[PEN-L:30384] military ricardianism

["Ian Murray" <seamus2001@xxxxxxxxx>]

[yes, I'm copyrighting the term...............]


http://www.feer.com
ARMS SALES
Gripes Over U.S. Grip on Arms Trade
By David Lague/HONG KONG
Issue cover-dated September 26, 2002

U.S. arms makers are cashing in on their country's military dominance and
network of security alliances in Asia to score big contracts in what critics
complain is a lopsided competition that could lead to dependence on expensive
weapons

ON JUNE 27, Daniel Fremont arrived in Canberra to lead Dassault Aviation's bid
in what the French aircraft maker believed would be a tough, five-year battle
for a $6 billion contract to supply the Australian air force with 100 front-line
strike aircraft.

But within hours, the Australian government announced it had abandoned its
normal tendering procedures and had signed up with United States defence giant
Lockheed Martin to develop the proposed Joint Strike Fighter--the
next-generation stealth fighter due to enter service from 2010. If all went to
plan, Australia would receive its first aircraft after 2015.

A dismayed Dassault soon realised that it was heavily outgunned. In what rivals
angrily protest is an increasingly lopsided contest for lucrative arms
contracts, especially in Asia, the U.S. applied an irresistible combination of
diplomatic, military-to-military, commercial and technological influence to win
the Australian deal with an aircraft that has yet to be built. Within days
Fremont had packed his bags and returned to Paris.

"This trend of increasing U.S. political pressure in arms deals is extremely
obvious," says Yves Robins, Dassault's Paris-based vice-president for
international relations. "The Australian case is typical."

Along with Australia's decision on the Joint Strike Fighter, or JSF, the deal
that probably aroused most open resentment against what is seen as growing U.S.
influence was the South Korean government's controversial move in April to award
a $4.2 billion contract to American aircraft-manufacturer Boeing to supply 40
F-15K multi-role fighters. These were the two biggest arms contracts awarded in
the region this year.

No one pretends that the flexing of U.S. muscles in a market it already
dominates is anything new. Of the $26.4 billion in global arms transfer
agreements signed last year, U.S. contractors accounted for almost half,
according to a report released by the U.S. Congressional Research Service.

What has changed in the post-Cold War period, critics claim, is that the U.S. is
increasingly able to exploit its position as the lone superpower to the
advantage of its domestic arms makers. This is acutely felt in East Asia, where
a close network of alliances with Washington and forward U.S. troop deployments
are widely acknowledged to play a crucial role in preserving peace and
stability. Rival arms manufacturers, mostly European, lack this clout.

And, since the terrorist attacks in New York and Washington on September 11 last
year, the feeling among some regional defence-industry executives is that the
administration of President George W. Bush and the Pentagon are even more
assertive in supporting U.S. military contractors abroad and promoting their
military technology.

"The U.S. is now so powerful and has exploited September 11 to its own benefit
so much that everybody else has been virtually reduced to the role of subject
states," says Hans Ohff, a former managing director of the Australian Submarine
Corporation. "If this continues there will only be one defence industry left and
it will be American."

Ohff's fear may be exaggerated but there is no doubt that signing up for big
defence contracts can commit a customer to long-term dependence on the supplier.
This is becoming more pronounced as weapons systems become more complex and
expensive. Once a high-technology jet fighter enters service, for example, the
buyer is locked in for decades. Apart from the purchase price, the buyer must
spend heavily on associated weapons, support and maintenance facilities and
training.

Among the bigger regional defence spenders, South Korea and Australia are coming
under heavy pressure to buy American, according to government officials in Seoul
and Canberra. Japan is virtually a captive market where Washington has expended
considerable effort to block the emergence of a potentially competitive weapons
industry, while Taiwan is forced to buy the vast majority of its arms from the
U.S. because alternative suppliers are unwilling to anger Beijing. Taipei is
expected to spend more than $17 billion on equipment orders from the U.S. over
the next decade.

Kuala Lumpur can soon expect to come under U.S. pressure as it weighs up whether
to select Boeing's F/A-18 Super Hornet or Russia's Sukhoi Su-35 to fill an order
for up to 18 fighter bombers for the Malaysian air force, a contract expected to
be worth $1.5 billion.

The one major regional market where the U.S. is unlikely to make any headway is
in China, the world's biggest arms importer. Russia is its main supplier. A U.S.
ban on all military sales imposed after the 1989 Tiananmen Massacre is unlikely
to be lifted while suspicion remains in Washington that Beijing seeks to build
up sufficient power to recover Taiwan by force and eventually challenge U.S.
dominance in Asia.

In South Korea, Dassault was again among the losers but this time it didn't go
quietly. When it learned that the Boeing contender was favoured against its
Rafale fighter, Dassault in early April launched legal action in Seoul to freeze
the evaluation process and force the South Korean Defence Ministry to disclose
how it was assessing the contenders. Ultimately, the court was unable to
intervene because Seoul successfully argued that its deliberations were
classified on national security grounds.

Dassault believed that the Rafale had performed better in flight trials than the
F-15K, met all the production-sharing and technology-transfer guidelines, and
the deal was $350 million cheaper. In addition to its own sources, the company
cites extensive press coverage, based on leaks from South Korea's Defence
Ministry, which indicate the state-of-the-art Rafale was ahead in the evaluation
against the F-15K, an upgraded version of a fighter that was first introduced in
the 1970s.

Dassault's Robins argues that his company had been given assurances from Seoul
that the competition would be free from politics and that there was a real
chance that an outsider could break the U.S. monopoly on fighter-aircraft sales
to South Korea. However, he claims the rules were changed during the game.

"They decided to have an international competition and the result was not
politically correct," he says. "They then had to manipulate the whole thing to
get a politically acceptable conclusion."

There is little argument with Dassault's claim that the presence of 37,000 U.S.
troops in South Korea and the country's substantial trade surplus with the U.S.
were decisive factors in the F-15K's favour when the final decision was made.
Even Boeing concedes that politics plays a part in defence contracts.

"Politics plays a huge role because it is governments that are deciding what
they want to purchase," says Boeing's Hong Kong-based communications director
for Asia-Pacific, Mark Hooper.

"They did an evaluation of the aircraft and decided that they were both good
products. Then they did a political evaluation and decided it was probably
better to align themselves with the U.S."

Privately, U.S. defence contractors scoff at suggestions that their rivals don't
exert political leverage when they get the chance. They point out that French
President Jacques Chirac accompanied Dassault's chairman to Seoul in 2000 and
later wrote to his South Korean counterpart, Kim Dae Jung, asking that the
company's bid be treated fairly.

One challenge for companies in competition with U.S. contractors is the
widespread perception, reinforced by the military successes in the Gulf War,
Yugoslavia and Afghanistan, that U.S. military technology is far ahead of the
pack. And customers considering rival equipment are always reminded that failure
to buy U.S. could lead to problems with interoperability. This means that in
joint operations, U.S. commanders may be unable or unwilling to link
communications, weapons and sensors with equipment from other countries.

Rivals dispute these claims. In some areas, the Americans are clearly ahead, but
industry analysts argue for example that French or Swedish fighter aircraft,
German submarine technology or South African artillery pieces are as good as, if
not better than, their U.S. counterparts. As for interoperability, they point
out that not a single U.S. combat aircraft flies in the Royal Air Force, but
Britain remains Washington's top ally and routinely deploys aircraft to fight
beside U.S forces.

Nevertheless, U.S. lobbying is difficult to resist. For Lockheed, Canberra's
decision to opt for the JSF is the latest demonstration of a successful and
highly coordinated strategy between the U.S. government and industry.

The strategy is aimed at persuading allies that contributing to a project to
develop and mass-produce up to 6,000 of the radar-evading jets over 25 years
means they will get a state-of-the-art fighter-bomber at a better price than
rivals can offer.

Britain, Italy, the Netherlands, Denmark, Canada, Norway and Turkey have agreed
to contribute more than $4 billion to development costs.

Australian Defence Department officials in Canberra, who agreed to speak on
condition of anonymity, say that high-level U.S. government lobbying was behind
the decision to join the JSF project from early next year and contribute $150
million to its development, a move that came as a shock to some of the senior
air force officers involved in preparation work to administer a conventional
tender.

They say that Australian Prime Minister John Howard, a fervent supporter of the
Bush administration, had also been impressed with the proposed aircraft after
meeting senior Lockheed officials. Other senior government officials, including
Industry Minister Ian Macfarlane and Defence Minister Robert Hill, had also been
convinced that the potential benefits to Australian industry from participating
in the JSF project outweighed the risk of a cost blowout or technical failure.

There were immediate protests from Dassault and BAE Systems, the company
representing the European consortium which markets the Eurofighter Typhoon
fighter-bomber. Both groups were gearing up to compete in an open tender. There
is also considerable opposition to the move in Australian defence industry
circles. The fear is that without competition, it will be impossible for the
government to control costs and maintain access to non-U.S. military technology.

"We have committed ourselves to something that doesn't exist," says
Canberra-based defence analyst Alan Behm. "There are technical and cost issues
yet to be resolved and every U.S. system is expensive, we know that. We will pay
top dollar for it, whatever comes out."

Others questioned why an evaluation system designed specifically to minimize the
risk to national security from hasty or ill-considered political decisions had
been dumped ahead of one of the biggest contracts Canberra was likely to sign.

"Why is a year-long tender process needed to select a supplier for new military
hardware worth perhaps $5 million, yet none is necessary for the supply of new
fighter aircraft costing more than A$10 billion ($5.5 billion)?" asked the
influential Asia Pacific Defence Reporter magazine in a July editorial.

CAUGHT OFF-GUARD
Washington's successful lobbying in Canberra even caught Lockheed off-guard.
Company officials said they were surprised by Australia's decision to buy the
JSF. "It's a government-sponsored initiative." said Charles "Tom" Burbage, head
of Lockheed's JSF programme. "It's not Lockheed Martin trying to subterfuge the
market."

Earlier, Canberra angered another European defence consortium, STN Atlas, when,
under pressure from Washington, it aborted a tender to supply a $200 million
combat system for the Australian navy's conventional submarine fleet. The
official assessment was that the STN Atlas combat system, essentially a
computerized network that connects a submarine's weapons and target-detecting
sensors, was technically superior to a rival bid from U.S. contractor Raytheon.

However, at the urging of the Pentagon, Australia opted to develop a joint
submarine combat-system development project with the U.S. Navy. Officially, the
government explains that the decision was made in the "national interest," but
senior Australian officials say that the U.S. wants to restrict access to the
advanced technology in the Australian submarines.

For some regional defence industry experts, the reason governments opt for U.S.
technology, even when it is still on the drawing board, is that it is
politically safe. The sheer size of the U.S. military budget and the need to
bring effective weapons into service means that technical problems are almost
always overcome.

"It may not be efficient and it may prove expensive but you can be sure that
they will get there eventually," says a senior defence official in Canberra who
asked not to be named. "You get on board and go for the ride."

AnneMarie Squeo in Los Angeles contributed to this article