Yesterday Britain and 21 other EU nations (not Spain, Hungary or Denmark) agreed a ‘code of conduct’ with the European Defence Agency (EDA), on national defence procurement. This weakens the abilities of participating nations to derogate from European Directive 2004/18/EC on competition in public procurement through use of the ‘national security’ clause of Article 296 of the Maastricht Treaty. Its aim, as summarised by BusinessWeek, is to open the EU’s €70bn arms industry to cross-border competition. It has provoked a vocal response from euro-sceptics who see it as another seditious step towards the creation of a European defence identity, however such a reaction could well be masking the real risks of the agreement.
The voluntary code of conduct requires contracts above €1m in value to be opened for tender within the EU through a website monitored by the EDA. The intention is that “peer pressure” will lie behind a voluntary openness in presenting contracts and that whilst nations can exempt “highly sensitive” products, such activities will need to be justified. Whilst this latter fact has caused some concern, it is technically already the situation that justification should be provided to national courts or the ECJ if nations protect their industries under the Article 296 clause. The Commission has repeatedly complained that despite this, nations have abused the exemption to cover non-military equipment like lorries and regimental wine glasses. The Telegraph makes this point and lays out the Commission’s fear that the current closed state of European defence procurement widens the gap between the EU and US military. Their new role, under the voluntary code of conduct, will be to assess when nations are withholding contracts under exemption and to define, in the words of Nick Witney (Chief Executive of the EDA):
“where the boots and minivans stop and the guns start.”
Geoffrey van Orden MEP, the Conservative defence spokesman in the EP, quoted in the Telegraph, has said:
“Of course we want to encourage European armies to procure more effectively. But the driving impulse behind this is European political integration.”
Really? Is it?
Surely the bigger concern is that it’s yet another example of a potential boondoggle emerging from the EU Commission that could develop from an intergovernmental agreement to an overly regulated obstacle, hindering the improvement of defence market efficiency? The Commission is planning an ‘Interpretative Communication’ for later this year that will try to define the scope of Article 296, which currently relies partially on a list of exempted materiel that was compiled in 1958! Until this has been released, then whatever we sign up to will continue to lack clarity. As a result nations will almost certainly err on the side of caution as before and continue to exploit the Article 296 exemption in order to preserve national security interests, which as the voluntary code of conduct lacks legislative teeth, will not be hard to do. At this point the Commission could be tempted to issue a Directive on the issue – they are already looking into one. This would both undermine the intergovernmental aspect of the agreement and also risk tying the defence industry down with the same market regulation that has already crippled huge sectors of business. As Mr. Van Orden said: “Of course we want to encourage European armies to procure more effectively”. An Interpretative Communication on 296 will not remove the ability of Member States to withhold their contracts, but it does codify the boundaries of the voluntary code of conduct and will thus give it a chance to succeed without further top-down regulation.
I think it is unrealistic to accuse the EU of constantly manoeuvring towards a common defence identity when the 2010 Headline Goals have so stridently scaled back the potential for active combat engagement by EU troops. As commented on this blog on March 14th, European defence policy is undermined by much deeper flaws than can be fixed by a voluntary code of conduct on procurement. However, there is no doubt that European nations’ ineffective defence spending is crippling the ability of those nations to undertake effective combat operations either unilaterally or as part of a EU Battlegroup. An intergovernmental response, such as the one proposed, is surely a better response to this than a supranational imposition from the Commission. The risk, therefore, is not that this code of conduct is yet another step towards a European defence identity, it’s that it won’t work and that its failure may further propagate the problem that it is trying to fix.