Manufacturing Intelligence and National Security

The Risks of an Eroding Manufacturing Sector

By Holly A. Bell

When I wrote the article Manufacturing: America’s Next Industrial Evolution? the primary purpose was to consider how to compete in a global manufacturing environment. I briefly mentioned national security as one reason we should actively seek to bring manufacturing back to the US and promised a more detailed discussion in a future article. Whether you agree or disagree with the other arguments for and against bringing manufacturing back to the US, the case for national security remains quite compelling. Forget for a moment the need to create jobs for unskilled labor, human rights abuses in other countries, the natural evolution of our economy, the superior skill of US workers, and the ‘trade leads to peace’ arguments many people impart and others debate. All of these arguments could be thrown out, as the national security issue stands alone.

Manufacturing and the Transfer of Power

As I stated in my first article, I am a free-market capitalist who supports globalization and free and fair trade. However, our current environment gives me cause for concern about the long-term consequences of our diminishing industrial base. When we choose to outsource manufacturing to the degree we have, we diminish our manufacturing capacity and erode our ability to keep pace in manufacturing technology and the development of a skilled manufacturing workforce.  Estimates of the total number of factories lost in the US between 2001 and 2010 range from 42,400 to 57,000. This is a significant loss of capacity. When manufacturing moves overseas, research and development often goes with it eroding our current competitive advantage in innovation while we help build R&D capabilities in other countries. This R&D capability is not limited to the development of manufacturing technology used to produce goods for US markets, but can be transferred to other areas of production we might find less desirable. This environment of reduced capacity, and the loss of R&D, technology, and skills significantly transfers power to other nations as it reduces our ability, over time, to turn production back on in the US during times of military or economic conflict.

There are already direct threats to military security as the US Department of Defense is often forced to go offshore to obtain parts for military equipment when no manufacturers remain on US soil. This gives other countries the power to slow or shut down our military. Think it couldn’t happen? According to Congressmen John Tierney (D-MA) the Swiss government, a self-described neutral country, delayed the delivery of parts the US needed for smart bombs to demonstrate their opposition to our involvement in the Iraq War. Other risks include the navy leasing ships from foreign manufacturers and the Coast Guard assembling ships from sections built in Korea.

We also give other countries the ability to control our supply chains for consumer and component goods. Don’t like US policy? Stop sending light bulbs, medicine, batteries, and cell phones. Or hold all shipments of a critical component needed for electrical transformers, medical devices, agricultural equipment, telecommunications, or computer networking. Domestic sourcing of critical items such as propellant chemicals, electronics, semiconductors, aircraft engines and parts, construction equipment, turbines, and rare-earth metals are becoming (or have become) extinct. While we might not be concerned that the last manufacturer of wire hangers for the dry cleaning industry left the US in recent years, we should be concerned about many other industries for finished and component goods. However, critical industries might be more difficult to identify than they were a generation ago due to our complex global system and the increased sophistication of the products we utilize.

Passive Technology Transfer Through Manufacturing

While there are many examples of active technology transfer in the form of manufacturing technology and R&D, it is often the passive technology transfers that have the potential to do the most harm in the long run. The first concern is the transfer of production knowledge to countries that have no regard for patents, trademarks, or other intellectual property rights and are willing to counterfeit goods. I was not able to find any data on the costs associated with intellectual property infringement compared to the cost savings of off-shoring, but this would certainly be an interesting and potentially enlightening study. A second associated issue is the potential to transfer technology and R&D outcomes to other countries; especially countries the US might not wish to share it with.

Of even greater concern is the passive transfer of technology intelligence. When most people think about the end of WWII, they think of the US dropping “The Bomb” on Japan. What many people have forgotten was that first Germany was defeated, in part, due to ball bearings. Once the US had captured enough German military equipment, they were able to establish the importance of ball bearings in its manufacture. By seriously damaging Germany’s ability to produce and purchase ball bearings, the US was able to significantly impact Germany’s ability to develop a war machine. The US is putting itself at similar risk for all goods.

By moving manufacturing overseas we are passively transferring our technological information that could be mapped in similar ways. We are not only exposing our critical inputs, designs, and processes, but we are also risking secret military technology as it is widely known there is significant technology cross-over between the military and consumer sectors. When one country has become the sole supplier of rare-earth metals because they have purchased and closed down the providers that existed in the US, I become concerned that technological mapping is taking place and measures to control our ability to produce critical products are being established. We also expose ourselves to issues like the possibility of another country manipulating the electronic devises they manufacture or developing ‘counter-technology’ that allows them to either access them at will, disrupt them, or even shut them down.

Many Americans understand the risks of dependence on foreign oil and advocate for energy independence, yet the same risks (and more) are present with dependence on foreign manufacturing. While we shouldn’t advocate for isolationism, we should support an industrial base that limits our exposure to risks in our supply chains and protects our innovations and technical knowledge. Determining these industries will take careful analysis and cooperation from the manufacturing sector to identify critical goods and components. This is in their own best interest as well as the military and economic security of the country.

Click to Return to Homepage