BRUSSELS—The European Union should consider funding military research, the European Commission says in an action plan aimed at bolstering the bloc's defense industry. Observers say that the proposal, presented here yesterday by political heavyweights, could bring about more pan-European alignment in an area that has largely remained the turf of member states.

The document, titled Towards a more competitive and efficient defence and security sector, includes a list of measures aiming to enhance the European defense industry's worldwide prospects. The commission says that E.U. countries should avoid unnecessary duplication and work together to counter growing competition from other parts of the world.

Between 2005 and 2010, military research spending in E.U. member states has dropped by 14% to €9 billion annually—one-seventh of the U.S. defense R&D budget. “[D]efence companies are surviving on the benefits of R&D investment of the past and have been able to successfully replace falling national orders with exports. However, this often comes at the price of transfers of technology, [intellectual property rights] and production outside the EU,” the document says.

On the R&D front, the commission says that it “will consider the possibility to support” research related to the European Union's Common Security and Defence Policy, a cooperation system that allows the union to run peacekeeping and security operations in troubled regions.

To study how this can be done in practice, the commission proposes using a tool called Preparatory Action, essentially a pilot program funding collaborative defense research projects that paves the way for a fully-fledged military R&D component in future E.U. programs. The move is similar to a Preparatory Action launched in 2004 that led to the introduction of a security component in Framework Programme 7, the European Union's R&D funding program for 2007 to 2013, says Olivia Cahuzac, a defense policy specialist at consulting company CEIS here.

The way the proposal was announced shows that the commission is willing to take an ambitious stand on defense issues, an area in which governments traditionally prefer to stay in charge, Cahuzac adds. Commission President José Manuel Barroso presented the plans himself, along with two European commissioners. “Twenty years ago it wouldn’t have been natural for the commission to talk about defense. Times have changed,” Barroso told reporters. Michel Barnier, commissioner in charge of internal market policies, added that Europe “must be autonomous while showing solidarity, in particular with the Atlantic alliance.”

Any military research funding would not come directly from Horizon 2020, the next 7-year R&D funding program, which will launch in 2014. That program will keep an “exclusive focus on civil applications,” the proposal says. But the commission wants to see if some technologies funded by Horizon 2020 could also be used in defense applications. It proposes funding a public procurement system to buy prototypes, for instance of drones, radio communication equipment, as well as technologies for the detection of chemical, biological, radiological, nuclear, and explosive weapons.

The proposal includes other measures outside R&D funding. For example, the commission proposes to develop shared standards for technologies with both military and civilian applications, such as data sharing and encryption. This would make it easier for European armies to work together and provide larger markets for new products.

The ball is now in the E.U. member states' court. The proposal will be submitted to the European Parliament, and heads of state and government will discuss it at a highly anticipated European Council meeting, to be held in December.