One of the largest export industries remaining in the United States is in aircraft production. The U.S. has a comparative advantage in aerospace trade. Boeing can benifit on the micro level through its technology transfer to its Japanese partners (they recieve substantial subsidies and indirect support from the Japanese government that allow them to underbid work for Boeing). However for the U.S. economy as a whole, the 787 program will erode one of the few remaining sectors that makes a positive contribution to the country's current account. The 787 program as it is being carried out will have negative repurcussions for the U.S. balance of payments and for the vitality of the Puget Sound region.

For a fairly compelling article on the controversy surrounding transfer of composite wing technology to Japan see Eamonn Fingleton's, "Boeing, Boeing, Gone." http://www.jpri.org/members/BoeingFingleton.pdf

I think Boeing is doing just the right thing in spreading the fabrication and assembly of the 787 over the world.
First, it brings us closer to other major countries, helping to cement cultural and economic ties.
Second, it helps spread the risk of production. We live in a different world now. There are terrorist risks that did not exist previously. With golbal warming threatening, we might face localized natural disasters that we are only beginning to glimpse now. The physical spread of fabrication facilities helps ameliorate these risks.
We just don't know what awaits us on into the future. One day we may need the Japanese just as badly as they once needed us, as just an example.
Good move, Boeing.

Aerospace is one of the last sectors of the U.S. economy that the country has a comparative advantage in. Statist challenges from abroad have proved too difficult for U.S. firms to compete aganist. U.S. industry has been hollowed out over the years, aerospace is one of the last things we have left. Airplane wing technology is extreamely prized and closely protected by the few firms that are sucessful at it. Transfering such a substantial amount of work to Boeing's foreign partners will hurt the U.S.' balance of payments.

On the micro level I can see why this deal is so attractive to Boeing. The Japanese partners were able to recieve substantial government subsidies which allowed them to underbid the work. This arrangement should allow Boeing to price 787s more competitvely and put pressure on Airbus.

Another problem I have with the technology transfer of wing technolgy to Japan is our bilateral trade imbalance. Despite economic problems during the 1990s Japan's economy essentailly remains closed to U.S. business(The US Trade Representatives report on Japan documents extensive barriers in essentially every sector). Even though economic growth has been lackluster for quite sometime, Japan's trade surplus with the U.S. has been raising quite substantially. In the past Japanese Prime Minister's felt compelled to increase purchases of US aircraft when their country's trade surplus numbers would begin to raise attention in DC. Future purchases of Boeing aircraft will no longer serve to improve U.S. trade numbers visa-vis Japan.

No other country in the world is blinded by rigid trade idelogy to the extent of allowing the transfer of such valuable aerospace technolgy.

This is purely the cultural in the interest of shareholders profitability only. It doesn't matter where parts or whole airplane is build as long as the profit is continue to add to shareholders' value, you and I will continue to debate forever and will not change a bit to the way the Boeing is running the businesss.

Aerospace is an interesting case because it has historically been unprofitable. Because of military applications aerospace is closely tied to the federal government. NASA and military research led to the composite technology that will be used on the 787. Although legally speaking Boeing can be considered a private corporation, it is at its heart sustained through research and procurement funds stemming from the federal government in a manner more consistent to state socialism than private enterprise.

The Keynesian multiplier on aerospace jobs is so great that it does in fact matter where high technology 787 parts are built. The US Commerece department, State government and labor leaders have let down the country and the Puget Sound region by allowing prized aerospace technology to be wrestled away by various statist economies (esp Japan). As we let aerospace be hollowed out we can expect an accelerated deteriation in the country's balance of payments and a decline in national security as we lose the capacity to produce military equipment domestically.

The Japanese understand the importance of high technology industries in maintaining their national security and maintain an industrial policy designed by METI to promote national strength in areas of high technology. The United States is sadly, oblivious.

in my mind , it is a really nice thing for these workers to make such a great advancement in aviation

the fact is , we need these aerospace jobs
boeing's goal is to bring together great airplanes so that they can be used in airports

and yes, there are factors that some of the parts of the dreamliner is being built overseas
but the truth of the matter is, whether it's this place or the next one, there needs to be local jobs in our aviation community

what a bunch of garbage -- "cultural ties". please. boeing was built with government subsidies and still received government subsidies yet outsources work to other countries. the reason? because of even MORE government subsidies (japanese this time). all these billions for corporations and stockholders and citizens who rarely even FLY pay.

I was disappointed in Glenn Farley’s much less than incisive and insightful commentary on the international outsourcing aspects of the fabrication of major 787 structural assemblies. Certainly, the Boeing explanation that he advanced without question: augmenting our own expertise and capabilities by making use of those possessed by corporations in other countries, has little or nothing to do with it.

As one of the interviewees said, fabricating major structural components from composites is quite different from manufacturing non-structural panels and parts. In fact, an Airbus aircraft crashed on Long Island, NY because the composite vertical fin broke off during pilot response to an apparent engine failure on take-off. A learning experience indeed.

Boeing developed the technology for creating entire structures out of composites while building the B-2 bomber, with plenty of government money to finance the R&D. Lockheed did the same when building the F-117 stealth fighter/attack aircraft. The purpose of developing the new technology was then strictly to create aircraft that could avoid radar detection – any of the other benefits that Boeing is now capitalizing on to advance the art of commercial transport design were simply side-benefits in the military application. Therefore, I personally doubt that industries in any other country exceed, or even match, the capabilities in the design and fabrication of composite structures that exist here in the USA, and even just within the Boeing Company itself.

On the other hand, giving away wing design secrets is probably not an item of real concern at this time. Advancements in this area are probably minimal on the 787, as the laws of physics and hydrodynamics have been pretty well stretched to their limits in previous designs. However, the rivet-free, smooth surface of a composite structure is probably a really significant factor in wing efficiency.

Furthermore, if you want to know what Boeing’s idea of an efficient wing shape is, you have only to go out to the hangar and measure one to get at least a design starting-point. The principles of design and the analysis tools for aerodynamic efficiency are often developed in the academic arena, which is open to view and may already include major participation by institutions in other countries.

Alternatively, here are three reasons for the outsourcing that were not clearly addressed in the broadcast:

1) This is an economic risk-sharing exercise.

Prior to the 1960’s, aircraft manufactures decided what designs would “fly” in the marketplace, built them unilaterally, and waited prayerfully for orders.

Then, when the up-front costs rose, they required the airlines to place orders and commit to progress payments before the decision was even made to build the vehicle. In return for these considerations and taking the risk that the aircraft could turn out to be sub-standard, the “launch customers” were given some influence in defining parameters, such as seating capacity, for at least the initial model variant to be produced.

The next step in spreading the enormous economic demands for designing ever more sophisticated and complex vehicles has been that subcontractors providing major subassemblies were also required to front some or all of the costs of building them, just in order to land the contract. The return to them is profit sharing as well as cost recovery, contingent of course on the aircraft being successful in the marketplace.

2) This sharing of manufacturing responsibility is also simply necessary to sell aircraft in foreign markets, where the airline industry is typically much more symbiotic with the government, if not actually run by the government.

Ergo, the selection of aircraft, given that there is no really egregious difference in performance, reliability, or availability of appropriate capabilities in the product lines, becomes as much or more a political exercise than one of hair-splitting technical or operational analysis. Surely, the current debacle in the wiring design for the Airbus A-380 “Super Jumbo” is more the result of European politics and national pride than to incompetence by the technical designers, who after all, produced the first commercial transport (the A-320) that relies on electronics for “fly-by-wire” commands absolutely critical to the control of the aircraft.

Other countries want to develop their own industries and to keep as much as possible of their money at home, just as we do. Given the competitive environment for aircraft sales and the influence of governments over them, the ultimate winner of orders for aircraft from a country may just have to capitulate to these demands for “production off-sets” to sell any aircraft at all. If the Boeing unions did not at least grudgingly accept the validity of this fact, they would be on the street right now.

Also, we may speculate that foreign manufacturers who are comfortable with the profits and prestige emanating from a partnership with Boeing (or Airbus) may have reduced incentive to invest the simply enormous up-front costs, and to accept the risk of failure inherent in creating their own aircraft manufacturing capabilities virtually from scratch. At the least, the partnership might delay that initiative.

3) So, why does Boeing outsource to the extent of spinning-off so much of its own domestic capability? Why is it cheaper to sell the Wichita plant and then buy the same parts from the new owner, even given the problems and cost of creating new commercial and technical interfaces with an entity that is not part of the family any more, and that has its own aspirations for making as much money as possible.

This is not to mention the difficulties that have consistently existed in educating and constantly monitoring outside suppliers about the demands on quality and process required for FAA certification and fundamental safety of flight. This is not a matter of exchanging your broken TV set for a new one; and the culture of quality that may be unparalleled in any other industry is already inculcated and taken for granted within the Boeing workforce.

Try union clout minimization and employment flexibility. In other words, counter the power of unions to dictate salaries and benefits due to their sole possession of the production expertise and capabilities, and to place restrictions, however small, on the way that the company flushes employees in and out of employment as workload cycles.

Union contract negotiations held during an upswing cycle in production can result in significant concessions by the company, just to get airplanes out the door and to pay the pending bills for investments already made in parts and design. If the threat is obvious that the jobs could just go somewhere else, to an environment where the union is not so well entrenched and supported by the local society; and where several entities must compete to land the contract, union power within both Boeing and their potential suppliers is significantly impacted.

If orders fall off, as they always do following the periodic buying stampedes for new aircraft, Boeing can just stop ordering parts from an outside vendor, and the subcontractor must substantially fend for himself (though you don’t want the developed and educated resources to go entirely out of business before the next production stampede). No spare real estate for Boeing to dispose of; no bad community relations due to heart-rending stories of human tragedies and no increased cost of unemployment insurance contributions.

Though the cost of a specific outsourced part on the loading dock today may be more than the equivalent part built on the Boeing site, as Mr. Farley related in the broadcast, the total cost of that part amortized over the ancillary costs during the life-cycle of the aircraft is most certainly calculated to be less. Boeing obviously thinks so, or they would not be changing their traditional modus operandi so drastically and dramatically, especially given the inherent concomitant downsides of doing so. They have had, after all, the example of Airbus’ traditional dispersed production processes to guide their decisions.

This story is missing one very important part of the equation: the insourcing of jobs. Just walk around the office and you'll see cubicle after cubicle full of foreigners primarily from India taking away jobs from americans. Just what did the Washington State tax payer get for their 3.2 billion dollar gift to Boeing. Isn't time that you people in the new media look at the true cost of Boeing doing business in this state!

I enjoyed the rebroadcast of the show tonight, and congratulations to Boeing on their latest world beater. I can't wait to fly in a 787.
Much has been made of the fact that Boeing has used Mitsubishi (and Kawasaki) to design/build the wings for the 787. Mitsubishi has a long history of wing design, with some recent examples being the F-2 fighter (F-16 clone) and the design and fabrication of the Bombardier CRJ. Is it possible that wing design (even using composites) really isn't all that value-added or difficult anymore? I'm guessing that the science of transonic, conventional (tube/wings) aircraft is understood so thoroughly that you could probably have a grad student with access to Google come up with a competent design.
Maybe Boeing was smart to outsource the wings, and for that matter, most of the airplane; save some money for tasks that are basically drudge work and lower the (financial) risk to the company.
Boeing has turned the rest of the world into its manufacturing floor, sort of like what Airbus has done with Europe. Get governments and large corporations to bid on being involved (subsidizing Boeing's access to worldwide production capital), leverage that at a political level to encourage future sales to the countries in question, assemble it all and sell them as fast as possible. I think it's brilliant.

How can any American cheer at this non-American airplane? So many parts are foreign built, so many potential American jobs gone, why are so many of you standing around with stupid grins on your faces? The founder of Boeing must be rolling in his grave.

At any time you so called "foreign partners" could pack up and tell Boeing to pack sand, American companies will doom themselves by outsourcing their futures to foreign vermin!

Foreign vermin?? Mr. Rush, that's a rather harsh comment, especially given that over 90% of the customers of the 787 are foreign. Richard Aboulafia has a nice write-up of why Boeing did the right thing in going global with the 787:
http://www.richardaboulafia.com/shownote.asp?id=250