The European Commission will reinforce its support for aerospace subsidy reform at a transatlantic trade meeting in September, when US officials are expected to back Boeing's opposition to Airbus receiving launch aid for a 7E7 competitor.
US President George Bush denounced state aid given to Airbus during an election rally at the Boeing delivery centre in Seattle earlier this month and is understood to have asked US trade representative Robert Zoellick to present a case for repealing the EU-US 1992 Large Civil Aircraft agreement, which regulates subsidies. In the run-up to the talks, Boeing is starting to reveal specific details about its hopes for a new agreement, as well as its concerns that Airbus may seek launch aid to develop a competitor for the 7E7.
"We cannot allow Airbus to use the same business model [as used for the A380] on whatever they develop to compete with it," says Boeing. The company appears to confirm European allegations of protectionism by adding: "The 7E7 is the future of our Seattle business unit and we have to protect that investment."
However, the EC says that it has been calling for revision of the treaty, which limits state aid to one-third of total development costs for new aircraft. The EC trade commissioner's office says: "The [1992] agreement contains a revision clause, and the Commission has made suggestions to improve the agreement as early as 1997, which were at the time rejected by the USA." The Brussels-based European Union executive says it would be prepared to "discipline" Airbus over subsidies in excess of World Trade Organisation (WTO) -permitted levels, if the US Department of Trade reciprocates with similar sanctions against Boeing. The 1992 agreement overrides the 1994 Uruguay round of WTO talks, which created a global agreement on trade in civil aircraft that sought to phase out any "adverse effects" created by "subsidies and countervailing measures". The deal restricts aid to state loans "based on a reasonable expectation of recoupment of all costs".
Boeing stresses that Airbus is now "at or beyond" the market parity point at which the 1992 bilateral was aimed. "Airbus has succeeded and arrived, and it should be forced to bear the risk of all future developments," says the company, adding that any new agreement will not be retrospective. Boeing argues that it has to fully fund its developments while Airbus can write off one-third of costs through government funds if the product fails.
Boeing says any new agreement could be modelled on the more- stringent 1994 WTO subsidies.
JUSTIN WASTNAGE / LONDON & GUY NORRIS / LOS ANGELES
Source: Flight International
