ITAR Seen as Barrier to Projected EU Defense Spending Increase
The EU’s plans to increase defense spending over the next several years could be hampered by burdensome export rules under the International Traffic in Arms Regulations, a senior EU diplomat said this week.
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Ruth Bajada, the EU’s deputy ambassador to the U.S., said Europe is “very much ready to invest in defense. She pointed to the European Commission’s endorsement earlier this month of a proposal that could mobilize up to $800 billion euros (about $950 billion) for defense purchases and weapons procurement by EU member states.
But Bajada, speaking during a webinar hosted by DLA Piper, also noted that European firms buy roughly half of their defense items and services from the U.S., and she questioned whether the ITAR and other restrictive U.S. regulations will allow EU companies to increase those purchases.
“One regulatory issue is, of course, ITAR. And that remains,” she said. “It's become a worry over the last years.”
The State Department in 2024 published a rule that created an ITAR exemption for defense trade among the U.S., Australia and the U.K. (see 2408160019 and (see 2512290017), although industry officials and policy analysts have long said the ITAR presents too many trade barriers with other close U.S. allies (see 2407300016 and 2302170022).
Bajada said EU companies “will not be able” to source $800 billion in weapons purchases from inside the bloc alone.
“Member states want to have arms that they can use and be able to use any time, anywhere, any place,” Bajada said. “I think there’s a lot of thinking around this, but as long as [ITAR restrictions] stay, that will be a regulatory issue from the U.S. side. But certainly we can very much work on that.”
Bajada, asked about issues arising out of the EU-China relationship, said she hopes that geopolitical and trade tensions aren’t forcing companies into a choice between doing business in one region or the other. But she noted that many large technology companies, including the ones “that complain most about European regulation,” make 40% or more of their profits from European customers, and she said the "first choice of investment" for many EU companies is the U.S.
“We've seen many companies that -- the ones that have a solid share in China -- they want to stay there because they've invested so much,” Bajada said. “But they understand the difficulties, and we have seen some of them also shifting and changing over time.”
Nicholas Klein, a national security and trade lawyer with DLA Piper, said the U.S. is pushing more European companies away from doing business with China. He said he's seeing that U.S. export licenses are becoming harder to secure and reviews before the Committee on Foreign Investment in the U.S. are becoming more challenging if the export license applicant or the foreign investor's home country “is more embedded with relationships in China.”
For some EU investors looking to complete a deal in the U.S., “their connections to China are heavily scrutinized and jeopardize transactions,” Klein said. “So the more a business pivots towards China, and the more a country, from a policy perspective, pivots towards China, the more difficult those regulatory processes are likely to be for companies trying to operate and be connected with the U.S. economy.”