The London School of Economics and Political Science The Institutionalisation of the European Defence Equipment Market Julia Muravska A thesis submitted to the Department of International Relations of the London School of Economics for the degree of Doctor of Philosophy, London, October 2014 1 Declaration I certify that the thesis I have presented for examination for the MPhil/PhD degree of the London School of Economics and Political Science is solely my own work other than where I have clearly indicated that it is the work of others (in which case the extent of any work carried out jointly by me and any other person is clearly identified in it). The copyright of this thesis rests with the author. Quotation from it is permitted, provided that full acknowledgement is made. This thesis may not be reproduced without my prior written consent. I warrant that this authorisation does not, to the best of my belief, infringe the rights of any third party. I declare that my thesis consists of 89, 461 words. 2 Acknowledgements I would like to say the sincerest thank-you to my PhD supervisors, Dr. Spyros Economides and Prof. Karen Smith. Their patience, wisdom and attentiveness over the past several years have been a steady source of invaluable support and guidance. I feel truly privileged to have worked with you. I am also a 100% convinced that I had the best “supervisee experience” out there! In addition, this research would not have been possible had the interviewees on whose input it so heavily relies simply ignored my overtures. Your cooperation has truly made this project – thank you for taking the time to engage in discussion and answer my questions when there was probably little incentive to do so! I am deeply grateful to the LSE and its International Relations Department, as well. Not only have the faculty and staff provided advice and approved those all-important funding applications, but they have also been a comforting, yet inspiring presence throughout my time here. It’s during my time at the LSE that I have forged the fulfilling and (I believe) lasting relationships that I am so happy to be taking away with me. I would like to thank my “colleagues,” who have swiftly become friends, for their empathy and their company. In this regard, a very special thanks goes to Melissa Koluksuz and Siamala Krishnan, who have simply saved me from myself during the most anxious and frenetic moments of the PhD. And finally I would like to covey the deepest gratitude I can muster to my mother, my sister, and my partner, who have been my rock, motivation, and inspiration. I would like to dedicate this thesis to my mother, Larisa Muravska, who has encouraged and enabled me to achieve literally everything meaningful in my life. I love you and am proud to be a mama’s girl forever! 3 Abstract This thesis examines the emergence of EU-level rules in defence industrial matters within the context of European integration and inter-state cooperation more generally. This is a remarkable development, as the defence industrial policy area has been viewed as a core of nation state sovereignty and appeared impervious to injections of “more Europe.” At the centre of this nascent policy regime is the increasingly institutionalised European Defence Equipment Market (EDEM). The first and most significant elements of EDEM to date have been the 2009 Defence Procurement Directive issued by the European Commission and the voluntary Code of Conduct on Defence Procurement launched by the European Defence Agency (EDA) in 2006. These sets of rules have materialised despite EU member states’ resistance to meaningful constraints of national autonomy in defence procurement, and a distaste for the involvement of the European Commission in particular. An analytical puzzle thus emerges: why have member states acquiesced to binding regulation in the shape of the Directive, having already enacted a soft cooperation mechanism represented by the Code? The thesis answers this question by pursuing three lines of inquiry, which correspond to three hypotheses and specify clear pathways whereby external adaptation pressures, such as the Euro-Atlantic defence budgetary trends, may result in states’ acceptance of particular constraints. Firstly, the project examines the lobbying activity of the EU’s major transnational defence firms in pursuit of a larger, more integrated “home” defence equipment market. In addition, this thesis evaluates the success of the European Commission as a determined “policy entrepreneur” in securing member states’ acquiescence to unprecedentedly binding defence procurement rules. Finally, the development of an EU security and defence policy as a source of “vital policy rationale” for an EU defence equipment market is also investigated. The tension between the supranational and intergovernmental modes of organising the defence industrial field constitutes a central theme of this thesis, while the “policy cycle” framework is used to order the causal significance of each hypothesis. 4 CONTENTS CHAPTER I: INTRODUCTION, RESEARCH QUESTION, AND RATIONALE ....................... 7 INTRODUCTION AND RESEARCH QUESTION .................................................................................................. 9 ARMAMENTS POLICY, SOVEREIGNTY, AND FRAGMENTATION OF EU DEFENCE PROCUREMENT .... 21 EUROPEAN DEFENCE PROCUREMENT ARCHITECTURE ............................................................................ 29 HYPOTHESES AND PLAN OF THESIS ............................................................................................................. 34 CONTRIBUTION ................................................................................................................................................ 37 SOURCES AND METHODOLOGY ..................................................................................................................... 39 ARMAMENTS COOPERATION- POLITICAL, LEGAL, AND ECONOMIC DIMENSIONS ............................... 45 FROM DIMENSIONS TO HYPOTHESES: EXPLANATIONS OF EDEM INSTITUTIONALISATION AND THEIR CRITIQUE ............................................................................................................................................... 51 HYPOTHESES CONSTRUCTION ....................................................................................................................... 61 THE POLICY CYCLE FRAMEWORK AS ORDERING MECHANISM ............................................................... 86 CHAPTER III: EU’S TRANSNATIONAL DEFENCE INDUSTRY LOBBY AND THE “SINGLE MARKET OF DEFENCE” ................................................................................................................ 92 INTRODUCTION ................................................................................................................................................ 92 THE EU DEFENCE INDUSTRIAL LANDSCAPE: EARLY 1990S – LATE 2000S .................................... 101 AGENDA SETTING: “SINGING HAPPILY ABOUT EDEM” AND BEMOANING THE TRANSATLANTIC “COMPETITIVENESS GAP” ............................................................................................................................ 106 AGENDA SHAPING ......................................................................................................................................... 110 DECISION-MAKING: THE BOTTOM LINE? ................................................................................................. 115 CONCLUSION ................................................................................................................................................... 125 CHAPTER IV: THE EUROPEAN COMMISSION AS “PURPOSEFUL OPPORTUNIST” AND POLICY ENTREPRENEUR ......................................................................................................... 130 INTRODUCTION .............................................................................................................................................. 130 AGENDA SETTING .......................................................................................................................................... 132 AGENDA SHAPING ......................................................................................................................................... 139 DECISION-MAKING ........................................................................................................................................ 157 CONCLUSION ................................................................................................................................................... 164 CHAPTER V: THE COMMON SECURITY AND DEFENCE POLICY AS AN IMPETUS FOR A EUROPEAN DEFENCE EQUIPMENT MARKET? ................................................ 168 INTRODUCTION ........................................................................................................................................... 168 AGENDA SETTING - DEFENCE ECONOMICS AND CAPABILITIES ...................................................... 170 AGENDA SHAPING ....................................................................................................................................... 178 DECISION-MAKING ........................................................................................................................................ 203 CONCLUSION .................................................................................................................................................. 220 CHAPTER VI: CONCLUSION –INTER-STATE