European Defence Decision-Making

Dilemmas of Collaborative Arms Procurement

Antonio Calcara

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000039528
• Edition: 1
• Topic: Politik & Internationale Beziehungen
• Subtopic: Nationale Sicherheit

This book comparatively examines the preferences of four key arms-producing states towards European joint armaments programmes.

The European defence market is characterised by a mixture of inter-state competition and European cooperation, and this work assesses why countries sometimes decide to cooperate with their partners, while in other instances they refrain from doing so. In order to shed light on this empirical puzzle, the book focuses on state-defence industry relations in the four major European arms producers: France, Germany, Italy and the UK. The main argument is that the public or private governance of industrial suppliers and market size are the two decisive variables that explain the simultaneous presence of cooperation and competition in European defence procurement. Specifically, it argues that in public governance ecosystems, arms industries are able to "capture" the state's decision-making processes to their own advantage. In private governance ecosystems, the state is relatively autonomous from defence industry's influence and able to pursue larger macro-economic and military benefits. Moreover, the strategy pursued by governments and defence firms is decisively shaped by market size because of its importance in determining the relative costs and benefits of collaborative arrangements.

This book will be of much interest to students of EU policy, defence studies, European politics and International Relations.

1 Introduction

The European security landscape is undergoing a period of great transformation. First, the turmoil in the southern border and the crises in Libya and Syria have created security problems through the terrorist threat and the large-scale migration into European Union (EU) states. At the same time, Russian aggressive posture in Ukraine and persistent tensions on Europe’s north-eastern frontiers have spurred instability on the continent (MacFarlane & Menon 2014). Second, “Brexit” will bring one of the two major military (and nuclear) power of the continent out of the EU, and the election of US President Trump in 2016 has certainly exacerbated this sense of insecurity, given his erratic foreign policy towards the EU allies, especially in the context of the North Atlantic Treaty Organization (NATO) (Besch 2016).

All these factors may help explain the European activism in the defence field in the last few years. Following the publication of the European Union Global Strategy in 2016, EU countries have relaunched the Permanent Structured Cooperation in the defence sector (PESCO) and they have institutionalized the Coordinated Annual Review on Defence (CARD), to stimulate collaborative defence procurement and coordinated military spending. In this context, the new European Defence Fund (EDF) could represent a real “game-changing” initiative in this field, given that for the first time EU funds will be used to finance military-related research (European Commission 2017a). In the next budget cycle (2021–27), the EDF will be endowed with €13 billion: €4.1 billion will be allocated to research, while €8.9 billion will be assigned to co-finance capability development activities. EU funds could support up to 10% of project costs during development, but up to 20% for prototype costs. Moreover, the EDF also has a link with PESCO projects, for which there is an additional 10% bonus. The coordination of these initiatives has the potential to finally increase European countries’ defence spending and to consolidate the long-term objective of a competitive European defence industry and a defence equipment market.¹

Despite in recent years European defence and its industrial dimension have taken central stage in the public debate, actually European defence-industrial cooperation has a long history. Since the end of the Second World War (WWII), European countries have collaborated to develop joint armaments projects and to gradually harmonize their defence procurement needs. Moreover, especially since the late 70s, the increasing armaments costs and technological complexity, decreasing national defence budgets and the globalization of the defence market have made intra-European cooperation an absolute priority to sustain a competitive defence-industrial base (see Chapter 3). European defence-industrial cooperation would therefore seem a very appealing strategy for developing sophisticated weapons systems, given its economic (lower costs and economies of scale), operational (interoperability and standardization of military equipment) and political (strengthen European security and defence cooperation) positive externalities. Yet, despite these considerations, the European defence-industrial field still remains a collection of different national markets, in which autonomy in armaments production and the consequent protection of a domestic defence industry have hindered – so far – the consolidation of a truly European defence equipment market. Furthermore, rivalry and competition among national governments and defence firms have often made collaborative projects inefficient and unable to provide the expected added value to the development and production of major weapons systems.

The present book aims to investigate this complex mix of inter-state competition and European cooperation in the defence-industrial field. Through an innovative theoretical framework that combines Comparative Politics, International Political Economy (IPE) and International Relations (IR), this work sheds light on the preferences of France, Germany, Italy and the UK towards four main instances of European armaments cooperation. The book, besides its theoretical contribution, is also important for assessing the longue durée of European defence-industrial cooperation and it has significant policy implications for the debate on European defence, both from a geopolitical and from an economic and industrial point of view.

The European defence-industrial field: between cooperation and competition

Procurement can be defined as the process by which an entity, such as a business enterprise or a government agency, acquires the goods, services or assets it needs to carry out its activities. In a competitive market environment, countries tend to specialize in a particular economic sector in order to gain a comparative advantage; indeed, procurement contracts are, in general, open and competitive and resources are determined by competition and prices (Hartley 1991: 105). However, in defence procurement, free market principles are generally resisted because of many interrelated risks: specialization could reduce the available military capabilities a government has at its disposal, a government may become overly dependent on external suppliers and open procurement contracts could favour foreign firms and harm domestic industry and employment (Hartley 1991: 31). Indeed, defence procurement is constantly permeated by security of supply concerns, which refer to the guarantee that national defence planners will have access to equipment in peace time and during crises, no matter in which member state their suppliers are located. As a consequence, security of supply considerations provide a strong incentive to maintain a control over defence-related supply-chains, in order to minimize potentially dangerous dependencies on foreign sources of supply (Uttley 2018: 677–678). Therefore, defence procurement assumes peculiar characteristics that set it aside from other economic and industrial sectors. Nation states – by holding the monopoly of force – are the only legal subjects authorized to buy war material. The state is also the regulator of the defence industry because – through the legislation – it controls and constrains the activities of the firms settled in its own national boundaries (Heidenkamp, Louth & Taylor 2015: 4–6). At the same time, the high financial, technological and knowledge-based entry barriers of the defence sector create an oligopolistic structure of the supply panorama, in which few firms in the market maintain a special relationship with the state (Dunne & Sköns 2011: 6). The defence-industrial sector, therefore, is not a free competitive market, but rather a market characterized by monopsony, namely for the presence of a single buyer (the state) and a limited array of defence firms. Indeed, there are two main types of defence firms that populate the defence-related market. At the higher end of the sector sit firms that are responsible for the final construction, assembly and delivery of weapons platforms. Referred to as “prime contractors”, these firms serve as the main point of contact with their customers. Below them reside a range of small and medium enterprises (SMEs) that are usually subcontracted to undertake niche production tasks and supply specific components for the finished system.

The industrial production of armaments has always been considered a strategic area for the independence and “prestige” of the state. The sociologist Anthony Giddens, drawing on the famous works by Charles Tilly, noted that even before the emergence of nationalism and nationalization of polity, “it was war, and preparations for war, that provided the most potent energizing stimulus for the concentration of administrative resources and fiscal reorganization, consolidating state power and establishing its bureaucratic and territorial form that endures to this day” (Giddens 1987: 112). Similarly, the historian Edward Kolodziej wrote that European states have been in “war making, war implementing and arms transfer business for centuries” (Kolodziej 1987: 6). As such, armaments production is considered an indispensable good, seen as the basis of national independence and for advancing states’ interests. For centuries, therefore, the process of developing weapons was a purely national affair, in which the state financed domestic defence industries’ programmes and consistently purchased the final products.

Yet, after WWII, European countries began to collaborate in defence procurement through the establishment of bilateral and multilateral joint armaments programmes. This unprecedented development was mainly due to the United States’ (US) security umbrella over the European continent and by the common Soviet threat. In this regard, Josef Joffe and David Calleo argue that the presence of the US through NATO mitigated traditional enmity among Western European states (Joffe 1984; Calleo 1987). In other words, the presence of Washington as the number one partner in European defence relieved the West Europeans’ hierarchical struggles that, in the absence of the US, would almost certainly be unleashed (Creasey & May 1988: 2–3). Collaborative defence procurement activities were also highly encouraged by the NATO involvement in European countries’ defence planning, in order to improve standardization and interoperability among allies’ weapon systems. During the 50s, the 60s and the 70s, several joint armaments programmes were developed in Europe, especially among British, French, German and Italian defence firms in various constellations. Moreover, since the 80s, European governments created several ad hoc armaments organizations and facilitated the establishment of some EU-level initiatives in the defence-industrial sector (DeVore 2013). In this regard, European governments and industries have realized that defence-industrial collaboration is, ideally, a convenient strategy to develop sophisticated weapon systems, in order to ensure cost saving, economies of scale and military interoperability (Lorell & Lowell 1995: 8; DeVore 2014: 417–419).

Nevertheless, despite these significant developments, defence-industrial cooperation continues to be the exception and not the rule in the European landscape (Andersson 2015). European countries’ decision to cooperate with other partners is difficult to predict and the means for equipping European armed forces remain predominantly a collection of different national procurement schemes (Cobble 2004: 2). Protectionism, oligopolistic market straining and a tendency to source inputs from domestic suppliers have prevented a more structured defence-industrial cooperation (Masson et al. 2015; Mölling 2015). Moreover, Article 346 of the Treaty for the Functioning of the European Union (TFEU) constituted the legal basis that exempted defence-related procurement from the Internal Market rules. Indeed, according to this article, the member states are not obliged to disclose any information they consider contrary to their essential security interests (Trybus 1999). European countries, given that there is no common agreed definition on what constitutes essential security interests, have used this article extensively. To give just a striking example, in the early 2000s about four-fifths of the total value of defence equipment procurement in the EU was exempted through the article (Hartley 2008). According to the data collected by the European Defence Agency (EDA) in 2017, European countries spent 20% on collaborative defence procurement and only 9% on collaborative research and technology (R&T).² The main problem remains the duplication among platforms and systems currently in use and in production in Europe. Back in 1995, Pierre De Vestel highlighted that Europeans were producing a number of defence-industrial platforms three times higher than the corresponding US programmes, and warned that the financial costs of such duplication were soon to become unsustainable (De Vestel 1995). For instance, in order to improve air-power capabilities, European states have produced three different multi-role combat aircrafts: the Rafale (France), the Gripen (Sweden) and the Eurofighter (Britain, Germany, Italy and Spain), stressing the waste of financial resources, as well as the lack of interoperability among different weapon systems. In a study on “Armaments Duplication in Europe”, Briani (2013) showed how the relationship between European and US open production lines in all armaments domains is three to one, with a total of 36 open lines in Europe and 11 in the US. A more recent report on European defence capabilities confirms this worrying trend. In 2017, while the US used a total of 30 types of major weapon systems, EU members used 178, presenting major logistic challenges from training to spare parts and interoperability (Munich Security Conference 2017).

For what concerns defence procurement, European countries employ different strategies to tackle this fundamental issue. In general, in order to acquire weapon systems, advanced industrial democracies possess three options: autonomously produce their own armaments, import them from foreign suppliers or collaborate with other states to co-produce weapon systems (DeVore & Weiss 2014: 497). This is the decision-making dilemma of arms procurement policy. European countries sometimes decide to cooperate with partners in the development of collaborative defence-industrial activities, while sometimes they prefer to maintain defence procurement on a strictly national basis or to buy weapons “off the shelf”. In other words, defence-industrial relations among European countries are characterized both by inter-state competition and European cooperation. In order to come to terms with this puzzling mix of national persistence and European cooperation, this book proposes to answer the following research questions: Why do European countries sometimes decide to cooperate with their partners in defence-industrial activities, while in other instances they decide to refrain from acting cooperatively? What are the sources of European countries’ preferences towards defence-industrial cooperation?

Table 1.1 The empirical puzzle and the research questions

Decision-making dilemma of arms procurement	Empirical puzzle	Research questions
Autonomously produce armaments (non-cooperation) Import arms from foreign suppliers (non-cooperation) Collaborate with other states to develop common defence-industrial activities (cooperation)	Defence-industrial relations among European countries are characterized by a complex mix of inter-state competition and European cooperation	RQ1: Why do European countries sometimes decide to cooperate with their partners in defence-industrial activities, while in other instances they decide to refrain from acting cooperatively? RQ2: What are the sources of European countries’ preferences towards defence-industrial cooperation?

A comparative analysis of national defence-industrial ecosystems

Existing academic literature on European defence-industrial cooperation has not produced a satisfactory answer to the research questions highlighted above. The International Relations (IR) literature on the subject has focused predominantly on the systemic factors that discourage or encourage greater defence-industrial cooperation at the EU level. Traditionally, the Realist approach has been sceptical about the possibility of defence-industrial cooperation, assuming that governments will enact policies designed for the sole objective of maximizing their security against military threats. Therefore, sovereign states are likely to pursue defence-industrial autonomy because of “anarchy” in international affairs and the potential dangers related to being dependent on war supplies from foreign countries (Waltz 1979; Hoffmann 1982; Dyson & Konstadinides 2013). However, since the launch of the ESDP/CSDP,³ most Realist stud...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• List of tables
• Acknowledgements
• 1. Introduction
• 2. Explaining European defence-industrial cooperation: a theoretical framework
• 3. Defence-industrial decision-making: France, Germany, Italy and the UK
• 4. The NATO helicopter for the 90s
• 5. The Eurofighter
• 6. Airbus A400M
• 7. Conclusions
• Annex: interviews
• References
• Index