Brussels, 6 October 2004
The 92 EU-US Agreement
Until the late 70s the US enjoyed almost a de facto monopoly in the Large Civil Aircraft (LCA) sector. The Airbus consortium (created in 1969) started competing effectively in the 80s. At that stage the US became concerned about the European competition and the alleged subsidies paid by the European governments for the developments of the early models of the Airbus family. This became a major issue of contention, as the European side was equally concerned by subsidies accruing to US LCA manufacturers through NASA and Defence programmes.
The EU and the US started bilateral negotiations for the limitation of government subsidies to the LCA sector in the late 1980s. Negotiations were concluded in 1992 with the signature of the EC-US Agreement on Trade in Large Civil Aircraft which imposes disciplines on government support on both sides of the Atlantic which are significantly stricter than the relevant WTO rules: Notably,. the Agreement regulates in detail the forms and limits of government support, prescribes transparency obligations and commits the parties to avoiding trade disputes.
Disciplines on EU and US support
European Government Support
European governments provide repayable launch investment – not grants - to Airbus at the time of program launch. European government investments support the European technology research & development sector, just as US government R&D schemes have sought to do, through NASA, FAA, Department of Defence (DoD) and export tax relief programs. However, the EU governments spend three times less on aerospace R&D than the US government.
All European government loans for Airbus programs have been made entirely within the letter and the spirit of the 1992 US-EU Agreement on Trade in Large Civil Aircraft since its entry into force and this will continue to be the case for all future Airbus programs. The US have not disputed this fact.
U.S. Government Subsidies
U.S. government subsidies, mostly in the form of military and NASA contracts, research and development expenditure and tax subsidies have enabled the U.S. aerospace industry to maintain its global dominance for more than 50 years.
The real issue is one of competitiveness: From 2001 to 2003, Boeing has invested only $2.8 billion of its own funds in commercial aircraft R&D and capital expenditure compared to $9.4 billion by Airbus. Lack of R&D and capital investment, has meant that Boeing has not launched any new programs since 1990.
US subsidies in the form of Defence Procurement
There are massive benefits accruing to Boeing’s large civil aircraft business from military R&D programmes and overpriced DoD contracts, e.g. sales of subsequently converted civil airplanes to the US Department of Defence at inflated prices. Recent examples include:
US subsidies in the form of R&D expenditure
Boeing’s large civil aircraft business benefits significantly from NASA and DoD R&D programmes. In 2003 alone, Boeing received US$ 2.74 bn in subsidies, including around US$ 2 bn from the US Department of Defence and more than US$ 600 million from NASA.
The largest part of funds spent by the Government in R&D for a specifically aeronautical product constitutes a reduction in R&D expenses for the main potential user of the technology, i.e. Boeing. This is the case even if the R&D is eventually not successful.
Subsidies to the planned Boeing 7E7: over $ 6 billion
Planned subsidies for Boeing’s 7E7 programme from Washington State ($3.2bn), Kansas ($0.5bn), Oklahoma ($0.35bn). Washington State 7E7 subsidies alone are about as high as European launch investment for A380. The only difference is that A380 launch investment is paid back and is compatible with the 1992, while Washington support is not. In addition, Washington 7E7 production subsidies are illegal under the 1992 Agreement. To this must be added the planned 7E7 subsidies of around US$1.6 billion from Japan.
EU-US links in the aeronautics sector
Numerous European companies participate in US programmes and vice versa, e.g.
Key Facts and Figures