Defense Trade

The Congressional Budget Office this morning released a cost estimate of S. 3581, the "Defense Trade Cooperation Treaties Implementation Act of 2010," which would implement a pair of defense cooperation treaties with the United Kingdom and Australia:

S. 3581 would implement two treaties to facilitate trade in defense articles and services on the U.S. Munitions List. Businesses seeking to export defense articles and services on that list generally require export licenses from the Department of State. In 2007, the United States signed bilateral treaties with the United Kingdom and Australia that would waive the licensing requirement for exports of certain goods and services to those countries. This legislation would implement those treaties.

The Directorate of Defense Trade Controls (DDTC) at the Department of State issues export licenses and maintains a registry of manufacturers or providers of defense articles and services. The DDTC is funded primarily through annual appropriations but has the authority to collect and spend registration fees. It is also responsible for ensuring compliance with rules and regulations governing defense trade, and has the authority to assess civil and criminal penalties for violations.

Based on information from the DDTC, CBO estimates that most of the DDTC's workload would be unaffected by the treaties and that implementing the bill would have insignificant effects on spending subject to appropriation. Enacting S. 3581 could affect collections of civil and criminal penalties and registration fees, thus affecting federal revenues and direct spending; therefore, pay-as-you-go procedures apply. However, CBO estimates that such collections and spending would not be significant in any year.

CBO has not reviewed S. 3581 for intergovernmental or private-sector mandates because section 4 of the Unfunded Mandates Reform Act excludes from the application of that act any legislative provisions that are necessary for the ratification or implementation of international treaty obligations. CBO has determined that the bill falls within that exclusion.

During a press conference in July with British Prime Minister David Cameron at the White House, President Obama voiced his support for quick ratification of the U.S.-U.K. Defense Trade Cooperation Treaty, saying his "administration is working hard with the Senate to move forward as soon as possible with our defense trade treaty with the U.K., which will be good for our workers and our troops in both our countries."

S. 3581 isn't the only defense-trade-related piece of legislation on the congressional docket. As Inside the Pentagon reported in June:

An international defense procurement group is concerned about provisions on industrial base matters and "monitoring exemptions" in the House's fiscal year 2011 defense authorization bill, according to a Canadian official with the organization.

The Defense MOU Attaché Group, founded in 1986 and comprised of 21 countries, is monitoring these issues "very closely," said Jennifer Stewart, vice chairwoman of the group and director general of defense procurement at the Canadian embassy in Washington. The organization includes officials from Australia, Belgium, Greece, Israel, Egypt, Turkey and other countries that have reciprocal defense procurement agreements with the United States.

The international defense procurement officials are concerned about a provision in the House bill asking the Pentagon to include "detailed analysis of waivers granted under the Buy American Act, including analysis of domestic capacity to supply articles, materials or supplies procured from overseas," Stewart said in an interview.

The bill also asks for an analysis of the reasons for an increase or decrease in the number of waivers granted from fiscal year to fiscal year.

"The issue . . . looks like an attempt to make sure that DOD is basically buying exclusively from American sources," charged Stewart. "It kind of undermines the MOUs that we have in place to try to minimize an American preference."