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European Union

Trans-Atlantic Trade Tensions Escalate Over Aircraft Subsidies

Strategic Insights

— 1 min read

United States-European Union negotiations over aircraft subsidies have broken down, potentially leading to costly litigation at the World Trade Organization. The dispute has strained trans-Atlantic relations and would be the largest in WTO history. The United States and European Union have been accusing each other of paying out billions of dollars in illegal subsidies to their top aircraft manufacturers, Boeing and Airbus.

Key Takeaways:

  • The United States and European Union have been trading complaints at the WTO over illegal subsidies to Boeing and Airbus, with the US accusing the EU of paying out $15 billion in low-cost, no-risk loans for new projects and the EU claiming $23 billion in subsidies for Boeing since 1992.
  • The two sides agreed to negotiate the dispute in January, but the talks have collapsed, with the US Trade Representative's office stating that the EU is unwilling to eliminate launch aid subsidies.
  • The stakes are high as both companies build new generations of competing passenger aircraft, with Airbus developing the jumbo A380 and designing a new model to compete with Boeing's 787 "Dreamliner".
  • The Bush administration filed the WTO case partly to head off another round of support for Airbus' new aircraft model, with Boeing's then-President and Chief Executive Officer Harry Stonecipher urging the administration to confront the European conglomerate.
  • The trans-Atlantic rivals fought a similar battle over subsidies in the late 1980s and early 1990s, before a 1992 agreement allowed a set level of government support.

Statistics:

  • $15 billion: The amount of low-cost, no-risk loans that European governments have subsidized Airbus.
  • $23 billion: The amount of subsidies that the EU claims the US has given to Boeing since 1992.
  • 1992: The year in which the US and EU agreed on a set level of government support for the aircraft industry, after similar disputes in the late 1980s and early 1990s.
  • 2003: The year in which Airbus passed Boeing in annual aircraft deliveries.

Sources:

  • "U.S.-E.U. Talks on Aircraft Subsidies Collapse" by Jeffrey Sparshott, THE WASHINGTON TIMES
  • "U.S. Accuses E.U. of Illegally Subsidizing Airbus", Bloomberg
  • "EU Seeks to Protect Airbus in Subsidy Row" by Richard Milne and Courtney Weaver, Financial Times
  • World Trade Organization (WTO) complaint filed by the US against the EU over Airbus subsidies.

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