The US considers suing Airbus over the favorable government loans it receives, but the EU strikes back saying Washington has blocked previous efforts to reduce state loans and subsidies.
George W. Bush has Airbus under his scope
During a speaking engagement in his reelection campaign, United States President George W. Bush said he is considering filing a lawsuit with the World Trade Organization against European airplane manufacturer Airbus, the world market leader for new sales, for what he described as "unfair" subsidies.
"I've instructed the U.S. Trade Representative, Bob Zoellick, to inform European officials in his September meeting that we think these subsidies are unfair and he should pursue all options to end these subsidies, including bringing a WTO case if need be," Bush said on Friday.
The president was in Seattle, Washington, on a campaign stop and met with a group of managers at Airbus competitor Boeing. "We believe in free trade, but we want that free trade to be fair as well and getting rid of the subsidies of Airbus will make the trade fair, will make the playing field level," Bush told the group.
Last year, Airbus overtook Boeing as the world's market leader for civilian aircraft. Now Boeing is accusing Airbus of receiving unfair subsidies from European governments. However, Airbus executives have noted that what the company receives from European governments are legal loans that the airplane manufacturer is required to repay. The loans are legal and legitimate under the terms of a 1992 US-European accord that calls for an gradual reduction of state aid for companies. The accord also permits Airbus to obtain loans from governments under favorable terms.
EU rejects criticism
On Saturday, the European Commission in Brussels struck back at Bush. "The EU would like to point out that there are specific and clear rules on government support to both (US aircraft manufacturer) Boeing and Airbus laid down in the EU-US 1992 aircraft agreement," Commission spokeswoman Ewa Hedlund told the French news agency AFP. "The agreement contains a revision clause and the European Commission made suggestions to improve the agreement as early as 1997, which were at the time rejected by the US. If the US now feels a need to review the functioning of the agreement, the European Commission is open to discussions."
Government incentives are also a major part of the plan for constructing Boeing's new 7E7 Dreamliner in Washington state.
"Of course, any discussion needs to address both direct support, as granted by European governments to Airbus in the form of loans, and indirect support, as provided by the US government to Boeing," Hedlund said.
She stressed the EU had "as strong an interest in disciplining government support to Boeing as the US administration has in disciplining support to Airbus" and pointed out that talks on that subject were in preparation.
Recently, Airbus has raised questions about the $3.2 billion in incentives the state of Washington has offered Boeing to secure the assembly plant for its new 7E7 Dreamliner plane. The company said it is also gathering information about government loans and subsidies promised to Japanese manufacturers who will do about one-third of the work on the aircraft.
Boeing cheers Bush
Boeing greeted Bush's statement as well as his demand that the issue be brought to the table at the next US-Europe summit, which is scheduled to take place in September. The 1992 accord will be a central focus at the meeting.
"We are pleased that the president is determined to see U.S. negotiators create a more appropriate framework with their EU counterparts. The current framework cannot be justified and needs to be changed immediately," said Boeing president and chief executive officer Harry Stonecipher.