U.S. military comes to grips with over-reliance on Chinese imports

WASHINGTON (Reuters) - A Pentagon-led review ordered by President Donald Trump has identified hundreds of instances where the U.S. military depends on foreign countries, especially China, for critical materials, U.S. officials said.

    The study is expected to be released in the coming weeks and aims to lessen the U.S. military’s reliance on foreign countries and strengthen U.S. industry.

    Among the study’s conclusions will be a determination the United States is too dependent on foreign suppliers for a range of items including some micro-electronics, tiny components such as integrated circuits and transistors, the officials told Reuters on condition of anonymity.

    These kinds of essential components are embedded in advanced electronics used in everything from satellites and cruise missiles to drones and cellphones.

The focus on China reflects an effort under Trump to address the risks to U.S. national security from Beijing’s growing military and economic clout. Pentagon officials want to be sure China is not able to hobble America’s military by cutting off supplies of materials or by sabotaging technology it exports.

The report could add to mounting trade tensions with China, bolstering the Trump administration’s “Buy American” initiative, which aims to help drum up billions of dollars more in arms sales for U.S. manufacturers and create more jobs.

Lieutenant Colonel Mike Andrews, a Pentagon spokesman, did not comment on the contents of the report but told Reuters the study would make recommendations “to ensure a robust, resilient, secure and ready manufacturing and defense industrial base.”

China, which has also become the main supplier of many of the rare earth minerals used by the United States, will be given special emphasis in the report, said the officials who spoke to Reuters on condition of anonymity.

    A January analysis from the United States Geological Survey said the United States produced no rare earth minerals in 2017 while China accounted for 81 percent of global mine production. Rare earth minerals are used in magnets, radars and consumer electronics.

Aside from the risk that a foreign power could cut off vital supplies needed to keep the U.S. military up and running, other risks include the threat of sabotaged equipment or espionage.

The Pentagon has long fretted that “kill switches” could be embedded in transistors that could turn off sensitive U.S. systems in a conflict. U.S. intelligence officials also warned this year about the possibility China could use Chinese-made mobile phones and network equipment to spy on Americans.

    When the study is released, it will not provide a detailed inventory of all of the weaknesses in the supply chain. These will be in a classified annex.

A U.S. official said the report will also examine U.S. shortcomings that contribute to purchases from foreign companies, including roller-coaster U.S. defense budgets that make it difficult for companies to predict government demand. Another weakness is in U.S. science and technology education.

BOLSTERING U.S. INDUSTRY

    Advocates of the study say it is a late but critical look at ways to address America’s loss of manufacturing, whose toll on national security gets far less attention than the jobs lost, and the political wave that it created in rust-belt states that helped elect Trump president in 2016.

    “People used to think you could outsource the manufacturing base without any repercussions (on national security). But now we know that’s not the case,” said one U.S. official familiar with the report, speaking on condition of anonymity.

    One aspect of the report’s recommendation is expected to be ensuring profitability for niche U.S. producers of critical components in American weaponry.

    Ellen Lord, the Pentagon’s top weapons buyer, has publicly spoken in recent weeks about the Defense Production Act (DPA) of 1950, which allows the U.S. president to incentivize domestic producers of critical materials through purchase commitments and other guarantees.

    Lord said the government should step in to offer such support if businesses would be unable to ensure a “reasonable profit.”   

The U.S. Government Accountability Office offered one example in a report last year about how the U.S. military had to fund a U.S. factory in 2014 to produce the chemical Butanetriol, used in the Hellfire air-to-surface missile.

For the previous six years, the military relied on China for the chemical.