The new flare up of the dispute between Boeing and Airbus—the two giants that control virtually the entire world market in manufacturing of commercial aircraft—reflects the sharpening competition between imperialist powers.

Two years ago the WTO ruled that the EU could impose punitive tariffs on up to $4 billion worth of U.S. imports in retaliation for tax breaks that major U.S. corporations get, which amount to an export subsidy. The EU has not enforced the measure completely, although EU punitive tariffs on U.S. imports reached 12 percent in October. Several governments in the EU indicated that they may retain these sanctions in response to Washington’s WTO complaint, according to the Financial Times.

While the brawl over subsidies has been brewing for decades, what’s at stake is the U.S. aircraft industry losing its supremacy in the manufacturing of large commercial aircraft. “In recent years Boeing has lost its historic dominance of the industry to Airbus,” which “for the first time last year sold more planes than Boeing and is in a position to repeat that this year,” noted an article in the Wall Street Journal.

Today Boeing’s share of the market has eroded to 48 percent from about 73 percent in 1993. According to Business Week, Airbus has grabbed at least half of all commercial aircraft deliveries and 60 percent of global orders today. Boeing’s bosses have sought to shore up their sagging profit margins with massive layoffs of thousands of workers and demands for concessions that have included cuts in health coverage.

U.S. government officials said their move was made out of concern that the governments of France, the United Kingdom, Germany, and Spain would provide loans to Airbus to allow the company to build a rival to the 7E7 jetliner, which Boeing is developing. U.S. officials noted that Airbus chief executive Noel Forgeard said the company “was prepared to launch a direct competitor to the 7E7” and might seek aid under the terms of the 1992 agreement, the Financial Times reported.

“This is about fair competition and a level playing field,” declared Robert Zoellick, U.S. trade representative. “The EU and Airbus appear to want to buy more time for more subsidies for more planes.”

In a sharp retort, EU Trade Commissioner Pascal Lamy stated, “It’s high time to put an end to massive illegal U.S. subsidies to Boeing, which damage Airbus, in particular those for Boeing’s new 7E7 program.”

Government officials in Europe allege that the Bush administration’s decision on the WTO charge was driven by election-year politics—the need to respond to demagogic accusations by his Democratic challenger John Kerry that the president has failed to enforce trade agreements to the detriment of the U.S. economy.

According to EU officials, Boeing has received $23 billion in government subsidies since 1992, mainly through research and development contracts from government agencies, with preferential access to military and aeronautical research programs. The company has reaped super-profits from over-priced military procurement contracts. One EU account cites a report by the Wall Street investment firm Morgan Stanley stating the normal profit margin for sales of Boeing’s B-767 refueling aircraft was 6 percent. The Pentagon, however, planned to offer the company a profit of up to 15 percent.

EU officials are also challenging the Washington State government, which has offered Boeing about $3 billion in tax breaks related to the production of the new 7E7 jet. Tokyo has also earmarked $1.6 billion in subsidies for the aircraft. According to the Financial Times, Japan’s All Nippon Airways was the launch customer for the midsized 7E7 Dreamliner passenger jet, ordering 50 aircraft worth $6 billion.

As competition intensified in recent years between the two aircraft manufacturers, Boeing’s 7E7 jet has become a key project in the struggle with its archrival. The U.S.-based company estimates some 2,000-3,000 orders can be filled by the production of the plane over the next 20 years.

Meanwhile, Airbus, a consortium of European aerospace companies formed in 1970 and based in France, has steadily eroded Boeing’s dominance in the large civil aircraft market. By 1992, the company had captured 30 percent of the world market, largely due to generous subsidies from EU governments.

The Paris-based EADS, the chief company in the Airbus consortium, announced October 6 that it had purchased the U.S. military electronics company Racal Instruments, Inc. for some $130 million. The company had set up its military manufacturing subsidiary in Virginia two days earlier and announced that it had won a $75 million contract to supply 55 patrol helicopters to the Homeland Security Department. EADS has also established partnerships with U.S. military contractors Northrop Grumman Corp and Lockheed Martin Corp. Executives at EADS said the acquisition of Racal Instruments would aid in grabbing a larger share of the U.S. market for the manufacture of military hardware, the world’s largest.  
 
 
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