1. INT/406 - R/CESE 460/2008 EN/o
EN99 rue Belliard - B-1040 Brussels - Tel. +32 (0)2 546 90 11 - Fax +32 (0)2 513 48 93 – Internet: http://eesc.europa.eu
European Economic and Social Committee
INT/406
A Strategy for a stronger and
more competitive
European Defence Industry
Brussels, 17 June 2008
WORKING DOCUMENT
of the
EUROPEAN ECONOMIC AND SOCIAL COMMITTEE
on the
Communication from the Commission to the European Parliament, the Council,
the European Economic and Social Committee and the Committee of the Regions:
“A Strategy for a stronger and more competitive European Defence Industry”
COM(2007) 764 final
_____________
Rapporteur: Marius – Eugen Opran (Gr.I – RO)
_____________
Administrator: J. Pereira dos Santos

2. - 1 -
Study Group on: Communication from
the Commission to the European
Parliament, the Council, the European
Economic and Social Committee and the
Committee of the Regions:
“A Strategy for a stronger and more
competitive European Defence Industry”
COM(2007) 764 / INT 406
President:
Rapporteur:
Members:
GKOFAS (GR-III)
OPRAN (RO-I)
BOYLE (UK-II)
CABRA DE LUNA (ES-III)
CARR (EE-II)
CASSIDY (UK-I)
CEDRONE (IT-II) (art. 62 – Iozia)
DANEV (BG-I) (art. 62 – Behar)
D'SA (UK-III)
GENDRE (FR-II)
van IERSEL (NL-I)
KOTOWSKI (PL-III)
METZLER (DE-III)
SCHALLMEYER (DE-II) (art. 62 – Ott)
VOLEŠ (CZ-I)
Experts:
Mrs Cathy NOGUEZ (for the Rapporteur), Thales Alenia
Space, Director for European Affairs, Brussels Office
*
* *
On 5 December 2007 the European Commission decided to consult the European Economic and
Social Committee, under Article 262 of the Treaty establishing the European Community, on:
The Communication from the Commission to the European Parliament, the Council, the European
Economic and Social Committee and the Committee of the Regions:
“A Strategy for a stronger and more competitive European Defence Industry”
COM(2007) 764 final.
The Section for the Single Market, Production and Consumption, which was responsible for
preparing the Committee's work on the subject, adopted its opinion on …
The rapporteur was Mr. Marius – Eugen Opran (G .
At its ... plenary session, held on … (meeting of ...), the European Economic and Social Committee
adopted the following opinion by ... votes to ... with ... abstentions.
*
* *

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I. CONCLUSIONS
1. Currently, the EU MS have under development a numerous different National Military
Projects 1
underway (89 for the main categories of Armaments, comparing with US DoD /
DARPA only 27 major projects), often motivated by Regional economic needs instead of a
solid commitment to either serious Military Capability or Economic Efficiency, leading to the
European Market fragmentation, unnecessary duplication and often poor interoperability.
2. A Continuous Degrading of European Armed Forces and - to make matters worse, the
reduced State of Capability and Readiness leads to the derogation of the European Defence
Technological and Industrial Base (DTIB), allowing Foreign Competitors to gain ground on
us almost every year, further complicated by Defence Inflation and low levels of Military
Expenditure, particularly for the small and medium-sized MS - and some of the larger ones,
not least Spain, Italy and Germany, each spending merely between 1.1% and 1.8% of their
GDP on Defence.
3. In the actual circumstances, the Europeans are increasingly less able to
contribute anything of real substance to the Transatlantic Partnership, reducing the
effectiveness of NATO and producing an environment more conductive to American
unilateralism.
4. Restructuring the Defence Industry in accordance with the Lisbon Strategy represents the
actual major task conditioning Survivability and Global Future of the EU Defence Industry.
5. First of all that means to set up a real European Defence Equipment Market (EDEM), in
accordance with the full set of specific requirements unique for this special domain:
5.1. Strict Rules framing the Production and the Sales – this sensitive matter being entirely
under the MS decision, outside the scope of the Community competence (referring first to
the Third - Countries Export Operations);
5.2. Secret Character of the Activities, imposing severe constraints on the Access to Information;
6. Technological Excellence Level of the Products, requested by the Beneficiary in order to
successfully accomplish their missions.
7. The Public Procurement activities should be done according with a Common Set of Rules,
accepted by all MS in order to have a better utilisation of the allocated funds and to
strength the DTIB - by:
1
The EU MS Armed Forces are currently using 4 different models of Main Battle Tank, more than 20 different
Armoured Vehicles models, two types of Jet Fighters produced in the same country - one of them under
simultaneous production in all four countries of origin of the joint developers. We have more than 20 different
Armoured Vehicles models under development, in the same time – by contrary – the activities regarding the
development of a new 5th-Generation Jet Fighter, Ground-to-Air Laser Weapons or Reactive Protection of the
Army Combat Vehicles are totally missing!

4. - 3 -
7.1. Defining an European Common Model for the Public Procurements (as a “Template”) in
the field of Defence and Security, accepted by the all MS;
7.2. Developing the right Benchmarking procedures specially dedicated to evaluate the
contribution of the both Codes issued by the EDA, despite of the fact that the aspects
regarding the Security of Supplies was not included;
7.3. This problem was corrected by the Commission with the new Defence Package, introducing
both the Security of Supply and the Security of Information - as Selection Criteria.
8. The process of DTIB Reinforcement can be supported too by setting up:
8.1. A strict and efficient Community control of the Foreign Investments in the area of EU
Defence Industry, in order to avoid illegal access to the latest technologies developed by
the EU Defence industry companies;
8.2. A harmonised Common Politics in the field of the Golden Share Practice (not included as
individual aspect in the Strategy proposal of the Commission) imposed by some EU MS as a
mandatory condition for the privatisation process of the Defence Industry. This condition,
practically never used by the governments after privatisation, creates a false motivation for
the foreign investors to offer acquisition prices much lower than the real market price.
9. Links with the Lisbon Strategy: The future industrial policy for the European Defence
Industry can fully fulfil the following aspects emphasized by the Lisbon Strategy for growth
and jobs:
9.1. Building up the Internal Market and improving European and National Regulations;
9.2. Encourage knowledge and innovation by promoting more investment in R&D:
• In line with the Lisbon goal, the Defence Industry should increase research investment
with the aim of approaching 3% of Total Defence Expenditure (TDE) 2
;
• EU Member States could increase the efficiency of research spending if they pool
research activities and work more closely together - for example, through the
Commission and through the European Defence Agency (EDA);
• Furthermore, it could be considered to promote the use of Synergies between Civil and
Military Research. It is probable that the European Security Research Programme will
co-finance technology developments which might lead to Dual - Use applications,
mutually increasing the knowledge and innovation about civil and military technologies;
2
Whereas the United States spends 3.3% of TDE on defence R&T, the EU MS together spend only 1.1%

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9.3. More and better Jobs: The development of new defence technologies, especially the
increasing complexity of defence systems, will require excellent technological skills and a
well trained workforce. A European defence industry able to respond to all future military
needs will require a special human resources politics, including important investments in
the continuous professional training of its own personnel.
10. An industrial policy for the defence sector will emphasize the need for Member States and
industry to better coordinate the national programmes, work more together and ensure
that all capabilities are available which are needed for a European Security and Defence
Policy (ESDP). This cooperation would ensure the best use of available resources and the
identification of new technologies and products needed for future defence missions.
Note: According with the actual political status, two Western non-EU countries – Switzerland and Norway
3
-
both of them having highly developed defence industry national sectors and also officially recognized
as traditional partners of the EU and of NATO in various projects, can not participate as members to
the creation of EDEM. This situation can push these countries - like an unique alternative option - for
a more stronger alliance and cooperation with US defence industry, including facilities for a massive
implementation in Europe of the American companies in order to compete the new – born EDEM on
its home location. It is the role of the Community Institutions to keep away EU from this potential
threat by direct negotiations followed by political decisions. A similar case for discussion and
evaluation is Israel.
11. In order to lift the actual barrier blocking the R&D joint programs, the Council by the EDA
should fill up the actual existing gap between various national politics of the MS by setting
up a new “List of the Military Products” considered to be of general common interest for
the Community’s members. Of course, the Council by EDA should start work on issuing the
new “Euro-Armaments List” only after applying and being officially mandated by the EDA’s
Ministerial Steering Board (EDA-MSB).
12. Subject of the unanimous approval of the new “Euro-Armaments List” by the assembly of
the MS, it will be the role of the EDA to define the technical & operational requirements for
the Future Generation of Euro-Armaments to be designed and manufactured under the
brand “Made in EU” – with the support of a team of independent experts from all MS.
13. To have a successful “Euro-Armaments” Programme, after the Commission, the Council by
EDA and the MS will decide on the rules regarding the Rights of Intellectual Property
defending the Intellectual Property Rights of the Industrialists on the new-developed
3
On May 26, 2008, the EU Defence Ministers agreed to allow non-EU member Norway to participate in the
Regime on Defence Procurement, under which governments and industry voluntarily commit to more open
cross-border competition for defence equipment contracts. The decision was taken at a ministerial Steering
Board meeting of the EDA, to which all EU members except Denmark belong. “We are delighted that Norway will
be participating in the Regime, which will help our efforts to open the EDEM and further strengthen our DTIB”,
said Head of the Agency Javier Solana. Norway has an Administrative Arrangement for cooperation with the EDA.
Although not a member of the EU, it participates in its European Security and Defence Policy (ESDP) in many
ways, contributing troops to ESDP operations and forming part of the EU Nordic Battle Group.

6. - 5 -
Know-How and the effective Business Management Principles, the EDA R&D allocated
budget should be exponentially increased. Informally, the Ministers of Defence of the
Member States (MS) proposed, as a short-term target, 2% of the R&D European Defence
expenditure - Euro 500M based on actual expenses. The ministers mentioned also the
possibility of increasing the budget limit to EUR 900 M, or 2% of the credits contracted for
the development of new equipments and technologies
II. MILITARY AND POLITICAL ASPECTS AND THEIR IMPACT ON THE SECTOR
14. The roots of actual critical situation was all realised a long time ago, starting during the Gulf
War in 1991, raising again after the subsequent Bosnian and Kosovo wars and culminating in
the ongoing intervention in Afghanistan, where many European militaries have found it
difficult to interoperate with the American troops - or even with other European countries
contingents.
15. Indeed, facing the ongoing rise of China, India and Russia, alongside a myriad of regional
powers like Brazil and Iran, the need of a strong and militarily capable European Union has
never been greater, despite of the fact that the power of the individual power of its Member
States - even UK and France - is in a steady albeit relative decline. Also, the European’s
influence in Washington has been reduced, due to the growing Asian-Pacific orientation of
the US, but also because of the widening gulf of power between the two sides of the
Atlantic.
16. As one of its major priority, the French Presidency of the European Council (01.07. –
31.12.2008) drove forward the European Security and Defence Policy (ESDP), first of all by
redrafting the still into force 2003 document 4
. Also, the European Parliament's defence and
security subcommittee is currently preparing its own document on ESDP.
17. The drive to enhance Europe's military capabilities was partly responsible for the St. Malo
Agreement between the UK and France in 1998, the aim of which was to provide for a
greater level of European military cooperation with NATO. The conditions may now be right
for the UK and France to take European defence integration on to a new plane, opening the
door for all MS to fulfil the requirements that have to be met by the members of EU defence
forces.
18. Referring to EU military capabilities, EU High Representative for the Common Foreign and
Security Policy, Javier Solana noted at the informal meeting of EU defence ministers in
Deauville on 1 October 2008, that the European Union urgently needs national action to
overcome current shortcomings. This will only be possible if Member States make informed
decisions on specific projects. Over the past few months there have been some interesting
proposals by the Member States, with the active support of the EDA, mainly on helicopters,
4
Compiled in 2003 by Robert Cooper and Javier Solana.

7. - 6 -
strategic transportation, air-sea cooperation, space, military naval observation and maritime
mine clearance.
19. In his speech at the High-level conference on EU - NATO relations (Paris, 7 July 2008),
NATO Secretary General Jaap de Hoop Scheffer pointed out that many EU members accept
the need for a closer EU-NATO relationship and agree that a strong ESDP is becoming
increasingly necessary from a transatlantic perspective. In the same speech he tabled a
proposal for specific cooperation between the two organisations on a joint strategic airlift
project bringing together the A400M and the C17.
20. Some politicians already expressed their support for the solution that the way forward is for
we Europeans to band together in the European Union, which should then become a
member of NATO in its own right, replacing the current twenty-odd European Members.
III. PROPOSALS
PROPOSAL 1: The Committee considers that the Council, the Parliament, the Commission,
the Council and the EDA - SBMF should promote during 2009 – 2010, a full set of political,
financial and economic measures enforcing the EU Defence capabilities – in order to:
eliminate the actual distressing factors discontinuing the healthy growth of the
European Defence Industry – mainly: (a) Market fragmentation between different
manufacturers of the same category of armaments; (b) Unnecessary duplication of the
R&D activities; (c) Often poor interoperability between different national contingents,
members of the European Joint Task Force (or similar);
In the same time, improving at the level of the all Member States: (a) The Defence
Capabilities; (b) The Armaments Manufacturing Capacities 5
.
PROPOSAL 2: The Committee requests to the Commission and the Council mandatory
represented by the EDA to define during 2009 a EU Common R&D Defence Programme
“DEFENDING THE FUTURE!” - approved by the highest level political organs: the Council,
the Commission, the High Representative for CFSP and – the most important – by the EDA -
SBMF. In order to promote and to accelerate the European R&D cooperation in the area of
Defence projects, the main task of the new approach should be to define the List of the
Military Products considered by the all MS as representing the highest priorities – “THE
EURO-ARMAMENTS LIST”. The main goals which motivated that are represented by the
necessity to achieve the minimal requirement of standardisation and interoperability
among the EU military capabilities.
5
It’s embarrassing that when European nations – with almost 2 million men and women under arms – are only
able, at a stretch, to deploy around 100 thousand at any one time. EU countries have around 1,200 transport
helicopters, yet only about 35 are deployed in Afghanistan. And EU member states haven't provided any
helicopters in Darfur despite the desperate need there.are deployed in Afghanistan. And EU member states
haven't provided any helicopters in Darfur despite the desperate need there.

8. - 7 -
21. The Committee strongly recommends to the EDA – SBMF to urgently set up and approve the
level of the obligatory annual contribution of the MS 6
– as percentage of the National
Defence R&D Budget allocation - to the EDA Common Fund for the R & D activities.
European nations – with almost
PROPOSAL 3: During the next Czech Presidency, the Committee requests to the Council, the
Commission and the EDA – SBMF:
to express their firm position regarding the definition and the implementation of the
Euro-Armaments concept;
to set up a new Strategic Document on the EU Common Policy on Euro-Armaments :
(a) Identifying the Challenges and defining the needed Operational Capabilities;
(b) Establishing the Targets for National Investments in R&D, production and training –
in order to upgrade the Combat Level of our Armed Forces;
(c) Establishing the concrete actions for an efficient Cooperation between the MS;
(d) Supporting the backing up of the Strategy with Political Drive;
to organize during the 2-nd qt./2009 the 1st
EU Forum on Euro-Armaments – as a large
debate with the participation of the governments, industrialists, trade unions &
organised civil society.
22. If the Euro-Armaments concept is approved by the EDA-SBMF, the Committee considers that
a possible Road Map for the Euro-armaments R&D programme setting out concepts and
possible stages could be represented as follows:
a. EDA: using the EDA CAPTECH database, selecting and appointing the EDA Independent
Experts Group (IEG) of 27 people (27 EU MS – Denmark + Norway) – one expert from
each country;
b. IEG: setting up the list of armaments included in the category of "Euro-armaments" to
be developed jointly and to become operational within all EU MS Armed Forces; defining
the Technical and Operational Requirements (TOR);
c. EDA: sending the proposed list of Euro-armaments and the TOR to the military joint
staffs of all MSs for evaluation and comments;
d. EDA: receiving the comments and requests of each MS declaring their interest in
participating (or not) in a specific Euro-armament project, taking needs into account and
establishing the final order and schedule for developing Euro-armaments;
e. IEG: modifying initial TOR in accordance with amendments received from the MS;
6
The Ministries of Defence of the MS already approved last year, like short-term objective, an annual contribution
of each country representing 20% of the National Defence R&D allocated budget, the financial estimation being
close to EUR 500 M.

9. - 8 -
f. EDA: selecting priorities for Euro-armaments in accordance with the existing budget;
g. EDA: establishing the optional share of national financial contributions for each Euro-
armaments project in accordance with MS expressions of interest;
h. IEG: preparing tender documents;
i. EDA: launching the tender procedure to select the integrator – company/JV - in charge
of drawing up technical documentation and developing the project demonstrator for
each type of Euro-armament project;
j. IEG: technical and operational evaluation of bids;
k. IEG: field test and evaluation of the demonstrator, before taking any final decision on
starting industrial production to meet firm orders by MS;
l. IEG: preparing tender documents;
m. EDA: as proprietor of the intellectual rights of the project and of the demonstrator, the
Agency will select the system manufacturing integrator by a tender procedure;
n. IEG: technical and operational evaluation of bids.
PROPOSAL 4: The Committee considers that the Parliament, the Council and the
Committee should set up a special EU INTER-AGENCY COMMITTEE FOR THE CONTROL OF
THE FOREIGN INVESTMENTS IN THE AREA OF EUROPEAN AEROSPACE AND DEFENCE
INDUSTRY – a EU adapted version of CFIUS 7
.
Its task: to reviews the Community security implications of foreign acquisitions
of the EU companies or operations
8
.
7
The Committee on Foreign Investment in the United States (or CFIUS) is an inter-agency committee of the United
States Government that reviews the national security implications of foreign acquisitions of U.S. companies or
operations. Chaired by the Secretary of the Treasury, CFIUS includes representatives from 12 U.S. agencies,
including the Defense, State and Commerce departments, as well as (most recently) the Department of
Homeland Security. CFIUS was established by Gerald Ford's Executive Order 11858 in 1975. Ronald Reagan
delegated Presidential oversight to CFIUS by his Executive Order 12661 in 1988.
8
A Russian consortium owns +6% percent of EADS common stock. Analysts expect the Russian consortium of
banks and aircraft companies to increase their ownership of the EADS to at least 10% of common stock. Given
the current low share prices, the politically-controlled Russian banks will probably increase their holdings of this
stock. When evaluating the various political and economic issues, EADS management should consider the fact
that an increased Russian share holding might well empower its high-level officials, resulting in additional
demands on the Airbus Board.

10. - 9 -
PROPOSAL 5: The Committee considers the Organisation for Joint Armaments Co-operation
(OCCAR) created by France, Germany, Italy and the UK to be a precursor of a genuine
common armament agency/programme management agency, and recommends that
Council start consultations with all Member States regarding their position on a possible
official merger/joint cooperation between this organisation and the EDA, as envisaged in
the joint action that created the EDA. This would allow new programmes to start aimed at
developing a new generation of major European armament systems to be used jointly by all
Armed Forces and Security Forces of the EU Member States. The Committee is putting
forward this proposal in good faith, and understands that implementation is ultimately
solely a national responsibility.
23. Regarding the position expressed by some international politicians supporting EU to
become a member of NATO in its own right and replacing the current twenty-odd European
Members of NATO, the Committee believes that this option is not of actual interest for the
moment!
a. Of course, this requires much Political Solutions, not least a decision by the so-called
“Neutral Member States” like Austria and Ireland to take a firm position;
b. The EESC thinks that this solution will also necessitate considerable Institutional Changes in
Brussels and a certain Transfer of Powers between Member State capitals and the
European capital should be actually postponed …
c. … but can be considered like a goal for the New Generation of Young Politicians and
Military Experts can work towards!
24. Finally, the Committee much appreciates the official public position expressed on 30 May
2008 by the Council on current and future problems of the EU defence industry and agrees
that this document should be included within the Commission's strategy as a basis for key
guidelines to be followed by the future action plan for the sector 9
.
IV. THE EU DEFENCE INDUSTR IS STILL COMPETITIVE?
25. The answer is “Yes” – but does face a large number of constraints:
25.1. The European Market remains fragmented, each MS trying to preserve its status of “Donor
of Orders” and “Protector” of its own National Defence Industry;
25.2. In fact, the so-called Competition with the US is an asymmetric one, because of the Gap
between the levels of the Budgetary Allocations and of the Lack of Reciprocity regarding
the Market Access.
9
PRESS RELEASE, 2871st Council meeting on Competitiveness (Internal Market, Industry and Research), 29-30 May
2008. par. 3.3. http://data.ellispub.com/pdf/EN/2008/Council/100733.pdf

11. - 10 -
TABLE 1: Duplication of R&D activities and programmes in the EU Member States
(Source: UNISYS 2005, page 104)
AIRCRAFT
Research Cost
(Billion Euro)
Expected Output
(Units)
EUROFIGHTER 19.48 620
GRIPEN 1.84 204
RAFALE 8.61 294
JSF (US) 19.34 3003
TABLE 2: Combat Aircraft research costs
(Source: UNISYS 2005, page 105)
TYPE OF DEVELOPED SYSTEM EUROPE USA
LAND SYSTEMS
Main battle tank 4 1
Armoured Infantry Fighting Vehicle 16 3
155 min howitzer 3 1
AIR SYSTEMS
Fighter-strike 7 5
Ground attack – trainer 6 1
Attack helicopter 7 5
Anti-ship missile 9 3
Air-air missile 8 4
SEA SYSTEMS
Frigate 11 1
Anti-submarine torpedo 9 2
Diesel submarine 7 0
Nuclear-powered submarine 2 1
TOTAL 89 27

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Table 1: Comparison between EU and USA in the area of Defence Expenditures
General - for the FY2006.
Table 2: Comparison between EU and USA in the area of Defence Expenditures –
Reform - for the FY2006.
10
Europe means 26 EDA participating Member States.
11
Euro/US Dollar exchange rate is based on average for 2006 rate of 1,2556.
12
Authorized strengths of all active military personnel; includes non- MoD/DoD personnel in uniform who can
operate under military command and can be deployed outside national territory.
European - US Defence Expenditure - General
Europe
10
US
11
Total Defence Expenditure € 201 Bn € 491 Bn
Defence Expenditure as a % of GDP 1,78% 4,7%
Defence Expenditure Per Capita € 412 € 1,640
European - US Defence Expenditure - Reform
Europe US
Military Personnel 12
1,940,112 1,384,968
Civil Personnel from Military 484,827 699,520
Defence Spent per Soldier € 103,602 € 354,898
Investment (Equipment Procurement and R&D) per
Soldier
€ 20,002 € 102,489

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