U.S. ARMS EXPORTS
More than just Guns, Jobs Go Too
When-if ever-Congress con-siders restricting weapons exports, military contractors
counter with a cry for "jobs, jobs, jobs!" For example, in 1992,
McDonnell-Douglas claimed that 40,000 jobs would be lost if the U.S. did
not make a highly controversial sale of fighter-bombers to Saudi Arabia.
However, in the current buyers' market, military contractors have grown
all too willing to sacrifice U.S. jobs in order to clinch a deal. McDonnell-Douglas
didn't mention publicly that the Saudi government demands a 30% offset on
all major contracts, or that $2.7 billion of business was lost in that 1992
deal.
What are offsets? In today's highly competitive market, arms manufacturers
frequently provide economic incentives to "offset" the cost of
weapons sold overseas. Direct offsets include agreements to produce the
weapon (or parts for it) abroad or to sell U.S. military technology. The
$5.2 billion sale of F-16s to Korea in 1991 is a good example of a direct
offset, in the form of "co-production." Only 12 of the 120 planes
sold to Korea were made in the U.S.; 36 more were delivered in kits to be
assembled in Korea. South Korea held out for the right to manufacture (co-produce)
the remaining 72 under license. Thousands of U.S. workers rallied in protest
when they were asked to train their South Korean replacements as a part
of the deal.
Indirect offsets are a more subtle form of industrial barter; they are designed
to entice buyers with non-military extras. For example, closing a $1.8 billion
sale of fighter planes to Spain in 1982 required that McDonnell-Douglas
market a wide variety of Spanish products, promote tourism in Spain, and
help set up a pizza franchise in Barcelona-an offset package worth more
than $1.5 billion, more than two-thirds of the sale price.
In 1995, the Commerce Department studied the outcome of offset deals on
companies affected by them. The survey found that of 204 U.S. firms, over
80% were negatively impacted. These "side deals" are not reported
to Congress or to the public, even though they hurt U.S. businesses and
U.S. workers.
Fewer Jobs, More Guns. When military contractors export production along
with weapons, U.S. workers lose jobs. Moreover, the sale of military technology
poses a serious security challenge. Arms control and nonproliferation efforts
are impeded as more nations become capable of producing and selling weapons.
Military contractors say overseas competition makes offsets necessary, but
creating new arms suppliers only increases the number of competitors.
On the other hand, indirect offsets force the non-military industries to
absorb increased competition. Counter-trades and contract assistance are
carried out at the expense of the U.S. economy and U.S. jobs. Since details
of offset arrangements are considered "confidential business information,"
other U.S. companies are not alerted to the negative repercussions to their
market viability or their employment base. Selling U.S. workers short in
order to prop up the military industry defeats the very same arms-sales-for-jobs
argument used to justify expanding arms exports.
Increased International Competition? The end of the Cold War has resulted
in reduced military procurement budgets in the U.S. and elsewhere. Producing
countries began to rely on exporting arms, with government support to protect
their military-industrial bases, flooding the international market with
weapons for sale. Today's rationale for offsetting arms sales is the fierce
competition in both the U.S. and international arms market: the "if
we don't sell, fill-in-the-blank will" rationalization. But offsets
are also used in sales that are not subject to foreign competition.
U.S. military aid (Foreign Military Financing, or FMF) is linked to the
requirement that recipients spend it only on American-made weapons. A 1994
Government Accounting Office (GAO) study found that the four largest FMF
recipients were given $11.6 billion in aid. Offsets to these deals totalled
$4.7 billion, effectively increasing the assistance to $16.3 billion.
Both direct and indirect offsets negatively impact the U.S. economy by giving
away jobs. Although arms sales are touted as good for employment and trade,
the job loss caused by offset arrangements raises serious doubts about these
claims. Offsets disrupt international security, nonproliferation, and arms
control efforts by multiplying the number of weapons producers. The secretive
nature of these side agreements stacks the deck in favor of weapons manufacturers.
These practices must be exposed to both congressional and public scrutiny
so the whole story can be told.
-Reprinted from Friends Committee on National Legislation FCNL Washington
Newsletter, June 1996
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