July 2, 2001
News Release 01-092
Inv. No. 332-414
U.S. LARGE CIVIL AIRCRAFT AEROSTRUCTURES INDUSTRY'S POSITION
CHALLENGED IN THE GLOBAL MARKET
The U.S. civil aerostructures industry, which supplies fuselages, wings, and landing gear to the U.S.
large civil aircraft (LCA) industry, is facing new market challenges as it competes with the aerostructures industries in Europe, Canada, and Asia, reports the U.S. International Trade Commission (ITC) in
its publication Competitive Assessment of the U.S. Large Civil Aircraft Aerostructures Industry.
The ITC, an independent, nonpartisan, factfinding federal agency, recently concluded the investigation
for the U.S. House of Representatives' Committee on Ways and Means. The report examines the U.S.
civil aerostructures industry in its capacity as a major supplier to the LCA industry, discussing the composition of the industry and recent trends; the process of new aerostructures development; the means and
trends in government support and other financial assistance; and the relative strengths and weaknesses of
the aerostructures industries in the United States, Europe, Canada, and to the extent possible, Asia. The
report focuses on the U.S. civil aerostructures industry's ability to compete over the short and long terms
with the aerostructures industries in Europe, Canada, and Asia. Highlights of the report follow:
- Early global leadership in the aerospace industry enabled the United States to develop a highly
competitive aerostructures industry to supply the LCA industry. However, the U.S. aerostructures
industry has recently lost some of its competitive edge as a result of LCA industry consolidation,
aging U.S. manufacturing equipment, increasing responsibilities placed on suppliers by LCA
producers, and increasing foreign competition. A number of U.S. aerostructures firms are concerned
that foreign firms may displace U.S. suppliers because of market access and cost considerations.
- Some U.S. firms appear to be successfully responding to the challenges of the changing LCA aerostructures market by increasing scale and range of expertise through consolidation, adopting more
efficient and cost-saving measures, and taking on more supply chain management responsibilities.
- The European LCA aerostructures industry is characterized by its complex inter-relationships, the
dominance of Airbus Industrie and its aerostructures subsidiaries, and varying degrees of
government participation. Government-influenced consolidation is likely to increase the European
aerospace industry's efficiency and, in turn, competitiveness. Airbus encourages its predominantly
European supplier network to contribute research, development, and design inputs to a greater
extent than Boeing, the sole U.S. LCA producer. These suppliers are then able to market
themselves as design-build manufacturers, offering a value-added product for which they can
theoretically command a greater premium from the airframer.
- The Canadian aerostructures industry's continued consolidation will strengthen financial resources
and improve production capabilities, enabling Canadian aerostructures producers to take on greater
risk, responsibilities, and supply chain management to accommodate the demands of their LCA
customers. Boeing has been a long-time customer of Canadian aerostructures manufacturers;
however, the industry anticipates future work from Airbus as it and its aerostructures suppliers
encounter capacity limitations, prompting them to look for additional sources of supply.
- Asian aerostructures manufacturers have greatly improved their capabilities. However, gaps in
technological skill and a lack of experience in systems production and integration have thus far
prevented Asian firms from ascending to the upper levels of the supply chain. Conglomerate and
government management of Asian aerospace industries ensure that they are somewhat insulated
from the business pressures that other global firms might experience.
- NASA and U.S. Department of Defense research and development (R&D) spending for
aeronautics decreased in recent years relative to other major aerostructures-producing countries, a
trend paralleled by reductions in R&D expenditures by Boeing and other U.S. aerostructures
manufacturers. On the other hand, competing industries in Europe and Asia increased R&D
expenditures during this period, as did Canada, with the exception of 1999.
- Certain legal requirements and government policies have an effect on the competitiveness of U.S.
and foreign aerostructures manufacturers. Tax benefits include the United States FSC (Foreign
Sales Corporation) Repeal and Extraterritorial Income Exclusion Act of 2000; however, the lack of
financial transparency by European companies prevents a comparison to various European tax
incentives. Restrictive export financing regulations, combined with the United States' complicated
system of export controls, put U.S. aerostructures firms at a relative disadvantage compared with
European and Canadian companies, which enjoy more flexible export promotion programs. In
addition, productivity gains spurred by rigid EU labor regulations appear to balance the perceived
advantage U.S. companies might receive from more flexible labor laws.
The foregoing information is from Competitive Assessment of the U.S. Large Civil Aircraft Aerostructures
Industry (Investigation No. 332-414, USITC Publication 3433, June 2001). The report will be available
on the USITC's Internet site at www.usitc.gov. A printed copy of the report may be requested by calling
202-205-1809 or by writing the Office of the Secretary, U.S. International Trade Commission, 500 E
Street, SW, Washington, DC 20436. Requests may also by made by fax to 202-205-2104.
ITC general factfinding investigations, such as this one, cover matters related to tariffs or trade, and are
generally conducted at the request of the U.S. Trade Representative, the Senate Committee on Finance or
the House Committee on Ways and Means. The resulting reports convey the Commission's objective
findings and independent analyses on the subjects investigated. The Commission makes no
recommendations on policy or other matters in its general factfinding reports. Upon completion of each
investigation, the ITC submits its findings and analyses to the requestor. General factfinding
investigation reports are subsequently released to the public, unless they are classified by the requestor
for national security reasons.
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