WTO Ruling May Be Linked To KC-X Competition
WTO Rulings Mean Compliance For All Parties
Final WTO Ruling May Not Differ From Preliminary Report
The issue of subsidies between Airbus and Boeing is one that will reverberate for a long time – long after the WTO has ruled on both sets of complaints.
Since the interim ruling was shared between the US and Europe, much has been made as to whether both claim and counter-claim rulings should be presented between all parties, so that talks can iron out differences, as EADS Louis Gallois would like.
In reality, that isn’t going to happen – well, the talks might, but any agreement may not be a forthcoming prospect.
Complicating the issue further are US lawmakers that want the US Air Force to factor in the WTO ruling into the KC-X tanker competition. While Undersecretary of Defense Ashton Carter is partially right that the ruling is not a final one, many observers are wrong to suggest that the European case against the US should also be factored in.
There are a couple of reasons for this. Firstly, the 767 was not born out of US Government aid. The A330, built as a worthy competitor to the 767, certainly did benefit from subsidies and by default can and does, by the eyes of some US lawmakers, fall into the bracket as having shouldered less risk in coming to market.
The second key point is that the US claim against Europe, and the European case against the US are two, totally independent rulings, neither of which are linked. Two separate bodies at the WTO will rule on each case.
Image courtesy of Northrop Grumman
I had the opportunity recently to speak with Boeing’s legal counsel who is dealing with the WTO case, Bob Novick, at length on this issue and he affirmed that irrespective of the European claim against the US, Europe has no choice but to fall into compliance, before and independent of, any ruling against the US.
Of course, the media resident in Alabama are acutely unaware of this and probably worry that ultimately the USAF and DoD will have to consider the possibility of applying the WTO rulings on an airplane built with market distorting funding.
“I expect we’ll have a legal decision from the WTO sometime in the second quarter of next year, which means that whatever obligations arise as a result of the report start at that moment,” said Novick.
“There is a prohibited subsidies finding and that all other subsidies are actionable subsidies – under WTO rules, the period for correcting those and coming into compliance for prohibited subsidies has historically been three months and for actionable subsidies its six months. Some time from the second quarter of next year, three months from that point, six months from that point, the burden on Europe and Airbus to figure how they’re gonna comply will have come and gone. The US will have to decide, in light of what they [Europe and Airbus] do, if anything, what their counter-response is.
As a legal matter, there is no relationship at all between the two [complaints and counter-complaints] – they’re two completely separate sets of [WTO] panels. The outcome, there’s no off-setting. The fact is the obligation for [Europe and Airbus] to come into compliance will emerge in the middle of next year – the US will move forward and take whatever action to enforce this [WTO] decision.
The A330 is a creature of subsidies – the use of the subsidies was to obtain market share against the 767 and the Boeing Company. And now that same subsidy is getting leveraged again in the military space. We’ve had a finding that its against international rules to have given these subsidies and with those subsidies obtained market share that one shouldn’t have been able to obtain otherwise and be able to use those very same subsidies to do it all over again [in the KC-X competition] and that’s the part that’s an economic matter and a trade policy matter which is offensive.“
For those with blinkered insight, placating to the whims of an uninformed media base in Alabama, the fact remains that if the USAF waits for both the US ruling against Europe, and then waits for the European ruling against the US, then the KC-X tanker competition has more chance of being concluded in 2011 or beyond, rather than next summer.
Image courtesy of Boeing / UnitedStatesTanker.com
Further, that the 767 is not and has not been a recipient of direct state aid in the way that the A330 has further highlights the fallacy of those that want both rulings to be out in the open – so that if the USAF does want to factor in subsidies to the KC-X competition, it will have “both sides” of the WTO’s rulings as some sort of equilibrium by which to judge.
But that’s not the case.
As Novick clearly illustrates, the two cases are independent of each other, the 767 has not benefitted from Government aid as the A330 has and Airbus will, by next year, have no choice but to fall into compliance. At that stage, the USAF will have little grounds on which it can justify ignoring or not factoring in the WTO ruling to the KC-X tanker contest, particularly when the very essence of the complaint by the other half of the US Government is against illegal aid and subsidies for Airbus and its products.
If as Northrop Grumman alludes that they want out of the competition, a sole source contract to Boeing would probably be the best option to end this drawn out saga – but in the spirit of a contest, it is highly unlikely that Northrop will leave or that a sole source contract will be offered.
Senator Shelby may bizarrely believe that the USAF’s moves to keep the WTO ruling out of the tanker contest is “fair and just” however, the undisputed fact remains that the US Government, the DoD and USAF simply cannot ignore the legitimacy of the WTO’s indictment against state aid afforded Airbus as Novick pointed out.
Based on cases gone by, the final WTO ruling may not differ greatly from that which has already been made known.
“If the Air Force insists on allowing them to compete, then they should ensure a fair and level playing field by taking into account illegal Airbus subsidies,” said Kansas-based Republican Congressman Todd Tiahrt in a letter to President Obama.
The letter further states that the USAF “totally ignores the clear evidence that illegal European subsidization is injurious to both our economy and our national security industrial base.”
Taking all this into account, it is easy to see why Gallois’ tactic of engaging in talks to reach agreement with the US is an attractive one, but he fails to advise the lemming-like audience that EADS/Airbus has very little time in which it has to address the WTO charges.
Talks will not stop the compliance he has to oversee and enforce lest the US decide to wade in and enact punitive measures that Europe may not be able to stomach.
Equally, when the time comes for the European ruling, the US too will have to fall into compliance.
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.
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.
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.
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
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!
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?
>>>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!
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.
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.
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.
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?
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..
“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.
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
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.
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…”
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
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.”
“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.
“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.
>>>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.
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.
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?
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?
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.
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
>>>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.