US embassy cable - 04BRUSSELS3892

C O N F I D E N T I A L SECTION 01 OF 03 BRUSSELS 003892 
 
SIPDIS 
 
DEPARTMENT FOR EUR/ERA AND EUR/RPM 
 
E.O. 12958: DECL: 09/14/2009 
TAGS: MARR, PARM, ETRD, EUN, NATO, USEU BRUSSELS 
SUBJECT: EUROPEAN DEFENSE AGENCY: TAKING SHAPE 
 
 
Classified By: Deputy Chief of Mission Michael McKinley for reasons 1.4 
 (b) and (d). 
 
1. (C) Summary:  The establishment of a European Defense 
Agency (EDA) to harmonize moves to boost European military 
capacity might -- with important caveats -- develop in a way 
that is in accord with US and NATO interests.  However, we 
should be wary of any EU Member State effort to employ the 
proposed Permanent Structured Cooperation mechanism, which 
allows a self-selected group of Member States to participate 
in advanced defense cooperation projects.  US defense 
industry representatives have expressed concern that such an 
evolution could have a detrimental effect on the ability of 
US companies to have open access to the European market.  End 
Summary 
 
The Goal: A Continental-Scale Defense Market 
-------------------------------------------- 
 
2.  (U) EDA was established by European foreign ministers in 
November 2003.  As outlined, the EDA's essential functions 
are: identify European defense capability objectives and 
priorities and recommend and evaluate Member State 
contributions; and address the fragmentation and 
inefficiencies of the European armaments industry by 
fostering collaboration and harmonization among Member States 
in the area of military procurement and production. The 
stated goal is the "continental-scale demand and market which 
industry needs." The EDA is not intended to serve as an EU 
procurement agency. 
 
Organizational Structure 
------------------------ 
 
3. (U) The EDA currently exists only on paper.  A study 
prepared by the Agency Establishment Team in April 2004 has 
proposed an organizational structure for the agency. Its 
decision making arm would be comprised of a Steering 
Committee, whose members include the Defense Ministers of 
participating Member States. Javier Solana, the EU's High 
Representative for Common Foreign and Security policy, will 
chair the 
committee. EDA is ramping up rapidly: there are presently 80 
staff members, and this number is projected to increase to 
over 200 during 2005. 
 
EDA Currently Only Empowered to Make Recommendations 
--------------------------------------------- ------- 
 
4. (SBU) The EDA will be only empowered to make 
recommendations; as such, in the early stages it will 
function as little more than an advisory group - although it 
will be able to exert political pressure on Member States 
through EU channels.  The Agency Establishment Team paper 
states that Steering Committee decisions will identify 
priorities and approaches for a group of, or all, 
participating Member States to pursue, without compelling any 
to do so.  The paper emphasizes that the EDA should "face 
outwards" and that "complementarity and transparency with 
NATO will be assured." 
 
Three Possible Paths of Development 
----------------------------------- 
 
5. (C)  Our interlocutors in Brussels suggest there are at 
least three possible paths of development for this nascent 
arms agency. One would be consistent with current EU 
literature and would be in the best interests of the US and 
NATO. The second path would entail the EDA gaining the powers 
necessary to intervene directly in the European armaments 
market, which could open the door to protectionist policies, 
centralized EU arms procurement, and possibly even the 
development of a "fortress Europe." NATO standards, 
commitments, and interoperability would be at risk.  A third 
foreseeable path is for a group of participating Member 
States to move ahead of the others in the establishment of an 
interventionist armaments policy, which could entail, for 
example, Franco-German collaboration on the creation of a 
larger-scale and protected armaments industry in these two 
countries. The EDA would provide the mechanism for the 
advanced "structured cooperation." 
 
Path 1: EDA As an Advisory and Advocacy Group 
--------------------------------------------- -------------- 
 
6. (SBU) Many EU member states remain reluctant to cede 
national competence in defense-related areas.  Given the 
limits on EU jurisdiction in defense, this may reduce the 
EDA's ability to mandate changes in national defense policy 
or Member State collaboration.  Nonetheless, the EDA could 
very well encourage Member States to work together on defense 
projects, and even eventually pressure them to make purchases 
without regard to national preferences. The agency is likely 
to suggest policies designed to promote the harmonization and 
consolidation of the EU defense industry. Because of the 
strong attachment of many Member States to NATO, the EDA 
could face resistance if it pressed policies that would not 
complement Alliance goals. If the EDA were to succeed in 
increasing the productivity of the EU arms industry and the 
interoperability of Member State defense forces in a way that 
is consistent with NATO standards and requirements, this 
could increase European military capabilities and those of 
NATO at the same time. 
 
7. (C)  We are told that European political integration is as 
much of a driving force behind the EDA as the desire for 
military development. Although the EDA's stated purpose is to 
increase the efficiency of the European armaments industry, 
many Brussels insiders see this goal as subordinate to that 
of simply creating a new area of cooperation among EU Member 
States. Some in Brussels are also intent upon achieving 
eventual decisionmaking autonomy from the Member States in 
the realm of defense planning; and the EDA represents one way 
in which it could achieve this goal.  By itself, this does 
not necessarily mean that EU policy will move in directions 
incompatible with US and NATO interests.  Greater EU 
authority and Member State cooperation could be achieved 
without necessarily embarking upon controversial policies 
that would undermine status quo Member State commitments. 
 
Path 2: Fortress Europe:  Possible, But Hard to Pull off 
--------------------------------------------- ------------- 
 
8. (C) Some supporters of the EDA envisage a more powerful 
and interventionist organization, one that could run counter 
to US and NATO interests.  Given the imbalance between the 
EDA's stated task and the means at its disposal, the creation 
of the "continental-scale demand and market" will likely 
require far more coercive policies than those laid out in the 
EU literature.  Effective creation of continental demand in 
the long run would require the centralization of European 
arms procurement at the EU level, and a decision by Member 
States to 'buy European first.' In the competition for the 
modern fighter aircraft sales in new EU member states, for 
instance, the arguments to "buy European" were a factor in 
decisions taken.  Taken to extremes, centralization of 
European procurement efforts could also lead to subsidization 
of European arms manufacturers. The EDA could also recommend 
that Member States standardize their equipment in a manner 
incompatible with US manufacturing capabilities. 
 
Path 3: Structured Cooperation An Open Door to Stronger EDA 
--------------------------------------------- -------------- 
 
9. (C) Brussels contacts have suggested that another 
direction the EDA could take would be for a small group of EU 
Member States to decide to engage in what is referred to as 
Permanent Structured Cooperation (PSC). PSC is contained in 
the draft EU Constitution, which is now subject to member 
state ratification, a process that will take at least two 
years. This proposed ESDP mechanism would allow Member States 
who so desire to make more binding commitments to each other 
in the area of defense cooperation. Although vague, it could 
offer an open door to the establishment, under EU-auspices, 
of a more consolidated, unified -- and possibly protected -- 
defense program within any group of Member States. France and 
Germany, for example, may be able to use the EDA as a vehicle 
to centralize procurement and capabilities/industrial 
planning. Moreover, other Member States, facing the prospect 
of a capabilities gap between their own forces and those of 
the group engaged in PSC, could decide to join the group in 
question. Late-stage participation in PSC is explicitly 
allowed under the new European Constitutional treaty, 
although only with the approval of those Member States 
already engaged in it. There is nothing in the status quo to 
prevent member states from cooperating in the areas of 
procurement or defense industry planning, but to do so under 
the umbrella of the EU is currently prohibited. 
 
10. (SBU) Predicting PSC is difficult. The language 
concerning its operation in the Constitutional Treaty is 
vague; it seems to allow what was in earlier drafts more 
clearly specified. That is, once the Council votes through 
qualified majority voting (55% of Council representing 65% of 
EU population) to establish PSC, the participating states 
will have a free reign to pursue whatever ESDP policies they 
can agree on. The Constitutional Treaty states that decisions 
adopted within the framework of PSC will be voted on only by 
those states participating in it and not by the Council as a 
whole.  We have been told that the standard for participation 
in PSC, as laid out in the newly approved protocol governing 
its operation, is the ability to make a "tactical 
contribution" to an EU defense force, so participation in the 
Battlegroups initiative would be an obvious way to gain 
general PSC eligibility.  As noted in USNATO 746, meeting the 
standards necessary to participate in Battlegroups could 
enhance EU Allies' military capabilities.  A possible 
downside, however, would be for Battlegroup nations in a PSC 
format to use the EDA to move forward in defense 
collaboration, possibly in a way that would be incompatible 
with their commitments to NATO and/or negatively affect the 
arms trade between the US and the relevant EU Member States. 
 
EDA a Source of Apprehension For US Defense Corporations 
--------------------------------------------- ------------ 
 
11. (SBU) At a recent meeting here in Brussels of Amcham EU, 
the European arm of the American Chamber of Commerce, 
representatives from the European branches of several major 
American defense companies - including Boeing, GE, and United 
Technologies - voiced their concerns over the EDA and its 
possible connection to what they see as a growing tendency in 
the EU to increase the defense contract share of EU companies 
to the detriment of their US counterparts, often as a result 
of direct political pressure. US defense company 
representatives suspect that the EDA will compound their 
already significant problems in the European market, 
providing a new and more effective vehicle for European 
governments to intervene in the procurement process in favor 
of European contractors. 
 
Comment 
------- 
 
12. (C)  EDA is in its formative period.  If it results in a 
structure that will allow European allies to pool their 
resources more effectively, and provide an EU-veneer for 
increased (or at least more efficient) European military 
procurement, it could dovetail with US security goals.  The 
traditional fragmentation and in-fighting among European 
defense industries is a clear limiting factor in building 
genuine European capabilities that will need to be overcome. 
That same fragmentation will also limit the EDA's ability to 
bring about meaningful consolidation.  But we also expect 
that EDA will result in political pressures to pool EU 
resources to "buy European."  As part of our effort to 
monitor the evolution of the EDA, Paul Collins, seconded from 
the EU Military Staff to work on the establishment of the 
agency, was invited to attend a ten-day voluntary visitor 
program from September 20 to October 15 2004.  His US visit 
may -- if it takes place -- afford an opportunity to share 
our perspectives and register our concerns. 
 
Schnabel