Monday, August 15, 2005

The final surrender

The Financial Times this morning carries a story headed: "Britain plans sweeping defence audit". According to this source, a sweeping review of Britain's defence industry is to be carried out, to determine what weapons technologies should be maintained in the UK and which can be ceded to foreign suppliers. The review, says the FT, could lead to a fundamental reshaping of the nation's defence industry.

Interestingly, a version of this story was carried by The Observer on 31 July, when the paper announced: "Reid orders secret review of defence industry", reporting how he had asked Defence Procurement Minister Lord Drayson to carry out the exercise and report back to him by the end of the year.

The FT, however, adds more detail, indicating that the six-month review will lead to a detailed white paper by the end of the year, stating that: “It will specify which domestic industrial capabilities are essential to national security and competitiveness in effect, picking winners among existing military technologies.”

Lord Drayson, we are told, declined to speculate on which technologies would be included in the document but certain capabilities believed to be essential to national security nuclear arms technologies, chemical and biological weapons defences, and counter-terrorist capabilities are almost certain to be among those listed, says the FT.

What the FT does not say, however – and neither does the Observer – is that there is a very strong EU link here. The give-away is the reference to "national security". By the end of the year, the EU Commission is due to report on the application of Article 296 of the consolidated treaty, which exempts defence equipment from the procurement directive on the basis on "national security".

The options were set out on its "Green Paper" on defence procurement (COM(2004)608 final) in September 2004 and the Commission is expected to come up with a narrow definition of "national interest", which at the moment is based on a list drawn up on 15 April 1958 and has remained unchanged ever since.

In the interim, it had asked member states for its views and these have, undoubtedly been given. On that basis, the overwhelming odds are that this apparently spontaneous "review" is simply preparing the ground for the Commission proposals, a ploy to allow the government to look as if it is about to alter the rules all by itself, without EU input.

In this context, readers will recall the story earlier this month about the Scottish shipyard which lost a contract for a fisheries protection vessel operated by the civilian Scottish fisheries protection agency, because of the procurement directive. On the other hand, contracts for similar vessels in England were given to a British yard. Operated by the Royal Navy, they were classified as "defence equipment" and the directive did not apply.

Now, if the Commission gets its way, that will come to an end and we will see almost all defence equipment contracts opened up to European competition. When that happens, what little is left of an indigenous defence industry will be absorbed into the European maw. It will be the final surrender.

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