What remains of the U.S. defense industrial base?
A new report commissioned by the AFL-CIO Industrial Union Council and authored by Dr. Joel Yudken finds that the ongoing erosion of the U.S. manufacturing base has left critical holes in the America's national security.
Yudken's report, Manufacturing Insecurity, reports that "there are advanced technologies critical to military systems—armor plate steel, defense-specific integrated circuits, night vision goggles—for which domestic sources are inadequate."
Yudken says that significant numbers of items once supplied by U.S. manufacturers are now obtained from foreign suppliers because they are "not readily available from U.S. producers." He cites Col. Michael Cole, of the U.S. Joint Forces Command, who observes:
the problem is not just a matter of a handful of highly specialized items designed to meet narrow defense requirements, but the “eradication of U.S. industry capability.” He also warns that current strategies to deal with an industrial base that increasingly is unable to supply the military with manufactured parts and electronic components are not working.
Manufacturing Insecurity examines how much of U.S. industrial defense capability has been eroded and looks at the potential weakening of America’s defense industrial base in the coming decades.
At a forum this morning hosted by the AFL-CIO Industrial Union Council, the Coalition for a Prosperous America, the AFL-CIO Metal Trades Department, and the Alliance for American Manufacturing, Dr. Yudken is presenting the findings of the new report. Joining him in the discussion are Dr. Jerry Abbot, current faculty member and former director of the Industry Studies Program, Industrial College of the Armed Forces, National Defense University, and Owen Herrnstadt, Director, Trade and Globalization, International Association of Machinists.
FROM THE LIVE WEBINAR:
AFL-CIO's BOB BAUGH: What happens to our national security when our manufacturing base is destroyed? It's interconnected.
REPORT AUTHOR JOEL YUDKEN: Let's look at this more broadly than the defense department. Look at entire cross-section of industrial base, evaluate health of entire manufacturing sector. Across the board, there is a sustained erosion across the manufacturing sector. These are industries critical for national defense. R&D and innovation also affected.
YUDKEN: Some data: 6 million jobs lost in past decade. This includes lost expertise in niche areas. Manufacturing's value added growth has fallen tremendously. Industrial capacity has declined. 57,000 lost manufacturing plants. Steady growth of U.S. trade deficit. Very worrying: a trade deficit in Advanced Technology Products since 2002.
YUDKEN: 13 of 16 key defense industrial sectors show clear erosion. Two key areas for defense that are declining-- semiconductors and printed circuitboards. At the same time, China is building up its capacity.
YUDKEN: Other examples-- advanced materials, specialty metals, rare earth metals, stainless steel, machine tools. Specific applications include night vision goggles. China gaining an advantage through subsidies and other predatory actions.
YUDKEN: Aerospace helps improve our trade balance, yet we're losing ground in this sector, in part due to offsets (production is required to be moved overseas as condition of contract with foreign supplier). Offsets reach as much as 70% of overall contract.
YUDKEN: Offsets lead to U.S. technology being transferred overseas.
YUDKEN: The overall result: innovation and technological development are eroding, moving overseas. U.S. losing its world leadership position in technology innovation. U.S. has been building up for 50 years, but now it is eroding.
YUDKEN: If we lose the know-how embodied in trained workforce, we lose foundation of industrial sector.
YUDKEN: What we need to correct this: Buy America policies, national manufacturing strategy.
DR. GERALD ABBOT: On the demand side, $55 billion was allocated for homeland defense after Sept. 11, 2001. Congress typically allocates money only when it sees risk. Defense share of federal budget has declined overall.
ABBOT: The procurement account for national defense has fallen. Example: the aircraft industry-- in the past 30 years, we've gone from dozens of companies to just a handful.
ABBOT: The defense base is intertwined with overall manufacturing. With so few contractors available, competition means including overseas suppliers.
ABBOT: How does Defense Department downsize when experiencing budget cuts? "Shoot the wounded"--problem programs are cut. Means loss of innovation.
ABBOT: Manufacturing can be transferred-- it doesn't have enough advocates in Congress. Agriculture is low percentage of GDP but gets strong federal support while manufacturing has higher GDP percent, but doesn't get support. Manufacturing needs more advocates.
OWEN HERRNSTADT: There has been a weakening of domestic content requirents. Also, offsets result in transfer of technology. Offsets put a "crimp" on the free market.
HERRNSTADT: U.S. suppliers have been hard-hit by offsets. It is typically their products that are getting lost/transferred.
HERRNSTADT: We need to enforce trade laws, particularly in aerospace sector.
AUDIENCE QUESTION: Have you come across any particular and very worrying examples of a U.S. manufacturing sector or product that has been completely lost? Ie. there have been reports that the U.S. is dependent on China for Hellfire missile propellant, for example.
ABBOT: Night vision goggles, optics, and flat panel displays are well known examples. The Department of Defense publishes a list of "Diminishing Manufacturing Sources" (DMS) that can provide further examples.
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