Thursday, January 29, 2009

US Army Continues to Implement Taiwan PATRIOT Contract

This title would be more appropriate than the sensational media reporting that is making a routine US Army announcement much more than it really is. Admittedly, the Foreign Military Sales (FMS) process can be complicated, but it can be learned. Most important to know is that approval of Taiwan's price and availability (P&A) requests, which implies a US approval to release a system, and forwarding of Congressional notifications, which clears the way for a government-to-government contract, are the critical decision points. The Taipei Times, my favorite Taiwan paper, has one report that is worth comments:

Raytheon Welcomes PAC-3 Deal

(COMMENT: PAC-3 is a missile. There hasn't been a PAC-3 deal yet because there hasn't been a letter of offer and acceptance (LOA) signed between U.S. and Taiwan government authorities that addresses the sale of PAC-3 missiles. Besides, from a business perspective, Raytheon should only be concerned about the ground systems needed to support the PAC-3 missile, and not the PAC-3 itself. The missile is a Lockheed product, with a Boeing seeker and Aerojet motor.

By William Lowther


Thursday, Jan 29, 2009, Page 2

“Upgrading Patriot fire units from Configuration-2 to Configuration-3 will provide Taiwan with enhanced system capabilities to meet current and emerging threats.”— Sanjay Kapoor, vice president for Patriot Programs at Raytheon

The US has approved a US$154 million contract to allow Raytheon Company to further upgrade Taiwan’s Patriot Air and Missile Defense System.

COMMENT: The real contract -- a letter of offer and acceptance (LOA) -- would between AIT and TECRO (on behalf of the Ministry of National Defense and the US Army) to upgrade Taiwan's existing three PATRIOT fire units to the latest US Army configuration. This particular contract worth US $154 million would be between the US Army and a contractor -- Raytheon -- for support in implementing the LOA. The November 2007 Congressional notification, which is the enabler for signing an LOA, indicated that the contract would be as much as US $939 million. In addition, it's interesting that the release appears to have been generated by Raytheon via PR Newswire, a service that corporations employ to get the message out to the public. As of yet, the original DoD contract award notification can't be found. The 26 January PR Newswire release came two days before Raytheon's 4th quarter earnings statement, in which executives had the unfortunate task of telling shareholders that earnings were down.

It is the first positive indication of how the administration of US President Barack Obama will handle military requests from Taipei. There had been fears that the new president might neglect Taiwanese defense as he pushed for better relations with China.

COMMENT: This is the part that is dangerous and needs to be corrected. Because this US Army contract award to Raytheon is only implementing a Bush administration policy decision that was made in November 2007, it is unlikely that the US Army would have felt it necessary to seek policy clearance from the new Obama administration for this specific contract. This is simply implementing an on-going program. Is there symbolism in every single DoD contract that is awarded to US industry to implement Taiwan-related programs? Probably. But only a few -- ones involving a Presidential-or at least Principal-level decision - are truly significant.

In short, this contract award is far from being a "positive indication" of how the new Obama administration will handle Taiwan's requests. That's because senior officials likely had no clue about it. And even they did, stopping it would have been not only a significant departure from established policy, but also an international legal dispute since an LOA has already been signed.

But the new contract has won White House support in the wake of a major policy paper from Beijing that said blocking formal Taiwanese independence and stopping US arms sales to Taiwan were the chief concerns of the Chinese military.

COMMENT: Won White House support in the wake of a major policy paper from Beijing? As noted above, the premise that there was "White House support" is flawed. And the linkage with China's annual defense white paper is probably even further afield. The US Army is just trying to do their job, and the contracting process probably started well before the Chinese White Paper came out.

The Patriot contract was issued by the US Army Aviation and Missile Command at Redstone Arsenal, Alabama, on Monday. It is not part of the US$6.5 billion arms sale to Taiwan that was approved by former US president George Bush last October.

COMMENT: Exactly.

Rather, it is a totally separate deal that follows two other awards Raytheon received last year for Taiwan Patriot support, one in March for upgrades and another in April for technical services.

COMMENT: At risk of confusing things, there is a relationship between the Congressional notification last October for the additional fire units and PAC-3 missiles, and these ground system upgrades. The upgrades, with a total potential value of almost US $1 billion, are necessary for the existing three fire units to be able to fire the PAC-3 missile. They do have some value on their own, such as expanding the range of the existing three radar systems, greater target discrimination, better communications, and maybe an interface with Link 16. Whether or not the upgrades are worth the $1 billion without the PAC-3 missile is another question. From a simple business perspective, hats off to Raytheon for pulling off the delinkage. Caveat emptor...

Under the new contract Raytheon will upgrade Taiwan’s Patriots from “Configuration-2” to “Configuration-3,” bringing them to the same state-of-the-art level as the US Army’s own Patriot system. This means that Taiwan can use Lockheed’s PAC-3 missiles and allows missile launchers to be placed miles in front of the radar that controls the system.


The upgraded Patriots are believed to be capable of intercepting and destroying many — if not most — incoming missiles fired in an enemy attack. But the Patriot is not foolproof and in the case of a large-scale attack involving dozens of enemy missiles all being fired at once at a variety of targets, some would be nearly certain to get through.

COMMENT: The first sentence is problematic. The radar upgrades themselves seem like they would only offer a marginal improvement -- even if that -- in the PAC-2 Guidance Enhanced Missile's ability to engage China's short and medium range ballistic missiles. Because of China's intense efforts over the last 15 years to develop missle defense countermeasures, it's not clear how effective the radar upgrades and even the PAC-3 missile would be against PRC ballistic missiles. These aren't SCUDs. The PATRIOT radar system can only handle so many missiles at once - it is said to have a relatively low saturation point. But if the PRC launched a small number of ballistic missiles against Taiwan at one time -- say five to 10 -- then a PATRIOT ground system and PAC-3 missiles should perform OK.

But when trying to counter a large scale salvo involving multi-axis strikes, a mix of low flying aircraft/UAVs and ballistic targets, HARPY anti-radiation missiles intended to kill the PATRIOT radar, jammers on board re-entry vehicles, maneuvering re-entry vehicles, and longer range ballistic missiles with a reentry speed that precludes the ability of PAC-3 to intercept them, then it becomes really hard. In short, the upgraded PATRIOT ground systems and the PAC-3 missiles, if and when a deal is ever reached, would offer an ability to defend against a limited number of Chinese short range ballistic missiles. And a limited strike, as part of a coercive campaign intended to achieve limited political objectives, is the most likely scenario for use of PRC ballistic missiles against Taiwan.

As part of the new contract Raytheon — the world’s largest missile maker — will provide upgrade kits for radar and command and control components, a radar refurbishment and related engineering and technical services.

Under last October’s arms sales agreement, Taiwan will get 330 of the Lockheed Martin built PAC-3 missiles valued at US$3.1 billion. Bonnie Glaser, a senior associate at the Washington-based Center for Strategic and International Studies, predicted earlier this month that cooperation between Beijing and Washington would not come at Taiwan’s expense. “The US will seek to create an environment in which Taiwan feels secure. Arms sales will remain under consideration, especially new fighter jets. China’s military posture toward Taiwan will be the critical variable in any arms sale decision, along with Taiwan’s requests for defensive weapons to defend itself against a Chinese attack,” she said. China has more than 1,400 missiles pointed at Taiwan and has said repeatedly that it would achieve unification by force if needed.

COMMENT: Again, there was no agreement last October. There was only a Bush administration notification to Congress outlining its intent to conclude an agreement with the Taiwan government. There is no indication that this agreement has been signed. In fact, there may be problems. The reduction in the number of missiles that the Bush administration decided to include at this point in time is said to have affected the unit cost associated with production of the missiles. And the haggling goes on. At this point, one could argue that Taiwan almost has to follow through with the PAC-3 missile procurement. It's already sunk almost $1 billion in laying the necessary groundwork (no pun intended).


Indeed, China’s latest national defense White Paper indicates that Taiwan remains the focus of China’s current military buildup.The Associated Press reported a few days ago that Beijing was keeping this year’s spending figures for its 2.3 million-strong armed forces secret. But last year China announced a military budget of US$59 billion, up nearly 18 percent over the previous year.It was the 18th year of double-digit growth in military spending in the last 19 years.


Sunday, January 25, 2009

Envisioning Taiwan's Future: A Public Call

The article below announces an innovative approach to public policy. It solicits the public for ideas on a vision for Taiwan’s future. Having a positive vision for the future is a key enabler for improving the quality of life in a society, and something that has been missing in government for quite some time. Good move, and it even leverages Taiwan’s internationally acclaimed e-government capability:

CNA: Web Site Devoted To Discussing Visions For Taiwan To Be Launched Soon

Taipei Central News Agency in English 1230 GMT 25 Jan 09

[By Maubo Chang]

Taipei, Jan. 25 (CNA) -- What should Taiwan be in ten years' time? Will marriage still be defined as a sexual union between a man and a woman by 2019?

A Web site that's being sponsored by the Research, Development and Evaluation Commission of the Executive Yuan will soon invite the public to share their visions for the country in regard to the above two issues and eight other issues. Jiang Yi-huah, the minister heading the commission, said the Web site will be launched after the Chinese New Year holiday and will seek public opinion on issues of public concern.

Minister Jiang said special attention will be given to the views of young people because they are expected to lead society in ten years' time.

Jiang said his commission is searching for ten leaders of public opinion to preside over the discussion of the issues, with each of the ten in charge of one issue.

Other notable issues to be discussed include how to encourage innovations in society, and how Taiwanese citizens can get along well with Chinese citizens.

Jiang says all visions are welcome as long as they can broaden the public's horizons, drive them to think deeper and to produce more creative ideas.

The discussions will help the public reach a consensus on these issues and provide valuable reference material for the Executive Yuan in formulating its policy, said Jiang.

Each discussion leader is supposed to summarize the public's opinions six months after the Web site is set up, Jiang said.

Saturday, January 10, 2009

The Obama Taiwan Team Starting to Shape Up

For those interested in U.S.-Taiwan relations, get ready for a breath of fresh air. The Nelson Report and other publications have been offering glimpses into who could be directing U.S. policy towards Taiwan and the rest of the Asia-Pacific region. If some of the key names being floated turn out to be true, then the Obama administration’s Taiwan policy team could be almost as strong as the one that opened the Bush administration.

Kurt Campbell. The stars center on Dr. Kurt Campbell as Assistant Secretary of State for East Asian and Pacific Affairs. Kurt has been one of the strongest supporters of U.S.-Taiwan relations, and is the father of the transformation in bilateral defense relations in the late 1990s. He’s traveled to Taiwan on numerous occasions, and understands the issues and the people. He was an occasional contributor to the Taipei Times. During his four year tenure in the Pentagon’s top Asia job, Kurt often was viewed as the strongest Deputy Assistant Secretary of Defense since the legendary Richard Armitage served in the position in the 1980s. After having to coordinate the U.S. response during the 1996 Taiwan Strait missile crisis, Kurt made it his mission to deepen and broaden U.S.-Taiwan defense relations, including opening new avenues of dialogue between the two defense establishments.

Brilliant, passionate, and creative, Kurt knows how to heal an organization from the ills of bureaucratic inertia. And since the departure of Deputy Secretary Armitage, Assistant Secretary James Kelly, and Deputy Assistant Secretary Randy Schriver in 2005, the Department of State (and Taiwan) has needed someone like Dr. Campbell. As an aside, his spousal unit is Lael Brainard, who is rumored to be a candidate for a senior economic position at State or the Office of the US Trade Representative.

After leaving the Pentagon in 2000, Kurt assumed a senior position at the Center for Strategic and International Studies (CSIS). In February 2007, he and Michele Flournoy, who has been announced as the Obama administration’s Under Secretary of Defense for Policy, started up the Center for a New American Security (CNAS). The all-star cast making up the CNAS board of directors and advisory board includes Bill Perry, Madeleine Albright, Rich Armitage, Bill Lynn (Deputy SecDef designate), Richard Danzig (see below), ADM (ret) Denny Blair (Director, National Intelligence designate), LTG (ret) Chip Gregson (see below), John Podesta, Randy Schriver, Jim Steinberg (see below), Ash Carter, Jim Thomas, and Michael Green among others. With so many CNASers heading back into government, it’s unclear what form the organization will take in the future.

Jim Steinberg. Kurt will be working for Secretary of State Hillary Clinton and Deputy Secretary Jim Steinberg. While Hillary doesn’t have much experience in Taiwan, Steinberg was involved in a number of Taiwan-related policy issues during his time as Deputy National Security Advisor from 1996 to 2000, and has maintained channels of communications with interlocutors from Taiwan since leaving government. Since 2006, Steinberg has headed Texas University’s LBJ School of Public Policy and seems to have a soft spot for the underdogs. The other key position will be the Deputy Assistant Secretary responsible for China/Taiwan affairs, which likely would go to a career State Department foreign service officer.

Chip Gregson. At Department of Defense (DoD), the State Department bureaucracy has been in charge of managing defense policy toward China and Taiwan since the departure of Richard Lawless in 2006.
As a result, Taiwan has been relegated to the back benches over the last couple of years. However, the appointment of LTG (ret) Wallace “Chip” Gregson as Assistant Secretary of Defense for Asian & Pacific Affairs would be almost certain to restore dignity in the U.S.-Taiwan defense relationship. In overseeing the defense component of the bilateral relationship that has traditionally figured prominently, a Campbell-Gregson combo would be powerful. LTG Gregson served as Kurt Campbell’s director for Asia-Pacific Affairs between 1998 and 2000. In that position, he cleared the path for a number of Taiwan-related Pentagon initiatives.

Marine Commandant Jim Jones (designated as Obama’s National Security Advisor) brought LTG Gregson back to the Marines to serve as a division commander then III MEF Commander in Okinawa, and finally as Marine Forces Pacific Commander. Since retirement, he is said to have maintained links with Taiwan’s defense establishment as an informal advisor, along with ADM (ret) Denny Blair. A Naval Academy grad (class of ’68), Gregson did a brief stint with the U.S. Olympic Committee after retirement from the Marine Corps in 2005.

Richard Bush. Another leading figure should be (hopefully) Richard Bush. As one of the few true American Taiwan academic specialists, Richard would be ideal to serve as AIT Director. No word yet if this is the case or not. But if the post in Taipei needs to be filled, Richard’s the man. Quiet and thoughtful, he previously served as AIT Chairman in Washington (actually Rossyln, VA) from 1997 until 2002, a position in which he worked with Dr. Campbell, Jeff Bader, LTG Gregson, and Derek Mitchell, and performed with distinction and finesse. Before his AIT service, he was National Intelligence Officer for East Asia. He also supported Rep Steve Solarz' campaign for Taiwan democracy in the 1980s. Richard’s Untying the Knot is one of the best books ever written on Taiwan’s political environment, cross-Strait relations, and U.S. interests in Taiwan. He’s currently senior fellow and director of the Center for Northeast Asian Policy Studies at the Brookings Institution.

Having said all this, hats are off to Steve Young for his outstanding work at AIT Taipei. He’s been a saving grace in a Bush administration that seemed inclined toward throwing Taiwan under the bus. Steve has been an advocate for fairness, and a promoter of U.S. interests in Taiwan’s democratic consolidation.

Derek Mitchell. Rounding out the Obama Taiwan team could – should – be Derek Mitchell. Shaped by his experience as a Ted Kennedy staffer, Mr. Mitchell was active in Taiwan democracy issues as a young man, and worked for Dr. Campbell and LTG Gregson as a strategic planner and senior country director for China/Taiwan. At CSIS for the last eight years, he traveled to Taiwan on a frequent basis, and managed a highly successful annual seminar for Taiwan military officers, similar in nature to the general officer CAPSTONE course. Before joining the Campbell team in the Pentagon in 1997, he promoted democracy programs for the National Democratic Institute for International Affairs in Washington, D.C. Derek spent 1989 working in Taiwan as an editor of a local English-language newspaper, and is married to the beautiful Min Lee, who grew up in Taiwan.

Jeff Bader. Senior coordinator for Taiwan-related interagency policy development is said to be Jeff Bader. He’s been named to replace Dennis Wilder as the Senior Director for Asian Affairs on the NSC Staff. A career State Department officer and former NSC Asia Director under Sandra Kristoff and Ken Lieberthal in the 1998-2000 timeframe, Bader has been the Obama campaign’s Asia coordinator. He’s been strong on Tibetan issues, and presumably should be a proponent of Taiwan’s democratic consolidation. Regardless, he should bring stability and consistency to the table. Bader also has served as ambassador to Namibia and as a senior USTR official, he led the negotiations with China and Taiwan for WTO membership. He’s been Brookings’ China Initiative director over the last few years. He holds a PhD from Columbia in European history.

Others who played a role in the Obama campaign and thus possible candidates for Asia positions could Richard Danzig, Frank Januzzi, Mike Lampton, Evan Medeiros, Frank Levine, Bob Kapp, and Kevin Nealer. At one time, Danzig was touted as a candidate for Deputy Secretary of Defense. After stepping down as Secretary of the Navy, Danzig made a beeline for Taiwan, where he was given a intensive week-long course. Another potential candidate for a senior political-military position in the future, and one well known and respected in China/Taiwan circles, is LTG Karl Eikenberry. Senior country director for China/Taiwan under Kurt Campbell until 1997, Defense Attaché in Beijing, PACOM J-5, and Commander, Combined Forces Command in Afghanistan, LTG Eikenberry is currently Deputy Chairman of the NATO Military Committee.

In short, there’s reason for optimism with the new Taiwan policy team. One should not expect moves toward revival of the U.S.-ROC Mutual Defense Treaty, a push for U.N. recognition, or sudden jump in arms sales. On the former, officials in the Obama administration will find that programs they started eight years ago – such as the large phased array UHF radar (Surveillance Radar Program) and Link-16 (aka “Posheng”) – are still on-going after eight years. Congressional notifications for two major multi-billion dollar programs – UH-60 BLACKHAWK utility helicopters and initial design study for a diesel electric submarine program – are still frozen and unresolved. Letters of offer and acceptance (LOAs) on systems that were notified last year – PAC-3 in particular – are held up due to unexpected and sudden rise in the U.S. price, and the US Navy has yet to get the ball rolling with the refurbishment of Taiwan’s P-3C maritime patrol aircraft So with so many unresolved issues connected with on-going programs, one shouldn't expect a lot of enthusiasm for approving a follow-on buy of F-16s. Now working with Taiwan on the transfer of a very short take off and landing (VSTOL) design for a cooperative industrial project or examination of release of a VSTOL variant of the F-35 down the road? May be a different story…More on this another time.

Regardless, the new team will bring stability and respect to a U.S.-Taiwan relationship that has suffered from neglect over the last four years. The results may not manifest themselves easily to the outside world, and are likely to be nuanced. And the inner workings of the machinery are likely to run much smoother than has been the case over the last four years.

Thursday, January 8, 2009

Taiwan World Games 2009: Time to Buy Tickets

As Beijing and the world recover from the kitschy summer 2008 Olympic extravaganza, preparations are underway for a more subdued yet pivotal international event in Taiwan. Leave to Taiwan to go for substance and modesty over symbolism and glitter.

This summer, Taiwan will host its largest international event in its 50 year history – the 2009 World Games. Scheduled for 16-26 July 2009 in Kaohsiung, the World Games are held every four years, the alter ego to the Olympics. In fact, these are the “Taiwan Olympics.” The World Games features 31 events that aren't represented in Olympic competition, but could eventually qualify (click here for the official Kaohsiung World Games web site). And in many cases, the games include sports that many of us can related to better than the Olympics – water skiing, bowling, tug of war, sumo wrestling, squash, and pool. The World Games have been celebrated every four years since 1981, when the first event was hosted by the Californian city of Santa Clara. Organizers expect the Kaohsiung World Games to involve more than 3,000 athletes from 90 nations (click here for Reuters reporting). Below is an introductory overview from Youtube:

For a country like Taiwan, being able to host an international event – any event – is a big deal. And yes Virginia, Taiwan is a country. This is despite its lack of recognition by an international community that fears a China with some serious insecurity issues.

The games are the second-largest international multi-sports event, trailing only the Olympics. The International World Games Association (IWGA) awarded Kaohsiung the honor of hosting the eighth games in June 2004, during former presidential candidate Frank Hsieh’s term as mayor. Since that time, Kaohsiung city officials, including mayor Chen Chu, Kaohsiung Organizing Committee Chief Executive Office Emily Hsu, and Managing Director Liu Shyh-fang, have gone all out in preparation for the World Games.

After the announcement, then-Kaohsiung mayor Frank Hsieh asserted "hopefully Taiwan will obtain worldwide attention from the international media because of this grand sporting event and will have more opportunities to join in the international affairs." However, the attention just doesn’t seem to be there. The lack of a coordinated national-level publicity campaign from the central government is interesting, since it seems like Taiwan’s time to shine internationally. A July 13, 2008 China Post article covered the event, and highlighted the less-than-arousing marketing campaign for the games.

One impressive preparation is the giant 55,000 person solar-powered stadium. The Japanese-designed facility is alleged to be the largest solar powered structure in the world. On days when no competitions are taking place, the electricity generated is fed into the main city grid. The project leader is Delta Electronics. Kaohsiung also recently completed its new subway system, an investment valued at over U.S. $6 billion. The city has also been busy with its beautification efforts, cleaning up the once-not-so-lovely Love River. Artificial lakes that will serve water sports have been cleaned, and boardwalks also have been built along the banks.

“We haven’t done as well promoting this as they would overseas,” one observer notes. A Taipei Times report noted that Taiwan came close to losing the games last year due to the slow pace of construction of sports facilities.

Organizers are looking for foreign English-speaking volunteers for the World Games, particularly those able to also speak Arabic, French, German, Italian, Russian or Spanish. And of course, Chinese Mandarin or Taiwanese is a big plus. Point of contact is Conrado Piccin (

In addition, organizers, assisted by AIT Kaohsiung, have been highlighting business opportunities associated with the games, looking in particular for security-related help. See a short video below:

Sunday, January 4, 2009

Taiwan PAC-3 Sale Delayed: Reduction of Ballistic Missile Deployment Opposite Taiwan Imminent?

According to a Reuters newswire, MND's spokesperson MGen Lisa Chih announced that the People's Republic of China (PRC) may begin a gradual reduction in its short range ballistic missile (SRBM) deployments opposite Taiwan. No confirmation, but it's an interesting announcement. If true, such a move would be largely symbolic given the large number of launchers and missiles that are already in place, and in light of PRC deployments of land attack cruise missiles (LACMs).

The timing of a symbolic freeze or reduction of conventional ballistic missiles also could be interesting. First, the inauguration of President-elect Obama is just over two weeks away, and a goodwill gesture could be an attempt to cast China in a positive light as the new administration settles in.

The announcement also follows a series of public statements on both sides of the Taiwan Strait regarding prospects for cross-Strait military talks. The Ma administration's decision to scale back its annual Hankuang military exercise, holding it once every two years vice yearly. President Ma also made a public statement that hinted at the strong possibility of initiation of peace talks in the near future. Premier Liu Chao-hsuan also told the press that travel restrictions on active duty military personnel may be relaxed, ostensibly a requirement for MND personnel to be able to participate in meetings in the PRC.

The notion of a peace accord, which a reduction in the PRC's force posture theoretically could lead to, is nothing new. In an October 2007 New York Times interview, President Ma discussed the conditions under which he would engage his Chinese counterparts and enter into a "peace accord:"

We have always welcomed the idea of signing a peace accord with China and have been talking about this for the past seven or eight years. We have continued to appeal to China's leaders and government to sit down and have a dialogue on the establishment of a framework for peace and stability. Should a consensus be reached, we could then sign a peace accord and other related agreements. However, we oppose any preconditions or framework being set and any conclusions being reached prior to discussing an agreement. We are even more opposed to missile threats or the use of non-peaceful means or military force to coerce any party into signing a peace accord.

I detailed this concept in my 2000 inaugural address, when I said that as long as China does not intend to use force against Taiwan, then I would honor my "Four Noes" pledge. But today, the international community only pays attention to the proposal made by Hu Jintao regarding a peace agreement, and overlooks the precondition that Hu laid out--that such an agreement would be possible only if it was signed within the "one China" framework.

One, China must openly renounce the use of force against Taiwan. To this end, it must remove the 988 ballistic missiles it has deployed along its southeast coast targeted at Taiwan. Two, China must repeal its so-called "anti-secession law," which represents an attempt to lay a legal basis for a future invasion of Taiwan. Three, and most important, China must give up this notion of the "one China" framework it has insisted upon. In this light, it is very clear now that if we were to sign such a peace treaty under the framework of the "one China" principle, then I think this would mean, for the 23 million people of Taiwan, a treaty of surrender.

Of course, this statement may be pre-election rhetoric, and conditions for entering into negotiations may have evolved since October 2007. However, in his 2009 New Year's address commemorating the 30th anniversary of the PRC's January 1979 Message to Compatriots on Taiwan, Chinese President Hu Jintao echoed Ma's call for initiation of talks that could lead toward some form of peace agreement.

Finally, a symbolic freeze or reduction of ballistic missiles opposite Taiwan coincides with a delay in consummating a letter of offer and acceptance (LOA) for procurement of PAC-3 missiles and additional PATRIOT fire units. The Bush administration notified Congress of its intent to sell as many as 330 PAC-3 missiles and four additional fire units in October last year. The total value, if all options were to be exercised, is as high as U.S. $3.1 billion. Since October, a jump in unit cost for the PAC-3 missile is said to be holding up a signed LOA, which ultimately could lead to a reduced procurement. In an 8 Dec 08 Taipei Times editorial, John Tkasic noted Legislative Yuan members citing as much as an additional US $800 million has been added into the draft LOA, a major jump above previous quotes. Other sources have noted that PAC-3 unit cost has risen to as much as US $5.9 million, a significant jump from previous years. The rationales given for the higher price tag include "research and development" costs and "non-recurring engineering."

Lockheed Martin Missiles and Fire Control, headquartered in Dallas, Texas, is the prime contractor for the missile. Its Camden, Arkansas manufacturing facility (formerly under Loral Vought Systems), employing over 450 people, is responsible for missile integration and assembly. Boeing’s Air & Missile Defense System 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.

Raytheon is the prime contractor for PATRIOT ground systems, as well as the 200 some odd PAC-2 Guidance Enhanced Missiles (GEMs) that Taiwan currently has in its inventory. In 2007, Raytheon captured a program valued at between US $500 and $900 million to upgrade Taiwan's existing three PATRIOT fire units in the greater Taipei area. Raytheon also is supporting the US Air Force's Electronic Systems Command (ESC) in the development, manufacturing, and installation of a large UHF phased array array radar for early warning of ballistic missile attacks, as well as monitoring of air activity in the Taiwan Strait. However, the radar program, which the USG approved in 2000 and contracted in 2005, has experienced significant delays.

Should disagreements over PAC-3 unit costs continue, there could be an indefinite delay in concluding an LOA. The Ma administration, and/or a Democratic administration that has long been skeptical about missile defenses, may be thinking about ways to reciprocate for China's symbolic gesture. PAC-3 missiles could be the bargaining chips.

However, MGen Chih asserted that "we would look favorably at this development (in China), but we need to work on our own safety and not rely on someone else's goodwill." She added "we won't relax our own preparations."

More commentary on this later...