United States General Accounting Office

GAO Report to the Secretary of Defense

October 1997 DEFENSE TRADE

European Initiatives to

Integrate the Defense

Market

GAO/NSIAD-98-6

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-276450 

October 29, 1997

The Honorable William S. Cohen

The Secretary of Defense

Dear Mr. Secretary:

With decreasing U.S. defense procurement budgets since the end of the

Cold War, U.S. defense companies have been looking for sales in foreign

markets, and the Department of Defense (DOD) has been attempting to

increase cooperative programs with its major European allies. At the same

time, partly in response to their own reduced defense budgets, many

European countries have taken steps to develop a common armament

policy and consolidate their defense industrial base to become more

efficient and competitive in world markets. To provide some insights and

perspective on the implications these European efforts have on future U.S.

military procurement options, we have reviewed the changes that have

taken place in the European defense market over the past 5 years.

Specifically, our objectives were to examine (1) what actions European

governments and industry have taken to unify the European defense

market, (2) how key European countries’ defense procurement practices

have affected U.S. defense companies’ ability to compete on major weapon

competitions in Europe, and (3) how the U.S. government and industry

have adapted their policies or practices to the changing European defense

environment. Our review focused on the buying practices of five European

countries—France, Germany, Italy, the Netherlands, and the United

Kingdom.

Background Global exports of defense equipment have decreased significantly since

the end of the Cold War in the late 1980s. Major arms producing countries,

such as the United States and those in Western Europe, have reduced their

procurement of defense equipment by about one-quarter of 1986 levels

based on constant dollars. Overall, European nations have decreased their

defense research and development spending over the last 3 years, which is

one-third of the relatively stable U.S. research and development funding.

Defense exports have declined over 70 percent between 1987 and 1994. In

response to decreased demand in the U.S. defense market, U.S. defense

companies have consolidated, merged with other companies, or sold off

their less profitable divisions, and they are seeking sales in international

markets to make up lost revenue. These companies often compete with

Page 1 GAO/NSIAD-98-6 Defense Trade
B-276450 

European defense companies for sales in Europe and in other parts of the

world.

The U.S. government, led by DOD, has maintained bilateral trade

agreements with 21 of its allies, including most European countries, to

address barriers to defense trade and international cooperation. No

multilateral agreement exists on defense trade issues. Bilateral agreements

have been established to provide a framework for discussions about

opening defense markets with those countries as a way of improving the

interoperability and standardization of equipment among North Atlantic

Treaty Organization (NATO) allies. The United States has enjoyed a

favorable balance of defense trade, which is still an issue of contention

with some of the major arms producing countries in Europe.1

 This trade

imbalance was cited in a 1990 U.S. government study as a justification for

European governments requiring defense offsets.2

 However, because

European investment in defense research and development is significantly

below U.S. levels, a Department of Commerce official stated that

European industry is at a competitive disadvantage in meeting future

military performance requirements.

Reciprocal trade agreements recognize the need to develop and maintain

an advanced technological capability for NATO and enhance equipment

cooperation among the individual European member nations. A senior

NATO official stated that Europe’s ability to develop an independent

security capability within NATO and meet its fair share of alliance

obligations is contingent on its ability to consolidate its defense industrial

base. This official indicated that if such a consolidation does not occur,

then European governments may be less willing to meet their NATO

obligations.

Results in Brief Pressure to develop a unified European armament procurement policy and

related industrial base is increasing, as most nations can no longer afford

to develop and procure defense items solely from their own domestic

companies. European governments have taken several initiatives to

integrate the defense market, including the formation of two new

1

According to a DOD official, data showed that the balance of defense trade with Europe was about 2

to 1 in the U.S. favor. Although the accuracy of DOD’s defense trade estimates has been questioned,

alternative estimates support a U.S. trade advantage. See European Initiatives: Implications for U.S.

Defense Trade and Cooperation (GAO/NSIAD-91-167, Apr. 4, 1991).

2

Offsets are defined as the entire range of industrial and commercial compensation benefits provided

to foreign governments and firms as inducements or conditions for the purchase of military goods and

services.

Page 2 GAO/NSIAD-98-6 Defense Trade
B-276450 

organizations to improve armament cooperation. European government

officials remain committed to cooperative programs, which have long

been the impetus for cross-border defense cooperation at the industry

level. Some European defense companies are initiating cross-border

mergers that are not tied to government cooperative programs. Although

some progress toward regionalization is occurring, European government

and industry officials told us that national sovereignty issues and complex

ownership structures may inhibit European defense consolidation from

occurring to the extent that is needed to be competitive.

Until European governments agree on a unified armament policy,

individual European countries will retain their own procurement policies.

Like the United States, European countries tend to purchase major

defense equipment from their domestic companies when such options

exist. When national options do not exist, key European countries vary in

their willingness to buy major U.S. weapon systems. For example, the

United Kingdom and the Netherlands have often selected U.S. products

over European products, while France has only purchased major U.S.

defense items when a comparable French or European option was not

available.

Transatlantic industrial partnerships appear to be evolving more readily

than transatlantic cooperative programs that are led by governments. U.S.

defense companies have established these transatlantic partnerships

largely to maintain market access in Europe. U.S. defense company

officials say they cannot export major defense items to Europe without

involving European defense companies in the production of those items.

Some U.S. defense companies are seeking long-term partnerships with

European companies to develop a defense product line that will meet

requirements in Europe or other defense markets. They believe such

industrial interdependence can also help counter any efforts toward U.S.

or European protectionism and may increase transatlantic defense trade.

The U.S. government has taken several steps over the last few years to

improve defense trade and transatlantic cooperation, but some observers

point to practical and cultural impediments that affect U.S.-European

cooperation on major weapon programs.

Page 3 GAO/NSIAD-98-6 Defense Trade
B-276450 

Europe Has Taken

Steps to Integrate Its

Defense Industry, but

Progress Is Slow

European governments have made slow gradual progress in developing

and implementing unified armament initiatives. These initiatives are slow

to evolve because the individual European nations often have conflicting

goals and views on implementing procedures and a reluctance to yield

national sovereignty. In addition, the various European defense

organizations do not include all of the same member countries, making it

difficult to establish a pan-European armament policy.

European officials see the formation of a more unified European defense

market as crucial to the survival of their defense industries as well as their

ability to maintain an independent foreign and security policy. Individual

national markets are seen as too small to support an efficient industry,

particularly in light of declining defense budgets. At the same time,

mergers and consolidations of U.S. defense companies are generating

concern about the long-term competitiveness of a smaller, fragmented

European defense industry.

In the past, European governments made several attempts to integrate the

European defense market using a variety of organizations. The Western

European Union (WEU), the European Union, and NATO are among the

institutions composed of different member nations that have addressed

European armament policy issues (see fig. 1). For example, in 1976, the

defense ministers of the European NATO nations established the

Independent European Program Group as a forum for armament

cooperation. This group operated without a legal charter, and its decisions

were not binding among the member nations. In 1992, the European

defense ministers decided that the group’s functions should be transferred

to WEU, and the Western European Armaments Group was later created as

the forum within WEU for armament cooperation.

Page 4 GAO/NSIAD-98-6 Defense Trade
B-276450 

Figure 1: Organizations Addressing European Armament Policy Issues

NATO

EU

WEU

 Canada

 USA

Belgium

Denmark (2) France

Germany Greece Italy

Luxenbourg The Netherlands

Portugal Spain

United Kingdom

Czech Republic (3,4)

Poland (3,4)

Hungary (3,4)

Iceland (1)

Norway (1) Turkey (1)

Bulgaria (3) Estonia (3)

Latvia (3) Lithuania (3)

Romania (3) Slovakia (3)

Slovenia (3)

Finland (2)

Austria (2)

Sweden (2)

Ireland (2)

EU: European Union

NATO: North Atlantic Treaty Organization

WEU: Western European Union

Notes:

(1) Associate Members of WEU

(2) Observers of WEU

(3) Associate Partners of WEU

(4) Invited to begin accession negotiations with NATO

Page 5 GAO/NSIAD-98-6 Defense Trade
B-276450 

In 1991, WEU3 called for an examination of opportunities to enhance

armament cooperation with the goal of creating a European armaments

agency. WEU declared that it would develop as the defense component of

the European Union and would formulate a common European defense

policy. It also agreed to strengthen the European pillar within NATO. Under

WEU, the Western European Armaments Group studied development of an

armaments agency that would undertake procurement on behalf of

member nations, but agreement could not be reached on the procurement

procedures such an agency would follow. Appendix I is a chronology of

key events associated with the development of an integrated European

defense market.

Two Armament Agencies

Created

In 1996, two new armament agencies were formed. OCCAR4 was created as

a joint management organization for France, Germany, Italy, and the

United Kingdom, and the Western European Armaments Organization

(WEAO) was created as a subsidiary body of WEU. As shown in table 1, the

two agencies are separate entities with different functions.

3

WEU, which was established in 1955, serves a unique role between the European Union and NATO in

addressing defense and security matters since it is the only European organization that can carry out

military operations.

4

OCCAR is the French acronym for Organisme Conjoint de Coopération en Matière d’Armement.

Page 6 GAO/NSIAD-98-6 Defense Trade
B-276450 

Table 1: Selected Characteristics of

OCCAR and WEAO OCCAR WEAO

Principles/goals • Consolidate program

management.

• Coordinate long-term

requirements and develop a

common investment policy.

• Improve European

industrial base

competitiveness.

• Replace the program

specific “juste retour”

concept (work share in

proportion to funds

contributed) with an

equitable balance over

multiple programs and

years.

• Open membership to

European countries that

accept these principles and

plan to participate in a

major cooperative program.

• Give preference to

equipment to whose

development a country has

contributed within OCCAR.

Promote European

armament cooperation,

strengthen the European

defense technology base

and create a European

defense market. Offer an

appropriate legal framework

for a future European

armament agency.

Programs

to be administered

Milan and Hot antitank

missile systems, Roland

surface-to-air missile

system, Tiger combat

helicopter, and Brevel

surveillance and

reconnaissance drone

program.

Existing defense research

and technology projects.

Membership France, Germany, Italy, and

the United Kingdom.

Belgium, Denmark, France,

Germany, Greece, Italy,

Luxembourg, Netherlands,

Norway, Portugal, Spain,

Turkey, and the United

Kingdom.

Organizational status A management organization

located in Bonn, Germany,

with no legal charter to

administer contracts.

A WEU subsidiary located

in Brussels, Belgium, with

legal authority to administer

contracts.

Source: Our analysis of OCCAR and WEU documents.

OCCAR was created as a result of French and German dissatisfaction with

the lack of progress WEU was making in establishing a European

armaments agency. Joined by Italy and the United Kingdom, the four

Page 7 GAO/NSIAD-98-6 Defense Trade
B-276450 

nations agreed on November 12, 1996, to form OCCAR as a management

organization for joint programs involving two or more member nations.

OCCAR’s goals are to create greater efficiency in program management and

facilitate emergence of a more unified market.

Although press accounts raised concerns that OCCAR member countries

would give preference to European products, no such preference was

included in OCCAR’s procurement principles. Instead, it was agreed that an

OCCAR member would give preference to procuring equipment that it

helped to develop. In establishing OCCAR, the Defense ministers of the

member countries agreed that OCCAR was to have a competitive

procurement policy. Competition is to be open to all 13 member countries

of the Western European Armaments Group. Other countries, including

the United States, will be invited to compete when OCCAR program

participants unanimously agree to open competitions to these countries

based on reciprocity. OCCAR officials have indicated that procedures for

implementing the competition policy, including criteria for evaluating

reciprocity, have not yet been defined. According to some U.S.

government and industry officials, issues to consider will include whether

U.S. companies will be excluded from OCCAR procurement or whether

OCCAR procurement policy will be consistent with the reciprocal trade

agreements between member countries and the United States.

OCCAR’s impact on the European defense market will largely depend on the

number of programs that it manages. OCCAR members are discussing

integrating additional programs5

 in the future but are expected to only

administer joint programs involving participating nations, thereby

excluding transatlantic, NATO, or European cooperative programs involving

non-OCCAR nations. Some European nations, such as France and Germany,

are committed to undertaking new programs on a cooperative basis. While

intra-European cooperation is not new, French Ministry of Defense

officials have indicated that this represents a change for France because

they no longer intend to develop a wide range of weapon programs on

their own.

On November 19, 1996, a week after OCCAR was created, the WEU

Ministerial Council established WEAO to improve coordination of

collaborative defense research projects by creating a single contracting

entity. As a WEU subsidiary body, WEAO has legal authority to administer

contracts, unlike OCCAR, which operates without a legal charter and has no

5

These programs include a range of products, including a counter battery radar, armored vehicles, an

antiship weapon system, a satellite communication system, an observation satellite, surface-to-air

missiles, and a self-propelled howitzer.

Page 8 GAO/NSIAD-98-6 Defense Trade
B-276450 

authority to sign contracts for the programs it is to administer. WEAO’s

initial task is to manage the Western European Armaments Group’s

research and technology activities, while OCCAR is to manage the

development and procurement of weapon systems. The WEAO executive

body has responsibility for soliciting and evaluating bids and awarding

contracts for common research activities. This single contracting entity

eliminated the need to administer contracts through the different national

contracting authorities. According to WEAO documentation, the

organization was intentionally designed to allow it to evolve into a

European armaments agency. However, it may take several years before

the effect of OCCAR and WEAO procurement policies can be fully assessed.

Some European government officials also told us that OCCAR’s ability to

centrally administer contracts is curtailed until OCCAR obtains legal

authority.

U.S. government and industry officials are watching to see whether OCCAR

and other initiatives are fostering political pressure and tendencies toward

pan-European exclusivity. As membership of the various European

organizations expands, pressure to buy European defense equipment may

increase. For example, according to some industry officials, the new

European members of NATO are already being encouraged by some

Western European governments to buy European defense products to ease

their entry into other European organizations.

European Defense

Industry Begins to

Restructure

While European government initiatives appear to be making slow, gradual

progress, the European defense industry is attempting to consolidate and

restructure through national and cross-border mergers, acquisitions, joint

ventures, and consortia. European government and industry observers

have noted that European defense industry is reacting to pressures from

rapid U.S. defense industry consolidation, tighter defense budgets, and

stronger competition in the global defense market. Even with such

pressures, other observers have noted that European defense companies

are consolidating at a slower pace than U.S. defense companies.

The combined defense expenditures of Western Europe are about

60 percent of the U.S. defense budget, but Western Europe has two to

three times more suppliers, according to a 1997 Merrill Lynch study.6

 For

example, the United States will have two major suppliers in the military

aircraft sector (once proposed mergers are approved), while six European

nations each have at least one major supplier of military combat aircraft.

6

Barnaby Wiener, British Aerospace, Merrill Lynch, Pierce, Fenner and Smith Limited (Mar. 1997).

Page 9 GAO/NSIAD-98-6 Defense Trade
B-276450 

In terms of defense revenues, U.S. defense companies tend to outpace

European defense companies. Among the world’s top 10 arms producing

companies in 1994, 8 were U.S. companies and 2 were European

companies.

While economic pressures to consolidate exist, European defense

companies face several obstacles, according to European government and

industry officials. For example, national governments, which greatly

influence the defense industry and often regard their defense companies

as sovereign assets, may not want a cross-border consolidation to occur

because it could reduce the national defense industrial base or make it too

specialized. National governments further impede defense industrial

integration by establishing different defense equipment requirements.

Complex ownership structures also make cross-border mergers difficult

because many of the larger European defense companies are state-owned

or part of larger conglomerates.

Restructuring Within National

Borders

To varying degrees, defense industry restructuring has occurred within the

borders of major European defense producing nations, including France,

Germany, Italy, and the United Kingdom. In France, Thomson CSF and

Aerospatiale formed a company, Sextant Avionique, that regrouped and

merged their avionics and flight electronics activities. The French

government initiated discussions in 1996 about the merger of the aviation

companies Aerospatiale and Dassault, but negotiations are ongoing. In

Germany, restructuring has primarily occurred in the aerospace sector. In

1995, Deutsche Aerospace became Daimler-Benz Aerospace, which

includes about 80 percent of German industrial capabilities in aerospace.

In Italy, by 1995 Finmeccanica had gained control of about three-quarters

of the Italian defense industry, including Italy’s major helicopter

manufacturer Agusta and aircraft manufacturer Alenia. In the United

Kingdom, a number of mergers and acquisitions have occurred. For

example, GKN purchased the helicopter manufacturer Westland and GEC

purchased the military vehicle and shipbuilder VSEL in 1994.

Restructuring Across Borders European companies have long partnered on cooperative armament

programs for the development and production of large complex weapon

systems in Europe. Often, a central management company has been

created to manage the relationship between partners. For example, major

aerospace companies from the United Kingdom, Germany, Italy, and Spain

have created a consortium to work on the Eurofighter 2000 program.

Another cooperative venture is the development of the European military

transport aircraft known as the Future Large Aircraft. Companies from a

Page 10 GAO/NSIAD-98-6 Defense Trade
B-276450 

number of European nations are forming a joint venture company for the

development and production of this aircraft. Project based joint ventures

are typically industry led, but they are established with the consent of the

governments involved. (See table 2 for examples of European defense

company cooperative business activities for major weapon programs.)

Table 2: Examples of European

Defense Company Transnational

Cooperative Activities

Joint company

Company participants

and percentage

shareholdinga

Countries

involved Product

Airbus Military

Company

Aerospatiale (37.9%),

Daimler-Benz Aerospace

(37.9%), British

Aerospace (20%), CASA

(4.2%), Alenia (Associate

Member)

France, Germany,

Italy, Spain, and

the United

Kingdom

Future Large

Aircraft (planned)

Eurocopter Holding Aerospatiale (60%),

Daimler-Benz Aerospace

(40%)

France and

Germany

Tiger helicopter

and various

military and civilian

helicopters

Eurodrone Matra Hachette (50%),

STN Altas Elektronik

(50%)

France and

Germany

Brevel surveillance

and

reconnaissance

drone

Eurofighter

Jagdflugzeug

Daimler-Benz Aerospace

(30%), Alenia (19.5%),

British Aerospace

(37.5%), CASA (13%)

Germany, Italy,

Spain, and the

United Kingdom

Eurofighter 2000

Eurojet Turbo MTU (33%), Fiat Avio

(21%), Industria de

Turbo Propulsores

(13%), Rolls Royce (33%)

Germany, Italy,

Spain, and the

United Kingdom

Turbo jet engines

for the Eurofighter

2000

Euromissile Aerospatiale (50%),

Daimler-Benz Aerospace

(50%)

France and

Germany

Milan and Hot

antitank missiles

and Roland air

defense missile

European Helicopter

Industries

Agusta (50%), GKN

Westland Helicopters

(50%)

Italy and the

United Kingdom

EH-101 helicopter

Eurosam Thomson-CSF (33.3%),

Aerospatiale (33.3%),

Alenia (33.3%)

France and Italy Future

surface-to-air

family of missiles

(continued)

Page 11 GAO/NSIAD-98-6 Defense Trade
B-276450 

Joint company

Company participants

and percentage

shareholdinga

Countries

involved Product

GTK/MRAV/VBCI Two competing

consortium:b (1) GKN

Defense, Krauss-Maffei

Wehrtechnik, Giat

Industries, Wegmann &

Co., MaK System (2)

Henschel Wehrtechnik,

Alvis, Vickers Defense

Systems, Panhard &

Lavassar, KUKA

Wehrtechnik

France, Germany,

and the United

Kingdom

Family of wheeled

armored vehicles

Horizon International

Joint Venture

Direction des

Constructions Navales

(33.3%),

Fincantieri (33.3%),

GEC-Marconi Naval

Systems (33.3%)

France, Italy, and

the United

Kingdom

Horizon frigate

NH Industries Eurocopter (66.4%),

Fokker Aerostructures

(6.7%), Agusta (26.9%)

France, Germany,

Italy, and the

Netherlands

NH-90 helicopter

Panavia Aircraft Daimler-Benz Aerospace

(42.5%), British

Aerospace (42.5%),

Alenia (15%)

Germany, Italy,

and the United

Kingdom

Tornado combat

aircraft

aCompany participants and shareholdings obtained from Forecast International.

bData on shareholdings are not available.

Although most cross-border industry cooperation is project specific,

European defense companies are also acquiring companies or establishing

joint ventures or cross-share holdings that are not tied to a particular

program. Some cross-border European consolidation has occurred in

missiles, defense electronics, and space systems. For example, in 1996,

Matra (France) and British Aerospace (United Kingdom) merged their

missile activities to form Matra BAe Dynamics. Both companies retained a

50-percent share in the joint venture, but they have a single management

structure and a plan to gradually integrate their missile manufacturing

facilities. Figure 2 highlights some examples of consolidation in specific

defense sectors.

Page 12 GAO/NSIAD-98-6 Defense Trade
B-276450 

Figure 2: Examples of European Defense Company Cross-Border Consolidation

Matra BAe

 Dynamics

Product Line: Missiles

 Type: Joint Venture

 Year Formed: 1996

Matra Marconi 

Space

 Product Line: Space

 Systems

 Type: Joint Venture

 Year Formed: 1989

Thomson Marconi 

Sonar

 Product Line: Sonar

 Systems

 Type: Holding Company

 Year Formed: 1996

Parent 

Companies

50% 50% 51% 49% 49.9% 50.1%

Consolidated 

Companies

Filename: FIG2.AI (Box 1, Disk 1-4 PC)

British Aerospace

(U.K.)

Matra

(France)

GEC Marconi

(U.K.)

Thomson-CSF

(France)

Key European

Countries Vary in

Their Willingness to

Purchase Major U.S.

Defense Items

Despite attempts to develop a unified European armament policy,

individual European governments still retain their own defense

procurement policies. Key European countries,7

 including France,

Germany, Italy, the Netherlands, and the United Kingdom, vary in their

willingness to purchase major U.S. defense equipment. These countries

have been involved in efforts to form a unified European defense market,

which some observers believe may lead to excluding U.S. defense

companies from participating in that market. However, U.S. defense

companies continue to sell significant defense equipment to certain

European countries in certain product lines.

Europe has a large, diverse defense industrial base on which key

European nations rely for purchases of major defense equipment. As in the

United States, these European countries purchase the majority of their

defense equipment from national sources. For example, the United

Kingdom aims to competitively award about three-quarters of its defense

contracts, with U.K. companies winning at least 90 percent of the

7

France, Germany, and the United Kingdom have the largest defense budgets in Europe and their

defense industries comprise 85 percent of European defense production. Italy and the Netherlands are

also significant defense producers and buyers of defense equipment.

Page 13 GAO/NSIAD-98-6 Defense Trade
B-276450 

contracts over the past several years. According to French Ministry of

Defense officials, imports represented only 2 percent of France’s total

defense procurements over the past 5 years. Germany and Italy each

produced at least 80 percent of their national requirements for military

equipment over the past several years. Despite its relatively small size, the

Dutch defense industry supplied the majority of defense items to the

Netherlands.

Notwithstanding European preference for domestically developed

weapons, U.S. defense companies have sold a significant amount of

weapons to Western European countries either directly or through the

U.S. government’s Foreign Military Sales program. These sales tended to

be concentrated in certain countries and products. U.S. foreign military

sales8

 of defense equipment to Europe accounted for about $20 billion

from 1992 to 1996. Europe was the second largest purchaser of U.S.

defense items based on arms delivery data, following the Middle East. The

leading European purchasers of U.S. defense equipment were Turkey,

Finland, Greece, Switzerland, the Netherlands, and the United Kingdom.

U.S. defense companies had greater success in selling aircraft and missiles

to Western Europe than they did for tanks and ships. Of the almost

$20 billion of U.S. foreign military sales, about $15 billion, or 75 percent,

was for sales of military aircraft, aircraft spares, and aircraft

modifications. About $3 billion, or 13 percent of total equipment sales, was

for sales of missiles. Ships and military vehicles accounted for

$552 million, or less than 3 percent of the total U.S. defense equipment

sales. Figure 3 shows U.S. defense equipment sales to Western Europe by

major weapon categories. According to U.S. defense company officials,

sales of military aircraft to Europe are expected to be important in future

competitions, particularly in the emerging defense markets in central

Europe. Competition between major U.S. and European defense

companies for aircraft sales in these markets is expected to be intense.

8

Only data on sales made through the Foreign Military Sales program were available by weapons

category. Direct commercial sales data, which is tracked by the Department of State through export

licenses, were not organized by weapon categories. However, we reviewed congressional notification

records for direct commercial sales over $14 million for the last 5 years to supplement our analysis of

foreign military sales data. While direct commercial sales amounts can be significant for certain

countries that prefer this purchasing method, exports sold through the Foreign Military Sales program

still make up the majority of U.S. defense export sales.

Page 14 GAO/NSIAD-98-6 Defense Trade
B-276450 

Figure 3: U.S. Defense Equipment

Sales to Western Europe by Major

Weapon Categories

Ships

Vehicles

Aircraft

Missiles

Other equipment

Weapons

United Kingdom and the

Netherlands

U.S. defense companies varied in their success in winning the major

European defense competitions that were open to foreign bidders. The

Netherlands and the United Kingdom have bought major U.S. weapon

systems over the last 5 years, even when European options were available.

The United States is the largest supplier of defense imports to both the

Netherlands and the United Kingdom. Both of these countries have stated

open competition policies that seek the best defense equipment for the

best value. In the major defense competitions in these countries in which

U.S. companies won, U.S. industry and government officials stated that the

factors that contributed to the success included the uniqueness and

technical sophistication of the U.S. systems, industrial participation

opportunities offered to local companies, and no domestically developed

product was in the competition. For example, in the sale of the U.S.

Apache helicopter to the Netherlands and the United Kingdom, there was

no competing domestically developed national option, the product was

technically sophisticated, and significant industrial participation was

offered to domestic defense companies.

In the major defense competitions in which U.S. companies competed in

the United Kingdom over the last 5 years, the U.K. government tended to

chose a domestically developed product when one existed. In some cases,

these products contained significant U.S. content. For example, in the

competition for the U.K. Replacement Maritime Patrol Aircraft, the two

Page 15 GAO/NSIAD-98-6 Defense Trade
B-276450 

U.S. competing products lost to a British Aerospace developed product,

the upgraded NIMROD aircraft. This British Aerospace product, however,

contained significant U.S. content with major components coming from

such companies as Boeing. In the Conventionally Armed Standoff Missile

competition, Matra British Aerospace Dynamics’ Stormshadow 

(a U.K.-French developed option) won. In this case, the competing U.S.

products were competitively priced, met the technical requirements, and

would have provided significant opportunities for U.K. industrial

participation. Table 3 provides details on some U.K. major procurements

in which U.S. defense companies competed.

Page 16 GAO/NSIAD-98-6 Defense Trade
B-276450 

Table 3: U.K. Defense Procurement Policy and Selected Procurements

Major Defense Competitions In Which U.S. Companies Participated

Defense item Year awarded Competitors Outcomea

Attack helicopter 1995 (1) Apache (Westland, McDonnell Douglas)

(2) Cobra-Venom (GEC-Marconi, Bell

Textron)

(3) Tiger (British Aerospace, Eurocopter)

Westland/McDonnell Douglas team won.

Contributing factors were the technical

capability of the product, company

partnership, and the industrial participation

package offered.

Transport aircraft 1995 (1) C130J (Lockheed Martin)

(2) Future Large Aircraft (Airbus Military

Company)

Lockheed was selected. It had the only

existing product in the competition. The

Future Large Aircraft has yet to be

developed.

Transport helicopter 1995 (1) Chinook CH-47 (Boeing)

(2) EH-101 (Westland, Agusta)

The United Kingdom bought 22 helicopters

from the U.K.-Italian joint venture that

produces the EH-101 and 14 Chinook

helicopters from Boeing.

Air-launched

anti-armor weapon

1996 (1) Brimstone (GEC Marconi)

(2) JSOW (Texas Instruments)

(3) Typhoon (British Aerospace)

(4) SWARM (Hunting Aviation)

GEC Marconi won with a low cost,

technically competitive bid. The company

spent several years developing a product to

meet the U.K. requirement. Rockwell is a

subcontractor to GEC Marconi.

Conventionally Armed

Standoff Missile

1996 (1) Stormshadow (Matra British Aerospace

Dynamics)

(2) Tomahawk (Hughes)

(3) SLAM (McDonnell Douglas)

(4) JSOW (Texas Instruments)

(5) Pegasus (GEC Marconi)

(6) Taurus (DASA)

(7) Popeye (Rafael Armaments)

Matra British Aerospace Dynamics won.

This British/French joint venture company

had a competitive product that they will

jointly produce.

Replacement

Maritime Patrol

Aircraft

1996 (1) Nimrod 2000 (British Aerospace)

(2) Atlantique III (Dassault Aviation)

(3) P3 Orion 2000 (Lockheed Martin)

(4) P3 Upgrade (Loral)

British Aerospace won with its low-cost

domestically developed product. Boeing

will provide the mission suite and perform

the avionics integration work.

The U.K.’s Defense Procurement Policy: The policy is to aim for best value for money—which means taking a commercial approach to

procurement by using competition. Industrial participation packages are encouraged from non-WEU countries, and on a case-by-case

basis from WEU partners on all large purchases.

aThe factors that contributed to the outcome of these competitions were those identified by U.S.

industry and government officials.

France France has purchased major U.S. defense weapon systems when no

French or European option is available. In contrast to the Netherlands and

the United Kingdom, the French defense procurement policy has been to

first buy equipment from French sources, then to pursue European

cooperative solutions, and lastly to import a non-European item. Recently,

French armament policy has put primary emphasis on European

cooperative programs, recognizing that it will not be economical to

Page 17 GAO/NSIAD-98-6 Defense Trade
B-276450 

develop major systems alone in the future. The procurement policy

reflects France’s goal to retain a defense industrial base and maintain

autonomy in national security matters. As illustrated in table 4, the French

government made two significant purchases from the United States in 1995

when it was not economical for French companies to produce comparable

equipment or when it would have taken too long to develop.

Table 4: French Defense Procurement Policy and Selected Procurements

Recent Major Procurements of U.S. Defense Equipment

Defense item Year purchased Company Reasons for purchasea

KC-135 tanker aircraft 1995 Boeing The European Airbus consortium offered

the only other option, but it lacked the

range, duration, and payload of the KC-135,

and would have taken 5 to 10 years to build.

E-2C Hawkeye Airborne Early Warning

Aircraft

1995 Northrop Grumman No other U.S. or European companies

produced this type of specialized aircraft.

France’s Defense Procurement Policy: The policy is to buy technically sophisticated weapons from French companies or seek

European cooperative solutions. France will buy non-European commercially available defense equipment if a national or European

program cannot fill a requirement. Significant offsets are required on non-European purchases.

aThe factors that contributed to the outcome of these competitions were those identified by U.S.

industry and government officials.

Germany and Italy Germany and Italy have made limited purchases of U.S. defense equipment

in recent years because of significantly reduced defense procurement

budgets and commitments to European cooperative projects. Both

countries now have an open competition defense procurement policy and

buy a mixture of U.S. and European products. The largest share of these

countries’ defense imports is supplied by the United States. In recent

major defense equipment purchases from the United States, both Germany

and Italy reduced quantities to reserve a portion of their procurement

funding for European cooperative solutions. For example, Italy purchased

the U.S. C-130J transport aircraft but continued to provide funding for a

cooperative European transport aircraft program. As in the other

European countries, Germany and Italy encourage U.S. companies to

provide opportunities for local industrial participation when selling

defense equipment. Table 5 highlights German defense procurement policy

and a selected major procurement.

Page 18 GAO/NSIAD-98-6 Defense Trade
B-276450 

Table 5: German Defense Procurement Policy and Selected Procurement

Recent Major Procurement of U.S. Defense Equipmenta

Defense item Year purchased Company Reasons for purchase

Advance Medium Range Air-to-Air Missile

(AMRAAM)

1995 Hughes No other option existed that met military

requirements, but quantity purchased was

reduced to have funds available for a future

European alternative.

Germany’s Defense Procurement Policy: The policy is to have open competition on most major defense equipment purchases, with a

commitment to European cooperative solutions. Recent significant reductions in the defense procurement budget allow limited funds

that are primarily spent on upgrades and maintenance of existing defense equipment.

aAccording to German Ministry of Defense officials, the German government has not purchased

many major defense end items in the last 5 years. Its defense equipment spending has primarily

consisted of modernization of existing defense equipment or coproduction programs.

U.S. Industry Is

Taking the Lead in

Forming Transatlantic

Ties

As European nations work toward greater armament cooperation,

competition for sales in Europe is likely to increase. To mitigate potential

protectionism and negative effects on U.S.-European defense trade, both

the U.S. defense industry and government have taken steps to improve

transatlantic cooperation. U.S. defense companies are taking the lead in

forming transatlantic ties to gain access to the European market. The U.S.

government is also seeking opportunities to form transatlantic

partnerships with its European allies on defense equipment development

and production, but some observers point to practical and cultural

impediments that affect the extent of such cooperation.

U.S. Companies Form

Industrial Partnerships

With European Industry to

Sell Defense Equipment

U.S. defense companies are forming industrial partnerships with European

companies to sell defense equipment to Europe because of the need to

increase international sales, satisfy offset obligations, and maintain market

access. Most of these partnerships are formed to bid on a particular

weapon competition. Some, however, are emerging to sell products to

worldwide markets.

According to U.S. defense companies, partnering with European

companies has become a necessary way of doing business in Europe. U.S.

government and defense company officials have cited the importance of

industrial partnerships with European companies in winning defense sales

there. Many of these partnerships arose out of U.S. companies’ need to

fulfill offset obligations on European defense sales by providing European

Page 19 GAO/NSIAD-98-6 Defense Trade
B-276450 

companies with subcontract work.9 When U.S. companies had to find ways

to satisfy the customary 100-percent offset obligation on defense contracts

in Europe, they began to form industrial partnerships with European

companies.

With the declining U.S. defense budget after the end of the Cold War, many

U.S. companies began to look for ways to increase their international

defense sales in Europe and elsewhere. According to some U.S. company

officials, they realized that many European government buyers did not

want to buy commercially available defense equipment but wanted their

own companies to participate in producing weapon systems to maintain

their defense industrial base. Forming industrial partnerships was the only

way that U.S. companies believed they could win sales in many European

countries that were trying to preserve their own defense industries. In

addition, several U.S. company officials have indicated that European

governments have been pressuring each other in the last several years to

purchase defense equipment from European companies before

considering U.S. options. These officials stated that even countries that do

not have large defense industries to support were being encouraged by

other European countries to purchase European defense equipment for

the economic good of the European Union. U.S. company officials believe

that by forming industrial partnerships with European companies, they

increase their ability to win defense contracts in Europe.

U.S. defense companies form a variety of industrial partnerships with

European companies, including subcontracting arrangements, joint

ventures, international consortia, and teaming agreements. The various

examples of each are discussed in table 6.

9

For more information on offsets, see Military Exports: Offset Demands Continue to Grow

(GAO/NSIAD-96-65, Apr. 12, 1996).

Page 20 GAO/NSIAD-98-6 Defense Trade
B-276450 

Table 6: Types of Industrial

Partnerships Formed by U.S. Defense

Companies

Type Definition Comments Examples

Subcontracting

arrangement

Company agrees to

provide parts or

services for another

company’s weapon

system in a defense

procurement.

U.S. prime

contractors are

often willing to be

subcontractors to

European

companies to get

sales in Europe.

Hughes Aircraft is a

subcontractor for

British Aerospace’s

Advanced Short

Range Air-to-Air

Missile program.

Joint venture/

International consortia

Two or more

companies agree to

work on a particular

project together.

Can be formed in

response to

government-togovernment

cooperative defense

programs.

As one of two

competing teams,

Raytheon, Hughes,

Alenia, Siemens,

and DASA formed a

company to jointly

produce the

Medium Extended

Air Defense

System—a

cooperative

program between

Germany, Italy, and

the United States.

Teaming agreement Agreement between

companies to jointly

produce and bid for

a particular defense

contract.

Can take many

forms, including

those listed above.

Sometimes can

extend beyond a

specific competition

to future sales of the

item or other items.

Textron is teamed

with VSEL to

produce the

Howitzer for the

United States.

Companies will also

work together to sell

the Howitzer to the

United Kingdom.

According to some U.S. defense company officials, most of U.S. industrial

partnerships with European companies, whatever the form, are to produce

or market a specific defense item. Some U.S. defense companies, however,

are using the partnerships to create long-term alliances and

interdependencies with European companies that extend beyond one sale.

For example, Lockheed Martin has formed an industrial partnership with

the Italian company Alenia to convert an Italian aircraft to satisfy an

emerging market for small military transport aircraft. This arrangement

arose out of a transaction involving the sale of C-130J transport aircraft to

Italy. Some U.S. defense company officials see the establishment of

long-term industrial partnerships as a way of improving transatlantic

defense trade and countering efforts toward European protectionism.

Page 21 GAO/NSIAD-98-6 Defense Trade
B-276450 

Changes to U.S. Policies

Support Defense Trade and

Transatlantic Cooperation

DOD has taken a number of steps over the last few years to improve

defense trade and transatlantic cooperation. For example, it has revised its

guidance on considering foreign suppliers in defense acquisitions and has

removed some of the restrictions on buying defense equipment from

overseas. In addition, senior DOD officials have shown renewed interest in

international cooperative defense programs with U.S. allies in Europe and

are actively seeking such opportunities. Despite some of these efforts,

some observers have cautioned that a number of factors may hinder shifts

in U.S.-European defense cooperative production programs on major

weapons.

The following U.S. policy changes have been made that may help to

improve defense trade:

• A DOD directive10 issued in March 1996 sets out a hierarchy of acquiring

defense equipment that places commercially available equipment from

allies and cooperative development programs with allies, ahead of a new

U.S. equipment development program. According to some U.S.

government and defense industry officials, many military program

managers traditionally would have favored a new domestic development

program when deciding how to satisfy a military requirement.

• In April 1997, the Office of the Secretary of Defense announced that DOD

would favorably consider requests for transfers of software

documentation to allies. In the past, such requests were often denied,

which was cited by U.S. government officials as a barrier to improve

defense trade and cooperation with the United States.

• In April 1997, the Under Secretary of Defense (Acquisition and

Technology) waived certain buy national restrictions for countries with

whom the United States had reciprocal trade agreements.11 This waiver

allows DOD to procure from foreign suppliers certain defense equipment

that were previously restricted to domestic sources. European government

officials have cited U.S. buy-national restrictions as an obstacle in the

improvement of the reciprocal defense trade balance between the United

States and Europe.

DOD is also seeking ways to improve international cooperative programs

with European countries through ongoing working groups and a special

task force under the quadrennial review. Senior DOD officials have stated

that the United States should take advantage of international armaments

10DOD Directive 5000.1.

11Fiscal Year 1997 Defense Authorization Act (P.L. 104-201, sec. 810, amending 10 U.S.C. sec. 2534 (d))

provided the Secretary of Defense with the authority for this waiver.

Page 22 GAO/NSIAD-98-6 Defense Trade
B-276450 

cooperation to leverage U.S. resources through cost-sharing and to

improve standardization and interoperability of defense equipment with

potential coalition partners.

The U.S. government has participated in numerous international defense

equipment cooperation activities with European countries, including

research and development programs, data exchange agreements, and

engineer and scientist exchanges, but these activities only occasionally

resulted in cooperative production programs. More recently, senior DOD

officials have provided increased attention to armaments cooperation with

U.S. allies. In 1993, DOD established the Armaments Cooperation Steering

Committee to improve cooperative programs. In its ongoing efforts, the

Steering Committee established several International Cooperative

Opportunities Groups in 1995 to address specific issues in armaments

cooperation. In addition, the 1997 Quadrennial Defense Review to identify

military modernization needs included an international cooperation task

force to determine which defense technology areas the United States

could collaborate on with France, Germany, and the United Kingdom. In

March 1997, the Secretary of Defense signed a memorandum stating that

“it is DOD policy that we utilize international armaments cooperation to the

maximum extent feasible.”

The U.S. government has a few ongoing cooperative development

programs for major weapon systems, but most cooperative programs are

at the technology level.12 Some observers indicated to us that there may be

some impediments to pursuing U.S.-European defense cooperative

programs on major weapon systems because (1) European procurement

budgets are limited compared to the U.S. budget; (2) the potential that U.S.

support for a program may change with each annual budget review may

cause some European governments concerns; (3) despite changes in DOD

guidance, many military service program managers may be reluctant to

engage in international cooperative programs due to the significant

additional work that may be required and potential barriers that may arise,

such as licensing and technology sharing restrictions; (4) many U.S.

program managers may not consider purchasing from a foreign source due

to the perceived technological superiority of U.S. weapons; and

(5) European and U.S. governments have shown a desire to maintain an

independent ability to provide for their national defense.

12As of July 1996, DOD had several hundred ongoing cooperative programs at the technology level,

including cooperative research and development programs, data exchange agreements, and engineer

and scientist exchanges.

Page 23 GAO/NSIAD-98-6 Defense Trade
B-276450 

Conclusions Efforts have been made to develop a more unified European armament

policy and defense industrial base. As regional unification efforts evolve,

individual European nations still independently make procurement

decisions, and these nations vary in their willingness to buy major U.S.

weapon systems when European options exist. To maintain market access

in Europe, U.S. defense companies have established transatlantic

industrial partnerships. These industrial partnerships appear to be

evolving more readily than transatlantic cooperative programs led by

governments. Although the U.S. government has recently taken steps to

improve defense trade and cooperation, some observers have indicated

that practical and cultural impediments can affect transatlantic

cooperation on major weapon programs.

Agency Comments In commenting on a draft of this report, DOD concurred with the report and

the Department of Commerce stated that it found the report to be accurate

and had no specific comments or recommended changes. The comments

from DOD and the Department of Commerce are reprinted in appendixes II

and III, respectively. DOD also separately provided some technical

suggestions, which we have incorporated in the text where appropriate.

Scope and

Methodology

To identify European government defense integration plans and activities,

we examined European Union, WEU, OCCAR, and NATO documents and

publications. We developed a chronology of key events associated with the

development of an integrated European defense market. We interviewed

European Union, Western European Armaments Group, OCCAR, and NATO

officials about European initiatives affecting trade and cooperation and

their progress in meeting their goals. We also discussed these issues with

officials at the U.S. mission to NATO, the U.S. mission to the European

Union, and U.S. embassies in France, Germany, and the United Kingdom.

We interviewed or obtained written responses from officials from six

major defense companies in France, Germany, and the United Kingdom

about European industry consolidation. We identified relevant information

and studies about European government and industry initiatives and

discussed these issues with consulting firms and European think tanks.

To assess how procurement polices of European nations affect U.S.

defense companies’ market access, we focused our analysis on five

countries. We selected France, Germany, and the United Kingdom because

they have the largest defense budgets in Europe and their defense

industries comprise 85 percent of European defense production. Italy and

Page 24 GAO/NSIAD-98-6 Defense Trade
B-276450 

the Netherlands were selected because they are significant producers and

buyers of defense equipment. These five countries are also current

members or seeking membership in OCCAR. We interviewed officials from

13 U.S. defense companies on the basis of their roles as prime contractors

and subcontractors and range of defense products sold in Europe. Most of

these companies represented prime contractors. Eight of these were

among the top 10 U.S. defense companies, based on fiscal year 1995 DOD

prime contract awards. We also discussed the major defense competitions

that U.S. companies participated in over the last 5 years and the factors

that contributed to the competitions’ outcome with officials from these

companies and with U.S. government officials.

We discussed procurement policies with European and U.S. government

officials. We met with Ministry of Defense officials in France, Germany,

and the United Kingdom, as well as U.S. embassy officials in those

countries. We did not conduct fieldwork in Italy or the Netherlands, but

we did discuss these countries’ procurement policies with officials from

their embassies in Washington, D.C. We also reviewed documents

describing the procurement policies and procedures of the selected

countries and U.S. government assessments and cables about major

defense contract awards that occurred in these countries and discussed

factors affecting these procurement awards with U.S. government and

industry officials. We did not review documentation on the bids or

contract awards.

We collected and analyzed data on defense budgets and defense trade,

including foreign military and direct commercial sales to identify buying

patterns in Western Europe over the past 5 years. We only used the foreign

military sales data to analyze sales by weapons category for the five

countries and Western Europe. Direct commercial sales data, which are

tracked by the State Department through export licenses, were not

organized by weapon categories for the last 5 years. However, we

reviewed congressional notification records for direct commercial sales

over $14 million for the last 5 years to supplement our analysis of foreign

military sales data.

To determine actions the U.S. industry and government have taken in

response to changes in the European defense environment, we

interviewed defense company and U.S. government officials within DOD

and the Departments of Commerce and State. With U.S. defense

companies, we discussed their business strategies and the nature of the

partnerships formed with European defense companies. We obtained and

Page 25 GAO/NSIAD-98-6 Defense Trade
B-276450 

analyzed recently issued DOD directives and policy memorandums on

defense trade and international cooperation and discussed the

effectiveness of these policies with U.S. and foreign government officials

and U.S. and European defense companies.

We performed our review from January to September 1997 in accordance

with generally accepted government auditing standards.

We are sending copies of this report to interested congressional

committees and the Secretaries of State and Commerce. We will also make

copies available to others upon request.

Please contact me at (202) 512-4181 if you have any questions concerning

this report. Major contributors to this report were Karen Zuckerstein,

Anne-Marie Lasowski, and John Neumann.

Sincerely yours,

Katherine V. Schinasi

Associate Director

Defense Acquisitions Issues

Page 26 GAO/NSIAD-98-6 Defense Trade
Page 27 GAO/NSIAD-98-6 Defense Trade
Contents

Letter 1

Appendix I 

Chronology of

European Defense

Initiatives

30

Appendix II 

Comments From the

Department of

Defense

32

Appendix III 

Comments From the

Department of

Commerce

33

Tables Table 1: Selected Characteristics of OCCAR and WEAO 7

Table 2: Examples of European Defense Company Transnational

Cooperative Activities

11

Table 3: U.K. Defense Procurement Policy and Selected

Procurements

17

Table 4: French Defense Procurement Policy and Selected

Procurements

18

Table 5: German Defense Procurement Policy and Selected

Procurement

19

Table 6: Types of Industrial Partnerships Formed by U.S. Defense

Companies

21

Figures Figure 1: Organizations Addressing European Armament Policy

Issues

5

Figure 2: Examples of European Defense Company Cross-Border

Consolidation

13

Figure 3: U.S. Defense Equipment Sales to Western Europe by

Major Weapon Categories

15

Page 28 GAO/NSIAD-98-6 Defense Trade
Contents

Abbreviations

DOD Department of Defense

OCCAR Organisme Conjoint de Coopération en Matière d’Armement

NATO North Atlantic Treaty Organization

WEAO Western European Armaments Organization

WEU Western European Union

Page 29 GAO/NSIAD-98-6 Defense Trade
Appendix I 

Chronology of European Defense Initiatives

Western European Union (WEU) was established as a result of the agreements signed in 

May 1955 Paris in October 1954 modifying the 1948 Brussels Treaty.

Date Event

 Treaty of Rome wae signed creating the European community. Mar. 25, 1957

The Independent European Programme Group was established to promote European 

cooperation in research, development, and production of defense equipment; improve 

transatlantic armament cooperation; and maintain a healthy European defense industrial 

base.

Feb. 2, 1976

The Treaty on European Union was signed in Maastricht but was subject to ratification. The 

WEU member states also met in Maastricht and invited members of the European Union to 

accede to WEU or become observers, and other European members of the North Atlantic 

Treaty Organization (NATO) to become associate members of WEU. 

Dec. 9-10, 1991

The Council of the WEU held its first formal meeting with NATO.

May 21, 1992

The European Defense Ministers decided to transfer the Independent European 

Dec. 1992 Programme Group's functions to WEU.

The Maastricht Treaty was ratified and the European Community became the European 

Nov. 1, 1993 Union.

A NATO summit was held, which supported developing of a European Security and 

Jan. 10-11, 1994 Defense Identity and strengthening the European pillar of the Alliance.

French and German Ministers of Defense decided to simplify the management for joint 

armament research and development programs. The proposal for a Franco-German 

procurement agency emerged.

Dec. 1993

WEU Ministers issued the Noordwijk Declaration, endorsing a policy document containing 

Nov. 14, 1994 preliminary conclusions of the formation of the Common European Defense policy.

Page 30 GAO/NSIAD-98-6 Defense Trade
Appendix I 

Chronology of European Defense Initiatives

The European Union Intergovernmental Conference, or constitutional convention, 

March 1996 convened.

The Defense Ministers of France, Germany, Italy, and the United Kingdom signed the political 

foundation document for the joint armaments agency Organisme Conjoint de Cooperation en 

Matiere d'Armament (OCCAR). 

Nov. 12, 1996

The Western European Armaments Organization was established, creating a subsidiary 

Nov. 19, 1996 body within WEU to administer research and development contracts.

The four National Armaments Directors of France, Germany, Italy, and the United Kingdom 

met during the first meeting of the Board of Supervisors of OCCAR. The board reached 

decisions about OCCAR's organizational structure and programs to manage.

Feb. 4, 1997

The European Union Intergovernmental Conference concluded. A new treaty was drafted, but 

little advancement was made to developing a common foreign and security policy. The treaty 

called for the European Union to cooperate more closely with WEU, which might be 

integrated in the European Union if all member nations agree. 

June 19, 1997

The Board of Supervisors of OCCAR held a second meeting.

July 3, 1997

Date Event

'

'

Page 31 GAO/NSIAD-98-6 Defense Trade
Appendix II 

Comments From the Department of Defense

Page 32 GAO/NSIAD-98-6 Defense Trade
Appendix III 

Comments From the Department of

Commerce

(707230) Page 33 GAO/NSIAD-98-6 Defense Trade
Ordering Information

The first copy of each GAO report and testimony is free.

Additional copies are $2 each. Orders should be sent to the

following address, accompanied by a check or money order

made out to the Superintendent of Documents, when

necessary. VISA and MasterCard credit cards are accepted, also.

Orders for 100 or more copies to be mailed to a single address

are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 37050

Washington, DC 20013

or visit:

Room 1100

700 4th St. NW (corner of 4th and G Sts. NW)

U.S. General Accounting Office

Washington, DC

Orders may also be placed by calling (202) 512-6000 

or by using fax number (202) 512-6061, or TDD (202) 512-2537.

Each day, GAO issues a list of newly available reports and

testimony. To receive facsimile copies of the daily list or any

list from the past 30 days, please call (202) 512-6000 using a

touchtone phone. A recorded menu will provide information on

how to obtain these lists.

For information on how to access GAO reports on the INTERNET,

send an e-mail message with "info" in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at:

http://www.gao.gov

PRINTED ON RECYCLED PAPER
United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Bulk Rate

Postage & Fees Paid

GAO

Permit No. G100