President Nicolas Sarkozy of France accused Washington on Friday of setting the wrong example on protectionism, suggesting there had not been a level playing field in the race for a $50 billion refuelling plane contract.Yes, this is the same Nicolas Sarkozy who is demanding that all of Europe impose irrational, trade-war-inducing, economy-killing carbon tariffs on foreign imports, and who recently called free trade "immoral." But still, the little French protectionist has a point here: this whole EADS/Boeing tanker mess stinks worse than room-temperature Camembert. Too bad he has absolutely no credibility on the issue.
U.S. defence contractor Northrop Grumman and its European partner EADS withdrew on Monday from a renewed competition to supply tankers to the U.S. Air Force, saying the rules favoured rival bidder Boeing, the top U.S. exporter.
Boeing is now the sole known bidder for the contract.
Asked what he thought of the issue during a joint press conference with British Prime Minister Gordon Brown, Sarkozy delivered a scathing attack on how the United States had handled the tender.
"I did not appreciate this decision ... This is not the right way to behave," Sarkozy said.
"Such methods by the United States are not good for its European allies, and such methods are not good for the United States, a great, leading nation with which we are on close and friendly terms," he said.
"If they want to be heard in the fight against protectionism, they should not set the example of protectionism."
For EADS, the parent company of the Airbus plane-maker, the stand-down was a setback in a major push to pierce the lucrative U.S. military market.
Boeing hopes a preliminary World Trade Organization panel ruling next week will force European governments to reconsider plans to help finance Airbus' planned A350 widebody passenger jet, a company official said on Thursday.Apparently Mr. Austell didn't read my blogpost from Wednesday night (can't really blame him!) on the probable timeline for real resolution of the longstanding conflict between the US (Boeing) and EU (Airbus) over civil aircraft subsidies. As you'll recall, after discussing a lot of the remaining procedural hurdles at the WTO and likely US and EU positions during the next stages, I concluded:The confidential ruling comes at a "very contemporary moment as far as launch aid is concerned," Ted Austell, Boeing's vice president for government operations, told reporters.
"Since the Paris Air Show, the sponsoring European governments of Airbus have been talking about new launch aid for the A350, and we are hoping the interim decision will be informative enough that it will arrest any new launch aid for that aircraft which has the same shape and texture of previous launch aid," Austell said.
So while this preliminary decision is certainly interesting from an academic standpoint, and I'm sure that the US, EU, Boeing and Airbus are very interested to see the panel's reasoning, and the decision should produce some nice headlines and good quotes from [USTR Ron] Kirk and [EU Trade Commish] Catherine Ashton, the idea that a "permanent and complete end to launch aid" is anywhere on the near-term horizon is probably too optimistic (to put it mildly).Well, not to get all I-told-you-so on Mr. Austell, but yesterday we saw the first signals from the EU and Airbus that my conclusions were right. Here's Bloomberg on the less-than-shocking development:
The European Union signaled governments will proceed with subsidies for the Airbus SAS A350 even if a pending World Trade Organization decision finds previous aid to the biggest planemaker was illegal.Airbus' snotty taunting aside, I think it's safe to say that this conflict's not getting resolved anytime soon. But considering the money, tempers and history involved, this shouldn't really come as a surprise to anyone, and it seems that the "best case scenario" here is for both sides figure out a way to prevent further escalation - and delay! - of the dispute.
“Independently of new developments in the current case before the WTO, it has always been our position that any support for the A350 has no relation to the current WTO litigation,” Lutz Guellner, a spokesman for the European Commission, the 27- nation EU’s executive arm in Brussels, said today in a statement. The A350 will challenge Boeing Co.’s 787 and 777.
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A WTO panel is set to issue a preliminary ruling Sept. 4, addressing whether Europe violated WTO rules when the three European nations provided launch aid for previous Airbus models. Airbus benefited from risk-free grants worth $23 billion over the past four decades, the 2004 U.S. complaint alleged.
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Airbus itself says it has a right to the loans.
“Boeing received more than $5 billion in grants and other subsidies for the 787 from the U.S. taxpayer alone, none of which is repayable,” the Toulouse, France-based planemaker said in a statement. Loans for the A350 will “ensure fair competition and level the playing field with Boeing,” Airbus said.
The World Trade Organization is to give a preliminary decision next week on whether government aid given to European aircraft manufacturer Airbus violated free commerce rules, Boeing said Tuesday."The WTO has informed the US Trade Representative (USTR) and the European Commission (EC) that the interim ruling will be handed to them the week of August 31," said Charlie Miller, a spokesman for the US company Boeing.
The US aircraft maker says the subsidies given to Airbus provide it with an unfair advantage and violated WTO rules.
"There is no specific date so far. The interim ruling is a confidential document that is only for the two parties -- the USTR and the EC and their legal advisors. Neither Boeing nor Airbus will receive copies -- nor, of course, the media," Miller said.
The United States filed a complaint before the WTO in October 2005, accusing several EU countries of violating WTO competition rules by giving Airbus government aid.
The European Union filed its own complaint in the same year, accusing the United States of violating WTO rules by providing Boeing with subsidies, which the organization has yet to rule on.
Neither company is a party to the complaints before the WTO, which only handles cases submitted by governments.
"Boeing is confident the WTO will rule that government launch aid to Airbus is illegal and inconsistent with WTO rules," Miller told AFP.
"A permanent and complete end to launch aid is necessary to ensure free and fair competition in the large commercial airplane market," he said.
At the end of June, US Trade Representative Ron Kirk said that the US government was willing to file additional complaints before the WTO if Airbus received any more government money.
Airbus has been seeking funding for the construction of its new A350 XWB aircraft and received loan pledges of around 400 million euros (573 million dollars) from Britain, and 2.5 million euros (3.6 million dollars) in total from France and Germany.
Boeing denies that the money it receives from the US federal government compares with the loans offered to Airbus.
"EU claims against the US are grossly overstated. Most alleged 'subsidies' to Boeing are legitimate US payments for services rendered," Miller said.
The decision should inject some drama in US-EU trade relations, and will definitely produce some tough words from USTR Kirk and his EU counterpart, Catherine Ashton. And Reuters reports that, while the decision will be mixed, the panel will likely find that the EU provided a significant amount of WTO-inconsistent subsidies to Airbus. But the AFP piece (and every other article I've seen reporting this news) really misses an important point: this panel ruling, while interesting for trade geeks like me, won't actually solve anything, and that the ultimate resolution of this long dispute is, in all likelihood, many years away. There are several reasons for this:
First, the actual panel ruling won't be out for months. It's only then that the WTO's "clock" will start ticking on the official EU and US responses.
Second, it's almost certain that at least one party, if not both, will appeal the panel ruling to the WTO's Appellate Body (AB). Only when the AB rules will a decision on the subsidy programs' legality under WTO rules be considered "final."
Third, given all of the procedural wrangling in this case, a final AB decision might not be out until 2011. Seriously. If you think this is crazy, just consider that the initial US request for consultations in this case came over four years ago. The maximum period under WTO rules between consultations request and panel decision is only nine months, and even with extensions, typical cases last about a year. Lots of delays in this case. Lots. And I'd expect them to continue.
Fourth, assuming the AB affirms the (likely) adverse panel ruling against the EU, the EU will have several months (a "reasonable period of time") to comply with the AB decision. Maybe even a year or more (and the parties can seek arbitration about what's "reasonable"). Even then, the US and EU could haggle about whether the EU's "compliance" was indeed legitimate. And this dance could go on and on (and on and...).
And finally, let's not forget that the preliminary panel decision on the EU's counter-complaint against alleged US subsidies to Boeing should be out in about 6 months, so we then get to repeat steps 1-4.
So while this preliminary decision is certainly interesting from an academic standpoint, and I'm sure that the US, EU, Boeing and Airbus are very interested to see the panel's reasoning, and the decision should produce some nice headlines and good quotes from Kirk and Ashton, the idea that a "permanent and complete end to launch aid" is anywhere on the near-term horizon is probably too optimistic (to put it mildly).
