- 18/11/2020 Ref. Ares(2020)6881565        EU security industrial strategy Towards an EU security industrial strategy Rationale: The Security Union must include an industrial dimension Security is one of the key policy priorities of the EU, and funding for security is proposed to increase considerably under the next MFF. However, none of the relevant policies and funding instruments takes into account the industrial dimension of security. Concepts like industrial competitiveness, strategic autonomy, capabilities or critical technologies are almost completely absent from the debate on the Security Union and never considered as objectives of security-related funding programmes. This is remarkable as security has inevitably an important technology dimension. In our complex and connected societies, security threats can only be tackled with security solutions based on or at least supported by technology. And without a competitive industry, it is not possible to develop these technologies and translate them into applications. In particular when critical infrastructures and state institutions need to be protected against threats from state- or state-supported actors, it is crucial to use technologies, services and equipment developed from trustworthy sources. An appropriate level of autonomy from third-country suppliers should therefore be in itself a major European security interest. This implies the existence of a vibrant industrial and technological base able to support the Security Union. However, the specific features of the security market in Europe make it often difficult for companies to build viable business-cases for the technologies concerned. On the commercial side, there is only limited demand for cost-intensive state-of-the-art security products. Since private market operators constantly seek cost reductions, they normally limit investments in security to what is strictly necessary and give preference to the cheapest off-the-shelf product (often from third country suppliers). On the public demand side of the security market, there is a broad variety of buyers and end-users, mostly with limited procurement budgets, small orders, and legally bound to purchase at the lowest price. What is more, the vast majority of public security customers have no capability development planning. They buy off-the-shelf to satisfy their immediate needs, without any long-term thinking about how threats and technologies may evolve in the future, let alone investments to prepare for that. As a consequence, there is only a small market for critical technologies and applications. Complex security solutions are often tailor-made for a single or very few customers, which limits production volumes and economies of scale to a minimum. At best, the technologies used for such systems can be used for other, less sensitive applications for a broader commercial customer market. Thus, current market conditions do not allow to sustain the technological and industrial base that can develop the security capabilities Europe needs to protect its external borders, territory and citizens. This undermines the credibility of the Security Union and calls for EU action. Policy recommendation: Mobilise EU policies to maintain critical industrial capabilities We therefore call upon the new European Commission to launch a security industrial strategy. This strategy could be presented in a Communication during the first 100 days of the mandate and outline the political, institutional and regulatory measures to be taken in the coming 5 years. ASD | Rue Montoyer 10 I 1000 Brussels, Belgium I T: +32 2 775 81 10 I info@asd-europe.org I www.asd-europe.org

EU security industrial strategy Such a strategy should be politically much more ambitious than the 2012 Communication on “Security Industrial Policy” and aim at making a real difference for the EU and its industry. It should respond to the security challenges that derive from the development of new technologies and the emergence of state- sponsored competitors. To achieve that, it should be based on the following principles: 1. The existence of an innovative security industry is crucial for an appropriate level of autonomy and therefore of strategic importance for the Union; 2. Security is a sovereignty issue, which cannot be left to market forces alone. Political will and action are needed to maintain the capacity to develop complex hi-tech security solutions; 3. Political action should focus on the main weaknesses of the security sector in Europe: fragmentation of the demand side, lack of long-term planning for technologies and capabilities and flawed interoperability. The strategy should follow a holistic approach and mobilise all security-related EU policies towards the common objective of strengthening Europe’s industrial and technological capabilities in key security areas. More specifically, it should include the following objectives: o   screening of emerging technologies for potential security implications; o   definition of critical “must-have” technologies for which Europe should, for security reasons, not depend on third-country suppliers; o   use of EU agencies as drivers for capability planning and harmonization of national requirements; o   use of security-related EU instruments (ISF, IBMF, Digital Europe, Horizon Europe) for targeted investment in critical security technologies and applications; o   use of other EU instruments (Structural Funds, InvestEU, etc.) for security relevant investments (infrastructure), ideally through the creation of a Securing Europe Facility (analog to the CEF); o   use of European procurements and coordination of national procurements to support the relevant industrial base; o   use capability-oriented funding instruments (such as ISF and IBMF) to foster market uptake of EU security research beyond Horizon Europe; o   identification of possible new legislative initiatives, such as revision of the CIP directive or a possible instrument on urban security; o    coordination of relevant EU programmes (defence, security, space, cyber). We recognise the challenge to develop and implement such a comprehensive strategy covering policies and instruments of various DGs and concerning a broad variety of stakeholders. This can only be achieved in a top-down approach and with some institutional re-engineering, as the existing fragmentation of responsibilities inside the Commission and between agencies is in itself a major source of inefficiency. Moreover, each element of the proposed strategy needs to be designed in detail and linked to concrete measures and deliverables. Both conception and implementation of the strategy should be supervised from the top-level of the Commission, in close consultation with relevant stakeholders. ASD stands ready to support the European Commission in this endeavour. **** Signed by                                 , on 15 July 2019 Page | 2