Sunday, July 10, 2011

Lockheed Report Touts Taiwan F-16 Sale as Boost to U.S. Economy

Defense News


Lockheed Report Touts Taiwan F-16 Sale as Boost to U.S. Economy


TAIPEI — With the U.S. unemployment rate at 9.1 percent, the economy needs new jobs and tax revenue from the sale of F-16 fighter jets to Taiwan, according to a report issued by the Perryman Group, a Texas-based economic and financial analysis firm. The report, commissioned by Lockheed Martin, said the sale could generate $8.7 billion in gross revenue.

Taiwan’s request for 66 F-16C/D fighters and an upgrade package for 146 aging F-16A/B fighters has been on hold since 2007 and 2009, respectively. According to defense industry sources, the total price tag could be as high as $13.2 billion, if the $4.5 billion A/B upgrade is also approved.

The report said the “production of these aircraft (like any economic activity) generates multiplier or ripple effects through the economy.” As the U.S. presidential election draws near, the economic argument is part of a new strategy by pro-Taiwan lobby groups to pressure the White House to release the F-16s.

The report estimates that Taiwan’s F-16 program would generate more than 16,000 annual jobs over the life of the program and yield almost $768 million in U.S. federal tax revenue, as well as $593 million to state and local governments in 44 states. And much of that revenue would go to election battlegrounds in California, Connecticut, Florida, Maryland, Ohio, Texas and Utah.

“These states all stand to benefit significantly in employment and revenue terms,” said Rupert Hammond-Chambers, president of the U.S.-Taiwan Business Council. “In Ohio, an important battleground state in the 2012 election, the Perryman Group’s research shows a total economic impact over the program life of $1.7 billion, and total state and local tax revenue of over $61 million,” he said.

The report, “An Assessment of the Potential Impact of the Lockheed Martin Taiwan F-16 Program on Business Activity in Affected States and Congressional Districts,” is being widely distributed by the U.S.-Taiwan Business Council.

The Perryman report makes no mention of the impact the U.S. economy might face from a potential economic backlash from China, which has declared the F-16 sale a “red line.” Following arms deals totaling $13 billion in 2008 and 2010, China ended military-to­military dialogue with the U.S. and threatened economic retaliation.

The report includes summary measures of the total anticipated impact of Taiwan’s F-16 program on business activity by individual states and U.S. congressional districts.

“Once the direct input values were determined, the present study was conducted within the context of the U.S. Multi-Regional Impact Assessment System,” using estimates of spending for Taiwan’s F-16 program provided by Lockheed at the ZIP code level, the report said. “These amounts were then aggregated into congressional districts and states.”

The failure to release F-16s could have negative consequences for other customers seeking an alternative to the F-35 Joint Strike Fighter (JSF), if cost overruns and production delays continue to haunt the JSF. Should the Taiwan sale fail to materialize, the F-16 production line will end in 2013, Hammond-Chambers said.

Taiwan has 126 Indigenous Defense Fighters (IDFs), 56 Mirage 2000-5s, 146 F-16A/Bs and about 60 F-5E/Fs. The F-5s are scheduled for retirement within the next five years. The Mirages suffer from serious maintenance and logistics problems and will be retired within the next 10 years. Taiwan’s state-run Aerospace Industrial Development Corp. is upgrading 71 IDFs, with delivery scheduled by 2014.

Europe is blocked by China from selling arms to Taiwan, and the island has no other options beyond F-16s in the interceptor role. Some within Taiwan’s defense community have pushed the U.S. to release AV-8 Harrier attack jets, but the aircraft are subsonic and lack the firepower and maneuverability to counter China’s expanding fighter advancements.

Taiwan has a daunting task either way. China unveiled its first fifth-generation stealth fighter, the J-20, in December. And sea trials are expected to begin for China’s first aircraft carrier in July.

China has been replacing older fighters with newer Su-27/J-11, Su-30 and J-10 fighters over the past 10 years, as well as upgrading its ground-based air defense networks. Ground-based air defense missile systems in China can now shoot down Taiwan aircraft over the northwestern part of the island.

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