Sept. 26, 2016, © Leeham Co.: There are two airplanes under development that are in the 150-220 passenger space.
Both are under development by companies that get state aid and make no bones about it. The aid would likely be found in violation of World Trade Organization (WTO) rules.
But the most vociferous opponent to illegal subsidies hasn’t said a peep about it.
Neither has the opponent’s rival—although this company publicly recognizes the irony of it all.
I call it hypocrisy.
The two airplanes under development are the COMAC C919 and the Irkut MC-21. These directly challenge the Boeing 737 and Airbus A320 families.
Yet Boeing, which last Thursday crowed about thumping Airbus at the WTO, never filed a complaint about China’s open, multi-billion dollar state support to COMAC, which has open ambitions about becoming the next competitor to Boeing.
Nor has Boeing filed any complaint about Russian aid to Irkut.
(Complaints would actually be filed by the US Trade Representative, but the office won’t act without Boeing’s urging.)
Airbus once did make a meek inquiry with the WTO about COMAC, but it was a low-level inquiry and not a complaint. As far as I know, nothing has been said about Irkut.
But Airbus has said, many times, the dispute between Airbus and Boeing over subsidies is ill-advised because of the can of worms it could open if similar complaints were filed about China in particular and to a lesser extent about Russia.
As far back as 2008, during the 58-day strike by IAM 751 (Boeing’s touch-labor union), then CEO Jim McNerney wrote the membership that concessions and give-backs were needed because China would be the next new competitor to Boeing. He also pointed to Russia.
McNerney repeated his prediction about China during the next few years.
If this is the case, then why didn’t Boeing file a complaint about the billions of dollars in state funding of COMAC?
The answer, of course, is that doing so would royally piss off the Chinese government. China is one of Boeing’s largest customers for the 7-Series airplanes.
This is exactly what Airbus told me on several occasions. There was no way Airbus was going to file a complaint about China, for the same reason.
Boeing also has close ties with Russia. There is a Boeing engineering center there. Titanium is sourced from there. Boeing sells airplanes to the Russian airlines (as does Airbus).
COMAC’s C919 probably won’t enter service until 2020, but the company already has greater ambitions. China and Russia signed an agreement to develop the C929, a 250-seat twin-aisle aircraft that faces off against the Airbus A330neo and the Boeing 787.
Yet Boeing says nothing.
Airbus says it’s afraid of a Pandora’s box if a complaint is filed.
None of this addresses the fact that Boeing accepted hundreds of millions of dollars in new tax breaks from Washington State in connection with the 777X program. These are extentions of tax breaks granted by the State in 2003 for the 787–the very tax breaks that were ruled illegal by the WTO in the EU’s counter-complaint against Boeing.
LNC pointed out at the time extending the illegal 787 tax breaks would draw a complaint, and it did. Look for a WTO ruling next year. But the Governor’s Office and State Department of Commerce at the time pooh-poohed the point, saying the ruling was under appeal–neatly disregarding the same argument from Airbus over the WTO ruling about its tax breaks and subsidies.
The Seattle area media, giddy with the news that Washington would assemble the 777X, ignored the entire issue.
Regardless of the illegal subsidies to Airbus (or to Boeing), you can’t un-ring these bells. Talk of sanctions is, in my view, just that. LNC explains why behind today’s paywall.
Long-time readers know that I think the entire matter between Airbus and Boeing has been a big waste of time and money. It’s already gone on for 12 years and there really is no end in sight. The WTO decision on the Boeing appeal comes down next year. The EU is already talking about appealing last week’s decision.
The WTO is a toothless, ineffective organization that has no enforcement powers. A decision eons ago finding Canada and Brazil violated WTO rules in their subsidies to Bombardier and Embraer resulted in exactly nothing.
So will this.
But if Boeing truly was concerned about unfair competition, particularly from a country it repeated identified as its next competitor, it should have the USTR file complaints against China and Russia.
And therein lies the hypocrisy.