Defense from Outside

In its pursuit of greater sovereignty in defense procurement, Europe should open its doors before companies from trusted non-EU countries. Such companies are considered capable of bringing in key technologies, manufacturing capacity and logistical solutions that would improve European defense resilience.

Cited as the principal goal is ‘Europeanizing’ these foreign entrants. They must be fully integrated into the European industrial ecosystem, and foreign dependencies in critical capabilities must be reduced. Emil Archambault, associate fellow at the Center for Security and Defense, German Council on Foreign Relation, discusses this issue.

Today’s Europe really needs to reduce foreign dependencies on whatever source, and the defense industry is no exception. Provided they meet necessary conditions, companies from trusted allies can help Europe build industrial capacity and enhance interoperability worldwide. To this end, the EU’s NATO members and foreign defense companies must both work to Europeanize non-EU defense companies, particularly by localizing production and support throughout the product cycle.

Beyond providing access to high-end technologies and maintaining close ties with key defense partners such as the USA, opening the European defense market to foreign entrants offers three important benefits.

Firstly, the mutual exchange of imports and exports promotes the development of European defense industries. This enables local companies to expand and remain competitive without relying solely on domestic contracts.

Secondly, a diversified network of partners and manufacturing facilities increases the flexibility of European defense production, enabling surge capacity if needed and reducing the risks of disruptions to Europe-based production. Admittedly, this may also come with the risk of building dependencies on foreign-based production at the expense of domestic sources.

Thirdly, European defense capabilities are built on interoperability within open systems, allowing for flexibility and joint logistics. In the Atlantic and Pacific regions in particular, cooperation with allies enables greater standardization, allowing joint operations with compatible equipment.

Non-EU companies should demonstrate credible long-term commitments to Europe through substantial sunk investments in capital and resources such as manufacturing facilities, supply chains, and other industrial infrastructure. New market entrants need to demonstrate their sustained commitment to a European presence.

While foreign suppliers may not always be able to offer full technological control to EU States, they must be expected to demonstrate that EU customers will have control over the use and integration of equipment into their armed forces.

By operating across many markets simultaneously, foreign companies may offer a higher degree of standardization than nationally based European manufacturers. EU member States should seize these opportunities and offer incentives to Europeanize such suppliers through access to financing, joint ventures and participation in the European defense ecosystem.

Yet there are two key contradictions behind this entire scheme that will hardly enable it to develop normally.

First and foremost, there is strong influence of the European arms lobby – rooted many decades deep. The big question is whether local arms warlords will tolerate outsiders in their own domain where they have enjoyed almost unlimited influence for many years.

The second contradiction is closely related to the first one. If a balance of interest is struck and non-EU manufacturers do get a share in the market, who can guarantee that they will not start ousting local companies? For any market is mainly about competition, and the European market is too vast to rule out all disregard of the existing rules and principles. The good intentions to strengthen European defense may well grow into a large-scale standoff between European and external defense companies.

Original publication: https://dgap.org/en/research/publications/how-non-eu-defense-companies-can-strengthen-european-defense