U.S. Weighs New Arms Sales Policy : Defense: Support for contractors and state of economy would become factors in approving exports. Some decry plan for giving green light to dealers.

In a victory for the defense industry, the Clinton Administration is preparing to adopt policy guidelines that would factor the financial health of U.S. weapon makers and the shape of the domestic economy into decisions on foreign arms sales, Administration officials said Monday.

Arms sales abroad require government approval, and historically those decisions have been judged by whether the sale enhances U.S. security, regional stability and international cooperation. But the new guidelines would require the government to also consider whether a deal helps support U.S. defense contractors and maintains high-paying American jobs.

As U.S. defense spending continues its downward spiral, the Pentagon is unable to fully support its military industrial complex, and exports are being counted on for about 25% of contractors’ future revenue. Over the next two years, for example, about half of U.S. jet fighter production will be exported.

A draft order is awaiting President Clinton’s signature, pending White House and Cabinet-level decisions on several unresolved issues, including whether to approve a financing mechanism that would provide as much as $1 billion for the industry to promote foreign weapon sales.

The Clinton Cabinet must also decide whether the policy would include language that advocates restraint in arms trading on certain types of weapons and which nations would come under those restraints, a White House official said Monday.

Some experts are troubled by the proposed policy, saying that making economics part of the equation will not only encourage more U.S. arms exports, but it will also make it difficult for U.S. officials to ask other nations to restrain their own deal-making.

“This will be very lucrative for us,” said Kenneth Watman, a senior researcher at the RAND Corp. think tank in Santa Monica. “By this policy, the U.S. will also give a green light to other weapon sellers in the world.”

But Joel Johnson, vice president for international affairs at the Aerospace Industries Assn., a Washington trade group, defended the legitimacy of large U.S. arms exports. They have helped promote international stability in such areas as the Middle East, he said, and have cushioned the blow of declining defense spending on U.S. manufacturers.

“Nine years out of 10 we are the merchants of death, and then the next year we are the arsenal of democracy,” Johnson said. “I would feel more guilty selling sugarcoated breakfast cereal to kids than selling weapons to democratic nations.”

The proposed guidelines follow a review of the issue that began a year ago. The policy, known as a presidential decision directive, has been delayed, but a White House official said Monday: “Hopefully, it will be soon.”

The prospective policy would make explicit what has been an increasing trend of federal officials--from ambassadors to presidents--promoting U.S. arms sales around the world.

Recent deals mark a significant departure from U.S. history. In the 1930s and 1940s, the United States began exporting weapons for the first time to stop Adolf Hitler. During the Cold War, arms transfers were based almost entirely on the ideological and political battle against communism.

Although many experts predicted arms sales would decline after the Cold War, U.S. sales have gone up sharply because the world is less stable and Russian sales have dropped. The Persian Gulf War also provided a crucial proving ground for sophisticated U.S. systems.

The aftermath of the Gulf War also opened a huge market in the Middle East, stretching from Turkey to Egypt. And restraints against certain weapon exports to such countries as Taiwan were lifted. Meanwhile, the United States refused to sell to so-called rogue states--basically Iraq, Iran, Libya and North Korea.

As a result, U.S. defense firms have come to dominate the worldwide arms market, now accounting for 55% to 80% of international arms transfers, according to various estimates.

U.S. jet fighters, tanks, missiles and radars are widely regarded as the best in the world and have attracted loyal customers. Such major programs as the Lockheed F-16 jet fighter, the McDonnell Douglas F-15 fighter and the General Dynamics M-1A1 tank will be kept alive by future exports.

“Part of our security is our ability to produce certain weapons,” Johnson said. Keeping production lines going with exports is “a security consideration we have never had to make before.”

Arms deals fluctuate each year, though the general trend appears strongly upward. In fiscal 1993, U.S. firms signed agreements for a record $33.2 billion in arms exports, but the amount declined in fiscal 1994 to $12.9 billion.

In the three years preceding the end of the Cold War, the United States agreed to sales of $28.2 billion. In the three years after the Cold War, the sales shot up to $70.2 billion, according to William Keller, an analyst at the Office of Technology Assessment and the author of an upcoming book on the conventional arms trade.

The policy under consideration is part of a much broader thrust by the Clinton Administration to integrate the defense industry into the commercial economy by dropping complex military specifications, streamlining defense procurement rules and investing in research that can be applied to both military and commercial products, Keller said.

The changes could lead to globalizing the defense industry, taking it in the same direction as multinational corporations in other industries, Keller added.

Arms deals are also part of broader coordination between the United States and key allies, as well as an effort to more rapidly respond to crises around the world--a trend that is difficult to counter, said Lora Lumpe, an arms trade expert at the Federation of American Scientists.

Although the proposed guidelines raise economic considerations as only one ingredient in the decision to sell weapons, it is bound to be a potent part of the mix, Lumpe said.

Lumpe noted that economic considerations appeared to dominate the decision to sell Taiwan the F-16 jet fighter and Saudi Arabia the F-15. More recently, some defense firms cited the potential for foreign business in promoting next-generation weapons, she said.