The woes of Europe's defence industry can also be seen in the rate of merger and acquisition activity since the early 2000s – a trend highlighted by the failure of the attempted fusion of BAE Systems and EADS in 2012.
At their current level of ambition, European capability programmes hardly spike the interest of defence firms. The industry as a whole is still held back by member states protecting national producers and markets, despite some promising EU legislative moves. Against this grim backdrop, dual-use technologies have emerged as a sort of silver bullet to bolster European industry.
Shrinking budgets, rising costs
The idea is simple enough. Europe is a world leader in aeronautical, scientific and engineering expertise. It has companies – such as Airbus Group – that are globally competitive. In the civilian sector, European companies are pumping billions into the R&D that generates economies of the scale so needed in the European defence market. That is leading many to ask if the defence sector can reduce costs by relying more on commercial technologies and civilian R&D.
Such thinking is appealing in a context where defence budgets are shrinking and the costs of strategically relevant technologies are going up. Dual-use technologies are increasingly seen as a way to meet both of these challenges.
Three particularly appealing reasons stand out:
First, the adaptation of civilian technologies for defence would lower equipment costs. Several commercial technologies are intrinsically suited to meeting security needs in areas such as cyber technology, electronics and IT systems. Additionally, commercial products may be more technologically sophisticated and effective than their defence equivalents.
Second, an emphasis on dual-use technologies would encourage larger firms to improve internal efficiency, for example through greater symbiosis between their civil and military wings. Larger defence companies are already finding solutions to security concerns that have held back civil-military synergies and are heading towards greater reliance on their commercial business.
Third, these potential cost savings increase the importance of SMEs. Smaller companies are often technologically innovative and can inject genuine competition into the defence market. In such areas as maritime, space and cyber security, SMEs contribute to a range of dual-use technologies that can be adapted on a cost-effective basis.
These arguments make a persuasive case for greater cost effectiveness in European defence. The European Commission certainly recognises the potential, and is studying which dual-use capabilities can best serve the EU’s Common Security and Defence Policy. It seems likely that drones, cyber defence, maritime surveillance and satellite communication will be earmarked as priority areas where dual-use technologies can reduce costs.
It's clear that cost reductions can be found. However, dual-use remains a politically loaded term. Defence technologies are tailored to specific needs and the military always has to balance cost with the effectiveness of their equipment compared to that of current or potential adversaries.
There's a feeling within the defence community that the perfectly rational economic arguments for dual-use technologies cannot lead to a situation where commercial contractors are able to set conditions for production without due regard for strategic needs. Some also argue that the emphasis on dual-use technologies will further “civilianise” the defence sector in Europe, granting commercial operators precedence over the military.
Such concerns show that the benefits of dual-use technologies should not be exaggerated. Dual-use technologies have always been with us and they must not be used as a smokescreen to justify further defence cuts. The hard truth is that defence costs money. Dual-use technologies will rightfully become a more important feature of Europe’s defence-industry landscape, but alone they cannot ensure the strategic and cost effectiveness of European defence. If defence truly matters, governments have to put their money where their mouths are.
This article is part of Friends of Europe’s upcoming discussion paper on the future of dual-use technologies in Europe.
The full discussion paper will be available in early September. Read the other articles here.