News


Tracking Number:  133938

Title:  "McCain Addresses Merits of the Korean Fighter Program." Remarks of Senator John McCain on the Senate floor. (900328)

Date:  19900328

Text:
*EPF302

03/28/90 * MCCAIN ADDRESSES MERITS OF THE KOREAN FIGHTER PROGRAM (Text: McCain's remarks on Korean Fighter program) (2780)

Washington -- The Korean Fighter Program (KFP) will be of great benefit to the United States aerospace industry as well as to United States and South Korean security, according to Senator John McCain (Republican of Arizona).

Speaking on the Senate floor March 27, McCain said: "The Korean Fighter Program strengthens a key ally, generates significant export earnings for United States industry, and positions United States companies for substantial additional sales in the Pacific region."

McCain also submitted for the record questions he asked the Department of Defense and the reply he received from the Defense Security Assistance Agency regarding the Korean Fighter Program.

Following is the text of McCain's remarks as they appeared in the March 27 Congressional Record:

(begin text)

Remarks by MCCAIN (R-AZ) THE KOREAN FIGHTER PROGRAM (CR page S-3274, 77 lines) Attributed to MCCAIN (R-AZ)

THE KOREAN FIGHTER PROGRAM

Mr. McCAIN: Mr. President, on behalf of the Senator from Missouri (Mr. Bond) and myself, we would like to address the merits of the Korean Fighter Program. Recently, the Republic of Korea announced its selection of the McDonnell Douglas F/A-18 for the Korean Fighter Program (KFP). The Republic of Korea selected the F/A-18 to counter North Korean MIG-29 aircraft and the numerically superior North Korean ground forces which are concentrated near the demilitarized zone.

As representatives of States with a large concentration of aerospace employees, we are concerned about the possible impact of this program not only on aerospace employment in our States, but that of the United States as well. We are also concerned about the impact of this program on the U.S. medium and small aerospace subcontractors which are integral to the U.S. industrial base.

After reviewing the details of the Korean Fighter Program, however, we believe this program will be of great benefit to the United States aerospace industry as well as to United States and South Korean security. I ask unanimous consent that a detailed set of questions we have asked the Department of Defense and the reply we received from the Defense Security Assistance Agency be printed in the Record at the end of my statement.

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The PRESIDING OFFICER: Without objection, it is so ordered.

(See exhibit 1.)

Mr. McCAIN: In brief, Mr. President, the KFP will improve the ability of the Republic of Korea to defend itself and support its own defense systems. It will also improve the United States-Korean balance of payments by 3 to 6 billion dollars or more over an 8- to 10-year period and finally, it will bring more than 23 million man hours of employment to the United States defense industry at a time when domestic defense production programs are being reduced.

The Korean Fighter Program is a procurement of 120 F/A-18 Hornet Fighter Aircraft. Unlike the Japanese FSX, the F/A-18 is a fully developed fighter. No development or design work will be transferred to the Republic of Korea. High-technology items excluded from co-production include the radar, electronic countermeasures, classified equipment and other avionics items. The aircraft will be manufactured jointly in the United States and Korea as a part of a 3-year program. The first phase involves the delivery of 12 United States built aircraft to Korea through a United States Government FMS sale. In the second phase, the United States Government will deliver 36 complete aircraft kits to Korea for assembly by Korean industry. In phase three, United States industry will supply technical assistance, training and most of the aircraft parts while Korean industry fabricates a limited number of parts and assembly under license.

Despite some assertions to the contrary, Korea currently has extensive experience in aerospace. Ongoing aerospace activities include depot maintenance of the F-15 and F-4 fighters and the C-130 transport. Co-production of parts for both commercial and military aircraft includes F- 16, F/A-18, Boeing 747, 767, European Airbus and the McDonnell Douglas MD-82 and MD-11. Previously, Korea co- assembled the F-5 fighter.

In other co-production arrangements in which the United States has participated, foreign companies have insisted that as a condition of sale, a certain percentage of co-produced components be purchased by the United States. This is commonly referred to as "directed buybacks". Under the KFP agreement, however, there are no directed buybacks. This means that there will be no additional exports of F/A-18 components from Korea to the United States as a result of the Korean Fighter Program. This compares favorably with the F-16 European Production Group Program which guaranteed 10-15 percent of the worldwide F-16 production workshare to European industry and also the F/A-18 co-production programs in Canada and Australia which mandate buyback requirements. The United States and Korean Governments have also agreed that the requirement for indirect offsets will be limited to 30 percent. Specific projects will be identified and negotiated on a case-by- case basis by the contractor over

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The Korean Fighter Program strengthens a key ally, generates significant export earnings for United States industry, and positions United States companies for substantial additional sales in the Pacific region. The Defense Department will benefit from improved unit costs and from the recoupment of nonrecurring research and development costs.

The potential impacts of offshore production and offsets have been minimized through joint Commerce and Defense Department efforts to restrict the export of sensitive United States technologies, and to limit Korean industry participation to work on Korean aircraft. The resulting workshare is extremely favorable to the United States. It will improve the United States-Korean balance of payments and will bring more than 23 million man hours of employment to the United States defense industry. Mr. President, the KFP is a good deal for Korea and even a better deal for the United States. We encourage our colleagues to examine the recent letter we sent out on this subject and strongly urge them to support the Korean Fighter Program.

Text of Questions and Answers by MCCAIN (R-AZ) Exhibit 1 Korean Fighter Program (CR page S-3274, 161 lines)

Q. 1. When was the KFP program first established?

A. 1. The Korean government requested pricing and availability information about the F/A-18 in 1986. Since then, MDC has worked with a number of military and government agencies to carry out one of the most extensive evaluations of the F/A-18 to date.

Q. 2. What is the primary thrust of the KFP?

A. 2. The KFP enhances the capabilities of the Korean Air Force. The F/A-18 will provide significantly improved beyond visual-range air defense, close air support and sea lane and coastal defense capabilities.

Q. 3. What are the terms of the "offset" program as agreed to by the U.S. and Korean governments?

A. 3. In other co-production arrangements in which the United States has participated, foreign companies have insisted that as a condition of sale, a certain percentage of co-produced components flow back to the U.S. This is commonly referred to as "directed buybacks". Under the KFP agreement, however, there are no directed buybacks. This means that there will be no additional exports of F/A-18 components from Korea to the U.S. as a result of the Korean Fighter Program. This compares favorably with the F-16 European Production group program which guaranteed 10-15 percent of the worldwide F-16 production workshare to European industry and also the F/A-18 co-production programs in Canada and Australia which mandate buyback requirements. The U.S. and Korean governments have also agreed that the requirement for other kinds of non-buyback

GE 4 EPF302 offsets will be limited to 30 percent. Specific projects will be identified and negotiated with the Koreans on a case-by-case basis by the contractor over a 10 year period, and will be subject to U.S. government licensing and export control regulations.

Q. 4. How does the Korean Fighter Program differ from the Japanese FSX project?

A. 4. The primary difference is between "co- development" and "co- production." In the Japanese FSX program, the objective is to co-develop a new fighter with new technology being developed by the Japanese and the U.S. The Korean Fighter Program, on the other hand, is a co- production program, utilizing current technology.

Q. 5. Some have called the KFP the "son of FSX" and there is quite a bit of controversy over the program in the Congress. Can you comment on this? Do you expect strong opposition from the U.S. Congress to block this program?

A. 5. The U.S. Congress reviews all foreign military sales, and the KFP will be no exception. We are confident that the KFP will be no exception. We are confident that the KFP is in the best interests of both the U.S. and Korea.

Q. 6. Technology transfer has been raised on both the FSX and KFP programs. What is actually being transferred in the KFP?

A. 6. The U.S. government carefully reviews any technology transfers before they occur, and continues to monitor the use of these technologies by foreign countries as long as necessary. The Korean Fighter Program will continue to be carefully scrutinized and managed by the USG to make sure that sensitive technologies are protected.

Q. 7. What impact, if any, will the KFP have on the current trade imbalance between the U.S. and Korea?

A. 7. The KFP will result in U.S. exports to Korea valued at 3 billion dollars or more. This sale will generate more than 20 million man hours in U.S. manufacturing jobs in more than 1500 companies in 38 states.

Q. 8. What other U.S. companies will be major contractors on this program?

A. 8. There are more than 1500 contractors involved in the F/A-18 program. Among the largest are Northrop, General Electric, and Hughes.

Q. 9. How much influence did Samsung have on the government's final decision in this program?

A. 9. As Korean prime contractor and systems integrator, Samsung is responsible for leading the manufacturing program. Selection of the aircraft was a ROKAF and MND decision.

Q. 10. How is the KFP related to Korea's stated objective to develop its own aerospace industry?

A. 10. Korea already has a significant aerospace industry capability and McDonnell Douglas partnerships with Korean aerospace companies go back 20 years. The KFP will strengthen and expand these partnerships.

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Q. 11. There are some in Congress who charge that by sharing sensitive U.S. technology, you are in fact helping an industrial competitor gain entry into one of the few areas in which the U.S. still enjoys a global competitive advantage. How do you respond to this? Do you think Korea could be a strong aerospace competitor to MDC in the next 10 years?

A. 11. Korean industry already plays an important part in the world aerospace market. We believe that strengthening our partnerships with Korean companies will make MDC more competitive in the world market.

Q. 12. Were the reduction in offset requirements the result of pressure from the U.S. government?

A. 12. The Korean government, the Commerce Department and the DoD have been discussing the offset provisions of this program for many months. The comparatively low Korean offset requirement of 30 percent is the result of these negotiations.

Q. 13. Why do you think the Korean government ultimately decided on the F/A-18? What were the major factors impacting the decision?

A. 13. According to a statement made by the Korean Defense Minister when the F/A-18 decision was announced, the F/A-18 offered superior capability against the Soviet built MIG-29, twin-engine safety, and better capability for Korean coastal and sea lane defense. The Defense Minister said that in spite of its slightly higher program cost, the F/A-18 offered a better overall, long-term solution for the KFP.

Q. 14. What is the cost difference between the two aircraft?

A. 14. We have no insight into competitor pricing. According to an official statement issued by the Swiss government after they selected the F/A-18, the F/A-18 program price was about 15 percent higher than the F-16 for that program.

Q. 15. How will the F/A-18 purchased by the Korean government differ from those used by the U.S. Navy?

A. 15. The ROKAF will receive substantially the same aircraft configuration as the U.S. Navy and Marine Corps. A limited number of systems which are mostly related to aircraft carrier operations will be deleted, which is typical for all international users of the F/A-18.

Q. 16. When do you expect the first F/A-18s to be delivered to Korea?

A. 16. First deliveries are expected in 1993.

Q. 17. What is the percentage of F/A-18 work already being done in Korea that will be a part of those planes produced in the U.S. for the KFP?

A. 17. The number and value of parts manufactured by each of the more than 1500 worldwide F/A-18 suppliers changes constantly. In 1990 McDonnell Douglas expects to buy about 500,000 dollars worth of airframe parts from Korea, which is less than one-half of one percent of the value of an F/A-18.

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Q. 18. How many F/A-18 sole source subcontractors will be replaced by Korean KFP subcontractors?

A. 18. None, since the KFP does not involve any buyback of Korean KFP production for U.S. aircraft. The suppliers will continue to supply parts and assemblies for the U.S. Navy and other customers.

Q. 19. What protections will be provided in the KFP for U.S. intellectual property rights?

A. 19. The U.S. Departments of Commerce, State, and Defense, the Office of the U.S. Trade Representative, and other appropriate U.S. Government agencies will continue to address this issue with the Korean government. For the KFP, the Defense Department will maintain a continuous presence in Korea to monitor the handling of sensitive U.S. technology.

Q. 20. What is MDC's view of the recently released Korean government's plan for the development of a Korean aerospace industry? Why should the U.S. government and U.S. industry help the Koreans to develop a competitive aerospace industry?

A. 20. Korean industry already plays an important role in the world aerospace market. We believe that strengthening our partnerships with Korean companies will make the F/A-18 Hornet team more competitive in the world market. Without such partnerships, Korean industry is likely to turn to Japan and Europe, and the U.S. could lose the Korean market.

Q. 21. MDC maintains that 84 percent of the work and 88 percent of the dollar value comes back to the U.S. compared to an off-the-shelf buy. What percentage comes back to MDC?

A. 21. From 75 to 80 percent of the value of each F/A- 18 produced flows through MDC.

Q. 22. Why should the U.S. agree to a technology give- away program like KFP?

A. 22. The KFP gives nothing away, including U.S. technology. Technology which is licensed to Korea for the KFP will be subject to U.S. government controls, and U.S. companies will be compensated in the form of license and royalty payments. Usually, these payments reflect an extremely favorable risk/return ratio for the U.S. company.

Q. 23. The KFP will export U.S. jobs and erode the U.S. defense industry base.

A. 23. The Korean program, with more than 80 percent U.S. workshare, will result in the net expansion of U.S. aerospace employment and growth of the U.S. defense industry base. The alternative is co-production with Europe, not an off-the-shelf buy from the U.S.

Q. 24. What happens to KFP if peace "breaks out" in Korea?

A. 24. North Korea shows no signs of reducing its military force structure, which significantly outnumbers the South Korean force. If the KFP procurement will bring the South Korean Air Force marginally closer to its goal of a force structure two-thirds the size of the North Korean Air Force.

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Q. 25. When would the first South Korean KFP aircraft have been delivered if this were an off-the-shelf buy?

A. 25. Since the first 12 aircraft will be sold off- the-shelf under the current program arrangement, the delivery date would not change. NNNN


File Identification:  03/28/90, EP-302
Product Name:  Wireless File
Product Code:  WF
Keywords:  MCCAIN, JOHN; KOREA (SOUTH)/Defense & Military; PACIFIC RIM COUNTRIES; EXPORTS; MILITARY AIRCRAFT; KOREA (NORTH)/Defense & Military; AEROSPACE INDUSTRY; BALANCE OF PAYMENTS; MILITARY CAPABILITIES; CONGRESS, US; TECHNOLOGY TRAN
Document Type:  TXT
Thematic Codes:  140; 1DE; 5TT
Target Areas:  EA
PDQ Text Link:  133938