... And just when you thought George W. Bush couldn't possibly make another mistake, it's time for the WTO battle we've all been waiting for: BOEING VERSUS AIRBUS!!! :) :) :) :) :) :)

:bash:

Let the insanity begin! :rofl:

U.S. Reopens WTO Case Against EU Support For Airbus

Monday May 30, 2005 06:09 PM EST
By John Chalmers


BRUSSELS (Reuters) - The United States reactivated its World Trade Organisation (WTO) case against European subsidies for aircraft maker Airbus on Monday after fresh efforts to reach a negotiated settlement with Brussels failed.

The legal action at the Geneva-based trade body over billions of dollars in aid is likely to be the largest commercial dispute in history and will put a severe strain on transatlantic business relations.

The two sides said in a joint statement they would not let their aviation spat spill into other trade areas, including negotiations with developing nations for a global free trade blueprint that are due to reach a climax in December.

The breakdown in talks came after the European Union announced that, in a bid to avert a WTO showdown, it had offered to cut "launch investment" loans for Airbus's planned A350 airliner by around 30 percent.

That was not enough for Washington, which -- worried that soft loans from EU states for the A350 could challenge Boeing's new 787 Dreamliner -- wants such aid to stop altogether.

"We would rather not have to go back to the WTO. But the EU's insistence on moving forward with new launch aid is forcing our hand," U.S. Trade Representative Rob Portman said.

"Unfortunately, at this point, the EU is no longer willing to hold off on launch aid, and has only proposed to reduce subsidies, not end them," he said in a statement.

The EU lodged a case of its own with the WTO last year, arguing that Boeing is effectively subsidised by tax breaks in Washington State, federal contracts for military and space research and support from Tokyo for building wings in Japan.

It expressed disappointment at the turn of events on Monday but stopped short of announcing that it would reactivate its own case, saying it would make public its next steps on Tuesday.

"SPINNING TO THE PRESS"

The two sides had agreed in January to put their cases on ice and hammer out an agreement that would eliminate subsidies.

But negotiations broke down two months later because the EU refused to contemplate a cut in "launch aid" for Airbus without a balanced reduction in benefits for its rival.

Washington says that Airbus, owned by Franco-German-Spanish aerospace firm EADS and Britain's BAE Systems, no longer needs government support since snatching the crown as the world's largest commercial aircraft maker from Boeing in 2003.

Airbus has estimated it will cost 3 billion euros ($3.76 billion) to develop the mid-size A350. Chief Executive Noel Forgeard has said Airbus is likely to ask for up to 1 billion euros in repayable state loans from European governments.

EU Trade Commissioner Peter Mandelson offered during a telephone call to Portman last Friday to reduce that aid by 30 percent providing this is balanced by cuts in support to Boeing.

"What we are suggesting is a balanced solution ... whereby a cut on one side would be matched by a commensurate cut on the other side," said Mandelson's spokeswoman, Claude Veron-Reville. "There is no question of Airbus disarming on its own."

But news of the EU proposal only served to stoke tensions.

"We're extremely disappointed that they've begun spinning to the press -- this does not help our relations or the management of the U.S.-EU relationship," U.S. Trade Representative spokesman Richard Mills said in a statement earlier.

His comment was a barely disguised personal snub to Mandelson, whose former political career in Britain was marked by charges of media manipulation.

Airbus and its shareholders said Washington's response cast serious doubt on its commitment to a negotiated outcome.

"Such a negotiation should also address the short-term issue of the two competing new aircraft, the Airbus A350 and the Boeing 787," they said in a statement. "This latter has become the world's most subsidised airliner ever."

He's going to do whatever he wants to protect his support at home. He was hit hard by the steel industry for letting them die out so he protected them, now he's doing the same for Boeing.

If the WTO hands out a ruling, they're going to cap government subsidies and loans, which is going to hurt BOTH SIDES when trying to launch new aircraft in the future. They're going to end up doing more harm than good.

A VS B.

A VS B.
mmmm.... my favourite.
http://img19.echo.cx/img19/5868/icare5el.jpg (http://www.imageshack.us)

EU Strikes Back On Jet Subsidies
Resumes WTO Case Against Boeing

By Greg Robb, MarketWatch
Last Update: 5:59 PM ET May 31, 2005


WASHINGTON (MarketWatch) - The European Union has asked the World Trade Organization to resume its work on deciding whether U.S. government subsidies to Boeing Co. violate international trade rules.

EU Trade Commissioner Peter Mandelson told a press conference in Brussels on Tuesday that the EU had "no alternative" but to resume its case after the U.S. relaunched its WTO complaint earlier in the day about alleged launch-aid subsidies for Airbus. See full story.

"In order to sustain conditions for fair competition in civil aircraft production and to maintain a proper commercial balance between the two companies, the European Union is resuming action in the WTO to confirm ... the illegality of subsidies paid to Boeing," Mandelson told a news conference.

"I am confident about the strength of Europe case," he added.

U.S.-based Boeing and Airbus -- owned by European defense firm EADS and Britain's BAE Systems -- dominate the global market for airliners.

Each side claims the other is illegally subsidizing its own domestic industry to maintain market share and jobs. The U.S. claims Airbus has received $15 billion in subsidies, while the European Union counters that Boeing has received $23 billion in special favors.

Richard Mills, a spokesman for the U.S. Trade Representative Rob Portman, said the EU action was expected and the U.S. was confident that it would prevail before the WTO.

Crux of the dispute

At the heart of the bilateral dispute are loans that EU governments provide Airbus that remove the risk of launching a new model, said Paul Nisbet, an aerospace industry analyst with JSA Research Inc.

Airbus is seeking $1.7 billion in so-called launch aid for its A350 model that will compete with Boeing's new 787 Dreamliner, Nisbet said.

The loans don't have to be repaid unless the new models receive a certain large amount of orders. If the orders don't reach that level, Airbus doesn't have to repay the loans.

"This takes a lot of the risk out of proliferating new models whenever (Boeing) comes up with a new one," Nisbet said.

Airbus already received $4 billion for its 550 seat A-380 model.

In response, Airbus is saying that Boeing receives indirect aid from the Defense Department, state tax benefits from the state of Washington and research development funding from the Japanese government.

The WTO is expected to set up a formal panel to hear the complaints and then issue a final report, in a process seen lasting at least one year.

During this time, Airbus could use launch-aid for its A350, but would risk the ire of the U.S. Congress, Nisbet said.

If either side is found in violation of the WTO agreement, the global trade organization would first ask the offending party to undo the damage, or pay back the subsidies.

If there was no agreement by the party to undo the damage, the WTO would authorize the winning side to impose tariffs on the offending party in the amount of the damage.

Who will win?

Eugene Gholz, professor at the LBJ School of Public Policy in Austin, TX., said the conventional wisdom has been that both parties would lose in a WTO ruling.

But Gholz said he believes the WTO most likely "desperately doesn't want to rule huge damages against both the U.S. and Europe, so it will be looking for ways to avoid that outcome."

"I think there are reasonable possibilities that both sides would, in a sense, get off," Gholz said.

If only one country is found to violate the WTO agreement, it will be the Europeans, he predicted.

Gholz said the current dispute between the U.S. and the EU over airline subsidies is just the latest in a cycle that dates back to the early 1990s, and flares up when the companies are introducing new airlines.

"Every time a new model is about to come, there is an uptick in the trade controversy," Gholz said.

And then the two sides step back from the brink of a trade war and the dispute fades, he said.

Wall Street seemed to shrug off the dispute. Shares of Boeing closed up 88 cents to $63.90 trading on Tuesday, the highest level in four years.

Deal Likely Over US-EU Aircraft Subsidies

Thu Jun 2, 2005 8:17 PM BST
By Doug Palmer


WASHINGTON (Reuters) - The United States and the European Union probably will strike a deal to cut billions of dollars in subsidies for aircraft manufacturers Boeing (BA.N: Quote, Profile, Research) and Airbus (EAD.PA: Quote, Profile, Research) rather than fight the issue to the end at the World Trade Organization, analysts said on Thursday.

"I think the companies and their negotiators may have very strong incentives to settle along the way," said Brookings Institution trade scholar Lael Brainard, a White House economics official in the Clinton administration.

"A clear loss for either side would be a political nightmare to manage," she said.

The United States and the European Union said this week they were reactivating a pair of tit-for-tat cases over support for Airbus and Boeing after latest efforts to reach a negotiated settlement failed.

Washington acted first, saying it was forced to move because of signs European governments were preparing to provide Airbus with a new round of "launch aid" loans to help it develop its new A350 regional aircraft.

The U.S. case against the European loans appears stronger than the EU's countercomplaint, which targets aid Boeing receives in the form of government research-and-development grants and federal and state tax breaks, Brainard said.

Both sides face risks, because it is hard to predict how WTO panels will rule, she said at a Brookings-hosted discussion on the trans-Atlantic aircraft-subsidy clash.

A loss on either side would require Brussels or Washington to make politically painful decisions to comply with the WTO or face possible retaliation on a huge swath of their exports.

U.S. and EU officials are expected to formally request panels in the dispute on June 13. That coincides with the kickoff of the world's largest air show in Paris, where Boeing and Airbus typically show off their new orders, and comes a week before a U.S.-EU summit meeting in Washington.

Just picking panelists to hear the two cases could take months. If the two sides can't agree, incoming WTO Director General Pascal Lamy, a former EU trade commissioner, might have to decide who will serve. It could be years before there is a final WTO ruling, since initial decisions are usually appealed.

Hugo Paemen, a former EU ambassador to Washington who helped negotiate a 1992 U.S.-EU civilian aircraft subsidy agreement, said the only effective way for the two sides to resolve the matter was to negotiate a new pact.

"Everybody's in favor of having no subsidies in principle. In reality, I think the nature of the industry is such that governments will (always) be involved," Paemen said.

Bruce Stokes, a Washington-based columnist specializing in international economics, said he expected the two sides to withdraw their cases eventually and negotiate an agreement as part of world trade talks targeted to end by 2007.