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US Ambassador to Japan Rahm Emanuel is calling for defense firms that miss deadlines and drive up costs to be barred from bidding on new military contracts as punishment.
The final memo in his “Tokyo Takes” newsletter, obtained by The Hill, calls for defense companies to be barred from buying billions in stockpile if they default on their obligations on major weapons systems.
It specifically proposes a five-year ban on share buybacks or a ban on buying back shares until deadlines are met for companies that default.
“Trust me, this would quickly get the attention of the C-suite,” Emanuel wrote.
He also suggested blocking “the big five” from bidding for contracts in some areas, such as emerging systems, and encouraging bids from start-ups and “only small, ambitious companies”.
Although he doesn’t name them, the Defense Department’s five largest contractors are Lockheed Martin Corporation; Raytheon Technologies Corporation; General Dynamics Corporation; The Boeing Company; and Northrop Grumman Corporation,according to the Congressional Research Service.
“I know that both ends of Pennsylvania Avenue and both sides are responsible for this situation. None of us are blameless here, which means we must work together to resolve it,” the ambassador wrote.
Emanuel’s focus on military production is part of widespread recognition that the US defense industrial base is not meeting the demands needed to counter China’s aggressive ambitions in the region. US resources are further strained by supplying Ukraine in its defensive war against Russia and aiding Israel’s defense in the Middle East.
“Everybody agrees that something beyond normal, has to happen, that this is a tipping point,” Emanuel said in a brief phone call with The Hill.
“I don’t know if a five-year ban on stock buybacks until they fix it will work, but Lockheed, Raytheon, General Dynamics, Grumman and Boeing have to be shaken up somehow, somehow to heel. , and the corporate suite needs to be laser-focused on solving this problem.”
Emanuel calls the “stunted defense industrial base” the “weak link” in America’s strategic posture and blamed major defense contractors for “zero sense of urgency or understanding of how deterrence commitments are being undermined and security of the United States.”
Emanuel, who served as former President Barack Obama’s White House chief of staff and was previously an Illinois lawmaker and Chicago mayor, said he had to use “my political capital with Japanese officials to cover the failures of American companies.”
The “Tokyo Takes” newsletter reaches about 180 members of Congress, chiefs of staff and professional committee staff, including the armed services and foreign affairs.
Biden officials and lawmakers from both parties have called for reforms to U.S. military production. Earlier this month, Biden’s national security adviser, Jake Sullivan, called it a“A generational project”for the US government to invest in military procurement and research and development.
The bipartisan House Select Committee on US-Chinese Communist Party Competition focused a December hearing on “The Imperative to Strengthen America’s Industrial Base and Defense Workforce.”
“Bold policy changes and significant resources are needed now to restore deterrents and avoid a showdown with the People’s Republic of China,” said Rep. John Moolenaar (R-Mich.), the committee’s chairman.
Emanuel also calls for “economic craft” to be used to counter China, saying energy should be used as a “strategic asset.”
“Right now, our economic policy is absent, and that’s a ‘diplomatic’ euphemism,” Emanuel wrote. He called for marrying economic policies with “political, diplomatic and security policies.”
“We have gone from praising all trade agreements, regardless of cost, to denouncing all trade agreements, regardless of benefits. We can agree that this area requires a more nuanced position than ‘all’ or ‘none’.”
Emanuel also called for using energy as a “strategic asset, not just a resource,” noting how the U.S. helped replace banned Russian energy in Europe, which was cut off after Moscow launched its invasion of large scale of Ukraine.
He described this as a roadmap for the Indo-Pacific to “seduce nations and expand our network of partnerships.”
China is the second largest importer of US crude oil, behind the Netherlands,according to US government dataand Asia and Oceania are the second largest destination for US oil exports behind Europe.
TheThe United States is the largest exporter of liquefied natural gas (LNG)with almost half of exports to Europe and 38 percent to Asia.
Emanuel called for maintaining and strengthening American partnerships in the region that developed under the Biden administration, including the trilateral summit of the United States, Japan and South Korea. He also mentioned the strengthening of the Australia-Japan-India-US Quad and the creation of the Australia-UK-US (AUKUS) partnership for naval war production.
“Our partnerships root us in the region, much to China’s chagrin,” Emanuel wrote.
“We must repay that trust by continuing to cultivate these multilateral agreements. If our goal is to undermine China, we cannot undermine our allies at the same time.”
Asked if he would be in a position to return to the United States to push for his solutions, Emanuel said he would continue to work with lawmakers as he has.
“I won’t have the ambassadorial platform, but quiet doesn’t come naturally to Rahm Emanuel.”
Recipients of the newsletter include Senators Jack Reed (DR.I.), outgoing chairman of the Senate Armed Services Committee; Mark Warner (D-Va.), outgoing chairman of the Senate Select Committee on Intelligence; John Cornyn (R-Texas), a member of the Senate Finance and Intelligence Committee; and Todd Young (R-Ind.), co-author of the CHIPS Act that focused on investing in U.S. semiconductor manufacturing as opposed to China.
Other recipients include Rep. Adam Smith (D-Wash.), the ranking member of the House Armed Services Committee; and Speaker Emeritus, Rep. Nancy Pelosi (D-California)
