Taxpayers Shouldn't Underwrite US Arms Sales

AT a news conference shortly after the Gulf war ended, President Bush emphasized his desire to curb weapons proliferation in the Middle East. In the next breath he explained: ``That doesn't mean we're going to refuse to sell anything to everybody. We're not going to cut off all weapons sales.'' After this somewhat mixed message, the administration proposed that the Export-Import Bank of the United States guarantee up to $1 billion in loans for the purchase of American military hardware. This proposal is a dramatic departure for the US and the ExIm Bank. It is the first attempt in more than 15 years to use these credits for military sales. Under the president's program only NATO allies, Israel, Australia, and Japan would initially be eligible for the credits.

However, the plan leaves open one loophole which would allow financing to be extended to other countries if the president determined it was ``in the national interest'' - a vague phrase giving the administration wide latitude in selecting credit recipients.

Arming tomorrow's military conflict with US-made weapons at a discount is hardly the way to fight the recession and improve the trade balance.

As a member of the House Budget Committee, I added language to the 1992 Budget Resolution that says ``no funds for the Export-Import Bank of the US shall be available for providing loan guarantees, insurance or other financial assistance for the sale of defense goods or services.''

Supporters of the administration's proposal argue that it is necessary to help the American defense industry compete with foreign competition - most of whom have export-credit agencies that finance military sales. However, I feel it is necessary to ensure that this proposal is never carried out.

First, countries that were once our allies can quickly become our enemies. One year ago, US foreign policy favored Iraq, treating Saddam Hussein as an ally.

Second, since the ExIm Bank's creation it has typically been the less wealthy, third-world nations that rely on these export-credit guarantees. Nations such as Brazil, Mexico, and Eastern European countries, the most frequent beneficiaries of ExIm loans, guarantees, and insurance in the past year, would be ineligible for the advanced status. Diverting ExIm resources away from these nations only worsens their plight.

Third, the Defense Department's Office of Foreign Military Sales is responsible for financing arms sales. With a $4.8 billion budget, nearly five times the level Mr. Bush proposed for ExIm funding of arms sales, the FMS division is capable of providing our allies with attractive credit terms to purchase US weapons.

Fourth, the ExIm Bank lacks the experience to finance military sales, which require a balance of political and foreign policy considerations, as opposed to the commercial judgments of credit worthiness the ExIm Bank is accustomed to making. The bank's lack of experience in national security and foreign policy issues would make these loans risky and expensive.

Finally, the plan would hinder development in Eastern Europe, Latin America, and Africa, and slow the penetration of US commercial firms in these regions. many US companies - like the Florida firm that supplied truck-mounted well-drilling rigs to Turkey, and the construction company from San Francisco that used ExIm guarantees to provide Venezuela's hydropower project with export design, engineering, and construction services and equipment - would be shortchanged.

The ExIm Bank was established in 1934 to encourage foreign trade through both direct loans and loan guarantees at below-market rates to overseas buyers of US goods. Since 1974 the bank has provided loans and credits only for the purchase of nonmilitary goods.

At a time when everyone, Republican and Democrat, liberal and conservative, agrees we need to stop the proliferation of weapons, especially to the Mideast, this proposed change in policy is counterproductive. The president should show that he is serious about stopping proliferation rather than opening the door to future political, national-security, and financial difficulties.

In the wake of our Persian Gulf experience, the US objective should be crystal clear - to slow the proliferation of nuclear, biological, and chemical weapons and missile technology. The administration's flawed ExIm Bank proposal would do just the opposite, laying the groundwork for the next Saddam Hussein to acquire US weapons and technology.