A Small Country Perspective
Chapter 6: Policy scenario analysis: small countries in a European perspective
Faced with the ongoing liberalization process in the European defence market, many member states will arguably find it more difficult to maintain protectionist policies such as national favouritism and offset (counter-trade) requirements. Nevertheless, it is reasonable to expect that the new EU Directive will not affect each member country in the same way or to the same extent. Some authors have already begun to speculate that the Directive will impact member countries differently according to the size of their national defence markets and the strengths of their defence industrial base (Edwards, 2011). One concern, in this regard, is that although a higher degree of market liberalization in the European defence market might lead to rationalization of production and lower costs of defence equipment for the EU as a whole, smaller member states might find that these benefits are offset by the impediments that the Directive creates with respect to achieving other important policy goals. The first part of this chapter will carry out a simulation analysis of the model presented in chapter 5 in order to analyse the effects of liberalization under different policy scenarios, and how these effects will differ between large and smaller European countries. This comparative policy analysis will show that the effects of market liberalization will differ in large and smaller EU economies.
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