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Offshoring and National Security

In This Section:
1. Infrastructure
2. Airline Maintenance
3. Identity Theft

Most defense-related national security government work (such as designing or building missile systems) that is contracted out typically requires a certain level of security clearance (only available to U.S. citizens) that effectively precludes the possibility of sending military-related work to a foreign subcontractor.But since  September 11, 2001, it has become more apparent that many aspects of our domestic economy and national infrastructure are potential targets for attack and there are no restrictions on the offshoring of work related to vulnerable services or infrastructure facilities. 


For example, the massive blackout through the Northeast and Canada in the summer of 2003, though brief, caused $5 billion in economic damage. Although terrorism was ruled out as a cause, the East Coast blackout revealed a hole in national security and led to increased awareness about vulnerabilities within aging power grids across the country - including California’s enormous power grid which has been undergoing extensive repair for at least three years. Pacific Gas and Electric Company (PG&E), in repairing California’s power grid, has outsourced about $2 million worth of design, drawing and engineering work to Thailand since 2001. As the world’s fifth largest economy, California’s infrastructure is an obvious target for terrorists.

A PG&E spokesman says “sufficient steps” have been taken to ensure security of sensitive infrastructure information and that engineering contractors must sign confidentiality agreements. Yet offshoring infrastructure engineering work increases the chances of sabotage, according to energy experts, as well as PG&E’s own employees. For instance, Irving Joe, a PG&E designer, told the San Francisco Chronicle, “Going overseas, the chances of it [sensitive security data] getting into the wrong hands increases dramatically."

Airline Maintenance

National security concerns have been raised over offshoring in other areas – including commercial U.S. aircraft maintenance work. The ease and speed with which much of this maintenance work has been moved overseas provides a curious contrast to the strict controls on foreign ownership of domestic airlines that the United States has long maintained. Northwest Airlines has laid off hundreds of U.S. mechanics and shifted maintenance to Singapore (where terrorist cells are known to operate) and to the People’s Republic of China. Post-September 11 Federal Aviation Administration (FAA) regulations require all airport-based airline employees in the United States to submit to a “Fingerprint-based Criminal History Background Check” that probes the past ten years of the employee’s past. No such checks are required of employees at off-site contractors here in the United States – nor of mechanics working on U.S. commercial aircraft – a particularly troublesome fact in cases where work is sent to countries that are not known for their pro-U.S. sympathies.

Identity Theft

Additionally, as increasing amounts of sensitive personal information are handled outside the reach of U.S. privacy law, the potential for those seeking to use it for identify theft also increases. The National Commission on Terrorist Attacks Upon the United States (“the September 11 Commission”) has found that two of the September 11 hijackers manipulated passports in order to enter the United States, while two other hijackers had passports with “suspicious indicators.” The Michigan State University Identity Theft Crime Lab found that more than half of 1,037 identity thefts studied involved personal information that had been stolen in the workplace by employees or by people impersonating employees.

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