Dr. Mowery's paper and pointed out the positive employment benefits of that deal. He urged participants to be very careful about advocating any legislation that could end up hurting export sales.

Adjustment Assistance

Owen Herrnstadt, International Association of Machinists and Aerospace Workers: Mr. Herrnstadt agreed with Dr. Mowery about the confusion over direct and indirect offsets and about the lack of data. Given these difficulties, he questioned the conclusion in Dr. Mowery's paper that the employment impact of offsets is negligible. Without adequate data, such a conclusion is both hard to reach and hard to accept. Mr. Herrnstadt also pointed out that, although the paper called for improved adjustment assistance, one of the difficulties in receiving assistance is proving the cause of the displacement. This also points out the need for better information and data to inform the policy debate.

David Mowery, University of California, Berkeley: Responding to a number of comments made during the discussion, Dr. Mowery emphasized that the employment effects of offsets are only negligible with respect to other forces affecting the industry. This finding is broadly consistent with findings of others, including those in Dr. Scott's paper that will be discussed later in the day. With respect to adjustment assistance, Dr. Mowery offered that he has always believed that adjustment assistance should be made available, regardless of the cause of the displacement. Creation of separate programs based on the cause of displacement is poor policy design and needlessly adds administrative costs.

He reiterated his belief that the decline and fall of McDonnell Douglas was due to its inability to develop new products, which was due, in part, to its inability to get risk-sharing partners on the commercial side of the business. Although there may not be a direct causal effect, there is a connection.

He also pointed out that any discussion on offsets should not be dominated by the Boeing-Airbus competition. Internationalization and subsidies are still an important part of the aircraft engine sector, with the British government still providing launch funding to Rolls-Royce.

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