Read Online Free Lunch by David Cay Johnston - Free Book Online

accommodation deals with
China to get approval to enter the market there (though none dare call it commercial bribery). This was no ordinary concession for
commercial reasons, but part of a policy by Beijing to acquire high-technology industries with military significance. One of those
daughters, Deng Nan, was at the time vice minister of China’s State Science and Technology Commission, whose responsibilities
included acquiring military technologies by whatever means necessary.
    Complaints about the
sale of Magnequench were made to the U.S. government because of the military applications for the magnets. Still, the Clinton
administration, an ardent proponent of globalization, approved the sale. It did impose one condition: that the new owners keep
magnet production and technology in the United States.
    Soon the new owners of
Magnequench were busy buying up other magnet factories in the United States, including GA Powders, an Idaho firm that had
used taxpayer money to develop the powerful new magnets. Once the new owners had a monopoly on production of these
powerful magnets in the United States, they began shutting down facilities and moving manufacturing to China. By 2003, the
original GM factory in Indiana was the last American production line for the powerful magnets. Once it closed and its equipment
was hauled off, the United States became dependent on China for these magnets, including the ones needed for smart
bombs.
    Clearly, the promise to the Clinton administration had become hollow. Senator Evan
Bayh of Indiana wrote to President Bush in 2002 expressing concern that shutting down magnet production and moving it to China
was not improving national security. How could this sale possibly be good for America? Bayh asked. The senator, a Democrat,
later told colleagues that “it’s not very smart to rely on China for a critical component of an important weapons system for our
country.”
    The significance of this became clear when the Chinese launched a missile in early
2007 that shot down one of their own satellites. In a war with the United States, the ability to knock out American eyes in the sky
would give China a huge advantage. Few Americans got the point, however, after only one day of short articles and brief newscast
reports, hardly any of which connected the dots.
    That production of magnets made with
neodymium is now a Chinese monopoly is not the end of the story. America cannot just resume making these magnets at any time.
Not only is the technical knowledge largely gone, but America’s only neodymium mine shut down in 1996. And 85 percent of our
planet’s known stores of neodymium are in one country: China.
    The Bush administration has
never answered Senator Bayh’s questions about why it allowed this specialized form of magnet manufacturing to move to China. It
has instead issued blanket statements asserting it has taken all appropriate steps to safeguard Americans from foreign threats.
However, the Government Accountability Office, the investigative arm of Congress, does not share the administration’s sanguine
view of magnet production moving to China.
    When foreign governments or firms want to
acquire American companies whose business affects national security, the deals are supposed to be examined in advance by an
official government review panel known as the Committee on Foreign Investment in the United States. Studies by the Government
Accountability Office show the committee does little to secure the national interest. More than 1,500 such deals have been
approved since the committee was created in 1988, only a dozen of which were sent to the White House for review. Only one of
these was denied. That occurred in 1990 when the first President Bush killed the sale of a Seattle aerospace-parts maker to
China.
    The accountability office found that, in many of these deals, the committee examination
took place only after the sale to foreign