Economic Statecraft: Defense Trade Builds Diplomatic Relationships

June 14, 2012
Assistant Secretary Shapiro Addresses Boeing Plant in St. Louis

Promoting U.S. business abroad and expanding U.S. exports is a top priority of the State Department and the Bureau of Political-Military Affairs (PM). Our work in the PM Bureau to expand defense trade with our allies and partners is critical to America's national security and our economic prosperity and is an important part of the State Department's economic statecraft efforts.

At the State Department, we advocate tirelessly on behalf of U.S. companies abroad -- and I have the frequent flier miles to prove it. It is no longer just our Ambassadors who promote U.S. defense trade. Senior State Department officials regularly advocate on behalf of U.S. bidders on foreign government and foreign military procurements. We do so when we meet with officials on our travels abroad, on the margins of international conferences, and in regular diplomatic encounters with and correspondence to foreign government officials.

These efforts are having an impact. Despite the global economic strain, demand for U.S. defense products and services have remained strong.

Government-to-government transfers through Foreign Military Sales (FMS) have exceeded $30 billion for four consecutive years. Foreign military sales increased by approximately 9 percent last year, making FY 2011 the biggest year to date. Meanwhile, demand for the other major component of U.S. defense trade, Direct Commercial Sales (DCS), which involve countries purchasing systems directly from U.S. companies, also remain robust. Last year, the State Department received and reviewed over 83,000 DCS cases, the most ever.

A major reason for strong demand for U.S. defense products, despite the global economic downturn, is that countries want to partner with the United States. This Administration has worked aggressively to strengthen America's image, to build new partnerships, and strengthen existing ones.

Another reason is that we are increasingly reaching out to new partners and emerging markets. U.S. defense sales in India, for example, have grown from virtually zero to more than $8 billion over the past decade. We have also actively engaged Brazil, which is modernizing and expanding its military capabilities. Supporting these efforts and building on these ties is a major agenda item when I have visited both countries for political-military talks, as well as in my recent travels to Indonesia, Malaysia, and Singapore, which are also working to modernize their defense sectors.

Of course, expanding defense trade with our allies and partners not only helps countries better deal with shared security challenges; it also helps solidify our diplomatic ties and lock in partnerships. If a country is willing to cooperate in the area of national defense -- perhaps the most sensitive area for any nation -- they are more likely to cooperate in other areas as well. The complex and technical nature of advanced U.S.-made defense systems frequently requires constant collaboration and interaction training, maintenance, and upgrades over the life of that system -- decades in many cases. So, when a country buys an advanced U.S. defense system, they aren't simply buying a product. They are also seeking a long-term partnership with the United States.

This long-term relationship creates and sustains jobs here at home. For example, our agreement in December to expand our security cooperation with Saudi Arabia is projected to have a significant impact on the U.S. economy. According to industry experts, this agreement will support more than 50,000 American jobs. It will engage 600 suppliers in 44 states, and provide $3.5 billion in annual economic impact to the U.S. economy. This will support jobs not only in the aerospace sector, but also in our manufacturing base and support chain, which are all crucial for sustaining our national defense.

Still, we can do better. As we advocate abroad, we are also working to facilitate secure trade at home through a comprehensive overhaul of export controls on munitions and other items with military applications. Today's system operates under laws dating back to the 1970s, and for a company looking to sell products overseas means having to track and comply with regulations not only overseen by the Department of State, but the Departments of Commerce, Defense, Energy, Homeland Security, Justice, and the Treasury. Today, all seven departments are working toward a common-sense solution that keeps sensitive technologies safer while helping U.S. industry, in particular small companies, more successfully navigate export controls.

Countries want to buy the best. And to get the best, they rightly turn to U.S. defense systems. This Administration has worked hard to support the U.S. defense industry abroad because it supports our national security and jobs here at home.

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