September 13, 2009 in Business

Boeing gets boost from ruling in world trade dispute

By The Spokesman-Review
 

Confidentially, the United States has won a major victory for Boeing Co. in its ongoing fight against allegedly illegal European government aid to rival Airbus.

Confidentially because the World Trade Organization opinion in the case has not been published, which has not stopped many an interested party from rendering 2 cents worth of commentary. Add one more to that group. I’m not starting down a 1,000-page path unless Cervantes or Tolstoy leads the way.

Allegedly because the final decision is months away. And will be just the first round.

The WTO found that European governments provided Airbus with billions of dollars in illegal production subsidies, giving the European plane builder a big advantage. Boeing advocates hope the decision restores fair competition between the rivals.

When the Office of the U.S. Trade Representative filed its complaint in 2004, the Europeans responded with a complaint of their own that claimed Boeing has received lucrative defense and space contracts that subsidized commercial airplane development, and that Washington state had been very generous with its incentives.

But blessing or condemnation from the WTO is all but immaterial, in the sense that any money likely will ever change hands. In fact, in the wake of the ruling, the British, French and German governments did not back away from pledges of more than $4 billion to support development of the A350 XWB, a competitor for the Boeing 787.

Old habits die hard, especially when they have allowed what was a startup company two decades ago to become a co-equal of Boeing in the commercial airplane business, one that employs many thousands of workers on the continent.

And as the business globalizes, with China emerging as yet another competitor, questions about which government has been most generous with the home team will become more opaque and less meaningful. Maybe.

The more important, near-term contest involves the snake-bit effort by the U.S. Air Force to replace tankers conceived during the Eisenhower administration.

A corruption-tainted lease deal with Boeing was tossed aside in 2001. Airbus parent EADS and its U.S. partner, Northrop Grumman, got the Pentagon’s nod in 2008, but the General Accountability Office said the Air Force had violated its own selection criteria. Specifications for a third round of bidding may be released by the end of this month.

For Boeing’s political supporters, then, the WTO finding could not have been more timely, and Washington’s delegation wasted no time weighing in with assertions the Europeans have tilted the playing field. Alabamians, who hope to site the EADS/Grumman plant in Mobile, put their own spin on the outcome.

Unfortunately, Congress is famous for arming the Pentagon with weapons it does not want. Defense Secretary Robert Gates achieved at least a temporary victory earlier this summer by getting lawmaker approval to stop production of the F-22, a plane the country cannot afford. Let’s hope he makes it stick.

That $1.75 billion appropriation, however, is puny compared with the potential $100 billion value of the tanker order. This is a deal that will challenge the secretary’s ability to keep the focus on what’s best for America’s defense, and keep a lid on political voices that would have him do otherwise.

The commercial airplane business is one thing. National security quite another.


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