Schilde Testifies at European Parliament on Security Action for Europe (SAFE) Bill
Dr. Kaija Schilde testified before the European Parliament on June 25, 2025, to provide expert support for the Security Action for Europe (SAFE) bill, presenting research evidence on which policy instruments can most effectively develop European defense capabilities and improve European strategic autonomy. Schilde addressed a joint hearing of the European Parliament’s Committee on Security and Defence (SEDE) and Subcommittee on Tax Matters (FISC), demonstrating why regulatory mechanisms that require European-made content are essential for building Europe’s defense industrial base. The €150 billion SAFE bill was adopted by the Council on May 27, 2025, and introduces VAT exemptions for defense projects with at least 65% European content requirements.
Schilde testified that Europe faces a defense capability challenge, but it also cannot resolve that challenge by only buying from outside of the EU. But since 2022 and the Russian invasion of Ukraine, 78% of European defense procurement contracts have gone to non-EU suppliers, as European states have been buying primarily from the US to fill short- and medium-term capability gaps. She laid out the political economy logic for why this approach will not help the EU in the long-term. The EU and European states must incentivize domestic production through strategic policy to sustain defense capacity over time. Some of the mechanisms for encouraging European-based defense production include tax policy and regulatory tools to achieve this goal.
The SAFE Bill’s Innovative Approach
Schilde’s testimony presented evidence that the SAFE bill starts to address the fundamental challenge facing European defense. Her research situated EU defense efforts within a larger comparative and historical picture that also involves the private sector actors that need to be incentivized to invest in technology and produce equipment in advance of government initiatives, showing empirical evidence that defense firms do not simply respond to increased government spending, but that “they invest when regulatory changes assure their future competitiveness. During the 2009-2012 European defense spending downturn, European defense firms actually increased their R&D investments by 30%. They were responding to EU regulatory signals, not immediate fiscal incentives.” The SAFE bill’s 65% European content requirement represents the type of policy instrument that can build defense capabilities. Schilde’s analysis showed this requirement works through two mechanisms. First, it expands market scope through harmonized standards that enable dual-use applications. Second, it provides protected market access for European firms, assuring their competitive position.
Evidence from US and European Experience
Schilde presented data on private sector defense investment, showing that both the U.S. and European defense firms now invest more in R&D than their governments. European firms invest five times more than European governments in aggregate. This shift from government laboratories to private sector R&D occurred in the late 20th century in the United States and in the 2000s in Europe.
The testimony examined specific U.S. regulatory milestones that transformed defense investment patterns. The 1986 Goldwater-Nichols Act streamlined defense acquisition, while the 1988 Buy America Act privileged U.S. contractors over foreign firms. Both triggered increases in private defense R&D investment by assuring firms of their future market positions. “Regulations enabling some form of market protectionism are the core feature enabling private technology investments,” Schilde stated in her testimony. She also showed research across 27 countries finding that importing defense equipment undermines future domestic capacity. Imported equipment represents pure fiscal cost without creating the domestic political economy coalitions that support sustained defense investment.
“At this moment for European security, with warfare on the European continent and evolving global security challenges, it’s essential that the EU develops innovative regulatory tools that can effectively stimulate defense innovation,” said Schilde. “I’m honored to contribute my research to these policy discussions and to help shape evidence-based approaches that will strengthen Europe’s defense industrial base. The SAFE bill’s VAT exemptions demonstrate that European policymakers understand the fundamental shift in how modern defense capabilities are generated—through smart regulation that incentivizes private sector investment rather than relying solely on government spending.”
In addition to Professor Schilde, the hearing brought together experts and officials from the European Commission’s Directorate-General for Taxation and Customs Union and the Directorate-General for Defence Industry and Space. Their insights will inform the implementation of the European Defence Industry Programme (EDIP) and shape upcoming measures under the ReArm Europe Plan and Readiness 2030 strategy.
To read Schilde’s written statement, click here.
Kaija Schilde is the associate dean of studies and associate professor of international relations at the Frederick S. Pardee School of Global Studies. She is also the Jean Monnet Chair in European Security and Defense at Boston University. Her research and teaching focus on the political economy of security, with a particular emphasis on defense industry politics and the political development of the European Union. As the Jean Monnet Chair, Schilde advances the Pardee School’s agenda of preparing students to meet the international challenges of the 21st century through a rigorous and sustained presentation of the EU as a global power with responsibilities over European security, international order, and global security. Learn more about Professor Schilde on her faculty profile.