Arms Sales Monitor #23, November 1993

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Issue No. 23 (30 November 1993)

Code of Conduct on Exports Would Force Congressional Vote

A broad coalition of citizens groups has endorsed arms trade legislation introduced in November by freshman Rep. Cynthia McKinney (D-GA) and veteran Sen. Mark Hatfield (R-OR). The proposal, known as the "Code of Conduct on Arms Transfers Act" (S.1677/H.R.3538), calls for greater Congressional scrutiny and an affirmative vote■before certain states may buy American weapons.

The policy favored by many is to deny weapons only to countries currently regarded as "pariah states" and sell freely to "friendly countries." But many of today's pariahs used to be America's friends. The Code of Conduct is forward-looking and seeks to ensure that American-supplied weapons won't again outlast American alliances.

The premise of the legislation and grassroots campaign is that states which are not democratically-elected, that abuse human rights or are at war, are inherently less stable. And states which will not share limited information on weapons procurement with the United Nations' annual Register of Conventional Arms are inherently less trustworthy. Such states would only be able to import American arms in a given year if the President certifies their eligibility and Congress passes legislation affirming that certification. Rep. McKinney said when introducing the bill: "For years we have sold weapons to dictators and provided military training for their officers. We armed the Shah of Iran, we armed Iraq, we armed Panama, we armed Somalia and we armed Haiti. ... In Haiti, the military that has overturned the elected government of President Aristide and scorned the Governor's Island accord is comprised of an officer corps trained in America. At the very least, American arms should not be sold and US military training should not be provided to governments that oppose American principles."

The Clinton Administration has repeatedly asserted that the support of human rights and democracy is a principal tenet of its foreign policy. President Clinton said before the UN in September, "Democracies rarely wage war on one another. ... Democracies, with the rule of law and respect for political, religious, and cultural minorities are more responsive to their own people and to the protection of human rights." The Administration has also expressed support for the UN arms register.

In addition to backing these goals, the Executive Branch might be interested in having Congress share responsibility for arms sales to potentially unstable countries. Currently, US law calls for a vote on arms transfers only if Congress seeks to block a sale. Then, Congress must muster a two-thirds majority in both chambers. Given this difficulty, Congress has voted on a proposed sale only once in the past ten years. This legislation would not alter the Congressional notification process for individual sales, but would mandate additional scrutiny.

The law would probably not block all sales to states of concern. Non-democracies like Saudi Arabia and Kuwait, for example, might be exempted by the President and Congress. But the legislation would provide an opening--through the Congressional debate and vote--for citizens to express their concerns and seek to influence American policy. As Sen. Hatfield said: "the American people are ready to decide whether or not they want their nation to continue its role as the world's weapons pusher."

HFAC Hearing on Arms Trade Policy

On 9 November the Foreign Affairs International Security and International Operations Subcommittees convened the first of a series of joint hearings on conventional arms trade policy. Joining Chairmen Howard Berman and Tom Lantos were Committee members Cynthia McKinney (D-GA), Eni F.H. Faleomavaega (D-American Samoa) and Christopher Smith (R-NH). In an unusual but not unprecedented action, the subcommittees invited Rep. Tom Andrews (D-ME), a member of the Armed Services Committee, to sit at the dais.

In their opening statements and questions, the Members expressed concern about the magnitude and implications of the international arms trade, and they lamented the lack of Administration policy in this area. The subcommittees had solicited government testimony, but were put off until the Administration is further along with its policy review. A panel of lobbyists and academics representing a wide range of opinion testified.

Bush Administration Pentagon official William Inglee wondered whether and why the fact that US sales now account for nearly 60 percent of the market should "trigger alarm bells" in Congress. "US sales are not destabilizing in nature: they respond to legitimate defense requirements, they are subject to careful review both within the Administration and the Congress, and transfers to the most dangerous states today■such as Iran, Iraq or Libya■are specifically prohibited." Inglee noted that, due to US dominance of the market, "in calendar year 1992 the US Congress had a direct and extremely meaningful role in reviewing nearly 60 percent of all conventional arms sales to the Third World."

William Hartung, of the World Policy Institute, countered that even when the US is not arming problem countries (or potential problem countries), it is fuelling an arms race dynamic. Further, because no reliable alliance system exists today, Hartung said, the provision of military aid is a very risky proposition: Today's expedient ally can become tomorrow's "next Hitler." Hartung advised that arms trade controls should be "a central tool for conflict prevention and threat reduction in the post-Cold War era." As such, he argued, economic and defense industrial base considerations should not be factored into arms export decisions. "We don't need the type of defense industrial base we had during the Cold War," he asserted, and even if we did, "arms exports are the worst possible way to sustain that base," since exports may exact a price in lives and dollars.

The Aerospace Industry Association's Joel Johnson acknowledged the overwhelming US dominance of the arms market but added a creative twist: The question should not be why US marketshare is so high, but rather why it is so low. "Given all the money that US taxpayers have put into it, we should blush if we can't achieve at least 70 percent of the market," Johnson said. "Restrictive US government export policies" are the reason why sales are so depressed.

Johnson outlined industry's preferences for any arms transfer control policy. First and foremost, the US should focus on regional conflict resolution and demand-side arms control. If the government must engage in supply-side controls, "all major possessors of the technology or production capacity for the weapons to be controlled" must be on board. "Here, experience would indicate that the narrower the list of items to be controlled, and the narrower the list of countries on which controls are imposed, the more likely the success of the agreement." The government should limit weapons unilaterally only if (a) the US has a monopoly on the type of weapon; or (b) the recipient country is so egregious that the US should clearly distance itself. Otherwise, the government should supply "appropriate" weapons to "friendly" states.

Carter Administration ACDA official Alan Platt asserted that "now is the time to implement" multilateral arms trade controls, "not to engage in more study." As starting points Platt recommended: reinitiating the P-5 talks (or the P-4 talks if China won't return); piggy-backing a regime of arms transfer restraint to the Mideast on the regional arms control negotiations there; banning new types of weapons to regions where they are not already present; and moving toward prior notification in the UN Register of Conventional Arms. He also suggested a meeting among the major suppliers on the global overcapacity in arms production.

Caleb Rossiter, Director of the Project on Democracy and Demilitarization, plugged the "Code of Conduct" legislation, which Rep. McKinney announced. As proof that it is needed, Rossiter said the US will sell $20 billion of weapons to unelected governments this year. To counter the "if we don't sell, someone else will" amorality that justifies much of the trade, Rossiter noted that companion legislation is being introduced in the British Parliament.

Rossiter also challenged the arms sales "jobs myth." He cited offsets to sales (see box below), military aid, the high Pentagon budget now necessitated by regional arms races, and the economic costs of war as reasons why, in the end, arms transfers are a money- and jobs-losing proposition.

Arms Sales Offsets Cost Jobs

Congress has signed-off on record levels of arms sales during the past twelve months, largely to maintain jobs. Rarely mentioned by sales proponents, however, is the fact that most arms sales today contain hidden side agreements--"offsets"--which may result in a net loss of American jobs. Through these side deals the buyer is able to recoup part or all of the cost of an arms purchase. Typical off-sets include licensed or joint production of a weapon system or component; countertrade, in which a seller agrees to purchase or market some of the buyer's goods; or capital investment in the purchasing country. These agreements help arms manufacturers cement the deal, but they take business away from other US firms and increase the competitive position of foreign industry.

The September 1992 sale of combat aircraft to Taiwan illustrates the process. After the $6 billion deal was completed, the Taiwanese legislature blocked further payments unless Lockheed provided Taiwan with technology and production contracts related to the aircraft (see ASM No. 21 p. 9). In July Lockheed signed a 10-year, $600 million "Industrial Cooperation Agreement" which ensures production of some of the aircraft parts in Taiwan and the creation of depot maintenance centers there. (Defense News 23-29 Aug. 1993)

Sen. Russ Feingold (D-WI) introduced legislation earlier this year to force disclosure at the time of Congressional sales notification of offsets under consideration (see ASM No. 22).

A Rare Show of Courage

Congressman Tom Andrews became interested in the arms trade, he explained at the hearing, because of a letter from an arms industry trade association. The industry group sought his help in diverting money slated for arms industry conversion toward promotion and financing of exports. Industry representatives told Andrews exports are "even better than conversion."

Since Bath Iron Works, one of the primary ship-yards in America, is the largest employer in Andrews' Maine district, the association assumed that he would be supportive of reputedly job-saving arms exports. Some in his district supported the proposition and told him "jobs have to be our bottom line."

But Andrews found the industry's plan offensive. "No one is more interested in workers in my district than me," Andrews contended, but US arms exports, and lack of US leadership in limiting the international trade, are national security issues, not economic issues. Arms sales may result in "sending our young people into harm's way. ... Young people," Andrews said, "have got to be our bottom line."

Andrews passed legislation barring the use of conversion funds for arms export promotion and led the fight against the establishment of loan guarantees.

Deals in the Works

Notice of the following government-brokered Foreign Military Sales (FMS), leases, grant excess defense article transfers (EDA), and export licenses for direct commercial sales from industry (DCS) was sent to Congress for approval during October-November.

Clinton Admin. Watch
State Department Hears Industry's Views

On 6 October the State Department convened the fourth meeting of its Defense Trade Advisory Group (DTAG). Established in February 1992, DTAG comprises some 40 arms industry executives and two national security analysts. According to its charter, the objective of the group is "to provide a formal channel for regular consultation and coordination with US defense exporters on issues involving the US laws and regulations for munitions exports."

At the meeting (which was open to the public), policy, regulatory and technical working groups presented papers outlining DTAG's concerns and policy suggestions.

The Regulatory Working Group is concerned with missile-related export controls; achieving efficiency-enhancing automation in the arms export licensing process; resolving commodity jurisdiction disputes favorably (i.e., moving items from the Munitions List to the less restrictive Commerce Control List■see below); easing restrictions on third country transfer of US-supplied weapons or related technology; working to ensure compliance with US regulations; and establishing a speedy appeals process to challenge export license denials.

The Policy Working Group is primarily focused on influencing the Clinton Administration's ongoing arms transfer policy review. It has produced a draft document which is being circulated at the State Department (but is not available to interested outside parties). Other issues of concern to this working group are: liberalizing US arms sales policy toward Taiwan; the creation of a data base showing the availability from other suppliers of weapons and components comparable to those for which US manufacturers are seeking export licenses; the possibility of permitting exports and imports of Munitions List items to and from the former Soviet republics; the promotion of international collaboration on arms production; and cooperation with the DOD to "diminish the consequences of the unauthorized use of licensed exports."

Undersecretary for International Security Affairs Lynn Davis, Assistant Secretary for Politico-Military Affairs Robert Gallucci, and Deputy Secretary for Export Controls Martha Harris represented the State Department at the meeting. In her opening comments, Davis told the concerned arms industrialists that the Clinton Administration's still unarticulated arms trade policy will balance non-proliferation concerns with economic and defense industrial base concerns. She reminded the assembly that Secretary of State Christopher believes it is his job to "promote American business, promote American exports" abroad. "We take seriously your recommendations," Davis told the appreciative audience.

For more information about DTAG, including minutes from meetings held thus far, phone the State Department's Office of Defense Trade Policy (202) 647-4231.

Unequal Access For All

DTAG is one of several formal channels for industry input into arms export policymaking. The Pentagon analogue is the Defense Policy Advisory Committee on Trade (DPACT), self-described as "a federal advisory committee established to provide independent [emphasis added] advice to the Secretary of Defense and the US Trade Representative." And the Commerce Department has its Subcommittee on Export Administration, which advises the Department on laws and policies governing exports of dual-use items regulated by the Export Administration Act. Relevant Congressional reports also routinely call for industry input and comment.

While genuinely independent groups can, of course, mail in their policy suggestions and concerns, no Administration-assisted working groups are convened specifically to canvass and elicit such views. In fact, members of the Arms Trade Working Group, a coalition of some 25 public interest organizations, have been unable to schedule time with high ranking State Department officials like Undersecretary Davis. She has declined to meet with representatives of the group, comprised of analysts and lobbyists representing just regular citizens concerned about the impact of arms exports.

Arms Sales Commerce-ialized

In May Secretary of Commerce Ron Brown visited Saudi Arabia, and in June he stopped off at the Paris Air Show■in both cases to promote US commercial and military goods. Testifying on 5 August and again on 29 September before the House Foreign Affairs Subcommittee on Economic Policy, Brown made it clear that he will continue to be an aggressive advocate for American business abroad■including the arms business. The September report of the 19-agency Trade Promotion Coordinating Committee affirmed that "DOD, State, and Commerce [emphasis added] have begun to work aggressively overseas to support legitimate defense-related sales to foreign governments." And in the debate this fall over the establishment of a new arms export financing program, Secretary Brown weighed in heavily in favor (see ASM No. 22 box p. 5).

All of this raises the question of whether the Commerce Department■which has jurisdiction over the export of dual-use items (those with significant commer- cial, non-military as well as possible military uses)■has any business pushing weapons exports. Because of their national security and foreign policy implications, weapons exports fall under the sway of the State Department. Commenting on Brown's role at the Paris Air Show, one industry official said he "can't think of a Secretary of Commerce in the past who has associated himself with defense exports" to this degree.

Commerce's new assertiveness in arms exports seems to derive from its central role in arms industry conversion. Brown told Congress in August that a "critical piece of the defense conversion puzzle is helping firms find export markets" for their weapons. Much of Commerce's effort in this regard centers on California---a big military aerospace manufacturer and the key to Bill Clinton's electoral college victory last November. Commerce is helping military industries in California with foreign market assessments and export promotion; it is working with the State Department to provide "fast track" arms export licensing. (Brown says he wants to "streamline" the licensing process and "remove or reduce unnecessary government-imposed obstacles to exporters.")

Meanwhile, more and more items on the Munitions List, controlled for export by the State Department, have been moved to the Commerce Department's Control List (CCL). In the past year, communication satellites, navigation and avionics equipment, military explosives and propellants have been shifted, as per a November 1990 Executive Order that seeks to conform the CCL with the COCOM Industrial List of controlled items. Exports of these goods will still be subject to licensing but will be controlled less stringently.

Export Admin. Act Being Revised

The Commerce Department is working on a comprehensive rewrite of the Export Administration Act (EAA), which controls for national security and foreign policy reasons the export of dual-use items such as sophisticated computers, telecom- munications equipment and weapons components. The revised version, which will incorporate the modified COCOM, is expected to reach Capitol Hill early next year.

Meanwhile, on 28 October Rep. Toby Roth (R-WI) introduced the "Commercial Export Administration Act of 1993" (H.R. 3412). The bill would basically end the Cold War COCOM export controls against former Soviet republics. One of the bill's provisions would reportedly require that any US export controls be applied multilaterally. The bill has been referred to the Foreign Affairs Subcommittee on Economic Policy, where it■along with the Administration's draft■will serve as the basis for the Committee's work on the EAA next year.

F-15Es to Israel Inevitable

During a visit to Washington in November, Israeli Prime Minister Yitzhak Rabin reportedly received the go-ahead from President Clinton for the purchase of 20-25 F-15E bombers. Congress has not yet been formally notified of the sale, but it is not likely to object, since both the Clinton Administration and Congress are committed to maintaining Israel's "qualitative military edge." The planes will be paid for with US-supplied grant aid.

The sale of the "Strike Eagle"■the most lethal plane ever sold by the United States to any country■was made inevitable by the sale of 72 somewhat stripped- down F-15Es to Saudi Arabia last September. Before the Saudi sale, Israeli purchase of the Strike Eagle was considered an impossibility, and Israel concentrated on the Lockheed F-16D and McDonnell Douglas F/A-18C/D for its aircraft purchase. Israel wants the "E," ironically, because of the recent peace accord: Israel's principal security threats now lie farther afield, and although more than twice the cost of the F-16, the Strike Eagle would give Israel a long-range, all-weather attack capability. With aerial refueling, the aircraft could bomb almost anywhere in the Middle East.

Lynn Davis on Missile Technology Export Controls

While the Administration is not prepared to talk about controlling the spread of most conventional weapons, it does like to talk about limiting sales of ballistic missiles. Two Foreign Affairs Subcommittees tried to get Administration witnesses at a hearing on 9 November on conventional arms export policy, but to no avail. On 10 November, though, high-ranking officials from State, Commerce and Energy Departments and ACDA appeared before the full House Foreign Affairs Committee on the Administration's weapons of mass destruction and ballistic missile nonproliferation policies. Some missile-relevant excerpts from the testimony of Undersecretary of State Lynn Davis follow.

"The multilateral Missile Technology Control Regime (MTCR) will continue to be the primary tool of United States missile non-proliferation policy. It works and has enjoyed several successes since its creation in 1987. We now want to move the regime into the future, beyond a group of responsible suppliers that seeks to ensure that its own industries do not inadvertently contribute to missile proliferation, to a group that works actively together to deal with the missile proliferation problem worldwide. In other words, we want to promote the MTCR guidelines as a global missile non-proliferation norm, engaging our partners in a cooperative effort to encourage responsible behavior by non- member states, whether suppliers or recipients...."

"Non-proliferation is central to building our new strategic partnerships with the NIS [newly independent states of the former Soviet Union]. We have linked our cooperation in space to adherence to the MTCR by Russia, China and India. ... In Moscow we worked together to ensure a smooth entry into force of the bilateral missile technology control regime agreement signed by Vice President Gore and Prime Minister Chernomyrdin in September, as well as changes to Russia's technological cooperation with India. We look forward to future Russian membership in the MTCR."

"The Administration has demonstrated a willingness to apply both carrots and sticks in the fight against missile proliferation. Besides our successful negotiation with Russia, we have gained South Africa's agreement to abandon a space launch vehicle program. We are pursuing a policy of preventative diplomacy in South Asia that seeks to persuade India and Pakistan to forgo a ballistic missile arms race that■combined with the regions's nuclear weapons capabili- ties■would only destabilize an already fragile security situation there. And our decision to impose sanctions against China and Pakistan for the transfer of M-11 related technology demonstrates that we're prepared to pursue our non-proliferation goals vigorously even when such efforts may risk frictions in critical bilateral relationships."

Admin. Rewriting Foreign Assist. Act, "Pressler Amendment" Under Attack

On 23 November the Clinton Administration sent Congress a "discussion draft" of a new law to replace the 1961 Foreign Assistance Act, which governs the provision of military aid. The draft bill has caused a great deal of discussion on Capitol Hill: It seeks basically to cut Congress out of the decision-making process on the allocation of foreign aid funds, and it gives the President much greater discretion in waiving prohibitions on aid. Most press-worthy in this regard, the bill would replace the "Pressler Amendment," which bans arms sales and military aid to Pakistan unless the President can certify that Pakistan is not in possession of a nuclear weapon, with more generic language prohibiting aid to nuclear proliferators. But, unlike the Pressler Amendment, the measure contains a Presidential waiver. Congress hopes to pass a new version of the bill next year, but it will probably bear little resemblance to this current draft.

Dubai Air Show Policy

On 6 October Deputy Secretary of Defense William Perry issued an order governing Pentagon participation at the Dubai Air Show during 7-11 November. He authorized the military services to lease equipment to industry on favorable terms and to transport equipment to and from the show at no additional cost to industry if valid DOD training requirements could be fulfilled in flying the aircraft there. Manufacturers and trade associations paid only "incremental costs," as mandated by the FY1993 DOD authorization bill (see ASM No. 18 p. 3). "No direct Department of Defense participation in this event is authorized," Perry stated.

Industry has been lobbying for a "broad interpretation" of the FY1993 law to allow DOD personnel to help hawk weapons, chiefly by a finding that supplying aircraft to such shows is in US national security interests. (Inside the Air Force 15 October 1993) The next major air show will be held in Singapore in February.

The Scandal Box
Congress Did Not Want to Impeach Reagan

At a press conference for his new book on US policy in Central America (Worth It All), former Speaker of the House Jim Wright announced that Congress' investigation into Iran-Contra in 1987 was crippled by haste (it took six months) and fear of bringing down the Reagan Administration. "I hoped that there would not be discovery of an impeachable offense. ... I didn't want to focus on such a divisive subject. I may have bent over backwards in error," Wright said. (NY Times 27 Oct. 1993)

Senator North

Oliver North said in a recent interview that he doesn't plan to talk about his Iran-Contra involvement during his current campaign to become the next Senator from the Commonwealth of Virginia.... A smart plan. Unfortunately for him, though, the Justice Department is almost certain to question North on the pesky matter in the coming months to bolster its lawsuit against North's gunrunning collaborators, Richard Secord and Albert Hakim. The lawsuit seeks to recover $10 million, skimmed off the top off Iran-Contra dealings, which the two have squirreled away in a Geneva bank account.

Christopher Drougol On BNL

On 9 November Christopher Drougol, the former manager of the Atlanta Branch of the BNL, appeared before the House Banking Committee (see ASM No. 22 p. 3). His testimony reads like an international banking thriller, describing machiavellian power struggles between the various BNL offices, pro forma US regulatory action, and the Italian government's close association with the BNL.

He asserted, as he has all along, that the General Director and other high BNL officials knew of his loans to Iraq. But, because the bank operated on verbal authority, Drougol was not able to produce a "smoking gun" sufficient to satisfy most members of the Committee present. Drougol "was aware at all times that the policy of BNL was to further the foreign policy concerns of both the US and Italy." He described incidents which led him to believe that US intelligence services were "fully aware and supported BNL Atlanta's activities." "Certainly, our loans to Russia and Iraq, much of which was conducted by telex and telephone, would have been the subject of interception by US authorities. In addition, the USDA officials, who received copies of all documentation, should have been alerted to the considerable exposure BNL had to Iraq. The Commerce Department also participated in the yearly negotiations for CCC allocations..."

DOD Bills, Foreign Aid Appropriation Signed Into Law

Most changes to arms export and military aid policy are enacted through the annual foreign aid and Department of Defense budget bills. The President recently signed the fiscal year 1994 bills into law, and the relevant new policy is highlighted below. (For background descriptions on H.R.2295, see ASM No. 21. For background on H.R. 2401, see ASM No. 22.)

The Bills at a Glance

H.R. 2295, The FY1994 Foreign Operations, Export Financing and Related Programs Appropriation Act, was signed into law (as Public Law 103-87) on 30 September. The Act provides nearly $13 billion in foreign aid and programs, nearly $1.4 billion less than the Administration requested and $1 billion less than was funded last year.

H.R.2401, National Defense Authorization Act for FY 1994, was signed into law (as Public Law 103-160) on 30 November. It authorizes $275.6 billion in outlays for Department of Defense and weapons-related Department of Energy programs.

H.R.3116, FY 1994 Department of Defense Appropriations Act, was signed into law (as Public Law 103-139) on 11 November. It appropriates $241 billion in DOD expenditures.

Funding Denied for `Kempthorne' Program

Proponents and opponents alike can claim victory in the outcome of the House- Senate conference on the "Kempthorne Amendment" (see ASM No. 22 p. 1). "Congress Backs Loan Guarantees" trumpeted Defense News, a leading US military weekly, in a bold, front-page headline (8-14 November 93). And, indeed, PL 103-160 maintains the Senate bill's $25 million in funding authority to underwrite up to $1 billion in loans. But the conferees modified the provision somewhat, requiring Presidential certification within six months that the Administration actually intends to use the money. Since the Administration repeatedly (although rather anemically) stated its opposition to a loan guarantee program this year, the requisite Presidential certification is not expected.

The Act also mandates that the President must certify to Congress that the program is "consistent with the policy of the United States regarding conventional arms sales and nonproliferation goals" before the money may be released. This provides another practical hurdle to use of the guarantees, since the Administration as yet has no policy on conventional arms non-proliferation, and has apparently just undertaken in earnest the difficult task of formulating one.

Most significantly, PL 103-139 declined to actually appropriate funds for the program, effectively blocking it during the current fiscal year unless money is reprogrammed from some other DOD account or appropriated in a supplemental budget bill. Given the perceived money crunch on at the Pentagon, this is not likely.

Despite their apparent victory, opponents remain cautious. Industry continues to lobby hard for the program (claiming every year of delay costs 20,000 jobs), and the issue is certain to be revisited during next year's funding cycle. In fact, the Administration is likely to include the program in its FY1995 DOD budget request. The House's surrender on the issue in the authorization conference sets a precedent for future support of such a program.

Military Aid

The Kempthorne program notwithstanding, military aid is appropriated in the annual Foreign Operations Act. Funding levels appropriated by PL 103-87 are summarized below.

Programs for FY1994 
                                     (in $millions)
Foreign Military Financing (FMF)                                            
 comprising in part:
   Israel                                   1,800.0
   Egypt                                    1,300.0

 loan guarantees                               46.5
 underwriting loans of up to:

   Portugal                                    81.0
   Greece                                     283.5
   Turkey                                     405.0

Internat'l Military Education and Training     21.2

Anti-Terrorism Assistance                      15.2

International Narcotics Control               100.0

Excess Defense Articles                       250.0

Prepositioned Stockpiles                      292.0

Drawdown                                       75.0

Several restrictions were placed on the provision of military aid. No direct funding may be provided to Serbia or Sudan, no indirect funding may be provided to North Korea, China or Laos, and neither direct nor indirect funding may be provided to Cuba, Iran, Iraq, Libya, Syria or Vietnam. Funding is prohibited to countries "whose duly elected head of government is deposed by military coup or decree." The bill specifically prohibits the provision of FMF funds to Guatemala, Liberia, Malawi, Peru, Sudan and Zaire.

Bilateral aid to any country that grants sanctuary to terrorists or "otherwise supports international terrorism" is prohibited. No aid may be granted to any country which sells lethal military equipment to a government which the Secretary of State has determined to be a "State Sponsor of Terrorism" (see ASM No. 22 p. 7). No funds appropriated for military aid or arms sales programs may be used to provide assistance to any country not in compliance with United Nations Security Council sanctions against Iraq, unless the President waives the provision.

The law mandates "heightened scrutiny" for aid to Afghanistan, Cambodia, Colombia, El Salvador, Guatemala, Haiti, Indonesia, Jordan, Liberia, Malawi, Nicaragua, Peru, Sudan, Togo and Zaire. The relevant committees (Foreign Af- fairs/Relations and Appropriations) must be notified before any aid is disbursed to these countries.

Foreign aid is prohibited to countries that have been in default to the United States government for more than one calendar year, with the exception of Nicaragua and drug-war aid to Colombia, Bolivia and Peru.

Antipersonnel Landmine Ban Extended

PL 103-160 extends the ban on exports of antipersonnel landmines initiated last year (see ASM No. 18 p. 3) for three more years. In addition, PL 103-139 appropriates $10 million for technical assistance, training and equipment for landmine clearing.

Defense Industry Conversion

PL 103-139 appropriates $2.491 billion in defense conversion and transition programs. The lion's share of this funding (approx. $1.7 billion) goes to "dual-use partnerships" for industry, with only $39 million slated to assist communities affected by base or plant closures. PL 103-160 maintains the ban on the use of conversion funds for loan guarantees contained in the House version of the authorization bill. Congress Blocks Pentagon Ban on FMF for Direct Commercial Sales In June Deputy Secretary of Defense William Perry decreed that, effective 1 January 1994, FMF funds could no longer be used for direct purchases of military goods or services from commercial sources (see ASM No. 21 p. 2). Such funds had to be used through the government's Foreign Military Sales (FMS) program. Weapons contractors and the government of Israel lobbied heavily against the ban.

PL 103-87 (Section 572) blocks the change in policy until the Secretary of Defense submits a report to Congress taking into consideration the views of affected parties. The report is to assess the strengths and weaknesses of both the FMS and Direct Commercial Sales (DCS) programs, and to determine the amount of time needed to allow a seamless transition to the proposed changes. The Secretary of Defense is mandated to solicit input for the report from the State Department (which administers the DCS licenses), the National Security Council, foreign countries which purchase American weapons, and US military contractors. "All views solicited under direction of this subsection shall be included in the final report submitted to Congress," the law directs. The report, due by 1 January 1995, is to be provided in both a classified and unclassified form.

The law also directs the Pentagon to conduct audits of all private firms which have made contracts directly with foreign governments, financed by FMF.

Deobligated Funds Roll Over

For the first time, FMF appropriated but not spent by the recipient country by the end of fiscal year 1993 will not be returned to the Treasury, but will continue to be available during the current fiscal year.

Non-Proliferation and Disarmament Fund

PL 103-87 appropriates $10 million for a Non-Proliferation and Disarmament Fund to promote bilateral and multilateral disarmament activities, including those in the former Soviet republics and international organizations.

Excess Defense Articles

PL 103-87 (Section 555) authorizes nonlethal excess defense articles (EDA) to be provided to any country considered eligible under this act to receive aid (see "Military Aid"). This greatly expands the number of countries qualified to receive non-lethal EDA. For lethal EDA, a special justification is still required except for southern flank NATO members, major non-NATO allies near NATO's southern flank and drug warring countries. Congressional notification is re- quired, as for any other transfer of military goods or services, and the original acquisition cost of the article must also be included. Up to $250 million of EDA (original acquisition value) may be given away in FY1994.

Special Defense Acquisition Fund Zeroed Out

PL 103-87 "decapitalizes" the Special Defense Acquisition Fund (SDAF). The SDAF was created with appropriated funds in 1981 to procure and stockpile popular weapons for quick export. By 1987 it had become a self-sufficient revolving fund of receipts from sales of SDAF stocks. Since then, the foreign aid appropriations bill has set a ceiling on the amount of money that could be obligated to the SDAF annually. In FY1993, $225 million was approved for the fund. This law reduces the FY1993 obligational authority to $160 million and provides none for FY1994. Funds raised through selling off SDAF-stockpiled weapons in FY1994 are expected to total $266 million. This money will be deposited in the Treasury as miscellaneous receipts.

Annual Report on Military Expenditures and Arms Control

Congress directs the Secretary of State to provide an annual report on military expenditures of countries receiving US aid from the US. The report is to be submitted along with the State Department's annual Country Reports on Human Rights, due in February. This report will provide information and estimates on: current military spending and trends in military spending; spending on health care and education; a description of the size and political role of the armed forces; a description of efforts by the country and by the United States to encourage reductions in military spending; a description of participation in the UN Register of Conventional Arms; and an assessment of willingness to engage in regional talks aimed at reducing military spending.

DSAA Budget Reduced

PL 103-87 reduces the operating budget for the FMS program from $300 million in FY1993 to $290 million for FY1994. This covers expenses incurred by Department of Defense agencies in preparing arms sales paperwork and personnel to run the program.

The funds are derived through an administrative surtax of 3-5 percent of contract value charged on all FMS, as required under Sections 21(e)(1)(A) and 43(b) of the Arms Export Control Act. No budgetary outlay is involved, but the Appropriations Committee sets an annual ceiling on FMS operating expenditures. Congress expressed concern last year that the use of these funds needed greater scrutiny and recommended that estimates of how the FMS surcharge is spent should be included in the FY1994 budget submission. Congress warned that further reductions will be made unless such an estimate is provided with next year's budget documents.

The surplus funds are deposited into a Foreign Military Sales Trust Fund account in the US Treasury.

Arms sales and the Arab League Boycott

Section 550 of PL 103-87 states the sense of Congress that the President should "take into consideration the participation of any country in the primary boycott of Israel and the secondary and tertiary boycotts of American firms that have commercial relations with Israel when determining whether to sell weapons to said country." A report to Congress is required on steps the President is taking to bring about an end to the primary, secondary and tertiary boycotts of Israel.

Prepositioned Stockpiles and Drawdown Authority

The FY1994 bill mandates $200 million for weapons stockpiles in Israel, up to $72 million for stocks in South Korea, and $20 million for stocks in Thailand.

Up to $75 million in weapons can be drawn from Pentagon stocks and provided in emergency military assistance to any country, as determined by the President, in FY1994.


If the UN arms embargo is lifted, the President may give $50 million of weapons to Bosnia in FY1994.

Proliferation Studies Mandated

Section 1601 of PL 103-160 calls on the President to conduct a study of factors contributing to the proliferation of "strategic and advanced conventional weapons," and of policy options available to the United States to inhibit such proliferation. To help in the task, the President is directed to appoint five Advisory Board members by 15 December. Members should be "persons in private life who are noted for their stature and expertise in matters covered by the study...from diverse backgrounds." The President's report, along with the comments of the Advisory Board, are due to Congress by 1 June 1994.

Section 1606 of PL 103-160 directs the formation of a "Joint Committee for Review of Proliferation Programs of the United States," to comprise the Secretaries of State, Defense and Energy, the Directors of Central Intelligence and the Arms Control and Disarmament Agency, and the Chairman of the Joint Chiefs. The Committee is to produce a report (in both classified and unclassified versions) to include: a complete list of all existing, planned and proposed intelligence, surveillance and weapons programs to support nonproliferation and "counterproliferation"; a discussion of existing and planned capabilities of the Pentagon to detect, monitor and "assist in the interdiction and destruction of weapons of mass destruction, related weapons materials, and advanced conventional weapons." The report is due by 1 May 1994.

Section 1422 of PL 103-160 directs the Secretary of Defense and the Director of Central Intelligence to submit a report on the effect of increased reliance on dual-use technologies on the ability to control proliferation-related exports. The report is due to Congress by 30 May 1994.

Sec. 1154 of PL 103-160 directs a report by the Secretaries of Defense and Energy on personnel required and available to implement weapons of mass destruction-related export controls. The report is due to the House and Senate Armed Services Committees and the Senate Governmental Affairs Committee by 30 May 1994.

Recent Government Publications

Angola: The Aftermath of Elections (hearing before the Subcommittee on Africa of the House Committee on Foreign Affairs, 19 November 1992), USGPO: 1993, 26 pp.

Competitiveness of the Aerospace Industry (hearing before the Senate Committee on Commerce, Science, and Transportation, 19 May 1993), USGPO: 1993, 86 pp.

"Conventional Arms Transfers in the Post-Cold War Era," CRS Report for Congress [93-852F], Richard F. Grimmett, 28 September 1993, 6 pp.

Defense Conversion Initiatives: Progress and Plans (hearing before the Technology, Environment and Aviation Subcommittee of the House Committee on Science, Space, and Technology, 20 July 1993), USGPO: 1993, 99 pp.

Defense Trade Advisory Group (DTAG): List of Members and Affiliation, and Minutes from the Third Meeting, held on 2 February 1993, Department of State, Office of Politico-Military Affairs, 1993.

The Drug War: Columbia is Undertaking Antidrug Programs, but Impact Is Uncertain [GAO/NSIAD-93-158] August 1993.

"Foreign Aid: Clinton Administration Policy and Budget Reform Proposals," CRS Issue Brief [IB93060], Larry Q. Nowels, updated 15 October 1993, 15 pp.

Foreign Assistance Legislation for Fiscal Year 1994, Parts 1,2,8 (hearings and markup before the House Foreign Affairs Committee, 3 March, 21, 28 April, 11-12, 18 May, 8 June 1993), USGPO: 1993, 315 pp.

Foreign Military Aid to Israel: Diversion of US Funds and Circumvention of US Program Restrictions [GAO/T-OSI-94-9] 27 October 1993, 36 pp.

"Greece and Turkey: Current Foreign Aid Issues," CRS Issue Brief [IB86065], Carol Migdalovitz, 4 November 1993.

"Israel: US Foreign Assistance," CRS Issue Brief [IB 85066], Clyde R. Mark, 14 October 1993, 14 pp.

Joint Military Operations: DOD's Renewed Emphasis on Interoperability Is Important but Not Adequate [GAO/ NSIAD-94-47], October 1993, 38 pp.

Need to Reform US Export Controls (hearings of the House Foreign Affairs Subcommittee on Economic Policy, Trade and Environment, 9 and 23 June 1993) USGPO: 1993.

Operation Desert Storm: Casualties Caused by Improper Handling of Unexploded U.S. Submunitions [GAO/NSIAD-93-212] August 1993, 21 pp.

"Pakistan Aid Cutoff: U.S. Nonproliferation and Foreign Policy Considerations," CRS Issue Brief [IB90149], Richard P. Cronin, 3 November 1993, 15 pp.

"Procurement Prices Paid for Aircraft Weapons Systems for Foreign Military Sales," Audit Report No. 93-163, Department of Defense, Inspector General, 2 September 1993.

Proliferation Watch, US Senate Committee on Governmental Affairs, Randy Rydell, ed., Vol 4 No 4 (July-August 1993).

Proliferation Threats of the 1990s (CIA Director James Woolsey before the Senate Governmental Affairs Committee, 24 February 1993) USGPO: 1993, 192 pp.

Report on the Bottom-Up Review, Department of Defense, October 1993, 109 pp.

A Review of US Policy and Current Events in Kenya, Malawi and Somalia (hearing before the Subcommittee on Africa of the House Committee on Foreign Affairs, 23 June 1992), USGPO: 1993, 187 pp.

"Somalia: Arms Deliveries," CRS Report for Congress [93-934F], Richard F. Grimmett, 28 October 1993, 6 pp.

"Turkey: Ally in a Troubled Region," CRS Report for Congress [93-835F], Carol Migdalovitz, 14 September 1993.

Weapons Souvenirs (hearing before the Oversight and Investigations Subcommittee of the House Armed Services Committee, 18 March 1993) USGPO: 1993, 140 pp.

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