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Forbes Still Calling for Investigation Into GE’s China Deal

by John Reed on November 18, 2011

Below you’ll find the text of Rep. Randy Forbes’ (R-VA) latest letter to Defense Secretary Leon Panetta asking for the Pentagon to reveiw a proposed joint-business venture between American defense giant GE and China’s state-owned aircraft company, AVIC to develop avionics for China’s new COMAC 919 airliner (shown above). Forbes is concerned that the technolgy could end up being used in Chinese military jets despite GE’s insistence that the technology has no connection to U.S.  military systems

The threat of American companies inadvertently helping China develop advanced military tech is something we’ve written a ton about lately. One expert I’ve talked to goes so far as to say such deals “have the potential to give the Chinese aerospace industry a 100 piece puzzle with 90 of the pieces already assembled.” Remember, with the Western economy mired in crisis while China’s economy continues to grow we can expect more of these deals.

Forbes’ office sent DT his letter and the Pentagon’s response to his earlier request for an inquiry into the matter this morning.

Click through the jump to read his letter.

November 18, 2011
The Honorable Leon Panetta
Secretary of Defense
1300 Defense Pentagon
Washington, DC 20301-1300Dear Secretary Panetta,

Thank you for your Department’s response to my recent letter regarding my concerns about the proposed joint venture between General Electric (GE) and China Aviation Industry Corporation (AVIC) and your continued attention to maintaining the technological superiority of the United States military.

I firmly believe it is your responsibility, as Secretary of Defense, to ensure that the technologies developed under Department of Defense contracts for military purposes are not diverted in any form to strategic competitors such as China and I look forward to working with you to protect United States’ interests in this regard. I understand that neither GE nor the Department of Commerce have asserted the necessity for an export control license for the joint venture between GE and AVIC and  that the Department of Defense may not have independent authority to pose a binding objection or block the transaction.  However, this does not abrogate the Department of Defense from advising Congress, U.S. defense contractors, and the general public of the potential national security hazards of such technology transfers.

As a result, I request that you review the Defense Intelligence Agency (DIA) article in the October 7, 2011 Defense Intelligence Digest entitled “Civilian Aircraft Industry Likely to Transfer Foreign Technology to Military.” Please state if the conclusions of this briefing have any impact on the Department of Defense’s intentions regarding a review of the GE-AVIC joint venture.  Additionally, please state upon review of the DIA article that you reaffirm that it “remains the policy of the U.S. Government to deny exports to any Chinese military end-users or associated end-uses.”

While Undersecretary Flournoy’s response to my previous letter provided valuable insight into the export control process, my primary concerns are for the potential foreign use of technology initially developed under Department of Defense contracts with American taxpayer funding, the continued superiority of the U.S. military, and ultimately, the future national security of the United States.

Given these concerns, I ask that you clarify the Department of Defense’s intentions with respect to the following questions:

  •    Does the Department of Defense intend to conduct a formal review of the GE-AVIC joint venture that would examine the nature of the technology involved in the proposed joint venture and how it would be of benefit to the People’s Liberation Army Air Forces as well as the compliance and enforcement mechanisms of the proposed joint venture?  If not, why not?
  •    Has the Department of Defense determined that they do not possess the authority necessary to initiate such a review because GE has self-determined they need not apply for an export license for this technology?  If so, what other authorities does the Department of Defense have that would allow them to formally review transactions between foreign entities and companies that routinely contract with the Department of Defense for national security implications?  What authorities does the Department of Defense need that they do not currently have?·
  •    To date, what reviews – formal or informal — of the GE-AVIC joint venture have been conducted by the Department of Defense or subordinate agencies?  To date, what guidance – formal or informal — has the Department of Defense provided either directly to GE, to the Department of Commerce, or to any other agency or subordinate? ·         Please provide a briefing to my staff on the details of any reviews or guidance provided.·
  •     While I understand that the Department of Treasury acts as the chair of CFIUS, it is also my understanding that the Department of Defense has the authority to request a review for covered transactions and certain joint ventures.  Does the Department of Defense intend to request a CFIUS review of this transaction?  If not, why not?·
  •      Regarding your commitment to audit other joint ventures between PRC entities and defense contractors to the Department of Defense, please provide an expected timeline for the review as well as the terms of reference of the review.  I also ask that you keep my office appraised of the progress of this review process.  Further, please ensure that when the review is completed, a cross reference is provided that details the U.S. defense contracts the specified defense contractors are involved in.

Finally, I also wanted to draw your attention to the recently completed nonpartisan U.S.-China Economic and Security Review Commission (USCC) 2011 Annual Report which states that “Continued improvements in China’s civil aviation capabilities enhance Chinese military aviation capabilities because of the close integration of China’s commercial and military aviation sectors.”  They also state that “As part of its indigenous innovation policy, China incentivizes foreign companies to transfer technology in exchange for market access.”  Please provide your assessment of these conclusions and their influence on the Department of Defense’s intended actions.

Thank you for your continued concern for protecting the U.S. military’s technological superiority.  I look forward to continuing to work with you in this regard.

Sincerely,

J. Randy Forbes
Member of Congress

CC: Secretary of the Treasury
Secretary of Commerce
Director of National Intelligence

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{ 45 comments… read them below or add one }

blight2 November 18, 2011 at 12:30 pm

It's not a problem for GE. They know the blame will fall on "Obama", just as "Clinton" got the blame for Loralgate. Nobody remembers who Loral is.

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sdog November 18, 2011 at 12:31 pm

the fact that GE is trying to justify this is borderline treasonous. China is our enemy, period. they can't even build a jet engine on their own. GE is looking out for their bottom line, as usual. Watch the GE interview from the 60 minutes program, GE could care less about the rampant stealing of information, or about the defense of American intellectual property. The Chinese rep's in this "partnership" are ALL from the military and intelligence services, still wondering if this is a "civilian only" project?

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gunslinger6 November 18, 2011 at 12:09 pm

I agree sdog this is a very bad idea. We should not be giving our technology to the Chinese, especially now when they are selling us defected and used microchips that have found there way into our military. They Chinese do not trust us, and we should not trust them.

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Chops November 19, 2011 at 12:30 am

GE should be banned from doing business w/China–they claim that what they do is inspired by honoring their commitment to their shareholders but that is pure B.S.—They move their corporate HQ. out of the U S to avoid the higher taxes all the while they are reaping outrageous profits from the US taxpayer.IMO I think that GE will sell any technology they have as long as they greedy treasonous ***es make a porofit.

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blight2 November 19, 2011 at 11:23 am

It's not about country, it's about profit.

GE is a multi-nat now, and any expectation of loyalty from the company to this country out of corporate histoy is spurious.

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Mike Nguyen March 25, 2012 at 3:45 pm

ge already loss the leadership wind turbine business to china…stole their tech…FOOLs!

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Mike Nguyen March 25, 2012 at 3:49 pm

Chinese gov't go shopping once a years in US so everything is forgiving….the problem is chinese see economic as war… in a war law does not apply…

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blight_ March 25, 2012 at 8:20 pm

They're exploiting the greed of American companies, who in cost-benefit analysis do not do the long term due diligence that shows that giving the PRC a leg up means they will be cranking out your stuff and pocketing the change in a few years.

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Pedro November 18, 2011 at 12:37 pm

"China is our enemy, period."

Why is China your enemy?? They may sit across the big pond and compete with you for raw materials and have a different outlook on life but that hardly makes them your enemy.

They don't want your territory, they don't sponsor terrorist acts and they never threaten you militarily.

Sure they have territorial issues (having regained Tibet that had been conned out of them by the British while they were militarily weak) and there's occasional friction with neighbouring states that you consider friendly but that hardly makes them 'enemy' material.

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jumper November 18, 2011 at 1:59 pm

You apparently don't keep up on current events…. Might want to look into the economic stand off, recent electronic attacks on our military and financial institutions, etc, etc.

They may not rate the term "enemy" yet in the traditional sense but they certainly are not our friends.

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Alton Voss November 19, 2011 at 11:57 pm

They steal. They are dishonest about their intentions. They have attacked our cyber systems by hacking into them and disrupting them. They are comunists and have a completely diffrent agenda than we do, not even mentioning the human rights issues. You probably think the muslems are your friends too.Their only job to kill you infidels.

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Matt November 27, 2011 at 7:44 pm

How is Islam even remotely relevent here?

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Morty November 18, 2011 at 1:11 pm

no is a counter world power which means there our opposite not our enemy

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sdog November 18, 2011 at 1:29 pm

so the widespread theft of our technology is not threatening? do you think they are going to use that information to build playground equipment?

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gunslinger6 November 18, 2011 at 1:36 pm

Dont for get all the cyber spying and hacking they have done lately

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BILL November 19, 2011 at 1:36 pm

Not to forget the fact that Russia has problems with them also as China steals their aircraft and engine tech just to name a few things.

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itfunk November 18, 2011 at 1:43 pm

Paranoia about IP is really just a symptom of an inability to compete. Competitive economies thrive on openness.

Whether you keep IP secret or give the it away, it matters little because you cant compete anyways.

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Mitch S. November 21, 2011 at 3:27 pm

Guess that's why Apple went out of business… wait a minute!

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gunslinger6 November 18, 2011 at 1:37 pm

*forget, sorry for typo

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Uranium238 November 18, 2011 at 2:04 pm

Let's just cut our imports from them, tell them we will pay off our debt, cut the outsourcing to them, and then leave them alone so we can start focusing on our own domestic growth. The fact that GE is in cahoots with China over ANY project related to aviation is a serious red flag.

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justsaying November 19, 2011 at 7:58 pm

>America
>paying off debt
lol no. History has shown, that's not how the western world operates. Rest assured, it will seek to start a war and then claim all debts as void. Iran will be invaded soon enough by Israel, and it will give the people on this website a new wardrum to beat. Expect more countries to get involved and WWIII to begin.

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John November 18, 2011 at 2:11 pm

We should not be helping or supporting the Chicoms in anyway shape or form they never have and never will be Americas friend our ideaologys just dont mesh and the worst part is that we have been sold out by our fellow counrtymen and politicians all in order to get cheap products and to outsource our labor in the name of making a big profit!!

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blight2 November 18, 2011 at 2:29 pm

The ideology of greed is present there too.

However, our geopolitical objectives appear to clash. And yes, the PRC would not have moved forward without overtures from the west. It was western equipment, technology and dollars that brought about the real "Great Leap Forward".

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Morty November 18, 2011 at 2:49 pm

As long as we still owe them money there not going to attack us

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Lance November 18, 2011 at 3:46 pm

Easy give GE a ultimatum… Work here in the USA with us and get military deals and bid on competitions. OR work with China and be cut off from all US defense work period.

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Jazzism November 18, 2011 at 8:33 pm

Well said and couldn't be put in more plain English. Screw with us then we'll take our money elsewhere.

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joe November 21, 2011 at 3:44 am

Which then just leaves the question of what happens to every USAF and USN aircraft with a GE engine…I'm sure the DOD would love to pay to refit them all. And then you have to find a new engine manufacturer to meet the inevitable 'alternate engine' mandates – and the manufacturers will lace their bid with massive risk pots because they don't trust you not to do the same to them if you decide they're not playing ball.

The problem with throwing toys out of the pram is some of those toys are necessary.

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Matt November 27, 2011 at 7:40 pm

I'm sure another company would love to get into the engine bussiness if GE was no longer allowed
Better to take a monetary hit now than to have a PLA with American tech

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P.J. Busche November 18, 2011 at 3:57 pm

All of this give-away of U.S. technology and outsourcing of labor to foreign countries can be credited to former GE CEO Jack Welch. He has sold out the U.S. economy and technology to foreign countries to the unconditional loyalty of his stock shareholders so that his corporate peers can prosper at the cost of american jobs. Jack Welch has turned capitolism in our country into corporatism – political & industrial power ruled by corporate greed.

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SJjjjjjjjjjjj November 18, 2011 at 6:12 pm

Does it bother anyone that GE owns NBC?

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SJjjjjjjjjjjj November 18, 2011 at 6:21 pm

Hmm. GE owns NBC…And, they sell technologies to China (useful for war) at profit. Then, GE sells advertising for you, its viewers to consume, as you sit back and watch your cities burn by weapon's technologies provided by GE. Oh, and, the "talkingheads", at NBC, ALWAYS fail to mention the how/why/who…this happens. Just sit back and enjoy the sho………bzzzzzzzzzzzzzt…………..BOOM!!!!!!! yer dead.

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CaptSausage November 18, 2011 at 6:29 pm

Money rules. America should know this better than anyone. Now the money is Chinese. They haven’t overtaken you yet but it is inevitable. You had your time, hope you enjoyed it.

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PrometheusGoneWild November 18, 2011 at 8:12 pm

Boeing needs to make a phone call.
"Do you want to sell engines to us? Then cut the crap with the Chinese"
Endgame…..

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blight2 November 19, 2011 at 4:50 pm

More like "can you give the number to airline procurement, so we can sell our foreign products for a contract and make short-term gain in exchange for being ripped off next year"

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PrometheusGoneWild November 19, 2011 at 6:47 pm

Crap,…..your right.
American leadership at it best…:)

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IKnowIT November 19, 2011 at 5:07 pm

You guys know the CEO of GE is Obama's buddy, right?

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blight2 November 19, 2011 at 5:52 pm

It's not he can sign checks for the company without the board breathing down his shoulder. Unless the board is his friend too.

More logically, companies are "friends" to whoever is in power, simply to ensure they stay profitable and on the good side of government.

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Oudin November 20, 2011 at 4:08 am

I think US lack of competitive with China, every company in US to invested in China cause very competitive and productive labour, low electric bill, fairly market.

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Slug0 November 22, 2011 at 5:33 pm

Isnt Al Gore in bed with GE…..

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Trident November 30, 2011 at 5:52 pm

Could it be inadvertently on purpose?

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blight2 November 18, 2011 at 4:19 pm

If I remember correctly, they claimed tax credits based on the losses to GE capital. As for "funneling" to the DNC, those numbers can be looked up.

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blight2 November 18, 2011 at 4:20 pm

…no he doesn't. Short of executive orders which are "evil big government". Though he carries big sticks, such as possibly ordering execs to be detained for sending sensitive tech overseas, along with using the media pulpit as a way to attack companies.

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gunslinger6 November 19, 2011 at 9:35 am

I agree Trimaran that would be good news

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milemachine413 January 1, 2012 at 1:36 am

What are the chances that this guy even said that? and what are the chances he's right? But, I also hope it's true.

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Matt November 27, 2011 at 7:37 pm

He could always cut their tax breaks or not have their heads on his economic board.
I seems hypocritcal for him to both attack the "evil corperations" and support one who has shown no loyalty to America

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