November 1989, Page 28, 47

Business and Labor

US Aerospace Workers and Taxpayers Pay Bills for AIPAC Courtship of Congress

By Patrick F. Flynn

Last year, Saudi Arabia diverted from the United States to the United Kingdom a military purchase of such magnitude that it was called by the press "the deal of the century." The 1988 sale, involving the British Tornado fighter bomber, helicopters, ships and training and basing support, was estimated by Pentagon experts at $30 billion and by Saudis at $65 billion.

The diversion followed close signals to the US administration from Israel's extensive lobby and responsive members of Congress that they would oppose the sale of equivalent US weapons to Saudi Arabia. It represented a new high-water mark for Israeli intrusion into the very heart of the American economy. The Saudi decision penetrated deeply into such sensitive US bread-and-butter issues as industrial employment, economic prosperity, balance of trade and high tech competitiveness. Its short and long-term effects may be repeated on an even larger scale next year.

Loss of Sale Aids European Competitors

The economic impact of that lost sale on the United States, and the political impact of the slight to an important and faithful US ally, were ignored, however, by key US congressmen who scuttled the deal before it even got to the floor.

Joel Johnson, international vice president for the Aerospace Industries Association of America (AIA), summarized the long-term negative effects of the diversion in these words: "From the perspective of the US aerospace industry, this sale [to the UK] had negative impacts in three important ways. It effectively turned a large share of the Saudi, and perhaps other friendly Arab Middle East markets, to our toughest competitors, the Europeans. It provided a major infusion of funds to precisely those companies against whom we compete in both military and civil aerospace, around the world. And it gave a strong rationale to those Europeans who believe, whatever the cost, that they should build an aerospace industry that 'designs-out' US-supplied parts."

The billions of dollars flowing into British Aerospace, the Tornado's prime contractor, from Saudi Arabia will be used for vastly increased research and development, enabling it to spread out and lower production costs on future Tornado sales. US industry would have enjoyed the same competitive advantages had the Congress allowed the job to be awarded to American instead of British companies.

Johnson's reference to the European drive to "design-out" US components relates to the US penchant for wanting to control whole systems that utilize any US parts. European manufacturers, seeking increased profits and independence from American control, are thus encouraged to reduce US imports and to enter directly into competition with US companies on aerospace and high-tech hardware of all kinds.

All Americans will suffer with reduced national prosperity, security and international influence.

David Louscher, an aerospace analyst and consultant with Science Applications International Corp. (SAIC), refers to "equipment preemption" as another major factor in competitive export sales. When a country purchases a particular system from a supplier, it gets everything that goes with it, the support, training, ordinance, electronics and construction. Since Saudi Arabia made the decision to purchase British aircraft, American suppliers of all of the essential hardware, services and creation or modification of bases are also out of the picture at that point.

"It's not a mix-and-match business," explains Louscher, who is co-author of the book, Arms Sales in the US Economy, along with Dr. William D. Bajusz, vice president of SAIC.

In addition to the contract costs of defense sales, the US government levies recoupment fees to pay back the cost of research and development. It also assesses substantial administrative fees, all of which flow directly into the US Treasury.

Diversion of the 1988 Saudi purchase, Louscher estimates, cost the US companies between $15 billion and $20 billion in direct sales. An additional $15 to $30 billion will be lost to the US economy over a 10-year period.

This includes construction of two new Saudi Arabian air bases, also lost to US building contractors and suppliers. That new construction alone is estimated in excess of $3 billion.

Exports Offset Defense Cuts

With cutbacks in US defense spending programs, the need to export military aircraft is especially important now to the US aerospace industry in order both to maintain an American industrial base and to help reduce US defense expenditures by amortizing costs for weapons systems purchased over a broader base.

There was no compelling political reason in 1988 (nor in 1987, when other large sales were lost) to deny the Saudis an opportunity to purchase US defense equipment. The Saudis have historically preferred US technology ever since they chose American rather than British companies to find and market their petroleum in the 1930s and 1940s. The increasing difficulties faced by the Saudis in purchasing US arms occurred at the behest of Israel, working through its powerful lobby, the American Israel Public Affairs Committee (AIPAC) and other organizations and individuals. They were able to influence a large number of US senators to oppose the sale.

There are many US senators (and representatives, too) with major aerospace constituencies who nevertheless have been willing to cast their votes in accordance with recommendations by AIPAC and the Israeli government in sinking the Saudi and other Arab arms purchases. They include Senators Alan Cranston (D-CA) and Pete Wilson (R-CA); Ted Kennedy (D-MA) and John Kerry (D-MA); Christopher Dodd (D-CN); Howard Metzenbaum (D-OH); John Danforth (R-MO) and Christopher Bond (R-MO); Daniel Moynihan (D-NY) and Alfonse D'Amato (R-NY); Alan Dixon (D-IL) and Paul Simon (D-IL).

There is no countervailing lobby in the US to represent either the national interest in security exports or the economic stake of workers. Only once have individual US firms coordinated their efforts, and the result was the 1981 sale of the AWACS airborne early warning system to Saudi Arabia. Normally, it is all up for grabs, with members of Congress responding to their own self-interest and the most powerful lobby.

The result has been a congressional "double-whammy" against US business and labor interests alike by shrinking the defense market and exporting tens of thousands of jobs for skilled workers and technicians.

Louscher says that SAIC's economic analysis shows that $1 billion in aerospace export sales generates 61,000 man years of employment, direct and indirect, to our economy.

Included are 35,000 man years of direct employment, and an additional 26,000 man economic multiplier (1.96 for aerospace, as a national average) at work as that money filters through the economy for other consumer goods and services in thousands of communities.

US government defense program cutbacks have already caused a loss of 28,000 jobs in the defense aircraft sector of the industry, according to the AIA. More are expected with continuing layoffs by major contractors.

Some news media took editorial note of the lost sale in 1988, but few offered an explanation or comment on the behind-the-scenes machinations. An exception was the Los Angeles Times,which said in a June 14, 1988 editorial: "That rejection has little to do with the merits of the proposed sales. It had even less to do with the bigger issue of US foreign policy interests. It has a lot to do with domestic politics. Here is another case where Congress' skewed priorities are doing the country no good at all."

1990 Replacement Order Looms

It can happen all over again next year. Saudi Arabia will begin in 1990 to replace its aging fleet of F-5 fighter aircraft. It has 105 of them, originally manufactured by Northrop Corporation.

James A. Russell, manager of analytical studies for the American League for Export and Security Assistance, Inc. (ALESA), considers the F-5 replacement order even more potentially important than last year's Saudi "deal of the century" aircraft order loss to the UK. "The F-5 replacement by the Saudis," he says, "will determine our involvement in the Saudi Arabian aircraft market for the next 20 years."

Gulf countries are expected to buy a total of 300 military and commercial aircraft by the end of this century. International competition for these orders was highlighted earlier this year at the 1989 Dubai Air Show in the United Arab Emirates, at which US, British and French companies exhibited their competing wares.

The US aerospace industry, with an estimated 1.3 million workers, is a major hightech part of the US economy and a principal exporter. Despite the lost Saudi sale, it produced a positive trade balance of $17 billion in 1988, the only US industry at this level to have a positive net balance of trade.

As a result, the aerospace industry is a vital component of US prosperity as well as security. It produces more jobs than the chemical, apparel, trucking, communications and many other US industries.

Foreign Sales Mean Less US Influence

Aerospace spokesmen argue that US sales of armaments to Saudi Arabia and other friendly Arab countries are far less of a threat to Israel than are Arab purchases from other countries. American sales of armaments to Saudi Arabia give the US control over their use. No such control accompanies European sales. The Tornado aircraft have none of the basing or attack component restrictions that would have accompanied purchases by Saudi Arabia of the American F-15s and F-16s which the Saudis wanted to buy. The F-15 is manufactured by McDonnell Douglas; the F-16 by General Dynamics Corporation.

Americans who object to any arms sales to any country for moral reasons ignore the fact that the US would not reduce the arms race by estranging itself from the Arab states, or by refusing to sell them weapons. Saudi Arabia and others with cash can and do simply buy them elsewhere. In letting this happen, the US loses diplomatically as well as economically, with lessened influence over an arms spiral that is becoming increasingly beyond its ability to control.

Last year, for example, after placing its Tornado order with Britain, Saudi Arabia surprised the world by purchasing Chinese missiles. Ironically, the purchase was arranged in the US through contacts between the Washington embassies of the two countries. Most recently, the Kingdom bought several hundred French Mistral ground-to-air missiles and naval vessels.

A Lose-Lose Situation

Now, with big reductions in US defense aircraft and weapons spending, an increasing number of Americans in aerospace are beginning to suffer personal and corporate dislocations. While most US workers remain ignorant about the loss of the Saudi market and the bolstering of the competition, they will bear the ultimate impact.

Beyond their ranks, however, all Americans will suffer with reduced national prosperity, security and international influence. It is a lose-lose situation of monstrous proportions.

That all of this can be engineered by a Washington-based and American-staffed lobby for a third-party foreign interest points to a serious problem in how our government operates and conducts its international affairs.

The matter cries for open hearings and debate on the issues in formulation of new national policies. It now involves so much money, so many workers, that it cannot remain a private affair to be decided by a handful of powerful lobbyists and their congressional clients.

Such hearings would also provide an opportunity for mainstream American Jewish organizations and their members to reassess the role of AIPAC in carrying out the wishes of the Israeli government with activities that do not appreciably enhance the security of Israel but which dramatically erode US employment and the US balance of payments and dramatically increase the cost to US taxpayers of America's own defense.

Patrick F. Flynn is a former aerospace and construction worker living in southern California.