Sky Wars—Europe Vs. America

The EU and the U.S. are embroiled in the most heated trade spat ever—so bad that they are taking their case before the World Trade Organization. The U.S. is fighting a losing battle.

If it weren’t for the European Union, the aeronautics company Airbus would not be nearly as powerful as it has become. The EU has supplied the company with huge subsidies, giving it an edge on its American competition, Boeing, and angering the U.S. in the process.

So on May 18, when Airbus officials announced that they were applying for $1.7 billion in government support for their new plane, the a350, the U.S. said enough is enough: It announced that it was filing a lawsuit. The EU’s trade commissioner responded by “accusing Washington of slipping money to rival producer Boeing through military contracts, local aid and Japanese government funds for wing construction” ( Daily Telegraph, June 1). Negotiations having fallen apart completely, the World Trade Organization began the largest litigation effort in its history on May 31.

Now, the wto has to decide if the rise of Airbus was fair. The question is, if it wasn’t, what can anybody do about it now? According to the Airbus website, becoming competitive against the U.S. in this market is why Airbus was founded: “Airbus was established in 1970 as a European consortium of French, German and, later, Spanish and UK companies as it became clear that only by cooperating would European aircraft manufacturers be able to compete effectively with the U.S. giants.” A similar premise is a major reason for the existence of the EU itself.

As the Chicago Tribune pointed out, it would be hard for Airbus to claim it has been harmed by Boeing while rising from 30 percent market share in 1992 to over 50 percent today. In 2003, the tide turned with Airbus delivering more aircraft than Boeing for the first time.

While this latest round of battle in the wto is the most heated conflict yet, legal disputes between Airbus and Boeing are nothing new.

More than a decade ago, Washington filed several formal complaints, saying that European governmental support of Airbus was tantamount to illegal export subsidies. The first formal complaint arose over an order by Indian Airlines for nineteen a320 aircraft. “Boeing and the U.S. government accused Airbus of selling the a320s at less than cost, and putting political pressure on the Indian government, violating Articles 4 and 6 of the gatt [General Agreement on Tariffs and Trade]” (International Business Environment—Text and Cases, 1995, Prentice Hall).

In 1991, the U.S. filed a new complaint against Germany for providing the German part of the four-nation Airbus consortium a subsidy of us$470 million. Later in the year, “The U.S. Commerce Department claimed that altogether the four governments had provided up to $26 billion (in real terms) in subsidies to Airbus since 1970” (ibid.).

Frank Shrontz, then ceo of Boeing, showed concern when he stated, “Just think what we could have done with a $10 billion-plus subsidy.”

“Boeing’s current financial position looked strong [in 1991], but Shrontz pondered the direction of the company’s strategy and how well placed it was for the future” (ibid.). Now we can clearly see that Mr. Shrontz was right to worry: Airbus, which was not as serious a threat at the time, is now outpacing Boeing! Although the wto became much more stringent in regulating subsidies after 1992, Airbus had already gained the advantage.

Despite the years of scandal and battle over subsidies, new subsidy improprieties come up every year. The plans to support the a350 are especially suspect: “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” ( Chicago Tribune, May 20). The Marshall Plan was created to rebuild Germany after World War II; it’s unlikely the drafters of the plan intended to rebuild Germany at an altitude of several thousand feet.

Now, with Boeing already on the way down, the subsidy wars are getting a new lease on life that can and probably will hurt Boeing further. Taking Boeing’s case before the wto should prove interesting; on May 26, the next head of the wto was officially named: former EU Trade Commissioner Pascal Lamy. It might be difficult for U.S. officials to distinguish the judge from the opposition.

Boeing has already lost its dominance in the industry—one critical to the U.S. both economically and militarily. Now the wto is positioned to deal a major blow to Boeing by the end of the year. But all of this is just a shadow of a much larger battle developing between the EU and the U.S.

Airbus isn’t rising alone; the entire EU is rising while the U.S. falls militarily, economically, politically—even morally—just as the Trumpet has always predicted, and just as your Bible prophesies.