EU Nears Deal Allowing Limited U.S. Access to Defense Contracts
A pedestrian passes by European Union flags flying outside the headquarters of the European Commission. (Photographer: Geert Vanden Wijngaert/Bloomberg)

EU Nears Deal Allowing Limited U.S. Access to Defense Contracts

European Union governments are closing in on an agreement that would allow countries outside the bloc to participate in joint defense projects, though under a series of terms that would limit opportunities for U.S. and British companies to access lucrative contracts.

Under the latest draft of the accord seen by Bloomberg, only countries sharing “the values on which the EU is founded” and “respect the principle of good neighborly relations with the member states” can take part in joint defense procurement, meaning that NATO ally Turkey will be excluded for as long as the Cyprus dispute remains unresolved.

Other allies such as U.K. and the U.S. can only be invited to take part if EU member states unanimously agree that they provide “substantial added value” to the project, according to the draft which may be approved by EU government envoys in Brussels as soon as this week.

The proposed deal is part of the EU’s push to boost its “strategic autonomy” in the aftermath of Brexit and in the face of an escalating great-power competition between the U.S. and China. France, Germany, Italy and Spain, which host the bloc’s biggest military equipment companies, are the main advocates of deeper defense integration, despite U.S. concerns that the policy could undermine North Atlantic Treaty Organization.

EU member states have so far agreed to develop 47 joint projects, including a new warship named “European Patrol Corvette,” drones and artillery systems. Allowing non-EU countries to participate in the EU’s “Permanent Structured Cooperation” in the area of defense has been a persistent U.S. demand, and a potential deal would follow years of deliberations between EU diplomats.

The draft accord wouldn’t allow non-EU participants to dictate export restrictions of the technologies developed. Companies based in the EU, but controlled by or having management structures outside the EU, may only participate in the joint projects following unanimous approval of the bloc’s member states and only after 2025.

Defense is one of the facets of EU’s strategic-autonomy drive, which also includes new rules to protect European companies from hostile takeovers, punitive trade measures against what the bloc sees as unfair competition, and stricter rules for large tech companies based outside Europe. EU Council President Charles Michel, who chairs the meetings of the bloc’s leaders, has called strategic autonomy “the goal number one of our generation.”

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.