BRUSSELS, Nov 21: EU states promised on Monday to give each other’s firms greater access to military contracts in their closely-guarded national defence markets, in a potentially major step towards liberalisation of the sector. European states have for years favoured their own “national champions” for military procurement, often using an EU Treaty article that allows them to invoke security concerns to exempt contracts from usual EU rules on competitive tenders.

There are suspicions that some invoke Article 296 to cover even non-sensitive provisions such as army boots or catering. EU defence ministers meeting in Brussels agreed a non-binding “code of conduct” promising for the first time to stop such abuses.

“The need for a breakthrough in this area has been evident for years, if not decades,” Nick Witney, head of the European Defence Agency set up to coordinate the bloc’s defence spending, told a news briefing. “This is a critical first step.”

Total contracts for military purchases are estimated at around 30 billion euros ($35 billion) a year throughout the EU. About half of those are thought to enjoy Article 296 protection.

The agreement is to come into effect from July and will not increase access to EU markets for foreign firms. It is hoped that tougher competition for contracts will mean governments getting better value for their limited defence budgets and defence firms gaining access to more potential customers.

Total defence spending in the EU — including the costs associated with salaries for standing armies — amounts to 160-180 billion euros a year, less than half the US spending.

French Defence Minister Michele Alliot-Marie noted European defence firms faced increasingly tough competition from Asian, Russian and Israeli suppliers. She said a non-binding code was better suited to the defence sector than an attempt to regulate contracts with EU-wide legislation. Europe wants to become a global player in defence and has taken on a growing number of missions, from supporting security in Bosnia to peace monitoring in Aceh, Indonesia. But its ambitions are held in check by shortfalls in key equipment.

Defence analysts say the agreement is a potentially major step but note the code is voluntary and will rely on countries policing each other’s use of Article 296.

“It’s the first time governments have signed up to a single code like this. We’ll have to see how it is implemented,” said Daniel Keohane of the London-based Centre for European Reform.

Asked if he thought countries would apply the code fairly, British Defence Secretary John Reid said: “I do hope everyone will see it is in their self-interest to do that.” Denmark does not take part in common EU defence policies and will not participate in the code. Officials said Spain also expressed doubts and was not yet certain it would take part.—Reuters