Boeing and Airbus spar over subsidies :: Namibia Internet Gateway cc ::

Articles: Boeing and Airbus spar over subsidies

Posted by admin on Tuesday, July 20, 2004 - 01:15 AM

Top officials of the world's two largest aircraft makers deny a trade war is in the offing, even as rhetoric between the two rumbles on at the aerospace industry's biggest annual gathering.
Noel Forgeard, chief executive of Airbus, said at the Farnborough air show on Monday that the European planemaker would not spark a trade war with the United States over the issue of state subsidies to the aerospace industry. His counterpart at Boeing, which Airbus has knocked off its perch as the world's number-one civil jet manufacturer, also brushed aside talk of a trade war but said a bilateral trade accord struck in 1992 needed to be changed. Airbus, based in Toulouse, France, and Boeing both say the other benefits from various forms of government aid. Airbus points to Boeing's large share of the U.S. defence budget. Chicago-based Boeing and the U.S. Aerospace Industries Association say loans and other forms of state support to European manufacturers have gone beyond what was intended in the 1992 pact called the U.S.-EU Bilateral Agreement on Trade in Civil Aircraft. Alan Mulally, the president and chief executive of Boeing Commercial Airplanes, said there were specific rules on how companies should comply with the agreement, which capped government subsidies at one third of the cost of a commercial jet launch. Forgeard dismissed the issue of subsidies as an "artificial controversy." Yet he spoke on the topic at length with reporters at the show outside London. "Will Airbus start a trade war? No ... I prefer to pay engineers and tradesmen than lawyers and lobbyists," he said. New planes cost billions of dollars to develop and build and companies are unwilling to shoulder the financial burden on their own. TIME FOR CHANGE? But John Douglass, president of the AIA, told Reuters in an interview he believed that, one way or another, the 1992 trade pact would be changed. "It will either fade away by mutual consent or probably our government withdraws," Douglass said. An important component, he added, will involve who wins the next U.S. presidential election. A win by Democratic Sen. John Kerry might require some "re-education" on the issue, Douglass said. The issues of subsidies has resurfaced lately after U.S. Democrat Senator Patty Murray said the United States should quit the 1992 pact. Mulally said the remarks were just part of a formal negotiating process aimed at working out a solution to what Boeing sees as unfair competition. "I don't think it's going to come down to a trade war because you have two very mature market leaders that want to figure out how to work this out," Mulally said. Boeing's share of the commercial jet market has dropped substantially in the last decade, with Airbus surpassing Boeing for the first time last year in deliveries. Airbus is now building the world's biggest passenger jet, the 555-seat A380, due for delivery to airlines in 2006. Boeing earlier this year launched its first all-new aeroplane in a decade, the 7E7. It is a fuel-efficient jet aimed at a different market segment -- point-to-point services between an expanding number of destinations rather than large hubs. Airbus is owned by European Aeronautic Defence & Space Co and Britain's BAE Systems.

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