EUROPEAN DEFENSE AGENCY: TAKING SHAPE

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
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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
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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
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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