- The Washington Times - Saturday, July 1, 2006

BRUSSELS — The European Union took a major step toward opening its notoriously closed armaments market yesterday with a new code of conduct aimed at boosting competition.

The union’s 25 members currently spend $62 billion to $75 billion a year buying new defense goods, but there is little cross-border competition or tendering for contracts because the arms industry is exempt from normal EU rules.

Until now, defense ministries have jealously guarded their right to hand lucrative contracts to national industries without having to justify their decisions or open the tender to normal procurement practices. But dwindling defense budgets and the pressures of the single market, which allows for the free flow of goods across national borders, have prodded governments to tentatively open their markets.

Under the code of conduct, which will apply in all EU states except for Spain, Denmark and Hungary, defense ministries are obliged to post new tenders on an Internet notice board and all European arms companies are free to compete for the contracts. Although the code is not legally binding, EU officials hope peer pressure will force defense ministries to comply.

“This regime will create new opportunities for companies across Europe, strengthen our defense, technological and industrial base and offer better value for money to the armed forces and to taxpayers,” said Nick Whitney, head of the European Defense Agency.

In an interview with The Washington Times, Mr. Whitney said European governments were spending too much on soldiers’ wages and pensions — personnel costs consume half of the union’s $225-billion-a-year defense budget compared with one-quarter in the United States — and too little on high-tech hardware.

“We have more men and women in uniform than in America, yet if you compare the collective European deployable military capability, then it really bears no comparison,” he said.

The Briton, who manages the newly created agency, also said European governments should spend more on defense research and technology, noting that on average only 1.25 percent of their defense budgets goes for developing cutting-edge weapons, compared with more than 6 percent in the United States.

“If we carry on like that, we will not be able to sustain a competitive defense industry in Europe,” Mr. Whitney said.

EU defense ministers gave the green light to set up a common defense research fund in March but remain split over how to finance it.

Mr. Whitney said the United States had nothing to fear from a more robust and competitive European defense industry, but urged Washington to follow Brussels’ example in opening up its defense equipment market.

Decrying what he called “fairly strong protectionist currents” in the United States, the EU official said it was “a lot more difficult for European companies to access the American defense market than vice versa.”

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