WTO “anachronistic”

We are back from a trip to Europe, where we had the opportunity to sit down with Thomas Enders, CEO of Airbus. We talked about (among other things) the WTO case and the implications for Airbus on funding for the A350. The story we wrote for Commercial Aviation Online is below the jump.

Here is a Reuters report that has some interesting back-and-forth between US Sen. Richard Shelby (R-Northrop/AL) and US Sen. Patty Murray (D-Boeing/WA) over the outcome of the finding of the WTO’s assessment of the US complaint about Airbus launch aid.

Here is a story from Kansas.com with more detail about Boeing’s ambiguity whether its tanker program will include  Boeing’s Wichita facility. The only reason we care is because of how loud Kansas Members of Congress have been in support of Boeing’s tanker bid. Placing a question over Wichita’s role in the tanker is, we think, a politically embarrassing move on Boeing’s part.

Here is a story from Business Week taking a close look at the tanker competition and the impact from the WTO finding.

WTO an anachronism; new global mechanism needed

Commercial Aviation Online 17 September 2009

The World Trade Organization and bi-laterals on permissible aircraft funding are anachronisms and a new global approach is needed that also covers the emerging competitors, the chief executive officer of Airbus said 16 September in an interview with CAO.

Bi-lateral agreements between the Europe Union and the United States that previously applied to Airbus and Boeing direct and indirect government aid on commercial aircraft programs, and the presumption that a new bi-lateral will be negotiated to apply to the current disputes, are outdated, said Airbus CEO Thomas Enders.

With new airplane programs emerging from Canada, China, Japan and Russia, all involving state funding schemes, and the likelihood one will also emerge from Brazil, Enders said an entirely new global agreement is necessary to cover all these.

The WTO already has issued an interim report finding that Airbus illegally benefited from state funding. Enders expects that the WTO will also find Boeing illegally benefitted as well. This interim report is due in about six months. Enders expects the EU and US will resolve these differences outside the WTO process in a new bi-lateral, but he adds this won’t cover the emerging airplane programs and a global agreement is needed.
“The WTO in a sense is anachronistic,” Enders said. “How can a bi-lateral agreement be good with all the new entrants?”

Enders defended state funding to Airbus, called launch aid by the US and Reimbursable Launch Investments (RLI) by Airbus. The 1992 GATT agreement governing government support to Airbus and Boeing attempted to provide rules on what Enders calls an asymmetrical system whereby Airbus received direct aid and Boeing received indirect aid via US government grants. The WTO found certain aspects of the Airbus aid to be improper, but the findings haven’t been made public yet and descriptions by both sides as to what the findings were are conflicting.

Airbus has received commitments from the UK, German and French governments to provide RLI for the A350, which already raised the ire of the US, Boeing and Boeing’s supporters in Congress. The US vowed to protest the RLI to the WTO. Enders brushed off the complaints.

Each financing mechanism will be different, he said. The WTO’s interim report didn’t outlaw RLI “as such,” but is trying to establish rules for precisely what is permissible.

“[Airbus and Boeing] have different asymmetrical support schemes,” Enders said. “It’s more direct on our side and indirect for Boeing. Both sides get support from governments.”

2 Comments on “WTO “anachronistic”

  1. Judging from Ender’s comments and the absence of crowing from the European side, one can conclude that the preliminary WTO decision went badly for EADS. I have to ask again how is he so confident that the next ruling will “balance things out” by finding against U.S. government defense expenditures? What if it does not? Even if it does, how does one sort out the EU’s own defense expenditures (i.e., A400M) as an aid to their aerospace industry? The characterization of “asymmetrical support schemes” is cute, though.

  2. Aurora, if the U.S. was on the high and holy path this whole time, as you seem to believe, why would they even be tempted to sign this bilateral agreement back in 1992? Either they knew they were just as guilty as the EU or the U.S. was being very charitable and benevolent. Unless you want to believe they were extremely naive. I know what I believe.
    The A400 is a military transport procurement project that has spiraled out of control. Just like the original C-5 Galaxy, the F-111, the JSF, and the Raptor. Not to mention most every military/government program Boeing has participated in for the past decade.

Leave a Reply

Your email address will not be published. Required fields are marked *