Günter VERHEUGEN
Vice-President of the European Commission responsible for Enterprise and Industry

Towards an EU Strategy for Collective Security

New Defence Agenda Conference
Brussels, 3rd February 2005

Ladies and Gentlemen,

• Thank you for your invitation to address this forum on the important issue of the EU strategy for security.
• Europe has never been so prosperous, so secure or so free. Yet during the past decade, no region of the world, including our own, has been spared conflict.
• The world's geopolitical balance tilted with the end of the cold war, leaving the United States in a dominant position as a military actor and seeing the emergence of new forms of conflicts and terrorism. But the European Union is also a global actor which has to be ready to share the responsibility for safety in the world.
• Since 1993, the European Union has been actively developing a common security policy covering all questions relating to its security, including the progressive framing of a common defence policy.
• But 11 September 2001 and 11 March 2004 gave a new dimension to the concept of security. The fight againstterrorism is now a priority for all Member States. The European Union is committed to contribute to this fight and to help provide the best possible protection for its citizens. For this, a comprehensive strategy covering a wide range of measures is necessary.
• These measures aim at increased co-operation among the Member States in fields ranging from intelligence sharing to law enforcement and the monitoring of financial assets. They also aim at addressing our economy's dependence - and vulnerability - on interconnected infrastructure in transport, energy, information and other fields. And last but not least, they aim at supporting the industrial base necessary to provide adequate security systems, military equipment and civil crisis management capabilities.
• Many different parts of the European industry contribute to collective security in Europe.
• Firstly, we need a dynamic and competitive European defence industry to guarantee the security of supply of our military equipment for a reasonable cost and at an adequate technological level.

This industry has traditionally been excluded from many of the benefits of European policies which is why the Commission concluded that steps had to be taken to strengthen the competitiveness of the defence industry in its 2003 Communication "Towards an EU Defence Equipment Policy".

We are now working on concrete measures to implement the Communication and in this context, the creation of the European Defence Agency can make a very important contribution. As the Commission's representative on the EDA Steering Board, I will certainly be doing my best to ensure good cooperation between the EDA and the Commission.

• Secondly, we also increasingly need high-tech security solutions developed from civil technologies and applications. In this regard, the Preparatory Action for Security Research is paving the way for a future large scale programme on security research under the umbrella of the 7^th R&D framework programme.

The identification of new and future security threats is a clear objective of the Security Research preparatory action. The assessment of specific vulnerabilities arising from our open-bordered environment is another. Our economy relies extensively on huge flows of merchandise which are difficult to control so new screening systems will have to be developed.

Our democratic model guarantees the protection of civil liberties so new intelligence systems have to be conceived to respond to diffuse threats while at the same time safeguarding civil liberties.

The security action also aims at optimising the protection of networked systems, enhancing crisis management, improving situation awareness and globally protecting against terrorism.

• Thirdly, space programmes can also contribute to security. The establishment by 2008 of a European capacity for Global Monitoring of Environment and Security - the GMES programme - will contribute considerably to securing the provision of information needed to avert threats and respond to crises.
• Finally, the exploitation of civil-military synergies is a key priority within this new security context. Europe needs increased research and development investments not only in defence and security, but also in civil technologies, which can lead to further security applications.

The European defence industry landscape proves that diversification and the exploitation of the synergies of dual-use technologies are now the rule.

• Of course we all recognise that the future of the European economy depends on its capacity to innovate and develop new technologies, goods and services. But we should be clear: it is business itself that has to take the decisions to invest in R&D, to train its workers or to develop new products. What the public authorities can do - including the EU - is to help to create the right framework in which businesses can operate.
• The Commission is well aware of the specificities of the defence industry and has tailored its actions accordingly:
• We are currently carrying out an impact assessment study on simplifying the rules governing intra-community transfers of defence equipment,
• We have published a green paper on the issue of public procurement in the defence area which is still open for consultation, and
• We are working with the national procurement directors and standardisation bodies to develop a defence standardisation handbook.
• Despite its past difficulties, the defence industry is still a heavyweight in the European economic landscape. The main players of the European defence industry - the 28 companies belonging to the world top 100 - represent a turnover of more than 55 billion dollars.
• But these broad figures don't tell the whole story. That is why the Commission also aims to gather more precise data on the defence industry through its monitoring project, in order to assess properly the impact and needs of the sector, including its many SME's whose flexibility and innovation are important assets in facing new security threats in all areas.
• The European defence industry faces a competitive handicap in the form of much lower defence budgets than those available to competitors on the other side of the Atlantic.
• Nobody is proposing that EU budgets could, or should, match those of the US. However, that should make us even more determined to make the best use of those funds which are available to develop the capacities and technologies we need.
• That requires greater coordination and an increased focus on R&D in European defence budgets. The transatlantic financing gap will remain but that should spur Europe to act quickly in order to limit the current fragmentation and duplication. Europe's security ambitions compel us to achieve the highest technological levels by building on European centres of excellence, wherever they are to be found.
• We have to accept that our industry will lose market share if it cannot provide military capabilities of a similar technological level to its competitors. And this applies both to the European market and to the export market; on the export market because other countries combine high performance with affordability, often helped by generous financing schemes for potential buyers; on the European market because the threats are such that we cannot afford to buy European in the name of the security of supply if we do not get the technologies we need.
• We must also accept that in the long run, competitiveness cannot be served by protectionism. What was true in so many other sectors of the economy, is also true of the European defence industry whose long-term survival will not be served by systematic recourse Article 296 of the EC Treaty: a consolidation and restructuring both on the supply and on the demand side are necessary in Europe.
• The European defence industry has already made considerable progress in restructuring, especially in aeronautics, space and defence electronics. But it will also have to move ahead in land-based equipment and in shipbuilding. It is to be hoped that the creation of the European Defence Agency will allow a progressive consolidation of demand through procurement and research activities at European level.
• Collective security in Europe depends on a huge variety of actors at local, national and European level, but crucially also on adequate industrial capabilities in the civil, security and defence areas.
• Europe needs a dynamic industry to support the innovative solutions required for its security strategy to effectively counter current and future threats.
• Europe needs a competitive industry to provide affordable capabilities for conflict prevention, humanitarian and peace missions and the fight against terrorism.
• Europe needs a strong industry to create a zone of stability and help the emergence of a more secure and equitable international order.
• I am optimistic that Europe is now beginning to seriously face up to the need to provide the right conditions for our defence industry to make a full contribution to our ambitious security aims.
• By focusing on market and competitiveness issues, we in the Commission are strongly committed to playing our part in this collective endeavour and we hope that our efforts will encourage others in pursuit of a more secure Europe in a more secure world.

Thank you.