Development of a European Defence Technological and Industrial Base Main Report September, 2009
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Schoemakerstraat 97 P.O. Box 6030 2600 JA Delft The Netherlands www.tno.nl TNO report: Final T +31 15 269 54 43 F +31 15 269 54 60 [email protected] Development of a European Defence Technological and Industrial Base Main report Author(s) F. Bekkers (TNO) M. Butter (TNO) E. Anders Eriksson (FOI) E. Frinking (HCSS) K. Hartley (CDE) D. Hoffmans (TNO) M. Leis (TNO) M. Lundmark (FOI) H. Masson (FRS) A. Rensma (TNO) T. van der Valk (TNO) G. Willemsen (TNO) Copy no. No. of copies Number of pages 151 Number of appendices 5, included in the additional Annex report Customer European Commission, DG Enterprise and Industry Projectnumber 031.12922 © European Communities, 2009 Reproduction is authorised provided the source is acknowledged The opinions expressed in this study are those of the authors and do not necessarily reflect the views of the European Commission. Final report| Development of a European Defence Technological and Industrial Base Main report September, 2009 Contents 1 Introduction....................................................................................................................3 1.1 Backgrounds to the study.................................................................................................3 1.2 Main objectives of the study ............................................................................................4 1.3 Methodological framework..............................................................................................4 1.4 Approach to the study ......................................................................................................6 2 Current characteristics of the European defence industry ........................................8 2.1 Introduction......................................................................................................................8 2.2 General description ..........................................................................................................9 2.3 The aerospace sector ......................................................................................................12 2.4 The land equipment sector .............................................................................................18 2.5 The naval sector .............................................................................................................22 2.6 Overall conclusions........................................................................................................26 3 Drivers for change in the EDTIB................................................................................30 3.1 Introduction....................................................................................................................30 3.2 EU policy driving factors...............................................................................................31 3.3 National policy drivers...................................................................................................42 3.4 Economic driving factors ...............................................................................................54 3.5 Societal driving factors...................................................................................................72 3.6 Technological driving factors.........................................................................................81 3.7 Overview of the change drivers......................................................................................93 4 Towards three scenarios for the EDTIB ....................................................................97 4.1 Introduction to the scenarios ..........................................................................................97 4.2 Scenario A: Muddling through.......................................................................................98 4.3 Scenario B: Market forces dominate............................................................................101 4.4 Scenario C: Europe of different speeds........................................................................106 4.5 The EDTIB in scenario A.............................................................................................110 4.6 The EDTIB in scenario B.............................................................................................113 4.7 The EDTIB in scenario C.............................................................................................117 4.8 Selection of the scenario ..............................................................................................121 5 Policy analysis and recommendation........................................................................123 5.1 Introduction..................................................................................................................123 5.2 Gap analysis .................................................................................................................123 5.3 Gap Capability: Lacking vision on common European military capabilities...............126 5.4 Gap Capability: Lacking European organisational structure to fulfil capabilities........130 5.5 Gap Capability: Excess capacity to deliver key future military capabilities................133 5.6 Gap competence: Delivery of cutting-edge technology ...............................................135 5.7 Gap competence: Selectively open research/industry networks...................................138 5.8 Gap competence: Suboptimal integration between defence R&D and civil R&D.......140 5.9 Gap competitiveness: Barriers to entry in intra-European markets..............................144 References ....................................................................................................................................147 Final report| Development of a European Defence Technological and Industrial Base Main report September, 2009 1 Introduction 1.1 Backgrounds to the study The present defence industry is widely and unevenly spread across the EU27. It includes many facilities that may qualify as Centres of Excellence in R&T. However, the European defence industry also includes redundant capacity and non-competitive facilities. There is in fact no such thing as a ‘European defence industry’. Unlike in other sectors, such as the rubber or metallurgical industry, no Defence Industry Code exists. Note to the reader The defence technological and industrial This report integrates the outcomes of a study to obtain an in-depth base (DTIB) is actually a conglomerate of understanding of consequences on the industry structure of the subindustries. Civilian companies may Europeanization of the defense-related industries and markets. It identifies constitute a vital part of the supply chain possible initiatives for the European Commission and/or the European without being fully aware of their role. Defense Agency and contains policy recommendations on various levels. They certainly don’t consider themselves as part of the DTIB. Likewise, the In the first chapter, some backgrounds to the study are presented, including traditional defence companies are not fully its objective and approach. The second chapter focuses on the present conscious of their position. This implies situation, stating the characteristics of the defense industry. The third chapter that reflections upon the required (future) describes the various driving forces to the development of the Defense capabilities of a strong European DTIB Technology and Industry Base, making a distinction between policy drivers, (EDTIB) must also consider parts of the economic drivers, social drivers and technological drivers. In the fourth civilian ‘base’, offering solutions and chapter, three different scenarios are described, making use of the driving innovations relevant for military forces described in the earlier chapter. A single favorable scenario for applications. This observation is further establishing an EDEM is selected. In the last chapter the gaps between the strengthened by two factors: militarily present situation and this favorable scenario are assessed and possible policy relevant technologies are increasingly measures described to reduce these gaps. dual-use technologies, with the commercial sector taking the lead in many In this report, at some moments the reader is referred to several annexes. areas. Also, there is a tendency to These annexes can be found in a separate document annexed to this report. outsource support tasks, e.g. strategic lift or satellite imagery, to the civilian sector. Competition in the defence industry comes from within but increasingly also from outside Europe. However, competition is flawed because of the specific nature of the market that is also determined by particularities such as the ‘national security’ exception in Article 296 of the Treaty and the offset mechanism. On the demand side, the market is characterised by the dependency on one customer, the (national) government(s). This is a customer that not only procures the products and services but also regulates the market. Cross-border rationalisation of the EDTIB has made some advances through collaborative programmes as well as mergers and acquisitions. Some resulting mutual specialisations and interdependencies have been accepted between some MS in some sectors. These developments all create the sense of urgency to create an efficient and effective European Defence Technological Industry Base, that will be able to play a global role in the field of defence. Final report| Development