Archived Speeches
Remarks by Senator John D. Rockefeller IV, to the Aero Club,
April 23, 2002
Thank you very much, Shelly, for that kind introduction. And I thank the Aero Club for inviting me to talk to you all today. It's a pleasure to be here.
The past seven months have been an extraordinary and challenging time for American aviation, in ways no one could have anticipated. September 11 changed the world, and changed all of us. In addition to the staggering and tragic loss of life, and the ongoing and very serious threat to our security, the American aviation and aerospace industry was thrown into a tailspin.
Fortunately, the affected industries and the federal government acted rapidly. Together, and to your great credit, all signs are we have restored public confidence in our system: the American people are flying again.
But as I think about that very real accomplishment, I can't help but think of another potential crisis looming before us. In the coming months and years, we must match our ability to respond to this terrorist threat, with a similar drive to restore what I fear is a serious drop in our aviation and aerospace competitiveness around the world. And that's what I would like to talk with you about today.
For too long, the erosion of our leadership and of our dominance around the world has been disguised - by the size and proud history of our aerospace companies, by the turnaround in general aviation, and by the surge in U.S. travel.
- The U.S. trade surplus in aerospace declined last year for the third year in a row - from $41 billion in 1998 to just $26 billion in 2001.
- In 2001, Airbus won more new orders than Boeing for the second time in three years.
- The U.S. has largely missed out on the regional jet boom - with a $5 billion trade deficit in this fastest growing segment of commercial aviation.
- And we now run a very significant 3-to-1 trade deficit in civilian helicopters.
These are disturbing trends for an industry that is a pillar of American economic strength and national security. And they are trends that will accelerate if we do not act - rapidly, effectively, and collectively.
In my view, our long-term decline is rooted in two basic phenomena:
(1) Here in the United States, aerospace R&D spending has dropped by more than half; and
(2) Around the world, foreign governments and national carriers are pursuing an aggressive, possibly illegal, campaign of subsidy and discrimination.
The result is that our manufacturers are weakened, which means they can't invest to develop the new technologies our carriers need to expand. So our carriers can't place the new orders our manufacturers need to fund their research. It's a vicious cycle.
The first thing we need to do is fix what's wrong at home. The greatest source of American competitiveness is innovation, but in recent years, we have not been investing enough to support basic aerospace research -
- From the late 80's to the late 90's, U.S. funding for aerospace R&D fell from $34 billion to $15 billion.
- Aerospace has shrunk as a share of national R&D dollars from almost 20 percent at the end of the Cold War to less than 10 percent now.
- Today only 5-6 percent of government R&D funding goes to aerospace - a shocking figure, given the importance of aerospace and aviation to our country.
Much of our aerospace and aviation infrastructure is anchored in research initiated two or three decades ago. Because of the lead times involved, the current R&D shortfall may not affect our products for years. Unless we act, and act now, the day may come when we are forced to cede technical leadership in this vital field to Europe or the Pacific Rim.
Of course, increasing R&D won't, by itself, sustain U.S. leadership in aerospace if the playing field is tilted against us. And it is long past time we recognize that actions by foreign governments and companies violate the letter and the spirit of international trade rules.
This problem really begins with Europe. Europe has the next-largest aerospace sector, and a long tradition of governments promoting so-called "national champion" industries. But increasingly we see Europe's success inspiring copycats, like Brazil, China, Japan, and Southeast Asia. Thus, our ability to deal effectively with Europe - or not - will determine our future prospects with nations all over the world.
The core problem is government subsidies in the development and production of commercial aerospace products. For a while, we deluded ourselves into thinking that this problem would go away. But, in fact, the opposite has happened. The flood of Airbus subsidies, including interest, is estimated to be at least $30 billion. And that total will increase by at least another $4 billion as European governments subsidize the development of the new A380 jumbo jet.
Separately, the British Government has extended well over $1 billion in subsidies to Rolls-Royce over the past decade to develop aircraft engines, and last year announced it would provide an additional $400 million to fund the development of an engine for the A380. Earlier this year, the European Union specifically cited Airbus as a model when trying to cajole European governments into providing subsidies for Galileo, the new European GPS [Global Positioning System].
And subsidies are just the beginning. Last year the European Commission arbitrarily killed the GE/Honeywell merger. And Europe fought efforts to block the access of "hush-kitted" US aircraft to European airports - an effort that was ultimately rejected by the entire International Civil Aviation Organization (ICAO) ["eye-KAY-oh"].
Last year, the French Government said it was prepared to sell off 25 per cent of its jet engine maker to an international partner. But when GE expressed interest, the French Government clarified that by "international" it really meant "non-American."
And in the defense aerospace sector, there is an effort to create "pan-European" projects that freeze U.S. products out of military contracts.
We have to fight back immediately, at home and abroad.
At home, we need to use our tax code to encourage American aerospace companies to devote resources to risky, long-term research - by making permanent the R&D tax credit. And restoring Federal funding for aerospace R&D must become a national priority.
Overseas, we must fight back, with every weapon at our disposal.
(1) It is time for us to start talking seriously about mounting a WTO challenge to the EU's financial supports in aerospace. There was a time that taking Airbus to the WTO would have been considered a de facto declaration of trade war. But no rational person seriously thinks the U.S. wants to drive Airbus out of business. A WTO case would simply ensure that Airbus plays by the same rules we do. And the Europeans have shown they certainly have no hesitation about challenging U.S. trace practices at the WTO - whether it's our tax policies or tariffs on steel.
(2) We must develop a unified and comprehensive response to foreign regulatory decisions that discriminate against U.S. aerospace products or producers. Whether in antitrust measures, noise rules, or safety standards, foreign governments must know that if they discriminate against U.S. interests, there will be more than an expression of dismay. There will be a strong and concrete U.S. counteraction.
(3) And we must maximize every bit of the leverage we still have. If U.S. aerospace companies are excluded from investment or merger opportunities in Europe, we should make clear that we will prohibit European companies from making acquisitions in the U.S. If illegal European subsidies to certain companies continue, then those companies should be refused access to lucrative Pentagon contracts in the United States.
Over the last 30 years, I have had a front row seat for the American steel industry's grim decline. I have seen a strong, confident, wealthy industry reduced to near death by a combination of factors remarkably similar to those facing you: a decline in government support for R&D; systematic and remorseless trade discrimination; and a reluctance to pull the industry together and mount an organized fight until it was almost too late.
The silent mills and unemployed steelworkers who still dot the Ohio Valley are monuments to an industry that found itself in this very situation - and to government policies that put diplomacy and tact ahead of America's companies and workers. Government policies that lost a trade war in steel.
That can't happen again. I stand ready to support you and help you, in the Aviation Subcommittee, in the Commerce Committee, in the Finance Committee, and in the Foreign Relations Committee. On Capitol Hill, in West Virginia, in Seattle, in Chicago, in Brussels and at the WTO.
But you have to engage in the fight, too, to a far greater extent - airlines and manufacturers, general aviation and commercial aviation, labor and management. I know you face very real and immediate problems and needs, but I implore you to focus on the big picture and to take ownership of the future. Aviation is too important to our society, our economy, and our national security for us to decide we don't have the political will to defend our global leadership.
There is time, but not much. Let us work together to build a strategy and take the actions we need to prevent a long, slow decline of the American aerospace and aviation industry.
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