Arms Makers' Cozy Relationship with the Government
by Aaron Rothenburger
MoJo Wire / Mother Jones, August 1999
Samuel Colt was not only America's first major arms exporter,
but also its first arms lobbyist. In the mid-19th century Colt
(manufacturer of the .45-caliber "peacemaker") gained
lucrative contracts by giving ornately engraved firearms to U.S.
Gens. Zachary Taylor and Franklin Pierce. Later, Presidents Taylor
and Pierce each remembered Colt's gifts when it came time to award
military contracts. Today the arms industry gives cash to politicians'
war chests and fills the halls of government with lobbyists who
are often former Pentagon employees.
During the Clinton administration there's been heavy action
on the federal campaign front: The political action committees
(PACs) of the biggest defense companies gave $14.2 million directly
to federal candidates since Clinton's first presidential bid,
according to the Center for Responsive Politics (CRP). And the
recent frenzy of defense-industry mergers may increase the firepower
of these corporate PACs because, as Jen Schechter of the CRP says,
"Merging companies is merging clout."
The arms makers give money indirectly, too. In 1997 alone
the defense industry spent $49.5 million to lobby the nation's
decision-makers -- nearly 10 times what they handed out for campaign
contributions in the last congressional elections.
It's money well spent. During the Clinton years this cash
flow has helped arms exporters win tax breaks, guaranteed loans
for arms-importing countries, ended the ban on arms exports to
Latin America, expanded NATO to include former Warsaw Pact enemies,
and defeated bills that would have conditioned arms exports on
buyers' human-rights records.
While the arms industry successfully uses traditional methods
like lobbyists and campaign contributions, it may wield the most
influence through elite units within the government. For example,
the Defense Trade Advisory Group (DTAG) is a semiofficial body
appointed by the State Department to advise on arms exports. Its
40 current members represent the most powerful arms exporters
and industry trade groups in the U.S.: Boeing, United Technologies,
Lockheed Martin, Hughes, Allied Signal, Litton Industries, Raytheon,
General Dynamics, Loral Space Systems, the Electronic Industries
Association, and the Aerospace Industries Association.
At DTAG's first meeting in 1994, Chairman William Schneider
Jr. outlined the group's policy goals -- a virtual wish list for
the arms industry. Schneider, who was also an adviser to President
Reagan on arms control and disarmament, advocated an end to export
credits and tax rates that treated arms sales more harshly than
other exports. In the post-Cold War world, Schneider also favored
lifting restrictions on high-tech weapons exports to Latin America
and former Soviet-bloc countries. The policies, Schneider said,
were "fettered by old perceptions and Cold War thinking."
In 1995 Lockheed Martin Chairman and CEO Daniel Tellep took
up Schneider's call to arms. In a letter to a former U.S. senator,
Tellep urged an end to arms-export policies that "jeopardize
our ability to compete." This refers to the fact that, currently,
profits from arms exports get only half the tax exemptions that
most nonmilitary exports get. Arms exporters claim that these
lower exemptions (read "tax breaks") make U.S. "products"
less competitive in Europe, whose exporters are not similarly
"handicapped." And the exporters are gunning for a change
in this 20-year-old tax policy.
Another government group that advises the Pentagon on overseas
arms sales took up the tax-break cry. In 1998. The Defense Policy
Advisory Committee on Trade (like DTAG, an organization comprised
mostly of executives for major arms exporters) asked the Clinton
administration to lobby Congress to change this "unfair"
taxation. In fact, bills were introduced in the House and Senate
in 1998 to give the defense industry the break it sought; according
to Defense News, the reprieve would have amounted to $340 million
over the next five years. The bills' sponsors, Sen. Orrin Hatch
(R-Utah) and Rep. Amory Houghton (R-N.Y.), are longtime recipients
of campaign contributions from arms exporters. Neither bill made
it out of committee in the House or Senate -- a rare defeat for
the defense industry.
The lower exemptions for military equipment could have gone
the way of the "recoupment fees," which had allowed
the federal government to reclaim taxpayer-funded costs of developing
new weapons. Congress effectively ended that policy in 1995 after
industry representatives lobbied the government. In effect, Congress
rewarded arms exporters with a new $200 million tax break every
year -- at the expense of taxpaying citizens.
But the arms lobby's greatest victory in the Clinton years
was its battle for government-backed loans to countries importing
U.S. weapons -- in other words, the government would start guaranteeing
sales to fiscally unsound nations. In 1995 Congress established
the Defense Export Loan Guarantee program to the tune of $15 billion.
The bill's sponsor, Sen. Dirk Kempthorne (R-Idaho), is a former
vice president for governmental affairs for FMC Corp. (now part
of United Defense, a leading exporter of armored vehicles).
The Pentagon-administered loan program charges buyers an administrative
fee up front and an exposure fee (reflecting the risk of default)
at the time the loan is made; the Pentagon has approved $4.5 billion
in potential loans since DELG's inception. The problem is that
DELG's most likely borrowers are nations that are high credit
risks, such as former Warsaw Pact countries with shaky, newborn
market economies and poor credit histories.
It's too soon to judge DELG's financial soundness, but Pentagon
documents show that previous programs to finance foreign military
sales resulted in defaults by 34 nations on loans worth $14 billion,
according to the Seattle Times. The Pentagon, for its part, will
recommend that Congress terminate DELG since it shows no signs
of becoming self-sustaining.
It's the Arms Sales, Stupid
Before the Clinton administration came along, the executive
branch had made occasional attempts to restrict arms exports --
or at least exporters from selling to questionable customers.
President Carter enacted some fairly restrictive policies on arms
exports -- in one notorious cable the State Department told its
diplomats to shun arms exporters (the cable later became known
as the "leprosy letter"). But the pendulum soon started
swinging back; during the Reagan and Bush administrations, the
State Department began telling its diplomats to assist arms exporters
as matters of foreign and trade policy.
Just as Carter's must have in the 1970s, Clinton's campaign-trail
rhetoric on arms exports initially jolted the defense industry.
The industry feared new restrictions on diplomatic efforts to
sell U.S. weapons.
They needn't have worried.
In May 1993, Secretary of State Warren Christopher (a former
director of Lockheed) instructed U.S. embassies to help American
arms companies promote trade. "We are delighted to see that
the administration is serious about exporting American-made goods,
including defense goods," said Anna Stout of the American
League for Exports and Security Assistance. "The officials
that deal with this have been very open to requests from [the
defense] industry for consultation and discussion."
Clinton's policies repudiated the leprosy letter in no uncertain
terms. While Clinton lauded the goal of arms control, U.S. embassy
staff were directed "to support overseas marketing efforts
of American companies bidding on defense contracts."
Shortly thereafter, Assistant Secretary of State Thomas E.
McNamara detailed the new sales team's successes -- to DTAG. McNamara
said the new policy had helped McDonnell Douglas sell 30 Apache
helicopters to the Netherlands. And in another U.S. sales coup,
the U.S. embassy in Great Britain teamed up with U.S. arms makers
to tout the benefits of buying American -- rather than European
-- aircraft. The sale netted McDonnell Douglas a $4 billion deal.
It was a coup for McDonnell Douglas -- except that the terms of
the deal promised 3,000 of the new jobs the deal would create
to British workers, rather than Americans.
The Arms Export Tango: Sales to Latin America
Clinton also eliminated Carter's restriction on sales of advanced
weapons to Latin America. Carter's policy was based on preventing
arms races between the military dictatorships that ran most South
American countries at the time. But as Clinton's administration
saw the region slowly became more democratic, the defense industry
and the Pentagon lobbied to make this no man's land a new sales
In 1996, according to Time, aerospace lobbyists got 78 representatives
and 38 senators to sign letters asking Secretary of State Christopher
to end the Latin America restrictions. During this election year,
these legislators received a total of $1 million in PAC contributions
from manufacturers of jet fighters and their subcontractors. Under
further pressure from Defense Secretary William Perry, Christopher
recommended the president lift the ban (provided some safeguards
on sales remained). It was one of Christopher's last official
acts as secretary of state.
A prospective sale of F-16 and F/A-18 jets to Chile in early
1997 increased the pressure on the president to lift the ban,
as did aerospace executives' warning to the Clinton administration
that losing the sale could cost jobs in states that would be key
in any future presidential bid by Vice President Al Gore.
In August 1997, Clinton announced the end of the ban. The
Chilean sale fell through -- yet another victim of the global
economic crisis. But arms exporters had gained license to sell
state-of-the-art weapons systems throughout the Western Hemisphere.
New Allies Mean New Markets
The end of the Cold War was a huge marketing opportunity for
U.S. arms exporters, best exemplified by the drive to have Poland,
Hungary, and the Czech Republic admitted to NATO. Since any new
NATO country would have to upgrade its weapons systems to NATO
standards, U.S. arms exporters launched a lobbying offensive in
Washington, D.C., and abroad to press for the expansion.
Leading the charge was the U.S. Committee to Expand NATO (later
renamed the U.S. Committee on NATO), a lobbying group. "If
a senator is wavering," a spokeswoman told The Nation, "we
arrange for a meeting between that senator and a member of our
committee." Committee President Bruce Jackson also happens
to be the director of strategic planning for Lockheed Martin --
although when he meets with senators, Jackson says he doesn't
mention who his employer is. (Both Jackson and Lockheed Martin
claim there is no connection, financial or otherwise, between
the committee and the company.)
The committee ran a series of ads in Roll Call proclaiming
that "Americans Agree" on expanding NATO. And what Americans
they were: Stormin' Norman Schwarzkopf and three former secretaries
of state, including Henry Kissinger. (The committee also contacted
ethnic Polish and Hungarian lobbying groups in the U.S. who support
NATO expansion, according to The Nation.) Ultimately, the committee
got what it wanted: Hungary, Poland, and the Czech Republic will
formally join NATO this April.
If U.S. arms makers have their way, Romania will be next.
In 1997, former Lockheed Martin CEO Norman Augustine toured prospective
NATO countries (including Romania). Augustine vocally supported
Romania's bid for NATO membership; his company had already sold
the country $82 million in radar equipment.
In March of that year, Rep. Gerald Solomon (R-N.Y.) sponsored
a resolution promoting speedy NATO membership for Romania. Solomon
had received a combined $5,000 from Lockheed Martin and Textron
between 1997 and 1998 (Textron's contribution came after a seven-year
absence from Solomon's coffers); he also received $1,500 of in-kind
contributions from AAI Corporation, makers of Shadow 600 pilot-less
surveillance planes that Romania had bought from it in 1998. Solomon
praised Romania, claiming that its rapid shift to a free market
and its "increasingly mature and functioning democracy"
made it a good candidate for NATO inclusion. (This contradicts
the State Department's own assessment of Romania.)
Despite this boosterism, the Clinton administration said Romania's
undemocratic practices made it an unlikely candidate for NATO.
Not to mention that its economy is in shambles and its human-rights
record is poor.
Code of Conduct
Occasionally legislators have the gall to introduce bills
that might actually limit U.S. sales of weapons to countries that
have human-rights problems. Not that they've been able to beat
the arms industry's lobbyists.
In 1993 Sen. Russ Feingold (D-Wis.) proposed that arms sales
to Indonesia be linked to that country's human-rights record.
Lobbyists immediately went to work opposing Feingold's proposal.
As one complained to the Legal Times, "Every time a human-rights
issue comes up, they [Congress] jump on it and say, 'Let's cut
off arms sales to Bongo Bongo.'"
The lobbyist then became defiant: "We'll fight Feingold;
we'll fight each senator if we have to. The defense industry has
to fight each one of these battles."
The Indonesian government's "registered foreign agents"
-- its lobbyists in the U.S. -- disengaged from the fray and let
American arms exporters do the fighting. The arms makers impressed
upon legislators that tying arms exports to human rights meant
the loss of jobs to foreign competitors. The State and Defense
Departments phoned Feingold to let him know of the Clinton administration's
opposition to the bill. The Feingold bill went down in flames.
In 1995 Rep. Cynthia McKinney (D-Ga.) and Sen. Mark Hatfield
(R-Ore.) introduced the Code of Conduct bill , which would have
tied all U.S. arms exports to the customer's democracy record,
human-rights record, and its willingness to report arms imports
and exports to the United Nations.
At a 1995 defense trade seminar, three influential arms export
lobby groups recommended the bill "should be allowed to die
in [House and Senate] committees." Both the Senate and House
versions of the bill were soundly defeated, with the 65 senators
and 262 representatives who voted against it collecting some $4
million in contributions from defense PACs.
The undaunted McKinney, who in 1997 had said the U.S. "ought
not to be in the business of supplying weapons to dictators,"
introduced yet another Code of Conduct bill in the House last
September, with John Kerry (D-Mass.) doing so in the Senate. The
bill passed in the House, but was not taken up in the Senate.
McKinney plans to re-introduce the bill for debate by the 106th
And so it goes. The arms lobby pushes its interests. Occasionally
a principled legislator comes along and tries to introduce some
responsibility into the arms export process. The reformer quickly
gets squashed, with the Clinton administration's help.
It seems likely that the arms lobby will continue marching
through the halls of government, urging the expansion of arms
sales to repressive or poor regimes around the world -- unless
something like the Code of Conduct bill becomes law and finally
links arms exports to buyers' human-rights records.