Taiwan Submarines: At the Crossroads

The Republic of China (ROC) on Taiwan is said to be approaching a crossroads in its 40-year quest for a fleet of modern diesel electric submarines. With the delay in the Bush administration's Congressional notification of a three year, $360 million design program through Foreign Military Sales (FMS) channels, senior ROC political and military leaders have at least three choices:

• Advocate for the Bush administration to notify Congress of its intent to implement the FMS program as planned;

• Give up the 40 year quest for conventional submarines that former Defense Minister and President, Chiang Ching-kuo, began in 1969; or

• Direct the ROC's domestic industry to take the lead, with U.S. and other foreign assistance, in designing, developing, manufacturing diesel electric submarines.

At the current time, the Ma administration's intent is uncertain. Option 2 -- abandon the 40 year quest right when the likelihood of success appears greatest ever -- may be the prefered path. Such a decision is well within the right of the ROC's democratically elected leadership. However, such a decision could be influenced by PRC pressure and interest groups that do not have in mind broader U.S. interests and U.S. legal requirements under the Taiwan Relations Act. A Ma administration decision in the coming weeks to call off the 40-year quest may be irreversible. Yet the delay in the notification may also present opportunities to keep options open, and explore alternative acquisition paths.

Background: The ROC's 40-Year Quest for Submarines

Chiang Ching-kuo (CCK) and the Ministry of Defense leadership initiated the quest in October 1969, when the issue was first raised formally in discussions with senior U.S. political and military officials. The request for 10-12 submarines reflected a desire for greater self-reliance in the wake of U.S. drawdown in forces in the region under the Nixon Doctrine. Initially refused, the U.S. released two submarines in April 1971 as a consolation prize for supporting the PRC's entry in the United Nations at the expense of the ROC.

Between 1972 and 2001, however, U.S. policy, influenced in large part by the U.S. Navy nuclear submarine community, was steadfast in opposing any form of support for Taiwan's vision of a 12-boat fleet of submarines, including related components. As a result, between 1972 and 2001, the ROC scoured the world to fulfill CCK’s submarine dream, playing a cat and mouse game with the PRC, which had feared submarines more than any other capability that the ROC could possess.

The ROC Looks to Europe. The ROC's first breakthrough came with the Netherlands. Taiwan signed a U.S. $370 million contract for procurement of two Dutch Sea Dragon submarines, with deliveries in 1987. However in 1988, the PRC coerced the Dutch government into signing an agreement to restrict further arms sales. As an alternative, the ROC requested the licensed production of RDM Walrus-class submarines in Taiwan and through an intermediate country (Netherlands Antilles). However, again, the Dutch government denied the license for licensed production, as well as procurement of additional two submarines in 1992. In the late 1980s, Germany's HDW initiated discussions with Taiwan for possible sale of submarines. However, the Kohl government, under PRC pressure, denied export licenses in 1992 and 1993.

The Domestic U.S. Submarine Debate: The Nuclear Navy Shows Its Strength. In the meantime, the U.S. Congress began to review export policies related to the export of conventional submarines to foreign customers. In November 1991, Public Law 102-172, including in the 1992 Defense Appropriations Bill, mandated that DoD and military services take no action to “prohibit, impede, or otherwise interfere with construction of conventionally powered submarines by non-public owned and operated ship construction and repair entities in the U.S. for sales to foreign nations, providing that DoD may make recommendations to State Department regarding national security implications of proposed foreign sale." In response to the Congressional requirement, a Secretary of Navy Report to Congress, submitted in May 1992 in response to PL 102-190, Sec 1014, outlined issues that would have to be taken into account and criteria to be used for recommending granting of licenses for the export of submarine constructed in the United States. The report recommended minimal U.S. government involvement.

The ROC Looks to America. With U.S. appearing more relaxed, 1994 saw Taiwan's first formal request since 1978 for U.S. assistance in its acquisition of diesel electric submarines. However, still on the defensive from the 1991 attempt by Congress to force the U.S. Navy to relax its submarine policy, the ROC request was denied on grounds that submarines were “offensive.” To deflect continued ROC pressure on the U.S. for submarines, the Office of the Secretary of Defense directed the U.S. Navy conduct an assessment of Taiwan’s anti-submarine warfare (ASW) operational requirements. However, the 1995 assessment is said to have excluded any examination of a submarine requirement, and recommend that Taiwan rely on new maritime patrol aircraft to meet its ASW requirements. By 1998, however, the Clinton administration agreed to examine Taiwan's operational requirement for submarines in an earnest manner. Two assessments concluded in 2000, one carried out by the U.S. Pacific Fleet and the other by a hybrid team of Navy ASW experts, validated the ROC Navy's requirement. As a result, the stage was set for a shift in U.S. submarine policy.

Shift in U.S. Policy. In 2001, in the opening months of the Bush administration, U.S. policy changed. In April of that year, the Bush administration reversed long standing U.S. opposition and announced its intent to assist Taiwan in its acquisition of diesel electric submarines as part of an integrated anti-submarine warfare (ASW) architecture. In accordance with the Taiwan Relations Act, the decision was based upon the judgment of military authorities - two USN operational teams that validated the requirement - and with Taiwan's self-defense in mind. There were concerns over risks to U.S. naval forces operating in the western Pacific in a contingency, such as fratricide and waterspace management. However, because the dominant factor was Taiwan's self-defense rather than interoperability, waterspace management issues were assessed as manageable.

Because the agreement was principled in nature, the specific form of U.S. assistance to Taiwan's acquisition of submarines was left open. DoD Public Affairs statements made after the Bush decision, and other reporting, indicates that the intent was for the program to be carried out through direct commercial sales (DCS) channels, with licences to be release on a case-by-case basis. Up to that time, U.S. industry license requests associated with ROC submarines, including components for a potential domestic program, had been denied. Precedents for such an approach included a number of programs that were managed through DCS channels in the 1980s, including the Indigenous Defense Fighter (IDF), the PFG-2 frigate, Tienkung air defense systems just to name a few. U.S. Navy evaluation of licenses would be guided by the 1992 Secretary of the Navy Report to Congress on Criteria to Be Used for Export License Requests. The Report to Congress outlined the policy position of the U.S. Navy that remains valid until today - it had no desire to sponsor a diesel electric submarine through FMS channels.

Chen Shui-bian Meets Rickover's Revenge. Nevertheless, the Chen administration's submission of a letter of request for price and availability (P&A) in June 2001 for eight submarines formally placed the program in the hands of an institution that was ambivalent at best toward diesel electric submarines. In submitting its letter, the ROC request the program be managed through FMS channels, despite the U.S. Navy's policy position. Since the Chen adminstration's insistence that the program be carried out through FMS channels, the program has encountered obstacle after obstacle up until the present time. Among these obstacles has been a worst case cost estimate of almost U.S. $12 billion - almost double the anticipated cost. Another was initial U.S. Navy insistence that Taiwan attain legislative authorization of the full cost of the program. Navy program managers welcomed Taiwan's insistence that a proven design is needed, only attainable from a third party - the chance of obtaining an export license from the Dutch, German, Spanish, and other third party governments was rated as minimal.

The U.S. Navy's suggestion that the ROCN required at least a 2000-ton boat, questionably more than what could be required for legitimate self-defense, has been said to have been a purposeful move by the Rickover nuclear navy community to jack up costs. In its guidance to the contractors responsible for developing the Independent Cost Estimate (ICE), the US Navy's submarine program office wanted to "maximize risk," meaning gold plate the figures in a way to ensure sticker shock when the $11.7 billion was first briefed to the ROC Navy in December 2002. US Navy was said to be basing its program approach and costing on a similar basis as a Virginia, or other nuclear program. Without details on design and definition, Taiwan legislators across party lines rejected this approach, citing the exorbitant costs as compared with other diesel electric submarine projects around the world. Independent contractors in the United States challenged figures in ICE, and passed their own estimates of between US $3.5-5 billion.

Taiwan's Legislative Demands for an Indigenous Role. In 2002, more than 130 members – more than half – of the Legislative Yuan signed letters to the Chen Shui-bian administration asserting that if Taiwan is not given substantial workshare of submarine program, then funding would not be appropriated. The DPP administration responded that a domestic program would raise the total cost by at least 20%, or an additional US $400-800 million. Nevertheless, as the debates ranged, Taiwan press reporting (United Daily News, 29 Sep 02) highlighted the possibility of mini-submarine in lieu of larger 2000-ton submarines.

In January 2003, DPP Vice Premier Lin Hsing-yi established an interagency working group to begin plans for domestic construction. It included the Ministry of Economic Affairs, Ministry of National Defense, Ministry of Finance, Navy Ship Design Center, United Ship Design and Development Center (USDDC), and China Shipbuilding (CSBC). CSBC’s proposal, known as "2-2-2-2" plan, called for a partnership with a U.S. industrial counterpart in the development and production of the eight diesel-powered submarines. The “2+2+2+2 plan” would be a phased effort beginning with the first two submarines being built in a U.S. shipyard or elsewhere abroad with CSBC engineers participating; the second phase would be for CSBC to construct one-third of the third and fourth subs in Taiwan; in the third phase, CSBC would construct two-thirds of the fifth and sixth subs; and then CSBC would construct the final two submarines in entirety in Kaohsiung. Among the various other studies, Vice President Annette Lu, working in conjunction with MND technical staffers, oversaw a working group to evaluate alternative avenues rather than US Navy. Her study, allegedly in favor of shifting the program to domestic channels, was reportedly shelved. In 2003, Taiwan submitted a letter of request to the Bush administration for information on possible refurbished options for submarines. The U.S. Navy also torpedoed this option as well.

Nevertheless, despite the numerous studies and working groups, the Chen administration maintained that the only viable option was via U.S. government channels. The domestic production faction lost steam. As debate raged in the LY over the Chen administration's refusal to integrate Taiwan's domestic industry into the program, and with an explicit LY threat to not authorize funding if there was no business for Taiwan industry, the U.S. Navy saw an opportunity - entange the program in the quagmire of Taiwan domestic politics and announce a policy that would forbid any role for Taiwan industry in the manufacturing of the submarines. Furthermore, the U.S. Navy would retain the intellectual property rights to any design that the ROC would fund. In November 2004, the Chungshan Institute of Science and Technology (CSIST) is said to have developed alternative proposal for fully domestic submarine program to President Chen Shui-bian's office, but to no avail. The design was to be a smaller coastal submarine, although specifics are unknown. Various options were considered, including one involving a 1000 ton design with a estimated cost of US $4 billion.

In November 2005, as Taiwan continued to struggle domestically over the submarine and other programs, the Pacific Command Commander, ADM Fallon, was alleged to have discouraged Taiwan from going forward with the submarine program, though later publicly denied such a position. By February 2006, Janes Defense reported that Taiwan was claiming that the US Navy was subverting its plans to acquire US-built SSKs to protect its nuclear-powered submarine capability. As one source noted, "putting a diesel electric submarine programme in the hands of the US Navy is like putting an alcoholic in a brewery – the outcome won’t be good."

So Close, Yet so Far. Despite the U.S. nuclear navy's best efforts to kill the program, there has been progress. Under pressure from Connecticut and Rhode Island Congressional representatives, DoD relaxed its insistence that Taiwan's legislature authorize the full estimated cost. Then, in 2007, Taiwan's legislature finally authorized funding of the first of a two phased program through FMS channels. The final step in getting the program underway was Congressional notification of the U.S. Navy's intent to enter into a formal agreement with Taiwan. After a prolonged delay, the Bush administration last month forwarded six of eight Congressional notifications, yet continued to hold two that had been part of the pile -- diesel electric submarines and UH-60 Blackhawks. Because there appears to be a general consensus that the ROC Army needs a new fleet of utility helicopters, one should expect that this requirement will be met eventually. So how the submarine will be managed remains an open issue.

With so much criticism and skepticism regarding Taiwan's potential acquisition of eight diesel electric submarines, and a glaring lack of enthusiasm from the Ma administration, the Bush administration's decision to defer Congressional notification was regretable yet understandable. A program that could cost Taiwan taxpayers up to U.S. $11.7 billion or even more, and with no return on investment for up to 10 years, does deserve closer scrutiny. Some observers, such as the Naval War College's Bill Murray and Chris Nelson of the Nelson Report, have argued against Taiwan's acquisition of diesel electric submarines, implying that President Bush's decision in April 2001 was misguided and ill-informed. Murray argues that the subs Taiwan would operate would be operationally ineffective and destabilizing. Nelson echoes Murray's assessment, and highlights the cost, timeline, and sourcing issue.

William Murray on Taiwan’s Defense Strategy: Submarines Can Be Lethal…Except for Taiwan

With the program on the cusp of moving forward, the U.S. Navy wasn't finished yet. In a Naval War College Review article published this summer (click here for link), entitled "Revisiting Taiwan's Defense Strategy," William S. Murray, a retired nuclear submarine officer, argues that submarines are operationally ineffective and destabilizing. In an attempt to discourage the ROC from its 40-year quest, LCDR (ret) Murray, backed by academics, policy officials, and U.S. Navy officers, wrote a Naval War College Review with the intent to kill Taiwan’s submarine program once and for all.

The reality is that diesel submarines by themselves, as Murray notes, may be of limited utility. But submarines, like any other capability, aren't intended to operate in isolation. If part of a broader architecture, most observers would agree that submarines can be a lethal asset, especially for a smaller navy. The PRC and others wouldn't fear Taiwan's acquisition of submarines if they weren't operationally and strategically effective. Submarines were a priority of Chiang Ching-kuo and his KMT successors since 1969. They are a centerpiece of at least 39 navies around the world. A submarine capability, a stealthy underwater presence in Taiwan's coastal waters, could be the most effective investment that Taiwan could make for self-defense.

Coastal Defense. Most people tend to think of subs in a deterrent context, thus the claims that they're "offensive." The coastal defense value, however, is perhaps even more important. A viable fleet of at least 10-12 subs, linked with survivable architecture of sensors and comms, could deny the PLA uncontested control of the waters surrounding Taiwan. There is no other capability that could ensure the PLA would fail in an attempt to enforce a maritime blockade. This includes ASW and ASuW missions, including patrols or pickets to defend ships trying to get out to international waters from Kaohsiung and Keelong. Basically, subs would be positioned to guard a narrow one or two kilometer wide route. In an invasion scenario, larger 2500 ton subs could also hold amphibious ships at risk coming down from Zhejiang and up from Guangdong. Smaller coastal submarines, perhaps 750-1000 tons could operate in the Strait itself to interdict troop transports and landing craft, especially at the disembarkation point about 30kms off the coast.

Coastal subs and artillery, supported by survivable C4ISR assets, could bring lethality from both above and below in a way that would raise the cost of an invasion attempt to an unacceptable level. Contrary to assertions made in Murray's article, subs are a stealthy "force in being" that could withstand a PLA first strike. It's hard to think of any other capability, with the exception of hardened bunkers, that are as survivable as subs. The logistical tail would need to be addressed, but it is addressable, contrary to Murray's assertions.

Other Missions. Subs also would be a valuable addition to a maritime and coastal surveillance network. This is not just for military purposes. They also would be useful for monitoring fishing activities of neighbors, counter-trafficking and smuggling, and other border control missions. Subs also are critical for ASW training, scientific research, undersea resource exploitation, SOF missions, and stealthy resupply missions. For example, media reporting indicates that the Australian Customs Service has been pursuing the procurement of as many as five small submarines for stealthy coastal and harbor patrols.

The Domestic Option: Back to the Basics?

If senior-level political and military leaders are resolved to acquire a submarine capability, and senior political leaders in the United States stand by the commitment to assist Taiwan in its acquisition of diesel electric submarines, then there is no reason why the ROC’s 40-year quest for a viable submarine capability can’t be successful. However, critics may be right - if one uses the FMS route, the cost is very high and timeline is long. However, while there are advantages to the current FMS path, other options have existed since the shift in U.S. policy in 2001.

Are the cost, timeline, and sourcing obstacles so great as to render a Taiwan program infeasible? Assuming the will exists and with at least tacit U.S. political support, the ROC Navy is perfectly capable of acquiring a cost effective submarine capability within a reasonable timeframe. Then why all the problems? There are many reasons. But based on significant delays and cost overruns associated with the on-going Posheng and the SRP programs, one could argue that the DoD acquisition system is not optimized for executing complex design and developmental programs in support of FMS.

Media reports indicate that the original Bush administation decision to assist Taiwan in its acquisition of diesel electric submarine was premised on the assumption that the ROC would bear the responsibility of managing its own acquisition. Long standing U.S. Navy policy had been to discourage the U.S. FMS system from playing a major role in any conventional submarine program on U.S. soil. The 1992 SecNav Report to Congress established the U.S. Navy policy: "To prevent the inadvertent transfer of submarine technology and to reduce the overall cost to the U.S. Government, U.S. Government involvement must be minimized." Such a policy is what guided the U.S. Navy's 2001 input into President Bush's decision, which was to pose no objections if assistance were through DCS channels and consistent with the 1992 SecNav Report to Congress.

A number of U.S. observers familiar with the U.S. Navy -- as well as the U.S. Navy itself -- have advocated that Taiwan itself assume responsibility for the program. The National War College’s Bud Cole, a retired U.S. Navy officer, advocated a domestic program. Professor Cole was quoted as saying that "I would encourage Taiwan to begin an indigenous program to begin producing conventional-powered submarines." He added, "given the advanced state of Taiwan's electronics industry and its shipbuilding industry, I find it hard to believe that over the course of eight to ten years that Taiwan cannot produce an operational submarine." Bud also added, "many elements would have to be imported, such as periscopes and battery technology, but I believe that technology is available on world markets.”

Former Deputy Assistant Secretary of State and Senior Country Director for PRC and Taiwan for the Secretary of Defense, Randy Schriver, advocated that Taiwan's legislature "should approve funding for research and development of the submarine program. It should also introduce the notion, either in legislative language, or in associated public statements, that Taiwan should consider an indigenous program to produce diesel electric submarines. Doing so would be consistent with the aforementioned Article 22 and would give new momentum to a program stalled because of uncertainties surrounding foreign procurement of design. An indigenous program could produce a scaled-down -- in terms of gross tonnage -- cheaper and multi-purpose submarine. And the US industry need not fret -- an indigenous program would still involve very significant opportunities for US contracts."

Acquisition of refurbished subs has been an option. There are legitimate logistics support issues, but these could be addressed just as well as the ROCN has addressed their current four subs. But the most viable option has been to go back to the original plan - design, develop, manufacture, and support the subs indigenously, with US industry assistance based on the guidelines established in the 1992 SecNav Report to Congress. Design is usually believed to be the main stumbling block. It doesn't have to be. If the ROCN requirement is for a proven design, then the option with the least risk is to rely on the Sea Dragon maintenance technical data package. Computer aided design tools, such as those used by U.S. commercial and military submarine builders could offer the fidelity needed for a production TDP.

With a more open minded approach, a smaller, more simple design with a spiral acquisition approach that could plan for phased improvements could be an option. Smaller coastal submarines, many of which are based on the older German Type-206, are now becoming more popular among international navies. French DCN's SMX-23 and Sweden's Kockum's Sea Dagger and Challenger are marketed toward smaller coastal subs. While these companies are unlikely to be able to obtain an export license, European engineers, working as independent consultants, generally have no problems with deemed export laws. Similarly, Indian submarine engineers are positioned to help as well.

If Columbian Drug Runners Are Able to Build Submarines, Can Taiwan? If Taiwan's senior political and military leadership believes the a valid requirement exists for diesel electric submarines, then a strong argument could be made that the most viable acquisition route is one that places responsibility squarely on the shoulders of Taiwan itself. There is no inherent reason reason why the ROC can not design, develop, and manufacture diesel electric submarines on its own, with U.S. and other industries providing licensed technical assistance. Since the first modern submarine came off the production line in 1899, dozens of shipbuilders with much less skill than those in Taiwan have produced seaworthy boats. If the former Yugoslavia, universities, and even amateurs can design and build submarines, then there's a pretty good chance that Taiwan could as well. Even Columbian drug runners have operated mini-submarines, and were engaged in a larger submarine design and production program before being caught! The question is not whether or not can Taiwan's shipbuilders design and build a submarine. The question is how sophisticated a submarine could be designed and built.

Cost Factors of a Domestic Program. Arguments have been made that costs would go up if the program were domestic. Such assertions are questionable for a number of reasons. First, use of the FMS system by itself entails a range of fees and projected cost of offsets, which by some estimates could run as high as 15-20%. Therefore, a domestic program could see these cost savings. Secondly, capital investment into manufacturing facilities likely would be necessary whether or not the subs were manufactured or assembly in Taiwan or the United States. Thirdly, labor rates tend to be less in Taiwan than they are in the United States. Finally, it is difficult to compare the overall economic burden of a domestic submarine program since a large proportion of expenditures would be remain within Taiwan itself, including the creation of jobs, money that would cycle through the local economy (including the supply chain that likely would cover a wide swath of the island), as well as technology spin-offs that could enhance Taiwan's industrial competitiveness in other areas.

Export Licensing Issues: Commercial Yes, Nuke Builders Maybe. The other issue would be how the United States would manage the review of export licenses. The 1992 SecNav Report to Congress provides an idea of the basic policies that would guide the technology licensing. The basic rule of thumb may be that the farther one is away from organizations and individuals involved in the design and manufacturing of U.S. nuclear submarines, particularly the hull, the easier it would be to have licenses approved. This is not to say that General Dynamics Electric Boat and Northrop Grumman would be non-players. They could -- and should. However, licenses likely would be closely scrutinized, and there likely would be calls for USG technology safeguards. Bottom line is that no one knows until they try.

In a worst case scenario, and there is a need for a U.S. shipbuilder to be involved, then there are commercial submarine companies in the United States. Two of the most prominent include Kokes Marine Technologies and U.S. Submarines. Submarine designers include the Southwest Research Institute and American Systems Corporation.

Taiwan Arms Sales: A New Phase Begins

After a long delay and marking a symbolic end to six years of political wrangling, senior Bush administration officials on October 3, 2008 authorized the Defense Security Cooperation Agency (DSCA) to forward Congressional notifications on six Taiwan programs. Two other programs awaiting notification - diesel electric submarine design and UH-60 utility helicopters - were held in abeyance. The programs, with a value of up to U.S. $6.5 billion, which were notified are:

• PATRIOT PAC-3 missiles and fire units (see announcement here)
• AH-64D APACHE attack helicopters (see announcement here)
• Upgrade of E-2T Airborne Early Warning Aircraft (see announcement here)
• Submarine-Launched UGL-84L HARPOON Block 2 missiles (see announcement here)
• Spare parts for ROC Air Force aircraft (see announcement here)
• Javelin Missiles (see announcement here)

Media and Other Responses

While lauding the decision, the U.S.-Taiwan Business Council published a sharp criticism of the Bush administration's management of the Congressional notifications over the last 10 months:

The impasse over arms sales has done immeasurable damage to the U.S.-Taiwan relationship over the past several years, and these Congressional Notifications - while very late and incomplete - are an important and positive step forward in US-Taiwan relations. However, it has taken over 10 months for the notifications to accumulate - an unprecedented action irrespective of Bush Administration claims that this was part of a normal inter-agency process. There is simply no existing example of notifications being stacked in such a manner. We face a similar situation in the Bush Administration's refusal to accept an LOR for F-16s - itself unprecedented in a security relationship between the U.S. and a non-NATO ally.

Other reporting was generally positive and accurate with some exceptions. Today's Nelson Report provided a synapsis of today's decision, as well as a skewed critique of the submarine issue and some interesting remarks from Gregg Rubinstein. With regard to the submarines, Chris Nelson opines:

Left off are the conventionally powered submarines, a controversial, hugely expensive notion, one quite openly opposed right from the start, in 2001, by many in the US defense and strategic community on substantive grounds. As a friend put it today, "we don't make the damn things, so it was silly to offer them, since it would take at least a decade to get even one delivered...and that's assuming they made tactical sense, which they don't. We recognize others may disagree with the assessment, but note that even proponents agreed the cost of the submarines would likely be prohibitive, and that the money (something like half of the original package total cost) could certainly be better spent on immediately needed, and immediately deployable defensive armaments.

A detailed response can wait, but two points are important to make:

1. First, the Bush administration's decision in April 2001 marked a shift in policy regarding Taiwan's 40 year quest for a viable submarine force. Reporting has indicated that the decision was based on two military assessments, both conducted under the Clinton administration, which validated Taiwan's operational requirement for submarines as part of an integrated ASW architecture. The kind of opposition that Chris notes would have been based on reasons other than Taiwan's own self-defense needs (e.g., complicating U.S. military operations in the area or export control concerns), and not the Taiwan Relations Act. The Taiwan Relations Act is clear - decisions are to be based on military judgments of Taiwan's requirements alone. Bottom line is that Taiwan's operational requirement doesn't differ much from Singapore, Malaysia, Israel, Indonesia, Australia, Japan, South Korea, Sweden, and the dozens of other navies that own and operate diesel electric submarines.

2. Secondly, it may be an overly simplistic belief that the Bush administration "offered" submarines or agreed to "sell" submarines to Taiwan. In April 2001, the Bush administration agreed to assist Taiwan in its acquisition of diesel electric submarines. These words were nuanced but important. The U.S. left it open on how to satisfy Taiwan's requirement. Decision makers were well aware that the United States did not manufacture diesel electric submarines for use by the U.S. Navy. Observers note that the program had intended to be a cooperative defense industrial effort, and kept out of Foreign Military Sales (FMS) channels. Taiwan was to assume responsibility for acquisition and the U.S. would be in the assist mode through normal, routine review of export licenses. However, all this changed when the program, at Taiwan's request, was shifted to FMS channels and it's been a struggle ever since.

In the Nelson Report's coverage of the debate between Bill Murray and Harvey Feldman, Chris added a new, admirable perspective by Gregg Rubinstein, a former State and Defense official:

The [Murray] article has some excellent points, though some seem to use its arguments selectively to further confuse what amounts to an improvised, knee-jerk approach to Taiwan defense matters. While Murray is specific in many areas, we are still left without a clear definition of offensive weapons. Arguments on what Taiwan should have typically bog down because of this lack of consensus on what constitutes "weapons of an offensive character." For example, does this mean weapons that cannot reach China? Though simplistic, even this guideline might do if it reflected some serious thinking about Taiwan. But it doesn't.

Equipment is not the real issue here; it is lack of strategic policy. Good policy backed with a proper mix of defense planning and relevant transfers would enable Taiwan to dissuade China, something surely in US interest. The problem is that the US has not made a real effort to build up both a strategic dialogue and a capabilities assessment that evaluates needs in terms of perceived threat. The mechanisms to do so exist, but are useless without guidance from empowered decision makers. The substantive competence and morale courage to act within the legal framework of US- Taiwan relations has been lost in the fog of our preoccupation with China -- while China continues to build up its military leverage against Taiwan.

Gregg's got it right on a number of accounts, especially his point about what seems to be the lack of a strategic perspective regarding Taiwan. Decisions seem to reflect a tactical expediency. In addition to the Nelson Report, the Associated Press, CNN, Financial Times, BBC, AFP, and Washington Post all covered the release.

China's Possible Responses

How or if the PRC would respond to the announcements remain uncertain. It may only be coincidental that Chris Hill, as reported in the New York Times, just wrapped up three days of inconclusive talks in Pyongyong in a "last ditch effort" to head off North Korean action to restart its nuclear weapons program. Beyond this, John Pomfret of the Washington Post provided some interesting insights today in his blog, Pomfret's China. He highlights the signaling that may be going on, sending a message to China that the continued expansion of China's military capabilities arrayed against Taiwan carries a cost. He also notes that China may be less offended by the omission of the UH-60s and submarines in the series of notifications (the additional fire units were indeed covered in the DSCA announcement). If this indeed is one line of thinking within the administration, it may be faulty. Beijing strongly opposes any arms sales to Taiwan, and the larger and more public a particular package is, the stronger the potential response. The difference between a $6 billion package and an $11 billion may be significant in real terms, but it likely wouldn't make much of a difference to Beijing.

Beijing's track record in responding to major arms sales decisions is difficult to assess. However, responses in the past appear to have included negative proliferation behavior, withdrawal of support for issues that the U.S. has deemed important, as well as imposing penalties on U.S. commercial interests.

Boeing As a Target?

It's fairly well known that U.S. defense companies, such as Lockheed, Raytheon, and Northrop Grumman have been blacklisted, or at least punished, for supporting the U.S. government in providing defense articles and services (see reporting by Wendell Minnick in Defense News from May 2008 on this issue). Much of the lost business has been in the air traffic control arena, which is a relatively minor part of these companies' overall business. However, for Boeing, it's different because its business line is more evenly divided between commercial and defense, and it's a safe bet that Beijing has been putting the squeeze on the Chicago-based company. The PRC has been known to shift business back and forth between France's Airbus and one of America's largest exporters, Boeing, depending on the political winds.

Media reporting indicates that Boeing signed a $6 billion plus agreement in July 2008 for the possible sale of 45 Boeing 777 and 737 aircraft to Air China, the PRC's flagship airline. The deal, with a potential price tag of up to $6.3 billion and one of the largest deals to date that would expand Air China's fleet by 45%, was sealed after the visit of Boeing CEO Jim McNerney (and Yale colleague of President Bush) to Beijing in June. Given the company's labor problems and falling stock value, and penchant for playing hardball with U.S. companies that should be immune from politics, it wouldn't be uncharacteristic of China to take its anger out on Boeing. Just something to watch....

The Road Ahead

With the deck cleared on the Bush administration's April 2001 package (with the exception of subs), the next administration start with a clean slate. A Taipei Times editorial today offered a useful perspective:

The importance of the effort to unfreeze the arms deal cannot be understated as far as US foreign policy is concerned. As a number of analysts have suggested, leaving the problem to next year would have left both a Republican and Democratic president with an unnecessary burden. Starting a term as US president by releasing arms to Taiwan would be far more damaging to US-China ties than releasing them in the dying days of the current presidential term. The release of arms also lets the next president craft a China policy relatively unsullied by the ham-fisted behavior of everyone involved in recent years.

That said, what to do with the remaining two programs -- submarine design and the UH-60 Blackhawks -- on the table? Taiwan is faced with a few options, the first being to wait and see if a second set of notifications could be forthcoming in December or before the end of the Bush administration. Another option could be to initiate planning for the acquisition of these two systems through direct commercial sales channels or industrial cooperation.

Another option, specifically with regards to the submarines, could be to give up. Given the severity of the ROC Navy's Lafayette Syndrome and general distaste for relying on domestic industry, the Navy may indeed forego its 40 year quest for a full 10-12 boat diesel electric submarine fleet if given a choice between a domestic program or no submarines at all.

Regardless, for the programs that have finally been notified, the ROC Ministry of National Defense now will be in a race with the clock to review draft DoD letters of offer and acceptance (LOAs), get them signed, and then allocate funding before the end of the year. However, draft LOAs will have to wait until 30 days pass with no Congressional comment on the notifications.

Taiwan Arms Sales: The Defense Industrial Alternative

With the Bush administration's indefinite deferment of at least seven Congressional notifications for major Foreign Military Sales (FMS) programs, observers and stakeholders are beginning to assess the implications. This week's U.S.-Taiwan Defense Industry Conference provides an initial opportunity for participants to evaluate the way ahead. In Taiwan, media reports have reflected optimism that the notifications could be forwarded soon. Other reports are harsh in their condemnation of the Ma Ying-jeou administration's performance in managing the issue. However, of most interest are initial indications of Taiwan's most likely response to a prolonged, indefinite freeze on major arms sales: a strategic shift away from FMS and toward direct commercial sales (DCS) and indigenous defense research and development (R&D) and production.

The U.S.-Taiwan Defense Industry Conference and the Minister of Defense Visit

First, the upcoming U.S.-Taiwan Defense Industry Conference is scheduled to begin on Monday in Amelia Island, Florida. As the seventh defense industry conference that the U.S.-Taiwan Business Council has sponsored, the arms sales freeze is almost certain to be on minds of most participants. Last year, Deputy Assistant Secretary of State Tom Christensen spoke at the conference and reaffirmed U.S. commitment to Taiwan Relations Act, argued for greater domestic debate regarding security issues, and placed responsibility on Taiwan's people for providing for their own defense:

The Administration's commitment to fulfillment of TRA requirements remains beyond question. The principal issue in Taiwan's defense, however, is not whether Taipei buys a particular weapon system or whether that system comes from domestic factories or from abroad. The principal issue is the substance of Taiwan's overall defensive strategy and the maintenance of core capacities to sustain it. And the decision on that strategy, once again, rests with the Taiwan people themselves.

The first conference in this series was the St. Petersburg, Florida event where former Minister of Defense Tang Yiau-ming gave the keynote address in March of 2002, and met privately with Deputy Secretary of Defense Paul Wolfowitz. Wolfowitz' attendance as a senior official at that first conference reflected the importance the Bush administration placed on its unofficial relations with Taiwan. For the first time in six years, an ROC Minister of Defense -- this time retired ROC Air Force General Chen Chao-min -- is said to be visiting the United States and attending the conference. The minister's travel is a positive sign of the Ma administration's continued confidence in the U.S. commitment to Taiwan's security. However, the Bush administration's response is less than inspiring. Senior officials are said to be stiff arming the minister, barring access to Washington DC to meet with counterparts, and limiting the Bush administration's representation to the level of a deputy assistant secretary. Presumably, the cool reception could be the result of Chinese protests over the minister's visit, which could be viewed as implying an official state-to-state relationship.

Recent Media Reporting on the Freeze

The continued arms sales freeze and the attendance by Minister Chen provides an interesting context for this year's conference. Over the weekend, Taiwan media outlets carried some of the first reactions to continued hold on Congressional notifications for at least seven Foreign Military Sales (FMS) programs.

Taiwan's United Daily News (UDN), normally considered sympathetic to the KMT and the People's First Party, carried a set of articles today that criticized senior officials in the Ma administration for misjudging the freeze. On the other hand, one report lauded the ROC Ministry of National Defense (MND) preparing for a worst case scenario, specifically assessing alternatives to procurement through FMS channels (see following section). In the first case, a UDN editorial blasted President Ma and his national security team for being naive or overly confident that they would be welcomed into Washington DC with open arms after eight years of the DPP. The editorial argues that the new national security team's misjudgment has resulted in an embarrassing setback. Other reporting from Taiwan shows that some officials still believe that the notifications will go through. The Taipei Times also has carried a critical editorial of the KMT's handling of the freeze.

A Strategic Shift toward a Defense Industrial Alternative?

During this week's U.S.-Taiwan Defense Industry conference, an entire session will be dedicated toward defense industrial cooperation. According to the agenda, the session "will assess the impact on Taiwan of defense industry globalization, including opportunities for partnerships with U.S. companies and for domestic production and R&D by Taiwan industry." The session will also "examine the changing views on Industrial Cooperation Programs (offsets), as well as the effects of Taiwan’s experience with private defense procurement company Taiwan Goal."

Coverage of defense industrial cooperation may be well-timed. Advocates in Taiwan for strengthening Taiwan's indigenous defense industry may be posturing to fill the vacuum created by the continuing freeze on major FMS programs. A UDN article published today outlined near term MND contingency plans for shifting a portion of the budgets authorized for the seven programs toward other related programs, mostly involving domestic industry. These include:

• E-2T upgrade (NT $6 billion - US $194 million): To be shifted toward mobile radars;
• PAC-3 (NT $118.5 billion - US $3.8 billion): To be shifted toward acceleration of on-going upgrades to the three existing ground systems and upgrade of existing PAC-2 Guidance Enhanced Missiles (GEM), presumably to GEM+;
• Submarine design (NT $11.7 billion - US $377 million): Still under evaluation;
• Sub-Launched Harpoons (NT $5.9 billion - US $190 million): To be shifted toward an unnamed National Science Council program;
• UH-60 utility helicopters (NT $71.8 billion - US $2.3 billion): To be pursued through Direct Commercial Sales (DCS) channels;
• AH-64D attack helicopters (NT $59.3 billion - US $1.9 billion): To be shifted toward upgrade of existing AH-1W attack helicopters;
• Anti-armor missiles (NT $1 billion - US $32 million): Unclear, since UDN report said the budget would be transfer from Marine procurement of missiles (ostensibly Javelin) to Army procurement;
• F-16C/D (NT $160 billion - US $5.16 billion): To be shifted to upgrade existing F-16A/B fighters.

The reported shifts in budget allocation presumably would need to take place before December 31st, when unallocated funds in this year's defense budget would be returned to the treasury.

Why a Shift Toward Greater Industrial Cooperation May be Inevitable

If prospects for arms sales through FMS channels continue to decline between now and beginning of the new U.S. administration, the ROC may seek to revert back to the model for defense industrial cooperation from the Reagan administration, and seek industrial partners in the U.S. and elsewhere to satisfy ROC defense requirements. Should the Congressional notification issue carry over into the next administration, there's a decent chance that a new administration would make no decision on releasing the notifications until at least May 2009, when the rumored 18-month Joint Defense Capabilities Assessment (JDCA) is said to be scheduled for completion.

One scenario is that an Obama or McCain administration's Asia policy team would want to conduct a Taiwan policy review as a first order of business, including an examination of arms sales policies. With the JDCA not scheduled for completion until May, a new policy team may opt to defer decision until the assessment is completed. It should be noted that since the 1950s, U.S. decisions on security assistance, including those made in 2001, have often depended upon military assessments of ROC military capabilities and future requirements. Unlike these previous assessments, which were managed by the Pacific Command or other agencies that report to the Secretary of Defense, the Institute of Defense Analysis (IDA), a commercial firm and Federally Funded R&D Center (FFRDC), was contracted to conduct the JDCA and render judgments on Taiwan's required capabilities.

As the UDN report above indicates, MND, while preferring procurement through FMS channels, may get tired of waiting for the U.S. side to find the perfect time to render judgments on what it will release and what it won't. As a result, going local, working directly with U.S. industry, may become an increasingly appealing option.

There's a precedent for significant U.S.-Taiwan defense industrial cooperation. In fact, during the 1980s, it was the way business was done. In the wake of the 1979 shift in diplomatic relations and subsequent 1982 Communique, Reagan administration officials encouraged licensed production, cooperative R&D, technical assistance, and sales of sub-systems, sub-assemblies, and components to Taiwan through direct commercial sales (DCS). Because these types of assistance don't require public Congressional notification, the Chinese response to media reports of commercial cooperation was relatively muted. Plus, DCS programs weren't included in the State Department's accounting exercise that could demonstrate a decrease in the total value of arms sales.

There may be other reasons, beyond the arms sales freeze, to increase reliance on an indigenous defense industry. As in the United States, Japan, the European Union, and almost every other developed economy, popular sentiment drives development of a viable defense industrial base as a means to create jobs, income at the local level, and R&D into dual use technologies that could be spun off to the commercial sector. The hollowing out of Taiwan's manufacturing base, a more assertive Legislative Yuan, and the need to diversify the U.S.-Taiwan economic relationship may provide additional rationales.

The Reagan Model: An Inconvenient Necessity

During the 10 years following the signing of the 1982 Communique, the United States executed much of its legal obligations under the Taiwan Relations Act through licensed production, co-development, and hybrid FMS/DCS arrangements that minimized the U.S. government footprint. Congressional notifications under section 36(b) of the Arms Export Control Act (AECA) traditionally have been the trigger for whatever punishment Beijing dishes out. Industrial partnerships, with the licensed consent of the U.S. government, succeeded in shoring up Taiwan's fragile defense position after the break in formal diplomatic relations with the Republic of China (ROC) in 1979 and signing of the 1982 Communique on arms sales. Before 1992, few if any FMS programs notified to Congress had a value that exceeded U.S. $500 million.

Taiwan’s defense industry has its roots in the 1969, when the Nixon Doctrine portended an eventual withdrawal of the United States from Taiwan. In that year, the Chungshan Institute of Science and Technology (CSIST), AIDC, and other defense industrial establishments were formed. Some of the first joint programs included co-production of 108 UH-1 utility helicopters and 308 F-5E fighters. In 1979, the commitment to indigenous production was strengthened after the formal break in diplomatic relations and the signing of the 1982 Communiqué. Following are the major programs from the 1980s:

Tienkung (TK) Surface to Air Missile. President Chiang Ching-kuo authorized the initiation of R&D into the TK surface to air missile system a year or two after the break in diplomatic relations in 1979, the retiring of the ROC's Nike/Hercules air defense systems, and failing to secure release of the the U.S. PATRIOT air defense system. With CSIST serving as the lead systems integrator, initial testing began in July 1985. Although not confirmed, one estimate is that approved technology assistance from the United States accounted for 85% of the program. The system’s Changbai radar is believed to be a derivative of the SPY-1 radar system used on AEGIS destroyers. {UPDATE, 10/01/08: One senior engineer who worked on the TK program in the early 1980s claims the the TK missile was almost entirely indigenous. Some of the materials, such as aluminum powder, did have to be imported. U.S. industry, however, provided licensed assistance on the radar, including sales of components}

Indigenous Defense Fighter (IDF). Chiang Ching-kuo is said to have authorized design work in August 1980, shortly after the break in diplomatic relations Failing to secure a new generation fighter (Northrop’s F-20 Tigershark) to replace Taiwan’s aging F-104 fighters and assured of U.S. industrial support, a decision was made in 1982 to proceed with an indigenous alternative. With AIDC, supported by CSIST, serving as lead systems integrator, General Dynamics (GD) played a key role in the design and systems integration. Housing for an estimated 200 GD and other U.S. contractors was built near CCK airport and AIDC in Taichung. In addition to GD (now Lockheed Aero), Hughes, Smiths Industries, Westinghouse, Allied Signal/Garrett (now Honeywell), and Litton all supported the program through supply and integration of sub-systems. With design reviews starting in 1985, roll-out of the first prototype took place in 1988 and it made its maiden flight in May 1989.

During the licensing review process, the Reagan administration, concerned about the aircraft’s potential to strike targets in China, placed provisos on export licenses that restricted the performance of the fighter’s engine and radar/avionics. With an estimated unit cost of U.S. $24 million, the fighter began coming off the production line in 1994 and began operations with the ROC Air Force in 1997. AIDC manufactured 130 of the fighters (250 were originally ordered, and the program was cut back to 130 in 1991).

The program also included development of an air-to-air missile, the Tienchien 1 and 2 (TC-1/TC-2), which incorporated sub-systems sold by Motorola and other U.S. companies. The TC-2 incorporates an active seeker that some believe had been considered but lost in a completion for the AMRAAM program.

S-70C(M). Although details are unavailable at the current time, Sikorsky and AIDC are said to have coproduced the S-70C, a civilian version of the UH-60 BLACHAWK utility helicopter. Initial deliveries took place in 1992. AIDC has been producing the S-70 cockpit/nose assembly under license.

PFG-2 Frigates. Initial concept for the PFG-2, reportedly a 10 year program for design and production of eight frigates at a cost of US $5 billion, began in the mid-1980s. Gibbs and Cox worked to develop a modified design of the FFG-7 that incorporated a CSIST-developed combat system (developed in partnership with Honeywell). Gibbs and Cox also assisted in the design of a modified version of the PFG-2, the Advanced Combat System, which incorporated an AEGIS-derived SPY-1F combat systems and radar. Bath Iron Works assisted with the hull work. Fowler International Group provided program management support to the ROC Navy under FMS contract with the U.S. Navy.

The 1990s Shift from DCS to FMS

Having sufficed as a matter of necessity, things changed toward the end of the first Bush senior administration in 1991/1992. The Chinese Communist Party's violent crackdown on students in Beijing in 1989, the fall of the Soviet Union in 1991, and subsequently sales of Russian weapons systems to the China all contributed to a long needed adjustment to U.S. arms sales policy. The relative strategic shift toward FMS -- or perhaps better described as a spike -- began in 1992 with the release of F-16A/Bs ($5.8 billion notified), PATRIOT air defenses ($1.3 billion notified), C-130H transports ($62o million notified), and E-2T airborne early warning aircraft ($700 million notified).

From 1992 until today, Taiwan has relied on FMS as a portion of its overall defense procurement perhaps more than any country, with the possible exception of Saudi Arabia. There have been a number of obstacles to increased reliance on a domestic defense industry. First is political, bureaucratic, and commercial inertia. Because in 2001 the door was opened wider than at any time since 1979, there’s been little impetus to change. For U.S. defense industry, sales to the DoD to support FMS programs offer a tried and true route, with a set margin, and U.S. government buffer.

Another impediment has been the lack of a professional acquisition corps. Management of large public projects, such as weapons acquisition - either domestic or foreign -- is complex. The uniformed military focuses on warfighting, and planning, programming, and budgeting or acquisition-related assignments tend to be temporary "touch and go's." Countries such as the U.S., Japan, Australia, UK, France, etc, tend to rely on a cadre of civil servants.

There’s also risk averse culture in Taiwan's defense establishment, especially in the wake of the Lafayette frigate scandal in 1993. High cost programs managed by the U.S. government, including selection of the prime contractor, relieves the military of having to take responsibility for the decision. No one wants to open themselves up to charges of corruption. Fact is, however, potential exists for corruption regardless of whether a program is FMS or otherwise since US federal acquisition regulations include Taiwan among a select group of customers in which “contingency fees” for FMS programs are an allowable expense. Despite these obstacles, reformers in the legislature and MND did begin to evaluate means to hedge against a sudden reversal of U.S. arms sales as early as 1999. The end result was enactment of the National Defense Law in 2003 and inclusion of a section (Article 22) that called for prioritization of indigenous R&D and production.

The Defense Industrial Cooperation Alternative?

So what happens if the hold on submarines, PAC-3, Apaches, UH-60s, and other programs continues indefinitely? Assuming Taiwan's defense authorities remain resolved to procure these capabilities, then the obvious answer is to seek other channels.

Submarines. Indigenous R&D and production of diesel electric submarines may be the logical starting point. The United States has no requirement for the manufacturing of conventional military submarines, although a few commercial entities, such as U.S. Submarines, do design, produce, and sell diesel electric submarines for commercial use in the United States and to a range of customers overseas. There has long been a strong faction in Taiwan that favors domestic build over procurement via FMS channels. In fact, media reporting indicates that the Bush administration's commitment to assist Taiwan in its acquisition of submarines based upon an expectation that the program be carried out via DCS channels. China Shipbuilding Corporation (CSBC) had been expecting to serve as prime contractor until the program was shifted to FMS shortly after the April 2001 announcement. Interruptions of plans resulted in a downsizing of CSBC.

The issue has been a subject of long and heated debate. Critics argue that Taiwan's shipbuilding industry is incapable of developing and manufacturing a submarine. Advocates counter by highlighting the fact that a number of less developed industries such as Yugoslavia, as well as commercial entites and universities around the world, have successfully fielded viable submarine platforms for both military and civilian purposes. In May 2008, CSBC was rumored to have sent a letter to President Ma advocating a shift toward domestic program and Taiwan's National Security Council and Ministry of Economic Affairs held a series of conferences on the issue over the next three months.

Critics also highlight written DoD policy that forbids Taiwan's domestic industry from manufacturing submarines. However, that policy was premised on the assumption that the program would be carried out via FMS channels, in which the U.S. Navy assumes liability and responsibilities for a seaworthy design and safe construction. A program carried out via DCS channels, or perhaps an FMS-managed, DCS-executed, in which the U.S. Navy is absolved of liability and responsbility, is an entirely different matter. In 2006, Taiwan's legislature earmarked funding for a domestic design feasibility study that hedged for the possibility of a shift toward domestic production.

Presumably, a shift toward a domestic program would be of interest to those in the Bush administration wanting to avoid problems with China, and to elements in the U.S. Navy wanting to keep conventional submarine assembly out of U.S. shipyards. While some may argue against such an approach based on export control concerns, a viable technology safeguard program would provide the basis for approving licenses.

PAC-3. Should the sale of PAC-3 missiles and new ground systems continue to be held in abeyance, the obvious alternative is Taiwan's own Tienkung program. CSIST has had a program to upgrade its TK system and fielding an upgraded interceptor. The motor and seeker likely would not be on a par with the PAC-3 missile. However, if it's the best that can be done, then that's the likely solution. However, local assembly of the PAC-3 missile as well as U.S. industrial assistance in upgrading the Changbai radar could be a viable alternative. In addition, similar to the case of the TC-2 air-to-air missile in which Motorola was authorized to transfer to Taiwan its version of the AMRAAM seeker that lost in the DoD competitive acquisition, transfer to Taiwan of the design that lost to the current PAC-3 interceptor could be another route. Again, export control considerations would need to be taken into account and technology safeguard plan developed.

Apache and UH-60. No commercial variant of the Apache exists, although licensed production could be an option. A precedent may exist in given South Korea's July 2008 decision to accept an offer for licensed production. The alternative, of course, is the AH-1Z, a variant of which the ROC Army already has in its inventory. With regards to the UH-60, the obvious solution is a shift toward its commercialized counterpart, the S-70, which the ROC Navy and Air Force already have in its inventory.

F-16s. Alth0ugh not part of the Congressional notification package being held up, the Bush administration has refused to accept an MND letter of request for price and availability data for follow-on buy 66 F-16s. For Taiwan, assuming there's still a requirement for a new fighter, the obvious solution to is to seek other sources. An upgraded variant of the IDF may be one candidate. Given concerns in some quarters about the survivability of Taiwan airfields and runways, a STOL/VSTOL capability could be worthy of consideration. AIDC had studied the feasibility of a STOL/VSTOL variant of the IDF in the late 1990s. Such an effort would require a major redesign of the IDF. However, given the obstacles in procuring additional fighters from the U.S., investment in a redesigned IDF may be a necessity should the ROC Air Force desire additional fighter aircraft. Hopes of acquiring the VSTOL variant of the Joint Strike Fighter, when it's available for the international market in the outyears, may be misplaced given the reluctance to release the less capable F-16C/D.

In sum, a prolonged delay in forwarding Congressional notifications may provide an impetus for Taiwan to re-examine its procurement strategy. The natural course would be a strategic shift toward indigenous R&D and production, with a much diminished reliance on acquisition through FMS channels. Recent media reports provide initial indications that some thought has been given to the issue. The Reagan administration's encouragement of U.S. industrial assistance may provide a model for future efforts to ensure compliance with legal requirements under the Taiwan Relations Act.

Taiwan Arms Sales: Naval War College Study Argues for Major Cut Back

A Naval War College study, perhaps the most meticulous condemnation of U.S. arms sales to Taiwan in history, provides an interesting context for a potentially dramatic decline in U.S. security assistance to a long time friend, non-NATO ally, and struggling democracy. The study (click here for link), entitled "Revisiting Taiwan's Defense Strategy," is authored by a recently retired U.S. Navy officer, William S. Murray, and published in the Summer 2008 edition of the Naval War College Review.

At a minimum, the study offers a well-developed starting point for a more detailed debate over Taiwan's legitimate defense requirements. However, the study's political conclusions, related to the 1982 Shanghai Communique and the Taiwan Relations Act, dilute its value as a sound yet debatable argument in favor of a ground-centric strategy.

The Naval War College (NWC) study develops a sophisticated set of tactical and operational arguments to justify its end conclusion: the United States should cap, reduce, and ultimately terminate arms sales to Taiwan. If the study were a simple academic treatise on Taiwan's defense, similar to those RAND, American Enterprise Institute (AEI), Center for Strategic and International Studies (CSIS), or other think tanks produce, then that's one thing. But this study is not just academic. On the surface, it appears to be a rational military judgment, presumably informed by modeling, which advocates Taiwan's adoption of a "Porcupine Strategy."

Many of the study's arguments, with some exceptions, appear compelling when viewed from an exclusive American military perspective. This by itself is one counter-argument: Taiwan's conceptual approach to defense differs markedly from the United States. But more important is that underneath the surface and from a broad political perspective, the NWC study strengthens the hand of authorities in Beijing, pro-unification elements within Taiwan, and American academics and policymakers who view Taiwan arms sales as an impediment to closer U.S.-China relations. Whether or not this was the study's intent is unclear. Nevertheless, the effects are the same.

The study's conclusions have become a clarion call for key figures in both Washington D.C. and Taipei. The study's army-centric arguments may appeal to some at the operational level, while others, who view Taiwan arms sales as a problem, may find its political implications appealing.

According to senior level civilian and military sources in Taiwan, a group of Washington DC-based academics urged President Ma Ying-jeou to carefully review the study during a visit to Taipei in July 2008, shortly after the study was published. This assertion was confirmed when a recent visit to Taiwan by a U.S.-China Economic Security Commission delegation met with President Ma. Since then, the senior KMT leadership has directed that the study become required reading for senior military officers. In doing so, the KMT administration has created discontent within some military ranks that not only mock the study's conclusions, but also resent perceived undue civilian interference in military affairs. Furthermore, it appears that the study may have inspired some of Taiwan's strongest advocates of unification with China. CV Chen (Chen Chang-wen), a Harvard educated lawyer and close confidente of President Ma, authored a prominent editorial in the China Times on September 15, 2008 that called for support for the Bush administration's hold on Congressional notifications, citing similar operational shortcomings of major systems that are referenced in the Naval War College study.

The ROC Army, of course, has a right to be happy since it is almost in 100% lockstep with long-standing Army views that the Air Force and Navy are support elements and not really needed. These kinds of debates, the result of organizational competition within a resource constrained environment, are common throughout defense establishments around the world. In addition, at the political level, the potential reversion back to traditional KMT favoritism of the Army is worthy of note.

Who would have thought that an ostensibly innocent study, authored by an operationally competent retired field grade officer with little Taiwan-related experience, could have created such a storm?

Here's the study in a nutshell:

The proper starting point can be found in the study's conclusion. Arms sales should be reduced significantly and US should adhere, by inference due to its omission of important preconditions that Beijing rejects, to the Chinese interpretation of 1982 Communique. In other words, the so-called "strategy" is singular in purpose - reduce and ultimately terminate US arms sales and let Taiwan fend for itself. With the political end in mind, the study pieces together an argument to support a reduction and possible eventual termination of arms sales.

The centerpiece is an argument that establishes the ineffectiveness of Navy and Air Force systems in light of what the study portrays as relatively new PLA capabilities. The Bush administration approved a major package of arms sales in 2001, but ostensibly did so before these new PLA capabilities came about. Therefore, the change in strategic situation warrants a relook at the package and its cancellation.

The study asserts that only valid high cost procurement is the Boeing AH-64D APACHE, because it's an army system. The study posits that diesel submarines are not only "offensive" and "destabilizing" for Taiwan (or any navy for that matter, except China), but also ineffective in countering other submarines. The study neglects to mention that a submarines could be effective tools of anti-submarine warfare (ASW) if part of a broader ASW architecture that includes an integrated undersea surveillance system for strategic cueing, airborne maritime surveillance, and associated communications and ASW operations centers.

The rest of the study's anti-Air Force and anti-Navy argument is built around the ballistic missile threat. China's growing arsenal of increasingly accurate and lethal conventional ballistic missiles are said to negate the operational utility of expensive F-16s, P-3s, PAC-3, and P-3s and frigates and destroyers, and even submarines. Only mobile Army assets that could resist an invasion on Taiwan are appropriate in light of the changed security environment.

Main problem with the study's operational arguments is that they ignore a whole range of coercive scenarios far short of a full scale amphibious invasion, supported by large scale ballistic missile raids that would prepare the battlefield and suppress air defenses and naval forces in port. The study gives only passing reference to coercive theory. Based upon the assumption that a full scale amphibious invasion is the only scenario for PRC use of force, the NWC study argues Navy and Air Force assets are no longer necessary because they are no longer effective. Also implied is that there is no longer a need for an Air Force and Navy that are independent of the Army.

The Taiwan Relations Act requires that the United States provide necessary defense articles and services. By extension, provision of unnecessary defense articles and services, as the study defines them, would be a violation of the Taiwan Relations Act. The net effect is that opponents of arms sales could draw from the study to counter criticism that a strict adherence to the 1982 Communique counters the Taiwan Relations Act. Beijing's goal is to resolve the Taiwan issue once and for all. Arms sales have been the main obstacle. This is not necessarily due to their operational value, but because they represent continued U.S. acknowledgement of Taiwan's unresolved international status and de facto independence.

Getting the U.S. to move toward its interpretation of the 1982 Communique framework, which appears to have been a success in light of the freeze on notifications, is Beijing's goal. And the NWC study certainly has given those who support Beijing's position the ammunition they believe is needed.

Taiwan Arms Sales: Congressional Notifications Remain Frozen

As the scheduled final day of this Congressional session, Friday has come and gone with no movement on Congressional notifications, as required by Section 36(b) of the Arms Export Control Act (AECA), for at least seven major Taiwan arms sales programs.

There was a glimmer of hope on Thursday, when a routine meeting of senior-level officials from the Department of State, National Security Council staff, and Department of Defense included the issue of notifications on the agenda (see CRS Report on notification process).

Hearsay was that there may have been a push to release a select few, perhaps lower dollar figure systems such as munitions. However, a last minute call by a senior Bush administration official scuttled the whole deal, presumably due to anticipated Chinese reaction.

Turns out, however, that the Congressional session has been extended at least through the weekend and perhaps into the early part of next week to address the financial-related legislation. In accordance with the AECA, the 36(b) notifications need to be sent over to Congress while it is officially in session.

Taiwan Arms Sales: Congressional Notification Issue Heats Up

Taipei Times reported today that chances appear slim that Congressional notifications will go forward this session. In response, Congress has sent two shots across the bow. The first is yesterday's passage of House Resolution (HR) 6646, which requires "the Secretary of State, in consultation with the Secretary of Defense, to provide detailed briefings to Congress on any recent discussions conducted between United States Government and the Government of Taiwan and any potential transfer of defense articles or defense services to the Government of Taiwan."

Hitting a nerve, the Bush administration didn't respond kindly. The Department of Justice already responded that the "bill would infringe upon the President's constitutional authority to conduct foreign diplomacy and to supervise and determine the timing and extent of the disclosure of diplomatic and national security information outside of the Executive branch."

In addition, Rep Tom Tancredo has prepared a bill that would require "in accordance with section 3(a)6 of the Taiwan Relations Act, the defense articles and defense services described in subsection (b) shall be transferred on a sales basis to Taiwan as soon as practicable after the date of the enactment of this Act. The proposed bill notes that "the unfulfilled elements of the request made by Taiwan and approved by President George W. Bush in 2001 that includes diesel electric submarines or relevant designs, Mark-48 ASW torpedoes, Harpoon submarine-launched anti-ship cruise missiles, PAC–3 missile defense systems, Paladin self-propelled howitzers, Apache helicopters, and mine-sweeping helicopters." It also highlights "66 F–16 C/D fighter planes that were requested by the Government of Taiwan in August 14 2007."

It further states that "the requirement to transfer defense articles and defense services under subsection (a) shall be carried out notwithstanding the provisions for congressional notification and approval of a proposed sale of defense articles or defense services in section 36(b) of the Arms Export 21 Control Act (22 U.S.C. 2776(b))."

Both probably aren't expected to go far, especially since Congress goes into recess tomorrow. However, it certainly sets the stage for a major battle when Congress reconvenes. However, there is reason to believe that the Bush administration should come out tomorrow with some annoucement.

There's sufficient reason to suspect that the hold on Congressional notifications is more than just a tactical expediency. Based on an interpretation of statements dating back the last couple of years, the delay, or freeze, whichever term one prefers, could represent a strategic shift toward Beijing's interpretation of the 1982 Shanghai Communique. This would be based on the Bush administration's belief that the security situation in the Taiwan Strait has changed in a fundamental way since May 2008. Or that a fundamental change could be imminent, and they want to buy some time to give Beijing a chance. In other words, they may be willing to take some hits now and then hope that Beijing responds by standing down a conventional Second Artillery brigade opposite Taiwan. This is all just based on a reading of the tea leaves.

Beijing almost certainly has been pressing the Bush administration to abide by its perceived commitment to the 1982 Communique. It has since signing of the communique. But with as much as US $11 billion in arms sales appearing to be imminent, Beijing authorities likely would be pressing its case harder than ever, together with credible threats. In the 1982 Communique, the United States stated that its arms sales to Taiwan would not qualitatively or quantitatively the level of those supplied in years preceding the establishment of diplomatic relations between the United States and China. Then, there's a stated intent to reduce gradually U.S. sales of arms to Taiwan, leading over a period of time to a final resolution.

If there has been a strategic shift -- a Presidential-level determination that there has been a fundamental shift in the security situation in the Taiwan Strait since May 2008 -- then it follows that there would be a reconsideration of the decisions that were made in the beginning of the Bush administration. It also follows that the Bush administration would deny there's a freeze on arms sales to Taiwan. Arms sales would continue, but at a much reduced level, in accordance with the 1982 Communique. As in 1982 and as stated in the Communique, there could be a renewed view that "the new situation which has emerged with regard to the Taiwan question also provides favorable conditions for the settlement of United States-China differences over the question of United States arms sales to Taiwan."

However, U.S. law under the Taiwan Relations Act (TRA) would remain the sticking point. The TRA requires that the United States provide Taiwan with necessary defense articles and services for sufficient self defense. In the 1982 Communique, U.S. agreement to limit and reduce its arms sales to Taiwan was premised on the assumption that Beijing would be commited to a peaceful approach in resolving its differences with Taiwan. However, the metric to assess whether or not Beijing's approach is peaceful is ambiguous. The only valid basis for providing Taiwan with necessary defense articles and services would be military judgments regarding Beijing's military posture opposite Taiwan (e.g., the annual DoD report to Congress on PRC Military Power). Theoretically, if Beijing's military capabilities increase, so should U.S. arms sales and other forms of assistance. If capabilities decrease, then so should arms sales and other forms of assistance. Beijing doesn't accept this interpretation. It doesn't like the annual DoD report to Congress either.

So the question that should guide decisions on arms sales is whether or not Beijing has sufficiently reduced its military capabilities that could be employed against Taiwan. There's been no indication that they have at all. The last DoD report to Congress certainly did give any indication that PRC military capabilities that could be directed against Taiwan are going down. The opposite is true. But if there's been some change, the Bush administration should give tangible evidence. Without any evidence of a diminished military posture -- a substantial reduction in military capabilities -- opposite Taiwan, any Bush administration conclusion that there's been a fundamental shift in the security situation is tenuous at best.

Taiwan Arms Sales: The Beginning of the End?

Two of Taiwan's English-language newspapers, Taiwan News and Taipei Times, reported today on issue of arms sales to Taiwan. Both offered reason to suspect that President Bush may have decided to reverse previous policy decisions and now deny as many as seven weapon systems to Taiwan. Rumor in Foggy Bottom is that President Bush may indeed have made a decision this week. The nature of that decision has not been made public yet, but these initial press reports offer a clue - things don't look good. We should know for sure next week. Three general scenarios are: 1) none of the seven weapon systems move forward; 2) all of the seven weapon systems go forward; or 3) a selected three or four go forward.


The specific systems that have been awaiting notification to Congress since Spring 2008 include:

• Design, and possible construction, of as many as eight diesel electric submarines


• Four PATRIOT PAC-3 fire units and as many as 384 PAC-3 missiles


• Thirty (30) AH-64D APACHE attack helicopters


• Sixty (60) UH-60 BLACKHAWK utility helicopters


• Submarine-launched HARPOON anti-ship missiles


• JAVELIN anti-tank guided missiles


• E-2T HAWKEYE upgrades


• F-16 A/B MLU spare parts package

Taiwan also submitted a letter of request (LOR) for a follow-on buy of 66 F-16 C/D fighters in Spring 2006, which the Bush administration, allegedly President Bush himself, refused to acknowledge. This case is different than the seven listed above, which have all been previously approved and blessed. However, there has been no consideration of Taiwan's requests for the F-16 C/Ds, and thus no commitment.

A Bush administration reversal on any single one of the seven systems could be viewed as bad policy. But a failure to forward the complete package of seven systems would be hard to fathom and would mark a major shift in U.S. policy toward Taiwan. Why would the Bush administration, which started off so committed to defending Taiwan's nascent democracy, make such a radical departure, not only from long-standing bipartisan policy but also from policy decisions made during its first term from 2001 to 2004?

The Anti-Taiwan Shift

While U.S. policy has been remarkedly consistent over the years, the Bush administration's attitude toward does appear to have shifted over the last four years. Much of this shift has been said to have been driven by the President's own dislike for President Chen Shui-bian. However, even with the change in administrations in Taiwan, there doesn't appear to have been a warming of relations. At least four explanations could be offered.

Shift in Factional Influence. The Bush administration began with a China/Taiwan strategy that had been formulated by a united coalition of Republican Party factions during the transition. One could debate the wisdom of that strategy, but there was a strategy. The strategy reflected the views of two of the three China factions within the Republican Party -- the moderates best represented by Richard Armitage, Torkel Patterson, Jim Kelly; and the hawks and so-called neoconservatives represented by Vice President Cheney, Secretary Rumsfeld, and Paul Wolfowitz (on China/Taiwan issues, Wolfowitz is perhaps best categorized as a moderate). In general, the theory was that Taiwan's democratic transition deserved to be rewarded, that China's increasingly ambitious military modernization programmed aimed against Taiwan needed to be countered decisively, that the U.S. would equip Taiwan with much needed military equipment; and that the U.S. would accelerate and strengthen its capacity to respond to contingencies and work with Taiwan as an ad hoc coalition partner.

The third faction -- the softliners represented by Condoleezza Rice and outside advisors such as Henry Kissinger, Alexander Haig, Brent Scowcroft, and Doug Paal -- held little sway in the formulation the new Bush administration's China/Taiwan strategy. As a general rule, they hold the view that China is a strategic partner that is needed to counter some of the world's most complex problems. Taiwan is an irritant and problem that needs to be managed. As the moderates left the scene between 2002 and 2004, implementation of policy became more complex with the remaining two factions -- the hawks/neoconservatives and the softliners -- battling for control over the policy agenda. Eventually, by 2005-2006, the soft liners were in control, who then began a rollback of the original strategies and policies and a containment of Taiwan.

Bureaucratic Propensity at State/NSC. A constant, enduring predisposition within the State and NSC bureaucracies is to avoid allowing Taiwan to become an irritant in U.S. relations with China. Without assertive leadership at the top, and guided by an instinctual desire to avoid pain and discomfort, State/NSC tend to be passive in dealings with Taiwan. China inflicts pain and discomfort on State and NSC, and as long as that pain level is greater than what pro-Taiwan elements can inflict, China gains the upper hand. State/NSC tends to react to initiatives and requests from DoD, Congress, or Taiwan. However, if no initiatives or pressure originates from DoD, Congress, or Taiwan, things generally don't get done.

No More Troublemakers in Taiwan. Related to bureaucratic propensities, the KMT, which has committed to not making trouble, is now in charge. As a result, there is no need to worry about Ma and his government stirring up the pro-Taiwan activists, lobbyists, and friends in Congress. In effect, it means that troublemakers stand up for their own interests and are generally listened to and respected, albeit grudingly. China certainly is a troublemaker. But the Ma administration has been weak, at best, in pressing for these notifications to go through.

A Passive DoD. DoD, and OSD in particular, appears to have become increasingly passive and distracted in minding China/Taiwan defense policy. The departure of the hawks, neocons, and experienced China/Taiwan hands over the last four years has created a vacuum in the interagency process. With no more troublemakers in Taiwan and no push from OSD, there's little if any reason for State or NSC to fear the blowback from an indefinite freeze on arms sales to Taiwan. For Congress to be effective and assertive, key staffers need to be aware that there's a problem and most input comes from Taiwan or from DoD. Initiatives associated with defense and arms sales generally come from DoD, specifically the Office of the Secretary of Defense (OSD). OSD sometimes has been characterized as the guardians and enforcers of the Taiwan Relations Act, and since the 1970s/80s, its responsibilities sometimes have lapsed.

U.S. Arms Sales to Taiwan: The Bedrock of a Unique Relationship

Because they are viewed as the symbol of America's sustained support for Taiwan in the aftermath of the switch in diplomatic relations in 1979, arms sales to Taiwan have long been controversial. After a 25-year alliance relationship and two years of negotiation, President Jimmy Carter authorized the formal derecognition of the Republic of China (ROC) and the diplomatic recognition of the People's Republic of China (PRC). The 1979 Communique was the formal policy agreement that announced the arrangement, including the abrogation of the U.S.-ROC Mutual Defense Treaty. As noted in media reports at the time, it was assumed that U.S. commitment to Taiwan's defense, including arms sales, would continue. Carter is said to have noted in his private diaries, "U.S. agreement to drop diplomatic recognition of Taiwan for China was conditional on Beijing's acceptance that the U.S. would continue to offer defense to its long-time ally in Taipei."

The framework for continuing arms sales was the Taiwan Relations Act. Under the law, the United States will "make available to Taiwan such defense articles and defense services in such quantity as may be necessary to enable Taiwan to maintain a sufficient self-defense capability."

The 1982 Communique was intended to put the U.S.-China relationship on a stable footing. The wording and interpretation was intended to balance the requirements of the Taiwan Relations Act with the need to maintain stable relations with the People's Republic of China (PRC). The key wording is:

Having in mind the foregoing statements of both sides, the United States Government states that it does not seek to carry out a long-term policy of arms sales to Taiwan, that its arms sales to Taiwan will not exceed, either in qualitative or in quantitative terms, the level of those supplied in recent years since the establishment of diplomatic relations between the United States and China, and that it intends gradually to reduce its sale of arms to Taiwan, leading, over a period of time, to a final resolution.

It's important to note that the U.S. agreement to reduce arms sales was contingent upon Beijing's commitment to a peaceful approach to resolving its differences with Taiwan. As noted in State Department testimony before the Senate Foreign Relations Committee in August 1982, the metric for a peaceful approach is the nature of China's military posture opposite Taiwan. If the military threat to Taiwan is reduced, then there would be less need for arms sales. On the other hand, should the threat increase, then the level of arms sales would go up. Because of this linkage and contrary to complaints from Beijing, there has been no "violation" of the 1982 Communique. And as long as Beijing continues to deploy increasingly sophisticated military capabilities opposite Taiwan, release of the seven systems in question would be consistent with the spirit and letter of the 1982 Communique. On the other hand, should Beijing reduce its posture opposite Taiwan in a meaningful, sustained, and certifiable manner, then there may be grounds for freezing a portion or all of the programs awaiting notification.

The Arms Sales Process

The process for arms sales can be confusing. In the aftermath of the 1982 Communique, Taiwan requested that its requests for weapon systems be given due consideration. The normal process begins with a written letter of request (LOR) for price and availability (P&A) data. Under normal circumstances, the requesting party is granted an answer within a couple of months. The release of P&A, specifically pricing data, implies a policy decision to release the system. However, in Taiwan's case, the 1982 Communique resulted in a fear that the military's requests would be ignored. Taiwan representatives pressed for a unique process in which the island's requests would be bundled and presented in person each year in meetings with U.S. policy officials. After three months, a delegation would return to receive the formal responses. However, the Bush administration, arguing that there was no longer need for this system, as evidenced by the release of the largest arms sales package in history. From that point on, Taiwan would become a normal security assistance partner and submit LORs as other defense establishments do.

With P&A data in hand and confident of U.S. willingness to release the system, Taiwan's defense establishment can proceed with its planning, programming, and budgeting process and seek legislative authorization of funding. Once that legislative approval is granted, Taiwan's defense establishment can proceed with an LOR for a letter of offer and acceptance (LOA), in effect a government-to-government contract for buying a weapon system. Before signing the LOA, however, DoD, through the State Department, must first send a formal notification to Congress in accordance with Section 36(b) of the Arms Export Control Act (AECA). Although there are other procedures, the most important requirement is to submit the notification while Congress is in session and wait 30 days to give Congress time to raise objections. If no objections, the LOA can be signed and the program started.

Several of these notifications that have been held up, such as JAVELINs, HARPOONs, F-16 spare parts, and E-2T, represent follow-on procurements or upgraded capabilities to what Taiwan currently has in its inventory. The KMT under President Lee Teng-hui generated initial requests for submarines and PAC-3 in the 1990s, specifically 1994 for submarines and 1998 for PAC-3. Following detailed military assessments of Taiwan's requirements, the Bush administration announced the release of these systems in April 2001. The Bush administration deferred a request for APACHE attack helicopters in 2001, but approved release in 2002. Taiwan has had a civilian variant of the UH-60 utility helicopter -- the S-70C -- since the 1980s. Submarine and PAC-3 procurement was bogged down in Taiwan domestic political wrangling, and finally resolved in 2007. Frustrated over a perceived lack of commitment on Taiwan's part, Bush administration officials repeatedly criticized Taiwan for not following through on procuring the systems approved in 2001.

So when Taiwan's domestic polity reached a consensus to move forward, the Legislative Yuan appropriated funding for procurement of these seven items in Fall 2007. With funding approved, Taiwan's Ministry of National Defense submitted its LORs for LOAs for the seven systems in early 2008. In accordance with regulations and legal procedures outlined in the Arms Export Control Act, DoD Army, Navy, and Air Force program managers sent draft notifications to the State Department to forward to Congress.

However, the routine bureaucratic process hit a snag in Spring 2008. As the notifications piled up, the bundled package likely was brought to the attention of the seniormost levels of the State Department. In turn, the package likely was taken to President Bush for a decision. He reportedly said no. While it's uncertain, possible reasons could have included a desire to give the new KMT administration time to review the proposed procurements, a desire to contribute to a conducive atmosphere that could lead to a breakthrough in cross-Strait relations, and perhaps to not spoil the atmosphere leading up the the Beijing Olympic games.

U.S.-Taiwan Business Council's Rupert Hammond Chambers first highlighted the problem in an editorial in the Congressional newspaper The Hill on June 5, 2008. Defense News Asia Bureau Chief Wendell Minnick broke the freeze story to a wider audience on June 9, 2008. Glenn Kessler from the Washington Post followed up with added assertions that Secretary of State Condoleezza Rice and Deputy Secretary John Negroponte had recommended to President Bush to hold the notifications. There also were reports that President Ma Ying-jeou's KMT administration had requested that the notifications be delayed until sensitive cross-Strait negotiations related to direct flights and tourism wrapped up on July 4th. On June 25, responding to inquiries stemming from the media reports, Assistant Secretary of Defense James Shinn told a congressional hearing that the Taiwan arms freeze “was driven, as far as I understand, by Taiwanese domestic politics.” Commander, U.S. Pacific Command Admiral Timothy Keating, presumably speaking on the fly during a Heritage Foundation event, confirmed the freeze, saying that "there is no pressing and compelling need for at this moment arms sales to Taiwan.”

Yet, State Department and National Security Council representatives have been vociferous in their denials. They have to deny the freeze, of course. Failure to provide Taiwan with necessary defense articles and services would counter U.S. legal statutes under the Taiwan Relations Act. For example, a State Department spokesman said "there is no change in U.S. government policy" and that "the administration faithfully implement the Taiwan Relations Act." During a July 28 press conference, NSC's Dennis Wilder said:

"There is no change in American policy toward Taiwan, toward arms sales to Taiwan. This term 'freeze,' I'm not sure where it came from, but it is not a term we have ever used in the administration. We have a commitment under the Taiwan Relations Act to help Taiwan with its own defense. We continue to live up to that commitment. There are many engagements between the United States military and Taiwan military. Those are ongoing. Nothing has been frozen in this relationship."

Semantic debates over the definition of a "freeze" aside, observers expected the notifications to go forward after the Olympics and after Congress came back in session after Labor Day. Former Deputy Secretary of Defense Paul Wolfowitz, presumably armed with reassurances from senior Bush administration officials that the package would go forward, went on record in a media event to say that "President Bush treats commitments as commitments," and that the notifications would go forward. If true that he had been assured by a senior Bush administration official before making those public remarks, it most likely wasn't the President himself.

But Wolfowitz wouldn't be the only one with egg on his face if President Bush doesn't live up to his commitments. Jason Yuan, Taiwan's new defacto ambassador to the United States, ridiculed the notion of an arms freeze, thereby ingratiated himself to senior Bush administration officials. Furthermore, and as his first order of business, he publicly expressed confidence that he'll deliver the goodies shortly after he assumes the post on August 4. So far, Jason hasn't delivered, although the Washington Times reported on Thursday that he's still optimistic.

The new Ma administration appears to have mixed feelings about the issue. Initial indications were that there had been a request to hold the notifications, at least until after July 4th. Since then, there has been little indication that the Ma administration has been pushing hard for the notifications to go forward. The beltway rumor mill indicates that President Ma gave a letter to NSC Secretary General Su Chi to deliver to President Bush on the arms sale issue, perhaps to outline their priorities if the President would be unable to forward all the notifications at once. A senior U.S. NSC official was rumored to have traveled to Taipei to follow up the arm sales and other issues last week.

Taiwan's United Daily News reported today that scholars from Columbia University and other institutions have been advocating abandoning arms sales and a backing away from legal requirements to maintain the capacity to intervene on Taiwan's behalf in a conflict in order enhance relations with China.

Implications of a Permafreeze on Major Arms Sales

A permanent freeze on major foreign military sales to Taiwan could have a number of consequences. These include: 1) further weaken Taiwan's ability to defend itself thus increasing the risk to the United States; 2) raise questions about U.S. credibility; 3) weaken the KMT's negotiation position in dealings with China and embarrass it at home; 4) create incentives to strengthen Taiwan's domestic defense industry; 5) lost jobs and income in the United States; and 6) embolden the PRC in its dealings with Taiwan and the United States.

A Weakened Taiwan Military. The most obvious consequence could be a further deterioration of Taiwan's self defense capabilities. This, of course, assumes that the notifications are forwarded next year after the new U.S. administration is in place. Putting submarines to the side, average time between LOA signing and delivery is at least three years, depending on U.S. industrial production schedules. So APACHEs, PAC-3, and the munitions would be kicked down the road for a year. The submarine notification is said to only be for Phase 1 of the program -- only up to conceptual design, which is expected to take about three years. The funds that the LY appropriated this year for the systems presumably would be returned to the treasury.

Beyond this, what effect would foregoing these systems have on Taiwan's defense? Most critical are the F-16 spare parts, with a rumored value of between $200-500 million. The planes can't fly long without them. However, the U.S. Air Force came up with a clever solution to this impasse by offering an alternative package valued at less than U.S. $50 million, thus falling below the notification threshold. The HARPOON sale would provide Taiwan's existing submarines with the ability to target surface ships at longer ranges than offered with conventional torpedoes. The JAVELIN would augment the Taiwan Army's current inventory of TOW missiles, both of which are needed to kill landing ships approaching Taiwan's beaches. The E-2T upgrade is associated with the aircraft's command and control function. But the software also could serve as the basis for modernizing Taiwan's aging strategic level command and control system that is centered deep inside Hengshan Operations Center.

The four new PATRIOT fire units and more than 350 PAC-3 missiles would undercut the coercive utility of the PLA's growing ballistic missile arsenal deployed opposite Taiwan. Taiwan currently has three PATRIOT fire units, and Guidance Enhanced Missiles that were designed to counter aircraft. Last year, an LOA was signed to upgrade the radar and other ground systems of Taiwan's existing three PATRIOT units around Taipei. The additional four units presumably would be deployed in the Taichung and Kaoshiung areas. With the missiles by themselves costing around $1.5-2 million each, the total program is likely at least $1 billion.

The APACHEs, equipped with the Longbow radar, would augment and eventually replace Taiwan's aging AH-1W attack helicopters and would enable the Army to operate over the Taiwan Strait and to the northwest of the island to destroy landing craft and ships further away from Taiwan proper. The APACHEs would be accompanied by a range of munitions, including HELLFIRE air-to-surface missiles and probably air-launched STINGER missiles to defend against PLA air threats.

The submarine design would be the first phase of a longer program that would introduce advanced underwater vehicle that would be largely immune to a disarming PLA first strike, able to destroy PLA surface vessels approaching or operating in Taiwan coastal waters to the northwest, southwest, and east of the island. The design phase is said to be $360 million. Should Taiwan opt for Phase 2 -- construction -- cost estimates range from $8 to 10 billion. However, Phase 2 may require a second Congressional notification. If employed as part of an integrated anti-submarine warfare (ASW) architecture, including an undersea surveillance system, P-3Cs, heliborne ASW assets, and an ASW operations center, submarines would offer a lethal counter to the PLA's increasingly sophisticated offensive submarine force.

Harm U.S. Credibility. An indefinite deferral of Congressional notifications could damage America's credibility as a trusted partner, friend, and guarantor of Taiwan's security. The previous release of price and availability (P&A) data for the systems on the table carried with it an implied commitment to release the systems. A reversal, particularly without a major reduction in the PRC military threat to Taiwan, would reduce U.S. credibility, particularly within Taiwan's defense establishment.

Views on U.S. arms sales to Taiwan are sometimes contradictory. On the one hand, critics railed against U.S. pressure to invest greater resources into defense modernization resentment among a large segment of Taiwan toward the United States already exists. Yet the same critics may view a decision to forego arms sales in an equally negative light. Latent anti-American sentiment sometimes simmers beneath the surface in Taiwan, and both heavy-handed pressure or neglect or abandonment can often alienate the general public. As one taxi driver remarked, after being asked his views of the firmness of the American commitment to Taiwan, that "America has sold us out three times already -- 1972, 1979, and 1982. Why should we trust America now?" Some could argue that a hold on notifications could increase pro-China sentiment. However, it may be equally true that the appearance of diminished U.S. support could galvanize pro-independence sentiment on the island. Regardless, an announcement of an indefinite freeze would prompt an emotional reaction and the effects could be unpredictable.

Weaken the KMT Administration. Arms sales have traditionally been viewed as a metric of U.S. commitment to Taiwan's security. A permanent freeze could be viewed domestically as a failure of the new Ma Ying-jeou administration to effectively manage relations with the United States. Further diminishment of public confidence in the KMT could widen divisions with the domestic polity, complicate the ability of the Ma Ying-jeou administration to govern effectively, and could serve as a rallying point for a DPP that has been reeling from the losses in the legislative and presidential elections.

Strengthen Prospects for Unification on Terms Favorable to Beijing. Domestically, a permafreeze likely would weaken the KMT administration. However, a freeze may help the KMT achieve a breakthrough in cross-Strait relations. In the spirit of Kissingerian realism that many in the predominantly softline Bush administration believe in, a decision to halt arms sales could be driven by a a belief that a freeze would faciliate a political accomodation between China and Taiwan. In order to put U.S.-China relations on firm ground, resolution of differences between China and Taiwan is critical, even on terms that Beijing proposes. The indefinite cessation of arms sales may send a clear signal that the United States believes that the autonomy or de facto independence of Taiwan has come to an end.

Encourage Domestic Defense Industry. Diminished confidence in the United States' willingness to offer defense articles could strengthen commitment to shoring up Taiwan's domestic defense industry. Taiwan had prioritized domestic programs in the aftermath of the 1982 Communique, which resulted in the development of a number of systems, including the Tien-kung surface-to-air missile system, Hsiungfeng anti-ship missiles, and the Indigenous Defense Fighter (IDF), just to name a few. Since 1992, however, Taiwan's procurement policy shifted toward the acquisition of systems through Foreign Military Sales channels.

More recently, Article 22 of Taiwan's National Defense Law, enacted in 2003, called for greater domestic content in the development and production of weapon systems. While implementation of this section of the law has been weak, diminished confidence in the U.S. commitment to sell arms could shore up the position of those advocating a stronger defense industry.

The submarines present perhaps the best example. There has long been a faction that has advocated an indigenous submarine program. As options for managing a submarine program were contemplated, the original US Navy position in late 2000/early 2001 was that a program be carried out through direct commercial sales channels. In other words, U.S. Navy had no objection to assisting Taiwan in its acquisition of diesel electric submarines, but advocated doing it at an arms length. The goal seemed to be to keep final assembly out of US shipyards.

However, the Taiwan Navy and the Chen Shui-bian administration insisted that the program be managed through FMS channels. In response, the US Navy has been cool to the idea, highballed price and timeline estimates, yet has still supported the program. In the meantime, a faction within Taiwan has pressed for an indigenous submarine program. Debates over whether to pursue the program via FMS vs indigenous channels have taken place as recently as August 2008.

Opportunity Costs for US Industry. The shelving of these programs likely would have an effect on portions of the US defense industry and, by extension, could have some influence over undecided voters in the November election. DoD contracts for the manufacturing of the seven systems affects workers in a wide swath of the United States.

The total value of the seven programs is estimated to be around U.S. $5 billion. If one includes F-16s, the estimate runs as high as $11 billion. If one includes the manufacturing of submarines, the estimate could run as high as $20 billion spread over a 10 year period. Many states would be affected. For example, the PAC-3 system sale is said to include up to 356 missiles, with a unit cost of between U.S. $1.5-2.0 million per missile (total $534-712 million). Lockheed Martin Missiles and Fire Control, headquartered in Dallas, Texas, is the prime contractor for the missile. Its Camden, Arkansas manufacturing facility, employing over 450 people, is responsible for missile integration and assembly.

Boeing’s Air & Missile Defense Systems in Huntsville Alabama, supported by its Anaheim, CA facility for program management and design support and its El Paso facility for circuit cards, is responsible for the missile seekers. Aerojet, headquartered in California and with facilities in Virginia and Arkansas, produces both the solid rocket motor for the missile boost and the individual attitude control motors for homing guidance maneuvers during flight. Most of the ground systems would be manufactured in Raytheon plants in Massachussetts, with a range of component suppliers scattered through the rest of the United States.

For Apaches, Boeing Defense in Arizona would serve as the leading systems integrator. Other players would be Lockheed Martin, along with Northrop Grummon, for the radar sub-system and General Electric for engines bring business to Florida, California, Maryland, and Ohio. The list could go on, but suffice it to say that U.S. companies, which would reflect anticipated revenues in projected quarterly earnings estimates, could take hits in their stock value if they fall short of projected earnings.

Stock prices and unfullfilled business expectations, by themselves, aren't major issues. However, with elections coming up in November, the loss of projected work in a number of states could blow back on President Bush's fellow Republican and Presidential candidate, John McCain. This could be politically magnified given the economic problems the United States is currently facing.

An Emboldened China. Finally, failure to notify Congress could embolden leaders in Beijing who would be increasingly confident in their ability to coerce, deter, and influence the United States. They also may be less willing to compromise on other issues involving Taiwan or other issues in which the United States has interests. At a time when Beijing has been gradually softening its position on cross-Strait issues, the PRC could feel sufficiently confident that it could successfully entrap or coerce Taiwan into accomodations it normally may have made. Arguably, Beijing's softer approach, increasingly noted since the ascendency of Hu Jintao in 2005, arguably could have been influenced by past strong US support of Taiwan.

In sum, while unclear at the current time, a decision to impose an indefinite freeze would be a sharp divergence from long standing U.S. policy. It likely would draw sharp criticism from Congressional representatives who would argue such a freeze constitutes a violation of the Taiwan Relations Act. It would diminish Taiwan's self defense capability, affect U.S. jobs through a wide swath of America, further alienate the general populace on Taiwan, and perhaps trigger the final collapse of Taiwan's will to resist PRC coercion. striking a blow to supporters of democracy around the world.