Southland defense contractors may get export relief.

Congress moving to lift some Cold War-era restrictions

Converting military technologies to commercial applications has been widely discussed as a strategy for helping the Southland's aerospace/defense industry adapt to a peacetime economy. But an alternate strategy is now being pushed by the Clinton administration and many members of Congress: helping defense manufacturers export their goods abroad.

The Senate Banking Committee on May 24 unanimously approved legislation to amend Cold War-era controls on military-related exports. Full Senate action on that bill is expected later this month. And a similar bill is pending in the House.

Several local aerospace contractors expressed delight that the federal government is moving to lift some restrictions on military-related exports.

Robert Knapp, a spokesman for Litton Industries Inc., stated that the Beverly Hills-based military contractor looks forward to having export controls lifted on some of its goods. "The international marketplace is important to us, especially in relation to the downturn in the defense budget," he said.

But critics warned that lifting the restrictions could endanger international stability.

Congress is rewriting a 1979-vintage piece of legislation called the Export Administration Act. Several bills have been introduced to amend the legislation. And the main thrust of them all is to relax controls on the export of military goods to foreign countries.

Most of the defense contractors interviewed said passage of a bill to loosen provisions of the Export Administration Act would be good for business. There is a large world market, they said, that is untapped by American defense companies.

Critics argued, however, that allowing these firms greater access to the world market, while it would save jobs in the short run, would also pose a long-range security risk that the U.S. should not take.

"The point is that this (Clinton) administration has pursued exports in general as a key to recovery of the American economy," said Richard Bitzinger, a defense industry analyst with Washington, D.C.-based research institution Defense Budget Project.

Little consideration has been given to any of the other issues involved, said Bitzinger, including the escalation of regional warfare or even to human rights issues. The federal government is negotiating for arms sales to Singapore, Indonesia and Thailand, according to Bitzinger. "This government does not have any human rights qualms about these sales, which kind of surprises some liberal Democrats who supported Clinton," he said.

Nonetheless, liberalizing the sale of arms abroad has become increasingly popular among Washington politicians. Defense contractors have applauded U.S. Secretary of Commerce Ron Brown and U.S. Sen. Dianne Feinstein, D-California, for their efforts to aid the industry. President Clinton has also been instrumental in lobbying foreign countries, such as Saudi Arabia, to purchase U.S. military goods. And, according to some defense contractors, federal officials' actions have helped stem the tide of job losses in the industry.

Knapp said approximately 20 percent of Litton's revenues are either from exports or from Litton subsidiaries operating overseas, and the company expects an increase in foreign sales in the future. From Litton's perspective, the controls on exports no longer make complete sense because many of the technologies are available on the open market. In other words, the United States is not preventing countries from having access to military goods by controlling exports.

"If U.S. companies do not compete or are not able to compete in that marketplace, we won't be denying those systems to the countries that are looking to purchase the systems because there are a number of countries that develop good technology that can fill those requirements," Knapp added. Furthermore, "it means jobs in California."

Knapp and other industry sources pointed out that more defense layoffs are on the way in California, and that the industry views foreign sales as a way to stem the layoff tide.

Litton produces a variety of military electronic products that may be decontrolled under the revised Export Administration Act.

Other Los Angeles County-based aerospace companies also reported that they would benefit economically if the U.S. government loosened its grip on the export of military goods.

Terry Clausen, a spokesman for Northrop Grumman Corp., said that defense contractor would also likely benefit if some of the export controls are lifted. According to Andrew Baldwin, manager of imports and exports for Los Angeles-based Hughes Aircraft Co., that company manufactures several dual-use items being considered for decontrol. Among those are spacecraft, commercial satellites, air traffic control systems and air traffic management systems.

Several critics, however, contended that the logic behind revamping the Export Administration Act is flawed.

The U.S. is clearly the world leader in international arms trading. And the U.S. market share of total world arms sales is not endangered by the government's export controls on munitions, according to Natalie Goldring, deputy director of the Washington D.C.-based nonprofit research organization called the British American Security Information Council. "Other countries' market share (of international arms sales) is declining, while the United States' (market share) is increasing," she said. "The idea that (the U.S. defense) industry needs any more breaks to sell its wares overseas is ludicrous."

The defense industry has gone through a rough couple of years and, while it may be selling more on the international market, most industry sources said those increased sales are simply not enough to make up for revenues lost by defense downsizing.

"There is no way that the foreign market is ever going to totally substitute for losses in Department of Defense procurement," said Bitzinger. The most that can be expected from expanding export sales is that the decline of the defense industry will be slowed down, he said.

"It will make more of a gradual decline rather than having the floor fall out from under them," he added.

Industry analysts at Defense Budget Project anticipate five more years of defense budget cuts, which will undoubtedly result in more layoffs, particularly in California.

The issue of jobs, however, is not the main focus of defense contractors' argument in favor of loosening export controls. They claim the export controls on defense items are outdated.

The legislation now being rewritten is 15 years old and reflects an international political environment quite different from the one today, they contend. The end of the Cold War means many of the controls on defense goods should end as well, contractors argue.

"The control system is designed to weigh economic interests as well as the national security and foreign policy interests and to strike a reasonable balance," said Michael Hoffman, director of the western region of the Bureau of Export Administration. That agency is a division of the Department of Commerce that is responsible for licensing goods for export from the United States.

The controls were designed to be strict because of the fragility of relations between super powers during the time at which the Export Administration Act was written. They were written so that products which had commercial and military applications were treated as military goods, which prevents defense contractors from exporting them.

"Things like satellites which provide night vision are on the munitions list," said Joel Johnson vice president of the Aerospace Industry Association, a Washington, D.C.-based trade association. Items on the munitions list are under strict export control because they have military capabilities, explained Johnson. "There is a whole lot of stuff on the munitions list that should not be there," he noted.

Bitzinger noted that weapons of mass destruction will remain on the munitions list. Specifically, that would include nuclear weapons, biological weapons, chemical weapons and missiles.