Thursday, October 27, 2005

Defense Production Capacity--We Should Keep It

Perhaps the strangest anomaly of the Bush Administration is its seeming lack of interest in such things as strategic defense-manufacturing protection. There are simply some things that the US should not "give away," and defense-manufacturing capabilities leads the list.

In the Administration's own words: In 2003, Undersecretary of Defense for Industrial Policy Suzanne Patrick told the Banking committee, “A strong domestic industrial and technology base is one of the cornerstones of our national security.... The authorities in this Act continue to be of vital importance to our national security.” Last spring, Patrick launched her own probe into how mergers and acquisitions are impacting the defense industry to make sure we are not "inadvertently giving away our capability.”

However, when [t]he GAO revealed its new study of CFIUS at the October 6 hearing, [i]ts main recommendation was to expand the time available to CFIUS to review and investigate acquisitions, from the standard 30 days to the full 75 days allowed under current law.

Yet even this modest reform was opposed by the usual suspects -- the Chamber of Commerce, National Association of Manufacturers, Business Roundtable, et al., objecting to any constraints on foreign commerce, even for reasons of national security. In a letter to the Senate committee, these special interest groups argued that “amendments are unnecessary” to the present CFIUS process. Since this coalition does not want the system to work, their endorsement of the status quo was the best evidence that the system has failed.

Concludes our source:

In a dangerous world, America cannot allow its defense industry or other high-tech productive assets to either wither away or become the prey of foreign rivals. CFIUS as it currently operates is not up to the task of protecting the economic base upon which U.S. military superiority depends, and it does not seem willing or able to reform itself. It is up to Congress then to strengthen the system, and it must act as soon as possible to do so.

Let us hope that GWB instructs Treasury and Defense to pay attention.

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