Airbus vs Boeing: The Subsidy Wars
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Code : COM0100
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Region : USA Europe
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Introduction:On May 30th 2005, United States (US) announced that it would reactivate its suit atWorld Trade Organisation (WTO) against subsidies by European governments to Airbus. On the very next day European Union reactivated its complainat WTO against various subsidies received y US planemakers, particularly Boeing. The US government, in its filing alleged that the 'launch aid' provided by the European countries (mainly UK, France Germany and Spain) to Airbus for development of new Large Civil Aircraft (LCA)models was in contravention of WTO rules which prohibit direct government subsidies to specific company orindustry. The amountof such 'launch aid'subsidies received by Airbus was alleged to be worth $17 billion in the last 35 years. In its filing at WTO, EU claims that the hidden subsidies include, incentives to US producers of LCA, particularly Boeing by various US States in which the production facilities of Boeing are located. It was believed that Boeing has received Research and Development subsidies of $23 billion in last 13 years. The subsidies were also alleged to have been provided through the 'development contracts' received by Boeing from NASA and American Defense Department. The launch aid received by Japanese suppliers of Boeing was also cited in the EU filing. The filing of suits at the WTO brought about the fear ofa transatlantic tradewar on the airplane subsidydispute, in existence between the US and the EU for decades. These subsidies - from both the parties - form a part of prohibited subsidies provided to other industries. |
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