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FOREIGN MILITARY SALES ACT AMENDMENT: 1970, 1971

TUESDAY, MARCH 24, 1970

UNITED STATES SENATE,
COMMITTEE ON FOREIGN RELATIONS,

Washington, D.C.

The committee met, pursuant to notice, at 10 a.m., in room 4221, New Senate Office Building, Senator J. W. Fulbright (chairman) presiding.

Present: Senators Fulbright, Sparkman, Aiken, Case, Williams, and Cooper.

OPENING STATEMENT

The CHAIRMAN. The committee will come to order.

The committee is meeting this morning to consider the Administration's program for credit sales of arms and military equipment to underdeveloped countries for fiscal years 1970 and 1971. (The bills, S. 2640, and S. 3429, follow.)

[S. 2640, 91st Cong., first sess.]

A BILL To amend the Foreign Military Sales Act

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Foreign Military Sales Act (82 Stat. 1320) is amended as follows:

SECTION 1. Section 3 is amended as follows:

In subsection (b) strike out the entire subsection and substitute the following: "No sales, credits or guaranties shall be made or extended under this act to any country during a period of one year after such country seizes, or takes into custody, or fines an American fishing vessel for engaging in fishing more than 12 miles from the coast of that country. The President may waive the provision of this subsection when he determines it to be important to the security of the United States or he receives reasonable assurances from the country involved that future violations will not occur, and promptly so reports to the Speaker of the House of Representatives and the Committee of Foreign Relations of the Senate. The provisions of this subsection shall not be applicable in any case governed by an international agreement to which the United States is a party."

SEC. 2. Section 31 is amended as follows:

(a) In subsection (a) strike out "$296,000,000" and "1969" in the first sentence and substitute "$275,000,000" and "1970", respectively.

(b) In subsection (b) strike out "1969" and "$296,000,000" and substitute "1970" and "$350,000,000", respectively.

SEC. 3. Section 33 is amended as follows:

(a) In subsection (a) strike out "the fiscal year 1969" and substitute "each fiscal year".

(b) In subsection (b) strike out "the fiscal year 1969" and substitute "each fiscal year'.

(1)

[S. 3429, 91st Cong., second sess.]

A BILL To amend the Foreign Military Sales Act

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Foreign Military Sales Act (82 Stat. 1320) is amended as follows:

SECTION 1. Section 31(a) is amended by deleting the period at the end of the first sentence and inserting in lieu thereof "and not to exceed $272,500,000 for the fiscal year 1971."

SEC. 2. Section 31(b) is amended by deleting the period at the end of the subt section and inserting in lieu thereof "and during the fiscal year 1971 shall noexceed $385,000,000."

The CHAIRMAN. By coincidence, we met yesterday with the Arms Control and Disarmament Agency and had a very interesting discussion. I hope today won't be inconsistent with yesterday.

In 1966 and 1967 the Committee on Foreign Relations devoted a great deal of study to the Government's arms sales and grant programs. These studies led to repeal by the Congress of the broad authority for credit sales by the Department of Defense, elimination of the revolving fund used to finance them. and passage in 1968 of the Foreign Military Sales Act, designed to correct many of the abuses uncovered by the committee. This is the first hearing the committee has had to explore the operations of the sales program under the new authority.

The credit sales program must be viewed in the context of both our Nation's foreign policy objectives and the total picture of U.S. arms exports. The Department of Defense estimates that in the current fiscal year the United States will sell abroad a total of about $1.9 billion in arms and military equipment. Of that, $350 million will be financed under authority of the Military Sales Act. In addition to the sales volume, the United States will supply $392 million in arms through the military grant aid program and will have an additional $166 million in surplus arms and equipment-valued at onefourth of acquisition cost-to give away. Thus, the United States will sell or give away nearly $2.5 billion in military materials this fiscal

year.

We welcome the witnesses from the executive branch who will enlighten the committee concerning operations under the new authority, the Administration's policies on arms sales and grants, and what the implementation of the Nixon doctrine means in terms of the future plans for these programs.

The committee is pleased to have as witnesses today the Under Secretary of State for Political Affairs, Mr. U. Alexis Johnson, and the Deputy Secretary of Defense, Mr. David Packard.

In order to simplify the hearing, I think, perhaps, we should have the written statements of both witnesses first. Then we will proceed to questions, by which time, hopefully, some more members of the committee will appear.

Secretary Johnson, will you proceed?

STATEMENT OF HON. U. ALEXIS JOHNSON, UNDER SECRETARY OF STATE FOR POLITICAL AFFAIRS

Mr. JOHNSON. May I proceed? Thank you, Mr. Chairman. As you have stated, I am here today to discuss with you the foreign military sales bill and the Administration's request for renewed authority to provide credit and guaranties of credit for military sales

by the U.S. Government to allies, selected friendly countries, and international organizations. I want to discuss why we have made this request and how we have implemented the Foreign Military Sales Act.

The basic point to be recognized when considering armaments is that security is a paramount function of sovereignty and that nations will do what they believe necessary for their country. They will produce their own arms if they can; they will obtain them from abroad, if they cannot. Many countries prefer to rely on the United States, but if they are denied, they go elsewhere.

GOAL OF FOREIGN MILITARY SALES PROGRAM

The Nixon doctrine, which Mr. Packard will discuss in detail, provides the general objectives of the foreign military sales program; this is to achieve greater self-reliance on the part of our friends and allies for their own security.

This goal was underscored earlier this month in the report of a Presidential task force directed by Mr. Rudolph A. Peterson. The Peterson report recognizes the essential part that military assistance and sales programs have played in U.S. foreign policy over the last two decades. Although viewing a less sharply divided world in prospect, the task force nevertheless foresees a need for some increase in U.S. assistance as American military forces are reduced overseas. It believes that selective programs in support of individual countries are essential to the U.S. goal of a world order "in which each nation, large or small, alined or nonalined, can develop in its own way." This general emphasis on self-reliance and selectivity is consistent with this Administration's policies and goals.

REASONS UNITED STATES SUPPLIES ARMS

The United States became an important supplier of arms in the aftermath of World War II, because of the climate of fear engendered by Soviet action and because the United States alone in the West had the resources to produce the weapons friendly countries felt they needed for their security.

The United States has remained a prime supplier for a variety of reasons. First among these is that we have been providing arms to friends and allies on a grant basis through our military assistance program. Once a pattern is established of arms procurement from a particular source there is a strong incentive to continue on this road. It is difficult and expensive to mix weapons systems which are not compatible, or to change abruptly from one to another. The cost is not only in time and money but often in serious decline in military efficiency. Hence, many countries which first acquired U.S. weapons systems under the grant military assistance programs prefer to come to us for additional arms purchases even though, when using their own money, they could buy from many sources.

There is another intangible, but perhaps even more important factor that makes countries look to the United States for their requirements. Most countries that have a choice feel a large measure of trust and confidence in their dealings with us. They consider our products to be reliable and offered at a fair price. They feel certain that spare parts and technical assistance will be available for repairs and maintenance. They are confident that we will not promote unnecessary or

inappropriate weapons just to make a sale; in fact, we are quite prepared to advise against unsuitable or excessively costly military procurement. They have little reason to fear political motives behind our military sales which they would regard as endangering their vital interests.

The CHAIRMAN. You are talking only about sales to foreign countries here.

Mr. JOHNSON. I am talking entirely here about sales to foreign countries.

Let me address here the assertions that we should be or are selling arms because it is good for business and is beneficial to our balance of payments. That such benefits do accrue from arms sales abroad is indisputable, just as they accrue from any export sale. But on this issue the Administration and the Congress are of one mind: we do not and will not approve the sale of arms to other countries primarily for these reasons. This is made quite explicit in the statement of "U.S. Policy and Responsibility for Military Export Sales," which has been furnished to the committee.

SUPERVISION OF FOREIGN MILITARY SALES

Because we do not permit military exports primarily for balance-ofpayments reasons and because we exercise rigorous supervision of the military sales we do make, I believe our policies do contribute to control of the international arms trade. In addition to giving the most careful scrutiny to initial requests to us for arms, we assert control over the transfer of U.S.-origin materiel to third countries. The criteria for giving consent to such transfers, that is, strengthening U.S. security and contributing to world peace, are the same as for direct sales from the United States, and each new recipient is required to accept our control over further transfers.

Foreign military sales are supervised in conformity with the law, the intent of the Congress, and the policies of this Administration. All military export sales must be approved by the Department of State. A sale made directly by a private company must be licensed by the Office of Munitions Control. If the sale is made by the U.S. Government, it must be approved by the Office of Military Assistance and Sales. Both of these Offices are in the Department of State. Before licensing commercial sales or approving Government sales, these Offices are responsible for insuring that all requirements of law will be complied with and that an adequate review of political, economic, and any other factors material to the case has been made. If a case so warrants, it is reviewed at the highest level of the U.S. Government. All interested offices in the Departments of State, Defense, and Treasury (if there is credit involved) participate in sales case reviews, as do also AID and ACDA when their responsibilities are involved. Sales to less-developed countries receive particularly close attention. Only the most routine sales of common spare and other maintenance items by the Department of Defense do not normally undergo this comprehensive, case-by-case interagency review. However, if circumstances dictate, for example to a country involved in a regional conflict, every sale, even of minor items, would probably be handled on a case-by-case basis.

In every potential credit sale, we first determine that the sale would be consistent with our foreign and national security policies. Only then do we consider the provision of credit if it appears that this assistance would materially facilitate the purchasing country's pace of economic and social development, even when obliged to undertake arms procurement. Without exception, before a case is approved, each proposed credit arrangement receives a careful and comprehensive study in addition to the considerations which would also apply if the sale were made for cash.

PRESENT U.S. ARMS SALES POSITION

Now where do we stand in the field of arms sales? As I indicated, a pattern of procurement from the United States was set by our grant program, but perhaps just as important, we remain a significant source because countries have confidence in American weapons, in the reliability of the United States as a supplier, and because countries recognize that their national interests have much in common with those of the United States.

Gradually, over the last 20 years, as a growing number of countries have become able to assume a progressively larger share of their own defense costs, our grant military assistance has been considerably reduced or terminated; by the mid-1960's only economically lessdeveloped countries continued to receive grant materiel. It is here that the importance of the Foreign Military Sales Act to national policy becomes evident. By providing credits, this act enables us to ease the transition from outright grant to outright sales. Thus, countries which have depended on our aid are not suddenly confronted by a sharply increased burden of military expenditures that could severely affect their still fragile economies.

To provide you with a clear picture, let me now mention a few facts about U.S. military export sales-their magnitude and destination. Out of an estimated current annual average of $4.1 billion of arms sold abroad by NATO members, the United States sells about $2 billion, or 50 percent of the total. Of these $2 billion sales, 50 percent go to Europe and Canada; 30 percent go to Israel, Iran, and the Republic of China; and 7.4 percent go to Japan, Australia, and New Zealand. Only 2.4 percent of our sales go to Latin America and but 1.4 percent to Africa. The significance of these figures is that the bulk of our sales are to countries in whose security our interest is great.

It is interesting to note that in contrast to some $50 million of U.S. sales to Latin America, other NATO countries sell an estimated $343 million, or almost seven times as much as we do. To Africa, where the United States sells an annual average of $18 million, European nations sell $221 million or 12 times as much as we do.

It is noteworthy also that of the total value of U.S. military export sales, the 70 percent made to economically developed countries represents in large part products of our advanced technology. Because our own substantial requirements demand a highly developed defense industry with its large production runs, we produce many defense articles which are unique or which are better or cheaper than what can be produced by other nations. The enormous costs of developing and

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