Archive for May, 2012

Senate Report Reveals Extent of Chinese Counterfeit Parts in Defense Industry

Tuesday, May 29th, 2012

On May 21, 2012, the Senate Armed Services Committee released a report on counterfeit parts in the Department of Defense supply chain.  The Committee discovered counterfeit electronic parts from China in the Air Force’s C-130J and C-27J cargo plane, in assemblies used in the Navy’s SH-60B helicopter, and in the Navy’s P-8A surveillance plane, among 1,800 cases of bogus parts.

“The systems we rely on for national security and the protection of our military men and women depend on the performance and reliability of small, incredibly sophisticated electronic components.  Our fighter pilots rely on night vision systems enabled by transistors the size of paper clips to identify targets.  Our soldiers and Marines depend on radios ad GPS devices, and the microelectronics that make them work, to stay in contact with their units and get advance warning of threats that may be around the next corner. The failure of a single electronic part can leave a soldier, sailor, airman, or Marine vulnerable at the worst possible time,” the report says. “Unfortunately, a flood of counterfeit electronic parts has made it a lot harder to prevent that from happening.”

The year-long investigation launched by Sen. Carl Levin, D-Mich., the committee’s chairman,and Ranking Member Sen. John McCain, R-Ariz., found over a million suspect counterfeit parts involved in those 1,800 cases.

“Our report outlines how this flood of counterfeit parts, overwhelmingly from China, threatens national security, the safety of our troops and American jobs,” Levin said. “It underscores China’s failure to police the blatant market in counterfeit parts – a failure China should rectify.”  The Chinese government denied visas to Committee staff to travel to mainland China as part of the Committee’s investigation.

The investigation revealed that China was the dominant source of counterfeit electronic parts ? more than 70 percent of the parts tracked were traced to China, coming from more than 650 companies.  Counterfeit parts included unauthorized copies of an authentic product and previously used parts that were made to look new and sold as new.  The parts often change hands multiple times before being bought by defense contractors, who may know little about the source of the parts they buy, the report said.

“Our committee’s report makes it abundantly clear that vulnerabilities throughout the defense supply chain allow counterfeit electronic parts to infiltrate critical U.S. military systems, risking our security and the lives of the men and women who protect it,” said McCain. “As directed by last year’s Defense Authorization bill, the Department of Defense and its contractors must attack this problem more aggressively, particularly since counterfeiters are becoming better at shielding their dangerous fakes from detection.”

In November 2012, the Committee held a hearing on the investigation’s preliminary findings.  Following that hearing, Committee Chairman Carl Levin and Ranking Member John McCain offered an amendment to the National Defense Authorization Act for Fiscal Year 2012 to address weaknesses in the defense supply chain and to promote the adoption of aggressive counterfeit avoidance practices by DOD and the defense industry. The amendment was adopted in the Senate and a revised version was included in the final bill signed by President Obama on December  31, 2011.

The law requires the Secretary of Defense to conduct an assessment of Department of Defense acquisition policies and systems for the detection and avoidance of counterfeit electronic parts not later than 180 days after the date of the enactment of the Act to:

  • establish Department-wide definitions of the terms “counterfeit” or “suspect counterfeit electronic part”
  • issue guidance regarding “training personnel, making sourcing decisions, ensuring traceability of parts, inspecting and testing parts, reporting and quarantining counterfeit electronic parts and suspect counterfeit electronic parts, and taking corrective actions (including actions to recover costs…”
  • issue or revise guidance “on remedial actions to be taken in the case of a supplier who has repeatedly failed to detect and avoid counterfeit electronic parts or otherwise failed to exercise due diligence in the detection and avoidance of such parts, including consideration of whether to suspend or debar a supplier until such time as the supplier has effectively addressed the issues that led to such failures.”
  • require contractors or subcontractors that suspect a counterfeit part provide “a report in writing within 60 days to appropriate Government authorities and to the Government-Industry Data Exchange Program
  • “establish a process for analyzing, assessing, and acting on reports of counterfeit electronic parts and suspect counterfeit electronic parts” that are reported.
  • Require the Secretary to revise the Department of Defense Supplement to the Federal Acquisition Regulation to address the detection and avoidance of counterfeit electronic parts not later than 270 days after the date of the enactment of this Act.

The law includes provisions to help stop counterfeit electronic parts before they enter the U.S, strengthens the inspection regimen for imported parts, and gives the government wider berth in seeking assistance from the private sector in determining whether parts are authentic.  It also requires that contractors or subcontractors “obtain electronic parts that are in production or currently available in stock from the original manufacturers of the parts or their authorized dealers, or from trusted suppliers who obtain such parts exclusively from the original manufacturers of the parts or their authorized dealers manufacturers or authorized distributors.”

The investigation revealed that the defense industry also has routinely failed to report cases of suspected bogus parts.  For example, the majority of the 1,800 cases involving counterfeit parts appear to have gone unreported to the DOD or criminal authorities.  Boeing failed to report a case of a suspect counterfeit part used in the Navy’s P-8A surveillance airplane until the Senate Armed Services Committee began inquiring, the report said.  And L-3 Communications didn’t report the suspect memory chip to the Air Force until the day before the committee’s staff was scheduled to meet with the Air Force program office responsible for the program.

The Committee’s report includes detailed descriptions of how counterfeits are flooding the supply chain, risking the performance and reliability of critical defense systems. In just one example described in the report, the U.S. Air Force says that a single electronic parts supplier, Hong Dark Electronic Trade of Shenzhen, China, supplied approximately 84,000 suspect counterfeit electronic parts into the DOD supply chain. Parts from Hong Dark made it into Traffic Alert and Collision Avoidance Systems (TCAS) intended for the C-5AMP, C-12, and the Global Hawk.  In addition, parts from Hong Dark made it into assemblies intended for the P-3, the Special Operations Force A/MH-6M, and other military equipment, like the Excalibur (an extended range artillery projectile), the Navy Integrated Submarine Imaging System, and the Army Stryker Mobile Gun.

The Armed Services Committee reached the follow conclusions on counterfeit parts:

Conclusion 1: China is the dominant source country for counterfeit electronic parts that are infiltrating the defense supply chain.

Conclusion 2: The Chinese government has failed to take steps to stop counterfeiting operations that are carried out openly in that country.

Conclusion 3: The Department of Defense lacks knowledge of the scope and impact of counterfeit parts on critical defense systems.

Conclusion 4: The use of counterfeit electronic parts in defense systems can compromise performance and reliability, risk national security, and endanger the safety of military personnel.

Conclusion 5: Permitting contractors to recover costs incurred as a result of their own failure to detect counterfeit electronic parts does not encourage the adoption of aggressive counterfeit avoidance and detection programs.

Conclusion 6: The defense industry’s reliance on unvetted independent distributors to supply electronic parts for critical military applications results in unacceptable risks to national security and the safety of U.S. military personnel.

Conclusion 7: Weaknesses in the testing regime for electronic parts create vulnerabilities that are exploited by counterfeiters.

Conclusion 8: The defense industry routinely failed to report cases of suspect counterfeit parts, putting the integrity of the defense supply chain at risk.

Of course, China denies any culpability.  On May 25, 2012 an article appeared in China Defense News that stated, “The U.S. government has found yet another reason to ignore its own problems and bash China, this time accusing the country of compromising national security via the manufacture of counterfeit electronic components used by the U.S. military…The accuracy of the claims is questionable at best, but bigger questions should be answered first: how did counterfeit parts end up slipping into the U.S. military system in the first place? And for what purpose were the parts originally shipped for?

The U.S. has maintained a military embargo on China for 23 years. Military components and weapons aren’t supposed to be officially traded between the two countries to begin with. Taking this into consideration, the U.S. ought to find out precisely who purchased the parts and how they passed muster before accusing China of wrongdoing.”

I answered the question of how counterfeit parts ended up “slipping into the U. S. military system in the first place” in my blog article last fall, titled “What Led to the Problem of Chinese Counterfeit Parts.”  I detailed the following four main reasons for the problem of Chinese counterfeit parts:

  1. Mil. Spec. qualified components replaced by off the shelf components by allowing use of “dual use technology” of commercial components
  2. Relaxing “Buy American” requirements for Federal procurement
  3. American companies sourcing manufacturing offshore, mainly in China
  4. Rapid obsolescence of components, especially micro chips

The provisions of the National Defense Authorization for FY 2012 don’t directly address these four main reasons for the counterfeit part problem.  This is another typical example of Congressional legislation where they attempt to have their cake and eat it too by seeming to crack down on counterfeit parts while not endangering U. S. corporate investments in China.  In order not to anger their big political donors, who include some of the corporations that export our jobs to China, they place the burden of identifying and reporting counterfeit parts on contractors and subcontractors instead of addressing the root causes I have listed above.

The new Federal procurement regulations being drafted by the Department of Defense are supposed to “address the detection and avoidance of counterfeit electronic parts,” but there has been no mention of eliminating “dual use technology” of commercial parts for military/defense applications.  And, there has been no discussion of tightening or strengthening the “Buy American” requirements for Federal procurement to what they were prior to 1993.

Worst of all, there has been no action by Congress on addressing the trade and tax laws that currently incentivize American manufacturers to continue to offshore manufacturing in China and other foreign countries.  Congress must act to eliminate the incentives for offshoring and provide incentives for bringing manufacturing back to America.  Until these root causes are addressed, we will continue to have counterfeit parts slip into the military/defense procurement system and endanger the lives of our military personnel and threaten our national security.

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Changing to WTO’s “Made in the World” Labeling Would Harm Americans

Tuesday, May 22nd, 2012

How would you like to go shopping and find that everywhere you went, the label said “Made in the World” instead of “Made in China,” “Made in India,” “Made in USA” etc.?  The label on products Americans purchase that names the country in which they are made may soon be gone.    How could this be possible?

The World Trade Organization has been working on the “Made in the World” initiative for years, and in 2008, the WTO and Organization for Economic Co-operation & Development (OECD) began cooperating with other stakeholders to provide data that would shed lights on what is called “trade in tasks” i.e., the domestic value added content of trade.   While traditional statistics are necessary, they don’t identify the contribution of each trade partner to the total value of the final good in the supply chain. By contributing to specific segments of a global value chains, trade partners are actually “trading tasks” rather than trading final products.

In 2011, Andreas Maurer, chief of the WTO’s International Trade Statistics Section, “… in the past two or three years there has been huge momentum to get the necessary information” that would be used to rationalize elimination of country of origin labeling.”

The World Trade Organization and the European Union moved one step closer to eliminating “country of origin” labeling. On April 16, 2012, the European Commission and WTO held a conference to mark the launch of the World Input-Output Database (WIOD).  This new database allows trade analysts to have a better view of the global value chains created by world trade.

Globalization is changing business models and increasing fragmentation of production.  Companies divide their operations around the world, from product design, manufacturing, to assembly and marketing, creating global production chains.  More and more products are ‘made in the world’ rather than in any particular country.

Today’s traded products are not produced in a single location but are the end-result of a series of steps carried out in many countries around the world.  For example, cars and trucks produced by General Motors or Ford may have parts and assemblies coming from several other countries, including China.

Instead of counting the gross value of goods and services exchanged, the new database reveals the value-added that make up these goods and services as they are traded internationally.  The findings The Europe-based organizations instead want to adopt a “Made in the World” logo for all products on the grounds that global supply chains have rendered country of origin labeling inaccurate and obsolete. are significant as they may change the perception of the competitiveness of certain industrial sectors in some countries.

The WTO and OECD have been working with the U.S. International Trade Commission and the World Bank in the United States, the Institute of Developing Economies (IDE) and the Japan External Trade Organization in Asia, and the recently created World Input-Output Database (WIOD) consortium in Europe to implement the new trade statistics. The WTO has signed a contract with the OECD to start issuing official statistics on international trade based on value added.

The WTO’s Made in the World initiative is part of the process of “re-engineering global governance,” said WTO Deputy Director General Alejandro Jara at the event launching the opening of the World Input-Output Database.  With the rise of global supply chains “it is misleading to rely solely on gross trade flows as a measure” of a country’s competitive position.  As companies have created global supply chains, “attributing the full commercial value of imports to the last country of origin can skew bilateral trade balances, pervert the political debate on trade imbalances and may lead to wrong and counter-productive decisions,” says the WTO.

The intent of the WTO’s “Made in the World” initiative is to modernize global trade statistics, reduce public pressure on politicians for protectionist trade policies, and reduce public opposition to free trade.

Director-General Pascal Lamy has said that “improved measurement and knowledge of actual trade flows will help better understand the interdependencies of today’s national economies, supporting the design of better policies and better trade regulation worldwide.”

In an article on the Economy in Crisis website, “WTO Pushes ‘Made in the World’” on May 16, 2012, Karl Rusnak commented, “This may be a good PR move for the WTO and its agenda, but it doesn’t change the facts: trade still picks winners and losers, and the United States consistently finds itself in the “losers” column…This new initiative takes the same ill effects that have been occurring from free trade and attempts to reframe them in a more positive light…Trade deficits lead to bad results, but ultimately it is the bad results we need to look at, not the nominal number that represents the trade deficit.  If the numbers had shown that the United States was running a trade deficit but maintaining strong job growth, the WTO’s new calculation method might be something worth looking at.  Instead, we have lost millions of jobs as a result of free trade. Whether you calculate our trade deficit as $100 billion or $600 billion, those job losses can still be directly attributed to our failed free trade agreements.”

This Initiative could have dire consequences for America’s manufacturers and consumers. For manufacturers, it could eliminate one of the options allowed by the WTO ?  filing a charge for product  “dumping” against another country to have countervailing duties applied against that country.  For consumers, “Made in the World” labels wouldn’t allow you to protect your family from the tainted, harmful, and even life threatening products coming from China.  You wouldn’t be able to support saving and creating jobs for other Americans by buying “Made in USA.”

Alan Uke, founder of Underwater Kinetics, a company that manufactures high intensity lighting and other products, believes that “country of origin” labels could change consumer behavior and revive U.S. manufacturing.  He wants the government to require a detailed country-of-origin label on every product sold in America. The label would include sourcing information on all of the product’s parts and components along with the trade balance the U.S. maintains with each of those countries. Uke outlines his proposal in his book, Buying America Back, a Real-Deal Blueprint for Restoring American Prosperity.

The labels would be similar to those that have been successfully implemented in the U.S. food industry, describing such things as fat content, calories and nutritional values. Those labels have changed consumer behavior, forced producers to change ingredients, and motivated retailers to stock items that are demanded by customers.

“I am trying to start a movement of American consumers,” says Uke. “We need a home-team preference.” Uke is convinced that only the American consumer, whose spending represents 70 percent of the economy, will change the international trade dynamic in favor of U.S. manufacturing.  Knowledgeable consumers demanding products made in the United States or in countries that have employ ethical business practices could motivate companies to change their sourcing practices.

During my interview, Uke said, “The “Made in the World” label is the antithesis of my proposal. This initiative was probably promoted by those who profit from environmental abuse and child labor.  It makes countries that rape our environment and support child labor unaccountable to the world.  Knowing the sources for products is the only way that people can make countries accountable for their actions. Consumers can’t determine their own destiny if they have no idea of the sources.  If we want a better world, consumers need to be able to send their money to countries whose policies they support.  This isn’t free trade, it is slave trade.”

Peter Navarro and Greg Autry, the authors of Death by China – Confronting the Dragon, A Global Call to Action, also recommend that “country of origin” information be provided for all products sold on the Internet by online retailers that “Congress should require all food and drug producers to clearly label the countries of origin for all major ingredients that go into a product – and do so in a standardized and legible manner” in order to protect American consumers from tainted and poisonous products coming from China.

Greg Autry told me, “The “Made in the World” label is an obvious attempt to disguise the political differences between countries and normalize despotic regimes like China. This initiative can only result in the reduction of critical information to consumers.  I agree that we don’t have full information provided on the sources for products today, but this is the exact opposite direction to go.”

The authors believe that if 10% or more of Chinese products were boycotted by Americans, it could be enough to destabilize the Chinese economy and topple the Communist regime.  Converting to “Made in the World” labels would eliminate this possibility.

 

I urge everyone to contact your current representative to urge them to oppose this initiative and ask all candidates for federal office if they support our current “country of origin” labeling laws and oppose “Made in the World” labeling.

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Regional Trade Shows Provide Value for Exhibitors and Attendees

Tuesday, May 8th, 2012

At a time when trade shows and exhibitions have been shrinking in size, combining with other shows, and even disappearing like NEPCON and WESCON, a successful 18th Del Mar Electronics and Design Show was held May 2nd and 3rd in the San Diego region.

According to the report, “Manufacturing & Industrial Exhibition & Event Marketing Trends & Outlook,” published by TradeShow Week and Skyline Exhibits, a survey of manufacturers revealed that manufacturing trade shows and exhibitions in the United States have been affected by the shift of production offshore since the year 2000.  Manufacturers are exhibiting at fewer events in North America and are heading to China to participate in trade shows. Many companies are scaling down the size of their booths and placing fewer, but more informed people in their booths. “Two out of three exhibitors believe that demographics are impacting their industry and shows and about half of this group indicates that attendance levels are lower as waves of executives and managers retire in the industry.”

While the demise of trade shows has been predicted because of the Internet and outsourcing offshore, DMEDS and other regional shows such as the Design-2-Part shows been able to buck the trend and provide value for exhibitors and attendees.

DMEDS is the only show in the San Diego region for the broad base of the manufacturing, electronics, and design industry to exhibit and attend.   It is large for a regional show with nearly 400 booths filling the two largest buildings and a tent between them at the Del Mar Fairgrounds.  It originated as a show where the majority of exhibitors were manufacturers’ representatives and distributors exhibited their product lines, primarily related to the electronics industry.  However, the number of manufacturers’ representatives and distributors exhibiting dwindled every year and the number of manufacturers displaying a wider range of products and services increased every year until reps and distributor exhibits comprised less than ten percent of the booths.

DMEDS is now a very different show than what it used to be and provides value for attendees by giving them the opportunity to meet and talk with a wide variety of potential sources.  Products displayed are as diverse as adhesives to wireless and portable products in the A to Z show directory index.  Some of the services available include 3D scanning, assembly, design engineering, contract manufacturing, research prototyping, test measurement and calibration, and training.  Custom fabrication services exhibited include: dip brazing, die and investment casting, forging, machining, plastic and rubber molding, sheet metal fabrication, vacuum and pressure forming, and welding.  You can still find electronic components, as well as fasteners, hardware, and tools.  My company, ElectroFab Sales, has participated in the show for 15 years, displaying the custom fabrication services of the companies we represent.

Most of the manufacturing exhibitors had parts, assemblies, and products on display at their booths so engineers could have examples of how their designs could be fabricated.  Browsing websites to find pictures of parts just isn’t the same as seeing actual parts in person.  Besides, engineers could ask questions about materials, design details, and tolerances that are not easily answered through contact on the Internet.

Free seminars on a broad range of topics were provided for attendees both days of the show.  I gave one of the presentations on “Returning Manufacturing to America, highlighting the Total Cost of Ownership worksheet that was developed by Harry Moser of the Reshoring Initiative.

An informal poll of attendees, visitors to our booth, and exhibitors in our building revealed that in the past year, all but one American company had one or more customers give them a chance to quote on making parts that were currently being made in China.  One purchasing agent told me that if pricing from an American company comes within 20% or less than the pricing from China, he is allowed to select a domestic source.  If more companies would use the TCO worksheet to do a true total cost analysis, American companies would have even greater opportunities to recapture business now being done in China.

The show location is centrally located in San Diego County, with easy access to a major interstate highway, and parking is also free.  What makes it even more popular is a free reception immediately after the show ends at 5 PM on the first day of the show, providing excellent networking opportunities with industry peers for exhibitors and attendees.   If you haven’t been to a DMEDS show for a few years, be sure to make it a priority to attend the next show in May 2013.

The dozen different Design-2-Part shows, produced by the Job Shop Company, are held regionally around the county and feature design, custom fabrication, and contract manufacturers located in the United States.  While some of these companies may also have a plant offshore, no offshore-only companies are allowed to exhibit in the show.  No sales representatives or distributors are allowed to have their own booths in the show.  The mission of Design-2-Part shows is to support and feature American manufacturers.

At the Design-2-Part shows, engineers get to see and touch actual parts built by the exhibitors. This gives them ideas to use for new products they are designing and shows them how other people have solved problems they may be encountering in their design phase.

I have been attending the Design-2-Part shows since 1982 when I started in sales, and the Long Beach show in October 2010 and Pasadena show in 2011 were exciting. The show attendance for both shows was up to the pre-recession levels of fall 2007.  Show management said the Long Beach show was one of the best Southern California shows in the history of the company, with attendance up 21 percent over the 2009 show in Pasadena and up ten percent over the 2008 show in Pomona.   The shows were so well attended that many exhibitors had trouble talking to all of the attendees that were visiting their booths.  The attendees weren’t just browsing, and many exhibitors had far more leads from these shows than the 2008 and 2009 shows.

What made it even more exciting was the number of attendees who came to the shows looking for domestic sources for parts for new products or looking for a domestic source to replace an offshore vendor for parts for existing products, with some even bringing prints to quote.  We heard several stories about quality problems with offshore vendors that are making it no longer advantageous to source the parts offshore.  One company mentioned that because parts coming from China didn’t meet dimensional specifications, they had to rework the parts and modify assembly steps at their own cost. When they contacted the Chinese vendor to return the parts, the Chinese vendors said, “We’ll be happy to accept a new order for the parts,” but wouldn’t give credit for the defective parts from the previous order.   Refusing to take back and give credit for rejected parts is typical for Chinese vendors.

Harry Moser of the Reshoring Initiative has been a featured speaker at some of the Design-2-Part shows around the country, and I have given presentations at three of the West Coast shows on returning manufacturing to America by doing a thorough TCO analysis.  As more and more companies learn how to utilize this worksheet, the “reshoring” trend will continue to grow.

As long as show exhibitors and attendees receive value from regional trade shows such as DMEDS and the Design-2-Part shows, they will continue to thrive and grow.  In our new age of digital communication, many realize that there is no substitute for the face-to-face interaction provided by this type of trade show. Be sure to put one of these shows on your calendar to attend in the future.

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Death by China is a Global Call to Action to Confront the Dragon

Tuesday, May 1st, 2012

Every once in a while a book comes along that puts all the pieces into a complete picture.  The well-written, easy-to-read book, Death by China, is one such book, and the picture it portrays is both revolting and frightening.   For too long, our business and political leaders have kowtowed to China, and the consequences have been disastrous.  The response of most American economists and government leaders’ to the economic imperialism of China has been either naïveté, cowardice, or sheer stupidity.  As a result, we Americans now face the risk of losing our national sovereignty, freedom, and way of life.  But the whole world is in danger, both from a political and environmental viewpoint.

In the first chapter, “It’s Not China Bashing if It’s True,” co-authors Peter Navarro and Greg Autry portray the grim picture of the many tactics China uses to conduct unrestricted economic war against the United States in order to achieve its written goal of becoming the world’s super power of the 21st Century.

They write, “Even as thousands literally die from this onslaught of Chinese junk and poison, the American economy and its workers are suffering a no-less-painful ‘death to the American manufacturing base.’”  They corroborate the shrinking of the manufacturing industry that I wrote about in my book:  “America’s apparel, textile, and wood furniture industries have shrunk to half their size ? with textile jobs alone beaten down by 70%.” And, “other critical industries like chemicals, paper, steel, and tires are under similar siege.”

Navarro and Autry point out that as a consequence of China’s becoming the world’s “’factory floor,’ it must consume half of the world’s cement, nearly half of its steel, one-third of its copper, and a third of its aluminum.”  Even more alarming is the fact that “by the year 2035, China’s oil demand alone will exceed that of total oil production today for the entire world.”

To feed its voracious appetite for the world’s natural resources, China is practicing its own brand of colonialism that beings with a “Mephistophelean bargain:  lavish, low-interest loans to build up the country’s infrastructure in exchange for raw materials and access to local markets.”

The second chapter goes into detail on “death by Chinese poison.”  I’ve been careful in avoiding “made in China” products in the grocery store, but was horrified to find out that Chinese farmers produce 60% of our apple juice concentrate, 50% of our garlic, and a significant amount of “everything from canned pears and preserved mushrooms to honey and royal bee jelly.”

If that doesn’t make you sick enough thinking about how much mercury and other poisons you are accumulating in your body from eating these products, consider the fact that China now “produces 70% of the world’s penicillin, 50% of its aspirin, and 33% of its Tylenol.  Chinese drug companies have also captured much of the world market you in antibiotics, enzymes, primary amino acids, and vitamins. China has even cornered the world market for vitamin C — with 90% of market share ? even as it plays a dominant role in the production of vitamins A, B12, and E, besides many of the raw ingredients that go into multivitamins.”

While some of the poisons are accidental results of shoddy production methods, unsanitary processing, or soil toxicity due to a polluted environment, others are simply a way to boost profits by Chinese “’black hearts’ ? a term used by their own countrymen” ? to purposely increase their profits. Their retelling of stories you’ve read in the news will make you sick:

Melamine added to human and pet food products to increase protein levels, the adulteration of the life-saving anticoagulant drug Heparin, and lead and cadmium used in making toys and jewelry.  In addition, China is now “the world’s leading source of farm-raised fish and dominates the markets for catfish, tilapia, shrimp, and eel.”   It was horrifying to learn that China’s fish ponds are filled with water so polluted that it would be equivalent to sewer water in the U. S. and the Chinese put poultry cages over the ponds so that the fish can feed on poultry droppings.

This is why “Chinese foods and drugs always rank #1 of those flagged down at the border or recalled by both the U.S. Food and Drug Administration and the European Food Safety Authority.”  The authors point out that the “U. S. Food and Drug Administration is so grossly understaffed that although it regulates 80% of America’s food supply, it only inspects less than 1% of food imports.”

In the third chapter, the authors go on to “regale you with tale after tale of the myriad Chinese products that can sicken, maim, or kill you” so that you will be  become motivated to “call, write, or e-mail your Congressional representatives.”  They urge “all of us to stand up just like Peter Finch did in the movie Network and shout, “We’re mad as hell, and we won’t buy your ‘Chinese junk’ anymore.”

The book moves on in chapter 4 to explain how China uses “Weapons of Job Destruction” to gut the manufacturing industries in the United States.  Navarro and Autry specifically illustrate how the Chinese bureaucracy systematically targets American industries to take over market share and destroy their competition.  They explain how the Chinese Communist Party seeks to achieve economic imperialism through its “eight pillars”:

1. An elaborate web of illegal export subsidies;

2. A cleverly manipulated and grossly undervalued currency;

3. The blatant counterfeiting, piracy, and outright theft of America’s intellectual property 4. Engaging in massive environmental damage;

5. Ultra-lax worker health and safety standards;

6. Unlawful tariffs, quotas, and other export restrictions;

7. Predatory pricing and practices to push foreign rivals out of key resource markets and then gouge consumers with monopoly pricing;

8. “Great Walls of Protectionism” — to keep all foreign competitors from setting up shop in China.

The next chapter provides an explanation of how China uses the second pillar of currency manipulation, followed by the chapter, “Death by American Corporate Turncoat:  When Greenbacks Trump the Red, White, and Blue” describing how corporations offshored their manufacturing to reduce costs and increase profits.  I agree with their sentiment that there seems to be “no patriotism among American corporations” as judged by the examples of General Electric, Caterpillar, Apple, and many, many others.  Their original motives may have been fear of losing market share, greed or following “herd mentality.”  However, the loss of our manufacturing base is now compounded by China’s new demand mandating “forced technology transfer” wherein “American companies must surrender their intellectual property to their Chinese partners as a condition of market entry.”   The authors point out this facilitates “the dissemination of various technologies not just to the Chinese partner directly involved but also to the Chinese government and other potential Chinese competitors” … so that “Western companies, in effect, create their own Chinese competitors virtually overnight.”

If you aren’t outraged and concerned enough by the previous chapters, chapter 8 will do the trick.  In chapter 8, “Death by Blue Water Navy,” the authors document what China has been doing with the wealth they’ve accumulated from more than a decade of huge trade deficits ? building up their military might.  Consider this:  China’s army of 2.3 million “outnumbers the combined forces of Canada, Germany, the United States, and the United Kingdom.”    China’s 6,700 tanks “dwarf Taiwan’s 1,100, South Korea’s 2,300, and Vietnam’s 1,000 or so,” and even the U. S. only has “about 5,000 tanks.”  Navarro and Autry label China’s Air Force as the “best that the Chinese can buy with our ‘Walmart dollars’ or that its spies can steal.”  For example, the Shenyang J-11B “is a carbon copy knockoff of the Russion Sukhoi Su-27 and the J-15 “is the equally counterfeit twin of the Russian Su-33.”

China’s build up of its Navy to challenge the U. S. Navy is even more disturbing.  The dominance of the U. S. Navy in the Pacific has been the only thing keeping Taiwan safe from being subjugated by mainland China.  Navarro and Autry write that China’s “first goal is to push U. S. aircraft carrier fleets out of the Western Pacific ? and perhaps finally take Taiwan ?  and then to ultimately project hard power across the globe.”   The Chinese even have a new missile, the Dongfeng-21D, capable of hitting “a powerfully defended moving target with pinpoint precision,” meaning that it could destroy an American aircraft carrier.

The American manufacturing industry was responsible for producing the goods and equipment that enabled the U. S. to win WWII and defeat the Soviet Empire in the Cold War.  But, now the “factory floor” of the world is in China, and the U. S. no longer has the capacity to ramp up to produce enough of the goods and equipment that would be needed to defend our country in a war against China.

After defining the challenges America faces in competing in the “Century of the Dragon,” Navarro and Autry conclude with an outline of a clear and achievable path for America to tame the Dragon’s onslaught.  There are recommendations for everyone from government and business leaders down to individual Americans.  In my meeting with Mr. Autry after reading his book, he told me that he believes boycotting 10% or more of Chinese products may be enough to destabilize the economy enough to topple the Communist regime. Peter Navarro is a professor at the University of California, Irvine and Greg Autry is an instructor and doctoral student at the university.  Mr. Autry also serves as Senior Economist for the American Jobs Alliance, a non-partisan, non-profit organization formed in 2011 to create and support American jobs.  The mission of AJA is:

  • To encourage and facilitate an educational curriculum that cultivates and maximizes the innate creativity that resides within every human being to ensure the United States of America perpetuates its traditional “Innovative Spirit.”
  • To encourage and facilitate a better understanding of the history and functioning of the American or National System of free enterprise and the activities necessary for its preservation.
  • To, once again, MAKE, GROW and INVENT all items that are vital for the survival of this and future generations. American firms, individuals and our government must renew our dedication to investing in, as well as, protecting our “Engine of Innovation.”  We must boldly reclaim the title of “shop floor of the world” so that all Americans can share in our increased national wealth and have better paying jobs for generations to come.

You can join me in pledging to create and support American jobs and buy a “Boycott China, Buy American” bumper sticker at http://www.americanjobsalliance.com

Death by China is a book that everyone interested in securing the future of America must read.   Sign up to keep apprised of issues/events at http://www.deathbychina.com/updates and check out the Death by China Facebook page.

Posted in Economy, Manufacturing, National security, Outsourcing | 2 Comments »