Boeing, Airbus have much to gain by dropping subsidy feud

Those close to the aerospace industry who are used to dealing in facts rather than fancy will acknowledge that from the days of early flight, both Boeing and Airbus have received government support — they've just done it differently.

Bill Boeing drew his first "subsidy check" almost a century ago when he received favorable — and in some cases exclusive — contracts to carry U.S. airmail.

For decades, the United States has successfully provided support to its industry through a system of government contracts, research grants and tax supports. As taxpayers, we have supported this program to maintain our aerospace leadership in the interest of national security. Nothing is wrong with that.

In contrast, Europe's member states have successfully used loan funding. It is targeted and a non-trade-distorting use of a government's limited research resources. It offers governments a healthy return and brings to the market innovative products, which benefit everyone. Many of the European industry's greatest innovations coincided with the entry into service of Airbus aircraft, which has obliged Boeing to respond, and thus advanced the state of the art in the industry.

Airbus loans are repaid with interest and a royalty earning a healthy return on member-state investments. Unfortunately, this concept of repayable government funding has failed to catch on here at home.

In 1992, the U.S. and Europe signed a bilateral agreement designed to reduce and balance U.S. nonrepayable support with European repayable loans. Under the 1992 treaty, Europe successfully reduced its government support. However, the U.S. paid little attention to its limits, flouting transparency requirements before unilaterally withdrawing from the agreement in 2004, an action that brings into question whether our country can be trusted to abide by its treaty obligations.

Since then, Boeing has had but one agenda — to demon-ize Europe as a subsidizer and to excuse its loss of ground to Airbus over time as a result of something other than competition on the merits. Airbus believes that Boeing's claims against it are anticompetitive. If it comes to that, Boeing's exaggerated claims will be unmasked by the World Trade Organization.

Having received billions of dollars of nonrepayable taxpayer research funding, Boeing would hypocritically have the world believe no such support exists even as the 787, the most subsidized aircraft in history, benefits from this with record sales. While Boeing attacks Europe's support program, it has no problem with identical programs benefiting Boeing in Japan and Italy. In order to take advantage of foreign subsidies, Boeing has offshored to Japan thousands of American jobs as well as U.S. taxpayer-supported wing design and composite technology.

Besides U.S. jobs lost, technology transfers abroad create concerns as well. According to Bill Dugovich, spokesman for the Society of Professional Engineering Employees in Aerospace (SPEEA), "[T]he wings of an airplane are a good case in point." From a Boeing engineer's point of view, if you control the wings, you control your destiny as a company.

It's time to forget the past, end this feud, and look forward to the future of an estimated $2-trillion-plus market. Boeing's continued attacks on Airbus only damage our government's relationship with its greatest trading partner. A new agreement is needed to protect our Western core technologies in order to assure our mutual security so others are unable to pluck the raisins from our respective technology cakes simply for the purpose of Boeing's pursuit of short-term financial gain.

Instead of aiming our sights at each other, we should work to ensure that America and Europe don't lose their competitive technologies and competitiveness to China, Japan and Russia.

As long as the U.S. continues to deny it gives any subsidies to Boeing, negotiations are not possible. No one could reasonably accept Boeing's demand for unilateral surrender while it enjoys record subsidies that drive record profits. Even assuming the U.S. case against European aid succeeds, if the U.S. and Boeing think Europe is going to place some vague notion of WTO compliance above the 300,000 jobs Airbus creates in Europe, U.S. trade experts are in for a surprise.

Past government-to-government talks and consultations have failed. A new approach is needed. Boeing and Airbus need to find a way forward that will assure future competitiveness in an industry vital to the security of the West. In place of past rhetoric, we need a new forward-looking agreement for this decade.

We now have two potential statesmen in Louis Gallois of EADS, Airbus' parent company, and James McNerney of Boeing who can make it happen. If they and their companies work at it, they may find they can create a great future for their companies and their industry.