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European governments to cut aid to Airbus

Stephen Beard Dec 1, 2011

Mitchell Hartman: A top U.S. trade official this week criticized China for shielding homegrown companies from foreign competition. That’s a familiar issue for U.S. plane maker Boeing. Today European governments will announce how they plan to cut billions in aid to Europe’s Airbus. That’s supposed to level the playing field with Boeing.

Stephen Beard: Marketplace ‘s Stephen Beard joins us live from London. Good morning, Stephen.

Beard: Hello, Mitchell.

Hartman: Remind us, what is this dispute all about?

Beard: About so-called “launch aid” — European governments lend Airbus billions of euros when it’s developing a new plane like the A380. Boeing successfully argued before the world trade watchdog that this is an illegal subsidy. Today the Europeans will announce how they plan to get rid of it.

Hartman: And will today’s decision resolve the fight?

Beard: Probably not. If Boeing isn’t satisfied, it’ll appeal and that could take another two years. And in the meantime Airbus won its trade case that Boeing is getting an illegal subsidy in the form of tax breaks and defense contracts, and that case could rumble on for some time yet as well.

Hartman: So, how can we figure out, is either side really right in this dispute?

Beard: Well, they’re both wrong. We’re all sinners, Mitchell. But the U.S. argues that Airbus does better out of its subsidies than Boeing.

And Howard Wheeldon, an airline analyst with BCG Partners, agrees.

Howard Wheeldon: The Europeans have benefited far more than the Americans have, and that’s where the dispute really lies. If it were a fair and equitable system, then it’d be fine. But it isn’t and it can’t be.

But when is this all going to end? Who knows, it’ll probably go on forever.

Hartman: That’s a long time. Marketplace’s Stephen Beard in London, thanks very much.

Beard: Okay, Mitchell.

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