Editor's Note:

Each fall the National Council on US-Arab Relations brings together a distinguished group of diplomats, government officials, business people, military officials, scholars and others to tackle the thorny issues surrounding US-Arab relations. SUSRIS has provided AUSPC speakers' remarks, which touch on the Saudi-US relationship, to you for over the last five years. In keeping with that practice we again provide for your consideration a collection of AUSPC presentations.

Today we present the remarks of Jeff McCray, Vice President of International Marketing for BAE Systems, a merger of British Aerospace and Marconi Electronic Systems. Mr. McCray provided an industry prospective on defense cooperation. He was joined on the Security Cooperation panel by Doctor Anthony Cordesman, Mr. Christopher Blanchard, and Ambassador Barbara Bodine. Their remarks will be provided separately. The panel was chaired by Rear Admiral Harold J. Bernsen.

Additional AUSPC sessions which address U.S. and Saudi issues will be provided by SUSRIS in the coming days.

17th ANNUAL ARAB-U.S. POLICYMAKERS CONFERENCE
"Transitioning the White House: Challenges and Opportunities for Arab-U.S. Relations"
October 30-31, 2008 | Washington, DC

Defense Cooperation
Jeffrey McCray

[BERNSEN] Our next presenter is Mr. Jeff McCray. He is the Vice President for International Marketing at BAE Systems. He is just back from three weeks in the region, which included visits to Dubai and Cairo and he�s going to provide us an industry perspective on defense cooperation.

[JEFF MCCRAY] Good morning and thank you very much, I�d like to open my remarks by thanking Doctor Anthony, and Pat Mancino and the Council for the opportunity to be here with you today and talk about defense cooperation from an industry perspective. 

I have to say in response to Doctor Cordesman�s comments, and I will preface my comments by saying that I have not cleared my comments with the rest of the U.S. defense industry so these are probably just my comments. But we tend to look at defense cooperation activities in the Gulf from the perspective of a country-by-country basis. 

As a defense contractor there isn�t really a way or a forum to look at defense cooperation on a GCC wide basis. Defense cooperation ranges or can range from the delivery of equipment and services on individual contracts through local assembly, local manufacture programs, to the establishment of long-term partnerships, which we have done in some countries in the region, and potentially to the establishment of joint ventures, which we have also done in various places in the Gulf. 

The whole of the defense cooperation arena, if you like, not only in the Gulf but anywhere we operate in the world, from the United States standpoint is governed by the U.S. laws and regulations and defense exports are seen from the U.S. Government's perspective correctly as an extension of U.S. foreign policy. 

As a result, we can probably debate this subject for the rest of the day, let's not, as a result of that, U.S. companies tend not to lead that debate, we participate in that debate but we follow the U.S. Government�s lead. 

Everything we do in the area of defense exports is governed either by the International Traffic in Arms Regulations, the ITAR, which is managed by the Department of State with major inputs, obviously, from the DoD and the individual services or if the product is a commerce product it�s managed by the Commerce regulations, the EAR regulations.

The whole purpose of the U.S. Government�s exports licensing regime, and it is an extensive regime, is that it is in place to do two things. Firstly, protect U.S. warfighters, wherever they are, or wherever they operate, and secondly to support the activities of our allies. 

Export licensing is a complicated process that is sometimes a difficult issue to discuss and deal with in terms of our Gulf partners and Gulf customers. But the penalties, if you get it wrong can be draconian. They include fines, loss of the ability to contract with the U.S. government, and potentially if you get it seriously wrong you can go to prison. 

As a result of these issues it is sometimes, not always, but I think it is sometimes, easier for larger companies to be actively be involved in the export business and in part that�s because the larger companies can afford the infrastructure of the management capability that you need to deal effectively with the export regime.

However, I should also point out that defense cooperation and exports are not just a one-way street, they can be a two-way street. We haven�t gotten to the point where we own major businesses in the Gulf area yet, but we do as a company own major businesses in the UK, Sweden, Germany, South Africa, and we have numerous examples not of just exporting to those countries but numerous examples of importing technology and products here which have been used to support U.S. defense. 

Because we have export licensing regimes in each of the countries where we operate and where we own businesses, anytime we export into the Middle East we have to deal with not only our own export regimes but the export regimes of the other countries where we own businesses. 

If I could go back for a minute to the U.S. export-licensing infrastructure. We have seen over the past twelve months a great improvement and here I am comfortable that I speak not only for my own company but for U.S. industry as well. We have seen great improvements over the past 12 months in the areas of responsiveness and the efficiency of requests for exports, requests for technical assistance agreements and export licenses from the State Department in particular. And I think it�s also fair to say that both of the next two prospective Administrations have been in discussion with U.S. defense industry advisory councils and both have been briefed on issues that U.S. defense industries see with the export licensing regime and both prospective Administrations have said very encouraging things about the way they would like to improve that regime. As, I have to say, have every other previous prospective Administration that I am aware of. 

To come back to the two-way street, there are certainly benefits to prospective customers of cooperation, defense cooperation, those include obviously the spread of technical and operational skills and knowledge and where we establish manufacturing or cooperative development businesses the growth of employment prospects as well. Before we start any consideration of exports or defense cooperation activities there are some basic questions that I think each U.S. defense contractor has to ask themselves, and we all do. Those include: Is the prospect we�re looking at good for the U.S. warfighter? Is it good for the U.S.? Is it good for our coalition allies? Then, laterally, does it make sense to us as a company?

There are certain areas of technology that lend themselves to cooperation more easily than others. I would propose that certainly from our own experience businesses in the land vehicles side of our business have found greater opportunities and greater ease in establishing either co-production or manufacturing or refurbishment facilities in the Middle East than have our businesses that are involved in, for instance, electronic warfare or platform self-protection. That�s not to say that those kinds of businesses can�t enter into cooperative agreements but it tends to be more difficult. We have undertaken in the past and we do have ongoing cooperative programs in Saudi Arabia, Egypt, Jordan, Turkey and we, like many other U.S. defense contractors, continue to look for opportunities that make sense to us and obviously make sense to the U.S. Government.

That�s all the comments I have. I�m happy to take questions at the end. Thank you.

<end>

Source: Arab-US Policymakers Conference Web Site (AUSPC 2008)

Transcription Services by Ryan & Associates

About Jeffrey McCray

Mr. McCray is Vice President, International Marketing for BAE Systems, a merger of British Aerospace and Marconi Electronic Systems, engaged in the development, delivery, and support of advanced defense and aerospace systems in the air, on land, and at sea. He is responsible for BAE Systems, Inc. marketing activities in Central Europe and the Middle East. Mr. McCray has twenty years of experience in the defense field working with both US and UK companies.

For the past 15 years he has worked in sales and marketing positions of increasing responsibility. For much of this time he has focused on the Middle East, including a three year tour based in Abu Dhabi. In his current position he travels to the region on a regular basis working closely with customers and company offices in Egypt, Saudi Arabia, the UAE, Kuwait, Oman, Bahrain, and Qatar.

Prior to his present position Mr. McCray was Vice-President for International Marketing, responsible for the international sales and marketing of BAE Systems products and services throughout the Middle East and Central Europe. Prior to the BAE-Marconi merger Mr. McCray was Sales Director of Marconi Radar Systems, UK (1997-1999), General Manager, Marconi Prospects, Malaysia (1995-1997), and Marketing Manager for Marconi Electronic Systems, Abu Dhabi, covering the entire Gulf region. Earlier Mr. McCray worked for Ferranti International as Sales Manager, Middle East for Naval C� and Training Systems. 

Mr. McCray earned his BA degree in political science at Randolph-Macon College, the CPE designation in British Law at the Royal College of Law, Birmingham, England, and the MSC degree in international relations at the University of Southampton.

For more information: www.baesystems.com

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