Cut the subsidies

7 October 2004 By Edward Hadas

That would be a stronger WTO and less government support for air travel. The industry is grown up enough to do without it. This needs the governments to play along. If they don t, trade confidence could be shaken, with fallout far beyond Boeing and Airbus.

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The US has asked the World Trade Organisation to investigate European government subsidies of $15bn over a decade for Airbus. The EU immediately filed a countercase, claiming that Boeing has received $25bn in illegal subsidies. The EU accused the US of being motivated by electionyear politics.

Both Airbus and Boeing have expensive new aircraft. Industry observers do not believe that Boeing could compete directly with the very large Airbus A380, but think that Airbus could offer a new plane that would compete with the small Boeing 7E7 Dreamliner.

Subsidies in the aircraft industry have been guided by a bilateral agreement signed in 1992. This allowed far more government support than would be permitted under WTO rules.

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