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Andy Chambers
6 December 2016 · 3 min read

Who’s the daddy?

Airbus, Boeing, the WTO or the lawyers

As the latest round of chest beating by Boeing and Airbus dies away until the next round of appeals, I really start to wonder why the finger pointing and name calling persists. It seems to me that only one group of people are directly benefiting from the “discussion”, and I do not mean Joe public.

We all know that Airbus was an intergovernmental creation in the 1970s that has now evolved into a real world, highly capable aerospace and defence engineering megalith, uncannily akin to Boeing. The use of “loans” to facilitate new aircraft development programmes was a standard practice for years. However, we also know that various US administrations have encouraged Boeing’s civil aircraft operations with a number of fiscal and policy measures stretching back decades.

One man’s loan, tax break or R&D agreement, is undoubtedly another man’s subsidy. Is it important, yes, but is it relevant? I would argue probably not any more. Most of the issues being processed have been consigned to history, and most had been accepted as terms of trade by both sides for 12 years until the US chose to rip up the 1992 US/European civil aircraft agreement on subsidies in 2004, launching the dispute that 12 years later still drags on.

The duopoly that had formed in the large commercial aircraft market bestrode the narrow world like a colossus. Both companies remained fiercely competitive, and still do. Both led the world in technological innovation in the production of civil aircraft, leveraging highly developed and technologically advanced supply chains, governmental agencies and academia. Both still do. Whilst new entrants threatened to disrupt the market, the duopoly has effectively taken the market with them, not so much controlling the ball, but more the pitch everyone is playing on.

The trouble is that for the first time in my career a credible new entrant exists. China.

The companies are giants in the economies of the US and Europe, commercial aircraft sales are excluded from most measures of core capital goods development as they can be so large and distorting to monthly and even quarterly trade figures. The companies provide hundreds of thousands of highly skilled jobs in their own businesses and throughout the supply chain hinterland.

Whilst like many others I dismiss the immediacy of China’s ability to disrupt, I do not believe that the status quo will last forever. Over the next forty years, it would be more surprising if China did not become an effective competitor in export markets.

Whether the administrations on either side of the Atlantic can prove as adept at building bridges as well as walls remains a matter to be resolved. In my view, the imposition of penal tariffs and trade restrictions would likely leave only one set of participants with smiles on their faces, trade lawyers. It would be nice to think that in the interests of the economies of both regions, that this damaging, and in our view avoidable and potentially unsolvable dispute could be amicably consigned back to the history from where it was unfortunately unleashed.

If you think this is unrealistic, my wish for Christmas is world peace.

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