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EU Steps Up Its Defense Spending, But Washington Says Not So Fast

Posted by Paul McLeary on


French amphibious landing unit in Norway, part of the Trident Juncture 2018 exercise.

WASHINGTON: Just days before thousands of government officials and defense industry executives from around the globe gather at the Paris Air Show, neither the US nor the European Union appears ready to back down from a war of words over an ambitious European project to boost its homegrown defense industry.

At issue is the proposed $14 billion European Defence Fund, along with a host of procurement and development programs under the Permanent Structured Cooperation, or PESCO, that the European economic alliance is undertaking. American officials complain the plan is biased against non-EU defense firms and have suggested imposing penalties unless their concerns are addressed, but top European officials show no inclination to shift course.

Europe’s dilemma: President Trump wants the allies to spend more on their own defense — but it also wants them to buy defense equipment from the US.

Sydney J. Freedberg Jr. graphic

SOURCE: Stockholm International Peace Research Institute (https://www.sipri.org/)

“The US wants Europe to have a strong industrial base,” Jorge Domecq, Chief Executive of the European Defence Agency, told me recently on the sidelines of the EU-Foreign Policy Defense Forum. But PESCO and EDF “do not change the rules of the defense procurement market in Europe,” he said, and they don’t restrict US defense companies. Despite American suggestions to the contrary, he insisted, the proposed rules and programs “are not protectionist.”

The long-simmering disagreements burst into the open last month after a terse letter from US officials to their EU counterparts was leaked. The letter complains about “poison pills” embedded in the plans that “effectively preclude participation by any company that uses U.S.-origin technology.” The letter also relates concerns over the EU development projects duplicating NATO efforts, and suggests Washington would consider slapping penalties on EU member states if American companies are shut out.

Pedro Serrano, a deputy secretary general at the European External Action Service, told me that, “whatever the outcome is, there’s going to be a door, and the door is going to be open for US companies as long as concerns that we have — regarding security of supply and freedom to decide where you’re exporting — are dealt with.”

Washington has yet to be convinced.

Speaking across town on the same day as the EU forum, the Pentagon’s chief weapons buyer, Ellen Lord, said she was “concerned about EDF and PESCO and the opportunity for U.S. industry to participate in Europe, as European industry has the opportunity to participate in the US.”

The Europeans, unsurprisingly, insist US concerns are overblown.

Serrano said “we’re not touching procurement rules or the access to European markets.”

While Domecq said the proposed EU rules would keep a level playing field, he pointed out that Washington has a role to play in the controversy, as well. “The same thing happens in the US,” he said, referencing the Pentagon’s recently announced Trusted Capital Marketplace, which aims to connect venture capital firms with small tech companies that might have items of interest to the Pentagon. The program “is only for US industry,” he said. “Nobody is complaining about that. So I think it’s totally reasonable to try and protect the technological industrial base which delivers the capabilities we need.”

A State Department official who spoke on the condition of anonymity admitted there’s some irony in that the EU is simply reacting to Washington’s demands. “We have asked Europe to do more and they are doing more; this is Europe responding to the US and our president,” the official said. The problem is that, while the Europeans have made many specific assurances about how they would ensure fair play, these promises aren’t contained in any of the documents the EU is considering putting into action.

“These things are not written down,” the official said. So, from Washington’s perspective, the EU pledges are far from a sure thing.

The other longstanding anxiety in Washington about a Europeans-only, EU-led defense effort is that it might compete with, duplicate, or outright undermine the trans-Atlantic NATO alliance. Serrano said everything the EU plans to buy is “very much in cooperation with NATO. Whatever is developed within PESCO or EDF will respond to a priority that has been identified within NATO Therefore there is no possibility for this to be something that will harm NATO. Quite to the contrary.”

Trump at the 2018 NATO summit

He added that the thinking behind this new EU effort is less about creating unique European defense capabilities, or competing with NATO, than it is about streamlining the European defense industrial base across borders.

All of this points to another concern that underlies at least part of the American pushback: a strengthened and better integrated European defense industrial base might challenge the decades-old dominance of US defense firms in the international market.

“What is important is that there is a reciprocal flow of technology sharing without limitations on both sides of the Atlantic,” Domecq said, suggesting that more European military products could find a home in the US. “That would be good in the future.”

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