Statement of Administration Policy: S. 347 - Defense Production Act Amendments of 1991

(Senate)
(Riegle (D) MI and 7 others)

The Secretary of Defense will recommend that the President veto S. 347 unless the provisions pertaining to industrial policy, delegatory authority, and the Defense Production Act Fund's contingency liabilities are deleted. In particular, S. 347 would:

—   permit or require the limitation of the production and procurement of critical military components and technology to domestic sources, (sections 111 and 201);

—   circumvent necessary budgetary controls on spending by authorizing purchase guarantees and other actions that could result in obligations in excess of available budgetary resources (section 122); and

—   require that only officers appointed by the President and confirmed by the Senate approve the priority rating applied to each Defense contract, creating an enormous bottleneck due to the large number of Defense contracts that are currently rated (section 133) .

In lieu of S. 347, the Administration urges Congress to enact the its proposal, S. 259, which would extend the Defense Production Act of 1950 (DPA) until October 20, 1991. S. 259 also contains two amendments which include the provision of contract services and energy aspects of the current Persian Gulf conflict. Enactment of the Administration's proposal would support the defense requirements of operation Desert Storm.

The DPA authorizes the President to direct materials and facilities from civilian to military use to ensure adequate industrial production and supply for national security purposes. Additionally, the DPA authorizes loans, loan guarantees, purchase guarantees, and antitrust protection to participants in voluntary agreements to assist in production and supply to promote the national defense.

Although S. 347 would extend the essential DPA authorities, it would also establish entirely new industrial policy initiatives, extensive data collection and reporting requirements, procurement restrictions, and protectionist trade practices. These provisions would weaken the Nation's defense industrial base, increase the cost of weapon systems, and invite reprisal among our trading partners and military allies. More specifically, the Administration objects to:

—   Sections 123, 402, 403, and 404, which would mandate certain diplomatic initiatives and require disclosure to Congress of information relating to the initiatives. These provisions would interfere with the President's exercise of his constitutional authority to conduct foreign affairs and to maintain the confidentiality of international negotiations.

—   Section 124, which would require the Secretary of Commerce to prepare, on behalf of the President, an annual report on the impact of offsets that would be unnecessary and burdensome on U.S. industry. Section 124 would also require the Secretary of Commerce to report alternative findings and recommendations submitted by Executive agencies. Such requirements interfere with the management of the Executive branch and violate the President's authority to maintain the confidentiality of the Executive branch deliberative process.

—   Section 136, which would establish an information system on the defense industrial base that would be burdensome, costly and unnecessary.

—   Section 138, which would fail to provide proper or adequate conflict of interest and antitrust protection for members of the National Defense Executive Reserve.

—   Sections 202 and 203, which would establish acquisition preference policies before the Executive branch has completed its review of these policies.

—   Section 301(b), which would require a biennial report on alternative energy fuel sources for supporting the defense industrial base.

—   Title IV, which would establish a policy of reciprocity in financial services which would be contrary to the historic open investment policy of the United States, which under certain circumstances would violate certain U.S. international obligations, and which would interfere with the President's constitutional authority to conduct foreign affairs.