February 2005 
Volume 03, Issue 9 
Industry Wrap

Time for discussion

United States and European Union set talks to end subsidies for jetliner production


Time for DiscussionU.S. and European Union trade representatives said last month they have created a framework for continuing negotiations to end government subsidies for large commercial aircraft development and production. This round of negotiations is scheduled to last three months.

Boeing President and CEO Harry Stonecipher hailed this framework agreement by saying, "We're pleased that the United States and the European Union have taken an important step toward ending subsidies to establish much-needed balance in the commercial aircraft market."

Among other things, the two sides agreed they would seek neither World Trade Organization litigation nor new subsidies during negotiations.

"The objective on which we agreed is to secure a comprehensive agreement to end subsidies—and I repeat, end," said Richard Mills, spokesman for U.S. Trade Representative Robert Zoellick. "The U.S. will not agree to permit new aircraft subsidies that are illegal under World Trade Organization rules, and that certainly covers launch aid."

Beyond the agreement's clear rejection of production and launch subsidies, it also calls for both sides to forge a new agreement on subsidies that uses a relatively restrictive definition of "subsidies" found in the WTO's 1994 Agreement on Subsidies and Countervailing Measures, which was signed by the United States and the European Union, as well as more than 125 other nations.

"The 1994 definition of prohibited subsidies includes precisely the kind of aid Airbus has received from its sponsor governments for the past three decades," said Ted Austell, Boeing vice president for trade policy. "Europe's willingness to agree to using the 1994 definition as part of the negotiation framework signals that it may be slowly coming to grips with the idea that Airbus needs to operate on the same commercial principles as Boeing."

Newspapers laud continuing talks on subsidies

Newspaper editorials hailed the announcement as a step toward achieving fairness in the global commercial jetliner manufacturing industry. Among these articles:

The Times of London, in a Jan. 12 editorial: "Rather than take their fight through the protracted WTO settlement procedures, [European Union Trade Commissioner Peter] Mandelson has engineered an acceptance that government subsidies for large commercial aircraft should end. Some pragmatism may be required on both sides while existing projects are worked through, but this is the first time that the goal of eventually ending subsidies has been accepted. The parties have at least conceded that there will be no new government support for large commercial aircraft agreed while the next three months of negotiations take place. ... Mr. Mandelson is right to contend that they should not need government subsidies, however these may be disguised."

The Seattle Post-Intelligencer, in a Jan. 12 editorial: "The outline for the talks between U.S. and EU trade representatives spells out an excellent goal: eliminating subsidies for large airliners. Ultimately, that is the way to achieve fairness, create the best long-term jobs and build the best airplanes."

Jeremy Warner, in The Independent of London, on Jan. 12: "The basis for a deal is clear. Airbus subsidy, or refundable launch aid as Europe prefers to call it, was dreamed up in the days when the Americans had a virtual monopoly over airliner production and state handouts were the only way of turning Europe's new entrant into a viable competitor. Those days are long gone."



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