Northrop CEO, T V Jones, had been a wunderkind from Stanford who had extensive contacts with the California elite. Jones lived in Bel Air, with enough acreage to grow grapes (producing one of the world's most exclusive vintages). The corporate headquarters was in one of the towers in Century City, with loft offices, and decked out with enough Islamic and modern art to look like a wing of the LA County Art Museum. Jones had paid his dues to the California Republican Party, taking the fall when it was discovered he had handed over $40,000 cash to Nixon aide Maurice Stans for use as hush money for the Watergate burglars. Jones was somewhat inconvenienced, having to step down a while as CEO, but was back at the helm at the time Carter was in power, busy wheeling and dealing again.
The Carter administration was desperate to build public support for its SALT-II strategic weapons treaty, which was in serious trouble with Senate Republicans. They solicited support from the aerospace industry, and Jones dutifully provided it., even though it meant getting into bed with Alan Cranston, liberal California Senator and long-time bane of the aerospace industry. Evidently in exchange, Carter pronounced an export fighter policy that curtailed the export potential of the F-16, and favored the F-5G.
The Carter administration ruled that, outside of NATO, Japan, and Australia, the United States would only export aircraft that were 'modifications of an existing aircraft' and 'not as good as US front-line aircraft'. This ruled out export of the new General Dynamics F-16 lightweight fighter to what was its planned main market. Furthermore, any such export aircraft had to be developed with the company's own money, not taxpayer funds. Under the Carter administration, the F-20 (then called the F-5G - a 'modification' of the existing F-5E) fell into this category because it was better than an F-5E (not a US front-line fighter) and was therefore presumed not to be as good as the F-16. Carter had cleared sale of the F-5G to Taiwan in principle, and Northrop began development using its own funds on that basis.
In response to Carter's directive General Dynamics produced a crippled version of the F-16, the F-16/79, for export outside NATO. This was the basic F-16, but equipped with a J79 turbojet rather than the more modern F100 turbofan of the basic F-16. This reduced the aircraft's climb, turning performance, and range. But the F-16/79 retained most of the F-16's avionics suite, which was after all what made the aircraft most potent. It really shows the lack of understanding within the Carter administration of modern technology that an aircraft with a moderately inferior acceleration, but the same avionics, would be considered 'crippled'. And of course General Dynamics made sure that the F-16/79 could be quickly converted to use the F100 'at a future date' (wink-wink - e.g. as soon as this silly Carter administration was out of office). But still, a fighter equipped with a single engine of the same type that earned the F-104G the name 'Widow Maker' found little interest among the air forces of the world.
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