Opening Lecture in the Cicero Foundation Great Debate seminar "European Armaments Industries, ESDP, and Transatlantic Cooperation", PARIS, 29 March 2001

Introduction

Thank you for the invitation. I am delighted to be here. This is an excellent moment to discuss these issues: ESDP negotiations are moving towards the final stages, on the basis of what was agreed at Nice.The new US Administration is coming to ESDP for the first time - and getting to grips with the issues and the implications for NATO. And industrial restructuring has achieved a lot in the last few years, for example EADS, BAe/Marconi.
But there are big questions ahead, particularly on Transatlantic links, as well as some big procurement decisions too. I want to touch briefly on all those issues, which you will want to develop in more detail over the next couple of days.

Putting the Debate in a Broader Context

But to start with, I want to put the debate - and particularly the debate on ESDP and NATO - into a broader context. For 40 years and more after the end of World War II, European defence effectively meant only one thing: the territorial defence of non-Communist Europe, including Turkey, assured by NATO, under the terms of Article 5 of the Washington Treaty:

"The Parties agree that an armed attack against one or more of them in Europe or North America shall be considered an attack against them all…."; and that allies would assist any partner attacked "by taking forthwith, individually and in concert with the other Parties, such action as it deems necessary, including the use of armed force, to restore and maintain the security of the North Atlantic area."

NATO was a defensive alliance, in which conventional forces prepared for a possible land invasion across the Iron Curtain that divided Europe, with the nuclear umbrella providing the ultimate deterrence under the doctrine of mutually assured destruction - MAD. That defensive alliance was instrumental in ensuring peace in Europe for 50 years and by containing and preventing the spread of communism into Western Europe, it helped bring about the collapse of the Soviet Empire in the Soviet Union and in Eastern Europe. That collapse has brought huge opportunities, particularly the chance to welcome the countries of Central and Eastern Europe and the former Soviet Union into NATO and the EU as members or as close partners - a process which is really only just underway. But that collapse has also brought problems, in particular in the Balkans, as the break-up of Yugoslavia has led to the resurgence of old nationalisms.

The result is that for the first time since World War II, European defence has become not just territorial defence, but also conflict prevention and crisis management within Europe, and on the EU's own frontiers. The consequence is that NATO has had to adapt to a new range of tasks, which in turn require quite different philosophies and structures from the old Article 5 certainties. That process continues today. NATO cannot, alone, of course claim the credit for the end of communism. The inherent contradictions of Marxism played a key role and so, of course, did the development of the European Community, later the European Union, into an increasingly coherent economic and political entity. Indeed, NATO's guarantee gave Europeans the security they needed to rebuild Europe and made it possible for the EU, in its turn, to become a producer of stability.

A European and Transatlantic Approach Go Hand in Hand

But as with NATO, so the collapse of communism has faced the EU with the need to change. Enlargement is one aspect of that. But another is the need to develop the coherence and credibility of the CFSP to be able to deal effectively with political instability on the EU's borders. Until 1989, a CFSP that was limited to declarations and to economic and diplomatic sanctions was just about credible. The break up of Yugoslavia from 1990 onwards showed clearly that this was not enough.

What was now needed was a multi-dimensional response, using a new range of tools: economic, political, diplomatic and military. In other words, the last ten years have shown the necessity for both NATO and the EU to adapt radically to the new challenges presented by the end of communism. But the last ten years have also shown the need for the EU and NATO to work together in managing crises; in other words for a European and a Transatlantic approach that go hand in hand. The crisis in Bosnia in 1992-95 before the Dayton Agreement of December 1995, showed the difficulty of crisis management without the participation of the United States. The Americans did not wish to be on the ground. UN forces were inadequately manned and co-ordinated and therefore ineffective. With an EU capability of the type now taking shape, we might have been able to do better.

The same lesson needs to be drawn, though in different circumstances, from the Kosovo crisis of 1999. NATO action in Kosovo achieved its main objectives of forcing Serb military withdrawal from Kosovo. That result would simply not have been possible without the military support, and in particular, the air power, of the United States and NATO. Eighty percent of strike sorties were flown by the US Airforce. And while the Europeans now provide over eighty percent of the troops in Kosovo, we had the greatest difficulty in getting a small fraction of the troops we had on paper to the right place at the right time when the time came to deploy. I personally doubt Milosevic would have been removed from the political scene without NATO's action.

At the same time, we have to recognise that there may be crises in the future in which the European Union decides - through the General Affairs Council or the European Council - that a European military intervention, whether humanitarian, peace-keeping or crisis management (i.e. the so-called Petersberg tasks) is necessary, while the United States decides, for whatever reason, not to take part. We should also remember that the US have long been demanding that the Europeans take more responsibility for their own security needs. And we should also recognise that the WEU was never going to be able to provide the capability needed.

The St. Malo Defence Initiative

Hence the need, recognised initially by Britain and France at St Malo in 1998, for stronger European Security Defence arrangements which strengthen both NATO - by giving it a more flexible capacity to respond to crisis - and strengthen the European Union - by giving it the capacity to act as part of or alongside NATO, or, in certain circumstances, autonomously. France and Britain - whose policies on European defence had traditionally been at opposite ends of the spectrum - believed that if they could reach agreement on an ESDP which would be fully compatible with NATO, other EU and NATO allies would, after discussion, join a consensus. And so, up to now it has proved. The ESDP arrangements conceived at St Malo were accepted by NATO as a whole, in Washington in 1999, and the EU as a whole, in Cologne in 1999.

There are three main scenarios, following St Malo, in which Europeans could be involved in military action:

* Military intervention as part of NATO.

This was the Kosovo scenario, which would need to be repeated in any intervention on that sort of scale.

* Military intervention by the EU, but making use of NATO's assets

Its AWACS for example and above all its operational planning capability. These are the so-called Berlin plus arrangements.

* Military intervention by the EU, acting autonomously, in circumstances where NATO as a whole is for whatever reason not engaged.

A great deal has been done over the last two years to turn these concepts into practice.A new institutional framework has been established within the EU - a political and security committee, a military committee, and a military staff, which will soon be at full strength. Progress has been made in defining the relationship between those bodies and NATO, though important works remains to be done, in particular on agreeing arrangements for the EU to have recourse to NATO assets and capabilities - the Berlin plus arrangements. The EU has put into place arrangements for full co-operation and dialogue with partners and allies - i.e. non-EU European NATO allies and EU accession countries - at all levels from Ministerial down, and at all times.

How to Improve Military Capabilities?

In particular, heavy emphasis has been put, since the beginning, on military capabilities. It was clear to Britain and France from the start that the ESDP arrangements would not be credible unless they were backed up by the political will to fund the necessary military capability - at the very least, to halt the decline in defence expenditure. Hence the decision at the European Council in Helsinki to set a headline goal for the EU: "to be able, by 2003, to deploy within 60 days and sustain for at least one year, military forces of up to 50-60,000 persons, with air and naval support as necessary, capable of conducting the full spectrum of Petersberg missions." Hence also the capabilities conference in November 2000 at which EU member states agreed their contribution to this headline goal. Hence also the decision at the Franco-British Summit in Cahors in February this year to convene a second capabilities conference later in the year to address the capabilities gaps we have identified. That really brings us up to where we are now: a concept of ESDP, compatible with and indeed reinforcing NATO, on which we can all agree; institutions in Brussels which are bedding down, and starting to prove their worth; a commitment to a headline goal - a rapid reaction force or rather a pool of forces - (emphatically not a European army), and to national contributions to turn it into reality. Agreement at Nice was to sort out the institutional relationship between EU and NATO by the end of this year, so that the new arrangements could be declared operational.

What About the Future? Three Questions

But what about the future? That will be the subject of your conference. I would like to leave you with certain questions:

Will the US Administration accept the ESDP package? It was inevitable that a new Administration, coming to these questions for the first time, should ask themselves - and others - some searching questions. But the results of initial contacts has been positive. Prime Minister Blair and President Bush issued a joint statement in Washington a month ago confirming their support for a European defence "intended to make Europe a stronger, more capable partner in deterring and managing crises affecting the security of the Transatlantic Community". This was echoed during Foreign Minister Védrine's recent visit to Washington when Colin Powell said: "Mr Védrine and I agree that ESDP should be complementary to NATO". At the same time, US officials have made clear that their support will depend on two things: an agreement on the relationship between EU and NATO; and a real increase in European capabilities.

Those are second and third questions:

Can we reach an early agreement on EU/NATO relations, so that the ESDP arrangements can be declared operational - as agreed at Nice? We have already done a lot. The organisations are now working closely together at all levels. There was a joint meeting of the NAC and the EU's Political and Security Committee two weeks ago, for example, to discuss the EU and NATO's approach to the Presevo valley. George Robertson and Javier Solana are in regular contact about events in Macedonia. Another NAC/PSC meeting is planned for early next week. But we have got to make the arrangements permanent. And in particular, we have got to set out clearly how the EU will get guaranteed access to NATO's operational planning capabilities and access to NATO assets - once again, the Berlin plus arrangements. That is a key objective for the next few weeks and months.

And it is a crucial objective. We can all envisage scenarios over the next 5, 10, 15 years in which there will be pressure for EU military activity to back up CFSP - pressure from the sheer logic of a crisis, pressure from public opinion, backed up by the press - where diplomatic and political means have been exhausted. As I said earlier, any intervention on anything like the scale of Kosovo will require full NATO participation for the foreseeable future and the UK will certainly want the US to be involved when the US want to be engaged. In practice, it is hard to imagine any circumstances when the EU would want to act without the Americans if the Americans did want to take part. NATO, in other words, will in practice be the instrument of choice when the Europeans and US want to act together. But we must work on the assumption that there will be occasions where NATO as a whole will not be engaged, in which case it will be right that the EU should be able to decide to act and take action alone. To be able to do so, they will need to be able to choose to act with recourse to NATO assets, or autonomously - depending on the circumstances.

My third question is just as important. Will the EU countries have the political will to increase their defence capabilities and to arrest the decline in defence budgets since the end of the Cold War? The signs so far are mixed - but on balance encouraging. The post-Cold War decline in defence budgets has been halted and even reversed in some countries. Countries are also adapting their forces for their new roles. Britain is doing so through the implementation of the Strategic Defence Review. France is doing so through its modernisation programme. Many other European countries are now engaged in their own defence reviews. It is welcome the percentage of defence budgets devoted to equipment spending is increasing. There is undoubtedly more work to do here. Britain and France devote 20-25% of their defence budgets to equipment and about 12% to R&D. This is not the case with all European partners. But progress is being made.

European Defence Industry: The Importance of Transatlantic Cooperation

This brings me finally to the other main topic for your conference: the defence industry and procurement. Here too, I believe that Transatlantic cooperation is more important, and beneficial to us all, than confrontation. There is a tendency sometimes to see the present state of industry consolidation as having created two large European companies - EADS and BAe Systems - and two giant US companies, Boeing and Lockheed Martin. The reality, of course, is much more complex than that. There are close links between BAe Systems and EADS - over 60% of EADS's annual turnover is generated by joint activity between the two companies, for example in Airbus, missiles (MBD) and satellites (Astrium). Thales own Racal and Shorts. SNECMA has very close links with General Electric and Thales with Raytheon. BAe Systems, which now employ about 15,000 staff in the US, sell about the same value of equipment to the US Department of Defence as to the MOD. Nor does industrial consolidation seem to me to be over.

The question is where it's going, will there be further European consolidation? Consolidation in the US? Or more formal Transatlantic links? Procurement Patterns are evolving too. It makes sense to European governments to take steps to harmonise requirements and manage projects jointly - for example through the Intra-European Letter of Intent and through OCCAR, the joint European Armaments Cooperation Organisation. Britain is playing a full part in that. Along with other European partners we are committed to the Airbus A400M, a European military tactical aircraft, and to METEOR, a new collaboratively produced air-to-air missile. These projects are an important contribution to improving European capabilities in key areas, and to ensuring the maintenance of a strong European technological base. Britain, like other European countries, meets some key requirements by US purchases or collaboration too of which the recent announcement to participate in the Joint Strike Fighter (JSF) programme is an example. So European consolidation is not 'fortress Europe'. Such an approach would not make any sense, particularly given our need for access to US cutting-edge technology.

But it is equally reasonable to ask the US to avoid 'fortress America'. The Declaration of Principles Britain signed with the US last year is a first step in that direction. In terms similar to the intra-European Letter of Intent, it sets out our joint ambition to improve the framework for equipment collaboration by British and American companies, and for a more integrated and stronger defence industrial base. We and other European countries with similar goals, will in coming months be agreeing practical steps with the new Administration to put these ambitions into practice. I suspect that there will be some difficult hurdles to overcome before we have an effective two-way street in defence trade between Europe and the US. But we have, on both sides of the Atlantic, to try to do just that. So in procurement, as in industrial restructuring, as in defence - the strengthening of European capability needs to go hand in hand with transatlantic partnership.

Conclusion

In conclusion then, neither Europeans nor Americans profit from disagreement. Those with very different interests and approaches do. Only Europeans and the US working together will be able to stop Milosevic. The problems in Balkans are far from solved, as incidents of recent weeks demonstrate. But the EU and NATO acting together brought us to a position where long-term stability and democracy in key area of Europe is now possible.

Of course there will be transatlantic differences from time to time - just as there are differences within Europe. And there will be tough commercial competition in the defence industry, as in other industries - sometimes transatlantic, sometimes in more complex configurations. But on the defence and security issues that you will be discussing today and tomorrow, we share a basic objective - a stronger European contribution to international security - and need now to tie down agreement on the means of realising it.

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