European Defence Agency and Security Research Programme: Would EU defence industrial policy improve European security? - First draft, please do not quote without previous request of the author - - Work in Progress - Kazuto Suzuki Graduate School of Humanities and Social Sciences, University of Tsukuba suzuki@social.tsukuba.ac.jp Paper for EUSA Ninth Biennial International Conference April 1, 2005 Austin, Texas European Defence Agency and Security Research Programme: Would EU defence industrial policy improve European security? Kazuto Suzuki University of Tsukuba Introduction: Three characteristics of security-related R&D policy Common European Security and Defence Policy (ESDP) of European Union which took off after the St. Malo Franco-British summit in 1998 has gathered momentum in Councils in Helsinki, Laeken, Thessaloniki, cuminating in the creation of European Defence Agency (EDA). Meanwhile, the increasing attention to the security issues encouraged the Commission to initiate European Security Research Programmes (ESRP) within the framework of Research and Development policy. Both EDA and ESRP focus on the "gaps" between technology and capability in Europe. In other words, "gaps" are identified in areas where Europe lacks the technological and industrial capability to achieve the desired policy outcome. But also the "gap" was clearly marked in relation to technology and capability of the United States. Characteristics (1): Coordinating national capabilities These two different sets of policy indicate the confusing characteristics of the policy vis-à-vis the aim of establishing EU's competence in security technology and capability. First, the most urging question for Europe ought to be not to increase its capabilities through research, development and procurement, but to co-ordinate existing capabilities at the national level. In order to implement its security strategy, outlined in Petersberg Declaration, it is necessary to add more common European assets. However, the Berlin Plus agreement enables EU to utilise NATO assets to fill the requirements of EU operations. Furthermore, there are national and multinational projects (through OCCAR, LoI and WEAG), which would contribute to the improvement of European capabilities. Characteristics (2): Catching up with American technology However, current policy on European security is not only focused on the co-ordination of existing capabilities but also on the improvement of those capabilities. This policy direction is driven by some Member States which initiated the development of ESDP and are keen on filling the transatlantic technological and capability gaps. They have already developed national capability to some extent, but after having learned from the operations with the United States in Bosnia and Kosovo, they became aware that it would be impossible to "catch up" the pace of technological progress that the United States has already accomplished. Without its own capability, it would be extremely difficult to take an initiative in joint operation with the United States for implementing Petersberg Tasks or other international operations such as in Bosnia, Kosovo and Afghanistan. Although European states will be able to utilise NATO assets even when the United States stays out of the operation, there is no guarantee that there will be sufficient capability available for Europeans without the US capabilities. Therefore, certain Member States such as France, Germany, Britain, Italy and some others claimed that there should be autonomous capability which would not only meet the requirements for Petersberg Tasks, but also for the EU operation without the United States. Characteristics (3): Improving industrial competitiveness The third characteristic of defence-related research, development and procurement policy is that it is driven by the concern for industrial competitiveness. Since the end of the Cold War, the defence budget both in the United States and Europe has sharply declined, and defence industry was forced to restructure. In the United States, defence industry was concentrated in four major companies, Boeing, Lockheed Martin, Raytheon and Northrop Grumman. To adjust to the new circumstances, these giant companies became dominant player not only in the US market but also in the global armament market. European companies, such as British Aerospace, GEC-Marconi, Aerospatiale, Thomson-CSF, DASA, etc., found their competitiveness was seriously being undermined even in their home market. Thus, since 1998 when French Socialist government decided to privatise Aerospatiale, the dynamic process of restructuring European defence industry got underway and culminated with the creation of European Aerospace, Defence and Space Company (EADS) and BAE Systems as the main player in Europe. However, the creation of EADS and BAE Systems does not necessarily mean that the European armament market was unified. It was only a merger of supplier, and unless the demand-side (national procurement policy) is united, there would be no synergetic effect on European industry. Considering this, various multilateral structures, such as OCCAR, LoI, were established. Nevertheless, these structures were driven by larger Member States (though their budget for defence procurement is about 80% of all Member States), and would be unsatisfactory for smaller Member States since larger states dominate the needs and requirements of armaments for their defence equipments. Furthermore, smaller Member States considered that the defence-related research and development would improve their industrial capability for civil products as well as create opportunities for increasing military contracts. Therefore, they preferred to promote European programme instead of multinational programmes which tend to exclude smaller Member States. By glancing at the three characteristics of defence-related research, development and procurement policy, it becomes clear that there are different objectives and intentions among Member States, particularly between larger and smaller states. It is still early to make a judgement as to which course of policy Europe would take in near future. However, this paper aims to provide some food for thought about the future of the EDA and ESRP by analysing current policy trajectories. First, it will analyse the duality of purpose of ESDP which has grown out of the developments since 1998. It is argued that the duality of purpose, softer strategy and "hardware-oriented" research development and procurement policy, are causing confusion as to the goal of ESDP. In the second section, the role and functions of EDA and its problems will be analysed. On the one hand, the role of EDA is expected to be an "armament agency" for achieving Headline goals, but this paper concludes that it can only be a "coordinating agency" for many reasons. Third, it will discuss the Commission's research policy and space policy under European Space Agency (ESA) that are stimulated by the development of European armament policy. This paper puts emphasis on the "bandwagon effect" in these policy areas and analyzes how these policies are coordinated with armament policy. It is the aim of this paper to identify the problems of European armament policy and a scenario possible future development. The author hopes that the analysis of armament policy, which is situated at the junction of state and market, would, provide further understanding of the process of European integration. 1. From St. Malo to Thessaloniki The St. Malo Declaration which was the product of Franco-British summit in December 1998 gave a clear signal for establishing Common European Security and Defence Policy (ESDP). The primary objective of this declaration was to make sure that European Union could play its full role on the international stage if there is no American participation in the actions of NATO alliance. However, the secondary objective of this declaration was to develop European capacity for autonomous action, backed up by credible military forces. To this end, the declaration called for strengthening the competitiveness of European defence industry and technology . When Prime Minister Blair and President Chirac met at St. Malo, they made clear the need for the development of autonomous defence capability and enhancement of the role of European Union in the international politics. Both Britain and France have large defence industry and their procurement policies were directly related to the strategic needs. However, when the discussion of the European Defence policy was brought in at the Council of the European Union, France and Britain had to face certain difficulties in transmitting their ideas to other heads of governments. Many Member States including four neutral states hesitated to give stronger mandate for EU to establish autonomous defence capability, which would eventually introduce a characteristic of military alliance to the EU. Even though the Cologne and Helsinki Councils outlined political and military structure for EU defence activities, many had questioned the lack of coherent strategy and objectives of ESDP. There was a general consensus that EU's security actions should be based on the Petersberg Tasks, which includes humanitarian and rescue tasks, peacekeeping tasks and tasks of combat forces in crisis management, including peacemaking , but there was no shared goal among Member States to build European capability beyond Petersberg Tasks. Duality of the objectives of ESDP If the policy of developing an autonomous capability followed the logic of the Council, the policy objective for capability improvement should be placed on the capabilities for implementing Petersberg Tasks. However, the idea which was brought up by the British and French politicians who concerned the "technology and capability gap" with the United States did not limit itself to the Petersberg Tasks. Among larger Member States, Britain, France, Germany and Italy, together with Spain, Belgium and, to some extent, Greece, there was a strong determination for establishing European autonomous capability for taking actions without the support of the US. In short, the primary objective of St. Malo declaration was softened after it was introduced at EU Council, but the secondary objective on hardware-oriented capability improvement was strongly supported by larger Member States. This duality of St. Malo objectives created the confusing characteristics of ESDP. Financial constraints and Berlin Plus arrangement However, under the strict rules of fiscal policy through Stability and Growth Pact, Member States faced difficulties for investing in various capability development programmes. For developing European assets equivalent to that of NATO, European defence budget was far too small and inadequate. Therefore, they had to set a priority of capabilities and make sure what the most imminent needs for ESDP were. This issue was brought up at Helsinki Council for establishing Helsinki Headline Goals (HHG) followed by Capability Improvement Conference in 2000, European Capability Action Plans (ECAP) and Headline Goals 2010 (HLG2010). On the other hand, the United States found the development of European autonomous capability as decoupling, duplicating, and discriminatory (Albright's 3Ds) . Since the end of the Cold War, the raison d'être of NATO has been always under question. Without Communism, or no other immediate threat, NATO as an organization for collective defence lost its foundation. The conflicts in Bosnia and Kosovo introduced a concept of "non-Article 5 actions", which enabled NATO to take actions for peace activities including peace enforcement and humanitarian intervention outside NATO area. However, this additional function of NATO still does not fully justify the American involvement in European security issues. This was the basic motivation for Europeans to develop autonomous capability because they learned that the United States may not be willing to take part in security action in which Europe has a great stake. The experience of Bosnia and Kosovo was a significant reminder that Europe must consider scenarios in which the United States would not involve itself in the European security matters. However, from American viewpoint, the development of European capability would undermine the transatlantic alliance. For Americans, NATO would provide a certain condition for Europeans to support the actions of the US. In cases such as Bosnia, Kosovo and Afghanistan, the intervention by the US was supported by Europeans, particularly in the post-conflict phase. There was a certain division of labour between the United States and Europe that the US led exercise of military force whereas Europe would play greater role in post-conflict peace building . Thus, the United States accepted the improvement of European capability to strengthen the European pillar of NATO while maintaining the transatlantic alliance. The NATO council in 1999, immediately after the St. Malo initiative, at Washington D.C. defined the relationship between EU and NATO and provided a package of NATO assistance to EU (so-called "Berlin Plus"). The "Berlin Plus" arrangement allows EU forces (1) to access NATO planning capabilities, (2) to use NATO capabilities and common assets for EU operations, (3) to improve DSACEUR responsibility to assume European responsibilities to EU-led operations, and (4) to adopt NATO's defence planning system to incorporate for EU-led operations . Through "Berlin Plus" arrangement, the EU would be able to take military and humanitarian operations using NATO assets and command structures. From American point of view, this arrangement would discourage some NATO Member States from pushing for the development of European autonomous capability because NATO would provide for EU forces, saving the cost of development, while improved EU forces would strengthen the capability of NATO itself. However, some European Members, particularly France, Germany, Belgium and Luxembourg were not happy with complete dependence on NATO assets. The primary purpose of development of European autonomous capability was to avoid the dependence on American assets. So these Member States strongly pushed for the creation of EU military Headquarter for strategic planning and operation. The idea of European HQ was finally withdrawn because of American objections, and at the end of the negotiation, EU could only create a small "planning cell" within the NATO HQ in Brussels. Demand for improving technological capability maintained However, the process of technological capability improvement has not stopped even in the face of strong objection from the United States regarding the development of planning capability. At the Thessaloniki Council, Member States agreed to establish European Defence Agency for research, development, and procurement of armaments. The EDA was expected to coordinate existing multilateral procurement organizations such as OCCAR and LoI, but it was also expected to respond to the requirements of European forces for meeting the objectives of Petersberg Tasks and restructure European armament market. 2. Armament Agency or Coordinating Agency? The European Defence Agency was created in July 2004 by the Joint Action of the CFSP . Nick Witney, former Director General of International Security Policy of British Ministry of Defence, was appointed as the first Director of the EDA to oversee its setting up. The EDA subordinated to the Council's authority, but have the legal personality to closely link itself with the Council. The legal autonomy of EDA lies in the fact that it is open to participation by all Member States, but some Member States will be able not to participate. Therefore the structure of the managerial board of the EDA may be different from the Council. In fact, Denmark decided not to participate in the EDA, so the current participating Member States are 24; however, it is open to the contributions from Denmark on case-by-case programme basis. The aim of the Agency is (1) developing defence capabilities in the field of crisis management, (2) promoting and enhancing European armaments cooperation, (3) strengthening the European defence industrial and technological base (DTIB), and (4) creating competitive European defence equipment market. Also EDA is expected to work closely with the Commission on the research activities in strategic technologies which would contribute to the defence capabilities. Although the first objective mentioned was "in the field of crisis management", the focus of the EDA is on the improvement of industrial and technological capability, which may not limited to the field of crisis management. This refers back to the duality of the objective of the ESDP. While the primary objective of ESDP is on the "softer target" such as humanitarian support, the secondary objective on the "hardware-oriented" policy is clearly reflected on the aims and mandates of the EDA. First question: how could EDA contribute to the strengthening of European DTIB? At least three questions need to be answered in order to achieve these goals. The first question relates to the way in which EDA contributes to the strengthening of European DTIB. In a global armament market, European defence industry and technology stand very firm and competitive compared to other nation-states except the United States. The only competitor in this regard is the US industry and EDA is clearly aiming to fill the industrial and technological "gap" with it. In doing so, there will be no doubt that Europe needs to invest in defence industry and technology. However, the amount of the US investment in defence industry is enormously larger than that of Europe. The US defence budget only for research, development, test and evaluation (excluding procurement) is $63.56 billion , whereas entire British defence budget (including R&D, procurement, personnel, cost of deployment to Iraq etc.) which is the largest defence budget in Europe is about $57 billion (29.7 billion pound) in FY2003. Although the main purpose of EDA is not to "catch up" with the capability of the United States, it is clear that the "gap" of investment is widening. With the US policy to promote RMA (Revolution in Military Affairs) and Transformation of the forces under the Secretary of Defence, Donald Rumsfeld, it seems that Europe needs significant amount of investment in defence sector in order to keep up with the technological change. However, apart from general budget, the European programme budget is in general contributed by Member States. How much would be contributed is yet to be defined, but concerning the size of national defence budget, it is expected that Member States are not doubling their budget because of the strict rule of Stability and Growth Pact. It is not only the "gap" between Europe and the United States, but also the "gap" between what Europe wants to do and what Europe can do. The European Union has already deployed its forces in Macedonia, Bosnia, and Congo, but as Nick Witney, the Director of EDA has stated, Europe is still between "spending too much money on the wrong things and not enough money on the right things ". There are too many overlaps of investment and lack of interoperability among European forces. If the battle groups want to perform as it is expected, it is necessary to properly coordinate national industrial and technological standards. So, the role of EDA in strengthening DTIB seems to be that of coordination rather than filling the gap between Europe and the United States or spending extensive money in defence industry and technology. The primary role of EDA is to identify the burdens of operations, lack of interoperability, and mending the differences between European forces. Second Question: Coordinating with existing frameworks The second question relates to the issue of coordinating existing intergovernmental procurement frameworks. There are overlapping frameworks such as OCCAR (Organisation Conjointe de Coopération en matière d'ARmement), LoI (Letter of Intent), and WEAO (Western European Armament Organization, created under WEU) whose aims are to improve efficiency of defence procurement and facilitate multilateral procurement. The problem of these frameworks is that the membership of organizations is not coherent. OCCAR was created in 1996 with the agreement among Defence Ministers of UK, France, Germany and Italy. Belgium has joined in 2003 and Spain is expected to be a member for developing Airbus military transportation aircraft, A400M. The LoI was concluded among UK, France, Germany, Italy, Spain and Sweden in 1996 too. Whereas OCCAR focused on the efficient development and procurement of armaments, LoI's objectives are focused on the facilitation of restructuring of European defence industry by securing stable supply of armaments, harmonize export provisions, increase security of knowledge and information, collaborate in R&D, exchange technical information, harmonize military requirements, and coordinate legal framework. In a short, the objectives of OCCAR and LoI seem quite similar to those of EDA. Why is it necessary to create EDA when there are similar existing organizations? The membership of OCCAR and LoI is basically limited to the larger Member States, but what are the advantages for expanding the membership to smaller countries? There is no clear cut answer for these questions. On the one hand, there are certain advantages in enhancing the armament collaboration to European level. First, it would enable all European Member States to procure European products. One of the major problems among NATO Members for the enlargement of NATO was on the question of who would supply armaments for new Member States. Former Communist countries need to modernize their armaments for improving interoperability with other NATO Members. The creation of EDA would enable them to join the European scheme for development, widening the chances for opening their armaments market. Second, it would enable larger Member States to collect money for research and development. Although most critical technologies are developed in larger Member States, it would lighten the financial burden on them if other smaller Members would contribute financially. Third, it would increase the sense of satisfaction for smaller Member States. If research, development, and procurement are only conducted within larger Member States, smaller Members would feel that they were left out from Europe, and there will be a sense of dissatisfaction and exclusion. From the point of view of developing European common defence policy, it would not also be an advantage for making such a distinction. But, on the other hand, enlarging research, development, and procurement scheme to EU level would create some problems. First, the research and development would undoubtedly be less efficient under such circumstances. For contributing Member States, it is vital that they would get sufficient return for their investment. No matter how small the portion of their investment, they would expect sufficient amount of participation in R&D programme and return of the contract are needed. If their investment is used for R&D activities in other countries, their contribution, generated from taxpayer's money, cannot be justified. Therefore, they shall claim a fair return, or juste retour. The principle of juste retour is often used in other intergovernmental European projects such space programmes. In the experience of other projects, which are quite successful sometimes, the European Member States learned that the principle of juste retour would be an obstacle for the improvement of efficiency and competitiveness. This is why OCCAR sought to avoid using this principle and introduced competitive tenders (though it may not be entirely successful). Second, the increase in membership would complicate the decision-making process. The Member States might have different needs and requirements, so that the decision for design and specifications can be a product of political concessions and compromises. This was the case of Eurofighter. When Eurofighter was discussed among UK, Germany, Italy and Spain, each member proposed different designs and specifications for their own needs and requirements. If decisions involving the four members are so complicated, what will happen when there will be 24 members? The needs and requirements of the old and new Member States are quite different because of the basic infrastructures and characteristics of their forces. For example, Czech Republic focuses the niche capability such as CBRN (Chemical, Biological Radiological and Nuclear) Defence and Hungary does so in combat engineering and bridge-laying. These new Member States would be interested in developing such a particular capability, but is it necessary or efficient to do it at European level? Third, the increase in number of participating Member States would make it more difficult to establish a coherent armament market in Europe. Each Member States has its own procurement agency and procedure, and the process of procurement is not quite transparent. Even if the armament market is enlarged, it will be more difficult to set up a coherent market with competitive tenders. There are advantages and disadvantages in enhancing research, development and procurement scheme to smaller Member States. However, if the objective for collaboration in armaments is to improve the efficiency and establish common market, the existing frameworks, such as OCCAR and LoI, would serve better for achieving the objective. Of course, EDA assumes that the projects are on ad hoc basis, and there will be limited in the number of participating Member States, but the problem is, there will be no institutional arrangement to exclude less competent and less competitive Member States to participate. OCCAR and LoI were able to exclude them, but EDA cannot. Thus, coordination with existing bodies would be quite difficult, and disadvantages might overwhelm the advantages. Third Question: How would EDA be able to create competitiveness? The third question is about how EDA would be able to create competitive defence equipment market. In general, competitive defence market would be achieved through open and transparent tenders for national procurement processes. The Commission, which has tried to step in this policy area several times in the last decade , initiated a policy for coordinating defence equipment market by issuing Green Paper for defence procurement in September 2004 . This document primarily focused on the question of applying Commission rules for awarding defence contracts in order to overcome the fragmentation of defence market. This raised a lot of issues concerning the creation of competitive defence equipment market. (a) Article 296 of the EC Treaty allows Member States to derogate from rules on public procurement. This provision was set up in order for Member States to take decision by themselves in areas relating to their vital national interest, but in some cases, this Article is used for almost all procurement including shoes and shirts. Commission was trying to distinguish items which could be competitively procured and nationally controlled. This is discussed under public consultation process until mid-2005. (b) Question of security of supply. The major difference between normal public and defence procurement is the issue of security of supply. Armed forces tend to prioritize the importance of security of supply over cost-efficiency. Opening up the defence procurement market for competitive tender might jeopardize the security of supply. Thus, the rules for market regulation are difficult to apply against such a requirement from the forces. (c) Lack of Transparency. Usually the processes of defence procurement are conducted under the confidentiality rules because of the sensitiveness of military technology and specifications. Also, because defence procurement is limited in the volume of production, the procurement process is often complex and less transparent for protecting reliable suppliers. Therefore, by definition, defence procurement process lacks transparency. This situation would make the Commission extremely difficult to establish competitive, transparent and universal rules for procurement. Although the Commission in association with EDA has been trying to get hold of a control over defence procurement market for creating industrial competitiveness, it seems it would take many more years before light is seen at the end of tunnel. Summary The above three questions clearly demonstrate that the EDA would be mainly an agency for coordinating national procurement requirement and for developing DTIB through existing frameworks, such as OCCAR and LoI with limited financial resources, and for collaborating with the Commission to improve competitiveness by opening defence procurement market. In fact, the EDA structure was recently defined, namely Capability Directorate for defining the "gaps" in capability, R&T Directorate for developing necessary technology through ESRP and its own programmes, Armaments Directorate for identifying necessary armaments and develop them in collaborating with OCCAR etc., and Industry/Markets Directorate for promoting industrial restructuring and opening procurement market. Whether this structure would improve industrial and technological capability is still questionable. However, the establishment of EDA would at least constitute the first step toward coherent European defence equipment market. Member States as well as Commission have certain political willingness that the European capability must be improved; otherwise, Europe will not be able to assume its role in the global politics and stop wasting taxpayers' money. 3. Bandwagon Effect The development of ESDP and increasing interests for creating European common defence research, development, procurement mechanism generated gravity in other policy areas. The most outstanding cases are in Commission research policy and European space policy, conducted mainly within the framework of European Space Agency. Although European Commission was interested in defence procurement issue, in the context of strengthening competitiveness of European industry, Article 296 of EC Treaty prohibited Commission from stepping into this policy area. It issued two communications in 1996 and 1997 which encouraged the harmonization of European defence market by improving dual-use industry such as aircraft manufacturing or shipyard . However, Member States did not pay attention to these communications because there was no consensus among them about how the Commission would play a role in the policy area where they have vital national interests. Nevertheless, the mood has changed after St. Malo Franco-British summit. When the Member States began to consider the importance of European collaboration for defence procurement, it became not so inappropriate to think about Commission's engagement in this effort. The Commission which has been looking for an opportunity to involve in this most nationally-protected market took this change to promote Community policy in this area. Commission targeted aerospace industry as the gate for opening up the possibility of its involvement in defence industrial policy since aerospace is a typical dual-use technology for which there is already a collaborative framework at European level such as Airbus and Eurofighter. Thus, in 2002, the Commission called for a high-level advisory group from industry, the Commission and European Parliament, and produced a report called "STAR 21: Strategic Aerospace Review for the 21st Century ". This report recommended that there should be a European level policy framework for promoting coherent research, development and procurement. The role of the Commission was expected to play was defined in the areas such as competition policy, tax incentives, training and education, labour mobility and so forth. In short, the role of the Commission was highly appreciated as a regulating body for creating coherent rules and facilitating industry's business. However, the response of the Commission toward STAR 21 was somehow more enthusiastic about assuming more substantial role in this sector . In this response, the Commission focused on the defence and space research where the Commission could have some competence and advocating that Commission would play a greater role for improving defence equipment market which was referred to in the Commission's communication in 2003 . European Security Research Policy (ESRP) Following the Commission's defence equipment market policy, the Commissioner for Research, Phillipe Busquin, in association with the Commissioner for Industry, Errki Liikanen, promoted the Community research programme in the field of security and defence. The Community research policy, mainly focused on the Framework programmes, has been exclusively for civilian programmes. Of course, there has been some research agenda concerning dual-use technologies, but it was solely limited to civilian application studies because of the Article 296 of EC Treaty. However, the communication produced jointly between DG Research and DG Industry explicitly focused on research in the field of security, and expressed the Commission's intention to step in the most nationally protected industrial sector . This communication called for a "preparatory action" to set up security research programme in 2007. In doing so, this initial phase should identify the needs and demands in the security field and how the Commission could enable European research institutions to contribute for the improvement of security related technologies. In October 2004, the Commission launched so-called Preparatory Action in the field of Security Research (PASR) consultation with academic and scientific community. The initial PASR project funds are awarded to 11 consortia of industry and research institutions in various research subjects including space technology, 3D simulation technology for crisis management, geospatial data analysis, network security etc. These projects are yet at the preparatory stage, but the selection of the first call for PASR shows the Commission's intention to focus on the high-tech, digital, network oriented research. It seems that the PASR projects aim to catch up with the US technological development in military fields based on the concept of "network-centric warfare (NCW)". Of course these capabilities are needed for European security operations, but among many capabilities which are identified at ECAP process, it is interesting that these NCW-oriented technologies are prioritized by the Commission. It gives the impression that the Commission was trying to use this opportunity to enhance not only security-related technology but also the technologies which would contribute for strengthening European industry in civilian IT sector. Immediately after the launch of PASR, a report from the group of personalities in the field of security research, which consists of people in charge of European defence, aerospace, electronic industry, was published. This report, "Research for a Secure Europe ", clearly reflects the concern about the lagging of European industry behind the US in technology, and the former's lack of capabilities for achieving the goals identified in the European security strategy paper, "A Secure Europe in a Better World" (so-called Solana Paper) . It emphasised that ESRP should take advantage of the duality of technologies and bridge the gap between civil and defence research. The concept of duality or dual-use technology served quite well for the Commission because, on the one hand, the Commission does not have to argue over the question of Article 296 as long as it invests in the civilian programme which can be used for security purposes, and on the other, the investment in network-centric technology would strengthen the competitiveness of European industry in civilian market too. However, the report also pointed out the difficulty of Europe-wide security research programme, particularly about the issue of technology transfer. ESRP evidently involves consortia of companies across Member States, but there is no coherent rule in the Union for transferring sensitive technology. Of course, there are some experience of controlling technology transfer in other frameworks such as OCCAR, LoI, and aerospace industry, but most of these cases were conducted outside Community framework so that Member States were free to make adjustable rules. When the Commission is involved in the promotion of security research in dual-use technology, the Community rule should be applied. This is likely to pose a significant problem in the future, particularly for those who wish to protect their national industry sensitive to security-related issues and highly profitable sector. Space Space is another policy area where the Commission and European industry jumped on the bandwagon. There has been an extensive history of European space collaboration since 1960s, but most of the activities were undertaken by European Space Agency (ESA), and the role of the Commission was very marginal until late-1990s . However, the Commission gradually became a central player in European space activities. First, the end of Cold War made it difficult for Member States to justify the investment in space. Space activities have been driven by the competition between the United States and Soviet Union for the sake of space race, but it has ended. Second, German reunification took the political priority away from space. Most of the expensive programmes, such as participation in International Space Station, have been short-funded or cancelled. Third, the restructuring of European space industry, due to the lack of defence budget after the Cold War, made it difficult for intergovernmental framework to manage space policy. The space market has transformed from "national champion" to "European champion". Finally, the increasing commercial activities, such as communications, navigation, broadcasting from satellite, called for the involvement of the Commission in regulating the market. For these reasons, the Commission gradually stepped in the space policy-making. The first major step that the Commission took was to initiate Galileo satellite navigation programme. This programme was originally inspired by the French space agency's idea of developing the European version of GPS (Global Positioning System) which is controlled by US Department of Defence. The GPS signal is used for car or aircraft navigation, time stamping for bank transfer, and land survey and mapping. Although GPS signal is extensively used for civilian purposes, the GPS service might be degraded or stopped in case of conflict or US military action. Therefore, the Commission became keenly aware of the need for maintaining secure transportation system. Of course there was the investment in developing Galileo as a European version of GPS, but the Commission convinced Member States about the danger of relying on the American military system for such a wide civilian use. The launch of Galileo programme called for further cooperation between the Commission and ESA since the Commission has no technical competence. In order to bridge the institutional differences, ESA and EU jointly published a strategic paper, European Strategy for Space in 2000 . This strategy, though exclusively civilian, defined the division of roles between the Commission and ESA and emphasised the need for coherent European effort to promote space policy for improving European competitiveness in this field. Following the development of the relationship between ESA and the Commission, and taking advantage of the ECAP process, the Commission further pushed its role in initiating European space programmes jointly with ESA. This eventually became a White Paper on Space in 2003 . Though it is also comprehensively discussing the importance of EU in implementing European space policy, the Commission established its position as the leading political institution for formulating space policy by claiming that it is now important to include European security and defence issue in space policy. ESA, in its Charter, is limited to the implementation of defence-related issues since the Article 2 of the Charter states that all ESA activities have to serve for "exclusively peaceful purposes". Even though peaceful purpose may include peacekeeping activities or Petersberg Task, ESA Member States considered that those activities fall into the area of national competence. Thus, the development of the institutional link with the Commission was a significant change in the perception of ESA towards security-related programmes. This trend was further consolidated by ECAP conclusion that Europe needs to strengthen its strategic imagery intelligence. Although WEU has already been working to collect satellite imagery through WEU Satellite Centre at Torrejon near Madrid, the collection was mainly from commercial sources and not been useful for strategic purposes. Therefore, EU Military Committee (EUMC) requested the Council that Europe acquire space system for military operations and urged that EU increase its spending in space to develop its own asset. Currently, most of space systems for military purposes are owned by national governments. France has military reconnaissance satellite, Helios-1 and -2, and military communication satellite, Syracuse. Britain operates Skynet military communication satellites, and Spain has dual-purpose communication satellite. Also, Germany (SAR-Lupe) and Italy (Cosmo-Skymed) are planning to launch Earth observation satellites which could provide military intelligence. These Member States, particularly among France, Germany and Italy, are now forming a new approach to exchange satellite imagery for their own needs. This initiative, called 'Besoin Operationnel Commun' or BOC, is designed only to enhance Member States capability for strategic imagery, but it may be considered to "Europeanize" the national space assets. There are some other Member States, such as Spain, Belgium and Greece, which do not even own imagery satellites, they have joined BOC framework. This suggests that other Member States would be able to join this approach, and France, Germany and Italy would provide "common" assets for other European Members. Although the BOC approach is something new, it does not provide intelligence service for entire EU Member States. However, as stated in the White Paper as well as in the WEU report on the Space Dimension of the ESDP and Headline Goals 2010, there is certain political encouragement for developing space capability for ESDP. Thus, the Commission took another initiative to set up a panel of space and security experts (SPASEC) to identify the user needs and capability gaps and promote EU space and security policy. The SPASEC panel has not yet produced a report yet, but in the interviews conducted in February, the discussion about how space can contribute to the development of European security capability was no longer a conceptual issue, but an issue being discussed in detail of specifications and applications . Although there is no concrete commitment from Member States nor the Commission that funding will be available for developing European space assets, the discussion in SPASEC would be a very strong force to encourage the Council to promote space investment by EU. The SPASEC report is likely to recommend (1) the establishment of a platform or forum for elaborate the needs and user community, (2) the definition of the costs and contributions involved, (3) the setting up of a situation awareness centre (including early warning satellite intelligence), (4) and identification of the focus and priority of projects. Summary Both the Community's research and space policy increased their focus on security issue as a bandwagon effect of the development of ESDP and EDA. However, it became clear that it was not only the bandwagon effect but also a policy driven by its own logics. In the research policy, the primary target of the policy is set to increase the industrial competitiveness, whereas in space, the driving force was coming from the development of the relationship between ESA and the Commission. In both cases, security issue was added some important features to the policy, but this policy was not originally driven by the security issues. Also, it became clear that even though the Commission was initiating security-oriented programmes, it is the Member States which need to carry forward the policies. Both in security research and security and space, the role of the Commission is still constrained by the Article 296, and it has to approach from the duality of technology. In order to grant full authority for the Commission and the Union to implement coherent policy for improving European technological and industrial capability, the Member States need to team up with the Commission and other relevant actors for defining capability gaps and implementing European action plans. 4. Conclusion The objective of this paper was to assess the potential of defence-related technological and industrial policy for improving European competitiveness from institutional perspective. To this end, it analysed the dynamics of ESDP from St. Malo to Thessaloniki and concluded that the three characteristics and duality of the purpose of ESDP tend to confuse the policy objectives. This confusion of the objectives was a reflection of the complicated nature of European Union and its security policy. On the one hand, Member States demand for protecting their vital national interest as well as their industry from competition at European level. On the other, some Member States, particularly the larger ones, want to take advantage of their market position and insist on improving their competitiveness. For these reasons, the newly created EDA was put in a difficult position. Its role is defined as a coordinating agency, but at the same time, it is required to perform as armament agency. From the analysis of three questions, it appears that EDA would face great difficulty in achieving its goals because of the lack of funding to catch up with American technology and lack of transparency in defence equipment market. After all, the role of EDA was to provide opportunities for smaller Member States by participating in some of the research, development and procurement programmes, while relying on the larger Member States technological and industrial capability to promote efficient and effective policy. This can be achieved through coordination with OCCAR and LoI. Although EDA itself would only be a coordinating agency and not expected to fill the gaps, some of the EU security-related technological and industrial policies would be conducted in other existing policy areas. First, this paper analysed the possibility of the development of ESRP. The ESRP is conducted by the Commission, so that it will be constrained by the Article 296, but the constraint could be avoided by focusing of the dual-use technology area. In fact, the launch of PASR showed that the Commission could enhance the technological and industrial bases, while trying to strengthen civil technologies. Second, this paper discussed the field of space policy. Space policy has become a subject of the Commission's policy recently for reasons specific to the space activities in Europe; but security-related research and development provides additional value for the Commission to involve itself in the space policy where intergovernmental framework, ESA, was the dominant policy-making framework. It is true that Member States are also interested in European collaboration for security-related programmes in space, and therefore it can be expected that there will be more coordination between the Commission, Member States and other relevant agencies. In conclusion, European defence technological and industrial policy may not be successful in a short run. The lack of funding and confusing institutional structure would not maximise the investment. However, in a long term, European defence industry and technical competence will be much improved compared to today's situation, because current defence-related R&D are mostly concentrated at national level with a lot of overlaps and unnecessary duplications. Nick Witney, the Director of EDA, says that only 5% of defence spending is devoted to European collaboration. If this percentage rises, it would increase the efficiency of investment. The real question is, whether it will achieve the goal that Europe desires. The problem is that there is not yet a coherent and consistent desire that Europe has demonstrated. Perhaps the most important contribution of EDA, at least in the first phase, is to provide an opportunity for Member States, the Commission and the relevant agency to think what is desirable for Europe and what Europe can do to make the world more secure. Joint Declaration, British-French summit at St. Malo, 3-4 December 1998 (http://www.iss-eu.org/chaillot/chai47e.html#3) Western European Union Council of Ministers, Petersberg Declaration at Bonn, 19 June 1992. The Financial Times, 7 December 1998. Michael Ignatieff, Empire Lite: Nation-Building in Bosnia, Kosovo and Afghanistan. Vintage, 2003. NATO (North Atlantic Council) Washington Summit Communiqué "An Alliance for the 21st Century"(24 April, 1999) http://www.nato.int/docu/pr/1999/p99-064e.htm COUNCIL JOINT ACTION 2004/551/CFSP (12 July 2004, OJ L 245/17) Department of Defense Appropriations Act, 2004. "EU armies not up to bloc's ambition -defence agency", Reuters, February 15, 2005. COM (96) 10 final, The Challenges Facing the European Defence-Related Industry: A Contribution for Action at European Level; COM (97) 583 final, Implementing European Union Strategy on Defence-Related Industries; COM (2003) 113, Towards an EU Defence Equipment Policy. COM (2004) 608 final, Green Paper: Defence Procurement. See footnote 9. Commission of European Communities, STAR 21: Strategic Aerospace Review for the 21st Century – Creating a coherent market and policy framework for a vital European industry, July 2002. COM(2003) 600 final, A Coherent Framework for Aerospace - a Response to the STAR 21 Report. COM (2003) 113 final, Towards an EU Defence Equipment Policy. COM (2004) 72 final, Towards a programme to advance European security through Research and Technology. Commission of the European Communities, Research for a Secure Europe: Report of the Group of Personalities in the field of Security Research, 2004. Council of the European Union, A Secure Europe in a Better World: European Security Strategy, 2003. See, Kazuto Suzuki, Policy Logics and Institutions of European Space Collaboration, Ashgate, 2003. COM (2000) 597 final, Europe and Space: Turning to a new chapter. COM(2003) 673 final, WHITE PAPER, Space: a new European frontier for an expanding Union An action plan for implementing the European Space policy. Assembly of Western European Union, The Space Dimension of the ESDP, Document A/1881, 2004. The panel was convened by the Commission with participation from EU Member States, ESA, National space agencies (Italian ASI, British BNSC, Spanish CDTI, French CNES and German DLR), Eumetsat, EU Satellite Centre, Eurocontrol, OCCAR, GMES advisory council, ECAP space asset group, Common European Priority Area (CEPA 9), Eurospace, NAVOBS (network of SMEs), European Satellite Operators Association, Secretary General of the Council, and EDA. The Council General Secretariat noted this development by the Commission and encouraged Council to develop EU Space Policy for ESDP. See, Council of the European Union, 11616/3/04, 16 November 2004. 20