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U.S. , Britain To Ease Rules On Defense Sales

Wed May 28, 2003 6:05 am

From Reuters http://www.reuters.com/newsArticle.jhtml?storyID=2829498

"U.S., Britain agree to ease rules on defense sales
Tue May 27, 2003 04:16 PM ET

WASHINGTON, May 27 (Reuters) - U.S. and British officials have agreed on the broad terms of a deal that would waive restrictions on the sale of unclassified defense equipment between the two countries, a U.S. official said on Tuesday.
"They have agreed on a text but there are some other legal hoops that have to be leapt through ... to bring the thing to completion," said the official, who asked not to be named.

The deal, which is similar to an agreement the United States has with Canada, must be approved by the U.S. and British governments, as well as Britain's Parliament and the U.S. Congress, where some lawmakers have raised objections.

The agreement comes after years of negotiations between the two close military allies, and would permit the sale of unclassified weapons and other military technologies without a special license, officials said.

U.S. officials were concerned about ensuring that any exempted countries maintained the same high level of control over military technologies, including measures to prevent any transfers to third countries, one official said.

"We are concerned that if we grant an exemption that the country will have the necessary system in place with the same degree of controls that we would exercise," said one U.S. official.

British and other European companies want a bigger piece of the huge U.S. defense procurement budget, especially given the slump in defense spending in many of their own countries.

But the U.S. military only rarely awards contracts to foreign defense contractors, preferring to do business with its own stable of five prime contractors and smaller U.S. subcontractors.

The one notable exception is Britain's BAE Systems Plc BA.L , which has a large role in the F-35, or Joint Strike Fighter.

Martin Schulz, director of international equity investment for Armada Funds, said the agreement could frustrate some other European nations, which have pressured Britain to become better integrated into the European Union.

But he said it would be a positive step for Britain's defense industry.

Congressional aides said the House International Relations Committee rejected the waiver request by the Bush administration earlier this month, considering it unwise given continuing threats of possible terrorist attacks.

The Senate is still reviewing the issue."
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