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INTERNATIONAL TRADE, TECHNOLOGY TRANSFER, NATIONAL SECURITY, AND 97 DIPLOMACY Martin-Baker ejection seat episodes)3 have placed U.S. producers in an indefensible position. Through MOUs, DOD development centers transfer advanced technology abroad, much of it applicable to both civil and military applications. At the same time, Congress presses for protectionist actions that raise the possibility of European retaliation against U.S. exports of aircraft components and systems. The balance of defense trade is still in favor of the United States, in part due to two factors: the large U.S. investment in military R&D creates effective advanced technology systems, and the large U.S. purchases drive manufacturing costs down to levels others find difficult to match. The panel believes that these arrangements have benefited the United States. They have undoubtedly played an important role in preserving the unity and commitment of our NATO allies. Furthermore, in the early stagesâover two decades agoâthey contributed to rebuilding the industrial base of Europe and Japan when cold war concerns were high. The important policy question is the need to reflect the changing environment for U.S. products: much greater economic strength among allies, much more comparable technological capability of international competitors, and increased importance of international markets for U.S. manufacturers. Japanese-American Cooperation Japanese-American cooperation in weapons production represents a special case. Due to self-imposed prohibitions on weapons exports, Japanese industry does not at present have the option of selling systems to the United States or others. Export to the United States of certain electronic components with military applications is already a highly sensitive political issue within Japan. Accordingly, coproduction has remained the primary channel for joint support of weapons procurement. Recent cases of coproduction MOUs with Japan include the F-15 fighter and the associated F-100 engine. While these are highly sophisticated aircraft technologies, their direct, near-term spillover to commercial applications is relatively modest. However, this MOU followed a long list of similar agreements (e.g., P2V, T-33, F-104, F4, and P-3C aircraft as well as T58 and J79 engines) that in the aggregate significantly enhanced Japanese manufacturing capability. There has not been a large impact on the present ability of Japanese firms to operate as prime contractors for large transports or engines, or for regional aircraft. Japan has been active on a modest scale in the area of turbine-powered business aircraft. Since their introduction in
