EI321
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Randy Discusses The WTO Launch Aid / Subsidy Case

Fri Oct 19, 2007 12:06 am

Quote:
The notion of government subsides for the major airplane manufacturers is at the heart of a debate that’s now before the World Trade Organization (WTO).

When it comes to “launch aid,” does everyone do it? No, everyone does not do it. And that’s the point made by my Boeing colleague Ted Austell, our vice president of international trade.

http://boeingblogs.com/randy/

And you can read the article by Ted Austell Here:

Quote:
EU launch aid to Airbus clearly violates WTO rules

"Everyone does it, so let's be gentlemen and settle our dispute out of court." That's the gist of the arguments Airbus makes regarding the European Union-U.S. dispute over aerospace subsidies. Trouble is, everyone does not do it, if by "it" we mean the use of government "launch aid" to subsidize a private company in a manner that's inconsistent with the rules of the World Trade Organization.

http://seattletimes.nwsource.com/html/opinion/2003957578_boeing18.html

An 'subjective' argument that I will wait for the WTO to judge before making my mind up!
 
baroque
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RE: Randy Discusses The WTO Launch Aid / Subsidy C

Fri Oct 19, 2007 7:21 am

Quoting EI321 (Thread starter):
An 'subjective' argument that I will wait for the WTO to judge before making my mind up!

However, you would think they might get some basic facts correct.

"Airbus begins repayment only when certain Airbus-defined delivery thresholds are met, and if those thresholds are never achieved, there is no obligation to repay the balance of the loan."

http://seattletimes.nwsource.com/html/opinion/2003957578_boeing18.html

As I understand it, that is FLAT WRONG.

No mention of Royalty. These are not simple loans, however much the speed readers may like to think they are.

"It is such unsubstantiated allegations and misleading statements about "indirect" government support that have made it so difficult to resolve the subsidy issue outside of the litigation both sides have brought to the WTO."

True, trying reading the large print!
 
StoutAirLines
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Fri Oct 19, 2007 7:54 am

Quoting Baroque (Reply 1):
Quoting EI321 (Thread starter):
An 'subjective' argument that I will wait for the WTO to judge before making my mind up!

However, you would think they might get some basic facts correct.

"Airbus begins repayment only when certain Airbus-defined delivery thresholds are met, and if those thresholds are never achieved, there is no obligation to repay the balance of the loan."

http://seattletimes.nwsource.com/html/opinion/2003957578_boeing18.html

As I understand it, that is FLAT WRONG.

As you understand it? Do you have any hard evidence whatsoever that Boeing's position is false?

Where and when has Airbus or the European governments refuted Boeing's claim? Are you saying that Boeing is lying?

Quoting Baroque (Reply 1):
No mention of Royalty. These are not simple loans, however much the speed readers may like to think they are.

Can you provide evidence supporting "royalty" payments being made to Germany or France? How about for the A330/340 programs?
 
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zeke
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Fri Oct 19, 2007 10:52 am

Quoting StoutAirLines (Reply 2):
As you understand it? Do you have any hard evidence whatsoever that Boeing's position is false?

Where and when has Airbus or the European governments refuted Boeing's claim? Are you saying that Boeing is lying?

The EU has made several written responses to the WTO about this issue.

EU challenge to US subsidies (DS353)
22 March 2007: EU files confidential version of First Written Submission
6 July 2007: US files confidential First Written Submission
26-27 September 2007: First panel hearing
28 September 2007: EU puts non-confidential version of First Written Submission on its website
16 and 17 January 2008: second panel hearing (rebuttals submitted on 6 November 2007)
7 April 2008: issuance of the confidential interim Panel report (to the Parties)
16 June 2008: issuance of the final Panel report
Publication of the final report: (after translation of the final report – approximately 2-4 months)

US challenge to EU support (DS316)
9 February 2007: EU files confidential version of First Written Submission
20/21 March 2007: first panel hearing
25-26 July 2007: second panel hearing (rebuttals submitted on 25 May)
Initially scheduled for 24 October 2007 - now delayed: issuance of the confidential interim Panel
report (to the Parties)
Initially scheduled for 19 December 2007 - now delayed: possible issuance of the confidential
final Panel report (to the Parties)
Publication of the final report: (after translation of the final report – approximately 2-4 months)

a summary can be found here http://trade.ec.europa.eu/doclib/docs/2007/july/tradoc_135344.pdf

Excerpt of a recent speech from Airbus North America CEO Allan McArtor addressed the National Press Club on Oct 18 about the international trade dispute before the World Trade Organization

Quote:
Boeing and the U.S. Administration made a massive complaint to the World Trade Organization in 2004. ( You will recall, this was a particularly tough time for Boeing.)

They were feeling the effects of some “business decisions” and “business practices” that didn’t meet Boeing’s presumed high standard (and I will be pleased to expand later, if you are interested.)

In fact, the effects of those decisions have clearly been overcome in the marketplace and those behaviors of a few years ago are disavowed by Boeing’s current leadership.

I don’t want to get “too inside baseball” with you on a very complicated trade case, But the trigger in this trade war was when my competitor talked my country into walking away from a bilateral trade agreement between the E.C. and the U.S.

In 1992, the parties agreed to the rules that would govern acceptable government supports to the Large Civil Aircraft manufacturers.(I would be glad to give my opinion as to why Harry Stonecipher wanted to create this conflict …. at that time.)

That agreement between both parties acknowledged and defined the limits of support each government was allowed to provide to the large civil aircraft manufacturers.

The support Airbus received was fully compliant with this agreement.

We’ve accepted repayable loan support for new programs on only three of our last nine eligible projects. And we repay these loans plus interest, plus royalties for life of the aircraft program even after each loan is repaid.

It’s ironic that just as Boeing began complaining about this repayable launch investment in Europe, they began outsourcing to Japanese industries that get even more generous government loans.

There’s a key difference, and it’s a troubling one: the Japanese companies repay their loans into a revolving fund that continues to directly fund aeronautics companies (in other words, they repay to themselves), while our repayments go into the European governments’ general funds to meet other needs.

Their paybacks “revolve”, while ours “resolve”.

Finally, it looks like the facts are coming to light.

For instance, an army of lawyers has now tallied up all the specific supports for Boeing.

Our competitor has received nearly 24 Billion dollars in subsidies which are far out of bounds with WTO rules.

They’ve benefited from federal contracts and technology transfers, along with federal, state and local tax breaks.
Not a penny of these funds has ever been repaid to U.S. taxpayers.

With nearly a century of subsidies under its belt, Boeing knows the fruits of national pride and government research.
My point today is not to condemn this support, but to shine a light on it. Airbus too knows the benefit of capital from our capitols.

So, where is this all leading? If nothing changes, it’s not heading some place good. A protracted WTO effort will waste resources and time in Europe and the United States. And for what purpose? The two companies involved should be focused on designing more efficient, more technologically advanced, and even-safer aircraft to meet the needs and address the problems of air transportation in this country and around the world.



Quoting StoutAirLines (Reply 2):
Can you provide evidence supporting "royalty" payments being made to Germany or France? How about for the A330/340 programs?

The difficulty with getting information for Germany and France is the language, reports from these respective governments are normally are in their native language, just like it is unreasonable to find a statement by the US government on the 787 subsidies in German.

But as an indication on the 330/340 program

"For each and every Airbus model, BAE SYSTEMS (and now Airbus UK) from its own resources, has invested very substantial sums in the launch and on-going development costs, as well as in tooling and work in progress. In addition, for the A320, the A330/A340, the A340-500/600 and recently for the A380, the UK Government is providing fully repayable loans which are "designed to yield a return in real terms on the government's investment" to supplement Airbus UK's financial commitment. Repayment of capital and interest on the UK government's £250 million loan for the A320 (announced in March 1984) has been completed; royalty payments continue - the investment yielding £2 for every £1 invested. The loan for the A330/A340 programme announced in May 1987 was £450 million, repayments are in progress and are expected to yield the UK Treasury £3 for every £1 invested. The loan announced for the A340-500/-600 in February 1998 was £123 million and in March 2000 the UK government announced it would make available £530 million repayable launch investment for the A380. In the UK, current Airbus programmes secure 62,000 jobs in over 400 companies through the UK?s involvement in Airbus. Other UK companies involved include Rolls-Royce Aero-engines who supply power-plants for an increasing number of Airbus models. "

from http://www.smr.ch/bojcas/Partners/bae.html

and

"The major bone of contention is that of EU Member State co-financing of R&D for new Airbus aircraft ("Member State Financing" or "reimbursable launch investment"). This form of support is expressly agreed under the bilateral EU-US Agreement and has been used on three of the nine Airbus aircraft launched since 1990. It provides for government funding to Airbus repaid with interest under terms specified in the Bilateral Agreement (loan rates of return are cost to government plus 1%, and interest and principal is repaid on deliveries, even before the programs break-even). In some cases the terms are more onerous than those commercially available in that the lending governments are receiving royalty payments that will last through the life of a particular aircraft program even though the original loan and interest are completely repaid. In fact, EU governments so far have made handsome returns on their initial “investments”, even though there are instances where Airbus has been able to obtain financing on more favourable terms from private lenders, compared with government offers. As of today, Airbus has repaid in excess of 7 billion euros (USD 9 billion). Since 1992, Airbus has repaid 40 percent more than it has received from EU governments. Airbus currently repays loans at the rate of 300 to 400 million euros a year."

from http://trade.ec.europa.eu/doclib/docs/2007/july/tradoc_135344.pdf
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kaneporta1
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Fri Oct 19, 2007 12:22 pm

Quoting Zeke (Reply 3):
royalty payments continue - the investment yielding £2 for every £1 invested.

Just some food for thought, Airbus UK pay a set ammount to the UK government for eery wingset they produce, as part of the loan repayment agreement.
For the A320 series, the repayment ammount was based on projected sales of 400-500 aircraft for the life of the program...
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DAYflyer
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Fri Oct 19, 2007 1:15 pm

Oh crap, here we go.....  duck 
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baroque
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Fri Oct 19, 2007 3:57 pm

Quoting StoutAirLines (Reply 2):
As you understand it? Do you have any hard evidence whatsoever that Boeing's position is false?

Well yes, but Zeke beat me to the draw.

The payments to GoUK are recorded in House of Commons papers (see previous threads). It is rather difficult to believe that Airbus would be making payments to the UK and not to the other contributing governments and now the EU document cited by Zeke makes it so plain that they are making payments to those other governments.

Quoting StoutAirLines (Reply 2):
Quoting Baroque (Reply 1):
Quoting EI321 (Thread starter):
An 'subjective' argument that I will wait for the WTO to judge before making my mind up!

However, you would think they might get some basic facts correct.

"Airbus begins repayment only when certain Airbus-defined delivery thresholds are met, and if those thresholds are never achieved, there is no obligation to repay the balance of the loan."

http://seattletimes.nwsource.com/html/opinion/2003957578_boeing18.html

As I understand it, that is FLAT WRONG.

As you understand it? Do you have any hard evidence whatsoever that Boeing's position is false?

If you want to phrase it like that "yes". The links that Zeke cites basically say that.

Additionally, the RLI terms include FULLl repayment over a specified period with interest. It appears that all loans that have been repaid, have been paid off much more rapidly than appears to be required. We sort of know (mostly from BAE, but that source has dried up) that the A32x and 330/340 initial investments are fully repaid. Even though the A340-5/6 program has small numbers, it is probable that is either repaid or is close to being repaid. Which means the main outstanding amounts are on the A380.

However, overall, as Zeke and Kaneporta1 state, the program has repaid more than has been invested. Figuring out how the A380 program is doing might be even more difficult than working out what the break even sales would/will be. But the flood of funds from the A32x means that total repayments have swamped the A380 program, although that debt remains as a separate item until repaid.

This House of Commons document:

"HC 151-I Published on 5 April 2005 by authority of the House of Commons London: The Stationery Office Limited
House of Commons Trade and Industry Committee
The UK Aerospace Industry
Fifteenth Report of Session 2004--05
Report, together with formal minutes Ordered by The House of Commons
to be printed 22 March 2005"

Sets out matters in considerable detail. It is a 43 page document in the version I have. The investment conditions are set out in some detail, although I have little doubt that the contract documents would be a "bit" longer. They also specify amounts granted up to 2004, amounts repaid and forward estimates of repayment rates. The one thing they do not state is the rate at which Royalty payments are calculated, but they are on a per frame basis and for A32xs it appears that Royalties must be of the order of 1 to 2 million USD a frame. As far as is known, there are no circumstances in which the Royalty rate is discounted before you ask, but information on them is sketchy, except that they make the RLI program a great revenue source for the various governments. If only Blair had run a float on that activity!!

Following on Kaneporta1's comment, with the A350, there must be many accountants (probably some Dutch* ones!!!) in Airbus saying don't take the money, we know that sales would repay the initial amounts and that way they can avoid royalties on the A350.

*In-joke relating to Shell and their accountants.
 
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scbriml
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Fri Oct 19, 2007 5:23 pm

Quoting StoutAirLines (Reply 2):
Are you saying that Boeing is lying?

Not lying per se, but maybe slightly misrepresenting the truth or not giving the whole picture.

We have a politician to thank for the exquisite phrase "being economical with the truth".  wink 
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EI321
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Fri Oct 19, 2007 5:37 pm

Quoting DAYflyer (Reply 5):
Oh crap, here we go.....

Unfortunatly some people tend to shoot from the hip without knowing the backround of this subject! Some of them would be shocked if they found out the real figures.
 
Theoden
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RE: Randy Discusses The WTO Launch Aid / Subsidy C

Fri Oct 19, 2007 8:12 pm

Why doesn't Airbus just borrow money privately instead of from Governments? Is there some advantage to government loans?

Theoden
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David_itl
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Fri Oct 19, 2007 10:07 pm

Quoting Theoden (Reply 9):
Why doesn't Airbus just borrow money privately instead of from Governments? Is there some advantage to government loans?

It can and does I believe. Though the rates ex-Government are a little bit lower?

Quoting Scbriml (Reply 7):
We have a politician to thank for the exquisite phrase "being economical with the truth".

Was Edmund Burke a politician (as "Brewer's Quotations" by Nigel Rees cites him as being the originator of the phrase, and not who I'm sure you are thinking of.
 
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Stitch
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Fri Oct 19, 2007 10:20 pm

The Head of Airbus US this morning was claiming that because of the KC-767 and Lockheed-Martin launcher scandals, Boeing pushed for the WTO action to divert attention away from them...

http://seattletimes.nwsource.com/htm...echnology/2003961344_airbus19.html


I wish both sides would just shut up and focus on getting their darn product out the door on time.  mad 
 
tdscanuck
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Fri Oct 19, 2007 11:11 pm

Quoting Theoden (Reply 9):
Why doesn't Airbus just borrow money privately instead of from Governments? Is there some advantage to government loans?

They do borrow money privately, but it is cheaper and less risky to borrow it from government, which is good for EADS shareholders.

It's not really Airbus's fault...they'd be silly not to take advantage of such offers when they exist. The question is whether the governments involved are violating their own agreements (which it looks like they are).

Tom.
 
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zeke
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RE: Randy Discusses The WTO Launch Aid / Subsidy C

Fri Oct 19, 2007 11:12 pm

Quoting Stitch (Reply 11):
I wish both sides would just shut up and focus on getting their darn product out the door on time.

I agree Stitch, but I find it troublesome that the EU and US had a valid legally enforceable trade deal signed in 1992 on large commercial aircraft, and the US walked away from in 2004.

That agreement, put a ceiling on the amount of direct government support (33% of the total development costs) for new aircraft programmes. It establishes that such support (granted in the form of repayable royalty-based loans) will be repaid at an interest rate no less than the government cost of borrowing and within no more than 17 years, and Airbus developed aircraft within that framework.

The agreement also set limits for indirect support (i.e. benefits provided for aeronautical applications of NASA or military programmes) should be limited to a 3% of the nation's large commercial aircraft industry turnover. In contrast to the repayable royalty-based loans, since the repeal of the US rules on recouping, there is no requirement for indirect support to be reimbursed, and Boeing didn't.

One of the reasons why Boeing walked out of the agreement, was that Boeing was getting over double the level of indirect support that was permissible under the agreement.

So we have a case where :
1) The US and EU had an enforceable agreement on large commercial aircraft
2) Airbus obtained repayable royalty-based loans in accordance with the agreement
3) Airbus built and sold aircraft within the agreement framework
4) Boeing obtained indirect support in excess of the agreement
5) The US walk away from the agreement

I can understand that if Airbus was in breech of the agreement, and they pulled out, the US should have every right to take the to the WTO, but as it stands now, it smells of political interference.

You don't enter into an agreement with someone, then pull out of it, and then take them to court for doing something you agreed to in the first place.

Why is it, whenever you hear of this in the US press they don't mention these points ?

Why is it, you never hear in the US press that EADS/Airbus is the single biggest buyer of aerospace products from the US ?

Why is it, at the times when Boeing is moving jobs overseas, and EADS/Airbus is investing into the US, Airbus is portrayed the bad boy ?

Some good commentary on it http://iagblog.podOmatic.com/entry/2007-10-18T14_11_31-07_00

I think Airbus needs to put its case forward a little more in the media, it has to respond to the volumes of "generous" Boeing PR. The Boeing union have already piped up about the tanker deal saying how much of the 767 is already made outside of the US.

The 767 parts not made by Boeing

http://i15.photobucket.com/albums/a357/thezeke/767/97031cb0.png

The 767 parts made by Boeing



Most people just don't understand how "generous" Boeing is being with their PR, or the real history of what is behind it.
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Stitch
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 12:26 am

Quoting Zeke (Reply 13):
I agree Stitch, but I find it troublesome that the EU and US had a valid legally enforceable trade deal signed in 1992 on large commercial aircraft, and the US walked away from in 2004.

We've walked away from so much else, why be different here?  mad 

It's just so...stupid. Both companies are selling shedloads of planes. Both companies are making nice margins off each shedload. And both companies are working deals to launch their new aircraft programs because the bloody things are just too expensive to fund off internal cash-flows even when selling shedloads of existing stock at nice margins.

I mean if I was a vindictive Boeing, I'd be downright thankful that Airbus got RLA to launch the A380, because it's impacting their ability to respond as quickly and nimbly to my own new products (777 and 787) as well as allowing me to bleed them a bit with my old products (747) in RFPs. They sunk a vast amount of their own and other people's money into it and now they're in a position where the "upside" of the program looks to be "losing as little money as possible" instead of "making as much money as possible".

If Boeing is shedding any tears, they are likely Crocodile ones...
 
PPVRA
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RE: Randy Discusses The WTO Launch Aid / Subsidy C

Sat Oct 20, 2007 12:33 am

All I hope to come out of this is the end of subsidies in this industry. It deters new entrants, stifles competition, and does not progress an inch towards anything good, much less improved relations between countries and continents.
"If goods do not cross borders, soldiers will" - Frederic Bastiat
 
tdscanuck
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 2:33 am

Quoting Zeke (Reply 13):
You don't enter into an agreement with someone, then pull out of it, and then take them to court for doing something you agreed to in the first place.

That's certainly true, but the US isn't taking Airbus to court for violating that agreement, they're taking them to court for violating WTO regulations, which are a whole different animal. If both countries enter into a series of agreements, they should both be abiding by all of those agreements. In this case, it appears that the US isn't abiding by the specific '92 commercial aircraft agreement and the EU isn't abiding by the WTO. No surprises there, either way.

Quoting Zeke (Reply 13):
Why is it, whenever you hear of this in the US press they don't mention these points ?

Why is it, you never hear in the US press that EADS/Airbus is the single biggest buyer of aerospace products from the US ?

Why is it, at the times when Boeing is moving jobs overseas, and EADS/Airbus is investing into the US, Airbus is portrayed the bad boy ?

Because the US media makes money by appealing to US interests, who don't want to hear bad things about the home team or good things about the Europeans.

Tom.
 
redflyer
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 3:49 am

Quoting Theoden (Reply 9):
Why doesn't Airbus just borrow money privately instead of from Governments? Is there some advantage to government loans?

 checkmark 

Quoting Tdscanuck (Reply 12):
They do borrow money privately, but it is cheaper and less risky to borrow it from government, which is good for EADS shareholders.

One factor the Airbus boosters fail to take into consideration in all these arguments when they mention how strict the government loans are is that there is no way a government -- any government on the globe -- will allow a company it is heavily invested in to flounder. In the final analysis, when the chips are down and if the company's back is against the wall financially, everyone, in particular the other investors, knows that the government(s) will never hold the company's feet to the fire on loan repayments. One need only look at the A380 and the financial problems it caused EADS/Airbus. Both the German and French governments were scrambling (verbally anyway) last year to figure out ways to shore up the company. I know it was politicians talking and politicians always talk more than they act. But does anyone really believe that if Airbus launched a plane with government aid, and if the "repayable loan" matured and the plane was not selling, that the government would liquidate Airbus or take over assets in order to get its money back? Does anyone really believe that??

Airbus has been fortunate in that all of its programs have, at worst, been relatively successful (and at best spectacularly successful) and its sponsor governments have been "repayed" on the investments. But what if a program withers on the vine? Say the A380 doesn't sell as well as it is hoped it would; will Airbus have to repay the launch aid in full? The short answer is yes, but that will happen because Airbus will probably be able to afford to repay it. But what if the company couldn't afford to repay it because, say, the A350 program stalls as well?

Sorry, my friends, but there is only one reason Airbus continuously turns to its government sponsors for "repayable loans" (isn't that an oximoron?). Regardless of the terms, everyone knows that in the event of default the debt will be forgiven.
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Stitch
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 3:56 am

Quoting RedFlyer (Reply 18):
there is no way a government -- any government on the globe -- will allow a company it is heavily invested in to flounder...One need only look at the A380 and the financial problems it caused EADS/Airbus. Both the German and French governments were scrambling (verbally anyway) last year to figure out ways to shore up the company.

 checkmark 

Or the way the US government was, for a time, willing to shore up Boeing post-9/11 with the original KC-767 tanker deal.  yes 
 
redflyer
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 4:07 am

Quoting Stitch (Reply 19):
Or the way the US government was, for a time, willing to shore up Boeing post-9/11 with the original KC-767 tanker deal.

Very true. But that is not quite a good example in this context. The U.S. feds were not playing the role of banker using extra-commercial market terms. They were purchasing goods and services that were needed.

But it is a good example in that it shows any government will go the extra steps necessary to protect an industry it has a vested interest in.
A government big enough to take away a constitutionally guaranteed right is a government big enough to take away any guaranteed right. A government big enough to give you everything you need is a government big enough to take away everything you have.
 
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Stitch
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 4:08 am

Quoting RedFlyer (Reply 20):
Very true. But that is not quite a good example in this context. The U.S. feds were not playing the role of banker using extra-commercial market terms. They were purchasing goods and services that were needed.

But doing so at a cost that was much higher then it needed to be... If Boeing hadn't been greedy, they likely would have been able to keep McCain and Company at bay.
 
redflyer
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 4:12 am

Quoting Stitch (Reply 21):
But doing so at a cost that was much higher then it needed to be


...

Quoting RedFlyer (Reply 20):
it is a good example in that it shows any government will go the extra steps necessary to protect an industry it has a vested interest in.


[Edited 2007-10-19 21:21:49]
A government big enough to take away a constitutionally guaranteed right is a government big enough to take away any guaranteed right. A government big enough to give you everything you need is a government big enough to take away everything you have.
 
StoutAirLines
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 5:08 am

Quoting Baroque (Reply 6):
Quoting StoutAirLines (Reply 2):
As you understand it? Do you have any hard evidence whatsoever that Boeing's position is false?

Well yes, but Zeke beat me to the draw.

Thanks for your efforts, however...

Neither of you provided any information at all that I specifically requested, which is the verifiable evidence that any money has ever been repaid on the A330/A340 programs, in particular, to Germany or France. I did take the time to read all the information Zeke provided and not once did I see anything that provided such information.

Instead, I was given the usual reference that alludes to an obscure bit of inormation that came out several years ago for Airbus UK, sketchy, at best, and only for the A320 program.

Look, I am not trying to start a ruckus, but we are being asked to believe that Airbus repays loans made by the governments and I'd really like to believe it is true.

Why can this information not ever really be found and why all the mystery? By the way, as a European, I am hardly biased against Airbus, so let's be clear that I am just trying to find the truth and not bash anyone.

Wouldn't it be in everyone's best interest for Airbus or those European governments, especially now, to come forward with the proof that refutes Boeing's claims?
 
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scbriml
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 8:51 am

Quoting RedFlyer (Reply 18):
"repayable loans" (isn't that an oximoron?)

No. An oxymoron is a seemingly self-contradictory statement. "Military intelligence" would be an oxymoron.

The term "repayable loan" would be a tautology, in which part of a statement is effectively redundant. "Look at those two twins" is an example.

Back on topic, the term as used by the EU is RLI, refundable launch investment.
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BestWestern
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 9:41 am

Quoting StoutAirLines (Reply 23):

Wouldn't it be in everyone's best interest for Airbus or those European governments, especially now, to come forward with the proof that refutes Boeing's claims?

I thought the US believed in innocent until prooven guilty, or did that go out the window with 24hr news TV?
Greetings from Hong Kong.... a subsidiary of China Inc.
 
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keesje
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 10:49 am

I think in reality both sides of the oceans received enormous amounts of tax money in various visible and invisible ways.

What I wonder about is the moral high ground some folks in the press give their homefront.

One must be absolutely blind not seeing how much is invested / subisdized / loaned / supported / facilitated / develop / whatever they name it.

Also infrastructure, education, tax regimes, research and developemnt and military technology spin-off count for billions every year, export grants, outsourcing subsidies, trade balancing and political pressure dealing play a major role.

Funny is everybody in the industry knows but doesn´t want to come out because of many factors such as pride, liability, political standing / implications and most of the knowledge the industry can´t develop much without it.

"Never mistake motion for action." Ernest Hemingway
 
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par13del
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 11:24 am

The Airbus US head stated that Boeing started outsourcing to the Japanese when they started complaining about Airbus subsidies, call this a chicken and egg question, but did Boeing do that in order to compete with Airbus? Many US companies are now outsourcing to be competitive due high labour / infrastructure cost, in the EU since they "banded" some countries together, is their outsourcing - say UK to Italy - the same as US to India -, there is no EU like structure
between the US and most nations, heck they tried NAFTA and look where that went.

The US KC767 tanker deal, which deal is that? As far as I know, the deal never went through, so how could it be classified as a govt. subsidy, Airbus is talking about using launch aid for the A350, until it happens we cannot say that a deal is in place. What the KC767 ATTEMPTED DEAL does show is that there are checks and balances in place which Boeing and it's govt. supporters may or may not like, including Airbus, as they are now ramping up to get the contract with
their KC 330. A question I would ask is that are there such checks and balances in the EU, I don't think so on the people level, Europeans are more inclined to support govt. involvement in business rather than the US, so if the KC767 deal was in Europe for example, it would quite likely already be in place and a/c being built.

Is this a part of the US walking away from the 1992 agreement, when the US signed a lot of aggreements, they were the dominant power, and thus in their deals, gave what we would consider generous advantages to their partners, as
the US economy has slowed, and other countries have grown, the scales become un-balanced. The Bermuda agreement
come to mind also, I guess you may say LHR is so valuable to a couple US airlines that the US govt. would give
up access to the whole country to get it.
 
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zeke
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 11:54 am

Quoting Tdscanuck (Reply 17):

That's certainly true, but the US isn't taking Airbus to court for violating that agreement, they're taking them to court for violating WTO regulations, which are a whole different animal. If both countries enter into a series of agreements, they should both be abiding by all of those agreements. In this case, it appears that the US isn't abiding by the specific '92 commercial aircraft agreement and the EU isn't abiding by the WTO. No surprises there, either way.

Nooooooooooooooooooo

US took the EU to the WTO for following the terms of an agreement "AGREEMENT BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE EUROPEAN ECONOMIC COMMUNITY CONCERNING THE APPLICATION OF THE GATT AGREEMENT ON TRADE IN CIVIL AIRCRAFT ON TRADE IN LARGE CIVIL AIRCRAFT"

That agreement (http://www.ita.doc.gov/td/aerospace/agreements/usaeulca.pdf) says :

Quote:
ARTICLE 4
Development Support

4.1. Governments shall provide support for the development of a new large
civil aircraft programme only where a critical project appraisal, based on
conservative assumptions, has established that there is a reasonable
expectation of recoupment, within 17 years from the date of first
disbursement of such support, of all costs as defined in Article 6(2) of the
Aircraft Agreement, including repayment of government supports on the
terms and conditions specified below.

4.2. As of entry into force of this Agreement, direct government support
committed by a party for the development of a new large civil aircraft
programme or derivative shall not exceed:
(a) 25 per cent of that programme's total development cost as estimated
at the time of commitment (or of actual development costs, whichever
is lower); royalty payments on this tranche shall be set at the time of
commitment of the development support so as to repay this support at
an interest rate no less than the cost of borrowing to the government
within, no more than 17 years of first disbursement, plus
(b) 8 per cent of that programme's total development cost as estimated at
the time of commitment (or of actual development costs, whichever is
lower); royalty payments on this tranche shall be set at the time of
commitment of the development support so as to repay such support
at an interest rate no less than the cost of borrowing to the
government plus 1 per cent within no more than 17 years of first
disbursement.

These calculations shall be made on the basis of the forecast of aircraft
deliveries in the critical project appraisal.

4.3. Royalty payments per aircraft shall be calculated at the time of
commitment of the development support to be repaid on the following basis:
(a) 20 per cent of aggregate payments calculated in accordance with
Article 4.2. are payable on the basis of the delivery of a number of
aircraft corresponding to 40 per cent of forecast deliveries;
(b) 70 per cent of aggregate payments calculated in accordance with
Article 4.2. are payable on the basis of the delivery of a number of
aircraft corresponding to 85 per cent of forecast deliveries.

ARTICLE 5
Indirect Government Support
5.1. The Parties shall take such action as is necessary to ensure that
indirect government support neither confers unfair advantage upon
manufacturers of large civil aircraft benefiting from such support nor leads
to distortions in international trade in large civil aircraft.

5.2. As of entry into force of the Agreement, identifiable benefits to the
development or production of any of the products covered by this
Agreement, net of recoupment, derived from indirect support shall not
exceed in any one year:
(a) 3 per cent of the annual commercial turnover of the civil aircraft
industry in the Party concerned for the products covered by this
Agreement, or
(b) 4 per cent of the annual commercial turnover of any one firm in the
Party concerned for the products covered by this Agreement.

5.3. Benefits from indirect support shall be deemed to arise when there is
an identifiable reduction in costs of large civil aircraft resulting from
government-funded research and development in the aeronautical area
performed after the entry into force of this Agreement.

Where it can be demonstrated that the results of research and development
have been made available on a nondiscriminatory basis to large civil aircraft
manufacturers of the Parties, benefits deriving from such technologies shall
be excluded from the calculation in Article 5.2. However, identifiable
benefits may result when large civil aircraft manufacturers are responsible
for, or have early access to, the conduct or results of such research.

lf a Party has reason to believe that other indirect supports provided by a
government are resulting in identifiable reductions in the costs of large civil
aircraft, the Parties shall consult with a view towards quantifying such
reductions and including them in the calculation described above.

Benefits from indirect support resulting from the technology obtained
through government-funded research and development or through other
government programmes shall normally be calculated in terms of the
reduction in the cost of research and development and in the reduction in
the cost of the production equipment or production process technology.

But since that agreement was negotiated, and signed by both parties in 1992, the 1994 Uruguay Round of trade negotiations concluded in 1994 with the "General Agreement on Tariffs and Trade 1994"

The 1994 GATT agreement defined a subsudy as :

Quote:
Article 1: Definition of a Subsidy

1.1 For the purpose of this Agreement, a subsidy shall be deemed to exist if:

(a)(1) there is a financial contribution by a government or any public body within the territory of a Member (referred to in this Agreement as “government”), i.e. where:

(i) a government practice involves a direct transfer of funds (e.g. grants, loans, and equity infusion), potential direct transfers of funds or liabilities (e.g. loan guarantees);

(ii) government revenue that is otherwise due is foregone or not collected (e.g. fiscal incentives such as tax credits)(1);

(iii) a government provides goods or services other than general infrastructure, or purchases goods;

(iv) a government makes payments to a funding mechanism, or entrusts or directs a private body to carry out one or more of the type of functions illustrated in (i) to (iii) above which would normally be vested in the government and the practice, in no real sense, differs from practices normally followed by governments;

or

(a)(2) there is any form of income or price support in the sense of Article XVI of GATT 1994;



from http://www.wto.org/English/docs_e/legal_e/24-scm_01_e.htm

Both Article 4 (the method Airbus was using for government support) and Article 5 (the method Boeing was using for government support) are illegal under the 1994 GATT. For 10 years after the 1994 GATT was signed, Airbus and Boeing continued to operated under the 1992 EU-US LCA agreement.

The US withdrew from the 1992 LCA agreement, and then took the EU to the WTO for reasons unknown. If it was purely for breaching the 1994 GATT, action should have been taken 10 years prior.

As I said before, the US is taking the EU to the WTO for following negotiated 1992 agreement for LCA. Boeing is not an "innocent" party, they received over 20 billion dollars of indirect support via the 1992 LCA agreement, with none of it paid pack to the US government.

Since then we have seen significant WTO violations from the US regarding the 787, these are violations not only of the of the WTO rules, but also of the 1992 LCA agreement, for a good summary have a look at "Industrial Subsidies and the Politics of World Trade: The Case of the Boeing 7e7" ( http://findarticles.com/p/articles/m..._qa4127/is_200404/ai_n9388414/pg_1 )

Quoting Stitch (Reply 19):
Or the way the US government was, for a time, willing to shore up Boeing post-9/11 with the original KC-767 tanker deal.

I dont believe that for a second, when that fell through, the US Navy purchased 108 P-8A aircraft. A Morgan Stanley report in 2003 found that with the 767 tanker deal, the US government was giving an extra 9% premium over normal commercial margins for that project, that lease deal was the equivalent “at least 700 firm deliveries of Boeing 737s”, that the normal profit margin for the 767 is 6% and that the Pentagon plans to give Boeing up to 15%.

Also have a look at the "Industrial Subsidies and the Politics of World Trade: The Case of the Boeing 7e7" above for additional levels of support the US government if giving Boeing, with no repayment required.

For a good summary of the current situation see the report "Boeing vs. Airbus: Fighting the Last War" by Gary Hufbauer, Peterson Institute for International Economics, based in Washington DC. http://www.iie.com/publications/opeds/oped.cfm?ResearchID=773

Quoting StoutAirLines (Reply 23):
Neither of you provided any information at all that I specifically requested, which is the verifiable evidence that any money has ever been repaid on the A330/A340 programs, in particular, to Germany or France. I did take the time to read all the information Zeke provided and not once did I see anything that provided such information.

Under article 8 of the 1992 LCA agreement (http://www.ita.doc.gov/td/aerospace/agreements/usaeulca.pdf), "the Parties shall exchange on a regular, systematic basis, all public information of a kind governments make available to their respective national elected assemblies relating to matters covered by this Agreement and its Annexes.", which included the loan repayments.

The agreement was in place for 12 years, information was exchanged, I have not seen anything to suggest during the 12 years that the LCA was in place, France and Germany did not receive loan repayments.

I would have thought that if such a situation existed, the Office of Aerospace, International Trade Administration, U.S. Department of Commerce would have had something to say about it.

One of the reasons why it is difficult to find information about this maybe due to article 8.8 of the 1992 LCA:

Quote:
Any information not in the public domain, which a Party may provide, shall at the request of the Party providing the information, be considered as proprietary. A recipient government shall take all measures necessary to ensure that information thus designated not be disclosed to anyone outside that government even after expiry or termination of the present Agreement. In addition, proprietary information shall not be used in possible trade disputes except for the purposes of confidential internal government discussion and decisions in relation to the implementation of the Agreement.
Human rights lawyers are "ambulance chasers of the very worst kind.'" - Sky News
 
baroque
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RE: Randy Discusses The WTO Launch Aid / Subsidy C

Sat Oct 20, 2007 12:22 pm

Quoting Stitch (Reply 11):
I wish both sides would just shut up and focus on getting their darn product out the door on time.

Amen to that.

Quoting Zeke (Reply 13):
I agree Stitch, but I find it troublesome that the EU and US had a valid legally enforceable trade deal signed in 1992 on large commercial aircraft, and the US walked away from in 2004.

Great listing of the flaws in the Airbus are "simply awfully unfair" argument.

Quoting StoutAirLines (Reply 22):
Neither of you provided any information at all that I specifically requested, which is the verifiable evidence that any money has ever been repaid on the A330/A340 programs, in particular, to Germany or France. I did take the time to read all the information Zeke provided and not once did I see anything that provided such information.

The House of Commons document lists the programs and then adds
"The DTI has noted that all these programmes have either repaid at their expected rate of return or are on course to do so." That includes the A330/340 programS. So you have not been reading the documents carefully.

BAE 2000 annual report states:
"During 2000, launch aid repayments charged to the profit and loss account in respect of our Airbus programmes reduced substantially to £122m (1999 £176m). Launch aid repayment was completed in 1999 on single aisle programmes, with repayments moving onto a royalty basis from 2000. The charge to the profit and loss account for these programmes amounted to £22m (1999 £74m), while on the A330/340 programme, repayments amounted to £100m (1999 £102m)."

From that you can work out that BAE repaid over two years £202m, out of a total advance that I cannot seem to find but is certainly less than the £530 million for the A380. If you work out the rate of deliveries of 330/340 since 2000, it would take some really inventive maths for that not to have been repaid.

Of course since then BAE has sold its interest and that source of information has dried up. But I cannot quite see that the various Treasuries would suddenly have changed the habits of a lifetime and stopped taking the payments. Indeed, we know from the WTO documents that they have not and as you might expect with the higher rates of production from Airbus, have instead been coining it in.

Now you ask about Germany and France and the A330, and I cannot directly answer that question due to in part to my linguistic limitation and in part because they might not report such matters as did BAE. However, if you think that BAE were happily shedding out around £150 million a year to the GoUK while their partners paid not a French centime or left the German accounts without a (D)mark then, as seems to be the common way of putting it, there are some interesting real estate deals that I can offer to you.

I am pretty sure that no repayments on RLI will be made now on the A330 program simply because by my guesstimates, it was paid off about 2004 or a bit earlier. However, there will still be the per copy Royalties, although not in this case actually going to Royalty. Where is RP when we need him?  Smile
 
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Stitch
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 2:10 pm

Quoting Zeke (Reply 27):
I dont believe that for a second, when that fell through, the US Navy purchased 108 P-8A aircraft.

So? If they didn't buy P-8As, they would have bought more P-3s from Lockheed-Martin. But Boeing showed the P-8A was a more capable platform then the P-3 - an argument many EU forum members keep harping on about the KC-30 over the KC-767, I might add.

Plus, the P-8A procurement process followed "standard" procedures and the program is being funded in a "standard" way - both which were not the case with the original KC-767 order.

So I am sorry, but I do not believe for one second that the P-8A program was a "government hand-out" to Boeing.  no  Especially since Boeing has to build a third line to support it due to such strong 737 sales as opposed to propping up an existing line that was winding down.
 
StoutAirLines
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 3:50 pm

Quoting Baroque (Reply 28):
Quoting StoutAirLines (Reply 22):
Neither of you provided any information at all that I specifically requested, which is the verifiable evidence that any money has ever been repaid on the A330/A340 programs, in particular, to Germany or France. I did take the time to read all the information Zeke provided and not once did I see anything that provided such information.

The House of Commons document lists the programs and then adds
"The DTI has noted that all these programmes have either repaid at their expected rate of return or are on course to do so." That includes the A330/340 programS. So you have not been reading the documents carefully.

Once again, I was asking about the A330/A340 program as it pertains to Germany and France. You're speaking again of Airbus UK (versus Airbus EADS), which is a diffferent matter altogether, and clearly has a business relationship that is structured to require payments of some sort.

Quoting Baroque (Reply 28):
Now you ask about Germany and France and the A330, and I cannot directly answer that question due to in part to my linguistic limitation and in part because they might not report such matters as did BAE. However, if you think that BAE were happily shedding out around £150 million a year to the GoUK while their partners paid not a French centime or left the German accounts without a (D)mark then, as seems to be the common way of putting it, there are some interesting real estate deals that I can offer to you.

So there is no proof, whatsoever, and it's disappointing. If such proof was available, in any particular language, we could see it, but there isn't. And this is not just true for the A330/A340 program, but also for the A320 program as well.

Thank you for the sarcasm and especially for making my point better than I ever could.
 
Lumberton
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 4:14 pm

Maybe this is the way to sort this out?

Quote:
-EADS renounces all government aid for development of new aircraft.
-The U.S. Air Force selects the KC-30 tanker and agrees to buy 160.
-EADS cancels the A400M and agrees to buy 160 C-17s.
-Boeing and Airbus do the 737/A320 replacement (Y1) as a joint venture.
About a month after this happens, world peace breaks out….

http://fleetbuzz.wordpress.com/2007/...airbus-boeing-at-the-wto/#comments
"When all is said and done, more will be said than done".
 
trex8
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 4:32 pm

Quoting StoutAirLines (Reply 30):
So there is no proof, whatsoever, and it's disappointing. If such proof was available, in any particular language, we could see it, but there isn't. And this is not just true for the A330/A340 program, but also for the A320 program as well. Thank you for the sarcasm and especially for making my point better than I ever could.

do you really believe that somehow the Brits got a much better deal from Airbus than the French and Germans and Spanish who were the original partners from the beginning and through the early lean times when the UK dropped out??
When I was working for the Pentagon in the UK in the 80s all my MoD colleagues used to try explain to me how the EEC/EU worked. The French and Germans make the rules and the British (and others) pay for it! No. I can't quote any German or French govt publication saying what they have been paid back specifically for the A330/40 but it flies against the grain of all that goes on in the EU that the Brits are far out ahead of the French and Germans on this issue or any other!
 
StoutAirLines
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 5:09 pm

Quoting Trex8 (Reply 32):
do you really believe that somehow the Brits got a much better deal from Airbus than the French and Germans and Spanish who were the original partners from the beginning and through the early lean times when the UK dropped out??

Do I believe that the Brits got a much better deal? Perhaps.

Airbus UK is a separate entity from Airbus, the French-based concern, as I am sure you know already. Airbus UK partners with Airbus on every new airplane program, that it can, including the provision of funds for wing development and production.

Airbus UK must approach the UK government each time for funding and the UK does expect compensation of some sort, including repayment, jobs or both.

As for Germany and France, it is entirely a different matter with funds drawn from the Marshall Plan.
 
Mir
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 5:28 pm

Quoting Zeke (Reply 13):
The Boeing union have already piped up about the tanker deal saying how much of the 767 is already made outside of the US.

And many of those components are subsidized by the local governments.

-Mir
7 billion, one nation, imagination...it's a beautiful day
 
trex8
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 5:29 pm

Quoting StoutAirLines (Reply 33):
As for Germany and France, it is entirely a different matter with funds drawn from the Marshall Plan.

maybe when Airbus started in the late 60s but in the 90s?? I think not!
 
tdscanuck
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 6:27 pm

Quoting Zeke (Reply 27):
Nooooooooooooooooooo

US took the EU to the WTO for following the terms of an agreement "AGREEMENT BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE EUROPEAN ECONOMIC COMMUNITY CONCERNING THE APPLICATION OF THE GATT AGREEMENT ON TRADE IN CIVIL AIRCRAFT ON TRADE IN LARGE CIVIL AIRCRAFT"

Excellent summary, Zeke, well said.

Quoting Zeke (Reply 27):

Both Article 4 (the method Airbus was using for government support) and Article 5 (the method Boeing was using for government support) are illegal under the 1994 GATT. For 10 years after the 1994 GATT was signed, Airbus and Boeing continued to operated under the 1992 EU-US LCA agreement.

The US withdrew from the 1992 LCA agreement, and then took the EU to the WTO for reasons unknown. If it was purely for breaching the 1994 GATT, action should have been taken 10 years prior.

OK, as I understand this we agree that, today, Boeing is violating the LCA agreement and Airbus is violating the GATT agreement. Except the US withdrew from the LCA agreement (not really ethical, but legal) but didn't withdraw from the GATT agreement, which would suggest there is legal ground for the current case at the WTO. Even if it is 10 years late.

Quoting Zeke (Reply 27):
Quoting Stitch (Reply 19):
Or the way the US government was, for a time, willing to shore up Boeing post-9/11 with the original KC-767 tanker deal.

I dont believe that for a second, when that fell through, the US Navy purchased 108 P-8A aircraft.

They didn't buy 108 aircraft, they bought 5. The rest of them only get purchased if the first five pass all the operational testing.

Tom.
 
baroque
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 9:14 pm

Quoting Trex8 (Reply 32):
The French and Germans make the rules and the British (and others) pay for it! No. I can't quote any German or French govt publication saying what they have been paid back specifically for the A330/40 but it flies against the grain of all that goes on in the EU that the Brits are far out ahead of the French and Germans on this issue or any other!

Well summarised Trex8, the French have tended to make the rules. Perhaps one of our French or German members can tell us if the French or German Treasuries is especially generous: I rather doubt they are, but it would be nice to have direct evidence.

The RLI rules are clearly set out for the UK and they follow the 1992 agreement. It is difficult to believe that Germany and France set up entirely different rules under the same agreement. Rather than the onus being to prove that the rules are the same, what evidence, SAL, is there that the rules are different for different countries?

Quoting StoutAirLines (Reply 33):
As for Germany and France, it is entirely a different matter with funds drawn from the Marshall Plan.

That is the first I knew about Airbus producing planes in 1951 which is when the Marshall Plan funding stopped, unless you are referring to the revolving funds in Germany from repayments of loans. As I understand it the French funds were used to reduce the budget deficit. Part of the reason for the revolving funds was an obligation (which remained unclear for many years) to repay some and probably in some cases all of the aid moneys. And of course the UK only finished repaying Lend Lease obligations a couple of years ago.

As a general issue, I don't think the UK gets paid by the wingsets in those terms, but rather once the wingset and whatever else in included in the RLI, is included in a delivered airframe, then Royalty payment will take place. Repayment of the initial grant, may well be much more flexible.

Quoting Tdscanuck (Reply 36):

OK, as I understand this we agree that, today, Boeing is violating the LCA agreement and Airbus is violating the GATT agreement. Except the US withdrew from the LCA agreement (not really ethical, but legal) but didn't withdraw from the GATT agreement, which would suggest there is legal ground for the current case at the WTO. Even if it is 10 years late.

Could easily be !!!!! (Smilies have gone on holiday - again)
 
astuteman
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 9:31 pm

Quoting RedFlyer (Reply 17):
Airbus has been fortunate in that all of its programs have, at worst, been relatively successful (and at best spectacularly successful)

That's a bit uncharitable IMO. I think it was a bit more deliberate than "fortunate" suggests.....

Quoting Keesje (Reply 25):
I think in reality both sides of the oceans received enormous amounts of tax money in various visible and invisible ways.

What's irksome in these debates is that this situation is by no means limited to the airliner industry, and many of the "incentives" that both parties receive are routinely given to other industries. The exception seems to be RLI, which because of its exception, seems to be picked up on as the "gremlin".
IMO, certainly from a UK perspective, RLI is more onerous a financing solution than the typical regional development aid given to companies invesing in the UK/EU.
Toyota (or Ford, or GM, or Chrysler) opening a plant in Derby would get far better terms than RLI offers Airbus..

Quoting StoutAirLines (Reply 33):
As for Germany and France, it is entirely a different matter with funds drawn from the Marshall Plan.



Quoting Baroque (Reply 37):
That is the first I knew about Airbus producing planes in 1951 which is when the Marshall Plan funding stopped,

It never ceases to amaze what you can learn from A-net.......  Smile

Regards
 
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zeke
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RE: Randy Discusses The WTO Launch Aid / Subsidy C

Sat Oct 20, 2007 10:17 pm

Quoting Tdscanuck (Reply 36):

They didn't buy 108 aircraft, they bought 5. The rest of them only get purchased if the first five pass all the operational testing.

Thanks Tom, didn't know that, thought it was like the tanker deal, a number of technology demonstrators, the rest production aircraft, but only one contract.

Also some more happened recently ...

"Earlier this month, Canada quietly filed what's called a third-party submission in the WTO case launched by the European Union, which alleges the U.S. gave illegal subsidies to Boeing."

http://www.theglobeandmail.com/servl...71019.RAIRCRAFT19/TPStory/Business

All we now need is for Brazil to follow suit.

The problem Boeing has is that WTO has already one ruled against them for illegal subsidies back in 2000. They were getting federal corporate tax breaks, through the use of offshore foreign sales corporations (FSCs), which were authorised by the US government in 1984. These are corporate entities established in foreign jurisdictions such as the Bahamas through which US manufacturers could channel exports.

15% of the revenue earned through FSCs are exempt from the US corporate income tax. This means that at a corporate income tax rate of 35%, manufacturers can keep 5.25% more of their revenue. The EU took the US to the WTO claiming from 1990 to 2004, Boeing avoided paying more than $1.6 billion in taxes through utilisation of FSCs.

The WTO ruled in 2000 that FSCs constitute an illegal export subsidy for US companies. When the US government dragged its feet in addressing the issue, the EU imposed retaliatory tariffs on selected US exports in 2004, as authorised by the WTO. This forced the US government to begin phasing out FSCs, and they will cease to exist by
the end of 2006.

These reduced tax levels that Boeing is enjoying for the 787 forms part of the EU claim.

I find it very disingenuous when Ted Austell is vice president of international trade for Boeing said this week :
"It is such unsubstantiated allegations and misleading statements about "indirect" government support that have made it so difficult to resolve the subsidy issue outside of the litigation both sides have brought to the WTO. The U.S. government and Boeing remain prepared to negotiate a settlement of this dispute. However, Airbus and its government supporters have shown great reluctance to give up the launch aid that has made Airbus so successful, despite the fact that the practice is clearly illegal." from http://seattletimes.nwsource.com/html/opinion/2003957578_boeing18.html

When the WTO has already found Boeing guilt of subsidies in the past, the EU "unsubstantiated allegations", in my view have some solid WTO precedent.
Human rights lawyers are "ambulance chasers of the very worst kind.'" - Sky News
 
StoutAirLines
Posts: 53
Joined: Tue Sep 04, 2007 3:09 pm

RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 10:57 pm

Quoting Stitch (Reply 20):
Quoting RedFlyer (Reply 20):
Very true. But that is not quite a good example in this context. The U.S. feds were not playing the role of banker using extra-commercial market terms. They were purchasing goods and services that were needed.

But doing so at a cost that was much higher then it needed to be... If Boeing hadn't been greedy, they likely would have been able to keep McCain and Company at bay.

Actually, Stitch, a real tragic aspect of the demise of that original lease arrangement, offered to the U.S. Air Force, was that it was such a great deal!

Basically, the pricing and content were patterned after the most lucrative dry lease deal that any financially healthy airline could hope to wrestle away. It included comprehensive spares, maintenance and refurbishment coverage all packaged into a single monthly very reasonable payment.

That's why the accountants and budget planners at the Air Force were so enthusiastic about it. Elected officials, however, who came out against it, never understood the mechanics of it or how well the Air Force would have made out, had it gone through.

Quoting BestWestern (Reply 24):
Quoting StoutAirLines (Reply 23):

Wouldn't it be in everyone's best interest for Airbus or those European governments, especially now, to come forward with the proof that refutes Boeing's claims?

I thought the US believed in innocent until prooven guilty, or did that go out the window with 24hr news TV?

Really, we know that it is a matter for the WTO to fairly adjudicate, fully based on direct evidence and testimony, BestWestern.

Sadly, however, what we also really know is that there is no past evidence of sound fiducial oversight here. Funds siphoned off of sources, largely including the Marhsall Plan, are long gone and will never be repaid. And that is in violation of WTO governance, plain and simple.
 
tdscanuck
Posts: 8572
Joined: Wed Jan 11, 2006 7:25 am

RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sat Oct 20, 2007 11:21 pm

Quoting Zeke (Reply 39):
Quoting Tdscanuck (Reply 36):

They didn't buy 108 aircraft, they bought 5. The rest of them only get purchased if the first five pass all the operational testing.

Thanks Tom, didn't know that, thought it was like the tanker deal, a number of technology demonstrators, the rest production aircraft, but only one contract.

In fairness, the Navy fully intends to buy all 108 and I think the industry would be stunned if they didn't progress beyond the technology demonstration phase, but the existing contract is only through the tech demonstration (about $3.9 billion). The Navy isn't financially or legally committed to the full purchase yet.

Tom.
 
NAV20
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RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sun Oct 21, 2007 12:47 am

Quoting Astuteman (Reply 38):
many of the "incentives" that both parties receive are routinely given to other industries. The exception seems to be RLI, which because of its exception, seems to be picked up on as the "gremlin".

I think that's exactly right, Astuteman. I've worked on 'regionally aided' projects (and I expect that you have too, given where you are located) and the WTO raises no objection to regional incentives provided that they are transparent and directly aimed at creating new employment in needy areas.

But in my experience ALL such incentives are directly linked to the creation of new employment; indeed, they usually take the form of percentage grants or tax allowances on the cost of the physical assets (buildings, plant, and machinery), and they're not fully paid out until the assets are in place and the promised number of new jobs have been created. Boeing and Airbus both locate their new plants in development areas to take advantage of this.

But I've never come across any form of regional aid that consists of governments advancing risk capital, 'venture' capital,' to private companies to spend as they like. That's why the Airbus launch aid has been the subject of a complaint to the WTO, it doesn't 'fit the mould' of regional policy. Of course the EU governments are free to subscribe capital if they wish, but the normal way to do this would have been to take a shareholding in the company concerned - so that their sharing of the risks is counter-balanced by rights to share in profits. But this hasn't been done in the case of EADS, only the French and Spanish governments have small shareholdings, and neither has any board representation.

Quoting Astuteman (Reply 38):
Toyota (or Ford, or GM, or Chrysler) opening a plant in Derby would get far better terms than RLI offers Airbus..

But surely the point is that Airbus in Toulouse, Wales, Hamburg etc. - and Boeing in Washington State and elsewhere - get regional investment incentives as well? 'Launch aid' is on TOP of the normal run of central and local government assistance.

By the way, as I understand the WTO situation, the US Government's complaint was lodged first, and the EU lodged theirs later. So the procedure is that the WTO will first consider and rule on the US complaint against Airbus (possibly some time in November) and then move on (presumably some time in 2008) to consider the EU complaint against Boeing. On present evidence the WTO is not seeking to arbitrate between the two sides, it is treating the two complaints as separate issues.
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
astuteman
Posts: 7012
Joined: Mon Jan 24, 2005 7:50 pm

RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sun Oct 21, 2007 6:18 am

Quoting NAV20 (Reply 42):
'Launch aid' is on TOP of the normal run of central and local government assistance.

Who says?
Not in the UK it isn't.  no 

Regards
 
baroque
Posts: 12302
Joined: Thu Apr 27, 2006 2:15 pm

RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sun Oct 21, 2007 1:05 pm

Quoting StoutAirLines (Reply 40):
Funds siphoned off of sources, largely including the Marhsall Plan, are long gone and will never be repaid. And that is in violation of WTO governance, plain and simple.

I, at least, am all eyes to read how that has been done. What funds, by who and when?

Apart from the difference in time, the totals advanced for the A300 were close to the country totals for ALL Marshal Aid to France and Germany. We know a large part of the later Marshall Aid went to mining and steel. We also know that Germany at least initially had to repay all the aid, and only after the Plan had been terminated was the amount was reduced. Note also, that the strength of the German currency was not due to the Marshall Plan but due to changes that the German government could introduce only AFTER the Plan had ended. So financially, Germany post the plan tends to have very little to do with the Marshall Plan.

I am intrigued at how you know where the Marshal Aid funds went between 1951 and the time of the launch of the A300.

I knew I had another document, and then found this table stuck in my set of images. It is from an HoC 2000 document.

Big version: Width: 630 Height: 487 File size: 101kb
House of Commons 2000 data


A couple notes. The data on the A330 indicate that most of that program had indeed been repaid by 2000.

You can see in this table that outlays for 1999 totalled 106.1 million pounds and repayments were 104.8 million pounds. Forecast numbers for 2001 were just over 110 million pounds and repayments estimated at 134.7 million. So the system was cash negative for Airbus from around 2000 until the funds for the A380 were drawn down and almost certainly have been negative now for another couple of years as A32x production continues apace. Getting close to 100x330s a year must be quite profitable for the Treasuries too.

It is also worth noting that as the A32xs are "more and more" repaid, the amounts paid back get larger not smaller - oh the beauties of receiving royalties on a popular line!!
 
redflyer
Posts: 3905
Joined: Thu Feb 24, 2005 3:30 am

RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sun Oct 21, 2007 1:35 pm

Quoting StoutAirLines (Reply 40):
Actually, Stitch, a real tragic aspect of the demise of that original lease arrangement, offered to the U.S. Air Force, was that it was such a great deal!

Basically, the pricing and content were patterned after the most lucrative dry lease deal that any financially healthy airline could hope to wrestle away. It included comprehensive spares, maintenance and refurbishment coverage all packaged into a single monthly very reasonable payment.

 checkmark 

The basic foundation of the deal was actually pretty good. Unfortunately, it gets lost in the scandal that was associated with the contract (Darlene Druyun).
A government big enough to take away a constitutionally guaranteed right is a government big enough to take away any guaranteed right. A government big enough to give you everything you need is a government big enough to take away everything you have.
 
trex8
Posts: 5365
Joined: Sat Nov 02, 2002 9:04 am

RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sun Oct 21, 2007 4:19 pm

Quoting RedFlyer (Reply 45):
The basic foundation of the deal was actually pretty good. Unfortunately, it gets lost in the scandal that was associated with the contract (Darlene Druyun).

IIRC the Druyun factor only came out after the deal had already been torpedoed by McCain et al. as the CBO and others felt the lease costs were higher than what they thought were reasonable commercial rates.
 
redflyer
Posts: 3905
Joined: Thu Feb 24, 2005 3:30 am

RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sun Oct 21, 2007 4:30 pm

Quoting Trex8 (Reply 46):
IIRC the Druyun factor only came out after the deal had already been torpedoed by McCain et al. as the CBO and others felt the lease costs were higher than what they thought were reasonable commercial rates.

You might be correct; however, my recollection is it was during the McCain witch hunt during the contract review that ultimately led to the Druyun-Boeing relationship and ultimately to cancellation of the deal (again, you might be correct and my recollection of the time-line might be off). In any event, I don't remember the actual lease being unreasonably high as compared to other theoretical leases. What I do remember is that the lease, as compared to an outright purchase, was high. But then that is the nature of leases. The deal was sold by Boeing as a means of giving the USAF what it needed very quickly and at relatively low cost -- up front. And that is exactly what it would have done. But if one were to look at the lease from a long-term perspective then, yes, it was a lot higher cost than an outright purchase, which is how the DoD normally acquires hardware. What raised the red flags was this was going to be a major acquisition and unlike past major buys it was going to be a "lease". There was no sleeze in the lease. The sleeze oozed out after the Druyun-Boeing relationship came to light and it gave McCain the bullet he was looking for to kill the deal.

Anyway, this is off-topic and we can discuss it in further detail in Mil Av forum where several threads on the KC-X and KC-767 are underway.
A government big enough to take away a constitutionally guaranteed right is a government big enough to take away any guaranteed right. A government big enough to give you everything you need is a government big enough to take away everything you have.
 
Wsp
Posts: 356
Joined: Sun May 06, 2007 7:43 am

RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sun Oct 21, 2007 8:45 pm

Quoting StoutAirLines (Reply 40):
Sadly, however, what we also really know is that there is no past evidence of sound fiducial oversight here. Funds siphoned off of sources, largely including the Marhsall Plan, are long gone and will never be repaid. And that is in violation of WTO governance, plain and simple.

The ERP funds are increasing not decreasing. So why do you suggest that ERP credits are not being repaid?

What is your definition of "sound fiducial oversight" and why do you suggest that KfW is not applying "sound fiducial oversight" when giving out these credits?

When you use a term like "siphoned off" could you clarify what according to your definition is lawful/intended use of the ERP money and how the actual ERP loans deviate from that.

Quoting StoutAirLines (Reply 33):
Airbus UK is a separate entity from Airbus, the French-based concern, as I am sure you know already. Airbus UK partners with Airbus on every new airplane program, that it can, including the provision of funds for wing development and production.

Airbus UK Ltd. is a fully owned Airbus subsidiary just like Airbus Deutschland GmbH or Airbus France S.A.S.

Quoting StoutAirLines (Reply 30):
So there is no proof, whatsoever, and it's disappointing. If such proof was available, in any particular language, we could see it, but there isn't. And this is not just true for the A330/A340 program, but also for the A320 program as well.

The WTO panel certainly has all the documentation available. Unfortunately this text of the EC submission is heavily redacted but the 792 pages contain plenty of references to actual payments etc.

http://trade.ec.europa.eu/doclib/html/134551.htm

Btw. It seems the UK actually extracted more out of some of these contracts than the other governments.

If you get bored reading it, fast forward to the bits about the Iberia (ant other) sales campaigns. Or do a full-text search for "Aboulafia".
 
User avatar
zeke
Posts: 14399
Joined: Thu Dec 14, 2006 1:42 pm

RE: Randy Discusses The WTO Launch Aid / Subsidy Case

Sun Oct 21, 2007 9:22 pm

Quoting RedFlyer (Reply 45):
The basic foundation of the deal was actually pretty good.

"This is a great deal for the Boeing Company that I'm sure is the envy of corporate lobbyists from one end of K Street to the other. But it's a lousy deal for the Air Force and the American taxpayer,''

from http://query.nytimes.com/gst/fullpag...9C8B63&sec=&spon=&pagewanted=print

Quoting RedFlyer (Reply 47):
There was no sleeze in the lease.

"In documents released by Mr. McCain before the hearing, internal Boeing e-mail messages show that Ms. Druyun, while still at the Air Force, gave Boeing pricing data on a rival bid that Airbus was preparing. She turned over the information at a meeting with Boeing executives in April 2002, after the Air Force chose Boeing. Last January, Ms. Druyun joined Boeing as an executive in its missile defense division. "

my emphasis from http://query.nytimes.com/gst/fullpag...A9659C8B63&sec=&spon=&pagewanted=1

RedFlyer, are you associated with the Boeing company ?

"''Boeing still believes that the tanker deal is the right thing to do for our Air Force customer, as well as for our national defense program,'' said Dan Beck, a Boeing spokesman."

Sounds very similar to your "comments", is it the company line ?

Quoting Wsp (Reply 48):
http://trade.ec.europa.eu/doclib/html/134551.htm

Thanks for posting that, very good summary of history of the agreements and other international law in it. Clearly demonstrated the "damages" aspect of the WTO case that is required before a state can claim a subsidy.
Human rights lawyers are "ambulance chasers of the very worst kind.'" - Sky News

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