On Tuesday 15 February, the European Commission published its proposals to strengthen the competitiveness of the European defence market and cooperation between Member States in this field.
These proposals are the European Commission’s contribution to the draft ‘Strategic Compass’ - to be adopted in March - and could be discussed at the informal EU summit on 10-11 March. Speaking to the media, European Commissioner Thierry Breton highlighted three priorities for the European Commission: - strengthening and developing joint procurement of defence capabilities; - the reduction of strategic dependencies, which is the subject of a separate roadmap; - the need to better protect the new contested areas of space (see other news), cyberspace, and hybrid threats.
“These new initiatives are concrete steps towards a more integrated and competitive European defence market, in particular by strengthening cooperation within the EU, thereby increasing the size of projects, controlling costs and improving operational efficiency”, the European Commission said in its statement.
Only 11% of public spending on defence is done jointly, far from the 35% target set in the ‘permanent structured cooperation’.
The European Commission intends to develop new incentives to stimulate Member States’ investments in strategic defence capabilities, in particular when they are developed and/or acquired in EU cooperation frameworks. It is therefore expected to propose, by the beginning of 2023, a VAT exemption to support the joint acquisition and ownership of defence capabilities developed in the EU, while ensuring compliance with WTO rules.
The President of the institution, Ursula von der Leyen, announced such a measure during her State of the Union speech last September (see EUROPE 12791/3). Some common purchases made within NATO already benefit from VAT exemption, but this is not the case at EU level.
By mid-2023, the European Commission will propose new funding solutions to facilitate joint procurement by Member States of EU strategic defence priorities.
It could also revise the bonus mechanisms of the European Defence Fund (EDF) by amending Article 13 of Regulation 2021/697, which deals with cofinancing rates, in order to strengthen this mechanism when Member States are in a position to commit to the joint acquisition and/or ownership of defence capabilities under development (https://bit.ly/3oLXCiH ).
More generally, the European Commission will ensure that certain horizontal policies, such as initiatives on sustainable finance, remain consistent with the EU’s efforts to facilitate sufficient access for the European defence industry to financing and investment.
Arms export controls and resilience building
The European Commission also proposes that Member States consider ways of rationalising and progressively converging their arms export control practices, in particular for jointly developed defence capabilities, including in a Community framework, to allow EDF-funded products adequate and competitive access to international markets, without prejudice to Member States’ sovereign decisions.
The European Commission also intends to strengthen European resilience, particularly in cyberspace and in the fight against hybrid threats. It will therefore, in cooperation with Member States and the High Representative, assess resilience requirements to identify measures to address gaps and needs. The EU is expected to adopt a hybrid EU toolkit soon, and the European Commission will propose legislation on cyber resilience.
In addition, by the end of 2022, an update of the Joint Action Plan on Military Mobility (see EUROPE 12585/30) and various measures to address climate change challenges for defence will be presented.
See the communication: https://aeur.eu/f/cc
Reducing dependencies in critical technologies
In parallel, the European Commission unveiled a roadmap on critical technologies for security and defence. This is in response to a request from the European Council in February 2021 to present, “by October 2021”, an initiative to boost research, technological development and innovation, and to reduce the EU’s dependence on critical technologies and value chains.
“We will draw up, together with the Member States, a classified biennial report on the state of our strategic dependencies”, announced Mr Breton.
The European Commission commits to establishing an expert group in 2022 to facilitate exchanges with Member States on critical technologies, value and supply chains. It will be part of the Observatory of critical technologies, which is being set up and for which the European Commission is calling for an active contribution from the Member States.
By mid-2022, the European Commission will present a study on the EU security market and a document summarising proposals to encourage the adoption of capability-based approaches to be applied in all security sectors.
The European Commission also calls on Member States to commit to developing a coordinated EU-wide strategic approach to critical technologies within the framework of the ‘Strategic Compass’.
Next year, it will review existing EU instruments and propose new ways to encourage dual-use research, technology, development and innovation (RTD&I) at EU level.
The European Commission is also committed to supporting innovation and entrepreneurship in critical technologies through new tools (e.g. incubators or mixed investment funding mechanisms).
In addition, together with Member States, it will report in 2023 on the need to assess the risks of critical infrastructure supply chains, including in the digital domain, in order to better protect the EU’s security and defence interests.
See the roadmap: https://aeur.eu/f/ce (Original version in French by Camille-Cerise Gessant)