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Statement of Administration Policy: S. 1379 - Defense Production Act Amendments of 1990

September 21, 1990

STATEMENT OF ADMINISTRATION POLICY

(Senate)
(Dixon (D) Illinois)

The Administration opposes S. 1379 and urges Congress to adopt the Administration's proposal, S. 2168, which would provide for permanent re-authorization of the Defense Production Act (DPA). If there is insufficient support for S. 2168, the Administration would support an extension of the existing DPA for two years rather than enactment of S. 1379. Such an extension could include several provisions of S. 2168 that are directly related to the energy aspects of the current situation in the Middle East.

The DPA vests the President with the authority to direct materials and facilities from civilian to Federal use to ensure adequate industrial production and supply for national security purposes. Additionally, it authorizes loans, loan guarantees, purchase guarantees, antitrust protection, and the use of the National Defense Executive Reserves (NDER). S. 1379, however, would change the DPA to a statute which undermines antitrust laws, infringes upon the constitutional authority of the President, encourages protectionism and establishes unneeded authorities and unwarranted reporting requirements.

The Administration strongly objects to section 137 of the bill. This section would create a prior government approval and antitrust immunity program for a wide range of industry consortia engaged in joint research, development, and manufacturing activities. Such a program would seriously undermine the appropriate role of the antitrust laws in the economy, thus raising substantial competitive concerns. Section 137 would vest government agencies with the ability to intervene in a regulatory manner in a wide range of commercial activities, and it would entail substantial costs in a time of budgetary constraint. Unwarranted antitrust uncertainty regarding joint production activities could be reduced, as the Administration has proposed, by expanding the National Cooperative Research Act of 1984 to cover joint ventures, between direct competitors, formed to engage in cooperative research and development. If S. 1379 is presented to the President in a form that includes section 137, the Attorney General would recommend that serious consideration be given to a veto.

Moreover, S. 1379 contains provisions which impinge upon the President's constitutional authority to control diplomatic initiatives and to maintain the confidentiality of the Executive branch deliberative process. The Administration objects to the following sections which infringe upon this authority:

—  Section 124, which requires that the Secretary of Defense lead an interagency team to consult with foreign governments on limiting the adverse effects of offsets in defense procurement.

—  Section 125, which requires the Secretary of Commerce to report on alternative findings or recommendations submitted to the Department of Commerce on international negotiations related to the DPA.

Furthermore, S. 1379 adds unnecessary new authorities or responsibilities and burdensome, duplicative reporting requirements to the DPA. Most objectionable are:

—  Section 123, which would establish an unnecessary revolving fund and increase the Government's liabilities under active purchase guarantees from less than $100 million since the current program's inception in 1985 to as much as an additional $450 million spread over the next three years.

—  Section 125, which would make the Secretary of Commerce responsible for preparation of offset reports and would require transactional reporting by businesses of all offset agreements exceeding $5 million.

—  Sections 123-126, which establish or amend reporting requirements to Congress on industrial and technological issues.

—  Section 138, which would establish reporting requirements which duplicate other requirements found in the draft Senate Intelligence Committee report on the Intelligence Authorization Act for FY 1991 and current reporting being done by the Executive branch.

—  Section 152(1), which would repeal the requirement for paying interest on the net amount of Federal capital used under sections 302 and 303 of the DPA.

The Administration opposes Title IV, which amends the International Banking Act and authorizes retaliatory measures against foreign governments found to be in violation of the Omnibus Trade and Competitiveness Act. The Administration consistently has opposed retaliatory measures which could close U.S. markets.

The Administration strongly supports those provisions which amend section 708 to enhance the utility of "voluntary agreements" in responding to serious national emergencies. The Administration also supports section 141 which clarifies contract priority authority. This authority would apply to "services" contracts, such as for standby pipeline repair services for the Strategic Petroleum Reserve. These provisions, which are based on the Administration's bill, S. 2168, are potentially relevant to the U.S. response to the current situation in the Persian Gulf.

Also, in light of the present Persian Gulf crisis, the Administration urges enactment of those provisions of S. 2168 which provide conflict of interest and antitrust protection for the NDER. This would facilitate the development and staffing of an NDER composed of representatives from the petroleum industry, which most oil companies have declined to support because of the lack of such protection.

As noted above, several provisions of S. 2168 are directly related to the energy aspects of the current situation in the Middle East. These include improved authority for the use of "voluntary agreements," the clarification that the DPA's priority contract rating authority applies to "services" contracts, and the bills' provisions concerning the NDER. The Administration urges that these provisions be enacted in the context of any bill that otherwise would extend the existing DPA.

George Bush, Statement of Administration Policy: S. 1379 - Defense Production Act Amendments of 1990 Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/329098

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