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Unsafe Brexit: how Britain’s exit will affect EU defense?

This post was published in Gazeta. The point of view expressed in this article is authorial and do not necessarily reflect BM`s editorial stance.

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MOSCOW, (BM) – January 31, 2020 Brexit became a fait accompli. Now, a special transition period has come in relations between the EU and London, during which the parties are preparing for a new reality. Regardless of the final outcome of the negotiations, which are said to be completed before December 31 of this year, a split between Britain and the EU will affect all aspects of bilateral relations, including security and the defense industry, the text of the report, “Brexit’s Impact on Security and the Defense Industry in the European Union and UK ”published on the Warsaw Institute portal.

All existing agreements and agreements on cooperation in the field of defense will need to be reviewed, completely changing the defense landscape of Europe. Despite all this, the final degree of change will be known only after the completion of the transitional negotiations, when the exact form of relations between the EU and Great Britain is determined.

Divorce will affect all aspects of the life of the EU and the United Kingdom, including defense. However, compared to other areas – such as economics, tourism and cross-border cooperation – Brexit’s defense impact will be minimal. And this is because the main guarantee of security on the continent is NATO, not the EU. Britain has already promised to remain committed to NATO after Brexit.

The absence of the United Kingdom in EU-sponsored peacekeeping and monitoring missions, as well as the loss of British budgetary contributions to the Common Security and Defense Policy (CSDP), will be the main consequences for the EU defense sector.

The EU defense industry will also experience the effects of a split, as it will now be more difficult to trade with the UK. At the same time, sales of European-made weapons to the UK were minimal. Multinational companies, such as Airbus Defense, may suffer from the upcoming divorce more than others, as they need to maintain relations with the UK, regardless of the future form of relations between the EU and London.

The United Kingdom will feel the negative effects of Brexit on its defenses much more than the European Union, the authors of the Warsaw Institute report believe.

By not participating in the CSDP, the British Armed Forces may become less compatible with their European counterparts over time, as common goals will no longer be set. In addition, the UK will be excluded from training opportunities during peacekeeping missions led by the EU and future similar projects. At the same time, the UK has always been reluctant to support the “militarization” of the EU, citing NATO’s key role in these matters.

Brexit could actually accelerate the creation of a more defense-oriented European Union. This is due to the fact that since its accession to the EU in 1973, the United Kingdom has been a strong opponent of any attempt to increase the defensive capabilities of the union, citing the existence of NATO.

Now that Britain is gone, the Franco-German duo, which insisted on increasing the militarization of Europe, has been left without its greatest and strongest adversary, which will allow Paris and Berlin to take steps to finally implement these plans.

The British defense industry is likely to be hit harder by Brexit, as the new reality that has emerged after 2020 could interfere with many of its contracts with EU states due to higher prices, delayed completion of many projects.

Another aspect – the United Kingdom is one of two European countries with nuclear capabilities (Trident submarine ballistic missiles).

At the same time, the United Kingdom has two combat-capable aircraft carriers, which, although less relevant for a defensive war in Europe, at the same time represent a huge advantage in military and peacekeeping operations in remote regions of the globe.

In addition, the British Army is one of the most modern and combat-ready in Europe and plays an important role in all modern conflicts in which other European countries were involved.

From a purely economic point of view, the British defense industry is also one of the largest in the entire European Union, and it is surpassed only by France and Germany. Moreover, the UK is involved in a number of international projects (Eurofighter Typhoon, F-35, etc.). Any outrage caused by Brexit can affect both the strong position of the Royal Army and the well-developed military industry of Great Britain.

Experts are considering the possible consequences of Brexit for the armed forces and the defense industry of both the United Kingdom and the EU member states.

The main thesis of the report is that Brexit as such will have little effect on military security and the armed forces of both EU member states and Britain. Although the union is currently trying to develop more comprehensive cooperation between the 27 member countries in the defense sector, NATO, not the EU, is still the overwhelming majority of defense-related actions and decisions in Europe.

However, it is becoming clear that Brexit will have a major impact on the British military industry, regardless of which of the two scenarios (without a deal or with a free trade agreement) is put into practice.

The difference will only be in the degree of harm done, the Warsaw Institute report emphasizes. The European military industry will also feel the consequences of a divorce, but due to the vast network of alternatives already created, the harmful effects will be less felt. This applies to both optimistic and the most pessimistic results of the transition period.

Defense industry

The total cost of sales of weapons and military equipment carried out in the EU significantly exceeds € 100 billion, which allows Europe to be considered the second largest exporter of weapons after the United States.

In general, before Brexit, the EU defense industry employed more than half a million workers directly, and more than a million jobs were indirect. Despite these impressive numbers, the arms companies of the continent never combined into one joint venture, but always worked as separate units in completely different markets.

Decision makers in Brussels saw the need for closer integration in the arms market a few years ago.

The European Defense Agency, established in 2004, is responsible for both the multilateral cooperation of the armies of each member state and cooperation in the establishment of closer relations in the European defense sector, so that its negotiating positions are stronger and international. Thanks to sustainable financing, the military industry in the EU is now becoming more Europeanized.

An example of this is the Eurofighter Typhoon multirole fighter. From the very beginning, this aircraft was designed as a joint multidisciplinary project, which led to the creation of a new fighter for a number of European armies.

Due to this interoperability, funding came from various companies and even national governments, which then pledged to purchase a finished aircraft.

This process is likely to continue after Brexit, simply without the presence of British companies. The European Commission has made the integration of the European defense industry one of its main tasks.

Successful cooperation of the EU defense markets is “absolutely possible” without the UK, since most technologies and components can be obtained from alternative sources, the Warsaw Institute report emphasizes.

This is even though the total profit of the entire EU defense industry will be significantly reduced at the beginning of 2020. This will happen only because of one British company – BAE Systems. British Aerospace Engineering is the largest defense company in Europe, which sells arms for € 25 billion a year, and 85 thousand employees are engaged in its activities.

Although BAE Systems is not exclusively focused on defense (it also manufactures products for the civilian market), it is still considered to be a predominantly weapon-oriented company. The third largest company in the arms market of Europe is the French company Thales, which earns € 7 billion. Now that the UK is outside the union, this profit will flow outside the EU and will not contribute to closer integration of the union’s defense market.

At the same time, it is important to emphasize that a divorce does not have to completely complete all the international defense projects of many companies, although they will not be as simple as before.

The free trade agreement, which the UK and the EU wish to sign in the near future, will both simplify cooperation and reduce costs associated with customs duties and taxes.

This will only be possible if Brussels and London come to an agreement before December 31, 2020, negotiations on which, according to sources, are slow and painful, which calls into question the achievement of consensus before the end of the transition period.

If a free trade agreement is not possible, then bilateral industrial cooperation agreements are needed to reduce Brexit’s impact on the defense industry. These documents, signed by the UK with individual EU countries, will reduce or even completely abolish customs duties, taxes and border checks, which will simplify cooperation and the exchange of goods and technologies.

At the same time, it must be remembered that such documents are usually prepared for long months, if not years, and the need for coordination and ratification by all 27 EU member states can be a difficult task for the current and future administrations of Great Britain.

Fearing the exclusion of British finances and technological know-how from the planned pan-European defense programs – such as the tank and the fighter of the future – German officials have already expressed a desire to grant London a special status that will allow it to join any new or old joint programs. This would allow both Brussels and Westminster officials to avoid the lengthy process of bilateral free trade agreements.

The need for a special status in the defense relations of Great Britain and the EU also becomes apparent when looking at the second largest defense company in Europe – Airbus. Its defense division, Airbus Defense, produces arms worth € 13 billion a year, and 140,000 employees work in several countries of the union.

Two dark scenarios

Although Britain’s exit from the European Union has now become a reality, rather than some distant prospect, there are still a lot of unknowns in this equation that do not allow both London and the EU to solve the problems.

The current 11-month transition period, which is due to end on December 31, 2020, will allow Britain to prepare and adopt new legislation that will replace the EU laws in force before Brexit.

An in-depth analysis of the consequences of Brexit allowed the authors of the report to establish that the negative consequences felt by the EU as such and the army of 27 EU member states will be minimal or nothing.

The biggest drawback of a divorce will be the fact that there will be fewer resources for future EU peacekeeping / advisory operations around the world, according to a Warsaw Institute report.

There will also be fewer funds available for such operations coming from the CSDP, as there will be fewer contributions paid for these purposes. At the same time, despite the presence of an army with the highest level of funding in the entire EU, the UK allocated only about 3.5% of the total CSDP budget. In the future, this financial gap may be filled by minor adjustments to the contributions of the remaining 27 EU member states.

In some respects, the British exit from the EU can also lead to a healing result, since now France and Germany will be able to pursue a more comprehensive defense policy of the European Union.

Despite this, Brexit will have significantly more detrimental consequences for the European defense sector. If a comprehensive free trade agreement is not concluded by the end of the transition period, the EU-UK border will need to be restored by controlling all goods destined for and from the UK. Corresponding customs tariffs will also take place, which will impede mutual trade.

Although the defense markets of the 27 EU member states still remain largely independent and have not yet been closely integrated, many companies from all over Europe have some connections with British companies.

In this case, Brexit without a deal would mean higher prices and possible delays in European projects based on British parts or know-how.

The expected crisis can be prevented either by an existing free trade agreement, or, if this option is not possible, by a bilateral trade agreement between the UK and several, if not all EU states that abolish tariffs and border checks. If these measures are not taken, many projects of European companies may face delays or even cancellations.

After December 2020, the Royal Army will no longer be able to participate in peacekeeping missions organized by the EU. This would deprive Britain of valuable training opportunities for personnel and deprive it of its international ability to project power.

The UK will no longer be able to influence policies agreed as part of the CSDP. The UK is free to form its defense policy separately from the EU, setting its own independent course, which can lead to the creation of two speeds and two directions of Europe, which will be something dangerous for the integrity of the continent.

To avoid this, both sides agreed that Britain should be given special status in its relations with the EU and security policies in order to remain independent, but still close to the union.

At the same time, the UK can also continue to cooperate in defense without the EU by signing bilateral defense cooperation agreements or investing political power in alternatives, such as the E3 format (Great Britain, Germany, France) or a conceived, but still unborn concept “Global Britain.”

Although the bulk of British weapons are exported to the United States and the Middle East, the island’s industry continues to rely on European-made components. In addition, when the Middle East defense markets eventually become sufficiently modernized, more attention will need to be shifted to Europe, at which point British industry may face difficulties competing with its EU counterparts because of the higher costs associated with importing and production.

This grim scenario can, however, be largely prevented by the introduction of a free trade agreement that will regulate the flow of goods between the UK and the EU or, if this is not possible, a series of bilateral industrial cooperation agreements with all 27 EU countries .

In addition, as the global health crisis is still under development, any bilateral negotiations will certainly be suspended until the pandemic becomes more controlled.

This will put even greater pressure on the already shortened transition period and make the deal unlikely in the near future.

In this situation, the governments of Brussels and London will be faced with two options.

One of them would be to agree to extend the transition period after December 2020 – this option, although it is most reasonable, could be blocked by the British Prime Minister Boris Johnson himself, who made his main promise not to extend this period, even if Great Britain leaves the EU without deals.

The second option is to return to the negotiating table and work on a free trade agreement until a consensus is reached, regardless of the time period set by the transition period.

Since it took years to conclude similar trade agreements between the EU and other states such as Canada, moving to work on a deal without extending the transition period would mean returning border checks and customs tariffs between December 2020 and ratifying the free trade area, doing everything The “gloomy” scenarios of this work are real, at least for a while.

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