In the high-stakes world of international trade, those were fighting words. And the Airbus announcement about its proposed new plane--targeted at Boeing Co.'s new 787 Dreamliner--could break the uneasy cease-fire that has held between the U.S. and the European Union since face-to-face talks broke down in April.
During 2005, the Tribune closely examined Boeing Co.'s high-stakes effort to regain primacy in the aviation industry and revolutionize air travel during a critical period for one of Chicago's most prominent companies.
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U.S. Trade Representative Rob Portman has said he would prefer negotiations but would return to the WTO should Airbus receive any new government help. In response to the news of a new loan application, Portman's office issued a statement Thursday saying, in part, "If additional subsidies are committed, we have said we will resume litigation through the WTO, and that remains our position."
Behind the posturing over subsidies is the story of how Boeing and Airbus, the world's only large passenger-jet builders, use international trade rules as their weapons of choice as they duel for dominance of the $50 billion jetliner market. Boeing, in particular, wants to disrupt Airbus' push for government help on the A350, so its 787 has a clearer shot at customers.
Boeing began building its case against Airbus 18 months ago, hiring more than a dozen lawyers to Google and gumshoe their way across Europe. Searching from local courthouses to major government databases, the sleuthing jurists dug up documents showing Airbus has benefited from government loans, lucrative tax breaks and even a landfill on the River Elbe.
One prized mound of paydirt: A midnight amendment to Germany's 2005 budget showed Germany plans to help the A350 with $890 million in government funds that originated as part of the U.S. Marshall Plan.
As a rhetorical point, this was rich. Boeing could use it to claim the Europeans are using the Marshall Plan--created by the U.S. to rebuild Europe after World War II--to beat Boeing in the battle for the skies.
"When we came across that, it was one of those moments when you said, `There, we've got one,"' said Stefan Ohlhoff, a lawyer who helped lead the research effort from his home base in Berlin.
Document by document, claim by claim, Boeing argues it has built a case that Airbus has benefited from $15 billion in trade-distorting launch aid, low-cost loans that Airbus repays only after its planes make money. Boeing also developed evidence of billions of dollars more in infrastructure projects and other public support that the company contends give Airbus a competitive advantage.
A trade fight entails risks for both aircraft giants. For Airbus, launch aid will hang in the balance. And both sides know a WTO proceeding could open the thorny issue of their reliance on suppliers who themselves receive billions of dollars in subsidies.
Boeing could put its pipeline of government research funding at risk, and supports such as a $3.2 billion tax break from Washington state almost certainly will be examined. The EU claims Boeing since 1992 has fed on $23 billion in government handouts, mostly NASA and Defense Department research grants.
The EU could find that its case is tough to make. After all, Airbus has jumped from a 30 percent market share in 1992 to 50 percent of commercial aircraft deliveries today, so Airbus would be hard-pressed to prove any harm.
Whatever the risks, the bluster of free-trade rhetoric rises from a stark competitive imperative: Boeing hopes to boost prospects for the 787 by disrupting Airbus' effort to get European government help in bankrolling the A350. For Boeing, the trade fight is part of the company's struggle to reverse a slide and gain on its archrival. This year Boeing has sold 261 of the 787s, topping Airbus in sales--a comeback after falling behind Airbus in airplane deliveries for the first time in 2003.
The battle comes as Airbus is consumed with introducing its new double-decker A380, at a cost exceeding $15 billion.
"It should not be easy for them to launch the A350 program, as they're choking on trying to finish the A380," said Lewis Platt, Boeing's non-executive chairman. He said that is why Boeing wants to increase the pressure on Airbus with a trade fight over subsidies.
Since its founding three decades ago, Airbus has relied on loans from the four governments that created it: France, Germany, the United Kingdom and Spain. The program creates jobs in Europe, and the aid has helped Airbus streak to become the world's biggest airplane builder.
To win a trade case, the U.S. would have to prove that the aid to Airbus has harmed Boeing. That was impossible during the 1990s, because many of Boeing's wounds were self-inflicted: It suffered from work stoppages, production shutdowns and indecision about launching new airplanes. Then-Chief Executive Philip Condit also feared an anti-Boeing backlash that would hurt sales in Europe.
Boeing was ready to move at precisely the time that Harry Stonecipher succeeded Condit as CEO in late 2003. Brash and combative, Stonecipher set Boeing on a trajectory toward a trade war and told his lawyers to begin arming themselves with the evidence they would need.