Abstract
The last five years have seen major transformations in the various components of the defense economy in Europe. The end of the Cold War and the reduction in defense expenditure that followed it have destabilized defense companies. In addition to the reduction in activity, the defense economy is undergoing a process of transformation that affects many of its constituent parts. The justification for the size of defense budgets, and the economic and industrial policies associated with them, are challenged, beginning with their cost and place in the economy, the examples of defense production and technology are questioned principally in comparison with the state of the civil economy; the pace of internationalization of the defense sector is increasing and the traditional relationship between buyer and producer is changing; the demand is less predictive and the turnover and the employment is constantly decreasing since the mid 80’s.
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References
These are the European members of NATO, less Iceland: Belgium, Denmark, France, Germany, Greece, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Turkey and the United Kingdom.
This prospective approach is developed in a more comprehensive document: 2. De vestel, “The defense industry and markets in Europe: time for political decision?”, Chaillot paper, WEU Institute for Security Studies, Paris, (Forthcoming).
The statistics on defense budget, equipment procurements, employment are extracted from: P. 3e Vestel (dir.),“L’industrie europeenne de l’armement: recherche, development technologique et reconversion”, Dossier du GRI2, no 186–187, sruxelles,1993.
From $9.7 bn to $15.5 bn ( 1980 constant). Value and percentage calculated on the basis of NATO press release `Financial and Economic Data Relating to NATO Defense’, Yearly Press Release, NATO, Brussels.
It appears that the equipment purchases of the European members of NATO decreased for the first time in 1986. Nato press released op.cit.
SSIPRI Yearbook 1994 (Oxford: Oxford University Press, 1994), pp. 511–12.
The only exception is the Italian group EFIM, which has been absorbed by Finmeccanica.
It is obvious that there are exceptions to the European norm at national or company levels. For an analysis of the situation in individual countries, see H. wulf (ed.), Arms Industry Limited ( Oxford: Oxford University Press, 1993 ).
See for example Une industrie militaire en faillite’, Le Honde,l0–11 October 1993.
The concept of overlay is borrowed from B. su2an et al., The Security Order Recast (London and New York: Pinter Publishers, 1990), p. 16.
For a historical analysis of the concept of self-sufficiency in arms production, see A. Morayscik, Arms and Autarky in Modern European History’, in Daedalus, vol. 26, no. 4, Fall 1991, pp. 21–45.
The term “Europeanization” is used to describe that part of the phenomenon of internationalization which involves only European partners. Internationalization here refers mainly to transatlantic cooperation agreements. With the end of the Cold War, the phenomenon of globalization of the defense industry is gradually extending to more numerous partners, but this aspect is not further developed in this paper.
See for example Globalisation of Industrial Activities: Four Case Studies (saris: OECD, 1992); F. Chesnais, La monialisation du capital (2aris: Syros, 1994), pp. 117–77; s. Dunning, the globalization of business (London and New York: Routledge, 1993).
For a historical treatment of world arms exports see x. Xrausse, Alms and the State: patterns of military production and trade (Cambridge: Cambridge University sress, 1992 ).
E. Skons, -Western Europe: Internationalization of the Arms Industry’, in H. wulf (ed.), Arms Industry Limited (Oxford: Oxford University Press for SIPRI, 1993), pp. 160–90. C. Wilem and M. Sandstrom, A Changing European Defense Industry’, FOA Report, Swedish Defense Research Establishment, Stockholm, December 1993.
I wish to thank R. Sitzinger for allowing me access to his database, which has enabled me to present briefly the main conclusions on the evolution of the phenomenon of the internationalization, and in particular the “Europeanization” of defense. A more thorough explanation of the database can be found in R. Sitzinger, -The Globalization of Arms sroduction: Defense Markets in Transition, Defense Budget Project, Washington D.C., 1993.
K. Hartley and S. Martin, The Political Economy of International Collaboration’, in R. Coopey, M. Uttley and G. Spinardi (eds.), Defense Science and Technology, Adjusting to Change ( Switzerland: Harwood Azademic Publishers, 1993 ), pp. 171–206.
This information is not available for the other European countries. Statistics on the defense industry, particularly R3, do not permit more detailed conclusions to be drawn on this type of programme - the number of partners, the organization and the share of work. See The public funding of research and development’, yearbooks for various years, Eurostat, Luxembourg.
General Commission of the plan L’avenir des industries lie’s a la defense (Paris: La Documentation francaise, November 1993), p. 48.
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In 1991 this amounted to ECU3 bn out of a total of ECU12 bn (these figures are arrived at by adding the national figures quoted earlier).
E. Skons, western Europe: Internationalization of the Arms Industry’, in H. Wulf (ed.), Arms industry Limited ( Oxford: Oxford University Press for SIsRI, 1993 ), pp. 160–90.
For example, when Messier sugatti and Dowty merged, activities connected with military landing gear remained attached to the national structures that make up the new company. ‘Messier-Dowty International prend le relais ’, Air et Cosmos, 6 January 1995, p 64.
For a detailed study of collaborative agreements between missile producers, in particular the question of the state’s role in internationalization, see C. Wilem and M. Sandstrom, A Changing European Defense Industry’, FOA Reportf Swedish Defense Research astablishment, Stockholm, December 1993.
But in any case for as long as there is no supranational structure that has a budget and the ability to place contracts, this hypothesis seems improbable to say the least in the medium term
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Figures for turnover in 1992 have been taken from the list of 100 most important defense companies established by SIPRI, SIPRI Yearbook 1994 ( Oxford: Oxford University Press, 1994 ).
For historical overview of the different attempts to organize a European industrial pillar of defense see D. Haglund (ed.), The Defense Industrial Base and the West (London and New York: Routledge, 1989), R. Matthews, European armaments collaboration (Chur, Switzerland: Harwood Academic Publishers, 1992), R. Coopey, M. Uttley and G. Spinardi (eds.), Defense Science and Technology, Adjusting to Change (Switzerland: Harwood Academic Publishers, 1993) and T. Taylor, West European Defense Industrial Issues for the 90’s’, in Defense Economics, vol. 4, 1993 and William Walker and Philip Gutmett, -Nationalism, internationalism and the European defense market’, Chaillot yaper 9 (Paris: WEU Institute for Security Studies, September 1993.
In November 1988 the defense ministers of the IEPG adopted an action plan dedicated to the opening of European defense markets to the European competition. See: Action Plan on a Stepwise Development of a European Armament Market’, IEPG, 9 November 1988.
In 1985 the proportion of armaments developed in collaboration or coproduced, as a percentage of the total value, was 80% in selgium, 708 in Germany, 60% in the Netherlands, 50% in Italy, 25% in the United Kingdom and in France, and 5% in the United States. The balance was developed nationally. S. Webb, NATO and 1992 (Santa Monica, CA.: RAND Corporation, July 1989 ), p. 21.
As long as there is no serious threat to European security.
In “Avis de la Commission du 21 oactobre 1990 relatif au projet de revision du Traite instituant la Communaute economique europeenne concernant l’union politique”, Commission des Communautes europeennes, COM (90),600 final, sruxelles 1990.
Among the 65 billions ECU of total procurement of the Ministries of Defense of the EC in 1990, 25 billions were considered as purchases of equipments and services without an exclusive military character (clothing, eating, housing building, fuel, commercial computers…). The stricly military equipment purchases covered by the “armament list” of the Article 223 represented 40 billions ECU. See K. Hartley, A. Cox, “The Cost of nonEurope in Defense Procurement”, Executive summary, DG III -EC, Brussels 1994, p. 33.
The study realized in 1992 and released on December 1994, concludes that such reforms would allow saving between 6.5 and 9.3 billion ECU. Even if these data can be contested (and the authors insist on the difficulty to produce good and precise estimates in this field); they give show the financial challenges inherent to the reform of defense markets in Europe. “The Cost of non-Europe, op. cit., pp. 24–25.
This expression is close to the expression used to define the Combined Joint Task Eorce which NATO has put at the diposal of WEU: “ separable but not separated”;
For a detailed account of the activities of WEU in the field of armaments, see D. Delhauteur, Les activites du Conseil de l’UEO en matiere de cooperation dans le domaine des armements, Dossier Notes et Documents no. 160 (srussels: GRIP, August 1991 ).
The WEAG members are the European Nato’s l’ourtheen nations less Island i.e. selgium, Denmark, Erance, Spain, Greece, Italy, Luxemburg, Norway, Netherland, Portugal, Germany, United Kingdom and Turkey.
Declaration de Noordwijk du Conseil des ministres de l’UEO“ reproduit dans Europe Documents,N° 1910, Ig novembre 1994, p.7.
Rapport de x. sorderas sur Agence europeenne de 1 armement Reponse au trente-neuvieme rapport du Conseil“, document 1419, Assemblee de l’UEO, Is mai 1994, Paris, p. 10.
The principle of the fair return conceived by the IEPG is partly the sharing of business between partners in international collaborative agreements in exact proportion to financial participation. The idea of a juste retour draws its inspiration from the European Space Agency (ESA) on matters of industrial and technological return concerning national financing of ESA activities. Explicit reference is made to the ESA procedure in ‘Towards a Stronger Europe’, vol II„ pp. 125–32. ‘Towards a Stronger Europe’, is a report written by an independent team formed by the IEGP (1986) under the chairmanship of H. Vredeling. Volume I lists the proposals. Volume II is devoted to a detailed analysis of the competitiveness of the European defense industry.
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De Vestel, P. (1997). The European Arms Industry: Between Downsizing, Internationalization and Integration. In: Dundervill, R.F., Gerity, P.F., Hyder, A.K., Luessen, L.H. (eds) Defense Conversion Strategies. NATO ASI Series, vol 9. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-1213-2_14
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