EU exit is a lifeline for British shipbuilding, May’s Deal puts it at risk

– The exit deal means the £1-billion MOD ship contract could be lost from the UK

– It closes opportunities for British shipyards and defence industry by removing exclusivity rights for British industry

– Former Armed Forces and procurement chiefs are slamming the deal for threatening the survival of British shipbuilding

It is incredible that ministers are determined to give away £1-billion contracts when they could DITCH May’s deal, wait four weeks and legally give the contracts to British shipyards.
Thousands of jobs are at stake. May’s Deal keeps the UK in EU defence directives for years to come, even beyond the transition.

If the UK leaves the EU defence directive, the Government could guarantee UK build for the Royal Fleet Auxiliary’s Fleet Solid Support vessels by using the default WTO defence exemption.
Many other non-EU nations can do this including the US, Canada, New Zealand, Japan and Korea.

The WTO’s defence procurement exemption, which permits domestic exclusivity for defence contracts, under the (Government Procurement Agreement). In November 2018, the WTO announced that the UK is cleared to join the GPA and this was further confirmed in February 2019.

Misconception

  • There is a common misconception that the EU defence directive permits the construction of ‘sovereign assets’ or ‘warships’ to be kept in the UK. This is incorrect. Therefore simply arming the FSS ships would not trigger the exemption. The only way to guarantee to ‘Build them in Britain’ (Labour Party’s campaign) is by leaving the EU directive.

The exemption

  • The only exemptions to the EU defence directive are a narrow security clause and government-to-government procurement arrangements, both under EU Article 346. The security clause can only be used if an international contract brings a provable threat to national security which can’t be eliminated by the EU’s contract security arrangements. The already narrow exemption has been tightened again since 2016.
  • The EU defence directive is specifically designed to stop domestic-only procurement and accelerate the European Defence Technological and Industrial Base (EDTIB).
  • Government statements mention cost-effectiveness but avoid the EU directive. It would be politically damaging to acknowledge that the process is actually driven by the directive.

WTO alternative

  • Countries participating in the WTO’s GPA don’t need to give a reason for keeping defence contracts within their home market. They can do so to guarantee a domestic economic or strategic gain. Those considerations are banned under the EU defence directive.