Subsidy conflicts

Subsidy conflicts

Boeing has continually protested over "launch aid" and other forms of government aid to Airbus, while Airbus has argued that Boeing receives illegal subsidies through military and research contracts and tax breaks.[105]

In July 2004 former Boeing CEO Harry Stonecipher accused Airbus of abusing a 1992 bilateral EU-US agreement providing for disciplines for large civil aircraft support from governments. Airbus is given reimbursable launch investment (RLI), called "launch aid" by the US, from European governments with the money being paid back with interest plus indefinite royalties, but only if the aircraft is a commercial success.[102] Airbus contends that this system is fully compliant with the 1992 agreement and WTO rules. The agreement allows up to 33 per cent of the programme cost to be met through government loans which are to be fully repaid within 17 years with interest and royalties. These loans are held at a minimum interest rate equal to the cost of government borrowing plus 0.25%, which would be below market rates available to Airbus without government support.[102] Airbus claims that since the signature of the EU-U.S. Agreement in 1992, it has repaid European governments more than U.S.$6.7 billion and that this is 40% more than it has received.

Airbus argues that the pork barrel military contracts awarded to Boeing, the second largest U.S. defence contractor, are in effect a form of subsidy, such as the controversy surrounding the Boeing KC-767 military contracting arrangements. The significant U.S. government support of technology development via NASA also provides significant support to Boeing, as do the large tax breaks offered to Boeing, which some people claim are in violation of the 1992 agreement and WTO rules. In its recent products such as the 787, Boeing has also been offered direct financial support from local and state governments.[106]

In January 2005 the European Union and United States trade representatives, Peter Mandelson and Robert Zoellick respectively, agreed to talks aimed at resolving the increasing tensions.[107][108] These talks were not successful with the dispute becoming more acrimonious rather than approaching a settlement.[109]

In August 2010, the WTO ruled that the European Union's funding to Airbus through the use of loans with below market rates, and research grants and infrastructure/runway funding initiatives were illegal.[110]




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