Business Columns & Blogs

Bill Virgin: The global economic quandary

Some years back your columnist had the opportunity to speak to a group of members of one of Boeing’s unions. At that event, many of those in attendance wore buttons and/or hats adorned with the word “Globalization,” with the international symbol of negation – a circle with a diagonal red slash – imposed on it.

On the surface the sentiment on display was understandable given the audience. But on further review, it was a curious statement to make given how many in that room, in that union and at Boeing owed their jobs to globalization.

Globalization is what made it possible for an American company to be one of the two dominant manufacturers of passenger jets, instead of just one company among dozens of aviation companies around the world selling mostly to their home market. Globalization is what allowed a (then) Seattle-based company to sell those planes to every continent with an airline, generating jobs for tens of thousands of residents of the Puget Sound region.

Between the two extremes – hermetically sealed economies and borderless, restriction-free trading – is the world of contemporary globalization, and it’s a territory that not many people are comfortable inhabiting. We like globalization, as long as it works in our favor. And when it doesn’t? Umm, then not so much.

The continuing discomfort with globalization was illustrated by a recent conference that didn’t happen.

MexicoNow, a magazine focusing on trade and investment in and with that country, had planned a Dec. 2 conference at a hotel at SeaTac for aerospace companies to consider setting up operations south of the border. Objectives of the conference included providing insight into “the competitive advantages aerospace companies enjoy in Mexico” and information on the cost of “a potential offshore manufacturing project in Mexico.”

According to a calendar of events on the magazine’s website, this same conference has been held around the United States in Dallas, Philadelphia, Miami, Los Angeles and Kansas City; as well as in the home territories of Bombardier, in Montreal, and Airbus, in Toulouse, France.

But the prospect of such a conference in the Puget Sound region attracted the notice, and ire, of the International Association of Machinists and Aerospace Workers, which threatened to picket not only the conference itself but the local offices of several companies participating in the event. The IAM also sent a letter to Boeing CEO James McNerney asking him to pull the participation of a company executive scheduled to speak.

MexicoNow canceled the conference, but in a press release announcing the move, editor Sergio Ornelas defended the concept behind it. “Aerospace manufacturing has a lot to do with globalization and competitiveness. In order for the aerospace industry to work, it requires many people from many manufacturing platforms as competitive supply chains,” he said. “Manufacturers distribute their different work processes where they are most efficient ... And the low-cost manufacturing regions make companies that go there more competitive in world markets. Actually, production sharing or outsourcing in low-cost countries help global firms to conserve higher paying jobs in developed nations.

Consumers in the U.S. and around the world cherish production sharing practices because they are able to enjoy products and services at affordable prices.”

Ornelas added that “the vast majority of material sourcing for the Mexico aerospace industry represents billions of dollars of purchases from U.S. manufacturers – something that supports thousands of jobs in the United States. ... It seems paradoxical that organizations would want to suppress the free exchange of information in the aerospace industry global value chains.”

For its part the IAM was unapologetic in chasing the conference away: “At a time when 358,000 Washington state residents are unemployed, untold thousands more have given up on ever finding a job – and one in seven are on food stamps – we felt it was essential that someone ask the conference participants a very pointed question: Why are you working so hard to undermine this state’s economy, and send these vital aerospace jobs out of the country?” said District Lodge 751 President Tom Wroblewski in a statement.

“Sending work to Mexico or China may win short-term gains for the companies that practice it, but our members know first-hand how it can destroy a company’s – or a nation’s – long-term competitiveness in aerospace. If America is to maintain its leadership in this global industry, our companies and our nation need to invest here at home – and not overseas.

“This union remains committed to growing Washington’s aerospace industry, and we will eagerly partner with anyone who wants to help us create more opportunities for aerospace workers – even Sr. Ornelas, should he come to us with a plan that realistically grows jobs in this state. But as long as the goal of MexicoNow is to steal American jobs, we will continue to oppose any effort the group might make to organize any outsourcing conference in Washington state.”

Let’s acknowledge from the start that all participants in this dispute have self-interests they’re seeking to protect – the magazine to generate revenue through conferences, aerospace companies and other attendees in seeing if there’s a way to cut their costs, the union in defending member jobs (and its own dues income). Furthermore, there’s considerable validity made in the points by each party (the unions, for example, were among the first to question Boeing’s ability to pull off the global sourcing model for the 787. Whatever the motivation for the criticism, it turns out they were right).

But acknowledgement is not the same thing as solution. Those competing self interests are what make the globalization/offshoring/outsourcing debate so impossible to resolve, short of one or more competing parties giving up.

Which isn’t going to happen. Aerospace companies are going to continue to consider offshoring and outsourcing, although perhaps not in the spotlight of an advertised conference.

The globalization headache, at least for American workers, is going to get more difficult to remedy. As emerging competitive aircraft development programs reach commercial stage in China, Russia, Japan, Brazil and Canada, the Boeing-Airbus duopoly (and the jobs supported by it) will be weakened. The new message of globalization in the aerospace sector could be: “Keep your planes. We’ll build and buy our own.”

Thus globalization increasingly resembles the conundrum that a lot of airline passengers find themselves dealing with these days: We don’t like the ride we’re on, we don’t seem to be able to get off, we’re not sure when or if we’ll get to where we want to go, we’re not even sure what the destination is, but the alternatives (staying at home, walking) look even less palatable than what we’re enduring now.

Bill Virgin’s column on business and economics appears Sunday in The News Tribune. He is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at