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EU Ministers to OK Arms Industry Plan
Sunday November 20, 7:09 am ET
By Paul Ames, Associated Press Writer
EU Defense Ministers to Endorse Plan to Open euro30 Billion Armaments Market to Competition


BRUSSELS, Belgium (AP) -- EU defense ministers are expected to agree on a plan Monday to open up their euro30 billion (US$35 billion) arms industry to increased cross-border competition.
While the new "code of conduct" will be voluntary and nonbinding, it marks a breakthrough for the EU after decades of trying to persuade nations to relax protection of their tightly guarded national defense markets.

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Governments have been able to protect their national defense industry champions because military contracts have been largely excluded from EU legislation that has ripped down barriers to trade within Europe in other sectors.

EU officials say more than half the euro30 billion (US$35 billion) annual spending on new military equipment in Europe lies outside EU free market rules.

By allowing companies to compete more in each others markets, the EU hopes to secure lower costs for Europe's tight defense budgets and encourage a restructuring of the continent's fractured industry so it becomes more competitive on world markets.

The code of conduct is due to come into force in July, if ministers agree. EU nations will have until April to decide if they want to take part. Denmark has already opted out and officials said Spain also has doubts, but the other 23 EU members are expected to sign up.

Under the system, nations will commit to posting defense contracts on an Internet bulletin board open to companies from all EU nations who could then compete for it.

Although the rules are not legally enforceable, officials said nations would face considerable peer pressure to allow free competition from other EU companies. The EU will monitor application of the system to ensure governments are sticking to the rules.

Experts say they expect a more open defense industry to encourage the development of pan-European companies that would pool research and compete with U.S. rivals.

However, analysts warn it could take time before Europe's defense ministries from the main arms producers, like Britain, France, Germany and Italy, move away from trusted national suppliers.

Seven of the world's 10 biggest defense companies are American.

The U.S. top four -- Lockheed Martin Corp., Boeing Co., Northrop Grumman Corp. and Raytheon Co. -- had a combined revenue from defense of US$105.4 billion (euro90.15 billion) last year. That is more than double that of the four biggest European defense companies -- BAE Systems PLC, European Aeronautic Defence & Space Co., Thales SA and Finmeccanica SpA.





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