BRUSSELS ― A top American diplomat is concerned that a new European Union defense agreement could lead to “protectionism” that could ice American firms out of sales in Europe.

Kay Bailey Hutchison, the U.S. permanent representative to NATO, on Tuesday issued a preemptive warning about the Permanent Structured Cooperation (PESCO) on security and defense, an EU initiative launched late last year which could potentially lead to joint procurement of European defense products.

“Certainly, we do not want this to be a protectionist vehicle for EU. And we’re going to watch carefully because if that becomes the case, then it could splinter the strong security alliance that we have” Hutchison said.

There have been concerns from the U.S. about PESCO, as the new agreement excludes several NATO nations, including the U.S., U.K. and Canada, and includes several non-alliance nations in Austria, Cyprus, Finland, Ireland and Sweden. U.S. officials are concerned the group could become a competitor to NATO for military resources.

Hutchison specifically called out the idea that nations outside PESCO could find themselves cut off from sales among the European nations.

“We want to have a fair process. We want the Europeans to have capabilities and strength, but not to fence off American products, of course. Or Norwegian products. Or potentially U.K. products,” she said. “I think it’s very important that there be transparency and openness in all of those areas where PESCO would be in a bidding process.”

U.S. Secretary of Defense Jim Mattis will be attending a NATO-hosted event Wednesday evening with EU High Representative Federica Mogherini, as well as officials from Sweden and Finland, two non-NATO nations who have embraced PESCO.

According to NATO Secretary General Jens Stoltenberg, that meeting will include discussions on how best to align PESCO and NATO.

“Done in the right way, these efforts can make a contribution to fairer burden-sharing between Europe and North America,” Stoltenberg said Wednesday.

Jim Townsend, who spent eight years as deputy assistant secretary of defense for European and NATO policy and is now with the think tank Center for a New American Security, thinks such discussions will ultimately show that PESCO is “no threat to NATO and in fact may result in a more efficient and helpful European contribution to a NATO operation.”

Based on early public comments and planning, PESCO will be largely focused on big issues, such as mobility. In terms of industrial output, it is possible PESCO will help research and development funds for certain projects that in theory could become challengers to American firms, but Townsend is skeptical they would find much success.

“Experience has shown that those coordinated projects end up being too expensive and are delivered too late and with usually outdated capability, so I would doubt U.S. industry or even European industry has to worry about PESCO launching any big hardware-related projects that would be successful in keeping U.S. competitors out or give European industry an unfair advantage,” he said.

“PESCO’s level of ambition is much more modest, is not hardware-oriented, is not focused on competing with U.S. industry or establishing a fortress Europe, nor can they practically do that even if they wanted to,” Townsend asserted.

Aaron Mehta was deputy editor and senior Pentagon correspondent for Defense News, covering policy, strategy and acquisition at the highest levels of the Defense Department and its international partners.

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