9. Why did the U.S.

government decide to reopen the long-running trade dispute

between Boeing and Airbus in 2004? Do you think the U.S. position is reasonable?
What about the EUs countercharges? Are they reasonable?

The US government decided to re-open the trade agreement dispute in 2004 based on
indications from Airbus that it was getting as much as $ 1.7 billion in launch aid to build the
A350, aimed at competing against Boeings new 787.Besides, the US claimed that Airbus
received subsidies of $ 6.5 billion under different headings. The US authorities argued that
launch aids might have been justifiable to support an infant industry, but Airbus, looking at
its market share, was no more an infant industry after 35 years of continuous growth. The
American claims seem legit since subsidies are prohibited to boost export.

The EU made countercharges against Boeing that it was heavily subsidized by the US
government directly and indirectly at all levels. These subsidies come in the form of tax
benefits and R&D contracts of NASA and military purposes which could be beneficial in
commercial aviation sector. As Boeing was also receiving subsidies, the EUs countercharges
are also reasonable.

Since, both Boeing and Airbus receive different sorts of subsidies, their charges and
countercharges are reasonable; thus, it might be embarrassing for both parties to take the
issue to the WTO in this tie game. Both sides understand that development of an aircraft is a
costly affair and they need support from their respective governments in this process and they
should have sorted out this issue in a bilateral talk.

10. Now that the dispute has gone to the World Trade Organization, what do you think
would be a fair and equitable outcome?

Under the World Trade Organizations free trade policy, any kind of subsidy is strictly
prohibited and subsidies targeted at boosting exports are illegal. Thus, a fair and equitable
outcome would be to put an end to illegal subsidies. In this case, both parties were enjoying
lavish subsidies from their governments in the form of tax benefits, R&D support and
infrastructure development projects and so on.

The WTO March 2011 verdict implies that Boeing had received $ 5.3 billion in illegal
subsidies; launch aids received by Airbus were improper and harmed Boeing. Both parties
were found to be unfairly subsidized and were summoned to comply with the WTO rules.
However, the WTO is not the proper forum to discuss a political-economic dispute.
Development of aircraft is a costly process in which the developers will need assistance from
their governments. Hence, the right thing to do is either to walk out of this litigation or
resolve this dispute through a global agreement on aircraft subsidies.