Plane Old Protectionism

Protectionists are at it again, this time over the proposed U.S. and Japanese FSX jet fighter project. For once, the protectionists happen to be right—but for the wrong reasons.

The FSX was born as a compromise. The Japanese military is seeking a successor to its F-1 fighter, which was designed and produced entirely in Japan. General Dynamics tried to sell them the latest version of its successful but aging F-16, but the Japanese balked.

Against the backdrop of the U.S.-Japanese trade deficit and strong protectionist pressures, a deal was reached. Mitsubishi and General Dynamics would jointly develop an FSX derived from the F-16, to be produced mostly in Japan.

There's nothing that unusual about such collaboration. For years, the Japanese have been producing the McDonnell Douglas F-15 under license, as nine other countries do with the F-16. And General Dynamics is seeking a European partner to develop another F-16 derivative—the Agile Falcon.

But the Commerce Department, supported by protectionists in Congress and the media, began howling that the conniving Japanese were out to steal U.S. technology and displace yet another leading-edge U.S. industry—aerospace. Liberal columnist Robert Kuttner charges that FSX marks the beginning of the end for our commercial aviation industry.

If he's right, it's rather odd that neither of our two leading commercial jet makers—Boeing and McDonnell Douglas—opposes the deal. And that FSX has the blessing of the Aerospace Industries Association. Do these guys really want to cut their own throats?

Others charge that the Japanese are secretly planning to become a major arms merchant, thanks to FSX technology. That ignores Japan's constitutional ban on arms exports, as well as the small size of its aircraft industry, which makes economies of scale—hence, competitive prices on world arms markets—quite unlikely.

Nor is the FSX deal a one-way transfer of technology. The Japanese would be sharing their technology for making wings entirely of composite materials, as well as for a miniaturized phased-array radar.

So the protectionists are simply wrong in their arguments against the joint project.

That said, however, the FSX project is a bad deal at a more fundamental level. It's bad for taxpayers—both Japanese and American. And it's symptomatic of much of what is wrong with military procurement policy in the West today.

Protectionism has become the name of the game in Europe and Japan—aided and abetted by U.S. defense policy. Very few major weapons systems in Europe are put out to truly competitive bidding. All too often, a deal is negotiated with the major domestic aircraft firm or shipyard—for a small production run at very high cost. Occasionally, two or three European firms create a joint venture. But generally the coordination problems lead to lots of additional bureaucracy. Combine that with small production runs, and the results are still very high costs.

Right now the French and Germans are shopping for a new antitank helicopter. Instead of buying something like the United States' hot new AH-64 Apache, they will very likely design and produce a brand-new chopper—at about twice the unit cost. And the British appear likely to buy the less-capable Challenger-2 tank rather than the U.S.-built Abrams, which its officers apparently prefer.

Why does this continue to go on? For the same reason that the Japanese pay 1.5 times the U.S. price for home-assembled F-15s: to provide jobs at home. In other words: protectionism. But why do European and Japanese taxpayers stand for it? Because they are shielded from the true cost of providing their countries' national defense by…you and me.

It is the $160 billion that we spend defending Europe and Japan that permits them to indulge in such blatant protectionism. If we phased out this defense welfare, and the true burden of national defense became more apparent, taxpayer revolts in Europe and Japan would make outcries over $64 hammers and $300 toilet seats look trivial.

U.S. defense policy ought to have a major goal of weaning Europe and Japan from the defense welfare teat. In the case of Japan's FSX fighter requirement, our policy should be: if you want to indulge in protectionism, be our guest—but at your own expense. If you want to design and build your own fighter, at three or more times the cost of buying F-16s, go ahead. But don't expect the U.S. Air Force F-15s to remain based in Japan to defend your air space. They're coming home.

Europe and Japan are industrial giants. They are fully capable of defending themselves and making their own decisions. It would be a shame if their governments continue to subject their taxpayers to the outrageous costs of defense protectionism. They're far less likely to do that if we cut off their welfare checks.