Michael Murphy | 23 November 2020
Michael Murphy took part in an expert panel discussion on ‘Covid-19 and European Strategic Autonomy’ in October 2020 as part of The Azure Forum for Contemporary Security Strategy 2020 series on ‘Peace, security and defence during and beyond the Covid-19 Crisis: Lessons for future global crises’. He argues that Strategic Autonomy has been installed without roadmaps or metrics or justifying evidence bases. Moreover, it will be shaped for national ends and in the context of defence, it is about giving control to national defence champions.
Many years ago, as preparation for a job interview, I was given a corporate brochure to read. One sentence from that brochure stays with me. It said, ‘We’re a metrics driven company, if you can’t measure it then don’t talk about it.’ I wonder now what that company’s executives would think about the concept of ‘strategic autonomy’ – a grand but vague concept aimed at reducing Europe’s dependence on global supply chains. It is a concept that has neither metrics nor evidence-based roadmaps. It could even be counterproductive for a Europe that exports over 15 percent of its economic output. A Europe that benefits from global supply chain efficiencies and worldwide technology spillovers. Yet, ‘Strategic Autonomy’ or related terms such as ‘Technological Autonomy’, ‘Technological Sovereignty’, ‘Digital Sovereignty’, ‘Open Strategic Autonomy’ – or whichever moniker you choose – sets a broad direction for a continent like Europe.
Strategic Autonomy, security, EDIDP and defence: Anti-competitive structures
EU civil security and defence research and innovation (R&I) programmes are part of my day-to-day portfolio. Under this portfolio, the term ‘Strategic Autonomy’ made its debut this year in the H2020 civil security R&I programme.
Notably, there was a close to market artificial intelligence topic for law enforcement authorities that the Commission decided should be subject to Strategic Autonomy. No evidence-based justification was given for this decision and there was no debate at the appropriate committee level. In my mind, it seems that Strategic Autonomy is being invoked in ad-hoc fashion, driven by national interests. I believe that one intention behind the application of this concept in civil security is to chill-out non-European headquartered industry, even where some of these enterprises are large-scale employers across Europe as well as desirable research partners for many European organisations.
In terms of funding for areas such as Artificial Intelligence (given the unsurpassable sums being invested by public and private sectors in the United States), a business mindset would suggest it is better to collaborate, to focus on being rapid integrators of existing AI capabilities so as to amplify Europe’s existing strengths, and to upskill an AI workforce. And doing this while being alert for game changing opportunities. Nonetheless, Strategic Autonomy aside, it is encouraging that these issues are being addressed in Digital Europe.
Focusing more specifically on defence, according to the European Commission’s Communication on ‘A New Industrial Strategy for Europe’, “The European Defence Fund (EDF) will help build an integrated defence industrial base across the EU. It will invest throughout European defence industrial value chains, facilitate cross-border cooperation and support open and dynamic supply-chains that include SMEs and new entrants.” However, it seems likely that the gulf between these European policy aspirations and what will happen on the ground is wide.
To illustrate this, the European Defence Industry Development Programme (EDIDP) for 2020 (which is a precursor to the EDF) assigns 36 percent of the roughly quarter billion-Euro budget to pre-designated large industry beneficiaries. There is no competition – they just receive the funding. It assigns 60 per cent to topics that are in effect pre-designated as they are written in such a way that it is likely they will attract little or no competition. This competitive deficit is already evidenced by the 2019 results. The remaining 4 percent of the budget is assigned to SME dedicated solutions – where of course there is competition. In summary, EDIDP puts countries such as Ireland in a position of contributing to the European Commission budget so that the Commission can in turn fund the high-tech defence industries of other European countries. If this is what Strategic Autonomy looks like, it does not look right.
The Commission suggests that its EDIDP bonus system will motivate large industry consortia to include SMEs and ultimately involve them in their supply chains. It is probable that this will have some effect, but the structure is anti-competitive for several reasons. First and foremost, the prime contractors control who gets what work and under what terms and conditions. If they so choose, they can retain leading edge technical work in-house or within a tight supplier ecosystem while subcontracting the more mundane activities elsewhere. If an SME is competitive with a large company in a niche area then the large company is unlikely to subcontract related business. There is an additional risk whereby the primes (where they subcontract to SMEs and must look outside their own country to obtain a bonus) will involve industry from countries that are likely to purchase their kit, to ingratiate themselves and move closer to prospective customers. In the context of EDIDP, the large companies can, perfectly legally, deal amongst themselves to act as a de facto cartel and to cross-help each other’s supply chains if they so wish. Relatedly, given the often-secretive nature of defence, certain work will have limited circulation. And lastly, there is no single European market in defence, no level playing field. Rather, it comprises a set of national markets that are protectionist in nature. Overall, EDIDP structures are anti-competitive and give far too much power to the large players.
Arguing for a different approach to EDIDP/EDF structures
The current approach to EDIDP/EDF structures does not need to be this way. Among other steps, the European Commission could, by way of example, allocate 20 percent of the defence budget to SME dedicated topics including an SME Accelerator programme that invests in SMEs with high growth potential.
A strong case can be made for this approach. By way of example, the H2020 SME Accelerator is an excellent European Commission initiative. It has a total budget of more than €1.3 billion for the period 2019-2020 and it is extremely competitive with success rates of roughly 3 percent on average. With that kind of demand, 20 percent or €200 million per annum for defence SMEs seems reasonable. Furthermore, it would go some way towards creating a level playing field for all EU Member States and facilitate new ideas and a more dynamic defence sector. My concern is that this is the last thing that the major actors in defence want – even where it might ultimately strengthen their international competitiveness. Instead, they want an ossified structure of immovable national champions where they retain market power that ultimately will constrain Europe’s competitive potential.
In summary, the concept of Strategic Autonomy invites us to debate its meaning, so that meaning becomes reality. However, the primary shaping of that meaning will be for national ends. Nowhere is this more obvious than in security and defence.
The broader European industry is more open but the habit of invoking ‘Strategic Autonomy’ to promote and protect national champions will remain, while the concept will be conveniently ignored as it suits those same national interests. In this sense, Strategic Autonomy weakens the broader Single Market and it is protectionist in nature. In addition, it is deliberately vague, lacking justifying evidence bases or metrics. This makes for dubious industry development policy.
Harkening back to my interview long ago, I think those company executives would say it is time to stop talking about Strategic Autonomy.
ABOUT THE AUTHOR
Michael works at Enterprise Ireland which is the Irish government agency responsible for the development of indigenous industry. He coordinates the Irish Security Research Network (serenity) which has around 1,100 participants from academia, industry, practitioner organisations, and the civil/public service..He is the Irish Delegate and National Contact Point for the H2020 ‘Secure Societies’ research programme and the designated security contact for Horizon Europe (the successor to H2020). Michael supports the Irish Department of Defence in relation to European defence R&I and Capability Development programmes.
Authors’ views are their own and do not represent the official position of The Azure Forum.