We told you so

We told you so

Dr. Paul Freedenberg

The U.S. Commerce Department finally has confirmed what the machine tool industry has been telling the government for the past decade: China has access to whatever five-axis machine tools that it wants to acquire for its high-technology industry. Moreover, the U.S. export control system is increasingly irrelevant to Chinese efforts to acquire such technology. With six percent of world machine tool production, we no longer play a significant role in affecting Chinese technology acquisition or industrial production.

The reality of widespread foreign availability of fiveaxis machine tool technology to Chinese factories was an argument that AMT-The Association For Manufacturing Technology made since the beginning of this decade. Indeed, that assertion became more and more true in each successive year since the beginning of the 1990s. The report that the Commerce Dept.’s Office of Technology Evaluation released last month merely documented reality. Of course, the report also put the U.S. government’s stamp of authenticity on those facts, and noted, in passing, that five-axis machine tool technology is now produced in good quality and quantity by the Chinese themselves – as well as by the Taiwanese, who are not members of the Wassenaar Arrangement (the international body that sets rules and parameters for technology transfer).

A few other relevant facts were contained in the July fiveaxis machine tool study. The report noted that U.S. license processing times, especially to China, are longer that those of other Wassenaar Arrangement member countries, thereby placing U.S. exporters at a competitive disadvantage. Another important finding logically followed from the U.S. licensing process disadvantage, which is that the United States is losing market share to its European and Asian competitors, particularly South Korea. An interesting observation was that while U.S. producers of five-axis machine tools are currently profitable, they face an uncertain future — with imports outpacing domestic sales and an increasing level of world competition for the export market.

A logical implication of this export control-induced market loss trend would be for domestic five-axis producers to move offshore to escape onerous regulation. This was part of the reason behind the Commerce Department undertaking this study in the first place. There was a concern about the health and vigor of the U.S. defense industrial base. Ever since 1986, when President Ronald Reagan authorized the negotiation of a machine tool Voluntary Restraint Arrangement with Japan and Taiwan, the Commerce Department has monitored the health of the machine tool sector, which is so important to our nation’s ability to mobilize in the event of large-scale armed conflict.

Judging from the factual results of this most recent study, one would have hoped that the advice and counsel to the Obama Administration would have been more robust. Instead, the suggested changes repeat variations on advice that earlier studies of the export control system had prescribed: liberalize the export control parameters, decrease the license processing times for five-axis machine tools bound for China, and encourage the use of anti-tampering devices on five-axis machines in order to give the government more confidence that the machines will not be diverted from their stated purpose.

Given the lack of urgency in the recommendations coming out of this study, it would be reasonable to assume that in the short run (one to three years) not much will change regarding five-axis machine tool export controls for China. Why should they? Earlier recommendations were ignored, and the Defense Department is likely to delay and ask for further study. But, since the study also concluded widespread foreign availability of five-axis machines, we are likely to see further U.S. market loss in China and the migration of this formerly U.S.-dominated technology to countries with more congenial technology-transfer regimes.

You can help revitalize U.S. manufacturing! Send this page to your Congressman, local and state government leaders, or your local newspaper editor. Add your own comments on the importance of manufacturing innovation to the health of our economy. Your comments are also welcome at [email protected]

TAGS: Viewpoints
Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish