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EADS and BAE Issue Statement for Negotiated Solution in Boeing 787 Trade Issues

  • Friday, 3rd June 2005
  • Reading time: about 5 minutes

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Following the appointment of a new USTR just a few weeks ago, Airbus and its shareholders, EADS and BAE Systems, have put strong hopes on a new start for the peaceful settlement of the EU-US trade dispute on aeronautics.

In a statement released earlier this week, EADS are strongly convinced that the opening of a litigation would amount to the launch of a trade war which is in the interest of none of the stakeholders except, in a short term view, those looking for being protected from fair competition including on their domestic market.

However, several statements made by authorized persons in the USA along the last few days have cast a serious doubt on the interest of the US for a negotiated outcome. For the avoidance of doubt, Airbus and its shareholders have confirmed their full support to the European Commission and its target of a balanced and extended withdrawal of all kind of supports whether they come from national or local authorities, including those provided by third parties, like, for instance, Japan.

A statement from Airbus stated that “such a negotiation should also address the short-term issue of the two competing new aircraft, the Airbus A350 and the Boeing 787. This latter has become the world’s most subsidised airliner ever. Boeing has amassed more than US$ 5 billion in government subsidies to pay for its development and production, through US and foreign government R&D funds, tax relief schemes and launch aid. New subsidies are being added every day. But for these subsidies, Boeing could not have launched the 787, which is currently being dumped on the market at unprecedented low prices.”

The statement also added that “many of the technologies on the 777 and 787 were paid for by government. The composite wing was a NASA programme; the composite fuselage comes from military programmes developed by Boeing including the B2 and the V22 Osprey. Between1992 and 2004, Boeing has benefited of more than US$12 billion from NASA research funding. It has also received US$1.5 billion from FSC, an illegal export tax scheme. It has not repaid even one cent to the US government or taxpayer.

Airbus added that, in the same vein, Boeing is massively lobbying the American Congress to forbid any competition on a future tanker for the US Air Force. The amendment is clearly designed to reduce competition and allow Boeing to retain its monopolist position in the US, whilst keeping full access to European defence markets.

The fact that Boeing has managed to secure this amendment against the interests of other US primes and the hundreds of US aerospace companies that supply Airbus is not in the interest of the American taxpayers and of the US aerospace industry. Since giving up its responsibilities to limit these subsidies last September, when it withdrew from the US-EU agreement, Boeing has continued to get new subsidies whilst suggesting that Airbus should not receive government loans even when fully WTO compliant. The unwillingness of Boeing, since last year, to negotiate any new disciplines on its massive subsidies has brought the issue to the brink of a trade war.

In spite of this massive subsidisation of its competitor, Airbus believes that a trade war is against the interest of the industry including its numerous US suppliers from which Airbus procures US$ 6 billions a year. Airbus is the largest export customer of the American aerospace industry worldwide. However, would the USA refuse a negotiated settlement, all programmes subsidizing Boeing aircraft will be challenged at the WTO. A WTO case will flush out all of these hidden subsidy programmes to Boeing and its US partners and will prevent them from being used to injure Airbus in the future.

On the other hand, nothing in the WTO forbids governments from lending money to Airbus. EU government loans to Airbus are WTO compliant and Airbus expects EU governments will continue to loan Airbus funds whenever they seek a good investment. Since the signature of the EU-US Agreement in 1992, Airbus has repaid European governments more than US$6.7bn. This is 40% more than it has received. So, Airbus is a net ‘repayer’, not a ‘borrower’, from EU governments. Nevertheless, Airbus would be willing to renounce to this system if a comprehensive and balanced agreement is negotiated which would cover all types of funding – wherever they come from – and that would apply identically to the A350 as well as to the 787.

Furthermore, at the benefit of 777 and 787 sub-assemblies, Boeing is happy to extract from the Japanese government the very same kind of loans it so sharply criticizes when from the European governments for Airbus. Evidently both cannot be right. A WTO challenge will unavoidably have to address the issue wherever.

Airbus and its shareholders do believe that a negotiated settlement is not only the best way out, but also quite accessible. They do trust into the pragmatism and the solid business sense so many time demonstrated by the American decision makers. The transatlantic dialog has overcome, including recently, too many difficult challenges to fail that one.

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