U.S. Reopens Trade Case Over Airbus Support

The Bush Administration decides to bring a trade case against the European Union at the World Trade Organization. The administration says the EU is providing illegal subsidies to airplane manufacturer Airbus. The EU calls the U.S. decision "disappointing."

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MELISSA BLOCK, host:

A long-running trade dispute between the US and Europe heated up today. For years, the US and Europe have complained about each other's subsidies to airline manufacturers. Today, the US effectively ended a truce and said it will go forward with the case against Europe and Airbus at the World Trade Organization. Both sides have worked over the past year to avoid this development. Now it appears that the US has run out of patience and will go back to court. NPR's Adam Davidson joins us now.

And, Adam, if this has, indeed, reached the boiling point with the US now reopening its case, why now? Why has it come to this?

ADAM DAVIDSON reporting:

Well, to understand it, you have to understand that Boeing is one of the most important companies in the US and it's a huge--hugely important to the US government. They've been hurting a lot lately, and a lot of the reason they've been hurting is because Airbus, their chief rival, has been getting so much government subsidy from the Europeans, Boeing finally came out of its doldrums with its new plane, the 787 Dreamliner that just began development, and Airbus immediately responded just last week saying that they're going to launch a new plane with subsidies from Britain and Spain at least, if not France and Germany, as well. And this really scared Boeing, it really scared the US government and that's why they're launching this now.

BLOCK: Now it's said this could become the biggest trade fight in history. This is a huge market we're talking about.

DAVIDSON: It really is, and it's a market with only two players; aviation is one of the US' main exports, same for Europe. And only Boeing and Airbus in the entire world make those large, commercial passenger airplanes that we're so used to flying in. Each company employs tens of thousands of people and, then, when you add all the suppliers, the people who make landing gear and seats and all that sort of thing, you're talking about hundreds of thousands of jobs, many, many tens of billions of dollars. It's a huge, huge deal to both economies.

BLOCK: Well, what is the US alleging that the Europeans have done?

DAVIDSON: Well, actually the facts are not too much in dispute on this. The Europeans acknowledge that they give Airbus a lot of money, billions of dollars, in what they call launch aid. Basically, these are loans, but the loans only have to be paid back if Airbus is successful. The European countries will give Airbus several billion dollars to develop new aircraft. And if an aircraft is not successful, for example that new huge Airbus A380 is probably not going to be that successful, Airbus doesn't have to pay the loans back. The US calls that an illegal subsidy and says it's illegal under the WTO rules that all the parties signed.

BLOCK: And the Europeans have their own complaints about Boeing.

DAVIDSON: Yeah, they sure do. And the Europeans assure us that we can expect them to file a counterclaim as early as five minutes after the US claim is filed tomorrow. The Europeans say that Boeing gets just as much money, if not more, from the US government but that it takes a different tack. That the US gives money through NASA and DOD research contracts, that the state of Washington has given Boeing a lot of tax breaks. So each side says the other side is getting subsidies, but they disagree on the amount and who's really doing it illegally.

BLOCK: Well, as I understand it, to win a trade case, each side would have to prove that harm was done to them. Does one of these players have the upper hand here?

DAVIDSON: Pretty much every trade lawyer I've spoken with says that Boeing very much has the upper hand. First of all, they've been very much harmed. They've lost at least 20 percent market share; gone from the dominant to the second player. Airbus has a much harder case to make on that. Also the money Europe is getting--the money Europeans give to Airbus is much more clearly a subsidy than the money the US is getting. But most likely the WTO isn't going to resolve this because it's going--this will take years and years and it'll probably end up getting back to the negotiating table just between US and Europe.

BLOCK: OK. NPR's Adam Davidson, thanks so much.

DAVIDSON: Thank you.

BLOCK: You're listening to ALL THINGS CONSIDERED from NPR News.

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