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The European Defence Market Can the EU Work for a Stronger European Defence Industry Without Undermining Its Role As an International Peace Promoter?

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The European Defence Market Can the EU Work for a Stronger European Defence Industry Without Undermining Its Role As an International Peace Promoter? The European Defence Market Can the EU work for a stronger European defence industry without undermining its role as an international peace promoter? Örvar Þorri Rafnsson Lokaverkefni til MA-gráðu í alþjóðasamskiptum Félagsvísindasvið Febrúar 2015 The European Defence Market Can the EU work for a stronger European defence industry without undermining its role as an international peace promoter? Örvar Þorri Rafnsson Lokaverkefni til MA-gráðu í alþjóðasamskiptum Leiðbeinandi: Alyson J.K. Bailes Stjórnmálafræðideild Félagsvísindasvið Háskóla Íslands Febrúar 2015 Ritgerð þessi er lokaverkefni til MA-gráðu í alþjóðasamskiptum og er óheimilt að afrita ritgerðina á nokkurn hátt nema með leyfi rétthafa. © Örvar Þorri Rafnsson 2015 010382-5219 Reykjavík, Ísland 2015 Útdráttur Markmið rannsóknarinnar er að rýna ítarlega evrópska vopnageirann ofan í kjölinn og meta hvers vegna Evrópusambandið er að reyna að breyta þar viðteknum venjum í framleiðslu og viðskiptum. Alhliða yfirlit yfir geirann svo og tengdar stefnur Evrópusambandsins verða skoðaðar í því skyni. Allt frá því að innri markaður Evrópusambandsins varð til hafa vopn og aðrar tengdar vörur verið formlega undanskildar lögum og reglugerðum markaðarins. Aftur á móti hafa fjölmargar skýrslur sýnt fram á það að vopnageirinn er hægt og sígandi að verða ósamkeppnishæfari. Því er þörf á aukinni samþættingu vilji Evrópusambandsríkin viðhalda iðnaðarframleiðslu og tæknikunnáttu innanlands í geiranum. Tiltæk gögn rannsóknarinnar sýna að evrópski geirinn einkennist af mörgum ólíkum stefnum ríkjanna í sambandinu. Þetta leiðir m.a. til skorts á samkeppni, ýmiss konar óhagkvæmni svo og aukins kostnaðar. Meginniðurstöður rannsóknarinnar eru þær að viðleitni Evrópusambandsins að fella vopnamarkaðinn undir svipaðar reglur og þekkjast á innri markaðinum grefur ekki undan hlutverki þess sem alþjóðlegs friðarbandalags. Regluvæddur og opinn markaður ætti að leiða til aukinnar gagnrýni og bættari viðskiptahátta í geiranum. Þó gætir hér nokkurs tvískinnungs. Hræsnin liggur í því hvernig aðildarríkin sniðganga sameiginleg viðmið Evrópusambandsins í því hvernig þau haga útflutningi sínum. 4 Abstract The goal of the research is to analyse the European defence sector and assess why the European Union is striving to change well-established procedures for defence production and trade. To that end a comprehensive overview of the sector, and of relevant EU policies, will be provided. Since the creation of the European single market armaments and other defence-related products have been formally excluded from its rules and regulations. However, many reports have concluded that the European defence market is becoming increasingly uncompetitive and greater integration is necessary if European states want to maintain national production as well as their technological and industrial base. The data the research has presented shows that European sector is characterised by different national polices. This results in lack of competition, various inefficiencies and increased costs. The main finding is that the EU’s efforts to bring the defence market towards rules more similar to the single market need not undermine its role as an international peace promoter. A regulated and open market should bring closer scrutiny and better business practices in the sector. The element of hypocrisy lies in the way member states circumvent EU norms in their national export policies. 5 Preface This dissertation is the final assignment in the MA programme in International Relations at the University of Iceland Department Of Political Science. It accounts for 30 ECTS credits. My instructor during the research is Alyson J.K. Bailes, adjunct professor at the University of Iceland. My interest in issues related to security and defence started during my undergraduate studies in Political Science at the University of Iceland. I wrote my BA dissertation about the Western European Union (a defunct European collective security organization) in 2010 under the supervision of Alyson Bailes, who has been a constant supporter of my studies in the field. In the autumn of 2013 while I was an exchange student at Sciences Po Paris, I attended a course in defence and security economics, which further raised my interest in studying the European defence market. I hope that this research will contribute to further understanding of the defence sector in Europe and how it can be possibly be improved in order to benefit EU citizens. This research would not have been possible without generous guidance and encouragement from Alyson Bailes, to whom I am very much grateful. 6 Table of Contents Útdráttur ..................................................................................................................................... 4 Abstract ...................................................................................................................................... 5 List of Tables and Charts ......................................................................................................... 10 Abbreviations ........................................................................................................................... 11 1. Introduction ........................................................................................................................ 13 1.1 Research Question and Methodology ............................................................................ 15 1.2 Structure of the Dissertation ........................................................................................... 15 1.3 Key Concepts ................................................................................................................. 16 1.3.1 Defence Market ....................................................................................................... 16 1.3.2 National Security ..................................................................................................... 17 2. Theoretical Approach ........................................................................................................ 18 2.1 Realism ........................................................................................................................... 18 2.2 Neorealism ..................................................................................................................... 19 2.3 Neofunctionalism ........................................................................................................... 20 2.4 Intergovernmentalism ..................................................................................................... 22 2.5 Liberal intergovernmentalism ........................................................................................ 23 2.5.1 National Preferences ............................................................................................... 25 2.5.2 Substantive Bargaining ........................................................................................... 27 2.5.3 Institutionalization ................................................................................................... 27 3. The Defence Industry ......................................................................................................... 29 3.1 The National Defence Industry ...................................................................................... 31 3.2 The Defence Industrial Base .......................................................................................... 31 3.3 The Military-Industrial Complex ................................................................................... 33 7 3.4 Transformation of the Defence Industry after the Cold War ......................................... 34 3.4.1 Changes in the Global Security Environment ......................................................... 37 3.4.2 The Revolution in Military Affairs ......................................................................... 39 3.4.3 Globalization of Defence Industries ........................................................................ 41 3.5 World Defence Spending ............................................................................................... 42 3.5.1 Trends in World Defence Spending ........................................................................ 43 3.5.2 Current World Defence Spending ........................................................................... 44 3.5.3 Future Changes in World Defence Spending .......................................................... 46 4. The European Defence Market ......................................................................................... 48 4.1 Industry ........................................................................................................................... 49 4.1.1 State Participation ................................................................................................... 52 4.1.2 Major Companies .................................................................................................... 54 4.1.3 Sectors ..................................................................................................................... 57 4.1.4 Consolidation .......................................................................................................... 63 4.1.5 Fragmentation .......................................................................................................... 65 4.2 Defence Market Cooperation and Reform ....................................................................
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