Get China out of America’s military supply chain

OPINION:

For over 100 years, my family-owned company, Atlas Tool Works, has manufactured precision metal parts in Illinois. We’re one of the smaller suppliers for the U.S. defense and aerospace industry, proudly making parts for the F-35 fighter jet and other critical defense systems. In fact, Northrop Grumman recently honored us for our work in support of the Department of Defense.

Unfortunately, China has spent the past 20 years replacing small manufacturers such as Atlas. Today, Chinese companies supply many inputs for America’s military, putting the U.S. in a disturbingly vulnerable position. This threatens the survival of the small domestic manufacturers that play a critical role in America’s defense industrial base.

With Washington increasingly concerned about China, allowing China to supply parts and equipment for the U.S. defense industrial base makes little sense. And as Congress prepares the 2025 National Defense Authorization Act, lawmakers can ensure that Beijing does not further entrench itself in America’s military supply chain.

Consider that two years ago a Pentagon subcontractor used Chinese metal supplies in F-35 jet engines. The Air Force was forced to halt production until the safety of these metals could be verified. The Federal Aviation Administration recently announced an investigation of Boeing’s and Airbus’ use of titanium aircraft components from a Chinese company. The parts were sold with falsified documentation regarding the materials’ authenticity, raising serious concerns about structural integrity.

Chinese companies have also embedded themselves in U.S. supply chains by masquerading as domestic firms. For instance, Wanxiang America Corp. claims to be 100% American-owned. But it’s actually part of the Wanxiang Group, a Chinese conglomerate based in Hangzhou. As a technically U.S. company, however, Wanxiang America qualifies as a domestic supplier for the Pentagon.

A closer look reveals that the company is a conduit for Wanxiang Group’s products in the United States. That allows Wanxiang America to use subsidized supplies from China to outcompete American auto parts makers. Wanxiang America’s president, Pin Ni, has also boasted that a $20,000 investment in the U.S. grew into a $4 billion conglomerate. It’s hard to believe Beijing had no role in its stunning rise as a “discerning acquirer of distressed companies in the United States.”

These are just a few examples of America’s supply chain vulnerabilities. While large companies such as Northrop Grumman and Lockheed Martin are well known on Capitol Hill, policymakers must also consider that thousands of smaller domestic manufacturers throughout America’s heartland actually provide the inputs needed to build America’s most sensitive military equipment. Unfortunately, China’s efforts to pick them off are succeeding, leaving the Defense Department increasingly reliant on Chinese suppliers.

There is still opposition to removing China from America’s military supply chain. Raytheon CEO Greg Hayes recently said that the United States can “de-risk but not decouple from China.” That line of thinking is unacceptable if our goal is strong national security. We should pursue solutions to remove China from America’s military supply chain.

Congress should use the NDAA to enforce strict domestic sourcing requirements for all future defense spending, and the Pentagon must tighten its criteria and aggressively use the Defense Production Act to establish new domestic suppliers. For example, the act should address the current titanium shortage that resulted from Russia’s invasion of Ukraine. It’s time to boost U.S. mining, refining and processing of critical metals so that companies don’t source from Chinese companies using false documentation.

Wall Street also remains complicit in propping up Chinese producers. There are literally thousands of Chinese entities present in U.S. capital markets, including a wide array of Chinese companies that continue to hide their books from American investors. With Wall Street’s help, Beijing is using America’s financial markets to raise funds for its state-owned companies — an advantage that many U.S. producers don’t have. It’s time to delist these companies from U.S. exchanges.

As the pandemic took hold, a lack of domestic production exacerbated supply chain shortages. Without action from Congress and the Pentagon, these problems will get worse. To remain an industrial power, Washington must prioritize manufacturing — and condition defense spending on domestic suppliers while also supporting nondefense manufacturers that can contribute to the defense industrial base in time of need.

My company has watched in real time as China has picked off smaller producers throughout America’s industrial defense chain. It’s time for Congress and the Pentagon to address this — and ensure that our nation still retains domestic production capable of supporting a 21st-century military.

• Zach Mottl is chair of the Coalition for a Prosperous America and president of Atlas Tool Works. Follow him @ZachMottl.