PERSPECTIVE ON AEROSPACE : Letting Our Last Edge Slide Away : If McDonnell builds high-tech planes abroad, it will cripple U.S. manufacturing. No other country would allow it.
McDonnell Douglas is proposing to sell 40% of its commercial aviation division to the Taiwan Aerospace Corp. for $2 billion. McDonnell Douglas has determined that in order to stay in business and competitively develop and produce its next generation of commercial aircraft, the MD-12, it needs access to the Asian market, low-cost labor and, most important, an infusion of capital. For many, this appears to be a routine market transaction. Others say this is simply a wise business move.
Why, then, did 29 of my Senate colleagues join me in a letter to the President requesting an urgent review of the proposed deal? Why do we care?
We care because up to 60% of the manufacturing of McDonnell Douglas’ most advanced commercial aircraft would now be performed overseas. The deal is serious enough to have a short-term impact on employment at McDonnell Douglas and on its huge supplier base, but also have serious potential long-term impact. The fact that McDonnell Douglas would build one of its most advanced aircraft overseas would create an irreplaceable loss of manufacturing capability and subcontracting suppliers in this country.
But that is only part of the problem. Let’s look at the rest of the story.
McDonnell Douglas is under intense competitive pressure from Airbus, a consortium of four European companies that has received substantial government funding to cover the development costs of all of the Airbus models flying today. This assistance has allowed Airbus, in a short period of time, to overtake McDonnell Douglas as the world’s second-largest producer of commercial aircraft.
Commenting on the possibility of a trade war in aerospace, Alan Boyd, U.S. chairman of Airbus and former U.S. secretary of transportation and chairman of Amtrak, said in an April interview that “if Airbus has to give away airplanes, we will do it.” Given that attitude, it’s not difficult to see that McDonnell Douglas is faced with a competition it cannot win on its own.
Unable to find an American partner to provide much-needed capital, McDonnell Douglas was forced to look abroad. It found an investor in the Taiwan Aerospace Corp., a firm set up by the government of Taiwan as part of a six-year plan to develop and promote high-tech industry. TAC has few employees and has never produced so much as a toaster, let alone a sophisticated aircraft. Yet for the fire-sale price of $2 billion, Taiwan stands ready to become a world-class aerospace manufacturer.
This is anything but a routine market transaction. This is a case of a U.S. industry being beaten down by a government-subsidized competitor and forced to tap into another government’s industrial policy to compete in the world market.
No other country in the world would allow this to happen. Why do we?
The answer to that can be found at the White House. This Administration has been so tied up in ideological posturing that it has never focused on the hemorrhage of high-tech jobs and industries from the United States. Its trade policies have been totally ineffective in dealing with the blatantly unfair trading practices of Airbus. If we had adopted technology, manufacturing and strategic-trade policies that put American competitiveness before ideology, American companies would not face such limited business choices.
Some portray the proposed deal as a choice between half a loaf or none at all. But is that our only choice? I do believe that the policies of this Administration have left McDonnell Douglas very few options, and that it chose the only feasible alternative it had.
However, there is a full menu of alternatives to get our trade policies back on track and to open up new alternatives for McDonnell Douglas. Any investment by Taiwan could be predicated on keeping the most advanced technologies and highest value-added manufacturing jobs here at home. The potential for using the resources of the federal government as a catalyst for private American financing could be explored. We could develop a strategy that combines trade promotion and strong action on unfair subsidies.
But at the very least, the Administration should begin immediate high-level discussions with Airbus’ main backers, France and Germany, on whether future relations in aerospace will be cooperative or confrontational. This should be coupled with aggressive Export-Import Bank support for aircraft sales abroad, to put us on an even footing in at least that area. The next step would be to bring together McDonnell Douglas, representatives of U.S. industry who supply the aerospace industry and representatives of labor to examine American-financed and American-based alternatives.
A solution can be found that satisfies McDonnell Douglas, while maintaining a strong U.S. position in the last remaining high-technology sector where we hold an edge. All it requires is leadership and the will to find the solution. If the President turns his back on this case, as he has on so many other domestic issues, the United States will continue its slide into a hole that we will be digging out of for generations to come.
We have already given up our consumer-electronics industry, and let half of our steel industry go. We have surrendered a huge portion of our semiconductor industry. If we as a nation are unwilling to take action on aerospace, the one industrial sector where we are still the undisputed leader, we can only expect further deterioration of the U.S. economy--not just for the short-term, but well into the next century.
