A subset of the question of technology dependence is the question of foreign technology dependence. Depending on foreign sources for technological advantage in military systems compounds both the potential benefits from technology and the inherent jeopardy associated with such dependence. Foreign technology dependence is an inevitability in the new strategic era, although in past times autarky seemed to be the most desirable strategy. The globalization of military technology has been well-argued. [19] But the full extent of this global integration is not fully known. [20] It is very difficult to know with much certainty the exact national origin of all the various components and parts of a given weapon although a number of systems have been documented. [21] To the extent that dependence maintains U.S. access to foreign sources of technology not otherwise available to the united States, such dependency need not be detrimental and indeed may be a net benefit. But there are risks associated with foreign technology dependence. A good framework for understanding those risks was developed at the now-disestablished Mobilization Concepts Development Center (MCDC) at the National Defense University in 1987 [22] A foreign source is defined as a source of supply, manufacture or technology outside the United States or Canada. [23] A foreign vulnerability is a dependency on a foreign country whose lack of reliability and substitutability jeopardizes national security by precluding the production, or significantly reducing the capability, of a critical weapons system. The MCDC project examined case studies based on conflict scenarios embodied in then-current contingency plans and existing weapons systems priorities as detailed in the defense acquisition system. In precision-guided munitions the study found that only 1-2 percent of the value of PGMs comes from overseas sources, but the foreign content was concentrated in a few vital components and a cutoff in a crisis would result in cessation of production. For petroleum and nonfuel minerals in an extended war, the project found that provable domestic reserves or alternatives would probably increase under the price pressures of wartime and that strategic stockpiles would serve to provide sufficient time to bring new or alternative sources on line. For integrated circuits, the project found that there was no recourse to the loss of technology for integrated circuits other than a peacetime industrial strategy to recapture that technology for national security purposes. It found similar situations potentially developing in a number of other critical technologies. That crisis situations could disrupt the availability of militarily relevant technology for U.S. armed forces was hinted at during the Persian Gulf War when the Department of Commerce had to engage in "jawboning" procedures to get Japanese suppliers to provide certain computer electronic components on short notice. [24] While this framework is widely accepted for understanding the nature of the foreign dependency problem, there is little consensus on how to approach the problem. The MCDC study identified four policy approaches. The first was a continuation of the present haphazard market approach of attempting simultaneously to emphasize the preservation of the domestic base, cooperating with allies, and maximizing our competitive position globally. This seems to be the approach favored by the administration at the present time. [25] There are advocates of a "Buy American" approach that would provide maximum protection against disruption. But such an approach would be costly in terms of maintaining idle capacity in peacetime and duplicating the technology efforts of foreign partners. It would probably mean that we would not have access to the world's best technology and it might risk a trade war. At another extreme, the United States could pursue a "Buy World" strategy in which we counted on being able to participate as a buyer, if not as a seller, in any sector of the global technology market regardless of what those market forces do to the development of those sectors on U.S. soil. This would pose the greatest risk of foreign vulnerability as the twin processes of technology diffusion and industrial integration continue. Rejecting all these approaches, the authors suggest a strategy of managed risk wherein some rational combination of market competition is pursued to a point, at which the worst risks of foreign vulnerability would be managed by optimal solutions of protection of domestic sources, enhanced access to foreign sources, and allied cooperative agreements. There would not appear to be a rational method of optimizing such politically loaded policy approaches. Recognizing the inherently political nature of the managed approach, more recent academic study has concentrated on economic solutions to the problems of foreign technology dependence. Georgetown University Professor Ted Moran has suggested an approach that assesses foreign dependence in terms of the global concentration of industries in the militarily relevant technologies. [26] He borrows from Industrial Organization Economics [27] the notion of a "concentration ratio," which is the share of the total output of an industry captured by the top few--usually four or eight--firms. Industrial organization economists hold that market concentration does not result in the opportunity for monopoly profits unless a few firms control a majority share of the market and can exert control over pricing behavior of all the other firms or potential entrants. An elaborate body of theory has been held up as legal basis for antitrust action based on market concentration measures developed under this branch of economic theory. Moran argues that the threat of foreign control is similarly a function of the degree of external concentration in the industries upon which the defense effort depends, not solely the nationality of the firms. He suggests that the United States follow a 4-4-50 rule in allowing foreign participation in the U.S. defense technology and industry base. If any combination of four firms in four countries has 50 percent or more control over the world market, then those firms or countries could place U.S. access to those industries or technologies at risk. If it takes more than four firms or more than four countries to reach the 50 percent control threshold, then it would be highly unlikely that any combination of opponents could deny U.S. access without a suitable alternative source, including a domestic U.S. source, being available. For strategic policy purposes, Moran believes that diversification and multiplication of companies and locales from which the nation can draw is the most dependable method of providing insurance to minimize the threat of foreign control. If the 4- 4-50 rule is violated, he suggests voluntary application of a domestic U.S. location requirement for production and technological development as a prerequisite for foreign firm entry. If such arrangements cannot be made voluntarily, Moran argues that the most effective enforcement mechanism would be a tariff or countervailing duty. He argues strongly against strategic trade policies which would attempt to combine protection with promotion of select high technology sectors. He also opposes propelling national champions into a commanding global lead, citing examples-such as the British NIMROD program-of achieving national champion status but at unacceptable cost. More recently, a group at the RAND Corporation [28] has taken Moran's "insurance policy" notion a step further and has argued that the foreign vulnerability question is really a problem of the marginal cost of providing adequate insurance. The policy question, according to the RAND researchers, is not whether the insurance policy is complete or perfect for it will never be in a globally integrated economy. Rather, they believe the policy issue is one of adequacy, and it should be judged in terms of the marginal cost of obtaining it versus the marginal benefits thus obtained. They point out several factors which lead private sector participants in the defense industry and technology base to have inadequate insurance including an expectation of price controls, public sector monopsony, corporate income tax rates, regulatory policies, contracting policies, and poor information about conflict contingencies. On the government side inadequate insurance is brought on by short time horizons, political pressure from concentrated interests, foreign government policy, and the potential for interdiction. The researchers found inadequate insurance in the Tritium (government) and High Definition Television (private) industries, while the Surface Acoustic Wave and Dynamic Random Access Memory chips sectors seemed to have adequate insurance. Such economic approaches as proposed by Ted Moran or the RAND group, as sensible as they may seem to the analytic community, may not have the political appeal necessary to find their way into national security strategy and policy. But there is a window of opportunity opening for a time during this election season. We would serve the country well to attempt to explain these approaches in understandable fashion and to insert them into the public debate over the national security strategy for the new era. More Prospects and Risks of Technological Dependence Introduction Defense Technology and Industry Base Quantity vs. Quality Risks of Foreign Technology Strategy and Technology in the New Era Back to Table of Contents Prospects and Risks of Technology Dependence Back to SSI List of Issues Back to MagWeb Magazine List © Copyright 2001 by US Army War College. This article appears in MagWeb (Magazine Web) on the Internet World Wide Web. 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