Arms Sales Monitor #24, March 1994

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No. 24 (15 March 1994)

White House Reviews Policy...While Pentagon Makes It

Now it appears that the results~anxiously anticipated by concerned members of Congress, peace and arms control activists, and weapons exporters alike~will probably not be made public until mid-Summer at the earliest. That is when a Congressionally- mandated panel of (still unnamed) experts is to have completed its study of conventional arms proliferation and the means to control it (see ASM No. 23 p. 9).

But time stands still for no one. While the Administration drags along in its review, much policy is being made~mostly by the Pentagon, but also by Congress. Some recent initiatives are highlighted in this ASM.

Clinton Admin. Watch
Selling Weapons Elevated to National Security Interest

In a 5 January memo, Defense Secretary Les Aspin announced that Pentagon assistance to the U.S. arms industry at the Asian Aerospace '94 arms bazaar (held in Singapore, 22-27 February) is "in the national security interests of the United States."

U.S. arms manufacturers used to pay for the leasing, transport and insurance of Pentagon-owned weapons for display to foreign customers, but since the 1991 Paris Air Show, the military services have delivered U.S. military equipment to shows at no cost to industry. The General Accounting Office reported in March 1993 that Pentagon participation at six arms bazaars since 1991 has cost taxpayers over $3.5 million. Taxpayers also picked up the $18.9 million tab when the Marines crashed an AV-8B aircraft returning from the 1992 Singapore air show.

Opposed to the use of taxpayer funds for arms marketing, Rep. Howard Berman and Sen. Joseph Biden sponsored a provision in the FY 93 DOD authorization bill requiring a "national security" certification before direct DOD participation at arms bazaars is permitted (see ASM No. 18 p. 3). Industry has been lobbying for such a certification since the law was enacted (see ASM No. 23 p. 6).

Secretary Aspin contended that an "impressive display of U.S. defense technology at Asian Aerospace `94...will provide significant foreign policy dividends for a relatively modest cost." Pentagon participation at the show will demonstrate the United States's unflagging commitment to Pacific security, he said, in case the hundreds of thousands of U.S. troops tasked to the region do not suffice.

Perhaps more to the point, the Secretary cited a need to match the presence of other arms vendors at the show. "[E]conomic competitiveness is an integral part of our national security....U.S. industry faces formidable competition from other nations who are actively marketing their equipment globally," Aspin said. Russian, European and American firms are all competing fiercely for the lucrative East Asian market, the only area in the world where military budgets are on the rise.

In fact, American government and industry dominated the show; some 75 U.S. military personnel and scores of contractors attended. The Pentagon flew in 20 planes and helicopters, many of them front- line systems. In addition, industry displays showcased precision- guided munitions such as Paveway laser-guided bombs, Javelin and Hellfire II anti-tank missiles, Patriot and Hawk surface-to-air missiles and Sidewinder and Sparrow air-to-air missiles.

The cost to taxpayers for the show was estimated by the Pentagon at $575,000.

Sales of Non-Standard Weapons

A controversy continues to brew over the export of the Advanced Self-Protection Jammer (ASPJ). Manufactured by Westinghouse and ITT, the electronic radar jamming system was terminated by the Pentagon in 1992 after failing its operational testing.

In September 1993, Undersecretary of Defense John Deutch reaffirmed Pentagon policy that no unproven weapons systems would be exported by the U.S. government through the Foreign Military Sales (FMS) program (see ASM No. 21 p. 3). Apparently, however, an FMS agreement for the jammer had already been signed with Korea, as part of the 1991 Korean Fighter Program sale of 120 F-16 fighters. William Perry, then Deputy Secretary of Defense, informed the Korean Minister of National Defense in December (1993) that although the Pentagon could not sell the ASPJ through FMS channels (rather Korea must buy it directly from the manufacturer), integration of the system into the fighter jets would be assured through the FMS program.

In a 22 February letter to Secretary of Defense Perry, Sen. David Pryor (D-AR), a dogged opponent of the ASPJ, wrote: "By offering full integration of the ASPJ, you have provided U.S. government support for an unproven jammer. Even worse, your actions could expose our government to costly liabilities, such as the cost of maintaining and fixing these systems after they are sold over-seas. Given the problems ASPJ encountered during development and operational testing, the cost could be substantial."

Other countries are apparently lining up for the failed system: In addition to South Korea, the State Department has approved export of the ASPJ to Finland, Egypt, Kuwait, Switzerland, Greece and Turkey . This marketing success has Sen. Pryor and Sen. Philip Roth (R-DE) perplexed. They wonder whether ITT and Westinghouse have misrepresented the testing data on ASPJ and U.S. government policy toward the system. The two wrote Secretary of State Christopher on 10 February urging him to temporarily suspend all export licenses for the system until a GAO review of the matter is complete.

The GAO is studying the marketing of the weapon and, more importantly, the implications of permitting the export of non- standard (and sub-standard) goods to allies (Inside the Navy 21 Feb. 1994). In addition to liability issues, security concerns are raised. One of the main rationales for U.S. arms exports is increased "interoperability." Selling non-standard equipment obviates that rationale. Further, it may require the development of countermeasures to the system sold. And, in this case, Senators Pryor and Roth fear that exports are a trojan horse for a domestic resurrection of the ASPJ program.

Counterproliferation: Bombing as Arms Control?

At a 9 December speech at the National Academy of Sciences, then Defense Secretary Les Aspin unveiled the Pentagon's "Defense Counterproliferation Initiative." The plan is predicated on the assumption that export controls and diplomatic suasion will not stop the proliferation of weapons of mass destruction (WMD). Counterproliferation emphasizes the development and procurement of hardware~sensors, defenses, and new offensive weapons~to deal with undesirable proliferation. Military strikes with "improved non- nuclear penetrating munitions" would be undertaken preemptively to disable WMD programs.

The plan also calls for increased international cooperation, in particular, seeking to spread R&D costs for new weapons and defenses among our allies. U.S. allies, however, were reportedly not enthusiastic about the plan when it was presented to them at the NATO summit in January. Some questioned whether ballistic missile defenses are feasible, effective, affordable or even desirable. Others were concerned about using preemptive strikes. Critics pointed to the ineffectiveness of the Gulf War bombing campaign in destroying Iraq's WMD programs and mobile ballistic missiles.

Pentagon officials have said that the counterproliferation effort will have no effect on the sale of conventional weapons. Press reports quote a Pentagon official as saying that U.S. military exports are "denuded" of their ability to deliver nuclear arms or other unconventional weapons, although he acknowledged that some nations, such as Israel, "tend to put them back in" . In addition, Gordon Oehler, head of the CIA's Nonproliferation Center, said at a Senate hearing in February 1993 that U.S.-supplied F-16 aircraft are Pakistan's probable means of delivering a nuclear weapon (see ASM No. 19 p. 3).

The Drug War Comes Full Circle: Fighting Production at the Source

Following a government-wide, six-month policy review (Presidential Decision Directive 14 on U.S. Counternarcotics Policy in the Western Hemisphere), the Pentagon's counternarcotics office determined that its interdiction policy was a failure. Instead of using U.S. military assets to detect and monitor drug transshipment, the Pentagon will work (again) to combat cocaine and other drug production at the source. The policy shift is likely to result in increased training, communications and surveillance assistance, along with continued transfers of Excess Defense Articles to drug producing countries.

Meanwhile, the State Department is seeking to give aircraft to Andean countries, but with little success. In the mid 1980s Congress became concerned that aircraft donated to fight drug production in South and Central America were being used to counter insurgencies. In 1986, Congress legislated that the State Department retain title to all drug war-related aircraft provided to foreign countries. The result is the "Bureau of International Narcotics Matters (INM) Airwing" a State Department fleet of 46 aircraft (with 10 currently on lease to Bolivia).

In 1992, Congress retreated and allowed the President to transfer title of these aircraft if doing so was in the national security interests of the United States. Since then, the State Department has attempted to give these aircraft away to the governments of Bolivia, Colombia and Peru. However, the three governments face financial and technical hurdles to absorbing the aircraft at the present time. The INM estimates that it will be 3-5 years before Bolivia and Peru "can assume primary responsibility for their counternarcotics aviation units."

New Export Admin. Act: Proliferation vs. Export Promotion

On 24 February, the Administration sent Congress a comprehensive revision of the 1979 Export Administration Act (EAA). This law governs the export of items with significant military as well as commercial uses, such as computers, precision machining equipment, etc. (See ASM No. 23 p. 5.)

The Administration has attempted to strike a balance between the need to restrict potentially dangerous dual-use exports, which could contribute to chemical, biological and nuclear weapons and delivery systems, and to promote legitimate trade in these same high technology exports, which the Administration views as key to American economic strength.

The Administration's compromise is to place much greater emphasis on multilateral export controls. Exporters have been arguing successfully for "a level playing field" vis-a-vis their competitors. Deconstructed, this means industry does not want to be unilaterally restricted in any way that other countries' industries are not, and they want as much government subsidies and assistance as other countries' industries receive. The result is that the least restrictive export policies dictate the world norm.

The business community opposes the Administration's draft law, believing it still relies too heavily on unilateral export controls. Industry and exporters favor their draft version of the EAA (S.1846/H.R.3412), sponsored by Sen. Patty Murray (D-WA) and Rep. Toby Roth (R-WI).

The arms control community is dissatisfied with the bill in that it greatly weakens the United States's credibility in pushing for global nonproliferation norms.

Powerful members of Congress reside in both the nonproliferation and high-tech trade promotion camps, determined in large part by whether the member represents a high-tech manufacturing area.

The House is marking up the administration's draft bill (H.R.3937) on 10 March. The bill has not been formally introduced in the Senate yet. Congress is hoping to pass the new EAA by 30 June, when the old bill expires, but given the contentious nature of the debate, this deadline is probably not realistic.

Features of the New EAA Draft

The bill prohibits unilateral controls unless: --an embargoed item is unavailable outside of the United States; --the item cannot be controlled by means other than unilateral control; --the control will be effective in preventing, or establishing multilateral controls to prevent, a country's access to an item; --national security interests of restricting the export outweigh economic benefits of exporting, and; --such controls are enforceable.

A commitment to streamline the export licensing process and make all licensing decisions in 90 days or less.

A "presumption of approval...absent sound reason for denial based on national security, nonproliferation and foreign policy grounds."

An appeal process that would allow industry to challenge export controls that have an "unfair impact." Grounds for appeal would be:
--the item is currently or will soon be available from another country; --the controls are ineffective; and --differences between U.S. and foreign controls "will place the United States exporter at a near-term commercial disadvantage vis- a-vis its competitors abroad."

COCOM To Be Disbanded; Regime on Conventional Arms Being Cobbled Together

On the first of April (no kidding), the 17-nation Coordinating Committee for Multilateral Strategic Export Controls (COCOM) will close up shop. The regime~in many ways a multilateral version of America's EAA~was founded 44 years ago to stop the export of militarily useful items to Warsaw Pact member countries, and later expanded to include Mongolia, China and Laos.

Meeting in The Hague on 16 November 1993, COCOM member states (all NATO members except Iceland, plus Australia and Japan) decided to terminate COCOM and to create an as yet unnamed successor regime, which will focus on exports of conventional weapons and sensitive dual-use items to Third World countries of concern.

It was hoped that the new regime would be up and running by the time COCOM was disbanded. As of the end of February, however, working groups continued to meet to hammer out the structure and procedures of the forum and an export control list. That list will undoubtedly be much smaller than the munitions list, international atomic energy list, and industrial list (dual-use items) maintained by COCOM.

In addition, unlike COCOM, the new regime will have no veto mechanism; decisions to export, or not, will be left to the member states' discretion. According to a COCOM press release in November, the new body will serve as "a forum for discussion."

Membership will be expanded to include the former targets of COCOM controls. Russia, and East European countries with export control policies and a commitment to nonproliferation, will be invited to join as founding members. In addition, the COCOM "cooperating countries" will likely be members. These countries are: Austria, Finland, Hong Kong, Ireland, New Zealand, Sweden and Switzerland.

According to a communique from the November COCOM meeting, the new regime will not formally target any countries, but the United States is seeking to have the group focus on Iran, Iraq, Libya and North Korea. Since Iraq and Libya are currently subject to a UN arms embargo, and North Korea has no money, convincing European and other allies to choke off exports to Iran seems to be the central purpose of the exercise.

At a 24 February hearing before the Senate Banking Committee, Undersecretary of State for International Security Affairs Lynn Davis outlined problems in establishing the new forum: "Despite the very substantial progress, there are a number of outstanding issues. For one, how far will our European allies and Russia go in joining with us to keep dangerous technologies away from dangerous states?

"Second, will the new regime have real teeth~particularly when it comes to conventional weapons? We have proposed a regime which involves a serious information exchange and scope for consultation and concerted action where the risks are acute.

"There is also the further issue of Russia's acceptance of the obligations entailed by membership in the new arrangement~in particular, its commitment to responsible export control policy~a question we are continuing to discuss carefully and in detail with Russian authorities."

U.S.-Russian Statement on Conventional Arms

In a January 1994 "Joint Statement on Issues of Export Controls and Policy in the Area of Transfers of Conventional Weapons and Dual- Use Technologies," U.S. Secretary of State Christopher and Russian Minister of Foreign Affairs Kozyrev "welcomed the decision to establish a new multilateral regime for enhancing responsibility and transparency in the transfers of armaments and sensitive dual- use technologies." The communique continues:

The United States and Russia, as leading exporters of conventional weapons, military equipment and dual-use technologies, are convinced that additional measures are needed on an international basis to increase responsibility, transparency and, where appropriate, restraint in this area. They expressed their willingness to work with other countries in bringing about the early establishment of a new multilateral regime in order to achieve these objectives, which would supplement existing non- proliferation regimes, in particular through arrangements to exchange information for the purpose of meaningful consultations.

Foreign Assistance Act Rewrite

The Administration sent Congress a final version of its proposed reform of the 1961 Foreign Assistance Act (FAA), which governs the provision of military, as well as development aid (see ASM No. 23 p. 6). The bill, called the "Peace, Prosperity and Democracy Act of 1994," has been formally introduced as H.R.3765.

On 22 February, Caleb Rossiter, the Director of the Project on Democracy and Demilitarization, gave a very detailed analysis of the military aid provisions of the bill in testimony to the Senate Foreign Relations Subcommittee on International Economic Policy.

He asserted that, while the development aid title of the bill indicates real reform, the military aid titles represent a continuation of Reagan and Bush Administration policies "pushed past Congress during the Cold War frenzy of the 1980s and the arms sale frenzy in the aftermath of the Gulf War." If it is indeed to be a "reform" bill, nothing should be carried over from the 1961 FAA without a new justification, Rossiter argued.

In particular, Rossiter opposed the bill's support for training national police forces in furtherance of democracy:

"The guiding assumption of the military and police provisions of the bill appears to be that our security interests are best served by equipping and training the military and police forces of unstable, undemocratic regimes so that they can maintain internal order more professionally and deter aggression more convincingly. That was the theme of our security aid programs throughout the Cold War. I would like to see that tired rationale for continued security aid examined, country by country....Our goal in the 1990s should be to make the armed forces irrelevant in politics, not `influential'." He also challenged the bill's provisions on U.S. arms sales, human rights and democracy:

"...[T]his bill perfectly reflects President Clinton's policy toward the developing world: a lot of talk about how democracy and economic growth are essential to our own security and prosperity, but no action to restrain record levels of U.S. arms transfers to dictators, which block the transition to democracy and wreak havoc on the world economy. During fiscal year 1993, our government approved the sale of $25 billion of weapons to governments described as undemocratic in the State Department's most recent Country Reports on Human Rights Practices."

"The primary law that says what kinds of governments can and can't get our weapons is known as 502B, the human rights provision of the Foreign Assistance Act....It is clear that 502B is outdated....[T]his reform bill is the perfect opportunity to adopt a new standard, one that uses a positive certification and a more specific definition of the kinds of governments we should even consider propping up by strengthening their armed forces....[S]uch a standard has been developed in the Code of Conduct on Arms Transfers Act of 1993.... This Code of Conduct bill should be incorporated directly into the administration's foreign aid bill in place of 502B, which is renumbered 2303(e). That is the most important single step this Committee could take to make the foreign aid proposal truly a reform bill."

Rossiter made three further policy recommendations:

-- End cash flow financing for arms exports to Israel and Egypt. This practice allows the two countries to order weapons from the United States based on assumed steady levels of future military aid. Without an end to this financing scheme, reducing the annual $5 billion outlay in security aid to these countries in the futurewill be impossible, he said.

-- Reinstate the "section 657" reports. This report, required under section 657 of the FAA, required a listing of every weapon that went to every country from all of the U.S. government and private industry export programs. It was ended by President Reagan in 1981. "The most important technical reform that this Committee could make in the security aid area would be to bring back section 657, and add a requirement for best estimates of possible sales in the year to come. All these data exist in the U.S. government already: they are the building blocks that are used to come up with the country dollar totals for the previous fiscal year and the dollar estimates for the coming one...."

-- Prohibit covert arms supply and training. "[C]overt aid programs corrupt the recipients precisely because they are covert and have no leverage....If we are to engage in aiding foreign forces, we should do so openly."

Pentagon to Use Arms Sales Proceeds to Fund Procurement

At a 28 January meeting, officials from industry, the Defense Security Assistance Agency and the Air Force discussed a plan for funding new procurement through exports of older weapons. At the heart of the plan lie between 300-400 older model U.S. Air Force F- 16A/B fighters, but the other services are also considering using foreign sales as a way to fund new purchases.

Air Force Vice Chief of Staff Gen. Michael Carns, reportedly one of the chief architects of the plan, said the proposed sales do not involve obsolete weapons. Quite the contrary, "it's some of our best stuff," Carns said in a recent Wall Street Journal interview (14 Feb. 1994).

These sales would not go through the Excess Defense Articles (EDA) program. EDA given away or sold cheaply must first be declared "excess" and by law cannot be replaced. The F-16s are a newly developed category: "non-excess, to be replaced," according to Carns. Sales of some 360 F-16A/Bs would reportedly finance 88 new F-16C/D (Defense Daily 9 March 1994).

Countries under consideration to receive the planes include Egypt, Malaysia, Morocco, New Zealand, Singapore, South Korea, Thailand, Tunisia and East European countries.

Holum on "The Challenge of Conventional Weapons"

The following is taken from a speech by John Holum, the newly- confirmed Director of the Arms Control and Disarmament Agency, before the United Nations Conference on Disarmament (CD), 25 January 1994.

The devastating destructive power of nuclear weapons and the dangers posed by other weapons of mass destruction demand that they remain high on our arms control agenda, but they cannot be the only items. Another crucial element of the arms control equation is conventional arms.

We are reminded daily that the end of the Cold War has not by any means removed all conflict and danger from the world. Regional arms races and destabilizing accumulations of arms well beyond those realistically needed for defense are all too common. Reversing these trends is a global responsibility. We can help reduce the sources of tension that generate such accumulations. We must continue working to discourage the use of arms in resolving disputes.

...The immediate challenge to this forum is to promote greater transparency about security matters. Transparency in turn fosters the greater confidence and trust upon which stable political relationships can rest.

Last year the CD created the Ad Hoc Committee on Transparency in Armaments (TIA)....I strongly encourage you to build on the very useful work begun in the TIA Ad Hoc Committee last year....Some object that we should instead pay even more attention to weapons of mass destruction and the missiles used to deliver them. Let us discuss those concerns seriously, but let us not create yet another setting where we repeat ourselves endlessly to the point where other important business is neglected. If we slacken in our willingness to address the conventional weapons problems that first gave rise to the TIA Initiative, we will not make much progress, and we will begin to slide away from our global conventional arms control objectives.

Just as in the nuclear area, the work done here in Geneva on conventional arms will have a significant impact on related efforts elsewhere. We share your pride in the successful initiation of the UN Register of Conventional Arms. The first year's experience with the register was good~but not good enough. Eighty-two responses represent answers from less than half the UN's membership. We must do better; our goal should be universal participation, which your work here at the CD can encourage.

The United States also looks forward to the expert's meeting on these issues in New York next month. We will play an active part in moving their efforts to a successful conclusion.

Another conventional arms issue on which we have taken a first step relates to land mines. These weapons continue to wreak havoc on civilian populations whether or not they are any longer in an active war zone. The UN has supported by consensus the US-initiated resolution calling for a moratorium on the export of anti-personnel land mines. We must now take the next step and make the global moratorium a reality. In doing so, we not only protect the futures of many innocent civilians, but we also draw attention to a range of problems long thought too difficult for arms control to solve.

This process will also be fortified by this year's experts' deliberations leading to a review conference on the convention on weapons that may be deemed to be excessively injurious or have indiscriminate effects [aka: Inhumane Weapons Convention]. Although not presently a party to this convention, the United States will closely follow the progress of the conference as an observer, and the President intends to submit the convention to the United States Senate this year for advice and consent to ratification.

These positive developments can mutually reinforce one another, forming a tide that can break down resistance to progress on the conventional arms control agenda.

The UN Register of Conventional Arms

On 22 October the UN made public the data it had received from some 80 countries on arms imports and exports during 1992. The Register, established by a UN General Assembly vote in 1991, provides a count of seven categories of major weapons systems: tanks and armored vehicles, aircraft, ships, attack helicopters, missiles and large caliber artillery. The 1992 data confirmed U.S. dominance in global arms exports, with Germany number two; it also showed that Turkey and Greece were the leading importers of weapons in the categories covered.

All of the major supplying nations participated, but several major arms importers did not. Afghanistan, Indonesia, Iran, North Korea, Kuwait, Saudi Arabia, Syria, Taiwan (not a member of the UN), Thailand and the UAE are among the countries that did not provide data. Bills pending in Congress~the Code of Conduct on Arms Transfers Act (H.R.3538) and the Foreign Relations Authorization Act (H.R.2333) would condition U.S. arms sales on the recipient's participation in the Register. (The House version of H.R.2333 contains non-binding `Sense of Congress' language only (see ASM No. 21 p. 5).)

Senate Passes State Dept Authorization Bill; Conference Soon

On 2 February, the Senate passed its version of the Foreign Relations Authorization Act for Fiscal Years 1994 and 1995 (H.R.2333). The House passed the bill last June (see ASM No. 21 p. 3). A conference committee to reconcile differences between the two bills will commence shortly, possibly as soon as mid-March.

The Senate Foreign Relations Committee's mark-up of the bill was reported in ASM No. 22 p. 3. Arms sales-relevant amendments to the bill, passed from the Senate floor, are summarized below.

No arms sales to participants in the boycott. Section 703 modifies Section 322 of P.L. 102-138 (the Foreign Relations Authorization Act for FY 1992-93), so that the President should take steps to ensure that any Middle Eastern state which receives U.S. defense articles and services "does not participate in the Arab League primary or secondary boycott of Israel." The Secretary of State is required to submit a report to the Speaker of the House and the Chairman of the Senate Foreign Relations Committee on steps taken to ensure the end of the boycott.

Section 903 prohibits the sale or lease of defense articles to countries or organizations that have sought American firms' compliance with the boycott of Israel. The President may waive this requirement for one year if he determines that it is in the national interest to do so.

Reporting of offset agreements required. Section 715 requires that Congressional notification of a proposed arms sale include a description of any offsets agreement entered or proposed to be entered into in connection with the sale. Further, quarterly listings of arms sales are to include all offset agreements in connection with the sales of any weapons or related services. Section 716 prohibits arms manufacturers from making "third-party incentive payments for the purpose of satisfying, in whole or in part, any offset agreement."

ROK stockpile. Section 722 permits the Secretary of Defense to authorize, over the next two years, the transfer of "obsolete" or "surplus" Department of Defense equipment to the Republic of Korea. Equipment located in Korea may be transferred in return for compensation at least equal to the items' fair market value. Compensation may include cash, services, waiver of charges otherwise payable by the United States or other "items of value."

Senate urges lifting of arms embargo on Bosnia. Section 725 states the sense of the Senate that the President "should terminate the United States arms embargo of the Government of Bosnia and Herzegovina upon receipt from that government of a request for assistance in exercising its right of self-defense under article 51 of the United Nations Charter." Furthermore, the President should furnish the Bosnian government with "appropriate military assistance" if so asked.

Selective membership in MTCR. Section 730 requires the President to notify Congress 30 days before the United States takes the position within the Missile Technology Control Regime (MTCR) to support the admission of a country into the regime. The President must report to Congress the rationale for the country's admission.

In addition, the President must notify Congress 30 days prior to licensing for export technology intended for space launch vehicles, but controlled under the MTCR.

Section 757 states that "it shall be a rebuttable presumption" that when MTCR-controlled technology is exported to countries designated by the State Department to be state sponsors of terror (see ASM No. 22 p. 7), that technology is intended for use in a ballistic missile. Such exports would then result in the implementation of sanctions under U.S. law.

Partnership for Peace report. Section 753 requires the President to submit a report every six months on implementation of his "Partnership for Peace" initiative. The program is intended to increase cooperation between NATO and states of the former Warsaw Treaty Organization (WTO). The report is to include an assessment of the progress made by former WTO members in meeting the criteria for full membership articulated in Article 10 of the North Atlantic Treaty. The first report is due six months after enactment into law of H.R.2333.

Industry touchy about EDA. Section 756 requires the President to "consider the effects of the transfer of the excess defense articles [EDA] on the national technology and industrial base, particularly the extent, if any, to which the transfer reduces the opportunities" of American arms manufacturers "to sell new equipment" to that country. The measure applies to countries on the Southern and Southeastern flank of NATO, countries participating in antinarcotics programs, transfers to countries eligible to participate in the Foreign Military Financing program, and sales from stock and leases under the Arms Export Control Act.

Arms Control and Nonproliferation Act of 1994. Out with "Disarmament" and in with "Nonproliferation." Section 802 directs the revitalization of the Arms Control and Disarmament Agency (ACDA). $57 million in funding is authorized to run ACDA in FY 1994 and $59 million for FY 1995. The bill requires annual reports from ACDA on: arms control, disarmament and nonproliferation activities; the status of ongoing arms control, disarmament or nonproliferation negotiations; U.S. and other nations' adherence to arms control agreements.

Code of Conduct on Arms Transfers Act Gaining Support

Co-sponsorship of H.R.3538, the "Code of Conduct on Arms Transfers Act of 1993," is growing daily. The bill, introduced by Rep. Cynthia McKinney last November (see ASM No. 23 p. 1), would raise the level of scrutiny on arms exports to countries which: are non- democratic or abuse their citizens' human rights, are engaged in acts of aggression, or do not participate in the U.N. Register of Conventional Arms. The cosponsors as of early March:

Neil Abercrombie (D-HI) Lucien Blackwell (D-PA) Corrine Brown (D-FL) Maria Cantwell (D-WA) William Clay (D-MO) James Clyburn (D-SC) Barbara Collins (D-MI) Peter DeFazio (D-OR) Ronald Dellums (D-CA) Richard Durbin (D-IL) Lane Evans (D-IL) Eni Faleomaveaga (D- AS) Sam Farr (D-CA) Harold Ford (D-TN) Elizabeth Furse (D-OR) Henry Gonzalez (D-TX) Dan Hamburg (D-CA) Maurice Hinchey (D-NY) Andrew Jacobs (D-IN) Eddie Johnson (D-TX) Tim Johnson (D-SD) Mike Kopetsky (D-OR) Mike Kreidler (D-WA) John Lewis (D-GA) Carolyn Maloney (D-NY) Edward Markey (D-MA) Frank McCloskey (D-IN) Jim McDermott (D-WA) Martin Meehan (D-MA) Carrie Meek (D-FL) George Miller (D-CA) David Minge (DFL-MN) Patsy Mink (D-HI) Eleanor Norton (D-DC) James Oberstar (DFL-MN) John Olver (D-MA) Major Owens (D- NY) Donald Payne (D-NJ) Nancy Pelosi (D-CA) Timothy Penny (DFL- MN) Nick Rahall (D-WV) Charles Rangel (D-NY) Bernard Sanders (I- VT) Jose Serrano (D-NY) Karen Shepherd (D-UT) Pete Stark (D-CA) Bennie Thompson (D-MS) Robert Underwood (D-GU) Jolene Unsoeld (D-WA) Nydia Velasquez (D-NY) Melvin Watt (D-NC) Henry Waxman (D-CA) Lynn Woolsey (D-CA) Ron Wyden (D-OR) Albert Wynn (D-MD)

Industry Update
Profits Up, Employment Down

Despite much fretting and whining about decreased U.S. defense procurement, many of America's largest arms manufacturers scored record profits in 1993. According to the Aerospace Industries Association, 1993 saw total sales, sales to the Pentagon, civil sales, exports, new orders and employment all drop. But profits, as a percentage of sales and equity ratios, rose to levels not seen in over a decade~not even during the boom years of the Reagan build up. While total aerospace sales fell 10 percent, from $138 billion in 1992 to $124 billion in 1993, profits in 1993 were an astounding $5.463 billion, compared with a $1.836 billion loss in 1992.

This was accomplished by retaining core programs, dumping others and, of course, by `trimming the fat' off the workforce. Nearly 900,000 aerospace workers have been given pink slips since 1989. Aerospace industries fired nearly 3,200 people in November alone.

Meanwhile, the large arms makers are buying each other up. William Anders, CEO of General Dynamics, is pursuing a policy of "monetization" paying shareholders handsomely even at the cost of dismembering the firm. Loral, Lockheed and Martin Marietta have all made very large acquisitions recently (mostly of General Dynamics divi sions). Lockheed purchased the GD Tactical Military Aircraft division in 1993 for $1.52 billion. Loral has spent $1.65 billion buying LTV missiles, the aerospace arms of Ford and Goodyear, and the electronics divisions of Xerox and Honeywell. Martin Marietta, now the largest military electronics firm in the country, just purchased Grumman for $1.9 billion and GD Space Systems for $208.5 million. And Hughes bought GD Missile Systems in 1992 for $484 million.

Deals in the Works

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

Congressional Notification of Israeli Fighters Imminent

In late January, Israel announced it would purchase 20 McDonnell Douglas F-15E fighter-bombers, the most advanced warplane ever sold (see ASM No. 23 p. 5). The $2.05 billion order has been anticipated since the sale of 72 somewhat pared-back F-15E aircraft to Saudi Arabia in 1992. A larger production run of F-15E will reduce unit costs for both Israel and Saudi Arabia. Symbiosis.

Recent Government Publications

"Afghanistan: U.S. Policy Options," CRS Issue Brief [IB91111], Kenneth Katzman, 29 November 1993, 16 pp.

Agricultural Loan Guarantees: National Advisory Council's Critical Views on Loans to Iraq Withheld [GAO/GGD-94-24], October 1993, 36 pp.

Ballistic Missile Defense: Information on Theater High Altitude Area Defense (THAAD) System [GAO/NSIAD-94-107BR], January 1994.

"Chinese Missile and Nuclear Proliferation: Issues for Congress," CRS Issue Brief [IB92056], Shirley A. Kan, 18 November 1993, 15 pp.

Conventional Arms Control: Former Warsaw Pact Nations' Treaty Compliance and U.S. Cost Control [GAO/NSIAD-94-33], December 1993, 39 pp.

Country Reports on Human Rights Practices for 1993, Report Submitted to the Senate Foreign Relations Committee and the House Foreign Affairs Committee, prepared by the U.S. State Department, USGPO: February 1994.

Defense Conversion: Slow Start Limits Spending [GAO/NSIAD-94- 72], January 1994.

Developments in the Middle East (hearing before the House Foreign Affairs Committee, 21 October 1993), USGPO: 1994.

Export Control Reform in High Technology (hearing before the House Science, Space, and Technology Committee, 13 August 1993), USGPO: 1993, 178 pp.

Export Controls: Actions Needed to Improve Enforcement [GAO/NSIAD- 94-28], December 1993, 74 pp.

Foreign Aid Reform (hearing before the House Foreign Affairs Committee, 26 July 1993), USGPO: 1993, 72 pp.

Foreign Assistance: Clearer Guidance Needed on When to Use Cash Grants [GAO/NSIAD-94-30], December 1993, 47 pp.

Foreign Assistance Legislation for Fiscal Year 1994: Part 3 (hearings before the Economic Policy, Trade and Environment Subcommittee of the House Foreign Affairs Committee, 4, 12 May 1993), USGPO: 1993, 275 pp.

Iraq: U.S. Military Items Exported or Transferred to Iraq in the 1980s [GAO/NSIAD-94-98], February 1994.

Need to Reform U.S. Export Controls (hearing before the Economic Policy, Trade and Environment Subcommittee, House Foreign Affairs Committee, 9 and 23 June 1993), USGPO: 1993, 217 pp.

1994 Annual Report to the Congress on Foreign Policy Export Controls, U.S. Department of Commerce, 1994.

Nomination of R. James Woolsey (hearing before the Select Committee on Intelligence, 2-3 February 1993), USGPO: 1993, 122 pp.

Report of the Secretary of Defense to the President and Congress, January 1994, 327 pp.

Security Assistance: Need for Improved Reporting on Excess Defense Article Transfers [GAO/NSIAD-94-27], January 1994, 57 pp.

Small Arms Parts: Poor Controls Invite Widespread Theft [GAO/NSIAD- 94-21], November 1993, 40 pp.

"State Department Authorization, FY 1994-1995," CRS Issue Brief [IB93040], Robert G. Sutter, 7 December 1993, 12 pp.

"Taiwan: Recent Developments and U.S. Policy Choices," CRS Issue Brief [IB92038], Robert G. Sutter, 3 January 1994.

U.S. Policy on Conventional Arms Transfers (joint hearing before the Subcommittees on International Security and International Operations of the House Foreign Affairs Committee, 9 November 1993), USGPO: 1994, 121 pp.

Congressional reports and hearings can be obtained for free through the Congressional Committee or Subcommittee which issued them, or for a small charge through the Government Printing Office [(202) 783-3238]. GAO reports can be ordered by phoning (202) 512- 6000. They are free. CRS reports are free and can be requested through your Congressional Representative's office.

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