The subsidy battle between Airbus and Boeing is far from over

After 17 years, millions of dollars in legal fees and a lot of discontent between Boeing and Airbus, the world’s longest-standing trade dispute is finally over. At least that is how the EU and the United States announced Tuesday the suspension of tariffs on subsidies to the two largest aircraft manufacturers in the world.

But behind the ministerial slaps and the triumphant declarations of a shift from “litigation to collaboration”, the truth is that nothing has yet been concluded that will put a definitive end to the dispute.

The two sides have simply decided to put aside their tariffs, leave the root causes of their disagreements unresolved for now and give each other five years to come up with a mutually acceptable framework to support their aerospace industries.

Do not doubt that resentment is still simmering. Boeing’s comment that the EU is now committed to tackling the so-called launch aid for new aircraft speaks volumes. The deal announced to the world on Tuesday commits the EU to no such thing. It simply indicates that “the two parties will continue to consult on the resolution of the outstanding support measures”.

For the United States, this means ending the European system of granting loans for the launch of new aircraft, repayable when the jet wins a certain level of export orders. The system has been deemed legal by the World Trade Organization, as long as the loan is given at market rates, which was not always the case. But it protects Airbus from the cost of failure. And for Europe, the problem is supporting Boeing through state tax breaks and defense-funded research that benefits the commercial aircraft division.

Relatives on both sides said that as late as Friday, a deal in time for the EU summit from US President Joe Biden seemed unlikely, given that Boeing continued to insist that Airbus repay support for decades.

But this weekend, negotiators seem to have taken a new approach. They chose to explore ways to improve the dialogue between the two parties in the hope of a future agreement. This includes regular contacts between EU and US trade ministers in a joint working group, and transparency on research and development funding.

The hard work begins now. Finding a framework that works for both parties will not be easy. But everyone recognized that time is running out for the decades-long business duopoly enjoyed by their aerospace champions.

Later this year, the Chinese single-aisle C919 – a rival to Boeing’s 737 and Airbus A320 – is expected to enter commercial service. Although its range and fuel mileage are not competitive with the newer ones from Boeing and Airbus, Chinese state airlines have been aligned to ensure the aircraft’s success with multiple orders.

Its development has been smoothed from around $ 49 billion to $ 72 billion in state support over the years for government owned manufacturer Comac, according to the Washington-based think tank Center for Strategic and International Studies. While the first variant of the C919 may have a limited customer base, future iterations could be much more competitive globally, especially if backed by soft loans to customers.

The EU and the US have finally realized that if there is no agreement on what constitutes a level playing field, they can hardly complain about China’s support for its own champion. aerospace. The deal is more about self-preservation than the end of a trade dispute.

But, to be truly effective, the task force would have to bring in other aerospace countries, such as the UK, Brazil and Canada. If everyone agrees on what constitutes acceptable public support, it could give more weight to China’s demands for transparency.

Overall, the measures agreed this week could pave the way for a fairer competitive landscape. But they also, once and for all, buried the idea that civil aerospace has always been a real business concern.

In their statements on Tuesday, the two sides do not question the legitimacy of the government‘s support for their aerospace companies. Instead, they focus on how to define what support can be provided and under what conditions. “It’s really a question of what an acceptable level of subsidy is,” said a Geneva-based commercial lawyer.

Sash Tusa, Aerospace Analyst at Agency Partners, said: “This is the beginning of the realization that civil aerospace is. . . the very business of governments and states.

Many of us have known this for years. It’s just a shame that it took 17 years, millions of dollars and a lot of hot air to dispel the illusion.

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About Christopher Easley

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