TIME: Almanac 1995

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<text id=94TT1736> <title> Dec. 12, 1994: Trade:Going Up, Up in Arms </title> <history> TIME--The Weekly Newsmagazine--1994 Dec. 12, 1994 To the Dogs </history> <article> <source>Time Magazine</source> <hdr> TRADE, Page 46 Going Up, Up in Arms </hdr> <body> To buttress industry at home and policy abroad, the U.S. becomes the arms merchant to the world By Mark Thompson/Washington Secretary of Defense William Perry was in a quandary. What if the Russians decided to sell more submarines to Iran? He couldn't tell them to stop--not with a straight face. "They observe that the U.S. is No. 1 on the list," Perry told Time after failing to persuade Moscow to halt such sales earlier this year, "and why should we be taking a holier-than-thou attitude and telling them not to sell their weapons?" That predicament is not new. The U.S. has always made arms, sold them and then criticized others for doing the same. But it was somewhat easier in 1986, when the U.S. accounted for only 13% of the world's arms exports. Today the American share of the weapons market is an overwhelming 70%. It was not supposed to be this way. After all, Bill Clinton's 1992 campaign platform called for curbing such commerce, and only two weeks after his election he repeated his pledge to do just that. Yet shortly after the President took office, his State Department put out precisely the opposite message, telling U.S. embassies to push arms deals as if they were agricultural or pharmaceutical exports. "We will work with you to help you find buyers for your products in the world marketplace," Commerce Secretary Ron Brown told U.S. weaponsmakers in 1993, "and then we will work to help you close the deal." Now the Clinton Administration is preparing to make explicit a long-unstated U.S. policy by declaring, probably early next year, that the continued well-being of the defense industry can be a decisive factor in approving specific weapons sales. "People can say it's disgusting," a U.S. arms seller says, "but foreign arms sales provide jobs, help maintain the industrial base and, in a Machiavellian world, give us power and influence in international relations." Already, the sales pitch is several decibels louder. On his trip to Latin America last month, Perry said he would entertain requests from Argentina and Brazil for the U.S. Air Force's frontline F-16 fighters. Washington once discouraged such sales. In April the Administration, reversing U.S. policy, permitted Mississippi's Ingalls Shipbuilding to begin talks on constructing diesel submarines--worth $350 million each--for Egypt and other countries. And Rockwell International Corp. has begun seeking foreign buyers for its $80 million-a-copy AC-130 gunship, a specially modified cargo plane that puts a 105-mm howitzer into the sky, where it can destroy distant targets with devastating precision. For nations that can't afford brand-new weaponry, the Pentagon is literally giving away older but still lethal pieces of its cold war arsenal. Pentagon officials say such gifts help nurture closer ties between U.S. and foreign militaries and save millions of dollars that the Defense Department would otherwise have to pay to scrap arms. Among recent donations: Egypt received 700 M-60 tanks and nearly 1,500 machine guns; Israel was handed 15 F-15 fighters and 16 CH-53 helicopters; Mexico took in 48,178 M-1 carbines. Greece and its nemesis Turkey--both U.S. allies that already fly F-16s--received freebies as well. Athens took in a fleet of 80 A-7 and F-4 warplanes, 671 M-60 tanks and a guided-missile destroyer; Ankara received 28 AH-1 helicopter gunships, 822 M-60 tanks and 72 self-propelled howitzers. Strangely, few of the beneficiaries of the largesse take advantage of the chance to view the gear before delivery. "Many countries," the General Accounting Office (GAO) notes, "decline the offer because they cannot afford the travel costs associated with the inspections." While the worldwide arms market shrank to $31.9 billion last year--less than half of 1988's $67.9 billion--the U.S. share has skyrocketed. Since the collapse of the Berlin Wall in late 1989, U.S. overseas weapons sales have totaled $82.4 billion, far ahead of the $66.8 billion in sales racked up by the rest of the world's nations combined. U.S. arms-transfer agreements in 1993 totaled $22.3 billion, eclipsing second-place Russia's $2.8 billion and Britain's $2.3 billion third-place finish. The Pentagon sponsored weapons sales to 86 nations; furthermore, Washington approved the shipment of $2.2 billion in free weapons and military supplies to some 50 countries and sanctioned commercial arms deals with 146 of the world's 190 nations. Predictably, the U.S. weapons-market share increase has come at the expense of its competitors. Between the four-year periods of 1986-89 and 1990-93, the value of Britain's exports shrank 76%, while Russian and Chinese exports fell 68%. But over the same time span, the value of U.S. contracts climbed 134%, according to recent calculations by Richard Grimmett, a Library of Congress expert on the arms trade. The U.S. dominance stems from Russia's economic woes, which have eliminated the Pentagon's major arms-sale rival, and from the performance of U.S. weapons in the Gulf War. While U.S. sales are cresting, deliveries, which lag behind orders, will grow for years to come. The Administration expects the U.S. to continue exporting more weapons than the rest of the world combined for the foreseeable future. U.S. officials say the sales foster good relations with other military forces, enable those countries to defend themselves better and reduce the price of U.S. weapons by spreading the cost over bigger production runs. "We're pushing hard for overseas arms sales to make up for the shrinking U.S. military budget," confides an arms marketeer at a major defense contractor. "It's a matter of survival." The Clinton Administration justifies American arms sales from another perspective. "All our arms-sale decisions optimize national security," an Administration official insists. "We're not letting sales simply float up to their natural level." Beyond that, he argues, different militaries can work together more easily against a common foe if they possess similar armaments. "The success we enjoyed in the Gulf War was due in some substantial measure to the interoperability of the allied forces," this official says. Besides, defense contractors are starved for work. "We're in a difficult time. Shrinking U.S. defense budgets add pressures to sell abroad." Many U.S. weapons now being built--including most state-of-the-art F-15 and F-16 fighters, M-1 tanks and AH-64 helicopter gunships--will be bound for foreign customers, not the Pentagon. The new policy being formulated by the Clinton Administration may include up to $1 billion in loan guarantees to finance more overseas sales. The Administration says such sales are not a domestic jobs program in disguise. "The basic reason for selling weapons overseas has been to advance our foreign policy goals," Pentagon spokesman Ken Bacon says. "It is not to create jobs in the U.S." Yet their domestic economic impact is considerable; the 1993 deals will keep half a million workers busy for a year, according to defense experts. Whatever the motive, the Pentagon and its suppliers are coming up with innovative ways to keep factories humming. The Air Force, for example, wants to sell some 300 used F-16s to such countries as Indonesia, Morocco, the Philippines and others that cannot afford new ones. It will then use the $2 billion profit from the sales to buy 75 new F-16s for itself. The McDonnell Douglas Corp. is helping Kuwait sell its fleet of A-4 attack planes, hoping that Kuwait will use the proceeds to buy the company's F-18s and AH-64 helicopters. Northrop Corp. may have been a bit too creative in its dealmaking. When Finland agreed to buy $3 billion worth of Northrop jets, the company pledged to sell $2 billion in Finnish goods in the U.S. Northrop then offered $1.5 million to the International Paper Co. if it would buy a $50 million papermaking machine from a Finnish company instead of its U.S. competitor. This led Senator Russell Feingold of Wisconsin to push a law through Congress last year barring such payoffs as part of U.S. defense deals. "I am deeply troubled," he says, "by a defense company paying off third parties to take jobs away from American workers." In fact, the weapons industry may be prospering at some expense to the taxpayer. Currently, the Pentagon is permitting Sweden to wiggle through a loophole in U.S. regulations that would require an overseas client to pay a share of a weapon's development. Sweden was willing to pay $300,000 apiece for the U.S. AMRAAM air-to-air missile. However, it balked at the additional $100,000-a-copy development premium for any weapon purchased through the Pentagon. So, with a wink from the Administration, Sweden will buy the missile directly from the manufacturer--and avoid a contribution to U.S. tax coffers. Meanwhile, the Administration's stepped-up arms sales rack up $1 million a day for everything from the salaries of Pentagon accountants to charges for shipping displays to overseas weapons shows. Taxpayers subsidize the industry in other ways as well. U.S. weapons sold to Israel and Egypt are largely paid for by the U.S. as part of its foreign-assistance obligations. And some taxpayers pay with their jobs: the U.S. is the only nation that allows countries buying its weapons with its money to demand that some of the resulting work be done in their country. The GAO recently found that $11.6 billion in U.S. arms sales led to $4.7 billion in "offsets" that required labor to be done in the purchasing nations. Those demands, funded in part by the U.S., eliminated an unknown number of American jobs. For example, of South Korea's recent purchase of 120 F-16s, only the first 12 planes will be made in Fort Worth, Texas. The rest will be built in Korea. In fact, unlike all 3,400 F-16s built so far, most of the Korean jets will be built not by a U.S. company but by the Samsung Aerospace Industries. "The Koreans," says Pat Lane, an International Association of Machinists union official, "are going to build a little more of each airplane until they have the capability to build the whole thing from scratch." Lockheed points out that the assembly of the plane's critical black boxes (which contain the electronics that allow the plane to fly and to fire its weapons) and most high-value work will remain in the U.S. But Seoul makes little secret of its goal--one which it is paying $5.2 billion to reach. "We want to build future jets in Korea," says Colonel M.H. Shin of the South Korean military, who is monitoring the program from an Ohio Air Force base. Critics argue that America's surging weapons sales will turbocharge regional arms races--66% of all U.S. exports go to Third World countries, among which are many fragile autocracies vulnerable to sudden power shifts. While funneling weapons abroad may delay the Pentagon's and its client industry's shrinkage, it perpetuates an addiction for military perquisites. As Randall Forsberg, director of the Institute for Defense and Disarmament Studies in Cambridge, Massachusetts, puts it, "The forces and defense industries needed by the industrial countries are largely a function of regional arms buildups created by their own arms exports." There have been reports of worrisome weapons deployment by American clients. William Hartung, author of a recent book on the U.S. weapons trade, says American arms are playing a role in 39 of the globe's 48 conflicts. The U.S. in 1990 halted exports of F-16s to Pakistan, but not before Islamabad may have secretly modified some to deliver its handful of nuclear weapons. A Senate committee recently noted it had received reports "that U.S. military equipment, including helicopters, has been used in attacks against civilians in southeastern Turkey." Turkey, a NATO ally, denies it has attacked its Kurdish minority with U.S. weapons."Most of the weapons we purchase from the U.S. are not suitable for those operations," says Namik Tan of Turkey's Washington embassy. "We use weapons from other countries, like Russia." Proponents of arms sales, of course, say the worries are groundless. Joel Johnson of the Aerospace Industries Association argues that it is smaller arms--not planes and tanks, which make up the bulk of American exports--that draw the most blood. "Far more people were killed in Rwanda with small arms and machetes," he says, "than when a million of the most heavily armed soldiers in history faced off in Desert Storm." Furthermore, U.S. officials insist that they rarely introduce the first version of an advanced weapon into a region. "We don't want to sell a gold-plated weapon to some country if the plain-vanilla version will do the job," an Administration official says. Sales to places like South Korea and Taiwan, for example, counter the capabilities of North Korea and China. In fact, officials say, the Administration must assure Congress that U.S. sales don't upset such balances. Still, there are few impediments to most sales. They occur automatically unless Congress votes against them, something that has never happened. Administration officials say sales are weighed on a case-by-case basis--but in practice this simply facilitates sales. "That way, the government can justify almost any arms sale," says a U.S. official involved in the trade. "Having formal guidelines--no sales to dictators, nondemocracies, or if a country opposes us at the U.N.--would really cut down on deals." Sending arms abroad may in the end be counterproductive. U.S. combat missions in Panama, Iraq, Somalia and Haiti were made more dangerous for G.I.s, Hartung says, because "their opponents had received either weapons, training or military technology from the U.S." Even Pentagon officials express concern about the consequences of all this dealmaking. U.S. troops, a Navy intelligence report warned last year, "are likely to face an increasing number of regional powers with relatively sophisticated weapons." Most of those weapons will have been made in America. BUY AMERICAN Top-10 purchasers of U.S. weapons <table> <tblhdr><cell><cell>Country<cell>In billions (1990-93) <row><cell type=n>1.<cell type=a>Saudi Arabia<cell type=n>$30.4 <row><cell>2.<cell>Taiwan<cell>7.8 <row><cell>3.<cell>Egypt<cell>4.4 <row><cell>4.<cell>Kuwait<cell>3.8 <row><cell>5.<cell>South Korea<cell>3.7 <row><cell>6.<cell>Japan<cell>3.6 <row><cell>7.<cell>Turkey<cell>3.3 <row><cell>8.<cell>Greece<cell>2.8 <row><cell>9.<cell>Finland<cell>2.4 <row><cell>10.<cell>Switzerland<cell>1.8 </table> Source: Congressional Research Service and Defense Budget Project </body> </article> </text>