Bipartisan blame or blamelessness?
“America’s workers should build America’s defense,” announces the Clinton campaign commercial below. But nothing is quite as simple as it seems.
The Clinton campaign in Indiana is featuring an ad (via Gateway Pundit) of a plant that was closed in 2003. The jobs were outsourced to China, and Clinton blames the Bush administration. Run of the mill trade policy ad, you say. Not quite.
The Magnequench plant that was closed was not making waffle irons. The plant apparently manufactured 80% or more of the sintered NdFeB magnets that are used in the US military’s smart bomb guidance systems. Sounds sinister, yes? And an even better ad for the Clinton campaign. But it gets more complicated. All the transactions that resulted in ownership of the plant by Chinese interests occurred during the Clinton administration.
In 1995, according to ABC, “China National Non-Ferrous Metals…and San Huan New Material High-Tech Inc…joined with other interests to purchase the Anderson, Ind.-based Magnequench…The two Chinese companies were headed by the husbands of the first and second daughters of then-Chinese leader Deng Xiaoping.” The 1995 transaction was approved by CFIUS, the responsible government agency. Then, in 2000, Magnequench bought the factory that appears in the campaign ad. So it would appear that if there is an issue about the transfer of sensitive technology to China, it occurred before George Bush was President, rendering some of Senator Clinton’s claims in the ad moot or ridiculous.
But is there a legitimate national security angle to the story in the first place? Former Magnequench vice president Andy Albers says no, via ABC. “‘Nothing was done by Magnequench that aided the Chinese military program or hurt the U.S. military program,’ says Albers, who adds that Clinton’s focus on his former company ‘concerns me because it doesn’t address the main issue, which is how to make U.S. companies more competitive globally at’s the question we should be asking, that’s what we should be addressing. We should not be twisting the truth about that this is a national security issue, because it’s not a national security issue, it’s about global competitiveness’.” Former counsel to Congressman Duncan Hunter, Jeff Green, agrees that the matter is not a national security issue: “‘I think it’s more accurate to say that all the technology and production of these Neo magnets comes from overseas,’ he says, including Japan, Finland, Germany and China.”
So either both the Bush and Clinton administrations are to blame, or neither one did anything wrong. It’s a bit hard to say at the moment, but it appears from the news reports that, on a micro level, the system apparently functioned normally, although there are dissenting voices on left and right alike. However, on a macro level, the picture looks a little different, and raises the question as to whether the procedures in place at the CFIUS arm of the Treasury Department are adequate in a world that changes rapidly. At first blush, they do not appear to be.
One obvious question: does CFIUS track purchases or consolidations that occur after it has approved the sale of a company? For example, there are apparently sources for the Neo magnets in Japan, Finland and Germany, as well as in China. But what if a Chinese company or companies were to subsequently purchase those operations in Japan, Finland, and Germany? Would we ever know? Before it was too late to do anything about it? How? The current transactional approach of CFIUS, even as modified by FINSA, looks sort of like Hart-Scott-Rodino procedures for defense related industries. CFIUS procedures do not seem to take into consideration certain plausible or likely future events which could render its decisions unwise in retrospect. This would appear to bear looking into.