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For Perry, The Best Defense Makes Commercial Sense

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In a Fort Worth factory, Lockheed Corp. engineers are building test wings for Japan's new fighter plane, the FSX. By itself, that's hardly a surprise. U.S. defense companies have been licensing or selling military technology to Japan for decades. But Lockheed workers are building the composite carbon-fiber wing using cutting-edge made-in-Japan fabricating technology--a rare case of military technology flowing in reverse, from Japan to the U.S.

If Defense Secretary-designate William J. Perry has his way, such deals will be far more common. Perry, who was Deputy Secretary before being tapped for the top job on Jan. 24, has been implementing a bold agenda as departing Secretary Les Aspin's No. 2. Now that the former Silicon Valley executive and Stanford University professor is poised to take over the top post, the pace of change will accelerate. Clintonites think he can play a key role in the drive to bolster U.S. competitiveness.

OFF THE SHELF. The technology-swap plan, known as the Perry Initiative, illustrates the new defense chief-designate's approach. Japan would ante up some of its technological secrets in exchange for U.S. military systems. And since Tokyo can't offer much in the way of advanced tanks or missiles, the Pentagon wants Japanese companies to hand over the technology--as well as the manufacturing knowhow--for such commercially important products as flat-panel displays and advanced composites. If the plan succeeds, contends Deputy Assistant Secretary for Defense Kenneth S. Flamm, "it will be one of the most important things the Administration has done."

Perry, moreover, is pushing other initiatives. Whenever possible, he wants to buy off-the-shelf components for defense systems, refocus the Pentagon's R&D dollars on research that has both military and commercial payoffs, and encourage defense companies to find civilian uses for their military technologies. "We want to erase the distinction between defense and commercial industries," says one aide.

To be sure, it's far from certain that the Perry approach will succeed. Programs such as the tech-swap scheme "will be very difficult to manage" because they involve several companies with conflicting aims, predicts John Bottimore, Asia-Pacific marketing manager for Honeywell Inc.'s Defense Avionics Systems unit. There are also unresolved questions about who would own what. And Japanese companies fear not getting enough for their technology.

Still, the tech-swap initiative has been gaining acceptance ever since Perry first broached the idea while visiting Japan last May. The Pentagon is busily working to identify specific technologies and projects it hopes to pursue. "Japanese companies are very interested--but discussions are going to take time," warns economist Kiyoaki Aburaki at the Keidanren, Japan's largest business council.

For their part, U.S. companies are intrigued but skeptical. "It's a big step in the right direction," says Paul Rubin, director of special projects at TRW Overseas Inc. Not a bad plaudit for a guy about to start a new job. If Clinton's new Defense Secretary can continue to make progress, he might just last a bit longer than his predecessor.John Carey in Washington and Neil Gross in Tokyo

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