Boeing, Airbus Subsidy Dispute Escalates
STEVE INSKEEP, host:
A trade war is erupting in the airline industry.
The Bush administration is asking the World Trade Organization to punish the European Union for unfairly subsidizing the aircraft maker Airbus. And the EU today is responding. It announced it will re-activate its own legal case against the United States' support of Boeing. NPR's Adam Davidson reports.
ADAM DAVIDSON reporting:
The US government has long alleged that several European countries illegally subsidize airplane manufacturer Airbus. Richard Mills, the spokesman for the US trade representative, says the US hoped the issue could be settled through negotiation.
Mr. RICHARD MILLS (Spokesman, US Trade Representative): But unfortunately at this point, they are no longer willing to hold off on the type of subsidy they provide to Airbus, called launch aid. They've only proposed to reduce these subsidies. The EU's insistence on moving forward with new launch aid is forcing our hand.
DAVIDSON: Charlene Barshefsky, a former US trade representative, now represents Boeing in the trade dispute and says it all comes down to one basic fact: Boeing lives and dies by the market. It has to raise funds on its own to build new planes and only thrives if it makes good decisions.
Ms. CHARLENE BARSHEFSKY (Boeing Representative): In the case of Airbus, that financing, the ability to produce plane after plane after plane, has been provided by European treasuries at essentially no cost to Airbus.
DAVIDSON: Several European governments give Airbus billions of dollars in loans to build new planes. Airbus doesn't have to pay those loans back if its planes don't succeed in the marketplace. Therefore, Barshefsky says, the loans are subsidies and are clearly illegal according to the WTO rules that the US and Europe have agreed to.
Allan McArtor, who heads Airbus' office in Washington, says Barshefsky and the US government are only telling half the story.
Mr. ALLAN McARTOR (Airbus): Boeing and Airbus both receive substantial government support, but they are through decidedly different mechanisms and formulas. And it's a little bit like trying to balance baseball and cricket. They're kind of alike, but they're just different.
DAVIDSON: The European Union says that Boeing gets even more government money than Airbus. NASA and the Defense Department fund some of Boeing's research. The state of Washington gives Boeing substantial tax breaks. The problem with this argument, Barshefsky says, is that none of the Boeing aid is illegal under WTO rules.
Ms. BARSHEFSKY: It is virtually inconceivable that Europe's claims will succeed in the WTO, because the basic requirements for either subsidy or injury to Airbus will not be able to be shown.
DAVIDSON: Until two years ago, Boeing sold far more planes than Airbus, but Airbus now has a majority of the market share. So, Barshefsky argues, Boeing has clearly been hurt and Airbus has not.
The European Union has been eager to avoid this fight. Antony Gooch, the EU's spokesman in Washington, said last week that Europe will file a claim soon after the US does.
Mr. ANTONY GOOCH (EU Spokesman): And so no one should be under any illusion as to our stomach for a fight if that's the way we need to go. But we don't believe that fighting is actually what's in the best interests of a very important industry on both sides of the Atlantic.
DAVIDSON: Several trade lawyers with no connections to the case told NPR that the US does have the edge in a WTO case. But victory could come at a price. The WTO could tell both the US and the EU to reduce government aid. This will make it even harder for Boeing and Airbus to develop new models and to make a profit at a time when their customers, the airlines, are in severe economic distress.
Adam Davidson, NPR News.
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