Britain warns EU against trying to control its defense industry

By Belinda Goldsmith LONDON (Reuters) - Britain warned the European Commission on Tuesday that it would oppose any moves to enforce new rules on the region's defense industry that impinged on the competitiveness of British companies. Defense Secretary Philip Hammond expressed skepticism over proposals from Brussels aimed at helping Europe's defense industry cope with the pressures of falling military budgets and increased competition from new markets. In July the Commission, the European Union's executive body which has traditionally left defense issues to its 28 member states, presented a paper looking at how Europe can strengthen its fragmented arms industry and bolster a common defense policy. The measures proposed include allowing greater competition in the internal market currently dominated by companies such as Britain's BAE Systems, Franco-German group EADS, France's Thales and Italy's Finmeccanica. Hammond said he would resist any proposals that are not in the interests of British companies such as allowing the export market to be controlled centrally on a pan-European basis. "There is a tendency for proposals to come out of Brussels which talk about increasing the competitiveness of European industry and what they really mean is imposing a dirigism on European industry," he told a defense conference. "We have to be very clear (on this) if Europe is to stand a chance in the global defense industry." He said Britain was not alone in resisting the push for the European Union to take a more active role in the sector with the debate triggered by July's paper set to culminate in a summit of European leaders in December. Britain's defense industry revenue was 22.1 billion pounds ($35 billion) in 2011 with a study showing China replaced Britain in the top five arms-exporting countries in 2008-2012 alongside the United States, Russia, Germany and France. Europe's defense industry had sales of 96 billion euros ($126.9 billion) in 2012. The Commission has promised a crackdown on discriminatory practices and distortions affecting the defense market in Europe, where governments often try to keep manufacturing and other skills at home by favoring domestic companies. It said it would monitor the openness of member states' defense markets and make sure that new rules on buying defense equipment were applied by EU governments. Many EU officials see the failed $45 billion merger between EADS and BAE Systems last year, which collapsed in the face of political differences, as a missed opportunity to consolidate the European defense industry. Hammond told industry leaders attending the three-day Defence and Security Equipment International (DSEi) exhibition in London's Docklands area that he had their interests at heart. "I will do my best to protect you from unnecessary bureaucracy and regulatory burden," he said. (Editing by Greg Mahlich)