Meet the New U.S. Export Policy, And The Tariffs Complicating Things

FARNBOROUGH AIR SHOW The U.S. government says it’s ready to sell. But a slate of poorly understood new tariff and sanctions rules are complicating things, even as sales of American-made weaponry blow past previous highs.

President Donald Trump has officially signed off on the State Department’s plan to further boost the foreign military sales effort, government officials said here. That gives diplomats the go-ahead to move out on a plan to push the administration’s Buy American ideology and, hopefully, increase manufacturing output in the United States.

The State Department’s Tina Kaidanow — one of the top US officials attending the Farnborough Air Show here after a number of high-level pullouts — told reporters that the point of the policy “is exactly reflected in a place like Farnborough, where we are supporting U.S. economic security, and we are also achieving a number of national security goals in conjunction with our important partners and allies overseas.”

Officially called the Conventional Arms Transfer policy, the plan loosens restrictions on exporting all manner of equipment — including critical drone technology that close allies have long lined up to purchase — while enlisting government officials traveling overseas to act as salespersons for the U.S. defense industry.

According to a fact sheet provided by the State Department, some of the key points of the new plan include

• building exportability into systems when they’re first developed for the U.S. military,
• providing allies with more options when they’re considering buying foreign gear, and
• working with allies “to expedite transfers that support these essential foreign policy and national security objectives.”

But the punitive approach of the Trump administration to trade imbalances has cast a long shadow, raising questions about what effect a host of newly implemented tariffs and sanctions might have on exports.

Kaidanow, the the principal deputy assistant secretary of state for political-military affairs, dismissed such concerns, saying, “the conversations we’ve had with partners have been very straightforward, even in the Europe space, and it’s been – I think for the most part, it’s been able to transcend some of those other back-and-forth issues.”

But uncertainty over the steel tariffs Washington has slapped on European Union members, and other sanctions placed on commercial goods from the EU and other partners, hangs over the effort.

One U.S. government official, speaking with defense and commercial aviation industry representatives at Farnborough, admitted, “we don’t know how this is going to play out, and we’re asking allies to have patience” while the particulars are worked through.

The slapdash nature of the tariffs, and the speed with which they were implemented, mean that many in Washington don’t yet have a good handle on how their own policies will affect manufacturers in the United States and elsewhere.

“We’re asking U.S. businesses to hang on until we figure out how we adjust next steps and how we rebalance our trade relationships,” the official said. Breaking Defense was allowed to sit in on the exchange on the condition that the names of the officials were not used.

Likewise, language in the 2019 defense spending and policy bill that would impose sanctions on countries using Russian military equipment is also a major question mark. It would land particularly hard on Turkey, which is planning to buy the Russian S-400 air defense system — a move which may earn the country an expulsion from the F-35 program.

“We hope that our allies in thinking about this,” Kaidanow said. “Ultimately, we are concerned that by purchasing these systems from the Russians, it will be supportive of some of the least good behavior that we have seen from them in various places including in Europe but also elsewhere.”

Kaidanow spoke while president Trump was in Helsinki, meeting Russian president Vladimir Putin and denying that Russia interfered in the 2016 presidential election, a refutation of the findings of the entire U.S. intelligence community.

“So the real question for us,” she continued, is “can we get our friends and partners overseas to understand really, truly, this is a serious bit of business? We’re hopeful that they will take it into account as they consider their purchases. We want them to understand the downsides, the real serious downsides to making these acquisitions, and particularly the S-400 acquisitions from the Russians.”  

But the announcement of the new policy was welcomed by defense industry groups. Aerospace Industries Association President and CEO Eric Fanning said in a statement his organization “deeply appreciate[s] the Administration’s commitment to improve transparency and efficiency in the security cooperation process — an effort that we have been advocating for many years.”

American defense companies are already doing pretty well, having sold $46.9 billion worth of weapons to foreign governments this year, leaving the $41 billion worth of deals in 2017 in the dust.