Clustering the EDTIB
The reform of juste-retour, compensation and
Industrial participation
29 May 2024
The Ukraine War has seriously added relevance to
questions about effective ways to reshape the European Defence Technological and Industrial Base (EDTIB). This is
especially true in the EU where the traditional focus on national industry
through economic offset and industrial participation has led to scattered development
and costly production lines.
Current policies of European Member States require compensation or industrial
participation for the Defence industry when purchasing capabilities abroad.
These are beneficial for the national industry of the Member States in the
short and medium term, but complex and a cost driver for industry. In the long
term this is not the best economic way forward for the European Union as a
whole. National security is still used as main reason for these policies, but
interdependence in the EU has risen to a level that strategic autonomy of a single
Member State is impossible. Even when export boosts the Member State industry, a
certain level of dependence on (sub)systems from other Member States cannot be
avoided. Therefore the EU policy is aimed at achieving strategic autonomy of
the European Union. Eurodefense recommends the European Commission as well as governments
and industries of all Member States to cooperate to reach this goal.
This document broadly outlines a potential future to
improve the effectiveness of the Defence industry market from an economic,
political and military perspective. To reach this goal it is important to
change the current market distorting practice of compulsory offset or industrial
participation into a more open market. The implementation of the European
Defence Industry Strategy (EDIS) and European Defence Industry Plan (EDIP) are
an excellent opportunity to reach this goal.
For this purpose, a new structure is necessary to
recognise European companies and allow
them to participate within Europe and for exports on an equitable basis. This
could be achieved by concentrating Defence capability development in a limited
number of clusters in Europe. Each ‘cluster’ dedicated to a specific defence technology area
consisting of European established enterprises and institutes reinforcing each
other.
A limited number of clusters per technology area, strategically spread across
the continent. This structure limits the abundance of different systems in
Europe, supports harmonisation of requirements and technical standards and supports
international cooperation. However, political budget planning and procurement
procedures needs to be aligned as well to fully profit of these
improvements. For this reason, we recommend to develop an EDTIB Act for this
new cluster structure.
Similarly, we recommend to strategically spread production throughout Europe in
order to allow continued manufacturing in times of crisis and war. This concept
of clusters is flexible to allow easy scale-up and scale down production
whenever required. This will also smooth out price fluctuations.
This new
concept of technology clusters consisting research, development and production
facilities, strategically
spread across the European continent, could
be a new and modern policy for European defence industry. A policy that
recognises the needs of Member States and companies, and is beneficial for all
of us. In peace and war. This should lead to a more stable and
prosperous defence-industry and a better long term focus of Member States and
the Commission on clearly defined areas of defence-technology and production.