Let’s call it a bad week for the forces of globalization in the defense industry.
Not that there’s ever been a truly good week, mind you.
On Tuesday, ITT Corporation pleaded guilty to illegally outsourcing components of a night vision goggle to suppliers in China, Singapore and the UK without an export license.
On Thursday, a small defense contractor named Axion Corporation was indicted for allegedly doing the same thing with a component of the UH-60 Black Hawk.
Axion is still innocent until proven guilty, of course.
But it’s not difficult to imagine the temptations. You’re a defense contractor. Your customer wants you to cut your costs. You know that by outsourcing a small and seemingly innocent component of your military system to a foreign (read: cheaper) supplier, you could shave costs. But to do so you’d have to get an export license, and you know the foreign supplier would probably walk rather than have to endure that process. So you give the foreigners the deal on the sly and hope nobody is paying attention.
Welcome to the underbelly of this new era of globalized arms traders. I'm sure many such transactions occur completely legally, with all the appropriate licenses and reviews completed. But, given the suddenness of these two cases, one wonders if we're just seeing the proverbial tip of the iceberg.
Anybody who wants to learn more about the forces of globalization in the defense business should read a new monograph published by the Security Studies Institute at the Army War College. The paper, which was published on March 15, is titled, “Globalization and its Implications for the Defense Industrial Base.” I’ll give you the excerpt with the author’s conclusion:
“Globalization in many ways has strengthened the hand of defense companies at the expense of national governments. With more opportunities to expand their international presence, governments, at times, are being required to make concessions that would have been unheard of even a decade ago.”