Department of Defense’s dependence on Chinese suppliers must be addressed

An incredibly disturbing
analysis of US Department Defense (DOD) supply chains was recently conducted by
the research firm Govini. This analysis — a mere tip of the iceberg, as it only
looked at a sample of US defense suppliers — found that DOD’s supply chain is
riddled with Chinese suppliers and content. Perhaps most significantly, the
vast majority of this infiltration occurred in the last decade during the
transformation of China from potential economic partner to strategic rival and global
threat.

In Govini’s sample of US firms that
contracted directly with DOD, the number of Chinese suppliers within the firms’
supply chain had increased by 420 percent since 2010 to a total of 655 entities.
This Chinese penetration of the US defense market occurs across many different
industries to include semiconductors, specialty chemicals, software, electronic
components, aerospace, pharmaceuticals, and biotechnology.

Employees work at a factory of Renesas Semiconductor Co. during a government organised tour of the facility following the outbreak of the coronavirus disease (COVID-19), in Beijing, China May 14, 2020. REUTERS/Thomas Peter

None of this should be
surprising given defense spending and commercial manufacturing trends over the
last three decades, but this data should serve as an alarming wake-up call for
anyone concerned about the future security of the defense industrial base. 

DOD lost its innovation advantage
with respect to the commercial sector long ago. This began in 1980 when DOD’s share
of US research and development expenditure was overtaken by the private sector.
The end of the Cold War displaced any hope of DOD ever catching up with the commercial
market as defense R&D budgets continued to fall and private capital rushed to
Silicon Valley.

In recognition of these new
facts, Congress enacted a series of wide-ranging acquisition reforms in the
mid-1990s to make it easier and cheaper for the government to contract for new
commercial items and ideas. As a result, commercial technology has flowed ever
since into US weapons systems to help DOD maintain its technological edge at an
affordable cost. 

But unfortunately, what happened in Silicon Valley didn’t always stay in Silicon Valley. The commercial sector globalized and in the last two decades was lured to China by false promises, cheap labor, and subsidized prices while turning a blind eye to the theft of their companies’ intellectual property. Govini’s findings of China embedded in the US defense supply chain is the result of DOD in the last decade missing the significance of its growing dependence on commercial globalization run amok.

It is now imperative for DOD to take steps to reduce and eventually eliminate its Chinese addiction. This will not be easy. What is needed is a thorough triage of the China dependency in order to develop a plan for a real decoupling that relies on a system of trusted suppliers. This should not be some knee-jerk Buy American reaction that will be both unworkable and unaffordable, but a path to cooperation with our closest allies and partners to lessen our dependence on an actor that can no longer be trusted. A secure supply chain can be developed based on both shared interest and values, and it is long past time to start that effort.

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