Madrid, 12 March 2010 – In the context of the Spanish EU/WEU Presidency, the European Security and Defence Assembly (ESDA) held a seminar on “The transatlantic defence equipment market” in Madrid on Thursday 11 March.

Prior to the seminar, Mr Robert Walter MP, President of the Assembly, and his parliamentary colleagues attended a ceremony commemorating the 11 March 2004 terrorist attacks in Madrid. The participants observed a minute’s silence at the beginning of the seminar in memory of the victims.

A particularly topical issue on the agenda was the latest call for tenders for the Air Tanker project launched by the United States Air Force on 24 February. The contract has been the object of a long-drawn out competition between Boeing and Northrop Grumman/EADS. On 8 March, Northrop Grumman and EADS finally decided not to submit a new bid to the US Department of Defense for this contract, leaving Boeing as the sole bidder.

Mr Jaime BLANCO, Chairman of the Defence Committee of the Spanish Senate, opened the seminar together with Mr Robert WALTER. Mr WALTER underlined that Europeans were among the United States’ most loyal allies. Transatlantic cooperation in the field of defence equipment was alive and well despite some technology transfer problems. Europe and the United States had a history of cooperation spanning over 60 years. It was a cooperation that bore elements of competition however, particularly in the economic sphere. The transatlantic defence equipment market was still characterised by mutual attraction and cooperation on the one hand, and by suspicion and competition on the other. ITAR (International Traffic in Arms Regulations), in particular, was a source of discord in Euro-Atlantic relations. Buying “off the shelf” from the United States was sometimes an option, but European countries should also be able to produce certain strategic assets on their own. Notwithstanding the restrictions and tensions, the transatlantic defence equipment market was very dynamic and offered unique opportunities for return on investment. The transatlantic market also had a major political dimension, characterised by a strong degree of interdependence. Deepening the US-EU strategic alliance was a necessity in order to retain the lead in global affairs, and a strong transatlantic defence equipment market was an integral part of that relationship.

During the first session chaired by Mr Doug HENDERSON MP (United Kingdom, Socialist Group), Chairman of the ESDA Defence Committee, Admiral Alain COLDEFY, Vice-President Political Affairs, EADS, France, emphasised that the transatlantic market was the world’s biggest defence equipment market. It was also a very unbalanced market. The US-EU trade balance in the field of defence equipment traditionally significantly favoured the US. In 2008, for example, the US had exported US$5 billions’ worth of defence equipment to the EU against only US$2.2 billions’ worth of imports. Competition was not always fair. He quoted the example of Northrop Grumman and EADS which had recently dropped out of the US Air Force aerial tanker competitive tender, on the grounds that the new terms of tender were unfair. European cooperation was as necessary as transatlantic cooperation: at stake was the survival of the European defence industrial technological base. Mr Enrique NAVARRO GIL, President of the Spanish Consultancy, Portfolio IC 2, Spain, pointed to the widening technology gap between the US and Europe. He also remarked that more competition did not necessarily mean a more open US defence equipment market. While the Europeans were overcoming barriers, with a growing number of European-based calls for tenders, this was not the case in the United States. Moreover, the economic crisis could reinforce the trend to “spend at home”, in particular in order to protect national jobs.

During the debate, the following questions were raised: European strategic autonomy and protectionism (Mr Markku LAUKKANEN, Finland); the European Defence Agency (Mrs Tuija NURMI, Finland) and in particular, the EDA initiative in favour of small and medium enterprises (Mr Radu Catalin MARDARE, Romania); the role of political authorities on the defence equipment market (Mrs Federica MOGHERINI, Italy); the need for fair and open transatlantic competition and the role of emergent countries (Mrs Françoise HOSTALIER, France); competitiveness and the need for a more consolidated European Defence market (Mr Reijo KALLIO, Finland); EDA and the strengthening of military capabilities (General Pedro PITARCH, Former Commander of Eurocorps); public opinion in favour of European Security and Defence policy, as well as the challenge of protecting national jobs (Mr Jean-Paul LECOQ, France); defence budgets, current threats and the relations between the EU and Russia (Yves POZZO di BORGO, France).

During the second session chaired by Senator Jaime BLANCO, Mr Domingo UREÑA-RASO, Director General Airbus Military and President EADS CASA, gave two examples of recent US defence equipment tenders: the US Coastguard maritime patrol aircraft and US Air Force aerial tanker programmes. The new terms of tender for the latter were considered unfair by EADS, which, with its partner Northrop Grumman, had therefore decided to withdraw. Mr Domingo UREÑA-RASO stressed that the Airbus proposal based on the Multi-Role Transport Air Tanker was technologically superior to the Boeing 767.

In response to EADS’ comments on the KC-X tender, Mr Pedro ARGÜELLES, Vice-President Boeing International, President Boeing Spain & Portugal, stressed that his company, Boeing, intended to remain in the running. More generally, he pointed out that the transatlantic defence market had become increasingly interconnected. International teams were pursuing business opportunities. European companies were buying and investing in the US. Transatlantic cooperative programmes were growing in number and importance. The supply chains of both European and North American companies were increasingly globalised. North American Defence companies had made important investments in research and development and production activities in European Union member states.

Mr Octavio E. MANDULEY, Chief Executive Officer, Lockheed Martin, Spain and Portugal, pointed out that his company was not only an aircraft manufacturer but also a provider of comprehensive security solutions with a major international presence. Cooperative programmes such as the EADS Casa Maritime patrol aircraft or the F 35 were very international. What had changed for Lockheed Martin were its growing partnerships and cooperation with local companies, and the “mutual co-development” of new products. The Medium Extended Air Defence System (MEADS) with Germany and Italy was a case in point.

Mr Fernando RAMIREZ BALZA, Director Comercial, INDRA Espacio SA, emphasised new trends, such as the fact that platform systems were now often driven by commercial technology and that government procurements were focusing increasingly on services rather than products. While the European governments saw the US market as a big opportunity, the reverse was true. There were barriers preventing European companies from winning US defence equipment contracts (security agreements, arms regulations, US Congress approval and US military authorities’ preferences, etc.). INDRA sold electronic products such as satellite communications equipment for the land and naval forces. Europe had to increase and rationalise its Research, Technology and Development investment.

During the debate there were questions on the following: RT&D investment (Mr Pasquale NESSA, Italy); the Air Force aerial tanker latest call for tender and the EADS-Northrop Grumman decision to withdraw (Yves POZZO di BORGO, France); the Joint Strike Fighter programme and offsets (Mr Robert WALTER, United Kingdom).

In his concluding remarks, Mr Axel FISCHER, MdB (Germany, EPP Group), Chairman of the Technological and Aerospace Committee of the Assembly and Rapporteur, underlined that we needed the same “rules of the game” for the transatlantic Defence equipment market to flourish. As a matter of priority, Europeans should invest together in Defence R&T in order both to cooperate and to compete on an equal footing with the United States. For national parliamentarians the European Security and Defence Assembly provided an essential framework for the discussion of such issues.

The findings of the seminar will provide input for a parliamentary report entitled “The transatlantic defence equipment market” which will be submitted to the Assembly on behalf of the Technological and Aerospace Committee by Chairman and Rapporteur, Mr Axel FISCHER (Germany, EPP Group). The report will be the subject of wide-ranging debate and its recommendations to the member states of the Assembly will be voted on at the 58th session of the ESDA to take place at the Palais d’Iéna in Paris from Tuesday 15 to Thursday 17 June.