Tag Archives: Defense Procurement Policy

The Right’s Unilateral Disarmers

For several years now, some on the political right have portrayed the U.S. Export-Import Bank (Exim) as an exemplar of inappropriate federal government involvement in activities that should be left to the private sector. Worse, Exim is portrayed as engaging in “crony capitalism” – loosely defined as picking winners and losers on the basis of political connections, and favoring the former with taxpayer largesse.

Despite the evidence to the contrary – including the fact that taxpayers have not had to pay a cent on the billions in loans and credit guarantees Exim has extended to support American businesses providing goods and services to foreign customers – this mantra has become something of an idée fixe in certain circles. Increasingly, it poses a danger to the Export-Import Bank, its ability to provide such a service in the future, and to the competitiveness of U.S. exporters with foreign rivals that enjoy similar, if not vastly greater, support from their governments’ Exim counterparts. 

That prospect appears to have grown significantly after Rep. Kevin McCarthy announced shortly after his election as House Majority Leader that he would oppose the Export-Import Bank’s reauthorization. Were he actually to use his office to prevent consideration of the legislation necessary to allow the bank to do more than administer its existing loan and credit portfolio, Leader McCarthy would be engaged in something Republicans have generally eschewed – and properly castigated Democrats for doing with some regularity: unilateral disarmament.

That’s right. As long as no corresponding action is taken by China, Japan, the Europeans, or others with whom our exporters go head-to-head to make their sales, the United States will have denied itself unilaterally an often-decisive factor in such transactions: certain access to credit on favorable terms. And, while the Exim’s critics claim that an agreement can be forged whereby other governments’ export lending facilities will be shuttered, no such accord is in prospect.

Alternatively, we are told the private sector can pick up the slack. Unfortunately, publicly traded banks and other underwriters are simply unable or unwilling to offer terms that are competitive with those offered by foreign governments’ export facilitation operations. Export credit bridges real gaps in commercial finance, from developing emerging markets to financial market disruptions.

Even companies like Boeing that have relatively deep pockets depend on Exim to support foreign airline purchases of its high-quality planes when competing against heavily subsidized Airbus and emerging aircraft manufacturing concerns in China and Brazil. Most of the thousands of other American exporters that benefit from Exim’s services also lack such means. They would likely see their opportunities for overseas sales vanish as foreign competitors use government loan guarantees and credits to close deals, despite offering what are often inferior products.

Consequently, the upshot of the sort of Republican-led unilateral disarmament now in prospect with respect to Exim Bank is that the United States will lose export opportunities and jobs. In some cases, American companies that have a successful business model, provided they are able to compete internationally on a level-playing field, will become unviable.

Of particular concern is the likelihood that among the casualties will be the already-beleaguered U.S. defense industrial base. For example, what is left of the skilled workforce, engineers, design teams, machine tools, etc., needed to produce state-of-the-art fighter aircraft, transports, and satellites now resides substantially in our commercial aerospace sector. And if the industry’s commercial operations cease to be able to sell their products to overseas customers, as a practical matter, we are going to find ourselves even less capable of reconstituting our military production lines when, not if, they are needed.

That would amount to unilateral disarmament, not just in the figurative sense, but in the literal one.

As long as transactions supported by the U.S. Export-Import Bank are made on the merits and with the same record of fiduciary responsibility that has protected the taxpayer’s equities to date, and so long as other nations provide comparable support to their exporters, our country needs Exim. And Republicans should eschew the sort of unilateral disarmament that would eliminate it.

Shutting down national security

On October 15th, our military personnel will receive their paychecks as usual, thanks to a last-minute act of Congress passed in spite of the government shutdown affecting much of the rest of the government.

But our servicemen and women are being paid to work in a military that is rapidly being hollowed out to the point where it may be incapable of winning the nation’s wars. The federal government will not be shut down for long. The same can’t be said of those we expect to keep us safe and free.

In fact, the “fundamental” transformation promised by candidate Barack Obama in 2008 is arguably manifesting itself most dramatically in the systematic dismantling of our military capabilities. It has lately become so severe that, on September 18th, the nation’s senior officers testified to Congress that the armed services are at risk of being unable to meet even this administration’s sharply scaled-back requirements.

Recall that the President had justified the first nearly half a trillion dollars he cut from the defense budget by claiming that we no longer needed to be able to fight two wars nearly simultaneously. But at least they were supposed to be able to win one.

But now, according to the Joint Chiefs of Staff, if the sequestration process is permitted to continue to reduce Pentagon budgets over the next ten years by another half a trillion dollars, the uniformed leaders of three of the four services say they will not be able to execute even a one-war mission. And the Marine Commandant says his would have difficulty in doing so.

These dire predictions are the predictable – and predicted – results of both the sheer magnitude of the cuts themselves, compounded by the inherent, across-the-board nature of the sequestration mechanism. Insult is added to injury by the fact that the Pentagon has to bear a wildly disproportionate percentage of government-wide sequestration reductions: fifty percent of the total, even though defense represents just twenty percent of federal expenditures.

At present, every aspect of the military budget except for compensation for military personnel – including, in particular, training, operations and maintenance, procurement and research and development – is being ravaged.

What is more, regardless of the outcome of the fights over Obamacare this week, and raising the debt ceiling later this month, the structural damage resulting from the defense budget cuts to the nation’s industrial base is becoming increasingly irreparable.

The production line for the Free World’s only large military air transport aircraft, the C-17, is the latest to be threatened with termination. As with the supply chains associated with other critical weapon systems and components – from fighter aircraft to combatant warships to armored vehicles – we are seeing disruptions and, in some cases, the outright elimination of the required manufacturing capacity, especially among second- and third-tier subcontractors. Over time, such short-sighted behavior will tremendously compound the impact of the other reductions in the military’s resources and make any comeback that much more problematic.

The repercussions of such decisions are not affecting adversely just the national  security. It is also having profound repercussions in our economy, as well. The United States is losing what will shortly become over 1 million jobs. Among those bearing the burden of such losses are small businesses that have contributed for decades to our common defense. Notably, under the sequester regimen, minority-owned businesses are losing over $5 billion in revenue per year, and women-owned businesses over $2 billion per year.

Two years ago, such prospects prompted then-Secretary of Defense Leon Panetta to warn that sequestration would be like “shooting ourselves in the head.” Regrettably, both the Republican and Democratic leadership now seem intent on pulling the trigger. Apparently, like Team Obama and Harry Reid’s Senate Democrats, the GOP now finds it easier to cut defense rather than entitlements today, even if, by so doing, they are leaving America at risk tomorrow, both in terms of our national security and our financial security.

This is a formula for disaster for the Republican Party. In addition, first and foremost, to the compelling national security considerations for supporting the practice of what Ronald Reagan called “peace through strength” and secondarily the economic ones, the GOP has another reason to challenge and reject the Obama wrecking operation with respect to the common defense. Historically, when they have steadfastly championed the unrivaled military needed in an increasingly dangerous world, Republicans have been rewarded at the polls. And when, instead, they have abandoned this part of their brand, they generally have neither earned nor received the public trust and mandate.

For all these reasons, in the difficult budget and deficit fights ahead, the Loyal Opposition must find its bearings and coalesce around a restoration of our national security, not be party to its further dismantling.

A tale of two Obamas

Barack Obama was even more prominently featured in the news on Sunday than is usual for a President of the United States, what with his four appearances that day in 9/11-related events.  These opportunities afforded him the chance to appear dignified, non-partisan and, well, presidential.  A more illuminating sense of the man and his presidency, however, was provided by a curiously bipolar treatment of Mr. Obama in that day’s Washington Post.  Call it a tale of two Obamas.

On the one hand, columnist Dana Milbank scathingly described what he called "President Irrelevant."  Milbank not only chronicles the jaded response of many Republicans to Mr. Obama’s pitch for his new jobs bill.  He also describes the unconcealed lack of enthusiasm congressional Democrats are now exhibiting for the leader of their party.

On the other hand, the Post also served up a double-dose of fatuous spin from Obama partisans about the President’s derring-do as a hands-on leader in combating terrorism.  In a putative "news" article entitled "Obama Scores Well Against Terrorism" and in a column by David Ignatius under the headline "The Covert Commander-in-Chief," we are assured that the man who has publicly dithered on myriad issues and so bungled the economy and his relationships with members of both parties on Capitol Hill as to have become "irrelevant" has been stunningly decisive and successful in the secret campaign against our terrorist foes.

For example, Ignatius declares that, "Intelligence is certainly an area where the president appears confident and bold." The retired general Mr. Obama appointed as Director of National Intelligence, James Clapper, goes so far as to declare unctuously that his boss is "a phenomenal user and understander of intelligence."  Barack Obama is, we are told, a president who "prizes his authority to conduct covert action."  A case in point is supposedly his decision to opt for the most risky of three options with respect to Osama bin Laden, namely sending in the SEALs (albeit, after 16 hours of struggling with the question).

The spinners behind the puffery about the president’s skillful stewardship of his counterterrorism responsibilities are promoting the idea that, as the Post‘s "news" account had it, "National security has gone from being Obama’s big political weakness to his only area of policy strength."  For example, presidential handler (and obviously primary source for the spin) David Alexrod told the paper, "I don’t think the remaining al-Qaeda leadership that’s on the run would think of [Obama] as a weak leader."

Republicans are portrayed as taking the bait. They are described as giving Mr. Obama a pass on national security or, worse, deferring to him on the grounds that he bagged bin Laden. 

Such spin, and the lack of a robust GOP response to the President’s national security stewardship to date, would be laughable were the implications not so serious.  While the take-down of Osama bin Laden and other al Qaeda operatives is certainly welcome, they do not begin to offset President Obama’s serial failings as Commander-in-Chief.  Such failings have had a far worse effect than making him "irrelevant."  They have helped to make the world a vastly more dangerous place for America, her people and others who love freedom. 

A necessarily illustrative list of ways in which such dangers are arising would include the following examples:

Israel is likely soon to be engulfed in yet-another war for its very survival.  Straws in the wind are: the sacking of its embassy in Cairo over the weekend and intensifying attacks on its territory and natural gas pipelines from territory at least nominally controlled by Egypt; the portentous approval next week by the UN General Assembly of the Palestinians’ demand for recognition of their unilaterally declared state; the increasingly overtly hostile posture towards Israel being taken by Turkey under its Islamist prime minister, Recep Erdogan; the arming to the teeth of jihadists in Libya; Lebanon under the control of Iranian proxy, Hezbollah; the prospect that the Muslim Brotherhood will emerge ascendant as Syria unravels; and Iran’s incipient nuclear weapons capability.

China is becoming increasingly assertive in the South China Sea and elsewhere as its military build-up progresses, its economic power becomes more dominant and its colonial expansionism spans the globe.  Last week, the Washington Times’ Bill Gertz reported that in 2008 Chinese naval vessels and bombers temporarily blinded and repeatedly buzzed the crew of a U.S. Navy survey ship.  Unfortunately, far worse is in prospect.  That is especially true if the U.S. Senate buys into the false promise that the fatally flawed Law of the Sea Treaty (LOST) will somehow safeguard our rights of passage, despite our declining ability to project power in the face of growing Chinese access-denial capabilities.

The evisceration of our military and its supporting industrial base – which will be the hallmark of the Obama policy legacy – will be a far more important determinant of our future security and that of the Free World more generally than all of President Obama’s putative decisiveness in the fight against al Qaeda.  Today’s spin will be the subject of tomorrow’s ridicule as we inevitably reap the whirlwind of wars that could have been prevented. 

The key question is:  Will Republicans be able to show that they opposed the abandonment of the time-tested principle that Ronald Reagan called "peace through strength"?  Or will they prove to the American people that they were "irrelevant" – or worse, complicit – in conduct by Mr. Obama that will cost us greatly in lives and treasure?

 

Frank J. Gaffney, Jr. is President of the Center for Security Policy, a columnist for the Washington Times and host of the nationally syndicated program, Secure Freedom Radio, heard in Washington weeknights at 9:00 p.m. on WRC 1260 AM

The Future of Unmanned Flight

The infrastructure of the Air Force is aging.  The average age of an airplane is 25 years, and even older for Strategic Bombers, with an average age of 34 years, and Tanker Aircraft, at 47 years.

Unfortunately, many in Washington are reluctant to make the investments necessary to keep our Air Force strong and well equipped.  The failure to modernize comes to the detriment of our airmen and pilots, making their jobs more difficult and dangerous, and costs more money in the long run.

Meanwhile, some new weapons programs – like unmanned aerial vehicles, or UAVs – have already saved taxpayers billions and will continue to provide savings for the next generation.

Unmanned aerial vehicles are a proven technology that should continue to be a significant part of Air Force modernization programs.   A Teal Group analyst has predicted that in a time of defense cuts and shrinking budgets, this growth trend will defy trends and continue upwards, estimating a near doubling of market share by 2020 to $11.3 billion annually, up from $5.9 billion today.  Teal notes that "The U.S. market is expected to account for 77 percent of worldwide research, development, test, and evaluation (RDT&E) spending on UAV technology over the next decade, and roughly 69 percent of the procurement."

UAVs are being used by the military increasingly in integrated operations for various missions, and theater commanders needing a broad overview and systematic target surveillance rely on the Global Hawk, recently profiled on Secure Freedom Radio.  Developed by Northrop Grumman, it is designed to conduct high altitude surveillance missions and replace the U-2 spy planes, in use since the 1950s.  The Global Hawk can fly missions for up to 36 hours, three times the flying time of a U-2,  due to the lifting of pilot restrictions.  The UAV can also hover, essentially allowing for continuous surveillance on a battlefield or intelligence target and carries three cameras for surveillance, an electro-optical, black and white still camera; infrared, and a radar imaging camera.  The latest version has new sensor capabilities, employing  Multi-Platform Radar Technology  for improved surveillance .

As Col. Ed Walby of Northup’s High Altitude Long Endurance Systems Enterprise recently told Secure Freedom Radio, the Global Hawk requires fewer personnel for maintenance and operations.  When the UAV first deployed in the Persian Gulf, he says, "I had twenty-five people with me. The U-2 had almost a hundred and sixty people with its deployed element. So you have a hundred and sixty people you have to protect, a hundred and sixty people you have to worry about, feed, they’re away from their families, etceteras. On Global Hawk, the twenty-five people with me were mostly maintenance. All the pilots, except for a handful, were back home at Beale Air Force Base. And so the infrastructure that you normally carry with you can stay home because they’re flying the mission."

UAVs like the global hawk demonstrate the  benefits from continued smart investments in a strong national defense.  While it may seem tempting for deficit-cutters to save money in the near term, the failure to invest in improved and fiscally prudent capabilities, such as UAVs, would be of great detriment to the United States.  America must continue to invest in defending its future, and improving its ability to project power and comfort to the rest of the world.

Doing in defense

At this writing, many details of the debt ceiling deal wrangled out over the weekend remain fuzzy.  One thing is clear, unfortunately:  The national security of the United States is going to suffer greatly.

That will be so no matter how much is taken out of the defense budget as a result of the not-so-grand bargain struck by congressional leaders.  If approved by both houses, it would reportedly cut $350 billion from "security" spending as part of a first tranche of deficit-reduction.  Then, the Pentagon (and possibly the Homeland Security and State Department budgets) will be wacked by as much as half of the $1.5 trillion more that an as-yet undesignated congressional "super-committee" is supposed to come up with by Thanksgiving.

Put simply, these initiatives will treat national and homeland security as a bill-payer for deficit reduction.

The trouble is that – even if no further reductions were made in the spending allocated to defending our people and interests around the world – we will see ominous reductions in the capabilities needed to meet those vital responsibilities.  That will be because of the more than $400 billion already cut from our national security investments over the past few years.

The warnings of what will befall our military and country as a result are beginning to accumulate. President Obama’s first defense secretary, Robert Gates, put down repeated markers as he headed for the door to the effect that we risked once again "hollowing out" the armed forces if anything like the sorts of cuts Mr. Obama has proposed ($400 billion), let alone those called for by others (up to $1 trillion), are forthcoming.

Senior military officers, including the new chairman and vice chairman of the Joint Chiefs of Staff, General Martin Dempsey and Admiral James Winnefeld, respectively, are making plain the repercussions would be far-reaching.  Adm. Winnefeld told Congress at hisconfirmation hearing:  "…As we get to a higher and higher number [of defense cuts], we’re going to find that the strategies that we currently have are going to reach inflection points where we’re just going to have to stop doing some of the things that we currently are able to do because what we can’t afford is to have any kind of a cut result in a hollow force.  We can’t afford to have a cut result in irreversible damage to our industrial base."

Last week, the Lexington Institute’s Daniel Goure observed that these officers were hardly alone: "The Vice Chiefs [of Staff of the four armed services in congressional testimony] described a military worn out by continuous combat or allowed to age out as the result of a defense buildup that failed to adequately modernize the force. Each of the services has been plagued by readiness problems that, in some cases, have interfered with their ability to deploy forces."

Responsible legislators are expressing concern as well.  For example, last week the chairman of the House Armed Services Committee, Rep. Howard "Buck" McKeon of California, declared that cuts of the magnitude now in prospect, "would have a disastrous impact on our military and we wouldn’t be able to carry out our missions."

Earlier last month, the Senate’s Number 2 Republican, Senator Jon Kyl of Arizona, took to the floor of the Senate to challenge a remark by President Obama to the effect that we had to protect our government’s "core commitments" like food stamps at the expense of national security spending.  Sen. Kyl observed that there is no core commitment that supersedes the obligation to provide for the common defense, the first business of the federal government.

Yet, President Obama, congressional Democrats and at least a few Republicans aredetermined to make the sorts of reductions that will prevent us from assuring the common defense.  Some, particularly in conservative circles, are doing so out of a conviction that only a strong economy can make possible a strong military.

Jamie Fly of the Foreign Policy Initiative reminded us recently of a remarkable statement byRonald Reagan in which he addressed precisely this point: "In a December 1992 address to students at the Oxford Union Society, in a passage that is eerily relevant to today’s debate, [the former President declared]: ‘It is a fashionable assertion in these troubled times that nations must focus on economic, not military strength. Over the long run, it is true, no nation can remain militarily strong while economically exhausted. But I would remind you that defeats on the battlefield occur in the short run. As the tragedies ofBosnia, Somalia, and Sudan demonstrate all too well, power still matters. More precisely, economic power is not a replacement for military power.’"

History has taught us a painful lesson that we are poised to learn all over again.  Cutting "security spending" in a dangerous world is an invitation to enemies – actual and prospective – to make it much more dangerous for Americans and their vital interests.  It invariably proves to be a false economy, and the costs are measured in lives as well as immense amounts of dollars.

We literally cannot afford to make this mistake.  Those responsible will surely be held accountable – later, if not sooner.  They may never be forgiven, however.

 

Frank J. Gaffney, Jr. is President of the Center for Security Policy, a columnist for the Washington Times and host of the nationally syndicated program, Secure Freedom Radio, heard in Washington weeknights at 9:00 p.m. on WRC 1260 AM.

2011 Freedom Flame Award: John Lehman

The past June, the Center for Security Policy awarded former Secretary of the Navy John Lehman, father of the 600 ship Navy, with the Freedom Flame Award at the Union Club in New York City.

The Freedom Flame Award recognizes individuals who have exemplified the ideals of freedom, democracy, economic opportunity and international strength to which the Center for Security Policy is committed. The Award acknowledges the past contributions of its recipients while serving as a reminder that the goals for which they have worked so valiantly require the continuing, unflagging efforts of those who follow in their footsteps.  Secretary Lehman was the recipient for his unwavering support for a strong national defense.

Secretary Lehman has a long and storied career with the military that started not actually with the Navy, but with the Air Force Reserve while studying at Cambridge. After 3 years of service, he transferred to the United States Naval Reserve where he entered with the rank of ensign.

While working his way up through the ranks of the Navy, Secretary Lehman held a variety of positions including: President of the Abington Corporation, delegate to the Mutual Balanced Force Reductions negotiations and Deputy Director of the Arms Control and Disarmament Agency.

One of his greatest honors was serving as Secretary of the United States Navy from 1981 to 1987 where he was responsible for the management of 1.2 million people and an annual budget of $95 billion.  During that time, John worked tirelessly to implement the “600 ship navy,” a program unveiled during the early days of the Reagan administration that sought to reverse the dismantling of America’s military capabilities that occurred under Jimmy Carter.  Secretary Lehman fought hard for the necessary increases then, and his commitment to maintaining a robust military has not waned to this day.

In his acceptance speech [read the full transcript here] at the Freedom Flame Award Dinner, Secretary Lehman recalled the spirit of the ‘600 ship navy’ buildup, calling for strong leadership and a reeling in of the Pentagon bureaucracy to confront the declines in military readiness the United States currently faces.

We clearly have been unilaterally disarming our services over the last fifteen years. Our fleet is less than half the size, even though we’ve been spending in constant dollar terms almost twice as much in-adjusted for inflation-as President Reagan spent.

The world hasn’t gotten any smaller. The threats, while very different than the Cold War confrontation, are much more complex, much more varied, and much more disparate and less able to be dealt with by the kind of static and ordered forces that we were used to in the Cold War. So we’ve been steadily reducing our capability to act around the world. And we’ve been steadily reducing our capability to act around the world. And we’ve been doing it even while increasing the defense budget.

So I’m here to tell you that the problems we face today are very solvable. All it takes is a recognition of the problem and leadership. Seven hundred and fifty thousand bureaucrats are not needed. Nine percent a year is the attrition rate in the bureaucracy. So even a selective hiring freeze, not a total hiring, but a selective hiring freeze would shrink this bureaucracy down to a manageable size within four years.

So that’s my message. Yes, we are in a serious threat situation today. But, yes, we have the resources to turn this around and reassert American primacy as a defender of the free world. And all it takes, all it takes, is leadership.

As Secretary Lehman points out, the threat to the military is as acute now as it has ever been.  Defense spending is at the lowest point it has been in 50 years, standing at a mere 3.9% of GDP and it appears, poised to decline further: despite calls from many top officials for increased spending Obama seeks to cut another $400 billion from the military over the next 12 years.

Unless this trend is reversed and strong leadership is enacted, the United States will again find themselves in a military situation much like Secretary Lehman did when he took over the Navy, underfunded, undersized, and out-of-date.  The Center applauds Dr. Lehman for his efforts and will continue to work with him to ensure America’s military remains a dominant force for years to come.

Watch video from the 2011 Freedom Flame below.

First, Rabbi Aryeh Spero delivers a meaningful invocation. Next, the Center’s Chairman of the Board, E. Miles Prentice III, receives the Terry Elkes Sacred Honor Award for his philanthropic efforts on behalf of the Center. Then, Admiral James ‘Ace’ Lyons— former Commander-in-Chief of the US Navy’s Pacific Fleet– introduces Dr. Lehman. Finally, remarks by Dr. John Lehman, former Secretary of the US Navy.

Introductory Remarks by Adm. James “Ace” Lyons (USN, Ret.)

I’ve known John Lehman for many years. He has had more influence on the United States Navy than anybody since Teddy Roosevelt and the Great White Fleet. John learned early on about the Navy from his dad, who was captain of an LCS as a lieutenant junior grade and fought in the early battles for Okinawa. In his early college and graduate days, his inquisitive mind was put to full use. While he was at Cambridge, he spent many hours at the Tiki Lounge over a pint, discussing the issues of the day. It was there that he learned to hone his debating skills. Sometimes he was asked, why didn’t you go to Oxford? And he would reply, I was rejected when they found out my mother and father were married.  It was at graduate school at the University of Pennsylvania where John met one of his mentors, Dr. Robert Strauss and it was through that relationship that brought John to Washington and where he joined the Nixon Administration and worked directly for Henry Kissinger and Richard Allen. It was under the master, Henry Kissinger that he learned to consolidate power, which he would put to good use later on. John was the Congressional liaison point man for the administration. This let him establish close working relationships with the defense titles on Capitol Hill. Such as Senator John Stennis, John Tower, and Henry Jackson. Later on, he was appointed by President Ford as the Deputy Director for the Arms Control and Disarmament Agency. When Ronald Reagan won the presidency, he made a vow to build a six hundred ship Navy, to restore our maritime superiority. The man he chose to make that vow a reality was John Lehman.

Now, he was a young, politically-savvy, aggressive guy who knew how to get things done in Washington. He knew how to work the bureaucracy. You would have been-furthermore, he was also a qualified naval aviator who had flown combat missions in Vietnam, on his naval reserve active duty time. Now you would have thought the uniformed Navy would have greeted him with open arms. Not to be the case. He was greeted like a skunk at a picnic. What they wanted for a Secretary of the Navy was somebody they could pat on the head and send him off to make Navy-league speeches while they ran the Navy. Well, were they in for a surprise. John understood the culture of the Navy had to be changed. The programmers and budgeteers of the old-boy network were out. Operators were brought in. There was one delicate personal matter that every Secretary of the Navy had avoided like the plague. And that was how to retire Admiral Rickover gracefully. John devised the unique idea to make him the Special Adviser to the President for Nuclear Energy. Everything was set. Everything was set. They all marched in to the Oval Office. President Reagan, being the great gentleman that he was, warmly greeted the admiral, escorted him by the arm over to an armchair in front of the roaring fire, sat him down and started telling him how grateful the nation was for his years of service. At which point, Rickover interrupted him and said, ah, cut the crap. Why are you listening to these two piss ants? Pointing to John and Cap Weinberger. They don’t know what the hell they’re doing. And then he turned back to the President. He said, do you-do you know what you’re doing? Do you know how to be president? And it went downhill from there. Talk about one’s career flashing before his eyes.  Fortunately, John survived the day and fortunate for the Navy. Because we were just emerging from the disastrous Carter years where the Navy had gone from over nine hundred ships and was down to four hundred and seventy-seven. Seventy-five of those ships were overdue for their major overhaul. We were down in every readiness category.

We had senators like Gary Hart advising Carter to build low-tech ships and small carriers. That was a formula for disaster. Come to think of it, I’m wondering did Hart advise Congressman Weiner? There were many challenges facing the Navy and John met them head on. He embraced a new maritime strategy which literally took the fleet into the Soviets’ backyard in the Atlantic and the Pacific. There was not going to be a maritime Maginot Line at the GIUK Gap in the Atlantic that sacrificed our NATO allies on the northern flank to the Soviets. He implemented innovative shipbuilding plans. He built high-tech ships like Aegis cruisers. Aegis-equipped Arleigh Burke destroyers. He implemented multi-year carrier buys, which literally saved the taxpayers billions of dollars. Excuse me. He used the same technique for aircraft procurement. There was one innovative shipbuilding program which was the conversion of two super-tankers into hospital ships, now called the Mercy and Comfort. These thousand bed hospital ships are the most sophisticated afloat trauma facilities in the world. They are what the Navy uses today to project humanity, to show the best of America.  John streamlined the management system. He eliminated the naval material command along with a thousand bureaucrats. The Navy we have today is the Navy that John Lehman built in the 80s. And as I think Frank Gaffney stole one of my lines, that Navy has shrunk to two hundred and seventy-seven ships. Now, if John Lehman was Secretary of the Navy today, we would not be building these sorry-ass little, literal combat ships. That can’t defend themselves and have no offensive capability. Instead, he would be building the high-tech, twenty-first century, zoom-all class destroyer. Which is built from the keel up to be stealthy.  And has the power and capabilities to defeat any potential enemies, weapons systems, now or in the future, including the Chinese anti-ship ballistic missile. John Lehman would not tolerate the political correctness disease that has infected every echelon of Navy leadership today. John resigned as Secretary of the Navy in April, 1987. He went into business and became a very successful investment banker. I got to say, I didn’t get anything out of it, but-but he continued to serve his country.

He was a valuable member of the 9-11 Commission. He literally devoted hundreds if not thousands of hours to that committee’s work. The committee had a number of important findings. None more important than the cache of NSA documents that were found literally days before the committee’s report went to press. In those documents, it provides proof positive of Iran’s involvement in 9-11, utilizing their Hezbollah terrorist proxy group. Now I want to take you back to 23 October, 1983. The day of the Marine barracks bombing in Beirut, Lebanon where we lost two hundred and forty-one of our finest military personnel. We had proof positive information then Iran ordered the attacks. Actually, we had the information four weeks before. But I didn’t get to see it as the Deputy Chief of Naval Operations until two days after the bombing. And I showed John that message that day. Now, the Navy, working with the CIA, were able to identify the terrorist group as the Islamic Amal, which was the forerunner to Hezbollah. And where they were located at the Lebanese army barracks above Baalbek, which they took over months before with the help of the Iranian Revolutionary Guards. We had the planes loaded not once, but twice. We had shown the attack plans to John, which he approved. But, unfortunately, as Secretary of the Navy, he was not in the operational chain of command. We were essentially going to wipe out the entire Iranian Hezbollah Islamic network. The entire proxy network. We were going to take those Lebanese army barracks and when we got through with them, they were going to look like a plowed cornfield. However, we could never get authorization to launch. And that’s a story for another day. John continued to serve his country by being a valuable member of the National Defense Commission, where he did yeoman work. So it is with a great honor and privilege that I present this year’s Freedom Flame Award to the honorable John F. Lehman, Jr.

 

Remarks of Dr. John Lehman, former Secretary of the US Navy

The title of my talk tonight – and I’m going to keep it really focused on the lessons, perhaps – is national security in an age of rising Asia, unholy terror, and fiscal crisis. Pretty daunting formula. But I really want to focus on the half-full part of the glass tonight, not the half-empty.

Those of you who are long-time supporters and newcomers alike to Frank’s fantastic organization know well enough the nature of the dangers that we face today and they are certainly severe. We have a deterioration of our capability to deter and keep the peace. We have the phenomenon of a China that is exploding in terms of its capabilities and its power and where they’re going to fit in the world and this is yet to be determined. And we have an Islamist movement that we, I think very effectively laid out to the world in our 9-11 Report, that is a new phenomenon. It’s worldwide. It’s not—well, it’s enabled by some, it is not part of any nation-state. And they’re focused on setting off a weapon of mass destruction to bring down the culture of the free world as we know it. These are real threats. We also, as a result of some very inept foreign policy, have really grown the problem and the threat of nuclear non-proliferation. Now we’ve shown that if you give up nuclear weapons like Mr. Gaddafi and President Mubarak, that you can be out like that. But if you defy the United States and the world community and pursue nuclear weapons like North Korea and Iran and Syria, you are immune from even being asked to resign by the United States and the United Nations.

So these are the three major areas of threat that we as a nation and our institutions face today. And I’m not going to dwell on the ramifications of them. I want to dwell on the solutions to these issues. The solutions to these problems. Because they’re very solvable in the sense of we can provide for our national security in this very threatening age with new kinds of threats. And I want to dwell on, as I said, the half-full part of the glass here tonight. Most recently, we showed that we do have a capability and, indeed, a national will to defend our interests with the dramatic bringing to justice, as was said, of Osama bin Laden. We have enormous capabilities. We have the ability to project power anywhere in the world. We have the capability to demonstrate to the Chinese, for instance, that we are able to maintain a balance. That we are not inevitably in decline. But we have not really been taking advantage of the inherent capability we have. And I want to talk a little bit about why that is the case. We clearly have been unilaterally disarming our services over the last fifteen years. Our fleet is less than half the size, even though we’ve been spending in constant dollar terms almost twice as much in—adjusted for inflation—as President Reagan spent. The Air Force is—the average age of the Air Force’s fleet of aircraft is twenty-eight years. And they have half the number of combat airplanes that they had at the height of the Reagan Administration.

The world hasn’t gotten any smaller. The threats, while very different than the Cold War confrontation, are much more complex, much more varied, and much more disparate and less able to be dealt with by the kind of static and ordered forces that we were used to in the Cold War. So we’ve been steadily reducing our capability to act around the world. And we’ve been doing it even while increasing the defense budget. And this is why I argue all the time with my conservative friends who are constantly campaigning for increasing the defense budget. The answer is, we’ve got to have more money given to defense to provide for this deterrent. We’re fighting, now, three wars. And yet we’re talking about cutting the defense budget. But the real nature of our unilateral disarmament is something very different. We face a crisis of, to put it very simply, bureaucratic bloat. It afflicts our intelligence community. It afflicts every one of our military services. And most importantly, it afflicts our defense department. Now just to throw a few—a few factoids your way from our recent commission report. When the Department of Defense was set up in 1947, the law limited it to fifty civilian staffers for the Secretary of Defense. Which at the time was larger than the White House staff. Today, there are seven hundred and fifty thousand civilian staff members of the Department of Defense. And every time there is a crisis that the media focuses on in defense procurement, Congress reacts by creating a new layer of bureaucracy. Last year, alone, they added twenty thousand new civil service slots to the Pentagon because the argument was, we have to reform defense procurement. Now, the whole Pentagon only holds twenty-five thousand people. And with one trice, they added another twenty thousand. That’s seven hundred and fifty now added to by twenty thousand. And the problem is that this bloat has afflicted every part of defense procurement. So the F-22 had to be stopped at a hundred and eighty-seven airplanes when it was supposed to have seven hundred. And the reason was, the price had gone up to three hundred and fifty million dollars a copy. And that wasn’t because the contractors were gouging or the services were gold-plating. It was because the program took twenty-four years from the time it was started until the first squadron deployed to Japan.

And time is money. And the reason it took twenty-four years was that there are now forty requirements committees that have to approve every single action taken on a major ACAB [PH] one or two program. All of these seven hundred and fifty thousand bureaucrats have to have things to do. It is exactly the same thing in the Navy Department, for example. In World War Two, we built a thousand ships a year. At the time the Bureau of Ships, which was in charge of building ships, had a thousand bureaucrats. One thousand. Most of them were graduate engineers, graduates of MIT, members of the Engineering Duty Officer Corps Elites. When I was secretary and Ace was running the Pacific Fleet, it had grown to four thousand people. And we were building twenty-eight ships a year. Not a thousand ships a year. Today, we’ve been averaging five ships a year—of the ships that Ace was a little derisive of, shall we say. Rather than battleships or carriers. And the bureaucracy of new ships, now called NAP-C, is twenty-five thousand bureaucrats. Twenty-five thousand bureaucrats. So I won’t dwell too much on this because I said I was going to talk about the half-full part of the glass. But the intelligence community suffers exactly the same bloat. And in the 9-11 Commission, we recommended that we create a Director of National Intelligence to break down this bureaucracy, to cut it, to reduce it, to break down the layers, to tear down the stove pipe so information could be shared. It’s far too bloated. Too many bureaucrats. Fifteen different agencies. Well, unfortunately, instead, while Congress did what the Commission asked and passed the law, the Bush Administration turned it on its head and created a DNI without the powers to cut and gave them a staff of two thousand additional bureaucrats. Now that’s beyond belief. Well, now to the full part of the glass. The fact is that all it takes is leadership to reverse this and it can be reversed in a short period of time. Most of you are New Yorkers here.

When I moved to New York in 1988, it really was a cesspool of a city. It was filthy. It was disgusting. The trash wasn’t collected on time. You couldn’t walk down for a half an hour into Midtown without seeing a robbery or something. Squeegee bums on every major corner. And then suddenly we had—a leader was elected. And within three months, the squeegee bums were gone. The trash started to get collected. The streets were starting to be cleaned. The taxis were forced to turn on air conditioners. The city was transformed. At that time, New York had twice the crime rate of London. Today, the streets are clean. The subways work. The taxis are air-conditioned. No squeegee bums. The crime rate is forty percent less than London today. Everybody said, “New York is ungovernable. That’s just the way it is, you know. It’s always been that way.” Well, it’s not true. And in the 9-11 Commission, we pointed out that every bit of intelligence showed that New York was the epicenter of the targeting of al-Qaeda and every other Islamist group and that we did not have in New York anything approaching the kind of command and control or communications that could deal with that threat. As demonstrated by the inability of the cops to talk to the firemen and all of the casualties that resulted. Well, today, I’m pleased to tell you that New York, in my judgment and all of the other 9-11 people, is the safest city in the world. Because of leadership: Ray Kelly and two fine mayors. They’ve led the country and the country—most of the municipalities have tried to emulate New York. Now the cops are put in charge of the command centers in any crisis. Now the cops have the most sophisticated military communications to talk under any circumstances, in tunnels, on subways, to all of the—to all of the other first responders and the authorities.

We have the best, in New York, counter-terrorism center in the world. If I were president, I’d be briefed by Ray Kelly’s counter-terrorism center. They have the best, absolutely the best. Everybody said it couldn’t be done. It was done. And it was done fast by leadership. Ace Lyons, as I said, should have been the awardee tonight. Because everybody said when Reagan came in, all of the moss back admirals and the trendy OSD intellectuals and the people on the Hill said, you can’t take the fleet north of the GIUK gap, you can’t survive up there. NATO’s official doctrine said the fleet will get decimated within days by the Russian fleet. Ace Lyons, who had second fleet, said oh, yes, we can. And I’ll show you how to do it. And he took five carriers up there in September of 1981. And he kicked the Soviets’ ass from one side of the Norwegian Sea to the other.

And the reason we know this, still some classified sources that we can’t talk about, but three years ago, I was invited to Norway for a conference with my counterparts from the Russian high command to talk about the Reagan strategy, a forward strategy of practicing, going up there every year, showing we could not only survive, but we could run mock attacks against the Soviet Union. The White Sea. We did the same thing on the Northern Pacific. And these Russians said that their own wargaming and ops analysis showed that the longest their fleet had ever survived against Ace and his successors in these annual exercises was one week. And the entire fleet was gone. This is from the Russians. This is from the Russians. And it was the input of these general staff people who went, in 1986, back with a major position to the politburo that they had to triple the budget for defenses in the northern flank or the Soviet Union would lose the war. And it was that, that had, we now know from other intelligence sources, had a thunderclap impact on the leadership that eventually started glasnost and so forth. So I’m here to tell you that the problems we face today are very solvable. All it takes is recognition of the problem and leadership. Seven hundred and fifty thousand bureaucrats are not needed. Nine percent a year is the attrition rate in the bureaucracy. So even a selective hiring freeze, not a total hiring, but a selective hiring freeze would shrink this bureaucracy down to a manageable size within four years. Plus you have early retirements. Plus you have plenty of other tools that are available that could get back to the fine people that are in there that want to get these things done. So that’s my message. Yes, we are in a serious threat situation today. But, yes, we have the resources to turn this around and reassert American primacy as a defender of the free world. And all it takes, all it takes, is leadership. So on that note, I’m—I would like to thank you, I’m deeply honored for this—receiving this award, Frank, and keep up what you’re doing because you’ve done more to really articulate and get across to the leadership of the country the nature of this threat than anyone else I know. Thank you.

 


 

Huawei? No way

Last summer, a Chinese telecommunications giant founded by a former People’s Liberation Army (PLA) engineer was rebuffed in its effort to sell vast quantities of equipment to Sprint Nextel – an American company that provides communication services to the U.S. Defense Department and other government agencies.  An interagency group known as the Committee on Foreign Investment in the United States (CFIUS) took a hard look at the proposal and, quite sensibly, rejected it on national security grounds.

Unbeknownst to CFIUS at the time, Huawei was making another, unscrutinized and problematic investment in the United States.  It bought pieces of 3Leaf, a now-insolvent pioneer in "cloud computing" technology, including intellectual property with obvious military applications. 

When this transaction serendipitously came to the Pentagon’s attention, alarm bells went off.  CFIUS took a look at it as well and came to the same conclusion as it had with the Chinese company’s previous play with Sprint Nextel and two earlier initiatives – its effort to buy a stake in 3Com and bid to invest in some of Motorola’s assets: No way.

Initially, Huawei declared that it intended to appeal to President Obama to overrule his interagency experts.  Perhaps in doing so, it was counting on his well-established proclivity to yield to Chinese demands.  Perhaps the company was banking on the political influence of the prominent former American officials it had indirectly hired through a firm called Amerilink to tamp down their successors’ security concerns about Huawei.  These advocates include: a former Vice Chairman of the Joint Chiefs of Staff, Adm. William Owens; a former House Majority Leader, Rep. Richard Gephart; and a former Deputy Secretary of Defense, Gordon England. 

Five days after floating this idea, however, the Chinese were persuaded to abandon their latest gambit.  Presumably, Huawei’s American guns-for-hire or perhaps Obama’s own advisors impressed upon them that President Obama could hardly afford to ignore CFIUS’ conclusions in order to do the PRC’s bidding. 

Now, Huawei is trying a new tack.  Its deputy chairman, Ken Hu, published last week an audacious open letter on the corporate website.  Hu professes the company’s commitment to free enterprise and insistently denies any wrongful expropriation of proprietary information or ties to the PLA.  He decries the "longstanding and untrue rumors and allegations" that, among other things, suggest the company would use access to U.S. computer networks for nefarious purposes.  He goes so far as repeatedly to call on Washington to conduct a "thorough government investigation [that] will prove that Huawei is a normal commercial institution and nothing more." 

Essentially, Hu has challenged the U.S. government to make public what it knows about the security threat posed by this Chinese behemoth. 

What a splendid idea!  The more the American people know about Chinese enterprises like Huawei and the full extent of their efforts to penetrate the U.S. market (for example, for the purpose of acquiring technology, both legally and illegally) and the security implications of our relying upon their products and services, the better. 

Here are a few suggestions concerning information – at least some of which has evidently driven past CFIUS decisions to parry Huawei’s U.S. machinations – that it would be helpful to share with the American people:

  • What is the actual relationship between Huawei and the Chinese government?  Hu declares that his enterprise is "a private company owned entirely by its employees."  While he acknowledges that it benefits from tax incentives and loans made available to its customers from China’s "commercial banks" – read, state-owned enterprises routinely used as financial instruments of the communist government in Beijing – Hu suggests that there’s nothing for us to worry about.  That is assuredly not the case, and we need to know the truth.
  • How about the true extent of ties between the People’s Liberation Army and Huawei?  At a moment when the PLA is increasingly ascendant and aggressive, both at home and abroad, Hu’s assurances of no connection beyond its founder’s past service in the military’s now-disbanded engineer corps ring hollow. Huawei’s massive state-supported telecommunications research and development activities have clear military applications.  And its commercial transactions assuredly afford Chinese intelligence opportunities for insinuating trap doors and other means of penetrating Western computer and communications networks.  
  • What has been Huawei’s record elsewhere overseas?  The company has been implicated in selling sophisticated equipment to the Taliban, Saddam Hussein’s Iraq and the Iranian Revolutionary Guard Corps, in part, to improve their military capabilities.  Aiding and abetting America’s enemies is not something we can safely ignore, especially since it is both suggestive of Huawei’s utility to the Chinese government and adds further reason to be concerned about the role it might play if allowed to expand its operations here.

Evidently, China is prepared to play hardball.  It has announced that it will establish an inter-ministerial committee similar to CFIUS.  Presumably, it will become an instrument for selectively restricting foreign investment in the PRC – retaliating against U.S. business interests in the event of future CFIUS rejections on security grounds and creating still-greater leverage on U.S. companies to support its predatory trade and "commercial" activities.  Only by making plain what Huawei and similar enterprises are up to can the threat they pose be properly understood – and countered.  The place to start is by saying "No way, Huawei."


Frank J. Gaffney, Jr.
is President of the Center for Security Policy, a columnist for the Washington Times and host of the nationally syndicated program, Secure Freedom Radio, heard in Washington weeknights at 9:00 p.m. on WRC 1260 AM.

EADS/Airbus Government Ownership, Protection, Intervention & Subsidies

President Obama’s new National Security Strategy begins with a pledge of American leadership and the assertion that “the center of [its] efforts is a commitment to renew our economy, which serves as the wellspring of American power.” If this commitment is to be taken at face value, the recently released World Trade Organization (WTO) ruling on large Commercial Aircraft (LCA) should be cause for action. The WTO has ruled that for over forty years the European government owners of Airbus and its later formed parent the European Aeronautic Defense and Space Company (EADS) have been have been undermining that wellspring and harming the U.S. aviation industry.  The WTO ruling on June 30, 2010 flatly stated that Airbus’ success wouldn’t have been possible without over $15 billion in illegal launch-aid loans and $5 billion in other illegal support from European governments. The impact on American workers and businesses for the last decade has been lost production, lost profits and lost jobs.

The full extent of EAD/Airbus activities undercutting free enterprise goes well beyond the WTO ruling and the topic of government subsidies it covers. EADS was created, and remains tightly controlled, by the French, German and Spanish governments. These governments, along with that of the U.K. in the original EADS partnership, have a direct financial interest in EADS. As a result, these nations regularly protect EADS-and its subsidiary Airbus- from competition, interfere in the market on its behalf and provide it launch aid and research grants that are prohibited under World Trade Organization agreements. In addition, EADS/Airbus’ owners regularly employ prohibited political pressure and inducements such as airport landing rights in their sales tactics.

U.S. Department of Defense (DoD) officials have stated that government contracts are not jobs programs. However, EADS/Airbus is in fact explicitly intended as a European jobs program created at the expense of U.S. companies and their workers; U.S. companies are routinely excluded from European defense contracts. In spite of this completely overt protectionism, DoD has refused to take into account these anti-free enterprise activities that allowed EADS/Airbus to develop its products in the first place. By overlooking, and in fact rewarding, such actions the Pentagon neglects to uphold the President’s pledge to support the economy. The National Security Strategy calls for an integration of our economic and military power, but DoD has shown it is more interested in taking advantage of cost savings provided by foreign government subsidies. Our prosperity “pays for our military, underwrites our diplomacy and development efforts, and serves as a leading source of influence in the world.”7 This paper concludes that allowing EADS/Airbus to compete for U.S. government contracts without conditions comes at great cost to our prosperity and our overall national strength.

The economic and free market concerns raised in this paper are in addition to those based on EADS/Airbus’ history of questionable business practices and behavior that runs counter to U.S. foreign and defense policy. A previous Center for Security Policy paper, EADS: Welcome to Compete for U.S. Defense Contracts – But First It Must Clean Up Its Act (online at securefreedom.org), covers these areas.

The appendix included with this paper is a review of previous EADS tanker selections. An analysis of these selections clearly shows that rather than an endorsement of the EADS/Airbus tanker’s ability to win contracts in a competitive market, there is instead a pattern of EADS/Airbus taking advantage of non-competitive markets.  These non-competitive market bidding conditions ranged from advantages conferred on EADS/Airbus by European governments’ subsidy largesse, or advantages conferred by contract award conditions that were highly preferential from the very beginning of the bidding process. The Government Accountability Office ruling on the 2008 U.S. Air Force KC-X tanker competition is also highlighted as part of this review.

 

Read the paper… (Web)

Read the paper… (PDF)

Scandalous air tanker decision: Despite corruption, EADS favored over U.S.-based Boeing

Within days, the Obama Pentagon is expected to decide which supplier to rely upon for what is, arguably, the cornerstone of America’s ability to project power for the next forty years: the next generation aerial refueling tanker known as the KC-X.  The choice for this role – which is worth conservatively $40 billion – would seem to be a no-brainer.  The obvious winning candidate to produce and maintain for decades to come 179 tankers would be a reliable, experienced and responsible U.S. manufacturer, Boeing.

It seems, however, that Team Obama is poised to entrust responsibility for this vital defense capability to a company that has none of those attributes – the European aerospace conglomerate EADS.  The pretext apparently will be that the foreign competitor is offering a lower bid than its American counterpart.  

This claim is preposterous on its face.  The Lexington Institute’s Loren Thompson, one of Washington’s most respected defense program and budget analysts, noted recently that each of the two bidders has to satisfy 372 mandatory performance requirements.  “Thus, the key discriminator in who wins becomes price.”  Meeting or substantially undercutting Boeing’s bid is problematic since the Airbus tanker based on the A330 weighs in  28 percent larger with 40 feet more wingspan than Boeing’s derivative of the 767.  “It appears that is exactly what the European company plans to do, raising the obvious question of how such a bid is possible.”

How, indeed?  The answer is not so hard to fathom if you look at the nature of EADS.  As the Center for Security Policy documented in a white paper issued in September 2010 (https://www.centerforsecuritypolicy.org/p18520.xml), the company has relied on devious, unethical and unfair practices to buy-into or otherwise win contracts.  It has then relied upon massive subventions and/or cost-overruns to stay afloat.  For example, last June, the World Trade Organization estimated that EADS garnered some $20 billion in illegal subsidies from its European governmental owners.

Then, there are EAD’s endemic problems with bribery and corruption. Eleven years ago, with the company’s Airbus sales in mind, former Director of Central Intelligence R. James Woolsey told Europeans in an op.ed. in the Wall Street Journal:  “Your companies’ products are often more costly, less technologically advanced or both, than your American competitors’. As a result you bribe a lot.”

In addition, EADS has been under investigation in France for the past five years in connection with alleged insider trading tied, presumably, to the company’s abysmal financial track record.  In early February of this year, the Paris judges said they were focusing the investigation on Daimler.  In particular, EADS’ massive cost-overruns have gotten so bad lately that the German government has scheduled an emergency summit on February 23 to discuss bailing out Daimler, by nationalizing Daimler’s 7.5% stake in EADS.  According to the Financial Times, the EADS losses cost Daimler €231 million in the last year alone.  Is this really the kind of company we want the Pentagon to be keeping?

Here is what U.S. taxpayers can expect in EADS performance. The company’s A400M military transport plane program is surviving only because of a $4.6 billion bailout forced from European taxpayers in November 2010 .  The A400M program was originally to cost $27 billion; a recent study found that final costs could now rise to $44 billion. The program is three-to-four years behind schedule.

It is not easy getting a company with such a dismal past cleared to win what may prove to be the largest Pentagon contract ever.  In January 2010, then-Representative Todd Tiahrt of Kansas wrote in Human Events: “Given the well-known corruption practices by EADS, it would make common sense that it not be awarded Pentagon contracts. In fact, Congress has passed the Foreign Corrupt Practices Act that bars companies who engage in bribery overseas from competing for United States government programs.

“The U.S. Department of Justice has appallingly interpreted the laws to only cover U.S.-based companies – therefore exempting EADS. But it gets worse. The federal government has gone even further and exempted EADS from the Buy American Act, the Berry Amendment, the International Trafficking and Arms Regulations, and the Cost Accounting Standards. Complying with these expensive regulations is mandatory for any American company looking to do business with the Pentagon, but waived for a foreign competitor such as EADS.” (Emphasis added.)

If these considerations were not grounds enough for denying EADS the KC-X contract no matter what price it offers, there are other compelling reasons to have these tankers made in America.  These include: EADS has a highly politicized socialist workforce in Europe, one that has exhibited profoundly anti-U.S. sentiments in the past. Do we really want to rely on such workers in the event their efforts are essential to future combat operations with which they vehemently disagree? 

There have also been issues of technology theft and commercial espionage associated with EADS.  With the Kremlin owning a 5% stake in the company, the security implications of such behavior cannot be minimized. 

Taken together, the arguments against turning the future of a key determinant of America’s power projection capability over to EADS are compelling.  If the Obama administration persists in its efforts toward that end, it will likely find the Congress less willing to ignore the strategic and economic repercussions of such a step.  That is especially true insofar as doing so would give lie to the universal mantra of politicians on both sides of the aisle to promoting American competitiveness and the need to expand the number of skilled jobs here at home.  

Alternatively, the Government Accountability Office may find irregularities in the KC-X award (notably, the Pentagon’s inexplicable sharing with EADS last November of proprietary, competition-sensitive data supplied by Boeing) that once again justify overturning an ill-managed award.

Either way, the real loser will be the servicemen and women who needed a reliable and capable new tanker years ago – and certainly deserve no less now.


Frank J. Gaffney, Jr. is President of the Center for Security Policy (www.SecureFreedom.org), a columnist for the Washington Times and host of the nationally syndicated program, Secure Freedom Radio, heard in Washington weeknights at 9:00 p.m. on WRC 1260 AM.

EADS/Airbus Government Ownership, Protection, Intervention & Subsidies: The Effect on American Free Enterprise and National Security

President Obama’s new National Security Strategy begins with a pledge of American leadership and the assertion that “the center of [its] efforts is a commitment to renew our economy, which serves as the wellspring of American power.” If this commitment is to be taken at face value, the recently released World Trade Organization (WTO) ruling on large Commercial Aircraft (LCA) should be cause for action. The WTO has ruled that for over forty years the European government owners of Airbus and its later formed parent the European Aeronautic Defense and Space Company (EADS) have been have been undermining that wellspring and harming the U.S. aviation industry.  The WTO ruling on June 30, 2010 flatly stated that Airbus’ success wouldn’t have been possible without over $15 billion in illegal launch-aid loans and $5 billion in other illegal support from European governments. The impact on American workers and businesses for the last decade has been lost production, lost profits and lost jobs.

The full extent of EAD/Airbus activities undercutting free enterprise goes well beyond the WTO ruling and the topic of government subsidies it covers. EADS was created, and remains tightly controlled, by the French, German and Spanish governments. These governments, along with that of the U.K. in the original EADS partnership, have a direct financial interest in EADS. As a result, these nations regularly protect EADS-and its subsidiary Airbus- from competition, interfere in the market on its behalf and provide it launch aid and research grants that are prohibited under World Trade Organization agreements. In addition, EADS/Airbus’ owners regularly employ prohibited political pressure and inducements such as airport landing rights in their sales tactics.

U.S. Department of Defense (DoD) officials have stated that government contracts are not jobs programs. However, EADS/Airbus is in fact explicitly intended as a European jobs program created at the expense of U.S. companies and their workers; U.S. companies are routinely excluded from European defense contracts. In spite of this completely overt protectionism, DoD has refused to take into account these anti-free enterprise activities that allowed EADS/Airbus to develop its products in the first place. By overlooking, and in fact rewarding, such actions the Pentagon neglects to uphold the President’s pledge to support the economy. The National Security Strategy calls for an integration of our economic and military power, but DoD has shown it is more interested in taking advantage of cost savings provided by foreign government subsidies. Our prosperity “pays for our military, underwrites our diplomacy and development efforts, and serves as a leading source of influence in the world.”7 This paper concludes that allowing EADS/Airbus to compete for U.S. government contracts without conditions comes at great cost to our prosperity and our overall national strength.

The economic and free market concerns raised in this paper are in addition to those based on EADS/Airbus’ history of questionable business practices and behavior that runs counter to U.S. foreign and defense policy. A previous Center for Security Policy paper, EADS: Welcome to Compete for U.S. Defense Contracts – But First It Must Clean Up Its Act (online at securefreedom.org), covers these areas.

The appendix included with this paper is a review of previous EADS tanker selections. An analysis of these selections clearly shows that rather than an endorsement of the EADS/Airbus tanker’s ability to win contracts in a competitive market, there is instead a pattern of EADS/Airbus taking advantage of non-competitive markets.  These non-competitive market bidding conditions ranged from advantages conferred on EADS/Airbus by European governments’ subsidy largesse, or advantages conferred by contract award conditions that were highly preferential from the very beginning of the bidding process. The Government Accountability Office ruling on the 2008 U.S. Air Force KC-X tanker competition is also highlighted as part of this review.


FORWARD: DEFENDING FREEDOM WITH FREE ENTERPRISE

Prior to 1941 the U.S. military relied on its government-owned arsenals and shipyards for much of its procurement needs. Since then, the Department of Defense has transitioned to a predominant reliance on private commercial arms-makers for its needs during both war and peace.1 This Post WWII belief in private enterprise was so strong that, during the height of this transformation in 1960, the Air Force procurement Chief testified, “All things being equal, the man without the Government facility will get the award.”2 The privatization of U.S. military procurement since World War II was not simply an exercise in the principles of free enterprise; it was a recognition that private companies are, by nature, better suited to adjust to customers’ needs and, through fair competition, to provide a better product.

The possibility that government-owned companies might provide a lower cost to the government was specifically rejected as a justification for their continued support. Continuation of these government owned “businesses” was viewed as an “injury to the vitality of the whole private enterprise system.”3 As a 1956 Budget Bureau memorandum to President Eisenhower stated, “Above all, the decision whether to continue or discontinue a Government activity solely on an apparent cost basis runs counter to our concept that the Government has ordinarily no right to compete in a private enterprise economy.”4

That belief in free enterprise, free market competitors and fair competition is under assault today. The European Aeronautic Defense and Space Company (EADS)—an enterprise owned, controlled,and protected by foreign governments—has been welcomed to the U.S. defense market with open arms by the Pentagon and may be selected for U.S. Government contracts as a result of European government subsidies and activities that enable it to underbid truly private companies.

To allow EADS to compete for U.S. Government contracts, without additional conditions, requires that U.S. officials overlook past years of documented corrupt practices, as well as current anti-free market activities that have allowed EADS and its subsidiaries to develop their products in the first place. If American policy makers allow this to happen, they do so in direct contradiction of past and current national security strategy. ■

EXECUTIVE SUMMARY

President Obama’s new National Security Strategy begins with a pledge of American leadership and the assertion that “the center of [its] efforts is a commitment to renew our economy, which serves as the wellspring of American power.”5 If this commitment is to be taken at face value, the recently released World Trade Organization (WTO) ruling on large Commercial Aircraft (LCA) should be cause for action. The WTO has ruled that for over forty years the European government owners of Airbus and its later formed parent the European Aeronautic Defense and Space Company (EADS) have been have been undermining that wellspring and harming the U.S. aviation industry.  The WTO ruling on June 30, 2010 flatly stated that Airbus’ success wouldn’t have been possible without over $15 billion in illegal launch-aid loans and $5 billion in other illegal support from European governments. The impact on American workers and businesses for the last decade has been lost production, lost profits and lost jobs.6

The full extent of EAD/Airbus activities undercutting free enterprise goes well beyond the WTO ruling and the topic of government subsidies it covers. EADS was created, and remains tightly controlled, by the French, German and Spanish governments. These governments, along with that of the U.K. in the original EADS partnership, have a direct financial interest in EADS. As a result, these nations regularly protect EADS— and its subsidiary Airbus— from competition, interfere in the market on its behalf and provide it launch aid and research grants that are prohibited under World Trade organization agreements. In addition, EADS/Airbus’ owners regularly employ prohibited political pressure and inducements such as airport landing rights in their sales tactics.