German and European rearmament is largely framed as a means of achieving greater European sovereignty, particularly in light of waning American commitments to European defense and growing Russian threats against NATO’s European members. US trade restrictions and policies that openly aim to make European states dependent on American technology and the recent closure of a major shipping chokepoint in the Strait of Hormuz have only reinforced the perceived need for greater European self-reliance.
In its role as “enabler” of European defense planning, the European Union has become the main vehicle for advancing strategic autonomy in defense among its member states, 23 of which are also NATO members. Several initiatives – including SAFE, EDIP, and Rearm2030 – prioritize procurement within the EU. At the same time, an increasingnumber of countries pursue rearmament policies designed to boost their domestic industrial sectors by incentivizing local production and investment.
Europe needs to reduce foreign dependencies. However, European autonomy would not be served by the exclusion of defense companies from trusted allies outside the European Union. Provided they meet necessary conditions, these companies can help Europe build industrial capacity and enhance interoperability worldwide. To this end, the EU’s NATO members and foreign defense companies must both work to Europeanize non-EU defense companies, particularly by localizing production and support throughout the product cycle, and by ensuring European control of intellectual property and technology where appropriate.
Foreign Companies Can Help Europe Improve Its Defense Resilience
Beyond providing access to high-end technologies and maintaining close ties with key defense partners such as the United States, opening the EU defense market to foreign entrants offers three benefits. First, the mutual exchange of imports and exports allows EU states to build up their defense industries. While imports might shift some procurement spending abroad, these costs are offset by improved access to export markets. This allows European defense companies to expand and remain competitive without relying solely on domestic or intra-European contracts.
Second, a diversified network of partners and manufacturing facilities increases the flexibility of European defense production, enabling surge capacity when weapons are needed at short notice and reducing the risks of disruptions to Europe-based production. Admittedly, this may also come with the risk of building dependencies on foreign-based production at the expense of domestic sources, particularly if foreign procurement is concentrated in just a few suppliers.
Finally, European defense capabilities are built on interoperability within open systems, allowing for flexibility and joint logistics. In the Atlantic and Pacific regions in particular, cooperation with allies enables greater standardization, allowing joint operations with common equipment. Shared procurement with non-EU allies extends the range of shared logistics chains, creating an ecosystem of interchangeable capabilities, provided that foreign partners are willing to uphold the principle of interoperability.
Europeanizing Foreign Defense Industry
The procurement of defense material produced outside Europe can offer the advantage of increasing industrial output beyond European production capacity. In some cases, this can decrease delivery times: South Korean industry, for instance, regularly reallocates material initially intended for its own army to speed up deliveries to export customers. The co-development of key capabilities also benefits all collaboration partners. SAAB’s GlobalEye surveillance aircraft, for instance, brings together European surveillance technology and a Canadian platform.
Nevertheless, Europe’s priority when dealing with foreign defense companies should be to encourage investment in production facilities in Europe. This may encourage joint partnerships with German and European industry. Ukrainian companies have shown how a mutually beneficial, cross-border defense industry ecosystem can expand over time: The success of the EU-Ukrainian joint venture Quantum Frontline Robotics, for example, encouraged the later joint venture Quantum Tencore as well as partnerships between other Ukrainian and European companies, such as Diehl and MBDA. This network of industrial partnerships is giving EU countries access to leading Ukrainian technologies and solidifying a long-term defense relationship.
Similar industrial partnerships can be replicated outside of Ukraine. Incentivizing foreign companies to invest in Europe can progressively Europeanize them, embedding them in the region’s defense-industrial ecosystem to reduce what would otherwise remain foreign dependencies. Non-EU companies should demonstrate credible long-term commitments to Europe through substantial sunk investments in capital and resources such as manufacturing facilities and supply chains. As defense procurement operates in cycles that often span decades, new market entrants need to demonstrate their sustained commitment to a European presence.
Moreover, defense procurement projects often lead to a long “tail” of investments in further development, training, maintenance, and upgrades, activities that are often more important than manufacturing in creating industrial relationships. As a result, long-term arrangements for the upkeep of foreign defense systems can in some cases prove more valuable to European industry than securing manufacturing contracts alone, even where production takes place abroad.
Foreign Suppliers Must Be More Flexible About Intellectual Property
The greatest uncertainty in opening up European defense to foreign investment lies in securing control over the use and development of these systems. Several key systems – including European platforms such as the JAS 39 Gripen fighter jet – are subject to the US’s International Traffic in Arms Regulations (ITAR), which may restrict their sale and use. As a result, new European projects such as the Eurodrone prioritize ITAR-free development to avoid foreign restrictions on their export, deployment, and further development.
This is an area in which foreign companies are particularly exposed. Germany’s procurement of American F-35s, for example, has raised sovereignty concerns, as the fighter jet’s MADL data link is incompatible with European systems. Similarly, Lockheed Martin has refused to allow the use of its M31 rockets with other launchers in order to boost the market position of its HIMARS system. Both examples demonstrate the risks of creating dependencies on foreign-controlled weapons systems. European defense companies have taken note of these risks: in collaborative combat aircraft, for example, Germany’s Helsing is pitching its CA-1 “Europa” system as a sovereign alternative to the Rheinmetall-Anduril, Rheinmetall-Boeing (Australia) and Airbus-Kratos joint ventures, all of which depend on non-EU technologies.
Technological control is one area in which exporting companies and their governments are reluctant to compromise – but some are more flexible than others. To address this, European purchasers can seek to structure purchases in ways that locate intellectual property in more favorable jurisdictions. The German Navy, for instance, purchased a battle management system from the Canadian subsidiary of Lockheed Martin, avoiding further American involvement (and reducing the reliance on a single supplier country). Similarly, for Lockheed Martin, undertaking this product development in its Canadian branch reduced the political risk of concentrating their activities in one country. Boeing has been keen to highlight the Australian – rather than American – roots of its MQ-28 drone, while Rheinmetall has emphasized that its latest partnership with an American satellite imagery provider involves the transfer of control and intellectual property to Europe. While foreign suppliers may not always be able to offer full control guarantees to EU states, they must be expected to demonstrate that EU customers will have control over the use and integration of equipment into their armed forces.
Anchoring Defense Partnerships in Europe
Non-EU defense companies will always face initial challenges in entering EU defense markets. To overcome them, they must offer prospective government customers sufficient guarantees regarding supply security and technological control. By localizing key stages of the product life cycle in Europe – including production, maintenance and further development – and, where necessary, by transferring technological control to close allies, they can go a long way toward providing the kind of assurances European governments need.
EU NATO members should, in turn, encourage such entrants. Enhancing Europe’s access to export markets through reciprocal exchange will strengthen the EU defense industry by bringing in key capabilities and technological knowledge, while also expanding production capacity. Furthermore, by operating across many markets simultaneously, foreign companies may offer a higher degree of standardization than nationally-based European companies. EU NATO members should seize these opportunities and offer incentives to Europeanize such suppliers through access to financing, joint ventures and participation in the European defense ecosystem.
The EU and its defense industry stand to benefit from a denser network of collaborations, both within Europe and beyond. Foreign companies seeking to enter the EU market can contribute to diversifying and broadening this ecosystem – provided they can address the EU’s autonomy concerns. Both EU states and foreign companies should ensure a strong European presence throughout all stages of a product’s lifecycle – in production, training, maintenance, and operational development. European defense autonomy requires strategic leadership; autarky is not an option.
