Both Agree To Stop Subsidizing Aircraft Manufacturers
"We need open warfare like we need a hole in the head."
Those words from EU Trade Commissioner Peter Mandelson signaled
a break in the rising tensions between the continents over
subsidies granted Airbus and Boeing. Both the EU and the US have
agreed to at least try to settle their rancorous dispute over their
allegations, where billions of dollars are at stake. The agreement
is also another sign of a possible thaw in relations between
America and Europe.
The dispute began early last year when Boeing began making
unhappy noises over what executives saw as Airbus's unfair
advantage -- backing from France, Germany and Britain, which gave
the aviation manufacturer "launch loans" to help get new aircraft
models off the drawing board and into the sky. Then in the fall,
the US abruptly pulled out of a 1992 trade agreement covering
subsidies to airplane manufacturers. The US then set in motion an
appeal to the World Trade Organization.
Airbus fired back with
countercharges of its own, saying local tax breaks designed to
entice Boeing in its search for manufacturing sites amounted to
subsidies that were also illegal. At one point, US and EU trade
negotiators seemed so far apart that one expert predicted there
would be no settlement before the issue went before a WTO
commission.
But in the end, said US Trade Representative Robert Zoellick,
both countries decided it would be a good idea to talk about ending
all subsidies to their respective aerospace giants.
But does this really end the dispute?
Even as the agreement was announced
on Wednesday, Airbus said it would continue to pursue start up
subsidies for its A350, seen as a head-to-head competitor with
Boeing's 7E7 Dreamliner.
"The basis of the agreement is not that there will be no
support," said Airbus CEO Noel Forgeard (above, left). "It's
never been agreed that it should be zero."
In fact, Forgeard confirmed that his company has already applied
for government funds to spur development of its A350. Still, he
said, the A350 doesn't really have to have government backing to be
a success. "It's not a program that's hanging on any kind of
support," he said.
Boeing, a company whose rancor over the Airbus subsidies
prompted the Bush administration to seek redress before the World
Trade Organization, appeared willing to overlook Forgeard's
statements and, for the moment, turn the other cheek.
CEO Harry Stonecipher (above right) said in a statement quoted
by the AP that the US-EU agreement is a first step "to establish
much-needed balance in the commercial aircraft market."