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U.S. Files Grievance Over Airbus With WTO

E.U. Responds With Boeing Complaint

By Paul Blustein
Washington Post Staff Writer
Thursday, October 7, 2004; Page E01

The Bush administration dramatically escalated a dispute with the European Union yesterday by filing one of the biggest complaints in World Trade Organization history, accusing European governments of illegally subsidizing Airbus SAS, the continent's airplane manufacturer and a global competitor of Boeing Co.

The move, denounced in scathing terms by European officials as an election-year ploy, prompted an immediate E.U. counterclaim to the WTO alleging that subsidies paid to Boeing also violate international trade rules.

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Bringing dueling cases before the WTO raised the stakes in an increasingly acrimonious battle between the two flagship airplane makers. Airbus overtook Boeing in worldwide plane sales last year for the first time, sparking concern in the United States that the U.S. company was losing its long-dominant grip over an industry that generates enormous export receipts as well as tens of thousands of high-skill jobs.

Boeing blamed the shift in market fortunes on Airbus's generous use of funds from the governments of France, Germany, Britain and Spain -- subsidies that were allowed under a 1992 agreement between the United States and the E.U.

The two sides had been discussing a revision of that accord, but those talks broke down last week.

By seeking a ruling from the WTO, the Geneva-based arbiter of international trade disputes, Washington is risking the possibility that government support given by both sides might be judged illegal. That could threaten the duopoly that Boeing and Airbus maintain over the market for large commercial aircraft, which they estimate is worth about $2 trillion over the next 20 years, and give an opening to makers of smaller planes in Canada and Brazil.

The case also adds a substantial level of tension to the transatlantic trade relationship, which is already laden with spats over matters ranging from genetically-modified foods to hormone-fed beef and U.S. export subsidies.

U.S. officials contend they had no choice but to bring their case, which charges that Airbus has used $15 billion worth of subsidies to accelerate the development of aircraft. They asserted that the Europeans were refusing to make changes necessary in the 1992 agreement to reflect the huge transformation in the relative market clout of the two companies. The administration formally withdrew from the 1992 pact yesterday.

"This is about fair competition and a level playing field," U.S. Trade Representative Robert B. Zoellick said in a statement. "Since [Airbus's] creation 35 years ago, some Europeans have justified subsidies . . . as necessary to support an 'infant' industry. If that rationalization were ever valid, its time has long passed."

The action drew praise from Harry Stonecipher, Boeing's president, who since assuming the post of chief executive in December 2003 has pressed hard for an aggressive policy to prevent Airbus from getting further "launch aid" for new aircraft. "Boeing appreciates the U.S. government's leadership and its commitment to end the subsidies, particularly launch aid that Airbus receives," Stonecipher said, a sentiment echoed by some Democratic lawmakers, especially from Washington state where Boeing maintains some of its largest facilities.

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