European Primes Say Component Monopolies Would Enhance Global Competitiveness

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BRUSSELS — European space-hardware manufacturers said they relish the idea of gaining access to the U.S. government market through a U.S.-European free trade agreement but asked for rules to protect against their home markets being flooded with inexpensive U.S. goods.

They also urged European regulators to accept the creation of monopoly suppliers among component manufacturers as a necessary evil in pursuit of greater European satellite exports. The highly competitive worldwide market among prime satellite contractors, they said, and continued competition among primes in Europe would dampen the negative effects of monopoly suppliers.

Addressing a Jan. 28-29 space policy conference at the European Commission here, industry officials said the market in Europe is too small to permit lots of small companies, spurred by unsustainable investments by their national governments, to succeed commercially.

“Access to the U.S. market would be good,” said Marco R. Fuchs, chief executive of OHB AG of Bremen, Germany, and currently president of Europe’s Eurospace space industry association. He was referring to the Trans-Atlantic Trade and Investment Partnership (TTIP) agreement now being negotiated.

“But it cannot be only a regulatory agreement,” Fuchs said. “The U.S. industry has been strongly backed by its huge domestic market, both civil and military. We should make sure that the establishment of a level playing field is a prerequisite to any mutual opening of markets.”

Eurospace Secretary-General Jean-Jacques Tortora said U.S. satellite builders have built about 60 commercial telecommunications spacecraft in the past five years, compared with 50 sold by European manufacturers.

Daniel Calleja Crespo, director-general in the commission’s Enterprise and Industry Directorate-General, said his office is looking for ways to use trade relationships as a way to further Europe’s industrial policy goals. He agreed that the TTIP, if adopted by the United States and Europe, would need to assure “a level playing field” between U.S. and European manufacturers seeking access to each other’s government markets.

The 20-nation European Space Agency and the European Commission, Europe’s two principal government contractors for space hardware, both have rules whose effects are to stimulate the proliferation of a large number of contractors.

The commission takes competitive bidding to be the sine qua non of most of its procurements. ESA’s geographic return rules mean member governments’ investment automatically returns to their national territories in the form of contracts, prolonging the life of some companies that would not survive otherwise.

Francois Auque, chief of the space systems division of Airbus Defence and Space, said the unintended consequence of this is to undermine European industry’s competitiveness in export markets, which are crucial to the survival of European prime contractors given the current European government market.

Jean-Loic Galle, chief executive of satellite prime contractor Thales Alenia Space, said allowing certain component builders to become de facto monopolies in Europe will not result in monopoly pricing because of the need to remain competitive in international markets against companies in the United States, Russia — and increasingly in Japan, China and Korea.

“We can maintain their competitiveness even if there are monopolies,” Galle said. He said the European Commission’s recently approved seven-year budget should be directed to developing European autonomy in key space systems while at the same time strengthening Europe’s competitiveness.

The commission’s Horizon 2020 program includes some 1.4 billion euros ($1.9 billion) for space technology development between 2014 and 2020.

Luigi Pasquali, chief executive of Telespazio of Rome, which specializes in space services, said the commission’s goal should be external competitiveness and not systematic competitions for every European government program.

Auque said ESA governments should be able to agree among themselves on a list of companies that would be the acknowledged specialists in a given technology. Fewer European companies that are better able to survive in the global marketplace is the goal, he said. 

The recent track record of ESA governments, he said, is just the opposite, with companies created by national governments duplicating expertise existing elsewhere. “A little self-discipline would help us progress a lot,” Auque said. “To use an understatement, I am not sure the last few years have been exemplary in this regard.”

 

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