A different perspective on the Boeing-Airbus WTO dispute
The World Trade Organization is expected to issue a Tuesday ruling on a U.S. complaint charging the European Union with illegal subsidies to aircraft manufacturer Airbus. Airbus trade adviser Charles A. Hamilton suggests its time for the companies to stop feuding.
Special to The times
THERE are those who would have us believe that Airbus subsidies have destroyed thousands of U.S. jobs. This is simply not so.
Airbus (by virtue of its success) has created new jobs and strengthened our country's industrial base while Boeing continues to send offshore a growing percentage of its production and jobs. It has also transferred important technologies, developed at taxpayer expense, to its foreign suppliers. Now, Boeing's continued feud with Airbus has enabled others to enter the field.
Getting into a capital-intensive industry required Airbus to seek some form of funding. Since Europe had no equivalent to NASA or U.S. Defense Department funding, it chose repayable launch investment (RLI), borrowed from several European governments.
The Airbus consortium's early support is a matter of public record. As Airbus prospered and gained market share, investments were repaid with interest. Once the loans were paid, the company continued to make royalty payments. European member states and their taxpayers found Airbus to be a sound investment and supported the idea. Perhaps a similar system of funding should be tried in the U.S., given the state of the economy.
Boeing's close partnership with the government over nearly a century that included grants and technology research enabled it to become a leader. The grant funds did not have to be repaid. While feeding at the public trough, Boeing drove down the learning curve, mastering new technologies supported by lucrative government-funded contracts to develop new products and launch its famous airplanes.
Nothing wrong with that, but Boeing in its feud with Airbus has refused to accept the reality of the aerospace sector which has required in the past, and will continue to require, some form of supports going forward in the future.
At present, there are only two firms capable of integrating and manufacturing large civil aircraft. Instead of supporting open competition, the U.S. at the behest of Boeing brings a dispute in the World Trade Organization and Europe retaliates. After five years of pouring over thousands of pages of data, and many millions of dollars in legal fees, the final result on two disputes is still awaited from an overwhelmed WTO. The total legal costs of Boeing's feud could probably fund the launch of a whole new aircraft program.
Unfortunately, these two WTO cases have enabled future competitors to look at how Boeing and Airbus funded their aircraft programs. Under WTO dispute-settlement rules, both parties had to hand over confidential information to substantiate their claims. Watching from the sidelines were "interested parties" such as the Canadians, Brazilians, Chinese, Russians and Japanese. As a result, potential subsidized competitors have their eyes on a share of the Boeing/Airbus market. Boeing and Airbus are now being forced to upgrade their respective 737 and A320 programs to remain competitive and maintain market share. Boeing's misdirected WTO litigation has enabled others to take on the duopoly.
The global alignment of economic power and technology leadership is changing. Boeing has given composite wing technology to its Japanese business partners and outsourced much of its manufacturing to others in the interest of "shareholder value" and the harvesting of its product line. One wonders, in the end, whether Boeing may have set the stage for the destruction of its strategic value to the United States.
The Boeing/Airbus duopoly forecasts a $3.1 trillion market over the next 20 years. Scant reason to seek WTO relief! Unless these companies get their collective acts together, the West stands to lose its leadership.
Tuesday's WTO announcement is the first of several steps that offer an opportunity to begin a cease-fire in the Thirty Years War between these two companies. Time to start fresh and negotiate a new agreement that the U.S. and Europe can accept and get on with preserving the technology security of the West, strengthening the Transatlantic Alliance and keeping in mind they can either hang together or hang separately.Charles A. Hamilton is an international trade consultant in Washington, D.C. He serves as a consultant to Airbus on trade matters. The opinions expressed are his own.