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Politics : Politics for Pros- moderated -- Ignore unavailable to you. Want to Upgrade?

To: aladin who wrote (117684)	6/2/2005 1:08:30 PM
From: Elsewhere	Read Replies (1) \| Respond to of 794001

John, <Claiming that a quasi-government entity is doing well against a private company is just plain silly.> Shall I help you to find the EADS ticker symbol? <Maybe we should decide luxury cars are a national priority and invest 20 billion in GM to specifically target Mercedes and BMW and see how you feel.> Wouldn't help GM much. Two comments I basically agree with: Flight from reality Guardian Wednesday June 1, 2005 guardian.co.uk It is Europe's bad luck that in the week of the collapse of its new constitution it is also having to cope with a shock US decision to break off bilateral negotiations over the subsidies the Airbus receives. The World Trade Organisation will now have to adjudicate. Let us hope these troubles do not come in threes. The subsidy battle between Airbus and Boeing could be the most expensive case ever to come before the WTO. It could also create acrimony and sour relations between the EU and the US when they should be cooperating closely to bring a speedy end to the much-delayed Doha round of trade negotiations, which could give a big boost to developing countries. The core of the dispute is not so much past launch aid that the Airbus has received which has helped it win a bigger global market share than Boeing, but fresh aid - believed to be upwards of $1bn - that is due to be announced for the new planned European jet, the A350. The EU is reported to have offered to cut future launch aid by a third; but this is not enough for the US, which wants it eliminated entirely. That is an absurd demand to make, since everyone knows that Boeing - believed to be the driving force behind the US's tough stance - is also riddled with subsidies, albeit of a different kind (tax breaks from Washington state and indirect ones from government research projects). Boeing would never have been the success that it is today without such subsidies. Nor would the Airbus - a highly successful European project. It would never have been built, which would have left aircraft manufacture as a US monopoly, with all that that would imply for prices. Europe fears that the real agenda is a concerted attempt by Boeing to abort the launch of the A350. It believes that strong US political pressure was behind a recent switch of an Indian order from Airbus to Boeing. It also claims that the Japanese government is giving launch aid for the construction in Japan of the wings of Boeing's new "Dreamliner" plane. Launch aid may not be an ideal way of financing a project in an increasingly liberalised world, but for Europe it has worked. Governments offer money up front and get paid back if planes reach a target level of sales (which in many cases has proved profitable). In the current context of claim and counter-claim, it could be argued that the WTO is the best body to adjudicate. But the procedures will run on for years and then be subject to appeals, with scant chance of either side accepting a judgment that might involve running down its aircraft industry. This dispute should therefore be settled outside the WTO, for two reasons. First, it is ultimately a political, not a trade, dispute. Second, any talks about the future of the world's aircraft industry should step back and consider wider issues - including whether we should encourage the construction of so many planes in the first place. ... Who will win the US-EU trade war? By Stephen Evans BBC North America business correspondent Who's going to win the dispute between Brussels and Washington over Boeing and Airbus? The most likely answer is: neither. The World Trade Organisation (WTO) will take about fifteen months to look at what are two separate complaints. At the end of it, the best bet is that it will point the finger at both governments. The WTO's panels of lawyers and economists don't have to adjudicate between Europe and the United States as though they were involved in a wrestling match with one winner. Rather, there are two separate cases, with two possible losers or winners. Two cases The WTO will analyse the merit of the European Commission's allegations that Boeing gets unfair support in the form of generous help by the authorities in Washington State where it makes its planes, further Japanese subsidies from Boeing's Japanese suppliers and favourable treatment from the Pentagon. And it will determine the merits of the American allegation that European taxpayers' support of Airbus projects is an out-and-out unfair state subsidy. If the WTO does decide against both governments, they will each be told to stop breaking the rules. And if they fail to desist, then retaliatory sanctions will be allowed in line with a scale set by the WTO. Launch aid There's a lot to be said for both sides' cases. Airbus gets what's called "repayable launch aid" from European tax-payers. It can develop new aircraft knowing that if they don't sell, the money won't have to be paid back. In the case of the giant A380, this amounts to $3.7bn (£2bn; 3bn euros). As for Boeing, Airbus alleges that the firm's generous contracts from the American military amount to a subsidy. On top of that, the new Boeing 787 is being built with parts made in Japan by a consortium of Mitsubishi, Kawasaki and Fuji which too is getting "soft loans" from its government. Boeing out-sold Boeing has most to lose at the moment. It's now being out-sold by Airbus, but it's putting its money on a new mid-sized 250-seat jet: the 787, better-known as the Dreamliner. Airbus is putting a spoke in the wheel by pressing ahead with a mid-sized aircraft of its own, the A350. So Boeing faces losing out at the big end of the market to Airbus' giant A380, while also having its chosen niche in the middle of the market spoilt by the A350. If either government is found to be in breach of WTO rules when this dispute has wound through the process, the other will be authorised to retaliate. The US could put tariffs on European goods if the WTO rules against Airbus and vice versa. So if both lose, both could retaliate. Trade war These tariffs could go far beyond the aircraft industry. When the US was ruled to have unfairly supported its steel industry, for example, tariffs were slapped by the EU on Florida oranges to make a political point in a politically important state. Nobody wins in a trade war. We have been here before, though. Just over a decade ago, the Canadian plane maker, Bombardier, and its Brazilian rival, Embraer, were involved in a similar dispute. The WTO ruled against both governments, but neither Brazil nor Canada put tariffs on the other's goods. It was business as usual. With so many jobs at stake with Boeing and Airbus, it could be hard for either government to back down. Story from BBC NEWS: news.bbc.co.uk Published: 2005/06/01 09:16:06 GMT