The Changing european defenCe markeT

harri mikkola, Jukka anteroinen & Ville Lauttamäki fiia Briefing paper 123 • february 2013

U L KO P O L I I T T I N EN INS T I T U U T T I

U T R I K E S P O L I T I S K A INS T I T U T E T

THE F I N N I S H I N S T I T U T E OF I N T E R N AT I O N A L AFFA IR S

123

WiLL The neW european defenCe markeT LegisLaTion Be a game-Changer for finLand?

• TheEuropeandefenceindustrialbaseistransforming.ThechangesintheEuropeandefencemarketlegislation, the decrease in defencemateriel demand and changing defence requirements areredefiningtheindustryinawaythathasnotbeenseenindecades.

• The new European legislation in particular poses serious challenges for the Finnish defenceindustry, including the national market opening and the diminishing possibility for offsetarrangements.

• ItislikelythatthemajorEuropeanstatesaretryingtoprotecttheirowndefenceindustrialbase.ThefutureoftheFinnishdefenceindustrywillbedeterminedbywhethertheEuropeanmarketopensupinthefirstplace,inpartorinitsentirety.

• Thereisnogoingbacktothetimeprecedingthenewlegislation.ItiscrucialfortheFinnishdefenceindustry tofindandutilizenewmarketopportunities.Networkingwith theEuropeansystemintegratorsandsub-contractingchainswillbeofparamountimportance.

The Changing european defenCe markeT

fiia Briefing paper 123

february 2013

WiLL The neW european defenCe markeT LegisLaTion Be a game-Changer for finLand?

global security research programme

The finnish institute of international affairs

U L KO P O L I I T T I N EN INS T I T U U T T I

U T R I K E S P O L I T I S K A INS T I T U T E T

THE F I N N I S H I N S T I T U T E OF I N T E R N AT I O N A L AFFA IR S

harri mikkola

researcher

The finnish institute of international affairs

Ville Lauttamäki

researcher

university of Turku, finland futures research Center

Jukka anteroinen

researcher

national defence university

The finnish insTiTuTe of inTernaTionaL affairs 3

Introduction

TheEuropeanUnionistryingtocreatea“levelplay-ingfield”forthedefenceindustrybuttheFinnishindustryisindangerofbeingleftoutofthegame.TheEuropeandefencemarketisstronglyfragmentedinthememberstates’domesticmarketsandthevastmajorityofthemarketisnottrulyopenforEurope-widecompetition.

However, things are changing and the Europeandefenceindustrialbaseistransforming.Theforcesofchangeforthemarkettransformationstemfromthreeinterconnecteddimensions.Thefirstoftheseis thechange inmilitarycapabilityrequirements,namely a move from capabilities related to thethreatofaconventionallarge-scaleterritorialwartothoseneededinoftenasymmetricalexpedition-arymilitarycrisismanagementoperations.

The second force of change stems from financialpressures.Thefinancialcrisiswhichstartedin2008has accelerated and made the European armedforces’transformationmoreconcrete.Thedeterio-ratingeconomicsituationhashadadirectimpactondefencebudgets.Atthesametime,thetechnologyintensityofdefencematerielisincreasing,pushingupthepriceofend-products intheprocess.ThisdevelopmentmeansthateventhelargestEUmem-berstatesarestrugglingtosustainanadequateandeconomicallyviablenationaldefencemarketanddefenceindustrialbase.Thethirdforceofchangestems fromthechanges in theEuropeandefencetradelegislation.

ThispaperwillofferaFinnishsmall-stateperspec-tiveonthetransformationoftheEuropeandefenceindustryandEuropeandefencemarketbyfocusingonthethirdforceofchange–thechangesintheEuropeandefencetradelegislation–andraisesomeimportant related issues for the Finnish defenceindustryanddefenceadministrationtoconsider.

ThefragmentationoftheEuropeandefencemarkethasresultedintheunnecessaryduplicationofpro-ductionandwastingresourcesonoverheads,pooreconomiesofscaleandweakcompetitiveness.Ithasalsoresultedinmaintainingoutdated,ColdWar-erastockpiles ofmilitary capabilities. From the per-spectiveoftheEU’ssinglemarketandtradepolicyprinciples,thedefencemarkethasbeenproblematicduetoitsinherentopacityandunequaltreatment

ofcommercialoperators.Inordertoimprovethesituation,theEUisgettingincreasinglyinvolvedinthedefencesectortrade.TheCommission’squesttobringthedefencetradeundertheinternaltraderegulations,andtocreateanopeninternaldefenceequipment market, are efforts which will havepotentiallydramaticeffectsontheFinnishdefenceindustry.

TheCommission’sgeneralpolicyisclear.Astronger,deeper and broader internal market, free fromnationalprotectionism,isseenasvitalforeconomicgrowthalsoforthedefencesector.Stemmingfromthis,theEUiscallingforstrongerindustrialintegra-tion,reductionofduplication,specializationamongactors,Europeanindependenceintheproductionofkeytechnologies,market-basedconcentrationsof excellence, aswell as integrationbetween thedefence industry and the industries that supportit. If thesegoalswere tomaterialize, theywouldhaveasignificantimpactontheEuropeandefenceindustry’sstructure.

Changes in the European legislation

ThemainclausehinderingthedevelopmentofanopenEuropeandefenceequipmentmarketisArticle346TFEUintheTreatyofLisbon(formerArticle296TEC).ThisArticleallowsmemberstatestoexcludetheirsecurityanddefenceprocurementfromtherequirementsoftheEU’spublicprocurementdirec-tiveiftheseactsarenotsufficienttosafeguardthememberstates’“essentialsecurityinterests”.TheuseofArticle346TFEUinthedefenceprocurementhasfordecadesbeenaruleratherthananexception.ThisisduetothestrategicimportanceofthesectorandtheinadequacyoftheEUpublicprocurementdirectiveforthesector’sspecificneeds.TheCom-mission’smore powerful aspiration to bring thedefence tradeunder theUnion’s internalmarketlegislationhasalsoresultedineffortstolimittheuseofArticle346TFEUtoaminimum.

ThemostimportantEU-levelstepstowardsaEuro-peandefence equipmentmarket are the changesin the EU legislation brought about by two newdirectives.

The security and defence procurement directive2009/81/EC is intended to increase transparencyandcompetitioninthesecurityanddefencesector

The finnish insTiTuTe of inTernaTionaL affairs 4

trade,takingintoaccountthecomplexityandsensi-tivenatureofthesector’sproductsandcreatingfairandtransparentrulesforsuchtrade.Thedirectivesetsathresholdvaluefordefenceandsecuritygoods,andservicecontracts.Thecontractingopportuni-tiesexceedingthisthresholdshouldbesubjecttoopenEurope-widecompetition.Thedirectivealsocovers security equipment procurement whichhasdefenceprocurement-likefeatures,whichareequally sensitive. The directive regulates publicprocurementcarriedoutbypublicauthorities,andconsequentlydoesn’tapplytosubcontracting,forinstance.Comparedtothepast,thedirectivecon-ferstherightforcommercialoperatorstoappealtoanationalmarketcourt(andtheCourtofJusticeoftheEuropeanUnion).Thedirectivealsoprovidesa setofpossibilities for excludingpublicdefenceprocurement from public tendering, includinggovernment-to-government procurement, pro-curementbasedonaninternationaltreatyandR&Dcooperationagreements.

Despite directive 2009/81/EC, the use of Article346TFEUisstilllegitimateinmanycases.Suchuseshouldbelimited,however,andneedstobejusti-fiedonacase-by-casebasis.BoththeCommissionandtheEuropeanUnionCourtofJusticehavetakenastrongpositionaccordingtowhichtheuseoftheArticleisalwaysaseriouspoliticalandlegalissue,anditsuseshouldberestrictedtoexceptionalandclearlydefinedcasesofsecuringessentialsecurityinterests.ItislikelythatthenewEuropeanlegisla-tionwilllimittheuseoftheArticleinamorerestric-tivewaycomparedtothepastduetothepossibilityofusinglegalprotectionmeasures.Inpractice,thismeansthatthescopeofArticle346TFEUwillbesetbytheEU’sCourtofJusticedecisions.

Theothermajorlegalchangeaffectingthedefenceindustry’soperatingconditionsisthenewdefenceexportdirective2009/43/EC.TheexportdirectiveaimstofacilitatetheUnion’sinternaldefenceequip-menttransfersbysimplifyingandharmonizingtherulesandproceduresrelatedtointra-Communitytransfersofdefence-relatedproducts.Thedefenceexport sector has traditionally been under theindependent foreign and security policy discre-tionofthememberstates,andisgoingtoremainso in the future.The export directive, however,marksasignificantchangefromthepastbecausethe Commission and the internal market policywillforthefirsttimeoperateinthedefenceexport

sector aswell.The directivemakes a conceptualdistinction between the “transfer” and “export”ofdefenceequipment.“Transferlicence”referstoa licence underwhich the suppliers can transferdefence-relatedproductstoarecipientinanothermember state, while “export licence” denotes alicencetosupplydefence-relatedproductstoanythirdcountry.Withthisconceptualdistinction,theCommissionistryingtobetterintegratethedefenceequipmentmarketintotheEU’s(EEA’s1)commoninternalmarket,whilethetradetothirdcountrieswill remainunder the formerexportcontrol andundertheforeignandsecuritypolicydiscretionofthememberstates.

European legislation from the Finnish

defence industry’s point of view

PerhapsthebiggestchallengeposedtotheFinnishdefence industryby theEuropean legislation liesintheEuropeanCommission’sstanceontheoffsetarrangements.InFinland,theoffsetrequirementswere previously linked to defence procurementwhena certainfinancial thresholdwas exceeded.Theywereoftenalsodirectedatthecivilianprod-uctstrade(e.g.thepapermachinerytrade).Today,civilianoffsetsarenolongerpossible.Moreover,off-setarrangementsarenolongerpossibleinprocure-mentscarriedoutunderthenewdefenceprocure-mentdirective.Thepossibilityforthedirectmilitaryoffsetswillhowevercontinue,albeitwithnotablelimitations.Theyarenot“offsets”assuch–thatisafinancialcompensation–butrathertechnologytransfersrealizedundertheprocurementdirective’ssecurityofsupplyrequirements,orunderArticle346TFEU.

It is essential to note that offsets are importantforcountriessuchasFinland,whichdon’thaveacomprehensivenationaldefenceindustrybaseandwhichacquirealargepercentageoftheirdefencematerielfromabroad.Directmilitaryoffsetssupportthesustainmentofdefencesystemsthroughouttheirwholelifecycleandcreaterepairandmaintenancecapabilitiesforthenationalindustry.Inadditiontothis,offsetsbalancethenationaleconomy,supportand develop national industrial competitiveness

1 Thenewdirectivesarealsoinforcewithinthelarger

EuropeanEconomicArea.

The finnish insTiTuTe of inTernaTionaL affairs 5

andpromoteexport.TheimportanceoftheoffsetarrangementshasbeenvitalforsomeFinnishcom-panies,but lessso forothers. Itcanbeestimatedthat,onaverage,25percentoftheFinnishdefencecompanies’ turnover comes from offset arrange-ments,butforsomecompaniestheratioisupto100percent.Inlightofthesefigures,thediminishingpossibilityofoffsetarrangementswillhitFinnishcompanieshard.

Article346TFEUprovidesalotofroomformanoeu-vreintechnologytransfers.Thisisduetothecon-ceptof“essentialsecurityinterest”.Traditionally,legislative concepts are defined as precisely anduniversallyaspossible.However,auniversaldefi-nitionoftheconceptof“essentialnationalsecurityinterest”doesnotexist,thescopeofthisconceptcannotbeinanywayexhaustivelydefined,anditisdifferentineverycountry.Inotherwords,aslongasthisconceptisinArticle346TFEU,itwillneverbepossibletoreachauniversalinterpretationoftheArticle,althoughthecaselawoftheEuropeanCourtofJusticewillmakethescopeoftheArticleincreas-inglyprecise.

In addition to the transactions carriedoutunderArticle346TFEU, theprocurementdirectivealsopresentsopportunitiesforsettingspecificrequire-mentsforsecuringthenationalsecurityofsupply.Althoughitisbasicallyuptotheproducertodecidethemannerinwhichitfulfilstheserequirement,andalthoughitisnotpossibletodemand,forinstance,thatsparepartsandmaintenancecapabilitymustbesoughtfromaFinnishcompany,itisneverthe-less perfectly possible to require, say, a specificresponsetimeinsomuchthatthemaintenanceandrepaircapabilityandsparepartsmustbeobtainedwithin24hours.ThismightrequirethattherepaircapabilitymustbefoundinFinland.Inanycase,thesecurityofsupplyconsiderationneedstobesetearlyonatthetenderingstage.Inadditiontothesecurityof supply issues, thesecurityof informationcon-siderationsisanevenmorelegitimatereasontouseArticle346TFEU.Whenitcomestothecorenationaldefencecapabilities,theuseoftheArticleisnaturalduetothelargeamountofclassifieddatainvolved.

Thechangingandmorecomplexprocurementpro-ceduresrequirechangingthesomewhatcementedcultureandpracticesofthecontractingauthorities.Inparticular, theapplicationofArticle346TFEUdemandstrainingandsufficientlydetailedandclear

guidelines.Nationalprocurementactivitiesmustbestreamlined,uniformandalsoinaccordancewiththelegalproceduressetintheprocurementdirec-tive.Thiswillhelptoavoidunnecessarylegalpro-cesses,andtoensurethatthepurchasedmaterielisconsistentwiththecapabilityanddefencesystemdevelopment, and that security of supply issuescanbetakenintoconsiderationinanappropriatemanner.Itisclearthatthechallengesforcontract-ingauthoritiesare increasing.Althoughavoidingerrors in tendering isextremely important, largefinancialinterestsguaranteethatlegaltransactionswilllikelyincreaseinthefuture.Itmayverywellbe that thegreatest control factor in theapplica-tionoftheprocurementdirectivewon’tbetheEUCommissionbutthecompaniesthathavelostinthetenderingprocess.

The procurement directive offers a possibility tobypassthedirective’srequirementsinthecaseofmultinationalR&Dprojects,whichinFinlandcanbecarriedoutundertheNordicDefenceCoopera-tion(NORDEFCO)framework,forexample.WhiletheNordiccountriesaregeographicallyandcultur-allyclosetoeachother,differencesindefenceandsecuritypolicyprioritiesanddifficultiesindefiningthecommoncapabilityrequirementsanddivisionoflabour,aswellasindustrialpolicyconsiderations,makecooperationrelativelydifficult.

Opportunities for R&D collaboration withintheNORDEFCO framework are also limited.Themain problem is that the possibilities to excludeprocurement from the scopeof theprocurementdirectivemostlyexistforthecountriesthatfinancethe development phase of a piece of equipment.The Finnish national defence research funding ismodest, however, and Finnish defence procure-mentislargelybasedonpurchasingoff-the-shelfsystemsorsubsystems.AlthoughmultilateralR&DcooperationmightprovidesomeopportunitiesforsupportingtheFinnishindustry,theseopportuni-tiesarerelativelylimited,atleastwhencomparedtothelargerstates’opportunitiestosupporttheirnationalindustriesthroughtheprocurementdirec-tive’sR&Dexclusionclause.

AselsewhereinEurope,thenewEuropeandefenceexportlegislationalsohasimpactsontheFinnishdefencesector.Thedefenceindustryalwaysfacesadegreeofuncertaintyoverexportlicensing.It’spossible that prepared defence trades may be

The finnish insTiTuTe of inTernaTionaL affairs 6

jeopardizedbytherapidlychangingconditionsinthedestinationcountryforaprotractedperiodoftime.Thegrantingofexportpermitsisconsideredonacase-by-casebasis.Inthe“problematic”cases,thegeneralguidelineshouldbeabstinence,namelytherefusaltoissueanexportlicencetocountrieswhichdonotfulfiltheEU’sdefenceexportcriteria.

However,inpractice,case-by-caseconsiderationmay end upwith a strong emphasis on nationalindustrialpolicyinterests.Case-by-caseconsidera-tionsusuallyhaveawidemarginforinterpretation.Thiscanbeseen,forexample,intheimplementa-tionoftheEUCouncil’scommonpositiononarmsexport (2008/944/CFSP). The common positiondoesn’tinanywayensurethatthecommoncriteriaarealwaysappliedinthesamewayinallmemberstates.Inotherwords,althoughtheEUhascommoncriteriaforarmsexports,theUniondoesn’thaveacommonarmsexportpolicy.Rather,defenceexportdecisionswillbetaken,andtheassociatedsecuritypolicydiscretionwillbeexercisedatthenationallevel.ItisperfectlypossiblethatevenwithintheEUsomeothercountrymaygrantanexportlicenceforaproductwhichwasrefusedbythedomesticopera-torundertheFinnishexportconsiderations.

Inadditiontothearmsexport,theremightbeprob-lemswiththedefencematerielinternal“transfers”,whichmayindeedinhibitthecreationofa“levelplaying field” for the commercial operators.Thedangeristhatdifferentcountriesmayhavedifferentproductsunderdifferentlicencetypes,ascountriesconsider them from their industrial and securityinterestspointofview, inwhichcasethe licencecontentsbetweencountriesdonotalwaysmatch.

European changes and the future

of the Finnish defence industry

TheFinnishdefenceindustry’sfutureissomewhatblurry.ItisneverthelessclearthatthechallengesaregreatandthefuturebusinessenvironmentfortheFinnishdefencecompaniesischangingdrasti-cally.ThechangesintheEuropeandefencemarketlegislation,thedecreaseindefencematerieldemandandchangingdefencerequirementsareredefiningtheindustryinawaythathasnotbeenseenindec-ades.Aslongasnewmajorsecuritythreatsdon’temerge,themostcertainforceofchangewillbethediminishingdefencebudgets.

Itcanbeestimatedthatthedeclineinthefinancialresourceswilllead,atleastintheshortterm,toasituationwhere theEuropeanarmed forces’pro-curement iscarriedoutfirstandforemostbythenational industry by utilizing the procurementdirectives’exclusionclauses.ItishighlylikelythatthemajorEuropeanstateswithastrongnationaldefence industry are trying toprotect their owndefence industrialbase in the faceofamyriadofchallenges. Also, there’s a high probability thatFinland (andother smallEU countries)willhaveto face thedisadvantages resulting fromthenewregulationswhilethebenefitsmightbefewduetotheobjective(andthepoliticalability)ofthemajorEUcountriestoprotecttheirownnationaldefenceindustries.

It is possible to be quite pessimistic about theimpactofthenewlegislationontheFinnishdefenceindustry.AlthoughallEUmemberstateswillhavethe same legislative framework through thenewdirectives,onecouldraisetheissuethatEuropeancountrieswill interpret thedirective indifferentwaysandthatthelargercountrieswillbeallowedto take theexclusionmeasuresmore lightly,andinterpretthedirectivemorelooselythanthesmallcountries. To narrow it down, this wouldmeanthattheFinnishdefenceindustryanditscustomerswouldfaceprohibitivelyhighentrybarriersintheforeignmarket.

Also,itshouldbenotedthatthedifferentpracticesand delays in themember states in bringing thedirectiveintoforcemaychallengetheFinnishindus-try.Bycomplyingwiththeimplementeddirective,theFinnishdefencemarketwillimmediatelyopenuptoforeignoperators.Atthesametime,theoffsetarrangementswillbecomemoredifficult.Anothercountry’sstallingoverthedirective’simplementa-tioncankeepitsownmarketclosedforasignificantperiod of time. In this case, the Finnish defenceindustry,actinginaccordancewiththedirective’srequirements,would face increased competitionanddecreasedoffsetarrangements,whiletheindus-try’s competence to compete in other Europeancountries’marketswouldremainpoor.Thethreatsareimminent,buttheopportunitiesmightbeoutofreach,atleastintheshortterm.

Ontheotherhand,ifFinlandisabletocreatealistof the critical capabilities maintained domesti-cally,andifotherEuropeancountriesinterpretthe

The finnish insTiTuTe of inTernaTionaL affairs 7

directivewiththesameprecisionasFinland,Finn-ishindustrymaybenefitfromthenewmarketleg-islation.Furthermore,fromthepointofviewofthedefenceforces’procurementactivitiesandFinnishdefencesystemdevelopment,thechangesarenotnecessarilyallbad.IfactualizedinaccordancewiththeCommission’sintentions,creatingmoreopencompetition and a more level playing field, thenewEuropeanlegislationwillallowformorecost-effectiveprocurementsinprinciple.

Inanycase,thenewinternationalmarketenviron-mentwillmostlikelyleadtoincreasedinternationalcompetitionfortheFinnishdefenceforces’procure-ments,whichmayposeaseverethreattothecom-panieswhowere protected against internationalcompetitionuntilnow.Theeffectsofthedirectivedependtoalargeextentonthesizeofthecompany,itsstatusintheproductionchain,anditsabilitytoproduceinternationallycompetitiveproducts.Thedefenceprocurementdirectiveonlyregulatespub-licprocurement,and itwon’tdramaticallyaffectthesubcontractingbetweencompanies.Thus,thechangeforFinnishnichecompanies,alreadyinsidethe international subcontracting chains,will notnecessarilybesevere–otherthanperhapsindirectlyifthelargecompanies’marketdecreases.

Themarketchangesalso include theopportunitytochallengethetenderingprocessesbyusinglegalprotectionmeasures.Companysizedeterminestheresources available for the legal processes. Smallandmedium-sizedenterprisesoftendonothavesufficient resources to address the complex andoftenlong-runningjudicialprocesses,whichservestoincreasetherelativecompetitiveadvantageforlarger companies. Even though theEU Commis-sion officials see legislativemeasures as the bestwaytoguaranteetruemarketopening,theFinnishindustrymaybe relatively reluctant touse thosemeasures.This ismainlydue toacompany’s fearoflosingitsreputationintheeyesofamajorclient.ThiswouldposeaproblemfortheFinnishindustryiforwhenotherplayerswereabletomakeuseoflegalmeasures.

Inpractice,thefutureoftheFinnishdefenceindus-trywillbedeterminedbywhether theEuropeanmarketwillopenupinthefirstplace,inpartorinitsentirety.Ifthe“levelplayingfield”endorsedbytheCommissionisnotimplementedtothefull,andifthemajorEuropeanstatescontinuetoprotecttheir

owndefenceindustries,Finlandmustdoeverythingatitslegaldisposaltoprotectitsownindustry.Thesituationinwhichforeigncompaniescouldfreelyenter the Finnish market, but in which Finn-ishcompaniescouldn’tenter the foreignmarket,wouldhavedramaticconsequencesfortheFinnishdefenceindustry’schancesofsurvival,andalsoforthedevelopmentoftheFinnishdefencecapability,builtinpartbytheFinnishdefenceindustry.

TheEuropeanindustryisconsolidatingandthecom-petitivenessofnon-Europeancountriesisgrowing.Itislikelythat,regardlessofthenewdirective,themarket-basedconsolidationand“pruning”oftheEuropean defence industry that has been takingplace during the last couple of decadeswill alsocontinueinthefuture.Ifthepruningofovercapac-itywere to takeplace exclusively on thebasis ofthequalityofproductsandcost-effectiveness,onecouldestimatethattheFinnishdefenceindustry’schancesofsuccesswouldbereasonablygood.How-ever,duetothemarketpowerofmajorindustrialplayersandstatesinthesector,themarketsmaybereformedinfavourofthelargeEuropeanstatesinmanycurrentlyinefficientbusinesssectors.

Thedomesticindustrystillhasnotableadvantagesovertheforeigncompanies.Domesticcompaniesare familiar with the domestic military system,regimeandculture.Thebestprospectsforsuccessfor the Finnish defence companies arewith fewlarger national operators, who will most likelysucceedalsointhefutureasapartnerofthearmedforcesandwithcertaininternationallycompetitiveproducts.ThesmallerFinnishcompaniescansuc-ceedeitherbyproducingstate-of-the-arttechnol-ogy or by producing competitivemodular partsthatareattachabletolargersystems.However,itisrealistictopredictthatthefutureofmanyFinnishsmallandmedium-sizeddefenceenterprisesliesinbeingboughtby largercompanies (fromabroad),tryingtofindnewmarkets,orquittingthebusinessaltogether.

Thedomesticclient,namelythedefenceadminis-tration,hastraditionallybeenthebedrockoftheFinnishdefenceindustry.Inthefuture,theFinnishdefenceindustrywillnotbeinapositiontocopebyrelyingsolelyonthedomesticmarket.Theincreas-ing global consolidation of the defence industrybolsterstheimportanceoflargeindustrialgroupsininternationalcompetition.Despitetheeffortsto

The finnish insTiTuTe of inTernaTionaL affairs 8

createanetworkednationaldefenceindustrialbase,theFinnishdefenceindustryisstillfragmentedandrelativelysmall.

Inthesecircumstances,itcouldbetemptingforthedomesticactorstotrytocircumventthenewEuro-peanlegislationtoacertainextent,ortoslowdownitsimplementation.However,itishighlyunlikelythatwewillwitnessareturntothetimeprecedingthenewlegislation.ThatiswhyitiscrucialfortheFinnishdefenceindustrytoseekoutandutilizethepotentialnewmarket opportunities.TheFinnishdefencesectorhascertain“spearheads”andnicheareasofexpertise.ThemostappropriatethingfortheFinnishcompaniestodowouldbetodirecttheirenergyindevelopingcapabilitiestowardsensuringsuccessinthechangingcircumstancesaswell.ItisimportantfordomesticcompaniestochangetheirfocusandintegratewiththeEuropeansysteminte-gratorsandsub-contractingchains.Invokingtheoldpracticeswithoutconvincingargumentsisnotpossible,oratleastitwon’tmaintainthesituationthatexistedprior to thenew legislation.Finlandprobablywon’thaveamajorimpactontheforma-tionoftheEuropean,letaloneglobalmarket,soonemustbepreparedtoplaybytheprevailingrules,orriskbeingleftoutofthegame.

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