|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.
US took the EU to the WTO for following the terms of an agreement "AGREEMENT BETWEEN THE GOVERNMENT OF
THE UNITED STATES OF
THE EUROPEAN ECONOMIC COMMUNITY CONCERNING THE APPLICATION OF
THE GATT AGREEMENT ON
CIVIL AIRCRAFT ON
LARGE CIVIL AIRCRAFT"
That agreement (http://www.ita.doc.gov/td/aerospace/agreements/usaeulca.pdf) says :
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
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.
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
(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 :
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;
(a)(2) there is any form of income or price support in the sense of Article XVI of GATT 1994;
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
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
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.
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