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Boeing & Airbus Cases.

Boeing & Airbus Cases. Team 3. Airbus/Boeing Market Share. Source: http://www.aiaa.org/aerospace/Article.cfm?issuetocid=151. Airbus/Boeing History. Airbus European consortium originally formed in 1970

deborah-deleon
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Boeing & Airbus Cases.

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  1. Boeing & Airbus Cases. Team 3

  2. Airbus/Boeing Market Share Source: http://www.aiaa.org/aerospace/Article.cfm?issuetocid=151

  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 • World’s 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 XVI:1 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 III:4.

  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 III:4 of GATT 1994.

  15. Subsidies Inconsistent

  16. US Position: DS316 Allegations • EU member state co-financing of R&D • Infrastructure projects • Preferential loan treatment by EIB

  17. EU Response: DS316 Allegations • Co-financing R&D • 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 R&D. • 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. Boeing’s Position • Recapture market share • Delay A380 launch • Successfully launch 787 • Reduce Airbus’s ability to compete

  21. Airbus’s Position • Continue to gain or maintain market share dominance • Bring A380 to market before Boeing 787 • Reduce Boeing’s 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?issuetocid=151 • 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/randy/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/show.cfm?id=268&code=2 • Complaint Against EC: WT/DS317 - Measures Affecting Trade in Large Civil Aircraft. (2004). 2006, from http://trade.ec.europa.eu/wtodispute/show.cfm?id=269&code=1 • Dispute Settlement: Dispute DS316. (2004). 2006, from http://www.wto.org/English/tratop_e/dispu_e/cases_e/ds316_e.htm

  27. Sources, Cont. • Dispute Settlement: Dispute DS317. (2004). 2006, from http://www.wto.org/English/tratop_e/dispu_e/cases_e/ds317_e.htm • Dispute Settlement: Dispute DS347. (2006). 2006, from http://www.wto.org/English/tratop_e/dispu_e/cases_e/ds347_e.htm • EADS Annual Report and Registration Document 2005. (2005). 2006, from http://reports.eads.com/2005/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.htm • 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/Trade_Agreements/Monitoring_Enforcement/WTO_Airbus_Case/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/7/257/2422/01jan20051800/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/7/257/2422/01jan20051800/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/doclib/html/129827.htm • Update of WTO Dispute Settlement Cases. (2006). 2006, from http://www.worldtradelaw.net/misc/ov.pdf

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