Defense Contract Raises Questions About President Trump’s ‘America First’ Pledge | NTK Network Defense Contract Raises Questions About President Trump’s ‘America First’ Pledge

Defense Contract Raises Questions About President Trump’s ‘America First’ Pledge

KAI, which has partnered with Lockheed Martin, is competing for a contract that would have much of the work done overseas.

By NTK Staff | 07.17.2018 @8:00am
Defense Contract Raises Questions About President Trump’s ‘America First’ Pledge

There is yet another twist in the story of a scandal-plagued defense contractor that has captured national attention.

Korean Aerospace Industries (KAI), the defense company that has become a subject of controversy for its connection to the Michael Cohen scandal, has troubling ties to corrupt foreign ownership. In fact, the very contract KAI is competing for would have much of the work done overseas, running directly contrary to President Trump’s “America First” pledge.

A closer look at the embattled company, which has partnered with Lockheed Martin to compete for the $16 billion T-X Trainer contract, reveals that the company is partially owned by the South Korean government and that a significant portion of the work would not be done by U.S. workers.

Lockheed Martin has touted that its T-50A fighter jet bid for the U.S. Air Force’s Advanced Pilot Training competition, in partnership with South Korean state-owned company Korea Aerospace Industries (KAI), will create 200 to 250 jobs at its Greenville, S.C. facility.

However, as the T-50A aircraft is a modification of KAI’s T-50 Golden Eagle – which was originally built for the Republic of Korea Air Force – production will actually begin at KAI’s facilities in South Korea.

Lockheed Martin’s Doug Batista said “there was never a solution to have all the [aircraft] construction” done in the U.S. The cost to ship from South Korea ultimately outweighed the cost of setting up a full domestic production facility. As a result, only a bare minimum of production needed to comply with the Buy American Act will actually occur on U.S. soil.

The major components of the aircraft, including the main fuselage, would still be made in South Korea. The new airplane will be constructed in South Korea for 17 of its 24 total months in production. Final assembly – just 6 of the 24 months in production – will occur in the U.S.

The Korea Institute for Industrial Economics & Trade (KIET) actually considers a KAI-produced T-X Trainer a South Korean “arms export.”

Major production occurring in South Korea is certainly logical given the company is partially owned by the South Korean government, and the development of the T-50 – the same aircraft now being entered into the U.S. Air Force Trainer competition – was 70 percent financed by the South Korean government.

The South Korean government established KAI in the wake of the Asian financial crisis in the late 1990s by combining ailing private defense companies and injecting about 8 trillion won worth of taxpayer money into the endeavor.

In 2015, the government decided not to sell its shares of KAI, whose largest shareholder at the time was the Korea Development Bank (KDB). In 2017, the state-run Export-Import Bank of Korea became the largest shareholder, and it currently owns 26 percent of KAI.

Lest we forget, KAI has a sordid recent history. Its offices were raided multiple times by prosecutors and investigators, due to its alleged embezzlement and covering up significant flaws in its military chopper. Previously, Lockheed denied allegations that it had illicitly “received business favors from the Park [South Korean] government,” and similar allegations were leveled against KAI. The Korea Times reported that state prosecutors investigated a program involving Lockheed and KAI’s dealings with the Korean government.

It all raises the question: will KAI’s corrupt history and foreign T-X production be too much for the Trump administration to stomach?

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