Today, the U.S. aircraft industry remains a world leader, but significant adjustments will be needed for it to remain so in the future. Over the next decade, U.S. industry will continue to come under increasing international competitive pressure. The aircraft industries of Europe, Japan, Russia, Taiwan, China, and other nations are aggressively seeking opportunities to tap into the expected long-term growth in commercial aircraft markets. Forecasts for growth in the Asian market are particularly impressive. Heightened international competition will take place in an environment of unprecedented U.S. industry restructuring as a result of dramatic reductions in the defense budget. Therefore, U.S. industry will be severely challenged over the next decade just to hold its current position in global aircraft manufacturing. Achieving growth in global market share will be an even more difficult task.

This study of U.S.-Japan alliances illustrates the key features of this evolving global competitive environment and highlights the broad challenges faced by the U.S. aircraft industry. In order to reenergize U.S. leadership in the face of these challenges, a new approach must be developed by industry and government.

• Leadership in aircraft design and manufacturing—including a full spectrum supply chain—remains a vital U.S. national interest. In order for the United States to maintain its leadership position in this critically important industry, it is essential that aircraft be singled out for specific, strong, government-industry partnering in the development and implementation of a long-term strategy.

Japan is currently a significant player in global aircraft manufacturing. Japanese companies are formidable competitors in a number of aircraft subsystem and component areas. Although Japanese industry is not competing today at the prime integrator level, Japan already possesses or could acquire the capabilities needed to do so. The committee has seen that Japan is making the long-term investments necessary to be a world leader in air transport design, development, and manufacturing. Japan's primary strength lies in the manufacturing capabilities of its companies, and Japanese firms are focusing on low cost and high quality as differentiating factors.

Japan has established an aircraft industry as a matter of national policy with managed internal competition but with a resilience to changing economic conditions. Technological, financial, and human resources are leveraged across civil-military, supplier-prime, and horizontal interfaces to maximize industry's long-term competitive position. Strong industry-government partnership in formulating and implementing strategies in the aircraft industry has long been