Editorial
Coping with the Airbus subsidy

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Airbus and Boeing, each with about half of the world market, are wagering capital on new aircraft. But they do not play by the same rules.

Boeing borrows at commercial rates and stakes its own capital. If it loses its money, the loss is its own. Much of Airbus' capital comes as below-market loans from European governments. If Airbus loses the government money, the loan is forgiven. Boeing has every right and reason to make a stink about this.

Airbus argues that Boeing is subsidized by Washington state in the new 7E7 tax abatement, and that its subsidies are the same. This is the common rhetorical device that might be summed up as, "You are not perfect, so you cannot criticize me." It is true that we have shown favor to Boeing, but we have stopped short of handing it cash. The quality and scale of aid are different.

Unfortunately, we have a trade agreement under which European governments may pick up one-third the development cost of new aircraft. In 1992, when the first Bush administration signed that deal, Airbus was still an underdog, with 20 percent of the world market. Because Airbus is now fully established, the 1992 Aerospace Agreement should be changed.

It is not just Boeing saying so; the United States Trade Representative says so and has opened negotiations with a reluctant Europe. John Veroneau, USTR general counsel, says: "Our position is that a new agreement should be established that reflects the realities of 2004. It is time for subsidies to Airbus to end. We are not asking that subsidies in the pipeline be pulled, but that there be no new subsidies."

Why would the Europeans agree to give up a deal that suits them? Enter Sen. Patty Murray. On July 15, she gave a speech to the Woodrow Wilson International Center for Scholars proposing that the Bush administration unilaterally withdraw from the 1992 agreement. That would automatically put Boeing and Airbus under the rules of the World Trade Organization, allowing the United States to bring a WTO case against Europe for illegal subsidy.

While the negotiators talked, Murray swung a stick. USTR offered the Europeans a new agreement; she threatened them with no agreement at all. Murray is doing exactly what this state would expect its senior senator to do.

In this matter, it is irrelevant that USTR is part of the government of George W. Bush and that Murray is of the party of John Kerry. Some things are basic to both sides.