Time Of The Essence For Defense Industrial Base Revival, Panelists Say

An accelerated revival of the U.S. defense industrial base would be the best way to prepare for a worst-case scenario in the Taiwan Strait, panelists said Nov. 7 during a discussion on the first day of Aviation Week’s A&D Programs event in Washington.

Underscoring the paramount importance of the security challenge posed by the People’s Republic of China (PRC) and concern about the ruling Chinese Communist Party’s timeline for taking control of Taiwan, a question from the audience asked if America’s defense supply chain would be ready if tensions between China and Taiwan escalated in 2027.

If 2027 is the date, then production should start ramping up at the soonest, said Scott Baum, vice president of strategy and growth at Elbit Systems America. “Industry needs time to scale,” likely 24 to 36 months, he said.

U.S. intelligence agencies have assessed that Chinese leader Xi Jinping wants the People’s Liberation Army (PLA) to be capable of subduing Taiwan by 2027, though it remains unclear whether he intends to order an attack by that date.

Ironically, great-power competition with the PRC, once the top destination for the offshoring of America’s manufacturing sector, has galvanized policymakers and defense contractors to revitalize an industrial base that has been eroded over decades of aggressive offshoring of manufacturing capacity.

Given that erosion, the U.S. faces significant challenges today when it comes to talent in the defense sector. Adele Ratcliff, director of the Innovation Capability and Modernization Office, noted that large-scale offshoring of manufacturing has resulted in the atrophying of training programs that cultivate key skills in the U.S. workforce. Yet with geopolitical tensions at their highest since the Cold War, it is imperative that industry and government “work together with a sense of urgency” because America needs hundreds of thousands of new workers in the defense industrial base over the next decade, she said.

Baum traced the interest in rejuvenating the defense industrial base to the twilight of the Barack Obama administration, when three major trends of concern to the U.S. became apparent, all part of an increasingly assertive Chinese industrial policy. They are the Belt and Road infrastructure initiative, Made In China 2025–a blueprint for gaining leadership in strategic advanced technologies–and the PRC’s military-civil fusion strategy that seeks to develop the PLA into a more potent fighting force.

These trends “triggered a series of recognitions that we were playing in a different game, that the industrial base needs to be viewed as an element of national power, that decisions made over the last 20 years caused us to be outmatched,” he said.

“We identified that there was a problem and we’re still working with industry to figure out how to create win-wins,” said Jeff Hubert, director of the U.S. Air Force’s Office of Commercial and Economic Analysis. “Throwing money at the problem doesn’t necessarily fix what the issues are.”

Hubert said government concerns about the state of the U.S. defense industrial base were raised in the mid-2010s, but “folks didn’t really start listening until the 2017-18 time frame.”

At this point, it is important to consider what a partnership [between government and industry] looks like “to address these things at scope and scale,” he said. Hubert added that it is essential to figure out how to make participation in a defense industrial base revival profitable for industry.  

In recent years, the U.S. has worked to reduce reliance on China in areas like critical minerals, though dependency on Beijing remains high for many rare earth elements. Thus far this year, China has placed export restrictions on gallium and germanium, which both have crucial aerospace and defense applications. U.S. stockpiles of the minerals are still small.

Ratcliff said efforts are underway to strengthen mining capacity in the U.S. However, the financial environment could be challenging for U.S. companies and it is important to understand how to assess market demand and incentivize the participation of industry, she added.

Baum said “we aren’t in this alone,” noting the U.S.’s strong global network of allies and partners. “They aren’t just allies and partners on paper, but from an industry perspective,” he said.

A panel focusing on U.S. allies and partners addressed how they could play a role in strengthening the competitiveness of America’s industrial base. While panelists noted that so-called “friendshoring” with close traditional allies including Canada, the UK, France and Germany has been occurring for years, it is necessary today to expand that network.

Dak Hardwick, vice president of international affairs at the Aerospace Industries Association (AIA), recommended that the U.S. establish reciprocal defense agreements with India, Mexico and South Korea.

Vivek Lall, chief executive of General Atomics, highlighted the defense technology acumen of Indian startups and their impressive talent pool. With those startups, General Atomics is able to work not only on outsourcing, but also the co-development of technologies. The company is “very impressed with our collaboration there,” he said.

Looking ahead, the AUKUS partnership between Australia, the UK and the U.S.—which began with nuclear-powered submarines but also includes a Pillar 2 that will focus on developing a range of advanced capabilities—could be a litmus test for a new era of defense cooperation with close allies.

Resolving licensing challenges will be integral to the prospects of AUKUS.

“The AUKUS partnership is a landmark generational opportunity,” Hardwick said. “If we can’t get it right [with the UK and Australia], there isn’t another country with which we will get this right.”