Airbus Subsidies Have Destroyed Thousands of U.S. Jobs

In a few days, the world’s two major producers of commercial transports (jet airliners) will release their order and delivery results for 2009. The results will show that European champion Airbus delivered slightly over 50% of all planes built, while greatly exceeding American champion Boeing in the number of new planes ordered. It’s been going this way pretty much since the decade began, because after 40 years of subsidies from European governments, Airbus now has a complete family of transports that can aggressively compete in virtually any capacity/range category with Boeing.

In 1990, U.S. commercial transport producers had an 85% share of the global market and Airbus had a mere 15%. But as Airbus leveraged subsidies to aggressively price its planes and expand offerings, U.S. producers gradually lost ground. Lockheed exited the business in the 1980s. McDonnell Douglas effectively gave up in the 1990s. Boeing saw its market share fall from over 60% to under 50% in the current decade. As a result of these setbacks, tens of thousands of American aerospace jobs disappeared, and tens of billions of dollars in export earnings were lost.

This posting isn’t about why policymakers should take illegal subsidies into account in comparing the Airbus and Boeing planes being proposed as a future Air Force tanker. I’ll talk about that some other time. It’s about something more basic: a political system that is so insular and disorganized that it allows its great industries to be destroyed one by one through unfair, anti-competitive behavior without even noticing, much less acting. We have seen similar decay in steel, in electronics, in shipbuilding, in chemicals, in paper and in autos — and the net result is that America now runs a trade deficit in manufactured goods of over a billion dollars per day. Needless to say, this has not been a positive development for the U.S. dollar’s role a reserve currency.

What bothers me, and no doubt Boeing, is how European governments have been allowed to deliberately and systematically destroy America’s global lead in jet airliners without any real sense of outrage in Washington. The European governments and Airbus routinely issue dishonest statements about how Boeing gets unfair assistance too, but when the time came to lodge a case with the World Trade Organization, they didn’t even allege that Boeing gets the kind of launch aid that has enabled Airbus to undercut Boeing on price. Instead, they referred to more modest types of aid that Airbus gets too.

The lesson of all this is that when countries have been Number One in the world for as long as America has, it takes a while to grasp that the global alignment of power is changing. We were indifferent when Japan kicked American auto companies out so Toyota would have a protected home market, and we were barely aware when China built up its steel industry to five times the size of ours. But if we don’t start getting our act together on demanding fair treatment of our exporters — starting with Boeing — then we shall not be Number One for much longer.