 
As it has already been mentioned, the number of agencies, programmes and coordination instruments in Europe is too large and they should be somehow rationalized. The Spanish Presidency wishes to lay the foundations for the creation of a single agency that coordinates European cooperation in the field of armaments, drawing upon the experiece of OCCAR, LoI/FA or WEAG. But instead of confining itself to coordinating the development of common armaments programmes, this new agency could also manage the common use of certain weapons systems that, due to their high cost are difficult to tackle on an individual basis. Owing to the complexity of this mechanism of cooperation and communitarization of weapons systems, we can only think of a long-term objective.
 
10. Armaments Directors
 
The National Armaments Directors of the European Union have periodically held informal meetings. These meetings are meant to become an instrument of technical support for the Councils of Defence Ministers; the first institutional objective of the Spanish Presidency would be the formal establishment of this instrument.
 
Conclusion
 
It is important to promote a European armaments policy for two reasons. Firstly, because European defence would have no strategic autonomy if it is not endowed with an industrial basis able to supply the armed forces of Member States with increasingly advanced weapons systems. Secondly, because it will be impossible for the European defence industry to maintain acceptable levels of competitiveness in comparison with the Northamerican industry, if it is not based on a greater integration.
 
Cooperation in the field of defence among the European countries is already an old story. However, the time seems to have come to rationalize and coordinate the different initiatives, both institutional and industrial, that have been developed on the Continent in the last two decades. The European Union must play an essential role in the integration of all these initiatives into a real common armaments policy, and the Spanish Presidency wishes to lay the foundations in the first half of the year 2002.
 
Two and a half years have passed since the Cologne Council, which shows that this will be neither an easy nor a short road. On the contrary, the priority of national interests makes it difficult to reach the degree of consensus required by a purely intergovernmental policy, like everything related to defence. However, we must bear in mind that Europe is staking the future of its own defence and the survival of its industrial sector.
 
A European armaments policy would make it possible to put the defence industry to the service of the defence policy, and not the defence policy to the service of industries, as it often seems to happen nowadays. We need a European policy that gives preference to strategic and defence interests over the purely industrial interests of Member States. The threats and risks we are facing at the beginning of the century do not allow us to keep an eye on short-term national policies that are increasingly undermining Europe's ability to act with credibility on the new global strategic scene.
 
Nevertheless, the main obstacle that the development of the European armaments policy has to overcome is the lack of political will on the part of Member States to meet the strategic challenges faced by our armed forces. This lack of will implies growing budgetary deficiencies that prevent the modernization and the technological boost that the situation requires.
 
It is possible to imagine innovating financial formulae, or even modifications in accountancy that provide an interim solution to this deficiency in budgetary resources. But at the core of the problem lies the question whether Europe is ready to take on the appropriate role in the world and to generate with coherence the political will that is required to adopt a real common defence and security policy. At least the Spanish Presidency seems to be ready to make a move in that direction.