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INTERNATIONAL TRADE, TECHNOLOGY TRANSFER, NATIONAL SECURITY, AND 94 DIPLOMACY diverse, not to mention those of the thousands of component manufacturers. This already complex problem is further complicated by the fact that the United States approaches this issue with a quite different perspective from that of its allies. The United States has tended to place highest priority on national and mutual security. Our allies, who expect us to take the lead in security, give greater weight to furthering economic growth. Furthermore, and especially in the area of foreign policy, the U.S. purview tends to be global, while that of NATO emphasizes Europe and nearby regions. In all cases it is important to recognize that technology has value only in a limited time frame. If the rules and procedures preclude its commercial application during this ''window," its value deteriorates drastically. Licensing and Coproduction The United States has had a longstanding policy of cooperation through coproduction and licensing of American military aircraft and components with its industrialized allies (mainly NATO and Japan). The objective of this policy has been to enable allied nations to contribute to their mutual security with their own funds and industrial resources, by manufacturing and developing standard materiel of U.S. design. This program also reduces the drain on their foreign currency and engenders a greater feeling of partnership in mutual defense. The details of this policy have changed substantially during the last 25 years. From 1955 to 1970 the primary mechanism for industrial cooperation in weapon systems was that of grant aid and foreign production of U.S. systems by allied nations under license. Examples of such "coproduction" agreements with NATO allies include production of the F-104 in Canada, Germany, Holland, Italy, and Japan, and production of various military rotorcraft in Britain and Italy.1 These coproduction agreements began with repair and maintenance and U.S. export of "knockdown" kits for assembly in the licensee nation. This was followed by a gradual increase in content manufactured in the licensee nation. The agreements served as important conduits for the transfer of manufacturing technology, as well as more limited transfer of design skills and data. The magnitude of the transfer of technology through these coproduction agreements is very difficult to document. However, such licensed production undoubtedly helped create the manufacturing base for the European rotorcraft industry, and supported indirectly the growth of European components design and produc
INTERNATIONAL TRADE, TECHNOLOGY TRANSFER, NATIONAL SECURITY, AND 95 DIPLOMACY tion capability. The Japanese aircraft industry was destroyed in World War II and stayed moribund until component repair work began for the U.S. Air Force during the Korean War. In 1960, for the same objective of national security, the U.S. government approved the F104J program for Japan. This program transferred modern production technology and created a production base in Japan.2 However, it is doubtful whether such coproduction agreements directly or materially aided European prime contractor capabilities in large commercial transports, or current business or commuter aircraft design and development. With the growth in size and sophistication of their defense industrial bases, the NATO countries began to seek a more substantial role as partners with the United States in the coproduction of complex systems and as suppliers of systems and components to the U.S. market. The arrangement for the coproduction of the F-16 was an early example of European (NATO) success in obtaining offsets in exchange for the purchase of U.S. aircraft. The subject of mutual defense is beyond the scope of this study, but in the area of aircraft it is one in which the United States and its allies have somewhat opposing views. The United States wants its allies to bear their share of the cost of the joint aeronautical military establishment, and it exerts heavy pressure to adopt American equipment. Carried to extreme, that policy would leave Europeans totally dependent on U.S. aeronautical development and production capabilityâa position hardly consistent with mutuality. The European allies believe an indigenous aeronautical capability is not only vital to their internal security, but also to a viable mutual defense arrangement. The United States cannot be consistent in asserting the vital synergisms from a common civil- military aeronautical base for the United States without recognizing the applicability of this concept to Europe as well. Viewed from this vantage point, if it is in national security interests of the United States for Europe to have a viable military aircraft manufacturing establishment, we must recognize the legitimacy of Europe's interests in establishing a viable industry in civil aircraft manufacture. President Carter endorsed the policy of the "two-way street" in NATO procurement in 1977. This was intended to result in increased U.S. purchases of European systems and components. The "two-way street" policy was initiated to prevent Europe from undertaking diverging military development, but the desire to achieve greater standardization and interoperability of NATO weapons was an additional reason that received publicity. It was apparent that continued U.S. access to the European military market was dependent on programs that enabled the Europeans to attain a less secondary role in aircraft manufacture. The French,
INTERNATIONAL TRADE, TECHNOLOGY TRANSFER, NATIONAL SECURITY, AND 96 DIPLOMACY meanwhile, continued to develop a competing capability. The sheer magnitude of the U.S. defense effort, and especially the huge R&D effort, has meant that the "street" was never "two-way." This policy of reciprocal procurement has been carried out through the negotiation of bilateral Memoranda of Understanding (MOU) with the other NATO governments. Under the terms of the policy, the competitions of the U.S. and foreign signatory nations for military procurement are to be open to the foreign signators. As part of these MOUs exchanges of advanced technical data are mandated in order to provide a sound, even base for competition. The legal status of the MOU is somewhat cloudy: it is a bilateral Executive agreement over which Congress has very limited powers of review or approval. Industry spokesmen have felt that MOUs are negotiated with insufficient input from American industry. DOD is perceived as seeking some sort of quid pro quo in negotiating an MOU, but the thing(s) sought do not necessarily have anything to do with technology or commerce. The panel believes that the defense establishment is perceived as being very aware of and concerned about the possible loss of critical technology through commercial channels, but much less sensitive to the possible adverse commercial implications of military agreements for coproduction. It is asserted that too many data and too much technology of a proprietary nature and having commercial applications are being transferred abroad with too little reciprocal flow. Design techniques and detailed data that are much more technologically advanced than was the case under early license coproduction agreements are now subject to transfer. Thus, the newer form of allied cooperation is considered to have a higher potential for adversely affecting the competitive status of the U.S. commercial aircraft industry than may have been realized and considered in the decision to support this DOD technology transfer process. Frequently, the MOUs governing the "two-way street" via NATO procurements have obligated U.S. firms to make significant portions of their technology or research findings and know-how available to foreign firms. This transfer of technology involves "disembodied" product design data and production techniques. Consequently, this process represents a potentially more damaging channel of technology transfer than does direct coproduction itself. The inadequacy of opportunity to provide input on MOU negotiations is of concern to representatives of industry. Care must be exercised if expanded congressional review is adopted as the solution. Recent congressional attempts to enforce "Buy American" policies (e.g., the strategic metals clause and the
