In a stunning decision, the U.S. Air Force has just awarded its biggest-ever military order to a foreign supplier. The $40 billion deal, conferred to a partnership including the European Aeronautic Defense and Space Co. (eads), was a blow to U.S.-based rival Boeing, which was the odds-on favorite to win. More importantly, this contract to supply the military with new airborne refueling tankers confirms what analysts have called a “major shift” in U.S. procurement policy.

The contract, currently one of the largest at the Pentagon, has the potential to ratchet up to a massive $100 billion. It breaks a multi-decade relationship with Boeing, the company that built the bulk of America’s existing fleet. The 179 planes on order will be based on the European Airbus 330 design, and although the final assembly of the craft will take place in Alabama, components will be engineered and manufactured around the globe.

“This isn’t an upset,” Loren Thompson, a military analyst at Washington’s Lexington Institute, said. “It’s an earthquake.”

In fact, the earthquake victory for eads caught just about everybody by surprise. Since Boeing is an American company, many erroneously assumed that Boeing would be awarded the contract. A Bloomberg News analyst survey in February showed Boeing as the unanimous pick to win. Oddo Securities had the odds of an eads victory at “less than 5 percent.” It was also a complete surprise to Boeing. Reportedly, company officials were attending a victory celebration when the eads surprise upset was announced and suddenly the mood changed.

But Boeing could be forgiven for thinking it was the shoo-in recipient of the contract. Until the past few years, U.S. national policy has been to promote and foster development of domestic industries supporting a self-sustaining military complex. It makes sense. Awarding military contracts to domestic producers not only facilitated development of U.S.-based manufacturing and technology, but also kept the money, the jobs and the future parts supply chain in the United States as well. Now, although eads is partnering with Los Angeles-based Northrop Grumman and jobs will be created in the U.S., approximately 40 percent of the new tankers will be manufactured overseas, supporting foreign competitors to U.S. industry. (Although, even Boeing obtains many of its components from international sources.)

National policy, it seems, is changing. Now “free market” economics—awarding contracts based solely on who offers the product at the cheapest price—overrides ensuring the viability of domestic industry.

According to the Financial Times, “Such a landmark victory for eads would have been almost inconceivable three years ago, but U.S. relations with Paris and Berlin have sharply improved since the election of the more pro-U.S. Nicolas Sarkozy as president of France and Angela Merkel as German chancellor” (emphasis mine throughout).

Relying on other nations for military needs is foolhardy in the extreme, even if those nations are currently friends of the U.S.

As the Financial Times pointed out, just three years ago there would have been no way the U.S. would have bought the planes from Europe. Yet, free-market proponents argue that by opening up military contracts to foreign suppliers, the military can take advantage of greater foreign efficiencies and avoid wasting resources supporting domestic industries that otherwise might not be profitable. By purchasing certain slightly cheaper and/or arguably sometimes superior foreign-made military equipment—the theory goes—the Air Force gets more bang for its buck and therefore can spend more on other military needs, thus actually making the national militarily stronger.

This short-term thinking is a dangerous trap. Paying less now means paying more later—and probably when the nation can least afford it.

Promoting military equipment purchases based on free-market cost analysis alone, or on political convenience (another factor likely in this case), while sacrificing national self-sufficiency in matters of defense, neglects greater long-term dangers associated with relying on off-shore producers to supply the essential needs of the nation in times of crisis. In the extreme, it could open up the nation to geopolitical blackmail.

For example, as columnist Diane Grassi pointed out in 2006, there is now only one company left in the U.S. that manufactures roller cutters for heavy steel or armored plate. Because of this limited existing domestic manufacturing capability, when the call came in for more armor for American humvees in Iraq, it took almost a year to produce that armor plate.

Has America forgotten the War of Independence? In that war, the United States learned the costly lesson of depending on foreign nations. Then, because of a lack of manufacturing power, the U.S. had to rely on other nations to supply all sorts of military equipment, and Britain routinely cut America’s supply lines. To correct this weakness, America’s founders implemented a national strategy promoting industrial and military self-sufficiency in order to enhance the nation’s security.

Unfortunately, this latest military contract with eads and the humvee armor debacle are just the tip of a broad trend that is seeing the return of U.S. dependence on foreign nations.

Back in June 2006, the United States Army awarded a $3 billion contract to Eurocopter (a subsidiary of eads) to purchase up to 352 uh-145 helicopters. That was the first timeeads made a major break-in into the U.S. military market. That was also the start of what the Financial Timescalled a “major shift in Pentagon procurement policies.”

Less than two years later, that shift has led from outsourcing military procurement contracts worth a couple billion to a whopper that could total $100 billion. And since the new tankers will be used for decades, that deal will make America reliant on France and Germany for critical equipment and parts for the next 40 to 60 years or more.

But outsourcing military procurement goes even further. Many formerly “American” military supply companies themselves are now owned by foreign nations. The New York Times highlighted this trend back in the late 1980s, noting the sharp rise in foreign takeovers of military suppliers between 1983 and 1988. The trend continues today.

The most recent major foreign takeover took place last July when GE Plastics was purchased by Saudi Arabian state-owned Saudi Basic Industries Corp. for $11.6 billion. That transaction, which saw 11,000 U.S. citizens become employees of the government of Saudi Arabia, was the largest takeover ever completed by a Middle Eastern State. GE Plastics manufactures and develops plastic polymers, composites and other chemicals used in many military platforms including fighter jets, submarines and engines. It supplies products to not only the U.S. Defense Department, but also to the Homeland Security Department and nasa.

A little over a year earlier, it was the United Arab Emirates that purchased Doncasters Group Ltd. for $1.24 billion. Doncasters was a British firm that operated nine production facilities in the U.S. producing engine components for the U.S. military. One of the plants is the sole producer for components for the Abrams Main Battle Tank.

America’s leaders have allowed the nation’s manufacturing base to erode. Many manufacturers—including several that are strategically important for the military—have gone bankrupt or been bought out; others have moved overseas where manufacturing costs are cheaper. Click here to see the decaying state of militarily strategic manufacturing, ranging from metal castings for weapons systems and armor plate roller cutters, to ball bearings and aircraft chemical bonding agents—industries once found in America, but now almost exclusively found overseas. Click here to see the decaying state of mining and strategic mineral production in the U.S.

The full consequences of this short-term, free-market-inspired thinking may not be felt in times of peace and prosperity, but inevitably, when crises arise—and they always do—such neglect may prove fatal. As America’s economy continues to deteriorate, watch for more short-term economic policies to hollow out American industry as the weak dollar inspires more foreign takeovers.

The failure to learn from history is sapping America’s self-sufficiency and draining the country’s industrial life-blood. Eventually, it will threaten America itself.

For information pertaining to America’s escalating fall from superpower status, read The United States and Britain in Prophecy.

Editors note: An error in this article as originally published has been corrected.