The Commission is preparing a “single market” plan for defense. The Commission’s proposal for an EU defense industry strategy will likely include creating and securing EU-wide defense supply chains by mapping, tracking, prioritizing orders and facilitating intra-EU exports, according to a document seen by Euractiv .

“Each Member State’s security of supply strategy should increasingly integrate the EU dimension and make better use of one of the Union’s most important assets – the single market,” the document states.

The Commission’s fourth and fifth notes complete the series of five consultation documents sent to the defense industry and EU countries, as reported last week.

The documents in question are expected to shape the bloc’s future European Defense Industry Strategy (EDIS), which aims to increase defense cooperation and increase industry flexibility.

After the attempt was made for a comprehensive strategy in the autumn, a law for the defense production of the American style, the Commissioner of the Internal Market Thierry Breton finally postponed the proposal until next year, while he announced consultations with the stakeholders.

The idea of ​​mapping and securing supply chains gained ground mainly during the COVID-19 pandemic with mask shortages across the EU. Like medical equipment, the production of defense capabilities relies on European and international supply chains and , therefore, is subject to risks beyond the control of the final producers.

“These risks for Member States can be mitigated by a European level of governance,” the Commission suggests.

The idea comes as the goal of “achieving an effective single market for defence” features in the draft conclusions of next week’s leaders’ summit seen by Euractiv.

Therefore, in times of crises, “the functioning of international markets generally deteriorates (tighter export controls, higher demand, transportation problems, instrumentalization of dependencies, etc.) and procurement for defense production, including the delivery of defense products and services, may be significantly affected or even interrupted.”

Securing the chain

In the document, the Commission proposes ideas for mapping bottlenecks, facilitating intra-EU transfers of defense equipment and forcing industries to prioritize urgent government orders over commercial ones.

However, all these regulatory proposals were rejected by the member states during the urgent negotiation of the act to support the production of ammunition (ASAP) for the needs of Ukraine and the countries in the spring.

The EU proposal aims to “understand in detail the composition, capacity and functioning of supply chains [που] is necessary at both national and European level’, while the need for ‘more effective mapping and monitoring of critical supply chains’ and ‘potential bottlenecks’ is explicitly mentioned.

European Council President Charles Michel last week stressed the need to secure the coveted graphite produced by China.

The EU does not currently have the necessary means to proceed with defense procurement or production, nor does it have priority ordering mechanisms.

Compared to the US Defense Production Act, the Commission notes that “tensions may arise with respect to specific components or raw materials, and defense orders are not necessarily prioritized due to competition with the civilian sector,” which “may constitute a significant disadvantage”.

In the Commission’s letter to the defense industry, defense companies are asked, among other things, whether “a mechanism for prioritizing defense supply chains against policies in times of crisis” would bring significant benefit to the robustness of defense supply chains.

Many benefits would arise from “the Europeanisation of supply chains”, according to the Commission, such as “multiple business opportunities”, economies of scale, the creation of highly skilled jobs and a technological advantage, the Commission writes.

“A more integrated and competitive European defense equipment market would enable the European defense technological and industrial base to exploit economies of scale, enhancing the efficiency of its industrial organisations.”

Globally, “an EU-wide security of supply regime can be a key competitive advantage”, while also strengthening EU-based markets.

Simplifying transport within the EU is another key idea of ​​the document, as the existing 2009 defense transport directive “has not fully delivered its expected benefits”.

Other examples include stocks of maintenance and repair equipment, critical spare parts, ammunition, inventories, flexible production capabilities, and pooling and sharing of specific industrial capabilities. It also mentions the inclusion of security of supply as a requirement for projects financed by the European Defense Fund (EDF), as well as the exemption from VAT for the joint procurement of maintenance and repair services.

Examples of cooperation include the Nordic Defense Cooperation (NORDEFCO) initiatives and the RescEU stocks in the context of civil protection.

Finally, the fifth memorandum, seen by Euractiv, focuses on “embedding the culture of defense industrial readiness in all policy areas” raising questions about how the defense industry can gain a better image to attract personnel and investments.