24. Pentagon Seeks Mega-Mergers Between International Arms Corporations

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Arms Sales Monitor, January 2000
Title: Arms Company of the Future: BoeingBAELockheedEADS, Inc?
Author: Federation of American Scientists

Evaluator: Andrew Botterell, Ph.D.
Student Researchers: Steve Quartz, Nathalie Manneville

A United States government task force has released its final report to the public recommending globalization of the U.S. defense industry, even if it results in proliferation of conventional weapons.

The Defense Science Board’s (DSB) Task Force on Globalization and Security is a 27-member appointed board, composed mostly of Department of Defense (DoD) and private industry representatives. The DSB encourages the Pentagon to facilitate transnational mergers of defense corporations in order to avoid eventual conflicts with European countries over global arms market shares. Overall, the DSB task force advocates reducing DoD’s role in controlling arms exports, and holds little or no confidence in multilateral arms control agreements. The DSB recommends that the Pentagon automatically allow the export of military equipment, except when the United States is the sole possessor of the technology. However, since current U.S. practice allows arms exporters to outsource high-tech weaponry abroad before it enters the U.S. arsenal, such Pentagon exceptions would probably be rare. The task force recommends that the U.S. government stop worrying about protecting American military technologies since, in their judgment, most military technology will inevitably become available elsewhere in the future.

The DoD, State Department, and Congress lack consensus on these controversial issues. The Pentagon has conducted a variety of studies on globalization and related export control issues, and the State Department, anxious not to let its authority over arms export controls be usurped, has reportedly also done its own evaluations.

The DSB does acknowledge that its steps to maximize U.S. military capability may create tensions with other U.S. foreign policy objectives, particularly those achieved by limiting foreign access to U.S. defense technology, products and services. Yet the DSB feels that “military dominance,” rather than the promotion of U.S. foreign policy objectives and security, is the DoD’s “core responsibility.” The DSB considers U.S. State Department efforts to prevent or control conventional weapons proliferation as naive at best. The DSB report describes international efforts to control conventional weapons proliferation, such as the Wassenaar Arrangement, as only “marginally successful.”

A few large companies already dominate the American arms industry, and Europe’s defense firms are rapidly consolidating as well. Germany’s Daimler-Chrysler and France’s Aerospatiale announced a planned merger to form the European Aeronautics, Defense and Space Co. (EADS), and BAE Systems now monopolizes the U.K. defense industry. Increased partnership between U.S. and EU defense corporations is needed, DSB warns, to avoid a protectionist “Fortress America” from going to war with a hostile “Fortress Europe” over market share.

The Federation of American Scientists is concerned that transnational arms mergers would create very powerful defense companies, further shifting control away from governments and toward private industry. Transnational companies will be eager to market their arms to many different countries, and will adapt the lowest common standards for exporting arms to others nations. With fewer controls and diffused production capabilities, conventional weapons will likely proliferate, posing long-term security risks around the world. Globalizing production of weapons is easy; globalizing responsibility for arms is a real challenge.

Update by Tamar Gabelnick

While embracing the idea of a globalized defense industry, the Pentagon and U.S. arms makers have claimed that cumbersome U.S. export-licensing rules hinder exports to, and joint projects with, European and other allies. The Pentagon alleged that an overhaul of the U.S. arms export system was needed to avoid the creation of Fortress Europe, wherein consolidating European arms companies would shut American arms and technology out of the European market. With lightning speed and, according to the GAO, an inadequate analysis based on faulty anecdotal evidence, the Pentagon developed a set of 17 initiatives to expedite the arms export licensing process, especially to NATO members, Japan, and Australia. Despite protest by the State Department, which has the legal authority to decide arms export policy, the administration approved the Defense Trade Security Initiative (DTSI) in late May 2000.

The administration’s initiatives will fundamentally alter the U.S. export licensing system, endangering a process that has helped control weapons diversion, unauthorized re-exports, and misguided sales. The most far reaching of the changes would grant to certain allies (beginning with the UK and Australia, with the possibility of including other countries) a license waiver for exports of unclassified weapons systems, effectively ending U.S. control over the transfer of arms to those countries. A similar arrangement with Canada had to be suspended in 1999 after Canadian firms transferred U.S. military technology to Iran and China. Other ill-advised reforms include loosening the rules on third-party transfers of U.S. weapons; creating broader export licenses to cover entire weapons systems (munitions, engines, and other sub-components were previously approved individually to allow for greater scrutiny); and speeding up the licensing process for NATO members (including making greater use of exemptions for transfers of technology and training). All will reduce the level of scrutiny of arms export decisions in the U.S. and oversight of U.S. weapons abroad.

The administration approved these major policy changes with little public debate or consultation of arms control experts. The mainstream media ignored the issue until the announcement of the completion of the reform package at the May NATO Defense Ministerial meeting. At that point, the coverage was minimal and presented the official view that the DTSI would promote bureaucratic efficiency and boost the defense industry’s European business opportunities. Only the trade press covered the story throughout the spring, though again, the articles were geared toward their main audience, the arms industry. The arms control perspective was only provided in op-eds and newsletters written by the Federation of American Scientists and other arms control organizations.

For more information on the export reform process, visit the FAS website at:http://www.fas.org/asmp/campaigns/control.html. Along with background information and articles on the subject, you will find official documents and government website links on DTSI. You can also contact Tamar Gabelnick at the Federation of American Scientists with any queries at (202) 675-1018.