Opening Remarks

Dorothy Robyn

White House National Economic Council

Dr. Robyn began by thanking the National Academy of Sciences and the STEP Board for helping the administration think through this very complex and difficult issue. She then described two events that have influenced her thinking on the issue of aerospace offsets since the June conference.

The first event concerned the European review of the Boeing-McDonnell Douglas merger. This had been a difficult time in E.U.-U.S. bilateral relations. Indeed, although the subject was less threatening, the experience reminded her of the analysis of the Cuban missile crisis, where Graham Allison had used different conceptual models in his attempt to explain the Russians' behavior and the U.S.-Russian interaction. In this case, the U.S. decisionmakers were struggling to understand the Europeans' reaction to the merger.

The incident served as a strong reminder of the importance of the aerospace industry to both the United States and Europe. Based on recent experience, Dr. Robyn said that she finds it difficult to believe that the United States and Europe could come to an agreement to restrict the use of offsets. While it is an interesting intellectual suggestion that we are in a "prisoners' dilemma," with both sides increasing their use of offsets, it is hard to see how an agreement can be reached. Boeing and Airbus are now in direct competition, with Airbus taking market share directly away from Boeing rather than from McDonnell Douglas, as it has in the past. Nor is the playing field level. Airbus continues to develop new planes with government assistance, as allowed under the 1992 agreement. Given this high-stakes, zero-sum competition, it is hard to see how strategic outsourcing will not be seen as a critical competitive weapon by both parties.

The second event Dr. Robyn described was the failure of the Clinton administration to win fast-track trade authority. This loss was a stark reminder that the



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--> Opening Remarks Dorothy Robyn White House National Economic Council Dr. Robyn began by thanking the National Academy of Sciences and the STEP Board for helping the administration think through this very complex and difficult issue. She then described two events that have influenced her thinking on the issue of aerospace offsets since the June conference. The first event concerned the European review of the Boeing-McDonnell Douglas merger. This had been a difficult time in E.U.-U.S. bilateral relations. Indeed, although the subject was less threatening, the experience reminded her of the analysis of the Cuban missile crisis, where Graham Allison had used different conceptual models in his attempt to explain the Russians' behavior and the U.S.-Russian interaction. In this case, the U.S. decisionmakers were struggling to understand the Europeans' reaction to the merger. The incident served as a strong reminder of the importance of the aerospace industry to both the United States and Europe. Based on recent experience, Dr. Robyn said that she finds it difficult to believe that the United States and Europe could come to an agreement to restrict the use of offsets. While it is an interesting intellectual suggestion that we are in a "prisoners' dilemma," with both sides increasing their use of offsets, it is hard to see how an agreement can be reached. Boeing and Airbus are now in direct competition, with Airbus taking market share directly away from Boeing rather than from McDonnell Douglas, as it has in the past. Nor is the playing field level. Airbus continues to develop new planes with government assistance, as allowed under the 1992 agreement. Given this high-stakes, zero-sum competition, it is hard to see how strategic outsourcing will not be seen as a critical competitive weapon by both parties. The second event Dr. Robyn described was the failure of the Clinton administration to win fast-track trade authority. This loss was a stark reminder that the

OCR for page 17
--> United States may not be able to maintain the economic benefits of the international trading system, unless we preserve the underlying political consensus that supports that system. The discussion over offsets is one facet of that broader debate. Thus, it is important to have a rich and continuous discussion of offsets, and this is the important challenge facing this symposium.