Paris Air Show

U.S. trade group backs taking Airbus to WTO

 - December 15, 2006, 5:46 AM

John Douglass, president and CEO of the U.S. Aerospace Industries Association (AIA) firmly backs the Bush administration’s decision to proceed with its case at the World Trade Organization on the question of alleged direct and indirect subsidies provided to Airbus by four European Union member states. He accused Airbus of seeking improper government aid from France, Germany, Spain and the UK in the shape of repayable loans for the launch of its new A350 aircraft and insisted that the U.S. had a strong case against the European Union.

“As head of an association that represents major aerospace suppliers to both Airbus and Boeing, I have consistently supported the U.S. government’s pursuit of a negotiated settlement on this matter. However, the U.S. government has a solid case to move forward with a WTO case to eliminate launch aid for aircraft production,” he told journalists here in Paris. According to Douglass, the U.S. government entered into subsidies negotiations last fall willing to start with a clean slate without reference to the billions of dollars Airbus had received in launch aid in the past. Since then, however, the EU and Airbus have decided to take one more bite of the launch-aid apple for the A350, claiming unfair U.S. government support over the years for Boeing’s defense business.

‘Simply Wrong’

Douglass insisted that EU accusations of U.S. government support of Boeing are “simply wrong.” He argued that U.S. state economic development aid in the form of long-term tax relief is available to all aerospace companies and is being pursued by Airbus as it selects a site for a U.S. production facility. At the same time, he continued, the Airbus facility in Toulouse has benefited from millions of upfront euros in state-sponsored infrastructure. “Airbus claims that it does not require state launch aid to develop the A350 and that its balance sheet is strong enough given sales of the A380 and A350. If that is the case, the only reason to seek European taxpayer aid is either to obtain an unfair comparative advantage or because Airbus’s financial situation is not as favorable as it claims,” said Douglass.

The AIA leader reiterated that the EU and U.S. are each others’ biggest customers and it is “extremely important to come to solutions to solve transatlantic stresses and strains that affect our industry.” The subsidy issue is “coloring U.S. government policies affecting transatlantic aerospace and defense trade.” Members of the U.S. Congress have added several amendments to the House Defense Authorization Bill that would “hamper European companies in the U.S. market.” One provision in the bill prohibits the Defense Department from buying equipment from any foreign company, as a contractor or subcontractor, which receives subsidies that are currently being litigated against by the U.S. in the WTO. “European aerospace companies cannot expect to compete for U.S. taxpayer money in the defense sector with products supported by illegal subsidies,” Douglas warned. He does not fear a loss of business for U.S. firms from European customers as “Europe buys twelve times more from the U.S. than the U.S. purchases from Europe.”

Export Ban

Douglas expressed concern at European efforts to lift the ban on defense exports to China and said that U.S. political leaders would like to see “a greater recognition in Europe of the heavier defense burden the U.S. carries for the Western world.” The House Defense Authorization Bill also contains a provision that would restrict Defense Department procurement from companies that are “found to transfer items to China that are on or related to the U.S. munitions list.” He said that AIA stands with the administration in strongly opposing this legislation but would prefer to see the U.S. and the EU working together to create a way to synchronize what should be limited by our restrictive export control systems, the U.S. system admittedly being outdated and inefficient.

Another U.S.-EU issue of concern to Douglass is technology sharing on joint programs and the arguments of Europe’s industry and governments that there is not enough technology transfer from the U.S. to its European partners. He admitted that the U.S. “needs to be more reasonable” and discuss technology transfer earlier rather than later in the process of program design. But, he stressed, European industry “needs to understand that if you finance 2 or 3 percent of a program you can’t expect to get 100 percent of the technology developed for the program.”