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How to exploit EDIDP poses two key challenges for the future


BRUSSELS – The EU is preparing the final legal basis for the so-called capabilities window of its European Defence Fund, which labours under the clunky but aptly named “European Defence Industrial Development Programme”, or EDIDP.

Once approved by Council and the European Parliament, expected by mid-2018, the EDIDP will generate some EUR 5.5 billion per year in co-financing by the European Commission and national capitals, starting in 2021. This will be spent on the pre-acquisition phases (development, testing, prototyping and demonstration) of multi-nation defence capability projects.

But how should this money be spread around Europe and, more important, will the EDIDP offer to the UK and its large defence players a future link to it?

These are crucial questions because they raise the ghosts of Europe’s past illogical and expensive historical share-out of defence money to shore up uncompetitive or outdated capacities, as well as the spectre of trying to erect strategic autonomy for Europe without the UK and its technological and military prowess.

Defence policy pundits and officials concur that the old approach of guaranteed industrial share-out dictated by governments will not work. At the same time, they do not see a clear path for setting up EDIDP-UK cooperation, as I observed during a debate here involving defence policy groups from across Europe.

It took place on the morning of Friday 27 April while allied foreign ministers met for the entire day across town at NATO’s headquarters. I wagered, correctly it turned out, that none of my fellow reporters could break away that morning to cover this interesting debate.

So what emerged from it? Namely, that the EDF’s exploitation should be market-based and – if smaller countries and their players are to be involved – that Europe’s larger primes should determine industrial policy on their own, with no (or at least very minimal) government interference. Even if this is not realistic in the absolute, it is a big shift away in thinking from Europe’s long-standing assumption that industrial share-out – also known as “juste retour” – and the ills of mandatory economic off-set investments are the only game in town.

Persuading EU member states with little or no defence industrial base to go along with this, however, will be the major challenge here.

As Gen. Vincenzo Camporini, Italy’s former chief of defence and now vice-president of its leading security policy think-tank, the Instituto Affari Internazionali, Camporini, put it to the gathering: “If we hand out EDIDP money to an industry just [for it] to survive, that money will be lost.”

Renaud Bellais, associate researcher at Bretagne’s ENSTA (École Nationale Supérieure de Techniques Avancées) agreed. “The best way would be to let our defence companies decide how to do that – and to control the technologies”, he said.

EDIDP-funded work also should be allowed to cluster geographically, as best suited to the project at hand, argued Trevor Taylor, defence research fellow at the UK’s Royal United Services Institute.

“In the long-run there could be funding for big pan-EU projects such as Galileo,” he said, referring the EU’s network of earth-observation satellites. “What is not clear is whether the EDF will be used simply to spread Europe’s DTIB [defence technological and industrial base] more widely: that would be a high-risk approach.”

Pointing to Airbus’s multination military transport aircraft, he added: “If the A400 had been focused exclusively in Toulouse it would have unfolded with far fewer problems.”

Indeed, for Jean-Pierre Maulny, deputy director of the French Institute for International and Strategic Affairs, which organised the conference, the EDF and EDIDP offer “good opportunities to involve the EU’s smaller defence countries in the sector but that cannot be done the way it was in 1980s or 1990s.”

The debate’s other main topic focused on the potential of the EDF to foster Europe’s strategic autonomy – and how that could be achieved with the UK’s cooperation.

That points to a major problem, though: how to involve the UK and its world-class defence companies in EDF-funded projects?

This would be easier for the EDF’s so-called “research window” where the European Commission will fund at 100-percent defence R&D projects.  London could simply inject cash into the window’s budget – similar to what Norway and Israel do to enable their companies to participate in the EU’s wider H2020 general research budget – to open the way for UK companies to join EDF-funded R&D efforts.

That assumes, of course, London and Brussels include such eligibility in their final Brexit accord. But no matter how liberal the latter might be, the harder issue for the UK will be the EDF’s capability window – the EDIDP. It will be funded from the EU’s general budget, to which the UK will no long contribute and no longer have a say over its use.

Two big political thorns here.  Would London pay into the EDIDP without a voice?  Probably not.  Conversely, and crucially, would the other capitals tolerate the use of their collective budget to help develop capabilities that the UK could sell abroad without cumbrance of the EU’s arms-export rules the others must follow? That is very unlikely.

For such reasons a legally-binding treaty arrangement with the UK will probably be necessary in the field of defence. Several of the think-tankers argued that the long-dormant “LoI agreement” of the 1990s, which loosely links Europe’s six largest defence industry countries together (France, Germany, Italy, Spain, Sweden, UK), could be dusted off as the vehicle for such a document.

“Perhaps we could transform this into something more legally binding as a framework to link the UK to the others. That way you wouldn’t need to involve the complexities of involving all the countries and the EU institutions,” observed Bellais. “Do we need the UK? Absolutely: if we lose them, we are losing a huge share of Europe’s DTIB.”

     THE UPSHOT: The LoI option is a neat idea – in theory. But given the export and security-of-supply implications that any large EDIDP project would carry, a treaty only involving the six LOI countries would not be palatable to the other capitals.  Only a treaty struck between Brussels, on behalf of the post-Brexit 27 EU countries, and the UK would be politically defensible.
     As for ensuring that all member states benefit from an EU-funded EDIDP, some creative thinking is needed. Why? Because all EU countries simply will not directly benefit from the EDIDP. Some of them have weak-to-non-existent or outdated or hopelessly inefficient defence sectors that do not merit subsidies or any shoring up by the EU.
     A grand compromise is needed based on swinging other forms of EU support to the smaller or weak-defence countries. This could entail more of the EU’s Structural Funds for their infrastructure projects or a greater share of the H2020 civil research budget or swinging some EDIDP work to their dual-use companies.  In return, they would let Europe’s bigger and more advanced member states carry forward with the big EDIDP projects and thus start constructing Europe’s strategic autonomy. ##


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