Eroded American Industrial Base Must Be Restored to Defeat China

By John Rossomando
John Rossomando
John Rossomando
John Rossomando is a senior analyst for defense policy at the Center for Security Policy and served as senior analyst for counterterrorism at The Investigative Project on Terrorism for eight years.
January 17, 2022Updated: January 20, 2022


In the event of war with China, the weakness of America’s defense industrial base will ensure that the Chinese would prevail. As things stand, U.S. manufacturers lack the adequate ability to meet basic defense needs for the contemporary age of great-power competition.

“Innovations essential to military preparedness—like highly specialized lithium-ion batteries—require an ecosystem of innovation, skills, and production facilities that the United States currently lacks,” a White House report (pdf) on national supply chains from June 2021 stated.

The Biden administration needs to incentivize young Americans to study the trades, along with science, technology, engineering, and mathematics (STEM)—similar to what the Navy provides for those entering nuclear fields, which provides significant bonuses. Discounted college educations or trade school training could be provided. It would cost trillions and decades to undo the damage, but the cost of not doing so would be infinitely larger. Rebuilding the nation’s industrial base is a critical national defense and national security issue.

“[We need to do] a better job telling those coming into the workforce (and those that influence and advise them) that skilled careers are not second-class jobs but pay well, come with no or little student debt, provide a stable income, and are a noble way to make a contribution. A four-year degree is not the sole path to success,” Wes Hallman, vice president of the National Defense Industrial Association, said in a statement to The Epoch Times.

India has pursued a similar policy of working to domesticate its military supply chain to free it from disruption amid the COVID-19 pandemic.

Popular past policies that created this situation need reassessment.

During the Clinton years, outsourcing critical defense and intelligence functions to the private sector was a way to cut costs after the collapse of the Soviet Union, but more than two decades later, the long-term negative effect on national security is apparent.

The policy had bipartisan support. Congress formalized (pdf) the policy with the 1998 National Defense Authorization Act (NDAA).

“[The] Commission on Roles and Missions (CORM) and the Defense Science Board (DSB) have identified similar problems with DOD’s support structure and processes, but have made outsourcing and privatization the centerpiece of their reforms to reduce infrastructure and support costs,” a 1997 General Accounting Office report (pdf) stated.

China became the net beneficiary.

The United States prevailed in the two world wars and in the Cold War because of its superior manufacturing base. America’s skilled labor force has atrophied in the same period: As the United States shifted from in-house development to outsourcing, companies have shifted their operations to China due to lower labor costs. As a result, cybersecurity risks have risen, a 2018 Defense Department report (pdf) stated.

Outsourcing has coincided with China’s rise both economically and militarily. In the same time period, the number of U.S. defense contractors shrank from at least 20 in 1990 to at least five today. When former Navy Secretary John Lehman was appointed in 1981, he had the luxury of encouraging competition to build missiles, ships, and planes, and to use competition to drive down prices. Lehman noted at a recent Heritage Foundation dinner that competition drove down costs during his tenure.

The U.S. Army’s 2016 Cyber Defense Review reported: “Technology transfer between the [sic] China’s civilian sector and the military has long been a considerable concern for the American military, as the supply chain becomes increasingly outsourced and out of American control. One prime example is through the direct transfer of hardware components defense contractors produce for the US military using Chinese facilities. Many American aerospace ventures with dedicated US military contracts have their facilities located next to, or even in Chinese military aerospace factories.”

This raises concern that China can place untraceable hardware trojans that can be used to either spy on the United States using its own military equipment or render them useless at China’s discretion. Chinese manufacturers have supplied suspected counterfeit electronic equipment for American aircraft, including the L-3 Communications C-27J, the Lockheed Martin C-130J, and the Boeing P-8A, a Senate Armed Services Committee report (pdf) found.

“We have to remember that the defense supply chain is now global and should focus on driving supply chain risk away from politically troublesome and unstable sources to, where possible, domestic sourcing and where not from friends, allies, and partners,” Hallman said. “We very much support eliminating our dependence on China for [rare earth metals].”

The resurrection of the U.S. semiconductor industry on U.S. soil is a key national security priority due to the threat posed by hardware trojans and China’s ability to disrupt the supply in case of war.

As the White House report pointed out: “The Department of Commerce notes that large-scale public investment in semiconductor fabrication has allowed Korean and Taiwanese firms to outpace U.S.-based firms. As the Department of Commerce warns, ‘ultimately, volume drives both innovation and operational learning; in the absence of the commercial volume, the United States will not be able to keep up … with the technology, in terms of quality, cost, or workforce.’”

U.S. industrial policy should deter further consolidations of the defense industry and encourage the creation of defense startups to bring back competition and drive down costs.

The very idea of a government-directed industrial policy is anathema to conservatives and many Republicans, but not having a clear industrial policy aimed at rebuilding the defense industry and supply chain at home ensures that the United States will lose the next war.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.