ABSTRACT
This chapter examines the causes and consequences of the recent trend toward opening European defense industries to international competition and explores the dilemmas facing policy makers charged with crafting European defense industrial policy. The European Community's "1992 Plan," the proposals of the Independent European Program Group for integrating defense markets, and a series of North Atlantic Treaty Organization armaments projects all highlight the renewed interest in internationalizing the industrial base of West European defense. The traditional European approach to defense procurement, consisting of domestic procurement backed by ad hoc collaboration and occasional imports, is universally considered to be facing a crisis. The application of free market principles would introduce competition into the defense procurement process, thereby promising, according to classical economic theory, increased efficiency and rationalization through greater economies of scale. Companies would be free to merge or combine in any way, and European governments would solicit bids from all firms on the international market.
