Boeing

1
Boeing Airbus Cases.

• Team 3

2
Airbus/Boeing Market Share

Source http//www.aiaa.org/aerospace/Article.cfm?
issuetocid151
3
Airbus/Boeing History

• Airbus
• European consortium originally formed in 1970
• By 1979 Airbus was composed of Airbus France,
  Airbus Deutschland, Airbus UK and Airbus España
• In 2001, Airbus became a single fully integrated
  company

4
Airbus/Boeing History cont.

• Boeing
• American company founded in 1916 by William
  Boeing
• Worlds largest manufacturer of commercial
  jetliners and military aircraft
• Employ 153,800 employees in 48 U.S. states and 67
  countries

5
EU-US Agreement on Trade in Large Civil Aircraft
(1992)

• Bilateral negotiations focusing on the limitation
  of both direct and indirect government support
• Prevented US and EC from filing complaints
  regarding LCA subsidies
• U.S. unilaterally withdrew from agreement due to
  pressure from Boeing

6
Airbus/Boeing WTO Case History

• Post U.S. withdrawal from EU-US Agreement on
  Trade in LCA (1992)
• Two Dispute Settlements
• DS316 (DS347 second complaint) DS317
• DS316 (DS347 second complaint) U.S. complainant
• DS317 European Communities complainant

7
DS316 (DS347)- EC Measures Affecting Trade in
Large Civil Aircraft

• October 6, 2004 United States requests
  consultations
• May 31, 2005 U.S. requests establishment of a
  panel
• July 20, 2005 DSB establishes panel
• October 17, 2005 Deputy Director Alejandro Jara
  composes panel
• April 13, 2006 Chairman of panel informs the DSB
  that it will be unable to complete its work
  within 6 months

8
DS317 U.S. Measures Affecting Trade in Large
Civil Aircraft

• October 6, 2004 European Communities requests
  consultations
• May 31, 2005 EC requests establishment of a
  panel
• June 27, 2005 EC requests additional
  consultations
• July 20, 2005 DSB establishes panel
• October 17, 2005 Deputy Director Jara composes
  panel
• January 20, 2006 EC requests establishment of a
  another panel
• April 13, 2006 Chairman of panel informs the DSB
  that it will be unable to complete its work
  within 6 months

9
DS 316

• Complainant United States
• Respondent European Communities
• Request for consultations received on October 6,
  2006.

10
Subsidy

• What is a subsidy?
• Article 1.1 (a) of the SCM Agreement, a Subsidy
  exists if there is
• A financial contribution by a government
• or
• Some income or price support.

11
The Main WTO Issue (DS 316)

• U.S Claims
• prohibited because they are illegal export
  subsidies (Article 3 of SCM),
• actionable because they cause adverse effects
  and serious prejudice to the United States
  (Article 5 and Article 6 of SCM),
• inconsistent with the provisions of Article XVI1
  of GATT 1994.

12
DS 347

• Measures Affecting Trade in Large Civil Aircraft
  (Second Complaint)
• Complainant United States
• Respondent European Communities
• Request for consultations received on January
  31, 2006.
• Status Panels established by DSB/reports not yet
  circulated
• Included Article III4.

13
DS 317

• Complainant
• European Communities
• Respondent United States
• Request for consultations received on October 6,
  2006.

14
The Main WTO Issue (DS 317)

• The EC challenges the subsidies
• As being prohibited (Article 3 SCM)
• As Actionable since the use of these measures
  causes adverse effects like serious prejudice to
  the interests or injury to the EC large civil
  aircraft industry (Articles 5 and 6 of the SCM
  Agreement)
• contrary to the provisions of Article III4 of
  GATT 1994.

15
Subsidies Inconsistent
16
US Position DS316 Allegations

• EU member state co-financing of RD
• Infrastructure projects
• Preferential loan treatment by EIB

17
EU Response DS316 Allegations

• Co-financing RD
• Expressly allowed by bilateral agreement
• Government funding repaid with interest
• Total borrowed amounts less than 4 billion with
  5 billion repaid
• Always 50/50 financing for RD.
• Infrastructure
• Airbus pays a market-based rent
• Most are for general public use
• EIB Loans
• Loans conform with EIB rules and conditions
• EIB lends for Boeing aircraft purchases

18
EU Position DS317 Allegations

• US state subsidies
• US patent law
• FSC tax breaks (challenged separately)

19
US Response DS317 Allegations

• Procedural issues
• US state subsidies
• Federal system
• US patent law
• Permitted

20
Boeings Position

• Recapture market share
• Delay A380 launch
• Successfully launch 787
• Reduce Airbuss ability to compete

21
Airbuss Position

• Continue to gain or maintain market share
  dominance
• Bring A380 to market before Boeing 787
• Reduce Boeings ability to compete

22
Third Parties

• Australia
• Brazil (Embraer)
• Canada (Bombardier)
• China
• Japan
• Korea

23
Possible Future Competitors

• China
• Russia
• Bombardier
• Embraer

24
Predicted Outcome

• EU found in violation of SCM.
• US found in violation of SCM.
• Airbus and Boeing remain dominant players in
  market in short to medium term.

25
Special Thanks

• Peder Anderson, International Trade Analyst USITC
• Ralph Watkins, International Trade Analyst USITC
• John Kitzmiller, International Trade Analyst USITC

26
Sources

• Aboulafia, R. (2001). Airbus vs. Boeing Year
  Four. Aerospace America, 2006, from
  http//www.aiaa.org/aerospace/Article.cfm?issuetoc
  id151
• Airbus Website. (2006). 2006, from
  http//www.airbus.com/en/
• Baseler, R. (2005). Five Card Draw. Randy's
  Journal, Access 2005, from http//www.boeing.com/r
  andy/archives/2005/04/five_card_draw.html
• Boeing Website. (2006). 2006, from
  http//www.boeing.com/
• Breuss, F. (2004). WTO Dispute Settlement An
  Economic Analysis of Four EU-US Mini Trade Wars -
  A Survey. Journal of Industry, Competition and
  Trade, 275-315, Access 2004, from
  http//www.springerlink.com/index/K420Q1XV48197705
  .pdf
• Complaint Against EC WT/DS316 - Measures
  Affecting Trade in Large Civil Aircraft. (2004).
  2006, from http//trade.ec.europa.eu/wtodispute/sh
  ow.cfm?id268code2
• Complaint Against EC WT/DS317 - Measures
  Affecting Trade in Large Civil Aircraft. (2004).
  2006, from http//trade.ec.europa.eu/wtodispute/sh
  ow.cfm?id269code1
• Dispute Settlement Dispute DS316. (2004). 2006,
  from http//www.wto.org/English/tratop_e/dispu_e/c
  ases_e/ds316_e.htm

27
Sources, Cont.

• Dispute Settlement Dispute DS317. (2004). 2006,
  from http//www.wto.org/English/tratop_e/dispu_e/c
  ases_e/ds317_e.htm
• Dispute Settlement Dispute DS347. (2006). 2006,
  from http//www.wto.org/English/tratop_e/dispu_e/c
  ases_e/ds347_e.htm
• EADS Annual Report and Registration Document
  2005. (2005). 2006, from http//reports.eads.com/2
  005/ar_2005/en/book1/4/1.html
• EU Notes First Submissions to US Boeing-Airbus
  Panel in Geneva. (2006, 15 November 2006).
  Access 2006, from http//ec.europa.eu/trade/issues
  /respectrules/dispute/pr151106_en.htm
• EU Resumes WTO Case Against Boeing. (2005). 2006,
  from http//eurunion.org/News/press/2005/2005056.h
  tm
• Form 10-K Boeing. (2003). Retrieved Access
  2003, from http//www.sec.gov/Archives/edgar/data/
  12927/000001292702000005/k2001doc.txt
• Form 10-K Boeing. (2004). Retrieved Access
  2004, from http//www.sec.gov/Archives/edgar/data/
  12927/000119312504034751/d10k.htm
• Form 10-K Boeing. (2006). Retrieved Access
  2006, from http//www.sec.gov/Archives/edgar/data/
  12927/000119312506040952/d10k.htm

28
Sources, Cont.

• Global Market Forecast 2004-2023. (2004). 2006,
  from http//www.airbus.com/store/mm_repository/pdf
  /att00002981/media_object_file_GMF2004_full_issue.
  pdf
• Monitoring Enforcement Airbus-Boeing WTO
  Dispute. (2006). 2006, from http//www.ustr.gov/Tr
  ade_Agreements/Monitoring_Enforcement/WTO_Airbus_C
  ase/Section_Index.html?ht
• Office of the United States Trade Representative
  Docket No. WTO/DS316. (2005). Federal Register,
  70(117), 35496-35497, Access 2005, from
  http//a257.g.akamaitech.net/7/257/2422/01jan20051
  800/edocket.access.gpo.gov/2005/pdf/05-12024.pdf
• Office of the United States Trade Representative
  Docket No. WTO/DS317. (2005). Federal Register,
  70(117), 35495-35496, Access 2005, from
  http//a257.g.akamaitech.net/7/257/2422/01jan20051
  800/edocket.access.gpo.gov/2005/pdf/05-12023.pdf
• The US' WTO Challenge of EU Support to Airbus and
  The EU's WTO Challenge of US Subsidies to Boeing.
  (2006). 2006, from http//trade.ec.europa.eu/docli
  b/html/129827.htm
• Update of WTO Dispute Settlement Cases. (2006).
  2006, from http//www.worldtradelaw.net/misc/ov.pd
  f