By Dr. Paul Freedenberg,
Vice President Government Relations
AMT—The Association For Manufacturing Technology
"The United States needs to have a national debate on manufacturing," challenged Lieutenant General Joseph Yakovac Jr. at the recent Defense Manufacturing Conference in Las Vegas. And he's not the only one expressing concern about America's eroding defense industrial base.
For example, Chairman Duncan Hunter (R, Calif.) of the House Armed Services Committee added provisions to the last two Defense Authorization bills that favor U.S. companies as sources of defense production. He also wanted to make it more difficult for the Europeans to demand defense offsets as a part of the sale of U.S.-defense items to them. Chairman Don Manzullo (R, Ill.) of the House Small Business Committee has voiced similar worries about America's industrial base.
Clearly, though, the Defense Department does not have the same level of concern. Suzanne Patrick, deputy under secretary of defense for industrial preparedness, testified before Manzullo's committee that the defense industrial base was obviously healthy because the price-earnings multiples of the major defense contractors were higher than the overall market average. Manzullo was incredulous and responded that such ratios tell nothing about the underlying health of the secondary and tertiary suppliers. Indeed, many in industry can attest to the validity of Manzullo's observation. In 1986, as the Assistant Secretary of Commerce for Trade Administration, I negotiated a Voluntary Restraint Arrangement (VRA) with Japan and Taiwan, based on findings that the U.S. machine tool industry was in danger of falling below the level needed to supply the surge capacity required for large-scale mobilization during a wartime emergency.
We successfully concluded the VRA, which lasted for five years (with a 2-yr extension). In that time, the U.S. machine tool industry rebuilt its technology and once again aggressively competed in the world market.
Such a VRA isn't likely in today's defense environment — one where Secretary Donald Rumsfeld responded to charges of ill-equipped U.S. soldiers in Iraq by stating, "You go to war with the army you've got."
Unfortunately, our current defense industrial strategy does not give us the capacity to quickly make up for such deficiencies after a war has started. Instead, we fight conflicts with "off-the-shelf" equipment and then acquire whatever else is needed from our worldwide supply sources.
In the meantime, Hunter wonders whether our friends and allies can be counted on to provide vital military parts and equipment on a timely basis if they disagree with our decision to go to war. In one instance, a Swiss manufacturer refused to quickly supply a critical component of a "smart" bomb during the Iraq war. This example demonstrates the importance of relying on secure U.S. suppliers.
Hunter had the support of House colleagues in his battle to strengthen the U.S.-defense industrial base in the past two Defense Authorization bills. But strong opposition from the Bush Administration and its allies in the Senate forced Hunter to water down or delete these provisions during legislative conferences.
A growing number of legislators in both Houses of Congress are likely to pursue initiatives to strengthen U.S. industry's indigenous industrial capacity to rapidly and effectively supply needed weapons systems. These legislators believe defense cooperation is fine as a cost-cutting strategy. However, they also believe technologically sophisticated and independent production capability is critical to the U.S. ability to pursue an independent foreign policy.
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