Brazil's New Fighter Program Roiled By U.S. Trade Policies

Last Updated Sep 18, 2009 6:00 AM EDT

Brazil is planning on buying a new advanced jet fighter in the near future. They are currently conducting a contest for this program and D'assault, Boeing, SAAB and others bid on it. The program is part of a major upgrade to the South American country's overall military capability. It is also a critical program to the Western aerospace contractors as they are facing uncertain markets at home. Unfortunately for Boeing the contract requires substantial offsets and also certain level of technology transfer.

Brazil and the United States are trying to resolve a trade dispute over cotton importation. The World Trade Organization (WTO) ruled for Brazil and as a punishment is allowing Brazil to place $800 million of tariffs on U.S. goods. while this dispute on paper should not effect the awarding of a contract to Boeing for F/A-18G aircraft it has an impact. Boeing might also have problems with the United States government if they decided that the type of retaliation taken by Brazil would prevent it from allowing the sale to go through.

The United States also has very strict laws and regulations about the transfer of military or other advanced technology to foriegn countries and nationals. Boeing may be faced with the requirement to get a lot of licenses and permissions from the State and Commerce Departments. This might affect their ability to establish production facilities in Brazil as well as provide the most advanced technology to meet requirements. Boeing is already engaging companies in Brazil to be suppliers and support providers with an estimate right now of creating over five thousand jobs.

The U.S. is caught somewhat in a bind as it wants to promote foriegn sales of it military items but at the same time limit what technology is transferred. There is also the consideration of building parts of the aircraft overseas. The U.S. has made efforts to allow NATO allies to produce parts and assemblies for systems they buy but other countries have not always been able to do this. This inability to meet offset goals may make it harder for the customer to choose the U.S. product.

The U.S. military likes Foreign Military Sales (FMS) as the more of a system that is produced the lower the price paid. Congress likes them as they keep production lines going and provide jobs not only to manufacture but support. The Allies like them as it improves their military capabilities while providing greater integration with the U.S. military. The United States government and its contractors must try to balance these desires for sales with the need to protect America's technological advances.

  • Matthew Potter

    Matthew Potter is a resident of Huntsville, Ala., where he works supporting U.S. Army aviation programs. After serving in the U.S. Navy, he began work as a defense contractor in Washington D.C. specializing in program management and budget development and execution. In the last 15 years Matthew has worked for several companies, large and small, involved in all aspects of government contracting and procurement. He holds two degrees in history as well as studying at the Defense Acquisition University. He has written for Seeking Alpha and at his own website,