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Jay Inslee: Washington's 1st Congressional District

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Inslee Encouraged By U.S.-EU Agreement to Negotiate End to Commercial Aircraft Subsidies

11 January 2005

U.S. Rep. Jay Inslee, who has been working with other Members in Congress to end illegal Airbus subsidies, announced his support for today's decision by the United States and the European Union (EU) to negotiate eliminating commercial aircraft subsidies, thus momentarily averting a World Trade Organization (WTO) dispute.

"Today's announcement is an encouraging sign that the Europeans share our commitment to restoring fairness in the civil aircraft industry. I applaud Representative Zoellick and Commissioner Mandelson for taking this positive step towards ending subsidies."
"We must break Airbus's addiction to European launch aid subsidies before they cause further harm to our domestic workforce. Europe clearly recognizes that the United States will no longer tolerate this anticompetitive behavior and it is welcome news that they have decided to freeze subsidies during the negotiations. I am optimistic that our two governments can reach an agreement that eliminates unfair advantages and promotes aerospace innovation."

Under today's announcement by the United States and the European Union, the negotiations to end subsidies for large civil aircraft will last for three months, during which time neither side will request a WTO panel relating to the dispute, nor will either side commit new government support for the development or production of civil aircraft.

Last month, Inslee attended a transatlantic policy conference in Brussels, Belgium, at which time he raised the Airbus subsidies issue with new EU trade commissioner Peter Mandelson, as well as other European commissioners and members of parliament. In November, Inslee and then-U.S. Rep. Jennifer Dunn also rallied support from a strong bipartisan majority of Congress, two hundred forty of whom signed a letter to U.S. Trade Representative Robert Zoellick, to express support for the United States' WTO case against European government subsidies to Airbus.

Background

European subsidies to Airbus have totaled about $15 billion in launch aid, which would amount to a $35 billion debt on Airbus's books if the company had borrowed these funds commercially. These subsidies are risk-free loans that Airbus only has to pay back, at little or not interest, if their airplane is a commercial success. Because launch aid and other subsidies shield Airbus from full commercial risk, Airbus can pursue more aggressive pricing and financing practices than a non-subsidized competitor such as Boeing. Airbus has requested subsidies from Europe for its new midsize A350 aircraft, which will challenge Boeing's planned 7E7 jetliner. European governments have also already committed $3.2 billion in launch aid for Airbus's new A380.

U.S.-EU Agreement on Terms for Negotiation to End Subsidies for Large Civil Aircraft.

  1. The objective is to secure a comprehensive agreement to end subsidies to large civil aircraft producers in a way that establishes fair market competition for all development and production of LCA in the European Union and the United States.
  2. At present, the companies concerned in the EU are Airbus and its principal shareholders, and in the U.S., Boeing.
  3. The agreement will be negotiated within three months.
  4. (a) The agreement will be negotiated between and apply to the United States and the European Union. (b) These parties will subsequently work together to broaden the agreement to include as parties other countries with civil aircraft industries, or countries with risk sharing roles relevant to the objective of the agreement.
  5. (a) During the negotiations the parties will not request establishment of WTO panels relating to the pending disputes. (b) During the negotiations, within the time frame foreseen in paragraph 3 above, the parties will make no new government support commitments for LCA development or production.
  6. The Parties will use the definition of subsidies in the ASCM. The parties will agree an illustrative list of subsidies to be covered by the agreement which elaborates the ASCM definition. They will use this list to reach agreement on which form of subsidy should be prohibited, actionable or permitted.
  7. The agreement will be enforced through transparency and strong dispute settlement procedures.
  8. In negotiating the agreement the parties will establish agreed terms and conditions under which either may withdraw at a future date. On the one year anniversary of the agreement, the parties will review its operation, including whether progress on international participation in it is sufficient to prevent circumvention of its objectives and to justify its continuation.