Senior executives from a major U.S. defense contractor toured China last month as part of their search for a foreign company to build a dry dock for U.S. Navy ships, with the help of the chairman of the Senate Appropriations Committee. The trip raised eyebrows both inside the Pentagon and among experts who don’t believe a Chinese company should be involved in U.S. military-related projects.
The company, Ingalls Shipbuilding, is a division of Huntington Ingalls Industries, which advertises itself as “America’s largest military shipbuilding company” and has built more U.S. Navy ships than any other military shipbuilder. Ingalls is based in Mississippi. The problem is, it needs a new dry dock to build ships there and says there are no American companies that can do it. So Ingalls is looking abroad for help.
Last month, senior Ingalls executives traveled to China for two weeks to visit several different ports. They also met with officials at the U.S. Consulate in Shanghai, a meeting facilitated by a very powerful Mississippi lawmaker.
“The staff of Sen. Thad Cochran, R-Miss., the Chairman of the Appropriations Committee, has requested that Consulate Shanghai meet with a Mississippi constituent company Ingalls Shipbuilding,” wrote an official from the State Department’s legislative affairs bureau in a July 19 email I obtained. “The constituent is looking for a new Chinese vendor to build a new drydock for their shipbuilding company. They would like advice from the Consulate to walk them through how to do business in China.”
Ingalls executives met with U.S. officials in Shanghai, including Cameron Werker, the principal commercial officer at the consulate. In a follow-up email, Werker said Ingalls executives were planning to visit seven ports in China. The company has already conducted technical evaluations of proposals, and “China is the leading candidate,” Werker wrote. The other candidates are South Korea and Japan.
Ingalls’s only client is the U.S. Navy, according to Werker. He wrote that the plan is to build ships to about 50,000 tons in Mississippi and then float them out to the dry dock for adding another 20,000 tons of exterior work. The dock would then be used for “launch and retrieve.”
After the Ingalls executives left China, the defense liaison officer in Shanghai, Steve Angel, alerted the Pentagon, the Navy and the U.S. Embassy in Beijing about the trip.
“Ingalls Shipbuilding was here looking at Chinese shipbuilding companies to build a dry dock for USN ship construction,” Angel wrote. “Lobbied for by a U.S. Senator (Cochran). Not sure what Big Navy’s or OSD’s awareness are, but wanted to flag this for awareness.”
Larry Ferguson, China country director for the Office of the Secretary of Defense’s policy shop, responded to Angel’s email: “I think it’s fair to say we’ll want to do some fact finding.”
The Pentagon declined to comment about whether it has concerns about a Chinese shipbuilding company potentially building a dry dock that will then be used to build and maintain U.S. Navy ships.
“As many other shipyards in America, including those that also build Navy ships, have done in the last decade when needing to replace a large dry dock, Ingalls Shipbuilding is looking across the world market for a solution,” said Bill Glenn, a spokesman for Ingalls. “Since no decision has been made, it is premature to discuss this effort further.”
Chris Gallegos, a spokesman for Cochran, told me that the senator’s office didn’t actually lobby for Ingalls to get meetings with U.S. officials in China, but only forwarded a request for a point of contact at the U.S. Consulate in Shanghai from Ingalls to the State Department.
As for whether there is a security concern about having a Chinese company help build U.S. Navy ships, Gallegos said, “Senator Cochran expects all security precautions to be in place to protect U.S. national security.”
According to its public filings, Huntington Ingalls spent $4.8 million on lobbying in 2015. One of Huntington Ingalls’s in-house lobbyists, Carolyn Apostolou, spent 26 years as a professional staffer on the Senate Appropriations Committee before joining Huntington Ingalls in 2013, according to the Center for Responsive Politics’ Open Secrets project. Gallegos said Ingalls employees have also supported Cochran financially.
“Ingalls is the single largest private employer in Mississippi. Given Senator Cochran’s strong record of support for industry in Mississippi, I suspect many Ingalls employees have supported his campaigns,” he said.
Some Asia experts believe that there’s a real security risk in having a Chinese company build a dry dock for U.S. Navy ships because all large Chinese companies have deep ties to the Chinese government.
“Any time you have an entity like that working on U.S. military systems, common sense tells you there’s likely a security risk,” said Michael Auslin, Asia scholar at the American Enterprise Institute. “We know that there are connections, we know there is influence, we know there is government assistance. The Chinese government will have the plans.”
The Chinese government could use the project to implant surreptitious recording devices or other surveillance equipment near where sensitive U.S. Navy operations are ongoing, he said. U.S. intelligence agencies suspect that China uses projects of its largest telecom company, Huawei, as a means of spying on foreign countries.
Moreover, the Ingalls project would be a boon to the Chinese defense industry at the expense of the defense industry of U.S. allies, Auslin said. The money is essentially coming from the U.S. taxpayer because the U.S. government is Ingalls’s only client, he said.
“Wouldn’t it be better to go with an ally like Japan or South Korea?” Auslin said. “In an environment like this, you are basically subsidizing the Chinese defense sector. Is that something we want to do?”
It’s a shame the United States can’t handle 21st-century shipbuilding with its own domestic industry. But if U.S. defense contractors have to go abroad, they might want to think twice before subcontracting to America’s biggest naval competitor. It’s either a security risk or an economic subsidy that could better benefit an allied country. Either way, it’s a bad idea.