Airbus-Boeing Culture War
The United States has launched a major economic dispute with Europe, taking the biggest trade complaint ever to the World Trade Organization (WTO) for litigation.
The stakes are enormous, involving the world's No. 1 and No. 2 civilian aircraft makers - Airbus (owned by a European consortium) and Boeing, which is America's largest exporter.
If the WTO finds that either (or both) of the European or US governments is improperly subsidizing the manufacturers, it could allow billions of dollars in retaliatory tariffs. That, in turn, could cause major turbulence throughout the aviation industry, including the already wobbly US airlines.
On the surface, the dispute appears to be about boosting jobs and exports. But really, it's a magnification of the European-US culture clash over the role of government.
Although they're trying to wean themselves from the welfare-state model, Europe's citizens and businesses still reflect a mentality that expects government assistance. Americans, on the other hand, tend to view government help as an emergency measure - like the Chrysler bailout in 1980, or the airlines after 9/11.
Airbus itself was born of the French and German governments in 1970. A 1992 agreement between the US and the European Union set restraints on subsidies to Airbus, but as part of the agreement, it still receives favorable public loans to launch new aircraft.
The US and Boeing now say Airbus is healthy enough to fly solo. It's profitable, and last year, it overtook Boeing, grabbing over 50 percent of the world market in aircraft sales. While Boeing produced one new aircraft in the past decade, Airbus rolled out five - a feat only possible, Boeing charges, because of the so-called "launch" aid.
The US, in taking the case to the WTO, demands an end to subsidies, and is voiding the 1992 agreement. The Europeans counter that Boeing also drinks from the public spigot. Tax breaks and defense contracts indirectly benefit its commercial aviation business, they charge.
They're right, but defense contracts (which Airbus's owners also enjoy) are hardly on par with direct financial loans, and the US has the stronger argument as global business moves away from direct subsidies.
The WTO can bring needed transparency to what constitutes an unacceptable subsidy. While critics worry the trade arbiter is ill-equipped to handle such a large and complex case, it has the advantage of being able to depoliticize it - and perhaps force the two sides to an agreement to avoid high WTO-sanctioned tariffs.