White House asking Congress to let U.S. underwrite arms sales abroad

March 18, 1991|By New York Times News Service

WASHINGTON -- The Bush administration is asking Congress to authorize a government agency to underwrite sales of military goods for the first time since the 1970s.

After a long and divisive internal debate, the White House has come down on the side of U.S. military contractors, whose business has been lagging because of plans to reduce the size of the U.S. armed forces.

The proposal comes at a time when Secretary of State James A. Baker III and other members of the administration have been trying to limit the rearmament of the Middle East in the wake of the Persian Gulf war.

Administration officials insist the two efforts are not at cross-purposes.

The legislation would establish a pilot program to support the commercial sale of military products to members of the North Atlantic Treaty Organization and to Japan, Israel and Australia.

Should the president determine it is in the national interest, such financing would also be available for "any other country," which would include those of the Third World.

Backers say the proposal, which the administration sent to Capitol Hill last week, would merely level the playing field with the United States' main industrial competitors, most of which have export credit agencies that finance military sales.

A State Department official, who insisted on anonymity, said the proposal is "a strictly commercial operation and is to be used only to counter subsidized credit packages from competing countries, like France."

But opponents of the proposal say that by diverting resources that should be concentrated on nonmilitary exports, the program will hurt U.S. competitiveness and encourage poorer countries to spend more money on arms.

Representative David R. Obey, D-Wis., chairman of the House Appropriations Subcommittee on Foreign Operations, Export Financing and Related Matters, called the proposal "very wrong-headed." Arms sales are "by their very nature noncommercial and political," he said.

In 1989, the last year for which statistics are available, the United States sold about $10.8 billion worth of major conventional weapons systems abroad. The bulk of these sales went to allies in NATO.

The administration's request that the Export-Import Bank, a government agency, underwrite the arms sales promises to be hotly debated in Congress.

A Pentagon-administered military credit guarantee program was

suspended in the late 1970s after too many customers went into arrears, with their loans either forgiven or rescheduled.

With the president's backing, the proposal is expected to pass the Senate. But it will run into stiffer opposition in the House, and at this stage, its fate there cannot be determined.

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