Strasbourg, 14/11/2007 (Agence Europe) - On Tuesday 13 November, the European Commission welcomed the “unanimous” support of members of the European Parliament in their, “fierce and fair defence of European interests” in the dossier involving subsidies to Airbus and Boeing aircraft manufacturers. The commissioner for development, Louis Michel, speaking on behalf of his counterpart for trade, Peter Mandelson, said that the EU was in a “strong position” in this case.
The Commission pointed out that the US government “claims” that funds invested by EU member states in Airbus contravene WTO rules on public subsidies. In October 2004, the US unilaterally, and without any preliminary notification, withdrew from a bilateral contract signed with the EU in 1992 (which explicitly authorised this kind of investment) and went to the WTO. The EU took note of the fact that the US preferred litigation to negotiation and therefore requested the WTO to declare US subsidies granted to Boeing, illegal.
Where are we in the dossier, three years later? Despite several attempts over recent years, the two parties have not succeeded in settling the dispute amicably. The US denied that it had granted subsidies to Boeing, while at the same time demanded, as a preliminary condition, that the EU ended the system of repayable advances to Airbus. The commissioner affirmed: “You will appreciate that on this basis it has not been possible to establish a fair and balanced basis for at negotiated settlement”. Just a few weeks ago, Boeing publicly rejected “Airbus' latest olive branch” on 18 October. Mr Michel concluded that they were therefore sceptical “whether this dispute can be resolved at the negotiating table some time soon”.
The Commission will therefore continue to defend European support to Airbus. In the eyes of Mr Michel, the European case also appears to be “convincing”: Airbus has repaid 40% more than it has received from EU governments since 1992 and has repaid in excess of €7bn so far. The commissioner asserted: “We hope that the panel will demonstrate that the rather modest sums that Europe granted in the form of aid for research and development and repayable advances have not had an impact on Boeing's competitiveness”. He said that they should be aware that Boeing's B-787 “Dreamliner” is perhaps the “most subsidised” plane in history. In view of the WTO hearing in September, the EU provided solid elements of proof of the $24bn in subsidies given by the US to Boeing for this plane.
Once the WTO decides, probably in 2008, it is unlikely that this is the end of the story because both sides might appeal, “which may take us well into 2009”. The Commission believes that once the WTO has ruled in the two affairs, the EU and US should discuss the resulting implications.
In conclusion, the Commission considers that a negotiated settlement to the litigation would provide the necessary long term solution the market requires as a basis for future peaceful and fair competition in the aeronautics sector. Failing that, the Commission will vigorously and resolutely defend EU interests at the WTO. The Commission believes that competition between Airbus and Boeing should happen in the marketplace in a “fair and reasonable” way. However, this is not the case if the US competitor attempts to portray certain member states negatively or instigate legislation at the US Congress in an effort to block funds for improvements to US airports in view of accommodating the A-380. Mr Michel deplored the fact that “this sort of campaigning is damaging to wider transatlantic relations”.
Nevertheless, the message the Commission wants to send out is one of hope: the European Union and the US have both striven to prevent this dispute damaging the partnership linking them together, and they have managed to do this. The Commission is sure that the US government will ensure that the dispute between Airbus and Boeing will not affect either company's ability to compete fairly in public procurement competitions. Mr Michel concluded: “There should be no anti-competitive actions in legislation or executive policy that would improperly restrict the ability of EU companies to compete in the current US aerial tanker recapitalisation programme”.
Avoid any escalation at World Trade Organisation
Christine De Veyrac (EPP-ED, France) declared: “Boeing's complaint against Airbus at the World Trade Organisation clearly appears to be a reflection of a bad loser”. She pointed out that the US manufacturer had for a long time dominated the market up until 2003-04 when Airbus “overtook Boeing”. Ms De Veyrac stated that Airbus does not benefit from subsidies but from repayable advances (more than the loans received), while Boeing has always benefited from big military research and development programme from the Pentagon and NASA (the transfer of free military technology to the civilian sector) and different tax breaks from the US government. She explained that “We will be very vigilant on this dossier” and expect the Commission to “fiercely defend the economic interests of the European manufacturer”. The role of the EU and US is not to try to outdo each other as rivals at the World Trade Organisation, but to call the partners to bilateral negotiations over their dispute, concluded De Veyrac, who was speaking on behalf of her colleagues participating at the EP aeronautic group.
Erika Mann (German Social Democrat) spoke on behalf of the group of European socialists. She pointed out that for 11 years, competition between the two manufacturers had prospered and technology had helped make air traffic safer. Boeing, however, decided in 2004 to no longer respect the 1992 agreement and attacked Airbus over illegal subsidies. According to Ms Mann, the repayable advances to Airbus had no impact on Boeing activities. She called for the two sides to conclude an agreement that was propitious to “a stable environment” and suggested that this required a “six month moratorium” on the procedures submitted to the WTO. The MEP concluded that they had to look to the future rather than the past.
Jorgo Chatzimarkakis (ALDE, Germany) said that Airbus and Boeing should resume negotiations for an agreement in an effort to iron out the differences over public subsidies. He said that this game of hide and seek would not facilitate progress and added, however, that he was certain that the parties would find a solution to this problem.
Zbigniew Krzysztof Kuzmiuk (UEN, Poland) said that they needed bilateral negotiations to reduce these subsidies. He also affirmed that “this WTO litigation will be very onerous and put the two companies in danger”. Jacky Henin (GUE/NGL, France) said that the US and Japanese governments provided “massive” assistance to Boeing through military and public research orders. The Boeing 787 would therefore be the most subsidised civilian plane in history. Henin declared that the Commission should put up a solid defence of Airbus at the WTO because “it is its duty and citizens will judge it on its deeds”. He also defended the “efficient and healthy” system of repayable advances by Airbus. He said that they needed to complete this system of advances with a “strengthened aeronautic research policy” that would bring European efforts up to those of the US level.
Georgios Papastamkos (EPP-ED, Greece) thought that the seriousness of the litigation and the way in which it was politicised constituted a “test” for the WTO. He asked whether the latter had sufficient legal weight to find a solution. Kader Arif (PES, France) said that faced with this attack from the US, “Europe and the European Commission should prove their determination and conviction by defending a sector of unquestionable economic importance”. Mr Arif added that the US complaint at the WTO against Airbus appeared to him to be “unfounded and surprising”. He stressed that Boeing benefited from an almost total monopoly in large programmes for US army and NASA equipment, as well as public assistance for military development programmes and direct US aid, which were not repayable. The PES MEP concluded that they needed to explore all possible solutions (WTO, amicable agreement).
In response to contributions made by MEPs, Mr Michel explained that the Commission was prepared to negotiate amicably but not at any price, and on the condition that it was between both sides. He stated that they needed discussions where transparency was respected by both parties and where the EU remained in a strong position. According to the commissioner, “the case brought by Mr Mandelson appears extremely convincing…and we are in a strong position”. Geoffrey Schuman, the director of European affairs at Airbus recently explained that “the US says it is prepared to negotiate but says we must, as a preliminary measure, unilaterally renounce launch aid, without any similar concession from them. We cannot approve negotiations on such a basis”. (L.C.)