Neff Zone Column

Print Edition: March 31, 2007

WHEN DOES OUTSOURCING BECOME TREASON?

One of the main reasons the United States and its allies were victorious in World War II was the manufacturing might of this nation. In many respects, we had a huge advantage over our adversaries simply because we could out manufacture them. We had the capacity to build what we needed and build it quickly.

Fast forward to today and all the problems this country has in providing our soldiers with equipment needed to fight the current war (or protect this nation in the future). Due to the practice of outsourcing, we have to depend on third world countries to manufacture what our military needs. We have to rely on other countries, many of whom hate us, for everything from steel to armor Humvees to boots on the soldiers’ feet.

In short, we don’t make much of anything any more. I would argue that every job outsourced from our shores diminishes our capacity (bit by bit and miniscule piece by miniscule piece) to stand on our own two feet and hence defend ourselves. So I ask, when does outsourcing become treason?

This question came to the fore in the past week in a vastly under reported story about a fine levied against ITT. The company admitted to two export violations and agreed to forfeit $100 million for selling night-vision technology to an optics company in China over two decades (according to BusinessWeek). Authorities said "the illegal technology transfer could endanger U.S. pilots and ground troops because they could be blinded by lasers, and adversaries may be able to gain tactical advantage by seeing through darkness and smoke."

Basically what ITT did was outsource the manufacture of the night vision lenses and goggles to a contractor in Singapore which passed the technology on to the Chinese. The manufacturing was outsourced so ITT could make a larger profit.

Federal law requires firms that develop military technology to get permission from the State Department before exporting the technology. The night-vision technology was classified as "Secret — No foreign," meaning it could not be shared with foreign governments. You can’t get much more straight forward than that, yet ITT knowingly violated the law and put our soldiers in jeopardy so they could make some extra bucks.

As you might expect, the company argued that they were unaware of the complexities of the law and that they were taking measures to correct the problem. My take is that no one could be that dumb. I can read the law (above). You can read the law. Are you telling me that a company full of high priced executives can’t read the law? Soldiers probably died because of this. How can these bigwigs sleep at night?

Besides, According to BusinessWeek, "Government investigators say ITT never sought permission from the State Department or ignored restrictions on the export licenses it did obtain. The investigation revealed a pattern of blatant violations of export laws dating to 1980, court papers say." Playing the "stupid" card is, well, just plain stupid.

So, what "punishment" will ITT have to "suffer." Well, $100 million in fines seems like a big number, but the company has made $8 billion in each of the last two years, so $100 million is a drop in the bucket. In all the reports I’ve read, jail time for any ITT executives has not been mentioned.

The fines break down, according to USA Today, this way: $20 million to the State Department, $2 million in fines and $28 million to the government to cover the cost of the investigation, and ITT must spend an additional $50 million to develop a new generation of night-vision technology.

So, one half of the $100 million "fine" is for ITT to spend on research and development that it probably would have spent on R&D anyway. Meanwhile, our enemies have the current technology so our troops continue to be in jeopardy until the new stuff is developed.

Lest you think ITT is alone in this trend, in 2006, the Defense Criminal Investigative Service and the Immigration and Customs Enforcement Agency obtained 128 indictments and 98 convictions against U.S. companies for similar practices. According to BusinessWeek, "…those crackdowns have involved several attempts to obtain night-vision equipment for China and Iran."

Meanwhile, all across this land and even close to home, jobs are being shipped offshore and this outsourcing is being called "good business." But each and every job that we no longer do makes American a little bit weaker. The ability to stand on our own becomes more remote. And in the case of the illegal outsourcing of jobs related to national security, Americans dying so companies can make a buck is a tragic reality.

Such is America today. Again I ask, when does outsourcing become treason?

Jim Neff is a local columnist. Comments to neffzone@gmail.com. Read Neff Zone columns online at www.neffzone.com/cadillacnews.