European Initiatives:

Implications for U.S. Defense Trade and Cooperation

NSIAD-91-167: Published: Apr 4, 1991. Publicly Released: Apr 15, 1991.

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Pursuant to a congressional request, GAO examined European initiatives toward forming a single integrated market, focusing on the: (1) activities and initiatives of the European Community (EC) and the Independent European Program Group (IEPG) and their effect on U.S. defense trade and cooperation; (2) defense trade agreements with the European allies of the North Atlantic Treaty Organization (NATO); and (3) roles of the Departments of State, Defense (DOD), and Commerce and the Office of the U.S. Trade Representative in monitoring, assessing, and managing U.S.-European defense trade and cooperation issues.

GAO found that: (1) EC initiatives for U.S. defense trade and technology transfer policy have important implications for defense tariffs, rules of origin, product standards, mergers and acquisitions, and export controls; (2) IEPG was implementing a plan to integrate the European defense market and industry to better coordinate European defense research and development among the member countries, which could eventually exclude the U.S. industry; (3) since the U.S. defense trade advantage with European allies had significantly declined, the continued usefulness of reciprocal defense procurement agreements were questionable; (4) U.S. government and industry officials perceive an increase for European firms in defense contract awards and new programs; and (5) no State or DOD office fully addressed the defense trade implications of EC or IEPG initiatives.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: P.L. 102-190 requires the Secretary of Defense to implement certain GAO recommendations.

    Recommendation: The Secretary of Defense should establish a formal defense trade and cooperation working group under the Deputy Secretary of Defense to more fully examine, coordinate, and formulate U.S. positions on European initiatives affecting defense trade, cooperation, and technology security. The working group should include representatives from all DOD offices within Policy, Acquisition, and General Counsel International that have a stake and interest in European integration issues.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: State tasked the U.S. Mission to EC to focus and report on EC activities affecting defense trade. Such reporting has markedly increased.

    Recommendation: To improve internal monitoring and assessments in support of the Policy Coordinating Committee, the Secretary of State should direct the U.S. mission to EC to monitor, initially assess, and report to State on EC rules and regulations with possible defense implications.

    Agency Affected: Department of State

  3. Status: Closed - Implemented

    Comments: The two involved bureaus have begun close coordination on these matters and to participate in the informal, interagency Defense Trade Working Group.

    Recommendation: To improve internal monitoring and assessments in support of the policy coordinating committee, the Secretary of State should direct the Bureaus of Politico-Military Affairs and European and Canadian Affairs to formally coordinate on European initiatives affecting defense trade and cooperation.

    Agency Affected: Department of State

  4. Status: Closed - Implemented

    Comments: State attempted to form a defense trade sub-group under the DOD Policy Coordinating Committee in the National Security Council. However, State was unsuccessful because DOD resisted the effort, contending that the informal interagency Defense Trade Working Group is the appropriate forum for monitoring and managing the issues. State is exploring alternative ways to get the issues addressed.

    Recommendation: To improve interagency coordination and policy formulation, the Secretary of State should form a sub-group under a relevant policy coordinating committee. This group should provide the needed coordination between State and DOD, as well as the Department of the Treasury, Commerce, and the U.S. Trade Representative, to address EC and the IEPG initiatives affecting U.S. defense trade interests.

    Agency Affected: Department of State

  5. Status: Closed - Implemented

    Comments: P.L. 102-190 requires the Secretary of Defense to implement certain GAO recommendations.

    Recommendation: The Secretary of Defense should revise the armaments cooperation charter to task U.S. embassies' offices of defense cooperation in the appropriate European nations to: (1) track military procurement and evaluate the effect of IEPG initiatives on host government defense procurement practices; (2) determine whether price, capability, or buy-national or European criteria were critical factors in awarding contracts; (3) discuss contested contracts with U.S. industry representatives; and (4) determine if trans-Atlantic defense trade is subject to discriminatory practices or invisible barriers.

    Agency Affected: Department of Defense

 

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