Trends and Challenges in Aerospace Offsets (1999) / Chapter Skim
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The Role of the United States Government in Setting Offset Policy
The Role of the United States Government in Setting Offset Policy
Pages 197-212
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From page 197... ...
In some cases, nonaerospace industry products, are also relied on to satisfy offset arrangements. Although offset arrangements are traditionally linked with a country' s trade practices, similar arrangements are becoming more common through voluntary iDirector for the International Affairs Department, International Association of Machinists and Aerospace Workers.
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From page 198... ...
This paper examines why the federal government must take a leadership position in setting offset policy in the U.S. aerospace industry by reviewing the health of the aerospace industry from the view of the aerospace worker; the increasing threat offsets pose to aerospace workers and the national interest; the serious lack of current and accessible information on offsets, the need for coordination of offset policy within government, and the need for coordination of offset policy between the numerous private parties that are involved either directly or indirectly with offsets.
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From page 199... ...
The results indicated that at the time of the survey only a small group of aerospace workers who were laid off remained employed in the aerospace industry (16.8 percent) .7 The average displaced aerospace worker reported earning nearly $3 less per hour than they earned in their 4Summary of Comments of Gene Sperling, Director, White House National Economic Council, Policy Issues in Aerospace Offsets: Report of a Workshop (hereinafter referred to as "Workshop")
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From page 200... ...
aerospace industry are gloomy. Researchers predict that approximately 250,000 jobs are in jeopardy in the aerospace and related industries by the year 2000, and almost 500,000 jobs at risk by 2013.~6 "Direct jobs lost in 2013 would represent 25.6 percent of the total jobs in aircraft production in 1995."~7 The Impact of the Asian Crisis That some aerospace companies are currently hiring high-skilled workers does not lessen the impact that offsets are having and will increasingly have on 8Ibid.
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From page 201... ...
workforce in the future. In addition, claims that there are not enough aerospace workers to fill current job demands may be, in part, due to decisions by former aerospace workers laid off prior to the boom to seek employment in more stable industries.
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From page 202... ...
Department of Commerce, Bureau of Export Administration Defense Diversification Needs Assessment Survey program covering the period 1993-1994, found that 83% of subcontractors who responded to the survey that they were "positively or negatively impacted by offsets" had been "harmed" rather than helped by offsets.22 Furthermore, one-third of the 1,100 transactions examined involved " partial or full production" of the items sold in the country which purchased them.23 " In many cases, this has led to the creation of redundant or excess defense manufacturing facilities."24 In other words, these offsets have resulted in over-production capability in the defense industry. To the extent that over-production in the defense industry negatively affects production in the commercial aerospace industry, sub-tier producers that employ thousands of aerospace workers are also affected.
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From page 203... ...
Its state-owned aerospace company already "produces numerous military and commercial aircraft under licensed production agreements".32 It also "makes significant parts for all three major aircraft manufacturers."33 Insufficient Information About the Effects of Offsets In general, there is a serious lack of information about offsets and their effects on workers. While the government has limited knowledge of military offsets, it has little knowledge about the nature, extent, and impact of offsets in the commercial aerospace industry.
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From page 204... ...
One of the consequences of a company's failure to inform its workers fully about their offset arrangements is that it fosters distrust and other forms of illwill. If workers are not told the truth about corporate marketing schemes they may assume that the company is not protecting worker interests.
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From page 205... ...
There has already been a prior discussion regarding the public's interest in minimizing the social and economic effects from job losses that occur as the result of offset arrangements in the aerospace industry. Two other issues resulting from the aerospace industry's growing reliance on offset arrangements concern the public's essential need for national security and the necessity of balancing the impact of one corporation's offset arrangements against the interests of another corporation.
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From page 206... ...
Technology transferred to Brazil through an offset resulted in an improvement of targeting capability of the Iraqi Scud missile system.45 Under another offset arrangement, McDonnell Douglas sold machine tools to the China National Aero-Technology Import and Export Corporation to be used for production of commercial aircraft.46 Some of the tools, however, were transferred to the Nanchang Aircraft Company which produces Chinese military equipment.47 Domestic Impacts Offsets also harm other U.S. domestic companies that operate in the industry participating in the transaction.
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From page 207... ...
I estimate that our company has lost more than 50 percent of our business due to offset agreements." · A west coast machine shop reported, "EWie've lost processing work on the jobs that went overseas as a result of aircraft and military hardware sales." Another aerospace machine shop stated, "ET] he aerospace prime contractor we supply]
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From page 208... ...
Taking advantage of lower labor costs; and 2. Fulfilling certain aircraft purchasing requirements that require a production approval holder to produce a percentage of the aircraft within the purchasing country.57 Somehow the FAA, believes that such a rule would not impose a significant cost impact "on a substantial number of smaller entities." It also dismisses concern that implementation of the proposed rule could have a serious negative impact on U.S.
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From page 209... ...
aerospace industry and its workers. The commission would recommend policy and coordinate activities through efforts that would include a review of: 60The National Export Strategy Trade Promotion Coordinating Committee 5th Annual Report to the United States Congress, October 1997, p.
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From page 210... ...
Furthermore, offsets have pit one group of private corporate interests against another as prime contractors sacrifice their relationships with sub-tier producers to satisfy offset arrangements. Responsibility for creating a framework for resolving the issues that offsets raise lies with the U.S.
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From page 211... ...
To do so would be to abandon the role that government must play in protecting the public interest. As the stakes get bigger and the pieces to the offset puzzle become more difficult to identify, we, as a nation, can no longer sit back and let other countries and the hundreds of private parties that are involved in the offset game set our course.
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