Bye Buy European? A Liberal Take on European Preferences in EU Defence Instruments

Abstract  

‘Buy European’ – in any European capital or across the pond, these two words evoke contrasting though similarly strong reactions from security and defence experts. Following a string of policy initiatives to strengthen the EU’s industrial base over the past two years, the issue of a European preference for European defence equipment has been one of the most sensitive and contentious issues to date (Pugnet, 2024). This article analyses the EU’s initiatives to strengthen its defence industrial base and considers the added value and possible caveats of ‘Buy European’ provisions from a liberal point of view.  

Introduction 

Since Russia’s full-scale invasion of Ukraine in February 2022, the EU has developed a range of new ad hoc policy instruments to supply arms to Ukraine, stimulate the joint procurement of armaments, and ramp up production. These developments culminated in the launch of the European Defence Industrial Strategy (EDIS) in March 2024 (European Commission, 2024). The EDIS sets a long-term vision for ‘defence industrial readiness’ in the European Union.  

An important new element in the strategy, which was already reflected in some of its precursors, is the so-called European preference, better known as ‘Buy European’. This is closely related to discussions about European strategic sovereignty (Le Monde Editorial, 2022), which have touched on a broad range of domains, from technology to health, and trade to security.  

The aim to have more sovereignty or autonomy is an important value in liberal theory, both on an individual (Colburn, 2010) and on a societal level (Wellman, 2013). However, the protectionist ring of ‘Buy European’ seems to be at odds with the liberal belief in free choice, fair competition, and free trade. We will, therefore, analyse the ‘Buy European’ discussion from a liberal point of view, taking on board elements from other domains in Europe’s quest for strategic sovereignty. In doing so, we will use the term strategic sovereignty instead of strategic autonomy, as this reflects a deeper notion of political authority, as opposed to the focus on political action in discussions on strategic autonomy (Fiott, 2021).  

The problem with Europe’s defence industrial base 

Russia’s aggression against Ukraine has had an enormous impact on Europe’s security situation. As the continent experienced a new large-scale conflict, it became very clear that Europe was not prepared for conventional, high-intensity warfare. Decades of shrinking investments have led to underequipped armed forces and significant capability gaps across all domains. In addition, Europe is not able to provide sufficient military aid to Ukraine to enable it to make a decisive breakthrough (Moyer & Ocvirk, 2024). In the meantime, the Russian war economy is picking up steam (Snegovaya et al., 2024), and the longer Ukraine is not supplied with adequate equipment, the higher the chance of Russian advances in the future.  

In part, this problem was caused by structural underspending on defence over the past few decades.

At the same time, in the last decade, the US, Russia, and China increased their military expenditure by 34.8 per cent, 80 per cent, and 23 per cent, respectively, leading to a relative loss of Europe’s military strength on the world stage (SIPRI, 2024).  

From Europe’s defence industry side, there has also been a shift towards fewer, precise and technologically advanced weapons systems from the 1990s onwards (Nones, 2024). This has occurred at the expense of mass production of less sophisticated items, such as artillery shells and ammunition.

An additional challenge is the high degree of fragmentation of the European defence industry (supply) and market (demand). Both Europe’s defence industrial base and its market for defence equipment are still organised along national lines with heavy state involvement. On the industry side, governments continue to protect and isolate their national defence industries despite a clear need for collaboration to meet Europe’s security needs (Jones, 2018). This leads to reduced economies of scale and unnecessary duplications. On the market side, uncoordinated defence spending leads to additional duplications of purchased items, as well as capability gaps, especially for critical enablers. In short, the market may produce sufficiently for national demand but not for the needs at the European level.  

EU initiatives to strengthen the defence industry  

The watershed moment of Russia’s aggression against Ukraine provided a new impetus to reckon with the structural shortcomings of Europe’s defence industrial base.  

The initial push for defence integration started with programmes in research and development, such as the European Defence Fund (EDF) and the Permanent European Structured Cooperation (PESCO), both launched in 2017.ⁱ After February 2022, there was a new round of initiatives to accelerate the pace of these programmes. Just a month after the start of the war, the EU approved its Strategic Compass, in which Member States, for the first time, agreed on a common strategic vision for the EU’s role in security and defence. Included in the document was a call for an innovative, competitive, and resilient European Defence Technological and Industrial Base (EDTIB) (Council of the European Union, 2022).  

In the following year, the aim of a truly European defence industry was translated into several new policy initiatives for the production, procurement, and exportation of defence equipment. Most notably, these include the European Peace Facility (EPF), the Ukraine Assistance Fund (UAF), the Act in Support of Ammunition Production (ASAP), and the European Defence Industry Reinforcement through Common Procurement Act (EDIPRA). 

After the series of ad hoc interventions, the European Commission launched its first-ever European Defence Industrial Strategy (EDIS) on 5 March 2024. The main goal of this ambitious document is to address the fragmentation of European defence by investing ‘more, better, together and European’. It seeks to do this by raising the value of ‘intra-EU defence trade’ to 35 per cent of the overall value of the EU defence market by 2030. In the same year, the EDTIB is expected to amount to at least half of EU Member States’ defence purchases. In addition, the EDIS sets a goal that Member States procure at least 40 per cent of their defence equipment collaboratively (up from the current 18 per cent).  

To achieve these aims, the EDIS is accompanied by the European Defence Industry Programme (EDIP). This is the strategy’s main funding instrument, which contains €1.5 billion for the period from 2025 to 2027 (the end of the EU’s multiannual financial framework) (European Commission, 2024). Given the underwhelming size of the budget, the EDIS and the EDIP are not sufficient to address the immediate requirements of Ukraine and Europe’s short-term capability gaps (Grand, 2024). However, they are a good signal of the EU’s long-term ambitions to strengthen its defence industrial base.  

Making sense of ‘Buy European’ 

An underlying discussion across several of the EU’s defence policy instruments, such as the EPF and EDIRPA, is the inclusion of ‘Buy European’ provisions. This refers to a European preference in procurement processes. This preference can have different forms, but the general aim is for EU Member States to make more purchases from the European defence industry.  

When EU Member States buy new defence equipment that is not readily available from domestic or European producers, they have three options: national solutions, buying off the shelf, or cooperative development or procurement with other EU Member States. Some Member States invest in national capability development projects, but most also turn to buying off the shelf from abroad (Koenig & Schütte, 2023). To illustrate, between the start of Russia’s war of aggression and June 2023, 78 per cent of defence purchases by Member States were made outside the EU. The US alone represented 63 per cent of these (European Commission, 2024). 

To reduce the amount of imports and boost cooperative development with other EU Member States, the idea of ‘Buy European’ has gradually been taking hold. Several Member States, such as France, Greece, and Cyprus, have pushed for this as a way of boosting Europe’s defence industrial base (Financial Times, 2024). Others, particularly those with strong defence industrial ties with third countries such as the US and the UK, are less enthusiastic. This group includes Sweden, Finland, Poland, and the Netherlands.  

Positions on this issue are often determined by national factors, such as the size and orientation of the defence industry, but there are several recurring arguments in favour of introducing more European preferences in defence spending.  

Strategic sovereignty 

The first argument is that ‘Buy European’ would support Europe’s aim to have more strategic sovereignty. This is a broader discussion around the need for Europe to develop a greater ability to act to pursue and protect its own geopolitical interests. This requires less dependence on third countries in areas of strategic interest. In the European security and defence context, the aim of achieving more sovereignty, or autonomy, entails responsibility for greater defence spending and more capacity to act in crisis situations (Fiott, 2021).  

With this in mind, there would be a strategic interest in developing, producing, and procuring armaments within Europe. This would limit the leverage of third countries on specific European interests, such as the availability of defence equipment in times of need, and enable the EU to make more independent decisions.  

Protectionist reflexes 

Pleas for ‘Buy European’ provisions can also be seen as a reaction to protectionist measures taken by the US and China. This is often related to similar initiatives in other spheres, such as trade, investments, and technology. Examples include the recent push for decoupling from China and European responses to the US Inflation Reduction Act (IRA), which subsidises green industries. The latter led to the Commission calling for a European IRA in response to the American one (Von der Leyen, 2022) and President Emmanuel Macron calling for a ‘Buy European Act’. 

Justification for public spending 

A last argument that is often used in favour of ‘Buy European’ is that European public money must first and foremost benefit the European economy (Giuliani, 2023). The idea is that it is difficult to justify spending money on the industries of third countries when the European defence industry so desperately needs this investment to increase its capacity. Spending European is seen to close the circle and feed the premiums back into the European economy.  

Recent debates 

Different forms of these arguments regularly come to the fore in the negotiations on the EU’s defence instruments. So far, this mainly concerns the instruments on the demand side, so the defence market. Examples include certain parts of the EPF, particularly the UAF, EDIRPA, and the EDIS.  

For the EPF, discussions about ‘Buy European’ provisions started when Member States ran out of existing stockpiles and had to start procuring new armaments. With insufficient production capacity, this has led some Member States to procure off-the-shelf products from outside the EU (for instance the US or South Korea) (Fiott & Simón, 2023). France in particular has strongly opposed this and argued that equipment bought with EU funding must be produced inside the EU.  

Similar concerns were also reflected in the UAF, which includes many more restrictions against buying third-country equipment than the overarching EPF. The text mentions that the required defence equipment for Ukraine has to come from the European defence industry and Norway. However, there is flexibility in the supply chains to include operators from outside those countries. Interpreting this flexibility is left to Member States themselves, which eventually makes it a political decision.  

During the negotiations on EDIRPA, the original Commission proposal also featured a procurement initiative with a ‘Buy European’ rationale, but this was eventually rejected by the Member States. The main reason for this was that the EU industry was not able to keep up with demand (Besch, 2022).  

The EDIS and EDIP contain a set of softer nudges to push Member States towards buying more European equipment. A notable example is the proposal of a European Military Sales Mechanism, which would provide a common European catalogue of EU-produced defence equipment. This would make it easier for governments to see what is already available in European markets and could stimulate them to choose European options. 

The EDIS also features an instrument for Member States to jointly own procured equipment, the Structure for European Armament Programme (SEAP), for which they can benefit from a VAT exemption. If countries can also agree on a common approach to exports, EDIP will provide a bonus for products that are developed and procured as part of SEAP. 

The problem with ‘Buy European’ 

So far, the actual practice of ‘Buying European’ is still in its infancy on the European defence market. However, it will likely gain traction as the EDIS will be translated into more concrete policy instruments in the years to come. One of the difficulties in this process is that of defining what ‘Buy European’ means. Up to now, it means different things to different people, which makes it difficult to reach any form of consensus. The box provides an overview of some of the questions that ‘Buy European’ raises and some possible definitions. 

Pieces of the ‘Buy European’ puzzle 

– What qualifies as ‘European’ origin?  

• Produced in at least one Member State 

• Produced in multiple Member States 

• Produced as a result of a European project (e.g. PESCO/EDF) 

– How ‘European’ is the product?  

• 100% of the product is produced in Europe 

• A certain number of the components are produced in Europe 

• A certain type of component is produced in Europe (e.g. high-tech elements or critical technology) 

• Technology must be patented in Europe 

– Who is ‘European’?  

• EU Member States only 

• European Economic Area countries (Norway is currently included in the UAF) 

• United Kingdom (currently included in PESCO project on military mobility)  

• Ukraine (currently included in the EDIS) 

– Who is the final recipient of the purchase?  

• EU Member State(s) 

• Ukraine or other supported country 

• Partner countries 

– What financial incentive is provided?  

• Subsidy 

• Reimbursement 

• VAT exemption 

What type of product is being procured?  

• High-tech (e.g. radar equipment, fighter jets, air defence systems) 

• Mass production (e.g. artillery shells and ammunition) 

– How urgent is the procurement? 

• Short term 

• Medium term 

• Long term 

This list is not exhaustive, but it provides an insight into the complexity and variety of situations covered by the ‘Buy European’ principle.

A liberal take on ‘Buy European’ for EU defence initiatives  

EDIP ends in 2027 and lawmakers in the next legislative mandate (2024–2029) will have to decide how the EDIS is translated into policy instruments from their election onwards. This will include the possible inclusion of ‘Buy European’ provisions – or not. The following section will give some ideas for liberal policy-makers to consider.  

The goal of ‘Buy European’ provisions to achieve more strategic sovereignty is very much in line with liberal thinking. To liberals, sovereignty on an individual level means protection from arbitrary and capricious power and authority – in other words, self-ownership (Opello & Rosow, 1999). The same principles can be translated to other levels of governance as well. Self-ownership, protected by the rules-based, liberal world order, is key to modern statehood. This is one of the many reasons why liberals so strongly support Ukraine’s independence, sovereignty, and territorial integrity in its fight against Russia’s aggression.  

Goal: No shortcut to strategic sovereignty  

However laudable the quest for sovereignty may be, self-ownership does not translate into state ownership or state sponsorship. Strategic sovereignty is more concerned with having the ability (Groitl, 2021) or political authority (Fiott, 2021) to act rather than being a fully independent and autarkic actor. In a world of networked interdependence, ability and influence are more important than control.  

With this in mind, ‘Buy European’ is not a shortcut or an automatic guarantee of enhanced European sovereignty. It can be used as a tool to steer buyers’ behaviour, but this will not automatically lead to Europe’s armed forces acquiring better capabilities. In fact, it could decrease Europe’s overall capabilities if it limits access to necessary technologies produced in third countries. If the aim is to have more strategic sovereignty in defence industrial production, the guiding principles should be the obtainment of military strategic capabilities, the development of intellectual property, and cost efficiency (Wolff, 2024). These are drivers for more influence in an interdependent world. It is not clear if priority spending on domestic industry helps to achieve these aims or rather obstructs them.  

Costs: Less bang for more buck  

Having a European preference can be compared to imposing tariffs on foreign goods. It means that there are other, lower-cost suppliers on the world market and that governments will pay more for the same capabilities. It also risks potential efficiency losses for domestic industries through the loss of possible competition (Camporini et al., 2017). Introducing protectionist policies, therefore, risks wasteful competition between allies and missed opportunities for fruitful collaboration (Sweeney, 2024). This is even more relevant if non-European allies, most notably the US, close off parts of their defence markets in retaliation for ‘Buy European’ policies. When discussing European preferences, it is important to keep this in mind as a price to pay.  

Effectiveness  

This leads to an overarching question: Is ‘Buy European’ really the most effective tool to foster a strong European defence industrial base?  

As a general principle, it would deprive the defence industry and the defence market of choice and competition: choice because it excludes possible cooperation partners for producers and possible suppliers for purchasers, and competition because it takes away incentives to produce more efficiently and to buy more cost-efficiently. The European defence industry should aim not to produce pan-European products at any price but rather to develop competitive products for the global and domestic markets.  

Another risk is that the focus on ‘Buy European’ elements in the EU’s defence initiatives distracts from more liberal ways of achieving the same aims. These include incentive structures, harmonising export controls (Vagt, 2018), and revising the national security exemption for defence procurement. The EDIS already contains very promising steps in terms of nudges and incentive structures, including the European Military Sales Mechanism, a VAT exemption, and a bonus for jointly owned equipment, and it is important that they get the time to show their potential.  

That said, there could be instances where ‘Buy European’ policies can be tried to boost (or preserve) specific types of production of strategic importance, such as critical components, critical technologies, and critical enablers. However, before introducing such policies, it is important to first define their specific goals, formulate a specific form of ‘Buy European’ (see list of questions) that would help achieve them, and consider the costs. It should, therefore, at most, be considered as a policy instrument with a limited scope rather than a more general policy principle. 

The EDIS is a step in the right direction and offers a good basis for continued and new policy instruments to strengthen Europe’s defence industrial basis. Discussions about ‘Buy European’ provisions will certainly come up while negotiating these instruments, but policymakers would be wise to question their merits critically.  

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