Note from the Industry
Abstract
Russia’s war in Ukraine has demonstrated two key things. First, Europe’s collective security is not guaranteed forever. Europe was underprepared for the war when it started.
Secondly, the EU has emerged as an increasingly viable player in global defence. It has mobilised its existing tools and it has developed new collective defence initiatives. By introducing new mechanisms for collaboration in this domain, the EU has demonstrated it can improve its existing capabilities.
Industry obviously plays a critical role in this evolving agenda. As the EU’s largest defence company, and through its defence and space programs, Airbus is supporting a more coherent and unified EU approach to ensure our continent’s security and defence. To achieve this objective, a pro-active EU-Industry relationship is therefore critical in three key areas: healthy defence investment, strong cooperation and the successful implementation of policies.
Healthy investment
Europe needs to take a more strategic approach to its defence industrial base by developing an ambitious investment strategy. At the time of Russia’s invasion in 2022, just five EU countries (Estonia, Greece, Latvia, Lithuania, Poland) were spending above the NATO-required 2% GDP rate on their national defence capabilities. Over the last two decades, European militaries have lost 35% of their capabilities, while at the same time Russian defence spending grew by 227% and China’s expanded by 566%. Defence spending remained comparatively flat over the same period in Europe, at around 22%. While spending in Europe has improved following the Ukraine war, witnessing “the largest annual increase in total European spending in the post-cold war era”, it remains less than half of what is spent by the US (Sipri 2023). There is thus still more to be done.
To reach a collective 2% and fill existing national gaps, EU Member States could for instance decide to tap into EU funding in an effort to bolster the continent’s defence investment. This would also strengthen and balance the EU’s relationship with the US, who has for decades lobbied for higher European spending in this area.
When investing in defence, the EU shall take a more muscular financial approach to its own initiatives to support its defence industry. Recent mechanisms, like EDIRPA (European defence industry reinforcement through common procurement act) and ASAP (Act in Support of Ammunition Production), are potential game changers but lack the substantial funding required to make a real impact. The challenges of sustaining military assistance to Ukraine with sufficient stockpiles of weapons and spare parts have shown why European industrial capability planning should drive the development of its industrial base. The EU should also invest in domestic production of critical components, starting with semiconductors, to allow industry to purchase necessary materials more quickly, and cheaper.
Strong cooperation
For Airbus, a company resulting from cooperation between our four ‘Home Nations’ (France, Germany, Spain and the UK), the cooperative approach recently pushed by the EU is welcome and familiar. This is particularly true for the European Defence Fund, within which Airbus successfully coordinated key projects, such as the Defence Operational Collaborative Cloud or the Next Generation Rotorcraft Technologies. These projects will ultimately contribute to the defence agendas of the EU and its member states.
There is clearly a need to invest in the EU’s industrial base to preserve the integrity of European ‘strategic autonomy’ and thereby to break free from dependence on other international defence actors. The continued expansion of EU defence initiatives and programs should aim at maximizing collaboration among the stakeholders of Europe’s industrial base. Doing so shall drive competitive innovation, increase investment by defence companies and facilitate the exchange of ideas and expertise. Increased collaboration will also foster Member States’ EU preference in their defence procurement policies.
This doesn’t exclude the EU expanding its defence partnerships with like-minded allies, including the US and the UK, whose defence expertise would be a welcome addition to the EU’s vision and to explore opportunities for enhanced interoperability.
Policy implementation
In this EU endeavor for defence, policy implementation matters. The EU’s decision to publish a European Defence Industrial Strategy (EDIS) is therefore more than welcome. By working closely with Member States and industrial stakeholders across the EU, the Commission has confirmed its intention to help building the EU’s long-term defence capability and thereby to enhance Europe’s defence preparedness.
To achieve this objective, five strong policy priorities should be agreed upon and properly implemented in Member States’ procurement policies:
- EU preference: with the basic understanding that EU money shall be spent for the EU industry, the EU shall put in place regulatory or funding tools to incentivize, and maybe enforce, this “EU preference” principle through something like a “Buy EU Act”.
- Joint procurement: experimented through EDIRPA, this approach shall encourage Member States to get together to jointly buy and use equipment, including platforms and services, through a one-stop-shop mechanism (what one may call a “EU FMS” –, on the model of the US Foreign Military Sales).
- Building on EDF: to be useful, EDF R&D outputs shall feed follow-on collaborative programs. involving EU interested companies, through EU financing and/or regulatory tools supporting downstream collaboration making use of EDF results.
- Industrial investment: what is currently experienced with ASAP to help industry to overcome ammunition production bottlenecks is a critical breakthrough, with the EU supporting industry when taking investment risks to answer urgent purchase orders that haven not yet been fully processed an finalised. This requires an ASAP-like mechanism extended to other equipment production facilities.
- Procurement prioritization: to increase collaborative investment, there is a need for a joint EU procurement planning mechanism for shared military capacities providing industry with some clearly prioritsed and predictibile needs to focus on. Such mechanism, perhaps associated with EU funding, will ease collaborative industrial response to these agreed capacity priorities.
Everyone knows Bismarck’s quote: “A diplomacy without arms is like music without instruments!”. If the EU becomes serious about its common defence policy, it should now take defence investment and collaborative consolidation seriously. This is clearly what is at stake today.
