By Jeff Green. Originally posted August 28, 2018, on RealClearDefense.
DoD Photo by Kimberly Conrad
With the recent passage of the National Defense Authorization Act (NDAA), along with several executive orders promulgated this year, the Federal government is finally getting serious about revitalizing the defense industrial base. This strategically critical sector of the U.S. economy has suffered through years of neglect at great cost to U.S. security. Notwithstanding a few disappointments, including the failure of mine-permitting reform to make the final cut of the bill, this year’s NDAA is nonetheless a good one for the defense industrial base.
Big Wins for Strategic Materials and American Tech
One of the most meaningful items in the bill would prohibit the Department of Defense and its contractors from acquiring certain sensitive materials from non-allied countries, including Iran, China, Russia, and North Korea. These materials include tungsten and high-powered samarium-cobalt and neodymium-iron-boron magnets — items that are critical components of many U.S. weapon systems from ordnance penetrators to radars. Reliance on foreign, potentially hostile, sources of supply for these materials creates significant supply chain vulnerability. Requiring DoD to procure these items from domestic sources is, therefore, a smart move that will enhance U.S. security and encourage American production.
Other excellent provisions in the bill address the rampant theft of U.S. technology and intellectual property. Section 885 requires the Secretary of Defense to develop a process to curtail the ability of foreign adversaries to steal American IP. Section 1049 would require DoD to establish a list of critical technologies that the Secretary of Defense is then authorized to better protect from hostile intelligence and other acquisition threats.
Both sections 885 and 1049 address vulnerabilities that are inherent in the remarkably free and open American economy. This openness, which has led to a high degree of economic dynamism and foreign direct investment, has also facilitated rampant foreign exploitation of U.S. trade secrets and intellectual property. In the last two decades alone, the U.S. is reported to have lost nearly $600 billion at the hands of IP theft and cyber espionage. Left unchecked, this exploitation will erode the technological superiority that gives the U.S. military its qualitative edge over potential foes.
Smart reform does not require the abandonment of the American free trade paradigm, especially for commercial technologies and companies. This year’s NDAA instead makes relatively small changes to sales within the defense industrial base that will shield American companies from unfair foreign trading practices, often subsidized by hostile foreign governments, that have already demonstrated the ability to destabilize and destroy small but critical sectors of the U.S. manufacturing and technology base.
Still Work to be done on Mining Reform
Unfortunately, the NDAA did not address the important need for mine permitting reform in the United States. As it stands, the U.S. mine permitting process is much less efficient than that of our allies. Report language from the 2015 National Strategic and Critical Minerals Production Act notes that new mine permits in the U.S. take 7-10 years to process, but Australia and Canada both average 2 to 3 years, despite equally stringent environmental regulations. It is clear that the U.S. process adds significant time and cost without any commensurate benefit.
Permitting delays for mining projects might seem trifling in the context of the other significant national security challenges currently facing the U.S., but they are not. Even as the international trade outlook becomes increasingly murky, we continue to become more import-reliant. And, in the current environment of sluggish mine permitting processes, resource exhaustion or production problems at a single mine would significantly degrade the ability of the U.S. industrial base to source certain elements domestically. This is especially true for any one of the 21 minerals upon which the U.S. is completely import-reliant. Reform language included in the House version of the NDAA, largely adopted from the 2018 National Strategic and Critical Minerals Production Act, would have rectified this problem. However, this provision failed to attract enough support in the Senate to make it into the final bill. Congressional advocates for the defense industrial base should continue to drum up support for mine permitting reform and consider next year’s NDAA as a legislative vehicle to get it done.
The FY2019 NDAA has several significant provisions that benefit the U.S. defense industrial base. Though work remains to be done, Congress’s work this year is a remarkable and welcome step forward in securing the defense industrial base against foreign interference. If the remarkable speed and bipartisan support with which the bill passed is any indication, America is ready for a strong industrial base again.
Jeffery A. Green is president and founder of J.A. Green & Company, a bipartisan government relations firm based in Washington DC. Mr. Green served as a missile combat crew commander in the U.S. Air Force and continues to serve as a colonel in the United States Air Force Reserve.