EU near to agreeing plan to open armaments market

European Union nations are expected agree next week to open up their €30bn armaments market to more cross-border competition.

“It will actually be quite a landmark,” said Nick Witney, chief executive of the European Defence Agency. The agency was set up last year set up to co-ordinate military purchases.

Although the new “code of conduct” will be voluntary and non-binding, Witney said it will represent a significant breakthrough after decades of efforts to persuade nations to open their tightly-guarded national defence markets.

Currently the defence industry has been largely excluded from EU rules that have torn down barriers to trade within Europe, allowing nations to protect national champions with military contracts.

EU officials say more than half the €30bn annual spending on new military equipment in Europe lies outside EU free market rules.

The code likely to be adopted by defence ministers at a meeting in Brussels on Monday is designed to change that.

Officials hope it will cut costs for Europe’s tightly-squeezed defence budgets and lead to a consolidation of the continent’s fractured market so it can become more competitive against rivals from the United States and other international arms exporters.

“The desire to inject competition into this hitherto protected market has been something that has been recognised as beneficial for decades,” Witney said.

The code of conduct is due to come into force in July, if ministers agree. EU nations will have until April to decide if they want to take part. Denmark has already opted out and officials said Spain also has doubts, but the other 23 EU members are expected to sign up.

Under the system, nations will commit to posting defence contracts on an Internet bulletin board open to companies from all EU nations who could then compete.

Although the rules are not legally enforceable, officials said nations would face considerable peer pressure to allow free competition from other EU companies. The EU agency will monitor application of the system to ensure governments are sticking to the rules.

Experts say they expect a more open defence industry to encourage the development of pan-European companies that would pool research and compete with U.S. rivals.

However, analysts warn it could take time before Europe’s defence ministries from the main arms producers, like Britain, France, Germany and Italy, move away from trusted national suppliers.

“It won’t change overnight, it’s a first step,” said Johan Orsingher, a defence expert at consulting company Frost & Sullivan in Paris. “The new code of conduct will help moving on to more open markets, more respect, to more trust.”