Chamber Letter to Senate on Defense Authorization Bill

December 7, 2005

The Honorable John Warner
Chairman
Senate Armed Services Committee
United States Senate
Washington, DC 20510

Dear Chairman Warner:

On behalf of the U.S. Chamber of Commerce, the world's largest business federation representing more than 3 million businesses and organization of every size, sector and region, we thank you for your continued opposition to including so called "Buy American" provisions in the bill and urge your support to remove other restrictive language as you engage in conference discussions on the Fiscal Year 2006 National Defense Authorization Act (H.R. 1815 and S. 1042). We would like to highlight several sections included in the bill that address several protectionist-type provisions that would have harmful and unintended consequences. We also urge you to remove language that would enact barriers to the President's competitive sourcing initiative.

The Chamber believes the inclusion and codification of any "Buy American" or other protectionist-type provisions will have a considerably negative impact on industry, the U.S. government, and the American taxpayer. Since the end of the Cold War, industry and government alike have been seeking ways to improve and streamline the process of developing and providing products to the government that are of the highest quality, of the most advanced technology, and at the best value to the taxpayer. Through continued regulatory and statutory reforms, we continue to move toward greater value, faster development, and expanded capabilities, while maintaining strong relationships with our allies.

We are specifically concerned with Section 817 of the House bill that prohibits the Department of Defense (DoD) from entering into contracts with foreign persons that are from a member country of the World Trade Organization (WTO) if: the WTO has ruled that a subsidy provided by the foreign country is a prohibited subsidy under the rules; a trade dispute issue is before the WTO but has not yet been resolved; or the U.S. has requested consultations under WTO rules. Such protectionist language is problematic and creates barriers with our allies. We are party to the rules and regulations of the WTO agreement and we should allow them to resolve disputes and not legislate further trade regulations.

We also strongly urge you to remove Section 818 of the House bill as it imposes conditions that all goods procured by DoD have 50 percent of their total components by cost be made within the U.S. and that the end products be manufactured domestically. This section would rescind any memorandum of understanding in which DoD has waived the Buy American Act requirements with our allies. This has broad implications, but none more so than in the technology sector, where many of DoD's vital products are not made in substantial quantities nor assembled in the U.S. DoD needs the flexibility, especially during wartime, to purchase products of the highest quality, in a timely manner, and without regard for arbitrary domestic quota requirements.

Another area of concern is Section 1212 of the House bill, which would impose a unilateral 5-year ban on DoD procurements from any foreign entity (including parents, subsidiaries, successors and controlled affiliates of such an entity) that transfers any item to China that is on the U.S. munitions list, even if such a transfer is allowed under the laws and policies of that foreign government. Enactment of this provision would undercut efforts by the U.S. to engage effectively with other governments that might be contemplating arms transfers to China. If Congress prevents foreign companies from participating in joint programs or providing parts to DoD programs, then cooperation will be curtailed, international agreements will suffer, and foreign countries would likely respond in ways that would limit sales there of U.S. defense items. We believe that Congress should support the use of a multilateral framework to work with our allies and trading partners.

Included in both the House and Senate versions of the bill are provisions that impose unnecessary and burdensome barriers on the President's competitive sourcing initiative and also enact numerous barriers to the private sector competing and winning public-private competitions. These competitions, through the competitive sourcing process, have saved the Federal government billions of dollars and required government agencies to become more efficient. Competitive private enterprise systems are the most productive, efficient, and effective sources of goods and services.

Inhibiting the private sectors ability to compete is shortsighted and many times has the long-term effect of increasing costs to taxpayers.

We urge all conferees to stand for efficient and effective government by allowing the competitive sourcing process to continue without creating major impediments that reduce the value of the process to the government and the American taxpayer. Fewer companies are choosing to enter competitions because of the long, arduous process with seemingly little chance for success in the end. We need fewer restrictions and obstacles, not more, to fully realize the benefits of public-private competitions and the competitive sourcing initiative. We respectfully ask you to remove these barriers in conference.

The U.S. Chamber of Commerce strongly urges you to support the free market system that has allowed our country and businesses to thrive in the global marketplace. It is essential that we ensure our armed forces are able to protect and preserve America's global economic and political interests well into the 21st Century. Your leadership and continued support of these critical measures will ensure America's military is prepared for the mission today and in the future.

Sincerely,

R. Bruce Josten

Executive Vice President, Government Affairs
U.S. Chamber of Commerce