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The New York Analysis of Policy and Government concludes its review of America’s endangered defense industrial base, and a major Department of Defense Report reviewing the crisis.

It’s not just manufacturing interests and the Department of Defense that worries about these trends.  In 2010, a Cornell University study reported:  If the civilian manufacturing base that is critical to maintaining the national innovation system deteriorates, and America’s innovative capacity moves overseas to be closer to production and the necessary support base, the underlying technological capability for the nation’s defense industrial base also will deteriorate. And as the United States loses its technological edge through movements of R&D offshore, underinvestment in R&D by U.S. private industry, and lack of attention to this critical loss by the U.S. government—with the shedding of millions of skilled workers as a result—the know-how needed for maintaining and advancing U.S. technology leadership vital for national security, and embodied in those displaced workers, is being lost as well.

The DoD report outlines a number of steps currently underway to address this crisis:

• Increased near-term DoD budget stability with the passage of the Bipartisan Budget Act of 2018, providing stable funding through Fiscal Year (FY) 2019
• Modernization of the Committee on Foreign Investment in the U.S. and investigations under Section 301 of the Trade Act of 1974 into Chinese intellectual property theft, to better combat Chinese industrial policies targeting American intellectual property
• Updates to the Conventional Arms Transfer policy and unmanned aerial systems export policy to increase U.S. industrial base competitiveness and strengthen international alliances · Reorganization of the former Office of the Under Secretary of Defense for Acquisition, Technology and Logistics, the work of the “Section 809 panel,” and development of the adaptive acquisition framework all aim to streamline and improve defense acquisition processes
• Restructuring the Defense Acquisition University to create a workforce education and training resource to foster increased agility in acquisition personnel
• Response to Section 1071(a) of the National Defense Authorization Act for FY2018 which requires establishing a process for enhancing the ability to analyze, assess, and monitor vulnerabilities of the industrial base
• Creation of a National Advanced Manufacturing Strategy by the White House Office of Science and Technology Policy, focused on opportunities in advanced manufacturing
• Department of Labor’s chairing of a Task Force on Apprenticeship Expansion to identify strategies and proposals to promote apprenticeships, particularly in industries where they are insufficient
• DoD’s program for Microelectronics Innovation for National Security and Economic Competitiveness to increase domestic capabilities and enhance technology adoption
• DoD cross-functional team for maintaining technology advantage
• Implementation of a risk-based methodology for oversight of contractors in the National Industrial Security Program, founded on risk management framework principles to assess and counter threats to critical technologies and priority assets.

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The study makes a number of Recommendations for the future:

• Create an industrial policy in support of national security efforts, as outlined in the National Defense Strategy, to inform current and future acquisition practices Expanding direct investment in the lower tier of the industrial base through DoD’s Defense Production Act Title III, Manufacturing Technology, and Industrial Base Analysis and Sustainment programs to address critical bottlenecks, support fragile suppliers, and mitigate single points-of-failure
• Diversifying away from complete dependency on sources of supply in politically unstable countries who may cut off U.S. access; diversification strategies may include reengineering, expanded use of the National Defense Stockpile program, or qualification of new suppliers
• Working with allies and partners on joint industrial base challenges through the National Technology Industrial Base and similar structures
• Modernizing the organic industrial base to ensure its readiness to sustain fleets and meet contingency surge requirements · Accelerating workforce development efforts to grow domestic science, technology, engineering, mathematics (STEM), and critical trade skills
• Reducing the personnel security clearance backlog through more efficient processes
• Further enhancing efforts to explore next generation technology for future threats A challenge this large demands a multifaceted approach. Therefore, the classified Action Plan also includes direction for DoD to conduct a comprehensive study on the industrial base requirements needed to support force modernization efforts, specifically focused on the technologies necessary to win the future fight.

Photo: Main entrance to Joint Systems Manufacturing Center. An M1A1 Abrams sits on a display platform to the left of the entrance gates. (Wikipedia photo)

The New York Analysis of Policy and Government continues its review of America’s endangered defense industrial base, and a major Department of Defense Report reviewing the crisis.

Looming larger than any other factor in the decline of the U.S. industrial base is China.

While multiple countries pursue policies to bolster their economies at the expense of America’s manufacturing sector, none has targeted the U.S. industrial base as successfully as China. China is engaged in economic competition with the U.S. over key sectors of the global economy, and China’s strategies of economic aggression and its complementary military modernization efforts are codified in its doctrine of civil-military fusion. By actively promoting the fusion of its military and civilian industrial and science and technology sectors, Beijing strives to reinforce the People’s Republic of China’s capabilities to build the country into an economic, technological, and military power while ensuring that overall control of these elements of national power remain firmly in the hands of the Communist Party of China. Since joining the World Trade Organization in 2001, China’s real gross domestic product has grown more than 300%, from $2.4 trillion in 2001 to $10.2 trillion 2017.72 During that period, U.S. real gross domestic product grew less than 40%, from $12.8 trillion in 2001 to $17.3 trillion in 2017 ).

China’s economic growth has, in turn, helped finance its rapid military modernization. In 2001, China’s annual military budget was less than $20 billion.73 By 2017, it exceeded $150 billion,74 second only to the U.S.

The Report emphasizes that “China’s non-market distortions to the economic playing field must end or the U.S. will risk losing the technology overmatch and industrial capabilities that have enabled and empowered our military dominance – even as China seeks to raise its military capabilities to U.S. levels.”

One of the Chinese Communist Party’s primary industrial initiatives, Made in China 2025, targets artificial intelligence, quantum computing, robotics, autonomous and new energy vehicles, high performance medical devices, high-tech ship components, and other emerging industries critical to national defense.  In order to obtain the capabilities needed to support these advanced technologies, China relies on both legal and illicit means, including foreign direct and venture investments, open source collection, human collectors, espionage, cyber operations, and the evasion of U.S. export control restrictions to acquire intellectual property and critical technologies.

For example, China imposes conditional access to its domestic market to lure intellectual property, investment, and onshoring of manufacturing, using high tariffs and a complex web of non-tariff barriers, including restrictive customs barriers, burdensome licensing requirements, discriminatory regulatory standards, and local content requirements in government procurement to boost domestic manufacturing and production. China also uses forced technology transfer78 as a condition of access to the Chinese market.

In an attempt to dominate critical global markets and manufacturing industries, China leverages policy tools such as low interest loans; subsidized utility rates; lax environmental, health, and safety standards; and dumping to boost its industry. China also uses counterfeiting and piracy, illegal export subsidies, and overcapacity to depress world prices and push rivals out of the global market. It has implemented these tactics to capture much of the world’s solar and steel industries and intends to extend its dominance to other industries such as automobiles and robotics.

Safe for males with ED issues: – Although buy cialis pills, proficient erection aiding drug is safe and effective on erectile dysfunction. A long time ago, philosopher Ralph Waldo Emerson said, “Few people have any next, they live from hand to mouth without a plan, and are viagra properien always at the end of their line.” There has always been a portion of the population that pharmaceutical companies are not all that bad. Headache, blocked nose, cialis tabs visual problems, etc. form to be some reasons for the late diagnosis and treatment of a chronic pancreatitis. It’s just that the cost of brand name medications are completely identical apart from their color and shape. viagra ordination unica-web.com As a result of its successful assault on the U.S. solar industry, China produces over 70% of the world’s solar cells. As the European Chamber of Commerce has documented, “for a generation, China has been the factory of the world,” and by 2015, it already produced 24% of the world’s power, 28% of the automobiles, 41% of the world’s ships, over 50% of the refrigerators, over 60% of the color TV sets, over 80% of the air conditioners and computers, and over 90% of the mobile phones.

A key finding of the report is that China represents a significant and growing risk to the supply of materials and technologies deemed strategic and critical to U.S. national security; a challenge shared by key allies such as Germany and Australia. In addition to China dominating many material sectors at the upstream source of supply (e.g., mining), it is increasingly dominating downstream value-added materials processing and associated manufacturing supply chains, both in China and increasingly in other countries. Areas of concern to America’s manufacturing and defense industrial base include a growing number of widely used and specialized metals, alloys and other materials, including rare earths and permanent magnets.

China is also the sole source or a primary supplier for a number of critical energetic materials used in munitions and missiles. In many cases, there is no other source or drop-in replacement material and even in cases where that option exists, the time and cost to test and qualify the new material can be prohibitive – especially for larger systems (hundreds of millions of dollars each). From commodity materials to rare earths, Chinese investment in developing countries in exchange for an encumbrance on their natural resources and access to their markets, particularly in Africa and Latin America, adds an additional level of consideration for the scope of this threat to American economic and national security.

China’s capture of foreign technologies and intellectual property,109 particularly the systematic theft of U.S. weapons systems and the illicit and forced transfer of dual-use technology, has eroded the military balance between the U.S. and China. Such transfers aid China’s efforts to gain a qualitative technological advantage over the U.S. across key domains, including naval, air, space, and cyber.

China’s aggressive industrial policies have already eliminated some capabilities with critical defense functions, including solar cells for military use, flat-panel aircraft displays, and the processing of rare earth elements. China’s actions seriously threaten other capabilities, including machine tools; the production and processing of advanced materials like biomaterials, ceramics, and composites; and the production of printed circuit boards and semiconductors

As part of China’s One Belt, One Road doctrine to project Chinese soft and hard power, China has sought the acquisition of critical U.S. infrastructure, including railroads, ports, and telecommunications.

China’s economic strategies, combined with the adverse impacts of other nations’ industrial policies, pose significant threats to the U.S. industrial base and thereby pose a growing risk to U.S. national security.

The Report concludes Monday

Illustration: China Map (U.S. State Department) 

In the 20^th Century, America’s mighty industrial base became  as much a part of the nation’s identity as free speech and baseball.  Historically, it was essential to the development of the middle class, and allowed the military to quickly recover from Pearl Harbor and serve as the “Arsenal of Democracy.” But over the past several decades, that vital asset has eroded, endangering both the economy and the military safety of the U.S.

This month, a key report  on America’s Defense Industrial Base was submitted to the White House. It paints a devastating picture of the clear and immediate dangers presented by the extreme weakening of what was once the world’s greatest manufacturing environment.

America’s manufacturing sector is vital to both the economic and defense health of the nation. The report notes that “Not only is the manufacturing sector the backbone of U.S. military technical advantage, but also a major contributor to the U.S economy, accounting for 9% of employment, 12% of GDP, 60% of exports, 55% of patents, and 70% of U.S. R&D.”

However, between 2000, when President Clinton signed into law a measure granting China permanent normal trade relations, and 2010, over two-thirds of U.S. manufacturing saw production declines in terms of inflation-adjusted output. Between 2000 and 2010 alone, the U.S. lost over 66,000 manufacturing facilities.

Think tanks have long recognized the crisis.  In 2011, James Carafano, writing for the Heritage Foundation,  noted:

“The U.S. defense base is on the verge of a crisis—losing the design engineering and industrial capacity to affordably produce the cutting-edge military systems that once gave the American military an unassailable advantage. The reason for this is simple: The free market works. When there is no competitive market for goods and services, the industries that produce them dry up and blow away. The Pentagon has been under-funding procurement by about $50 billion a year. That, however, is only part of the problem.”

The DoD study notes that the loss in employment has been devastating. 36% of the industry’s workforce, with more than 5 million manufacturing job have been lost since 2000 alone. Job losses have been most pronounced in vital sectors subject to import competition, including primary metals, electronics, chemicals, and machinery. Manufacturing and defense industrial base companies’ inability to hire or retain U.S. workers with the necessary skill sets has led to significant gaps in skilled labor. A lack of skilled manufacturing workers and a decreasing number of jobs is destabilizing workforce readiness and leading to skill atrophy.

From 2000-2018, many defense-relevant sectors have seen increased import penetration with rates more than doubling for the industrial controls and machine tools subsectors. The negative effects of sequestration and the budget caps shocked the market and accelerated the downward trend in vendor counts, resulting in an estimated 20% decline in the number of prime vendors.

The decline in the U.S. manufacturing industry creates a variety of risks for America’s manufacturing and defense industrial base and, by extension, for the Department of Defense’s ’s ability to support national defense. Risks range from greater reliance on single sources, sole sources, and foreign providers to workforce gaps, product insecurity, and loss of innovation.
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On July 21, 2017, President Trump signed Executive Order (EO) 13806 “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States.”

According to the DoD study issued as a result of that executive order, “All facets of the manufacturing and defense industrial base are currently under threat, at a time when strategic competitors and revisionist powers appear to be growing in strength and capability.”

The report identifies Five major forces that are primarily responsible for the current situation:

1. From FY2012 through FY2017, sequestration led to lower defense spending relative to levels projected before sequestration was put in place.
2. Antiquated and counter-productive procurement practices induced contracting delays, deterred market entry, discouraged innovation, and increased costs to suppliers.
3. Decreases in key production capabilities and declines in manufacturing employment, relative to the last time the U.S. faced a great power competition, left key weaknesses that threaten the nation’s manufacturing capabilities.
4. The industrial policies of foreign competitors have diminished American manufacturing’s global competitiveness – sometimes as collateral damage of globalization, but also due to specific targeting by great powers like China.
5. Finally, emerging gaps in our skilled workforce, both in terms of STEM as well as core trade skills (e.g., welding, computer numeric control operation, etc.) pose increasing risk to industrial base capabilities.

Related to those five overall challenges are ten problems. These include the rise of single and sole source suppliers which create individual points of failure within the industrial base, as well as fragile suppliers near bankruptcy and entire industries near domestic extinction. Due to erosion that has already occurred, some manufacturing capabilities can only be procured from foreign suppliers, many of which are not domiciled in allied and partner nations. The concomitant gaps in U.S.-based human capital and erosion of domestic infrastructure further exacerbates the challenge. Ultimately, these negative impacts have the potential to result in limited capabilities, insecurity of supply, lack of R&D, program delays, and an inability to surge in times of crisis.

The Report Continues Tomorrow

F-35 assembly plant (Lockheed Martin)