foreign sources for a wide variety of components and production equipment. Japan has been a focus for rising concerns in this area because of its strong technological-industrial capabilities. In particular, Japanese companies dominate several of the most well-known areas of U.S. dependence in dual-use components and equipment. The two most significant U.S. policy initiatives relevant to this discussion have addressed areas of U.S. weakness vis-à-vis Japan, with implications for dependence on Japan or Japanese denial of critical technologies —significant Department of Defense (DoD) financial support for the SEMATECH research and development (RżD) consortium and the National Flat Panel Display Initiative announced in 1994.
Japanese and other foreign producers may be able to supply components of better quality or lower cost or may be the only available source of a specific technology. However, foreign sourcing and dependence carry potential national security liabilities. For the purpose of conceptualizing the issues, it is useful to distinguish between the short-run, acute risks of inadequate supplies of components or equipment for surge or mobilization contingencies, as well as the longer-term risks of inadequate access to foreign technologies during the development phase for new systems, and spillover effects that the absence of domestic capabilities might have on upstream and downstream industries. As explained below, dependence in some component and equipment areas carries both short- and long-term risks.
In short-term contingencies the key national security imperative for any critical component or piece of equipment is to obtain adequate supplies for peacetime surges in production or general mobilization. The criteria used to evaluate the risk of foreign dependence in manufactured products are similar to those that would apply to strategic commodities or materials. Concretely, concerns about foreign sources revolve around several possible scenarios that would block adequate supply. For example, foreign production sites or transportation channels might be destroyed or disabled by military action, natural disasters, or accidents. Foreign sources might also withhold supply from the United States for political reasons; the government of a foreign production site might be allied with countries hostile to the United States, be threatened by such countries, or may be under the pressure of public opinion to withhold the component or piece of equipment in question. Even if supplies are not withheld, foreign sources could not be compelled and might be reluctant to divert production from other customers to meet increased U.S. military demand during a crisis.
Table C-1 shows the most important criteria for evaluating these short-term risks. As is apparent, the risks of dependence increase with the criticality of the component, surge and mobilization production requirements, the concentration of suppliers, and the political relationship of supplier governments with the United States.
The overall extent of foreign dependence and foreign sourcing is generally unknown, particularly at the lower tiers of the supplier base.4 The preponderance of publicly available information indicates that foreign dependence, particularly dependence on Japanese sources at the
U.S. Congress, General Accounting Office, Significance of DOD’s Foreign Dependence (Washington, D.C.: U.S. Government Printing Office, 1991), p. 1.