The European Commission wants a single market in defence

The European Commission wants to create a single market in the field of defense, which will include establishing and securing the supply chains of the defense industry at the level of the EU bloc, mapping, monitoring, prioritizing orders, as well as facilitating intra-EU exports, according to a document consulted by Euractiv. The objective of "achieving a single and efficient defense market" appears in the provisional conclusions of next week's summit of heads of state and government, the document consulted by the source cited as saying that "each member state's security of supply strategy should gradually integrate the European Union and take better advantage of one of the main assets of the Union: the single market".

According to the new document, a European Defense Industrial Strategy (EDIS) will be adopted, which will aim to increase defense cooperation and make the industry more flexible.

The new initiative came after Thierry Breton, the European commissioner for the internal market and defense, who tried to propose a European defense production law based on the American Defense Production Act earlier this fall, announced that it would be postponed for next year and starting consultations with interested parties.

The cited source mentions that the idea of mapping and securing supply chains gained momentum following the mask crisis during the Covid-19 pandemic. As with medical equipment, the manufacturing capacity of the defense industry relies on European and international supply chains and is therefore exposed to risks beyond the control of end manufacturers.

"These risks for member states can be mitigated by governance at the European level," explains the European Commission.

Consequently, in times of crisis, "the functioning of international markets generally deteriorates (tighter export controls, increased demand, transportation problems, exploitation of dependencies, etc.) and supplies to the defense industry, including the delivery of defense products and services , can be significantly affected or even interrupted", say the Commission's experts in the cited document.

In its questionnaire sent to interested parties, the European Executive presents its own vision on mapping the blockages, but also the solutions for facilitating transfers of defense equipment within the EU and forcing industries to prioritize urgent orders from states, rather than commercial orders.

These regulatory proposals were all rejected this spring by the EU Council during negotiations on the Ammunition Support Action (ASAP), which aims to meet the needs of Ukraine and member states.

In relation to the future strategy for the defense industry, the cited source also shows that Ursula von der Leyen, the president of the European Commission, believes that the EU should take Ukraine's military needs into account. However, the European Union does not have the necessary powers to issue orders or to produce defense equipment, nor does it have mechanisms for prioritizing orders.

That is why the Commission emphasizes that, at the European level, "tensions may arise over specific components or raw materials, and defense orders are not necessarily prioritized due to competition with the civilian sector" which "can constitute a significant disadvantage".

In the questionnaire sent to stakeholders, defense companies are specifically consulted on "a mechanism to prioritize defense supply chains over civilian supply chains in times of crisis", to see if this could provide a significant advantage for the robustness of defense supply chains.

"A Europeanisation of supply chains" would have many advantages, the Commission explains, including "multiple business opportunities", economies of scale, the creation of highly skilled jobs and a technological advantage.

The document consulted by the cited source also states: "A more integrated and competitive European defense equipment market would enable the European defense industrial and technological base to capitalize on economies of scale, thereby improving the efficiency of its industrial organisations. On the international stage, a secure European supply regime can be a major comparative advantage and could boost EU procurement."

Other measures mentioned in the European Commission's proposal concern the creation of stocks of maintenance and repair equipment, critical spare parts, ammunition, reserves, flexible production capacities and pooling and sharing of specific industrial capacities.

It also mentions the inclusion of security of supply as a requirement for projects financed from the European Defense Fund (EDF), as well as VAT exemption for the joint purchase of maintenance and repair services.

The Nordic Defense Cooperation (NORDEFCO) initiatives and the RescEU stocks, a European capacity reserve, in the context of civil protection are also cited as examples of cooperation.