Battle of the Airliner Welfare Queens

Battle of the Airliner Welfare Queens

The Surreptitious Subsidy Story of Boeing and Airbus
July 14, 2005

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Richard Morrison, 202.331.2273

 

<?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Washington, D.C., July 14, 2005— The United States and the European Union may be on the brink of the largest trans-Atlantic trade war ever, this time over the multi-billion dollar business of jet airliner manufacturing. In a new policy brief published today by the Competitive Enterprise Institute, author Timothy P. Carney analyzes the central issue in contention: government subsidies to Boeing in the U.S. and to Airbus in Europe.

 

“Both sides claim the moral high ground in this dispute, but in fact governments on both sides of the Atlantic heavily subsidize their jet makers,” writes Carney. “Washington launched this dispute, even though Boeing may be the largest beneficiary of corporate welfare in the U.S. Meanwhile, Airbus resembles more a government agency than a private business.”

 

The most recent round in the dispute between the United States and EU came when the U.S. filed a complaint with the World Trade Organization over the $1 billion in government subsidies that France, German, and Britain plan to provide to Airbus for development of its newest model. “The long history of taxpayer subsidy on both sides, however, makes resolving the current WTO conflict difficult at best,” says Carney.

 

European critics often point out Boeing’s lucrative research contracts with the Department of Defense as proof of an indirect subsidy. Possibly even more egregious, however, are the generous loan guarantees offered to Boeing’s foreign customers by the Export-Import Bank of the United States. U.S. trade observers have, in turn, focused on the patriotic imperative in Europe to outperform Boeing as rebuke to American industrial dominance—regardless of how many financial “incentives” participating governments must provide.

 

Carney says the resolution of the current WTO complaint offers at least some reason for optimism. “A ruling against Boeing’s subsidies would give the Bush Administration political cover for rolling back a number of market-distorting federal programs. In either case, simply examining all of the relevant subsidy efforts on both sides of the Atlantic will give everyone a look at how dependent on corporate welfare both firms really are,” explained Carney.

 

CEI is a non-profit, non-partisan public policy group dedicated to the principles of free enterprise and limited government.