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A few years ago Boeing was a successful commercial-jet maker easing out of the weaponry business. Then came the Clinton administration, and Boeing dove back in. How did Boeing emerge as the country's second-largest arms contractor and largest arms exporter? In 1993, then-Secretary of Defense William Perry reversed a 40-year ban on federal reimbursement of certain expenses of defense company acquisitions and mergers. The government's rationale was that the downturn military contractors were experiencing at the Cold War's end would force some out of business; these payoffs were seen as a way of cushioning the impact of a defense-industry downturn. (Perry and his then-deputy, John Deutch [later head of the CIA], also sped up the public-private revolving door by waiving an ethics regulation prohibiting Pentagon officials from dealing with former employers for one year.) In other words, merging paid. From about 25 military contractors at the beginning of the 1990s, the U.S. now hosts two giants (Boeing and Lockheed Martin), two other major contractors fighting to stay independent (Raytheon and Northrop Grumman), and a host of subcontractors and niche companies highly disadvantaged in competing for major contracts. It has also given both Boeing and Lockheed Martin a stupefying amount of economic and political power, a complex web of subcontracting relationships linking them, and access to astonishing taxpayer largesse. Boeing's political clout in the arms export market accelerated with its purchase of Rockwell International's space and defense divisions in December 1996 , and again when it bought McDonnell Douglas in August 1997. Taxpayers will likely pay more than $1 billion -- including executive bonuses, plant closures, and layoffs -- for costs related to the McDonnell Douglas deal, which has boosted Boeing's annual sales to $50 billion. Meanwhile, thousands of U.S. workers have been laid off as the new colossus streamlines operations. That comes after the 14,000 layoffs McDonnell Douglas had already announced in 1993-5, and shamefully soon after the company spearheaded the first-ever U.S. Jobs Now campaign during the 1992 presidential race. ("Who needs 40,000 highly skilled jobs? We do," proclaimed ads a McDonnell-led coalition took out in Roll Call, Congressional Quarterly, and National Journal.) During that campaign, Clinton took a "swords to plowshares" approach, emphasizing the need for arms makers to convert their production processes to meet civilian needs. The arms industry braced for a battle. But Clinton's approach in office was epitomized by the aggressive salesmanship of his late Commerce Secretary, Ron Brown, whose frequent foreign junkets tended to include American executives -- and Democratic National Committee (DNC) donors. Both McDonnell Douglas (CEO Harry Stonecipher on a 1995 trip to India) and Rockwell (President John Girotto on a 1994 trip to Russia ) were represented. McDonnell Douglas gave $54,600 to the Democratic party in the 1991-2 election cycle (while Brown chaired the DNC), and chipped in another $41,250 in the 1993-4 cycle. The cozy relationship has continued past Brown's death and into the "new" Boeing; Defense Secretary William Perry, after resigning in January 1998, promptly joined Boeing's board of directors. From January 1997 to June 1998, Boeing poured $660,000 into Democratic and Republican coffers -- not a pittance compared to the return Boeing gets on its investment in...democracy. The combined force of the new Boeing gives it a dizzying catalog of aerial death, from F-15s and AH-64 Apache attack helicopters to antiship and antitank missiles. (Click here for a more complete inventory of Boeing's recent foreign sales.) As a combined commercial and military entity, Boeing has an economy larger than most Eastern European countries -- roughly the 78th largest in the world, with annual sales of $48.5 billion. It is the largest U.S. arms exporter, with 60 percent of its total sales made to other countries, and the military share of this is increasing. Naturally Boeing deploys a whole army of lobbyists and influence-peddlers to ensure that taxpayers underwrite its global marketing. For years the dissonance between national security, human rights, and the corporate mandate to make money has been epitomized by Boeing's advocacy of commercial relations with China -- and the company's dominance of Sino-American trade policy. Boeing retains seven separate lobby shops just to advocate for perennials like permanent Most Favored Nation (MFN) status for the People's Republic. The payoff? China accounts for fully 10 percent of Boeing's business. And China isn't just a market; it's a cheap labor pool, and an increasing share of Boeing's manufacturing takes place under the wing of the People's Liberation Army, where workers make $50 a month and never, ever unionize. Boeing's China connection has been greased by its relationship with the Export-Import Bank (or Ex-Im Bank), a federal agency that offers below-market-rate loans to countries purchasing U.S. goods. So many Ex-Im deals have been Boeing-related that the program is known in some congressional quarters as the "Bank of Boeing." Before 1990 Ex-Im could only fund civilian products; its expansion since then has neatly paralleled Boeing's greater arms export profile. Thus the Clinton administration has underwritten Boeing's China sales in two ways: directly through Ex-Im, and indirectly by refusing to link incidents like China's alleged 1996 sale of nuclear components to Pakistan with China's Most Favored Nation trade status. And Ex-Im -- and, therefore, American taxpayers -- has almost entirely financed certain Boeing exports to Saudi Arabia due to the Saudis' professed lack of cash reserves. Deals with big customers such as China and Saudi Arabia have also become notable for displacing of U.S. jobs. Both countries (and many others) now insist on "offsets." The Saudis, for instance, don't officially require a particular percentage of offsets, but in practice, those offsets have reached as high as 35 percent of a deal's overall value. And don't expect the arms maker to fight this too hard. For them, it's a double win -- a big sale and reduced labor costs. Boeing executives gush about "internationalizing" the company by using foreign sources for parts, labor, and new factories. Foreign outsourcing was central to the raucous, 32,000-person Boeing machinists' strike in 1995, one of the first of organized labor's recent string of highly visible victories. The machinists' contracts will expire in December 1999, and it's virtually certain that Boeing will ask -- amidst a shaky international economy and its own production difficulties -- for wide-ranging wage and benefit cuts. -- Geov Parrish
Recent products and buyers include the F-15 Eagle (Israel, Saudi Arabia); F/A-18 Hornet (Kuwait, Malaysia, Thailand); 767 AWACS (Japan, Saudi Arabia); AH-64 Apache attack helicopter (Egypt, Kuwait, Israel, United Arab Emirates); Harpoon antiship missiles (Egypt, Brunei, Thailand, Taiwan, Singapore, Turkey, Greece); TA-4J Skyhawk attack aircraft (Argentina, Indonesia); Boeing H-47 series Chinook helicopters (Egypt, Greece, South Korea); KC-135R Stratotanker refueling aircraft (Singapore, Turkey); McDonnell Douglas/British Aerospace AV-8A/B attack aircraft (India, Thailand); Hughes/Rockwell Hellfire antitank missiles (Kuwait, United Arab Emirates); and TH-57A Sea Ranger utility helicopter (Chile). | | |||||||||||||
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