Post-BREXIT, one can expect more flexible collaborative initiatives between the UK and EU countries, such as the TEMPEST multirole air-combat project involving the UK, Sweden, and Italy.
The most pressing question for the EU defence industry community is what lies ahead for Europe in terms of its future, post- BREXIT and COVID. Will the EU remain united, continuing to push for collaboration, competition, and increased efficiency supporting an EDTIB, or will individual EU countries turn to nationalism, increasing the requirement for offsets and industrial participation?
The famous American author, Henry James, stated that the Europe’s greatest enemy is ‘nationalism’. The domain of defence economics is shaped by the debate of EU nations having to make difficult choices based on the Treaty of the Functioning of the European Union (TFEU); between developing a national defence industrial base, which seems to promise security of supply for defence equipment; and moving towards integration with the hope of reducing costs and increasing interoperability.
Besides, defence industry forms an important component of large EU companies aspiring to move away from duplication and protectionism, to increased competitiveness and transparency. These complex choices become even more difficult in a post- COVID world where governments have to re-consider spending priorities and make hard policy choices on how best to invest. Ironically, Europe was already in a difficult position pre-COVID when UK’s BREXIT plan started in 23 June 2016 . Among the many other unresolved issues is the future of the European Defence Industrial Base (EDTIB).
The EU has long been pushing for the development of the Common Security and Defence Policy to enhance self-sufficiency of Europe in key strategic technologies and assisting in key defence capabilities, plus increasing competitiveness within Europe. In fact, the UK’s departure from the EU has been a devastating shock to collective EU defence and security solidarity. The United Kingdom is the second largest contributor to defence spending in real terms within Europe, one of the two nuclear powers, and one of the only four that meets the 2% NATO defence spending requirement. Furthermore, the UK is committed to open procurement and often takes the lead as a proponent of trade liberalisation within Europe together with Sweden and a few others.
In 2017, 28% of UK MOD’s equipment expenditure was allocated to EU collaborative weapon programmes, including the Eurofighter Typhoon and the A400M tactical and strategic airlift aircraft, and plans to spend another £178 billion over 10 years on new military equipment. The UK also contributes hugely to European defence R&D and is at the cutting edge of defence research and innovation. Hence, we have proposed four assumptions to the position of the UK-EU relationship in relation to EUDTIB post BREXIT.
The first assumption is where EU countries take a nationalistic position and continue to invoke Article 346 TFEU for reasons of sovereignty, by protecting critical strategic manufacturing and new digital technology sectors including: cryptography, Cyber-defence, artificial intelligence, space technologies, and micro satellites spin-offs into commercial and dual-use sectors, plus military access to cutting-edge technologies. Despite the pan EU adoption of Directive 2009/81/EC to combat protectionism, the EU Parliament reported that 80% of EU defence expenditure is still spent nationally. In fact, offsets and industrial participation activities may increase as nations see many reasons for autarky.
Second, UK will choose to be more selective, given the flexibility to collaborate and expand its supply chain and access to skilled workers from the Five Eyed Nations, the Commonwealth, Japan, or select EU countries. The UK is then no longer restricted by EU withdrawal agreements and export control regulations. However, the UK’s access to the European Defence Agency and certain markets through EU’s membership to WTO GPA agreement may be impacted.
Third, there will be more flexible collaborative initiatives between the UK and EU countries based on common threat perceptions and political economic agenda. The UK will still have access to continued defence industrial collaboration through the Organisation for Joint Armament Cooperation (OCCAR). The TEMPEST multirole air-combat project amongst the UK, Sweden, and Italy is a case in point. Existing EU-UK defence industrial projects such as GALILEO and Copernicus must continue as the UK has already invested hugely and continues to view the European defence industry and defence integration as vital to UK’s security.
Fourth, the EU itself will continue to consolidate its EDTIB under the ‘ Buy European policy’ especially now with a limited budget and increasing threat, with possibly France taking the lead. Hopefully, this is a decision motivated by efficiency rather than obsessive ‘Pro-Europeanism’. It will be a hard call as a major partner like the UK will be missing from the equation. However, the EU can continue to engage the UK through attractive incentives, such as defence bonds, tax breaks, and access to European Bank Funds, the European Defence Fund Plan, and joint defence research and development programmes.
In conclusion, a selective nationalistic-collaborative EDTIB policy will emerge within the 27 EU countries and their relationship with the UK in the future, which remains close to the existing dynamics. The EU and the UK have too many convergent geo-political interests for full defence separation to take place.
Dr Kogila Balakrishnan is Director, Client and Business Development ( East Asia) WMG, University of Warwick, and Adjunct Professor, Malaysian National Defence University. She has served as Under Secretary, Department of Defence Industry, Ministry of Defence, Malaysia.
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