Thursday, October 30, 2008

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.

Friday, October 3, 2008

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:

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.