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High-Stakes Aviation: U.S.-Japan Technology Linkages in Transport Aircraft Appendix A The Importance of the U.S. Aircraft Industry The track record of the U.S. aircraft industry over the past fifty years constitutes one of the outstanding success stories of global competition. This success and the importance of the aircraft industry to America's economic wellbeing, national security, and technological leadership are testified to by numerous reports and experts.1 The economic importance of the industry can be seen clearly in the relevant statistics. The U.S. aerospace industry holds more than half of the world market and ranks sixth among U.S. industries in total sales. 2 In 1992, U.S. aircraft sales were $72.8 billion, and the combined trade surplus for civil transports, engines, and parts was $23.7 billion.3 Table A-1 contains a 1 See National Research Council Aeronautics and Space Engineering Board, Aeronautical Technologies for the 21st Century, (Washington, D.C.: National Academy Press, 1992), p. 1; Council on Competitiveness, Gaining New Ground: Technology Priorities for America's Future, (Washington, D.C.: Council on Competitiveness, March 1991), pp. 55–56; Michael L. Dertouzos, Richard K. Lester and Robert M. Solow, Made in America: Regaining the Productive Edge (Cambridge, Mass.: MIT Press, 1989) pp. 201–216; and U.S. Congress, Office of Technology Assessment (OTA), Competing Economies—America, Europe and the Pacific Rim (Washington, D.C.: U.S. Government Printing Office, 1991), pp. 341–358. 2 The aerospace market is divided into several segments, including aircraft, missiles, space, and related products and services. U.S. Department of Commerce, U.S. Industrial Outlook 1993 (Washington, D.C.: U.S. Government Printing Office, 1992), pp. 20/1–20/3. 3 Aerospace Industries Association (AIA), "1992 Year-End Review and Forecast—An Analysis," December 1992. Note that AIA figures are somewhat different from the Department of Commerce statistics appearing in Table A-2.
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High-Stakes Aviation: U.S.-Japan Technology Linkages in Transport Aircraft statistical comparison of the aircraft and aerospace industries with the chemical industry—another technology-intensive sector in which the United States is highly competitive globally. Table A-2 contains a breakdown of U.S. aircraft sales, Table A-3 lists aerospace export figures for 1992, Table A-4 indicates aerospace trade with Japan. The aircraft and aerospace industries are also key components of America's larger technological enterprise. The aerospace industry accounts for about one-quarter of U.S. industrial R&D expenditures. Many of the technological competencies fundamental to competitiveness in transport aircraft diffuse to TABLE A-1 1992 Industry Comparison—Aerospace and Chemicals Aerospace (aircraft) Chemicals Value of shipments 125.7 (54.0) 301.9 Share of gross domestic product (%)a 2.1 (1.0) 5.0 Employmenta 695,000 (253,000) 853,000 Imports 12.7 (5.9) 25.1 Exports 42.2 (24.0) 44.2 Trade surplus 29.5 (18.1) 19.1 1989 R&D spending 20.3 11.5 1990 non-federally financed R&D spending 6.1 12.5 1990 non-federally financed R&D spending (% of sales)a 3.5 5.7 a Except for these items, all figures are current billion dollars. SOURCE: U.S. Department of Commerce, U.S. Industrial Outlook 1993 (Washington, D.C.: U.S. Government Printing Office, 1992); National Science Board, Science and Engineering Indicators: 1991 Edition (Washington, D.C.: U.S. Government Printing Office, 1991), and National Science Board, The Competitive Strength of U.S. Industrial Science and Technology: Strategic Issues (Washington, D.C.: U.S. Government Printing Office, August 1992).
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High-Stakes Aviation: U.S.-Japan Technology Linkages in Transport Aircraft TABLE A-2 U.S. Aerospace Exports (thousand 1992 dollars) Product Japan Worldwide New civil general aviation aircraft 13,381 580,799 New military aircraft 100,976 1,909,398 New civil heliopters 11,783 117,694 New civil passenger and cargo aircraft over 15,000 kg 2,574,413 22,378,686 Aerospace parts and equipment not elsewhere specified or included 1,089,140 10,146,951 Other civil and military aircraft, balloons, gliders 1,081 17,445 New and Used Civil and Military Piston Engines and Parts 1,777,348 315,734 New and Used Civil and Military Turbine Engines and Parts 449,172 636,220 Missiles, space vehicles, and parts 245,182 1,764,678 New and used civil and military aircraft engines and parts 466,519 6,683,953 New and used civil and military aircraft 2,703,859 26,419,249 Total 9,432,854 70,970,807 SOURCE: U.S. Department of Commerce. other industries and contribute to the overall economy.4 U.S. strength in the development and production of transport aircraft is also an important support for the defense industrial and technology base. Technology developed for commercial transports is often utilized in military programs; the production of commercial aircraft reduces military aircraft costs in companies that manufacture both; and commercial aircraft production helps to maintain the supplier and the work skill base in times of weak military demand.5 Finally, the excellence of American-made aircraft has long played a major role in improving the safety and efficiency of the nation's air transportation system. The aircraft industry—like many others—is regionally concentrated, so that its economic importance is felt unevenly throughout the country. 6 In 4 These technologies include "system integration in the design and manufacture of complex, high-performance equipment; project management to meet demanding targets for performance, cost, and delivery; sophisticated manufacturing techniques for fabrication, testing, and assembly; and computer-integrated manufacture, factory automation, and large-scale integrated information processing" as well as "the more obvious ones that affect aircraft performance—aerodynamics, propulsion, advanced structures, and avionics and control ..." National Research Council, The Competitive Status of the U.S. Civil Aviation Manufacturing Industry (Washington, D.C.: National Academy Press, 1985), p. 22. 5 OTA, op. cit., p. 344. 6 According to Boeing Commercial Airplane Group's brochure, "The Invisible Exporters," between 1987 and 1991 the Boeing Material Division procured an average of $10 billion per year in goods and services from suppliers in all 50 states. More than three-quarters of this amount was purchased from suppliers in four states: Ohio, California, Connecticut, and Washington. Of course, the larger first-tier suppliers in these states made purchases of their own, likely resulting in a greater geographic dispersion (including from overseas) at lower tiers.
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High-Stakes Aviation: U.S.-Japan Technology Linkages in Transport Aircraft TABLE A-3 U.S. Shipments of Aerospace Products (thousand dollars) Product Description 1987 1988 1989 1990 1991 Aircraft 36,002,800 37,765,100 39,531,000 46,885,300 52,513,500 Military aircraft 16,862,300 15,044,400 14,832,900 14,108,700 15,622,000 Complete civil aircraft 12,491,743 16,019,855 17,421,046 24,864,289 29,780,098 Civil aircraft (fixed wing, powered) 12,145,669 15,453,662 17,108,080 24,608,896 29,550,713 Unladen weight not exceeding 2,000 kg 308,452 596,954 Unladen weight exceeding 2,000 kg but not exceeding 15,000 kg 802,657 Unladen weight exceeding 15,000 kg 11,837,217 29,151,102 Helicopters (rotary wing) 338,182 559,284 301,809 247,298 218,691 Other civil aircraft (nonpowered) and kits 7,892 6,909 11,157 8,095 10,694 Aircraft Engines and Engine Parts 18,821,900 18,866,700 19,903,900 21,580,200 21,314,900 Aircraft engines for military aircraft 4,205,600 3,214,200 3,342,000 3,265,800 2,967,600 Complete civil aircraft engines 2,841,150 3,753,689 4,358,246 5,335,475 5,778,444 Turbojet and turbofan 2,637,638 4,082,669 4,949,573 5,465,954 Turboshaft (turbo propeller): 203,512 275,577 385,902 312,490 Other, including auxiliary power units excluding missile and space engines 0 0 0 0 0 Aircraft Parts and Auxiliary Equipment Not Elsewhere Classified 19,528,900 20,545,400 21,294,500 23,081,800 25,288,200 Aircraft parts and auxiliary equipment, n.e.c. 15,817,800 16,331,000 18,155,900 19,618,100 22,155,100 Aircraft propellers and helicopter rotors 724,100 676,300 746,500 881,100 951,400 SOURCE: U.S. Department of Commerce.
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High-Stakes Aviation: U.S.-Japan Technology Linkages in Transport Aircraft TABLE A-4 1991 U.S.-Japan Trade in Aerospace Products (million dollars) U.S. exports to Japan 3,907 Japanese exports to U.S. 661 SOURCE: Aerospace Industries Association, Aerospace Facts and Figures 1992–1993 (Washington, D.C.: AIA, 1992), p. 122. contrast to other high-technology sectors in which the globalization of markets and technological capabilities has prompted companies to multinationalize, aircraft manufacturers—at least at the level of airframe integrators and manufacturers of major subsystems such as engines and avionics—have generally not established their own offshore production and R&D sites.7 The globalization of production and design has proceeded largely through international strategic alliances, consortia, and other types of supplier-partner relationships between nationally based companies. Although U.S. companies continue to hold global leadership overall and in most important industry segments, the transport aircraft industry—including airframe integrators, engine makers, manufacturers of major avionic and structural components, and the broad supplier base—faces a number of significant challenges that threaten this leadership (see Table A-5). Global competition is intensifying—most notably in the large transport airframe market, where the Airbus Industrie consortium has leveraged significant support from four European governments to gain a large share of the market.8 Also, as a result of declining defense budgets in the United States and elsewhere, fewer resources are available from military programs for R&D, training, and other investments—investments that have traditionally provided an indirect support to commercial product development. Further, the synergy between commercial and defense R&D has declined in recent years as military aircraft design increasingly emphasizes features such as stealth, high maneuverability, and short field landing capability. Finally, the global market for large commercial 7 "The difficulty governments face in determining what constitutes a domestic firm, and therefore which companies are eligible for public support, is not a problem in this industry. There is little foreign direct investment in the aircraft business." George Eberstadt, "Government Support of the Large Commercial Aircraft Industries of Japan, Europe, and the United States," contractor document for the Office of Technology Assessment, May 1991, p. 11. 8 See Gellman Research Associates, Inc., An Economic and Financial Review of Airbus Industrie, September 4, 1990. The European Airbus consortium members and their respective governments have argued that the indirect benefits that accrue to the U.S. aircraft industry from the defense budget are equivalent to the direct government support that Airbus members have received. The U.S. position is that these indirect benefits are not really equivalent and that, in any case, European aircraft makers also enjoy defense spillovers. Although a detailed treatment of the protracted U.S.-EC conflict over this issue is beyond the scope of this report, a number of the policy issues raised by the conflict and the 1992 U.S.-EC agreement are central to the committee's charge.
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High-Stakes Aviation: U.S.-Japan Technology Linkages in Transport Aircraft transports has experienced a significant downturn over the past several years due to sluggish demand for air travel. The impact of this cyclical slump through the aircraft supply chain has been exacerbated by structural problems afflicting the U.S. airline industry—traditionally the largest component of the aircraft industry's customer base.9 It is safe to assume that the aircraft industry will retain its economic importance into the next century, despite the current downturn in sales. The global market for air transportation and large transports is expected to grow significantly over the next several decades. Table A-6 shows that much of this growth is likely to occur in Asia. Further, in contrast to declining spillover benefits from defense to commercial markets, the importance of commercial transport manufacturing for maintenance of the defense industrial and technology base is likely to grow, both because fewer companies will be able to maintain extensive R&D operations on the basis of military work alone, and because increasing pressure for cost performance on the military side will require the incorporation of greater commercial discipline. The benefits that accrue to countries with a strong aircraft industry have always been compelling and have justified public policies of direct or indirect support in the United States and elsewhere. Europe, Japan, Russia, China, and other countries are pursuing a variety of policies to promote domestic aircraft manufacturing. The emerging environment for U.S. private and public policymakers is characterized by significant challenges, high stakes, and a complex field of players and interests. 9 See testimony of Lawrence W. Clarkson, Corporate Vice President for Planning and International Development, The Boeing Company, and testimony of Thomas M. Culligan, Corporate Vice President, McDonnell Douglas, before the Subcommittee on Aviation, Committee on Public Works and Transportation, U.S. House of Representatives, on the "Financial Condition of the Airline Industry," Washington, D.C., February 24, 1993.
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High-Stakes Aviation: U.S.-Japan Technology Linkages in Transport Aircraft Table A-5 Aircraft Manufacturing Process and Supplier Structure Materials Structures Integration Delivery Aluminum Fabrication Engines Marketing Composites Subassembly Avionics Financing Tooling Other components Certification Machine tools Materials Structures Engines Avionics & Instruments Other Components & Systems Alcoa U.S. Pratt & Whitney Collins (Rockwell Intl) Hamilton Standard Kobe Steel Vought GE Allied Signal Allied Signal Hercules Grumman Rolls Royce Honeywell Menasco Toray Northrop Sundstrand Sundstrand Yokahama Rubber Rockwell International Tokyo Aircraft Instruments Cleveland Pneumatic Union Carbide Japan Japan Aviation Electronics Shinko Electric Rohr MHI TRW Lear Siegler KHI Westinghouse Kayaba FHI ShinMaywa Japan Aircraft Manufacturing Airbus Deutsche Aerospace Aerisoatuake British Aerospace CASA NOTE: The list of companies under each heading is included for illustrative purposes and is not an exhaustive list. SOURCE: National Research Council Working Group on U.S.-Japan Technology Linkages in Transport Aircraft.
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High-Stakes Aviation: U.S.-Japan Technology Linkages in Transport Aircraft TABLE A-6 The Global Aircraft Market—Historical and Forecast Regional Shares of Average Annual Deliveries to Airlines (percent) 1972–1981 1982–1992 1993–2000 2001–2010 United States 35 38 39 31 Europe 26 28 25 25 Asia-Pacific 20 24 27 33 Africa-Middle East 10 6 5 5 Latin America 5 2 3 4 Canada 3 2 2 2 Total market (billion 1993 dollars) 14.8 26.1 40.9 48.7 NOTE: Percentages may not total 100 due to rounding. SOURCE: Compiled from data appearing in Boeing Commercial Airplane Group, 1993 Current Market Outlook, March 1993, p. 3.5.
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