Defense Executives: Trump Cannot Reverse Globalization Trends

Defense Executives: Trump Cannot Reverse Globalization Trends
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Congress in last year’s National Defense Authorization Act made Canada, the United Kingdom and Australia members of the “national technology and industrial base.” The legislation also called for closer industrial ties with other countries such as India.

The Pentagon long ago accepted and embraced the globalization of the defense industry and has increasingly tapped into technologies developed by foreign allies.

“The United States no longer has the luxury of assuming that it will remain the sole origin of new technology breakthroughs,” said a Defense Department report sent to Congress in March. “DoD must take advantage of emerging capabilities, regardless of where they originate.”

The issue is gaining new relevance as the Pentagon and other federal agencies work to complete, by early next year, a sweeping study of the national defense industrial base that President Trump directed in a July executive order. Trump directed the review to assess the health of the defense industrial base.

Industry executives say it is a good idea for a new administration to get a handle on the nation’s defense industrial capabilities. But Trump’s protectionist tone baffles the defense sector given the multinational makeup of the U.S. military industrial base.

The review the president ordered was shaped, according to White House officials, by Trump’s “America first” ethos and his desire to bring back manufacturing jobs to the United States.

One problem with this thinking is that the U.S. defense sector and the military have forged deep industrial ties with foreign allies and there is no one clear definition of what “U.S. made” means, says Kevin Cochie, a former Pentagon procurement official, now vice president of Nammo Inc., a supplier of ammunition and rocket engines.

Nammo is headquartered in Norway but has two large U.S.-based companies that operate independently of their corporate parent. Other defense firms, mostly from NATO countries, have similar corporate structures that allow them to work with the Pentagon as U.S.-based suppliers.

Trump’s executive order does not recognize how globalized the industry has become, Cochie tells RealClearDefense. “It’s unfortunate because you can’t just have a complete ‘Buy American’ attitude towards weapon systems development.”

Like other industrial sectors, aerospace and defense have shed jobs that will never come back regardless of any presidential directive, he says.

“We have become flat out more productive, we have automation, robotics, better designs,” says Cochie. “There is a real danger in saying that you can make it all in the U.S., design it all in the U.S.”

Trump asked agencies to describe how the closure of 60,000 factories and the loss of more than 5 million manufacturing jobs in recent decades have affected the military and national security more broadly.

The defense industry long ago downsized its manufacturing capacity because of automation but also because military budgets plummeted after the Cold War ended. More jobs were cut after Congress passed the Budget Control Act in 2011.

In a leaner defense industry, American companies have become more interconnected with foreign partners and have benefitted from other countries’ investments in their defense industries, Cochie says.

“There’s some incredible technologies that come out of our NATO allies,” he says. The largest share of foreign direct investment in the U.S. defense industry comes from NATO countries and Japan.

Industrial ties are essential to broader political alliances, he notes. It sends the wrong message “when we start asking our NATO allies to provide soldiers and forge coalitions and yet we exclude them from weapon systems developments.”

The Pentagon has been at the forefront of doing business with multinational industries, Cochie says. “DoD has done a good job working with allies on weapon systems development.”

It’s not clear what will come out of the review that Trump ordered, Cochie says. “I have mixed feeling about the directive,” he adds. “I don’t know that the administration knows how big the industrial base is.” There are many layers of sub-tier suppliers, many of which are commercial companies with multinational presence. “My question is, ‘Define the domestic industrial base,’” Couchie says.

With Canada, Australia and the United Kingdom now included in the national industrial base, “is domestic only what is made on U.S. soil?” he asks. “And what about the rest of NATO? What contributions do they provide?”

Nammo corporate spokesman Endre Lunde says the company — with annual revenues of about $500 million — plans to invest tens of millions of dollars in the United States in the coming years, primarily in the modernization of ammunition production facilities at the U.S. Naval Surface Warfare Center in Indian Head, Md. Nammo signed an agreement with the Defense Department in January to produce solid rocket motors, propulsion, tactical warheads and demilitarization services of U.S. munitions at Indian Head.

Lunde says the industrial review ordered by the Trump administration parallels what other NATO countries are doing out of concern that they might lack sufficient capacity to equip their militaries in a crisis. “In many countries we are seeing a focus on supply agreements with defense companies,” says Lunde. “It’s not about protectionism. They are realizing they need to take stock of their industrial skills and know-how. Everyone in NATO is going through that right now.”

Trump’s executive order — titled “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States” — for the first time directs the Pentagon to work with other agencies and look at the nation’s manufacturing and supply sources more comprehensively than in the past.

The secretary of defense will lead the study but must coordinate with the secretaries of commerce, labor, energy, and homeland security. The defense secretary also must consult with the secretaries of the interior and health and human services, the director of the Office of Management and Budget and the director of national intelligence.

White House officials said the president was disappointed to learn that the United States has lost domestic manufacturing capability to make flat panel displays for aircraft and has almost no domestic sources of so-called rare earth minerals essential for manufacturing microelectronics. Once dominated by domestic sources, microelectronics manufacturing has migrated to Asia and is focused on consumer electronics.

China is now the world’s largest market for semiconductors. “They have committed to investing $104 billion over the coming decade to develop a domestic semiconductor capacity,” the Pentagon industrial capabilities report says.

The White House on Wednesday announced the president was moving to block the acquisition of the Lattice Semiconductor Corporation by a group of investors that included a Chinese venture capital fund. Under the Defense Production Act, the president is authorized to suspend or prohibit certain acquisitions that result in foreign control of a U.S. business if he concludes that the foreign buyer might take action that threatens U.S. national security. In this case, the decision was based on the “importance of semiconductor supply chain integrity to the United States government, and the use of Lattice products by the United States government,” the White House said. 

Lauren Fish, an analyst at the Center for a New American Security, suggests the Trump administration should use this review as an opportunity to identify what skills will help U.S. workers thrive in new manufacturing landscape.

“Weapons systems today are more complex than at any point in history, and those who build them are highly skilled. It is critical that the training pipeline for these roles is both robust and sustained,” Fish writes in a blog post. The study of the defense industrial base “should consider the full suite of skills that are needed for 21st-century warfare. These absolutely include highly trained manufacturing skills, but modern warfare will also require cyber warriors. Therefore, programming and computer skills will be vital.”

Although the Pentagon has viewed globalization mostly as a positive trend, it does have concerns about losing control of technology. “While globalization brings many benefits to both defense firms and the Department, this cross-border collaboration has also increased the potential threat of global supply chain disruption, counterfeit parts, sabotage, and theft of critical American defense technology,” says the Pentagon’s report to Congress. “This shifting landscape of defense production may require new tools and authorities to address prospective security threats and to safeguard the value and integrity of American technology.”

Sandra Erwin is a national security and defense reporter for RealClearDefense. She can be reached at Follow Sandra on Twitter @Sandra_I_Erwin.

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