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Former EU Official Urges Talks to Resolve Boeing-Airbus Trade Row


A former ambassador of the European Union (EU) to the United States says negotiation is the best method for resolving the trans-Atlantic trade dispute involving aircraft makers Boeing and Airbus. In recent days, the United States and the EU have filed opposing claims before the World Trade Organization, each accusing the other of pumping billions of dollars of public funds into their aviation industries.

The trade dispute was discussed at the Brookings Institution, a public policy organization in Washington.

Former EU Ambassador Hugo Paemen compares the current Boeing-Airbus dispute to an earlier protracted trade battle concerning Canadian aircraft firm Bombardier and Brazilian rival Embraer. In 1999, the WTO ruled that both firms received unfair government assistance. Mr. Paemen notes, at the time, each side hailed the ruling as a victory, but in the years since neither Canada nor Brazil has terminated government support for the enterprises.

Similarly, the ambassador says neither Boeing nor Airbus should expect a prompt resolution of the issues raised by their WTO complaints, which could take years to go through an initial ruling phase and any subsequent appeals.

In the meantime, he says both sides have to acknowledge that aircraft making is a unique industry, and that a certain amount of government involvement is unavoidable.

"The United States cannot afford not to have an aircraft industry, and they [the U.S. government] will not let Boeing down, as the Europeans will not let Airbus down [withdraw financial backing]," he said. "Now, that is not a good reason to subsidize, and I am against too much subsidizing, but all of this is linked. There will be no innovation without investment; there will be no investment without government support. That is a reality. The only thing is that we should discipline and agree on common rules of the game: how all of this is managed. But that you can only do when you talk to each other."

But The United States has long argued that generous European "start-up" subsidies for Airbus are no longer needed, especially now that Airbus has grown to become the world's number-one aircraft maker. For its part, the European Union contends that Boeing benefits from lucrative U.S. defense contracts that provide a financial boost equal to actual subsidies.

The dispute comes as both Airbus and Boeing take orders for new aircraft: Airbus' mammoth 550-seat A-380 model and Boeing's luxuriously-appointed 787 Dreamliner. Trade and aviation analyst Eugene Gholz of the University of Texas says, in filing WTO complaints, both sides of the dispute hope to plant doubts about the future financial health of their competitor, a factor aircraft purchasers might weigh when deciding which company to do business with.

Mr. Gholz says the actual WTO process will meet neither side's stated forward-looking goal.

"They want a disciple on subsidies in the future. And with the WTO case, if a panel goes forward and somebody loses, it cannot provide discipline on the future. It is a backward-looking thing [process]," he noted. "It is assessing what happened in the past. Did someone violate rules in the past, and should there be penalties? Should someone have to be asked to pay back subsidies?"

Mr. Gholz echoed Ambassador Paemen's suggestion that the United States and the EU negotiate directly outside the WTO. Trade officials from both sides have, in fact, expressed a willingness to do so. But U.S. officials have set a pre-condition for such talks: that the EU terminate direct subsidies to Airbus for the development of new civilian aircraft.

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