THE ARMS TRADERS WEAPONS FOR THE WORLD Exporting Arms in the Reagan Era By William D. Hartung William D. Hartung is a fellow with the Council on Economic Priorities. THE IRAN/CONTRA scandal exposed a world of secret weapons shipments and shadowy arms dealers to the public, shredding what was left of the Reagan administration's credibility and calling into question its vision of how to conduct foreign policy. The attempt to subvert the will of Congress, the reliance on people like Iranian intermediary Manucher Ghorbanifar and Saudi arms dealer Adnan Khashoggi, and the use of weapons sales to conduct foreign policy are all grounds for public outrage. Nevertheless, the scandal accounted for a relatively small portion of the multi-billion dollar international arms trade. The largest deals have been conducted in full public view, rubber stamped by the U.S. Congress. The benefits skimmed off the top by the Ghorbanifars and the Khashoggis pale in comparison with the billions that General Dynamics, McDonnell Douglas and other large defense contractors have earned from government sponsored and subsidized sales under the Pentagon's Foreign Military Sales (FMS) program. These corporations are the real arms traders, and any attempt to restrict the deadly international traffic in weapons will eventually run up against their considerable financial and political clout. The Reagan years have been a boon to the corporate arms merchants. The administration's strong anti-communist and anti- terrorist rhetoric, along with its commitment to arming and training anti-communist governments and rebel movements, have helped create a favorable climate for arms sales. James Buckley, the conservative who President Reagan put in charge of arms exports at the State Department, immediately took the message of the new administration's commitment to deregulate the arms trade to the most sympathetic audience-the arms manufacturers themselves. In a May 1981 speech to the Aerospace Industries Association at Williamsburg, Virginia, Buckley attacked the Carter administration's policy of arms transfer restraint as a "naive" approach which "substituted theology for a healthy sense of self-preservation." He ridiculed legislative restrictions on arms sales and aid to countries which violated nuclear non- proliferation safeguards and internationally accepted standards of human rights as "well-intentioned" but ineffectual. And, he said, such efforts undercut important allies like Pakistan and Argentina, whose support in the global confrontation with communism was essential. Military contractors looking to increase their exports could not help but leave the meeting feeling that the Reagan administration would be a strong ally. The first sign that this pro-export rhetoric would indeed become official policy came with the release of the July 1981 Presidential Directive on arms transfer policy. Carter administration controls--some of which had been quietly shelved in the more conservative second half of the Carter term--were openly repudiated in the Reagan directive. Ceilings on the total volume of U.S. arms sales to the Third World, restrictions on being the first nation to introduce a more advanced level of weaponry into a region, and the so-called "leprosy letter" which had prevented U.S. government personnel overseas from actively promoting the sale of U.S. weapons to host governments were all eliminated in favor of a "case-by-case" approach. "When in doubt, sell" seemed to be the new motto. The words of the directive were unequivocal: "The United States... views the transfer of conventional arms and other defense articles and services as an essential element of its global defense posture and an indispensable component of its foreign policy." It didn't take long for the administration's commitment to its stated policy to be put to the test. The proposed sale of six advanced Boeing Airborne Warning and Control Systems (AWACS) radar planes to Saudi Arabia spurred a pro-Israeli lobby to take exception with Reagan's new policy. Opponents of the sale argued that the AWACS would allow the Saudi regime to conduct surveillance of Israel which could be used to mount an air attack with its expanding Air Force--the Saudis were already in the process of receiving F-15 fighter planes they had ordered from the United States in 1978. In the face of a 311 to 11 House of Representatives vote against the sale and mounting Senate opposition, President Reagan personally took up the Saudi's case. He lobbied key swing votes in the Senate and was able to muster enough support to win a 52 to 48 vote in favor, clearing the way for the sale. Thus was an $8.5 billion weapons deal, and a business bonanza for Boeing, the manufacturer of the AWACS, snatched from the jaws of political defeat. Only much later was it revealed that there was considerably more riding on the deal than met the eye. As the Iran/Contra scandal broke, a number of former administration officials involved in the AWACS deal told the New York Times that U.S. officials had received a pledge from the Saudi leadership that they would stand ready to provide financial support to the Nicaraguan contras, the Afghan resistance and other anti-communist movements as a quid pro quo for Reagan administration persistence in getting the AWACS deal through Congress. The secret and public uses of arms sales in the Reagan foreign policy were apparently linked from the beginning. Neither the public nor the Congress was fully aware of what was being exchanged. Another early corporate beneficiary of Reagan's deregulation of the arms industry was General Dynamics, whose F-16 fighter was offered to Venezuela, South Korea and Pakistan within the first year of the new guidelines. The Carter restrictions on introducing more sophisticated weaponry into regions where it had yet to be deployed had kept F-16s from being offered for sale to most Third World governments. With the "sophistication barrier" broken, F-16s have also been offered for sale to Thailand, Indonesia, Singapore and Bahrain. This seemingly technical policy change has meant over 100 additional orders and well over $3 billion in additional business for General Dynamics since 1981. With spiralling debt, unstable commodity prices and even drought and famine pressing for the attention and resources of most Third World governments, it may seem surprising that so many countries are willing and able to purchase advanced combat aircraft like the F-16 - prices for the F-16 alone range from $20 to $40 million depending on the kind of weaponry and training included in the package. Military aid and U.S. government subsidized loans under the Pentagon's Foreign Military Sales program provide part of the answer: the two forms of assistance combined more than doubled in the first Reagan term, from $3.2 billion in 1981 to over $6.4 billion in 1984. Although budgetary pressures pulled this total down to $5.9 billion in fiscal year 1986, the proportion offered on subsidized terms--direct aid, "forgiven" loans which never have to be repaid and concessionary loans with interest rates as low as 5 percent or lengthy "grace periods" of up to 10 years before repayment begins--has continued to grow steadily. Subsidized terms accounted for less than 20 percent of all assistance in 1981, but rose to over 75 percent in 1986. These financial subsidies quickly find their way back into the coffers of the major arms contractors when recipient nations spend them on fighter planes, tanks, guided missiles and other weapons and services. While domestic farmers or students from low income families have been finding it harder and harder to get government subsidized loans, dictators in search of the latest in U.S. weapons technology have had a considerably easier time of it during the Reagan years. General Dynamics and Boeing have not been the only firms to cash in on the Reagan arms sales boom, which actually got a running start during the final year of the Carter term. From 1980 to 1985, nine firms made $1 billion or more in sales under the Pentagon's Foreign Military Sales program, while a tenth, Westinghouse, had $992 million in FMS contracts. From the General Dynamics F-16s used by Israel in its invasion of Lebanon, to the Westinghouse radar systems being used by Morocco to defend its illegal efforts to annex the Western Sahara, to the proposed sale of Northrop F-5 fighters to Honduras, to the Hughes TOW anti-tank missiles that served as the basis of the arms-for-hostages swap with Iran, these firms have benefited directly and indirectly from the Reagan policy of war by proxy and its "supply side" foreign policy centered on arms sales. Now that world financial conditions and the budget crunch in the United States have finally begun to slow down exports under the Foreign Military Sales program, which dropped to $9 billion in fiscal year 1986, the corporate arms traders will have to work harder to keep their sales figures in the multi-billion dollar range. The corporate response to a shifting market will involve pursuing more direct commercial deals, selling more "upgrade kits," spare parts, and military services, and offering more "offsets" in the form of transfers of arms production technology and agreements to steer commercial business to the governments buying their weapons. It will also entail vigorous lobbying against any attempts to impose stricter controls on arms exports and in favor of further increases in military assistance. The biggest potential thorn in the side of the corporate arms traders is the Arms Export Reform Act, a bill cosponsored by Rep. Mel Levine, D-Calif., Senate Foreign Relations Committee Chairman Claiborne Pell, D-R.I., and Senator Joseph Biden, D- Del. The bill would reverse the current arms sales oversight process by requiring a vote of approval by both houses of Congress for any foreign sale of advanced weaponry, including military aircraft, missiles, artillery, combat helicopters, combat ships and tanks. NATO allies, Japan, Australia, New Zealand, Israel and Egypt would be exempted from the new, more rigorous approval process. This would mark a major step forward in congressional responsibility over arms sales. In the 14 years since a form of legislative veto was first introduced in 1974, Congress has never directly voted down an arms sale proposed by the Executive branch, although a number of deals have been scaled down or withdrawn in the face of overwhelming opposition. The closest calls have come in proposed deals with Saudi Arabia. In May 1986 both houses voted down a $354 million package of Sidewinder, Stinger and Harpoon missiles for Saudi Arabia, but Congress was unable to override President Reagan's veto when 34 Senators voted to sustain his position. Most of the 50 to 100 major arms sales proposals that pass through congressional review each year are barely debated, much less voted upon. Passage of the Biden-Pell-Levine bill would increase public knowledge of and leverage over major arms sales. Far from "micro-managing" foreign policy, the bill would force members of Congress to take positions on what have increasingly become the main vehicles for making foreign policy-arms sales. The pitfalls of letting the Executive branch go it alone in this field have already been amply demonstrated in the Iran/Contra scandal. Military contractors are anxious to head off attempts by Congress to renew congressional oversight of arms sales. Their trade association and lobbying arm, the American League for Exports and Security Assistance (ALESA)--which includes major FMS contractors Boeing, Lockheed, Northrop, Raytheon and United Technologies among its 24 corporate members--has made action aimed to "prevent changes in the Arms Export Control Act which would require affirmative action for specific arms transfers" one of its top priorities. Only pressing for more government subsidies for arms exports rates higher. If the Biden-Pell- Levine approach garners enough support that passage is a practical possibility, the corporate arms traders and the Pentagon can be expected to resort to good old fashioned pork barrel politics. The Pentagon has already commissioned several studies which assert that foreign military sales support 265,000 to 371,000 jobs in the United States. While the figures may be exaggerated, the fact remains that in regions where major contractors dominate the employment market--as in St. Louis (McDonnell Douglas), Fort Worth (General Dynamics), Seattle (Boeing) and Hartford, Connecticut (United Technologies)-- members of Congress will be hard pressed to turn down major arms sales which might help keep local production lines open in a period of level or declining Pentagon procurement. Until such time as the public takes a greater interest in the arms trade which is being carried out in their name and subsidized by their tax dollars, the corporate arms merchants will probably continue to find ways to prosper from the regional wars and local arms races which continue to proliferate throughout the Third World . It may be a long time before they have as good a friend and ally in the White House as they have had in Ronald Reagan, but it remains to be seen whether all the talk of "peace and prosperity," "leadership," and "character" in the 1988 presidential campaigns will come to encompass putting some long overdue controls on the international arms trade.