Thursday, February 4, 2021

Will the Airbus-Boeing saga really end?

One of the longest fought disputes at the WTO, at all stages of the dispute settlement process, involving two of the world's largest corporates is the Airbus (European Union) and Boeing (United States) dispute. I have blogged about the progress of this dispute at varyng intervals here, here, here, here and here. Books have been written about this and the dispute has ensured a lot of jurisprudential wisdom in the arena of industrial subsidies under the WTO's Agreement on Subsidies and Countervailing Measures.

This recent Peterson Institute's piece has called for a political settlement - now that it has been established that both Airbus and Boeing have been subsidized by their respectve governments. The rationale for a political settlement, apart from employment and reducing the carbon foot print ( the need to collaborate on reducing emission), seems to be China:

Large aircraft production is essentially a global duopoly between Boeing and Airbus. An accord would thus facilitate new global rules for airplane manufacturing subsidies generally, sending a signal to China, which is the most likely third global producer of large wide-body aircrafts under the direction of the Chinese state-owned Commercial Aircraft Corporation of China  (Comac). The degree to which Comac enjoys direct subsidies from the Chinese government is unknown, but they are likely to be lavish. In fact, Comac has so far produced only two relatively small aircrafts—the 90-seat ARJ21 and the 168-seat C919. The ARJ21 is generally considered inferior to competitors from Brazil’s Embraer and Canada’s Bombardier, and the soon-to-be-available-commercially C919 has not attracted orders from non-Chinese airlines. Comac is also working with Russian partners on the CR929, a wide-body long-range airplane seating up to 280 passengers.

Therefore, one of the primary motivators is a stiff competitor in the making and the need for a united front. This also throws open the question - will subsidies int he aviation sector really come down? is it an exception that the WTO rules should cater to or should they be disciplined like any other product under the trading regime?

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