Jewish World Review April 3, 2001 / 10 Nissan, 5761
Frank J. Gaffney, Jr.
Defense fire sale redux
http://www.jewishworldreview.com --
A FEW WEEKS ago, this column focused a spotlight on the proposed
sale of a critical part of the U.S. defense industrial base to a foreign
firm -- and the larger trend, involving the selling-off of America's
national security technology seedcorn, of which this transaction is a prime
example. Fortunately, in the intervening period, the bid by a Dutch
company, ASM Lithography Holding N.V. (ASML), to buy San Jose-based Silicon
Valley Group (SVG) has run into trouble within the executive branch and on
Capitol Hill.
Yet, entrenched Clinton Administration holdovers and lower-level
bureaucrats in the Pentagon, Treasury and other departments are working
assiduously to prevent President Bush from making an informed decision to
block this defense fire sale. If as a result he fails to do so, he will be
making a mistake that will not only have incalculable adverse effects with
respect to such sensitive U.S. technological advantages in the area of
electronics and optics. Wittingly or not, he will also be establishing a
precedent that will be used by proponents of down-sizing and "globalizing"
critical defense industrial assets to justify the further liquidation of
those U.S. capabilities.
At issue most immediately is the question of whether an interagency
organization known as the Committee on Foreign Investment in the United
States (CFIUS) will do its job. Pursuant to the 1988 Exon-Florio amendment
to the 1950 Defense Production Act, CFIUS is supposed to scrutinize proposed
foreign investments in this country to ensure that they are consistent with
U.S. national security interests.
The effectiveness of the Committee in performing this mission over
the past thirteen years has been greatly circumscribed by the fact that it
has been chaired by the Treasury Department, whose responsibility it is to
promote foreign investment in America. More surprising has been the support
the Defense Department has given in recent years to foreign nationals and
companies buying up essential parts of the manufacturing base upon which the
armed services must rely.
There have been several arguments for such a course of action:
-
The Clinton Administration in particular believed that the United
States had excess defense industrial capacity; the ancien regime reasoned
that if others will pay to maintain it, so much the better. This ignores
the fact that the upshot of these sales is that the American enterprises
acquired by foreign concerns not-infrequently wind up being seen as
superfluous to the new owners' core overseas operation and get shut down.
This will almost certainly be the case should Silicon Valley Group be sold
to the Netherland's ASML. The latter has made no secret of its desire to
eliminate what is today an increasingly formidable competitor -- thanks to
many tens of millions of U.S. tax dollars invested in enhancing SVG's
ability to bring to market state-of-the art, high-end lithography machines
used to mass-produce sophisticated microcircuitry.
- The Persian Gulf War and Kosovo operations underscored the yawning
discrepancy between the sophisticated technology used by the American
military and that upon which U.S. allies rely. Some contend that foreign
investment in the United States defense sector will help facilitate greater
commonality in hardware and, thereby, enable greater synergy among coalition
partners in combat.
Should SVG and its subsidiary, Tinsley Laboratories -- a
manufacturer of advanced optics used in American spy satellites, missile
defense and other military applications -- be sold off to the Dutch, though,
this originated-in-America technology may be available to our allies, but
not to us in time of need. Just as it is foolish in the extreme to rely
upon overseas suppliers (including the likes of Iraq's Saddam Hussein, the
mullahs of Iran and Hugo Chavez of Venezuela) for the Nation's oil supplies,
it is reckless to assume that those who may disagree with the uses to which
we would put our armed forces and/or who simply have full order books would
give assured priority in a pinch to meeting the needs of the American
military.
- Finally, some believe that the dictates of globalization are such
that it is no longer practical, and probably not even possible, for the
United States to preserve an indigenous defense industrial base. This is a
view not generally shared by our potential adversaries. Even our nominal
allies in a unifying Europe seem to be replacing national companies in this
sector with consortiums and teaming arrangements that will be better able to
vie for contracts worldwide and dominate an increasingly closed-shop
European continent.
Accordingly, if ASML and its German partner, Carl Zeiss Ltd., are
able to make off with SVG/Tinsley's cutting-edge technology, the ugly face
of globalization is likely to present itself: Prime beneficiaries will be
Russia, China, Iran and other nations in these European companies' client
roster, nations that will at a minimum find ways to employ such technology
to our security disadvantage and may be able -- like the Dutch and the
Germans -- to do so at considerable expense to our microcircuit-dependent
economy, as well.
Such concerns prompted Deputy Secretary of Defense Paul Wolfowitz
recently to insist that CFIUS conduct an in-depth 45-day investigation into
the proposed ASML purchase of Silicon Valley Graphics. If properly
performed, it seems very likely that the result would be recommendations
from one or more agencies that President Bush object to, and thereby block,
this sale.
As things stand now, however -- despite considerable agitation from
Members of Congress like Senators Trent Lott, Bob Bennett, Jon Kyl and Jim
Inhofe and Representatives Robert Stump, Duncan Hunter and John Hostettler
-- the investigation seems to about to be deep-sixed by the same CFIUS
apparatchiks who nearly pushed the deal through, until Secretary Wolfowitz
intervened.
Too much is riding on the SVG/Tinsley sale -- both in its own right
and as a precedent for transactions to come -- for the President to be
denied the benefit of a real and rigorous investigation and the opportunity
to decide on the merits whether to allow this American technological
seedcorn to go overseas. Will CFIUS do its job, and thus allow Mr. Bush to
do
his?
JWR contributor Frank J. Gaffney, Jr. heads the Center for Security Policy. Send your comments to him by clicking here.
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© 2000, Frank J. Gaffney, Jr.
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