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House of Commons
Session 2007 - 08
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General Committee Debates
European Standing Committee Debates

European Defence Equipment Market and European Defence Agency

The Committee consisted of the following Members:

Chairman: Frank Cook
Ainsworth, Mr. Bob (Minister for the Armed Forces)
Borrow, Mr. David S. (South Ribble) (Lab)
Caborn, Mr. Richard (Sheffield, Central) (Lab)
Cunningham, Tony (Workington) (Lab)
Howarth, Mr. Gerald (Aldershot) (Con)
Hurd, Mr. Nick (Ruislip-Northwood) (Con)
Jones, Mr. Kevan (North Durham) (Lab)
Liddell-Grainger, Mr. Ian (Bridgwater) (Con)
Mudie, Mr. George (Leeds, East) (Lab)
Rennie, Willie (Dunfermline and West Fife) (LD)
Russell, Bob (Colchester) (LD)
Spellar, Mr. John (Warley) (Lab)
Taylor, Mr. Ian (Esher and Walton) (Con)
Hannah Weston, Eliot Wilson, Committee Clerks
† attended the Committee
The following also attended, pursuant to Standing Order No. 119(5):
Hodgson, Mrs. Sharon (Gateshead, East and Washington, West) (Lab)
Cash, Mr. William (Stone) (Con)
Jenkin, Mr. Bernard (North Essex) (Con)

European Committee

Monday 10 March 2008

[Frank Cook in the Chair]

European Defence Equipment Market and European Defence Agency

4.30 pm
The Chairman: We are running on the revised procedure as determined in the main Chamber, so a member of the European Scrutiny Committee is to be given an opportunity to address us about the decision to refer the relevant documents to this Committee before we hear the ministerial statement.
Mr. David S. Borrow (South Ribble) (Lab): This is the first time that I have had the honour to address such a Committee under the new procedures. I shall keep what I have to say short as I explain to the Committee why the European Scrutiny Committee has referred three documents to it.
The European Defence Agency was established as a European Union body in 2004 to support the Council and member states in their efforts to improve the European Union’s defence capabilities in crisis management and to sustain European defence and security policy. The European Defence Agency has four functions: to improve defence capabilities; to promote defence research and development; to promote armaments co-operation and to create a competitive European defence equipment market. The November 2007 report by the head of the European Defence Agency is on current year activity and the following years’ budgets. The Council’s guidelines to the agency set the framework for its 2008 work programme. Together, they raise wider issues that the European Scrutiny Committee thought worthy of debate.
It is plain that the Government have worked hard to ensure that the agency learned to walk by keeping it focused on areas in which it would add value and ensuring that its budget was suitably restrained. It is equally clear that there are still pressures from some member states for it to run faster with bigger budgets and ambitions. Given that the French will hold the presidency in the second half of this year and that the traditional French approach is towards wanting the European Defence Agency to expand and develop its influence, the European Scrutiny Committee felt that it was important to debate such matters. There are clear signs that the French presidency will develop the European Defence Agency.
In particular, France seems keen once again that the European Union should have its own independent military planning capability, which was one of the major bones of contention during the negotiation of the 1998 St. Malo declaration, the final outcome of which was that the European security and defence policy required a capability for relevant strategic planning, but without unnecessary duplication. As the European Defence Agency enters the next stage of its development, the European Scrutiny Committee felt that including the report and the guidelines for 2008 in this debate would enable the House to consider the wider framework, and how the EDA might best contribute.
The last of the three documents is the Commission’s strategy for a more competitive European defence industry. The European Scrutiny Committee noted that the communication suffered from defects in its analysis of the market and its context, notably in relation to research and development. The Committee also drew attention to the absence of any mention of NATO in the communication, even in the context of standardisation and quality assurance. It agreed with the Government that the communication looked at matters through a single market lens. Indeed, it was perhaps so focused on single market issues within the European Union that the increasingly global nature of defence acquisition was ignored. The Government also identified that many of the issues raised in the communication would be better addressed by the European Defence Agency than by proposals from the Commission.
The European Scrutiny Committee is holding under scrutiny two such proposals, one for a directive on defence procurement and one on intra-EU transfers of defence equipment. It thought that the general issues raised by the communication should be debated at this stage and against the wider background of the respective roles of the Commission and the EDA in relation to the present and prospective ESDP.
I have set out the views of the European Scrutiny Committee and, as a member of the Defence Committee as well as the ESC, I shall hope to take a further part in the debate.
The Chairman: I call the Minister to make his opening statement.
4.35 pm
The Minister for the Armed Forces (Mr. Bob Ainsworth): It is a pleasure to appear before the Committee under your chairmanship, Mr. Cook.
As hon. Members are aware, we have consistently supported the European security and defence policy to enable the EU to play a comprehensive role in military and civilian aspects of international crisis management and to develop as a strategic player in its own right. I view the EU’s ability to respond to international crises as complementary to that of NATO. That in no way detracts from NATO being the first line of defence for the United Kingdom. To ensure that the EU and NATO can fulfil their respective roles, they need access to modern, deployable, sustainable and interoperable military capability.
To enable all EU member states to play their part in operations, we must build a more consistent level of capability throughout Europe. The European Defence Agency is key to exposing issues of capability shortfall and in assisting member states to do more. Clearly, if the EU is to have the ability to develop the modern capabilities that are needed now and will be needed in the future, it must be supported by a defence industry that is optimised to meet our needs cost-effectively.
I believe that the Commission has a role in helping to develop a competitive and efficient European defence industry, but I do not support the notion that that should be done with the goal of achieving European autonomy. I believe that the demand and supply sides stand to gain from a rationalised technological and industrial base for European defence and a more open European defence equipment market, through which the UK can benefit from greater genuine choice in the defence marketplace.
I hope that the Committee agrees that the Government have adopted an open and consultative approach to the work programme of the European Defence Agency and to the Commission communications. As set out in the explanatory memorandum submitted to the Committee, the Government should continue to engage proactively with the Commission on its work to address the European defence technological and industrial base, and the work of the EDA, to develop a work programme that enhances the military capabilities of our European partners.
The Chairman: We have until 5.30 pm for questions to the Minister. I remind hon. Members that questions should be brief. It is open to a Member, subject to my discretion, to ask a series of related questions one after another. In doing so, I hope that hon. Members will bear in mind the interests of others who may wish to pursue a sustained line of questioning.
In the past, we have been compelled to tolerate the rather restrictive practice used in the main Chamber of going from one side to the other and, in doing so, have lost the theme of questioning. In this sitting, I propose that themes should be followed. When a Member asks a question, I will ask them to exhaust the questions on that theme and will then open it to the rest of the Committee before moving on to a new theme. I hope that that works effectively. It ought to and I see no reason why it should not.
Mr. Gerald Howarth (Aldershot) (Con): I understand that these are new procedures.
The Chairman: Modified.
Mr. Howarth: Modified procedures. I will endeavour to follow them. The Clerk was very helpful in advising me earlier today.
Before I ask any questions, may I put on the record my appreciation for the work undertaken by the European Scrutiny Committee? The hon. Member for South Ribble introduced the proceedings by referring to why that Committee thought it appropriate that we should review these matters. In turn, I would like to put on record that I think that the European Scrutiny Committee has done a huge service to the House, and to those of us with an interest in defence matters, by teasing out some of the issues.
I would like to ask the Minister a number of questions—they may not be exhaustive and perhaps I could follow on later on a similar theme. First, on a procurement theme, the Minister will recall that in 2006 the European Defence Agency agreed on a code of conduct that was designed to try to break down barriers and the propensity of member states to buy defence equipment from their own industrial base. How great a difference has that code of conduct made in the past two years? I note particularly that as soon as the code was introduced, the Spanish announced that they were going to absolve themselves from the responsibility of following it. Can I also ask the Minister—
The Chairman: Order. Perhaps I did not make myself clear, so I will try again. There is an opportunity to ask questions on a related theme, but one at a time so that everybody can follow the theme.
Mr. Ainsworth: I say to the hon. Member for Aldershot that there are problems in the area of procurement rules for the defence sector. There are genuine issues regarding national security that are interpreted in different ways by different member states. We try not to go beyond those things that we consider to be absolutely essential to our national security. However, it is clear that other member states take a different line, and we would have a more efficient and open European defence market were they not to do so. Therefore, we will continue to encourage them to move in what we consider to be the appropriate direction.
Mr. Howarth: I am grateful to the Minister, although that was rather a vague answer that did not really tell us how effective or otherwise the code of conduct has been. He said that it was interpreted in different ways by different member states, and that leads to a question about article 296, which exempts military equipment from the competition rules and allows member states to exempt themselves from putting out to open competition EU contracts for military equipment. There is clear evidence that, if the directive is implemented, there is a strong possibility that the European Court of Justice will arrogate the power to determine whether, in its view, a state is entitled to continue to seek that exemption. As far as we in the UK are concerned, that would inevitably lead to a very serious situation in which we were no longer subject to the interpretation of what is our own national interest. Will the Minister respond to that point?
Mr. Ainsworth: As ever, in this area the hon. Gentleman wants two separate things. He wants increased openness from others, and now he is worried about the potential for our own requirements not to be met. We are convinced that we have the framework within the treaty, and in what the Committee is scrutinising, to maintain our position on our ability to derogate under article 296 appropriately. We will continue to do that. The European Court of Justice could rule on that, but we are convinced that it is an area for member state decisions, and that we will be able to maintain that position.
Mr. Howarth: I am sorry, but that is a seriously unsatisfactory answer. We cannot rely on the Minister’s assurance that the exemption will not become subject to the European Court of Justice’s interference. The history of our involvement in the EU has found us progressively under the jurisdiction of the European Court of Justice. I do not think that the Minister’s response will satisfy those of us who are concerned that the United Kingdom will lose the exemption. On what basis is he offering the Committee the assurance that the ECJ will not arrogate unto itself the power to challenge a decision by the United Kingdom Government on what constitutes the national interest?
Mr. Ainsworth: In our national security interest we are able to derogate under article 296—that is the purpose of the derogation. Yes, of course, the European Court of Justice can rule on that area. However, as the provision is there for precisely that purpose, if it is used correctly, the ECJ should not be able to do what the hon. Gentleman fears.
The Chairman: Do any other members of the Committee have a question on that particular aspect?
Mr. Borrow: Will the Minister clarify not necessarily the technicalities of any treaty, but whether, in the negotiations that are about to take place during the French presidency, the UK Government will consider it to be in their interest to open up public procurement of defence products in other countries? Given that the UK probably has the most open defence market regarding procurement for our services, it is a contention that other countries have far more closed defence markets. Is it in our interest to seek, through the European Union, to open up other markets, or are we satisfied to leave the situation as it is?
Mr. Ainsworth: My hon. Friend is right that we have probably the most open defence market in the EU. The European Commission is already able to refer cases under article 296 to the ECJ. However, the Commission’s challenge regards the inappropriate use of that article. The aim is not to prevent its correct use, but to take action against those member states that, as my hon. Friend points out, have a far more closed market, and that are believed to be using article 296 inappropriately to protect their own industry, when that has nothing to do with their strategic national defence.
Mr. Ian Liddell-Grainger (Bridgwater) (Con): The Minister is aware that we have a fairly problematic history of procurement from Europe. In the first Gulf war, we could not get ammunition because the Belgians refused to sell it to us. Since then, the situation in the United Kingdom has worsened. We are shutting our ammunition factories; the last one in my constituency goes in two months’ time.
The history of procurement involving BAE Systems in Europe is that it tries one country, but if that country is not prepared to be supplied, or cannot be supplied, BAE goes to countries that are not in the European Community. Will the Minister assure the Committee that we will still be able procure where we want to; that we will not be bound or held, for example to the French, who have a centrally controlled system, as the hon. Member for South Ribble was saying; and that we will be able, dare I say, to make a unilateral declaration of independence and bring in emergency war stocks, and not be held to only one country?
Mr. Ainsworth: The hon. Gentleman points out a genuine problem with the documents. When I referred in my opening statement to the Commission’s propensity to look to European autonomy, that was precisely the point that I was trying to make. It is in our interest to open up the market and to be able to acquire ammunition and other defence supplies from the world market. The European Commission needs to accept that there is a world market and that most of the European players are also players within that world market. Therefore, we cannot consider supply solely from within the EU. We must have an outward-looking focus in that regard and look at improving the market, rather than closing it down.
Mr. Liddell-Grainger: The Minister knows that the biggest ammunition factory in the world is based in Tennessee and is controlled by BAE Systems, which is a British company. I am sure that we will be buying much more from that area in the future. The French system is tightly controlled. The French have made it clear that they want to be able to sell us ammunition on a fair and open basis, but it must be in our interests to support our indigenous company, which happens to control the biggest ammunition factory in the world. Is it not in our interests to make it clear, and to enshrine in writing, that that is what we will do—I am talking about not only this Government, but successive Governments—so that there is no misunderstanding that we, as a nation, will not be held hostage by organisations or countries that are less than happy with what we are doing?
Mr. Ainsworth: I do not disagree with the hon. Gentleman. I think that it is in our interests to develop European capability, but we should not do so within some kind of closed framework that protects the European market completely from the world market, which already exists and meets our needs. That is precisely the Government’s position. We want to assist in any way that we can to develop the capability and capacity of our European partners, but not to close our mind and doors to companies—in many cases our own—that have capability well beyond the boundaries of the EU.
The Chairman: Maintaining this theme, I call Ian Stewart.
Mr. Ian Taylor (Esher and Walton) (Con): I am sure that I would prefer to be Ian Stewart, but sadly I am not.
I agree with what has just been said because we clearly have an international market. It is also clear that the main defence companies in Europe are cross-frontier companies. EADS not only crosses several frontiers, but has just won an enormous contract for refuelling tankers in the United States. BAE Systems, as my hon. Friend the Member for Bridgwater said, has extensive interests in the Unites States, and Thales is a worldwide defence company that has interests not only in America, but extensively in this country.
Has the Commission indicated that it wants to use its powers to open up defence markets to more transparency within the member countries than has perhaps been the case, particularly in France? Does it understand that it is not in the EU’s interests to develop an indigenous defence market on an almost protectionist basis, simply because the commercial interests are global?
Mr. Taylor: Before I lost track in the introduction to my question, I had intended to declare a vague interest in the defence sector, as I am a director of a company that has some defence interests, although they are not directly relevant to this discussion.
The Chairman: Thank you for that clarification.
Bob Russell (Colchester) (LD): In the extensive documentation for this sitting, we are advised by the Secretary of State for Defence that no new policy implications arise from the report, and that the UK
“will continue to engage positively with the EDA to ensure that it is an effective tool in helping to improve military capability in Europe.”
Does the Minister share my concern that theory and practice are not necessarily the same? European countries are signed up to NATO, as we are, but when it comes to putting troops on the front line—as in Afghanistan—they are somewhat reluctant to do so. If they are not prepared to do that, what guarantees are there that if there is a conflict that they disapprove of, they will not withhold some of the munitions or equipment that we might need, such as helicopters?
Mr. Ainsworth: It is the EDA’s job not to involve itself in operations, but to try to develop military capability. It can do that only with the agreement of all member states, all of which will have their own interests to protect. However, there are areas in which we can co-operate and we see the EDA as an important tool in that. That will not take away all the politics of any particular engagement, and that is why all nations will want to lay out some basic requirement that they will keep to themselves. We do that—in terms of industrial capability, we have done it through the defence industrial strategy—but we do not look to use basic national security rules to protect our industries in areas where it is not appropriate so to do.
The Chairman: Maintaining the theme, I call Richard Caborn.
Mr. Richard Caborn (Sheffield, Central) (Lab): Many years ago, when I was Chair of the Trade and Industry Committee, I brought it and the Defence Committee together to look at some of these issues. One could look at the Airbus model: we brought four members states together to produce it, and British Aerospace played a significant role, but that did not debar it from continuing development across the pond in the USA. It was a great advantage to both British industry and European industry. Is the model we are looking at now in terms of the European Defence Agency the kind in which we can protect the ability to purchase, but equally so marry in industrialists from the industrial base? The greatest advantage for UK Ltd would come out of that.
Mr. Ainsworth: Rather than use the word “protect”, I would use the word “develop”, and that is precisely what the agency is there to do. For instance, we and the French account for some 80 per cent. of defence research and development across the European Union. Making sure that we work together and look at each others’ capability will be hugely beneficial to us both. However, to cut us off, from both the markets and the supplies that are necessary in this area outside of the European Union, would be a retrograde step and not something that we would want to do.
Mr. Kevan Jones (North Durham) (Lab): Does my right hon. Friend agree that the British policy on open markets in defence has led to an expansion of the UK defence industry in terms of not just market share, but jobs? I am thinking about the investments of Finmeccanica in this country, and of Thales, EADS and, obviously, BAE Systems. They have been able to have a larger footprint in not just Europe, but internationally. Reference has been made to the tanker contract that has just been won in the United States, and Finmeccanica has won the presidential helicopter contract. What is the way forward? Surely that is not necessarily regulation to try to force the defence market to follow a certain method, but opening up the market—not only in this country, which has happened successfully, but across Europe.
Mr. Ainsworth: I agree with the hon. Gentleman. Opening the markets but protecting only that considered vital to our national defence is the appropriate way forward. All the companies named by the hon. Gentleman are international companies operating well beyond the boundaries of the European Union, so his point is well made—this is a world market. The Commission needs to understand that; we need to understand that; everyone needs to understand that, if we are to get the best out of the situation.
Several hon. Members rose—
The Chairman: Order. I have noticed a tendency over the last several questions to introduce argument, rather than purely posing questions. The debate comes later, after the questions are finished. I call Bernard Jenkin. I am sorry that it has taken us so long to get round to you.
Mr. Bernard Jenkin (North Essex) (Con): I put it to the Minister that the whole conversation underlines the fact that he is trying to have his cake and eat it. He is insisting that article 296 exempts all this from any possible incursion from the European Court of Justice, but he is also saying how desirable it would be if it was all properly co-ordinated from the centre and we created a European defence industrial strategy, which is the title of the EDA’s press release on these papers.
The Chairman: Question.
Mr. Jenkin: Can the Minister tell the Committee which European institution will adjudicate on how article 296 is applied, if at all?
Mr. Ainsworth: I am not trying to have my cake and eat it. Article 296 is there to be used, and to be used appropriately. If it is used inappropriately, judgments will potentially be brought against the people or the nation doing so. As I acknowledged to the hon. Member for Aldershot, in such circumstances, the ECJ would make that adjudication.
Mr. Jenkin: I am grateful for that response. Is the Minister aware of what the European Scrutiny Committee made clear? It noted:
“even though the Court of Justice has stated that the use of the exemption should be limited to exceptional, clearly defined and individually justified cases.”
Does that not demonstrate that the European Court of Justice is already trying to limit the scope of article 296? So, on matters such as markets for parts that might be used in civilian as well as military applications, or intellectual property rights that might apply to civilian as well as military capabilities, article 296 will not be allowed to apply. It is to those grey areas that my hon. Friend the Member for Aldershot was trying to alert the Committee.
Mr. Ainsworth: It would be impossible for me to persuade the hon. Gentleman that any European institution was capable of doing anything for a good reason in an appropriate way. It is just possible, however, that the ECJ’s attempts to limit the use of article 296 are in line with our interests and our current position. We do not derogate and use 296 inappropriately, as it is felt that many others do. That might be the issue from which the ECJ is trying to protect us, although I am sure that the hon. Gentleman would not accept that because it has “European” in its title.
Several hon. Members rose
The Chairman: Order. How do I say this? We are trying to establish a slightly modified procedure, so that hon. Members, when making an inquiry, exhaust the basis of their interrogation or inquiry and then sit down and pass on to someone else. However, on this occasion, let us follow the same theme, on the same aspect, with Kevan Jones.
Mr. Jones : I understand the rules, Mr. Cook, but I also understand that the hon. Member for North Essex raised the issue of treaty relationships in Europe, particularly around the defence co-operation treaty on technology transfer with the United States. Does the Minister agree that for the purpose of the treaty under discussion, companies such as Thales and Finnmeccanica are European—
The Chairman: Order. The procedure to be followed is that there is a statement from the European Scrutiny Committee and then the main statement from the Minister. The question time is meant to elicit clarification and understanding on the ministerial statement. It is not to engage in debate with comments that have come from another hon. Member as part of a question. That should be part of the debate that has yet to come. Therefore, I prefer to leave aside any reference to questions asked by other hon. Members.
Mr. Jones: I am asking the Minister whether he thinks that for the purpose of the defence technology transfer treaty with the United States, other European companies, such as those that I have already mentioned, with large footprints in the UK should be considered as UK companies?
The Chairman: I understand that, but the justification for the question was based on the fact that another hon. Member in the Committee had made a point that the hon. Gentleman had not raised. I will permit the question on this occasion, but not again.
Mr. Ainsworth: My hon. Friend the Member for North Durham raises some important issues concerning the US-UK treaty. We need to satisfy the United States that in any transfer of technology and capability, we can protect appropriately that which it has been prepared to transfer and under the terms in which it has transferred it. If the United States transfers any technology or capability for the specific use of the UK, we must be able to honour the restrictions that it applies in that regard. At the same time, it would be good to be able to increase the transferability of capability across the European Union. We must deconflict those two situations and ensure that we can benefit from a more simplified market while, at the same time, being able to satisfy our partners in the United States that it can transfer and work with us safely and securely.
Mr. Howarth: Following on the article 296 debate, which is essentially what we are having here, the Minister has tried to reassure us that he is satisfied that we can maintain national sovereignty in that regard. May I draw to his attention what the Government have said in respect of the risk of article 296 being applied to extra-territorial contracts—that is third-party contracts outside the EU to which the hon. Member for North Durham has alluded? The Secretary of State said that although
“the draft would not extend the Community's external competence in relation to trade in military goods (already theoretically covered by the Common Commercial Policy), the Commission might become more willing to challenge Member States’ use of Article 296 of the EC Treaty to justify bilateral treaties in this area. Given the impact that this could have on our ongoing efforts to ease the conduct of defence trade with non-EU nations, the Government will pay special attention to this aspect during the Council Working Groups.”
The European Scrutiny Committee asked that question, which I will put to the Minister now so that he can answer it, not just for me but for the Scrutiny Committee. We know about the exclusion of certain contracts awarded in third countries, but question whether the proposed directive should have any application when a contract is awarded in a country outside the EU. We are asking for an explanation about the degree to which extra-territorial jurisdiction is intended by this provision. That is critical because the United States is our key partner. I put it to the Minister that if there is a whiff in the United States that the European Court of Justice or the European Commission are going to involve themselves in regulating contracts between the UK and the US, that business will be dead.
Mr. Ainsworth: As acknowledged in the paragraph that the hon. Gentleman read out, I am not denying that there are potential difficulties to which we will need to play close attention. I am only trying to reassure him that I believe that we will be able to do that and that we will not be alone in having those concerns. Ultimately, those difficulties will be sorted out to our satisfaction. We will be able to protect our relationship with the United States and other external partners within the framework that is finally agreed. I am not saying that there are not tensions in the document: the Secretary of State’s statement exposed those and the hon. Gentleman has just read them out.
Mr. Howarth: Has the Minister had any intimation from the United States that the fact that this debate is now out in the open in Europe has had any effect on the decision of Congress so far not to debate the US-UK treaty? He again tries to reassure us. I am perhaps not yet persuaded, but let me put it this way—
The Chairman: Order. Once again, we are descending into the debate which has yet to come. In doing that, we are curtailing the amount of time made available and allotted for questioning. The more time Members take doing that, the less time there will be for others to ask questions. Questions must be brief and to the point.
Mr. Howarth: I am sorry, Mr. Cook. These are extremely complex and interconnected matters, which I think that the Minister fully understands. This is our opportunity to debate these matters, so forgive me. Let me ask the Minister a quick question. Will qualified majority voting apply in the negotiations that will be undertaken to define whether the directive on intra-European trade in defence products will be extended into our trade with the United States specifically?
Mr. Ainsworth: Qualified majority voting applies in that area. I have no evidence that there is any concern in the United States that we will not be able to reach a satisfactory situation on these proposals, which protect the position of the United States and its ability to do business with us and other European members on a satisfactory basis.
Mr. William Cash (Stone) (Con): I should like to ask the Minister one or two questions that follow from one other. They will be questions. First—
The Chairman: One at a time.
Mr. Cash: Indeed. Does the Minister agree that the European Scrutiny Committee found it inexplicable that the Commission communication contained no reference to NATO and why was that?
Mr. Ainsworth: The Committee made that observation and was right to do so. All the capability that is now being used by the European Defence Agency builds upon knowledge that is possessed by NATO and has been developed in NATO. So no, I am unable to say why the Commission did not manage to mention NATO in the communication. I should have thought that that was an error and a mistake not to do so.
Mr. Cash: The Minister will not deny, I am sure, that the high representative, Javier Solana, campaigned for seven years in Spain against NATO. Is that correct?
Mr. Ainsworth: I do not know.
Mr. Cash: I can confirm that that is the case. Does not the Minister accept that under the arrangements for the EDA, the EU high representative is head of the agency and chairman of the steering group—
Mr. Ainsworth: This is the EDA?
Mr. Cash: I am talking about the European Defence Agency. In other words, I am asking the Minister to confirm that the same Javier Solana is the EU high representative and is also the head of the agency and chairman of the steering board, the decision-making body composed of the Defence Ministers of the 26 participating member states and the European Commission. That is correct is it not?
Mr. Ainsworth: Yes.
Mr. Cash: I also want to ask something that goes back to a question that was answered earlier from the hon. Member for Colchester. Does the Minister accept that the question of whether there is, or could be, an interrelationship between the activities of the high representative in the European Union’s foreign and security policy and in its defence policy is something of great concern, because he holds both roles—
The Chairman: Order. We are doing it again, and in a slightly more devious manner.
Mr. Cash: It would be—
The Chairman: The hon. Gentleman will listen to me. The questions are being put in the form of cross-questioning—
Mr. Cash: They are.
The Chairman: The hon. Gentleman will listen to me until I am finished. The questions are being put in the manner of cross-questioning, as though we were in a court. We are dealing with a ministerial statement, on which the hon. Gentleman, who is not a member of the Committee but who is allowed to speak at the discretion of the Chair, can seek clarification. The questions that he has been asking are in the form of a debate, and I have already ruled that that debate must come later, otherwise it will penalise the other hon. Members who want to ask questions. I ask the hon. Gentleman to modify his approach, or I shall withdraw the discretion that I am exercising.
Mr. Cash: I am grateful for that, Mr. Cook. May I ask a further question? Is the Minister concerned that, because the high representative has a dual role, in respect of the EDA and as the vice-president for external affairs and high representative in relation to European foreign and security policy, there is potential for difficulties to arise in the context of his having to carry out all those duties together, when he has so much power over operational roles and contractual arrangements of the kind to which my hon. Friend the Member for Aldershot has just been referring?
Mr. Ainsworth: I am not at all sure whether there is such potential, and to be honest with the hon. Gentleman I have struggled to understand the thrust of his questioning. He seems to be of the view that Javier Solana is an anti-NATO figure who campaigned against NATO for seven years. He was, some time ago when I used to hear him named fairly often, the Secretary-General of NATO, so I cannot quite see how he is an anti-NATO figure. I do not know whether there is a conflict between the different roles and jobs that he has currently. I shall happily look into that, and come back to it.
Mr. Cash: I am very grateful. I have one last question, if I may. Did the Minister note the point that the European Scrutiny Committee made about what the Government said: that the Minister, the Government and the Secretary of State all thought that the budget for 2008 for the EDA was excessive and that the growth projections had to be restricted? What has he been able to do about that?
Mr. Ainsworth: We have tried to focus on the EDA’s work. The EDA’s budget is not huge in the grand scheme of things. Our contribution to it, I think, is 17 per cent., which is less than £3 million. We have tried to ensure that it focuses on work where it can add value and we have had a degree of success in that.
Mr. Jenkin: I welcome the Minister’s disappointment that NATO is not mentioned in the documents produced by the EDA, but what does he propose to do about that, given that the Government presumably never intended the EDA to duplicate NATO’s role on weapons standardisation? Are we not now in a position where two organisations will be involved in weapons standardisation in Europe—the EDA and NATO? Is that duplication not precisely what the Government said they would avoid?
Mr. Ainsworth: We need to get it right when we say that the documents produced by the EDA do not mention NATO. The documents are a communiqu(c) from the Commission, not the EDA. Yes, there is an EDA statement about its work load in the past year, but there is also a Commission document laying out the EDA’s work load in the year to come. Those are the documents that do not refer to NATO, and they are not all authored by the EDA—indeed, only one document in the bundle is authored by the EDA. The hon. Gentleman is therefore totally wrong to say that the documents that do not mention NATO originate from the EDA; there are two Commission documents and there is one EDA document on its work load in the past year.
The Chairman: Mr. Howarth, what is your next aspect of inquiry?
Mr. Howarth: May I pursue a further aspect of article 296, which touches on what the Minister said in his opening remarks? He mentioned the key capabilities that we have in the UK, but there is a real question about what assurance he can give us on that issue and, indeed, about the value that we can put on such an assurance. What assurance can he give us that the proposed directive will not limit the UK’s declared position in the defence industrial strategy to identify the key capabilities that we need to maintain here? For example, will we be threatened by the directive where we have only one company making a particular piece of military equipment, whose production we think it is vital to retain in the UK? Could our position be challenged under the wider interpretation of article 296, as my hon. Friend the Member for North Essex suggested? May I add that industry is also very concerned that the proposal will limit the ability of British defence companies and their partners on the continent to engage in partnering arrangements? The Ministry of Defence has a partnering arrangement with MBDA on missiles and with AugustaWestland on helicopters, but there are also cross-European partnering arrangements. Will those be subject to competitive challenges or will they be allowed to continue?
Mr. Ainsworth: First, may I correct something that I said to the hon. Member for North Essex? The three documents are not two Commission documents and one EDA document, but a Council document on the EDA’s forward-looking programme, a Commission document and an EDA document.
On the extent of article 296, that article has never given a blanket exemption and has always been limited by a list of military equipment. The justification that needs to be used is that an item meets the essential interests of national security. We believe that that is precisely the criterion to which we operate and that we do not misuse the position under article 296. We believe that we use it to defend our ability to produce items that are in the essential interests of our national security. We need to do some analysis of the directive and its potential impact on the defence industrial strategy. There is no indication so far that the directive would hamper or impact on the defence industrial strategy or partnering strategies. However, we need to satisfy ourselves fully that that is so.
Mr. Howarth: The Minister mentioned the list. Again, I refer to the European Scrutiny Committee, which drew attention to the wide delegation of powers to the Commission. It is empowered to amend not only the list of defence related products in the annexe, but non-essential parts of the directive. The Commission is apparently the judge of what is essential for these purposes.
The Minister says that of course the United Kingdom has applied article 296 appropriately. I put it to him that it is about to be taken out of his hands. He will no longer be able to determine what is appropriate and could be subject to challenge from the European Court of Justice. That is the concern that he has and that the European Scrutiny Committee has. What is the answer, particularly on the list question? Again, does that use qualified majority voting?
Mr. Ainsworth: We have the concern that Commission competence should not be extended to inappropriate areas. The difference between the thrust of the hon. Gentleman’s questions and our position is that we are confident that we will be able to protect the position that has been outlined to the Committee.
Mr. Howarth: May I explore another aspect?
The Chairman: Order. Other hon. Members wish to come in.
Mr. Liddell-Grainger: R and D research in Europe shows that the figure for spending on collective R and D is about 14 per cent., whereas that for spending by individual countries doing R and D is 86 per cent.
Mr. Ainsworth: In the defence sector?
Mr. Liddell-Grainger: No, internationally. The obvious problem is that nation states are determined to maintain their own defence capabilities. Time and again, war stocks procurement and operations procurement have been beset by problems—for instance, the 500 lb bomb for Harriers. We have not been able to get round those problems because of that national and international procurement problem. I find it slightly worrying that the Minister has full confidence in our ability to do so when history tells us that that has not always been the case. I am talking about not this Government, but successive Governments. Therefore, will he give further assurances, other than his confidence, that we will not end up in a very sticky position in 10 or 20 years’ time?
Mr. Ainsworth: Developing a genuine defence market involves difficulties that do not apply in other areas. There are quite reasonable issues of national security, but it is not in our interests for there not to be a genuine market or to end up with only one supplier. Therefore, we must develop openness in the European market, but in such a way that it is accepted that there is a world market that can be used for the purposes of competition.
I cannot give the hon. Gentleman assurances that we will achieve some nirvana that we all hope for, but we must try to move the issue in the right direction. That is the Government’s position. We should seek more genuine openness, transferability of capability and rising capability within the European market. However, we should not do that by closing the door to the outside world market. That will not be possible in any case because, as the hon. Gentleman knows, those companies operate on a worldwide basis.
Several hon. Members rose
The Chairman: Order. The hour allotted for question time will be over in one minute, but it appears that several hon. Members still wish to ask questions. Under the provisions of Standing Order No. 119(7), I am extending Question Time to allow the remaining questions to be asked, if they are brief and to the point. We shall move on to the debate after no more than half an hour. Any additional time given for questions will be deducted from the total time available for the debate, so we will still finish no later than 7 pm.
Do you wish to continue on the same theme, Mr. Howarth?
Mr. Howarth: Indeed. I want to pick up on research and development, to which my hon. Friend the Member for Bridgwater referred. The Government have rebutted the European Commission’s claim of duplication and waste in defence research across Europe. In those circumstances, what does the Minister think will be gained from pooling our often-secret research with European partners who contribute nothing or very little? Will that not imperil our relationship with the United States?
Mr. Ainsworth: The Commission will have to evidence its allegation. If it can, it will be well worth considering, but we doubt that it can. There is a fair concentration of almost all the spending on research and development in just four nations—more than 90 per cent., I think. We will have to take up those issues with the Commission, but we do not think that it can evidence its statement.
Mr. Taylor: Research and development will inevitably be cross-border. For example, Astrium is part of a European group—the European Aeronautic Defence and Space Company—but it is based principally in this country. Is not safeguarding our own research and development intellectual property and secrecy part of the system already in collaborating across frontiers? Is the Minister satisfied that the Commission is not trying to interfere with that, but is trying to reinforce it?
Mr. Ainsworth: We consider the EDA the vehicle by which to encourage members to collaborate on research and development—indeed, that constitutes a large part of its work—but it can do that only by agreement and by understanding what is done and what the capabilities and needs are, and therefore by encouraging people to work together where it is in their interests to do so. We consider the EDA the vehicle by which to do that, not the Commission.
In further response to the previous question, which was asked by the hon. Member for Aldershot, there is no question of any obligation being placed on us to share classified research with others.
Mr. Howarth: So what sort of intellectual property and defence research, if not classified, is likely to be exchanged?
Mr. Ainsworth: That which is agreeable to the parties, which is what the EDA is trying to scope.
Mr. Howarth: The Minister will know that the Secretary of State, in a letter to the Scrutiny Committee on 26 November, reported that he had supported the EDA’s 2008 work programme
“on the basis that the long term strategies and objectives will add value to European capabilities”
and that his officials will be working to ensure that the agency has made its work programme coherent by 2009. Why does he support an organisation the work of which he does not believe to be coherent?
Mr. Ainsworth: It is early days for the EDA. It was established in 2004 and has done some useful work. We are engaged with a very large part of it and have every confidence that it is the vehicle by which to bring partners together in an acceptable way, which is why we are working with it and why we are confident that we can steer it in the right direction.
Mr. Howarth: I am sorry, but why do we need the EDA to do that? That work is ongoing and there is already collaboration. I alluded to that earlier—for example, MBDA, which is a cross-frontier United Kingdom and French company. What will the EDA add to the United Kingdom? Perhaps it will add something to other countries, but we already have such arrangements.
Reference has been made to Airbus. That was a civilian project anyway, but it fell completely outside the scope of any European agency. The contracts are free and negotiated, and they have served us well. Why do we need the EDA?
Mr. Ainsworth: Not only private sector entities need to be able to collaborate. Governments need to be able to do so as well, and the EDA is the forum in which members of the European Union can come together to do so. If the hon. Gentleman does not think that Governments, as well as their private sector suppliers, need to collaborate in research and development, I am surprised indeed.
Mr. Jones: Does the Minister agree that unless the EDA says to individual countries, “You will do this and you will do that,” what is happening at the moment will carry on happening? An example given in annexe 2 is investment in combat and strike fighters, specifically the Eurofighter, Gripen, Rafale and joint strike fighter. The document says that research and development investment in the first three amounts to some €10.5 billion, which has led to less technology and ageing aircraft compared with the JSF. Unless the EDA has some direct say in what countries do, will it not be whistling in the wind against the national interests of each individual country?
Mr. Ainsworth: The EDA has to work with the grain of countries’ national interests. I understand what my hon. Friend is saying, and what frustration the matter could cause, but the other side of the coin is that almost all our research and development is bent towards our own national needs and basic requirements. If we allow a European institution effectively to remove that and spend it in other areas where other countries are doing less than us, that will detract from our own research and development capabilities and our fundamental national interests, so we must be bought into the process. The EDA will not be allowed by any EU country to extend its ability to impact on that. That will work as much in our interests as in those of other countries, in certain circumstances.
Mr. Jones: I agree with the Minister, but will not the EDA’s scope and effectiveness be limited? The only time that it will ever get co-operation is when individual member states’ national interests agree. It is a pipe dream to hold it out, as is done in some quarters, as the answer to the problem of how to compete with the United States and not waste money on research and development.
Mr. Ainsworth: The EDA is a small organisation with a £20 million budget. We contribute 17 per cent. of that—less than £3 million. The EDA is there to bring people together to find things on which they are prepared to co-operate, and it can do no more than that, but that in itself is worth doing and worth supporting. We are involved in much of the EDA’s work, which deals with identifying capability and shifting people towards a focus on capability and away from areas of work that have been less productive in some member states.
Mr. Howarth rose—
The Chairman: Order. Is this question on the same theme?
Mr. Howarth: Yes, it is. If the EDA is supposed to engage in a debate on identifying capabilities, why is it involved in trying to determine a framework for operating unmanned aerial vehicles in controlled air space? The Secretary of State wrote to the European Scrutiny Committee:
“I am clear that I need not only a robust justification as to why the Agency should proceed with work in this area, but also a case that allows me to judge whether it is a better use of defence funds to invest in this work rather than investing in other projects, nationally or internationally.”
Will the Minister explain why, therefore, in a subsequent note, the Government say that they share the agency’s objective in the area of UAVs and believe
“that the EDA could play a useful role in both legislation and standards”?
That is a complete contradiction. What is the Government’s position?
Mr. Ainsworth: The airspace over western Europe is extremely crowded and there is increasing use of unmanned aerial vehicles. How far we should allow unmanned aerial vehicles to operate inside commercial airspace is an important matter. It needs to be thought through and developed, and the EDA is capable of doing that.
Mr. Howarth: Why did the Secretary of State tell the European Scrutiny Committee that he needed not only a robust justification as to why the EDA should do that work, but to judge whether it was the best use of defence funds, rather than investing the money in other national and international projects? It seems that the Government are all over the shop. I put it to the Minister that that is a matter for the national air traffic control service, not the EDA, which has no competence in this area.
Mr. Ainsworth: I shall have to check.
Mr. Borrow: I return to the point made by my hon. Friend the Member for North Durham. Is it not the case that until the EDA and the European Commission recognise the transatlantic nature of the European defence industry, any money invested in the agency will not realise its best potential? Until that is sorted out, the less that is spent the better.
Mr. Ainsworth: We need to persuade the Commission to have an open mind about the market and supplies from outside the EU. I have already said that. I think that that is what my hon. Friend is getting at. It would be wholly useful if we persuaded the Commission to accept such a position.
Mr. Howarth: The Minister has said that he sees a role for the EDA, but the Secretary of State has said that he does not want to see an increase of €6 million in the budget—he is prepared to agree to only €1 million. How far are the Government prepared to go in sticking to their position in limiting the EDA’s budget?
Mr. Ainsworth: As I have said, we have tried to focus the EDA’s work, and I think we have had a degree of success in that. As I have also said, the position on unmanned aerial vehicles and other areas is that that is an appropriate field for the EDA.
Mr. Taylor: Will the Minister confirm the size of the budget? I understand that it is €20 million. The current framework programme for EU research and development in the civil sector is €53 billion. We are taking an awfully long time to debate a very small budget.
To what extent can the Minister influence EDA discussions in areas in which there undoubtedly needs to be European competence, because we should not leave ourselves vulnerable to the purchasing of US technology?
Mr. Ainsworth: As the hon. Gentleman says, the budget is small. As yet, there is no agreement on an increase in spending of €6 million. I do not have the exact figure, but the budget is about €20 million, our contribution being €2.8 million. In the grand scheme of things, for defence capability and procurement that is a very small amount.
Mr. Taylor: May I pursue that point? I happen to think that the defence industrial strategy has an interesting way of taking things forward that fascinates me—how to take ideas through to applied products. In defence and security, that is crucial. If the small budget of the EDA is designed to do that, so much the better. Does the Minister agree that it in no way threatens the United States—other than providing the beginnings of ideas, which I would welcome, that could be competitive to the United States?
Mr. Ainsworth: I do not believe that the United States or NATO feels threatened by the EDA. The United States and NATO have a keen interest in developing European capability and that is, hugely, the work of the EDA. I would have thought that NATO and the United States were more than happy to see the EDA succeed in that regard.
Mr. Taylor: Again, I would like Minister to clarify something. Of course, the membership of the EU, and therefore of the EDA, does not overlap entirely with that of NATO and some neutral countries are involved. Will he reassure us, therefore, that there will be no attempt to hold back developed products from the EDA, when NATO is engaged in out-of-area missions—for example, to deploy such products?
Mr. Ainsworth: I am trying to understand the thrust of the hon. Gentleman’s question, but I am afraid that it has defeated me.
Mr. Taylor: Given that the intellectual property will have been developed by the EDA, some of whose members are neutral, I wish to have the Minister’s assurance that any products sponsored by the EDA will not then be withheld when deployed by countries that are members of NATO in out-of-area operations.
Mr. Ainsworth: I am pretty sure that that is not the case. The overwhelming majority of members of the EDA are members of NATO, and they would try to ensure that they deconflicted such issues. However, I shall write to the hon. Gentleman to try to satisfy him on that point.
The Chairman: Mr. Howarth, would you like to move on to your next aspect?
Mr. Howarth: I shall not say that I am exhausted, because there are many other questions I would like to raise, but I am conscious of time and I do not wish to detain one or two colleagues on the Government Benches.
The Chairman: If there are no further pressing questions that hon. Members want to ask, we can proceed to the debate on the motion.
Motion made, and Question proposed,
That the Committee takes note of European Union documents No. 14937/07, Report by the Head of the European Defence Agency on its activity in 2007, No. 15413/07, the Council’s guidelines for the European Defence Agency’s work in 2008, and No. 16682/07 and Addenda 1-2, Commission Communication on a Strategy for a Stronger and More Competitive European Defence Industry; and endorses the Government’s approach to the development of the European Defence Agency and its view that the analysis and proposed solutions in the Commission’s Communication need further refinement before they could be supported.—[Mr. Bob Ainsworth.]
5.48 pm
Mr. Howarth: We have had an interesting exchange, but the Minister has invited us to rely heavily on assurances, which, I am afraid to say, as a result of 30 years’ experience with the European Community in its various guises, do not reassure me.
Conservative Members have always taken a cautious view on the objectives of the European Commission and the EU generally in respect of defence. Our uncompromising view is that NATO has provided for the past 60 years, and continues to provide, the people of these islands and people on the continent with their protection. It thus beggars belief that the Commission documents before us make no reference whatever to NATO.
The United Kingdom has been a very good European partner over the past 40 years and has led co-operation on a number of military projects, not least the Tornado and the Typhoon, which are advanced combat aircraft in which the French refused to participate, preferring their own solution, the Rafale. My hon. Friend the Member for Bridgwater reminded us that, during the first Gulf war, the Belgians refused even to sell us ammunition.
Our market has been wide open to overseas investors. We have led the way in this area, which is why major US, French, German and Italian companies have been able to acquire British companies. It is interesting to note that, as far as I am aware, neither BAE Systems nor QinetiQ, both of whose headquarters are in my constituency, has been able to make similar investments in France. I remain completely unpersuaded that the proposed directive will induce a change of heart. Furthermore, I am not persuaded that the invocation of article 296 will result in any material change, if the Government of France decide that invoking that article is what they want to do.
The interpretative communication on the application of article 296 gives me considerable cause for concern. As we have discussed at some length, that article specifically exempts defence equipment from the rules on common procurement, thereby enabling member states not to put such contracts out to competitive tender should they not wish to do so. These new proposals are clearly designed to encourage—indeed, potentially to enforce—the procurement of European military equipment by member states. I say “enforce” because it is crystal clear that the European Commission intends to use “all the legal instruments” at its disposal, which includes the European Court of Justice.
My fear is that that will open the door to allowing the ECJ to determine what constitutes the national interest—defence—in the making of decisions on buying military equipment. Thus, we shall have transferred such national sovereign power to the EU Commission, which is unacceptable to my party. It is what my hon. Friend the Member for Woodspring (Dr. Fox), in the curtailed debate in the House on the defence and security aspects of the Lisbon treaty, described as
“the creeping competence of the Commission and the EU structures...which gradually erode our ability to be masters of our own destiny.”
It is sad that neither the Minister for the Armed Forces nor the Secretary of State for Defence were able to participate in that debate on the Lisbon treaty, which touched directly on the issues that we are discussing today. [ Interruption. ] I know that the Minister for the Armed Forces was in the Chamber then, but it is astonishing that he made no contribution to the debate.
Britain does not have the same interests as other EU countries, as recent operations illustrate only too graphically. I think that it was the hon. Member for Colchester who pointed out the fact that we are engaged in two medium-scale war fighting operations to a far greater extent than any of our EU partners. In those operations, we invariably fight alongside the United States and interoperability with the United States must be our key determining factor.
If the Minister is going to respond, he needs to tell us a little about how the European standards are compatible with NATO standards. I am making an assumption that they are indeed compatible, but the last thing that we want is European standards that do not mirror exactly the NATO standards.
If we are interested in operating so extensively and alongside the United States, when our European partners do not take the same view, it is inevitable that our procurement requirements will be different from theirs. That is why it is critical that we should maintain our ability, unchallenged by the ECJ, to decide what is in the national interest of the United Kingdom when it comes to defence procurement.
We do not believe that the Commission has a role in defence, nor do we want to see power exercised by an individual who, as my hon. Friend the Member for Stone pointed out, is head of the EDA, vice-president of the European Commission and the EU’s Foreign Minister. That, of course, is our friend Javier Solana.
There is concern about the EDA in military quarters. I have in front of me the January 2008 EDA Bulletin, in which there is an article by General Sir Kevin O’Donoghue, Chief of Defence Materiel, Defence Equipment and Support, who will be well known to the Minister. General O’Donoghue makes an interesting point:
“We look for innovative solutions to the development of capability, remembering that we in the UK are currently supporting two major operations. It is inevitable that our top priority will be current operations and the equipment needed to support them. Although our front line forces tell me that their equipment and its support is excellent, we need to think carefully about priorities when every pound sterling or Euro spent on international institutions is a pound or Euro I cannot spend on equipping and supporting deployed front line forces.”
That is General O’Donoghue making his position absolutely clear. His argument makes it clear that he cannot see a particular purpose that is served by the EDA. As my hon. Friend the Member for Woodspring said during the debate in the House:
“The EDA offers the UK no tactical, strategic or technological advantage that NATO, bilateral or multilateral agreements, or the UK defence industrial base do not already provide.”—[Official Report, 20 February 2008; Vol. 472, c. 417.]
We believe that we need not more institutions or agencies, but an acceptance by member states that they must make a far greater contribution towards enhancing their own capabilities. We all agree with that, and I know that the Prime Minister agrees with it, as does the Secretary of State. However, it is significant that, despite public reprimands, those member states that have failed to increase their military capabilities continue not to do so. In matters of research and development, there is no way that we in the UK should put the product of our research—funded in many cases by the British taxpayer—at the disposal of countries that not only make no, or very little, contribution to defence research, but that do not buy the products that result from it.
Another concern raised by industry is about the extent to which it will be able to carry on doing research and benefit from the production that flows inevitably from that, or whether there will be a requirement on those companies that have carried out the research to be subject to competition, particularly from overseas. A host of issues need addressing, but the European Commission is interested only in building up an agency and staffing it with ever more people. As my right hon. Friend the Member for North-East Hampshire (Mr. Arbuthnot) said in the House during the debate on the Lisbon treaty:
“What I do not why the European Union is so intent on building up a defence role for itself when it is so reluctant to pay for it, to build its capabilities or to deploy troops to Afghanistan, which many EU members voted for.”—[Official Report, 20 February 2008; Vol. 472, c. 409.]
The communication from the Commission says that member states must
“shoulder their responsibilities to collectively provide the European security and defence policy with the industrial and technological tools it needs.”
The truth is that this package of measures is the latest step in building the apparatus to create a European army to implement a European foreign policy. I suspect that the Government agree, which is why they believe that the proposals require, in the words of the motion before us, “refinement”. The Government accept, and have accepted in all the evidence that they have given to the European Scrutiny Committee, that the reservations held by the right hon. Member for East Kilbride, Strathaven and Lesmahagow (Mr. Ingram) in 2005, when he appeared before a similar Committee, still exist in Government quarters. They are similar to those that were expressed about the Lisbon treaty and faded away as the Government came under pressure. I believe that that is what will happen here.
All the assurances that we have been given and all the concerns that the Government have expressed to the European Scrutiny Committee will eventually evaporate, as they want to be seen to be good Europeans, which means going along with whatever emerges out of Brussels. I believe that, as a nation, we have been good Europeans in terms of defence, which is indicated by the products that we have produced together with some of our European partners—without the benefit of the EDA.
We believe that a clear message must be sent that defence is a sovereign issue for nation states. The European Commission should not be permitted, by a process of creeping competence, to arrogate that responsibility to supranational EU institutions. This is a matter for the UK Government and a matter for the UK Parliament, and it must remain so.
I warn the Minister: all the signs are there that the ECJ will interfere in these matters, our sovereign status will be attacked as a result and the Government will be able to do very little about it—we are giving them the warnings now so that they can take action now. To reinforce how strongly we feel about this, I shall invite my hon. Friends to vote against the motion.
6 pm
Bob Russell: Other than the penultimate phase of the speech, I have considerable sympathy with and understanding of the points made by the hon. Member for Aldershot. Whatever criticisms I may make of the Government, I would never accuse them of wanting a European army or a European defence policy. I do not believe that that is the case. I would not under any circumstances support a European defence policy or a European army, or anything of that sort.
As Members on both sides of the Committee will be aware, I am very supportive of the concept and ethos of closer collaboration with our European allies. However, when it comes to defence matters, I somehow take a different perspective, perhaps because I represent a garrison town.
European Union countries have not pulled their weight in Afghanistan, which I recently visited, or in Iraq. Therefore, I have serious reservations. In my constituency—hon. Members can probably tell similar stories—there used to be two engineering companies that provided equipment for Her Majesty’s armed forces and for armed forces around the world. Neither exists today. Paxman Diesels, which used to provide engines for the Royal Navy and other navies around the world, was acquired by MAN of Germany and closed by MAN of Germany.
Over the last decade, I have seen one-way traffic. Our European allies—I use that term guardedly—in NATO have not played their full part. That is the message I brought back from Afghanistan.
The Government say that no new policy implications arise from the documents. That is fine. They say that the UK will
“continue to engage positively with the European Defence Agency to ensure that it is an effective tool in helping to improve military capability in Europe.”
It is all very well having a military capability, but what if the vast majority of EU countries do not exercise that capability?
In Afghanistan, which is a conflict that should involve all the democratic countries of the world, Europe has been represented by the United Kingdom, Estonia, Latvia, the Czech Republic and Holland. Of the 38 NATO countries—the vast majority of them EU members—there is no sign of the big EU countries on the front line, yet we are being asked to collaborate with the European countries in the EDA. I do not see them putting their forces where they want their equipment to be.
I have a simple message: if the EU countries in the EDA want to play a team game, they must put players on the pitch. So far, things have been too one way, and that message comes from somebody who is generally very supportive on EU matters.
6.4 pm
Mr. Jenkin: I commend the comments of the hon. Member for Colchester, which were extremely measured and well informed by his experience of front-line operations; he has visited troops, particularly from Colchester, many times. I remonstrate with him on one point, however. He says that he is not in favour of a European army and he is not in favour a European defence policy. Why then did he vote for the Lisbon treaty, which sets out the provisions for
“the common security and defence policy”?
However, whether that policy leads to a common defence is perhaps where the argument lies.
We are confronted with an extraordinarily voluminous set of documents. The European Union has a habit of making such matters seem extremely complex, but that complexity dulls the senses and enables what it would call progress to be made out of reach of the understanding of ordinary citizens, something that at one stage the Lisbon treaty was meant to resolve, but clearly will not. The European Union is becoming ever more complex and ever more obscure.
I must confess some disappointment about the exchanges that took place during questions. Valiantly as you attempted to chair them, Mr. Cook, and to bring some order of topics to the questions, the issues are so complex and so obscure that it is difficult to ask straight and pointed questions without becoming embroiled in great detail, as colleagues from both sides of the Committee found themselves. The complexity of the issues should not obscure for us the underlying direction that events are taking in the European Union and are intended to take, even if some are capable of denying that while supporting the events, or some are genuinely ignorant of where they are intended to lead.
The documents need to be seen in context. I quote from the document provided by the Council, which contains Commission document COM (2007) 764 final. It states:
“For the Commission, improving the functioning of the internal market for defence products is a priority. This Communication is therefore accompanied by a proposal for a directive on intra-EU transfers of defence products and for a direct directive on defence procurement.”
After all that the Government have been saying throughout the debates on the Lisbon treaty about defence remaining intergovernmental, I believe that a number of colleagues in the House and outside it will remain absolutely astonished that the European Commission is bringing forward draft directives on defence products, which is what we are considering today. That underlines how the EDA—and our work today demonstrates it—sees its role, albeit, let us agree, with a limited budget and operating, however grandly with its rhetoric and its sweep of the global horizon, with limited effect.
I shall give way. I am sorry. I thought that the Minister wanted to intervene. He was twitching. I have to be careful with the right hon. Gentleman, for whom I have great respect. He commands loyalty and affection from those in the armed forces for his role. I must have been getting a little under his skin at that point. He seemed as though he had an attack of lice. However, he seems all right now and looks very cheerful.
I was about to set the work of the European Defence Agency in its proper context. The Minister agreed that ultimately article 296 will be adjudicated by the ECJ and the draft directives demonstrate that the European Commission is already seeking to push the boundaries of the internal market into defence-related matters. It is extremely hard to argue—although not impossible—that the ECJ could finish up adjudicating on fundamental aspects of military policy, but it is the grey areas, the border areas, the penumbra between the internal market and defence policy where an increasing body of European Community law will be established, rather than the intergovernmental arrangements that the Government insist will be adhered to.
Mr. Howarth: Has my hon. Friend also noted the Minister’s acknowledgement that qualified majority voting will apply in the debate that he and his colleagues will have with our European partners over the question of the extent to which we can protect our bilateral trade with, for example, the United States, where we have sold more than £6 billion-worth of equipment over the past five years and it has sold half that to us?
Mr. Jenkin: My hon. Friend leads me directly to the next point, which describes the context for these documents. They are brought to us after a long period when many European defence companies and many countries—I shall not name any in particular, because I do not wish to cause unnecessary offence, but people might know who we are talking about—have definitely taken a protectionist view of their defence markets. That is not why we in the United Kingdom avail ourselves of article 296, and I commend the Minister for explaining how the UK regards use of article 296 as right and proper. It is used to protect genuine national interests, genuinely sensitive issues of intellectual property and so on; it is not used simply to protect industry. However, if we are to be realistic about how we develop a European defence industry, which is what the papers seem to be about, we should be realistic about how other member states are likely to behave.
We have been here before. I remember the Horizon frigate programme. That was an Anglo-French venture. The idea was that the British and the French should jointly develop a frigate and we would agree to stick British and French bits on it as recognition of the joint venture. In the end, what happened was that the British would say, “Okay, you do the gun and we’ll do the avionics that relate to the communications, the radar and so on,” and the French would say, “Absolutely right, but of course with the French frigate we’ll have to do the gun and the avionics because we’re French.” It quickly became apparent that the French wanted to have it both ways. There is a long history of protection in the French defence industry—genuine protection—probably to the detriment of their defence capability, but it is a country where even centre-right politicians, who should naturally be in favour of free markets, extol the virtues of protection. We all know that.
Therefore, I rather suspect that one motive behind the European Defence Agency—particularly as it is not dealing with the real need, as was mentioned, to create a genuine transatlantic pool of defence capability and a defence industry—is a desire to create standards and operational requirements for certain bits of kit in the European Union that will be unable to be satisfied by equipment that is not manufactured to a close specification, and therefore it is likely to be of European rather than French origin. I think that that could be detrimental to the UK. We are in an advantageous position as a leading member of NATO in Europe, but also because of our close relationship with the US. We can pick and choose. A former head of the Defence Procurement Agency once described to me the nature of that choice. We could buy the European kit—we would be involved in the research and development, create extra jobs and finish up with a bit of kit where we could look inside the box, know exactly how it works and be able to modify it for our own purposes. Yet it would probably be considerably more expensive and not work quite as well as the American kit, because they spend vastly more on their research and development than we do in Europe. However, if we buy the American kit, which will be cheaper and do exactly what it says on the outside of the box, we will not be able to look inside the box and we will probably not have so many jobs or intellectual property under our ownership.
That is the choice that every procurement Minister and Defence Secretary has to grapple with on every piece of equipment. Other countries are involved, such as Israel and South Africa, but that is basically the balance of the judgment. I would not want to create a limit on the ability of a British Minister to make that judgment. However, we are now dealing with a new institution, and from little acorns, great oaks grow.
Craving your indulgence, Mr. Cook, it is worth reminding Members what the Lisbon treaty intends the European Defence Agency to do. It is important to see these documents in that context. Article 28D of the Lisbon treaty, which becomes article 45 of the consolidated treaty, states that the task of EDA shall be to:
“(a) contribute to identifying the Member States’ military capability objectives and evaluating observance of the capability commitments given by the Member States;
(b) promote harmonisation of operational needs and adoption of effective, compatible procurement methods”.
That is interfering—potentially considerably—in the defence policies of the member states.
Mr. Howarth: My hon. Friend is making an important point. In order to determine the capabilities needed, we start from a foreign policy baseline. That is what the Government did in the strategic defence review. They started with the foreign policy baseline: what is our foreign policy? That will determine what capabilities we need, which means we go and procure those capabilities. Is this move by the EDA and the Commission not an indication that they are looking for a European foreign policy and that they want to build a European defence capability that meets that European foreign policy?
Mr. Jenkin: My hon. Friend may lead me further down the track than you want me to go, Mr. Cook, but I wish to elaborate a little further on the context of the Lisbon treaty.
The Lisbon treaty establishes the EDA more formally as a European institution and makes it clear that the Council, acting by qualified majority, adopts the decision defining the agency’s statute. That is, we do not have a veto on how the agency is constituted. The statute already exists and, underlining the point made by my hon. Friend, according to the statute, the agency
“should contribute to the implementation of the Common Foreign and Security Policy”,
not just developing
“defence capabilities in the field of crisis management, promoting and enhancing European...cooperation”.
One other aspect of the agency’s statute, to which I will refer directly, is a decision adopted by the Council on 12 July 2004. The document is numbered L245/17 and paragraph 17 states:
“The Agency, while being open to participation by all Member States, should also provide for the possibility of specific groups of Member States establishing ad hoc projects or programmes”.
That directly mirrors permanent structure co-operation that exists under the Lisbon treaty where groups of member states can form a sub-group of member states for particular purposes for particular military operations. The permanent structure co-operation can only be established according to the protocol of the Lisbon treaty. It includes article 1(a), which states that a member state shall
“proceed more intensively to develop its capacities through the development of its national contributions and participation, where appropriate, in multinational forces”.
Article 2(b) states that member states shall
“bring their defence apparatus in to line with each other as far as possible particularly by harmonising the identification of their military needs”.
It is clear not only that we are participating in the European Defence Agency, but that we intend to participate in the permanent structure of co-operation. Incidentally, although the permanent structure of co-operation votes by unanimity, it is constituted by qualified majority voting and a member state that fails to fulfil the criteria set out in the protocol can be removed by qualified majority voting. Therefore, the same dynamic pressure that is put on member states to reach consensus—instead of sticking their neck out and objecting—exists in the permanent structure of co-operation as exists in the European Defence Agency.
The development of the European defence industrial strategy needs to be considered in that context and alongside the Commission encroaching upon defence and bringing in the jurisdiction of the European Court of Justice in order to force uniformity of defence policies, defence acquisition policies, defence research and development policies, and defence armament development policies along the European lines. As I said earlier, one of the primary motives is to create a rival to the United States rather than a partner. If there were any doubt about the latter point, the Minister should ask why, despite Government assurances about NATO being the cornerstone of our defence policy and the fact that the treaty refers to the primacy of NATO, it has been utterly ignored in these documents. The reason is that the real game plan is not to build on or complement NATO—as the Government keep saying—but for NATO to become a second-rank player and also-ran in the defence policy of the European Union. If the French are allowed to join the military structure of NATO, they will be even more able to paralyse matters than they were before the invasion of Iraq in 2003.
The Chairman: For the record and in response to the criticism of the hon. Member for North Essex about my criticism of procedures earlier today, I remind the Committee that we are required to apply amendments to the Standing Orders that have been approved by the House. At the same time, we had to maintain the requirement to keep a clear division between question time and the time allotted to it and the debate that follows. The House must have taken its decision without taking into account the voluminous material that we have had to consider today, as the hon. Member for North Essex rightly said, and the intricacies of it, as the hon. Member for Aldershot pointed out. However, we seem to be getting somewhere near to resolution.
6.25 pm
Mr. Jones: I was going to say something, but having listened to the contribution of the hon. Member for North Essex, I have lost the will to live, so I shall leave it there.
The Chairman: If that is the extent of your contribution, I call the Minister.
Mr. Jones: Has he got the will to live?
6.26 pm
Mr. Ainsworth: I am still alive.
The UK Government are committed to developing and strengthening an open, flexible, militarily robust and NATO-friendly European security and defence policy. It is accepted in the hated Lisbon treaty that NATO has primacy over our defence needs, but there is no proposal for a European army. The EDA, supported by the Commission, has a pivotal role to play as a facilitator. It will help to improve member states’ defence capabilities, and help the Community to achieve its European security and defence policy. The hon. Member for Colchester studies these matters, so he will know that capability is relevant. If he really wants to get over the problem of burden sharing, which is a real issue, he ought to support the EDA, which is a small organisation and is trying to develop European capability. In those circumstances, burden sharing would become a lot more realistic than it is today.
Bob Russell: Does the Minister accept that the theory and reality are separate? I acknowledge totally his comments about the theory and how we want things to develop, but the reality is that the vast majority of European countries are not putting their troops on the ground. I have to look at the issue as it is and not as it ought to be.
Mr. Ainsworth: I do not know how the hon. Gentleman responds to real-world issues and problems. We tend to respond to them by engaging—not by walking away. That is all I shall say on that. This engagement is appropriate. The EDA is a small organisation that seeks to help to develop interoperability and capability among European nations. The Commission’s communication usefully highlights the areas that need to be addressed, and the EDA should be the organisation that leads in moving those forward. However, it should be responsible not to the Commission, but to the Council and individual Defence Ministers.
Finally, there is no question of our putting our research at the disposal of others who do nothing, as the hon. Member for Aldershot suggested. The projects are individual, and we will decide how to get involved, where we ought to help and where we need to defend our national interests. The EDA gives us a forum by which to do that.
Question put:—
The Committee divided: Ayes 6, Noes 4.
Division No. 1 ]
Ainsworth, rh Mr. Bob
Borrow, Mr. David S.
Caborn, rh Mr. Richard
Cunningham, Tony
Jones, Mr. Kevan
Spellar, rh Mr. John
Howarth, Mr. Gerald
Hurd, Mr. Nick
Liddell-Grainger, Mr. Ian
Russell, Bob
Question accordingly agreed to.
That the Committee takes note of European Union documents No. 14937/07, Report by the Head of the European Defence Agency on its activity in 2007, No. 15413/07, the Council’s guidelines for the European Defence Agency’s work in 2008, and No. 16682/07 and Addenda 1-2, Commission Communication on a Strategy for a Stronger and More Competitive European Defence Industry; and endorses the Government’s approach to the development of the European Defence Agency and its view that the analysis and proposed solutions in the Commission’s Communication need further refinement before they could be supported.
Committee rose at half-past Six o’clock.

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