Subsidies give Airbus unfair lift vs. Boeing

European complaints about subsidies to the Boeing Co. remind us of a scene from the movie “Casa Blanca.”

You remember the one. French Capt. Louis Renault, played by Claude Rains, feigns shock that illegal gambling is taking place at Humphrey Bogart’s saloon, then gratefully pockets his own winnings. Renault, of course, was looking for a pretense to shut down Bogie’s bar, just as the European Union now is pointing its finger at Boeing to divert attention from its own unfair trade practices.

The most egregious of those is the use of “launch aid.” European governments provide loans to Europe-based Airbus to start new a new line of commercial jetliners, loans that don’t have to be repaid if the new model is unsuccessful. Launch aid was instituted during Airbus’ early years, the idea being that the startup company needed such financial backing to get off the ground. Airbus is flying high now, having passed Boeing as the world’s leading commercial aircraft manufacturer.

Earlier this year, the United States pulled out of a 1992 agreement with the EU that allowed launch aid, but intended to reduce it over time. U.S. trade representatives also filed a case with the World Trade Organization, seeking to have such subsidies outlawed. In response, the EU filed its own complaint, arguing that the $3.2 billion package of tax and other incentives Boeing received from the state of Washington last year amounted to an illegal subsidy.

Even ignoring the fact that Airbus receives similar local subsidies of its own – how much is unknown because records aren’t made public – Washington’s incentive package doesn’t compare with the size of Airbus’ launch subsidies, or their effect. Boeing received tax breaks for agreeing to build the 7E7 here, but the billions it is investing in the program are its to lose. As Airbus seeks approval from its parent company to launch a competitor to the 7E7, the A350, its CEO says it also will seek more of those fat loans with the risk-free terms.

U.S. officials calculate that Europe has provided some $15 billion in launch aid to Airbus over the years, which would amount to a $35 billion debt on the company’s books today if it had borrowed that money commercially, as Boeing does. Such aid shields Airbus from risk, allowing it to price its airplanes more aggressively and putting Boeing at a big competitive disadvantage.

The WTO has an easy call to make in this case: the launch aid Europe provides Airbus is anti-competitive and should be banned. The EU could take a big step toward easing tensions by working toward a settlement, but that’s probably wishful thinking.

In the absence of such good faith, the Bush administration should press this case as hard as it can. Until launch aid is eliminated, Boeing and Airbus won’t be competing on a level runway.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Opinion

toon
Editorial cartoons for Thursday, Nov. 7

A sketchy look at the news of the day.… Continue reading

FILE — Supporters of President Donald Trump storm the U.S. Capitol in Washington, Jan. 6, 2021. The Supreme Court’s ruling that Trump enjoyed broad immunity from prosecution over official acts has opened the possibility that more evidence in his attempt to subvert the 2020 election could be revealed in public court filings — maybe even before the upcoming presidential election. (Kenny Holston/The New York Times)
Editorial: As important as voting is acceptance of voters’ will

Regardless of outcome, voters must acknowledge the result, then work within democracy’s framework.

Our leaders must reconcile, work together

Never in my 16 cycles of voting have I seen our country… Continue reading

Time to move on and put personal over political

Since getting older I have grown tired of political opinions. The idea… Continue reading

Reform needed for flood insurance after disasters

A recent commentary in The Herald notes that the number of properties… Continue reading

Comment: Finding hope in the ‘good bones’ of a democracy

Despair is always an option; it’s going backward that we have to avoid.

Stephens: How could the Democrats lose against Trump?

You can start with their dismissiveness in recognizing the economic hardships of fellow Americans.

toon
Editorial cartoons for Wednesday, Nov. 6

A sketchy look at the news of the day.… Continue reading

Burke: Nothing beats a mystery for waiting out election results

When you’re waiting for the Electoral College numbers to drop, you might as well watch some bodies drop.

It’s troubled, but we need Boeing

Proud Boeing has lost its way, but we in the Pacific Northwest,… Continue reading

Herald staff have provided excellent coverage for election

Though I’ve meant to write applauding many excellent Letters to the Editor,… Continue reading

Sid Schwab isn’t only one baffled by Trump’s allure

Just back from a few days immersed in a four-part a cappella… Continue reading

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.