September 28. 2023. 7:30

The Daily

Read the World Today

Defence industry nervous about sharing trade secrets with EU

As EU member states consider boosting the production capacity of the bloc’s defence industry, they must also decide how much power they are ready to cede to Brussels.

The flurry of weapons and ammunition deliveries from Western governments to Ukraine and the bloc’s repeated pledges that EU support will continue for “as long as it takes” are putting a strain on the European defence industry, which so far has not been able to keep up with the demand

To help the industry ramp up ammunition production, the European Commission presented an Act in Support of Ammunition Production (ASAP) earlier this month.

But although EU support is welcome, some member states worry that Brussels may be too intrusive, several EU diplomats told EURACTIV.

EU member states and the European Commission will also have to find the right balance of “transparency” in sharing information about the industries’ production capacity, two EU diplomats said.

Member states indeed worry that the EU executive is granting itself far-reaching powers with few guarantees that sensitive industry information will be protected accordingly.

Trade secrets

According to the the proposal from Brussels, the European Commission would have access to the ammunition industries’ confidential information related to its production capacity.

The EU executive could then request data related to the company’s current production capacity, anticipated bottlenecks, supply chain elements, stockpiles or difficulty in accessing certain products.

“Based on this mapping, the European Commission shall, (…) continuously monitor their production capacity and their supply chains and assess their overall ability to respond to the expected evolution of the market demand,” according to the Commission’s proposed text.

This mapping of a company’s production material and capacity is usually confidential and well-protected from foreign governments, international bodies and competitors.

The question now will be “how” this “intrusive information” would be used, and secured and whether it might be shared with competitors and other capitals, one EU diplomat said, adding that member states will need safeguards before agreeing to share the data.

It is not clear how and why the European Commission is planning on using this information, EU diplomats and industry representatives univocally told EURACTIV.

Defence industries are closely linked to their governments, and EU capitals wish to protect their national state-sponsored industries and trade secrets.

This move is meant to give the European Commission oversight of the manufacturing capacities on the continent to help increase production.

This worry has already been raised in the framework of the European Defence Fund (EDF), an already-existing EU programme to boost collaboration in defence-related research and development.

Companies are sometimes asked to provide lists of employees working on such projects, with little guarantee that this sensitive information will stay confidential and with no indication of the purpose of such moves, industry sources told EURACTIV.

Decisive powers

The European Commission would also grant itself a right to commission priority-rated orders to the European ammunition industry, according to the proposal.

“The Commission may, after the consultation of the Member State of the establishment of the concerned undertaking and with its agreement, notify the latter of its intent to impose a priority rated order,” the text states.

Member states’ involvement in the matter would act as a safeguard, industry sources told EURACTIV, hoping they would be protected from such a decision.

Another issue would be that manufacturers could, under the proposed legislation, export the ammunition and their components with no prior authorisation or oversight by the government of the countries where they are established.

As this would constitute a precedent, this should be assessed carefully to avoid any misuse of power by the industries, one EU diplomat said.

Read more with EURACTIV

Borrell: Russia won’t enter negotiations while trying to win war

Borrell: Russia won’t enter negotiations while trying to win war

EU’s top diplomat Josep Borrell on 29 May said he believed Russia will not be willing to negotiate while it is still trying to win the war in Ukraine, adding that he was "not optimistic" about what could happen this summer.

[an error occurred while processing the directive]