Sales of Defense Systems Abroad Critical to National Security

Foreign sales of defense equipment are big business for our nation. Last fiscal year, exports of defense and aerospace products exceeded 40 billion dollars. Overall the industry employs 800,000 workers.

These sales help our national security posture in a variety of ways:

• They sustain production lines in the face of dramatically decreased U.S. defense budgets,
• They spread the overhead across a larger business base, thereby lowering the costs of weapons systems for the U.S. government,
• They are critical to U.S. interoperability with our foreign-nation allies.

But the United States, by any means, is not the only supplier of defense equipment in the world. During the past several decades, the technological sophistication and weapon-production capacity of developed nations have increased significantly vis-a-vis the United States. Nations formerly dependent on the United States for their defense materiel have developed very capable, indigenous defense industries. Unfortunately, in many cases, the indigenous industries have too small a national market to support their infrastructure. Accordingly, they must augment their domestic defense sales with exports, in order for the industries to remain viable.

Aggressive Competitors
So the United States finds itself with many aggressive competitors seeking to match U.S. equipment technologically and beating the United States in a business sense.

Specifically, this means many foreign governments, for example, provide various forms of financial assistance to their industries-such as export loan guarantees and other financial packages, which make it possible for cash-poor customers to purchase big-ticket defense products. Further, these U.S. competitors get excellent marketing support from their parent governments. Finally, many of our competitors have limited or no export restrictions on military equipment.

How does the United States compare? First of all, we have very restrictive export restrictions for arms sales. This system, established by the Arms Export Control Act of 1979, requires both the Defense and State Departments to approve sales of military equipment.

Unfortunately, the approval process for arms export licenses is not only torturous, but long. Secondly, there is little export financing provided by the government. Defense equipment cannot take advantage of the Export-Import Bank and, while a formal program for defense equipment was established, it has proven difficult to use and, accordingly, rarely is used. In addition, little marketing support is provided by the Defense Department.

Recently, attention has been focused on the frustration experienced by defense firms as a result of slow processing of arms-export licenses. The horror stories are numerous-with many taking up to 100 days to obtain approval. During the Kosovo conflict, the State Department took more than two months to approve a license to sell 35 flares to the Italian Coast Guard.
Most recently, NDIA objected to a State Department mandate requiring an export license for chemical demilitarization equipment, because the technology already was in the public domain.

But all is not lost.

John Hamre, until recently the Deputy Secretary of Defense, kicked off internal changes at the Pentagon in order to facilitate routine export approvals for industry. He chartered a group to re-engineer the system and make it not only more customer-friendly but more customer responsive.
But much remains to be done.

The State Department habitually is understaffed and continues to rely on paper-based transactions, as opposed to electronic procedures. Recently, the agency announced that it plans to re-engineer the system, but the proof of the proverbial pudding will be in the eating, as they say.

Educational Campaign
During the next several months, NDIA will mount both an educational and an advocacy campaign. From an educational perspective, we hope to ensure that Congress and other decision-making authorities are aware of the importance of the defense and aerospace markets to the United States, as well as the archaic, bureaucratic restrictions in place. From an advocacy perspective, we want to encourage the government agencies involved to step up their efforts to streamline the system.

Topics: International, Security and Counterintelligence, Foreign Military Sales