United States Department of State
Defense Trade Advisory Group
Minutes of the Plenary Session
May 16, 1997
East Auditorium
U.S. Department of State
Washington, DC
The Defense Trade Advisory Group met in plenary session on Friday, May 16, 1997, in the East Auditorium at the U.S. Department of State, Washington, DC. William Schneider, Jr., the DTAG Chair, opened the meeting and welcomed the DTAG members. A copy of the information
package provided to the members at the meeting is provided at Attachment 1. The DTAG attendance list is at Attachment 2.
Mr. Schneider discussed the deactivation of the TWG and reassignment of members to the PWG and RWG. The increased number of members calls for the addition of a vice chair in each working group. Mike Richey was selected to chair the combined Regulatory/Technical Working Group.
Mr. Gregory M. Suchan
Director, PM/ATEC
Mr. Suchan introduced himself as the new Director of PM/ATEC, having succeeded Gerry Hamilton on April 28, 1997. He has been a Foreign Service Officer since January 1973, beginning his career as an export promotion officer in Mexico and London. He has served previously in PM's offices dealing with nuclear nonproliferation and strategic nuclear policy. He also served at the U.S. Mission to NATO and was political-military officer at the U.S. Embassy in Islamabad at a time when the United States was providing more than $250 million a year in security assistance to Pakistan. From 1985 to 1987, Mr. Suchan was the senior State Department representative on the Defense and Space Negotiating Group in Geneva, dealing with issues related to ballistic missile defense and the ABM Treaty. Immediately prior to assuming his duties in PM/ATEC, Mr. Suchan spent a year on the staff of Senator John McCain.
Mr. Wolfgang Demisch
BT Securities
"Prospects and Implications of the Global Consolidation of the Defense Industrial Sector"
Mr. Demisch focused on the "edge" currently enjoyed by the United States in military
capability and production technology and argued that to maintain that edge, the US needs to allow
export sales of existing US military equipment to fund R&D for advanced technologies.
According to Mr. Demisch, the US defense industry has done well over the last five years.
Productivity is growing at 6-7 percent annually, and US firms are supported by strong government
policy. Stock prices of US defense firms are four times higher than they were five years ago.
As a result, US firms are more competitive and have greater resources to develop advanced
technologies than their competitors. Russia is not buying and Asians are simply looking for
"models that work" for their own defense industries. Mr. Demisch downplayed the capability of
European firms to integrate their defense industries successfully and asserted that the focus by
European governments on domestic problems, local markets, and local industries is hindering
industry efforts to become more efficient. The only successful company in Europe is Airbus, and Mr. Demisch believes the only way forward is for European firms to follow the Airbus example.
Thus, the challenge for US government and industry is not deciding how to deal with the
competition, but deciding where to go next and how to develop the appropriate policy to achieve
these goals.
Mr. Demisch said that the biggest threat to the US is that it has not had a new idea in 75
years and that tactics and doctrines remain virtually unchanged. He sees a mismatch between the
dollar value spent on defense R&D and the resulting advances in technology. The objective is to
esure that the US is "the model to beat," and the key to ensuring that this occurs is to sell US
military weapons to any country willing and able to afford such items, for example F-15s to
China. This would give US industry the financial resources to develop more advanced
technologies as well as to commit a particular country to US military equipment. Mr. Demisch
argued that failing to do this encourages foreign governments to look elsewhere for these
technologies, thus preventing US industry from benefiting economically. Furthermore, he stated
that selling US weapons freely to non-allies enables the USG to know a foreign military's
capabilities. He concluded by stating that US industry will remain dominant provided that the US
invests the revenue from foreign sales into future R&D, citing Arianespace--Europe's leading
satellite producer--as an example of what happens when foreign countries denied access to US
weapon systems obtain such technologies through other means.
During the Q&A session, DTAG members thoroughly questioned Mr. Demisch on his theory
of exporting US military weapons to any country. The first question regarded the implications for
US military officers facing US-origin weapons while in combat with a foreign country. He replied
that the US military would be better off facing its own rather than foreign-manufactured weapons
because we would know exactly what version the foreign country had and the weapon's
capabilities. The foreign military would also be at the mercy of the USG for supplies and spares
and would be at a disadvantage to US forces in combat without the aid of US intelligence,
information systems, etc.
He was also questioned about the factors that would keep a foreign country tied to buying
follow-on military equipment from the US. He responded that simply giving a foreign country
military equipment does not give it the technology base to develop the next generation
indigenously. He also stated that the foreign purchaser would likely not buy the next generation
US-produced item, but that this should not be a concern to the US. Rather, the US should be
concerned about staying ahead technically so that by the time a foreign industry did learn to copy
the technology, the US would have moved on to the next generation system.
The concern of third-party conflict between foreign governments with US-origin weapons
was raised using China and Malaysia as a hypothetical example. Mr. Demisch admitted this subject was a "thorny part" of his theory. However, he asserted that the USG would be just as obligated
to help resolve such a conflict if the foreign country was using foreign-manufactured weapons
against a smaller country. As such, this should not be a reason to restrain export sales.
On other issues:
Mr. Demisch was asked about his views on transatlantic cooperation and replied that
Europe is far from ready to participate fully in transatlantic programs. There are too many players
and European governments are too parochial. European firms view partnerships with the US as
"selling out," and Mr. Demisch claims that the best opportunities for US firms are on a project-by-project basis rather than pursuing widespread cooperation.
Mr. Demisch concluded the Q&A session by briefly discussing the improved performance
of defense stock over the last several years. He stated that the US defense industry is in good
shape for now. Export opportunities are available, the demand for commercial items and
satellites is booming, and domestic profit is attractive. However, he stated that private investment
in the US defense industry will certainly decline if profit becomes controlled and growth
opportunities cease to exist.
Mr. Roger Cressey
Office of the Assistant Secretary of Defense for Strategy and
Requirements
Ambassador Robert Kimmitt
Wilmer, Cutler & Pickering
"Implications for Defense Trade of the Quadrennial Defense Review"
Mr. Cressey opened the presentation by covering the key tenets of strategy involved in the
QDR. (A copy of the briefing slides for his presentation is attached.) Near and long-term
assumptions about the projected security environment drove the process of defining future
military needs and developing a program within available resources. In the near-term, the security
environment is not expected to change. Failed states, regional instability, and cross-border
aggression will remain the most likely sources of conflict. However, asymmetric challenges to
the U.S.--in the form of terrorism, nuclear warfare, and information warfare--may present new
and increasing challenges. Transnational dangers such as terrorism, migration and refugees,
drugs, and organized crime will increase. Scenarios of mid- and long-term security concerns are
less clear. However, it is unlikely any peer competitor will emerge in the foreseeable future. Our
national security strategy assumes continued U.S. global leadership, U.S. forces capable of
concurrent operations, and a political willingness to employ power.
Ambassador Robert Kimmitt highlighted the rapid and dramatic changes which have
reshaped the defense trade environment. Among the most important are the rise of foreign
competition, Congressional involvement in weapons sales, the absence of a clear enemy, defense
budget cuts, flat line spending, and geometric increases in technological development.
Ambassador Kimmitt emphasized the need for DoD to catch-up to the business revolution which
has taken place in the defense industry. He suggested a critical need for market-based solutions and a shift in focus
by DoDto improving core competencies and letting others do the rest.
On the international front, Ambassador Kimmitt advocated defining our role as the world
policeman and called for a more cohesive strategy for determining when to respond. He was
concerned that the U.S. is militarily so far ahead of our competitors that we may be
encouraging a stagnant response from our allies.
Noting that the private market is ruthlessly efficient, Kimmitt supported increased efforts
on our part to encourage European consolidation and increased transatlantic investment. These
are the means, he said, to ensure an efficient, viable defense industry into the 21 st century.
Mr. Randy Scheunemann
Office of the Senate Majority
Leader
"Congressional Perspectives on Arms Transfers"
Mr. Scheunemann explained that in the new Senate, 26% of Senators have served less
than three years. The Senators with the most knowledge on defense and arms issues have left
the Senate. The isolationist label that has been placed on "new Republicans" is a myth; there is
tremendous interest in foreign relations. The three new subcommittee chairs in this area are all
volunteers. When a NATO observer group was formed there was a tremendous response,
leading to an unwieldy 28-member group.
Funding for international affairs is receiving lots of attention as arms dealers and NGOs
have formed an alliance to request increases in spending. The irony of this alliance is that the
cuts have really come from security assistance provided to E1 Salvador, to the Contras in
Nicaragua, and other similar cases. Recent cuts in 150 Account spending have amounted to a
gutting of security assistance. We will see better numbers, but the pie will not get much bigger;
the focus is on how the pie will be divided.
With regard to arms exports, Senators tend to focus on the impact on jobs in their
districts. Senators will not say that arms sales or security assistance is in our national interest.
Work needs to be done, particularly with new senators, on the importance of arms sales in
support of foreign policy objectives. Denying arms sales to individual countries will continue to
be seen as a means of expressing displeasure. Senators will first cut foreign aid, then security
assistance, then arms sales, to express disapproval of a country's behavior.
There is support for NATO enlargement in the Senate, and this will open markets for
arms exports as interoperability becomes an issue. However, the most important issue in
NATO expansion will be burdensharing. How much will we pay? NATO members? NATO
aspirants?
Region by region, in the Middle East there have been greater arms sales to Arab nations.
In the Senate, barely below the surface, there is irritation with the perception that President has
a detached attitude toward Israel. In Latin America the policy of no sophisticated weapons
sales, a hangover from the Carter Administration, will probably hold. In East Asia, there is a potential for
greater missile defense support with Japan, South Korea and Taiwan. There is much support in
Congress for expansion in Pacific Basin countries. With regard to Greece and Turkey, there are
some signs of a softening of the current anti-Turkey posture. It is time to figure out where to go
next and how to progress in our security relationship. However, it is too soon to tell, and will
depend on the degree of involvement in politics by the Turkish military.
One additional item that is important to the majority leader has been ensuring that
amendments to the ABM treaty and the Conventional Forces in Europe Flank Agreement are
submitted to the Senate. This was important in that it forced the Administration to change its
position and to seek the advice and consent of the Senate.
In response to a question about whether there is any plan to change the way arms transfers
are managed in the Senate, Mr. Scheunemann replied that an "informal hold" process is currently
used when a Senator objects to a license notification. The State Department respects this and tries
to work it out. This procedure is supposed to allow time to provide further information or
additional policy justification, but it has become a means to stop debate and prevent a vote. Sen.
Sarbanes has effectively shut down security assistance to Turkey using this method. It is up to the
Administration to decide if it wants to push this. The internal dynamics of the Administration must
determine if it will try to break his hold. Following a later comment about the inconvenience
caused because notifications cannot go forward during recesses, he added that the notification
requirement will not change. There is a procedure for use in urgent cases that must be considered
during recess. Cases may be brought to the attention of the Committee of jurisdiction, but the
committees do not see the notification requirement as burdensome.
With regard to the status of CWC legislation, Mr. Scheunemann explained that, pursuant to
the agreement to permit ratification, it was agreed that the Congress would consider implementing
legislation for the CWC by Memorial Day. The Judiciary Committee held hearings during the
week of May 12-16. The issues to be resolved include: 1) protection of 4th amendment rights with
regard to search warrants; and 2) potential loss of confidential business information via
inspections. Resolving these issues will be difficult because foreign inspectors will have
diplomatic immunity. Such inspections can present both proliferation and business concerns, as in
the case of a Chinese inspector. An attempt will be made to make the USG liable for the loss of
business information, since there is no recourse against the OPCW and its inspectors. Burden of
proof standards, among others, are being considered. It is important to note that the House did not
have an opportunity to vote on the CWC, so its vote on implementing legislation will be its first
chance to comment and vote on the treaty.
In reply to questions about the 150 Account and State-ACDA-USIA-USAID reorganization,
Mr. Scheunemann replied that AID is funding soap operas in Tanzania and home repair programs
in Nicaragua. The Administration has asked for funds to pay UN arrears. The point is that the
Administration's priorities are not the same as those of Congress. Funds allocated for global issues -- the perceived threat of disease, environmental issues and population -- do not reflect
Republican priorities.
Congress and the Administration appear to have two different timelines for the
reorganization process. The Administration proposal was well received on the Hill. Taking the
reorganization out of the realm of politics and bringing it into the practical was a big step forward.
However, the Administration proposed 120 days to review unresolved questions. The
authorization and appropriations timelines can't wait that long. Administrative issues, such as
pensions and number of positions should be easy to resolve. On the issue of AID, the Hill would
rather have seen all three agencies completely integrated but will settle for two of three.
In answer to a final question, Mr. Scheunemann concluded that he thought recently
introduced Code of Conduct legislation was terrible and did not believe there was much support
for it.
Ambassador Thomas E. McNamara
Assistant Secretary of State for Political-Military
Affairs
Ambassador McNamara discussed two issues which would have a direct impact on the way
PM does business and therefore have an indirect impact on industry. The first is the recent
decision to consolidate three previously independent foreign affairs agencies into the Department
of State. The greatest impact on DTAG members would come from consolidation of the Arms
Control and Disarmament Agency (ACDA) with PM. Consolidation of ACDA would take place
more quickly than the other two as relatively fewer people are involved -- roughly 250 each in
ACDA and PM. Following a 1 20-day study period which began on 1 May, the reorganization is
to be completed within one year. As USIA has several thousand people and USAID functions will
require some sorting out, their consolidation will take place over two years.
The consolidation of State and ACDA was first considered in 1993. It was eventually
decided not to complete the process, but the plans made then are still on hand. That work will
provide the foundation as State and ACDA work to lay out the architecture of the new
organization in the remaining 90 days of the 1 20-day study period.
Ambassador McNamara said he believed that the result would likely be two or more bureaus
recognizing the current division of responsibilities in PM. PM is organized into four divisions:
arms control, nonproliferation, export controls and arms transfers, and regional policy and
operations. ACDA and PM interact frequently on arms control and nonproliferation issues, so
those areas will be the focus of the integration. There is likely to be some understandable
apprehension among personnel as this integration takes place. However, ACDA is only slightly
involved in export controls and not at all involved in regional affairs. The integration may have
some effect on export controls, but any disruption will probably not be significant. Ambassador
McNamara said he thought it would have been wiser to have completed the consolidation in 1993, however, State
and ACDA had made an attempt in 1995 to downsize and reduce overlap. There had been some
success in this and the reorganization should be less traumatic as a result.
As has been announced, the positions of Under Secretary of State for Arms Control and
International Security Affairs (T) and the Director of ACDA will be combined. When and how
will be decided shortly. Other aspects of the consolidation will require legislative changes.
ACDA is mandated by law, so legislation will be required to change its legal standing. Task
forces and working groups are being established to look at all aspects of the legal, administrative,
and other aspects of consolidation. The goal will be to complete the task and return to normal
operations as quickly as possible.
The second issue affecting PM's operations is the budget. Ambassador McNamara said he
had been pessimistic for the past decade about State's budget. The budget had been cut in half
compared to 1983, by one third since 1985, and 14-15 percent in the two previous fiscal years.
The budget has been hacked in a way destructive of foreign policy goals. He related the recent
press account of Secretary Albright's reply to a student who said he thought the USG spent too
much on foreign affairs. When she asked what percentage of the budget he thought was devoted
to foreign affairs, he replied twenty percent. In fact, as she told him, we spend less than one
percent. Our current request amounts to .88 percent of the total budget. According to a University
of Maryland poll, the average American believes we spend in excess of twenty percent of the
budget on foreign affairs and would prefer to see it cut in half. Congress heard that part of the
message and made the fifty percent cut.
That said, there has been a turnaround on the Hill in the last 12-18 months. There appears
to be a new recognition that the cuts have gone too far and it is time that they are reversed. If
State gets its present request, it will amount to a $1.2 billion increase over the FY 97 request. The
fact that there is even have a chance shows that there is a true bipartisan desire for change. But
the Hill doesn't change fast. This year State may wind up only with what it received in FY 97, but
that would be better than another cut. Ambassador McNamara said he believed State is finally
getting its message across to the Hill and the public. This will have implications for how State
supports defense trade. Turk Maggi added that late that morning the House budget committee
had approved the requested level of funding. Ambassador McNamara said this was cause for
optimism but cautioned that hurdles yet remained in the appropriations committee.
Mr. Johnson said a coalition of seven companies had made 30-40 visits on the Hill to
support greater funding for State and that industry was supportive. Mr. Schneider recalled the
point from Mr. Scheunemann's presentation that the timing of the State-ACDA reorganization
study is out of sync with the budget and appropriations cycle. Ambassador McNamara said State was aware of
the need to move forward immediately with a legislative package to begin effecting the change.
Ms. Hazera asked whether the consolidation with ACDA would result in savings in
personnel slots which could be used to staff up DTC and ATEC. Ambassador McNamara replied
that it is too early to tell but it is true that State will have some flexibility over the next few months
to introduce changes. The 1995 review of PM and ACDA functions cleared away much of the
overlap and OMB will be looking for saving, but there should still be some positions which might
be used to beef up these licensing and transfer functions in the new bureaus.
Mr. Lavery asked whether it is true that embassies have taken a larger percentage of the cuts
than domestic operations. Ambassador McNamara agreed that it was true that we have cut back in
constituent posts, but new embassies have been added in the states of the former Soviet Union
and some embassies have increased staff. As we consolidate administrative functions with USIA
and USAID overseas, there may be some savings. The consolidation of ACDA and PM will not
have such an effect as, unlike the geographic bureaus, neither ACDA nor PM has much of an
overseas presence. Ms. Neuman commented on the importance of ACDA's publication World
Military Expenditures and Arms Transfers and hoped that it would not be discontinued following
the reorganization. Ambassador McNamara acknowledged that this work is not duplicated
elsewhere and added that he had spoken specifically about this with Director Holum and believed
it was almost certain to continue.
Mr. DeCain said that he had once worked on the ACME initiative (Arms Control in the
Middle East) but that the new administration had abandoned it and the countries involved, which
had previously exercised restraint, were now rushing in to make sales. The same thing now
appears to be happening in Latin America. Ambassador McNamara responded that it was not that
a new administration had abandoned ACME but that China had resisted and the other countries
eventually began peeling way when it was clear that consensus was unraveling. With regard to
Latin America, the U.S. has been working in the Wassenaar Arrangement to develop mechanisms
not only to consult on sales but also to establish dialogs on regional issues such as Latin America.
Another comment was that the change last December which moved licensing in some
encryption cases from State to Commerce appears to have resulted in PM, ACDA, and others
spending more time reviewing cases they had never reviewed before. Ambassador McNamara
replied that Commerce is requesting a total delegation of authority to decide whether there is a
national security aspect to be considered in individual encryption cases. State still has authorities
which must be observed. We don't need to see most licenses but cannot support a blanket
delegation to Commerce. This issue remains the subject of active discussion.
In response to a concern that ACDA's consolidation with State might cause delays in
DTC's processing license applications, Ambassador McNamara said he did not think the
reorganization would reduce DTC's responsiveness. Responding to a further question on
licenses for individual countries, he explained that licenses for specific countries which often
present problems, such as Greece and Turkey, South Africa, or Indonesia, are rarely delayed
for bureaucratic reasons. They are difficult due to policy considerations, and this will not
change for better or worse due to reorganization. These are high-level policy decisions and
are not caused by paperflow problems. When asked why the Administration does not move
Greece and Turkey cases to the Hill where Congress can kill them or not with a vote,
Ambassador McNamara stressed again that these are policy problems and one has to look at
the larger political environment. South Africa was a different question. However, the
ARMSCOR case which tied up defense trade with South Africa while the criminal case was
in court has now been settled and the Administration is putting in place a compliance mechanism to implement the decision. During a period of one year of debarment, trade with
the company will require a policy decision. This was a unique case and now that it is settled
in less than a year we will be back to a normal relationship. Regarding Latin America, the
Administration allowed marketing licenses to go forward so as not to disadvantage U.S.
companies in meeting the March 31 deadline for the Chilean fighter competion. We hope in
the next few weeks that the President will have time to review the policy and make a decision
which will modernize our policy.
Ms. Deborah Carroll
Defense Investigative Service
Ms. Carroll began the afternoon session with a presentation on a recent industry
survey undertaken by DIS. The purpose of the survey was to identify trends in the
defense industry, in hopes of identifying ways in which DIS could be more responsive
in meeting the demands of industry. The survey included U.S. and NATO defense
manufacturers.
Six trends were identified for study in the survey: 1) restructuring; 2)
privatization; 3) globalization of the workforce; 4) commercialization of the defense
industrialization base; 5) the global communication revolution; and 6) the role of senior
management in implementing security measures.
The survey revealed that the U.S. is ahead of Europe in restructuring. In Europe,
many defense consolidations are transnational, bringing the issue of third party transfers of
technology into play. Privatization has resulted in an increase, rather than a decrease, in
requests for security clearances. Managing the global workforce is becoming increasingly
difficult as companies wish to hire more foreign nationals. The use of off-the-shelf hardware
and, particularly, software in defense products is complicating security. There has been an
increase in international visitors sponsored by U.S. industry, raising security concerns and
industry concerns with security requirements. The use of the Internet as a communications
port has complicated the security situation. Ms. Carroll concluded by saying that DIS will try to adjust its programs to be more responsive, flexible,
and compatible with the new reality.
Questions focused on three areas: foreign nationals studying in the U.S., the transfer of data
from foreign companies to U. S. companies, and the Internet as a form of export. Specifically, the
issue of thousands of foreign nationals studying highly technical subjects at U.S. universities was
raised, and the question was asked why this was permissible while the defense industry was
tightly regulated in the foreign nationals they could hire and the information which can be passed
to them. Rose Biancaniello of PM/DTC answered for Ms. Carroll, informing the audience that
universities do indeed have an exemption in the law which permits them to teach technological
principles without regulation, Universities are, however, subject to the same regulations as
industry with regard to the provision of defense services. On the transfer of tech data from foreign
companies to U.S. companies, Ms. Carroll offered to provide the questioner with materials
explaining the procedures and regulations. On the Internet, Ms. Biancaniello explained that the
issue is very controversial and that the USG does not appear to be close to resolving it and
establishing regulations to govern the Internet's use in the transfer of defense services and
technology. She made it clear, however, that both Customs and the ITAR have identified the
Internet as a port of export, and that therefore, use of the Internet to transfer tech data does equate
to an export and is regulated. A host of technical issues relating to the Internet remain to be
resolved, however.
Ms. Rose Biancaniello
Deputy Director, Office of Defense Trade
Controls
Ms. Biancaniello gave a brief presentation on recent changes in the laws which govern
defense exports and on the state of play in drawing up the implementing regulations. She
emphasized that all of these legal changes are unfunded mandates and highlighted the fact that
PM/DTC processes far more cases than the Department of Commerce each year with just a
fraction of the staff.
Ms. Biancaniello touched briefly on the new Section 655 mandated report on the aggregate
value of goods exported under Section 38. She then commented on the elimination of the 36(d)
NATO exemption and on the shortening of the 36(c) notification period. Ms. Biancaniello also
discussed a change in Section 38 which reduced the level of confidentiality by requiring the
Department to release information on the type and amount of any particular commodity license for
a particular country. Finally, she covered new provisions in the law requiring the registration and
licensing of "brokers", which is defined very broadly to include those involved in financing,
freight forwarding, transport or other actions connected to an arms export.
Questions immediately arose on this last topic, as audience members sought to pin down
how State would implement this broad mandate. Ms. Biancaniello, while emphasizing that the
implementing regulations were not finished yet, told the audience that State was trying to
eliminate from this requirement those who are acting in their normal capacity (e.g. freight
forwarders, banks providing loans), particularly when the transaction in question is already being
licensed by the exporter. Instead, State will concentrate on those who are acting as true "brokers"
and arranging transactions which are not otherwise licensed.
Questions also arose over the change in confidentiality, and concern was expressed that
this would expose sensitive information to competitors. Ms. Biancaniello emphasized that the
change in the law does not permit the name of the company involved in the transaction to be
released, but acknowledged that in certain cases the identity of the company would be
obvious when the commodity is identified. State is working to limit the loss of confidentiality.
Questions on the Internet arose again and the unsatisfactory nature of the existing
regulations was highlighted. A DTAG Task Force was proposed to deal with the issue.
Finally, in response to a question, Ms. Biancaniello assured the audience that DTC is
working with DoD on upcoming regulation changes.
Dr. Martha C. Harris
Deputy Assistant Secretary of State for Political-Military Affairs
Dr. Harris gave a short presentation touching on two issues of concern to the DTAG: Latin American conventional arms transfer policy and arms transfer policy toward the Aegean.
She first outlined official U.S. policy toward Latin America, informing the audience that
the Administration's complex review of the issue is still underway, and acknowledging the
DTAG's contributions to that review. Dr. Harris went on to point out that our policy is and
remains one of case-by-case review, and that in Latin America this review is conducted in the
context of restraint. Changing conditions in the region, including the expansion of democracy
and economic liberalization, have prompted a review of this policy. She emphasized that any
change in our policy would be in accordance with our goals for the region. After setting the
context, Dr. Harris reviewed the USG's decision to permit the issuance of marketing licenses
to companies wishing to compete in Chile's selection of fighter aircraft. She pointed out that
this decision does not constitute approval for a sale, but does permit U.S. companies to
compete. She provided the audience with our analysis that U.S. fighters remain strong
contenders in the competition.
Moving on to the Aegean, Dr. Harris highlighted USG concern with the levels of
tension in the region, which are echoed in Congress. She said that, although we appreciate the
importance of competing for several large contracts up for bid in both Greece and Turkey, we
are concerned that that any new system introduced into the region could prove destabilizing.
Dr. Harris emphasized that there is no embargo against Greece and Turkey. On the contrary,
$400 million in LOAs have been approved for Turkey and $220 million for Greece in FY97.
That said, she informed the audience that the Department will continue to be quite
conservative in adjudicating cases for the Aegean.
The audience immediately questioned the Aegean policy, asking why the Aegean sales
couldn't be approved. Dr. Harris replied that we have strong indications that there is serious
opposition to these sales in Congress, and the Department is unwilling to proceed in the face
of this opposition. Audience members pressed harder, insisting that their legislative experts
guarantee that no resolution of disapproval could be passed in Congress and that therefore the
Administration should just force a vote Dr. Harris and Robert Maggi of PM/ATEC reiterated that we have
indications of serious Congressional opposition, and that we are not willing to risk forcing
approval against this Opposition.
Turning to Latin America, an audience member asked why the Administration couldn't just
make a decision on the overall policy, instead of approving only marketing licenses for Chile with
no guarantee of approval of a sale. Dr. Harris asked him in return if he would have preferred the
marketing licenses not be issued, which was greeted with some humor by the audience.
The meeting adjourned at 3:30.
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