U.S. Military ‘Can’t Compete With China’; Would Lack Defense Industrial Goods After Month of War

William Greenwalt, Nonresident Senior Fellow at the American Enterprise Institute said the U.S. lacks the manufacturing capacity to build out its defense industrial base. He singled out ship building in the U.S., which has fallen by the wayside since the end of the Cold War. He hinted that shipbuilders that build large oceanic container ships, like Philadelphia based Matson Inc’s recent announcement that it will be building three “Aloha Class” container ships, should also be tasked to build Navy vessels in what Greenwalt likened to China’s civil-military fusion. 

“The first step is to restore a sense of urgency,” Greenwalt said, suggesting more Capitol Hill talk about China and wars in the months and years ahead to justify more defense spending.  The problem is not in the spending, however, as the witnesses all said. It is in contracting terms and in regulations that make it more affordable for contractors like Raytheon to source goods from elsewhere, including China.

Raytheon’s CEO in June 2023, Greg Hayes, said they source from “thousands” of suppliers in China. He said decoupling was impossible. “There is a codependency with China, whether it’s rare earth metals or pharmaceutical precursors,” he told CNBC at the time. “We talk about pulling supply chains out of China, but I will tell you it’s very impractical. We cut off our work with Russia, but we cannot do that with China. They are too big, too important and too necessary to the U.S. economy,” Hayes said.

During the Q&A period, Rep. Raja Krishnamoorthi (R-IL-8) held up a graphic showing just how far behind the U.S. is in relation to China on certain defense goods, like drones.

“How do we overcome these production gaps?” he asked, holding up a piece of aluminum cast equipment that prevents tanks from overheating. “China produces over five times those items than the U.S. and the Department of Defense relies on China for those castings. We outsource almost our entire production of them to China,” he said. “I’m going to make a provocative statement: I think we should buy all of it domestically and here’s why. China bans things like critical minerals because they need it; now what happens if they banned something like this?” he said, holding up the gray box-sized item that fit in the palm of his hand.

“We have to shift our thinking away from lowest price buying to value buying,” said Halimah Najieb-Locke, Vice President of Policy and Strategy at Entanglement, Inc., a cyber security firm contracting with the U.S. Army. “Value buying means strategic buying and it means secure supply chains,” she said.

Chairman John Moolenaar (R-MI-2) asked the panel what could be done to get more domestic production going quickly.

Greenwalt suggested advanced purchase agreements, which are multi year procurement deals. “You also have to deregulate the process. There is a lot of compliance in the industry. Let’s focus on solutions rather than focusing on complying with all these rules and regulations,” he said, but did not get into what regulations he thought needed to go.

He said that the government also had to consider the impact of environmental regulations “if you are talking about building new facilities. You have to streamline that process if you want to compete against China,” Greenwalt said.

Rep. Neal Dunn (R-FL-2) brought up the now famous DC line of “work with allies”, made popular by the Biden administration four years prior. “We have to decouple from China and work more with our allies,” he said, citing the CSIS war gaming video. Like Greenwalt, he too singled out lackluster shipbuilding in the U.S., something the Biden White House worked to reverse.