Brussels, 31/05/2005 (Agence Europe) - The dispute between the EU and the United States about public subsidies to Airbus and Boeing should be finally settled by the World Trade Organisation (WTO), with consequences that are today unforeseeable for transatlantic relations and multilateral WTO talks on the Doha round. The affair had begun to escalate on Monday evening when US Trade Representative Rob Portman announce that Washington would call for the opening of a WTO panel on subsidies to Airbus. On Tuesday, the European Trade Commissioner, Peter Mandelson, after consultation with Member States, announced that, in response to the American approach, the EU would, in turn, call for a separate panel to be set up to rule on the legality of “illegal” subsidies received by Boeing. The complaint filed by the EU does not yet cover Japan which, according to the Commission's calculation, also offered launch investment by way of $1.6 billion for Boeing's 787 “Dreamliner”, but Japanese aid “remains on the agenda” for the EU because of its “important role” in the development and the production of the 787, Mr Mandelson said.
Speaking to the press on Tuesday, Mr Mandelson admitted his disappointment that, despite the new European proposal last Friday aimed at reducing by 30% the amount of launch investment aid for A350 (EUROPE 8957), the United States had chosen the road of confrontation, taking the matter before the WTO and thus forcing the Geneva organisation to arbitrate what could “spark probably the biggest, most difficult and costly legal dispute in thr WTO's history”. The EU would have preferred to find an amicable solution, rather than to start up a costly and destructive dispute for two reasons in particular, Mr Mandelson. First of all, because after two dispute procedures at the WTO, which would no doubt last for years, “the final verdict will probably not be clear” and the two sides should, at the end of the day, most likely have to sit round a table to negotiate a final decision together. Then, because the WTO has important things to do, especially to make Doha talks move forward with a view to the next ministerial meeting in Hong Kong this December rather than “head over the commercial rivalry of two companies, Boeing and Airbus, who should be left to compete in a global market place big enough to accommodate them both”. Instead of making abusive use of the WTO machinery to resolve the Airbus/Boeing conflict, the United States would do better to devote its energy and resources to “leadership” and make the Doha round of talks move forward. Mr Mandelson, who returned from a visit to the WTO Tuesday, told the press: “I was struck by the complexity of the Round, its slow pace and by the urgent need for an injection of energy into the talks”.
The Commissioner stressed the need to prevent escalation of the Airbus/Boeing dispute from “infecting” its good personal relations with Rob Portman (“with whom I have had a good beginning of cooperation”, mainly with the recent Paris agreement on the modalities for calculating farm tariffs in WTO talks), or EU/US transatlantic relations in general. Messrs Mandelson and Portman, moreover, published a joint declaration in which they say: “We remain united in our determination that this dispute shall not affect our cooperation on wider bilateral and multilateral trade issues. We have worked well together so far, and intend to continue to do so”. During his press conference, Mr Mandelson was nonetheless highly critical about Boeing and its directors that he accused of not making any compromise impossible by making the immediate and full stop of all investment aid in favour of Airbus a prior condition for any negotiation. Boeing has never had the “appetite for compromise” and, thanks to its enormous influence on political decision-makers in Washington, its strategy has finally been followed by the US Administration, the Commissioner said.
US Trade Representative Rob Portman said for his part in a press release that the decision to go before the WTO was taken because of the lack of will shown by the European Commission to put an end to the new subsidies (…) of $1.7 billion that the EU Member States are preparing to grant to Airbus 1350. This is risk-free launch aid, the US press release states (contested by the EU). During over one year, the United States has sought to convince the EU to negotiate the end of subsidies but the EU is not willing to hold off the launch aid and has only suggested reducing it, not eliminating it, hence the need to go before the WTO, Mr Portman explained.
Overall, Mr Mandelson appeared to be in fighting form and affirmed that “Airbus is a huge success. This is why Boeing has been so instrumental in bringing this case to the WTO: not because it fears subsidies but because it fears competition. I am confident about the strength of Europe's case”. Addressing journalists, Mandelson also outlined some of the main lines of defence for WTO arbitration, namely: a) launch aid which Airbus benefits from and which should not in the eyes of the Europeans be banned by the WTO as it is reimbursable and involves risk sharing for Member States that grant favourable financial conditions, explained Mr Mandelson. With the opening up of WTO panels, while waiting for their verdicts, this launch aid for Airbus (and notably from A350) could be released if “Member States concerned (Germany, France, United Kingdom, Spain) are prepared” and are in favour. If the Americans had accepted the final offer from the Europeans (last Friday, this aid could have been reduced by 30%, which is obviously not the case now that the case has gone to the WTO, he remarked impassively. All launch aid to Airbus is reimbursable; b) the amount of different public aid Boeing received by the US Federal State and the different state governments has exceeded 2 to 3 times the threshold allowed in the EU/US agreement of 1992 on aid to aircraft manufacturers. Mr Mandelson pointed out that none of this aid had been reimbursed, contrary to the case for Airbus; c) Boeing also received subsidies to the tune of USD 22 bn over the last ten years through programmes and contracts concluded with NASA and the Defence Department. Mandelson explained that this aid had funded technological research at Boeing allowing the company to develop the 787. In total, 70% of development costs for this plane will have been paid by US taxpayers and Boeing will only have paid 15% of them; d) Boeing also benefits from military contracts at “inflated” prices, without mentioning the profits from the Foreign Sales Corporations (FSC) that the WTO declared illegal. Therefore The State of Washington has made commitments to granting Boeing tax breaks worth USD 4.2 bn for development and production of the 787 over the next 20 years, explained the Commissioner. Other States and cities like Kansas and Wichita have done the same thing, he concluded.