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American Shipper

U.S., EU claim victory on subsidies

U.S., EU claim victory on subsidies

   A World Trade Organization dispute settlement panel report published March 30 concluded that billions of dollars in U.S. federal and state subsidies given to Boeing are illegal under WTO rules.

   The European Union claimed that from 1989 to 2006 U.S. government subsidies to Boeing amounted to at least $5.3 billion. Planned future subsidies are estimated to be worth $3 billion to $4 billion.

   'The U.S. began this dispute in 2004 and now finds itself with a crystal clear ruling that exposes its long-running multibillion-dollar subsidization of Boeing through federal and state programs as illegal,' said EU Trade Commissioner Karel De Gucht, in a statement.

   'These subsidies have resulted in substantial harm to EU interests, causing Airbus to lose sales, depress its aircraft prices and unfairly lose market share to Boeing,' De Gucht added. 'The detrimental costs to EU industry from this lengthy and onerous subsidization run into billions of euros. We therefore welcome the WTO panel's report and call on the U.S. government to take the appropriate steps that may assist to achieve a mutually agreed solution to this dispute.'

   The panel report specifically noted the main sources of U.S. subsidies to Boeing, including:

   ' $1.3 billion to $2 billion in research and development program funds granted by NASA and the U.S. Defense Department.

   ' $1.5 billion from NASA and Defense in 'general support.'

   ' $2.2 billion in foreign sales corporation (FSC) export subsidies.

   ' Washington state tax breaks valued up to $4 billion for the 2006-2024 period.

   The panel also confirmed federal FSC tax breaks for Boeing are prohibited subsidies, which according to WTO rules must be withdrawn by the United States without delay.

   The EU claimed the subsidies from multiple U.S. government sources have enabled Boeing to develop new aircraft, in particular the 787 'Dreamliner,' at much lower costs than would otherwise have been the case.

   'Support to Boeing has been and continues to be in the form of non-repayable grants or free access to government facilities,' the EU said. 'In the Airbus case, however, the most important instrument ' the    Repayable Launch Investment (RLI) ' was considered WTO-compatible in principle, with the subsidy element being, in certain cases, the sole difference in the conditions provided compared to other repayable commercial financing.'

   However, U.S. Trade Representative Ron Kirk said the panel ruled in favor of the United States on most of the dispute's claims.

   He noted that last year a different WTO panel found the Europeans gave Airbus launch aid and other WTO-inconsistent subsidies in the amount of $20 billion. Although the March 30 panel agreed with the European Union in some areas, the programs it asked the United States to remove were worth only $2.7 billion.

   'Today a WTO panel confirmed what we have been saying for the last 20 years ' that the WTO-inconsistent subsidies that the Europeans gave to Airbus dwarf anything that the U.S. government has given to Boeing,' Kirk said. 'This outcome shows that the steps the federal government and the states have taken to create a positive environment for our workers and industries are generally consistent with WTO rules.'

   Although the panel last year found that Airbus received prohibited export subsidies from Germany, Spain and the United Kingdom, the March 30 report rejected the EU's claim that Washington state gave prohibited subsidies to Boeing.

   Since October 2004, the European Union and United States have contested before the WTO their governments' respective support to their aerospace industries. Both WTO challenges relate to alleged illegal WTO support to Airbus and Boeing respectively over a 20- to 30-year period.

   Prior to these WTO challenges, U.S. and EU government support to their aircraft manufacturers had been regulated by the Bilateral EU-U.S. Agreement on Trade in Large Civil Aircraft. This 1992 agreement allowed each party to provide a certain level of support to their respective aircraft industries. On Oct. 6, 2004, the United States announced its withdrawal from the agreement and immediately filed a challenge at the WTO on all EU support ever granted to Airbus.



TNT to hold vote on company split May 25

   TNT said its shareholders will vote May 25 on a plan to divide the company into two separate companies, one focusing on the express business.

   TNT announced the demerger plan Dec. 2. The new mail unit will be known as PostNL.

   'The main reasons for separating the businesses are their increasingly divergent strategic profiles and the limited synergies. Separation will enable greater focus and transparency as well as facilitate participation in possible sector consolidation and acquisitions,' TNT said.

   The express company plans to grow into high-end standard parcels and freight and value-added services, in addition to disciplined expansion in key emerging markets, while the mail company said that in the Netherlands it would focus on implementing a restructuring program and seek further growth through parcels and postal activities outside of the Netherlands.

   TNT offered an update on its operations in the first quarter, saying its express business experienced 'volatile trading conditions in first 12 weeks of the year.

   'Year-to-date trading conditions have been much more volatile than had been previously assumed. Volatility has been caused by a sharp increase in the oil price, social and political unrest and natural disasters. This was exacerbated by unforeseen effects from the integration issues in Brazil.'

   Total underlying operating income for the first 12 weeks is about 25 million euros ($36 million) lower than last year, the company said. ' Chris Dupin



U.S., Israel open skies enters force

   An open skies agreement between the United States and Israel entered into force March 29 as both countries' governments completed an exchange of diplomatic notes.

   The initial agreement was reached on Dec. 1.

   'The agreement strengthens and expands our already strong trade and tourism links with Israel and will benefit American and Israeli businesses and travelers,' the U.S. Department of Transportation said. 'It will expand air service and encourage vigorous price competition by airlines, while safeguarding aviation safety and security.'

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