Arms Embargo: No Lift in Sales; Why European business can follow the U.S. lead on China, without really embarrassing the EU.

Byline: Rana Forhoohar (With Tracy McNicoll in Paris)

No matter what Jacques Chirac and Gerhard Schroder may say, it's clear that European defense contractors plan to follow George Bush's lead and maintain the arms embargo on China. Mike Turner, the CEO of British firm BAE Systems, Europe's largest defense company, said his company "will do nothing that will jeopardize our position with the U. S. They are a very, very important customer." EADS, the Franco-German conglomerate, has made similar statements. Dassault of France, which makes the Rafale fighter jet coveted by Beijing, said "military sales to China are not on the agenda."

It's not hard to figure out why. The United States spends as much money on defense as the rest of the world combined, and there's still room for more. Homeland Security programs have bolstered demand for things like helicopters and electronic security equipment. "The European firms have to choose between the U.S. and China," says Andrew Dorman, a defense expert at King's College London.

That so many of Europe's top firms are following America's lead might seem an embarrassment to Brussels. The reality is more complicated. Last December, when the European Council announced its intention to lift the embargo, it also stated that the result should be neither a "quantitative nor qualitative" increase of arms exports to China. So why lift the ban if that has no impact? The embargo was imposed in 1989 after the Tiananmen massacre, and the Chinese ...