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Tags: mergers | china | russia | raytheon | united technologies

Mergers Are Good for the Economy and Defense Against China and Russia

Mergers Are Good for the Economy and Defense Against China and Russia
(Feng Yu/Dreamstime.com)

George Landrith By Tuesday, 03 September 2019 05:30 PM Current | Bio | Archive

China and Russia and any number of rogue powers are currently working overtime to improve their offensive military capacity. In order to maintain our strategic advantage, America needs a strong and robust defense sector with firms that can efficiently innovate and produce the defense products needed to outmaneuver our adversaries.

The recent announcement that Raytheon and United Technologies plan to combine forces as Raytheon Technologies is a great example of how two complementary high-tech American companies can join forces to be in a better position to innovate, create high paying manufacturing jobs, and help defend America’s national security.

Raytheon is a major defense contractor that produces most of America’s guided missiles and its high-end radars and other electro-optical sensors. If you’ve heard of the Tomahawk or the Patriot missile, then you know some of the technologies that Raytheon is famous for.

United Technologies works primarily in the industrial sector, but also does some defense related work — researching, developing, and manufacturing everything from aircraft engines and aerospace systems to fire and security and building systems — including HVAC and elevator and escalator equipment.

Of course, anytime two companies want to merge, there are naysayers who argue that the merger will create anticompetitive pressures. In this case, such concerns are not only overblown, they are actually silly. If two firms that did the same thing or substantially the same thing were to merge, in theory we’d have fewer competitors and if the number of competitors were too few, that would be an example of a merger that would undercut competition. But in this case, Raytheon and United Technologies are not competitors — they create different, but complementary things. So their merger will not reduce the number of defense contractors or limit competition.

What this merger would do is provide a new firm that would have access to a much larger pool of skilled engineers to innovate and problem solve as well as establish a firm that could take advantage of economies of scale and create new synergies that would permit the new combined firm to keep costs low — even while innovating and creating new products and solutions.

The Pentagon has looked at this proposed merger and sees no problem.

Ellen Lord, the DOD undersecretary for acquisition and sustainment, said “There are no major concerns that I know of right now.” She went on to describe the process of review at the Pentagon. As soon as they learned of the proposed merger, they reviewed every business interaction the Pentagon has with both companies to see if there are any problems with limiting competition. This proposed merger passed the test.

The Department of Justice and the Federal Trade Commission will also review this merger and the Pentagon will partner with them in their review. But the fact is, this is a merger that should be allowed to proceed. The government should only stop mergers that would stifle competition and tend towards monopoly power. This merger is 10,000 miles from either concern. Competition will be increased, rather than hindered by this merger. And with greater competition the public will benefit from a more capable and innovative competitor in the marketplace.

Here is what is at stake. China is in the news for its predatory trade policies and its theft of intellectual property. But it should also be in the news for its massive increases in research and development for its military. According to General Mark Milley, China is “outspending us in research and development and procurement.” He went on to warn “We, the United States, need to make sure that we do not lose our advantages that we have relative to other countries, specifically to China.”

Russia is the world’s second-largest arms producer and has developed a hypersonic missile that could be ready for combat as early as 2020. Flying 27 times faster than the speed of sound makes it nearly impossible to stop given current defenses.

We live in a dangerous world. We need our high tech firms to be as robust and capable as possible. We need them to have the resources to do research and development to keep us safe and make sure that China and Russia do not erode our advantage to the point where we wake up one morning realizing that we are unacceptably vulnerable to their offensive capabilities. We are getting dangerously close to that point.

It is, quite frankly, stupid and self-defeating to stop American firms from merging to form a stronger more capable enterprise that will (1) increase our R&D capacity which will only make us more competitive internationally, and (2) expand our innovative abilities.

You can bet that China and Russia are opposed to this merger. Their goal is to harm America economically and reduce our ability to defend ourselves against aggression. Stopping this merger will serve China and Russia’s strategic interests — not America’s! Regulators at the Department of Justice and the Federal Trade Commission must side with America, rather than with China and Russia.

George Landrith is the President and CEO of Frontiers of Freedom, a public policy think tank devoted to promoting a strong national defense, free markets, individual liberty, and constitutionally limited government. To learn more about Frontiers of Freedom, visit www.ff.org. To read more of his reports — Click Here Now.

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China and Russia and any number of rogue powers are currently working overtime to improve their offensive military capacity.
mergers, china, russia, raytheon, united technologies
Tuesday, 03 September 2019 05:30 PM
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