Senator Sullivan: Reliance On China Is ‘Outrageous’

By Kenneth Rapoza, CPA Industry Analyst

A Senate Armed Services Committee hearing on Thursday highlighted the ways the Department of Defense is taking on China. 

In Thursday’s Senate Armed Services Committee hearing, chairman Dan Sullivan (R-AK) said what we all believe here at the Coalition for a Prosperous America, loud and clear, and he said it to a Defense Department official: “It is outrageous that we are so reliant on the Chinese. Their calculated attempts to keep supply chains dependent on them has to stop.”

At the very least, there is bipartisan support for moving critical supply chains out of China. Wheels are in motion.

Sullivan was addressing Ellen Lord, the Under Secretary of Defense for Acquisition and Sustainment at the DoD in the question and answer period following her testimony.  In that testimony today, Lord singled out small drones as a sector China now dominates.

She was the only person providing testimony on supply chain integrity at the Readiness and Management Support Subcommittee of the Senate Armed Services Committee. She only mentioned China briefly in her opening remarks. So all of the real meat on China was reserved for the Q&A session afterwards.

In her remarks, she said that her department has been working to re-shore critical industrial base capabilities to address the foreign dependency risk identified in a DoD report requested by President Trump’s 2018 Executive Order No. 13806 over two years ago.

“We have made significant progress in the long-term objective of re-establishing domestic rare earth element production – which is key to reducing Chinese dependency,” she said, adding that funding has also been given to help US companies manufacturing small unmanned aerial systems in order to reduce “a large Chinese dependency for these systems.”

US companies have helped build up China’s drone manufacturing base, a base that now looks like something out of Star Wars.

In fact, in August, the Commerce Department banned US companies from selling computer hardware to the Chinese company that makes the “X-6 Skywalker” drone. 

When asked by Senator Doug Jones (D-AL) about whether the DoD had any concerns about China trying to infiltrate US private sector companies, including those working on defense contracts, Lord said she was “absolutely concerned”.

She said that her department is no longer just playing defense with China, but is now getting more aggressive on offense. “We are making sure we don’t have tech compromised or people infiltrating critical data,” she said.

Lets just hope Congress follows these statements and doesn’t allow for a flood of waivers or any modification to the 2019 National Defense Authorization Act which prohibits the federal government, government contractors, and grant loan recipients from procuring or using certain covered telecommunication equipment or services made by Huawei, ZTE, Hytera, Hikvision, and Dahua and their subsidiaries as a “substantial or essential component of any system, or as critical technology as part of any system.”

This is an ongoing battle behind the scenes on Capitol Hill with the defense contractor lobby working overtime for waivers and breaks on the law’s requirements. The argument is always the same: that supply chains are complicated. 

More interesting for us here at CPA, Lord said the US needed to “development industrial bases here so as not to be reliant on any back and forth with China, including on some commodities.”

In this case, she singled out microelectronics, long considered a commodity in the tech universe. Asia dominates this market and China is a growing component of that market.

“We are working closely across the DoD to come up with a very specific recommendation for some public and private partnerships to develop this sector domestically,” she said. “But we are only about 1% of the microelectronics market. We think we can work with other sectors, like automotive, to help sustain some of those microelectronics manufacturing facilities.”

On Wednesday, President Trump signed an Executive Order that mitigates risk of overdependence on China for critical minerals used in making next generation technologies, such as new microchips and long-life batteries for energy consumption and storage. 

“Any nation that is overly reliant on imports of crucial commodities faces a serious chokehold in times of crisis,” says CPA Chairman Dan DiMicco. “Securing the domestic production of these important resources will put our nation on a stronger economic footing and grow high-tech industries currently dominated by China.”