The Dangers Of “Looking The Other Way” On Sensitive Foreign Acquisitions In The United States

The Center for Security Policy today questioned the Bush Administration’s failure to put a proposed acquisition by the Japanese firm Komatsu of a unique American high technology capability on hold, pending a thorough investigation of its national security implications and appropriate decisions concerning steps needed to ensure that such a capability remains available to the United States.

In a paper entitled Did the Bush Administration Compromise U.S. Security for Japanese Trade Talks Atmospherics?, the Center revealed that, on 3 April, the interagency Committee on Foreign Investment in the United States (CFIUS) chose not to require an investigation of Komatsu’s purchase of a key Union Carbide division responsible for the production of ultra-high quality polycrystalline silicon. Polysilicon is an integral component of semiconductors and the entire micro-electronic chain. Union Carbide is currently the only domestic supplier of the ultra-high purity semiconductor material increasingly required for defense applications.

Frank J. Gaffney, director of the Center, noted that, "Given the unquestionable importance to the national security of safeguarding the quality, reliability and security of supply of high-grade polysilicon to the U.S. defense industrial base, it is deeply disturbing that the Komatsu transaction would be allowed to proceed without a rigorous investigation of its implications — as provided for by the Exon-Florio amendment."

Gaffney added, "Even more distressing is the evidence that the decision not to investigate this deal was principally motivated by a concern that doing so would complicate on-going bilateral trade negotiations with Japan. Given the less than impressive results of such talks to date, the Bush Administration’s refusal adequately to weigh the national security implications of the Komatsu purchase appears to add injury to insult."

The Center’s analysis notes that the Administration’s decision to approve this Japanese acquisition is ironic in several respects. Just last month, the Defense Department reported on the critical role played by this and other semiconductor technologies in present and future weapon systems. This deal also directly contradicts the objectives of SEMATECH, the semiconductor manufacturing technology consortium created to enhance and strengthen U.S. companies involved in the semiconductor industry. More remarkable still, this contraction of indigenous polysilicon manufacturing capability comes at a time when the United States is acting to upgrade and diversify the supply of such militarily relevant material to the USSR.

Copies of Did the Bush Administration Compromise U.S. Security? can be obtained by contacting the Center.