F-2 / FSX - The F-16 Decision

The Japanese decided to base their FSX on General Dynamic's F-16 in October 1987. After more than a year of four difficult, hard-nosed negotiations, the government of Japan and thegovernment of the United States signed the memorandum of understanding for codevelopment ofthe FSX in November 1988. Following equally thorough negotiations, the principal Japanese and American companies involved, Mitsubishi Heavy Industries and General Dynamics, signed their company-to-company agreement in January 1989.

Due to Congressional concerns raised during confirmation hearings, the process was delayed. President Bush was attentive to the concerns of the 101st Congress. At the President's direction, both DOD and the Department of Commerce worked overtime to ensure that what was essentially a good deal for both the US and Japan also met the standards of the new Congress, and the new administration. The President sought and received clari?cations from Japan concerning production workshare and technology transfer, ensuring that these concerns would be fully satis?ed.

In May 1988, the Senate Armed Services Committee requested that any agreement to enter into co-development and co-production include provisions to ensure that the US receives meaningful workshares during both development and production phases and that Japan provide, expeditiously and without charge, any technical improvements substantially derived from technology provided by the United States. The FSX agreement meets both these requirements. Under the agreement, Japan would completely fund the FSX program and the US will receive approximately 40 percent of the development workshare and a similar share of the production work.

In the development phase of this agreement, the workshare was based on 40 percent of the total FSX development budget, as determined by exchange rates at the time the contracts were let. Based on the estimated FSX budget, this amounted to about $480 million. This agreement includes substantial work for the American subcontractor, including airframe and software development in partnership with the Japanese. The had access to all technology brought to the program by Japan. Additionally, the agreement provided that technological improvements based on US information would ?ow back to the US expeditiously and free of charge. Technologies that were solely developed by Japan could also be acquired by the US. Unique to the FSX agreement was the provision for a technical steering committee to overseethe development program and monitor the two-way transfer of technology and the allocation of workshares. The committee is co-chaired by general officers of the US Air Force and the Japan Air Self-Defense Force. The Commerce Department was also represented on this committee.

The FSX program helped ensure that Japan had a first-rate support fighter to meet legitimate military requirements in support of Japan's security responsibilities. The improved anti-invasion and ground-support capability provided by the FSX added a new and improved dimension toJapan's defense. The enhanced capability provided by the FSX increased the deterrent effect of Japan's self-defense forces and thus contribute to greater stability in this volatile region. Because the FSX was based on the F-16, interoperability bene?ts accrued to US forces. Fueling and some ground-support equipment are compatible, as will certainmaintenance functions. The US maintained direct involvement in the Japanese military aircraft industry and gained access to the technological improvements, including cocured whole-wing process and miniaturized, active, phased-array radar manufacturing capabilities, all of which could have significant potential for future US aircraft development.

US industry expected to receive about $2.5 billion of work during the life of the program. There was about $480 million for the US in the development program. In the follow-on production program, there was significant workshares for US industry totaling approximately 40 percent of the nominal production budget of $5 to $6 billion. This represents, at a minimum, $2 billion of workshares during production for American workers and more than 22,000 man-years of labor over the life of both the development and production programs. Among the benefits is the prospect that the US would have access to significant technologyfrom the FSX.

DOD, however, did not enter into the FSX agreement for the purpose of seeking technology from Japan. It entered into the agreement because close integration with Japan in the defense area benefits US national security. In the past, technology ?ow has been primarily inone direction - to Japan. The FSX agreement reversed this pattern by providing a framework which would allow significant US access to Japanese technology. While some, or even most, of the technologies that DOD is interested in exist in some form in the US, American industry had not successfully developed them into usable technologies on the scale involved with the FSX. The Japanese were prepared to fund research on these new technologies and will provide the US access to their developments. Suggestions that the Japanese had nothing in which the US would be interested underestimated Japanese technological capabilities, and denied US defense industry the synergistic bene?ts of technological cooperation.

Disapproval of the FSX by the Congress would most likely have resulted in Japan modifying an existing aircraft to meet the immediate military need and then attempting to develop indigenously a follow-on aircraft, possibly with European assistance. If Japan does need fighter technology, it could easily ask the European community for assistance, and this in turn might do real damage to our future competitiveness and arms sales. In short, the US stood to gain a great deal from pressing ahead with the FSX codevelopment agreement. The US Department of Defense believed that in such a circumstance wewould probably see a significant increase in Japan's R&D budget and increased domestic pressure for indigenous development of other military systems that would have been purchased or licensed-produced from the US. Example were the US-built AWACS and tanker aircraft. The most damaging impact would be on the relationship as a whole, with Japan pursuing increasingly independent security policies, raising potential consequences in economic and ?nancial policy areas that no one can foresee.