DOCUMENT A/1840

3 December 2003

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The development of armaments policy in Europe - reply to the annual report of the Council

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Document A/1840

3 December 2003

The development of armaments policy in Europe - reply to the annual report of the Council

REPORT¹

submitted on behalf of the Technological and Aerospace Committee²
by Mr Agramunt Font de Mora, Rapporteur

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¹ Adopted unanimously by the Committee on 4 November 2003.

² Members of the Committee: Mr Arnau Navarro (Chairman); MM Mauro, O'Hara (Vice-Chairmen); MM Anacoreta Correia, Atkinson, Azzolini, Barquero Vázquez, Bindig, Braga, Van den Brande (Alternate: Ramoudt), Danieli (Alternate: Piscitello), Dimas, Duivesteijn, Etherington, Haupert, Höfer, Kucheida, Le Guen, Letzgus, Martínez Casañ (Alternate: Agramunt Font de Mora), Meale, Mrs Melandri (Alternate: Giovanelli), MM Monfils, Pintat, Reymann, Siebert, Verivakis, Van Winsen.

Associate members: MM Açikgöz, Ates, Çavusoglu, Eörsi, Gawlowski, Komorowski (Alternate: Lorenz), Konradsen, Rockenbauer, Mrs Senyszyn, Mr Titz, N..., N...., N...

N.B.: The names of those taking part in the vote are printed in italics

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RECOMMENDATION 740¹

(i) Noting the first part of the annual report of the Council to the Assembly of WEU, for the period 1 January to 30 June 2003, particularly in regard to WEAG and WEAO activities;

(ii) Noting with satisfaction that European Union member states have agreed to set up a European agency in the field of defence capabilities development, research, acquisition and armaments;

(iii) Recalling that the Assembly has always supported the idea of setting up a European armaments agency;

(iv) Considering that European armaments cooperation, although working well in a number of instances, is not yet such as to be able to meet new armed forces requirements;

(v) Noting the delays to which European air, land and naval defence equipment programmes developed in cooperation are subject;

(i) Concerned about uncertainties over the "Eurofighter" combat aircraft programme and the Airbus A-400M transport aircraft;

(ii) Stressing that consolidation of the European aeronautics and research and technology sectors, needs to be followed by a regrouping and restructuring of defence industry sectors involved in army and navy procurement;

(iii) Considering that governments carry the primary responsibility for such moves and have an obligation to support them using appropriate legal and financial means;

(iv) Deeming it necessary for European armaments cooperation to extend to the new NATO and EU member states and other European Alliance members and third countries with recognised capabilities in this sphere;

(v) Taking the view that pending establishment of the EU agency, it is important for the activities of other cooperative institutions, such as the Western European Armaments Group (WEAG), the Western European Armaments Organisation (WEAO), and the Organisation for Joint Armament Cooperation (OCCAR) to continue apace;

(vi) Emphasising WEAO's unique contribution to European defence research and technology and considering that were its competences transferred to the EU agency, care must be taken that the experience, competence and expertise it has amassed throughout its existence can be used to the full and developed in support of EU capabilities in that sphere;

(vii) Considering that membership of the agency should be open to third countries with recognised weapons capabilities - irrespective of whether they are EU applicant countries - under arrangements to be defined between them and the European Union;

(viii) Considering that the agency should also establish close working ties with the NATO bodies responsible for implementing the Prague Capabilities Commitment, so as to avoid pointless duplication and fragmentation of resources, while respecting the autonomy and priorities of all concerned;

(ix) Hoping that the agency can also be a centre for coordination and information exchange between the various intergovernmental initiatives on European arms cooperation;

(x) Considering that the agency should establish close working relations with European industrial players and ensure that their interests are represented within the organisation;

(xi) Considering that the work of the EU Military Staff should be directly tied in with the agency's work and that the EUMS should have sole responsibility for all matters relating to equipment needs at operational level;

(xii) Considering that the agency should have a budget commensurate with European requirements and, particularly in research and technology, the necessary autonomy to develop and exploit new concepts - similarly to DARPA, the US Defense Advanced Research Projects Agency;

(xiii) Calling for more rapprochement between OCCAR and the Framework Agreement, and for their further widening to include other European nations that share their objectives and operating rules;

(xiv) Taking the view that it is essential for the WEU nations, European Union member states, European members of NATO and candidate countries to implement a policy of harmonisation of their requirements, interoperability and specialisation in the field of defence equipment, so as to put available resources to best use and guarantee the preservation and development of Europe's defence industrial and technological capability;

(xv) Taking the view that transatlantic cooperation needs to be more balanced, free and fair and that there is a need to safeguard Europe's industrial interests in the face of pressure for transatlantic integration, with its inherent risk to European industry of a loss of autonomy and of its being increasingly given over to subcontracting;

(xvi) Considering that national parliaments have an important contribution to make to the debate on a European armaments policy, particularly through discussions on spending, and the adoption of structural reforms necessary for an economic overhaul without which there can be no increase in defence budgets;

(xvii) Expressing its determination to pursue and encourage debate on a European armaments policy at all levels, national, intergovernmental and inter-institutional,

1. Pursue WEU's endeavours in the field of armaments cooperation and make an active contribution to setting up the EU agency;
2. Reflect on and come up with an answer as to how the future European armaments agency is to relate to other existing initiatives and institutions in this sphere, such as WEAG and WEAO in WEU, CNAD in NATO, OCCAR and the Framework Agreement on restructuring the European armaments industry, bearing in mind that if the aim is to strengthen European capabilities and prevent present duplication in the industrial and technological spheres, and in regard to spending, the Agency should logically become the hub that links these initiatives - a centre for coordination and farming out work;
3. Ensure the Agency is in a position to assist in rationalising and providing support to efforts on the part of nations and the industry and that it has powers in regard to international cooperation with other (non-EU) European states, the United States and Canada and other weapons producers whose production and cooperation are necessary for strengthening European defence capabilities;
4. Make sure the Agency is not conceived as an instrument for setting up an exclusively "buy European" regime, which would be bound to generate further tension between the United States and European nations;
5. Lend robust support to the bid for autonomy voiced by EU heads of state and government at the 1999 Cologne Summit, with all it implies in terms of the need for a strong European defence industry, capable of facing up to the challenges of transatlantic and world competition;
6. Bear in mind that flexibility and openness to all comers must be the watchwords of the Agency's philosophy, which must, initially, provide a new working framework and qualitative support, but that greater political will is needed if decisive results are to be achieved in terms of capability;
7. Ensure that the harmonisation of schedules, a matter of crucial importance, should be regarded as one of the Agency's prime objectives;
8. Ensure that any transfer of WEAG and WEAO competences and functions to the EU Agency, safeguards the achievements and expertise - and the staff - of the two organisations;
9. Ensure that, as necessary, work in progress, particularly the research programmes being carried out in WEAO, is wound up properly and that where it is to continue, it is possible for it do so uninterrupted;
10. Ensure the necessary parliamentary dimension to guarantee the full democratic follow-up of the activities of the European Agency.

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EXPLANATORY MEMORANDUM

1. Armaments policy in Europe made major advances from an institutional point of view in 2003 with the statement at the Thessaloniki European Council (June 2003) of the EU's resolve to develop cooperation over armaments production through an:

2. The widening of EU competence to include armaments issues serves to strengthen the ESDP and thus give it greater credibility. As such matters are dealt with under the intergovernmental cooperation pillar, Article 296 of the Treaty establishing the European Community³ presents no obstacle, thus preventing the issue being raised of its amendment or abrogation. However the wording "armaments policy" does not appear in the European Council's decision, nor among the Agency's competences, in any event couched in very general terms, as set out above. This policy continues to be markedly influenced by national interests and priorities and common ground, where it exists, is the product rather of constraint (over budgets, industrial and technological capabilities) than of a common political resolve to work for a group entity over and above present national frameworks.
3. The process is nevertheless now under way, and a number of questions are already surfacing, such as for example how the Agency will interact with other existing institutions and initiatives - in WEU (WEAG and WEAO), in NATO (Conference of National Armaments Directors - CNAD), the Organisation for Joint Armament Cooperation - OCCAR) and the Framework Agreement on defence industrial restructuring. Although the intended aim is to strengthen European capabilities and to prevent the present duplication and fragmentation and the effects of uncoordinated industrial and technological spending, the Agency should logically become the hub linking these initiatives - a centre for coordinating and farming out work.
4. However this would imply the gradual transformation of the EU into a political and military alliance, something not yet on the cards. The combined effects of the forthcoming enlargement and tension between the two sides of the Atlantic mean that when it comes to its own security and defence, Europe must tread warily, and this will have a direct impact on armaments cooperation. It is especially important also to prevent the European agency becoming just another "talking shop" within a ragbag collection in which the frequently contradictory and conflicting interests of producer and consumer nations and the European and various national industries and those of third countries, particularly the United States, are all thrown together.
5. The Agency has also to be in a position to assist in rationalising and supporting efforts on the part of nations and the industry and it would be desirable for it to have powers in regard to international cooperation with other (non-EU) European states, the United States and Canada and other weapons producers, whose production and cooperation are necessary for strengthening European defence capabilities. Indeed, it would be counterproductive to regard the Agency as an instrument for setting up an exclusively "buy European" regime, which would be bound to generate further tension between the United States and European nations.
6. However, there should be no doubt that the desire for autonomy that EU heads of state and government expressed clearly at the 1999 Cologne Summit, and the summits that followed, imply the existence of a strong European defence industry, capable of dealing with the challenges of transatlantic and world competition, the existence of which can only be guaranteed by all the countries concerned pulling together.
7. Flexibility and openness to all comers must be the watchwords of the Agency's philosophy. In the meantime, nations and industry must continue their respective efforts to make good Europe's shortcomings in the field of equipment. The Agency will, in the first instance, provide a new working framework and qualitative support (at least from an institutional perspective), but greater political will is needed if a decisive goal in terms of capability is to emerge from these tentative beginnings. The temptation, in the absence a shared political resolve as far as European security and defence goes, is to fall back on erecting empty bureaucratic structures, albeit justifiable in terms of work organisation. This is yet another deficiency in addition to those already identified in the famous Helsinki catalogues, and doubtless the most difficult to eliminate.

8. One cannot really talk about an armaments policy in Europe. There are a number of fragmented policies, some to a degree coordinated depending on who the players in the field are: governments, national industries, European and transatlantic institutions, instances of "enhanced cooperation" - the spectrum of options for dealing with armaments questions is wide-ranging. A Europe whose geometry varies according to institutional dividing lines and national capabilities, with the further complication of cooperation with the opposite Atlantic shore and with Russia, Ukraine and other third countries. Consensus is not easy to achieve, but there is a tendency towards a concentration of expertise in this area within the European Union.
9. The second half of the 1990s has also seen a growing impetus towards strengthening and enhancing the military capability of the countries of Europe to make them more adaptable and flexible in a context of multinational operations and force and power projection. New equipment is necessary for new needs but tight budgets mean that the solutions envisaged can no longer be purely national ones. In satellites, as in combat aircraft or military airlift, helicopters or missiles or other modern weapons systems, cooperation over production is the norm even if this at times leads to cost overruns and delays due to the vagaries of individual countries' involvement (e.g. political and economic circumstances, changing national priorities).
10. The State remains central to any armaments policy for Europe. The gradual emancipation of Europe's defence industries from state control gives them greater influence and greater power of negotiation than in the past but still does not allow them to achieve the degree of independence enjoyed by their American competitors. This is also competition that is strong on the idea of progressive integration of American and European capabilities in a shared transatlantic space. Intergovernmental cooperation therefore, unsurprisingly, provides both the framework and the driving force for armaments policy. This intergovernmental character is inevitable under present circumstances, but is also the cause of foot dragging when it comes to developing a common policy over the short and medium term.

1. Cooperation in WEU: what future is there for WEAG and WEAO?

11. In its reply to WEU Assembly Recommendation 719 on arms cooperation in Europe⁴, the WEU Council reaffirmed the role WEAG and WEAO continue to play "in contributing to convergence" in that field. There is a process going on in parallel to study what parts of WEAG/WEAO could be transferred to a future EU armaments organisation⁵. This task is proving politically sensitive owing to the fact that some countries in WEAG and WEAO are not yet EU members and account must be taken of their rights and interests. For the moment, WEAG and WEAO cooperation with the European Union is informal, on a case by case basis. However, convergence is gradually occurring and in autumn 2003 a WEAG Ministerial meeting is to be organised "coinciding with an EU+6 Ministerial meeting"⁶.
12. The Netherlands WEAG Chairmanship 2003-2005 is likely therefore to be taken up with the preparation for the transfer of certain competences proper to the armaments side of WEU to the future EU Agency. There will also be a need to continue with and complete the two organisations' current programmes. At the same time the presidency wants to maintain WEAG as "a forum of reference for armaments cooperation in Europe (...) WEAG can play the role of nerve centre for all the activities and initiatives being undertaken in the area of armaments cooperation". This also represents recognition of the fact that, contrary to when it was first established, WEAG no longer has a monopoly in this area.
13. On 20 and 21 March 2003, the National Armaments Directors of the 19 WEAG nations, meeting in Noordwijk, Netherlands, reached agreement on the following principles concerning the way ahead for the Group's immediate future⁷:

14. The development of other initiatives like OCCAR and the Framework Agreement (LoI) are also a reminder of WEAG shortcomings and the difficulty, because of the need to reach consensus, of making rapid strides forward and producing concrete results. Adopting a pragmatic stance, the Netherlands Chair acknowledges and is proposing that: " the challenge for the WEAG in the coming years will be to follow intensively everything that is happening in the area of European armaments cooperation and to give added value to all the different initiatives undertaken in its sphere of influence. The WEAG could act as a forum where all those other multinational groups come together and can exchange information. The WEAG could act as a broker's office and mediate between the WEAG nations and other European structures and bodies." This role also extends to assistance to individual states.
15. WEAG nevertheless has one advantage over other institutional forms of cooperation: its inclusivity and readiness to allow other countries to accede. Cooperation in NATO or the EU is between member states only, whereas WEAG brings together members of both those organisations, thus constituting an ideal point of contact for discussion and information exchange between all the European states involved, irrespective of their membership of other bodies or their participation in more restricted forms of cooperation (such as OCCAR or the Framework Agreement, to which the major European arms manufacturers belong). To take optimum advantage of this potential, the Chair also "intends to strengthen the relations between the WEAG and other relevant nations and institutions. It will maintain, continue and intensify the contacts with NATO, POLARM, OCCAR, Framework Agreement nations, EDIG (IV), etc. as appropriate. By doing so, the WEAG could make its experience and knowledge in the armaments field available to the EU, NATO and other bodies for their analysis, plans and activities on armaments matters. On the other hand those organisations could keep the WEAG informed about current plans and programmes in this field. Visibility and open lines of communication are therefore of prime importance".
16. By including, in this context, assistance to NATO and EU candidate countries, the Netherlands Chair is laying the foundations for the continuation of WEAG's activities even in the event of a transfer of some of its functions and competences to a future European agency. For although there is to be a pause in the processes of NATO and EU enlargement, the intention is for their expansion to continue in future to take in south-eastern Europe, and as far as the EU in particular is concerned, Bulgaria, Romania and Turkey, in the period 2007 to 2010.
17. WEAG's more recent sister organisation could be taken without much difficulty under the future EU agency umbrella. The experience gained in coordinating European defence research and technology is essential to get the Agency off to a good start. Its organisational flexibility (and low staffing levels) belie the significant work that has been done within a short time span (roughly five years). Through its management of the EUCLID, EUROFINDER and EUROFINDERdb (database) SOCRATE and THALES programmes and of the EUROPA MOU, WEAO is today at the heart of defence research and technology, even though its role is largely technical. One of WEAO's most promising fields of action is that of testing and evaluation, and the organisation has compiled a Directory of Test Centres in WEAG nations, enabling them to identify the facilities available in each and have recourse to them on a reciprocal basis.

2. The European Union: POLARM, ECAP, the Commission and the Constitution

18. In the EU, armaments questions fall within the sphere of intergovernmental cooperation, through the POLARM group, which puts proposals to COREPER and then to the Union Council. The EU's military structures also play a part in this sphere through the European Capability Action Programme (ECAP), designed to make good the deficiencies identified in the catalogues of forces and capabilities defined, and updated regularly, since the 1999 Helsinki Summit.
19. The European Commission, which has competence in the spheres of industry and of civilian research from which (by virtue of Article 296 of the Treaty establishing the European Community) defence applications are in theory excluded, is trying to expand its sphere of action in those fields, particularly through its ties with industry. The Convention on the Future of Europe also brought attention to bear on the armaments question, for which specific proposals are made in the draft Treaty establishing a Constitution for Europe. This draft will be endorsed, amended or not as the case may be, by the European Union's Intergovernmental Conference which is under way.

20. Under the impulsion of the EU Greek and Italian presidencies, POLARM submitted a package of proposals for developing armaments cooperation within the Union. Two resolutions from the Council of the European Union were thus adopted on 16 June 2003: one on "restructuring challenges in the European Union" and the other on "security of supply within the EU armaments sector" - two issues of major importance to any armaments policy in Europe.
21. The armaments industry is the core factor in any such policy. A strong industry, ready to meet domestic demand and compete abroad, is also the guarantee of Europe's strategic autonomy in security and defence matters. On that point the EU Council recognises "restructuring in the European defence industry as necessary in order to maintain a strong and competitive technological and industrial base with appropriate transatlantic links, in the face of increased global competition" but implicitly delegates oversight of the development of the sector to the Commission.
22. Likewise, security of supply consists not only in having equipment in sufficient quantity when required, it also means diversification so as to avoid dependence on a single supplier, European or other. The EU Council acknowledges that "the globalisation of the defence marketplace highlights [the fact] that security of supply of critical products, materials and services to meet national defence requirements is an issue of increasing concern" and that "the promotion of a more competitive and robust European defence technological and industrial base will support and encourage the development of a common European security and defence policy", and then invites the Presidency:

23. The ECAP is the framework for dealing with member country capability shortfalls. Launched in February 2002, the programme's first task was to put forward short and medium-term solutions for all the gaps identified, pending establishment of an armaments policy and armaments structures appropriate to the longer term. Initially 19 panels were formed, tasked with dealing with 24 of 42 shortcomings identified in advance. Each panel was made up of several volunteer nations, led by one or several Member States. The panels had the remit of identifying common operational requirements, producing an audit of existing and projected capabilities, identifying potential synergies and either promoting or expanding cooperation over future programmes and devising joint qualitative or quantitative approaches for meeting perceived shortcomings in capabilities.
24. The reports of the 19 ECAP panels were submitted to the EU Defence Ministers at the Capabilities Commitment Conference on 19 May 2003. The conclusions were included in the analysis of the forces and capabilities catalogues arising from the Helsinki process leading to the drafting of a new version of the Headline Goal and Force catalogues. The Defence Ministers had decided (on 19 November 2002) that:

25. On 11 March 2003, the Commission published a Communication entitled "European Defence - Industrial and Market Issues; Towards an EU Defence Equipment Policy"⁹. This document forms part of a series of communications issued in 1996 and 1997 on the same issue but not acted upon by the Council and the member states. The Commission is seeking to play a central part in the defence and research and technology sector on the basis of its competence in the civilian sphere and of the dual-use nature of the sector. Although the Council acknowledges the Commission's role in the industrial sphere, it is quite obvious that there is no consensus about involving the latter in the development and introduction of an armaments policy in Europe; the only way would be to delegate the handling of technical aspects to it.
26. In the communication, the Commission sets out proposals for the formation of a European defence equipment market, standardisation of equipment, control of defence-related industries, intra-Community transfers, competition policy, rationalisation of contracting out procedures in the defence sector, export controls for dual-use goods and technologies and advanced research in the field of security. Two other subjects raised in the document are the setting up of a European armaments agency and advanced research on security. The Commission thus proposes the following:

27. Clearly, in making such proposals, the Commission aspires to be a player in the armaments field, alongside the governments, within the EU - unsuccessfully for the time being, as intergovernmentalism predominates in all European Security and Defence Policy matters. The Commission, however, has the support of the industry, and of research circles, which through it aspire to gain access to substantial Community funds which, for the time being, are allocated solely within the civilian sector. The nub of the matter can be summarised as follows: the Community framework has budget resources but no competence, intergovernmental cooperation has the competence, but insufficient resources.

28. In the draft Treaty establishing a Constitution for Europe, dated 18 July 2003, the question of an armaments policy is dealt with under Article 40: "Specific provisions for implementing the common security and defence policy", paragraph 3:

29. However, the Convention members failed to follow through their thinking. So Article III-342 of the draft Treaty is a word for word transposition of the provisions of Article 296 of the Treaty establishing the European Community. The Agency therefore falls into the sphere of intergovernmental cooperation dominated by the EU Council of Foreign Ministers and henceforward represented by a Union Foreign Affairs Minister. There is no mention anywhere of a Defence Ministers Council, although the defence ministers are those primarily concerned, since they have responsibility for defence equipment.

3. The Atlantic Alliance: the Prague Capabilities Commitment

30. In November 2002, the Atlantic Alliance's Prague Summit was marked by the adoption of significant measures for reforming the transatlantic organisation and making it more efficient. The Prague Capabilities Commitment (PCC) is thus intended to meet the needs in equipment of NATO forces, particularly the NATO Response Force, formed to provide the Alliance with a far more integrated, high-performance external intervention capability, interoperable with US forces, as with other military components of the Organisation.
31. The Prague Capabilities Commitment first identified more than 400 specific areas for improvement within the following eight fields:

32. The major challenge of the PCC is to increase interoperability between European and American forces, narrow the technology "gap" separating them and develop new joint approaches on equipment, in other words improve and develop transatlantic cooperation. This does not amount to a NATO armaments policy but the emphasis placed on specialisation and (transatlantic) integration has important political implications, including for an ESDP still in the making. The PCC is an initiative which, like the NATO Response Force (NRF), will be decisive for the Alliance's future as the basis of transatlantic security and defence ties, as opposed to the future variable geometry (and geography) coalitions formed with those European states which over time develop the capabilities they need to act alongside the United States.
33. From the American point of view the PCC is not intended "to sustain interoperability across the combat spectrum" but to "create niches of excellence" inside the armed forces in the groups referred to above - especially in relation to the modernisation and transformation of forces assigned to the NRF, the ultimate aim being the gradual extension of this process to NATO forces in their entirety. When complete, the PCC will also open up new prospects for European defence industries, in particular in research and technology and in the aerospace sector. However, unlike ECAP, the PCC belongs within the transatlantic dimension, with recourse to American and Canadian suppliers who sometimes hold a dominant market position and are in direct competition with European companies.
34. As with European involvement in the JSF programme, there is a risk that European investment will go to American companies or into joint projects that do not contribute to the development of an autonomous European defence industry. In relation to strategic airlift, air-to-air refuelling, radar aircraft (AWACs¹¹), UAVs, the sector is again dominated by the large American companies, Lockheed Martin and Boeing, where, apart from EADS/Airbus (whose projects have not yet reached the production stage) there is little or no competition. The effects in terms of European armaments policy, particularly in the industrial sphere, will be highly significant for Europe's strategic autonomy.
35. From another perspective, by looking to develop specialist niches, the PCC will contribute to the rationalisation process and to intensifying cooperation over equipment. It is also a way to bring the industries, know-how and technologies of the central European countries into a market (often exclusively) dominated by western European firms. This is a development that must happen, one spin-off of which will be to speed up reform and modernisation of the defence industry - and research and technology - in a part of Europe that now forms part of both NATO and the EU.

4. Bilateral and multilateral initiatives

36. OCCAR, the LoI - now the Framework Agreement on defence industrial restructuring - the various bilateral declarations of heads of state and of government, the support given to defence industry restructuring, in particular through privatisation and the relaxing of government controls are the result of convergent national policies on armaments. However, they are no more than milestones on the road towards the development of an armaments policy for Europe.
37. OCCAR acts as and is the precedent for what could be a real armaments agency, with rules that are binding on all participants and firm commitments to programmes developed, designed and produced jointly. The enlargement of OCCAR beyond the four nations¹² which set it up in 1998 (partly in response to the WEAG/WEAO's inability to develop into a European armaments agency) is in progress, with Belgium having joined in May 2003 and Spain due to join later on this year, and talks are going on with other producer nations¹³. OCCAR has been successful by and large, but has also pointed up the policy, technical and financial weaknesses that are holding back the armaments sector in Europe. In the first place, the small number of countries that are members, even if they are the major producer nations, serves to illustrate the fact that there is as yet no European consensus on how to galvanise the industry.
38. While the kinds of programme currently being carried out in OCCAR are important and calculated to meet Europe's shortcomings, they are also fairly limited and not particularly innovative from a technological point of view. The knock-on effect in terms of investment and major technological spin-off is fairly slight. A fair number of the programmes started in the 1980s or even earlier (1978 in the case of the ROLAND Short Range Air Defence Missile System) well before OCCAR came into existence. They are, in the main, systems for the suppression of air and sea defences (extended to theatre missile defence systems) combat helicopters (TIGRE), a radar anti-battery system, an air carrier (Airbus A-400M) and a multifunctional armoured vehicle. These programmes are also being developed with other states outside OCCAR.
39. Budget constraints are also limiting OCCAR's development potential. Non-application of the "juste retour" rule is a necessary measure but one that is politically difficult to justify. The motivation for a country taking part in a joint programme is not simply to have access to equipment it cannot develop and produce on its own, it also expects there to be economic spin-offs, including exports, as well as social (employment) and technical ones. These do exist in OCCAR but are not calculated in terms of direct contributions from participant nations. This means a stronger commitment to OCCAR, as the desire to work together takes precedence over any narrow calculation on the part of countries of the advantages they anticipate will come their way, but limits the scope of that commitment, in regard in particular to programmes of major economic and technological potential (where spin-offs are greater).
40. Pending OCCAR's enlargement, in 2000 six European countries¹⁴ signed a Framework Agreement concerning Measures to Facilitate the Restructuring and Operation of the European Defence Industry. The agreement covers six areas essential to the future of a European armaments policy, namely:

41. Likewise, the areas the Framework Agreement covers are also covered by other institutions. The EU's political and military institutions are already concerned with security of supply; the EU already has a code of conduct for exports, which it adopted in 1998; WEAO deals with research and technology and is today the most experienced specialist body in the field. That leaves harmonising military requirements, an area with important political implications since it presupposes a degree of coordination of defence policies, not to say acceptance of specialisation between countries (as between forces assigned to EU headline goal or NATO Response Force missions).
42. It is becoming obvious, through such multilateral initiatives, that a number of European states engaged in developing an armaments policy and setting up support structures, have decided not to wait on a consensus that is difficult to achieve when a plethora of at times conflicting interests have to be taken into account. It is no accident that the larger producers are to be found in OCCAR and as signatories of the Framework Agreement, since they are the natural leaders of that movement. It will have a salutary effect on the search for a common approach, but it should not be forgotten that those countries' interests, for example in the degree of autonomy Europe's armaments industry should enjoy or the amount of transatlantic competition it should face, are not always convergent.
43. Such piecemeal solutions are only satisfactory if they prove to be inclusive over time, but in that case wider membership would, perversely, make it more complicated to achieve a consensus that merely represented the lowest common denominator. The idea of a centre, an agency, bringing everyone under one roof, now seems the optimum solution. Here again, national opinions converge but without falling completely in line with one another. Multilateral shades into bilateral, an agreement between two parties being a prerequisite for maximising the likelihood of a project being accepted by the others, especially since, once again, the dominant countries are the ones that push their proposals.
44. Thus in 2003, two bilateral declarations, one by France and Germany, the other by France and the United Kingdom, have thrown the armaments question into focus. The first of these, on 22 January 2003, states that Germany and France will make the necessary efforts to improve the military capabilities of both countries and undertake to develop new forms of cooperation, largely through the harmonising and planning of military requirements and the pooling of resources and capabilities contributing to the implementation of a European armaments policy. It should be noted in this connection that harmonisation is one of the goals laid down in the Framework Agreement and that implementation of an armaments policy for Europe was initially one of WEAG's functions.
45. In the Franco-British Summit Declaration (Le Touquet, 4 February 2003), France and the United Kingdom put forward more detailed proposals for strengthening European military capabilities, including quantitative objectives (including relevant measures of defence expenditure). This is a key point in the debate on armaments policy, on which, notwithstanding declarations of intent, many countries disagree, not about not spending more (which is not at issue in the prevailing monetarist climate) but about how to achieve "better spending". Next, and this is the crux of the matter, the two countries propose establishing "an intergovernmental defence capabilities development and acquisition agency (...) in the EU", the objective of the agency being "to promote a comprehensive approach to capability development across all EU nations".
46. On 29 April 2003, the heads of state and government of Belgium, Germany, France and Luxembourg, meeting in Brussels, issued a joint declaration on European defence in which they proposed to the members of the Convention on the Future of Europe integrating "the creation of a European Agency for development and acquisition of military capabilities" in the draft Constitutional Treaty. The goals of the Agency "will be to increase the European military capabilities and strengthen the interoperability as well as the cooperation between the armed forces of the member states. The Agency will help to create a favourable environment for a competitive European defence industry".
47. Therefore, the future shape of armaments policy in Europe will be that of an EU Agency. In 1996, WEAO was set up as the basis for a European armaments agency. Seven years later, we are back to where we started from, but in a more complex environment, riddled with different initiatives (intergovernmental, multilateral and bilateral) and marked by the impact of EU and NATO enlargement to take in the central European countries, which have a not inconsiderable potential in the area of defence equipment and are a force to be reckoned with. To this must be added transatlantic cooperation and competition with US partners and competitors resolved to enlarge their share of and influence within the European market, which they perceive, to an extent, as an enormous reserve of capabilities and a captive source of profits.

48. It seems that the way forward on armaments policy in Europe lies in the future European Agency. In the absence of a European defence policy, from which a European armaments policy would automatically spring, strenuous efforts are being made to prepare the framework in which this hypothetical policy can be put into practice. For the Agency can only be an instrument in the service of a policy. Pending the latter coming into being, the member states have decided to proceed empirically, in the hope of thereby creating a will towards cooperation and pooling of resources with a view ultimately to achieving a common armaments policy.
49. In the absence of a catalyst to pull everything together, this is likely to be a long, hard road, since the model chosen for the Agency is international cooperation, as in NATO, WEU, OCCAR and the Framework Agreement. On every occasion the limitations of that model have prompted a search for outside solutions and it stands to reason that the EU is now being pressed into service as a framework for cooperation on military equipment. It has already embarked on that road in practical terms through ECAP with POLARM, the European Commission and the European Parliament each making their own contribution to the political debate.
50. At the same time, the Agency will be required to deal with any initiatives external to the Union. It must at one and the same time take a definite position and cooperate without appearing to dominate. It should also reflect an EU made up of 25 member states (or 27 or 30 even in the medium term) with different stances and experiences. The older Western cooperation will have to open up to the new members, or there will otherwise be the risk of groups forming that represent divergent interests and divisiveness leading, in short, to a lack of consensus over the development of a European Union armaments policy.

1. The birth of the Agency: from Maastricht to Thessaloniki

51. The idea of a European armaments agency is closely linked to the development of autonomous European capabilities in defence. The end of the cold war created the conditions for getting this project off the ground. The European Union, with the Maastricht Treaty, laid down the markers for what has today become the ESDP. WEU naturally became involved in building a European defence within the Union. In the matter of armaments, the WEU nations at that point decided to strengthen the Organisation's operational role and examine further the prospect of "enhanced cooperation in the field of armaments with the aim of creating a European armaments agency"¹⁵. The WEU Assembly, for its part, noting that undertaking, recommended:

52. Six months later in Petersberg, on 19 June 1992, the WEU Council adopted a declaration in implementation of the decisions taken in Maastricht. However, in the matter of armaments cooperation, a certain amount of "foot-dragging" was observable, due in particular to discussion of the transfer of the activities of the Independent European Programme Group¹⁷ and EUROGROUP¹⁸ functions to WEU, into what was to become the Western European Armaments Group or WEAG. This issue, which nevertheless dealt with one of WEU's major activities, was dispatched in two paragraphs.
53. WEAG was formed in late 1992. One of its guiding principles, and one highly relevant to the subject under discussion, was that "there should be a single European armaments cooperation forum"¹⁹. In 1992, that forum was WEAG, which, by taking on the IEPG's²⁰ functions, then those of the EUROGROUP, had the potential to become a true European armaments agency, bringing together existing bilateral and multinational initiatives under one roof and open to other states, irrespective of their WEU status.
54. However, WEAG has not been able to overcome the difficulties of intergovernmental cooperation over armaments, especially when it comes to partnerships between producer and consumer countries, dealing with transatlantic cooperation issues and setting up programmes likely to produce technological and industrial spin-offs. The central role assigned to the National Armaments Directors, who are primarily managers, diminishes the opportunity for WEAG, under the political control of the Defence Ministers of its member nations, to become the focal point for discussion on developing a credible European armaments policy.
55. In order to break through the deadlock, the WEU Council of Ministers decided in November 1996 to set up the Western European Armaments Organisation (WEAO). This subsidiary body of the Council has as its objective " ... to assist in promoting and enhancing European armaments cooperation, strengthening the European defence technology base and creating a European defence equipment market, in accordance with policies agreed by the WEAG"²¹. This summarises all the basic principles for a European armaments agency. Nevertheless, divisions between states were eventually to end up consigning WEAO to a "coordinating" role in regard to defence research and technology.
56. After 1996, WEU initiatives also ran up against the multilateral initiatives of some of its members and the gradual drift of the debate on European armaments cooperation from WEU to the EU. Indeed, the major producer countries did not want to wait for a consensus between WEAG and WEAO members on the definition of a European armaments policy, and the setting up of structures to support it that was almost never likely to happen. This was also the time when the defence industries of those states were restructuring, merging and becoming more free of their governments, their erstwhile shareholders and customers.
57. The Treaty of Amsterdam, in its provisions on the common foreign and security policy, added armaments to the list of the EU's responsibilities, through cooperation with WEU. Article 17 (Title V on the common foreign and security policy CFSP) states that "The progressive framing of a common defence policy will be supported as members consider appropriate, by cooperation between them in the field of armaments". This cooperation was still to be channelled through WEU (via WEAG) as set out in the "Declaration relating to Western European Union" annexed to the Treaty, couched in identical terms to the Declaration by the WEU Council of 22 July 1997, in which the Ministers state:

58. However, a political and juridical obstacle stood in the way of the scope of such declarations - the presence among the membership of WEAG (and WEAO) of states that did not belong to the EU. The lack of an understanding that could reconcile the legitimate interests of those states and the EU's decision-making procedures and working methods is part of the explanation why, once WEU's operational functions (including the Torrejón Satellite Centre and the Institute for Security Studies) were transferred to the EU, armaments cooperation remained with WEU.
59. From 1998 to 2001, WEAG ceased to be the focus of the debate on the European armaments policy. (Four) producer states met as OCCAR (in 1998) and six signed a letter of intent on defence industry restructuring the same year. This subsequently became the Framework Agreement (in 2001). These initiatives did not constitute a "policy" as such but were the result of a pragmatic approach between producer countries ( the six Framework Agreement countries are responsible for roughly 90% of European armaments production and for all the major programmes underway). They also point up the weaknesses of a system where the political authorities do not fully take on board their responsibilities and cannot manage to overcome their differences.
60. It was also in 1998 that the St Malo Franco-British Summit Declaration dispelled the ambiguities of the Maastricht and Amsterdam Treaties on the role of the EU in European defence. Henceforward "the Union must have the capacity for autonomous action, backed up by credible military forces, the means to decide to use them and a readiness to do so, in order to respond to international crises". This implied "strengthened armed forces that can react rapidly to the new risks, and which are supported by a strong and competitive European defence industry and technology".
61. The Declaration would find application when, in June 1999, the Cologne European Council, where the heads of state and of government of the EU member states agreed to assume responsibility for WEU's operational functions, with the notable exception of the bodies responsible for armaments issues (WEAG and WEAO). The Cologne European Council Declaration on strengthening the common European foreign and security policy nevertheless states in this regard that:

62. The Union thus affirmed its primacy in the field of European defence. However, no armaments organisation has been set up as yet. But ESDP implementation cannot go ahead without the armaments dimension, the more so since the setting up of a military intervention capability, as defined at the Helsinki European Summit in December 1999, and known as the "headline goal" highlighted major shortcomings in equipment. In order to make them good, in 2001, the Union launched ECAP.
63. For its part, the Atlantic Alliance in April 1999 adopted the Defence Capabilities Initiative (DCI), a programme for modernising NATO forces. Interoperability with NATO forces was the driving force behind this reform which later ran into difficulties as a result of the budget problems from which a large number of European countries were suffering, particularly those involved in the transition to the euro. In 2002, the DCI gave way to the Prague Capabilities Initiative (PCI), also concerned with continuing and stepping up forces modernisation, this time to meet the new challenges created by international terrorism and the threat of terror and weapons of mass destruction.
64. WEAG thus lost its central position in developing armaments policy in Europe and one of the guiding principles set out above has had to be sacrificed. In May 2002, the WEAG Defence Ministers confirmed the reality of that position by acknowledging the institution's role as "a forum for political consultations in the field of armaments in Europe and for the promotion of cooperation among member nations". As far as a European armaments agency was concerned, Ministers decided to adopt "the concept of an evolutionary process, envisaging its establishment as soon as all appropriate conditions are met and political consensus is reached, and agreed that any outstanding work should continue under the direction of NADs". In parallel, they suspended all work in progress in WEAG in that connection.
65. The establishment of an agency in the EU becomes possible if WEAG is removed from the process. The Convention on the Future of Europe and the Thessaloniki European Council have had the final word in this particular debate. This round-up of the debate on this issue is important in showing how, as always with the history of defence in Europe, piecemeal action, dispersal and fragmentation are still the order of the day in European armaments cooperation. Patching up things here and there serves to disguise the fact that there is no overall strategic vision for this area. The search, empirically and pragmatically, for a "miracle" cure, is a substitute for an armaments policy. The challenges standing in the way of a Union Agency have been there for more than twenty years (counting in the IEPG era) - but this time, given the expectations of the EU, there cannot afford to be another failure.

2. The European Agency and its prospects

66. The European Agency is to be set up in 2004. Discussions between governments are already under way and its competences and working methods will very probably be defined and developed in the course of the 2003-2004 Intergovernmental Conference. But what kind of an Agency will it be?
67. In the Maastricht Treaty reference is made directly to a "European armaments agency". The Amsterdam Treaty uses the same terms, rather more vaguely, without laying down a timescale or specifying further. The Nice Treaty merely talks about "cooperation (...) in the field of armaments". The Presidency Conclusions to the Nice European Council describe the ways and means to a common European Security and Defence Policy in detail but make no reference to armaments cooperation or to an Agency with competence in this sphere.
68. At the Le Touquet Franco-British Summit Declaration on "strengthening European cooperation in security and defence", held on 4 February 2003 explicit reference was made to "an intergovernmental defence capabilities development and acquisition agency" which would have the following roles²²:

69. Article III-212²³ of the draft Treaty establishing a Constitution for Europe, adopted by the Convention on the Future of Europe in June 2003, offers a detailed description of the functions of the future Agency:

70. The Thessaloniki European Council took up this proposal as one for an "Agency in the field of Defence Capabilities", as described at the start of the present report. Setting up this Agency is one of the current Italian Presidency's priorities.
71. The description given by the European Council is in effect a synthesis of all the initiatives put forward in regard to this issue since the IEPG was created. The only ideas that have been added are "crisis management", a euphemism to prevent the overt use of the terms "collective" or "common" defence. However, it is possible already to make some observations about the Agency, as envisaged by the European Council.

72. The Agency will be subject to the Council's authority and open to participation by all Member States. It is assumed that by "Council" is meant the configuration involving the Foreign Ministers (Council of the European Union), since no reference is made in the draft Constitutional Treaty to a Defence Ministers' Council. In WEAG's case it made sense for the Council of Defence Ministers to have political responsibility. Similarly, the role of the Political and Security Committee (PSC) has not been spelt out. The PSC has competence in security and defence matters but POLARM documents, for example are passed to the Committee of Permanent Representatives (COREPER), which is senior to the PSC, before going before the Council of the European Union. To whom then will the Agency be answerable?
73. This is not a purely operational matter. It is also a political concern, for either the Agency is conceived purely as an administrative structure, or its job is to have a hand in developing a European armaments policy - a component of a European Security and Defence Policy which, for the time being, is also still somewhat vague. Currently the ESDP structures come under intergovernmental cooperation and have practically no autonomy at all vis-à-vis states. To counterbalance the absence of a Defence Ministers' Council, informal structures, such as the Informal Advisory Group, consisting of the Defence Ministers' representatives, which also has responsibility for armaments issues in connection with work on ECAP, have been set up.
74. The Informal Advisory Group is thus obviously central to the way the Agency operates. It might be envisaged, for practical purposes, that this Group's remit might be to direct the work of the Agency at the "operational level', as a steering committee, for example. The PSC would have political responsibility, delegated to it by the Council. But the question again arises as to the role of the Defence Ministers, who are directly responsible for armaments issues. There will be an Agency, a formal EU body (intergovernmental pillar), answerable to the Council (Foreign Ministers) and supervised politically by the PSC, working under the supervision of an informal body (the Informal Advisory Group), answerable in its turn to an informal Council of Defence Ministers.
75. This hotchpotch of different types of arrangement highlights a wider problem - the inability of the member states to integrate the defence dimension into EU policies other than via the crisis-management route, despite having committed themselves since Maastricht (1991) to the progressive definition of "a common defence policy (...) which might in time lead to a common defence". Another important point is that of the working organisation of the Agency. There will be a director (so-called in order to simplify matters) and a secretariat, all of which implies an operating budget. Logically, the appointment would be made by the CFSP High Representative or a possible future EU Minister for Foreign Affairs and the Agency staff would form part of the Council's Secretariat-General (as with the present CFSP/ESDP structures). The director would chair the steering committee and be supported by one or more deputies supervising the working of the Agency and its administrative organisation (possibly in the form of committees or divisions).
76. It goes without saying then that given the number of players on the European armaments stage, especially in an EU that by 2010 will consist of some 25 or 26 members, the steering committee will need to include (although the list is not exhaustive):

77. The broad objectives of the Agency as regards armaments policy, as defined in the Thessaloniki communiqué, are of two orders: one operational (immediate) the other (medium-term) more wide-ranging. The first involves developing defence capabilities in the field of crisis management, the second "promoting and enhancing European armaments cooperation, strengthening the European defence industrial and technological base and creating a competitive European defence equipment market, as well as promoting, in liaison with the Community's research activities where appropriate, research aimed at leadership in strategic technologies for future defence and security capabilities, thereby strengthening Europe's industrial potential in this domain". This is an ambitious programme, encompassing earlier and present forms of cooperation.
78. By "defence capabilities in the field of crisis management" are meant the ECAP process and the Capability Development Mechanism (CDM). These are current projects which it might be assumed will be transferred to the Agency, whose main activities they would become in the initial stages. That would imply a close relationship with the EU Military Committee, and possibly bringing the Headline Goal Task Force (HTF) that draws up the forces catalogues and capabilities within the ambit of the Agency. The Agency would thus become the focus of the development of EU military (equipment) capabilities which would ultimately encourage greater harmonisation of requirements.
79. In parallel there is a need to ensure that this operational function does not become the Agency's sole power, in the same way as WEAG has become a "forum" and WEAO has been reduced to a "research cell". It is a major political choice with far-reaching industrial and strategic consequences. If one holds to the formula approved in Thessaloniki, the Agency will be an instrument for getting a coherent and credible European armaments policy up and running; it will be founded on three pillars: intergovernmental cooperation (to which there is no alternative at present), the industrial base and research and technology.
80. European armaments cooperation is, as pointed out above, multiform and fragmented, organised across a spectrum of bi- and multilateral institutional initiatives ranging from a broad forum (WEAG) to what are virtually cartels of "western" producers (OCCAR and the Framework Agreement). Setting up yet another structure to complete or supplement what is there already would be quite meaningless. Some sort of rationalisation and regrouping is what is needed. Given that WEAG and EU memberships are almost coterminous it might be assumed that if the right kind of arrangements can be reached (Berlin plus or the like) WEAG's functions could be transferred to the Agency. This implies that an understanding is reached between WEAG nations that takes account of their individual interests and their various stances in relation to the EU's ESDP.
81. It will be more difficult to create a partnership between the Agency and OCCAR. The Framework Agreement is essentially a set of principles governing industrial cooperation and the various R&T fields, which the Agency could adapt and implement. But OCCAR is more than that; it is a programme manager, the guiding principle behind which, namely, the non-application of the principle of "juste retour"²⁴, is not one with which all European states are in agreement by any manner of means. OCCAR also has legal personality and its member states have delegated to it the right to let contracts and oversee their execution on their behalf. They include for example the agreement on building the A400M military transport aircraft (EADS, Airbus). To merge OCCAR's functions into the Agency (always assuming that EU member states accept the "no juste retour" rule) would give the latter an equipment procurement and programme management role.
82. The other important task the Agency will have is "strengthening the European defence industrial and technological base and creating a competitive European defence equipment market". It is in this sphere, and in R&T, that the European Commission will have a hand in the Agency. The state of Europe's defence industry (i.e. within the EU) gives cause for concern. Rationalisation and restructuring, with its attendant mergers and acquisitions (over the last 10 years the number of large firms in the aeronautics sector, for example, has dropped from 30 to 14²⁵), is now complete (other than in respect of the interface between western European defence firms and those of the EU and NATO applicant countries).
83. The difficulty is that government orders for defence equipment have remained static or fallen over that period and European competition inside Europe remains keen, with every country having its own national niche markets (which may or may not be profitable in a "globalised" environment) to safeguard. This is as true of equipment for use on land and at sea as for that produced by the defence aerospace industry (with its three fighter aircraft: Eurofighter, Rafale and Gripen). Added to this, there is very strong competition from across the Atlantic, through direct sales, acquisitions of European companies or integration in joint programmes, like the F-35/Joint Strike Fighter. European equipment exports outside the EU economic area are also encountering hurdles and problems for want of a truly European approach.
84. The Agency will therefore need to deal with these issues, but what should its policy be and what means will it be able to draw on? Although the Agency will have the necessary powers of procurement and programme control, as OCCAR does, it is virtually a certainty that it will be in the industry's interest not only to deal with it (rather than with an unspecified and constantly changing number of defence ministries) but to seek to be represented within its organisation. Should one assume then that the attendance sheet for the steering group will be swelled, according to the circumstances, representatives from the industry, or that the Agency will absorb the functions of the European Defence Industry Group (EDIG)? Or will the defence industry make itself heard only through the Commission, which has not a shred of competence in the armaments sphere (a possibility ruled out under Article 296 of the Treaty establishing the European Community?
85. These are questions to which for the moment there are no answers but which are fundamental if the Agency is to move beyond its first stage as a "capabilities" Agency and gather momentum in the sphere of European armaments production. Similarly, does "creating a competitive European defence equipment market" apply solely within the Europe of the Union or does it have implications for transatlantic and worldwide competition? The creation of a "single" armaments market also implies protection of that market, which, without going as far as the "Buy American" Act now before the US House of Representatives, means giving preference in procurement to European industries, investment in European production and, where there is cooperation with the US and with third countries, ensuring a fair balance in terms of economic and technology spin-offs.
86. The Agency should also have a say in the restructuring of the defence equipment sector and international cooperation between industries, without calling into question the Commission's competences in the field of acquisitions and mergers and other forms of industrial development. As far as the defence industry goes, competence might be shared between the two institutions but this is perhaps expecting too much immediately in an area where there are a number of competing national, industrial and institutional interests.
87. Another objective for the Agency will be to promote "research aimed at leadership in strategic technologies for future defence and security capabilities". This is currently WEAO's specialist area - as the only organisation with a relevant remit. Like OCCAR, this subsidiary body of the WEU Council has legal personality, can let contracts with research institutions and has oversight of current projects. If the Agency is to have responsibility in this area, this again raises the question of whether it will supplement WEAO or replace it completely.
88. It might be assumed that as in the case of WEAG, the "Berlin plus" formula would solve the problems of the differing memberships of the EU and WEAO, thus making it possible to integrate WEAO in the Agency. However, the latter would then become the only defence R&T organisation. But while WEAO's activities are important, in terms of actual needs, and also, for instance, of bridging the technology gap between Europe and the United States (to achieve greater interoperability), they are not enough. What has been lacking has been the political will to turn WEAO not into an armaments but a defence research agency, which would imply more substantial operating resources and financial input, and its independence from what may be overlapping national priorities.
89. An EU Agency that incorporated WEAO's functions would constitute progress inasmuch as any movement in this direction would bring both civilian and defence research which have elements in common, within a single institution (the EU). The Agency would then become the fulcrum of work on armaments and research with military applications. The DARPA (US Defense Advanced Research Projects Agency) model could therefore be the logical developmental route for the European Agency to follow. DARPA "manages and directs selected basic and applied research and development projects for DoD, and pursues research and technology where risk and payoff are both very high and where success may provide dramatic advances for traditional roles and missions".
90. It is to this US Agency that we are indebted for the Internet, for example. But DARPA has one big advantage; it works and operates within an American dimension inasmuch that the Department of Defense is its only employer and its sole customer. With an annual budget of close on three billion euros, and wide autonomy from its supervisory government department, DARPA has, since its foundation, been at the forefront of US technological innovation, not just in the defence sphere but equally, through various spin-offs, in the civilian sphere. This is what European defence needs, but it would mean insisting that the Agency operates within a properly "European" context, and it is this that is missing from ESDP thinking.
91. The WEAO model is one still based on intergovernmental cooperation, with interference from states at every level. DARPA's staff work for the Agency and answer to its authority. The staff of the European Agency, as in the case of other ESDP structures, would basically be national civil servants, described as "European" but answerable, at the end of the day, to their home civil service departments. Giving the Agency powers in respect of defence research is an important step forward, but it is not enough simply to graft WEAO's functions on to it. The Agency has the potential, if the political will is there, to generate momentum in defence research, going way beyond what there is at present, which will allow it to get to grips with new projects and technologies in a European perspective, in order to make good shortcomings in terms of interoperability, not just between the forces of EU nations but also between them collectively and those of the United States.

92. The great debate on European armaments policy has yet to take place. The interests of nations, industries and the cooperation structures concerned appear similar, identical even, but convergence is slow in coming. The enlargement of the existing institutions has advantages (political, budgetary, administrative and technological) as far as contributions all go, but also has its disadvantages in terms of decision-making and reaching agreement on joint projects. Added to which, as enlargement of the European Union and NATO draws ever closer, the clearer it becomes that existing intergovernmental and industrial cooperation structures have not yet grasped the wider implications of that process.
93. The new members are also contributing capacity and have an interest in effecting a change in the traditional power balance by siding with one or other group of "Old Europe" nations. These countries are also looking for support from elsewhere, from the opposite Atlantic shore, where some heed is likely to be paid to their economic and industrial concerns. Poland's purchase of F-16 aircraft has extended US penetration of Europe's defence aerospace market and provides the launch-pad for an attempt to capture the central European market as well. This is effectively harmonising needs, but on the basis of US-supplied equipment.
94. Another unresolved difficulty is the extensive fragmentation of European initiatives on armaments cooperation. After ten years' work in this area, in full knowledge of the need to centralise and coordinate such initiatives, nations are still "doing their own thing". Or, as the Netherlands Defence Minister and WEAG Chair reminded participants at the WEU Assembly conference held in Baveno, Italy²⁶ "we need to establish a single framework for European armaments cooperation. This will improve the competitiveness of the European defence industry in the world market". This was, it should be remembered, the purpose of one of the WEAG guidelines at the time of the Group's formation in 1992-1993.
95. The Dutch Minister, Henk Kamp, also suggested two ways of improving cooperation: "thinking European" and harmonising operational requirements. The implementation of these practical, no-nonsense measures is, however, running up against major obstacles that have largely to do with an absence of European and national strategic vision. The sacrosanct principle of sovereignty in matters of defence, and of recourse uniquely to intergovernmental cooperation, is holding back the process and leading to duplication and unhelpful competition between European nations, at a time when they need more than ever to work together.
96. There are already doubts about whether the Eurofighter programme, including the third tranche, involving the aircraft's transformation from an interceptor to one with ground-attack capability²⁷ will run its full term. While EU nations' defence budgets still, surprisingly, hover around the critical 2% GDP mark - France's defence budget is supposed to attain that level by 2008²⁸ - the US defence budget, on the other hand, is estimated at 3-3.5% of GDP (not counting additional funding allocated to operations in Iraq and Afghanistan). Defence spending, leaving aside the rationality of its apportionment, is a highly sensitive and complicated political issue directly linked to the state of Europe's various economies and national priorities.
97. To increase defence spending in the euro zone and beyond implies either living with mounting budget deficits (funded by borrowing or new taxes) or cutting back on other areas of state spending (such as health, education and pensions). This is a choice societies need to make, since there is no way other than general economic overhaul in order to stimulate growth, without which further investment in security is not possible.
98. But equipment costs continue to rise (and delivery periods to lengthen). The industry (EADS in the case of Eurofighter and the Airbus 400M; Dassault for Rafale, for example) have made an effort to cut costs, but prevarications on the part of governments, the inability to hold to commitments and changing priorities and needs, all serve to bid up end costs. And, in the absence of a real European arms export policy, neither firms nor governments can rely on the scale effects of mass production. It is not an institutional issue at all but a question of the need for a major political debate among European countries as to the kind of Europe they want to build.
99. If the intention is that the European Union should become a centre of power internationally, it has to have the necessary wherewithal to fulfil that role. Military assets and defence equipment must be regarded as a major strategic element in this. Therefore, it is necessary to develop and implement a European armaments strategy in the coming years, based on past experience but avoiding the habitual pitfalls and mistakes. The European Union's armaments agency, whatever name it eventually goes by, has a part to play, provided that the member states and all others involved take on board their responsibilities in full and find common solutions to common problems. Cooperation is the single most important issue, in the first place at European, then transatlantic and, finally, at the international level. Future global security and stability depend on it.

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APPENDIX

Airbus-400M military transport aircraft - programme managed by OCCAR (see) which signed a procurement contract in May 2003 on behalf of the Airbus Military consortium for delivery of 180 aircraft, to commence by end 2007 at the earliest (60 for Germany, 50 for France, 27 for Spain, 25 for the United Kingdom, 10 for Turkey, 7 for Belgium and 1 for Luxembourg).

AWACS - Airborne Warning and Control System

"Berlin Plus" - agreements between the EU and NATO, adopted in December 2002, the purpose of which is to give the EU access to NATO assets and capabilities for crisis-management operations in the ESDP framework (see ESDP).

CDM - Capability Development Mechanism for monitoring the development of military capabilities in the ESDP framework (see ESDP). Additionally, an EU/NATO working group on equipment was set up in 2003, following signature of the "Berlin Plus" agreements.

CFSP - Common Foreign and Security Policy, the second pillar of European Union policy. It was set up under and is governed by Title V of the Treaty on European Union (signed in Maastricht in February 1992, effective from November 1993).

CNADs - Conference of National Armaments Directors, responsible for armaments cooperation in the 19 NATO countries.

COREPER - Committee, consisting of the Permanent Representatives of the EU member states, which has general, across the board competence in relation to Community policies. It is responsible for the preparation of the Council's work and the implementation of the tasks conferred on it by the latter. It provides the link between the technical or "expert" and the political or "ministerial" levels.

DARPA - Defense Advanced Projects Agency. It manages applied defence and development projects for the DoD (see) in an area of major risk and significant technological impact.

DCI - Defence Capabilities Initiative, launched by NATO at the 19 April 1999 Washington Summit, for modernising the forces of the Alliance, in particular with a view to their interoperability with US forces. Replaced by the PCC (see) in 2002.

DoD - Department of Defense (United States).

EADS - European Aeronautic Defence and Space Company. The company was set up in July 2000 and is central to Europe's civilian and military aeronautical and space activity. It represents a leap forward in European industrial integration.

ECAP - European Capability Action Plan within the ESDP framework (see ESDP). Approved in December 2001 by the Laeken European Council, it constitutes an integral part of the process for developing the EU's military crisis-management capabilities and operates intergovernmentally through working groups (Panels).

EDIG - European Defence Industries Group. Set up in 1976, it brings together European and the national industries of producer and consumer nations in a defence equipment cooperation framework. It was replaced by WEAG (see) in 1993.

ESDP - European Security and Defence Policy. This was instituted in the framework of the CFSP (see) by the Treaty of European Union (signed in Amsterdam in October 1997, effective from May 1999).

EU - European Union.

EU + 6 - The Czech Republic, Hungary, Iceland, Norway, Poland and Turkey - European NATO countries which are not EU members.

EUCLID - European Cooperation for the Long Term in Defence - set up in November 1990, by the 13 NATO member states making up IPEG (see).

EUMS - European Union Military Staff. Set up as a permanent ESDP body (see ESDP) within the Council Secretariat-General in January 2001 and consisting of military experts from EU member states, the CFSP is able to draw on its expertise, particularly in situation evaluation and strategic planning.

Eurofighter - air to air fighter aircraft which also has air-ground (Suppression of Enemy Air Defences, anti-radar capability) and air-surface capabilities. An order has been placed for 620 Eurofighter in the context of a programme in which Germany, Italy, Spain and the UK are participants (commissioning from 2003).

EUROFINDER - procedure created in 1996 in the framework of European defence cooperation which gives firms the opportunity to submit proposals for including new research and technology programmes within the EUCLID programme.

EUROFINDER Db - Eurofinder database. Longterm project managed by the WEAO research cell (see WEAO) to assist defence sector firms identify partners in their R&T fields and to take part in research projects funded by governments.

EUROGROUP - set up in 1968 to strengthen the European pillar of the Alliance, it is open to the defence ministers of the European NATO members. Its armaments activities were transferred to the IEPG (see) in 1976. Until it was disbanded in 1994, it provided for exchanges on political and security questions and encouraged cooperation through its specialist subgroups.

EUROPA memorandum of understanding - European agreements on defence organisation, programmes, activities and research, signed in May 2001 by the WEAG Defence Ministers (see WEAG).

Framework Agreement, signed in July 2000 by the LoI countries (see LoI). Its object is the reorganisation of Europe's defence industry by setting up an intergovernmental cooperation framework for the countries involved to enable them to take the specific measures required for eliminating the obstacles standing in the way of that project.

Gripen - multi-role combat aircraft of Swedish design and manufacture (SAAB), marketed internationally in partnership with BAe Systems (commissioned in 1996). Sweden has ordered 204 aircraft to 2007, 116 of which have already been delivered. South Africa has purchased 28 and Hungary 14.

HTF - Headline Goal Task Force. A group of national experts and officers of the EU Military Staff. The group can meet in a configuration that includes NATO experts and officers known as "HTF Plus".

IAG - Informal Advisory Group, made up of defence ministry representatives. It is answerable to an informal Defence Ministers Council and also has responsibility for armaments questions in connection with ECAP work.

IEPG - Independent European Programme Group. Set up in 1976 by 13 NATO member states to define and harmonise as far as possible their operational needs in an equipment cooperation framework. It was replaced by WEAG (see) in 1993.

ISTAR - Intelligence, Surveillance, Target Acquisition and Reconnaissance. This is an ECAP panel (see ECAP) concerned particularly with the above areas.

JSF/F-35 - Joint Strike Fighter F-35 multi-role supersonic stealth aircraft designed in three variants: conventional for air forces, a short take-off/vertical landing "Marine" variant for navies and a carrier, for both the US market and that of a number of European countries (Denmark, Italy, Netherlands, Norway, Turkey and the United Kingdom). Due to be introduced in 2008.

LoI - Letter of Intent signed in July 1998 by France, Germany, Italy, Spain, Sweden and the United Kingdom. Intended to facilitate the reorganisation of Europe's defence industry through the work of specialist groups, the results of which were consolidated in a Framework Agreement (see).

NADs - National Armaments Directors

NATO - North Atlantic Treaty Organisation. Treaty signed in Washington in April 1949.

NATO Response Force - project adopted in November 2002 on the basis of a proposal from the US Administration, it is planned that the force should reach its initial operational capability in October 2003 and its final operational capability in October 2006. This is a flexible interoperable force, deployable in five days and sustainable for up to 30 days, for dealing with new threats and situations such as the aftermath of 11 September 2001.

OCCAR - Organisation for Joint Armament Cooperation. Set up in November 1996 by Germany, France, Italy and the United Kingdom, it acquired legal personality in January 2001. It aims to bring about more practical and effective collaboration in armaments programmes.

PCC - Prague Capabilities Commitment. NATO programme which began in May 2003 replacing the DCI (see). It continued and stepped up modernisation of Alliance forces, in order, in particular, to meet the new challenges raised by international terrorism and weapons of mass destruction.

POLARM - European Armament Policy. An ad hoc group of COREPER (see) was formed in July 1995 to monitor CFSP policy development.

PSC - Political and Security Committee. Permanent committee set up within the ESDP framework (see ESDP) in January 2001. Made up of permanent representatives of the rank of ambassador, its task is to deal with all matters relating to the policy, including, under the authority of the Council, political control and strategic direction of crisis management operations.

R&T - Research and Technology.

Rafale - multi-role French combat aircraft in two versions: air and sea (for aircraft carriers).

ROLAND - Short-range ground-air system - French/German short-range air defence managed by OCCAR (see).

SOCRATE - Memorandum of Understanding on a European R&T cooperation system signed in November 1998 by the WEAG Defence Ministers (see WEAG).

THALES - Memoranda of Understanding. Technology arrangements for Laboratories for Defence European Sciences, signed in November 1996 by WEAG Defence Ministers (see WEAG).

T & E - test and evaluation, a promising area of work for WEAO (see) enabling member states to identify and have reciprocal access to each others' capabilities.

TEEC - Treaty establishing the European Economic Community, signed in 1957.

TIGER - combat helicopter: anti-tank, reconnaissance and combat support variants. French/German programme managed by OCCAR (see) with initial deliveries in 2002.

WEAG - Western European Armaments Group. Set up in May 1993 to replace the IEPG (see) following the transfer of some NATO activities to WEU. Its objective is to rationalise existing armaments cooperation machinery at European level.

WEAO - Western European Armaments Organisation, set up in November 1996. The forerunner of a European armaments agency, it is intended to make possible implementation of decisions taken in WEAG, particularly in regard to research (WEAO has legal personality and can let contracts).

WEU - Western European Union. European collective defence organisation established under the 1954 Paris Agreements modifying the 1948 Brussels Treaty.

WRC - The WEAO Research Cell provides WEAO member states (see WEAO) with a range of defence R&T support services.

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AMENDMENT

AMENDMENT 1²⁹

tabled by Mr Nazaré Pereira

1. In the draft recommendation proper, after paragraph 9 insert the following new paragraph:

Signed: Nazaré Pereira

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DRAFT RECOMMENDATION

(i) Noting the first part of the annual report of the Council to the Assembly of WEU, for the period 1 January to 30 June 2003, particularly in regard to WEAG and WEAO activities;

(ii) Noting with satisfaction that European Union member states have agreed to set up a European agency in the field of defence capabilities development, research, acquisition and armaments;

(iii) Recalling that the Assembly has always supported the idea of setting up a European armaments agency;

(iv) Considering that European armaments cooperation, although working well in a number of instances, is not yet such as to be able to meet new armed forces requirements;

(v) Noting the delays to which European air, land and naval defence equipment programmes developed in cooperation are subject;

(vi) Concerned about uncertainties over the "Eurofighter" combat aircraft programme and the Airbus A-400M transport aircraft;

(vii) Stressing that consolidation of the European aeronautics and research and technology sectors, needs to be followed by a regrouping and restructuring of defence industry sectors involved in army and navy procurement;

(viii) Considering that governments carry the primary responsibility for such moves and have an obligation to support them using appropriate legal and financial means;

(ix) Deeming it necessary for European armaments cooperation to extend to the new NATO and EU member states and other European Alliance members and third countries with recognised capabilities in this sphere;

(x) Taking the view that pending establishment of the EU agency, it is important for the activities of other cooperative institutions, such as the Western European Armaments Group (WEAG), the Western European Armaments Organisation (WEAO), and the Organisation for Joint Armament Cooperation (OCCAR) to continue apace;

(xi) Emphasising WEAO's unique contribution to European defence research and technology and considering that were its competences transferred to the EU agency, care must be taken that the experience, competence and expertise it has amassed throughout its existence can be used to the full and developed in support of EU capabilities in that sphere;

(xii) Considering that membership of the agency should be open to third countries with recognised weapons capabilities - irrespective of whether they are EU applicant countries - under arrangements to be defined between them and the European Union;

(xiii) Considering that the agency should also establish close working ties with the NATO bodies responsible for implementing the Prague Capabilities Commitment, so as to avoid pointless duplication and fragmentation of resources, while respecting the autonomy and priorities of all concerned;

(xiv) Hoping that the agency can also be a centre for coordination and information exchange between the various intergovernmental initiatives on European arms cooperation;

(xv) Considering that the agency should establish close working relations with European industrial players and ensure that their interests are represented within the organisation;

(xvi) Considering that the work of the EU Military Staff should be directly tied in with the agency's work and that the EUMS should have sole responsibility for all matters relating to equipment needs at operational level;

(xvii) Considering that the agency should have a budget commensurate with European requirements and, particularly in research and technology, the necessary autonomy to develop and exploit new concepts - similarly to DARPA, the US Defense Advanced Research Projects Agency;

(xviii) Calling for more rapprochement between OCCAR and the Framework Agreement, and for their further widening to include other European nations that share their objectives and operating rules;

(xix) Taking the view that it is essential for the WEU nations, European Union member states, European members of NATO and candidate countries to implement a policy of harmonisation of their requirements, interoperability and specialisation in the field of defence equipment, so as to put available resources to best use and guarantee the preservation and development of Europe's defence industrial and technological capability;

(xx) Taking the view that transatlantic cooperation needs to be more balanced, free and fair and that there is a need to safeguard Europe's industrial interests in the face of pressure for transatlantic integration, with its inherent risk to European industry of a loss of autonomy and of its being increasingly given over to subcontracting;

(xxi) Considering that national parliaments have an important contribution to make to the debate on a European armaments policy, particularly through discussions on spending, and the adoption of structural reforms necessary for an economic overhaul without which there can be no increase in defence budgets;

(xxii) Expressing its determination to pursue and encourage debate on a European armaments policy at all levels, national, intergovernmental and inter-institutional,

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¹ Adopted unanimously by the Assembly on 3 December 2003 (10^th sitting) on the basis of the amended draft recommendation.

² Thessaloniki European Council, 19-20 June 2003: Presidency Conclusions; http://europa.eu.int.

³ Treaty establishing the European Union, 24 December 2002; http://europa.EU.int:

"Article 296

1. The provisions of this Treaty shall not preclude the application of the following rules:

(a) no Member State shall be obliged to supply information the disclosure of which it considers contrary to the essential interests of its security;

(b) any Member State may take such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of or trade in arms, munitions and war material; such measures shall not adversely affect the conditions of competition in the common market regarding products which are not intended for specifically military purposes.

2. The Council may, acting unanimously on a proposal from the Commission, make changes to the list, which it drew up on 15 April 1958, of the products to which the provisions of paragraph 1(b) apply."

⁴ Recommendation 719 on arms cooperation in Europe: WEAG and EU activities - reply to the annual report of the Council. 4 December 2002; http://www.assembly-weu.org/.

⁵ Replies of the Council to Recommendations 715-720. Assembly Document 1815; 6 May 2003; http://www.assembly-weu.org/.

⁶ The Czech Republic, Hungary, Iceland, Norway, Poland and Turkey.

⁷ First part of the forty-ninth annual report of the Council to the Assembly on the activities of the Council (for the period 1 January to 30 June 2003. Document 1833, 6 October 2003; http://www.assembly-weu.org.

⁸ The acronym stands for "Intelligence, Surveillance, Target Acquisition and Reconnaissance".

⁹ Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions : "European Defence - Industrial and Market Issues; Towards an EU Defence Equipment Policy". 11 March 2003; http://europa.eu.int .

¹⁰ The European Defence Standardisation Handbook, work on compiling which was begun in 1998, is intended to contain "references to standards and standard-like specifications commonly used to support defence procurement contracts as well as guidelines on the optimum selection of such standards". Idem. Page 13.

¹¹ "Airborne warning and control system".

¹² France, Germany, Italy and the United Kingdom.

¹³ The Netherlands and Sweden, in particular.

¹⁴ France, Germany, Italy, Spain, Sweden and the United Kingdom.

¹⁵ Declaration by the WEU member states on "the role of Western European Union and its relations with the European Union and with the Atlantic Alliance"; Maastricht, 10 December 1991; http://www.weu.int/. The Declaration was annexed to the Maastricht Treaty.

¹⁶ Recommendation 517 on "WEU after Maastricht", 2 June 1992; http://www.weu.int/.

¹⁷ The IEPG was set up in 1976 in Rome, with the task of "making more efficient use of budgets in the fields of research, development and procurement, to increase standardisation and interoperability of equipment, facilitate cooperation and maintain a solid European defence industrial and technological base". "WEU"; Assembly of WEU, 1998.

¹⁸ The EUROGROUP was set up in 1968 by the European NATO members (excepting France). In 1976 its armaments activities were transferred to the IEPG (with France's involvement)

¹⁹ . "WEU today" WEU Secretariat-General 1997.

²⁰ The objectives of IEPG are still of such relevance today that they could be incorporated as they stand in the charter for the future EU Agency.

²¹ WEAO Charter, section II, paragraph 6; 19 November 1996; http://www.weu.int/.

²² Franco-British Summit Declaration on strengthening European cooperation on security and defence; Le Touquet (France), 4 February 2003; www.elysee.fr.

²³ Part III of the draft Constitutional Treaty: The Policies and Functioning of the Union.

²⁴ This can be described as "a compensation arrangement between governments participating in a collaborative programme which seeks to align work-share with cost-share. These arrangements will be reflected in obligations placed on contractors to discharge obligations that have been accepted by governments". EDIG Policy Paper on Offsets, 26 June 2001.

²⁵ "The European Aerospace Industry, Facts & Figures 2001"; Association Européenne des Constructeurs de Matériel Aérospatial (AECMA), October 2002; www.aecma.org.

²⁶ Conference on "New scenarios for European common security and defence", organised by the WEU Assembly and the Italian Chamber of Deputies and Senate, Baveno, 22-23 September 2003; http://www.assembly-weu.org.

²⁷ "Last jets in Eurofighter project face funding cut", Financial Times, 3 October 2003.

²⁸ "$37.2B eyed for French defense", Defense News, 29 September 2003.

²⁹ Amendment adopted.