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Europe: EU threatens to build own defence market

01 January 2005

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Rapidly mounting frustration with US restrictions on defence technology transfers appeared in a 17 January gathering in Brussels of EU and NATO officials, industry executives and defence policy experts, organised by the New Defence Agenda conferencing group. EU and industry officials warned that the US Department of Defense (DoD) technology export rules will drive the EU to create its own defence market. Basically, the situation leaves only three choices for European defence firms:

* Establish themselves within the US as second? or third-tier suppliers for the DoD and accept the transfer restrictions.

* Settle into niche positions as sub-suppliers to US industry-led international projects or as sellers of specialised items to fill gaps in the US arsenal such as anti-terrorist equipment and training packages.

* Construct a consolidated EU defence market to boost Europe's bargaining power in getting Washington to liberalise its technology transfer regime, epitomised by the three-year old US International Traffic in Arms Regulations (ITAR).

A senior EADS executive said: "US technology restrictions on foreign defence firms have reached the absurd. Dual-use technology such as ordinary Internet communications protocols that are freely used in civil products cannot be exploited by us commercially if we're involved in a DoD project using the same protocols."

Even companies with privileged access to US technologies such as BAE Systems lament the effects of the restrictions. In 2003 the DoD handed out contracts worth $65 billion to US firms and $1 billion to foreign firms.

The European Defence Agency will hand over its recommendations for a cross-border European defence market to the European Commission in March.

Defense News 24.1.05 (Brooks Tigner)

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