Europe to open defense markets over French "non"

The irony abounds in this development from Europe. The EU will move to open its defense contracting market to foreign bidders, including those in the US, in a series of economic reforms. This comes over the objection of France, which wants to protect its own defense contracting industry — although it just won a lucrative American defense contract:

Efforts to bring large swathes of the arms business under European law will deliver competitive advantages to US firms and discourage research and development spending, European defence companies warned yesterday.

The attempt by the European Commission to extend common market rules to the defence business is expected to make progress today with the publication of two draft directives, one aimed at streamlining export control procedures and the other governing rules for defence procurement.

Until now, well over 90 per cent of the European defence procurement market, worth €80bn ($118bn, £57bn) annually, has been excluded from European competition. Governments have done this using article 296 of the European Community’s founding treaty, which says member states’ essential security interests trump competition law. The commission has argued article 296 has been abused and a year ago published a new interpretation that tried to narrow its scope. However, that interpretation has not been tested in the absence of the new defence procurement rules.

A partnership between American contractor Northrop-Grumman and French Airbus producer EADS won a multi-billion contract last week for a new fleet of refueling craft, the KC-45A. That award created a large amount of criticism directed at the Air Force, which decided against the smaller but less expensive Boeing aircraft. Although EADS will do most of its work in the US to fulfill the contract, politicians in the Northwest and in DC objected to the reliance on foreign suppliers for critical defense systems.

The French have now objected over the same issues in reverse, despite winning the American contract last week. Unfortunately, they may have little sympathy from their EU partners. France has a history of competing against EU consortiums rather than joining them, such as with the Eurofighter Typhoon two decades ago. Their large defense export industry relies on French insularity, not cooperation. They want to use their upcoming EU presidency to force other nations to shut out international competitors, but they may find that a lonely task.

The US needs to press the point with the EU. If the French pressure them to close their market rather than open them, then the US needs to announce a re-think of the Air Force award last week.

CORRECTIONS: Typhoon, not Tycoon. Needed coffee and not tea this morning, I see… And “contract” should have been “aircraft”, too.