United States arms transfer and security assistance programs

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Material Information

Title:
United States arms transfer and security assistance programs
Physical Description:
xiv, 175 p. : ill. ; 24 cm.
Language:
English
Creator:
Library of Congress -- Foreign Affairs and National Defense Division
United States -- Congress. -- House. -- Committee on International Relations. -- Subcommittee on Europe and the Middle East
Publisher:
U.S. Govt. Print. Off.
Place of Publication:
Washington
Publication Date:

Subjects

Subjects / Keywords:
Munitions   ( lcsh )
Military assistance, American   ( lcsh )
Arms transfers -- United States   ( lcsh )
Military relations -- United States -- Foreign countries   ( lcsh )
Military policy -- United States   ( lcsh )
Genre:
federal government publication   ( marcgt )
non-fiction   ( marcgt )

Notes

Bibliography:
Includes bibliographical references.
Statement of Responsibility:
prepared for the Subcommittee on Europe and the Middle East of the Committee on International Relations, U.S. House of Representatives by the Foreign Affairs and National Defense Division, Congressional Research Service, Library of Congress.
General Note:
CIS Microfiche Accession Numbers: CIS 78 H462-22
General Note:
At head of title: 95th Congress, 2d session. Committee print.
General Note:
Issued Mar. 21, 1978.
General Note:
Reuse of record except for individual research requires license from LexisNexis Academic & Library Solutions.

Record Information

Source Institution:
University of Florida
Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
aleph - 024739112
oclc - 04131550
Classification:
lcc - KF49
System ID:
AA00024797:00001

Full Text





95th Congress C02MITTEE PRINT 2d Session




UNITED STATES ARMS TRANSFER AND

SECURITY ASSISTANCE PROGRAMS




PREPARED FOR THE

SUBCOMMITTEE ON
EUROPE AND THE MIDDLE EAST

OF THE

COMMITTEE ON

INTERNATIONAL RELATIONS

U.S. HOUSE OF REPRESENTATIVES

BY THB

FOREIGN AFFAIRS AND
NATIONAL DEFENSE DIVISION,
CONGRESSIONAL RESEARCH SERVICE,
LIBRARY OF CONGRESS


A!4%


XPR
'too.
MARCH 21, 1978




Printed for the use of the Committee on International Relations


U.S. GOVERNMENT PRINTING OFFICE 23474 0 WASHINGTON : 1978

















COMMITTEE ON INTERNATIONAL RELATIONS CLEMENT 3. ZABLOCKI, Wisconsin, Chairman L. H. FOUNTAIN, North Carolina WILLIAM S. BROOMFIELD, Michigan
DANTE B. FASCELL, Florida EDWARD 3. DERWINSKI, Illinois
CHARLES C. DIGS, JR., Michigan PAUL FINDLEY, Illinois
ROBERT N. C. NIX, Pennsylvania JOHN H. BUCHANAN, JR., Alabama
DONALD M. FRASER, Minnesota J. HERBERT BURKE, Florida
BENJAMIN S. ROSENTHAL, New York CHARLES W. WHALEN, JR., Ohio
LEE H. HAMILTON, Indiana LARRY WINN, JL, Kansas
LESTER L. WOLFF, New York BENJAMIN A. GILMAN, New York
JONATHAN B. BINGHAM, New York TENNYSON GUYER, Ohio
GUS YATRON, Pennsylvania ROBERT 3. LAGOMARSINO, California
MICHAEL HARRINGTON, Massachusetts WILLIAM F. GOODLING, Pennsylvania
LEO J. RYAN, California SHIRLEY N. PETTIS, California
CARDISS COLLINS, Illinois STEPHEN 3. SOLARZ, New York HELEN S. MEYNER, New Jersey DON BONKER, Washington GERRY E. STUDDS, Massachusetts ANDY IRELAND, Florida
DONALD J. PEASE, Ohio
ANTHONY C. BEILENSON, California WYCHE FOWLER, Jr., Georgia E (KIKA) DE LA GARZA, Texas GEORGE E. DANIELSON, California JOHN J. CAVANAUGH, Nebraska 3oaN J. BRADY, Jr., Chief of Staff


SUBCOMMITTEE ON EUROPE AND THE MIDDE EAS' T"
LEE H. HAMILTON, Indiana, Chairman ,

BENJAMIN S. ROSENTHAL, New York PAUL FIY4fllinois
STEPHEN J. SOLARZ, New York SHIRL Y N. PETTIS, California .
DONALD J. PEASE, Ohio :o /
GEORGE E. DANIELSON, California / ,. &
MICHAEL H. VAN DUSvi, Subcommittee
ALISON L. BRENNER, Mtnority Staff f b~ldtant RONALD L. SORIANO, SubcommitimStaffAsociate DAVID P. BARTON, Subcommittee Sf 9 Aeoe*t SANDRA DcECKE,
(HI)








FOREWORD


HOUSE OF REPRESENTATIVES, COMMITTEE ON INTERNATIONAL RELATIONS,
Washington, DXU, March 21, 1978.
This study was prepared by the Library of Congress at the request of the Subcommittee on Europe and the Middle East, chaired by Hon. Lee H. Hamilton, and has been submitted to the Committee on International Relations.
This report, which examines the various security assistance programs carried out by the United States, serves as a useful reference document and will be of special interest to members of the Committee on International Relations.
The findings of the study are those of the Foreign Affairs and National Defense Division, Congressional Research Service, Library of Congress, and do not necessarily reflect the views of the membership of the Committee on International Relations.
CLEMENT J. ZABLOCKI,
Chairman.





















Digitized by the Internet Archive in 2013















http://archive.org/details/unitedstatesarmsOOlibr








LETTER OF TRANSMITTAL


HousE OF REPRESENTATIVES,
COMMITTEE ON INTERNATIONAL RELATIONS,
Washington, D.C., March 21, 1978.
Hon. CLEMENT J. ZABLOCKI,
Chairman, Committee on International Relations, U.S. House of
Representatives, Washington, D.C.
DEAR MR. CHAIRMAN: I enclose a study prepared for the Subcommittee on Europe and the Middle East by the Congressional Research Service of the Library of Congress. This report's basic objective is to examine the various U.S. security assistance programs.
The purpose of commissioning this study from the Congressional Research Service was largely in response to my concern, as well as that of many Members of Congress, with the large security assistance programs, including arms sales, that the United States undertakes worldwide, particularly in the Middle East. Congressional scrutiny of direct and indirect military assistance programs, as well as of arms sales, is an increasingly important element of Congress overall oversight responsibilities.
This study contains a review of the various legislative mechanisms by which Congress oversees the many U.S. security assistance programs. This study will be useful to Members of Congress and others interested in the nature and scope of these programs. It synthesizes in one volume the numerous programs and the legislative controls affecting them.
This report was prepared by Herbert Y. Chandler, Specialist in National Defense, Foreign Affairs and National Defense Division, Congressional Research Service, Library of Congress. The analysis presented here is that of the Congressional Research Service and does not necessarily represent the views of members of the Subcommittee on Europe and the Middle East.
I believe this study will be of special interest to my colleagues of the Committee on International Relations, which has primary jurisdiction over these programs.
Respectfully submitted,
LEEH. HAMILTON,
Chairman,
Subcommittee on Europe and the Middle East.
(V)












LETTER OF SUBMITTAL

THE LIBRARY OF CONGRESS,
CONGRESSIONALRESEARCH SERVICE,
Hon. LEE H. HAMILTON, Washington, D.C., February 15, 1978.
Chairman, Subcommittee on Europe and the Midile East, Committee on
International Relations, House Annex 1, Washington, D.C.
DEAR CONGRESSMANHAMILTON: In recent years, Congress has expressed concern over the scope, level, and purpose of U.S. arms transfer and security assistance programs. Problems of special significance have arisen regarding American arms sales and security assistance programs in the Middle East. The various security assistance programs of the United States are subject to differing and increasingly complex requirements with respect to congressional authorization, appropriation, policy direction, limitations, nd oversight.
The enclosed report, prepared at your request and entitled "U.S. Arms Transfer and Security Assistance Programs," draws together an array of information on arms transfer and security assistance legislation, policies, and procedures. It reviews current legislation concerning these programs and details the purpose, scope, limitations, legislative requirements and restrictions, justifications, operation, implementation, and reporting requirements which apply to their conduct and administration.
U.S. security assistance programs are now conducted under the following broad categories: the military assistance program (MAP); the international military education and training (IMET) program; the foreign military sales (FMS) program; commercial sales; ship transfers; and security supporting assistance. It is often difficult for Members of Congress to become completely familiar with the full scope and details of the overall effort.
It is hoped that this study will be of assistance to the Congress in exercising its legislative and oversight responsibilities concerning this important implement of American foreign and national security policy.
The report was prepared by Dr. Herbert Y. Chandler, specialist in National Defense, Foreign Affairs and National Defense Division, Congressional Research Service. Informal comments on certain technical aspects of the study were solicited and received from the Office of the Under Secretary of State for Secretary Assistance, the Defense Security Assistance Agency, and appropriate offices in the Departments of the Army, Navy, and Air Force. We are grateful for their interest, time, and generous assistance.' However, we remain responsible for the contents of the study and for its conclusions. Stenographic assistance was provided by Miss Cheryl E. Powell.
It has been pleasure to be of service to your subcommittee. Please call if you require additional information.
Sincerely, GILBERTGUDE, Director.

(VII)














CONTENTS

Page

LETTER OF v
LETTER OF V11
X1
I. INTRODUCTION ----------------------------------------------- 1
Il. MILITARY AssiSTANCE PROGRAM (MAP):
A. Definition ------------------------------------------- 9
B. Reduction in the 9
C. Legislative requirements and restrictions 12
1 Presidential determination---------------------- 12
2. No U.S. commitment 13
3. Purposes for which aid may be used -------------- 14
4. Requirements for recipient countries 15
5. Transfers to third countries- 16
6. Human 17
7. Additional restrictions -------------------------- 19
D. Presidential 25
E. Restrictions on U.S. military personnel- 26
F. Flexibility of 29
G. Treaties and Defense Cooperation Agreements (DCA) ------ 30 H. Stockpiles for 31
1. Excess defense 33
J. Required 35
K. Administration of the 37
L. Security assistance 39
M. Current status --------------------------------------- 40
III. INTERNATIONAL MILITARY EDUCATION AND TRAINING (IMET): A. 43
B. 43
C. 44
D. Current 45
IV. FOREIGN MILITARY SALES (FMS): A. Definition ------------------------------------------- 46
B. Eligibility ------------------------------------------- 46
C. Purposes for which sales are permitted ------------------ 47
D. Sales financing program ------------------------------- 48
1. DOD guaranteed credit ------------------------- 48
2. DOD direct credit ----------------------------- 49
3. Export-Import Bank direct credit ---------------- 51
E. Procurement and 51
F. Agent's 54
G. Transfers to third countries ---------------------------- 55
H. Legislative restrictions -------------------------------- 55
1. Restrictions on the use of U. S. military personnel 58 J Congressional 59
K. Administration of the program ------------------------- 61
L. Processing requests for arms purchases------------------ 63
M. Reporting requirements ------------------------------- 66
N. Congressional interests in reducing arms sales------------ 70
0. President Carter's arms transfer policy- 72
P. Arms Export Control Board (AECB) ------------------- 74
Q. Current 78
(TLK)







X

V. COMMERCIAL SALES: page
A. Definition- 82
B. Limitations on commercial 82
C. Administration of the program ------------------------- 84
D. Requirements for prior 84
E. Export 86
F. Agent's 91
G. Additional restrictions -------------------------------- 91
H. Required 91
I. Review of controls on nonlethal 92
J. Transfers of 93
K. Current 94
VI. SHIP TRANSFERS:
A. 99
B. Authority ------------------------------------------- 101
C. GAO report on ship transfer procedures----------------- 102
D. Current procedures ----------------------------------- 102
E. Current status --------------------------------------- 104
VII. OTHER SECURITY ASSISTANCE PROGRAMS: A. Definition ------------------------------------------- 106
B. Security supporting 106
1. 106
2. 107
3. Flexibility of the 108
4. Current 108
C. Middle East Special Requirements Fund ---------------- 110
D. Other programs -------------------------------------- ill
VIII. CONGRESSIONAL INTEREST ------------------------------------ 112
APPENDIXES:
I. Conventional Arms Transfer Policy Statement by the President, May 19, 125
II. Military Assistance Program ------------------------------ 127
III. International Military Education and Training Program ------ 129 IV. Excess Defense Articles Program --------------------------- 132
V. Foreign Military Sales 136
VI. Foreign Military Sales 139
VII. Foreign Military Sales Financing Program ------------------ 142
VIII. Commercial Exports -------------------------------------- 148
IX. Ship Transfers ------------------------------------------- 152
X. Statement by the President, February 1, 1978 174










UNITED STATES ARMS TRANSFER AND SECURITY ASSISTANCE PROGRAMS


SUMMARY
The various arms transfer and security assistance programs of the United States are subject to differing requirements concerning congressional authorization, appropriation, limitations, and oversight. It is often difficult to become completely familiar with the details of the overall effort. The scope, extent, and policy rationale of these programs has been of major congressional concern in recent years. One of the major complaints voiced by some Members of Congress has been the difficulty of first determining the full scope of, and then exercising legislative control and oversight over, the Nation's arms transfer and security assistance programs.
This study draws together an array of information on arms transfer and security assistance legislation, policies, and procedures. It summarizes current legislation concerning U.S. security assistance programs and details the purpose, scope, limitations, legislative r quirements and restrictions, justifications, operation, implementation and reporting requirements which apply to the conduct and administration of these programs.
U.S. security assistance programs, are now conducted under the following broad categories: the military instance program (MAP); international military education and training (IMET); the foreign military sales (FMS) program; commercial sales; ship transfers; and security supporting assistance. Within each category, this study summa izes key information on program purposes, legislative authority and limitations, program administration, and current status.
The supply of arms, weapons of war, and defense equipment to friends and allies has long been a major instrument of U.S. foreign and national security policy. Significant U.S. milita,y supplies of all kinds were furnished to our allies or potential allies under the Lend-Lease Act.
Postwar American aid, both military and economic, was extended to areas and nations devastated by wax and threatened by Communist subversion or aggression. In the postwar period, this great effort in defense, economic, and political recovery was, to a great extent, a triumph of American leadership and initiative, especially in Western Europe.
As the nations of Western Europe completed their economic recovery, the military assistance programs in that area were reduced and arms began to be provided through cash sales. In recent years, trends in U.S. arms transfers have continued to reflect the declining use of military assistance and an increasing reliance on arms sales.
(XI)






XII

The military assistance program (MAP) involves the loan or outright grant to foreign countries of military equipment, facilities, technical assistance, repair and rehabilitation, supply operations support, and administrative support. The military assistance program is carried out under authority of part II of the Foreign Assistance Act (FAA) of 1961, as amended. This act has been subject to reconsideration annually by the Congress, at which time funds to carry out the program are authorized and later appropriated.
The military assistance program was born in the early days of the cold war and the stated purpose of that program since its inception has been to strengthen the mutual defense and collective security of the non-Communist world. As such, it was a flexible instrument of U.S. foreign policy. However, as the original cold war rationale for military aid programs receded, the Congress, in recent years, has indicated that this program should, in general, be phased out and be replaced by a program of sales. Legislative authority for the military assistance program, however, remains intact. This program is likely to continue on a reduced and annually authorized basis for specific countries for some years to come in order to provide military assistance to countries with which the United States has concluded base rights in exchange for, inter alia, multiyear military assistance commitments. The program also remains available for unforeseen contingency use or in situations where a sales approach may be inappropriate for economic or foreign policy reasons.
International military education and training (IMET), until 1976 a part of the military assistance program, is a grant program for formal or informal instruction of foreign students in the United States or overseas. The purposes of such training are to encourage mutually beneficial relations and increased understanding between the United States and foreign countries and to improve the ability of participating countries to utilize their resources, including defense resources obtained from the United States, with maximum effectiveness.
The foreign military sales (FMS) program is carried out under the provisions of the Arms Export Control Act (AECA), formerly the Foreign Military Sales Act (FMSA). That act provides for the transfer of arms and other military equipment, and various services, through government-to-government agreements. Under this program, the Department of Defense (DOD) purchases military equipment or services from U.S. firms, or takes equipment to be sold from U.S. stocks (under some circumstances) and sells the equipment or services to a foreign government or international organization, or sells the services of DOD personnel such as training or management advice. This program is not considered "assistance" as such since there is no cost to the U.S. Government. These sales comprise the largest volume of U.S. arms transfers.
The Arms Export Control Act (AECA) also provides authority for the President to finance sales of defense articles and services or to guarantee financing to friendly foreign countries or international organizations. A major purpose of AECA credit is to help economically less developed countries make the transition from grant aid to sales.
As the foreign military sales program has grown, the Congress has come to feel that its controls over this program were not adequate. In attempting to gain increased control over and a greater voice in this program, the Congress, in 1974, enacted section 36(b) of the






XHI

Foreign Military Sales Act (later changed to the Arms, Export Coratrol Act). This provided for a congressional veto over individual arins sales.
On May 9, 1977, President Carter outlined his administration's policy concerning arms sales. In his statement, the President indicated that, "The virtually unrestrained spread of conventional weaponry threatens stability in every region of the world." The policy announced by the President contained two basic elements:
* The United States will henceforth view arms transfers as an exceptional foreign policy implement, to be used only in instances where it can be clearly demonstrated that the transfer contributes to our national security interests.
* We will continue to utilize arms transfers to promote our security and the security of close friends. But, in the future, the burden of persuasion will be on those who favor a particular arms sale, rather than those who oppose it.
To implement the first element of this policy-that of unilateral U.S. restraint in the sale of arms-the President established a set of six controls applicable to all future arms transfers "except to those countries with which we have major defense treaties (NATO, Japan, Australia, and New Zealand)." During the remaining months of the fiscal year subsequent to the President's policy announcement, the administration transmitted 46 separate arms sale notifications to Congress involving 19 separate countries and goods and services totaling over $4.5 billion, including a controversial offer to sell Airborne Warning and Control System (AWACS) aircraft to Iran.
These actual sales and other proposed sales called into question, in the minds of many in Congress, the President's announced policy of using arms transfers as an "exceptional foreign policy implement." Thus, there currently has grown a skepticism concerning the effectiveness of the announced policy in restricting U.S. arms exports. The administration, however, contends that it is too early to judge the effectiveness of the President's policy.
Commercial arms sales do not constitute a Government program as such, and no Government expenditures are involved. These sales involve the direct transfer of arms, equipment, and services between domestic private corporations and foreign governments (or other foreign purchasers). Payment is arranged on a private contract basis. Export licenses issued by the Department of State control the export of defense articles and services sold through commercial channels.
The, ship transfer program involves the grant, sale, lease, or loan of U.S. naval vessels to foreign governments. Except for new construction sales, ships granted or sold to friendly foreign countries have been determined to be no longer needed by the Navy and have been stricken from the U.S. Naval Vessel Register. Specific congressional authorization is required for the transfer of all capital ships and for all ships less than 20 years of age or in excess of 3,000 tons.
Security supporting assistance is designed to promote or support economic or political stability. It has historically been intended to assist countries whose economics are burdened by ni jor defense programs. Basically, security supporting assistance is designed as budgetary support. Security supporting assistance funds normally contribute to some degree to the economic growth or to the developmental goals of the recipient country, but the U.S. motive in providing these funds is neither economic growth or development per se; rather the specific purpose is to stabilize the political or economic situa-








tion vis-a-vis a given security situation. Security supporting assistance seeks, therefore, to assist the recipient nation to overcome an immediate security or defense problem while avoiding deterioration of its national economy. This has been a flexible program which, through its history, has provided U.S. assistance to Western Europe, Southeast Asia, the Middle East, and, most recently, to Africa.
Other programs, such as the Middle East Special Requirements Funds, loans to Portugal, and the international narcotics control program are identified as security assistance programs since they are provided to meet legitimate U.S. national security interests rather than to fulfill an obligation to the world's poor.
Congress has attempted to gain a greater voice- in establishing national policies involving arms transfers and security assistance programs through recent legislation. The International Security Assistance and Arms Export Control Act of 1976 (Public Law 94-329) overhauled the statutory framework governing, these programs. To some extent, the procedures established in Public Law 94-329, combined with greater sensitivity on the part of the administration to the desires of Congress to be consulted in the formulation of arms sales
policies, and in the conduct of U.S. security assistance programs, have been successful in achieving greater congressional control over those programs. However, the 8ongress has expressed its concern that much remains to be done to insure effective congressional oversight.
Thus, in the future, regardless of the effectiveness of President Carter's arms transfer policy, Iit is likely that the Congress will seek, by working with the administration or through legislation, increased participation in the formulation of policy concerning U.S. security assistance programs.










I. INTRODUCTION


The supply of arms, weapons of war, and defense equipment to

friends and allies has long been a major instrument of U.S. foreign and national security policy. Significant U.S. military assistance dates to World War II when vast quantities of military supplies of all kinds were furnished to our allies or potential allies under the Lend-Lease Act. This Act (55 Stat. 3, approved March 11, 1941) authorized the President to manufacture "or otherwise procure" defense articles for any foreign government the defense of which the President considered "vital to the defense of the United States."

Postwar aid was expected to be primarily economic, in order to promote the relief and recovery of Europe. However, the cold war quickly developed and it was determined that both American military and economic assistance should be extended to areas and nations threatened by Communist aggression or subversion.

In an address before Congress on March 12, 1947, President Truma t set forth a policy, which came to be known as the Truman Doctrine, of providing U.S. economic and military aid to the nations of the free world or those resisting aggression or subversion whether external of internal.

In voting to aid Greece and Turkey under this program, the Congress reiterated that:

. the national integrity and survival of these nations are of importance to the security of the United States and

1 (1)








2



of all freedozi-loving peoples and depend upon the receipt
at this time of assistance;

About fifty-nine percent of the aid provided to Greece and nearly 100 percent of the aid provided to Turkey in response to the Truman Doctrine in 1947-48 was for military purposes.

The Greek-Turkish aid program was but the first step in the implementing of the Truman Doctrine. Communist moves in Europe became more threatening in 1948 with the seizure of Czechoslovakia and the Berlin blockade. In Asia, the fall of China to communism called into question the security of U.S. allies in that region. In 1949 the North Atlantic Treaty Organization (NATO) was established, and extensive military help was provided by this country to the other NATO members under the Mutual Defense Assistance Act of 1949 (63 Stat. 714, October 6, 1949). Aid was also provided under this Act to Iran, Korea, the Philippines and the "general area of China."

As a consequence of the invasion of South Korea in 1950, large amounts of military assistance (in addition to American troops) were provided to that nation through regular Department of Defense appropriations, and aid to NATO countries was speeded up.

The Mutual Defense Assistance Program was absorbed into the Mutual Security Program under the Mutual Security Act of 1954. Under this Act, the purpose of the program became:







4ri
43


...to maintain the security and to promote the foreign
policy of the United States-to strengthen mutual security
and individual and collective defenses of the free world,
to develop their resources in the interest of their security
and independence and the national interest of the United
States and to facilitate the effective participation of those
countries in the United Nations system for collective security.

The Foreign Assistance Act of 1961 (75 Stat. 424, September 4,

1961) repealed and superseded portions of the Mutual Security Act.

Section 502 of this Act (redesignated Section 501 in 1967) reiterated

the belief of Congress that "the security of the United States

is strengthened by the security of other free and independent

countries." It is, therefore, the intention of the Congress,

this section stated:

. to promote the peace of the world and the foreign policy,
security, and general welfare of the United States by fostering
an improved climate of political independence and individual
liberty, improving the ability of friendly countries and international organizations to deter, or, if necessary, defeat Communist or Communist-supported aggression, facilitating
arrangements for individual and collective security, assisting friendly countries to maintain internal security, and creating
an environment of security and stability in the developing
friendly countries essential to their more rapid social, economic, and political progress.

This section has remained largely unchanged to the present time.

During the period 1964-1966, as the nations of Western

Europe 'completed their economic recovery, the grant military aid

programs in that area were reduced and arms began to be provided

through sales. Grant aid from that time on has been directed

primarily to the so-called "forward defense" nations of Taiwan,






4


Korea, Greece and Turkey and to nations where the U.S. maintained significant military bases, such as the Philippines, Spain and Ethiopia. In Fiscal Year 1967, executive branch requests and congressional appropriations for the military assistance program dropped below $1 billion and the Military Assistance Program (MAP) has remained well below that figure ever since. Thus, Fiscal Year 1967 marked the crossover from an emphasis on grant aid to an emphasis on military sales.

In the postwar period, this great effort of defense (as well as economic and political) recovery was, to a great extent, a triumph of American leadership and initiative, especially in Western Europe. In recent years, however, trends in U.S. arms transfers have continued to reflect the declining use of military assistance and an increasing reliance on arms sales. The Military Assistance Program (MAP) has been reduced from $5.7 billion in Fiscal Year 1952 to $0.22 billion in Fiscal Year 1978. Conversely, the U.S. Foreign Military Sales (FMS) program has grown from $1.6 billion in Fiscal Year 1971 to $11.2 billion in sales agreements in Fiscal Year 1977. The most dramatic increase in the Foreign Military Sales (FMS) program has been the sale of large amounts of defense articles and services to Israel and to the oil producing states of the Middle East.








5


Congress has recognized the contribution of these sales to

American foreign policy interests and objectives. The Arms Export Control Act (AECA), which authorizes the FMS program, charges the Secretary of State with the responsibility for insuring that U.S. arms sales ". are integrated with other U.S. activities and the foreign policy of the United States is best served thereby." In that same Act, the Congress has stated that:

. it remains the policy of the United States to
facilitate the common defense*by entering into international agreements with friendly countries which further
the objective of applying agreed resources of each country
to programs and projects of cooperative exchanges of data, research, development, production, procurement,
and logistics support to achieve specific national defense
requirements and objectives of mutual concern. To that
end, this Act authorizes sales by the United States
Government to friendly countries . in furtherance
of the security objectives of the United States.

U.S. security assistance programs are now conducted under the following broad categories: the Military Assistance Program (MAP); International Military Education and Training (IMET); Foreign Military Sales (FMS) Program; Commercial Sales; Ship Transfers; and Security Supporting Assistance. These programs have varied in importance and in dollar amounts over the years.

Proponents of U.S. arms transfer programs state that these

transfers provide the President with an important tool in the conduct of America foreign policy. They are advantageous to the U.S., it is claimed, in that they have allowed recipient countries to maintain internal order and have increased the prospects for regional stability







6


in areas of the world important to the United States, thereby reducing the likelihood of direct U.S. military involvement. In addition, it is claimed that standardization of materiel, doctrine and training is enhanced among our allies and friends. Other claimed advantages include maintaining the U.S. arms production base which can be diverted to U.S. use in an emergency, increasing U.S. employment, aiding the U.S. balance of payments, and reducing unit costs of equipment to U.S. forces through larger production runs and because research and development costs are partially recovered. Also, it is claimed that cooperation and closer relations are maintained with recipient nations through arms transfers, resupply, logistics, and training commitments. Foreign dependence on U.S. logistic support is created and additional training is provided for U.S. personnel. Further, it is argued that, if the U.S. restricted the sale of arms or refused to sell or grant arms, current recipients would merely obtain them from other sources and the advantages would accrue to other nations. In addition it is claimed, by insuring that friendly nations have a dependable source of conventional arms for their security requirements, the urge to build their own armaments industry, or in some cases, to develop their own nuclear weapons is removed.

Critics of the arms transfer programs, on the other hand, maintain that they no longer serve the security purposes for which the program was established are now used primarily for less justifiable political or economic objectives. It is further contended that these programs have been conducted rather indiscriminately, with little policy guidance from the Administration,








7


and that they contribute to and even stimulate regional arms races, encouraging certain regimes to give undue attention to military as opposed to social-economic development. Arms transfers are also said to link the United States with regimes prone to practices inimical to our concepts of human dignity, to provide the U.S. with little or no influence on the policies of the recipient countries or the use to which these arms may be used, to promote regional instability, and to increase the ability and the willingness of these nations to resort to force to settle international disputes. Moreover, it is alleged, this massive transfer of weapons, technology, and training reduces U.S. force readiness, creates military commitments, and could involve the U.S. in international disputes which may be contrary to the vital interests of this nation.

The various arms transfer and security assistance programs of the United States are subject to differing requirements concerning Congressional authorization, appropriation, limitations, and oversight. It is often difficult to become completely familiar with the details of the overall effort. One of the major complaints voiced by some Members of Congress has been the difficulty, first of determining the extent of, and then of exercising legislative control and oversight over, the full scope of the nation's arms transfer and security assistance programs.







8


This paper will su=,arize current legislation concerning U.S. security assistance programs, and will detail the purpose, scope, limitations, legislative requirements, justifications, operation, and reporting requirements to the Congress which apply to the conduct and administration of these programs.













II. MILITARY ASSISTANCE PROGRAM (MAP) A. DEFINITION

The Military Assistance Program (MAP), also called rant

L military Assistance, involves the loan or outright grant to foreign countries of military equipment, facilities, technical assistance, repair and rehabilitation, supply operations support, and administrative support.* The Military Assistance Program is carried out under authority of Part II of the Foreign Assistance Act (FAA) of 1961, as amended. This Act has been subject annually to reconsideration by the Congress, at which time funds to carry out the program are authorized and later appropriated. B. REDUCTION IN TRE PROGRAM

As indicated in the Introduction, the Military Assistance

Program (MAP) was born in the early days of the Cold War and the purposes of the program as enacted in legislation reflect that origin. As the nations of Western Europe completed their recovery, and as the original rationale for military aid programs receded,



Beginning with the Supplemental Defense Appropriation Act of 1966, one of the single largest categories of grant aid--that of aid to South Vietnam and for other free world forces in Vietnam-was provided through regular Department of Defense appropriations under the Military Assistance Service Fund 04ASF) account. In FY 1968, aid to Laos and Thailand was similarly transferred out of MAP and placed under MASF. In FY 1973, military aid to Thailand was again authorized by the Foreign Assistance Act of 1961, rather than the DOD Appropriation Authorization Acts. Funds for Laos were returned to MAP funding in FY 1975. MASF expenditures are not included in MAP totals cited herein.

(9)








10



Congress in recent years, has sought the reduction of and eventii termination of this program.

Section 501, FAA, states the sense of Congress that, in-the

administration of the military assistance program, "priority shall be given to the needs of those countries in danger of becoming victims of active Communist or Communist-supported aggression or those countries in which the internal security is threatened by Communist-supported internal subversion."

Section 505(c) of that Act requires the President to reduce

and terminate, as relevant conditions permit, grant aid to a country having sufficient wealth to enable it, in the judgment of the President, to maintain and equip its own military forces in adequate strength without undue burden to its economy. Section 620(m) further prohibits the furnishing of assistance on a grant basis to any economically developed country capable of sustaining its own defense burden and economic growth, except for orientation and training grants not to exceed $500,000 each fiscal year.

The Senate had included a provision for a three-year phaseout of the military assistance program (other than training) in its consideration of the Foreign Assistance Act of 1974.








11



In its report on this bill, the Senate Foreign Relations Committee

expressed its view that military assistance should be provided "not as

a habit, but rather only in specific instances where such assistance
l/
is clearly warranted." The House, however, refused to accept that

amendment and the bill as passed contained the following provision

(Section 17):

(a) It is the sense of Congress that the policies and purposes of the military assistance program conducted
under chapter 2 of part II of the Foreign Assistance Act of 1961 should be reexamined in light of changes in world conditions and the economic position of the
United States in relation to countries receiving such assistance; and that the program, except for military
education and training activities, should be reduced
and terminated as rapidly as feasible consistent with
the security and foreign policy requirements of the
United States.

(b) In order to give effect to the sense of Congress expressed in subsection (a), the President is directed
to submit to the first session of the 94th Congress
a detailed plan for the reduction and eventual elimination of the present military assistance program.

In his response to that requirement, the President reported,

on January 20, 1976, that "grant military assistance in some form

will remain a basic requirement of U.S. foreign policy for the

foreseeable future," and urged the Congress "to preserve the

authorities in law to provide grant military aid, an instrument

of our national security and foreign policy that has served the

national interest well for more than 30 years."



l/ U.S. Congress. Senate Committee on Foreign Relations.
Senate Report No. 93-1299, 93d Congress, 2d Session, November 27, 1974.







12


The International Security Assisance and Arms Export Control Act of 1976 (P.L. 94-329), which was signed by the President on June 30, 1976, amended the FAA to provide for the termination of the Military Assistance Program after September 30, 1977, except to the extent that Congress might subsequently authorize such assistance for specified countries in specified amounts (Section 516, FAA). This, in effect, retained the legislative authority for military assistance as recommended by the President while providing a strict congressional control over that program. C. LEGISLATIVE REQUIREMENTS AND RESTRICTIONS

In addition to the requirement for specific authorization

on a country-by-country basis by the Congress, however, P.L. 94329 and subsequent legislation (P.L. 95-92) left intact many additional requirements and limitations of a substantive nature concerning the provision of military assistance by the United States. (All references are to the Foreign Assistanct Act of 1961, as amended, unless otherwise indicated).

1. Presidential Determination

In order for a country or international organization to

receive grant military aid, the President must first determine that the granting of such aid "will strengthen the security of the United States and promote world peace" (Sec. 503a). Indeed,








13


Section 504(b), FAA, directs the President to establish procedures for programing and budgeting to insure that military assistance programs "come into direct competition for financial support with other activities and programs of the Department of Defense" so as to insure that "a dollar spent on military assistance to foreign countries is as necessary as a dollar spent for the United States

military establishment."

The Foreign Assistance Act also constrains the President, in determining whether to provide assistance to any country, to take into account the status of that country with respect to its dues, assessments, and other obligations to the United Nations (Section 620 W). In addition, the President shall adopt regulations and establish procedures to insure that U.S. aid is not used in a manner which, contrary to the best interests of the U.S., promotes or assists foreign aid projects or activities of the Communist-bloc countries (Section 620(h)).

2. No. U.S. Commitment Implied

In answer to the specific charge that U.S. security assistance to a particular nation implied an American military commitment to the defense of that nation, Section 650 of the FAA states that "the furnishing of economic, military, or other assistance under this Act shall be not construed as creating a new commitment or as affecting any existing commitment to use Armed Forces of the United States for the defense of any foreign country."







14


3. Purposes for Which Aid May be Used

Section 502 of the Act lists thepurposes for which grant aid may be used. Articles and services provided are furnished:

...solely for internal security, for legitimate selfdefense, to permit the recipient country to participate
in regional or collective arrangements or measures
consistent with the Charter of the United Nations, or
otherwise to permit the recipient country to participate
in collective measures requested by the United Nations
for the purpose of maintaining or restoring international
peace and security, or for the purpose of assisting
foreign military forces in less developed friendly countries
(or the voluntary efforts of personnel of the Armed Forces
of the United States in such countries) to construct public
works and to engage in other activities helpful to the economic
and social development of such friendly countries.

The United States can, of course, enter into agreements for uses of military articles more limited than the purposes indicated above.

Section 505(d) requires that assistance as well as deliveries of assistance shall be terminated to any country which uses U.S.furnished defense articles or services "in substantial violation" of the purposes for which furnished, or which transfers these articles or permits their use by another country without permission of the President, or which fails to maintain the security of such articles.

Assistance and deliveries of assistance will be terminated if the President determines that such violations have occurred and states this in writing to the Congress, or if the Congress so determines by joint resolution. Assistance to the country shall remain terminated until the President determines the violation has ceased and the country concerned has given satisfactory assurances that such violation will not recur.








15


4. Requirements for Recipient Countries

The country receiving military aid must agree, under the provisions of Section 505(a), that it will not, without consent, permit the use of furnished defense articles by anyone who is not an officer, employee, or agent of that country; permit the transfer of such articles to another nation; or use or permit the use of such articles for purposes other than those for which furnished. Under this same section, the country must also agree that it will provide substantially the same degree of security protection afforded to such articles by the United States Government; that it will permit continuous observation and review by, and furnish necessary information to, representatives of the United States Government with regard to the use of such articles; and that it will return to the United States Government those articles no longer needed for the purposes for which furnished, unless the President consents to other disposition. In the case of other disposition, the country must agree, under Section 505(f), that "the net proceeds of sale" which it receives in disposing of MAP-furnished defense articles "will be paid to the U.S. Government."

Countries that agree to the above-mentioned qualifications and that are not subject to additional restrictions, which will be discussed later, are eligible to receive assistance of no more than $3.0 million in a given fiscal year. Should it be desirable








16


to furnish IMAP defense articles in excess of $3.0 million, the President must make a further determination, under Section 505(b), to the effect that the country conforms to the purposes and principles of the Charter of the United Nations; that the defense articles will be utilized for the maintenance of the recipient's own defensive strength, or the defensive strength of the free world; that the country is taking all reasonable measures, consistent with its political and economic stability, to develop its defense capacities; and that the increased ability of the country to defend itself is important to the security of the United States.

5. Transfers to Third Countries

The President shall not consent to a transfer of U.S.-furnished significant defense articles to a third country unless the United States would itself transfer the defense articles under consideration to that country. In addition, the country requesting consent to a transfer must agree to demilitarize the defense articles prior to transfer, or the proposed recipient country must provide a commitment in writing to the United States Government that it will not further transfer the articles, unless demilitarized, to another country or person without United States consent (Section 505(e)).

The President, further, shall not give his consent until

he submits a written certification to the Congress concerning the transfer, listing the article to be transferred and its acquisition








17


cost, the country transferring the article, the recipient, and the reasons for the proposed transfer. Unless the President also states that an emergency exists which requires the immediate transfer of the article in the national security interests of the United States, his consent to any transfer shall not become effective until thirty

(30) calendar days after notification to the Congress and only if, within that thirty day period, the Congress does not adopt a concurrent resolution disapproving the transfer (Section 3(d), Arms Export Control Act).

These restrictions on transfers do not apply, however, to

transfers of maintenance, repair, or overhaul defense services, or articles or parts used in such services, if the transfer will not result in any increase in the military capability of the articles to be maintained, repaired or overhauled. Similarly, these provisions do not apply to temporary transfers of defense articles for the sole purpose of receiving maintenance, overhaul, or repair, nor to cooperative cross servicing arrangements among members of NATO. In addition, consent is not required by law, but by executive branch regulation, for the transfer of items produced abroad under U.S. Government license. The law requires consent only where the item to be transferred was itself originally transferred by the U.S. Government to the proposed government.

6. Human Rights

Section 502B(a)(3), FAA, directs the President to "formulate

and conduct international security assistance programs ... in a manner







18


which will promote and advance human rights and avoid identification of the United States, through such programs, with governments which deny to their people internationally recognized human rights, and fundamental freedoms." Thus, Section 502B(a)(2) specifies that "no security assistance may be provided to any country the government of which engages in a consistent pattern of gross violations of internationally recognized human rights." For purposes of this section of the Act, security assistance is defined to include military assistance, international military education and training, cash or credit sales of defense articles and services under the Foreign Military Sales (FMS) program, commercial sales, and security supporting assistance (to include assistance to the Middle East). "Gross violations of internationally recognized human rights" is defined, for purposes of this section, to include "torture or cruel, inhuman, or degrading treatment or punishment, prolonged detention without charges and trial, and other flagrant denial of the right to life, liberty, or the security of person" (Section 502B(d)).

Section 502B(b) requires that a report with respect to the

observance of and respect for "internationally recognized human rights" for each country proposed as a recipient of security assistance (as defined above) be provided the Congress as a part of the Administration's presentation material for security assistance programs. In addition, the Congress may request statements concerning observance








19



of and respect for human rights for specific countries. Any time

after receiving such a statement (required within 30 days of the

request), the Congress may adopt a joint resolution terminating,

restricting, or continuing security assistance for that country.

7. Additional Restrictions

Throughout the.years, Congress has carefully examined military

Assistance Program (MAP) authorizations and expenditures and has

enacted a series of additional restrictions on the use of funds

authorized and appropriated for this program. Among current restrictions are the following (references are to the Foreign Assistance

Act (FAA) of 1961, as amended, unless otherwise indicated):

a. No military assistance may be provided other than
to countries specifically authorized by legislation.
(In FY 1978, these countries are Greece, Portugal,
Spain, Turkey, Jordan, Indonesia, Philippines, Thailand) (Section 504(a)(2)).

b. No assistance should be furnished countries which,
through laws, regulations, policies, or government practices, prevent any "United States person" from participating in the furnishing of defense articles
or services on the basis of race, religion, national
origin or sex (Section 505(g)).

c. No assistance shall be furnished to any country'unless the Pregident determines that "such country is
not dominated or controlled by the international
Communist movement" (Section 620(b)), and no assistance
may be furnished to any Communist country unless the President finds (and reports to the Congress) that such assistance is vital to the security of
the United States, the recipient country is not
controlled by "the international Communist conspiracy,"
and that such assistance will further promote the independence of the recipient country from international communism (Section 620(f)).







cull
4V


d. No assistance shall be furnished the present government of Cuba (Section 664).

e. No assistance shall be provided to any country
(unless the President finds such action contrary to
national security) which is indebted to any U.S.
citizen for goods and services furnished where
such citizen has exhausted available legal remedies
or the debt is not denied or contested by such
government (Section 620(c)).

f. No assistance shall be provided to any country
which the President determines is engaging in or
preparing for aggressive military efforts directed
against the United States, an aid recipient country,
or any country to which PL 480 sales are made,
unless the President determines that such military efforts or preparations have ceased and he reports to the Congress that he has received satisfactory assurances that such military efforts or preparation will not be renewed (Section 620(i)).

g. The President shall suspend assistance to any
country which has nationalized, seized, or expropriated property owned by any United States
citizen, corporation, partnership, or organization,
or has taken steps to repudiate or nullify contracts or agreements or has imposed or enforced
discriminatory taxes (or other conditions or
actions) which have the effect of nationalizing, expropriating, or seizing US-owned property and
fails to take action within a reasonable time
to compensate for such property. This provision
can be waived by a Presidential certification
to Congress that such waiver is important to the national interests of the United States (Section
620(e)).








21


h. After July 1, 1975, no funds shall be used to
provide training, advice, or any financial support,
for police, prisons, or other law enforcement forces for any foreign government or any program of internal
intelligence or surveillance on behalf of any
foreign government within the United States or abroad
(Sec. 660).

i. All assistance under this Act shall be terminated
to any country which aids or abets any group
that has committed an act of international terrorism
by granting sanctuary from prosecution, unless
the President finds national security to require
otherwise and so reports to Congress (Section 620A).

j. No military or security supporting assistance,
grant military education or training, or credits or guaranties may be provided any country which
receives or delivers nuclear enrichment equipment,
materials, or technology unless both countries concerned have agreed to place this equipment,
etc., under multilateral auspices and management, when available, and the recipient country agrees
to place such equipment, etc., under the safeguards system of the International Atomic Energy
Agency, unless the President determines and
certifies in writing to the Congress that: (a) the termination of such assistance would have a serious adverse effect on vital U.S. interests;
and (b) he has received reliable assurances that
the country in question will not acquire or develop
nuclear weapons or assist other nations in doing
so (Section 669).

k. No military or security supporting assistance,
grant military education or training, or credits
or guaranties may be provided to any country which
delivers or receives nuclear reprocessing equipment,
materials, or technology, or to any non-nuclearweapon state which detonates a nuclear explosive
device, unless the President determines and certifies
to the Congress in writing that the termination
of such assistance would be "seriously prejudicial
to the achievement of United States nonproliferation objectives" or would otherwise jeopardize the common
defense and security (Section 670).








22


I. No assistance can be furnished which would have the
effect of promoting or augmenting the capability of any nation, group, organization, movement, or
individual to conduct military or paramilitary operations in Angola (Section 404, International Security
Assistance Act of 1976).

M. No military assistance, security supporting
assistance, military education and training,
credits, guaranties, cash sales, or export
licenses may be provided Chile (Section 406,
International Security Assistance Act of 1976).

n. All military assistance and sales to the Government of Turkey shall be suspended unless and until the President determines and certifies to the Congress that Turkey is in compliance
with U.S. laws governing the use of such assistance
and sales and that substantial progress toward
agreement regarding military forces in Cyprus
has been made. However, the President may suspend
this prohibition for cash and credit sales for
defense items which he determines are necessary
to enable Turkey to fulfill her defense responsibilities as a member of NATO. Sales shall be limited, however, to $175 million in FY 1978
(Section 620(x)).

o. No military assistance, security supporting
assistance, military education and training,
credits, guaranties, military sales, or the granting
of export licenses for the commercial sales of
arms may be made to Argentina after September 30,
1978 (Section 620B).

p. The aggregate total of military assistance and
of credit military sales (except training) shall
not exceed $40 million in each fiscal year for
African countries, unless the President determines
that a waiver of this provision is important to the security of the United States and so reports to the Congress (Section 33, Arms Export Control
Act).

q. If a country contains a base constructed, maintained, or operated with U.S. funds, or from which
U.S. military personnel carry out operations, no
assistance may be provided until the President has








CNO
za



determined that the government of the country has authorized access to that base on a regular basis
to bona fide news media correspondents of the
United States (Section 659).

r. No funds may be expended by or on behalf of the
Central Intelligence Agency for operations in
foreign countries, other than those intended solely
to obtain necessary intelligence, unless and until
the President finds that such operation is important
to the national security and reports, in a timely
fashion, a description and scope of such operation
to the appropriate committees of the Congress.
This restriction does not apply, however, during
military operations initiated by the United States
(Section 662).

s. No assistance of any kind may be furnished during
FY 1978 for the purpose of, or which would have the
effect of, promoting or augmenting, directly or
indirectly, any military or paramilitary operations in Zaire, unless the President determines that such
assistance should be furnished in the national
security interest of the U.S. and submits to the
Congress a detailed explanation of this determination (Section 25, International Security Assistance
Act of 1977 (P.L. 95-92)).

t. No monetary assistance may be made to any government
for the purpose of compensating owners for expropriated
or nationalized property. If the President finds
that such assistance has been used for such purpose,
no further assistance shall be furnished until
appropriated reimbursement to the United States for
funds so used has been made (Section 620(g)).

u. No funds for FY 1978 may be used to finance the
construction, operation, or maintenance of, or
supply of fuel for, any nuclear power plant (Section
14, International Security Assistance Act of 1977).

The following additional restrictions are included in the

Foreign Assistance and Related Programs Appropriations Act, 1978

(P.L. 95-148, October 31, 1977) concerning funds appropriated or

made available under that Act:








24


a. No funds provided for military assistance shall be
available for the purchase of new automotive vehicles
outside of the United States.

b. No funds may be used to make any payments on contracts to which the U.S. is a party entered into
after October 31, 1977 which does not contain a
provision authorizing the termination of that contract for the convenience of the United States
(Section 104).

c. No appropriated funds may be used to finance directly
any assistance or reparations to Uganda, Cambodia,
Laos, or the Socialist Republic of Vietnam (Section 107)

d. No funds may be used to provide security assistance to
any country for the purpose of aiding directly the
efforts of that country to repress the legitimate
rights of its population contrary to the Universial
Declaration of Human Rights (Section 113).

e. No funds may be used to finance directly any assistance
to Mozambique or Angola (Section 114).

f. No funds may be used to provide military assistance,
international military education and training, or
foreign military credit sales to Ethiopia and
Uruguay (Section 503A).

g. No funds shall be used to furnish assistance to any
country which is in default in excess of one calendar
year in payment of principal or interest on any loan
made to that country under this Act unless the
country has disputed the debt or has taken steps to
cure the existing default (Section 503).

h. Not more than $18.1 million shall be used for
military assistance, not more than $1.85 million shall
be used for foreign military credit sales, and not
more than $700,000 shall be used for military education and training to the Government of the Philippines
(Section 503C).








25



D. PRESIDENTIAL DISCRETION

Beyond these prohibitions, the Foreign Assistance Act gives

the President certain discretion in the granting or terminating

of military assistance. These circumstances are as follows:

a. The President "shall consider" terminating assistance
to any country which permits, or fails to take
adequate measures to preventthe damage or destruction by mob action of United States property within such country, and fails to take appropriate
measures to prevent a recurrence thereof and to
provide adequate compensation for such damage or
destruction (Section 620(j)).

b. The President can deny assistance under the Act
to the government of any less developed country which
has failed to enter into an agreement with the U.S.
to institute an investment guaranty program providing
protection against inconvertibility, expropriation
or confiscation (Section 6200)).

c. Assistance may be excluded from any country which
seizes or imposes any penalty or sanction against
a U.S. fishing vessel on account of its fishing
activities in international waters (Section 620(o)).

d. Section 481(a) provides for the suspension of
economic and military assistance furnished under
the FAA or any other act when the President determines
that the government of a country has failed to take adequate steps to prevent narcotic drugs and other controlled substances produced or processed in such
country or transported through such country, from
being sold illegally within the jurisdiction of
such country to U.S. Government personnel or their
dependents or from entering the United States
unlawfully.

e. Within 60 days after receiving information which
substantiates that officials of a foreign country
receiving international security assistance have (1) received illegal or otherwise improper payments from a United States corporation in return








26


for a contract to purchase defense articles or services from such corporation, or (2) extorted, or attempted to
extort, money or other things of value in return for
actions by officials of that country that permit a
United States citizen or corporation to conduct business
in that country, the President shall submit to Congress
a report outlining the circumstances of such payment
or extortion. The report shall contain a recommendation from the President as to whether the United
States should continue a security assistance program for that country (Section 607, International Security
Assistance and Arms Export Control Act of 1976).


E. RESTRICTIONS ON U.S. MILITARY PERSONNEL

Other legislative provisions limit the number of U.S. military

personnel which may be assigned duties related to the military assistance program. Title I of the Foreign Assistance Appropriation Act of 1975 (P.L. 94-11) provides that no more than twenty (20) general or flag officers may be assigned or detailed to military assistance advisory groups, military missions, or similar organizations, or to duties primarily involved in military assistance or foreign military sales activities.

Section 515, FAA, provides that no military assistance advisory group, military mission or other organization of U.S. military personnel performing similar military functions may operate in any foreign country unless specifically authorized by Congress. This requirement for specific Congressional authorization, however, does not apply to regular units of the U.S. Armed Forces engaged in routine functions designed to bring about standardization of military operations and procedures between the U.S. and its "defense treaty allies."








27


For FY 1978, Congress authorized these organizations in only fifteen countries (the eight countries authorized grant military assistance--Greece, Portugal, Spain, Turkey, Jordan, Indonesia, Philippines, and Thailand--plus Korea, Panama, Brazil, Morocco, Iran, Kuwait, and Saudi Arabia). Section 515(b)(1), FAA, further specifies that members of the armed forces so assigned shall have as their primary functions those of logistics management, fiscal management, transportation, and contract administration of country programs. It is the sense of Congress, this section further states, "that advisory and training assistance in the countries specified above shall primarily be provided by personnel who are not assigned under this subsection and who are detailed for limited periods to perform specific tasks." Military personnel in excess of six assigned to Iran, Kuwait, and Saudi Arabia will be on a fully reimbursable basis (Section 515(b)(3)), and the total number of U.S. Armed Forces personnel assigned to the fifteen countries may not exceed the number justified to Congress, unless Congress is notified of any increase (Section 515(b)(2)).

In countries where a military assistance advisory group or similar organization is not authorized, the President may assign up to three (3) Armed Forces personnel to perform accounting and other management functions with respect to U.S. security assistance programs. Three additional personnel may be assigned when specifically







40


requested by the Chief of the Diplomatic Mission as necessary to the efficient operation of the Mission (Section 515(c)). The total number of members of the U.S. Armed Forces assigned to foreign countries in regard to security assistance programs may not exceed 865 for FY 1978 (Section 515(d)). All members so assigned serve under the direction and supervision of the Chief of the United States Diplomatic Mission in each particular country (Section 515(e)).

Defense attaches may perform overseas management functions

for U.S. security assistance programs only if the President determines that this is the most economic and efficient means of performing such functions, and so reports to the Congress with a description of the number of personnel involved and the reasons for his determination. In any case, the number of defense attaches performing such functions in a country may not exceed the number of defense attaches authorized to be assigned to that country on December 21, 1976 (Section 515(f)).

The entire costs (including salaries of United States military

personnel) of the overseas management of international security assistance programs will be charged to or reimbursed from funds made available under Chapter II (MAP), Part II, of the Foreign Assistance Act (Section 515(g)).








29


F. FLEXIBILITY OF ADMINISTRATION

Some flexibility is provided the Administration in the conduct

of the military assistance program. The ceiling amounts specifically established for the eight countries concerned may be increased by not more than ten percent (10%) if the President deems such increase necessary (Section 504(a)(1)). Funds may be used for the winding up of military assistance programs or for other costs incurred in loans of defense articles to countries no longer eligible for military assistance (Section 515(b)). Section 614 authorizes the President the sum of $250 million, plus $100 million in foreign countries, "for the use ... without regard to the requirements of this Act." This authority, however, was limited by the International Security Assistance Act of 1977, which amended the FAA to preclude an increase in any amount specifically authorized (other than the 10% increase authorized) or to provide assistance to any country not specifically authorized (Section 504

(a)(3)). Section 506 authorizes the President to order defense articles from the stocks of the Department of Defense and defense services not to exceed a total value of $67.5 million in any fiscal year, to a foreign country or international organization provided he reports to the Congress that (a) an unforeseen emergency exists which requires immediate military assistance; (b) that a failure to respond immediately will result in serious harm to vital U.S. security interests; and (c) that the emergency








30


requirement cannot be met under authority of any other law. However, section 505(a)(2) states that this authority shall be effective in any fiscal year only to the extent provided in an appropriation act. This provision, therefore, limits this presidential discretion to the extent that Congress fails to appropriate funds for this purpose.

Section 663 allows the President, "not withstanding any other provision of law," to furnish military assistance in exchange for flany necessary or strategic raw material," to include petroleum, other fossil fuels, metals, minerals, or any other natural substance which the President determines is in short supply in the United States. G. TREATIES AND DEFENSE COOPERATION AGREEMENTS (DCA)

The military assistance implications of treaties and defense cooperation agreements have also been addressed by the Congress. Both the Treaty of Friendship and Cooperation with Spain, to which the Senate gave its advice and consent to ratification on June 21, 1976, and the Defense Cooperation Agreement with Turkey, signed March 26, 1976, on which hearings were conducted by the Senate, contained multi-year commitments for security assistance to those countries. It was felt by many in the Congress that congressional approval of those agreements would constitute multi-year authorizations for military assistance in the amounts indicated in the agreements. This tendency toward multi-year military assistance








31



commitments, some felt, would tend to undermine congressional control over the program exercised through yearly authorization and appropriation. This argument was specifically met and dealt with by the Senate, which included the following declaration as part of the resolution of ratification of the Spanish Treaty:

The sums referred to .... shall be made available for
obligation through the normal procedures of the Congress,
including the process of prior authorization and annual
appropriations, and shall be provided to Spain in
accordance with the provisions of foreign assistance
and related legislation.

In addition, Section 22 of the International Security Assistance Act of 1977 (P.L. 95-92) authorized funds for FY 1978 as might be necessary to carry out international agreements with Greece and Turkey, but prohibited the obligation or expenditure of those funds until Congress had enacted legislation approving such agreements. To date, no such legislation has been enacted. H. STOCKPILES FOR ALLIES

During hearings on the annual Foreign Assistance Authorization Bill in 1974, the Congress learned that since 1972 the Department of Defense had been stockpiling arms and equipment for possible use by South Vietnam, Thailand, and Korea in the event of future hostilities. These items were funded under the Department of Defense budget category, "Support of Other Nations." A General Accounting Office (GAO) report requested by the Congress showed








32


that these stocks, particularly ammunition, were not segregated from U.S. reserve stocks and, in general consisted of older articles replaced by the modernization of U.S. forces equipment through new procurement. These old reserve stocks were than made available to allies as excess to U.S. defense needs pursuant to applicable legislation, e.g. the FAA or the AECA.

The Congress felt that this program was an unintended addition to the Military Assistance Program through the use of Defense Department funds. If a stockpile for foreign military forces was warranted, the Congress felt, it should be justified as a part of the regular foreign aid program and paid for out of foreign aid funds.

Consequently, Section 514 was added to the Foreign Assistance Act. That section, as subsequently amended, stated that no defense article set aside or in any way earmarked or intended for future use by any foreign country could be made available unless the transfer were authorized by legislation and the value of the transfer charged against funds authorized for that purpose. The value of such transfers were defined as acquisition cost plus crating, packaging, handling, and transportation costs incurred.

In addition, this section required that the value of war reserve stocks to be set aside in stockpiles located in foreign countries (other than for NATO purposes) in any fiscal year must be authorized








03


by the Congress in security assistance authorizing legislation. The value of such additions to stockpiles in foreign countries authorized for FY 1978 is $270 million.


I. EXCESS DEFENSE ARTICLES

Section 502A, FAA, requires that excess defense articles shall be provided to satisfy requirements under the Military Assistance Program (MAP) whenever possible rather than the procurement of new items. Excess defense articles are defined in Section 644(g), FAA as "the quantity of defense articles owned by the United States Government, and not procured in anticipation of military assistance or sales orders, which is in excess of the Approved Force Acquisition Objective and Approved Force Retention Stock of all Department of Defense Components at the time such articles are dropped from inventory by the supplying agency for delivery to countries or international organizations under this Act." The Approved Force Acquisition Objective and the Approved Force Retention Stock levels are the quantities of items authorized to be acquired and retained to meet U.S. peacetime operational and mobilization reserve requirements of approved force levels.

For many years, the total monetary value (acquisition cost) of the excess defense articles program accounted for the second largest dollar value of any weapons transfer program. The total







C1 A
64


acquisition cost of equipment furnished under this program ranged from $647 million in FY 1960 to $419 million in FY 1973. The 11value" of these articles to be charged to MAP appropriations was merely the "gross cost incurred by the United States Government in repairing, rehabilitating, or modifying such articles." The total acquisition cost of the article was thus written off. Thus, excess defense articles were utilized as a supplement to Military Assistance Program (MAP) appropriations.

In 1970, Congress became particularly concerned about this use of excess defense articles by the Department of Defense as a means of augmenting military assistance appropriations. In that year, Congress refused to authorize an additional $54.5 million in MAP funds to provide a squadron of F-4 aircraft to the Republic of China. Following this refusal, the Department of Defense announced it was providing the Republic of China with a number of F-100 and F-104 aircraft from excess stocks. Amendments to the Foreign Military Sales Act [P.L. 91-672, January 12, 19711, therefore, required:

(1) the value of excess defense articles granted to a foreign country or international organization shall be considered to be an expenditure of funds appropriated for military assistance (Section 8(a)); (2) the value of any defense article so transferred will not be less than onethird of the acquisition cost to the United States (Section 8(c)). These provisions applied, however, only to the excess defense articles ordered during any fiscal year in excess of $100 million.








35


These two congressional limitations made the transfer of excess defense articles far less attractive and had the effect of reducing the program. For FY 1975, the acquisition cost of excess defense articles delivered under MAP to foreign nations or international organizations was $99.7 million and in FY 1976 was $37.2 million. Some of this reduction, of course, could also be attributed to lessened availability of excess defense articles after the Vietnam War.

The International Security Assistance and Arms Export Control Act of 1976, however, repealed the major provisions of P.L. 91-672 relating to excess defense articles and substituted new provisions. Henceforth, Section 31(d), AECA, provided that the aggregate acquisition cost to the United States of excess defense articles provided under the Military Assistance Program (MAP) or through sales in any fiscal year subsequent to Fiscal Year 1976 may not exceed $100 million (exclusive of ships).


J. REQUIRED REPORTS

Section 657, FAA, requires an annual report to the Congress

from the President showing the aggregate dollar value of all foreign assistance provided by the United States Government by any means to all foreign countries and international organizations by category to each such country and organization. In addition, an annual report,








36



for the next five years, to the Congress is required which reviews progress of the force modernization program of the Republic of Korea, the role of the U.S. in mutual security efforts in the Republic of Korea, and the prospects for, or implementation of, phased reduction of U.S. Armed Forces in the Republic of Korea, in coordination with the Korean time table for military self-sufficiency (Section 668).

Section 653(a), FAA, requires the President to report to

the Congress no later than thirty days after the enactment of any law appropriating funds for security assistance programs as to each foreign country or international organization to which the government plans to provide funds under such law and the amounts of funds, by category of assistance, that will be provided.

In addition, Section 643(d), FAt, requires the President to

report to the Congress at the end of each fiscal year actions which resulted in the furnishing of assistance of a kind or purpose, or to an area substantially different from that included in the presentation to Congress, or which resulted in obligations greater by fifty per cent than that which was proposed, and the justification therefore. This section also specifies that, in presentation material to the Congress justifying security assistance requests, a comparison of proposed programs with those of the previous year will be included, with an explanation of substantial changes. This presentation material will also include








37


a chart showing, insofar as security assistance is concerned, the full extent of all United states assistance planned or expected on A countryby-country basis for the next fiscal year. I

Section 8(d), P.L. 91-672, requires that the President promptly

report to the Congress any decision to furnish on a grant basis to any country excess defense articles which are major weapons systems to the extent that these systems were not included in presentation material previously submitted to the Congress. Additionally, this Section requires a quarterly report to the Congress listing by country the total value of all deliveries of excess defense articles, giving both the original acquisition cost and the aggregate value at time of delivery. K. ADMINISTRATION OF THE PROGRAM

The Secretary of State, under the direction of the President, is charged with the responsibility for the general direction and continuous supervision of grant military assistance and training programs. His responsibilities, as set forth in Section 622(c), FAA, include determining whether there should be a military assistance or training program for a country and the value thereof, so that such programs are effectively integrated both at home and abroad with other assistance programs and the foreign policy of the United States is best served thereby.







CIO
00


In addition, any decision to furnish military assistance shall be coordinated with the Director, Arms Control and Disarmament Agency (ACDA) and shall take into account his opinion as to whether such assistance will: (a) contribute to an arms race; (b) increase the possibility of outbreak or escalation of a conflict; and (c) prejudice the development of bilateral or multilateral arms control arrangements (Section 511).

The responsibilities of the Secretary of Defense concerning

the military assistance and training programs, as set out in Section 623, FAA, include: (a) the determination of military end-item requirements; (b) the procurement of military equipment in a manner which permits integration with service programs; (c) the supervision of foreign military training; (e) the movement and delivery of enditems; and (f) the establishment of priorities in the procurement, delivery, and allocation of military equipment.

Within the Department of Defense, the Assistant Secretary

of Defense/International Security Affairs (ASD/ISA) acts for the Secretary of Defense and is his principal representative and spokesman on security assistance matters. As the operating arm of the Secretary of Defense, the Defense Security Assistance Agency (DSAA) is responsible for directing and supervising the implementation and administration of the program. The Military Departments are specifically








39


responsible for conducting training and for procuring and providing such defense articles and services as may be required by approved security assistance programs.

The Defense Security Assistance Council (DSAC) advises the

Secretary of Defense on security assistance matters of major importance and provide-s expeditious high-level coordination of such matters within DOD. Membership of the DSAC includes the ASD/ISA (Chair-man), the Director, DSAA (Secretary), appropriate Assistant Secretaries of Defense, and the Director of the Joint Staff, JCS. The Chairman may also request representation from the military services on an ad hoc basis as appropriate.


L. SECURITY ASSISTANCE PLANNING

Planning for security assistance is an integral part of the Department of Defense Planning, Programming, and Budgeting System (PPBS). Security assistance programs are initiated by requests from recipient governments. U.S. overseas security assistance management organizations (MAAGS, etc.) provide their estimates of host country plans and requirements to the Unified Commands. Commanders of Unified Commands review and comment on these security assistance plans and programs, correlate them with U.S. military plans, and are responsible for developing and submitting assistance plans to the Secretary of Defense. The Joint Chiefs of Staff (JCS) are responsible for correlating security assistance planning with military force planning and security objectives and provide the Secretary of Defense with their recommendations








AO
X"W



concerning security assistance levels. Upon approval by the Secretary of Defense, these recommendations are considered by the Security Assistance Program Review Committee (SAPRC), an interagency working group of the newly-established Arms Export Control Board (AECB)(see pp. 74-78). The SAPRC, chaired by the Director of the Bureau of Political-Military Affairs, Department of State, reviews country assistance plans and makes recommendations to the AECB on resource allocations and proposed budgetary levels for the security assistance program. The decisions of the AECB, after approval by the appropriate departments, are included in budget proposals, reviewed by the Office of Management and Budget (OMB), and, based upon Presidential decision, are included in the budget presented to the Congress.


M. CURRENT STATUS

Military aid has been a decreasing part of the total U.S. arms

transfer program. Military aid appropriations have ranged from a high of $5.7 billion in FY 1952 to a low of $220 million in FY 1978.*

The list of restrictions on the use of grant military assistance attests to congressional interest in the oversight of this program in terms of policy, impact, extent, and purpose. This interest has been expressed through annual hearings and through congressional authorization of programs and amounts, and appropriation of funds.



Not including MASF. See note, p. 9.








41


Grant military assistance programs of the United States were born in the early days of the cold war and the stated purpose of these programs since their inception has been to strengthen the mutual defense and collective security of the non-Communist world. As such, these programs were flexible instruments of U.S. foreign policy. However, as these programs--and U.S. relations with the rest of the world--evolved, these programs began to be justified on several new grounds. For example, grant military assistance programs have been requested for the following purposes: to retain U.S. military base rights; to maintain regional arms balances and thus contribute to regional stability in areas important to the U.S.; to encourage greater military self-reliance on the part of certain nations; to promote favorable bilateral relations; to establish and maintain rapport with the military leaders of foreign countries in order to provide channels of communications, dialogue, and influence which are valuable to the U.S. Government for diplomatic and commercial, as well as military, reasons; to provide tangible evidence of U.S. support; to maintain internal security and contribute to self-defense capabilities; to preclude arms aid and sales by other nations; to insure the survival and security of nations to whom the U.S. committed; to contribute to the stability of friendly regimes; to contribute to internal development by assisting the military forces in less developed friendly countries to construct public works and engage in other activities helpful to their economic and social development.








42



Clearly, the Congress has indicated that this program should,

in general, be phased out and be replaced by a program of credit and cash sales, to the extent possible. Legislative authority for the Military Assistance Program, however, remains intact. This program is likely to continue on an annually authorized basis for specific countries for some years to come in order to provide payments to countries with which the United States has concluded agreements for base rights in exchange for, inter alia, multi-year military assistance commitments. The program also remains available for unforeseen contingency use or in situations where a "sales" approach may be inappropriate for economic or foreign policy reasons.














III. INTERNATIONAL MILITARY EDUCATION AND TRAINING (IMET) A. DEFINITION

The International Security Assistance and Arms Export Control Act of 1976 [PL 94-3291 established a separate chapter for international military education and training in the Foreign Assistance Act (Part II, Chapter 5). Previously grant training assistance had been included under military assistance totals. Since inception of the program under MAP, about 456,000 foreign personnel have been trained. Military education and training is defined as "formal or informal instruction of foreign students in the United States or overseas by officers or employees of the United States, contract technicians, contractors, or by correspondence courses, publications and media of all kinds, training aids, orientation, and military advice to foreign military units and forces" (Section 644, FAA). B. PURPOSES

The purposes of such training, as indicated in the Act, are to encourage mutually beneficial relations and increased understanding between the United States and foreign countries as well as to improve the ability of participating countries to utilize their resources-including defense resources obtained from the United States--with maximum effectiveness (Section 543). Such training and education may be provided to military and "related civilian personnel" of foreign countries through attendance at

(43)








44


military educational and training facilities (other than Service academies) in the United States and abroad; attendance in special courses at schools in the United States and abroad; and observation and orientation visits to military activities and related activities in the United States and abroad (Section 541). After June 30, 1976, however, no training may be conducted outside the United States unless the President has reported and justified such training to the Congress (section 542). C. LIMITATIONS

International Military Education and Training (IMET) is

considered "assistance under the Foreign Assistance Act of 1961" and, as such, is subject to all legal restrictions on such assistance, but IMET is not subject to legal restrictions on "military assistance" expressed in those terms.

The Congress, in addition, has expressly prohibited the

furnishing of IMET to Ethiopia, Uruguay, Chile, and to Argentina after September 30, 1978. Also not more than $700,000 may be furnished the Philippines for international military education and training in FY 1978. No IMET funds may be furnished Uganda, Cambodia, Laos, Mozambique, Angola, Cuba, or the Socialist Republic of Vietnam (see pp. 20-24).








45


D. CURRENT STATUS

The Department of Defense feels that the training of foreign

military personnel is of lasting value and provides a simple, direct, effective, and relatively inexpensive contribution to the achievement of American foreign policy objectives. Participation in the program, it is hoped, will often create ties to the United States that endure long after the actual training experience is completed. Alumni of the program include many individuals who have become high ranking military and government leaders in their countries today. Since instruction is largely conducted in English, this tends to become the foreign student's second language, producing a bonus which transcends the immediate purposes of the instruction.

In an analysis of the U.S.. foreign military training program conducted in 1976, Dr. Ernest W. Lefever concluded:

The Military Assistance Training Program has been
and is a low-cost, low-risk foreign policy instrument
that has served the United States interest in interstate
stability and has provided a valuable channel of communication and influence with a significant elite, especially
in the Third World. ... The program has advanced the
efficiency, professional performance, and readiness of
the recipient military services. Perhaps more significant, it has established a continuing link between United States and host-state military leaders, many of the latter being
in positions of political responsibility. I/



I/ Ernest W. Lefever, "The Military Assistance Training Program," The Annals of the American Academy of Political and Social Science, March 1976.











IV. FOREIGN MILITARY SALES (FMS)


A. DEFINITION

The Foreign Military Sales (FMS) program is carried out under the provisions of the Arms Export Control Act (AECA), formerly the Foreign Military Sales Act (FMSA).* That Act provides for transfer of arms, other military equipment, and various services through government-to-government agreements. Under this program, the Department of Defense purchases military equipment or services from United States firms, or takes equipment to be sold from U.S. stocks (under some circumstances) and sells the equipment or services to a foreign government, or sells the services of DOD personnel such as training or management advice. This program is not considered "assistance" as such since there is no cost to the U.S. Government. However, these sales comprise the largest volume of U.S. arms transfers. B. ELIGIBILITY

In order for a country or international organization to be

eligible to purchase arms or defense services from the United States under the AiECA, the President must find that the furnishing of such articles and services, in language exactly the same as required to justify the MAP under the Foreign Assistance Act (FAA), "will



The title of the act was changed by Section 201 of the
International Security Assistance and Arms Export Control Act of 1976, and reflects increased congressional interest in the control of arms sales.

(46)








47


strengthen the security of the United States and promote world peace" (Section 3(a)(1)). As in the FAA, the country must agree that it will not, without Presidential consent, transfer title or possession to another country or use the articles for purposes other than those for which furnished under U.S. legislation.

In addition, cash sales are to be approved only when consistent with U.S. foreign policy and national security interests and foreign aid purposes, with regard being given to the economic and financial capability of the purchaser and the impact of the sale on the purchasers social and economic development and on existing and incipient arms races (Section 1, AECA).


C. PURPOSES FOR WHICH SALES ARE PERMITTED

Purposes for which defense articles and services are permitted to be sold are listed in section 4, AECA, and are identical to the purposes contained in Section 502, FAA (see page 14). Similarly, the penalty for substantial misuse of these articles is that the recipient country shall be immediately ineligible for further cash sales, credits, guaranties, or deliveries pursuant to previous sales. A country can be determined to be ineligible either by a Presidential determination transmitted in writing to the Congress or by a joint resolution of the Congress. Cash sales and deliveries pursuant to previous sales may continue to be made, however, if








48


the President certifies in writing to the Congress that such termination would have "significant adverse impact on United States security." Termination of cash sales and deliveries would remain in effect, however, even in the face of such Presidential determination, if Congress has adopted a joint resolution to that effect (Section (3(c)).

A country found ineligible under the above provisions and

procedures would remain ineligible until the President determined the violation had ceased or the country concerned had given satisfactory assurances that such violations would not recur. D. SALES FINANCING PROGRAM

The Arms Export Control Act (AECA) provides authority for

the President to finance procurement of defense articles and services or to guarantee financing for friendly foreign countries or international organizations (Section 23). A major purpose of AECA credit is to help economically less developed countries make the transition from grant aid to sales.

Three basic types of credit assistance utilizing U.S. Government resources are generally available for military sales:

1. DOD Guaranteed Credit:

The AECA (Section 24) provides that the President may "guarantee any individual, corporation, partnership, or other juridical entity doing business in the U.S. (excluding U.S. Government agencies other








49



than the Federal Financing Bank), against political and credit risks of nonpayment arising out of their financing of credit sales of defense articles and services to friendly countries and international organizations."

To cover possible nonpayment to U.S. lenders, the AECA requires that ten percent (10%) of the principal amount of all guaranteed loans to be aside as a reserve, using funds appropriated for that purpose. A fee of one-fourth of 1% is charged for such guarantees.

Since Section 24(a), AECA, was amended in 1974 to permit such financing, the Federal Financing Bank (FFB) has been the exclusive source of DOD guaranteed financing.

2. DOD Direct Credit:

In this case, the Defense Department directly finances

procurement of defense articles for sales credit out of funds specifically appropriated for AECA financing programs. Although there is no legal prohibition against using FMS funds for credit to developed countries, U.S. Government policy and practice have generally restricted such credit to eligible economically less developed countries. The basic reason for this policy is to maximize available AECA credit resources which are generally more limited than other credit resources. FFB financing with DOD guaranties is preferred to DOD direct credit because the former requires only 10% of the principal amount to be obligated whereas








50



the latter requires 100%. DOD direct credit is used largely, if not exclusively, at the present time to satisfy that portion of credits provided to Israel which by law are not required to be repaid to the United States and which cannot therefore be met by use of the FFB.

Repayment to the U.S. Government of these credits must be

completed within twelve years after delivery (Section 23). However, DOD credit arrangements require completion of principal repayment within a stated number of years after the initial disbursement of funds, which generally precedes delivery of the procured items to the borrower-purchaser.

Interest on credits is set by the AECA (Section 23) at "a rate equivalent to the current average interest rate, as of the last day of the month preceding the financing of such procurement, that the United States Government pays on outstanding marketable obligations of comparable maturity, unless the President certifies to Congress that the national interest requires a lesser rate of interest" and states the justification therefor.

Funds for DOD direct and guaranteed credits are authorized

and appropriated annually by Congress, and when repaid are returned to the general account of the Treasury. Thus, one of the major congressional controls on credit sales, a control which does not apply to those commercial and government sales not financed under








51


the AECA, is this annual ceiling imposed by the authorization and appropriation of specific amounts for financing those sales. For FY 1978, $675.85 million was appropriated to support a credit sales program of $2,102.35 million.

3. Export-Import Bank Direct Credit

Export-Import Bank direct credit may be utilized for sales of defense items only to developed countries. The AECA (Section 32) specifically prohibits the Export-Import Bank from using its credit resources for the sale of defense items to economically less developed countries However, the Export-Import Bank has not in recent years financed any military sales even to developed countries.


E. PROCUREMENT AND PRICING

Section 22 of the AECA authorizes the President to procure

defense articles or defense services for sale without requirement for charge to any appropriation or authorization if a "dependable undertaking" has been provided by a foreign country or international organization to pay the full amount of such contract which will assure the United States Government against any loss on the contract. In FY 1975, the procurement by the U.S. Army for foreign military sales exceeded procurement for its own use.

A Foreign Military Sales Trust Fund maintained by the Security

Assistance Accounting Center, Denver, Colorado, functions as a holding




















23-874 0 78 5








52



account and medium of transfer for payments received from foreign governments for defense articles procured by the U.S. military departments on their behalf, or for items sold out of stock. The trust funds of all military services are maintained in this one account. Sales agreements which are executed with a foreign government provide authority to the military department to enter into a contract with a supplier and thereby incur an obligation. These obligations are liquidated by funds which the foreign governments have paid into the trust fund.

The AECA also mandates pricing policies for the sale of U.S. defense agencies and equipment. In the case of defense articles not intended to be replaced in the U.S. inventory, the actual value of the item must be charged. If it is intended to replace the item in the U.S. inventory, then the estimated cost of replacement, minus any depreciation, will be charged (Section 2(a)). "Value" in regard to excess defense articles is further defined in Section 47(2), AECA, as not less than the greater of: (1) the gross cost incurred by the United States Government in repairing, rehabilitating, or modifying such article, plus the scrap value; or (2) market value, if ascertainable.

For defense services, the full cost to the U.S. Government of furnishing such service will be charged (Section 21(a)).








53



Appropriate changes shall also be included for administrative services; any use of plant and production equipment in connection with the purchased articles; and a proportionate amount of any nonrecurring costs of research, development, and production on major defense equipment sales under the AECA. The President, however, may reduce or waive the charge or charges concerning use of plant and equipment and/or non-recurring costs for particular sales that would significantly advance North Atlantic Treaty Organization (NATO) standardization efforts, or foreign procurement in the United States under co-production arrangements (Section 21(e)). In addition, other administrative expenses incurred by U.S. Government personnel in carrying out sales functions which are primarily for the benefit of any foreign country will be fully reimbursed from amounts received from sales (Section 43(b).

Sales will be made only for U.S. dollars. Payment shall be made in advance, or, if the President determines it to be in the national interest, upon delivery of the defense article from stock or the rendering of the defense service. Interest will be charged on any amount not*paid within sixty days. The President may extend this to one hundred twenty days if he determines that emergency requirements of the purchaser for acquisition of the defense articles or services exceeds the ready availability to








54



the purchaser of funds to pay for them in full within the sixty day period, notifies Congress of that determination, and makes a special emergency request for authorization and appropriation of additional funds to finance such purchases (Sections 21 and 22).

Section 663(a), FAA, authorizes the President, "notwithstanding and other provision of law," to furnish defense articles or services under the AECA in exchange for "any necessary or strategic raw material," when he determines this to be in the U.S. national interest. These materials include petroleum, other fossil fuels, metals, minerals, or any other natural substance which the President determines is in short supply in the United States. Section 663(c), however, requires that funds received for the disposal of such materials must be deposited as miscellaneous receipts in the U.S. Treasury. This, in effect, would require payment for defense articles or services furnished under this program to be financed by Department of Defense appropriations. F. AGENT'S FEES

Section 39, AECA, requires the Secretary of State, under such regulations as he may prescribe, to receive "adequate and

reports on political contributions, gifts, commissions paid or offered or agreed to be paid by any person in








55


connection with sales of defense articles or services to or for the armed services of a foreign country or international organization to secure the conclusion of such sales. The amounts and kinds of payments or offers and the names of sales agents or other persons receiving such payments shall be specified. The President may prescribe regulations to prohibit, limit, or prescribe conditions with respect to such payments. No such payment may be included in the FMS procurement price of defense articles and services unless the amount is reasonable, allocable to such procurement, and not made to a person who has solicited, promoted or otherwise secured the sale, or held himself out as able to do so, through improper influence. A quarterly report to the Congress describing each such contribution, payment, gift, commission, or fee is required by Section 36(a)(8), AECA. G. TRANSFERS TO THIRD COUNTRIES

Requirements for Presidential and Congressional approval

for the transfer of U.S.-furnished defense articles and services to a third country under the FMS program are exactly the same as for articles furnished under MAP (see pp. 16-17). H. LEGISLATIVE RESTRICTIONS

In addition to the requirements heretofore discussed, the

Congress has enacted the following specific restrictions on foreign











military sales under the Arms Export Control Act (AECA) (all

references are to that Act unless otherwise specified):

a. Sales shall not be approved to arm military
dictators who are denying the growth of fundamental rights or social progress to their people.
The President may waive this sense-of-Congress
limitation when he determines it would be important to the security of the United States and so reports
to Congress (Section 1).

b. No sales shall be made, or credits or guaranties
provided to any country whose laws, regulations,
official policies, or governmental practices prevent
any United States person from participating in the furnishing of defense articles and services
on the basis of race, religion, national, origin,
or sex (Section 5).

c. Unless the President determines that national security
requires otherwise and so reports to the Congress,
he shall terminate all sales, credits, or guaranties
for one year to any government which aids or abets,
by giving sanctuary from prosecution to any individual
or group which has committed an act of international
terrorism (Section 3 (M.

d. Sales of defense articles or services which would
have significant adverse effect on the combat readiness of United States Armed Forces will be kept to
an absolute minimum, and the President must certify to the Congress that each such sale is important to
the security of the United States (Section 21(h)).

e. No sale or credit guarantee shall be made to an
economically less developed country that is diverting
development assistance or P.L. 480 sales furnished
by the United States to military expenditures, or
diverting its own resources to unnecessary military expenditures to a degree which materially interferes with its development, until the President is assured
that such diversion shall no longer take place (Section
35 W).








57



f. FMS funds may be used for procurement outside the
U.S. only if the President determines that such procurement will not result in adverse effects upon the U.S.
economy or the industrial mobilization base which
outweigh other advantages to the U.S. (Sec. 42(c)).

g. No credits shall be extended or guaranteed for any
sale of sophisticated weapons systems, such as
missile systems and military jet aircraft, to any underdeveloped country (other than Greece, Turkey,
Iran, Israel, the Republic of China, the Philippines,
and Korea), unless the President determines that
such financing is important to the national security
of the United States and reports each such determination to the Congress (Section 4).

h. No credit or guarantee shall be provided in any
case involving coproduction or licensed production outside the United States or any defense article of U.S. origin unless the Secretary of State shall, in
advance of such transaction, furnish the Congress with
full information regarding the proposed transaction
to include a description of the article(s) to be produced, their estimated value, and the probable
impact of the proposed transaction on employment and production within the United States (Section
42(b)).

i. No funds shall be used to provide foreign military
credit sales to Argentina, Brazil, El Salvador, and
Guatemala (Section 503B, Foreign Assistance Appropriations Act, 1978).

j. No credit or cash sales may be made to Chile, and
no cash sales may be made to Argentina after
September 30, 1978 (see pp. 19-23).

k. No credits may be provided Cuba, Ethiopia, Uganda,
Cambodia, Laos, the Socialist Republic of Vietnam,
Mozambique, or Angola (see pp. 19-23).

1. In Fiscal Year 1978, not more than $1.85 shall be
used for foreign military credit sales to the Government of the Philippines. Cash and credit sales to
Turkey shall be limited to $175 million in Fiscal
Year 1978 (see pp. 19-23).








58



Finally, the AECA provides that any cash sale entered into may be canceled in whole or in part, or its execution suspended by the United States at any time under or compelling circumstances if the national interest so requires (Section 42(e)(1)).

There is no specific legislative ceiling on arms sales under

the '-:,S program. The question of such a ceiling, to include commercial sales, was addressed by the 94th Congress, and a ceiling on sales was included in the initial Security Assistance Authorization Bill passed in 1976. This bill, however, was vetoed by President Ford on May 7, 1976. A subsequent bill which contained no ceiling was passed and signed by the President. This act, (P.L. 94-329) however, contained a sense-of-the Congress provision to the effect that the aggregate value of FMS and commercial sales in any fiscal year it should not exceed current levels" (Section 1, AECA).


1. RESTRICTIONS ON THE USE OF U.S. MILITARY PERSONNEL

Congress has provided for some flexibility in the utilization of U.S. military personnel in the FMS program. The requirement for specific Congressional authorization for U.S. military missions

onacountry-by-country basis, as well as numerical restrictions on

thoe issions contained in Section 515, Foreign Assistance Act

('i~ p. 2-28) do not apply to U.S. Armed Forces members performing

.vcc-s for specific purposes and for specific periods of time on

Fully reimbursable basis in connection with FMS activities (Section 515(g) FAA).








59



The Arms Export Control Act (AECA) does, however, place some additional restrictions on the use of U.S. military personnel in the conduct of the program. Section 21(c) of the AECA states that "personnel performing defense services sold under this Act may not perform any duties of a combatant nature, including any duties related to training, advising, or otherwise providing assistance regarding combat activities, outside the United States in connection with the performance of these defense services." In addition, Section 42(f), AECA, states that, to the maximum extent possible, civilian contract personnel will be used in foreign countries to perform defense services sold under the Act.

The entire costs (including salaries of U.S. military personnel) of overseas management of the FMS program must be reimbursed from charges for administrative services collected on FMS cases (Section 515(g), FAA and Section 43(b), AECA).


J. CONGRESSIONAL CONTROL

The major provision of law which provides Congress with approval or disapproval authority over specific sales under the FMS program, other than the specific restrictions indicated above, is contained in Section 36(b), AECA. This section requires that any letter of offer to sell defense articles or services in the amount of $25 million or more or any major defense equipment* in the amount of



Major defense equipment is defined as any item of significant combat equipment on the U.S. Munitions List having a nonrecurring research and development cost of more than $50 million or a total production cost of more than $200 million.







jet%
UV



$7 million or more shall be submitted to the Congress prior to being issued, and shall not be issued if the Congress, within thirty (30) calendar days after receiving such statement, adopts a concurrent resolution stating that it objects to the proposed sale. This provision is waived, however, if the President certifies at the time the notification of the proposed sale is submitted to the Congress that an emergency exists which requires the sale in the national security interests of the United States.

In order to allow the Congress additional time to review

proposed arms sales, the Defense Security Assistance Agency (DSAA) has agreed to provide the Congress with 20 days advance notification prior to the formal notification required by Section 36(b).

At least one hundred fifteen (115) resolutions to disapprove sales have been introduced since the enactment of this authority. Although hearings have been held in both Houses of Congress on many of those resolutions, no sales have been disapproved by Congress to date. However, informal consultations between the Congress and the Administration have resulted in modifications to Administration proposals in the case of the sale of HAWK surface-to-air missiles to Jordan and of SIDEWINDER air-to-air missiles and MAVERICK air-toground missiles to Saudi Arabia. Congress has also raised questions concerning the sale of airborne warning and control system (AWACS) aircraft to NATO and Iran and C-130 aircraft to Egypt.








61


K. ADMINISTRATION OF THE PROGRAM

Functions and responsibilities of the Executive Departments in the FMS program, as spelled out in the AECA, are very similar to those enacted in the FAA. The Secretary of State, under the direction of the President, is charged with responsibility for the continuous supervision and general direction of sales and exports, including the determination as to whether there shall be a sale to a country and the amount thereof, "to the end that sales and exports are integrated with other United States activities and the foreign policy of the United States is best served thereby" (Section 2(b)).

The establishment of priorities in the procurement, delivery,

and allocation of military equipment under this program is determined by the Secretary of Defense, under the direction of the President (Section 42(d)(2)). In addition, the Secretary of Defense has primary responsibility for: (a) the determination of military enditem requirements; (b) the procurement of military equipment in a manner which permits its integration with service programs; (c) the movement and delivery of military end-items; and (d) the supervision of the training of foreign military personnel under this program (Section 42(d)(1)).

In evaluating any proposed sale, the opinion of the Director of the United States Arms,,Control and Disarmament Agency (ACDA)








62



as to the extent to which such sale might contribute to an arms race, or increase the possibility of outbreak of escalation of conflict, or prejudice the development of bilateral and multilateral arms control arrangements, will be taken into account (Section 42

(a)(3)).

Within the Department of Defense, the Assistant Secretary of

Defense, International Security Affairs (ASD/ISA) has been appointed to act for the Secretary of Defense in security assistance and arms sales matters. The Director, Defense Security Assistance Agency (DSAA) is responsible for directing, administering, and supervising security assistance programs. The Director, DSAA is a military officer of at least three-star rank while serving in that position, who concurrently serves as Deputy Assistant Secretary of Defense for Security Assistance. Among his duties and responsibilities are the following:

1. Direct, administer, and supervise, within the policies

established by the Assistant Secretary of Defense (International Security Affairs), approved security assistance plans and programs. The administration of sales programs

may be delegated in whole or in part to the Military Departments, but such administration will be under the

direction and supervision of the DSAA.








63



2. Direct and supervise implementation of security assistance

programs to include daily line item management of security assistance materiel and training programs to include excess

and long supply items.

3. Conduct international logistics and sales negotiations with

foreign countries, as directed by the Assistant Secretary

of Defense (International Security Affairs) and in coordination with the offices within the Office of the Secretary of Defense which are responsible for logistics policies.

4. Maintain liaison with U.S. industry in the export of

military supplies, equipment, and services.

5. Manage governmental and government supported private

sources of credit financing of foreign military sales.

6. Develop, within policy guidance, and promulgate security

assistance procedures.


L. PROCESSING REQUESTS FOR ARMS PURCHASES

Requests for the sale of defense articles or services originate with the foreign country concerned. The Department of State has categorized countries eligible for military sales as Category A (generally NATO or other developed countries) or Category B. Some countries are listed as Category A for maintenance support and as Category B for major military end items. Category A countries are








64


authorized to send their requests for arms purchases directly to the U.S.Military Departments (Army, Navy, Air Force) for action without prior State Department review or approval. The Department of State does, however, review and approve sales which require the notifications to Congress required by Section 36(b), AECA (see pp. 59-60) for defense articles and services of $25 million or more for any purchaser.

In addition, any sale for which a sales commission or fee

is included must be coordinated with the Defense Security Assistance Agency (DSAA), regardless of the dollar amount or the country involved. When ready for submission to the purchasers, all letters of offer are submitted by the Military Departments to the Defense Security Assistance Agency (DSAA) for final approval and countersignature. DSAA clears all such letters of offer to to the State Department's Bureau of Politico-Military Affairs prior to submission to the purchaser (Chart 1).

Category B countries require submission to, and approval by,

the Department of State and the Department of Defense prior to action within the Military Departments. All requests for credit sales must be submitted to the Department of State for approval.

When procuring for a foreign government, the Department

of Defense applies the same contract clauses and contract administration as it would use in procuring for itself, except where exceptions are authorized in Armed Forces Procurement Regulations. When a











65





CHART 1






PROCESSING EXPORTS OF U.S. MUNITIONS LIST ARTICLES

U.S. GOVERNMENT SALE TO FOREIGN GOVERNMENT PURCHASER



FOREIGN GOVERNMENT
MILITARY. PARA-MILITARY, OR SPACE AGENCY PURCHASER FROM USG SOURCE J




Dept. of State




I Military Servjice Deamets





Age~wmntNtification to



VVCM'fORERCOPY OF 00.1SI3 Vendor Contract



R~3 F FOREIGN GOVIRNMENTOUC
US MLTARY]II EBSYO U.S. COMMRCIA
PURCHASING MISSION SUPLER



11(11130 APPtICATloow UCEPSEAfjCAI




MUNWfl" OKROL,







% US BROKER /
SNIPPING AGENT VERIFIE
OR VRFE
FREIGHTUS.GOVERNMENTI FOWRET SALES
I --AR-ERRANACTIONSJ




005 CASS OTHER Us WNTI(myI~T AGENCY SALES, 0a GIANTS.$# #Ap. l l
AIO 'ALA ft. UNLESS1 EXPOOED ly I ANl AGENCY Of THE IUS GOVIANjAET (MyU M *11CR CASE NO LICENSE11 I IIfao EQUIPMENT


FOREIGN LETR1 GEND

GO VT ENa ow
EOWUENYft







Source: Office of Munitions Control, Department of State

(Modified by the author).







6&



foreign government requests, prior to its acceptance of the letter of offer, that a particular prime contractor of subcontractor be used in the execution of the sale, the request will be honored when the sole source designated is based upon the objective needsof the FMS purchaser as stated by the purchaser, but will not be honored in any case of patently arbitrary, capricious, of discriminatory exclusion of other sources.


M. REPORTING REQUIREMENTS

The International Security Assistance and Arms Export Control Act of 1976 also amended the Foreign Assistance Act and the Arms Export Control Act so as to impose additional reporting requirements on the Administration in order for the Congress to be better informed concerning the security assistance program. Section 657, FAA, requires

not later than March 31 of each year, the President shall

report to the Congress the following data for the proceeding fiscal year: (1) the aggregate dollar value by category of all foreign assistance (including international military education and training), foreign military sales, sales credits, and guaranties provided or

by the United States Government by any means to all foreign

mllltries or international organizations by each country and organizati(,ii; (2) the total amounts of foreign currency paid by each foreign

or international organization to the United States Government







67



in each fiscal year, what the payment was for, whether any portion was returned by the U.S. Government to the country concerned or to another country of organization, and, if so, the kind of assistance obtained by that country with those foreign currencies; and (3) the aggregate dollar value and quantity of defense articles and services, and of military education and training, exported to each foreign country or organization by category.

Section 25, AECA, (added in 1976) requires the President to

transmit to the Congress, as part of the presentation materials for proposed security assistance programs for each fiscal year, a report which sets forth: (1) an estimate of the amount of cash sales expected to be made to each specific country, including a detailed statement of the foreign policy and national security considerations involved in such expected sales; (2) an estimate of the amounts of credits and guaranties expected to be extended to each country;

(3) a list of all Presidential findings that the furnishing of defense articles and services to specific countries will strengthen the security of the United States and promote world peace (as required by Section 3(a)(1), AECA), together with full justification for each such finding; and (4) an arms control impact statement for each purchasing country, including an analysis of the relationship of expected sales and arms control efforts relating to each country and the impact of such sales on the stability of the region of the purchasing country. It should be noted, however,







68


that these estimates of expected cash sales are not binding upon the Administration. However, these estimates of sales credits to be extended by country may not be exceeded by the Administration unless the Appropriations Committees are "previously notified fifteen days in advance" (Foreign Assistance Appropriations Act, 1978, Title 1, Economic Assistance, last unnumbered paragraph).

Section 634(f), FAA, further requires the President to report to the Congress, as of September 30 and March 31 of each year, the status of each sales credit and each guaranteed loan under the AECA on which there remains any unpaid obligation or potential liability.

Section 36(a), AECA, requires a quarterly report from the President to the Congress containing:

(1) a listing of all letters of offer to sell any major
defense equipment for $1,000,000 or more to each
foreign country and international organization, by
category, if such letters of offer have not been
accepted or cancelled;

(2) a listing of all letters of offer to sell any major
defense equipment for $1 million or more that have been
accepted during the fiscal year in which the report is
submitted, together with the total value of all defense
articles and services sold to each foreign country and
international organization during the fiscal year;

(3) the cumulative dollar amounts, by foreign country and
international organization, of sales credit and guaranty
agreements made during the fiscal year in which the
report is submitted;

(4) projections of the dollar amounts, by foreign country
and international organization, of cash sales expected
to be made, credits to be extended, and guaranty agree-








69



ments to be made in the quarter of the fiscal year
immediately following the quarter for which the report
is submitted;

(5) a projection with respect to all cash sales expected
to be made and credits expected to be extended to each
country and organization for the remainder of the fiscal
year in which the report is transmitted;

(6) an estimate of the number of officers and employees
of the United States Government and of United States
civilian contract personnel present in each such country
at the end of that quarter for assignments in implementation of sales and commercial exports under this Act;

(7) an analysis and description of the FMS services being performed by officers and employees of the United States
Government including the number of personnel so employed.

Further, Section 813, Department of Defense Appropriation

Authorization Act, 1976 [P.L. 94-106] as amended by Section 814, Department of Defense Appropriations Authorization Act, 1978 (P.L. 95-70), requires that in the case of any letter of offer to sell or otherwise transfer defense articles that are valued at $25 million or more from United States active forces inventories or from current production, the Secretary of Defense shall submit a report to the Congress setting forth: (1) the impact of such sales or transfers on the current readiness of U.S. forces; (2) the adequacy of reimbursements to cover the full replacement cost of those items; and (3) for each article to be sold: (a) the initial issue quantity requirement of U.S. forces for that article; (b) the percentage of such requirement already delivered to such forces or contracted for at the time of the report; (c) the timetable for meeting such require-







70


ment absent the proposed sale; and (d) the timetable for meeting such requirement if the sale is approved. N. CONGRESSIONAL INTEREST IN REDUCING ARMS SALES

As indicated, the Congress attempted, in the International

Security Assistance and Arms Export Control Act of 1976 [P.L. 943291, to gain a greater voice in the policy aspects of arms sales decisions and greater knowledge of and control over proposed sales. Section 1, AECA, states that it shall be United States policy to 11exert leadership in the world community to bring about arrangements for reducing the international trade in implements of war," and states the sense of Congress that the President should "seek to initiate multilateral discussions for the purpose of reaching agreements among the principal arms suppliers and arms purchasers and other countries with respect to the control of the international trade in armaments." Congress further expressed its sense that the President "should work actively with all nations to check and control the international sale and distribution of conventional weapons-and to encourage regional arms control agreements."

As indicated, the Congress expressed its sense, in the AECA,

that the aggregate value of defense articles and services sold under FMS programs or through commercial channels in any fiscal year "should not exceed current levels" (Section 1).








71



In addition, Section 202(b), Public Law, 94-329, directed the following study requirement:

The President shall conduct a comprehensive study of
the arms sales policies and practices of the United States
Government, including policies and practices with respect
to commercial arms sales, in order to determine whether
such policies and practices should be changed. Such study
shall examine the rationale for arms sales to foreign
countries, the benefits to the United States of such arms
sales, the risks to world peace as a result of such arms
sales, trends in arms sales by the United States and other
countries, and steps which might be taken by the United
States to provide for limitations on arms sales. In
addition, such study shall include an evaluation of the
impact of United States arms sales policies on the economic and social development of foreign countries and consideration of steps which might be taken by the United States to
encourage the maximum use of the resources of the developing
countries to economic and social development purposes.

The President was required to submit to the Congress no later than June 30, 1977 the findings of this study, along with recommendations for legislation as appropriate, as well as the efforts made by the United States during the preceding five years to initiate and otherwise encourage arms sales limitations, and the efforts currently being made along those lines.

Congress also directed the Secretary of State, in consultation with the Secretary of Defense, to conduct a comprehensive study of the effects of the provisions of the Arms Export Control Act with a view to determining their consequences on (1) the foreign policy of the United States; (2) the balance of payments of the United States;

(3) trade with foreign countries; (4) unemployment in the United States; and (5) weapons procurement by the Department of Defense. This study, along with recommendations for appropriate legislation,








72



was also required by June 30, 1977, one year after enactment of this provision (Section 218, International Security Assistance and Arms Export Control Act of 1976, P.L. 94-329).

These studies requirements were consolidated into one study by the Department of State and were submitted to the Congress on
1/
June 30, 1977.



0. PRESIDENT CARTER'S ARMS SALES POLICY

On May 19, President Carter outlined his Administration's policy concerning conventional arms transfers (See Appendix I). This policy was based upon the studies required by Sections 202(b) and Section 218 of the International Security Assistance and Arms Export Control Act of 1976.

In his statement, the President indicated that, "The virtually unrestrained spread of conventional weaponry threatens stability in every region of the world." The policy announced by the President contained two basic elements:


...The United States will henceforth view arms
transfers as an exceptional foreign policy implement, to be used only in instance where it can be clearly demonstrated that the transfer contributes
to our national security interests.



1/ U.S. Congress, Senate, Committee on Foreign Relations, Arms Transfer Policy, Report to Congress, 95th Congress, lst Session, Committee Print, July 1977. Washington, U.S. Govt. Print. Off., 1977, 107 pp.








73



... We will continue to utilize arms transfers to
promote our security and the security of close
friends. But, in the future, the burden of persuasion will be on those who favor a particular arms
sale, rather than those who oppose it.

The President added, however, that "actual reductions in the

worldwide traffic in arms will require multilateral cooperation...The

United States will meet with other arms suppliers... to begin discussions

of possible measures for multilateral action."

To implement the first element of this policy--that of unilateral

United States restraint in the sale of arms--the President established

a set of six controls applicable to all future arms transfers "except

to those countries with which we have major defense treaties (NATO,

Japan, Australia, and New Zealand)." These controls are:

1. The dollar volume (in constant FY76 dollars) of new
commitments under the Foreign Military Sales and Military Assistance Programs for weapons and weapons-related items
in FY78 will be reduced from the FY77 total., Transfers which
can clearly be classified as services are not covered, nor
are commercial sales, which the U.S. Government monitors
through the issuance of export licenses. Commercial sales
are already significantly restrained by existing legislation
and Executive Branch policy.

2. The United States will not be the first supplier to
introduce into a region newly-developed, advanced weapons
systems which would create a new or significantly high combat capability. Also, any commitment for sale or coproduction of
such weapons is prohibited until they are operationally deployed with U.S. forces, thus removing the incentive to promote foreign
sales in an effort to lower unit costs for Defense Department
procurement.

3. Development or significant modification of advanced
weapons systems solely for export will not be permitted.








74



4. C'production-agreements for significant weapons
equipment, and major components (beyond assembly of subcomponents and the fabrication of high-turnover spare parts) are prohibited. A limited class of items will be considered
for coproduction arrangements, but with restriction on thirdcountry exports, since these arrangements are intended
primarily for the coproducer's requirements.

5. In addition to existing requirements of the law, the
United States,, as a condition of sale for certain weapons, equipment, or major components, may stipulate that we will
not entertain any requests for retransfers. By establishing at the outset that the United States will not entertain such requests, we can avoid unnecessary bilateral friction caused
by later denials.

6. An amendment to the International Traffic in Arms
Regulations will be issued, requiring policy level authorization by the Department of State for actions by agents of the
United States or private manufacturers which might promote
the sale of arms abroad. In addition, embassies and military
representatives abroad will not promote the sale of arms and the Secretary of Defense will continue his review of
government procedures, particularly procurement regulations,
which may provide incentives for foreign sales.


P. ARMS EXPORT CONTROL BOARD (AECB)

In his report to the Congress on arms transfer policy on

June 30, 1977, the Secretary of State pointed out that there

presently was no single, formally established means within the

Administration for policy control of all programs for the transfer



I/ U.S. Congress. Senate. Committee on Foreign Relations. Arms Transfer Policy: Report to Congress. 95th Congress. Ist Session, Committee Print. July 1977. op. cit.








75



of U.S. defense articles and services. Transfers under the FMS program are controlled, as has been indicated, through a system of direct coordination between the Departments of Detensc. and State and ACDA, with the State Department making the final decision in most cases on individual sales. Sales which raise major policy issues, of course, are decided by the President.

The Secretary of State, under the direction of the President, is charged with the responsibility for the general direction and continuous supervision of grant military assistance and training programs. His responsibilities (section 622(c), FAA) include determining whether there should be a military assistance or training program recommended for a particular country and the value thereof, so that such programs are integrated effectively with other assistance programs and with the foreign policy of the United States. However, articles and services to be transferred under the military assistance or training programs are determined by the Def e Department.

Requests for commercial export licenses (see pp. 86-88) are

reviewed and approved by the Department of State which seeks informal advice from other agencies.

According to the report submitted by the Secretary of State,

this system has been "generally effective and reasonably efficient." It has, however, met the following problems:

its essentially ad hoc and fragmented character;

the multiplicity of decision channels;







76



the lack of a single document or coherent series of
documents on policies, planning, and procedures;

difficulty in controlling all significant decision
points;

inadequate interagency planning.


In order to centralize and formalize the decision-making process concerning arms transfers, the report indicated, an interagency Arms Export Control Board (AECB) would be established. This Board, created by modifying the charter of the Security Assistance Program Review Committee (SAPRC) (see p. 40), is an advisory body with policy planning and review functions. It is chaired by the Undersecretary of State for Security Assistance and has the same composition as the former Security Assistance Program Review Committee (representatives from Departments of State, Treasury and Defense, Joint Chiefs of Staff, Arms Control and Disarmament Agency, National Security Council, Central Intelligence Agency, Agency for International Development, and Office of Management and Budget). Other representatives (such as Department of Commerce) attend Board meetings whenever matters under consideration may be of concern to them.

The Arms Export Control Board will review, consult, and hear

recommendations on security assistance and arms export control policy and on the following:

-- procedures for implementing the arms transfer policy
conveyed by the Presidential statement of May 19;








77



guidelines and criteria for setting priorities and making
decisions;

means for systematically collecting, analyzing, utilizing
pertinent data, and for exchanging views of interested
agencies;

key transfers of defense articles and services as they
relate to policy;

preparation and submission of all security assistance
plans, programs, budgets, and legislative proposals.

The Arms Export Control Board has also established several

interagency working groups responsible to it. These working groups also have policy planning and review functions but are not decisionmaking bodies. Their deliberations, along with diverging views, are provided to the Arms Export Control Board. These working groups, in general, work continuously within the regular channels of agency responsibility and interagency coordination. When new issues or substantive policy questions arise, these groups formulate the issues and options for the Board's consideration. These working groups and their areas of concern are as follows:


Working Groups Areas of Concern

1. Arms Transfer Policy- Develop recommendations for
Planning policies and procedures to
implement the President's arms Chair: State Department transfer policies; recommend
(Director of PM) policies concerning applicability of human rights concerns to arms transfer policy; monitor implementation and recommend changes in policies, procedures, or statutes as needed.

Review individual arms transfer proposals focusing on those
which require Congressional
notification. Prepare re-








78



Working Groups Areas of Concern

commendations on key transfers for consideration. Prepare recommendations on key transfers for consideration by the AECB. Monitor license violations and transfer requests.

Prepare plans for multilateral initiatives designed to secure supplier and recipient restraint; monitor such multilateral efforts; monitor non-U.S. arms transfers.

2. Security Assistance Prepare Security Assistance
Program Review programs, budgets, and legislative proposals for discussion Chair: State Department by the AECB.
(Director of PM)

3. Administration and Monitor administration of
Management arms transfer programs.
Propose remedies for administraChair: Defense Depart- tive problems (e.g., shipping,
ment (Director, DSAA) financing). Design procedures
for improved data acquisition and utilization.

4. Middle East Arms Monitor and coordinate technical
Transfer Panel aspects of the transfer of
defense articles and services Chair: State Department to Middle East countries.
(Director of PM)

5. Arms Control Impact Assess the general impact of
arms transfer policy on arms Chair: ACDA races, regional stability,
and the probability and intensity of conflict.


Q. CURRENT STATUS

In the remaining months of the fiscal year subsequent to

the President's policy announcement, the Administration transmitted

46 separate arms sales notifications to Congress involving 19








79



separate countries and involving goods and services totallinp over $4.5 billion, including a controversial offer to sell Airborne Warning and Control System (AWACS) aircraft to Iran. In additionn, it was also announced or reported during this same period that the United States was prepared to negotiate substantial arms sales to Saudi Arabia, Egypt, Chad, the Sudan, and Somalia (the offer to Somalia was later withdrawn). The Administration also announced the necessity for a substantial arms transfer program for South Korea in order to strengthen that nation's defenses over the next five years during the contemplated withdrawal of American ground forces.

These actual and proposed sales called into question the President's policy of using arms transfers as an "exceptional foreign policy implement." Indeed, arms sales by the United States appeared to continue as a rather routine tool of American policy. Thus, there currently exists in the Congress some scepticism concerning the effectiveness of the announced policy in restricting U.S. arms exports.

The Administration, however, contends that it is too early to judge the effectiveness of the President's policy. It is further contended that recent arms transfer approvals made after the announcement of the ?resident's policy were commitments made by the previous Administration which had to be honored in order to assure these allies that the United States was a dependable supplier.








80



What has changed, Administration spokesmen state, is that there is a heightened sensitivity to arms sales concerns within the Executive Branch, a more positive and centralized control of the management of arms transfers, new regulations concerning the manner in which arms transfers are initiated and approved, and a firm commitment to lowering sales and to negotiating a multilateral approach to a reduction in the worldwide traffic in arms. In this latter respect, formal talks with the Soviet Union on limiting Soviet and American conventional arms sales were opened in Washington in mid-December, 1977. The President is also reported to have raised this issue with the French president during his visit to that country in January, 1978.

On February 1, 1978, the President announced that arms transfer agreements for Fiscal Year 1978 covered by the ceiling established in his policy statement of May 19 would be reduced by $740 million. New commitments under the Foreign Military Sales and Military Assistance programs for weapons and weapons-related items to all countries except NATO, Japan, Australia, and New Zealand would therefore not exceed $8.6 billion, a reduction of 8 percent, figured in constant FY 1976 dollars, from the comparable figure of $9.3 billion for Fiscal Year 1977. The President stated:

A larger cut in the ceiling would violate commitments
already made, including our historic interest in the
security of the Middle East, and would ignore the
continuing realities of world politics and risk the confidence and security of those nations with whom
the United States has vital and shared foreign policy
and security interests. A smaller reduction would
neglect our responsibility to set an example of restraint
that others might follow [See Appendix X1.








81



The White House also announced, however, that total arms sales to all nations in FY 1978 was likely to rise above $13 billion, almost $2 billion over FY 1977 sales.

In testimony before a subcommittee of the House International Relations Committee on February 1, 1978, Lucy Wilson Benson, Undersecretary of State for Security Assistance, indicated that, as of that date, over half of the ceiling dollars were already 11pretty much committed." The residual less than $4 billion, is the discretionary sum available to the Administration to apply to new major sales of defense articles and services in FY 1978 2/
under the FMS program.

The proposal by the Administration, 'announced on February 14, 1978, to sell $4.8 billion of jet aircraft to Egypt, Saudi Arabia, and Israel would appear to threaten the President's ceiling, however.











1/ "Rise in Total U.S. Arms Sales Seen Despite Curb Set for Fliscal 1978," New York Times, February 2, 1978, pg. 1.

2/ Testimony of the Honorable Lucy Wilson Benson, UnderSecretary of State for Security Assistance, Science, and Technology before the Subcommittee on International Security and Scientific Affairs, Committee on International Relations, House of Representatives, February 1, 1978, p. 8.













V. COMMERCIAL SALES


A. DEFINITION

Commercial arms sales do not constitute a Government program as such, and no Government expenditures are involved. These sales involve the direct transfer of arms, equipment, and services between domestic private corporations and foreign governments (or other foreign purchasers). Payment is arranged on a private contract basis. Payments may be financed by sources available to the foreign purchaser abroad, or by a U.S. bank, or by the Exportimport Bank (in the case of a developed country purchaser), or by financing authorized by the Arms Export Control Act. Regardless of the source of financing, however the sale is considered a commercial sale if the U.S. Government neither procures nor sells the items.


B. LIMITATI0S ON COMMERCIAL SALES

The International Security Assistance and Arms Export Control Act of 1976 (Public Law 94-329) made major changes in the legislation concerning commercial sales in order to increase congressional control over those sales. Section 414 of the Mutual Security Act of 1954, which had provided authority to the President to control th(. i xport (and import) of arms, ammunition, and implements of war 1-111d ti-chnical data relating thereto, was repealed and replaced by

38, AECA, and other provisions. The so-called Fulbright

(82)








83



amendment to the Foreign Military Sales Act, which stated congressional preference for the reduction of government-to-government arms sales so as to return such transactions to commercial channels, was also repealed.

Section 38, AECA, gives the President authority to control

the export and import of defense articles and services, to designate those items to be considered as defense items and services, to promulgate regulations for the import and export of such articles and services, and to provide foreign policy guidance to persons involved in the export and import of such items and services.

Section 38, AECA, further directs that no defense articles

or services designated by the President may be exported or imported without a license issued in accordance with the AECA, except for exports by an agency of the U.S. Government for official use or for carrying out any foreign assistance sales program.

Section 38(b)(3) further restricts commercial sales of major

defense equipment as defined in Section 47 of the Act in the amount of $25 million or more to members of NATO, Australia, New Zealand, Japan or in implementation of a coproduction agreement between the United States and a foreign government which has been approved by the Congress. Sales of $25 million or more to other countries are prohibited through commercial channels and must be conducted on a government-to-government basis under the EMS program.

Commercial sales to Chile are prohibited, as are sales to Argentina after September 30, 1978 (see pg. 22).


















23-874 0 78 7












C. ADMINISTRATION OF THE PROGRAM

The Department of State, thought its Office of Munitions Control in the Bureau of Political-Military Affairs, has been delegated the responsibility for administering the United States commercial arms sales program. That office prescribes International Traffic in Arms Regulations (ITAR) in Title 32 of the Code of Federal Regulations. The ITAR lists and defines arms, ammunition, and implements of war, and enumerates the articles controlled by the Office of Munitions Control. This is the U.S. Munitions List. These items are decided upon by the Department of State with the concurrence of the Department of Defense.

Section 38(b)(1) requires that every person (other than

government employees acting in an official capacity) who engages in the business of manufacturing, exporting, or importing any defense article or service designated on The Munitions List must register with the Office of Munitions Control and pay a registration fee.


D. REQUIREMENTS FOR PRIOR APPROVAL

In his May 19 policy statement, President Carter announced

that "an amendment to the International Traffie in Arms Regulations (ITAR) will be issued, requiring policy level authorization by the Department of State for actions by agents of the United States or private manufacturers which promote the sale of arms abroad." The new rule, which became effective September 1, 1977, requires








85



State Department approval as a "condition precedent to any proposal or presentation designed to constitute a basis for a decision to purchase, either through commercial or Foreign Military Sales procedures, made to any foreign government or foreign national



(1) Significant combat equipment valued at $7
million or more is involved; and

(2) the equipment involved is for the use of
a foreign nation's armed forces; and

(3) the sale would involve export of any item
on the U.S. Munitions List or any technical
data relating to an item on this list; or if

(4) Technical assistance or a manufacturing
license agreement for the "production or assembly of significant combat equipment"
on the Munitions List is involved; and

(5) the equipment involved is for the use of
a foreign nation's armed forces; and

(6) the technical assistance or manufacturing
license agreement would involve the export
from the U.S. of any item on the U.S.
Munitions List or of any technical data relating
to an item on the U.S. Munitions List.

Further, the regulation defines a "proposal or presentation designed to constitute a basis for a decision to purchase" as the communication of information in sufficient detail that the person communicating that information knew or should known that it would permit an intended purchaser to decide to acquire the particular combat equipment, technical information, or license in question. Thus, presentations which describe the equipment's







86



performance characteristics, probable availability, and price would require the State Department's prior approval where the above criteria are met in any given case. However, prior approval by the State Department would not be required for advertising in a general circulation publication, for preliminary discussion to ascertain market potential, or for merely calling attention to the fact that a particular item is manufactured by or is available from a company.

The requirement to obtain prior approval may be met by
"any of the following":

(1) Obtaining from the State Department a "written
statement approving the proposed sale or approving the making of a proposal or presentation";

(2) Obtaining from the State Department a "license
for the export of technical data relating to the proposed sale to the country concerned";

(3) Obtaining from the State Department a "temporary
export license relating to the proposed sale for
a demonstration to the armed forces of the country
of export";


E. EXPORT LICENSES

After these negotiations have been concluded under the

permission granted under the new regulation, an export license is still required when items on The Munitions List are to be:

commercially exported;

commercially exported temporarily for demonstra9i@Ve@; other purposes and returned to the United