US-EU Row Over Aircraft Makers' Support: Finding a Path to Resolution

The row between the United States and the European Union over financial support for aircraft makers, Boeing and Airbus, has become a major obstacle to transatlantic cooperation. The dispute centers on whether the EU's assistance to Airbus is in compliance with international rules, while the US claims that Washington provides more support to Boeing in the form of federal contracts and tax breaks. The EU is willing to reduce the amount of launch investment for Airbus, but it seeks a commensurate offer from the US to lower its subsidies for Boeing.

Key Takeaways:

• The US claims that the EU's investment in Airbus is illegal under international rules, while the EU believes that the US provides far greater support to Boeing, in violation of WTO rules.
• The EU is not threatening to take the US to court, but it would have no choice but to launch a counter-case if Washington pulls the WTO trigger.
• The US and EU agreed to seek a negotiated solution in January, aiming to remove some aid by April 11 and commit to a further agreement on eliminating all aid.
• The American side insists on the elimination of EU launch aid, which provides a win-win arrangement for Airbus and the governments concerned.
• Boeing receives over $20 billion in research and development grants, tax incentives worth $3.2 billion, and subsidies for physical improvement of plants and infrastructure.
• The US argues that commitments to reduce subsidies can be made only in a second stage, while the EU seeks a balanced, step-by-step approach.
• The EU is willing to reduce the amount of launch investment for Airbus, but it seeks a commensurate offer from the US to lower its subsidies for Boeing.

Statistics:

• $3.7 billion: Total amount of EU investment in Airbus since 1992
• $20 billion: Research and development grants to Boeing
• $3.2 billion: Tax incentives for Boeing in Washington State over 20 years
• $4.2 billion: Subsidies for physical improvement of Boeing plants and infrastructure
• $200 million: Annual tax benefits from the Foreign Sales Corporation Programme for Boeing
• $1.6 billion: Japanese launch aid to Boeing for its 787 Dreamliner

Sources:

• Peter Mandelson, Trade Commissioner of the European Union, The Times, 2005
• Various reports and agreements cited in the article