Arms & the Bank

FOREIGN RELATIONS

Since World War II, the U.S. has sold and given to friendly nations nearly $50 billion worth of arms, generally with the full support of Congress. Of late, however, many political leaders have undergone a change of heart. With the Indian-Pakistani war in 1965 and this year's Arab-Israeli hostilities--both conflicts in which American weapons were used by each side against the other--Senate critics have charged that U.S. arms sales, far from serving freedom and peace, may actually do the opposite. Last week, after bitter Senate debate, Administration forces defeated, by 49 votes to 40, an amendment that would have barred the sale of arms to any underdeveloped country.

As it was, the Senate cut such trade roughly in half. It voted to limit arms trade by the U.S. Export-Import Bank with underdeveloped countries to 7 1/2% of the bank's lending capacity, thus slashing by 50% next year's planned $256 million in such loans. After that, Minority Leader Everett Dirksen lost a battle to bar Ex-Im Bank from financing machine tools for an Italian Fiat plant in Russia, but Virginia's Harry Byrd succeeded in getting through an amendment forbidding Ex-Im to ex tend credit to governments that send supplies to any nation "with which the United States is engaged in armed conflict." Since Italy has minor trade dealings with Hanoi, the Administration-backed Fiat deal seemed to be quashed. To make certain, the Senate at week's end made the Fiat ban specific.

Leverage. Opposition to the weapons trade will adversely affect U.S. efforts to even its balance of payments--the major reason for the Administration's decision in 1960 to switch from out right grants to sales of weapons. Moreover, say Administration officials, such sales in general help to correct power imbalances, counter Soviet influence in the Middle East and elsewhere, and allow the U.S. "to use what leverage we have to get countries to minimize their purchases." In fact, the arms trade with underdeveloped countries amounts to only 10% of the nation's sales of weapons.

Though the Administration narrowly managed to extend Ex-Im's power to extend arms loans for another five years, it will face an even sterner challenge this week when the President's foreign aid bill reaches the Senate. The Senate Foreign Relations Committee has trimmed $736 million from Johnson's requests--including the Defense Department's $383 million revolving fund for arms loans to poorer countries.

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