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Commentary: NSA Scandal Hurts US Exports

Underscored by Brazilian Fighter Bid Loss

Jan. 7, 2014 - 10:17AM   |  
By ERIK BRATTBERG   |   Comments
Gripen test platsform NG with new droptanks
Saab's Win, Boeing's Loss: Brazil announced it will purchase the Swedish-made Gripen for its fighter fleet, over the Boeing F/A-18 Hornet and Dassault Rafale. (Stefan Kalm/Saab)
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To assess the impact of the National Security Agency scandal on US defense sales abroad, one need not look any further than Brazil. The December announcement that Boeing lost a multibillion-dollar bid to supply the Brazilian military with its next fighter jet fleet to Swedish defense company Saab is clearly a major setback for the American manufacturer.

But it is also the latest ex­ample of the negative fallout from the Edward Snowden revelations on the US defense industry.

Of course, the Brazilian decision to purchase the Swedish Gripen plane instead of the American F/A-18 was based on several factors, including price, maintenance costs and the potential for technology transfer. Still, Brazilian officials did not hide the fact that the NSA scandal also played a key role.

No surprise here. The Snowden documents allegedly revealing unprecedented US spying programs overseas have caused an enormous backlash around the world, even among America’s traditional friends and allies.

Brazil’s reaction has been especially vocal. Earlier in 2013, President Dilma Rousseff (whose personal email account and phone were allegedly tapped by the NSA) decided to cancel her planned trip to Washington in what can only be seen as a personal snub to President Barack Obama.

Moreover, Brazilian officials have publicly discussed the need for local Internet data storage for American tech companies like Google and Facebook to keep information safe from the NSA’s snooping. While Boeing’s lost bid in Brazil is a major setback for the company, it is merely the latest example of how the Snowden revelations are hurting US strategic interests abroad.

Clearly, the still unfolding NSA scandal has become a huge liability for US defense companies seeking to sell their products and systems to other countries.

In another example, US tech exports by companies such as Cisco and IBM experienced difficulties selling in China. The Chinese reluctance in this case was also attributed to the Snowden scandal.

No one should be surprised if other nations decide to follow suit with the same rationale that left Boeing empty-handed in Brazil.

If so, this would be detrimental for the US defense industry. As the Pentagon’s budget is projected to shrink over the coming decade, overseas exports will become all the more important for US defense companies.

As the world’s leading producer and exporter of defense products, and with a strong research and development (R&D) and high-tech base, the US has plenty to offer to the rest of the world.

Exporting American defense systems also gives the United States strategic leverage and eases military interoperability between US and foreign militaries. For these reasons, the US cannot afford to see its defense exports take a heavy toll as a result of the political and diplomatic crisis that the Snowden scandal has triggered.

Of course, defense exports are not the only ones hurt by the NSA scandal — other sectors are affected as well. But defense export is a peculiar case as it goes to the very core of national sovereignty issues. Mutual trust is an important element in defense trade. And it is trust that the NSA scandal has undermined and which must be restored abroad.

In response to the NSA scandal, the US needs to take swift, bold action. Merely reassuring words from Obama are not going to cut it this time to allay allies’ fears.

Stronger judicial oversight of the NSA’s intelligence-gathering activities is a starting point. The current review of NSA by the White House is therefore an opportune moment to address NSA practices and put in place stricter guidelines.

A guiding principle must be that intelligence efforts, such as tapping foreign leaders’ personal communications, take place only when they are merited by the presence of a significant national security threat.

Clearly, the NSA scandal has been costly to the American reputation abroad.

But also it has cost Boeing billions of dollars in Brazil. If left unaddressed, the spying crisis will continue to hurt America’s defense industry abroad.

This would be very unfortunate as a strong defense industrial base is crucial to US global leadership over the coming decades. Let’s therefore quickly get past the current mess and move on.


Erik Brattberg is a resident fellow at the Brent Scowcroft Center on International Security at the Atlantic Council in Washington.

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