costs of a program. If U.S. legislation were to restrict the ability of American companies to do what they think is necessary, then the response from industry will simply be to walk away from the business. That, as Dr. Wessner pointed out, would have its own consequences for employment and national security.

Steve Beckman, United Auto Workers: Mr. Beckman noted the importance of the distinction between the military and the commercial sectors. What is being discussed as "sound business practices" are not sound practices by the standard of American economics. Economic theory would predict that the United States should be dominant in the aerospace industry because it has the most efficient production. The problem is that the market does not work that way. It is difficult for business to accept that a different mechanism is needed because the market is not working the way it should. In essence, business is making a necessity into a virtue by saying that these agreements are the only way to get access to markets. The traditional way to gain access to markets is for governments to negotiate access agreements and enforce those agreements through trade mechanisms. If the argument is that trade mechanisms and trade policy do not work, then the discussion needs to be enlarged. The fundamental problem with offsets is the imperfections of the market that are being, in many respects, exacerbated by these "good business practices." Such practices do not move toward a common way of dealing with the problem in a manner beneficial to the U.S. national interest as well as the commercial interest of the companies.

Mr. Martin responded by saying that he was focused on market access in terms of what the customer wants, not in terms of what governments will allow. For the same reason that there is a reluctance on the part of some U.S. companies to buy from a foreign source, there is a reluctance on the part of European companies to buy from American sources. This reluctance stems from that fact that suppliers are not located in-country. You have to be there to support your customer. These strategic alliance arrangements allow U.S. producers to be there without having to open up a new company in each customer country.

Charles Wessner, National Research Council: In closing this part of the discussion, Dr. Wessner noted that Mr. Beckman's point appeared to be not that there are market imperfections through lack of information, but rather that the issue is one of how to respond to government interventions designed to achieve a particular goal.



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