European Union member states could soon be spending billions of pounds on military research if funding is agreed this week for a multi-million pound project, Preparatory Action for Defence Research.

The scheme, which will cover the years 2017-2020, at an estimated cost of €50-100 million, would pave the way for a full research programme that could require a budget of at least €3.5bn between 2021 and 2027.

But the proposal is hugely controversial. More than 60,000 people have signed a petition against it. Laëtitia Sédou, EU programme officer at the European Network Against Arms Trade, said it was being pushed by vested interests without proper oversight and debate. “This proposal is merely a military-industrial policy driven by economic interests of a few, a trend towards liberalisation of the arms trade and competition with the US,” she said.

If the budget is approved, it would be the first time the EU has provided funding exclusively for defence research purposes.

“The EU was envisaged as a peace project and that’s what it should be,” said Andrew Smith of the Campaign Against Arms Trade. “Whatever your views on the UK’s role in Europe, it should not be using public money to fund research for arms companies. This proposal could mean taking funds from other projects for something that would only benefit arms companies.”

Some EU member states believe a common defence research fund is long overdue because Europe is lagging behind other major powers.

A document outlining the proposal claims that “cooperative defence research programmes are essential for sustaining and fostering key military capabilities in Europe, and for addressing capability shortfalls”.

A report published by the European Union Institute for Security Studies – drawn up by an advisory panel whose members include figures from European industry, government, the European Parliament and academia – makes the case for further spending on defence research capabilities.

It states: “Europe’s ongoing economic and fiscal crisis has clearly had a negative impact on the resources available to EU member states to engage in security-related activities. At the same time, threats have become more ‘hybrid’, less conventional, and very difficult to tackle with traditional means and without international cooperation. For its part, the US strategic ‘pivot’ to Asia forces Europeans to take defence more seriously.”

• This article was amended on 25 October 2016. It originally erroneously stated that the European Union Institute for Security Studies was funded by some of the world’s biggest arms companies. EUISS is an autonomous EU agency which is directly funded by the EU member states, It is not and never has been funded by arms companies of any description.