May 2005 
Volume 04, Issue 1 
Industry Wrap

All talk—and no action

As oil prices rise again, numerous industries—including aviation—are feeling the effects

By Len Vraniak

All talk—and no actionJan. 11 was a critical date in the ongoing dispute between the United States and the European Union over subsidies for manufacturers of large commercial aircraft. That day, officials from the two governments agreed to spend 90 days negotiating to end subsidies. The agreement contained three key objectives:

  • Ending subsidies to airplane manufacturers.
  • Doing so with a bilateral agreement between the United States and the European Union.
  • Creating an agreement with strong transparency and enforcement mechanisms.

But the end of the negotiating period passed last month with no agreement and no indication of what would come next. Boeing officials expressed disappointment in the lack of progress, saying the company "had hoped both sides would approach the negotiations with the intensity and seriousness of purpose required to solve this matter. We salute the U.S. government for making its commitment to a negotiated solution crystal clear over the past 90 days."

The company continued, "The U.S. government has stated that it is willing to continue talks under the terms of the Jan. 11 agreement, and Boeing firmly supports that stance. In addition, the company continues to support every effort the U.S. government makes to end subsidies to Airbus."

Editorial page support

As the dispute continues between the United States and the European Union over subsidies for manufacturers of large commercial aircraft, editorial boards at newspapers and newsmagazines have continued to weigh in on the subject. Here are some recent opinions.

"The U.S. has offered a fair solution that the Europeans should accept. Subsidies already in the Airbus pipeline (including $3.5 billion for the A380) would be grandfathered, but Airbus would be prohibited from getting more—including launch aid for the A350 that Airbus is now seeking. Airbus and the Europeans know that the U.S. probably would win a [World Trade Organization] challenge, and a bruising trade war is in no one's interest."

Los Angeles Times, April 16

"This [dispute] isn't about defense contracts, local tax breaks or supplier subsidies. It's about launch aid: upfront money to develop planes. ... Airbus gets launch aid. Boeing doesn't. If the [European Union] doesn't get that, then the U.S. has no choice but to litigate this to the end at the WTO."

Chicago Tribune, April 9

The U.S. Trade Representative's Office said it "regrets" the passing of the negotiating deadline. However, it maintained its resolve to reach a solution. "The U.S. is reviewing the situation to determine the best course of action to obtain the elimination of subsidies to Airbus. In the event that the EU proceeds with additional subsidies for Airbus large civil aircraft, the United States will return to [World Trade Organization] dispute settlement," the USTR said.

Press reports indicated one reason for the lack of progress was that the Europeans undertook actions that contradicted the three key objectives set out for the negotiating period. Indeed, just days after European trade officials agreed to a moratorium on new subsidies, then-Airbus CEO Noel Forgeard said the company would seek launch aid subsidies from its sponsor governments for its conceptual A350 aircraft, even though Airbus could finance the plane itself.

Also, although Europe initially agreed to bilateral talks only with the United States, followed at some future point by talks with other nations as appropriate, European representatives invited Japanese participation in negotiations before the United States and the European Union had a chance for substantive discussions. The Japanese declined the invitation.

Once the agreement expired, former U.S. Trade Representative and current Deputy Secretary of State Robert Zoellick wrote a letter to Peter Mandelson, his European counterpart, asking him to clarify the Europeans' position on the dispute, the negotiations and the agreement the two governments made on Jan. 11. Specifically, Zoellick asked if the Europeans were "willing to continue to negotiate under the terms of the Jan. 11 agreement, including the standstill on subsidies." At press time, there were no indications that Mandelson has responded.


Front Page
Contact Us | Site Map| Site Terms | Privacy | Copyright
Copyright© Boeing. All rights reserved.