Keynote speech summary from the 2018 NDTA-USTRANSCOM Fall Meeting
Dr. Peter K. Navarro, Director of the White House Office of Trade and Manufacturing Policy
Dr. Navarro began by describing what President Trump is doing in terms of broad themed economic securities and national security. Past [US] presidents have often been characterized by short, but profound maxims that both guided their policies and led to some of their greatest successes. For example, Teddy Roosevelt’s “walk softly and carry a big stick” was the motivating idea and principle behind transforming a domestic leaning Sea Service to what became a global reaching Navy. President Ronald Reagan’s “peace through strength” was the guiding principle for an innovative rebuilding of our defense industrial base and the eventual downfall of the Soviet Union. President Donald Trump has upped that ante in a way with this principle “economic security is national security.” The corollary to which is simply that a strong manufacturing and defense industrial base is critical to both economic prosperity and national defense.
The President is often accused of having no strategy, when in fact this principle—economic security is national security—is a strategy which guides everything he does. Navarro expanded on this point by using the example of tax cuts which he said lead to increased investment, productivity, and a rebuilding of our manufacturing and defense industrial base. Deregulation creates a pure supply side stimulus by lowering the cost of our manufacturers, thereby making us more competitive and able to export more. Through executive action, the President has been very successful reinvigorating “Buy American” policies. These policies, when applied to our steel and aluminum industries, help build up our manufacturing and defense industrial base.
A report on the first assessment of the defense industrial base ever undertaken by the government was recently released. Many agencies and more than 300 subject matter experts worked on it. The idea of the assessment was to look at nine different sectors such as aircraft, shipbuilding, and nuclear, along with six cross cutting sectors like cyber and machine tools. If you think about this from a production standpoint, you have assembly plants, but you also have a seven-tier deep supply chain. So if you need to build an F-35 and you have a component down in the fifth tier of the supply chain that is in financial trouble after eight years of sequestration, that would be a vulnerability in the defense industrial base and if we tried to surge your production that could be a bottleneck. The assessment identified close to 300 of those vulnerabilities. When the report were submitted to the President, a number of actions were submitted with it.
Another major vulnerability identified was foreign dependencies, much of which Navarro thought was the product of bad trade policies. Additionally, strategic rivals like China are identified in the report for specifically targeting parts of our supply chain and industrial base. Many in the audience, he surmised, may not think that trade policy has much to do with defense policy. But that is not true, he said, because when we lose the ability to produce critical material like Beryllium, Tungsten, and other kinds of rare Earth—when those go offshore or when we don’t have the ability to produce components for some of our night visions systems—that puts us at risk, and particularly in a crisis or surge. Furthermore, you cannot always rely on allies to get you what you need, he explained, citing issues during the first Gulf War when trusted allies in Europe refused to ship what we needed, leading to a 10 or more day delay getting boots on the ground where we needed. When you have a 10-day delay that gives the enemy time to dig in and create more risks and dangers. Navarro summarized his point by saying that the Administration is trying to think globally about homeland security and national defense through the lens of “economic security is national security,” particularly in a democracy and a capitalist country, defense and government, working with the private sector.
Another takeaway from the assessment is that it’s long past time for an assessment of our infrastructure. As successive USTRANSCOM Commanders have noted, our transportation has faced years of underinvestment and often neglected that has produced significant strains and gaps. Our defense rail system is aging, faces chronic underinvestment, and we have significant foreign competition in rail cars that are critical for national defense. The Australian rolling stock industry was decimated in a matter of years, not decades but years, by a conscious Chinese strategy to undercut domestic industry with stock that was made with dump steel, heavily government subsidized and just put that industry out of business. We are facing the same problem here. The Chinese are busy trying to take over our rolling stock industry. They have made great inroads bidding on things like public transportation systems in cities like Chicago, Boston, and Los Angeles, and the problem is the Chinese government is willing to heavily subsidize things like steel and aluminum which is a major part of the cost of the rolling stock. He continued that they will also steal US technology which helps them avoid the cost of R&D, all this means that when it comes time for an American company to bid on the rail car system in Chicago versus a Chinese company, it’s not a fair fight. The US is losing these unfair fights and that may begin to impact missions. For that reason, Navarro hoped to push forward to the next leg of the defense industrial base assessment regarding the issue of infrastructure, and with the logistics community’s help, he said, perhaps some accelerated solutions can be found.
Finally, Navarro discussed his office’s work on the Merchant Mariner shortfall which he estimated to be around 2,000 mariners. We are fierce defenders of the Jones Act and fierce defenders of cargo preference, he said, adding that it is a continuous struggle to raise awareness of just how significant the shortfall could be in the event of another surge. His office is trying to tackle the issue in many different ways. One way which he hoped would soon be finished was making it easier for Sea Service Veterans to seamlessly transition into the Merchant Marine without any undue obstacles or delays in certification. This is part of a broader effort by the Administration to help Veterans transition into civilian roles more effectively.