Year: 2011

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Analysis & Commentary

Special Commentary: Aerospace Industries Association (AIA) Report Underscores Importance of F-16C/D Sale to Taiwan

In an important new report on behalf of the Aerospace Industries Association (AIA), economist Dr. Stephen Fuller at George Mason University concludes that the U.S. economy is at risk of losing over one million American jobs and over US$1 trillion in economic investment in the aerospace sector as a consequence of projected U.S. defense budget cuts. The report concludes that while all 50 states would be adversely affected, California, Virginia, Texas and Florida all stand to be hardest hit.

The AIA report also notes that the ripple-effect of the proposed cuts on the broader aerospace and defense industry will be immense, given the significant number of subcontractors in the sector. The very existence of some subcontractors – many of which are small and medium sized businesses – is threatened, and once lost the intellectual property and supplier base will be extraordinarily difficult to rejuvenate. This is a serious issue for the United States, and will impact our ability to project our global interests. It will also affect U.S. partners and allies, who will find American defense products less capable and more expensive.

The impending financial tsunami to hit the defense and aerospace sector comes at a time when the Taiwan government seeks to procure 66 replacement F-16C/D fighters for its aging fighter fleet – a purchase that would result in a gross investment of almost US$9 billion into the American economy and which would support over 16,000 jobs in the defense and aerospace sector.

In contrast to the dire consequences of the defense budget cuts as predicted by the AIA report, a follow-on sale of F-16s to Taiwan would have a positive economic impact around the country, generating some US$8.7 billion in gross output and sustaining approximately 16,000 direct and indirect jobs over the life of the program. This would represent a significant economic boost to states such as Ohio and Florida – where unemployment stands at 8.6% and 10.6%, respectively. If approved, the purchase is also projected to yield almost US$768.0 million in Federal tax revenues over the course of the program, as well as about US$593.7 million to various state and local governments.

Should the Taiwan sale fail to materialize, however, current orders would only sustain the F-16 production line for another two years. The closing of the F-16 production line would simply add further job losses to the sector, impacting the U.S. states already hit hard by the proposed budget cuts.

 

The Council comments on a report released by the Aerospace Industries Association on the economic impact of reduced DoD spending

Special Commentary: Aerospace Industries Association (AIA) Report Underscores Importance of F-16C/D Sale to Taiwan

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Taiwan Defense & Security Reports

Taiwan Defense & Security Report – Q3, 2011

The third quarter of 2011 ended with the long-awaited – as well as repeatedly and seriously delayed – U.S. Government decision on the sale of F-16 fighters to Taiwan. More precisely, the U.S. government notified to Congress its intention to provide to Taiwan a major package of mid-life modernization for its existing F-16A/B fighters – argued by the Obama Administration as being a better option than the sale of replacement F-16C/D fighters.

The U.S. side insists that they have not ruled out selling a new tranche of F-16s to replace aging equipment, and Taiwan President Ma Ying-jeou has renewed calls for the new buy. Nevertheless, the controversial Obama Administration decision spoke volumes of the complex three-way dynamic between Washington, Taipei, and Beijing, and may herald a new reality that could soon confront Taiwan’s national security establishment.

In the meantime, everything related to Taiwan – including defense issues and cross-Strait relations – continues to take a backseat to, and merely serve as backdrop for, the campaigns ahead of the next joint presidential/legislative elections scheduled for January 14, 2012. In the presidential race, incumbent Ma Ying-jeou of the Kuomintang (KMT) faces opposition Democratic Progressive Party (DPP) Chairwoman Tsai Ing-wen in what will be a hotly contested and close race. The addition of Peoples First Party (PFP) Chairman James Soong to the contest adds a complicating factor for both candidates – but particularly for President Ma.

This quarterly analysis report provides a brief overview of significant developments in Taiwan during the past three months, and examines some of the factors that influenced the course of events during the third quarter of 2011. In addition to examining the current political environment in Taiwan, the report will look at defense policy, budget, and procurement issues. It will also provide an update on U.S.-Taiwan defense relations, and a look at the current status of select programs.

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Analysis & Commentary

Special Commentary: The Obama Administration Notifies Taiwan’s F-16A/B Upgrade Program To Congress. Where Are The F-16C/Ds?

The US-Taiwan Business Council welcomes the news that the Obama Administration will proceed with a commitment to upgrade Taiwan’s present inventory of F-16 A/Bs at a possible cost of US$5.3 billion, the continuation of the Luke Air Force Base training program at a potential cost of US$500 million, and a requisition for up to US$52 million in parts for Taiwan’s F-16 A/Bs, F-5s, C-130s and IDFs. The congressional notifications are attached.

The Council welcomes the Obama Administration’s partial commitment to supporting Taiwan’s efforts to upgrade and modernize its air power capabilities. As we noted in our 2010 report “The Balance of Air Power in the Taiwan Strait”, Taiwan certainly needs to implement a robust mid-life retrofit/modernization program for its existing fleet of F-16 A/Bs. The FMS programs notified to Congress today will help Taiwan address diminishing manufacturing sources and obsolescence issues, improve reliability and maintainability, improve survivability, and update aircraft capabilities to remain abreast of current mission requirements.

Upgraded F-16 A/Bs Are Not Enough to Face the Threat from China

A recent U.S. Department of Defense report states that “China has continued to develop a wide range of weapons and capabilities designed to provide credible military options in a Taiwan contingency.” The report goes on to note that the military threat posed by China to Taiwan continues to grow rapidly.

The Taiwan Air Force is therefore in dire need of a robust and modern fighter fleet in order to prepare for all possible contingencies. The upgrade of Taiwan’s F-16 A/Bs will go some way towards moving the Taiwan Air Force in the right direction, if the upgraded fighters are equipped with modern systems and munitions.

However, with the Taiwan Air Force retiring its obsolete F-5s and prohibitively expensive Mirage 2000-5s, Taiwan will still fall perilously short of the airframes it requires to maintain an adequate air defense force, even with the scheduled upgrade. This shortfall is inherently destabilizing, and if not addressed it will threaten the military balance in the Taiwan Strait and encourage Chinese adventurism in the coming years.

Unnamed Obama Administration officials have been stating – as they did in the Wall Street Journal yesterday – “Taiwan gets them quicker and they are cheaper than C/Ds”.

This is a false statement. The upgrade program is comprehensive, but spans almost 10 years with the first upgraded A/B coming as late as the 6th year of the program. If the Obama Administration were to accept a Letter of Request for 66 F-16 C/Ds now, the entire tranche of new fighters could be delivered before Taiwan receives any of its upgraded F-16 A/Bs.

Secondly, the Obama Administration is suggesting that the choice was between either the F-16 A/B upgrade or the F-16 C/Ds. Again, this is a false choice. It is not either but both programs that are required. The correct approach would have both programs running sequentially, so that as new F-16 C/Ds are delivered to Taiwan – before Taiwan starts pulling front line F-16 A/Bs out of operations – there will be no degradation of Taiwan’s fighter strength. As presently structured, Taiwan will actually see a reduction in the number of operational F-16s over the next 10 years.

The solution to this shortfall is the sale of 66 F-16 C/D fighters to Taiwan, as a follow up and in addition to the announced upgrade of Taiwan’s existing fleet of A/Bs. Together, these two programs would help Taiwan adequately fill the fighter gap, and would ensure that Taiwan has an air force capable of deterring China from provoking or attacking it. A fighter force able to handle all of Taiwan’s many contingencies.

The Council comments on Congressional Notifications for Taiwan Arms Sales:

Special Commentary: The Obama Administration Notifies Taiwan’s F-16 A/B Upgrade Program To Congress. Where Are The F-16 C/Ds?

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Press Releases

US-Taiwan Business Council Urges Congress to Pass the Taiwan Airpower Modernization Act (TAMA)

The Taiwan Airpower Modernization Act (TAMA) was submitted today for Congressional review and passage by Senators John Cornyn of Texas and Robert Menendez of New Jersey. The object of the Act is to assist the Obama Administration in meeting the obligations encompassed in the Taiwan Relations Act (TRA) – to provide Taiwan with weapons of a defensive nature to meet the growing threat from China. The TAMA would legislate selling 66 or more F-16 C/D fighter jets to Taiwan, and the US-Taiwan Business Council urges Congress to pass the Act.

The balance of power in the Taiwan Strait is an essential aspect of Americas’ Asia Pacific foreign policy. As China continues to invest heavily in expanding and modernizing its military capabilities, passage of the Taiwan Airpower Modernization Act would provide Taiwan with badly needed replacement F-16 fighters, thereby bringing the U.S. government back into compliance with the TRA.

Council President Rupert Hammond-Chambers said that “TAMA will enjoy broad bipartisan support in both the Senate and the House of Representatives. Both chambers recently released letters in support of the F-16 C/D sale, with significant numbers of signatories from both parties. This strong Congressional support for the sale represents the foundation for TAMA, as well as a path to passage of the Act.”

Hammond-Chambers went on to note, “this Act and this sale is a win-win for the national security interests of both the United States and Taiwan, as the new fighters would address part of the airpower imbalance by modernizing Taiwan’s fighter fleet. The sale also plays a vital role for the United States, in expanding forward-deployed capacity building with a key Asia Pacific security partner.”

 

US-Taiwan Business Council Urges Congress to Pass the Taiwan Airpower Modernization Act (TAMA) (PDF file)

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Past Events

September 19-20, 2011 – US-Taiwan Defense Industry Conference 2011

Event:
US-Taiwan Defense Industry Conference 2011

September 19-20, 2011
Richmond, Virginia

2011 US-Taiwan Defense Industry Conference
2011 US-Taiwan Defense Industry Conference

The US-Taiwan Defense Industry Conference 2011 was held September 19-20, 2011 in Richmond, Virginia. This was the tenth annual event in a series of ongoing conferences addressing the future of U.S. defense cooperation with Taiwan, the defense procurement process, and Taiwan’s defense and national security needs.

The first conference in this series was the St. Petersburg, Florida event where former Minister of National Defense Tang Yiau-ming gave the keynote address in March of 2002. The second conference in the series was held in February 2003 in San Antonio, Texas, the third in October 2004 in Phoenix, Arizona, the fourth in September 2005 in San Diego, California, the fifth in September 2006 in Denver, Colorado, and the sixth in September 2007 in Annapolis, Maryland. Taiwan’s Minister of National Defense Chen Chao-min gave the keynote address at the seventh conference in the series, held in September 2008 on Amelia Island, Florida. The eighth conference was held in September 2009 in Charlottesville, Virginia, and the ninth conference was held in October 2010 in Cambridge, Maryland.

Keynote Addresses
Keynote speakers at the 2011 conference included Dr. Andrew Yang, Vice Minister (Policy) from Taiwan’s Ministry of National Defense, and Dr. Peter Lavoy, Acting Assistant Secretary for Asian & Pacific Security Affairs at the U.S. Department of Defense. US-Taiwan Business Council Chairman Dr. Paul Wolfowitz was the conference host.

Conference Program
Sessions at the US-Taiwan Defense Industry Conference featured a moderator and several speakers on the panel, and some sessions included additional commentators. Each speaker gave a short presentation on the session topic from his or her own viewpoint and expertise. Those presentations were then followed by a moderator-led discussion among the panelists, as well as a moderator-driven question and answer period with the attendees. This format offers the maximum amount of time for exchanges among the panelists, as well as between the panel and the audience, allowing the sessions to become a forum for substantial and valuable interaction and discussion.

Breakout Sessions
There were three sub-sessions within Session IV. These sub-sessions conducted discussions focusing on the Threats, Requirements & Solutions for each individual branch: Navy, Army, and the Air Force.

Archived version of the website for the 2011 US-Taiwan Defense Industry Conference

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Press Releases

Governor Rick Scott of Florida Supports Taiwan F-16 Deal in Letter to President Obama

On August 2, Governor Rick Scott of Florida sent a letter to President Obama in support of selling 66 F-16C/D fighter jets to Taiwan. In his letter, Governor Scott said that the sale and manufacturing of F-16 aircraft supports hundreds of skilled jobs in his state, and that the sale of new aircraft to Taiwan would save 477 direct jobs and 1,446 indirect jobs in Florida.

Governor Scott reminded the President that the window of opportunity to act on Taiwan’s request for new fighters is rapidly closing, and requested that the Obama Administration accept Taiwan’s Letter of Request for F-16C/Ds.

 

Governor Rick Scott of Florida Letter to President Obama supporting F-16C/D fighter jets to Taiwan (PDF file)

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Press Releases

181 Members of the U.S. House of Representatives Challenge President Obama on F-16s for Taiwan

The US-Taiwan Business Council welcomes the August 1, 2011 letter to President Barack Obama, where 181 Members of the U.S. House of Representatives stated their belief that “it is critical for the United States to sell the government of Taiwan all the F-16 C/Ds it requires.” The letter strengthens and reinforces the corresponding message in a similar letter sent earlier this year by 47 members of the U.S. Senate.

The government of Taiwan has attempted to purchase 66 new F-16 C/D model fighters from the United States since 2006, but has found itself in the precarious position of the U.S. refusing to even consider the sale. These new fighters would replace Taiwan’s aging fleet of Vietnam War -era F-5s and Mirage 2000s, which are to be retired from active service in the coming decade.

U.S. Secretary of State Hillary Clinton has committed the Obama Administration to decide by October 1 what – if anything – the U.S. is prepared to do in order to help modernize Taiwan’s air force. That includes making a decision on providing replacement F-16 C/Ds, as well as on upgrading Taiwan’s 145 existing F-16 A/Bs.

 

181 Members of the U.S. House of Representatives Challenge President Obama on F-16s for Taiwan (PDF file)
House Members’ August 1, 2011 Letter to President Obama on F-16s for Taiwan

Categories
Press Releases

Senator Cornyn and Secretary Clinton Make Taiwan F-16 Deal

Secretary Clinton today informed Senator John Cornyn – who had been blocking the Senate confirmation of the Deputy Secretary of State nominee to motivate the Administration to accept Taiwan’s Letter of Request for new F-16s – that the Obama Administration would make a decision on the F-16 sale, as well as deliver a long delayed Taiwan Airpower Report, by October 1, 2011. On that basis, Senator Cornyn lifted his hold on the nomination of Bill Burns, and awaits the Administration’s announcement and its submission of the report.

While the US-Taiwan Business Council welcomes the Obama Administration’s commitment to finally make a decision, we suspect that the outcome simply reiterates decisions already made, and therefore fails to address Taiwan’s central need – new combat aircraft to meet the growing threat from China.

 

Press Note: Senator Cornyn and Secretary Clinton Make Taiwan F-16 Deal (PDF file)

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Press Releases

U.S. Government Should Consider the Economic Impact of Releasing F-16s to Taiwan

The Lockheed Martin Aeronautics division, manufacturer of the F-16 fighter jets long sought by Taiwan, last week announced plans to cut 1,500 jobs at locations around the United States. This news highlights the need for the U.S. government to reassess its position on the sale and to consider the positive economic impact of releasing F-16s to Taiwan. The US-Taiwan Business Council joins Senator John Cornyn of Texas in calling on the Obama Administration to “end its blockade of Taiwan’s request to purchase new F-16s.”

Commenting on the Lockheed Martin announcement, Council President Rupert Hammond-Chambers said, “The recent Perryman Report shows that the follow-on sale of F-16s to Taiwan would have a positive economic impact around the country, generating some US$8.7 billion in gross output and sustaining approximately 16,000 direct and indirect jobs over the life of the program. That would represent a significant economic boost to states such as Ohio and Florida – where unemployment stands at 8.6% and 10.6%, respectively. Reports estimate that 1,800 workers in Ohio and 1,900 in Florida depend on an F-16 sale to Taiwan. Should the Taiwan sale fail to materialize, however, current orders would only sustain the F-16 production line for another two years.”

 

U.S. Government Should Consider the Economic Impact of Releasing F-16s to Taiwan: US-Taiwan Business Council (PDF file)

Categories
Taiwan Defense & Security Reports

Taiwan Defense & Security Report – Q2, 2011

Preparations for and campaigning ahead of the upcoming Presidential and Legislative Yuan (LY) elections, which will both take place in January 2012, continued to dominate the Taiwan political environment through the second quarter of 2011. The elections will likely continue to affect the political and economic environment in Taiwan through the remainder of the year.

Defense and national security issues have so far not been central to the election calculus. As presidential election politics intensify, however, greater attention could be focused on President Ma Ying-jeou’s overall record on cross-Strait relations and national defense, and how these policy arenas relate to the economy, the government’s fiscal health, and wealth distribution under the Ma Administration. This is true to a lesser extent of the legislative elections as well. As the overall impact of President Ma’s first term in office gradually becomes discernible, the outcome of the 2012 elections could increasingly rest on a narrow band of middle voters, whose concerns may include a greater emphasis on defense.

For his part, Mr. Ma is clearly eager to achieve a breakthrough in defense sales before the election, in order to address criticisms that his government has been soft – or even negligent – on defense. However, his efforts at lobbying for U.S. action in the desired direction appear both late and inadequate.

This quarterly report provides a brief overview of significant developments in the past three month, and examines some of the factors that influenced the course of events in Taiwan during the second quarter of 2011.