California Congressman Duncan Hunter is an old and dear friend and someone who knows more about defense policy in this country than anyone else I know. That's why it amazes me that someone so knowledgeable can fall prey to the fallacies of protectionism, particularly when it involves the defense of our nation.
When he once took a baseball bat to a Japanese-made TV set on the Capitol steps, it was good political theater, but it illustrates how deeply ingrained his protectionist streak runs. But now, Hunter, who is chairman of the House Armed Services Committee, has gone beyond political vaudeville into the theater of the absurd. He inserted into the House Defense Authorization Bill a "buy-American" provision that not only would cut back by a third the so-called "foreign content" permitted in goods purchased by the military, but it also would create a long list of goods - such as machine tools, dies and industrial molds, and airplane tires - that must come exclusively from American firms. The provision also would establish a $100-million corporate welfare fund to subsidize American firms to produce "critical" military parts and supplies.
A potential unintended consequence of the provision might be that joint defense programs, such as the Joint Strike Fighter that is being developed in partnership with Great Britain, would become impossible to do. The Pentagon is so concerned that the provision would cripple our ability to procure the best military equipment and systems on a timely basis that Defense Secretary Donald Rumsfeld has rightly recommended to the president that he veto the bill if it comes out of the House/Senate Conference Committee with the Hunter provision intact.
In times like this, emotions run high, and it is not unusual to see members of Congress resort to indirect means, such as a "buy-American" provision, to retaliate against countries that do not fully cooperate and support our foreign policy. Moreover, there is always a great temptation among members of Congress to succumb to the illusion that forcing the government to spend money exclusively on American-made goods will slow the decline in American manufacturing.
What the protectionist mentality ignores is that for every American job saved, American consumers and taxpayers end up paying more money, and American soldiers, sailors and pilots must use inferior quality weapons and systems. The sole question that we should ask ourselves when discussing defense contracting is what policies will ensure that the United States maintains the best possible defense? Never should our national defense become subordinate to parochial congressional interests that seek to subsidize globally uncompetitive companies at the expense of providing our men and women in the military with the best technology and hardware at the most affordable cost.
By no means do I mean to imply that we should ignore that national defense is a special case, which Adam Smith acknowledged in "The Wealth of Nations" when he said, "It isof importance that the kingdom depend as little as possible upon its neighbors for the manufactures necessary for defense." I think we fully abide by that principle.
For example, supporters of the Hunter provision cite the spat over the delivery of Swiss-made parts for the Joint Direct Attack Munitions, which had been halted during the Iraq war because the Swiss government opposed U.S. policy in Iraq. It should be noted, however, that the United States was able to find an alternate supplier. During the war with Iraq there were no instances, zero, when the U.S. military failed to get foreign-produced supplies as necessary, even when the governments of foreign suppliers opposed the war.
A seven-month study of eight major defense systems in 2001 found that less than 2 percent of the content was produced abroad. U.S. aerospace/defense companies currently enjoy profit margins 50 percent greater than they did 20 years ago. The aerospace industry exports 40 percent of its products, and in 2002 delivered a $30 billion export surplus, the largest of any sector of the economy. These combined aerospace/defense industry exports also support more than 300,000 American jobs. The United States sells six times as many defense-related products to Europe as it purchases from Europe.
The other major contention of the protectionist elements is that U.S. firms are being bought out by companies of foreign origin. While this may be true in some cases, the U.S. government already has a Committee on Foreign Investment in the United States that is charged with policing overseas takeovers. Also, it is highly unlikely U.S. workers would stop production during a time of war simply because the owner of the corporation was located in a country that opposed U.S. policy. Even if they did, the company could be compelled to produce under the Defense Production Act. A far better solution to blanket protectionist measures would be to establish procedural safeguards, on a case-by-case basis that will ensure that we are not overly dependent on an unreliable supplier.
Protectionism is always tempting to political leaders, especially if they represent districts adversely affected by competition from free-trade policies. But they almost always learn the hard way that protectionist policies, even in the area of defense, are counterproductive because they are economically harmful. They shrink national output more than they increase business in the protected industry, and they cost more jobs in related industry than they save.
Duncan, you and I have campaigned with and for each other many times, and our friendship will always be there, but please work out a compromise on this one.