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EU: Aerospace Reform Measured Against U.S.

The European Commission today released a report looking at ways of making the European Union's aerospace industry more competitive. The report -- drawn up by EU officials and representatives of the aerospace industry -- emphasizes in equal measure the need for investments and reform in both civilian aviation and defense-related projects. Comparisons with the United States figure prominently in the report, which says the EU's ambitions require that independence from the United States be increased.

Brussels, 16 July 2002 (RFE/RL) -- On the face of it, the "Strategic Aerospace Review" presented today in Brussels offers a set of recommendations for a crucial industry the report says is "in a critical phase" and in need of a long-term policy approach with a 20- to 30-year perspective.

EU officials and representatives of the EU's leading aerospace companies today, however, made it clear that the review is more than a look at an essential sector. It is also a call for the EU to focus its economic might on the wider global political ambitions EU leaders have evoked more and more passionately over the past few years. In doing this, the study and its authors, not surprisingly, find themselves time and again measuring the EU's progress and shortcomings against the United States.

Presenting the report, the EU's Enterprise and Information Technology Commissioner Erkki Liikanen clearly linked aerospace development with the EU's security-political ambitions, and hinted at the rivalry with the United States. "At successive European councils, Europe's leaders have defined ambitious economic, political, and social goals for the EU. This requires a competitive industrial base to meet these goals. We need to maintain a strong technological and industrial base in support of the European Security and Defence Policy. [The] aerospace [sector] makes a central contribution -- it is a high-tech industry requiring a highly skilled workforce, a heavy investment in research and development which has important spin-off benefits in many other areas. The industry has to compete on a global scale, and the competition is fierce -- naturally, especially from the United States."

The report calls for reforms and increased investment in five areas of the aerospace sector -- the position of EU firms on international markets, EU regulations affecting the industry, civil aviation, related EU security and defence capabilities, and space.

Addressing international trade, the report highlights the need to ensure what it calls the "fair application" of trade rules and a "level playing field" with U.S. companies.

Jean-Paul Bechat, a co-author of the report and the head of a leading European engine manufacturer, SNECMA, said today EU companies were at a distinct disadvantage: "The message is simple. We need a level playing field with the U.S. To that end, we are looking for fair, reciprocal market access. Some American legislation makes trading with the U.S. difficult. For example, in some instances, equipment to be used by the U.S. government must be procured from U.S. firms. Also, the U.S. strictly controls the export of foreign equipment that contains U.S. technology."

Bechat said it was up to EU governments to ensure improvement. The report notes that while the EU's aerospace industry has become a "truly cross-border" activity, the political and regulatory frameworks in which it operates have not adapted, and remain based on national legislation. Again, a parallel is drawn with the United States, where -- unlike in the EU -- companies benefit from huge public procurement and research projects and face a consolidated market.

Another top priority identified in the report is research and development (R&D) spending. It says 100 billion euros are needed from public and private sources until 2020 to maintain competitiveness. The report adds that the funds must be spent "coherently," on a European scale. It also recommends EU governments create tax incentives for the industry, noting such schemes have long been in place in the United States.

In the field of civil aviation, the EU is called upon to take over from member states as a policymaker and regulator. Jean-Paul Bechat notes the EU needs a transnational authority, which would be "equal in weight" to the U.S. Federal Aviation Administration.

Bechat says advancing the EU's security and defence capabilities is one of the most crucial aspects in developing the aerospace industry. "Here the basic question is: What influence does Europe wish to exert at the global level? If its ambition is in line with resolutions made in 1999 at the Helsinki and Cologne [summits], then a major breakthrough will be necessary. A credible security and defense policy is essential and it will require a substantial and capable industrial base."

Bechat adds that a related key goal is the establishment of a harmonized EU armaments and procurement policy. This would allow EU member states to make more efficient use of their funds. But, Bechat notes, increased budgets are also a must.

He draws another parallel with the United States -- whereas the United States spends more than 3 percent of GDP on defense, the EU spends less than 2 percent. Bechat concedes, however, that achieving parity with the United States is at this point an unrealistic goal, given the low domestic priority given to defense funding in most EU member states.

Finally, space applications are identified in the report as an essential component in developing both civil aviation and defense projects. Bechat praises the EU's recent decision to go ahead with its own Galileo satellite positioning system, but says the EU must consolidate its policies further, adding that the EU "must" maintain independent access to space.