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Boeing V Airbus: The Wto

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February 1, 2007

Boeing v Airbus: The WTO dispute that neither can win
In October 2004 the US terminated the Agreement on Trade in Large Civil Aircraft it had signed with the EU in 1992. This agreement regulated

International topics

the forms of government support for the civil aircraft industry (launch aid in Europe, indirect benefits in the US). At the same time the US initiated WTO dispute settlement procedures regarding subsidies to the European aircraft industry. In response the EU initiated similar WTO proceedings against the US.
Since then all attempts to get the two parties back to the negotiating table have failed. Nevertheless both sides have reiterated their preference for

resolving the matter without recourse to the WTO. However, the swift negotiation of a solution appears unlikely given the current relative market strength of the two rivals, the debate about increased state ownership of EADS and the uncertainty surrounding the financing of the new Airbus A350. To put it in a nutshell, this transatlantic trade dispute has become bogged down.
There are nevertheless good reasons for resuming talks. For example, it

is unlikely that there will be a clear winner in this dispute since both parties are on the receiving end of huge subsidies. Moreover, it is doubtful whether a WTO ruling would result in a major change in the way that subsidies are currently administered. Furthermore, the international division of labour means that both rivals have long since ceased to be pure “national champions”. Disruptions at Airbus and/or Boeing would send the global air traffic sector into a tailspin. And last but not least, a dispute on this scale casts a shadow over relations between the world’s two biggest trading blocs and ties up scarce management resources.
The objective of a negotiated solution should be to achieve a lasting reduction in the volume of subsidies granted to the aircraft industry.

This should be achievable given...