77 Comments Add your own

• 1. Don Shuper  |  November 4th, 2009 at 05:33

  

  As I’ve tried to point out on a related thread when I posted part of my analysis made 8 years ago for a countervailing duties petition . . .

  http://home.att.net/~dshuper/CVDanalysisRDX.pdf

  and related links

  http://home.att.net/~dshuper/CVDPOSIT.html

  The issue was not whether or not Airbus had received subsidies in excess of that allowed by GATT92, but how much.

  “The L&PA Committee has made the following observations which lead to our belief that Airbus, through a variety of methods, is effectively selling their products below cost. Raw material, engines, avionics, landing gear, and similar parts cost the same for Boeing and Airbus. Assembly techniques, automation, certification, process controls, and computer-aided design techniques are essentially the same, and have no inherent cost differences. Additionally, labor costs are higher for EU countries, with differences from 15% higher in 1995 to about 5% in 1998. Finally, the EADS annual report shows that for the year 2000, Airbus’ share of EADS net consolidated profit was zero.
  We then compared the published selling prices of Boeing and Airbus commercial airplanes from 1998 - 2000, omitting figures for the Boeing 747. For 1999, the average cost of all airplanes sold by Boeing was $59 million per plane, whereas the average cost for Airbus was $46.4 million per plane. We then compared two comparable models of aircraft, the A320 and the 737-800. Figures reflected an average 737-800 costing (conservatively) about 10% more than the A320.
  Therefore, how can Airbus, with equal material and subassembly costs, higher labor costs and arguably lower productivity, and admittedly zero profits, still undercut Boeing prices by at least 10 percent? Our determination is that Airbus is selling most, if not all aircraft models into the U.S. at 10 25% below cost . .

  The only thing not yet public is some sort of comparison as to the actual amount of excessive subsidies involved.

  When compared to the 767 airframe - whether it is the A330-200 or other version basic airframe modified to be a tanker - I believe some sort of price/cost adjustment would be appropriate.

  Remember that initially, in 2001-2 Airbus claimed a significant cost savings over the 767 tanker.

  Supposedly around 40 percent as claimed by Rudy deLeon

  ” . . .Washington Post ran an Airbus story the day before Christmas saying they could build the tankers and for 40% less money. . . . ” ( meeting in Feb 2002 minutes in which I was in attendance ”

  Even though BA had jacked up the price, etc, the resulting gap simply could not have been made up without significant subsidy involvement.

  So I believe a good case can be made for an adjustment in $$ - with the real problem being just how much of the basic airframe cost should be factored in as an unfair subsidy.

• 2. Mike M  |  November 4th, 2009 at 07:55

  

  The rednecks in AL probably do not even know what the WTO is.

  They probably do not know what an airplane is!

  Its not as if Northrup is gonna win anyway, the WTO has all but proven the aid for Airbus was illegal - Airbus is not in a position to pay it back and the Air Force will have to void the A330.

• 3. Aurora  |  November 4th, 2009 at 12:10

  

  This analysis is spot on in my opinion. For airbus/NG and their supporters to maintain that adverse WTO rulings should be “irrelevant” to the tanker competition is wishful thinking in the extreme. What amazes me is that most media people can’t get their arms around the fact this competition will be decided not on how many pallets these aircraft carry but the political calculus.

  The airbus plane does not have the votes in the Congress to secure funding. One of the reasons the secretary of defense took the procurement off the table during last summer/fall’s presidential campaigns was to avoid having McCain tarred with his support of airbus, his ex-aides lobbying efforts for Northrop Grumman, and especially to not put the all-but-certain winner, Barak Obama, in a position where he would declare that jobs in America and the U.S. aerospace infrastructure would be best served by selecting the American plane, not the european one. And given the union support enjoyed then and now by Obama, it WOULD have happened. That would have provided a de-facto “fait accompli” and removed any hope the USAF had to get their european tanker.

  Fast forward to last night. The President and his party were dealt a huge election setback. The “take-aways” and “analysis” over these defeats will be debated for weeks, but one thing is crystal clear to the White House: Americans are not seeing improvements in the job sector and are concerned primarily by the economy. Anything that could even tangentially serve to contribute to criticism of “eroding the manufacturing base” or “outsourcing jobs” will strike fear in the political hacks that ultimately provide the penultimate advice to any politician before a decision of this magnitude has to be rendered. “How will this affect our base”? “What do we owe these guys”? Most importantly, “how will this impact the vote next time”? This is the calculus that really matters in the final analysis. The last administration was inept when it came to this kind of thinking; this administration is nothing if not political.

  That would not be true were one plane incapable of performing. This simply isn’t the case and not even a re-written, doctored RFP could hide that fact.

  An airbus-adverse ruling would be heaven sent to the White House. it would provide the cover needed to make this whole controversy go away. Defense Secretary Gates will likely step down sometime next year; the Air Force AMC Commander, Gen Arthur Lichte, a huge supporter of the big airbus, retires soon. Who are the proponents remaining? Will “competition fatigue” set it and will the Pentagon insiders conclude–if they haven’t already–that there is simply no way they are going to get this airbus?

  Will the White House–correctly–conclude that it must mollify a significant pillar of its base, organized labor, at all costs before the 2010 Congressional elections?

  I think so on both counts. As I have said here and elsewhere before, another attempt at competition for this procurement only guarantees war without end, protest upon protest, and likely litigation in the courts; years if not a decade to resolve.

  I have argued the infrastructure case for years now. That the DOD conveniently ignored the law last time won’t pass this time.

  What do you want to do, Air Force? Fight this thing for the next 15 years, or do you want a tanker next year? If the latter, the KC-767 is the only way you’re going to get there.

• 4. ikkeman  |  November 4th, 2009 at 12:17

  

  On the article - as you correctly point out, BOTH US and EU MUST comply with the WTO ruling AND WTO rules.
  WTO rules clearly state no member is allowed to take actions against another member based on anything but the final release - that final release is not out yet, nor is it likely that it will be out before the final RFP is issued. therefore, based on your own facts, the USAF CANNOT reference the WTO case in it’s final ruling.

  Also, The 767 most definately benefitted from indirect and actionable state aid - I’d like to see you claim out right that the WTO case of EU vs US will rule in favor of the defendant - that will give us something to confront you with when that final ruling is released.
  The point is not whether both cases are linked - The point is that if use one WTO case before it’s concluded, why not include a nother. In fact, why not include ALL.

  your lawyer friend is wrong by the way - he does not have “a finding that its against international rules to have given these subsidies”
  there is no finding - just a preliminary draft proposal that at least some, but by no means necessarily all, of the government support to airbus, directly or indirectly linked to the A330 program, is eiher prohibited or actionable.

  1. Don Shuper | November 4th, 2009 at 05:33
  I think we talked about your CVD pletny last time around.
  Why shouldn’t a 320 cost 10% less than an 737-8. It’s lighter, has shorter range and is not a ’90s update of an ’60s design.

• 5. Ed  |  November 4th, 2009 at 12:47

  

  I doubt very much the final report will be a lot different than the interim ruling. The USAF will not be able to ignor this. Even if they tried to (which I doubt they will), Congress and political pressure will not let them get away with it.

  This really is an important consideration for the USAF. Illegal European subsidies have reduced the US’s ability to compete globally, and possibibly put some US workers out of work.

  While both the B-767 and A-330 are very good airplanes, the ability of each to transform into a great usable tanker has to also be considered. The new tanker will have very big shoes to fill, following the KC-135. No other airplane has stayed in front line combat serviced for 50 + years. I just don’t see the A-330 being able to do this. No Airbus product has lasted more than about 30 years. At least the B-767 can trace its lineage back to the B-707 and the KC-135 through the B-367-80.

• 6. FleetBuzz Editorial.com  |  November 4th, 2009 at 13:22

  

  “The 767 most definately benefitted from indirect and actionable state aid”

  Boeing and its legal representatives most clearly disagree. Unless you have something to the contrary?

  “The point is that if use one WTO case before it’s concluded, why not include a nother.”

  Because they are separate - or did you miss that bit? Also, the 767 is not under WTO investigation as the A330 is

  “your lawyer friend is wrong by the way - he does not have “a finding that its against international rules to have given these subsidies””

  Actually, you’re wrong.

  He’s the Boeing attorney dealing with the (WTO) case and knows it more intimately and better than either of us or Joe public.

  Obviously, there is content that was discussed I am not able to disclose and will not disclose, suffice to say unless you can prove he is wrong, I can state in the affirmative that the only wrong person here is you

  “there is no finding - just a preliminary draft proposal”

  We know that, but as Ed points out and as Bob Novick pointed out, the outcome will remain unchanged in relation to the charges.

  Cheers

• 7. ikkeman  |  November 4th, 2009 at 15:39

  

  6. FleetBuzz Editorial.com | November 4th, 2009 at 13:22
  “[Airbus] and its legal representatives most clearly disagree. Unless you have something to the contrary?”
  (and no - a preliminary, non released document which you shouldn’t (and I haven’t) insight in is not good enough - innocent until proven guilty and no sentence has passed yet)
  I do agree with you (and probably the WTO) that Airbus recieved illegal subsidies - all subsidies are objectionalble in my opinion - but that doesn’t change the innocense fact above.

  “Because they are separate - or did you miss that bit? Also, the 767 is not under WTO investigation as the A330 is”
  Yes, they are seperate but what is your reason for “cherry picking” the one over the other - just because the defendant in the one pays your wages and the other does not. that’s my question. (or did you deliberately not get that)
  Though that’s a valid reason for you, it cannot and should not be good enough for the USAF.

  “Actually, you’re wrong.
  He’s the Boeing attorney dealing with the (WTO) case and knows it more intimately and better than either of us or Joe public.
  Obviously, there is content that was discussed I am not able to disclose and will not disclose, suffice to say unless you can prove he is wrong, I can state in the affirmative that the only wrong person here is you”

  Who he is, or what he does for a living is not germaine to the argument. He does not have a finding by the WTO that Airbus recieved illegal subsidies because the WTO released no such finding. Period.

  “We know that, but as Ed points out and as Bob Novick pointed out, the outcome will remain unchanged in relation to the charges.
  Cheers”
  And as I metioned I agree with them and you that the content is unlikely to be changed and that Airbus very likely recieved illegal state subsidy - but that wasn’t your point. You champion the idea that one competitor should be penalised while the other should not where every one with a grain of independant though can see BOTH have benefitted from the same.
  The whole aviation industry is kept alive only by state support. Where that state support falls away (Holland, Russia) aviation goes bankrupt, where the support picks up (China) the industry rises (watch for COMAC to become the third integrator within mere decades).
  If, after more than a century an industry still requires government support day to day there’s nothing commercial about it.
  At least Auto and Banks only needed support when the bottom fell out.

• 8. NH  |  November 4th, 2009 at 15:50

  

  Saj, in your opinion, how exactly should the USAF take into account the subsidy issue in their tanker RFP? Ban NG from bidding, deduct points, modify the costs?

  I agree the preliminary WTO draft will probably not change much and the final draft will force some sort of compliance action against EADS, the EU or both. But those potential actions required by the WTO have not been specified and ordered yet. As ikkeman said, the US can’t start taking action against the EU or EADS before a final ruling is made - that’s how the system works.

  As we all discussed in your the last editorial post, the competition is getting messy and complicated - the exact opposite of what the USAF and DoD want in order to have a clean, legal competition that can actual be completed without protests and GAO rulings from either side. If the USAF starts taking a “vigilante justice” approach by deducting points from NG’s big because the the preliminary ruling, they are setting themselves up for even more protests and pitfalls. What’s the point in wasting time and money having another flawed competition?

  From a technical/war fighting perspective, the subsidy issue is essentially irrelevant. These are both mature and profitable airplane lines. Both will make excellent tanker platforms. The real cost considerations are recurring airframe and equipment manufacturing costs, and NRE costs associated with the militarization of the civilian airframe design. I don’t see how the original passenger airframe development risks can even factor into these aircraft as far as the USAF is concerned. They want the best tanker they can get for their money (I would at least).

  Of course where the WTO ruling on subsidies would matter is from the political perspective, and they pay the bills. So I guess this competition really is screwed again.

• 9. MPTA-098  |  November 4th, 2009 at 15:53

  

  Saj, the timing and substance of panel procedures in WTO dispute cases are confidential. Therefore, as the interim report of the US WTO challenge to EU support for Airbus is confidential, I would doubt that Mr. Novick would risk talking to you about the details of the interim report in order not to be barred from subsequent litigation at the WTO, unless of course, you’re on Boeing’s payroll?

  Curiously enough, Boeing’s congresscritters don’t like to be reminded about the fact that there is a separate, pending dispute brought by the EU challenging a broad range of WTO-incompatible US Federal, State and local subsidies benefiting Boeing, including benefits under the US Foreign Sales Corporation act which has repeatedly been found to violate WTO rules.

  Fleetbuzzeditorial: “Because they are separate - or did you miss that bit? Also, the 767 is not under WTO investigation as the A330 is.”

  It’s interesting to note that, apparently, the WTO did note that Reimbursable Launch Investment (RLI), the raison d’etre of Boeing’s claim. (official version) can be an acceptable option for financing aircraft, although they did rule on some “excessive” subsides granted to Airbus for the A380 programme in particular.

  Isn’t it fair to assume that the 2004 U.S. complaint at the WTO was nothing but an attempt to divert attention from Boeing’s self-inflicted decline?

  If Harry Stonecipher (at the time) would just have had his eye on the ball (787) instead of wasting his time on office affairs and the WTO, the 787 programme could perhaps have been launched as a 7 year programme (EIS 2Q 2011), and without an unrealistic overconfidence in the company’s change management preparedness. The consequences of his inaction on the 787 is clearly one of the reasons that the 787 debacle may have resulted in a catastrophic setback to the company’s capabilities in designing new competative LCAs in the mid- to long-term.

  As for the A330 being under “investigation”; the development of the A333 (-/A343) was not included in the 1992 bilateral EU-US Agreement on Trade in Large Civil Aircraft, as the programme had been launched in the late 1980’s. The reason for the US unilateral withdrawal from the 1992 agreement was according to Stonecipher/Boeing/US that the agreement “had outlived its usefulness.”

  It’s correct that 33 percent of the $450 million costs for the A330-200 R&D was covered by RLI. However, I doubt that the $150 million RLI will be ruled illegal as there are no, or little, additional infrastructure costs (hidden subsidies) required for derivative aircraft.

  http://www.flug-revue.rotor.com/frtypen/FRA33020.htm

  Source: Development costs are expected to be 450 million US-Dollars. Sticker price for the A330-200 is around 112 - 118 million US-Dollars in mid-1998, ten million or so more than a Boeing 767-300ER but roughly the same as a Boeing 767-400ER.

• 10. MPTA-098  |  November 4th, 2009 at 16:00

  

  Don, I notice that you now use Airbus instead of “Airbutt”. Not bad, not bad at all.

• 11. FleetBuzz Editorial.com  |  November 4th, 2009 at 16:09

  

  Ikkeman :

  “He does not have a finding by the WTO that Airbus recieved illegal subsidies because the WTO released no such finding.”

  As he is someone involved in the case, I’d welcome your evidence to the contrary. The draft ruling has been issued - the final ruling rarely, if ever changes. You’re welcome to read into that what you will.

  “You champion the idea that one competitor should be penalised while the other should not”

  Nope - the ruling against US/Boeing will play out in due course.

  The A330 is in question here, not 767, so the ruling against the US/Boeing isn’t immediately pertinent and as such the USAF does not need to consider the same funding techniques for the 767.

  MPTA-098 :

  “…I would doubt that Mr. Novick would risk talking to you about the details of the interim report”

  I don’t think I claimed that he did?

  I simply opined that there is content which was discussed that I am not able to or will not disclose.

  I leave the floor open to the audience to debate the merits or otherwise of the KC-X, WTO and all sundry in between

• 12. robert  |  November 4th, 2009 at 16:23

  

  hey ED , The B-52 has been in service 50 plus years as well.

• 13. Mike M  |  November 4th, 2009 at 16:24

  

  No one knows what Saj talked about, and frankly, who gives a ****. (No offense Saj).

  The real issue is noted by Novick and thats what should be debated - will/should the US Administration force the USAF to consider the A330s illegal sustenance?

  Why not - it is nothing but a form of modern day dumping, however, Northrup finds that the RFP doesnt award for bigger tankers, so cost certainly is factor now.

• 14. robert  |  November 4th, 2009 at 16:28

  

  Here is the list of planes with 50 years of service or more.

  “In January 2005, the B-52 became the second aircraft, after the English Electric Canberra, to mark 50 years of continuous service with its original primary operator. There are six aircraft altogether that have made this list as of 2009; the other four being the Tupolev Tu-95, the C-130 Hercules, the KC-135 Stratotanker, and the Lockheed U-2.”

• 15. robert  |  November 4th, 2009 at 16:36

  

  Here are the planes with 50 plus years of service::

  In January 2005, the B-52 became the second aircraft, after the English Electric Canberra, to mark 50 years of continuous service with its original primary operator. There are six aircraft altogether that have made this list as of 2009; the other four being the Tupolev Tu-95, the C-130 Hercules, the KC-135 Stratotanker, and the Lockheed U-2.

• 16. Bill  |  November 4th, 2009 at 17:05

  

  If you can’t win on airframe, then try to win on illegal subsidies, nice try Boing

• 17. Dougloid  |  November 4th, 2009 at 17:11

  

  Four out of five is a damned good batting average, robert.

• 18. Falcon  |  November 4th, 2009 at 19:15

  

  Mike M says “Why not” with Saj and Aurora saying just about the same thing.

  The answer is because WTO says so.

  No retaliatory actions can be taken until the party found guilty also has been found to have failed in implementing corrections.

  Anyone suggesting the WTO case to be considered at this time is also suggesting US is breaking the rules they are claiming should be considered.

  It really isn’t difficult meaning the people insisting on it to be considered a) Have no respect for WTO and thus can’t use their rules as justification b) Apparently are afraid the KC-30 will be selected on the RFP criteria when they want a Boeing win more than what is best according to the RFP.

• 19. don shuper  |  November 4th, 2009 at 19:31

  

  arrrgh …. ikeman ..”I think we talked about your CVD pletny last time around.
  Why shouldn’t a 320 cost 10% less than an 737-8. It’s lighter, has shorter range and is not a ’90s update of an ’60s design…..

  +++

  The comparison if you read closely- was a summary example. And please look at the petition blanks that needed to be filled in

  In addition - ever hear of a learning curve ? By the years 1998-2000 quite a few more 737 airframes IN TOTAL had been sold/delivered. While there were obvious cockpit and certain parts upgrades and changes, virtually all of the tooling, developement costs for the airframe had ben amortized. True there was a fiasco on the wing redesign - getting very little performance increase for spending bundles of money and also the internal games played re Aeropartners winglets - the NIH attitude along with the MCDummy crowd insistence on the flakey ‘ wedge’ game.

  But the productivity numbers used by AECMA, and the nice freebies such as no cost maintenace agreements, the FedEX underhanded games, etc all pointed towards the same conclusion -

  They could not be making a real profit or even an imagined profit without a lot of creative bookeeping involving subsidies ‘ write offs ‘.

  While my analysis percentages may be and probably are not correct - ( didn’t have non public data ) that the WTO people got acess to, I still claim it was in the correct direction and order of magnitude.

  Sort of like the old gag about the lady being asked if she would sleep with someone for a million $$, and she answered yes. then she was asked if she would accept 100 $- “what do you think I am ? ” - Thats already been determined- now we are just negotiating the price !

• 20. don shuper  |  November 4th, 2009 at 20:17

  

  Uhh falcon ?

  ….No retaliatory actions can be taken until the party found guilty also has been found to have failed in implementing corrections. ..

  partly right regarding certain WTO agreements

  But CVD Countervailing Duties petitions do not fall under the ambit of WTO rules

  CVD is subtley different than dumping, but they come under the purview of ITC outside of WTO

  And such could be filed at any time by Boeing or any group of aerospace workers. Union not required.

  Wheter by subsidy or bookeeping makes no difference, only need to establish real costs versus recorded sales and customs declarations

  I had that discussion with ITC general counsel office several years ago . .

  http://home.att.net/~dshuper/ABOUTCVD.html

  They use similar criteria as WTO -

• 21. USAF Fan  |  November 4th, 2009 at 21:12

  

  “Anyone suggesting the WTO case to be considered at this time is also suggesting US is breaking the rules they are claiming should be considered.”

  Actually, it is only the US Air Force in breach, not the entire Administration.

  “No retaliatory actions can be taken until the party found guilty also has been found to have failed in implementing corrections.”

  No question there - I dont think any commentator has implied otherwise

• 22. keesje  |  November 4th, 2009 at 21:59

  

  I think the WTO ruling should be taken into consideration, both actually. Luckely for everyone the preliminairy ruling on Boeing subsidies will come out in time.

• 23. Mike M  |  November 4th, 2009 at 22:10

  

  You must be joking, right Keesje?

  If BOTH rulings are considered by the USAF, then there wont be any award next year.

  Also, what subsidies has the 767 had to warrant the USAF factoring in to the KC-X competition like the A330 huh??

  Your Airliners.net propaganda will not work here.

• 24. ikkeman  |  November 4th, 2009 at 22:21

  

  19. don shuper | November 4th, 2009 at 19:31
  ok, last try:
  from your own website (no, I apparently had nothing better to do than to do research on an online discussion… )

  How is Subsidization Remedied?
  If a U.S. industry believes that it is being injured by unfair competition through subsidization of a foreign product, it may request the imposition of countervailing duties by filing a petition with both Import Administration and the United States International Trade Commission (ITC). While Import Administration determines whether and to what extent unfair subsidization is occurring, the ITC determines whether the domestic industry is suffering material injury as a result of the imports of the subsidized products. The ITC considers all relevant economic factors, including the domestic industry’s output, sales, market share, employment, and profits. Both the ITC and Commerce must make affirmative preliminary determinations for an investigation to go forward.

  so any government help received by the foreign party must be shown to be both unfair and injuring to the domestic industry…
  Most of the subsidies enjoyed by Airbus were fair - the US said so by signing the agreement. Any subsidies to Airbus over and above that will be clear when the WTO finally releases it’s report.
  remember the WTO was not part of any agreement and may find practices covered by that agreement to be illegal and objectionable.

  Also, proving the EU subsidies to A were injuring B would be hard without going into detail on just how, and to what level, B receives govt subsidies.
  single source contracts, cost + based research agreements, unrestricted and free access to govt research findings - these and many more forms of subsidies are enjoyed by B.

  So while airbus were getting cheap money in the form of RLI, Boeing was getting free research - and yes, both were getting much more for free. I don’t Think Airbus ever paid for their landing strip along the elbe?, and we all know what Boeing got out of Washington and now South Carol…

  So the point I’m trying to get across is not that airbus is holier than the pope - but rather that A and B are equally holy.

• 25. Paulo M  |  November 4th, 2009 at 23:17

  

  I’ve been hoping all along that this contest would not be decided by issues of law, trade, etc., but rather by the technical characteristics of the competing bids. This is not only is impossible - it’s also quiet frankly silly. I prefer to see that sort of thing - these are planes aren’t they?

  As an arm of the American armed forces - and further, more importantly - of the United States government, the USAF is in a position where its primary role is to protect the mainland, and/or interests thereof. Unfortunately - depending how you look at this, in cases where the US has grounds to believe that it has been subject to unfair industrial/commercial competition - the USAF, in awarding industrial/commercial contracts is also in a position to consider those issues, and the effects on the ‘people whom it is required to protect’.

  Similarly, the EU has the same right - but not the same power - and only because it does not have a comparable aerospace and defence market, the US is significantly bigger.

• 26. don shuper  |  November 5th, 2009 at 00:59

  

  ARRGHHHHHH >>>>>single source contracts, cost + based research agreements, unrestricted and free access to govt research findings - these and many more forms of subsidies are enjoyed by B…

  1) Airbus EADS has/had the same free acces to NASA/NACA research as Boeing

  2) Specific to 767 Commercial - what subsidies did Boeing get ? what free research did they get?

  3) the WTO filing was in 2004 - does not include 787 SC or anything after that data

  the preliminary ruling, based on data/compllaint filed in 2004 was that **some** subsidies regarding Airbus/EADS on COMMERCIAL aircraft were illegal. What is not know at this time is how much and which ones and which models, etc

  Its not a matter of holier than thou - its a matter of which subsidies as of 2004 arranged/guaranteed/financed by a soverign government. e g spain, italy germany, france, england.

  AFIK OUR feds did not guarantee any of the state subsidies for any Boeing aircraft eg 777, 787, 767,757, 747, etc

  And the old myth about the 747 being an offshoot of the C-5 contract in the 60’s is just that. the closest common thing was the C-5 landing gear tests run by boeing with boeing funds. Then 747 was designed, built, and flying slightly ahead of the C-5.

  As I’ve previously stated - the real problem is how much $$ adjustment for the commercial parts of the 767-A330-x can be traced to the excess R&D subsidies enjoyed by airbus - EADS. As for the military parts - Both EADS and Boeing enjoy the same government - military research funding since we buy from both… and besides which military ” stuff” is specifically excluded from GATT92

• 27. don shuper  |  November 5th, 2009 at 02:15

  

  Oooops - I said “Then 747 was designed, built, and flying slightly ahead of the C-5″

  it was the reverse by about 7 months first flight C-5 was june 1968 and first fllght 747 is shown as Feb 1969.

  but my point was twofold

  1) 747 was a private venture - almost busting boeing
  2) C-5 was strictly military with a lot of existing facilities

  C-5 was high wing 747 is low wing, etc

  And in those days, Airbus/ EADS was just a gleam in some nations eye . .

  That was not true in the 80’s and 90’s - which led to GATT

• 28. jmbee  |  November 5th, 2009 at 03:55

  

  “Most of the subsidies enjoyed by Airbus were fair - the US said so by signing the agreement. Any subsidies to Airbus over and above that will be clear when the WTO finally releases it’s report.”

  Ikkeman just a note on the US-EU agreement, it was not incorported by the WTO. It was a bilateral agreement between the US and Europe and was in effect between 1992 when it was signed and 2005 when the US terminated the agreement, because the US said it wanted to negotiate and end to RLI. In all likelyhood the WTO would only view RLI received during the period the agreement was in effect as being covered or fair as you put it. In other words the US by viture of signing the agreement in essence agreed to overlook the A340NG and A380 launch aid only. Everything else is on the table including RLI for the A330, which received aid outside of the agreement.

  Also, the process you describe for remidying unfair trade are laid out by several US anti-dumping laws dating back to the anti-dumping law of 1916. They predate the WTO by quite a margin and don’t have any relevance to the current WTO trade dispute between the US and Europe. Boeing has not filed an anti-dumping case against Airbus/EADS with the US government and US anti-dumping laws will not be considered by the WTO or the Pentagon.

  The short answer is that there are many remedies to combating what might be called unfair trade, most of them are generally fairly ineffective though. The route the US has chosen though is to go thru the WTO. If the WTO agrees with the US, the US government can seek compensation for damages from the EU. If there is no agreement between the parties the US can then legally impose retalitory penalties on EU goods. Neither of these routes are likely to happen in the end most likely there will be a negotiated settlement at some point in the future. And ultimately the effect of the WTO ruling on the Tanker contest is political not legal, since procurement of military aircraft is not covered.

  So in short the US government can say we don’t like RLI and we are going to penalize the A330 regardless of what the WTO says, or they could say we like the A330 based tanker so much were going to buy it even if was built with what the WTO calls illegal launch aid. The main point of the article is that politically the US government cannot ignore the fact the A330 was built using what the WTO has preliminarily determined to be an illegal subsidy. On this point the author is probably correct, the A330 RLI was not covered by the 1992 bilateral agreement and even if it is true that Congress could fund an A330 tanker when and if the final WTO report says it utilized illegal RLI, the truth is they won’t. There is simply not enough political support in congress for the KC-30 tanker to do this, leaving the Pentagon with a very difficult choice. We need to have a competition, but if the A330 based solution wins this round the situation may be the same as round 2. Congress won’t fund it and well be right back where we started.

• 29. don shuper  |  November 5th, 2009 at 06:00

  

  re 28. jmbee | November 5th, 2009 at 03:55
  . .. Also, the process you describe for remidying unfair trade are laid out by several US anti-dumping laws dating back to the anti-dumping law of 1916. They predate the WTO by quite a margin and don’t have any relevance to the current WTO trade dispute between the US and Europe. Boeing has not filed an anti-dumping case against Airbus/EADS with the US government and US anti-dumping laws will not be considered by the WTO or the Pentagon. . .

  Actually- there are TWO distinctly different issues re the anti dumping - countervailing duties are also part of the laws initiated in the early 1900’s. They were primarily aimed at agriculture imports .

  Anti dumping basics are that the perp is selling items in the U.S at a lower price than at home. No one has claimed that that is what Airbus /EADS has done

  The below link to my site was copied from a white paper put out by the government several years ago.

  details at bottom of my page - link is now outdated

  http://home.att.net/~dshuper/ABOUTCVD.html

  This article provides a brief overview of how Import Administration provides a way for firms to seek relief from unfairly traded imports by filing a petition seeking the imposition of countervailing duties on imports of the unfairly traded merchandise. Countervailing duties offset the effect of unfair subsidies. Countervailing duty trade remedies have been successfully pursued by a variety of domestic industries, including producers of steel, industrial equipment, computer chips, agricultural products, textiles, chemicals, and consumer products.

  +++

  Boeing did not want to file a CVD case early in 2002, for reasons I described earlier.

  One interesting problem is that the formula for determining industry support percentages to file breaks down when there is only ONE domestic industry involved. technically, under the formula, if Boeing objected to any group filing, an argument could be made that it would be denied. However, congressional supoort could easily override that issue if desired- since ambiguities in a contract are held againstg the drafter. It had never been contemplated that a single ‘ producer ‘ ( in this case of LCA) would be in a position of being one of the nations top ( By $$ ) exporters with a significant effect on balance of trade.

  From my notes in 2002

  On 6 May - I participated in a call with several people from the Dept of Commerce. -
  Import administration
  Bob Heilfertg - Counsel from General Counsel office of DOC
  Norbert Gannon -Working in pre-petition section of DOC
  Jim Nunno - responded to email request re standing.
  I had made earlier contact via e-mail on March 31- and who had responded by phone to my
  initial e-mail requesting clarification of issues about standing of retirees, about percentages of workers
  or percentage of industry figures re filing of CVD petitions and related issues. . . .

  . . What follows is a summary of the responses to my questions as I understood them and how
  they would apply to anyone filing a CVD.
  1) Numbers of workers or percentage of workers represented are NOT a factor in the 25%
  or 50 % figures described in the Code I understood that ANY group of current employees , union or not,
  and perhaps even a few employees could file and have standing to file. A TAA petition only needs 3 to 50
  employees or their representative to file. A small group would still have the same responsibilities as a
  larger group - support their data and allegations before an administrative hearing, or as requested by
  the variouls agencies. The operative portion of the code we discussed is as follows :
  . . . To ensure there is sufficient support by domestic industry for the
  investigation, the law requires that the petitioners must represent at least 25% of the
  domestic production of the product that competes with the imports to be
  investigated. ”
  Those numbers relate only to the INDUSTRY - NOT TO THE NUMBER OF EMPLOYEES
  OR WORKERS - e.g if 10 steel companies in domestic production. the total number of producers is
  in the denominator. = /10
  Now if say 3 companies file, and they represent say 40 percent of the domestic production [
  sales/deliveries ] , then the numerator would be 4 and the result would be 40 percent. If all companies
  had equal shares e.g 10 percent each , then the 3 companies would have 30 percent… Neutral companies
  drop out of the calculation .
  Note the math breaks down when there is only ONE producer which makes 100 percent of
  the domestic production. The legislation was not drafted to cover the special case of a sole producer .
  e.g Boeing …The only way to get resolution IF Boeing objects may well be thru legislation, which
  means filing and getting turned down on the basis of company objections. . .

  5) Available information - just what it says. Later support activities would center around
  our justification of numbers, statements, and analyis that we supplied. They are *required* to verify
  the accuracy or source of out data, usually by verifying our sources. This is where petitioner would
  have to provide supporting arguments or information. Lawyers are not really needed, just
  knowledgeable and responsible people.
  NOTE: All of our data is from the public domain, and I have provided links and cites of
  sources. The only analyis or extension of data is my parametric study, the results of which are
  mentioned in the petition and in our supoorting comments for the mootion passed last August.
  6) Legal support - issue becomes one of again providing support for our arguments - however,
  if company supports, the data to support of the cost and profit numbers needed would come from the
  company.

  +++

• 30. keesje  |  November 5th, 2009 at 10:37

  

  All this WTO noise. Its all politics. Political games many like to keep away from unless it serves their preferences. I think Boeing needs it badly in this competition. Many here also seem to jump in bed with the politicians if it protect their precious national industrial resources.

  More on general on subsidies; they are everywhere in aerospace. Ignoring it makes you either look uninformed or dishonest.

  Boeing would be halved if there was no US government. They are traditionally much more dependent then EADS on them.

  http://www.boeing.com/ids/a_to_z.html

  I’m always very impressed by the scale and diversity of R&D and development funds from NASA, DARPHA and DOD to Boeing and LM. In Europe we have our fare share but nothing close to our US colegaes. I guess it requires a lot of pride & commitment from US tax payers. This week NASA granted a open rotor contract to Boeing they need for future aircraft developments. Congratulations again.

• 31. NH  |  November 5th, 2009 at 14:43

  

  Well heck, maybe everybody would be happier if we split both Boeing and EADS into separate civil and military aerospace companies - then nobody can complain about back-door military subsidies!

• 32. Falcon  |  November 5th, 2009 at 14:55

  

  @Don Shuper,

  There is no such case at this time… The rest of us are talking about the WTO case(s) that exist, not a case you like to see. You seem to be on a one man mission with very little traction gained over your many years of effort.

  @USAF Fan,

  WTO is on the national level, not individual organizations. USAF is a direct arm of the US Government so the connection is more direct than Boeing suffering from EU subsidies to Airbus. Not that the degree maters?

  How have you missed all the people claiming the WTO case must be considered in the competition? The selection is supposed to be complete mid 2010. Well before you can expect any implementation deadline to have expired.

  @NH,

  They already are split though the A400M got Airbus directly involved. Even so there are plenty of overlap as in the real world it makes too much sense.

• 33. JmBee  |  November 5th, 2009 at 15:01

  

  Keesje,

  “Boeing would be halved if there was no US government. They are traditionally much more dependent then EADS on them.”

  Not quite, both companies roughly split the world commercial aircraft market in half and receive about the same amount of revenue from commercial operations as they do from defense and other government work. EADS had revenues roughly 43 billion Euro or $60 billion US (at prevailing exchange rates)in 2008, while Boeing had revenues of $61 billion US in 2008. What is remarkable about both companies is how much they look like a mirror image of each other. Both have almost the same revenue levels and both have almost the same split between commercial and government work.

  In addtion from the perspective of Airbus both companies have followed a very similar business path. Boeing was dominated by the commercial side of the business until 1997 when it aquired McDonnell Douglas in an effort to bolster it’s defense revenue. Airbus was almost completely a commercial company until 2000 when it was merged into EADS, and since then has almost mirrored Boeing in it’s defense commerical business split and attempts to grow the defense side of the business to balance the civilian side. Both companies are strangely similar to each other in terms of revenue, revenue sources, and business strategy, which probably goes a long in explaining the competition between them and the mutual animosity.

  It is only true that Boeing depends more on US Government contracts than EADS does, while EADS certainly depends much more on European Government contracts than Boeing does. Hence, one more reason for the politcal atmosphere surrounding this debate.

• 34. MPTA-098  |  November 5th, 2009 at 16:28

  

  JmBee, with all due respect, you’re way out on the limb here. Keesje is right.

  Source: EADS Revenues

  http://www.eads.com/1024/en/investor/Financials_and_Guidance/Segment_information/Revenue/Revenue.html

  Before the full integration of the former Military Transport Aircraft Division into Airbus, the revenues of the latter accounted for about 63,5 percent of the total revenues at EADS.

  The revenues from Defence & Security, Military Transport Aircraft and the defense related activities at Eurocopter and EADS Astrium account for less than 30 percent of EADS’ total revenues.

• 35. don shuper  |  November 5th, 2009 at 18:32

  

  32. Falcon | November 5th, 2009 at 14:55

  @Don Shuper,

  There is no such case at this time… The rest of us are talking about the WTO case(s) that exist, not a case you like to see. You seem to be on a one man mission with very little traction gained over your many years of effort.
  +++

  I guess you missed my point(s).

  1) 8 years ago it was obvious to some( many) that Airbus was abusing GATT92
  2) Comparisons of equivalent models - BA v Airbus re pricing, sales, maintenance , etc tended to verify

  3) That was BEFORE the tanker fiasco and during the time the A380 was in preliminary stages

  4) it was not a one man effort re putting together a CVD petition- and BA was NOT involved until AFTER 911 AND the lease tanker issue was in congress

  5) Boeing improperly ” leaned on ” or perhaps I should say bribed a few union leaders to stop the filing.

  6) the so called reason for Boeing was that they feared kickback from EU countries re sales, etc.

  7) the improper subsidy issue has NOW been verified as a result of Boeing pushing the issue ( through a different channel ) in about 2004-2005. It is highly probable that Boeing used the data we (I) put together, as they eventually were given a copy of most of it.

  regardless of the process - WTO or CVD, the facts available to the WTO group or the ITC apparently support the improper subsidy issue ( in excess of the allowable 30-35 percent ” research ” funds at preferred loan rates, etc )

  9) Like it or not - Congress will have to address the issue of using taxpayer funds to pay back some of the EU/EADS/Airbus subsidies if the Airbus/EADS tanker wins - that will not set well. And there is also thye jobs issue, etc

  10 ) I find it amusing- interesting - and sometimes frustrating that several posters here want to personalize the issue againt me simply because I support my opinions and comments with background and documented FACTS available to myself and relatively few others. It is always difficult to ” argue ‘ against a strong position of ignorance or belief based on little knowledge of the subject. And it is rarely worth the time - after all, in the legal world, one cannot challenge a belief.

• 36. JmBee  |  November 5th, 2009 at 19:07

  

  MPTA-098

  “The revenues from Defence & Security, Military Transport Aircraft and the defense related activities at Eurocopter and EADS Astrium account for less than 30 percent of EADS’ total revenues.”

  With all due respect you have completely misquoted me and for that matter Keesje as well. I said, “almost the same split between commercial and government work”, and Keesje said, “Boeing would be halved if there was no US government” (Note: Neither of us said the word Military or Defense). So both of us are clearly talking about all government related contracts and R&D not just military related contracts and R&D. From that perspective Boeing and EADS do indeed look very similar, since while EADS Astrium is not doing a lot of military work nearly all of their projects are government funded. Even the Ariane V, which is operated by a commercial company still had it’s development funded by the government and it would not exist if not for government funding, just like Boeing’s Delta IV rocket. Additionally, although Eurocopter certainly sells far more civilian helicopters than Boeing, it’s biggest customers are still government agencies if not necessarily the military.

  If you want to slice and dice it is likely a slightly smaller portion of EADS revenue is directly from government contracts. But the fact remains asside from Boeing commercial aircraft and EADS Airbus division the other parts of Boeing’s and Airbus’s business units are highly if not wholly dependant on government contracts and government provided R&D. Without government support EADS Astrium would not exist, just like Boeing’s space division within IDS. The only significant difference between the products of the two is that Eurocopter does sell far more civilian helicopters than Boeing Vertol. But Eurocopter is still almost as dependant as Boeing Vertol is to fund new technology development, and when you include the fact that Eurocopter’s military range is far more extensive than their civilian range (3 helo models vs 5 modes + the tiger and NH-90 which are joint projects) it is safe to assume they get more revenue from government sales (military + civil uses) than they do from commercial customers. For EADS this is more than balanced out by the fact that for the A320 and A330, 50 percent of the development aid was government provided, and for later models the number is 33 percent.

  So I’ll go ahead and stand by what I said ealier, with the exception of their commercial aircraft units both companies feed heavily at the government trough, and any additional civilian sales by Eurocopter are more than offset by Airbus’ civilian aircraft divisions reliance on direct government support.

• 37. Chris Wallace  |  November 5th, 2009 at 19:32

  

  The real issue is “passing the buck”.

  Congress want the USAF to penalize the KC-30A so that it loses the RFP to the KC-767 and that way they don’t have to try and explain how they “allowed American manufacturing jobs to go overseas”.

  The USAF do not want to penalize the KC-30A because that just means NG and EADS will file their own protest and the entire thing starts yet again and there is a risk that KC-X will just be cancelled and the USAF will be ordered to continue to fly the KC-135R with another round of Block Updates to keep them in service for another two decades until a new KC-X RFP can be fielded based on the 787 and A350XWB freighter programs.

  Frankly, how it should go down is the USAF just makes a decision, be it for the KC-30A or the KC-767. If it is for the KC-30A, then it is up to Congress to decide whether to fund the KC-30A or to tell the USAF to choose the KC-767 or stay with the KC-135R.

  Europe will howl, but if there is any time to do this, now is that time. With the US government already spending trillions to prop up their financial and automobile manufacturing sectors, doing so with the aerospace manufacturing sector by “giving” Boeing the KC-X program can at least vaguely be made justifiable.

  Though I still like a dual buy. If you’re going to spend the money to prop up the aerospace manufacturing industry by buying Boeing, why not spend some more to expand it by also buying Airbus product built in the US?

• 38. Erik Bloodaxe  |  November 5th, 2009 at 20:15

  

  JMBee: EADS Astrium is not doing a lot of military work nearly all of their projects are government funded.

  Pssst… M51, and the #1 reason why the French government will NEVER, EVER let EADS become a “real” company. The mere passing thought of Le Boshe getting their hands on French nuclear weapons contracts is enough to have them preemptively shouting “We surrender”.

• 39. Paulo M  |  November 5th, 2009 at 20:17

  

  I agree with JmBee. Sure they have their differences. But in the greater scheme of things - very similar. Just like their homes. The likes between the US and EU are far more significant than the differences - far more important too..

  ——————————————————–

  Seeing today is Guy Fawkes Day - in the UK, I had a bright spark with a couple of words. It goes like this:

  The South African government today cancelled its contract with Airbus Military for 8 A400M airlifters, as well as industrial work on the project - citing excessive cost overruns (by Airbus, linked to the delays) as its reason. Originally signed in 2005 worth R17 billion, the contract ballooned to R47 billion - with a US dollar/rand exchange fluctuation of around 14% during that time.

  Needless to say, there was a burning debris field outside Parliament today.

  For its part, Airbus agreed to refund the South African investments commited - to me, that says it was cheaper for them to dump the South African partners. Unfortunate event.

• 40. JmBee  |  November 5th, 2009 at 22:10

  

  “I agree with JmBee. Sure they have their differences. But in the greater scheme of things - very similar. Just like their homes. The likes between the US and EU are far more significant than the differences - far more important too.”

  I certainly wouldn’t want to give the impression that they are two peas in the pod and not different at all. It’s just their business strategy is very similiar. You can even look at Boeing’s recent decision to locate a 787 assembly line in South Carolina. One major reason to do this is to shore up political support for Boeing across the US. In particular for Boeing to make sure it has strong poliical support from the Republican dominated South in the future. Something it hasn’t really had in the past. Airbus follows a very similar strategy in putting an assembly facility in Toulose, and later on to maintain German support for the consortium they started assembling A320s and derivatives in Hamburg. Airbus was reluctant for many years to do this but decided they had to set up the Hamburg assembly line to mantain the support of their two largest investors, Germany and France. We’ll have to wait an see if Boeing follows Airbus’ lead and set’s up an overseas assembly line but if the past is any guide we should expect one within the next 20 years.

  Where they differ is not so much in their goals or what they want to be, or even how they currently operate, but in the tactics they use to get there. The RLI issue is just one of the biggest differences, in Europe direct state involvement in the economy is an accepted fact, so there is very little political opposition to direct aid for Airbus. In the US direct aid to industry in the post-WWII era has in general been completely unacceptable until recently (although large amounts of indirect aid are given). The main point of the opinion piece is that the US government should consider this difference in the tanker contest, not that Boeing is intrinsically better or different from Airbus.

• 41. MPTA-098  |  November 5th, 2009 at 22:21

  

  JmBeee, Keesje not only said that “Boeing would be halved if there was no US government. They are traditionally much more dependent then EADS on them, but he provided a direct link to Boeing Integrated Defense Systems (IDS)

  http://www.boeing.com/ids/a_to_z.html

  I would assume, therefore, that he did mean to point out IDS in particular, and not the additional benefits Boeing accrues from research and development funded by NASA, the DoD and US Defense Advanced Research Projects Agency (DARPA), and the additional indirect subtle tax breaks from Washington State, Kansas (etc.), and which now also would include the doubled-up the tax-breaks from SC for the 787 programme.

  Development aid for A and B are based on two completely different systems of government support, balancing Airbus´ that Reimbursable Launch Investment (RLI) against the benefits that I just mentioned Boeing accrues, and I would guess that most observers; i.e. the ones who are not caught up in the jingoistic and xenophobic outbursts from the B camp, would tend to agree that A and B are about equally “guilty” in receiving governmental support.

  As for Eurocopter and EADS Astrium; I would agree that most of their technology development has been paid for by public funds, as of course, has also been the case in the US.

  Now, I pointed out that (in 2008), Airbus accounted for 63,5 percent of the total revenues at EADS. Of the remaining 36,5 percent (non-Airbus) of the revenues; more than one sixth comes from commercial activities.

  And that was really the crux of my argument, that when development aid for both EADS and Boeing are not accounted for; there is still a significant difference between the 50 percent of total revenue generated by public contracts (as is the case for Boeing), and less than one third of total revenue generated by public contracts (as is the case for EADS).

• 42. keesje  |  November 5th, 2009 at 23:48

  

  Speaking to only “Boeing’s legal counsel who is dealing with the WTO case, Bob Novick” and just repeat what he says without asking questions.. Have we learned nothing.

  Do you think you anyone can convince the WTO there are several Boeings, e.g. one that build the 767, one that builds the F15 and another one that builds the 787? They aren’t dumn..

• 43. don shuper  |  November 6th, 2009 at 02:43

  

  There is a significant cultural - business difference between U.S and other Countries

  What we call bribes are often accepted business practice elsewhere.

  They consider “middlemen” and many govt workers dealing in certain quantities of palm grease m- bartering ,etc as commonly accepted practice -

  We use lobbyists, campaign contributions, inventory loss and trips to exotic places to get the same results

  This makes it difficult to assign ” costs “

• 44. FleetBuzz Editorial.com  |  November 6th, 2009 at 05:08

  

  Speaking to only “Boeing’s legal counsel who is dealing with the WTO case, Bob Novick” and just repeat what he says without asking questions.

  Keesje - you do NOT know what was/wasn’t asked.

  It is better for you not to speculate since you know nothing of the discussions that I had and with whom - and yes the WTO is aware it is dealing with one Boeing, not four Governments protecting one EADS.

• 45. JmBee  |  November 6th, 2009 at 16:22

  

  MPTA-098

  “JmBeee, Keesje not only said that “Boeing would be halved if there was no US government. They are traditionally much more dependent then EADS on them, but he provided a direct link to Boeing Integrated Defense Systems (IDS)”

  And so he did, but the point is that Boeing IDS could be more aptly described as Boeing Government Services. IDS includes Boeing’s substantial contracts with NASA as well as pretty much any other government contracts, Boeing IDS provides substantial services to the Dept. of Homeland Security, and just about any other large US government agency just like EADS Astrium and other EADS divisions service non-military government customers. In other words if EADS structure was converted to mirror Boeing’s, EADS Astrium and Eurocopter would be incorporated under IDS.

  The point I am trying to make is simple: 1) By annual sales Boeing and EADS are very similiar in size. 2) Boeing’s commercial aircraft division and Airbus nearly split the global market down the middle and very close in commercial revenues, and finally 3) therefore, non-commercial aircraft revenues are about the same for both and what is being argued is how much of these revenues for both companies are government driven and how much are commercial driven.

  So in summary for item 3) everything not included in their respective commercial aircraft divisions is what we are questioning. You yourself said, “As for Eurocopter and EADS Astrium; I would agree that most of their technology development has been paid for by public funds, as of course, has also been the case in the US.” We can therefore argue about whether or not civilian sales of Eurocopter’s balance out Boeing’s greater investment in civilian flight services such as Jeppeson and their greater investment in aircraft maintenance and services, but I haven’t seen anything presented yet to convince me that for either company everything outside of their commercial aircraft divisions is not primarily based on government contracts. And as been pointed out here, Airbus depends much more heavily on direct government investment than Boeing does for their commercial aircraft division. The arguement put forth by Airbus is that this needs to be so to balance out the fact that Boeing IDS get’s a little more in the way of government contracts that Airbus. So here again you have EADS/Airbus claiming that the realtive levels of support are balanced as long as they get their RLI.

  So in the end, I just don’t buy the statement that one company is more dependant on government support than the other. Unless someone cares to break down government money received contract by contract and say Boeing received x government dollars over the last decade and EADS received y government dollars, I really see no reason to change my assessment. If you care do to the assessment that is fine, but comparing Boeing’s apples corporate structure to EADS oranges corporate structure doesn’t do it. All it points out is that they are structured differently.

• 46. Ed  |  November 6th, 2009 at 16:22

  

  robert | November 4th, 2009 at 16:23

  hey ED , The B-52 has been in service 50 plus years as well.

  The B-52, and C-130 types have been in service for 50 + years. The oldest B-52H was built in 1961 and the oldest C-130E was built in 1965. However, not the individual airframes. There are still 1955, 1956, 1957, 1958, 1959, and 1960 model KC-135s still in active front line service with the USAF, Many of them are flying combat missions even today.

• 47. Aurora  |  November 6th, 2009 at 18:41

  

  As I noted in post #3 above:

  “Will the White House–correctly–conclude that it must mollify a significant pillar of its base, organized labor, at all costs before the 2010 Congressional elections?”

  Unemployment in the U.S. is now estimated at 10.2% today. This number is a dagger pointed at the heart of the party in power.

  This further compounds the difficulty of a european solution for KC-X.

• 48. Mantra  |  November 6th, 2009 at 20:41

  

  So now the argument from Boeing fans has degenerated to:

  Sure Boeing took and continue to take subsidies but we can’t remember any of those going directly to develop the original version of the 767

  It was 40 years ago, of course most of you can’t remember them!
  There were subsidies, from Japan for example. These were in the form of those ‘repayable’ loans you guys claim are so abhorant.
  The truth is both Airbus and Boeing need subsidies because otherwise in 10-20 years
  they will be niche players to India, China, Russia Brasil etc who are pouring money into their own planes and have much lower labour costs.

• 49. don shuper  |  November 6th, 2009 at 21:34

  

  48 MANTRA — . . .There were subsidies, from Japan for example. These were in the form of those ‘repayable’ loans you guys claim are so abhorant. . .

  ++
  HMMMM- The Japanese Consortium that was formed for the 767 was subsidized by the japanese govt as I recall, Boeing simply offered them a contract for body and a few feathers if they could produce. part of a cost sharing arrangement. It was up to the consortium to deliver the parts at the agreed on price and on the agreed on schedule.

  But AFIK - there were no loans repayable to Boeing. Perhaps you know the details of the japanese government arrangements ? Did they get a free pass if Boeing did not sell or deliver x planes at y price ?

  In any case, the quality of the parts was first rate, with relativelym few teething problems. matter of fact, space set aside for rework of the body sections was in the process of being dismantled and reused as I recall by then time the first 767 flew.

• 50. Mike M  |  November 7th, 2009 at 10:01

  

  >>>It was 40 years ago, of course most of you can’t remember them!

  Mantra, are you a complete retard?

  The 767 is not forty years old and was not subsidized like the abortion A330 was.

  Get your facts right.

• 51. robert  |  November 7th, 2009 at 16:50

  

  From the Political standpoint of jobs the 767 should win. From the standpoint of cost the 767 should win. It will be cheaper to buy and maintian. It will not require new facilities in that it can use the existing facilities for the KC-135. It will carry more fuel and optional loads that the KC-135. The perfect political storm is in favor of the 767. Jobs, Money and not having to modify or expend money on new facilities.

• 52. JmBee  |  November 7th, 2009 at 17:13

  

  Mantra

  “So now the argument from Boeing fans has degenerated to:

  Sure Boeing took and continue to take subsidies but we can’t remember any of those going directly to develop the original version of the 767″

  I don’t know the level of Japanese participation in the original 767 project my recollection is it was around 10 percent increasing later on to about 15 percent. The problem though for this discussion is that Japanese subsidies are not relevant to the EU’s WTO case. You may ask why not, or why don’t they matter? Well the answer is simple because the EU said so, by not including them in their WTO case.

  Even though the Japanese and Italian subsidies for their suppliers for the 787 program were probably the single strongest charge the EU had against Boeing, they decided not to include them for political reasons. In the case of Italy it is obvious, an EU member state is the one providing said state subsidies and would be the state subject to penalties if the EU won. In the case of Japan, Airbus has only a 9 percent market share but would very much like to increase the share of the Japanese market. In essence, because the EU did not want to antogonize the Japanese the EU ignored Japanese subsidies to their manufactures for their participation in the 757, 767, 777 and 787 programs.

  Therefore, if for some reason a preliminary ruling is handed down before the KC-X decision on the EU’s WTO complaint it will not contain any mention of Japanese subsidies and will Japanese subsidies will play absolutely no role in any potential DoD consideration of WTO rulings (not though that the DoD wants to consider the WTO cases period). The EU case in the WTO could potentially have some effect on the competion, but the Japanese subsidies don’t matter, in essence because the EU went out of its way not to include them in its complaint.

  If you believe the subsidies should matter that is not an issue to take up with Boeing supporters, but rather an issue with the EU itself for not including them in their WTO case.

• 53. don shuper  |  November 7th, 2009 at 23:33

  

  RE the japanese and 767.

  The first significant agreement re WTO/GATT re aircraft R&D subsidy issues was in 1992. AKAGATT92.

  Japan Joined in 1995 as did the U.S
  http://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm

  The first 767 flew in 1982. The japanese consortium aka kiretsu(sp) re aircraft was formed in the 1970s I beleive.

  Generally- GATT–>>WTO was not designed- intended to be retroactive. So any discussion re subsidies re 767 for any country involved such as italy , england, etc is simply wrongheaded and moot.

  GATT92 was intended to provide a reasonable framework for Airbus to receive government aid to run competition to Boeing. - and MDC which are/were private companies.

• 54. don shuper  |  November 7th, 2009 at 23:52

  

  A bit more on GATT92-

  although there had been since 197X a general trade agreement regarding duties onCIVIL aircraft and parts, it was not until the late 80’s that (EU) subsidies of Airbus became a signifiant issue - since Boeing -MDC had around 80 percent of the market in LCA. So to pick up the story, take a close look at
  http://www.defense-aerospace.com/article-view/verbatim/45452/eu-details-position-on-civil-aircraft-talks.html

  3. 1992 EC/US Agreement on Trade in Large Civil Aircraft

  Until the late 70s the US enjoyed almost a de facto monopoly in the LCA sector.

  The Airbus consortium (created in 1969) started competing effectively in the 80s. At that stage the US became concerned about the European competition and the alleged subsidies paid by the European governments for the developments of the early models of the Airbus family. This became a major issue of contention, and the European side was equally concerned by subsidies accruing to US LCA manufacturers through NASA and defense programmes.

  The EU and the US started bilateral negotiations for the limitation of government subsidies to the LCA sector in the late 1980s. Negotiations were concluded in 1992 with the signature of the EC-US Agreement on Trade in Large Civil Aircraft which focuses on the limitation of both direct and indirect government support.

  On the one hand, the agreement puts a ceiling on the amount of direct government support (33% of the total development costs) for new aircraft programmes. It establishes that such support (granted in the form of repayable royalty-based loans) will be repaid at an interest rate no less than the government cost of borrowing and within no more than 17 years. Basically, this discipline applies to the form of government support in use in Europe.

  On the other hand, the agreement establishes that indirect support (i.e. benefits provided for aeronautical applications of NASA or military programmes) should be limited to a 3% of the nation’s LCA industry turnover. This discipline is primarily targeted to the support system in use in the US. In contrast to the European system of repayable royalty-based loans, since the repeal of the US rules on recoupment, there is no requirement for indirect support to be reimbursed.
  . . .

  goes on.

  My point here is that the 92GATT later WTO was the first definitive whack at the subsidy issue.

  so those who want to extend the subsidy game or the ‘ freebiesw from transforming military aircraft technology into commerical- all the way back to stratocruiser, 707,727,737,747 757, and 767 should take the time to look up a few facts.

  And that includes more than a few members of Congress and even more of the Airbus supporters.

  Its not that subsidies are wrong, bad, or illegal- its the ABUSE of that agreement that is at issue.

  Don

• 55. Mike M  |  November 8th, 2009 at 08:26

  

  Thanks for the links and details don shuper.

  I note that the jumped up Frenchman Mantra in post #48 has vanished back down the Channel Tunnel!

• 56. ikkeman  |  November 8th, 2009 at 12:26

  

  54 & 53. don shuper | November 7th, 2009 at 23:33
  what of the indirect subs B got and is now using on the 787 and 747-8?
  But wait - those programs were officially launched after the US withdrew - does that matter?

• 57. Mike M  |  November 8th, 2009 at 13:11

  

  >>>Ikkeman

  What indirect subsidies did Boeing get for 747-8? Can you tell us please?

  As for the 787, yes Boeing was given tax breaks from the state, but that is no different for the tax breaks Airbus and continues to get for the A350 and A380.

  And then, we see the shameless Europeans adding yet more DIRECT aid thanks to the coward Spaniards who cut-n-run from Iraq:

  http://www.reuters.com/article/industrialsSector/idUSL62348720091106

  500 million euros - I bet if Boeing got the same amount for the 787, it would have surely helped alleviate their compensation payments if nothing else!

  But of course, Airbus is still in diapers and needs a helping hand, four decades after sprouting from the same birth canal that gave the world Concord!

• 58. Buster  |  November 8th, 2009 at 18:33

  

  50. Mike M | November 7th, 2009 at 10:01

  ” the abortion A330″

  Well, Mike M, now we see your true colors. Even the biggest Boeing fanboyz can’t bring themselves to admit that the “Evil French” can build a superior plane.

  If it wasn’t so sad, it’d be funny.

• 59. MPTA-098  |  November 8th, 2009 at 21:22

  

  JmBee, as for revenues, I pointed out that somewhat more than one sixth of EADS´ (minus Airbus) revenues are generated commercially. However you want to twist this, there is a significant difference between the percentage of total revenue for Boeing generated by US governmental contracts and the percentage of total revenue for EADS generated by governmental contracts to France, Germany and Spain. (i.e. parabublic sales for both companies throughout the world not included).

  Boeing v Airbus: The WTO dispute that neither can win

  http://www.dbresearch.de/PROD/DBR_INTERNET_EN-PROD/PROD0000000000205714.pdf

  At first glance Boeing and Airbus (or rather its parent EADS) are very similar companies. Although Boeing’s revenues (2005: USD 54.8 bn) and payroll (around 153,000 employees) are much higher than those of EADS (revenues EUR 34 bn, 113,000 employees), this is partly due to the greater significance of Boeing’s military arm.

  For example, and as you somehow indicated, Boeing hardly sells any civilian helicopters and is not present in the commercial space transportation business with Sea Launch going bust while the ULA is concentrating on fat governmental space launch contracts.

  In comparison, last year about 55 percent of Eurocopter´s turnover was derived from civil and parapublic sales while 45 percent was related to Eurocopter’s military products, and Arianespace, which buys each Ariane V from Astrium Space Transportation on commercial terms (i.e. R&D not included), is currently holding more than 50 percent of the international market for satellites launched to geostationary transfer orbit (GTO).

  http://www.eads.com/1024/en/businet/eurocopter/eurocopter.html
  http://www.ainonline.com/airshow-convention-news/dubai-air-show/single-publication-story/article/eurocopter-proves-virtue-of-patience-in-mideast/

  http://en.wikipedia.org/wiki/Arianespace

  Now, do reread my comments in post #8 in the last thread where I pointed out that due to an almost 100 percent cost overrun, the total costs for the intial 777 programme was $12 billion (or nearly $17 billion evaluated in the dollars of today), compared to the cost to Airbus for initial design, production tooling, and flight-testing of the A330/A340, which was in the order of $3,5 billion (or some $5 billion evaluated in the dollars of today). Not only, therefore, did Airbus develop the initial A330/A340 series for far less dollars spent than Boeing managed to do with the 777 (and in about the same time frame), but Airbus’ entire manufacturing infrastructure (mostly state-of-the-art) combined with their commonality philosophy, was the main reason why Airbus could produce large civilian aircraft some 10 to 20 percent cheaper than Boeing at the turn of the century. Fortunately for Boeing, the decline of the dollar vs the euro has somewhat closed that gap, if only temporarily.

  Interestingly, this is a fact the US side conveniently chooses to glance over. Why? Because the dollars spent to develop the original A330 was actually “nothing” compared to, for example, all the subsidies thrown at the 787. Inconveniently perhaps, this means that the entire RLI (at the 50 percent level) for the A330/A340 was around $2.5 billion (evaluated in the dollars of today) which compares very favourably with the illustrative examples of subsidies to Boeing at the State and local level, which include a USD 4 billion package in the State of Washington (combining tax breaks, tax exemptions or tax credits and infrastructure projects for the exclusive benefit of Boeing) and a USD 900 million package in the State of Kansas in the form of tax breaks and subsidised bonds, some of which are known as “Boeing Bonds”. These will be enjoyed by Boeing until 2024.

  Preferential treatment, btw, is strictly prohibited by the WTO. If a local, or state, government want to lure business to their area, an equal taxation footing must be granted to all investors and businesses. All players must be treated equally, it´s as simple as that. It looks like Boeing has been granted preferential treatment at the local level in several US states, so it is thus highly likely that they will be found “guilty” at the WTO

  As I´ve mentioned earlier, the WTO did apparently note in their initial report, that reimbursable launch investment (RLI), the raison d’etre of Boeing’s claim, can be an acceptable option for financing aircraft. It´s highly amusing, therefore, that the WTO, apparently believes that it was largely the “irrelevant” A380, and not so much the other members of the “family”, which has received illegal subsides.

  The US side, of course, claims that a number of infrastructure projects were allegedly built or upgraded exclusively for Airbus, or that Airbus enjoyed preferential treatment. However, unlike infrastructure projects for the 787 in the State of Washington which, it seems, was designed for Boeing, and for which Boeing likely benefited from preferential treatment, Airbus claims to have been paying a market-based rent for “their” projects, and furthermore, it may look like they have received only preferential treatment for the A380. Also, some (or all) of the infrastructure projects were also, apparently, for the use of the general public.

  Now, as don shuper indicated regarding the 767 in post # 53, and as recognised by Article 28 of the Vienna Convention on the Law of Treaties, Governments cannot retroactively be subject to legal obligations that did not exist at the time when the alleged subsidy was brought into existence. Moreover and specifically for the LCA sector, (re. the 1992 agreement) the parties had agreed on a cut-off date: 17 June of 1992. Accordingly, Member state financing (MSF) provided for development of the A300, A310, and A320, as well as most MSF loans for development of the A330/A340 (i.e A330-200 and A340-500/600 excluded), are not within the temporal scope of the so called Countervailing Measures (SCM) implemented by the Uruguay Round of multilateral trade negotiations.

  Finally, therefore, it’s highly amusing to note that all the noise from the Boeing camp in the US Congress regarding the supposedly “subsidised” KC-30, is really only based on around a $150 million (or some $220 million in the dollar value of today) RLI loan. And I doubt that those $150 million will be ruled illegal as there are no, or little, additional infrastructure costs (hidden subsidies) required for derivative aircraft.

  Source: http://www.flug-revue.rotor.com/frtypen/FRA33020.htm

  Development costs are expected to be 450 million US-Dollars. Sticker price for the A330-200 is around 112 - 118 million US-Dollars in mid-1998, ten million or so more than a Boeing 767-300ER but roughly the same as a Boeing 767-400ER.

• 60. JmBee  |  November 9th, 2009 at 01:32

  

  MPTA-098

  You are still going on that defense vs civilian kick, again I never said defense, so please take the word defense out of your posts when addressing this topic. I said all government contracts. For example it’s good you looked up eurocopter revenues, you orginially said under 30 percent where defense derived, now you say 45 percent are defense derived. If you then consider the additional research money provided by European governments plus the sale of Eurocopters to civilian government agencies, police, search and rescue, etc. you would find that Eurocopter relies on government sources for over 50 percent of its revnue and nearly all of its technology development. That was my point to begin with, that with the exception of their civilian aircraft divisions both companies other business units depend primarily upon government contracts and funding for their current level of technology and structure. You are more than welcome to keep splitting hairs but I appreciate that we have at least gotten to the point that yes, both Eurocopter and Boeing Vertol primarily depend (>50%) on government money.

  What I will grant you is this though, in general European government support is structured differently from American and in some ways is superior. In exchange for government support it is expected that EADS will use the government support to generate civilian jobs. Hence, the fact that Eurocopter has parlayed government support into the largest market share of the civilian helicopter market. While Boeing simply cut lose MD Helicopter and let go of the civilian side as soon as they took over McDac. The reason is simple in the US we have little to no expectations of corporations receiving government money that they will do anything except seek maximum profit. Hence, the desire of US helicopter makers to focus on the more profitable military side of the business and ignore the civilian side.

  And this leads me to my final point if you believe as you are arguing that the European way of supporting business with government contracts to expand their civilian operations is superior. Why on earth would you ever support a company like Northrop Grumman in this bid? NG is almost 100 percent reliant on government contracts for its business and could care less about anything except maximizing profitability. From a European perspective of job creation and home team technology development, you would never ever give this contract to NG/EADS if roles were reversed, so why on earth are you insisting that the NG/EADS bid is superior when judged by the standards you are putting forth it is not! At the very least you could agree that what is good for the goose is good for the gander and try to apply the same standards to Boeing and the US that you apply to EADS and European countries.

  “Preferential treatment, btw, is strictly prohibited by the WTO. If a local, or state, government want to lure business to their area, an equal taxation footing must be granted to all investors and businesses. All players must be treated equally, it´s as simple as that. It looks like Boeing has been granted preferential treatment at the local level in several US states, so it is thus highly likely that they will be found “guilty” at the WTO”

  You are correct that taxation must be on an equal footing, and all states giving these breaks know this. So all of them without exception write their tax breaks so that in theory any company (unless they are really stupid!) can take advantage of them. The tax breaks given to Boeing from Washington State where in theory avalaible to Airbus as well. In practice however, the tax breaks were only available to Boeing since they were not looking to locate a new aircraft assembly plant in Washington state when the tax breaks were granted. This will be the issue the WTO needs to resolve here.

  However, I would remind you that the last time a similar issue came up between the American practice of allowing US corporations to shelter overseas revenue in offshore tax havens and European preference for VAT rebates, the US lost and Europe won. Europe won in this case because although both practices do the same thing, they shelter export income, Europe was smart enough to have an exception written into the WTO agreement for VAT rebates. And the WTO ruled against the US, even though both sides were doing the same thing. Hence, the WTO went with the letter of the law instead of the spirit. As far as the local taxbreaks go the localities are obeying the letter of the law if not the spirit, so why are you assuming that its an open and shut case here?

  Also, ironically, this issue plays far more against the KC-30 than it does the KC-767. For the simple reason that as Dan has pointed out any taxbreaks for Boeing to locate 767 production in Washington State happened a long time before the WTO, GATT 92 or anything else and aren’t relevant. But guess what, Alabama recently gave EADS $14 million to locate a service center in Mobile, and have promised in excess of $100 million in targeted tax cuts if Airbus builds its A330 assembly plant in Mobile. In addition EADS has also said they need the military contract for the tanker to justify and provide the business volume for their assembly facility in Alabama. I find it quite ironic that EADS wants to fund a civilian aircraft assembly plant in the US with what its own case before the WTO claims are illegal targeted taxbreaks and illegal use of military contracts to subsidize civilian projects.

• 61. Aurora  |  November 9th, 2009 at 23:02

  

  Dr. Loren Thompson of the Lexington Institute just came out with this opinion piece.
  http://www.lexingtoninstitute.org/tanker-wars-why-boeing-thinks-subsidies-matter?a=1&c=1129

  The title is “Tanker Wars: Why Boeing Thinks Subsidies Matter”

  I see a lot of wishful thinking here and elsewhere that if EADS is found guilty by the WTO then DOD should just ignore the decision.

  Won’t happen.

  Here’s Dr. Thompson’s take:

  But once the controversy is seen for what it is — a trade dispute — it becomes obvious that Boeing is right and Airbus is wrong. European governments have violated free-trade rules by subsidizing Airbus for decades, providing benefits that an impartial panel of trade experts has determined to be illegal, and as a result of those benefits U.S. companies have lost hundreds of billions of dollars in sales. America’s share of the global market for airliners has been cut in half as a direct result of these unfair practices.

  Boeing and the U.S. Trade Representative argue convincingly that the availability of illegal launch subsidies has given Airbus huge pricing advantages in competing against Boeing in commercial markets — advantages that are worth many times the original face value of the subsidies. The Airbus rejoinder that Boeing gets unfair advantages from military work or state and local aid is not convincing, since Airbus gets those benefits too. In fact, the year the WTO case was brought, Boeing and Airbus had roughly equal military sales. And Boeing makes another persuasive point too: how can the Pentagon simply ignore the position of the U.S. Trade Representative, when trade deficits are destroying the value of the dollar and the military is planning to conduct many more competitions for weapons systems based on commercial products available from overseas sources?

• 62. keesje  |  November 10th, 2009 at 07:59

  

  Italian tankers further delayed because of technical problems

  http://www.defensenews.com/story.php?i=4366294

  how long have they been working to fix this.

  I have absolutely lost track on the delays..

• 63. MPTA-098  |  November 10th, 2009 at 22:57

  

  “You are still going on that defense vs civilian kick, again I never said defense, so please take the word defense out of your posts when addressing this topic. I said all government contracts.

  Really? Perhaps if you’d actually read what I wrote in the first paragraph in my prevous post, you would’ve avoided saying the following:

  “For example it’s good you looked up eurocopter revenues, you orginially said under 30 percent where defense derived, now you say 45 percent are defense derived.”

  Eurocopter’s revenues? Are you serious?

  Again, with all due respect, this is blatantly false and a gross misrepresentation of what I’ve been saying; =; which is:

  1) Airbus accounts for 63,5 percent of total revenues at EADS (2008)

  http://www.eads.com/1024/en/investor/Financials_and_Guidance/Segment_information/Revenue/Revenue.html

  2) The rest of EADS’ segments (activities) account for 36,5 percent of the (remaining) revenues (2008). Of those 36,5 percent, more than 16,7 percent percent (one sixth) are generated by commercial activities. As one should be able to see from this link to Financials & Guidance; Revenues at EADS is, in fact, that I’ve been exceedingly conservative in my estimate. So, what I’ve been implying is that under 30 percent of EADS revenues are non-commercially generated (i.e defense, parapublic etc). Is this so hard to understand ?

  If you then consider the additional research money provided by European governments plus the sale of Eurocopters to civilian government agencies, police, search and rescue, etc. you would find that Eurocopter relies on government sources for over 50 percent of its revnue and nearly all of its technology development.

  First, you should deduct parapublic sales (civilian government agencies, police, search and rescue etc) which are not to those countries (i.e. France, Germany,Spain, UK and the US (Boeing)) providing R&D funding to EADS and Boeing. Not only is EADS selling far more helicopters and GTO launch slots to commercial customers than Boeing, but also their parabublic sales throughout the world significantly surpasses that of Boeing.

  As for technology development, what I’ve been saying is that Airbus and Boeing are about equally “guilty”, or for that matter, implying that both sides are as bad as each other, that is if one considers tax breaks and loans/subsidies are bad. The general European view regarding aerospace subsidies is, as I´ve indicated, such that the EU does not deny subsidies for Airbus, but that they are largely transparent and repayable (in the case of loans), unlike in the US.

  While the EU (like everyone) is far from being innocent in trade issues, at least there is not the assumption of moral goodness or “our way is best”. The fact is that the high profile WTO action was undertaken with much fanfare and moral posturing from the US side, all the while being warned that it might also rebound on Boeing.

  Also, under the bilateral 1992 agreement between the EU and the US, the US was free to hand out launch aid to Boeing too, and skip “the rest”, but of course, the US side went to the WTO partly to try to stop the A350 in the tracks, as they somehow believed Airbus was “vulnerable” due to the ongoing A380 programme, however “irrelevant” they may have believed the superjumbo being. It’s pretty ironic, though, that in the end, the A350 is likely to become a much more formidable competitor than Boeing, at the time of the 787 launch, ever envisaged Airbus could possibly field on the heels of the development of the A380.

  As I implied above, many US “observers” can’t seem to comprehend that their side has done anything “wrong”, which is of course remarkable, but still quite “understandable” when one looks at how seemingly easy it is for many participants in the US-based aerospace commentariat to keep on pounding and relentlessly slant Airbus for being mostly “subsidised” and subsequently causing “great harm” to Boeing. I would go as far as to say that I see many similarities in the way in which a similar US-based commentariat were nothing but vulgar propagandists for the former administration’s hoax regarding WMDs in Iraq; which is if you tell a lie big enough and keep repeating it, many people, if not most, will start believing what they´re “told”. Similarily, it seems like the US-based aerospace commentariat’s repeated inaccuracies in reporting the B vs A story at the WTO, and earlier, is influencing US public opinion as well as on quite a few US-based participants in online discussions on the case.

  The latest example of this comes from no other than Loren Thompson of the Lexington Institute:

  http://www.lexingtoninstitute.org/tanker-wars-why-boeing-thinks-subsidies-matter?a=1&c=1129

  But once the controversy is seen for what it is — a trade dispute — it becomes obvious that Boeing is right and Airbus is wrong.

  Finally, as for some of your other points:

  1) Re. Northrop Grumman; I´m sorry to say that your logic is flawed and that your conclusion is essentially nonsensical. =;

  2) Washington State has clearly given Boeing ilegally preferential treatment (tax breaks) on several of seven-series not commonly available to ALL businesses in the state.

  3) VAT: DON´T GO THERE! =;

  VAT, or Value Added Tax. is a consumption tax and added to the price of each product sold in the EU and in many other parts of the world. It is applied equally on ALL products, regardless of the origin of these products (imported or not). As for the EU, it´s a tax on the consumption of goods and is purely territorial, meaning it is applied only within the borders of the European Union. VAT is not “rebated” for export goods from the EU, and it simply can not be levied since it is a territorial consumption tax only applicable if goods are consumed. Furthermore, when it comes to income taxes, Europe sticks to what is often referred to as the territorial principle, meaning it is up to the country of origin of a firm to tax them, not the country where the transaction is done.

  For example, I recently bought a 2000W step up and step down voltage converter from the US, but when I picked it up at the shipping company, I had to pay not only 25 percent of VAT on the US purchase price (converted into the national currency), but also 25 percent of VAT on the cost for shipment of the product from the US.

• 64. don shuper  |  November 11th, 2009 at 06:02

  

  Uhh mpta ? . ..2) Washington State has clearly given Boeing ilegally preferential treatment (tax breaks) on several of seven-series not commonly available to ALL businesses in the state. . .

  Actually the breaks were specific to aerospace ** related **industries . . .

  And even under WTO-GATT - just what was illegal ?

  And about the 767 ?? vs A330-xxx ?

  and look again at the source I posted earlier

  So to pick up the story, take a close look at
  http://www.defense-aerospace.com/article-view/verbatim/45452/eu-details-position-on-civil-aircraft-talks.html

• 65. MPTA-098  |  November 11th, 2009 at 11:39

  

  Don, if specific tax-breaks are granted only to one sector (i.e. aerospace), and not to all the other businesses in the state (i.e Starbucks, your local hairdresser etc), they will be held illegal by the WTO.

  As for more “specifics”, Endgame Research has more:

  http://www.endgame.org/boeing.html#Subsidies

  <i<Washington State exempts Boeing from various taxes and environmental regulations. (Wilson, Mar 3, 1993).

  In 2003 Washington State gave Boeing a $3.2 billion tax break if it would “save” 800 jobs by building its new 7E7 airliner in Washington. Details of the deal are being kept secret, but they apparently include $3.2 billion in tax breaks over 20 years, $4.2 billion in transportation improvements across the state, $24 million to establish recruitment, training, and employment programs and a work force center for Boeing and suppliers, $15.5 million for improvements at the Port of Everett satellite rail-barge facility, reforms to the state’s unemployment insurance and injured workers’ compensation systems, and an aerospace manufacturing degree program at state community and technical colleges, and a pledge to provide more tax help and incentives, as well as assistance on permits and workforce training. Sources:

  Boeing 7$7: The costs of keeping the company happy just keep going up. Seattle Weekly, June 4, 2003.

  Boeing Wins: The state’s $3.2 billion offer ‘preserves’ 800 dream jobs assembling the Dreamliner. Seattle Weekly, Dec 23, 2003.

  Tax Cracks: $64 Billion Falls Through the Tax Cracks. Seattle Weekly, Feb 18, 2004.

• 66. Leelaw  |  November 11th, 2009 at 15:21

  

  Thanks to Dr. Thompson for so succinctly explaining the gravamen of what’s driving the US complaint:

  “…launch subsidies has given Airbus huge pricing advantages in competing against Boeing in commercial markets — advantages that are worth many times the original face value of the subsidies…”

• 67. don shuper  |  November 11th, 2009 at 15:38

  

  The 7e7 does not come under the WTO complaint AFIK due to U.S bailing out the year before ( date ? )

  I will repeat- RE the tanker and WTO, the A330-XXX v the 767-xxx is the issue form the tanker

  other A3x-xxxx started between 1989-90 and 2003 ARE part ofm the WTO complaint I believe

  The 767 was in service almost a decade before GATT92

  The ONLY question pertinent to then tanker issue is the amount of excessive- improper subsidy involved in then A330-xxx

• 68. MPTA-098  |  November 11th, 2009 at 16:37

  

  Public opinion in the US is being targeted by pseudo defense intellectuals who have economic links to the US defense industry. Interestingly, the foremost public proponent of the US defense industry, is non other than the partisan hack Loren B. Thompson formerly with the the Alexis de Tocqueville Institution in Arlington, Virgina (a think tank funded by the defense industry).

  Some links:

  http://lefarkins.blogspot.com/2009/08/hack.html

  If you read Defense News, you quickly become familiar with Loren Thompson of the Lexington Institute. He appears in an extraordinary number of stories, usually as voice recommending the purchase of some new weapon or the continued acquisition of an older weapon type. While I’m sure that you could find some examples of expensive weapons that he didn’t like, it’s pretty rare. *** This is not surprising, given that the Lexington Institute (not affiliated with Lexington, KY) is bankrolled by the defense industry.

  (*** One example: Mr. Thompson doesn’t like the KC-30 as he’s currently bankrolled by Boeing IDS.)

  http://warisboring.com/?p=2482

  Quotes: But there’s a reason Thompson is well-connected — and it has nothing to do with diligent reporting or exhaustive research. Thompson is well-connected in the defense industry because defense firms pay to use Thompson as an unofficial spokesman. “He’s a conduit for very high-level people,” Nick Schwellenbach, then an investigator for the Project on Government Oversight, a watchdog group in Washington, D.C., told the Mobile, Alabama, Press-Register.

  “What is often not revealed in news reports … is that almost all funding for Thompson’s employer, the non-profit Lexington Institute, comes from the same defense contractors who frequently have a stake in the programs that he writes about,” the newspaper added.

  Said Schwellenbach of Thompson: “He represents a very pro-industry viewpoint. I don’t think you’ll ever see him calling for less spending or cutting programs.” Galrahn at Information Dissemination said Thompson’s recommendations “root in industry, not strategy.”

• 69. mpta-098  |  November 11th, 2009 at 17:37

  

  “The 7e7 does not come under the WTO complaint AFIK due to U.S bailing out the year before ( date ? )”

  Nonsense. That the US “bailed out” didn’t prevent the EU for filing a tit-for-tat complaint at the WTO which, of course, included most of the subsidies granted to Boeing for the 7E7/787 at the local, state and federal level in the US.

  One source, among many:

  EU/US Large Civil Aircraft WTO Disputes
  Background fact sheet
  http://trade.ec.europa.eu/doclib/docs/2007/september/tradoc_136044.pdf

  As for your 767 vs. A330 “thing”; I’ve already said something about that further up in the thread:

  Now, as don shuper indicated regarding the 767 in post # 53, and as recognised by Article 28 of the Vienna Convention on the Law of Treaties, Governments cannot retroactively be subject to legal obligations that did not exist at the time when the alleged subsidy was brought into existence. Moreover and specifically for the LCA sector, (re. the 1992 agreement) the parties had agreed on a cut-off date: 17 June of 1992. Accordingly, Member state financing (MSF) provided for development of the A300, A310, and A320, as well as most MSF loans for development of the A330/A340 (i.e A330-200 and A340-500/600 excluded), are not within the temporal scope of the so called Countervailing Measures (SCM) implemented by the Uruguay Round of multilateral trade negotiations.

  Finally, therefore, it’s highly amusing to note that all the noise from the Boeing camp in the US Congress regarding the supposedly “subsidised” KC-30, is really only based on around a $150 million (or some $220 million in the dollar value of today) RLI loan. And I doubt that those $150 million will be ruled illegal as there are no, or little, additional infrastructure costs (hidden subsidies) required for derivative aircraft.

• 70. USAF Fan  |  November 11th, 2009 at 17:39

  

  “Nick Schwellenbach, then an investigator for the Project on Government Oversight, a watchdog group in Washington, D.C., told the Mobile, Alabama, Press-Register.”

  Mobile Press Register?

  Says it all.

• 71. Mike M  |  November 11th, 2009 at 17:42

  

  >>>The 7e7 does not come under the WTO complaint

  Spot on.

  The Europeans and Airbus cannot afford to piss the Japs off, since they got Japanese loans for the heavies to build 787 parts.

  Also, why do people suggest the 767 should be accounted for like the A330?

  The 767 never got launch, reimbursable or otherwise.

• 72. MPTA-098  |  November 11th, 2009 at 17:58

  

  Oh poor Loren, the Mobile Press Register talked to someone who once worked for POGO.

  http://www.pogo.org/about/

  And for all I know Mr. Thompson might have worked labouriosly, even in his spear time, to sell military items such as a $7,600 coffee maker and a $436 hammer to the DoD.

• 73. MPTA-098  |  November 11th, 2009 at 18:02

  

  Spot on. The Europeans and Airbus cannot afford to piss the Japs off, since they got Japanese loans for the heavies to build 787 parts.

  Yeah, spot on nonsense!

  Perhaps International Trade 101 is a good start?

• 74. Mike M  |  November 11th, 2009 at 19:03

  

  If it is nonsense MTPA-098, can you explain WHY then, Airbus didnt include the 787 in its complaint?

  After all, dont the Airbus leadership team bang on about how its the most subsidized jet in history?

• 75. MPTA-098  |  November 11th, 2009 at 22:42

  

  Mike, the 787 is indeed part of EU´s complaint, but only the subsidies granted to Boeing for the 7E7/787 at the local, state and federal level in the US proper. It is true, of course, that the EU did not challenge the more than $1 billion in funding from the Japanese government to Japan’s so-called Heavy Industries involved in the development of Boeing’s 787 as the trade dispute is caused by the action of the US government, and not the Japanese government.

  Apparently some people believe (the grassy knoll types?) that Airbus did not want to upset the Japanese as the company tries to sell more of it´s products to ANA and JAL and achieve greater market penetration in country which is solidly in Boeing´s corner.

  More on Japanese reimbursable launch “aid”.

  http://www.eurunion.org/Airbus-BoeingFactsheet-9-1-09.pdf

  Quote:

  If launch aid is such a good investment, why don’t other countries do it?

  They do. Launch investment schemes are in fact, a widely-used form of financing the development, and outside Europe, also the production, of civil aircraft. They are used, for instance, in Canada and Japan.

  In fact, Boeing benefits from a Japanese scheme for development and production of Boeing’s 787 aircraft, which competes with the Airbus A350. In effect, 35% of the B787 will be produced in Japan and it is understood that Boeing’s risk-sharing partners have received financing from the Japanese government of up to 70% of development costs (the ceiling in the EU is 33%). And this is on top of the other forms of support Boeing receives.

  The example of Japan demonstrates that even if the Airbus-Boeing dispute is presented as a US jobs issue, Boeing increasingly outsources its R & D projects to non-US firms, and therefore non-US workers, while continuing to receive US government support. The opposite is true for Airbus which imports more and more jobs into the US, but does not benefit from US government funding.

  It is also noteworthy that Boeing itself sought royalty-based launch investment from the US government in the 1970’s. However, Boeing is significantly better off under the current system since the company benefits from subsidies (e.g. $3.2 billion tax subsidies by the State of Washington for the B787 alone) which do not have to be repaid.

• 76. don shuper  |  November 12th, 2009 at 06:08

  

  again- just what does the 787/7e7 a-380 , etc have to do with the Tanker A330-200(basic) v the 767 regarding subsidies. ?

  While it is true that AFTER U S filed in 2004 against airbus, Airbus/EADS filed against Boeing re 7e7/787, that has NOTHING TO DO WITH THE TANKER ISSUE.

  MY POINT IS/WAS/STILL THE SAME

  RE THE TANKER - AIRFORCE- EADS/AIRBUS, THE 787 A380 HAS ZIP- NADA-ZERO TO DO WITH THE FACT THAT AIRBUS HAS BEEN FOUND TO HAVE USED IMPROPER SUBSIDIES OF SOME AMOUNT RE THE A330 AIRFRAME USED AS BASIS FOR THE AIRBUS TANKER.

  Please stick to the subject of the thread

• 77. Mike M  |  November 12th, 2009 at 06:17

  

  >>>Mike, the 787 is indeed part of EU´s complaint, but only the subsidies granted to Boeing for the 7E7/787 at the local, state and federal level in the US proper.

  Boeing didnt get a dime - it got tax breaks etc from the state, the same kind Airbus got and gets from Franco-Deutschland.

  Airbus’ complaint on this will not be upheld since it is guilty of the very same action itself.

  As DOn Shuper says, the 787 has nothing to do with the fact that AIrbus, like Jean Pierson has been caught with its trousers down by the WTO.

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