Complaint by Boeing (US) against Airbus (EU) before the WTO (debate) 
President
The next item is the Commission statement on the complaint by Boeing (US) against Airbus (EU) before the WTO.
Louis Michel
Member of the Commission. - (FR) Madam President, ladies and gentlemen, it is important to remember that you invited the Commission here today to discuss the dispute between the United States and the European Union on the support provided by the governments concerned for Airbus and Boeing.
Much ink has been spilled over these matters so let us start by recalling the key facts. What is at issue? The US Government claims that money that the European governments have invested in Airbus infringe WTO rules on subsidies. In October 2004 the United States, unilaterally and without prior notice, withdrew from a bilateral agreement signed with the European Union in 1992, which explicitly authorised this type of investment, and the US decided to being a case in the WTO.
The European Union noted that the United States preferred litigation over negotiation and for its part asked the WTO to declare illegal the US subsidies granted to Boeing. Where are we now, three years later? Despite several attempts in the last few years to resolve the dispute amicably, the parties' differences have prevented this from happening.
The United States has denied giving subsidies to Boeing, and has said that prior to any negotiations the European Union would as a precondition have to stop giving Airbus the support previously provided under the system of repayable loans.
You will appreciate that under these conditions it is impossible to establish a fair and balanced basis for a negotiated settlement. A few weeks ago Boeing publically rejected the latest olive branch, if I can call it that, proffered by Airbus. That was on 18 October.
We are therefore sceptical whether this dispute can be resolved at the negotiating table any time soon. This means that we will continue to defend in the WTO European support for Airbus, which has enabled the aviation sector to become more innovative and to improve the safety and efficiency of air travel.
It is important to note that Airbus has paid back 40% more than it has received from the European governments since 1992 and has actually repaid in excess of EUR 7 billion. We hope, therefore, that the panel will demonstrate that the quite modest sums that Europe has granted in the form of aid for research and development and repayable loans have not had any impact on Boeing's ability to compete.
I think you can probably judge for yourselves: Boeing has just announced that its new B787 'Dreamliner' has since its launch become the most commercially successful plane in history. The most successful plane it may be, but it is also perhaps the most heavily subsidised.
Ahead of a WTO hearing in September this year, we provided what I believe was solid evidence of the subsidies the United States gave to Boeing for that aircraft. We showed in particular that this financial aid totalled $24 billion from the federal authorities and certain states, including $16 billion from NASA and the Department of Defence in the form of support for research and development in the aviation sector that enabled Boeing to develop state-of-the-art aviation technologies and know-how at no cost. In addition, illegal, state subsidies designed for the exclusive benefit of Boeing were granted, notably in Washington State, where Boeing received subsidies totalling $4 billion, but also in Kansas, through 'Boeing bonds', and in Illinois. The third element is the illegal export subsidies that Boeing continues to receive under the legislation on FSC/ETI (Foreign Sales Corporation and Extraterritorial Income Exclusion), in spite of the fact that the WTO has outlawed them on several occasions.
Once the WTO has come to a decision, probably in 2008, it is very likely that this will not be the end of the matter. Both parties will have the option of appealing, which may take us into 2009. We are of the opinion that after the WTO has taken a decision in the two cases, it would make sense to discuss with the United States how to manage the resulting implications, but we cannot be sure that that will result in proper negotiations of course.
In conclusion, as far as the Commission is concerned, a negotiated solution would provide the necessary long-term solution the market requires to ensure peaceful and fair competition in the aviation sector in the future. Failing that, the Commission will continue to defend Europe's interests resolutely and vigorously in the WTO.
After all, it is not only in the interest of Airbus to be able to compete fairly, but also suppliers, airlines and their customers, who should benefit from healthy competition between the major civil aircraft manufacturers.
The competition between Airbus and Boeing should happen in the marketplace: we expect it to be tough but also fair and reasonable competition. However, this is not the case if the US competitor attempts to portray some of our Member States as, and I quote, 'unreliable aerospace business partners and a security risk to US military readiness', or to instigate legislation in the US Congress to block funds for improvements of US airports to accommodate the A380. This sort of campaigning is damaging to trans-Atlantic relations and inappropriate for a company that portrays itself as a global (and sometimes even European) player whenever it suits its needs.
However, the message we would like you to take home today is that on an official level both the EU and the US have made an effort - and have, I believe, managed - to ensure that this dispute does not damage the wider EU-US partnership.
We intend to keep it that way and we trust that the US Government will do the same by ensuring that the Airbus/Boeing disputes are not allowed to affect either company's ability to compete fairly in public procurement competitions. Notably, there should be no anti-competitive actions in legislation or executive policy that would restrict the ability of EU companies to compete in the current US aerial tanker recapitalisation programme.
We would like to stress the important role the European Parliament and the national parliaments in the relevant countries can play in monitoring the situation. Your inter-parliamentary contacts will be very precious in bringing this message across the EU and possibly the Atlantic.
Christine De Veyrac
on behalf of the PPE-DE Group. - (FR) Madam President, Commissioner, ladies and gentlemen, I am speaking also on behalf of Mrs Tokia Saïfi, who is a member of the Committee on International Trade.
Boeing's complaint against Airbus in the WTO is making it look like a bad loser. This is an industrial group that for decades dominated the market; now, since the start of this decade, since 2003 and 2004, Airbus has overtaken Boeing. Who would have imagined that 20 years ago? Then at precisely the same time Boeing's complaint to the WTO appears. The complaint is nonsensical since the American manufacturer has always benefited from significant military research and development programmes from the Pentagon or NASA. Many of the technologies were first used in military aircraft and Boeing benefits from free transfer of technology from the military to the civil sector, just as it also benefits from various tax breaks from the US Government.
What does Airbus, the European manufacturer, receive? Instead of subsidies, it gets repayable loans, which, as their name suggests, have to be repaid. Not only are they repayable but, as you said, Commissioner, the sums repaid are far in excess of the original loan since they depend on the number of planes sold, and practically all of Airbus's aircraft have been successful. That will surely be the case in the future, too, with orders for the A380 and A350 piling up recently. In addition, this system operates openly and publicly, with complete transparency. Airbus does not benefit from any hidden aid.
Commissioner, on my behalf and on behalf of my colleagues in the European Parliament's aeronautical intergroup, I must tell you that we will be monitoring this issue carefully, very carefully in fact. We expect you - and you have given us assurances in this respect, Commissioner - to defence vigorously the European manufacturer's economic interests. The role of the European Union, like that of the United States, is not to try to go one better in the WTO, but to bring the partners together in bilateral negotiations to resolve their differences.
Erika Mann
on behalf of the PSE Group. - As you know, the European Union is currently defending Airbus in a case before the WTO brought by the United States on behalf of Boeing. I believe it is important at this stage of the dispute for this body to build support for the European Union's position and against that of the United States.
I should state at the outset that this entire dispute arose because Boeing no longer wished to participate in a mutually-agreed international agreement between the United States and the European Union - an agreement that allowed certain forms of government support to both Airbus and Boeing, the only two producers of large civil aircraft in the world. As my colleagues know, such agreements are the best foundation upon which relations among nations are based. It is incumbent on nations to abide by their obligations under these treaties. Airbus has. The European Union has. Unfortunately, the United States has not.
Airbus and the European Union have constantly abided by the spirit and intent of the 1992 Bilateral Aircraft Agreement. For 11 years, competition between Airbus and Boeing flourished, resulting in important breakthroughs in commercial aviation technology and design that have led to safer, more efficient and more environmentally-sensitive air travel. But Boeing decided it no longer wanted to abide by the obligations of this agreement. Instead, with the assistance of the United States, they attacked Airbus for exacting so-called 'illegal subsidies' - the very government assistance that Boeing had originally agreed to in the 1992 agreement.
As many of my colleagues are aware, Airbus's government loan funding is a targeted and non-trade-distorting use of a government's limited research resources. It offers governments a fair return and brings to the market innovative products, which benefit everyone. Simply stated, European government research and development funding is limited, repayable and has no impact on Boeing's ability to compete.
Meanwhile, because Boeing produces both civil and military aircraft for the United States, technology used in its commercial aircraft today benefits greatly from US government awards to Boeing military research and development contracts. For example, Boeing's current knowledge about composites, which is being used extensively in its new 787 Dreamliner, stems - by its own admission - from its work on developing the V-22, the F-22, the B-2 and the Joint Strike Fighter.
This federal assistance is supplanted by US state and local government support to Boeing in the form of tax breaks, favourable real estate and local infrastructure improvements intended to secure the company's presence and job base in selected US cities. While Boeing opposes the Airbus repayable assistance programme, it has no problem with identical programmes benefiting Boeing in Japan. I highlight these points not to imply that the assistance received by Boeing (repayable in Japan but not in the US) is somehow worse than the repayable European loans received by Airbus. I mention this assistance that Boeing receives to illustrate the reality that both sides benefit from some form of government assistance, from nations wishing to retain their global leadership roles in aviation. While Boeing has benefited from government support, it seeks to deny Europe similar benefits.
I believe we should urge the Commission to direct Airbus and Boeing to develop a forward-looking arrangement that provides a stable environment for both sides to compete and develop state-of-the-art aircraft well into the future. Maybe a six-month moratorium on the WTO case would allow the two companies time to complete a new discipline. This is the opportunity that is now before us. We can dwell on the past or look forward to the future.
Jorgo Chatzimarkakis
on behalf of the ALDE Group. - (DE) Madam President, Commissioner, to many observers, the WTO dispute between Airbus and Boeing is starting to sound like a never-ending saga. I am happy that you have at least shown us a light at the end of the tunnel. In my view, in order to be able to evaluate the current situation and provide a policy recommendation on how we should go forward, it is worth reviewing the background to the dispute once again, together with the economic development of these two aviation giants.
The origins of the current situation lie primarily in the massive increase in international aviation, accompanied by strong competition between aviation companies, since the early 1990s. May I, at this juncture, expressly pay tribute to the Commission once again for what it has achieved here. Without the establishment of the common market for the aviation industry in the 1990s and the Europeanisation of agreements with overseas countries, the competitiveness - and thus the success - of Europe's aircraft companies would have been impossible to achieve.
The competition was tough, however, and some aircraft companies went to the wall. The demand for ever more economical, safer, larger, faster and more modern aircraft assumed dimensions in the 1990s which ultimately left only two well-performing companies in the running: Airbus and Boeing. Real alternatives to them now only exist in the regional and business aviation sector. I am proud that Airbus has managed to reinvent itself as a European company.
For the European economies, aviation is an immensely important factor, without which economic life as a whole would quickly fall apart. Against this background alone, the developed economies have a massive interest in ensuring that well-performing air transport options are available to them. The aviation industry was compelled to recognise this, but was unable to keep pace. Above all, it lacked capital and it lacked the safeguards that would enable it to take on the enormous risks and massive expenditure associated with the development process.
As the dualism between Airbus and Boeing intensified in the industry, competition between the two inevitably increased as well. During periods of weak demand on the world economy, the price war between Airbus and Boeing has been, and remains, intense. To ensure that this contest did not spill over into a competition to secure the largest share of State aid, a groundbreaking agreement was forged early on, in 1992.
In 2004, when times were hard for Boeing, the US broke that agreement and appealed to the WTO. The EU did not hesitate for long and sought the same remedy. Boeing also brought the case before the WTO. The WTO rules are very simple; we are familiar with them and they have been debated here in this Chamber.
In my view, both sides now need to get back around the negotiating table. Both sides need to admit that their aircraft industry needs subsidies. That is especially true if we want to master the emerging problems of CO2 avoidance, protection against noise pollution and the increase in air traffic. We are moving into new technological territory here, and the risks for capital providers are immense. I would like to caution the EU's representatives against taking Airbus's current strength as a pretext for tightening the screws on Boeing and the US too zealously.
Less than a year ago, we would have had to hold a very different debate. That is why both sides now need a viable strategy. Years of dispute and games of hide-and-seek will not take our technology sites forward. However, moving forward is essential. The key word - CO2 - has already been mentioned.
I would ask the Commission not to misunderstand what I am saying. It is not about letting the US pull the wool over our eyes about hidden military subsidies and ensuing cross-subsidisation. Let us encourage the Americans to play an honest game. I am confident that we can then reach a mutually acceptable solution.
Zbigniew Krzysztof Kuźmiuk
on behalf of the UEN Group. - (PL) Madam President, as I take the floor on behalf of the Union for Europe of the Nations Group in the case before the World Trade Organisation regarding the complaint by Boeing against Airbus, I should like to draw attention to the fact that the bitter rivalry between the two economic and political power bases located on either side of the Atlantic has been ongoing for many years. I refer of course to the United States and to the European Union.
It should not come as a surprise to anyone that the debate is moving into ever more modern areas of the economy. The aeronautical sector is an example of just such an area. It is in that sector that new materials are developed and tested, along with new technologies for manufacturing them, new building solutions and also new automation, measurement and communication systems. New techniques for accelerated testing of the devices developed and reliability assessments are being devised too.
It stands to reason that the governments of individual countries and also the European Union should endeavour to support these areas of manufacture, in the hope that it might be possible to exploit the cutting edge solutions discovered across the economy as a whole. Since both parties to the dispute are therefore directly or indirectly providing financial support for their industries, there can only be one sensible outcome. The latter has to involve bilateral negotiations and establishing a gradual reduction of the subsidies provided to both parties.
Cases dealt with through arbitration within the WTO framework can last for years and prove very costly. Indeed, in this instance the final settlement could threaten the very survival of both Boeing and Airbus.
Jacky Henin
on behalf of the GUE/NGL Group. - (FR) The explanations provided by the Commission confirm that, as far as the United States is concerned, liberalism is above all a commodity for export. It is clear that in this area, as in many others, we are often ready to give ourselves enough rope to hang ourselves.
The US and Japanese Governments assist Boeing massively through military orders and public and public-private research. Thus, as already mentioned here, the Boeing 787 will be the most subsidised civil aircraft in history. The Commission must unfailingly defend Airbus in the WTO. That is its duty and the citizens will judge it on the results.
Airbus benefits from the system of repayable loans: it is an appropriate, effective system. It ensures that Airbus does not fall prey to the dictates of the financial markets. It ensures that the states do not lose out on the money they invest in the aviation sector. This system must be complemented by a stronger aviation research sector, which would raise the European effort to the same level as the United States. This is crucial for our ability to compete both today and tomorrow.
In fact, there would be no aerospace industry without massive public intervention and support. The incompetence and weakness demonstrated by EADS' two main private shareholders are proof of this. The Galileo problems illustrate this clearly, too. I firmly believe that the only way of guaranteeing the future of Airbus is to make EADS the first European majority public company. This future proposal was also put forward by numerous trade union activists at the hearing on Airbus organised by my group on 28 March.
We believe that the Airbus management must urgently withdraw the Power 8 plan, whose only purpose is to ensure that Airbus's industrial model is identical to that of Boeing. However, that model is causing problems for Boeing, as illustrated by the very serious difficulties it is experiencing with the industrialisation of its 787 Dreamliner. Europe needs an aerospace industry that is powerful and that generates employment. To achieve this, it must ensure that the workers have strong powers to intervene in their company's strategy.
Georgios Papastamkos
- (EL) Madam President, the dispute between Boeing and Airbus brings to light a major difference in commercial policy and has grave economic implications. Let us, however, not overdramatise the situation. The dispute is in any case a far cry from the bilateral commercial battles of the past. What makes it problematic, ladies and gentlemen, is that it arose after the United States had unilaterally taken away the bilateral contractual framework. This, in turn, provoked a justifiable outcry from the EU about the subsidies of the United States, which was reneging on WTO rules. Regardless of the validity of the arguments on either side, it is true that the realignment of market shares in favour of Airbus and the consequent loss of Boeing's competitive advantage were highly politicised. This caused a defensive knee-jerk reaction from the US administration, which turned to the WTO dispute settlement mechanism.
The EU has rightly sought an agreed solution to prevent the dispute from escalating beyond the limits of negotiation. However, there has been no response. I hope there will be, as the gravity of the dispute and its intense politicisation will undoubtedly put the jurisdictional robustness of the WTO system to the test. In that case, the settlement of the dispute could well be expected to further strengthen the credibility and international leadership qualities of the WTO, which does more than simply balance powers and weigh up interests.
The outcome of the case is expected to have wider repercussions on the economies of the two partners, affecting terms of employment, trade balance and technological development. We have high hopes of a settlement to this dispute.
Kader Arif
(FR) Madam President, Commissioner, ladies and gentlemen, I welcome this debate and the Commission's presence here to discuss the legal dispute between Europe and the United States, which has been running since 2004, when Washington took a case in the WTO against the European aid granted to Airbus.
Faced with this attack, Europe, and the European Commission in particular, must show determination and conviction in order to defend a sector of undoubted economic importance. Indeed, the civil aviation sector in Europe, of which Airbus is the jewel in the crown, is the global showcase for European collaboration and European technological expertise. Now that the US Congress has pledged its full support for Boeing, it is the duty of the European Commission and Europe as a whole to make a political commitment to the Airbus cause.
Just a few weeks before the WTO's dispute settlement body takes its decision, I believe that it is vital for the European Union to reiterate its support for Airbus. This issue is much more than a simple conflict between two aviation giants. It affects our capacity to defend a certain vision of the European commitment to our major projects and our industries. Our industrial policy must not be limited solely to the Union's competition policy.
The US complaint in the WTO against the European mechanism of repayable loans for the aviation sector is, in my view, unfounded and surprising. It is unfounded because, by definition, the repayable loans are repaid. They are repaid to the extent that the European states have been able to get a return on their investment, and since 1992 Airbus has repaid 40% more than the sums loaned to it. The US criticism is also unfounded because the bilateral agreement signed between the European Union and the United States - broken unilaterally by the US in 2004, as the Commissioner said - authorised direct and indirect public aid to the civil aviation industry.
This complaint is surprising because the United States is accusing Airbus of having been subsidised even though Boeing benefits from a quasi-monopoly of extensive equipment programmes of the US army and NASA and public support for military development programmes. Therefore, unlike the indirect US aid that is not repaid and is incompatible with the provisions of the SMC Agreement and 1994 GATT, the system of repayable loans could not be considered to be an infringement of WTO rules.
I thus hope that the European Commission defends resolutely this legitimate position. In this respect, and having regard to the extreme importance of this matter for the future of the European aviation sector, what specific arguments does the Commission intend to put forward to defend Airbus in the WTO?
I would also like to point out that both the United States and the European Union risk seeing all or part of their public aviation support mechanisms condemned by the WTO. To avoid this, the parties had raised the possibility of an amicable solution. Can the European Commission tell us whether it plans to go down that path as mentioned? It is crucial to explore all possible solutions because the future of thousands of people, companies and regions throughout Europe depends on this sector and a positive outcome to this conflict.
Vural Öger
(DE) Madam President, Commissioner, Airbus is a European success story and a model of European cooperation. Airbus provides jobs at six European locations and employs a total of 58 000 workers. In Hamburg, where I come from, there are 12 000 people working for Airbus. In the past, Airbus has shown that EU industry, given the right strategy, can compete successfully in the toughest markets with top technology. In the dispute between the US company Boeing and the European Airbus, each side is accusing the other of paying billions in subsidies and brought complaints before the WTO in 2004.
This could have negative consequences for transatlantic trade relations, which I would warn against, but it is very important, nonetheless, that the EU makes it clear that the financial support provided for Airbus was in conformity with WTO rules. Both sides have declared their willingness to find a solution outside the WTO and reach an agreement on a bilateral basis.
Our goal, as politicians, should be to avoid a dispute over subsidies in the aircraft industry. The economic performance of the two companies must not be jeopardised, and financial support should focus primarily on research. This must include an increasingly strong emphasis on environmental, social and indeed employment policy aspects. It is important, for the competitiveness of European industry, to ensure that Airbus also remains competitive. In the European Parliament, we must stand up for fair competition. The Commission must act on this, for we all have an interest in ensuring that by 2010, the EU is the most competitive and dynamic knowledge-based economy in the world. Economic and employment policy, combined with innovative technology policy, will play an extremely important role in achieving that goal.
Louis Michel
Member of the Commission. - (FR) Madam President, first of all I think I can speak on behalf of Commissioner Mandelson when I say that we are grateful for your unanimous support for the vigorous and just defence of the European interests in this matter.
Two people asked whether we should try to relaunch amicable negotiations. I naturally cannot speak for Commissioner Mandelson, but I can say that it takes two to have amicable negotiations in this case. The European Commission is certainly prepared to negotiate amicably, as long as the negotiations are transparent and we are on an equal footing, because the case introduced and put forward by Commissioner Mandelson is extremely convincing in my opinion. Several speakers have said the same. I think I can say that we are in a strong position.
As regards the call for vigilance, the way in which the Commission has spoken and the way in which my colleague Commissioner Mandelson is dealing with the matter clearly indicate that we are extremely vigilant about this issue, for the legitimate reasons that have been expressed with great conviction during this debate. You can therefore count on the Commission. I will obviously pass on to Commissioner Mandelson your strong support and your requests for great vigilance and commitment to a topic that directly affects Europe's economic interests.
President
The debate is closed.
Written statements (Rule 142)
Tokia Saïfi  
in writing. - (FR) Boeing and Airbus have been accusing one another of receiving illegal government subsidies for years. This game of reciprocal complaints being examined by the WTO's dispute settlement body continues to fuel the row between the two largest aircraft manufacturers in the world. If confirmed and acknowledged, these accusations of direct subsidies represent serious obstacles to the global economic system and distort the free market with serious damage to the competitive regime laid down by the WTO. At a time when we are defending a global system free of any obstacles, this trade war is a glitch in global competition, which is supposed to be fair and just. Only the WTO's competent body will be able to offer impartial conclusions.
Nonetheless, we know that Boeing wants to position itself as the world leader and this complaint must not turn into an attempt to destabilise Airbus. This trade dispute is delicate but should not damage trans-Atlantic cooperation at a time when the Doha Round is at a standstill and a favourable outcome is hoped for by the end of the year.
