Unfriendly Skies: the Airbus Aggression

GEORGE F. WILL

September 30, 1991|By GEORGE F. WILL

Renton, Washington. -- Americans who look skyward, or around airports here and abroad, see many products from this Seattle suburb, home of Boeing's commercial-aircraft division. But Boeing's competitive position is under sustained attack by illegal subsidies given by governments to Airbus, Boeing's European competitor.

So the Bush administration faces a high-stakes test of its willingness, and ability, to insist effectively on equitable trading practices from the ''mixed'' economies of our major trading partners. If the test is flunked, many Americans may conclude that free trade is an intolerably expensive fiction.

The stakes are enormous. Commercial aircraft are 77 percent of Boeing's sales. In 1990, when America's merchandise trade deficit was $100 billion, the commercial-aircraft sector showed a $16 billion surplus. For the fifth time in 12 years Boeing was America's leading exporter.

Today 81 percent of the commercial jets ever made -- 9,100 -- are in service. Between now and 2005, about 9,000 more will be delivered, 30 percent because of retirements, 70 percent because of air-traffic growth. More than 2,000 airplanes are more than 20 years old. The market from now until 2005, averaging 600 planes worth $41 billion every year, will be $615 billion.

The worldwide crisis of airport congestion requires a shift to larger planes. Boeing's 777, to be delivered in 1995, will seat 325 to 440, depending on whether it has three-class seating or all-economy configuration. An option will be fold-up wing tips to accommodate narrow gate slots. Next there probably will be ''super jumbos'' seating 650, superseding the 747 that has been Boeing's most profitable product.

Every time Boeing develops a new aircraft, it invests a sum exceeding more than half the company's net worth. Boeing must finance this from profits and by borrowing against future profits.

Two of the three significant commercial-aircraft manufacturers are American -- Boeing and McDonnell Douglas. Their historical market shares, 1947-1990, were 56 percent and 21 percent. But Airbus, their European competitor, has 30 percent of today's market and a goal of 40 percent by 1995. Note that Airbus' goal is expressed in terms of market share, not profits.

Airbus is a consortium of four companies -- French, German, British and Spanish -- constantly receiving substantial cash infusions from their governments. Airbus understandably prefers to measure its performance in terms of cash flow and market shares. This obscures the extent to which Airbus is a jobs program, a technology-development project, a weapon in an aggressive war targeting an American industry, and even a prestige project for several nations. What Airbus is not is a competitive private enterprise comparable to Boeing.

Airbus is now in its third decade of subsidies estimated (bookkeeping is obscure and often secret) to total upward of $26 billion. The head of Airbus' U.S. operations exaggerated when he said, ''If Airbus has to give away airplanes, we will,'' but subsidies enable Airbus to ease customers' financing and even to produce aircraft for inventory -- ''whitetails'' with no customer's insignia. It gave Northwest and America West cheap loans not even restricted to use in purchasing aircraft, but usable as operating funds or for acquiring other airlines.

Strict free-traders may say: Fine, if European governments, either supported by or deceiving their taxpayers, want to sell aircraft below market prices, we should snatch the windfall and switch to manufacturing other things. There are three arguments, each sufficient, against such passivity in the face of subsidies and political practices contrary to GATT (General Agreement on Tariffs and Trade) rules.

First, international agreements should not be violated. Second, the U.S. has a national-security interest in the health of the complex social organism that Boeing has become, an organization of talent that if dispersed would be largely lost. Third, even in a world without weapons, the commercial-aircraft industry would be a crucial component of America's economic vitality.

Airbus' arrogant aggression assumes that GATT enforcement mechanisms are toothless and GATT strictures, if any, can be stonewalled. Also, Airbus knows that U.S. retaliation may be inhibited by the fact that Boeing needs its European Community customers. Its contemptuous illegalities already have cost America more than $80 billion in lost markets and jobs.

Free trade is not solitaire, a game at which one can play alone. And the alternative is a trade war. The Airbus dispute is a $H suitable occasion for America to say what Americans said about some overbearing Europeans 216 years ago: If they mean to have war, let it begin here.

George F. Will is a syndicated columnist.

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