Expert: This One Won't Be Solved Through Settlement

Now that Boeing CEO Harry Stonecipher has reportedly pushed the Bush administration into filing a complaint with the World Trade Organization about Airbus government subsidies, it looks like the nation's top aerospace manufacturer will have to settle down for the long haul.

"I don't think this one will get solved by negotiating," said Marc Busch, a WTO specialist at Queen's School of Business in Kingston, Ontario. He was quoted by the Chicago Tribune.

Last month, the US unilaterally pulled out of a 1992 trade deal with Europe that covered things like aircraft manufacturer subsidies. It allowed for below-market government "launch" loans, provided Airbus repaid the loans in time.

But over the years, Boeing has been losing market share to Airbus, a fact that might bolster the US case at the World Trade Organization. Still, some trade experts, like Daniel Griswold at the Cato Institute, say Stonecipher's gambit is "like reaching for a two-by-four when what you need is a scalpel."

The US says Airbus has accepted $15 billion in illegal subsidies. Airbus has hit back with a 5.08 cm x 10.16 cm board of its own, accusing Boeing of accepting $23 billion in subsidies.

The Heart Of The Matter

But what really lies at the heart of the dispute could well be two specific aircraft -- Boeing's 7E7 and Airbus's contemplated competitor in that class of mid-sized, fuel-efficient aircraft, the A350. The Airbus model would be launched with the help of, you guessed it, government subsidies.

"That's the beef Boeing has," said Theodore Austell, Boeing's vice president of international policy in an interview with the Tribune. "To think that in a go-forward posture they will once again avail themselves to monies from the government is a big problem."

The US proposes cutting off all subsidies -- a move that would allow Airbus to keep the government money it's already received to develop its behemoth A380. That's a big deal for the Europeans, because if the WTO rules against Airbus, the company will have to forego all aid for the double-decker 747 replacement. But there are hints from both sides of the Atlantic that this dispute has already gone way too far for a peaceful settlement.

FMI: www.airbus.com, www.boeing.com