- The Washington Times - Friday, August 24, 2001

Lott's campaign
Senate Minority Leader Trent Lott's warning this week that a proposed shipbuilding merger is anti-competitive is having an effect within the Bush administration.
The Mississippi Republican's sharply worded letter to Defense Secretary Donald H. Rumsfeld is forcing the Justice and Defense departments to slow a review process that had seemed certain to approve the purchase of Newport News Shipbuilding.
There are two pursuers for Newport News, a key military asset as the nation's only maker of nuclear-powered aircraft carriers. General Dynamics, the country's only other nuclear-ship builder, put in the first bid, at $2.1 billion. Alarmed at the prospect of a monopoly, Northrop Grumman Corp. then also made a $2.1 billion bid.
The administration's decision principally rests on whether the merger would violate antitrust laws by creating a monopoly harmful to national security. A decision had been expected in early September. But after Mr. Lott sent off his letter Monday, more internal meetings have been scheduled, lasting well into September, defense sources tell us.
We hear Deputy Defense Secretary Paul Wolfowitz, the Pentagon's merger point man, is scheduled to meet Monday with Justice lawyers, and then continue merger talks later in September.
"To the best of my knowledge," Mr. Lott wrote this week, "this country has never before allowed a merger to form a monopoly in the defense world. I am concerned that the Bush administration is considering allowing a monopoly for estimated small near-term savings that will set a weak antitrust precedent and cost the American taxpayers hundreds of billions of military dollars in the long-term."
Northrop Grumman owns Ingalls Shipbuilding, the No. 1 employer in Mr. Lott's home state. The senator argues that a General Dynamics-Newport News marriage would eventually choke off work to Ingalls. He supports Northrop Grumman's bid.
"A merger in nuclear shipbuilding would also, over the long run, significantly reduce competition for the design and production of conventionally powered ships," the senator said in a two-page letter that uses the words "monopoly" or "monopolies" 13 times. "This kind of merger to a dominant monopoly could lead to a replay of earlier calls for an all-nuclear Navy, which would eliminate all shipbuilding competition."
General Dynamics, which builds nuclear-powered submarines at its Groton, Conn., yard, argues that it can save the Navy billions of dollars by consolidating all nuclear work within one firm. The company also argues that there is no real competition today in nuclear work. And the purchase of new Virginia-class submarines is so small the work is split between General Dynamics and Newport News.
The Navy apparently agrees. Defense sources say it has unofficially relayed to senior Rumsfeld aides that it favors either General Dynamics or Northrop Grumman merging with Newport News.
But Mr. Lott knows who will win that battle. He wrote, "Some have suggested that Defense and Justice should approve both [offers] and then let the marketplace decide the winner. It is obvious that the marketplace will always support the creation of a monopoly because of the guaranteed higher profit margins."

EP-3E, the recovery
The Air Force's Pacific command is circulating a briefing on its role in chopping up and shipping off the Navy's EP-3E surveillance plane trapped on China's Hainan island for more than three months.
The briefing states that the communist government "tried but could not run up the bill" for the 19-day operation. The Air Force concedes the United States was responsible for "pavement degradation" from the giant Russian An-124 that hauled off the American plane, piece by piece.
The pavement damage may be why the Bush administration settled on a payment of $34,000 to China over the entire incident, as opposed to Beijing's demand for more than $1 million. "The airfield already had existing defects," says the Air Force briefing, which featured a picture of a pockmarked runway.
The Chinese treated the American crew like visiting VIPs. The press and public were kept away from Lingshui air base. The Chinese stationed police along the route from the Gloria Resort Hotel, where the Americans stayed, to the airfield.
Other notes: "Physician on team. Local hospitals inadequate. Temperatures reached 107 degrees F with high humidity. Heat stress encountered early on."
The People's Liberation Army "monitored operations closely. Continuous photography and video taping of work and people. Routine review of photos and video taken by U.S. Non-threatening, but many 'home turf' rules."

Pentagon China post
The Pentagon's top China policy-maker, Peter Brookes, is on his way out, defense officials tell us. The reason has nothing to do with the behind-the-scenes policy battle inside the Bush administration over whether Beijing is a friend or foe.
Mr. Brookes, deputy defense secretary for East Asia, ran afoul of his superiors in the two months he has held the post, we are told. One official cited "personality differences."
Mr. Brookes angered defense officials by planning a trip to Asia that wasn't properly cleared. He also was upset by his exclusion from the small group of Pentagon officials who traveled to Australia with Defense Secretary Donald H. Rumsfeld last month.
Deputy Defense Secretary Paul Wolfowitz has interviewed four replacement candidates and is said to be looking for an expert in Japan and Korea, as opposed to a China hand.
In a related development, J.D. Crouch, the new assistant defense secretary for international security policy, has hired Mira Baratta, a Balkans expert who speaks Serbo-Croatian, as a top staff aide. Mrs. Baratta was a longtime foreign policy aide to former Senate Majority Leader Bob Dole of Kansas, the 1996 Republican candidate for president.

CIA China hand
CIA China analyst Dennis Wilder has stepped down as acting deputy director of the Asia-Pacific-Latin America analysis group, known as APLA. Mr. Wilder held the APLA post for the past several months. He was identified to us by CIA officials as one of the agency's key China hands who is under fire for poor analysis on China.
A panel of outside experts concluded recently in a still-classified report that CIA China analyses suffer from an "institutional predisposition," although the agency denies that means "bias or politicization."
Mr. Wilder, however, has been praised in the past by CIA Director George J. Tenet. Mr. Wilder is now back as head of the CIA's China-Taiwan Issues Group.
A CIA spokesman said the move is not a demotion for Mr. Wilder. "He always wanted to return to being an analyst; that's his first love," the spokesman said.
Administration officials told us that the recent criticism by the commission headed by retired Army Gen. John Tilelli has left many analysts in the CIA and other intelligence agencies and components in a deep funk and the reporting on China has worsened.
The officials said the problem was obvious in poor intelligence reporting on the four-month-long Chinese military exercises that concluded this week. "We learned more from Chinese press reporting than from the CIA or the intelligence community," said one policy-maker.

New vice chairman
Defense sources say that with the promotion of Air Force Gen. Richard B. Myers to chairman of the Joint Chiefs of Staff, the favorite to succeed Gen. Myers as vice chairman is Gen. Peter Pace.
Gen. Pace, who heads U.S. Southern Command, would be the first Marine to hold one of the two JCS leadership posts. The well-respected Vietnam combat veteran was among five generals whose name Defense Secretary Donald H. Rumsfeld submitted to the White House for the chairman's job.


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