Aggressive Chinese industrial policy impacting American defense industry: Pentagon
The aggressive Chinese industrial policies have adversely impacted some of the critical American capabilities and its defense manufacturing base, the Pentagon said in a report yesterday. At the direction of President Donald Trump, the Pentagon prepared a report in which it said while many companies have established their research and development wing in India and China, the latter is different in its approach.
"Many technology-intensive MNCs have established R&D facilities in India and China for access to cheap, high-skilled labor. As part of its industrial policy aggression, China has forced many American companies to offshore their R&D in exchange for access to Chinese market," the Pentagon report said.
The report also said as technical innovation moves abroad, changing rules around intellectual property development will impede America's access to the latest manufacturing technologies and decrease overall competitiveness. "At risk is America's loss of leadership in industries of the future such as artificial intelligence, quantum computing, and robotics. Over the remainder of this century, these emerging industries will help redefine the battlefield," it said.
According to Pentagon, headquarters of United States Department of Defense, China's capture of foreign technologies and intellectual property, particularly the systematic theft of US weapons systems and the illicit and forced transfer of dual-use technology, has eroded the military balance between the US and China.
The forced transfer of dual-use technology aid China's efforts to gain a qualitative technological advantage over the US across key domains, including naval, air, space, and cyber, the Pentagon report said. "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," it said.
As such 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, the report said. The Pentagon said foreign dependency risk arises when the domestic industry does not produce the item or does not produce it in sufficient quantities.
The Pentagon report said that in many cases, there is no drop-in replacement material and even in cases where that option exists, the time and cost to test, qualify the new material can be prohibitive especially for larger systems (hundreds of millions of dollars each).
The "Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the US" report said the US industrial-base faces an unprecedented set of challenges These challenges are sequestration and uncertainty of government spending; decline of critical markets, suppliers; unintended consequences of the US government's acquisition behavior, aggressive industrial policies of competitor nations; loss of vital skills in the domestic workforce.
The report said increasing globalization of the supply chain and a diminishing domestic manufacturing sector are combining to create human capital gaps and erosion of American capabilities. STEM knowledge and core trade skills are necessary to ensure holistic and synergistic health of the defense ecosystem. It said skill gaps in both areas entail inherent risk, from a decline in production capacity to decreased innovation.
