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When The U.S. Drops Its Defenses

February 05, 1989|Kevin Phillips | Kevin Phillips is publisher of the American Political Report and Business and Public Affairs Fortnightly

WASHINGTON — When Japan began to overtake the United States as the West's leading financial power in the 1980s, Americans consoled themselves that U.S. military and defense-industry leadership, at least, was undisputed. Japan and West Germany couldn't challenge us there. Not with the constraining memories of World War II--of Messerschmitts over the white cliffs of Dover and Mitsubishis over Corregidor.

The extraordinary probability of the 1990s, however, is that the company manufacturing Messerschmitts may be the world's largest aerospace corporation, and the firm making Mitsubishis may not be far behind. The larger U.S. predicament is just as unnerving: a slow global decline going beyond individual perils-- lost electronics markets, slumping military exports and threatened worldwide U.S. military base closings--to the infrastructure of U.S. defense preparedness.

The domestic and international consequences of this dislocation could be huge. Jobs, technology and even future U.S. elections may be at risk. Aircraft and weapons systems now built in Burbank, Calif., and Bethpage, N.Y., may be replaced by others built far, far away.

The U.S. defense industry is beginning to suffer from adverse international trends not unlike those whipsawing other U.S. industries. Foreign competitors have been taking over overseas military and aerospace markets. Between 1982 and 1987, for example, military exports dropped by about 60%--from $22 billion to just $9 billion. "Large sales agreements . . . have virtually disappeared," retiring Defense Secretary Frank C. Carlucci admitted in a recent report to Congress.

Countries such as Brazil and Israel have built a good business with Third World nations that would rather not buy from a great power like the United States. The United States is also losing international leverage from foreign military aid cutbacks: Countries getting less U.S. aid buy less U.S. equipment. There's also no denying rising overseas disenchantment with local U.S. military bases and operational tie-ins with the U.S. military. Portugal, Spain, Greece, Turkey and the Philippines are all squeezing or terminating U.S. base arrangements--which usually means less reliance on U.S. equipment. It's a little bit like the pullback of the Roman Empire 1,500 years ago. Rome, too, probably started losing local armor, chariot and catapult markets.

Unfortunately, the threat doesn't end there. Countries that gained economic clout in the 1980s, such as Japan and West Germany, are getting interested in military production and commercial markets. They will let the United States carry the strategic and financial burdens of Atlantic and Pacific defense, but they want more of the commercial profits. If that sounds like a bad deal for the United States--it is.

But it's also the emerging reality. West Germany's Daimler-Benz, already in the aircraft business through its Dornier unit, is now acquiring Messerschmitt-Bolkow-Blohm, the country's leading aerospace concern. Taking over MBB would make Daimler a $46 billion-a-year firm, much larger than the top U.S. aerospace giants--Boeing and United Technologies. And that's just the beginning of Daimler's ambitions. Company chairman Edzard Reuter recently said he would like to build ties and even cross-shareholdings with French, British and Italian defense contractors--such as British Aerospace, Aerospatiale and Dassault. The objective? To promote European integration and outpace U.S. competition.

Even the Japanese, limited by their constitution to defense outlays of just 1% of gross national product, are getting bigger ideas. It's not that Tokyo wants a large Pacific military role; Uncle Sam can keep furnishing--and paying for--the defense umbrella, thank you. It's the neo-mercantile potential. Japanese strategists are starting to suspect they might be able to take over military equipment markets the way they've grabbed global consumer electronics markets.

The numbers are scary. Back in October, several U.S. media published highlights from a confidential private sector memo circulating in Tokyo. Its author concluded that if manufacturing giants such as Mitsubishi Heavy Industries, Toshiba and Ishikawajima-Harima were to start exporting the aircraft and weapons they now build for Japan's small armed forces, the economic payoff could be enormous. In less than a decade, the memo said, Japan could control 45% of the world's tank and motorized artillery market, 40% of military electronics purchases, 30% of the aerospace market and 60% of warship construction. Nervous U.S. policy-makers privately worry that any such Japanese emergence in armaments would not only jeopardize American defense capabilities but would threaten the already thin U.S. edge over foreign rivals in basic technologies.

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