EI321
Topic Author
Posts: 4788
Joined: Tue Jul 07, 2009 4:43 pm

Hopes Fade For Boeing-Airbus WTO Settlement

Wed Nov 14, 2007 3:45 pm



Quote:
GENEVA (AP) --- American airplane manufacturer Boeing Co. accused rival Airbus and the European Union on Wednesday of standing in the way of a settlement to their trans-Atlantic dispute over subsidies in the aviation industry.

Spokesman Tim Neale said Boeing had yet to receive an offer from the EU or Airbus to eliminate the below-market loans known as "launch aid," which the Chicago-based plane maker and the U.S. government have challenged at the World Trade Organization.

The 27-nation EU's top trade official warned Tuesday that it may be impossible to settle the massive commercial dispute for another two years, or even longer.

"We are not aware of any (EU) or Airbus offers to resolve this dispute that would address the most market-distorting subsidies," Boeing's Neale said in an e-mailed statement.

The competing WTO cases rest on the ability of Washington and Brussels to demonstrate that their industries have been harmed by the other's subsidies. Both have presented evidence of lost plane sales or lowered prices to back up claims.

http://ap.google.com/article/ALeqM5i...ULAaLqk7ZBPiziBtSccVnbx8QD8STF1HO1

If the EU were so worried about being found 'guilty' over this, surely they would have proposed a settlement by now? Or is the Boeing/US case towards the EU/Airbus weaker than we are being led to believe?
 
User avatar
moo
Posts: 4101
Joined: Sun May 13, 2007 2:27 am

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Wed Nov 14, 2007 4:00 pm



Quoting EI321 (Thread starter):
If the EU were so worried about being found 'guilty' over this, surely they would have proposed a settlement by now? Or is the Boeing/US case towards the EU/Airbus weaker than we are being led to believe?

Couple of conclusions I have come to during my research of this over the past few years:

1. The WTO will *not* rule on the case against the A300, A310, A320, A330-300 or A340-200/300 as these subsidies were given prior to the formation of the WTO in 1994/1995

2. The WTO will most probably refrain from ruling against Airbus and the EU on the basis of any valid and correct loans made under the auspices of the 1992 agreement until its termination in 2005, as this would be considered a binding, voluntary and valid agreement between two parties and any complaints against valid and correct loans made after the signing of the agreement may be considered a 'bait and switch' tactic

3. The WTO will concentrate on any significant and blatant violations of either the WTO rules or the 1992 agreement, if it finds any

I have discussed these points with several people I would consider 'informed' in the economic mindset and they, by and large, agree with me on the above points.
 
User avatar
zeke
Posts: 9930
Joined: Thu Dec 14, 2006 1:42 pm

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Wed Nov 14, 2007 4:41 pm



Quoting EI321 (Thread starter):

If the EU were so worried about being found 'guilty' over this, surely they would have proposed a settlement by now? Or is the Boeing/US case towards the EU/Airbus weaker than we are being led to believe?

Few problems from what I understand :

1) The US did not cancel the 1992 agreement correctly with cause, they just walked away from it. EADS/Airbus have continued on like the agreement is still in place, and from what I understand this will be the first point to be argued, if in fact if the 1992 agreement is still in place.

2) Under the 1992 agreement, indirect support (i.e. benefits provided for aeronautical applications of NASA or military programmes) should be limited to a 3% of the nation's LCA industry turnover, the level of indirect support Boeing has been reported to have been over double that at times. http://trade.ec.europa.eu/doclib/docs/2007/september/tradoc_136046.pdf

3) The 787 program received numerous illegal subsidies under the 1992 agreement. http://www.buffalo.edu/reporter/vol35/vol35n40/articles/Boeing.html

4) EADS/Airbus do not deny receiving repayable loans, they are repaying 300-400 million euros a year back on them, and in some cases royalties are still being paid when the loan has been fully repaid, as the payment is fixed per airframe. For example on the A320 when they thought 800 frames would be built, and now with over 5000 ordered, the royalties will continue to flow until the frames stop shipping.

5) Boeing has already been taken to the WTO before over using illegal tax havens, they lost that case as well.

6) Boeing has failed to show how the repayable loans are hurting/�"causing injury to” to them.

Quoting Moo (Reply 1):
I have discussed these points with several people I would consider 'informed' in the economic mindset and they, by and large, agree with me on the above points.

I agree as well, dont forget the Agreement on Subsidies and Countervailing Measures was made after the 1992 LCA agreement as well.
We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
 
SJBOEING
Posts: 13
Joined: Mon Nov 12, 2007 8:50 pm

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Wed Nov 14, 2007 4:45 pm

Moo, you seem very knowledgeable on this subject. Maybe you, or anyone else who really understands what is going on here, could help me understand something a little better. Maybe I have missed this in previous threads, or maybe I just don't understand the theory completely. Given the USD/Euro disparity over the past several years, and certainly more recently, of course, how is it that Airbus is able to be so competitive with Boeing on price if it prices its planes in USD but must over its cost in Euros? A quick answer I would think would be a major hedging campaign inside Airbus, but could someone shed some light on that for me? I understand that airlines do not pay list prices for their aircraft and receive ridiculous discounts/incentives, but in principle the currency gap shouldn't allow any price cushion. I would appreciate it, as I do not want to jump to conclusions or point fingers without completely understanding the subject. Thanks.
 
User avatar
zeke
Posts: 9930
Joined: Thu Dec 14, 2006 1:42 pm

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Wed Nov 14, 2007 4:54 pm



Quoting SJBOEING (Reply 3):
A quick answer I would think would be a major hedging campaign inside Airbus, but could someone shed some light on that for me?

Over 40% of all Airbus aircraft by value are sourced or built in the US.

Boeing's are not 100% made in the USA, assembled yes, but a lot of components come from Europe and Asia, and a lot of raw materials like titanium is imported to the USA. I think they may have at most 10-15% more content by dollar value at the most difference between A&B aircraft.

The strong euro hinders manufacturers which export like Airbus, at the same time the weak US$ hurts large scale importers like Boeing.
We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
 
User avatar
moo
Posts: 4101
Joined: Sun May 13, 2007 2:27 am

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Wed Nov 14, 2007 5:10 pm



Quoting SJBOEING (Reply 3):
Given the USD/Euro disparity over the past several years, and certainly more recently, of course, how is it that Airbus is able to be so competitive with Boeing on price if it prices its planes in USD but must over its cost in Euros?

As Zeke mentions, a large proportion of Airbus aircraft are made in the US or in USD linked economic zones - and that proportion can infact exceed 50% when certain options and configurations are taken by the customer.

Secondly, the dollar:euro disparity we have been seeing has only really come into effect in the past 2 or so years, before then the euro was fairly static value wise against the dollar.

Thirdly, a significant proportion of the list prices of aircraft you hear talked about is infact pure profit, some times as much as 50% or greater - aircraft list prices are infact over valued, allowing manufacturers to make vast discounts right down to the bone which while sounding fairly damaging are infact just reducing the profit margin.

Fourthly, of all the orders you hear about today, the only ones that are actually affected by the dollar:euro disparity are those being delivered today, unless the airline placing the order pays for its aircraft in full at the time of the signing of the order (very rare) - the orders being taken today will be subject to the dollar:euro exchange rate at the time of delivery, which could be anything.

There are many incidental costs which affect Airbus today, and they are all linked to the cash flow from deliveries being worth less than when they were placed and not orders being placed now. If the dollar continues to tank for the next 5 years, then you will see the major financial issues you allude to and Airbus will not be as competitive, and indeed unless it changes significantly to allow payment to subcontractors in dollars based on a dollar linked economy, then Airbus could infact be in serious difficulties (and this is why Power8 is being carried out at the moment).

However, before this is likely to happen, the world wide financial markets would most likely force a correction in the dollar value, resulting in a recession and a general slowdown in both the EU and American economies - that in itself isn't likely to cause problems for either Airbus or Boeing due to the fantastic sales years they have had over the past 3 or 4 years - their backlog is such that it will see them through any lean periods in the next 5 years or so.
 
airways45
Posts: 282
Joined: Wed May 10, 2000 1:26 am

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Wed Nov 14, 2007 5:18 pm



Quoting SJBOEING (Reply 3):
Given the USD/Euro disparity over the past several years, and certainly more recently, of course, how is it that Airbus is able to be so competitive with Boeing on price if it prices its planes in USD but must over its cost in Euros?

This is a major issue for Airbus, and, indeed other companies that pay in some contracts (salaries etc) in Euros, Pounds or whatever.

It's a headache for Airbus and many others who receive payment in US $ and have to pay in Euros.

Merrill Lynch has estimated that the change from US$/Euro 0.85 to 1.39 has cost Airbus $6.5B.

So, Airbus has to reduce costs. So, it is has initiated Power8, and, aims to become more efficient. And, it's expecting its suppliers to do the same.

However, on the positive side, both Airbus and Boeing may benefit from the relative 'cheaper' planes so, perhaps this offsets it. If something is relatively cheaper maybe people have ordered more because of this.

Airways45
 
User avatar
Stitch
Posts: 23206
Joined: Wed Jul 06, 2005 4:26 am

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Wed Nov 14, 2007 5:28 pm

I just wish both sides would shut-up and move on. They split the market 50-50 and they're both enjoying their third straight 1000+ sale year.

It's a moot case in a ruling, anyway. If Boeing loses and loses big, the US is not about to let a prime defense contractor go down so they'll tell the WTO to shove off. Same with the EU should Airbus lose and lose big.

And if you think the EU and the US are going to put god knows how many hundreds of billions - if not trillions - of annual bi-lateral trade at risk in a trade war over some airplane deals...
 
airways45
Posts: 282
Joined: Wed May 10, 2000 1:26 am

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Wed Nov 14, 2007 5:37 pm



Quoting Stitch (Reply 7):
I just wish both sides would shut-up and move on. They split the market 50-50 and they're both enjoying their third straight 1000+ sale year.

 checkmark 

Well said!

Airways45
 
n1786b
Posts: 384
Joined: Tue Sep 27, 2005 6:10 am

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Wed Nov 14, 2007 5:42 pm



Quoting Zeke (Reply 2):
1) The US did not cancel the 1992 agreement correctly with cause, they just walked away from it.

They served notice and terminated the agreement as is allowed under Paragraph 9.4.

9.4. If, after consultations pursuant to Article 11, a Party determines the
action taken under this Article significantly undermines the objectives of this
Agreement, it shall have the right to suspend some or all of the provisions of
this Agreement or to terminate it within 15 days of the conclusion of
consultations.

Quoting EI321 (Thread starter):

If the EU were so worried about being found 'guilty' over this, surely they would have proposed a settlement by now?

Obviously you didn't read yesterday's news article:

http://www.reuters.com/article/ousiv/idUSL1389175720071114

"Only a few weeks ago, Boeing publicly rejected Airbus' latest olive branch," the European Union executive said in a statement to the European Parliament, drawn up by European Trade Commissioner Peter Mandelson.

So they are proposing settlements but they are being rejected. And the reason they are being rejected is IIRC the reluctance of the EU to give up launch aid.


-n1786b
 
n1786b
Posts: 384
Joined: Tue Sep 27, 2005 6:10 am

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Wed Nov 14, 2007 5:48 pm



Quoting Zeke (Reply 4):
Over 40% of all Airbus aircraft by value are sourced or built in the US.

Does this include engines?

Please provide impartial sources.

-n1786b
 
JoeCanuck
Posts: 3952
Joined: Mon Dec 19, 2005 3:30 am

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Wed Nov 14, 2007 5:53 pm

There is no way in the universe this can ever be settled. By the time they even decide the definition of 'subsidy', we'll all be long dead.

The WTO is completely toothless, much like the UN. As Stitch mentioned, regardless of any ruling, neither side is ever going to cough up a cent.

Both sides are being subsidized, by some definition or another, by their military arms, by tax breaks, by sweetheart loans, by deals with customers or some other thing or things.

I'm not even sure who this charade is supposed to impress. I say quit pretending.

May the best subsidy win.
What the...?
 
SJBOEING
Posts: 13
Joined: Mon Nov 12, 2007 8:50 pm

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Wed Nov 14, 2007 6:38 pm

Moo and Zeke, I appreciate the explanations. I knew it wasn't a cut and dry issue, and so I really do appreciate your insight. Thanks guys.
 
Rheinbote
Posts: 1103
Joined: Sun May 21, 2006 9:30 pm

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Wed Nov 14, 2007 10:35 pm



Quoting JoeCanuck (Reply 11):
The WTO is completely toothless, much like the UN. As Stitch mentioned, regardless of any ruling, neither side is ever going to cough up a cent.

You don't want to know how much the lawyers earn on both sides...
 
User avatar
zeke
Posts: 9930
Joined: Thu Dec 14, 2006 1:42 pm

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Thu Nov 15, 2007 1:19 am



Quoting N1786b (Reply 9):

They served notice and terminated the agreement as is allowed under Paragraph 9.4.

The very paragraph you posted says after consultation, they just served notice. The agreement that is in place required mediation before any party could walk away.

Quoting N1786b (Reply 10):

Please provide impartial sources.

Not sure how one gets an impartial source, this come from Airbus http://www.airbus.com/en/worldwide/north_america/us_indus_partners/

"Airbus spends more money with U.S. suppliers than in any other country – placing 46 percent of its aircraft-related procurement with suppliers across the United States and Canada.

These companies supply hundreds of thousands of parts, from small fasteners to engines, landing gear and structural components for fuselages and wings.

In 2006, Airbus spent $10.2 billion on parts, components, tooling and services with American companies. The United States is the largest single supplier country to Airbus, making Airbus the largest export customer for the U.S aerospace industry. A large part of this business is dedicated to the A380, so the supplier figures in terms of dollars and people, are set only to grow as the A380 becomes more commonplace at airports worldwide. "
We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
 
tdscanuck
Posts: 8572
Joined: Wed Jan 11, 2006 7:25 am

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Thu Nov 15, 2007 1:54 am



Quoting Zeke (Reply 2):
3) The 787 program received numerous illegal subsidies under the 1992 agreement. http://www.buffalo.edu/reporter/vol3....html

None of the "subsidies" cited in the article you linked to are illegal under the 1992 agreement. The agreement was between Boeing and Airbus...subsidies to suppliers, like the Japanese heavies, are not covered by the agreement. The Washington State incentives are not Boeing-specific (they're available to any aerospace company in Washington), which I believe clears them of the 1992 agreement as well.

Quoting SJBOEING (Reply 3):
how is it that Airbus is able to be so competitive with Boeing on price if it prices its planes in USD but must over its cost in Euros?

Part of it is that Airbus planes cost less to manufacture.

Tom.
 
XT6Wagon
Posts: 2639
Joined: Tue Feb 13, 2007 4:06 pm

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Thu Nov 15, 2007 2:07 am



Quoting Tdscanuck (Reply 15):
None of the "subsidies" cited in the article you linked to are illegal under the 1992 agreement. The agreement was between Boeing and Airbus...subsidies to suppliers, like the Japanese heavies, are not covered by the agreement. The Washington State incentives are not Boeing-specific (they're available to any aerospace company in Washington), which I believe clears them of the 1992 agreement as well.

I am highly amazed that the EU/Airbus brought any of that at all, since Aribus reciveves the same kind of "aid". France bailed out A380 suppliers that were going to go under due to the delay. Airbus got tax incentives for thier US operation.

I'm sure the list is much longer, but there is too easy examples of why speaking up may cost them.
 
n1786b
Posts: 384
Joined: Tue Sep 27, 2005 6:10 am

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Thu Nov 15, 2007 10:02 am



Quoting Zeke (Reply 14):
The very paragraph you posted says after consultation, they just served notice. The agreement that is in place required mediation before any party could walk away.

HA! You are kidding, right? I can't believe you can claim that.

How many times did Zoellick and Lamy see each other in 2004? My goodness, you really didn't pay attention to all the press about subsidies and launch aid before the US canceled the agreement?

Let me refreshen your memory.... even your EU pals admit they were talking..... not listening to each other, but far from "serving notice and walking away" to paraphrase your claim.
++++++++++++++++++++++++++++++++++++++++++++

"Lamy, however, has dismissed the threat of a WTO challenge as "election-year politics" from President Bush, who is facing criticism from his Democratic challenger, John Kerry, over the loss of U.S. manufacturing jobs.

Lamy also accused the Bush administration of not being serious about negotiations in recent weeks that were aimed at modifying a 1992 bilateral agreement that covered support for civilian aircraft."

http://archive.newsmax.com/archives/articles/2004/10/6/140642.shtml

+++++++++++++++++++++++++++++++++++++++++++++

As a matter of fact, they were holding talks right up to the last minute before the US withdrew:
ST

Oct 1, 2004

A high-stakes dispute over government loans to airplane maker Airbus reached a tipping point yesterday when top trade officials from the United States and Europe failed to find common ground.

According to sources briefed on the talks, U.S. Trade Representative Robert Zoellick and European Union trade minister Pascal Lamy could not bridge their differences during what was widely viewed as the last, best chance to find a compromise.

"Any chance of an easy solution probably ended today," said a source close to the discussions.

http://seattletimes.nwsource.com/htm...logy/2002050865_boeingtrade01.html

+++++++++++++++++++++++++++++++++++++++++++++

http://www.ustr.gov/Document_Library...gy_in_the_Airbus_WTO_Case.html?ht=

August 13, 2004 President Bush instructs USTR Zoellick to pursue all options to end the subsidization of Airbus, including the filing of a WTO case, if need be.

September 16, 2004 Senior U.S. and EC representatives meet again to discuss need for new agreement eliminating new subsidies for large civil aircraft. As in July, the EC refuses to commit to the negotiation of a new agreement.

September 28, 2004 In an interview, Airbus CEO Noël Forgeard gives clearest sign yet that Airbus intends to launch the A350, and that Airbus will seek government aid to help finance the project pursuant to the 1992 Agreement.

September 30, 2004 USTR Zoellick and Commissioner Lamy hold discussions on bilateral and multilateral issues, discuss Airbus and Boeing issue. (See Above)

Quoting XT6Wagon (Reply 16):
I am highly amazed that the EU/Airbus brought any of that at all, since Aribus reciveves the same kind of "aid". France bailed out A380 suppliers that were going to go under due to the delay. Airbus got tax incentives for thier US operation.

Not to mention that the EU directly funds commercial aircraft R&D programs. For example, they are currently giving Airbus 50% of the money needed for the NSR A320 replacement composite fuselage study.

Quoting Moo (Reply 1):
2. The WTO will most probably refrain from ruling against Airbus and the EU on the basis of any valid and correct loans made under the auspices of the 1992 agreement until its termination in 2005, as this would be considered a binding, voluntary and valid agreement between two parties and any complaints against valid and correct loans made after the signing of the agreement may be considered a 'bait and switch' tactic

If this is the case, then what will your friends say about the willingness of the EU to continue to use this agreement to justify launch aid and subsidies for the A350 program? If the WTO won't condemn the EU on past subsidies, they will have to rule on the validity of any plans/programs for such aid for the A350 program. Wasn't that the goal to begin with?

- n1786b
 
User avatar
moo
Posts: 4101
Joined: Sun May 13, 2007 2:27 am

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Thu Nov 15, 2007 10:14 am



Quoting N1786b (Reply 17):
If this is the case, then what will your friends say about the willingness of the EU to continue to use this agreement to justify launch aid and subsidies for the A350 program? If the WTO won't condemn the EU on past subsidies, they will have to rule on the validity of any plans/programs for such aid for the A350 program.

What about it? The A350 RLI was applied for, and granted, prior to the final termination of the agreement by the US, so if it is given to Airbus then it is covered under the 1992 agreement and thus my second point still stands.

However, although it has been granted, Airbus has yet to take it, so there is currently no case to answer anyway.

When it comes to the crunch, both the EU and the US *voluntarily* signed the 1992 agreement, knowing what it contained and what it meant. That is why the WTO will almost certainly not rule on RLI given under it.
 
User avatar
zeke
Posts: 9930
Joined: Thu Dec 14, 2006 1:42 pm

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Thu Nov 15, 2007 10:48 am



Quoting Tdscanuck (Reply 15):
None of the "subsidies" cited in the article you linked to are illegal under the 1992 agreement.

They are illegal, otherwise you could provide a reference where they are legal.

N.B. under the 1992 agreement, required repayments, this does not exist in Japan. As the US based report discussed. Japan does not require repayments in full, they are trying to build their own industry, in the process, Europe is hurting, which is damamge, which turns out as being the trigger for an illegial subsudy.

Quoting N1786b (Reply 17):

HA! You are kidding, right? I can't believe you can claim that.

I am not kidding, at this level of international diplomacy, every move is recorded. The US government did not follow the recognised international protocol. To commence discussion, the US needs to file an petition, which the US failed to do. One cannot just hand back an agreement which took years to come to agreement on, just at will.

Just like a partner cannot hand out a divorce at will.

This is just another case of the US acting unilaterally, they have done similar in Afghanistan and Iraq if you remember.
We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
 
n1786b
Posts: 384
Joined: Tue Sep 27, 2005 6:10 am

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Thu Nov 15, 2007 12:25 pm

Quoting Zeke (Reply 19):
They are illegal, otherwise you could provide a reference where they are legal.

Guilty until proven innocent? How convenient. You made the statement along with the University of Buffalo Geography Professor that they are illegal. It is for you to prove they are illegal. And be careful, you just may get what you wish for, because if they are proven equal, all the public monies you pals in the EU get will also be illegal. Bye bye paving roads for Airbus, bye bye filling in PROTECTED wildlife reserves to extend runways, bye bye cities/states owning factories, bye bye all the tax incentives and early retirement programs partially funded by taxpayers here in France, bye bye the Framework projects, bye bye all of the EU development projects, bye bye all of the state subsidies for Eurocopter in Mississippi, bye bye all the public monies promised by Alabama.

Here is a challenge for you. What are the differences different between what Washington State has done for Boeing and what France is doing for Airbus with its Aerospace Valley? Please spell them out and tell me why what your consider illegal in Washington is not in Bordeaux/Toulouse?

Quoting Zeke (Reply 19):
I am not kidding, at this level of international diplomacy, every move is recorded. The US government did not follow the recognised international protocol. To commence discussion, the US needs to file an petition, which the US failed to do. One cannot just hand back an agreement which took years to come to agreement on, just at will.

Huh? You said there were not discussions carried out before the US simply "served notice and walked out." I provided proof that talks were going on and that there was consultations before the US exercised its RIGHT to declare the agreement null and void. Now you want them to follow some sort of international protocol not included in the agreement? They followed the protocol as spelled out by the agreement and there is no proof to the contrary, period.

Quoting Zeke (Reply 19):
One cannot just hand back an agreement which took years to come to agreement on, just at will.

Yes you can - it is clearly spelled out in the treaty.

And as far as unilateral actions, I will pass on commenting on the uncalled for injection of international politics in this discussion. I will however turn your attention to the EU acting unilaterally in the Aerospace industry.
1. declaring illegal the open-skies treaties between the United States and (no longer) sovereign EU states.
2. including foreign companies in their CO2 emissions trading scheme

-n1786b

[Edited 2007-11-15 04:45:34]
 
XT6Wagon
Posts: 2639
Joined: Tue Feb 13, 2007 4:06 pm

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Thu Nov 15, 2007 12:52 pm



Quoting Zeke (Reply 19):
N.B. under the 1992 agreement, required repayments, this does not exist in Japan. As the US based report discussed. Japan does not require repayments in full, they are trying to build their own industry, in the process, Europe is hurting, which is damamge, which turns out as being the trigger for an illegial subsudy.

If this is the case, then the EU would have filed a case against Japan. They haven't because they know filing a WTO dispute against Japan would burn the chances of getting any of the Japanese heavy industries risk sharing, any chance at some of the Japanese defense market, and any chance of seeing any more Aircraft orders by the Japanese airlines. Right or wrong, Japan acts very much on a Nationalistic or Clan mentality, where outsiders hurting even thier worst enemy in said clan/nation is worthy of retaliation.

Airbus knows this, the EU knows this, and thus they have not filed against them.


If they honestly think they can get the time of day at the WTO with an argument that its all Boeings fault, and should be punished.... Lol I got some great ocean front property in south dakota for you.
 
User avatar
zeke
Posts: 9930
Joined: Thu Dec 14, 2006 1:42 pm

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Thu Nov 15, 2007 1:00 pm



Quoting N1786b (Reply 20):
What are the differences different between what Washington State has done for Boeing and what France is doing with its Aerospace Valley? Please spell them out and tell me why what your consider illegal in Washington is not in Bordeaux/Toulouse?

One is covered, and agreed to in the 1992 agreement, and one is not. One is accepted by the WTO as being legal, and one is not. The Washington State subsidies are not legal, even the link I provided stated they are not legal, and that source is US based.

Quoting N1786b (Reply 20):
Huh? You said there were not discussions carried out before the US simply "served notice and walked out." I provided proof that talks were going on and that there was consultations before the US exercised its RIGHT to declare the agreement null and void. Now you want them to follow some sort of international protocol not included in the agreement?

You provided no proof, as a counter argument, when Boeing was using illegial offshore tax havens, the EU took Boeing to the WTO and Boeing lost being found taking part in illegial activities. Instead of using the established procedure of discussion and then a challenge to the WTO, the US just served notice and thought they withdrew. Many think the 1992 agreement is still in place, and think the notice served by the US was not legal.

That is the first point of law to be established before going any further.

Quoting N1786b (Reply 20):
Yes you can - it is clearly spelled out in the treaty.

No one cannot. The whole point of the agreement, which too years to negotiate, was that no party can just serve notice and leave, the 'bait and switch' tactic was described very well by Moo in reply 1.

Your other comments are red herrings on the topic, i.e. off topic, start your own thread. Neither is part of the bilateral EU-US Agreement on Trade in Large Civil Aircraft.
We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
 
n1786b
Posts: 384
Joined: Tue Sep 27, 2005 6:10 am

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Thu Nov 15, 2007 2:04 pm



Quoting Zeke (Reply 22):
One is covered, and agreed to in the 1992 agreement, and one is not.

Uhhh excuse me? Aerospace valley was started AFTER THE WTO FILINGS BY BOTH THE EU AND US. So how could it be covered by an agreement has been null and void for 3 years now?

Quoting Zeke (Reply 22):
One is accepted by the WTO as being legal, and one is not.

They are actionable according to to a university professor in the US. They have not been judged nor been declared illegal. Are you taking Prichard's word? The arguments he uses to declare de facto the Washington state incentives as illegal are also valid in the case of Aerospace valley.

Quoting Zeke (Reply 22):
You provided no proof, as a counter argument, when Boeing was using illegial offshore tax havens, the EU took Boeing to the WTO and Boeing lost being found taking part in illegial activities.

Here is your red herring - we were not talking about that at all. The EU did not file a grievance under the 92 agreement but went to the WTO. And even though Boeing was a major benefactor of this tax break, there were other major companies who were using it as well.

Quoting Zeke (Reply 22):
Instead of using the established procedure of discussion and then a challenge to the WTO, the US just served notice and thought they withdrew. Many think the 1992 agreement is still in place, and think the notice served by the US was not legal.

I provided proof there were discussions beforehand. The day the US declared the agreement null and void was the same day the notified the EU that they were going to file a complaint with the WTO. They did exactly what you said.

What part of the following do you need help in understanding?

9.4. If, after consultations pursuant to Article 11, a Party determines the
action taken under this Article significantly undermines the objectives of this
Agreement, it shall have the right to suspend some or all of the provisions of
this Agreement or to terminate it within 15 days of the conclusion of
consultations.

The United States determined that the launch aid give to Airbus was undermining the objective of the agreement which was to limit and regulate the subsidies and other issues in the trade of very large aircraft (such as the slots for orders crap). The United States informed the EU that they felt this was the case and spent a year trying to get the EU to talk. They refused to give up one of the provisions that the US felt was undermining the objective of the agreement and thus used ITS RIGHT TO SUSPEND SOME OR ALL OF THE PROVISIONS OF THIS AGREEMENT OR TERMINATE AND Irtysh-Avia (Kazakhstan)">IT.

The last talks were held on Sept 31, 2004. The US notified the EU it was terminating the agreement and filed the WTO complaint on Oct. 6th - within 15 days.

You have yet to prove the contrary that the US did not follow the rules spelled out in the agreement.

Quoting Zeke (Reply 22):
Your other comments are red herrings on the topic, i.e. off topic, start your own thread. Neither is part of the bilateral EU-US Agreement on Trade in Large Civil Aircraft.

You started with the red herrings and comments about unilateral US moves. At least mine are limited to the Aviation industry.

-n1786b
 
Joni
Posts: 2613
Joined: Thu Aug 10, 2000 11:05 pm

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Thu Nov 15, 2007 2:15 pm



Quoting Tdscanuck (Reply 15):
The agreement was between Boeing and Airbus

The agreement was between the EU and the US. In particular, the agreement covered aircraft with over 100 seats produced in Europe by Airbus and in the US by "existing manufacturers of large civil aircraft" (in 1992).

Quoting Tdscanuck (Reply 15):
The Washington State incentives are not Boeing-specific (they're available to any aerospace company in Washington), which I believe clears them of the 1992 agreement as well.

Boeing-specificity or otherwise is not relevant to whether they would fall under the 1992 agreement.

Quoting N1786b (Reply 23):
And even though Boeing was a major benefactor of this tax break, there were other major companies who were using it as well.

I don't believe the number of recipients is material to the legality of the tax breaks. In fact, the WTO did rule the practice illegal.
 
trex8
Posts: 4618
Joined: Sat Nov 02, 2002 9:04 am

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Thu Nov 15, 2007 7:01 pm

Quoting Tdscanuck (Reply 15):
The Washington State incentives are not Boeing-specific (they're available to any aerospace company in Washington), which I believe clears them of the 1992 agreement as well.

subsidies which are connected to manufacturing are illegal by most peoples interpretation of trade rules. property tax cuts,infrastructure support etc etc are not usually considered illegal. The WA state "subsidies" are cuts in the business tax which depends on receipts etc which some would consider directly related to manufacturing and so illegal.
ie if you have a new railway or road to a new plant which you have property tax breaks , thats not considered an illegal subsidy . if the plant is making something and affects your bottom line and the tax break affects your bottom line and is dependent on your producing a product that is certainly actionable under WTO.
while not Boeing specific in themselves, the WA state cuts only occur after Boeing makes a 787, the wording in the legislation is very clear and can only apply to one product then available when it was written for the law to come into force. In that sense this can be considered legislation favoring one manufacturer only which may make it questionable. but obviously the WA state legislature only wanted to give a tax break if the 787 was actually built in the state.

[Edited 2007-11-15 11:03:56]

[Edited 2007-11-15 11:05:48]
 
User avatar
zeke
Posts: 9930
Joined: Thu Dec 14, 2006 1:42 pm

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Fri Nov 16, 2007 12:02 am



Quoting XT6Wagon (Reply 21):
Airbus knows this, the EU knows this, and thus they have not filed against them.

I think the EU is looking at the bigger picture. It is unclear whether the Japanese subsidy should be separated from the US own subsidies for the 787 in calculating the level of injury to Airbus, or should it be deemed an integrated part of the whole subsidy scheme.

I think they are taking the view that it should be part of the whole subsidy scheme, I dont think the US can hide by off shoring the subsidies on components, when the finished product comes form the US.

Also as far as I am aware, the WTO is only looking at complete products, "These products shall not include:
an incomplete or unfinished product, unless it has the essential character of a complete or finished part, component, sub-assembly or item of equipment of a civil aircraft or ground flying trainer*, (e.g. an article which has a civil aircraft manufacturer's number), materials in any form (e.g. sheets, plates, profile shapes, strips, bars, pipes, tubes or other shapes) unless they have been cut to size or shape and/or shaped for incorporation in civil aircraft or a ground flying trainer* (e.g. an article which has a civil aircraft manufacturer's part number), raw materials and consumable goods. "

from the "Agreement on Trade in Civil Aircraft"

Quoting N1786b (Reply 23):
Aerospace valley was started AFTER THE WTO FILINGS BY BOTH THE EU AND US. So how could it be covered by an agreement has been null and void for 3 years now?

You are the one stating the agreement is null and void, others think the despite the US unilaterally withdrawing from the 1992 EU-US Agreement, it is still valid. The WTO will also take into account that the EU operated within the bounds of the 1992 agreement.

Quoting N1786b (Reply 23):
They have not been judged nor been declared illegal. Are you taking Prichard's word?

I have read the WTO text for what a subsidy is, in my view, his view is correct.

"For the purpose of this Agreement, a subsidy shall be deemed to exist if government revenue that is otherwise due is foregone or not collected (e.g. fiscal incentives such as tax credits)"

"In order to determine whether a subsidy, ......., is specific to an enterprise or industry or group of enterprises or industries (referred to in this Agreement as "certain enterprises") within the jurisdiction of the granting authority, the following principles shall apply:

Where the granting authority, or the legislation pursuant to which the granting authority operates, explicitly limits access to a subsidy to certain enterprises, such subsidy shall be specific."

from "Agreement on Subsidies and Countervailing Measures".

The Washington state non-taxes in my view are subsidies specific to the aerospace industry, which is also Prichard's view. Also under the 1992 agreement, production subsides are illegial.

Quoting N1786b (Reply 23):
The EU did not file a grievance under the 92 agreement but went to the WTO. And even though Boeing was a major benefactor of this tax break, there were other major companies who were using it as well.

That is because it was an issue outside of the 1992 agreement, and as you pointed out, it covered multiple industries, while the 1992 agreement was specific to 100 plus seat civil aircraft. Canada also took Brazil to the WTO in a similar fashion for a similar grievance, but that was specific to aircraft.

Quoting N1786b (Reply 23):
I provided proof there were discussions beforehand.

Talks did take place, but as far as I am aware, they were not formally part of the 1992 agreement, they were an attempt to negotiate a new bilateral agreement.

In my view the US wanted out of the 1992 agreement by any means to prevent the A350 from gaining up to 33% of its development costs in the form of repayable loans from the EU, which was a legal, and agreed to mechanism under the 1992 agreement. It did not like the terms it agreed to in the 1992 agreement.

The US has not shown at any stage that the EU did not comply with the terms of the 1992 agreement, nor has it been able to demonstrate any damage caused by the EU following the agreement.

from http://ec.europa.eu/trade/issues/respectrules/dispute/pr310505_en.htm

"Background

In 2004 the EU and the US agreed to discuss a possible revision of the 1992 Agreement provided that this would cover all forms of subsidies including those used in the US, and in particular the subsidies for the Boeing 787, the first new aircraft to be launched by Boeing for 14 years.

Last October, the US began legal proceedings at the World Trade Organization by requesting WTO consultations on European launch investment to Airbus. The US also unilaterally withdraw from the 1992 EU-US Agreement.

On January 11, Robert Zoellick, then the US trade representative, agreed to Commissioner Mandelson's offer to seek a negotiated agreement within three months. During this time, both sides agreed to refrain from granting any new support to their large civil aircraft industries until 11 April.

On February 16, Mr. Zoellick and Commissioner Mandelson agreed that, while it would not be possible to reach a comprehensive deal covering all forms of support within such a tight three-month time frame, both sides would aim for an achievable and important first step - removing significant amounts of government support for the Boeing 787 and the Airbus A 350 by April 11 - and commit to a further, wider agreement on eliminating all future support.

European governments' investment in Airbus projects - which amounts to far less than what Boeing receives - takes the form of repayable loans which, including interest, must be repaid by the company, on the basis of a levy for each plane sold. Once that initial investment is repaid, the company continues to pay royalties on additional sales. These investments are perfectly compatible with WTO rules. All subsidies provided to Boeing are grants, with no obligation to repay. Yet the US has insisted that the EU scrap the entire investment plan for Airbus up front as a starting point in any negotiation, before even a lowering of subsidies for Boeing could be discussed. "
We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
 
Shenzhen
Posts: 1664
Joined: Wed Jun 25, 2003 12:11 pm

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Fri Nov 16, 2007 1:43 am



Quoting N1786b (Reply 23):

Everything you have quoted and stated makes complete sense EXCEPT any provisions within the agreement that lets someone walk away were written for the sole purpose of the EU, not the US. LOL
 
Shenzhen
Posts: 1664
Joined: Wed Jun 25, 2003 12:11 pm

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Fri Nov 16, 2007 1:50 am



Quoting Zeke (Reply 26):

Nothing of what you quote or state makes any sense. You seem to think Boeing can be taken to the WTO. Only a country can be taken to the WTO, and if you were referring to the United States Tax incentives that were available to ALL companies exporting from the US, then this has nothing to do with Aviation (other then airplanes are exported). Maybe you can explain how the EU VAT exemption for exports is legal under the WTO rules.

Cheers
 
tdscanuck
Posts: 8572
Joined: Wed Jan 11, 2006 7:25 am

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Fri Nov 16, 2007 2:17 am



Quoting Zeke (Reply 19):
Quoting Tdscanuck (Reply 15):
None of the "subsidies" cited in the article you linked to are illegal under the 1992 agreement.

They are illegal, otherwise you could provide a reference where they are legal.

Zeke, that's not how the law works and you know it. All activities are default legal unless legislation specifically exists making them illegal.

Quoting Joni (Reply 24):
Quoting Tdscanuck (Reply 15):
The agreement was between Boeing and Airbus

The agreement was between the EU and the US.

Good point. However, that still leaves Japanese subsidy of their heavies outside the Europe/Airbus vs. US/Boeing fight.

Tom.
 
User avatar
zeke
Posts: 9930
Joined: Thu Dec 14, 2006 1:42 pm

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Fri Nov 16, 2007 5:00 am

Quoting Shenzhen (Reply 27):
Everything you have quoted and stated makes complete sense EXCEPT any provisions within the agreement that lets someone walk away were written for the sole purpose of the EU, not the US. LOL

It also requires the US to show that the EU "significantly undermines the objectives of this Agreement", that was never made, they were just unhappy with the terms of the agreement, and Airbus was working within the agreement.

Quoting Shenzhen (Reply 28):
Maybe you can explain how the EU VAT exemption for exports is legal under the WTO rules.

VAT/GST etc does not apply to things exported, hence the reason why anyone can go duty free shopping at airports.

From the "Agreement on Trade in Civil Aircraft"

"Article 2 - Customs Duties and Other Charges

2.1 Signatories agree:

2.1.1 to eliminate by 1 January 1980, or by the date of entry into force of this Agreement, all customs duties and other charges[2] of any kind levied on, or in connection with, the importation of products, classified for customs purposes under their respective tariff headings listed in the Annex, if such products are for use in a civil aircraft and incorporation therein, in the course of its manufacture, repair, maintenance, rebuilding, modification or conversion;

2.1.2 to eliminate by 1 January 1980, or by the date of entry into force of this Agreement, all customs duties and other charges[2] of any kind levied on repairs on civil aircraft;

2.1.3 to incorporate in their respective GATT Schedules by 1 January 1980, or by the date of entry into force of this Agreement, duty-free or duty-exempt treatment for all products covered by Article 2.1.1 above and for all repairs covered by Article 2.1.2 above.

2.2 Each Signatory shall: (a) adopt or adapt an end-use system of customs administration to give effect to its obligations under Article 2.1 above; (b) ensure that its end-use system provides duty-free or duty-exempt treatment that is comparable to the treatment provided by other Signatories and is not an impediment to trade; and (c) inform other Signatories of its procedures for administering the end-use system."

Quoting Tdscanuck (Reply 29):
All activities are default legal unless legislation specifically exists making them illegal.

The production and development support is not legal under the 1992 agreement. http://trade.gov/td/aerospace/agreements/usaeulca.pdf

Quoting Tdscanuck (Reply 29):

Good point. However, that still leaves Japanese subsidy of their heavies outside the Europe/Airbus vs. US/Boeing fight.

Subcontractors are covered, see annex 1.

[Edited 2007-11-15 21:12:09]
We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
 
Shenzhen
Posts: 1664
Joined: Wed Jun 25, 2003 12:11 pm

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Fri Nov 16, 2007 5:11 am

Quoting Zeke (Reply 30):
VAT/GST etc does not apply to things exported, hence the reason why anyone can go duty free shopping at airports.

The reason it doesn't apply is because that is the way the tax law was written, not that it shouldn't be considered a subsidy under the WTO rules. If the WTO can rule on one countries tax laws (what you keep pointing your finger at), why not another....... I believe that GATT may have already ruled against the VAT, but could be wrong...


Cheers

Appears that you edited your post with more irrelevant informtion regarding agreements on Customs Duty, which is an IMPORT TAX, and not export related.

In addition, per the terms of the 1992 agreement, either party can walk, at any time they flelt like walking. By posting that something is acceptable or not acceptable per some non existent agreement is simply silly.

Cheers

[Edited 2007-11-15 21:32:21]
 
OldAeroGuy
Posts: 3208
Joined: Sun Dec 05, 2004 6:50 am

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Fri Nov 16, 2007 4:55 pm



Quoting Trex8 (Reply 25):
The WA state "subsidies" are cuts in the business tax which depends on receipts etc which some would consider directly related to manufacturing and so illegal.



Quoting Zeke (Reply 26):
The Washington state non-taxes in my view are subsidies specific to the aerospace industry, which is also Prichard's view. Also under the 1992 agreement, production subsides are illegial.

The problem with these lines of arguments is that state tax codes in the US are not uniform. Boeing could have obtained the same tax benefits by moving to another state that had lower tax rates than WA. This was what they said they would do unless WA revised its tax codes to be more in line with the manufacturing taxes found in other states.

If Boeing had moved 787 production to another state with lower taxes they could received the same financial advantage with no argument about a "subsidy" due to a lowered WA tax rate. Airbus is doing just that by planning to set up a KC-30 production line in AL where they can obtain a lower manufacturing tax than WA. Does this mean that the KC-30 production is being "subsidized"?
Airplane design is easy, the difficulty is getting them to fly - Barnes Wallis
 
Rheinbote
Posts: 1103
Joined: Sun May 21, 2006 9:30 pm

RE: Hopes Fade For Boeing-Airbus WTO Settlement

Fri Nov 16, 2007 9:23 pm

Guys, both Airbus and Boeing are pampered by their governments, like everyone else's national champions are. The large commercial airplanes trade dispute is fought for political reasons, both sides are hypocritical. Ask yourself why neither the US nor the EU dare to drag Japan, China, or Russia to court. These are much more blatant cases of subsidized large commercial aircraft industries.