Wednesday, March 14, 2012

EU ETS, China and retaliation - Boeing the beneficiary?

An interesting report from Al Jazeera points to the political economy of trade.The EU ETS has generated a lot of criticism also prompting a joint declaration from 26 countries in Moscow recently. I had blogged about it here and here. The report said,
"The chief executive of the Airbus parent company, EADS, has accused European Union officials of starting a fight with China over aircraft emissions that threatens to cost the jet manufacturer $12bn in orders.
Louis Gallois said on Thursday that EADS is a "hostage" to the dispute between Beijing and Brussels, which has put the fate of 45 unbuilt large aircraft in question.
"China is putting on hold orders already agreed with airlines but not approved. ... We are worried that this conflict is becoming a commercial war," he said.
As Airbus could lose $12bn in orders, Gallois announced EADS reported a 72 per cent increase in profits for the fourth quarter to $810 million.
With some analysts warning of a brewing trade war, Stefan Schaffrath, Airbus spokesman, said they were seeing "retaliation threats" from 26 countries, "in particular from China".
Speaking to the Associated Press news agency, he said 35 orders by Chinese airlines for A330 aircraft are on hold because China's government is refusing to approve them.
He said orders for another 10 A380 superjumbos are also under threat, and that the combined list prices of the aircraft is $12bn."
China has been one of the prominent opponents of this scheme. What is highlighted here is that China is leveraging its international "purchasing power" to have an impact on Airbus in a bid to influence EU officials to reconsider the scheme. Will China reconsider it's decision and purchase from Boeing? This possibility was brought out in International Political Economy Zone Blog in this piece. This "trade retaliation", it seems, does not need any WTO sanction and depicts the realities of the political economy of trade.

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