The Globalization of America's Defense Industries: Managing the Threat of Foreign Dependence

The (flobalization of America's Defense Industries Managing the Threat of Foreign Dependence I American defense industries , like the rest of the American economy, are undergoing a process of globalization. The Defense Science Board, the undersecretary of defense for acquisition, the Office of Technology Assessment, and a variety of congressional committees join in warning that U.S. defense increasingly relies on foreign technologies, foreign-sourced products, or domestic-sourced products purchased from the local subsidiaries of foreign corporations.' When should this trend toward globalization be worrisome, when should it be embraced, and when can it be ignored? The dialogue between economists and national security analysts on these questions has tended to be limited, unproductive, and highly unsatisfactory to both sides. With the exception of industrial policy advocates and strategic trade theorists, discussed below, economists ordinarily ignore the nationality of producers, and scoff at ideas that governments should preserve certain companies, simply on the basis of the citizenship of their owners or managers or workers, if those owners or managers or workers are unable to compete as cheaply or imaginatively as others can. When defense analysts recommend Theodore H. Moran I wish to thank C. Fred Bergsten, Ethan B. Kapstein, Gary C. Hufbauer, Robert Z . Lawrence, Susan Strange, and Raymond Vernon for helpful comments on earlier versions of this paper. Theodore H. Moran is Karl F. Landegger Professor and Director of the Program in International Business Diplomacy at the School of Foreign Service, Georgetown University. 1. U.S. Department of Defense (DoD), Bolstering Defense Industrial Competitiveness: Preserving Our Heritage, Securing Our Future, Report to the Secretary of Defense by the Undersecretary of Defense (Acquisition), July 1988; Defense Science Board, The Defense Industrial and Technology Base, Final Report of the Defense Science Board 1988 Summer Study, October 1988;DoD, Critical Technologies Plan, for the Committees on Armed Services, United States Congress, May 5, 1989; U.S. Congress, Office of Technology Assessment (OTA), The Defense Technology Base: Introduction and Oveniiew-A Special Report, OTA-ISC-374 (Washington, D.C.: U.S. Government Printing Office [U.S. GPO], March 1988); and OTA, Holding The Edge: Maintaining the Defense Technology Base, OTA-ISC-420 (Washington, D.C.: U.S. GPO, April 1989). Cf. also Senator Jeff Bingaman and Senator John McCain, Deterrence in Decay: The Future of the U.S. Defense Industrial Base (Washington, D.C.: The Center for Strategic and International Studies, 1989). International Security, Summer 1990 (Vol. 15, No. 1) 01990 by the President and Fellows of Harvard College and of the Massachusetts Institute of Technology 57 lnternational Security 15:1 I58 that the United States ”stop the loss of production capabilities,” “reverse the trend” toward globalization, and ”secure” the industrial base, economists instinctively identify their pleas (except for the narrowest categories of finished military equipment like tanks and guns) as nothing more than new instances of old attempts at protectionism and the preservation of inefficiency . To national security analysts, on the other hand, where production takes place and who controls the process are of crucial importance. The benign neglect by conventional economics of the nationality of economic actors seems singularly unhelpful in analyzing what to do about the defense industrial base. Quite apart from traditional preoccupations with the blockage of sea lanes in time of war, the contemporary movement toward globalization opens the door in peacetime to foreign influence, foreign control, and foreign domination. For this reason national security analysts show little patience with the economists’ obsession about efficiency and consumer welfare if, in the process, the United States becomes “dependent on foreign-sourced hardware ” or, via foreign acquisition of domestic facilities, increasingly reliant “on technologies controlled by other nations.”2 What is for economists the unfolding of international comparative advantage is, for national security analysts, an erosion of the “capacity to build or replace critical force structures independently of economic and political decisions of other sovereign powers .”3 How can a dialogue between economists and national security analysts be structured to find ways to maximize efficiency and at the same time to minimize foreign control? How would a new generation of strategists, defense industrid strategists, trained in both economics and defense analysis, approach the problem of globalization? The prospect of launching...