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Boeing, Airbus Subsidies Contested

Fri Oct 08, 2004 2:45 am

The following Associated Press article appeared on Page 1 of the Raleigh's "The News and Observer" Business section.

"A decades-long struggle between the world's two largest aircraft makers escalated into a new trade war between the United States and Europe, just as France-based Airbus stepped up plans to challenge Boeing for lucrative U.S. defense contracts.

U.S. trade officials filed a complaint Wednesday with the World Trade Organization, contesting what they say are [is] unfair subsidies to Airbus by European governments.

The European Union quickly retaliated, filing its own complaint with the WTO challenging U.S. tax breaks for Boeing.

Europeans dismissed the U.S. complaint as election-year politics from President Bush, who is facing criticism from Democratic challenger John Kerry over the loss of U.S. manufacturing jobs.

Kerry called the timing of the U.S. action, less than a month before the election, suspicious.

'For the last four years, George Bush has been asleep at the wheel when it comes to enforcing existing trade agreements, and while the president dozes, American jobs are being stolen by foreign competitors relying on government handouts.'

Administration officials denied politics played a role and noted that lawmakers in both parties supported the complaint

'This is about fair competition and a level playing field,' said U.S. Trade Representative Robert Zoellick. 'Since its creation 35 years ago, some Europeans have justified subsidies to Airbus as necessary to support an infant industry. If that rationalization were ever valid, its time has long passed.'

Tension between the companies has escalated in recent years as Chicago-based Boeing and Airbus compete in a range of civilian and military aircraft markets.

Airbus' parent, Paris-based EADS, said Wednesday that it has acquired U.S. military electronics company Racal Instruments for up to $130 million. EADS said the purchase would help it gain a larger share of the U.S. defense market, the worlds largest.

The company opened a Virginia-based defense subsidiary Monday and has scored several recent victories in the United States. These include a $75 million contract this week to supply 55 patrol helicopters to the Homeland Security Department. It also has partnerships with U.S. defense companies Northrop Grumman and Lockheed Martin.

Citing that success, U.S. officials argue that Airbus has grown into the market leader and no longer deserves government help. In particular, U.S. officials claim that Airbus has unfairly speeded up development of the A380 and other planes with help from $15 billion in subsidies from Germany, France, Spain and the United Kingdom.

But Europeans decry an estimated $3.2 billion in aerospace tax incentives by Washington state to help gain final assembly of Boeing's planned 7E7 Dreamliner in Everett, Washington.

The United States and EU agreed in 1992 to limit subsidies to 33% of the production costs for new models. The United States terminated that agreement Wednesday [October 6, 2005].

'It is clear that the 1992 agreement does not reflect current market realities and has outlived its usefulness,' said Harry Stonecipher, the chief executive at Boeing, whose shares gained 87¢ to close at $52.36

Ralph Crosby Jr., chairman and CEO of EADS North America, said he was disappointed by the move. 'I'm fearful that more heat than light will be generated by this action,' he said.

A WTO panel will examine the dispute if a resolution isn't reached in 60 days. A decision can take a year or more, and it can be appealed."
Oh how I miss Midway Airlines. A class act right to then end.
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Joined: Wed Oct 08, 2003 3:39 pm

RE: Boeing, Airbus Subsidies Contested

Fri Oct 08, 2004 2:51 am

May I direct your attention towards the already running thread...

US To File WTO Complaint

Smile - it confuses people!

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