Market Size and the Political Economy of European Defense

There is an intense debate in international relations scholarship on whether the benefits accrued by arms production globalization outweigh the risks of depending on foreign suppliers. Europe is an interesting case: although regional protection could help Europeans mitigate exposure to global actors, the prospect of regional integration generates concerns about autonomy within Europe itself. We depict European defense cooperation as a "two-level playing field," whereby market size informs a country's hedging between global-external and European-internal competitors. First tiers push for defense market integration because they expect to be strengthened vis-a-vis global players but also because market size gives them a competitive advantage over fellow Europeans. Second tiers resist market integration, as they worry it might lead to first-tier dominance. To probe our hypotheses, we examine the behavior of two first tiers (France and Germany) and two second tiers (Poland and Sweden) in the context of the European Defense Fund.