For the First Time, China Threatens Sanctions Against U.S. Defense ContractorsFebruary 04, 2010

 

The United States' decision to sell arms to Taiwan is shaking up U.S-Chinese relations and could lead to sanctions by China against American defense companies. China's Foreign Ministry accused the White House of moving forward with the $6.4 billion sale to Taiwan despite high-level negotiations and warned that the development would squander China's support of important U.S. initiatives, such as its nuclear sanctions against Iran and North Korea.

American administration officials defended the proposed sales, noting that it's been a longstanding U.S. foreign policy—under the 1979 Taiwan Relations Act—to equip Taiwan to defend itself from China. China continues to claim that Taiwan is a renegade province that China will recover, even if force is required.

The proposed sales package for Taiwan includes 60 sets of communications terminals that would let "Taiwanese pilots, sailors and ground troops exchange instant messages and images of potential Chinese threats," according to Bloomberg News.

The Pentagon said these terminals—worth about $340 million—would be provided by a company yet to be selected through a competition. Other systems include two Osprey and sonar equipment. Beijing said it would also freeze military exchanges with the U.S., but for the first time added the threat of sanctions against private defense companies whose weapons are part of the proposed package for Taiwan.

The companies that could be affected include the following:

  • Sikorsky, a unit of United Technologies, for its UH-60 Black Hawk helicopters worth $3.1 billion;
  • Lockheed Martin and Raytheon, for their joint Patriot missile defenses worth about $2.8 billion; and
  • Boeing, for its Harpoon land and sea attack missiles, costing about $37 million. Boeing also has commercial ties to China through passenger jet sales.

Between 1950 and 2006, Taiwan received $18.3 billion in U.S. weapons under the Foreign Military Sales program, Bloomberg reported, using data from the web site of the Defense Security Cooperation Agency. Under this program, the Pentagon serves as an agent between defense contractors and foreign buyers.