Outlook: Dogfight with US set to rumble on

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Europe and the US may have settled for a score draw over the Boeing- McDonnell Douglas merger, but the dogfight over which side gives its aerospace and defence industry more back-door government support rumbles on.

The latest broadside comes in the shape of a revealing set of statistics drawn up by the European Association of Aerospace Industries. Its 1996 survey shows that whereas government contracts now account for less than 30 per cent of industry turnover in Europe, the comparative figure for the US is 50 per cent.

Whilst Europe's aerospace companies have had to make their way by building up export and commercial aircraft orders, Boeing, Lockheed et al still rely to a remarkable extent on Uncle Sam asking them to find ever more inventive and expensive ways of trashing the enemy.

The ripple effects from the Pentagon's astronomic procurement and research and development budgets are there to see. Europe might support its industries with state aid, but the US government-funded military programme has spawned and supported just as much industrial activity. It's a bit rich of the US to come over all indignant about state subsidies to industry when its own military programme is just a different version of the same thing.

On a narrower front, the advantages of having a large and unfragmented home market and a single buyer to deal with are also apparent. The sheer scale of the US military machine makes it a potent force in export markets as well, which is partly why Europe ran up a 9bn ecu deficit in aerospace trade with the US in 1996.

The question is how should Europe's aerospace industry go about rectifying the problem and overcoming its relative disadvantage. Whingeing is all well and good but no amount of statistical evidence will change the central thrust of US military procurement policy or the support the US gives its aerospace companies.

The best riposte for Europe must be to take the Americans on at their own game. It would be too much to ask the 15 EU member states to draw up a joint aerospace policy overnight. But the industry can help itself by ensuring that the pace of consolidation here matches that taking place in the US. That requires political will as much as commercial impetus. In particular, the French need to make a start by pressing ahead with the privatisation of Thomson and Aerospatiale. Without this, Airbus will never see the light of day as a single commercial entity, nor will the consolidation necessary in the defence sector take place.

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