Why US industry should be concerned about domestic policies

China’s 70th anniversary of Communist Party rule and the annual parade of military capability exposed the world to what the U.S. already knows — that China is succeeding with its development and fielding of advanced military capabilities. Hypersonic missiles and underwater drones rolling through Tiananmen Square, whether operational or momentarily aspirational, was a deliberate move to reassure its citizens while raising doubts about the future role of the U.S. as an influencer in the region. Let there be no doubt: China intends to displace the U.S. as the sole superpower in the greater Asia-Pacific region.

The past two administrations, working with Congress, have moved to address emerging capability threats by raising defense spending and investments, reorganizing the Pentagon, and seeking ways to focus both government and industry attention on this national security concern. Although progress is underway, most believe we are being outpaced. To quicken innovation and associated levels of investment, we need to ensure that our defense and aerospace industries remain healthy.

The ability of our industries to retain and grow their international presence helps to ensure,— along with continued, robust domestic investment — that they have the needed cash to innovate while sustaining sufficient rates of production to remain competitive both domestically and globally.

U.S. industry has and continues to succeed in international markets for the following reasons:

(1) Product and process innovation that provides buyers with exceptional products that are well-engineered and reliable.

(2) Continued free market access and global confidence that the U.S. will remain a reliable, steadfast, unwavering ally and international partner, bolstering allied confidence politically and industrially.

(3) And finally, resilience: Regardless of the crisis, the U.S. and its industries find a way to quickly recover and prevail.

This collection of key attributes has enabled historic U.S. industrial success. However, challenges are emerging on multiple fronts, raising concerns about the direction of U.S. global market share tomorrow.

What are these challenges? The emergence of credible international competitors; the U.S.-led trade wars that negatively impact essential markets; STEM deficiencies; legacy restrictions on military technology; and the rise of populism, especially within the U.S., challenging public support for traditional allied and partner relations globally.

Although the current administration favors programs that help expand U.S. industry global market share, these headwinds, two of which are self-inflicted, if left unanswered may impede continued market success and diminish opportunities for greater global market share tomorrow.

I’ve worked on developing U.S. military and allied capability for over 33 years, during which time I’ve witnessed the erosion of the U.S. as the unrivaled global leader in defense capability. Today, allied and partner nation defense budgets are constrained while the cost of most advanced military capabilities rises. All the while we are seeing the emergence of credible competitors that are making inroads into the arsenals of traditional U.S. partners seeking diversification of acquisitions and who are willing to accept less capability if more affordable with fewer post-delivery restrictions.

The U.S. is in the midst of the largest trade war since the Great Depression. Tariffs are nothing more than a tax. And there is no logic in imposing them on allies and adversaries alike, without distinguishing between friend and foe, partners and competitors. These barriers to cross-border collaboration are compounded by export controls predicated on a bygone era of American monopoly control of defense technologies. In combination, U.S. policy has the potential to further discourage America’s commercial sector and to retard international cooperation critical to the development of the next generation of defense capabilities. Today we need to refocus on creating an environment that allows for international partnerships. And we need to act now.

Another critical challenge is insufficient STEM education in the U.S., which is complicated by U.S. immigration policies that discourage foreign STEM talent from seeking employment in the country. In manufacturing, it is estimated by 2020 that there will be a 15 percent increase in the shortage of engineers and a 9 percent increase in the shortage of research scientists. On average, a quarter of graduate degrees earned by foreign students were in core STEM fields, compared to just 2 percent of graduate degrees earned by U.S. citizens. U.S. citizens cannot fill these fields at the moment nor in the near future.

The rise of populism within the U.S. and within some of our closest allies and partner nations presents another challenge for the defense sector. As the U.S. challenges the long-standing post-World War II liberal international world order, traditional defense collaborators have growing doubts about the reliability of the U.S. as a partner. These nations are seeking new alliances and deepening existing alliances with competitors of the United States that include industrial cooperation that will exclude U.S. industries.

So then what should we do?

We must find ways to enable unprecedented partnering between our commercial and defense industries as well as the Defense Department, and ensure we exploit the relief provided under the export control reforms of the past decade while seeking ways to secure greater relief from U.S. government control where appropriate. We must be willing to accept more risk within a community of like nations while tightening up controls where we are certain that unacceptable vulnerabilities exist.

Closing our borders to industrial and technical cooperation will not help us achieve our modernization objectives. We must continue to share with the administration the impact that trade wars are having on our relations with allied and friendly nations who ultimately are a security and economic partner. If we soon don’t resolve these issues and reach an agreement, the impacts will be significant and possibly irreversible for decades.

Finally, all of us must work to reassure our allies and friends that America will fulfill its obligations and that we will remain a reliable partner. We need to remain resilient as a community and reassure all that America will not abandon what has been the most successful alliance structure in the history of mankind. And through our actions and reassurance, we can help ensure doors remain open for our industries tomorrow as they are today. But most importantly, we will ensure that our military will always have the capability and partners needed to defend the nation and our alliances.

Featured herein Defense News.

About the authors

Keith Webster

Keith Webster, president of the U.S. Chamber of Commerce’s Defense and Aerospace Council, guides the focus of the council to strengthen the U.S. defense and aerospace industries by influencing domestic and international policy on behalf of its members.

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