Alan Wm. Wolff

Board on Science, Technology and Economic Policy

Ambassador Wolff welcomed the participants to the symposium on behalf of the Board on Science, Technology and Economic Policy (STEP). The STEP Board seeks to bring together experts in the disciplines of business management, engineering, and economics, with people with public policy experience, to address issues of national concern. In that regard, Ambassador Wolff welcomed the participation of senior public officials in today's symposium, including Dorothy Robyn of the White House National Economic Council, William Reinsch, Undersecretary of Commerce, and Page Hoeper, Deputy Undersecretary of Defense.

Turning to the topic of today's symposium, aerospace offsets, Ambassador Wolff observed that the aerospace sector of the U.S. economy remains a leading source of high-technology exports and exemplifies American technological preeminence. He also noted that today's symposium is designed as a sequel to the June 1997 workshop that, for the first time, brought together industry representatives directly involved in aerospace offsets to discuss the different types and rationales for offsets, as well as their consequences, with representatives of labor unions, expert academics, and government officials. The summary of that workshop, "Policy Issues in Aerospace Offsets," published shortly after the meeting, contains a rich discussion of the current policy issues relevant to this topic. This unique meeting also demonstrated the value of a balanced exchange of views to help policy makers understand the problems the industry faces in the fierce international competition for large contracts and follow-on work. The June meeting also led to a better understanding of some of the trends in demands for offsets. Questions were raised concerning the cumulative consequences of offsets, especially in conjunction with other industrial policy tools. In addition, the June

discussion underscored the challenge the growth of offsets poses to the international trading system.

For the United States to meet these challenges, participants at the 1997 workshop suggested that a key first step would be to develop a better understanding of America's long-term economic interest. While the current financial crisis in Asia has led many U.S. journalists to believe that the Japanese model of economic development has been discredited, Ambassador Wolff doubted these views were shared by government agencies such as the Ministry for International Trade and Investment (MITI). Indeed the papers to be presented today suggest that the industrial policy plans of many countries are still an important factor in the aerospace industry.

To better understand these challenges and trends, there was a sense from the participants in the 1997 meeting that a more focused and detailed discussion would be of value. Today's symposium seeks to meet that need by attempting to further clarify the issues and long-term U.S. interests. To that end, the STEP Board commissioned a series of papers that are the basis of today's discussion. In reviewing the papers, Ambassador Wolff suggested that the participants might keep in mind the following questions:

• Do we have a clear idea of what is happening in aerospace offsets?
• How extensive are they, both in terms of dollar value and technological value?
• What is their impact, positive and negative, on both the industry and the country as a whole?
• Is there any part of the government that has a good understanding of the nature, content, and potential consequence of current offsets agreements?
• Does the government in fact have a need to know, or are offsets primarily a private matter even though public authorities are often involved as buyers?
• Do the demands for offsets that represent the objectives of a foreign government's industrial policy require a policy response by the United States? If so, what should be the main elements of that policy response?
• Are those foreign government industrial policies successful in their objective of transferring technology to better enable their companies to compete with U.S. firms?
• Are these policies succeeding cumulatively as the result of separate deals with competing vendors?
• Are these technologies being transferred crucial to long-term U.S. Interests?

In summary, participants were asked to consider what is the environment in which U.S. companies are forced to compete, and what policy would be appropriate for the United States to pursue, both internationally and domestically.

Ambassador Wolff reminded participants that the goal of today's symposium is to be relevant to the current debate over U.S. policies. He encouraged a vigorous discussion, where it is recognized that all participants have a valid perspective. He asked participants to be specific but also to explore a broad range of policy options. These options could include, inter alia:

• multilateral or bilateral agreements to restrict or limit offsets;
• continued or enhanced government investment in research;
• the development of key infrastructure, such as wind tunnels;
• renewed attention to the national supply base, especially at the sub tier level-perhaps through a new manufacturing initiative directed at the needs of the aerospace industry;
• consideration of the impact of export control policy; and
• a review of the adequacy of export financing arrangements and international disciplines on export finance.

Ambassador Wolff closed by expressing the STEP Board's appreciation to the White House, to the Bureau of Export Administration and the International Trade Administration of the U.S. Department of Commerce, and to the Defense Advanced Research Projects Agency and the Office of the Deputy Undersecretary for International and Commercial Programs of the U.S. Department of Defense for their continued support of this program.