Next they started doing minor pieces for Boeing. Now they are doing rear fuselage and tail pieces for Boeing. And they have entered into a memorandum of agreement with the Europeans and other Asian nations to build a 100-seat aircraft—an aircraft for which 43 percent of the market is in North America. This process of competency building could have happened without offsets, but not as quickly.

From the workers' point of view, they are not at the table when these decisions on granting offsets are made, even though these decisions may eliminate a great many jobs. In fact, many workers do not even know that a table exists where jobs are being traded—nor do the subcontractors.

In this context, it is important to challenge what Mr. Barber feels are some unsustainable assumptions. First is the assumption that U.S. companies will lose all sales if they fail to grant offsets. There needs to be a look at what the calculation is between zero and 100 percent. A second assumption concerns the protection of core technologies—a focus on the "latest" cutting edge technology may be missing the point. In some cases, next-best technology, combined with government financial support, control of access to the market, and increasingly competent domestic producers, can lead to a serious erosion of market share for U.S. companies.

Mr. Barber then raised a number of questions:

  • First, what are the legitimate interests of the government, the public, and workers in offset "marketing" decisions by companies to transfer technology, production, and/or skills in exchange for sales?
  • Second, how can these interests be reasonably, but effectively, asserted?
  • Third, what are the threshold criteria for public concern with offsets—the impact on market share? the sensitivity of the technology involved? the strategic importance of the industry? the likely impact on existing productive capacity and employment?
  • Fourth, if an industry claims strategic importance, and accepts public support for R&D and export finance as a result, does it not then have certain public obligations as well? What information should be required to be disclosed about these decisions, and how should competitively sensitive information be handled?
  • Fifth, is there any reason to believe that we can negotiate with other nations on offsets to stop this economic and technological race to the bottom—and get rid of this trade-distorting activity?
  • Finally, and most fundamentally, do offsets really work? Do they really increase net sales and discourage the growth of other competitors?

McDonnell Douglas did not expand market share in China when it gave offsets. The use of offsets by Boeing in China did not keep Airbus out of the market. In closing, Mr. Barber suggested that, rather than helping the companies make future sales, offsets may only raise customers' expectations and cause them to demand even more concessions the next time.

Discussion

One audience member suggested that the discussion should be expanded to include U.S. production requirements, including state incentive programs. This is common in many industries, and especially common in the auto industry. The U.S. must be careful when complaining about actions of others when we do the same thing. A related question is the impact of offsets on smaller U.S. companies that follow larger U.S. companies overseas. In many cases, this has given smaller companies the chance to access global markets.

One of the industry panelists responded that offsets have given that panelist's company opportunities to get into new markets. Especially important in that regard has been the NATO interoperability requirement, which has allowed the company to penetrate certain NATO procurements that might not have been otherwise possible.

Another industry panelist talked about how his company often goes outside the aerospace industry to meet offset requirements. He cited the example where his company is helping environmental technology companies enter into a joint venture in another country as part of fulfilling an offset requirement.

One industry panelist took issue with Mr. Barber's assertion concerning a lack of information. He pointed out that there have been many studies on offsets. He also expressed his belief that it may not be possible to put the issue into terms of clear-cut economic calculus, given the complexity of the process. In closing, the panelists affirmed that the U.S. economy is doing quite well, and the labor market is good in part because U.S. companies have readjusted to deal with globalization and are succeeding.



The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement